FORM 10-Q
(Mark One) For the quarterly period ended June 30, For the transition period from to Commission File Number 001-37503 B. RILEY FINANCIAL, INC. (I.R.S. Employer 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 July Quarterly Report on Form 10-Q For the Quarterly Period Ended June 30, Table of Contents B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except par value) The accompanying notes are an integral part of these condensed consolidated financial statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Dollars in thousands, except share data) The accompanying notes are an integral part of these condensed consolidated financial statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Dollars in thousands) The accompanying notes are an integral part of these condensed consolidated financial statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Equity (Dollars in thousands, except share data) For the Three Months Ended June 30, The accompanying notes are an integral part of these condensed consolidated financial statements. For the Six The accompanying notes are an integral part of these condensed consolidated financial statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Dollars in thousands) The accompanying notes are an integral part of these condensed consolidated financial statements. B. RILEY FINANCIAL, INC. AND SUBSIDIARIES 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”) 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 $14,544 and $10,725 (d) Concentration of Risk Revenues in the Capital Markets, Financial Consulting, Wealth Management, Brands and Principal Investments — 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 $2,594 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 Accounting Standards Codification (“ASC”) 718 - Compensation — Stock Compensation (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. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The (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 June 30, 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 June 30, (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 has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments is derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC The Company has warrant liabilities related to warrants of the SPAC’s that are held by investors in BRPM 150 and BRPM 250. The warrants are accounted for as liabilities in accordance with ASC 815 - Derivatives and Hedging and are measured at fair value at inception and on a recurring basis using quoted prices in over-the-counter markets. Warrant liabilities are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets in the amount of $3,737 and $12,938 as of June 30, 2022 and December 31, 2021, respectively. Changes in fair value of warrants are included within change in fair value of financial instruments and other as part of other income (expense) in the condensed consolidated statements of operations. The fair value of mandatorily redeemable noncontrolling interests is determined based on the issuance of similar interests for cash, references to industry comparables, and relied, in part, on information obtained from appraisal reports and internal valuation models. The following table summarizes the significant unobservable inputs in the fair value measurement of The amount reported in the table above As of June 30, The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. The following table The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States. As of June 30, The forward exchange contracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable. The net gain from forward exchange contracts was zero and $363 during the three months ended June 30, 2022 and 2021, respectively, and $68 and $673 during the 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 bebe stores, inc. Other Equity Investments The Company (r) Supplemental Non-cash Disclosures During the six months ended June 30, 2022, non-cash investing activities included $20,320 in issuance of the Company's common stock as part of the purchase price consideration from the FocalPoint acquisition and $22,661 in seller financing for deferred cash consideration, the conversion of $17,500 of debt owed by Lingo to equity, and the repayment of loans receivable in the amount of $850 with equity securities. During the six months ended June 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $133,453 with equity securities. In addition, $35,000 of loans receivable were exchanged for $35,000 of newly issued debt securities and a $36,000 note receivable was issued for the sale of equity securities to a third party. The Company, through its The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC 323 - Investments – Equity Method and Joint Venturesas an equity method investment with changes in allocation recorded currently in the results of operations. Placement agent fees attributable to such arrangements The carrying value of the Company’s investments in the VIEs that were not consolidated is shown below. Not yet adopted In In October NOTE The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of June 30, NOTE The components of accounts receivable, net, include the following: NOTE Goodwill was The changes in the carrying amount of goodwill Amortization expense was $6,940 and $5,134 NOTE Asset Based Credit Facility NOTE Nomura Credit Agreement On June 23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement Eurodollar loans under the Credit Facilities Subject to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities. If borrowings under the facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess. The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind. Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity. Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of The Company had The Company is in compliance with all financial covenants in the BRPAC Credit Agreement On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of the Company, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral. The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel. Such security interests are evidenced by pledge, security, and other related agreements. The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also As of June 30, The Company is in compliance with all financial covenants in the BRPAC Credit Agreement NOTE Senior notes payable, net, are comprised of the following: During the three months ended June 30, 2022 and 2021, the Company issued $15,800 and $72,469, respectively, of senior notes, and during the six months ended June 30, 2022 and 2021, the Company issued $35,873 and $85,327, respectively, of senior notes 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 and six months ended June 30, 2022 and 2021 United Online 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 June 30, 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 and Lingo contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period. The capitalized costs to fulfill a contract were 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 a provision of As of June 30, 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 June 30, 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 audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 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. Remeasurements to the carrying value of the redeemable noncontrolling interests in equity of subsidiaries are not deemed to be a dividend (see Note 2(p)). According to ASC 480 - Distinguishing Liabilities from Equity, there is no impact on earnings per share in the computation of basic and diluted earnings per share to common shareholders for changes in the carrying value of the redeemable noncontrolling interests in equity, when such changes in carrying value which in substance approximates fair value. 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 (b) Babcock & Wilcox Commitments and Guarantees On June 30, 2021, the Company agreed to guaranty (the “B. Riley Guaranty”) up to $110,000 of obligations that On August 10, 2020, the Company entered into a project specific indemnity rider On 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 In connection with the Company’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was (c) Common Stock During the six months ended June 30, 2022 and 2021, the Company issued 3,941 and 228,477 depository shares of the Series B Preferred Stock. There were NOTE B. Riley Securities (“BRS”), B. Riley Wealth Management (“BRWM”), NOTE In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a limited partnership controlled by Mr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. Whitehawk has agreed to provide investment advisory services for two of the funds, GACP I, L.P. and GACP 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: During the three months ended June 30, 2022 and 2021, the Company earned capital raising activities. During the 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: As of June 30, Segment assets are not reported to, or used by, the 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) 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 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 Segment. Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances. Financial Consulting Segment. Our Financial Consulting segment provides services to law firms, corporations, financial institutions, lenders, and private equity firms. These services primarily include bankruptcy, financial advisory, forensic accounting, litigation support, operations management consulting, real estate consulting, and valuation and appraisal services. Our Financial Consulting segment operates through limited liability companies that are wholly owned or majority owned by us. Principal Investments - Brands Segment. Our Brands segment consists of our brand investment portfolio that is focused on generating revenue through the licensing of trademarks and is held by BR Brands.☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19342021Oro☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Delaware 27-0223495
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 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 ☐x Accelerated filer ☒o Non-accelerated filer ☐Emerging growth company ☐oSmaller reporting company ☐o Emerging growth company o ☐☐o No ☒26, 2021,22, 2022, there were 27,580,30028,290,458 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.2021Page 178375762586359655965606560656065606660666168June 30,
2022December 31,
2021(Unaudited) ASSETS Assets: Cash and cash equivalents $ 216,098 $ 278,933 Restricted cash 928 927 Due from clearing brokers 50,597 29,657 Securities and other investments owned, at fair value 1,144,896 1,532,095 Securities borrowed 2,414,074 2,090,966 Accounts receivable, net 52,935 49,673 Due from related parties 645 2,074 Loans receivable, at fair value (includes $88,893 and $167,744 from related parties as of June 30, 2022 and December 31, 2021, respectively) 770,840 873,186 Prepaid expenses and other assets 480,276 463,502 Operating lease right-of-use assets 59,806 56,969 Property and equipment, net 14,182 12,870 Goodwill 394,331 250,568 Other intangible assets, net 270,322 207,651 Deferred tax assets, net 5,287 2,848 Total assets $ 5,875,217 $ 5,851,919 LIABILITIES AND EQUITY Liabilities: Accounts payable $ 22,428 $ 6,326 Accrued expenses and other liabilities 245,773 343,750 Deferred revenue 79,226 69,507 Deferred tax liabilities, net — 93,055 Due to related parties and partners 470 — Due to clearing brokers 24,695 69,398 Securities sold not yet purchased 5,403 28,623 Securities loaned 2,414,201 2,088,685 Operating lease liabilities 70,972 69,072 Notes payable 23,186 357 Revolving credit facility 80,000 80,000 Term loans, net 367,815 346,385 Senior notes payable, net 1,644,778 1,606,560 Total liabilities 4,978,947 4,801,718 Commitments and contingencies (Note 15) 0 0 Redeemable noncontrolling interests in equity of subsidiaries 352,894 345,000 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 June 30, 2022 and December 31, 2021, respectively; and liquidation preference of $113,380 and $112,790 as of June 30, 2022 and December 31, 2021, respectively — — Common stock, $0.0001 par value; 100,000,000 shares authorized; 28,290,458 and 27,591,028 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 3 3 Additional paid-in capital 459,220 413,486 Retained earnings 32,570 248,862 Accumulated other comprehensive loss (3,884) (1,080) Total B. Riley Financial, Inc. stockholders’ equity 487,909 661,271 Noncontrolling interests 55,467 43,930 Total equity 543,376 705,201 Total liabilities and equity $ 5,875,217 $ 5,851,919 June 30, December 31, 2021 2020 (Unaudited) Assets Assets: Cash and cash equivalents $ 297,396 $ 103,602 Restricted cash 1,335 1,235 Due from clearing brokers 424,949 7,089 Securities and other investments owned, at fair value 1,278,773 777,319 Securities borrowed 1,140,023 765,457 Accounts receivable, net 57,853 46,518 Due from related parties 734 986 Advances against customer contracts 200 200 Loans receivable, at fair value (includes $131,379 and $295,809 from related parties at June 30, 2021 and December 31, 2020, respectively) 270,295 390,689 Prepaid expenses and other assets 119,400 87,262 Operating lease right-of-use assets 60,933 48,799 Property and equipment, net 14,447 11,685 Goodwill 236,005 227,046 Other intangible assets, net 200,304 190,745 Deferred tax assets, net 4,080 4,098 Total assets $ 4,106,727 $ 2,662,730 Liabilities and Equity Liabilities: Accounts payable $ 6,101 $ 2,722 Accrued expenses and other liabilities 220,603 168,478 Deferred revenue 68,398 68,651 Deferred tax liabilities, net 90,325 34,248 Due to related parties and partners 230 327 Due to clearing brokers — 13,672 Securities sold not yet purchased 272,088 10,105 Securities loaned 1,134,359 759,810 Mandatorily redeemable noncontrolling interests 4,105 4,700 Operating lease liabilities 73,761 60,778 Notes payable 357 37,967 Loan participations sold 4,444 17,316 Term loans, net 257,104 74,213 Senior notes payable, net 1,213,105 870,783 Total liabilities 3,344,980 2,123,770 Commitments and contingencies (Note 13) B. Riley Financial, Inc. equity: Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,275 and 3,971 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; and liquidation preference of $106,882 and $99,260 as of June 30, 2021 and December 31, 2020, respectively — — Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,580,300 and 25,777,796 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 3 3 Additional paid-in capital 387,084 310,326 Retained earnings 338,260 203,080 Accumulated other comprehensive loss (1,178 ) (823 ) Total B. Riley Financial, Inc. stockholders’ equity 724,169 512,586 Noncontrolling interests 37,578 26,374 Total equity 761,747 538,960 Total liabilities and equity $ 4,106,727 $ 2,662,730 (Unaudited)Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 Revenues: Services and fees $ 200,905 $ 266,143 $ 411,580 $ 555,612 Trading (losses) income and fair value adjustments on loans (223,927) 32,679 (292,317) 299,621 Interest income - Loans and securities lending 63,835 25,491 125,261 62,411 Sale of goods 1,887 12,457 3,765 19,285 Total revenues 42,700 336,770 248,289 936,929 Operating expenses: Direct cost of services 17,785 12,094 29,436 23,416 Cost of goods sold 1,994 3,626 4,245 8,952 Selling, general and administrative expenses 167,136 199,922 342,335 391,266 Interest expense - Securities lending and loan participations sold 14,544 10,983 26,310 30,172 Total operating expenses 201,459 226,625 402,326 453,806 Operating (loss) income (158,759) 110,145 (154,037) 483,123 Other income (expense): Interest income 500 56 567 105 Change in fair value of financial instruments and other 4,321 6,509 10,302 6,509 (Loss) income from equity investments (3,399) (852) 3,376 23 Interest expense (31,764) (20,856) (62,200) (40,642) (Loss) income before income taxes (189,101) 95,002 (201,992) 449,118 Benefit from (provision for) income taxes 52,513 (19,902) 56,208 (117,420) Net (loss) income (136,588) 75,100 (145,784) 331,698 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,571 (576) 4,437 1,366 Net (loss) income attributable to B. Riley Financial, Inc. $ (140,159) $ 75,676 $ (150,221) $ 330,332 Preferred stock dividends 2,002 1,789 4,004 3,538 Net (loss) income available to common shareholders $ (142,161) $ 73,887 $ (154,225) $ 326,794 Basic (loss) income per common share $ (5.07) $ 2.70 $ (5.52) $ 12.03 Diluted (loss) income per common share $ (5.07) $ 2.58 $ (5.52) $ 11.39 Weighted average basic common shares outstanding 28,051,570 27,344,184 27,953,845 27,159,257 Weighted average diluted common shares outstanding 28,051,570 28,668,465 27,953,845 28,690,444 Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Revenues: Services and fees $ 266,143 $ 125,595 $ 555,612 $ 284,976 Trading income (losses) and fair value adjustments on loans 32,679 114,547 299,621 (67,895 ) Interest income - Loans and securities lending 25,491 24,506 62,411 46,357 Sale of goods 12,457 1,820 19,285 2,824 Total revenues 336,770 266,468 936,929 266,262 Operating expenses: Direct cost of services 12,094 7,985 23,416 27,937 Cost of goods sold 3,626 860 8,952 1,629 Selling, general and administrative expenses 199,922 106,562 391,266 194,306 Impairment of tradenames — 8,500 — 12,500 Interest expense - Securities lending and loan participations sold 10,983 11,221 30,172 19,694 Total operating expenses 226,625 135,128 453,806 256,066 Operating income 110,145 131,340 483,123 10,196 Other income (expense): Interest income 56 224 105 470 Gain on extinguishment of loans 6,509 — 6,509 — (Loss) income from equity investments (852 ) (318 ) 23 (554 ) Interest expense (20,856 ) (16,509 ) (40,642 ) (32,163 ) Income (loss) before income taxes 95,002 114,737 449,118 (22,051 ) (Provision) benefit for income taxes (19,902 ) (32,208 ) (117,420 ) 5,331 Net income (loss) 75,100 82,529 331,698 (16,720 ) Net (loss) income attributable to noncontrolling interests (576 ) (1,311 ) 1,366 (1,895 ) Net income (loss) attributable to B. Riley Financial, Inc. $ 75,676 $ 83,840 $ 330,332 $ (14,825 ) Preferred stock dividends 1,789 1,087 3,538 2,142 Net income (loss) available to common shareholders $ 73,887 $ 82,753 $ 326,794 $ (16,967 ) Basic income (loss) per common share $ 2.70 $ 3.23 $ 12.03 $ (0.66 ) Diluted income (loss) per common share $ 2.58 $ 3.07 $ 11.39 $ (0.66 ) Weighted average basic common shares outstanding 27,344,184 25,627,085 27,159,257 25,827,849 Weighted average diluted common shares outstanding 28,668,465 26,992,823 28,690,444 25,827,849 (Unaudited)Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 Net (loss) income $ (136,588) $ 75,100 $ (145,784) $ 331,698 Other comprehensive income (loss): Change in cumulative translation adjustment (2,316) 281 (2,804) (355) Other comprehensive (loss) income, net of tax (2,316) 281 (2,804) (355) Total comprehensive (loss) income (138,904) 75,381 (148,588) 331,343 Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,698 (576) 4,564 1,366 Comprehensive (loss) income attributable to B. Riley Financial, Inc. $ (142,602) $ 75,957 $ (153,152) $ 329,977 Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Net income (loss) $ 75,100 $ 82,529 $ 331,698 $ (16,720 ) Other comprehensive income (loss): Change in cumulative translation adjustment 281 515 (355 ) (705 ) Other comprehensive income (loss), net of tax 281 515 (355 ) (705 ) Total comprehensive income (loss) 75,381 83,044 331,343 (17,425 ) Comprehensive (loss) income attributable to noncontrolling interests (576 ) (1,311 ) 1,366 (1,895 ) Comprehensive income (loss) attributable to B. Riley Financial, Inc. $ 75,957 $ 84,355 $ 329,977 $ (15,530 ) (Unaudited)20212022 and 2020Preferred Stock Common Stock Additional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
LossNoncontrolling
InterestsTotal
EquityShares Amount Shares Amount Balance, April 1, 2022 4,535 $ — 27,928,234 $ 3 $ 450,164 $ 205,765 $ (1,568) $ 45,813 $ 700,177 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 362,224 — (5,146) — — — (5,146) Share based payments — — — — 14,202 — — — 14,202 Dividends on common stock ($1.00 per share) — — — — — (31,034) — — (31,034) Dividends on preferred stock — — — — — (2,002) — — (2,002) Net loss — — — — — (140,159) — 3,698 (136,461) Distributions to noncontrolling interests — — — — — — — (801) (801) Contributions from noncontrolling interests — — — — — — — 6,757 6,757 Other comprehensive loss — — — — — — (2,316) — (2,316) Balance, June 30, 2022 4,535 $ — 28,290,458 $ 3 $ 459,220 $ 32,570 $ (3,884) $ 55,467 $ 543,376 Balance, April 1, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ (1,459) $ 33,823 $ 765,820 Preferred stock issued 304 — — — 8,281 — — — 8,281 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 385,391 — (10,348) — — — (10,348) Share based payments — — — — 8,608 — — — 8,608 Dividends on common stock ($3.00 per share) — — — — — (88,537) — — (88,537) Dividends on preferred stock — — — — — (1,789) — — (1,789) Net income — — — — — 75,676 — (576) 75,100 Distributions to noncontrolling interests — — — — — — — (2,597) (2,597) Contributions from noncontrolling interests — — — — — — — 6,928 6,928 Other comprehensive loss — — — — — — 281 — 281 Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178) $ 37,578 $ 761,747 Accumulated Additional Other Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total Shares Amount Shares Amount Capital Earnings Loss Interests Equity Balance, April 1, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ (1,459 ) $ 33,823 $ 765,820 Preferred stock issued 304 — — — 8,281 — — — 8,281 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 385,391 — (10,348 ) — — — (10,348 ) Share based payments — — — — 8,608 — — — 8,608 Dividends on common stock ($3.00 per share) — — — — — (88,537 ) — — (88,537 ) Dividends on preferred stock — — — — — (1,789 ) — — (1,789 ) Net income — — — — — 75,676 — (576 ) 75,100 Distributions to noncontrolling interests — — — — — — — (2,597 ) (2,597 ) Contributions from noncontrolling interests — — — — — — — 6,928 6,928 Other comprehensive income — — — — — — 281 — 281 Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178 ) $ 37,578 $ 761,747 Balance, April 1, 2020 2,531 $ — 25,988,565 $ 3 $ 308,472 $ (70,232 ) $ (3,208 ) $ 27,986 $ 263,021 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 481,709 — (2,157 ) — — — (2,157 ) Common stock repurchased and retired ��� — (605,881 ) — (3,711 ) — — — (3,711 ) Share based payments — — — — 4,168 — — — 4,168 Dividends on common stock ($0.25 per share) — — — — — (6,594 ) — — (6,594 ) Dividends on preferred stock — — — — — (1,087 ) — — (1,087 ) Net income — — — — — 83,840 — (1,311 ) 82,529 Distributions to noncontrolling interests — — — — — — — (465 ) (465 ) Other comprehensive income — — — — — — 515 — 515 Balance, June 30, 2020 2,531 $ — 25,864,393 $ 3 $ 306,772 $ 5,927 $ (2,693 ) $ 26,210 $ 336,219 B. RILEY FINANCIAL, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Equity (Continued)(Unaudited)(Dollars in thousands, except share data)months endedMonths Ended June 30, 20212022 and 2020Preferred Stock Common Stock Additional
Paid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
LossNoncontrolling
InterestsTotal
EquityShares Amount Shares Amount Balance, January 1, 2022 4,512 $ — 27,591,028 $ 3 $ 413,486 $ 248,862 $ (1,080) $ 43,930 $ 705,201 Preferred stock issued 23 — — — 639 — — — 639 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 394,552 — (6,440) — — — (6,440) Shares issued for the acquisition of FocalPoint — — 304,878 — 20,320 — — — 20,320 Share based payments — — — — 31,215 — — — 31,215 Dividends on common stock ($2.00 per share) — — — — — (62,067) — — (62,067) Dividends on preferred stock — — — — — (4,004) — — (4,004) Net loss — — — — — (150,221) — 4,564 (145,657) Distributions to noncontrolling interests — — — — — — — (1,736) (1,736) Contributions from noncontrolling interests — — — — — — — 8,527 8,527 Acquisition of noncontrolling interests — — — — — — — 182 182 Other comprehensive loss — — — — — — (2,804) — (2,804) Balance, June 30, 2022 4,535 $ — 28,290,458 $ 3 $ 459,220 $ 32,570 $ (3,884) $ 55,467 $ 543,376 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 Preferred stock issued 304 — — — 8,281 — — — 8,281 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 389,459 — (10,370) — — — (10,370) Share based payments — — — — 14,134 — — — 14,134 Dividends on common stock ($6.50 per share) — — — — — (191,614) — — (191,614) Dividends on preferred stock — — — — — (3,538) — — (3,538) Net income — — — — — 330,332 — 1,366 331,698 Distributions to noncontrolling interests — — — — — — — (13,854) (13,854) Contributions from noncontrolling interests — — — — — — — 10,650 10,650 Acquisition of noncontrolling interests — — — — — — — 13,042 13,042 Other comprehensive loss — — — — — — (355) — (355) Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178) $ 37,578 $ 761,747 Accumulated Additional Other Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total 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 Common stock issued, net of offering costs — — 1,413,045 — 64,713 — — — 64,713 Preferred stock issued 304 — — — 8,281 — — — 8,281 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 389,459 — (10,370 ) — — — (10,370 ) Share based payments — — — — 14,134 — — — 14,134 Dividends on common stock ($6.50 per share) — — — — — (191,614 ) — — (191,614 ) Dividends on preferred stock — — — — — (3,538 ) — — (3,538 ) Net income — — — — — 330,332 — 1,366 331,698 Distributions to noncontrolling interests — — — — — — — (13,854 ) (13,854 ) Contributions from noncontrolling interests — — — — — — — 10,650 10,650 Acquisition of noncontrolling interests — — — — — — — 13,042 13,042 Other comprehensive loss — — — — — — (355 ) — (355 ) Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178 ) $ 37,578 $ 761,747 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 ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 520,007 — (2,677 ) — — — (2,677 ) Common stock repurchased and retired — — (1,627,946 ) — (27,779 ) — — — (27,779 ) Share based payments — — — — 9,489 — — — 9,489 Dividends on common stock ($0.60 per share) — — — — — (16,642 ) — — (16,642 ) Dividends on preferred stock — — — — — (2,142 ) — — (2,142 ) Net loss — — — — — (14,825 ) — (1,895 ) (16,720 ) Distributions to noncontrolling interests — — — — — — — (1,486 ) (1,486 ) Other comprehensive loss — — — — — — (705 ) — (705 ) Balance, June 30, 2020 2,531 $ — 25,864,393 $ 3 $ 306,772 $ 5,927 $ (2,693 ) $ 26,210 $ 336,219 (Unaudited)Six Months Ended
June 30,2022 2021 Cash flows from operating activities: (Revised - See Note 20) Net (loss) income $ (145,784) $ 331,698 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 15,809 12,924 Provision for doubtful accounts 1,276 755 Share-based compensation 31,215 14,134 Fair value adjustments, non-cash (13,572) (10,046) Non-cash interest and other (1,237) (9,091) Effect of foreign currency on operations 298 (1,486) Income from equity investments (3,376) (23) Dividends from equity investments 1,908 610 Deferred income taxes (95,342) 51,242 Loss on disposal of fixed assets 122 — Gain on extinguishment of loan (1,102) (6,509) Loss on extinguishment of debt — 919 Gain on equity investment (6,790) (3,544) Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 436 347 Change in operating assets and liabilities: Amounts due to/from clearing brokers (65,644) (424,062) Securities and other investments owned 390,147 (316,181) Securities borrowed (323,108) (374,565) Accounts receivable and advances against customer contracts 5,308 808 Prepaid expenses and other assets (12,598) (25,870) Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities (138,605) (22,983) Amounts due to/from related parties and partners 1,876 155 Securities sold, not yet purchased (23,220) 261,476 Deferred revenue 6,568 (3,158) Securities loaned 325,516 374,549 Net cash used in operating activities (49,899) (147,901) Cash flows from investing activities: Purchases of loans receivable (199,109) (87,309) Repayments of loans receivable 241,695 95,522 Repayment of loan participations sold — (10,772) Acquisition of businesses, net of $27,740 and $34,924 cash acquired for 2022 and 2021, respectively (38,383) (390) Purchases of property, equipment and intangible assets (896) (288) Proceeds from sale of property, equipment and intangible assets 2 — Investment of subsidiaries initial public offering proceeds into trust account — (345,000) Purchase of equity and other investments (2,786) (10,485) Net cash provided by (used in) investing activities 523 (358,722) Cash flows from financing activities: Repayment of notes payable (357) (37,610) Repayment of term loan (54,316) (11,484) Proceeds from term loan 75,000 200,000 Proceeds from issuance of senior notes 35,874 475,698 Redemption of senior notes — (128,156) Payment of debt issuance and offering costs (450) (15,661) Payment of contingent consideration (451) (411) Payment of employment taxes on vesting of restricted stock (6,440) (10,370) Common dividends paid (62,039) (181,269) Preferred dividends paid (4,004) (3,538) Distributions to noncontrolling interests (2,414) (14,792) Contributions from noncontrolling interests 8,527 10,650 Proceeds from initial public offering of subsidiaries — 345,000 Proceeds from issuance of common stock — 64,713 Proceeds from issuance of preferred stock 639 8,281 Net cash (used in) provided by financing activities (10,431) 701,051 (Decrease) increase in cash, cash equivalents and restricted cash (59,807) 194,428 Effect of foreign currency on cash, cash equivalents and restricted cash (3,027) (534) Net (decrease) increase in cash, cash equivalents and restricted cash (62,834) 193,894 Cash, cash equivalents and restricted cash, beginning of period 279,860 104,837 Cash, cash equivalents and restricted cash, end of period $ 217,026 $ 298,731 Supplemental disclosures: Interest paid $ 83,102 $ 66,359 Taxes paid $ 45,343 $ 63,987 Six Months Ended June 30, 2021 2020 Cash flows from operating activities: Net income (loss) $ 331,698 $ (16,720 ) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 12,924 9,879 Provision for doubtful accounts 755 2,081 Share-based compensation 14,134 9,489 Fair value adjustments, non-cash (10,046 ) 21,975 Non-cash interest and other (9,091 ) (6,943 ) Effect of foreign currency on operations (1,486 ) (73 ) (Income) loss from equity investments (23 ) 554 Dividends from equity investments 610 797 Deferred income taxes 51,242 (14,340 ) Impairment of intangibles and gain on disposal of fixed assets — 12,550 Gain on extinguishment of loans (6,509 ) — Loss (gain) on extinguishment of debt 919 (1,556 ) Gain on equity investment (3,544 ) — Income allocated for mandatorily redeemable noncontrolling interests 347 397 Change in operating assets and liabilities: Due from clearing brokers (424,062 ) (5,271 ) Securities and other investments owned (316,181 ) 20,009 Securities borrowed (374,565 ) 27,967 Accounts receivable and advances against customer contracts 808 27,601 Prepaid expenses and other assets (25,870 ) (19,707 ) Accounts payable, accrued expenses and other liabilities (22,983 ) 738 Amounts due to/from related parties and partners 155 4,404 Securities sold, not yet purchased 261,476 (32,017 ) Deferred revenue (3,158 ) 3,896 Securities loaned 374,549 (31,481 ) Net cash (used in) provided by operating activities (147,901 ) 14,229 Cash flows from investing activities: Purchases of loans receivable (87,309 ) (152,228 ) Repayments of loans receivable 95,522 74,450 Sale of loan receivable to related party — 1,800 Proceeds from loan participations sold — 2,400 Repayment of loan participations sold (10,772 ) (940 ) Acquisition of business, net of $34,924 cash acquired (390 ) (1,500 ) Purchases of property, equipment and other (288 ) (851 ) Proceeds from sale of property, equipment and intangible assets — 1 Purchase of equity investments (10,485 ) (6,486 ) Net cash used in investing activities (13,722 ) (83,354 ) Cash flows from financing activities: Repayment of asset based credit facility — (37,096 ) Repayment of notes payable (37,610 ) (357 ) Repayment of term loan (11,484 ) (9,620 ) Proceeds from term loan 200,000 — Proceeds from issuance of senior notes 475,698 171,078 Redemption of senior notes (128,156 ) (1,829 ) Payment of debt issuance costs (15,661 ) (2,760 ) Payment for contingent consideration (411 ) — Payment of employment taxes on vesting of restricted stock (10,370 ) (2,678 ) Common dividends paid (181,269 ) (17,489 ) Preferred dividends paid (3,538 ) (2,142 ) Repurchase of common stock — (27,779 ) Distribution to noncontrolling interests (14,792 ) (2,143 ) Contribution from noncontrolling interests 10,650 — Proceeds from issuance of common stock 64,713 — Proceeds from issuance of preferred stock 8,281 4,630 Net cash provided by financing activities 356,051 71,815 Increase in cash, cash equivalents and restricted cash 194,428 2,690 Effect of foreign currency on cash, cash equivalents and restricted cash (534 ) (705 ) Net increase in cash, cash equivalents and restricted cash 193,894 1,985 Cash, cash equivalents and restricted cash, beginning of period 104,837 104,739 Cash, cash equivalents and restricted cash, end of period $ 298,731 $ 106,724 Supplemental disclosures: Interest paid $ 66,359 $ 45,934 Taxes paid $ 63,987 $ 608 1—1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS and, magicJack VocalTec Ltd. (“magicJack”), and Marconi Wireless ("Marconi"), and majority ownership interest in Lingo Management, LLC (“Lingo”). The Company also has a majority ownership interest in BR Brands Holding, LLC (“BR Brands” or “Brands”), which provides licensing of trademarks.On February 25, 2021, the Company completed the acquisition of all of the outstanding shares of National Holdings Corporation (“National”) not already owned by the Company. The total cash consideration for the approximately 55% of National outstanding shares that the Company did not previously own and settlement of outstanding share based awards amounted to $35,314. The Company used the acquisition method of accounting for this acquisition. The acquisition expands the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services. As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented.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, global cloud/unified communications and managed services from Lingo, and mobile phone voice, text, and data services and devices through a mobile virtual network operator; and (vi) Brands, which is focused on generating revenue through the licensing of trademarks.30, 2020,19, 2022, the Company acquired FocalPoint Securities, LLC ("FocalPoint"), an independent investment bank headquartered in Los Angeles, California. The purchase price consideration totaled $124,479, which consisted of $64,248 in cash, $20,320 in issuance of common stock of the Company, and $39,911 in deferred cash and contingent consideration payable over the next three years. The Company used the acquisition method of accounting for this acquisition. Goodwill of $110,512 and other intangible assets of $10,780 that were recorded as a result of the acquisition will be deductible for tax purposes. The acquisition is expected to expand B. Riley Securities’ mergers and acquisitions (“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.(“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 second quarter of 2021,social, business, travel, and government activities and functions; however, the full impact of the COVID-19 outbreak continues to evolve. Asevolve with the U.S. economy recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries across the world continue to manage repeated wavesemergence of the pandemic, includingnew variant strains of COVID-19, amid uneven progress toward vaccination.and breakthrough infections. The continuing impact of the COVID-19 outbreak onpandemic, higher inflation, the Company’s resultsactions by the Federal Reserve to address inflation, Russia's invasion of operations, financial positionUkraine, 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 and six months ended June 30, 20212022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.and loans 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, 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 $10,802 forduring the three months ended June 30, 20212022 and 2020, 2021,and $18,723 forduring the six months ended June 30, 20212022 and 2020, respectively. Loan participations sold as of June 30, 2021, and 2020 totaled $4,444 and $14,109, respectively. Interest expense from loan participations sold totaled $258 and $419 for$726 during the three months ended June 30, 2021 and 2020, respectively, and $726 and $971 for the six months ended June 30, 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.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.and $864 forduring the three months ended June 30, 20212022 and 2020,2021, respectively, and $4,357 and $1,156 and $1,704 forduring the six months ended June 30, 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 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan. ForDuring the three months ended June 30, 20212022 and 2020,2021, the Company recognized compensation expense of $115$43 and $59,$115, respectively, related to the Purchase Plan. ForDuring the six months ended June 30, 20212022 and 2020,2021, the Company recognized compensation expense of $342$196 and $224,$342, respectively, related to the Purchase Plan.$864$928 and $927 of cash collateral for foreign exchange contractsleases, respectively.leases and $471 related to onerestricted cash consist of the Company’s telecommunication suppliers. In June 2021, National’s Paycheck Protection Program (“PPP”) which the Company assumed as part of the acquisition of National on February 25, 2021 was forgiven, and $6,553 of restricted cash related to the loans was returned to the Company. 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.June 30,
2022December 31,
2021Cash and cash equivalents $ 216,098 $ 278,933 Restricted cash 928 927 Total cash, cash equivalents and restricted cash $ 217,026 $ 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 $1,021 and $1,031 and $899 forduring the three months ended June 30, 20212022 and 2020,2021, respectively, and $2,053 and $1,904 and $1,831 forduring the six months ended June 30, 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 receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of operations. These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes. The impact of adopting ASC 326 was immaterial to the consolidated financial statements.$270,295$770,840 and $390,689 at$873,186 as of June 30, 20212022 and December 31, 2020,2021, respectively. The loans have various maturities through March 2027.2027. As of June 30, 20212022 and December 31, 2020,2021, the historical cost of loans receivable accounted for under the fair value option was $274,624$783,901 and $405,064,$877,527, respectively, which included principal balances of $284,664$788,972 and $416,401,$886,831 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $10,040$5,071 and $11,337,$9,304, respectively. During the three months ended June 30, 20212022 and 2020, 2021,on the loans receivable at fair value of $680$10,985 and $4,049,$680, respectively, and during the six months ended June 30, 2022 and 2021, the Company recorded a net unrealized loss of $129 and 2020,net unrealized gainsgain of $10,046, and losses of $21,975, 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 June 30, 2021,2022, the Company has outstanding limited guarantee 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 June 30, 2021,2022, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.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: June 30, December 31, 2021 2020 Securities and other investments owned: Equity securities $ 1,129,217 $ 697,288 Corporate bonds 42,912 3,195 Other fixed income securities 3,227 1,913 Partnership interests and other 103,417 74,923 $ 1,278,773 $ 777,319 Securities sold not yet purchased: Equity securities $ 261,314 $ 4,575 Corporate bonds 10,675 4,288 Other fixed income securities 99 1,242 $ 272,088 $ 10,105 June 30,
2022December 31,
2021Securities and other investments owned: Equity securities $ 1,055,379 $ 1,444,474 Corporate bonds 8,231 7,632 Other fixed income securities 2,321 2,606 Partnership interests and other 78,965 77,383 $ 1,144,896 $ 1,532,095 Securities sold not yet purchased: Equity securities $ 226 $ 20,302 Corporate bonds 2,093 6,327 Other fixed income securities 3,084 1,994 $ 5,403 $ 28,623 “Topic 820:820 - Fair Value Measurements.”20212022 and December 31, 2020,2021, investments in nonpublic entities valued using a measurement alternative of $42,931$84,280 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 June 30, 2021 Using Quoted prices in Other Significant Fair value at active markets for observable unobservable June 30, identical assets inputs inputs 2021 (Level 1) (Level 2) (Level 3) Assets: Securities and other investments owned: Equity securities $ 1,086,286 $ 767,788 $ — $ 318,498 Corporate bonds 42,912 — 42,912 — Other fixed income securities 3,227 — 3,227 — Total securities and other investments owned 1,132,425 767,788 46,139 318,498 Loans receivable, at fair value 270,295 — — 270,295 Total assets measured at fair value $ 1,402,720 $ 767,788 $ 46,139 $ 588,793 Liabilities: Securities sold not yet purchased: Equity securities $ 261,314 $ 261,314 $ — $ — Corporate bonds 10,675 — 10,675 — Other fixed income securities 99 — 99 — Total securities sold not yet purchased 272,088 261,314 10,774 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,105 — — 4,105 Total liabilities measured at fair value $ 276,193 $ 261,314 $ 10,774 $ 4,105 Fair value as of June 30, 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 $ 345,514 $ 345,514 $ — $ — Securities and other investments owned: Equity securities 971,099 637,183 — 333,916 Corporate bonds 8,231 — 8,231 — Other fixed income securities 2,321 — 2,321 — Total securities and other investments owned 981,651 637,183 10,552 333,916 Loans receivable, at fair value 770,840 — — 770,840 Total assets measured at fair value $ 2,098,005 $ 982,697 $ 10,552 $ 1,104,756 Liabilities: Securities sold not yet purchased: Equity securities $ 226 $ 226 $ — $ — Corporate bonds 2,093 — 2,093 — Other fixed income securities 3,084 — 3,084 — Total securities sold not yet purchased 5,403 226 5,177 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,160 — — 4,160 Warrant liabilities 3,737 3,737 — — Contingent earnout 17,722 — — 17,722 Total liabilities measured at fair value $ 31,022 $ 3,963 $ 5,177 $ 21,882 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2020 Using Quoted prices in Other Significant Fair value at active markets for observable unobservable December 31 identical assets inputs inputs 2020 (Level 1) (Level 2) (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 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 20212022 and December 31, 2020,2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $588,793$1,104,756 and $539,981,$1,250,735, respectively, or 14.3%18.8% 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 June 30, 2021: Fair value at June 30, Weighted 2021 Valuation Technique Unobservable Input Range Average Assets: Equity securities 279,648 Market approach Multiple of EBITDA 5.85x - 12.00x 7.31x Multiple of PV-10 0.65x 0.65x Multiple of Sales 2.13x 2.13x Market price of related security $0.83 $0.83 38,850 Option pricing model Annualized volatility 0.21 - 2.83 $0.67 Loans receivable at fair value 270,295 Discounted cash flow Market interest rate 4.9% - 37.5% 16.9% Total level 3 assets measured at fair value $ 588,793 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,105 Market approach Operating income multiple 6.0x 6.0x Valuation
TechniqueUnobservable
InputRange Weighted
AverageAssets: Equity securities $ 266,927 Market approach Multiple of EBITDA 1.75x - 10.50x 6.39x Multiple of PV-10 0.33x 0.33x Multiple of Sales 1.00x 1.00x Market price of related security $9.90 - $24.16 $14.18 64,691 Discounted cash flow Market interest rate 17.8% 17.8% 2,298 Option pricing model Annualized volatility 30.0% - 678.0% 137.5% Loans receivable at fair value 770,840 Discounted cash flow Market interest rate 6.0% - 28.3% 20.9% Total level 3 assets measured at fair value $ 1,104,756 Liabilities: Mandatorily redeemable noncontrolling interests issued after November 5, 2003 $ 4,160 Market approach Operating income multiple 6.0x 6.0x Contingent earnout 17,722 Discounted cash flow EBITDA volatility 80.0% 80.0% Total level 3 liabilities measured at fair value $ 21,882 and 2020 arewere as follows: Level 3 Level 3 Changes During the Period Level 3 Balance at Fair Relating to Purchases, Transfer in Balance at Beginning of Value Undistributed Sales and and/or out End of Year Adjustments Earnings Settlements of Level 3 Period Six Months Ended June 30, 2021 Equity securities $ 149,292 $ 53,074 $ — $ 119,745 $ (3,613 ) $ 318,498 Loans receivable at fair value 390,689 10,141 4,473 (135,008 ) — 270,295 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — (595 ) — — 4,105 Six Months Ended June 30, 2020 Equity securities $ 109,251 $ (2,462 ) $ — $ 1,000 $ — $ 107,789 Loans receivable at fair value 43,338 (21,974 ) 2,462 75,843 225,848 325,517 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,616 — (265 ) — — 4,351 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 3Six Months Ended June 30, 2022 Equity securities $ 377,549 $ (24,047) $ — $ 18,423 $ (38,009) $ 333,916 Loans receivable at fair value 873,186 (47) 5,373 (66,835) (40,837) 770,840 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,506 — 468 (814) — 4,160 Contingent earnout — (4,500) — 22,222 — 17,722 Six Months Ended June 30, 2021 Equity securities $ 149,292 $ 53,074 $ — $ 119,745 $ (3,613) $ 318,498 Loans receivable at fair value 390,689 10,141 4,473 (135,008) — 270,295 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,700 — (595) — — 4,105 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 six months ended June 30, 2022 and 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 $1,213,105$1,644,678 and $870,783,$1,606,560, respectively, and fair value of $1,262,750$1,544,036 and $898,606,$1,661,189, respectively. The carrying amount of the term loans approximates fair value because the effective yield of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.sets forthpresents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2021. This investment was2022. These investments were measured due to an observable price change or impairment during the three months ended June 30, 2021. Fair Value Measurement Using Quoted prices in Other Significant active markets for observable unobservable identical assets inputs inputs Total (Level 1) (Level 2) (Level 3) As of June 30, 2021 Investments in nonpublic entities that do not report NAV $ 2,536 $ — $ 2,536 $ — As of December 31, 2020 Investments in nonpublic entities that do not report NAV $ — $ — $ — $ — During the six months ended June 30, 2021 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 additional 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 June 30, 2022 Investments in nonpublic entities that do not report NAV $ 16,387 $ — $ 15,737 $ 650 2021 and December 31, 2020,2022, there were no forward exchange contracts in the amountoutstanding. As of 20,200 Euros and 6,000 Euros, respectively,December 31, 2021, 6,000€ forward exchange contracts were outstanding. three and six months ended June 30, 2022 and 2021, respectively. There was no forward exchange contract activity during the three and six months ended June 30, 2020. This amount iswas reported as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.losses weregain was $834 and loss was $390 and $438 during the three months ended June 30, 20212022 and 2020,2021, respectively, and gains were $166$1,130 and $510$166 during the six20212022 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 June 30, 20212022 and December 31, 2020,2021, the warrant liability totaled $3,737 and $12,938, respectively, which was included in accrued expenses and other liabilities in the condensed consolidated balance sheet.$48,851$43,235 and $54,953,$39,190, respectively, were included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets. The Company’s share of earnings or losses from equity method investees iswas included in gain (loss)income from equity investments in the accompanying condensed consolidated statements of operations.AtAs of June 30, 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 was accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.As of June 30, 2021, the carrying value of the Company’s equity investment in bebe exceeded the fair value based on the quoted market prices. In consideration of these facts, the Company evaluated its investment for impairment. The Company did not utilize bright-line tests in the evaluation. Based on the available facts and information regarding the operating results of bebe, the Company’s ability and intent to hold the investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying values, the Company concluded that recognition of impairment losses in earnings was not required. However, the Company will continue to monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.National Holdings CorporationAs of December 31, 2020, the Company owned approximately 45% of the commons stock of National which was included in prepaid expenses and other assets in the condensed consolidated balance sheets. The equity ownership in National was accounted for under the equity method of accounting for periods prior to February 25, 2021. On February 25, 2021, the Company completed the acquisition of National by acquiring the 55% of common stock not previously owned by the Company pursuant to an agreement and plan of merger dated January 10, 2021, following the successful completion of a tender offer commenced by us on January 27, 2021. The cash consideration for the purchase of the 55% of common stock not previously owned by the Company and settlement of outstanding share based awards was $35,314. National’s operating results subsequent to February 25, 2021 is included in the Company’s condensed consolidated financial statements.hashad other equity investments over which the Company exercises significant influence but which dodid not meet the requirements for consolidation, including B. Riley Principal 150 Merger Corp., B. Riley Principal 250 Merger Corp., and 40% ownership interest in Lingo Management, LLC.consolidation. The equity ownership in these other investments was accounted for under the equity method of accounting and iswas included in prepaid expenses and other assets in the condensed consolidated balance sheets.(q) Loan Participations SoldAs of June 30, 2021, the Company has sold investments (“Loan Participations Sold”) to third parties (“Participants”) that are accounted for as secured borrowings under ASC Topic 860, Transfers and Servicing. 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 sheets. The Participants are entitled to payments made by the borrower of the related loan equal to the current Loan Participations Sold outstanding at the interest rates for the respective 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 June 30, 2021 and December 31, 2020, the Company had entered into participation agreements for a total of $4,444 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. Duringsix months ended June 30, 2020, non-cash investing activities included $4,633 non-cash conversion of an equity method investment and $6,170 conversioncharacteristics of a loan receivable to shares of stock.(s) ReclassificationsCertain amounts reported inVIE but are not consolidated as the Capital Markets segment for the three and six months ended June 30, 2020 have been reclassified and reported in the Financial Consulting and Wealth Management segments for the three and six months ended June 30, 2020 as a result of the organizational changes that created the new Financial Consulting segment in the fourth quarter of 2020 and Wealth Management segment in the first quarter of 2021.For the six months ended June 30, 2020, $797 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 determined that it 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.In November 2020, the Company invested in Lingo 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 Holdings Corporation (“National”), has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entitiesVIEs 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 six months ended June 30, 2022 and 2021 were $12,088 and $25,382, respectively, and are included in services and fees in the condensed consolidated statements of operations. June 30,
2021 Partnership investments $ 23,516 Equity Investment 2,255 Due from related party 536 Loans receivable, at fair value 57,400 Maximum exposure to loss $ 83,707 June 30,
2022December 31,
2021Securities and other investments owned, at fair value $ 30,968 $ 27,445 Loans receivable, at fair value 76,995 205,265 Other assets 2,855 4,956 Maximum exposure to loss $ 110,818 $ 237,666 (u)No. 2020-04, “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 another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective through December 31, 2022. The Company is currently assessing the potential impacts the adoption of ASU 2020-04 may have on its consolidated results of operations, cash flows, financial position or disclosures.August 2020,January 2021, the FASB issued ASU 2020-06, Debt – Debt with Conversion2021-01, 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 and six months ended June 30, 20212022 and 2020.2021. The following tables summarize the changes in accrued restructuring charge during the three and six months ended June 30, 20212022 and 2020: Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Balance, beginning of period $ 702 $ 1,284 $ 727 $ 1,600 Cash paid (29 ) (315 ) (57 ) (631 ) Non-cash items 3 10 6 10 Balance, end of period $ 676 $ 979 $ 676 $ 979 Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 Balance, beginning of period $ 599 $ 702 $ 624 $ 727 Cash paid (28) (29) (55) (57) Non-cash items 3 3 5 6 Balance, end of period $ 574 $ 676 $ 574 $ 676 4—4 — SECURITIES LENDING20212022 and December 31, 2020:Gross amounts recognized Net amounts included in the consolidated balance sheets Net amounts As of June 30, 2022 Securities borrowed $ 2,414,074 $ — $ 2,414,074 $ 2,414,074 $ — Securities loaned $ 2,414,201 $ — $ 2,414,201 $ 2,414,201 $ — 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 $ — Amounts not offset in the consolidated balance Gross amounts Net amounts sheets but eligible offset in the included in the for offsetting Gross amounts consolidated consolidated upon counterparty recognized balance sheets (1) balance sheets default(2) Net amounts As of June 30, 2021 Securities borrowed $ 1,140,023 $ — $ 1,140,023 $ 1,140,023 $ — Securities loaned $ 1,134,359 $ — $ 1,134,359 $ 1,134,359 $ — As of June 30, 2020 Securities borrowed $ 786,363 $ — $ 786,363 $ 786,363 $ — Securities loaned $ 779,013 $ — $ 779,013 $ 779,013 $ — (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 RECEIVABLEJune 30,
2022December 31,
2021Accounts receivable $ 45,339 $ 39,045 Investment banking fees, commissions and other receivables 10,369 14,286 Total accounts receivable 55,708 53,331 Allowance for doubtful accounts (2,773) (3,658) Accounts receivable, net $ 52,935 $ 49,673 Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 Balance, beginning of period $ 3,103 $ 3,526 $ 3,658 $ 3,599 Add: Additions to reserve 871 353 1,276 755 Less: Write-offs (1,209) (320) (2,169) (821) Less: Recovery 8 6 8 32 Balance, end of period $ 2,773 $ 3,565 $ 2,773 $ 3,565 June 30, December 31, 2021 2020 Accounts receivable $ 33,917 $ 33,604 Investment banking fees, commissions and other receivables 20,817 10,316 Unbilled receivables 6,684 5,712 Total accounts receivable 61,418 49,632 Allowance for doubtful accounts (3,565 ) (3,114 ) Accounts receivable, net $ 57,853 $ 46,518 June 30,
2022December 31,
2021Funds held in trust account $ 345,514 $ 345,024 Equity investments 43,235 39,190 Prepaid expenses 13,259 14,965 Unbilled receivables 16,491 12,315 Other receivables 46,533 40,483 Other assets 15,244 11,525 Prepaid expenses and other assets $ 480,276 $ 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 Balance, beginning of period $ 3,526 $ 2,238 $ 3,599 $ 1,514 Add: Additions to reserve 353 940 755 2,081 Less: Write-offs (320 ) (418 ) (821 ) (835 ) Less: Recovery 6 — 32 — Balance, end of period $ 3,565 $ 2,760 $ 3,565 $ 2,760 6—7 — GOODWILL AND OTHER INTANGIBLE ASSETS$236,005$394,331 and $227,046 at$250,568 as of June 30, 20212022 and December 31, 2020,2021, respectively.forduring the six months ended June 30, 20212022, resulting primarily from the acquisition of FocalPoint in the Capital Markets segment and Lingo in the Principal Investments – Communications and Other segment (as previously discussed in Note 1), were as follows: Principal Investments- Capital Wealth Auction and Financial United Online Markets Management Liquidation Consulting and magicJack Segment Segment Segment Segment 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 — 8,959 — — — 8,959 Balance as of June 30, 2021 $ 50,806 $ 37,355 $ 1,975 $ 23,680 $ 122,189 $ 236,005 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 businesses 110,512 — — — 33,251 143,763 Balance as of June 30, 2022 $ 161,850 $ 51,195 $ 1,975 $ 23,680 $ 155,631 $ 394,331 As of June 30, 2021 As of December 31, 2020 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Useful Life Value Amortization Net Value Amortization Net Amortizable assets: Customer relationships 0.1 to 13 Years $ 116,858 $ 50,153 $ 66,705 $ 98,898 $ 40,281 $ 58,617 Domain names 7 Years 235 165 70 235 148 87 Advertising relationships 8 Years 100 62 38 100 56 44 Internally developed software and other intangibles 0.5 to 5 Years 11,775 7,757 4,018 11,775 6,913 4,862 Trademarks 7 to 10 Years 5,469 1,272 4,197 2,850 991 1,859 Total 134,437 59,409 75,028 113,858 48,389 65,469 Non-amortizable assets: Tradenames 125,276 — 125,276 125,276 — 125,276 Total intangible assets $ 259,713 $ 59,409 $ 200,304 $ 239,134 $ 48,389 $ 190,745 As of June 30, 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 $ 184,949 $ (70,766) $ 114,183 $ 130,801 $ (59,671) $ 71,130 Domain names 7 years 185 (156) 29 185 (143) 42 Advertising relationships 8 years 100 (75) 25 100 (69) 31 Internally developed software and other intangibles 0.5 to 5 Years 21,855 (10,494) 11,361 15,275 (8,820) 6,455 Trademarks 3 to 10 Years 22,069 (2,621) 19,448 6,369 (1,652) 4,717 Total 229,158 (84,112) 145,046 152,730 (70,355) 82,375 Non-amortizable assets: Tradenames 125,276 — 125,276 125,276 — 125,276 Total intangible assets $ 354,434 $ (84,112) $ 270,322 $ 278,006 $ (70,355) $ 207,651 and $4,024 forduring the three months ended June 30, 20212022 and 2020,2021, respectively, and $13,756 and $11,020 and $8,048 forduring the six months ended June 30, 2022 and 2021, and 2020, respectively. AtAs of June 30, 2021,2022, estimated future amortization expense was $10,159, $17,193, $14,686, $10,745$14,825, $23,934, $19,814, $15,346, and $7,518$14,530 for the years ended December 31, 20212022 (remaining six months), 2022, 2023, 2024, 2025 and 2025,2026, respectively. The estimated future amortization expense after December 31, 20252026 was $14,727.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 made2(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 $39 and $108 and $143 forduring the three months ended June 30, 20212022 and 2020,2021, respectively, and $147 and $216 and $420 forduring the six months ended June 30, 20212022 and 2020,2021, respectively. There was no outstanding balance on this credit facility atas of June 30, 2021 or2022 and December 31, 2020. At2021. As of June 30, 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 June 30, 2021.Paycheck Protection ProgramOn April 10, 2020, NSC (a subsidiaryAs of National) entered into a Promissory Note (the “NSC Note”) with Axos Bank asJune 30, 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 $23,186 and $22,891, respectively. Interest expense was $295 and $5 during the Paycheck Protection Program (the “NSC Loan”) offered bythree months ended June 30, 2022 and 2021, respectively, and $527 and $12 during the U.S. Small Business Administration (the “SBA”) pursuantsix months ended June 30, 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.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.In June 2021, the full amount of the Company’s PPP loans and accrued interest were forgiven in the amount of $6,509, and the Company recorded a gain on extinguishment of loans for this amount in the accompanying Condensed Consolidated Statement of Operations.Other30, 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 June 30, 2021) payable annually, maturing, matured on January 31, 2022. At June 30, 20212022 and December 31, 2020, the outstanding balance for the notes payable was $357 and $714, respectively. Interest expense was $5 and $48 for the three months ended June 30, 2021 and 2020, respectively and $12 and $63 forrepaid during the six months ended June 30, 2021 and 2020, respectively.Also included in notes payable at December 31, 2020, was a $37,253 note payable to Garrison TNCI LLC which was assumed as part of the Company’s investment in Lingo Management LLC. The note accrued interest at 12.5% per annum and had a maturity date of March 31, 2021. During the six months ended June 30, 2021, interest expense on the note was $238. The note was paid in full in January 2021. 89 — TERM LOANS(the(as amended, the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Administrative Agent”), and Wells Fargo Bank, N.A., as collateral agent (the “Collateral Agent”), for a four-year $200,000 secured term loan credit facility (the “Term Loan Facility”) and a four-year $80,000 secured revolving loan credit facility (the “Revolving Credit Facility”).together withthe Borrower entered into a Second Incremental Amendment to Credit Agreement, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $100,000 (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility. The Borrower borrowed the full amount of the Incremental Term Loans on the Amendment Date. The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit“Credit Facilities”). The Credit Facilities will, mature on June 23, 2025, subject to acceleration or prepayment. will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans will accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.Operating EBITDAoperating earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of at least $115,000$135,000 and the Primary Guarantor to maintain net asset value of at least $900,000.$1,100,000. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.$2,500$3,750 per quarter.AtAs of June 30, 2022 and December 31, 2021, the outstanding balancebalances on the credit facility’s term loan was $194,218Term Loan Facility and Incremental Facility were $293,676 (net of unamortized debt issuance costs of $5,782).$6,324) and $292,650 (net of unamortized debt issuance costs of $7,350), respectively. Interest on the term loan forduring the three and six months ended June 30, 2022 and 2021 was $4,735 (including amortization of deferred debt issuance costs of $516) and $236 (including amortization of deferred debt issuance costs of $30)., respectively. Interest on the term loan during the six months ended June 30, 2022 and 2021 was $8,837 (including amortization of deferred debt issuance costs of $1,025) and $236 (including amortization of deferred debt issuance costs of $30), respectively. The interest rate on the term loan atas of June 30, 2022 and December 31, 2021 was 4.64%.not made any borrowingsan outstanding balance of $80,000 under the Revolving Credit Facility atas of June 30, 2022 and December 31, 2021. Interest on the revolving facility during the three and six months ended June 30, 2022 was $1,227 (including amortization of deferred financing costs of $145) and $2,327 (including amortization of deferred financing costs of $288), respectively. The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $30 (including amortization of deferred financing costs of $13). The interest rate on the revolving facility atas of June 30, 2022 and December 31, 2021 was 4.65%. Subsequent to June 30, 2021, the Company drew down the full $80,000 of the Revolving Credit Facility.Nomura Credit Agreement atas of June 30, 2021.UnderThrough a series of amendments, including 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 Firstmost recent Fourth Amendment to the Credit Agreement and Joinder (the “First Amendment”) pursuant to which, among other things, (i) New Lender became a party to the BRPAC Credit Agreement (ii) the New Lender extended to Borrowers the Option Loan in the amount of $10,000, (iii) the aggregate outstanding principal amount of the term loans was increased from $80,000 to $90,000; and (iv) the amortization schedule under the BRPAC was amended as set forth in the First Amendment. Additionally, in connection with the Option Loan, the Borrowers executed a term note in favor of New Lender dated February 1, 2019 in the amount of $10,000.On December 31, 2020,(the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders entered intoagreed to the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which,following, among other things,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 Loansterms loans and Optional Loansoptional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make a one-time Permitted Distribution (as defined incertain distributions to the Second Amendment) in the amount of $30,000 on the dateparent company 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’ obligationsBorrowers.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. Borrowings under theamended BRPAC Credit Agreement bear interest at 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%3.50% per annum, based upondepending on the Borrowers’ consolidated total funded debt ratio of consolidated funded indebtedness to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) foras defined in the preceding four fiscal quarters or other applicable period. AtBRPAC Credit Agreement. As of June 30, 20212022 and December 31, 2020,2021, the interest rate on the BRPAC Credit Agreement was 3.36%4.66% and 3.40%3.17%, respectively.AmountsPrincipal outstanding under the Amended BRPAC Credit Agreement areis due in quarterly installments commencing on March 31, 2021.installments. Quarterly installments from September 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$2,813 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3,750$4,688 per quarter, from March 31, 2024 to December 31, 20242026 are in the amount of $3,250$3,750 per quarter, and fromon March 31, 2025 to December 31, 2025 are2027 is in the amount of $2,750 per quarter.20212022 and December 31, 2020,2021, the outstanding balance on the term loan was $62,885$74,140 (net of unamortized debt issuance costs of $631)$860) 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 June 30, 2022 and 2021 was $578 (including amortization of deferred debt issuance costs of $99) and 2020, was $663 (including amortization of deferred debt issuance costs of $77) and $586 (including amortization of deferred debt issuance costs of $72), respectively. Interest expense on the term loan during the six months ended June 30, 2022 and 2021 was $1,080 (including amortization of deferred debt issuance costs of $171) and 2020, was $1,377 (including amortization of deferred debt issuance costs of $157) and $1,415 (including amortization of deferred debt issuance costs of $148), respectively.atas of June 30, 2021.9—10 — SENIOR NOTES PAYABLE June 30, December 31, 2021 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 152,573 134,657 6.375% Senior notes due February 28, 2025 139,218 130,942 6.000% Senior notes due January 31, 2028 255,718 — 5.500% Senior notes due March 31, 2026 192,858 — 1,227,004 880,340 Less: Unamortized debt issuance costs (13,899 ) (9,557 ) $ 1,213,105 $ 870,783 June 30,
2022December 31,
20216.750% Senior notes due May 31, 2024 $ 124,277 $ 111,170 6.500% Senior notes due September 30, 2026 180,224 178,787 6.375% Senior notes due February 28, 2025 145,726 144,521 6.000% Senior notes due January 31, 2028 266,058 259,347 5.500% Senior notes due March 31, 2026 217,440 214,243 5.250% Senior notes due August 31, 2028 405,483 397,302 5.000% Senior notes due December 31, 2026 324,714 322,679 1,663,922 1,628,049 Less: Unamortized debt issuance costs (19,144) (21,489) $ 1,644,778 $ 1,606,560 due with maturity dates ranging from May 20232024 to JanuaryAugust 2028 pursuant to At the MarketOn 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 6.0% 2028 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 5.5% 2026 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.On June 24, 2021, the Company announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the "Redemption Date"). The Notes have an aggregate principal amount of $122,793. The redemption price is equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date. The Notes, which are listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.On July 26, 2021, the Company redeemed, in full, $122,793 aggregate principal amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017. The total redemption payment included approximately $2,127 in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.At June 30, 20212022 and December 31, 2020,2021, the total senior notes outstanding was $1,213,105$1,644,778 (net of unamortized debt issue costs of $13,900)$19,144) 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%5.70% and 6.95%5.69%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $19,970$24,650 and $15,588$19,970 for the three months ended June 30, 20212022 and 2020,2021, respectively, and $38,564totaled $49,072 and $29,980$38,564 for the six months ended June 30, 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 June 30, 2022 and December 31, 2021, the Company had $64,673$76,038 and $111,911, respectively, remaining availability under the April 2021 Sales Agreement.June 30,
2022December 31,
2021Accrued payroll and related expenses $ 70,955 $ 107,904 Dividends payable 28,514 28,486 Income taxes payable 35,459 39,776 Other tax liabilities 18,869 20,106 Contingent consideration 17,722 — Accrued expenses 30,387 96,250 Other liabilities 43,867 51,228 Accrued expenses and other liabilities $ 245,773 $ 343,750 10—12 — REVENUE FROM CONTRACTS WITH CUSTOMERSand 2020 iswas as follows: Principal Investments - Capital Wealth Auction and Financial United Online
and Markets Management Liquidation Consulting magicJack Brands Segment Segment Segment Segment Segment Segment Total Revenues for the three months ended June 30, 2021 Corporate finance, consulting and investment
banking fees $ 107,224 $ — $ — $ 14,513 $ — $ — $ 121,737 Wealth and asset management fees 1,994 67,017 — — — — 69,011 Commissions, fees and reimbursed expenses 11,265 18,132 4,749 9,222 — — 43,369 Subscription services — — — — 17,255 — 17,255 Service contract revenues — — 784 — — — 784 Advertising, licensing and other (1) — — 11,743 — 2,391 4,501 18,635 Total revenues from contracts with customers 120,483 85,149 17,277 23,735 19,646 4,501 270,791 Interest income - Loans and securities lending 25,491 — — — — — 25,491 Trading gains on investments 30,577 2,865 — — — (83 ) 33,359 Fair value adjustment on loans (680 ) — — — — — (680 ) Other 5,514 2,295 — — — — 7,809 Total revenues $ 181,385 $ 90,309 $ 17,277 $ 23,735 $ 19,646 $ 4,418 $ 336,770 Capital
Markets
SegmentWealth
Management
SegmentAuction and
Liquidation
SegmentFinancial
Consulting
SegmentPrincipal
Investments -
Communications and Other SegmentBrands
SegmentTotal Revenues for the three months ended June 30, 2022 Corporate finance, consulting and investment banking fees $ 35,473 $ — $ — $ 15,646 $ — $ — $ 51,119 Wealth and asset management fees 2,519 53,291 — — — — 55,810 Commissions, fees and reimbursed expenses 11,336 3,311 2,488 8,664 — — 25,799 Subscription services — — — — 37,809 — 37,809 — — — — 4,724 5,174 9,898 Total revenues from contracts with customers 49,328 56,602 2,488 24,310 42,533 5,174 180,435 Interest income - Loans and securities lending 62,399 — 1,436 — — — 63,835 Trading (losses) gains on investments (214,493) 1,528 — — — 0 (212,965) Fair value adjustment on loans (10,962) — — — — — (10,962) Other 18,098 4,259 — — — — 22,357 Total revenues $ (95,630) $ 62,389 $ 3,924 $ 24,310 $ 42,533 $ 5,174 $ 42,700 (1)Includes sale of goods of $11,743 in Auction and Liquidation and $714 in Principal Investments - United Online and magicJack.Revenues for the three months ended June 30, 2020 Corporate finance, consulting and investment
banking fees $ 38,498 $ — $ — $ 11,155 $ — $ — $ 49,653 Wealth and asset management fees 3,641 15,060 — — — — 18,701 Commissions, fees and reimbursed expenses 12,785 — 2,596 7,668 — — 23,049 Subscription services — — — — 18,287 — 18,287 Service contract revenues — — 4,610 — — — 4,610 Advertising, licensing and other (1) — — 1,045 — 3,145 3,206 7,396 Total revenues from contracts with customers 54,924 15,060 8,251 18,823 21,432 3,206 121,696 Interest income - Loans and securities lending 24,506 — — — — — 24,506 Trading gains on investments 118,128 467 — — — — 118,595 Fair value adjustment on loans (4,049 ) — — — — — (4,049 ) Other 5,440 258 — 22 — — 5,720 Total revenues $ 198,949 $ 15,785 $ 8,251 $ 18,845 $ 21,432 $ 3,206 $ 266,468 (1)Includes sale of goods of $1,045 in Auction and Liquidation and $775 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 June 30, 2021 Corporate finance, consulting and investment banking fees $ 107,224 $ — $ — $ 14,513 $ — $ — $ 121,737 Wealth and asset management fees 1,994 67,017 — — — — 69,011 Commissions, fees and reimbursed expenses 11,265 18,132 4,749 9,222 — — 43,368 Subscription services — — — — 17,255 — 17,255 Service contract revenues — — 784 — — — 784 — — 11,744 — 2,391 4,501 18,636 Total revenues from contracts with customers 120,483 85,149 17,277 23,735 19,646 4,501 270,791 Interest income - Loans and securities lending 25,491 — — — — — 25,491 Trading gains on investments 30,577 2,865 — — — (83) 33,359 Fair value adjustment on loans (680) — — — — — (680) Other 5,514 2,295 — 0 — — 7,809 Total revenues $ 181,385 $ 90,309 $ 17,277 $ 23,735 $ 19,646 $ 4,418 $ 336,770 Capital
Markets
SegmentWealth
Management
SegmentAuction and
Liquidation
SegmentFinancial
Consulting
SegmentPrincipal
Investments -
Communications and Other SegmentBrands
SegmentTotal Revenues for the six months ended June 30, 2022 Corporate finance, consulting and investment banking fees $ 77,146 $ — $ — $ 32,616 $ — $ — $ 109,762 Wealth and asset management fees 4,919 117,513 — — — — 122,432 Commissions, fees and reimbursed expenses 23,381 16,161 5,843 17,630 — — 63,015 Subscription services — — — — 65,622 — 65,622 — — — — 9,575 9,731 19,306 Total revenues from contracts with customers 105,446 133,674 5,843 50,246 75,197 9,731 380,137 Interest income - Loans and securities lending 123,825 — 1,436 — — — 125,261 Trading (losses) gains on investments (294,343) 2,050 — — — — (292,293) Fair value adjustment on loans (24) — — — — — (24) Other 31,064 4,144 — — — — 35,208 Total revenues $ (34,032) $ 139,868 $ 7,279 $ 50,246 $ 75,197 $ 9,731 $ 248,289 Principal Investments - Capital Wealth Auction and Financial
and Markets Management Liquidation Consulting magicJack Brands Segment Segment Segment Segment Segment Segment Total Revenues for the six months ended June 30, 2021 Corporate finance, consulting and investment banking fees $ 254,293 $ — $ — $ 27,940 $ — $ — $ 282,233 Wealth and asset management fees 4,878 117,528 — — — — 122,406 Commissions, fees and reimbursed expenses 26,809 31,600 11,807 17,204 — — 87,420 Subscription services — — — — 34,499 — 34,499 Service contract revenues — — 1,085 — — — 1,085 Advertising, licensing and other (1) — — 17,835 — 5,676 8,889 32,400 Total revenues from contracts with customers 285,980 149,128 30,727 45,144 40,175 8,889 560,043 Interest income - Loans and securities lending 62,411 — — — — — 62,411 Trading gains on investments 284,354 5,221 — — — — 289,575 Fair value adjustment on loans 10,046 — — — — — 10,046 Other 10,996 3,858 — — — — 14,854 Total revenues $ 653,787 $ 158,207 $ 30,727 $ 45,144 $ 40,175 $ 8,889 $ 936,929 (1)Includes sale of goods of $17,835 in Auction and Liquidation and $1,450 in Principal Investments - United Online and magicJack.Revenues for the six months ended June 30, 2020 Corporate finance, consulting and investment banking fees $ 94,386 $ — $ — $ 22,648 $ — $ — $ 117,034 Wealth and asset management fees 5,304 33,718 — — — — 39,022 Commissions, fees and reimbursed expenses 27,255 — 18,774 16,457 — — 62,486 Subscription services — — — — 37,120 — 37,120 Service contract revenues — — 9,093 — — — 9,093 Advertising, licensing and other (1) — — 1,045 — 7,034 7,007 15,086 Total revenues from contracts with customers 126,945 33,718 28,912 39,105 44,154 7,007 279,841 Interest income - Loans and securities lending 46,357 — — — — — 46,357 Trading losses on investments (45,960 ) 40 — — — — (45,920 ) Fair value adjustment on loans (21,975 ) — — — — — (21,975 ) Other 7,018 487 — 454 — — 7,959 Total revenues $ 112,385 $ 34,245 $ 28,912 $ 39,559 $ 44,154 $ 7,007 $ 266,262 Capital
Markets
SegmentWealth
Management
SegmentAuction and
Liquidation
SegmentFinancial
Consulting
SegmentPrincipal
Investments -
Communications and Other SegmentBrands
SegmentTotal Revenues for the six months ended June 30, 2021 Corporate finance, consulting and investment banking fees $ 254,293 $ — $ — $ 27,940 $ — $ — $ 282,233 Wealth and asset management fees 4,878 117,528 — — — — 122,406 Commissions, fees and reimbursed expenses 26,809 31,600 11,807 17,204 — — 87,420 Subscription services — — — — 34,499 — 34,499 Service contract revenues — — 1,085 — — — 1,085 — — 17,835 — 5,676 8,889 32,400 Total revenues from contracts with customers 285,980 149,128 30,727 45,144 40,175 8,889 560,043 Interest income - Loans and securities lending 62,411 — — — — — 62,411 Trading (losses) gains on investments 284,354 5,221 — — — — 289,575 Fair value adjustment on loans 10,046 — — — — — 10,046 Other 10,996 3,858 — — — — 14,854 Total revenues $ 653,787 $ 158,207 $ 30,727 $ 45,144 $ 40,175 $ 8,889 $ 936,929 (1)Includes sale of goods of $1,044 in Auction and Liquidation and $1,780 in Principal Investments - United Online and magicJack.$57,853$52,935 and $46,518 at$49,673 as of June 30, 20212022 and December 31, 2020,2021, respectively. The Company had no significant impairments related to these receivables during the three and six months ended June 30, 20212022 and 2020.2021. The Company also has $6,684had $16,491 and $5,712$12,315 of unbilled receivables atincluded in prepaid expenses and other assets as of June 30, 20212022 and December 31, 2020,2021, respectively, and advances against customer contracts included in prepaid expenses and other assets of $200 atas of June 30, 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 beenatas of June 30, 20212022 and December 31, 20202021 was $68,398$79,226 and $68,651,$69,507, respectively. The Company expects to recognize the deferred revenue of $68,398 at$79,226 as of June 30, 20212022 as service and fee revenues when the performance obligation is met during the years December 31, 20212022 (remaining six months), 2022, 2023, 2024, 2025 and 20252026 in the amount of $37,452, $11,493, $7,632, $5,212,$48,031, $12,620, $8,421, $4,792, and $3,025,$2,247, respectively. The Company expects to recognize the deferred revenue of $3,584$3,115 after December 31, 2025.20212022 and 2020,2021, the Company recognized revenue of $9,370$10,055 and $10,087$9,370 that was recorded as deferred revenue at the beginning of the respective year. During the six months ended June 30, 20212022 and 2020,2021, the Company recognized revenue of $26,649$24,994 and $24,074$26,649 that was recorded as deferred revenue at the beginning of the respective year.$242$2,564 and $279 at$1,605 as of June 30, 20212022 and December 31, 2020,2021, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets. ForDuring the three months ended June 30, 20212022 and 2020,2021, the Company recognized expenses of $51$175 and $70$51 related to capitalized costs to fulfill a contract, respectively. ForDuring the six months ended June 30, 20212022 and 2020,2021, the Company recognized expenses of $109$1,090 and $142$109 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three and six months ended June 30, 20212022 and 2020.atas of June 30, 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 June 30, 2021.11—13 — INCOME TAXES26.1%27.8% and benefit of 24.2%26.1% for the six months ended June 30, 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$61,315$65,900 against these deferred tax assets.20172018 to 2020.12—14 — EARNINGS PER SHARE936,7271,757,081 and 1,365,738936,727 for the three months ended June 30, 20212022 and 2020,2021, respectively, and 832,3601,553,571 and 1,592,958832,360 for the six months ended June 30, 20212022 and 2020,2021, respectively, because to do so would have been anti-dilutive. Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Net income (loss) attributable to B. Riley Financial, Inc. $ 75,676 $ 83,840 $ 330,332 $ (14,825 ) Preferred stock dividends (1,789 ) (1,087 ) (3,538 ) (2,142 ) Net income (loss) applicable to common shareholders $ 73,887 $ 82,753 $ 326,794 $ (16,967 ) Weighted average common shares outstanding: Basic 27,344,184 25,627,085 27,159,257 25,827,849 Effect of dilutive potential common shares: Restricted stock units and warrants 1,324,281 1,365,738 1,531,187 — Diluted 28,668,465 26,992,823 28,690,444 25,827,849 Basic income (loss) per common share $ 2.70 $ 3.23 $ 12.03 $ (0.66 ) Diluted income (loss) per common share $ 2.58 $ 3.07 $ 11.39 $ (0.66 ) Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 Net (loss) income attributable to B. Riley Financial, Inc. $ (140,159) $ 75,676 $ (150,221) $ 330,332 Preferred stock dividends (2,002) (1,789) (4,004) (3,538) Net (loss) income applicable to common shareholders $ (142,161) $ 73,887 $ (154,225) $ 326,794 Weighted average common shares outstanding: Basic 28,051,570 27,344,184 27,953,845 27,159,257 Effect of dilutive potential common shares: Restricted stock units and warrants — 1,324,281 — 1,531,187 Diluted 28,051,570 28,668,465 27,953,845 28,690,444 Basic (loss) income per common share $ (5.07) $ 2.70 $ (5.52) $ 12.03 Diluted (loss) income per common share $ (5.07) $ 2.58 $ (5.52) $ 11.39 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”) 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 $3,000 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.Babcock & Wilcox Enterprises, Inc. (“B&W”)&W may owe to providers of cash collateral pledged in connection with B&W’s debt financing. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $935 per annum in connection with the B. Riley Guaranty. B&W has agreed to reimburse the Company to the extent the B. Riley Guaranty is called upon.(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.May 14, 2020,December 22, 2021, the Company entered into ana general agreement to provide B&W future commitments to loan B&W up to $40,000 at various dates startingof indemnity in November 2020,favor of which, at June 30, 2021, no amounts remain available. The Company provided a limited guarantyone of B&W’s obligations under B&W’s credit facility with Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (the “BOA Credit Facility”), which was paid off and the Company’s obligations relating thereto terminated as of June 30, 2021, as more fully described in Note 16 - Related Party Transactions(c) Other CommitmentsOn June 19, 2020,sureties. Pursuant to this indemnity agreement, the Company participatedagreed to indemnify the surety in connection with a loan facility agreement to providedefault by B&W under a total loan commitment up to 33,000 EUROS to30,000€ payment and performance bond issued by the surety in connection with a retailer in Europe. The Company made an initial funding of 6,600 EUROS in July 2020. No additional borrowings have been made sinceconstruction project undertaken by B&W. In consideration for providing the initial funding, leaving unused future commitments available of up to 26,400 EUROS as of June 30, 2021 and December 31, 2020. At June 30, 2021,indemnity, B&W paid the Company had an outstanding commitment to purchase a loan pursuant to an assignment agreement with a clientfees in the amount of $77,477 that was funded$1,694 on July 2, 2021. Simultaneously withJanuary 20, 2022.fundingnormal course of the loan on July 2, 2021,business, the Company receivedenters into commitments to its clients in connection with capital raising transactions, such as firm commitment underwritings, equity lines of credit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company to purchase securities at a principal paymentspecified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the loanCompany to market and credit risk, primarily in the event that, for $27,477 reducingany reason, securities purchased by the loans receivableCompany cannot be distributed at the anticipated price and to balance to $50,000.sheet risk in the event that debt or equity financing commitments cannot be syndicated.14—16 — SHARE-BASED PAYMENTSAmended2021 Plan was $14,159 and Restated 2009 Stock Incentive Plan (the “Plan”) was $8,493 and $4,109 for the three months ended June 30, 20212022 and 2020,2021, respectively, and $13,792$31,019 and $9,265$13,792 for the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, in connection with employee stock incentive plans, the Company granted 555,168 restricted stock units with a grant date fair value of $31,670 and 2020, respectively.65,000 performance based restricted stock units with a grant date fair value of $2,329. During the six months ended June 30, 2021, in connection with employee stock incentive plans, the Company granted 365,050 restricted stock units with a grant date fair value of $25,534 and 1,100,000 performance based restricted stock units with a grant date fair value of $40,876. 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 thetwo to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value is adjusted for (a) estimated forfeitures, (b) expected dividends based on historical patterns and the Company’s anticipated dividend payments over the expected holding period and (c) the risk-free interest rate based on U.S. Treasuries for a maturity matching the expected holding period.$115$43 and $59$115 for the three months ended June 30, 20212022 and 2020,2021, respectively, and $342$196 and $224$342 for the six months ended June 30, 2022 and 2021, and 2020, respectively. AtAs of June 30, 2022 and December 31, 2021, there were 471,973398,442 and 450,717 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 six months ended June 30, 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 fees19,659 and costs.(d) Preferred StockDuring the six months ended June 30, 2021, the Company issued 76,417 depository shares of the Series A Preferred Stock.Stock, respectively. There were 2,6572,834,144 and 2,5812,814,485 shares issued and outstanding as of June 30, 20212022 and December 31, 2020,2021, respectively. Total liquidation preference for the Series A Preferred Stock atas of June 30, 20212022 and December 31, 2020,2021, was $66,430$70,854 and $64,519,$70,362, respectively. Dividends on the Series A preferred paid during the six months ended June 30, 2022 and 2021, were $0.859375$0.4296875 per depository share.1,6181,701,075 and 1,3901,697,134 shares issued and outstanding as of June 30, 20212022 and December 31, 2020,2021, respectively. Total liquidation preference for the Series B Preferred Stock atas of June 30, 20212022 and December 31, 2020,2021, was $40,452$42,527 and $34,741,$42,428, respectively. Dividends on the Series B preferred paid during the six months ended June 30, 2022 and 2021, were $0.921875$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 June 30, 2021,2022, BRS had net capital of $329,063,$150,415, which was $324,101$146,305 in excess of required minimum net capital of $4,962;$4,110; BRWM had net capital of $10,073,$10,699, which was $9,328$10,029 in excess of required minimum net capital of $745;$670; NSC had net capital of $7,162$363 which was $6,162$113 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,$250; and FocalPoint had net capital of $2,599$513 which was $2,460$271 in excess of the required minimum net capital of $242.$139.$1,000.16—18 — RELATED PARTY TRANSACTIONSAt$734$2,306 included $1$621 from GACP I, L.P. (“GACP I”) and $536 from GACP II, L.P. (“GACP II”)the Funds for management fees and other operating expenses, and $197$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 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”) for management fees and other operating expenses, and $433 due from CA Global Partners (“CA Global”) for operating expenseswholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.At June 30, 2021, the Company had sold loan participations sold to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of itsthe Company's subsidiaries, in the amount of $1,975, and recorded interest expense of $133 and $479 during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, the Company recorded interest expense of $133 and $479 related to BRCPOF’s loan participations sold to BRCPOF. No commission income was recorded from introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2022, respectively. The Company also recorded commission income of $93$92 and $422 from introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2021, respectively.2021. Our executive officers and members of our board of directors have a 65.6%48.1% financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of 52.8%27.3% in the BRCPOF atas of June 30, 2021. At June 30, 2021 and December 31, 2020, the Company had outstanding loan to participations to BRCPOF in the amount of $1,975 and $14,816, respectively. II.II, L.P. During the three and six months ended June 30, 2022 and 2021, management fees paid for investment advisory services by Whitehawk was $94 and $236, respectively, and during the six months ended June 30, 2022 and 2021 management fees paid was $1,173 and $1,446, respectively.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 IPO.BRPM 250$3,337$11 and $1,710, respectively, of underwriting fees from the initial public offering of B. Riley Principal 250 Merger Corp, (“BRPM 250”), 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 250 IPO”). The Company has also agreed to loan BRPM 250 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 250 $100 which was repaid in full on May 17, 2021, using proceeds from the BRPM 250 initial public offering.SonimOn June 30, 2021, the Companyfinancial advisory and EF Hutton, division of Benchmark Investments, LLC (the “Sales Agents”), as sales agents, entered into an At Market Issuance Sales Agreement (the “Sonim Sales Agreement”) with Sonim Technologies, Inc. (“Sonim”) to sell shares of Sonim’s common stock, $0.001 par value per share (the “Sonim Common Stock”), having an aggregate offering price of up to $10,000 (the “Sonim Shares”) through the Sales Agents. Under the Sonim Sales Agreement, the Sales Agents will be entitled to compensation of up to 3.0% of the gross proceeds from each sale of Sonim Shares sold through the Sales Agents.Babcock and WilcoxThe Company had a last-out term loan receivable dueother fees from B&W that was included in loans receivable, at fair valueconnection with a fair value of $176,191 at December 31, 2020. On June 1, 2021 the Company agreed to settle the outstanding balance and accrued interest on the last-out term loan receivable in exchange for $848 and 2,916,880 shares of B&W’s 7.75% Series A Cumulative Perpetual Preferred Stock. Additionally, the Company holds senior notes from B&W with a fair value of $21,415 at June 30, 2021.On January 31, 2020, the Company provided B&W with an additional $30,000 of last-out term loans pursuant to amendments to B&W’s BOA Credit Facility. On May 14, 2020, the Company provided B&W with another $30,000 of last-out term loans pursuant to a further amendment to the BOA Credit Facility which also included future commitments for the Company to loan B&W $40,000 at various dates starting in November 2020 and a limited guaranty of B&W’s obligations under the amended BOA Credit Facility, (the “Amendment Transactions”). In November 2020, an additional $10,000 was funded under the Amendment Transactions. 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 June 30, 2021, the amended BOA Credit Facility was paid off and the Company’s obligations relating thereto terminated.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 Tranche A Term Loans made by the Company to B&W pursuant to the new BOA Credit Facility. three and six months ended June 30, 2022 and 2021, the Company earned $1,710$64 and $12,348, respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.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. (“Maven”) that are("Arena") included in loans receivable, at fair value with a fair value of $60,491$68,047 and $56,552 at$69,835 as of June 30, 20212022 and December 31, 2020,2021, respectively. Interest on these loans is payable at 10% per annum with maturity dates through December 2022.On October 28, 2020, in connection with a capital raise by Maven,2023. During 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 $9,991three 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”) included in loans receivable, at fair value with a fair value of $56,335 and $55,066 at June 30, 2021 and December 31, 2020, respectively. The term loan bears interest at 16.0% per annum with a maturity date of December 1, 2022. The term loan has a conversion feature under which $17,500 will convert to additional equity ownership upon receipt of certain regulatory approval. If those regulatory approvals are received, the conversion would increase the Company’s ownership interest in Lingo from 40% to 80%. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $1,100. The note bears interest at 6% per annum with a maturity date of March 31, 2022.bebeThe Company has a loan receivable due from bebe stores, Inc. included in loans receivable, at fair value with a fair value of $7,900 and $8,000 at June 30, 2021 and December 31, 2020, respectively. The term loan bears interest at 16.0% per annum with a maturity date of November 10, 2021.OtherThe Company has loans receivable due from Dash Holding Company, Inc. with a fair value of $3,020 and Rumble On, Inc. with a fair value of $2,568 included in loans receivable, at fair value at June 30, 2021. On March 2, 2021, the Company purchased a $2,400 minority 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 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 of the Company’s senior executives serve on the board of directors, which bears interest at 12% and is due on September 30, 2021.During the six months ended June 30, 2021,2022, the Company earned $2,957$2 and $1,234 of$2,023, respectively, in underwriting and financial advisory and other fees from Rumble Arena in connection with Arena's capital raising activities.IncNovember 1, 2021, the Company extended a $34,393 bridge promissory note bearing interest at up to 10.0% per annum to California Natural Resources Group, LLC (“CalNRG”). On January 3, 2022, CalNRG repaid the promissory note using proceeds from a new credit facility with a third party bank (the “CalNRG Credit Facility”). The Company has guaranteed CalNRG’s obligations, up to $10,375, under the CalNRG Credit Facility.Applied Blockchain, Inc,accrued interest pursuant to the Bridge Agreement was repaid upon closing of Faze’s business combination (the “Business Combination”) with BRPM 150, which following the Business Combination changed its name to Fazecompanyresult of the Business Combination, BRPM 150 is no longer a VIE of the Company. On July 19, 2022, in connection with the Business Combination, the Company purchased 5,342,500 shares of Faze Holdings Class A common stock for $10.00 per share.a senior executive of the Company and the spouse of a senior executive of the Company servehas significant influence through equity ownership, representation on the board of directors (or similar governing body), or both. Other than the fees described above, during the three months ended June 30, 2022 and in which employees and executives of2021, the Company are investors,earned $2,156 and $1,234, respectively, in connection with capital raising activities.of fees related to these services and during the six months ended June 30, 2022 and 2021, the Company earned $4,036 and $2,957, respectively, of fees related to these services.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 In 2022, 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 reportedresults in the Capital Markets segment are now reportedinclude the operations of FocalPoint and the segment results in the Wealth Management segment. UnderPrincipal Investments – Communications and Other segment include the new structure, there is a new segment for Wealth Management. In conjunction withoperations from Lingo (as previously discussed in Note 1) in each case from the new reporting structure, the Company recast its segment presentation for all periods presented. Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Capital Markets segment: Revenues - Services and fees $ 125,997 $ 60,364 $ 296,976 $ 133,964 Trading income and fair value adjustments on loans 29,897 114,080 294,400 (67,935 ) Interest income - Loans and securities lending 25,491 24,506 62,411 46,357 Total revenues 181,385 198,950 653,787 112,386 Selling, general and administrative expenses (65,473 ) (56,623 ) (151,613 ) (84,924 ) Interest expense - Securities lending and loan participations sold (10,983 ) (11,221 ) (30,172 ) (19,694 ) Depreciation and amortization (247 ) (595 ) (1,012 ) (1,191 ) Segment income 104,682 130,511 470,990 6,577 Wealth Management segment: Revenues - Services and fees 87,444 15,318 152,986 34,205 Trading income and fair value adjustments on loans 2,865 467 5,221 40 Total revenues 90,309 15,785 158,207 34,245 Selling, general and administrative expenses (88,702 ) (15,283 ) (150,174 ) (32,831 ) Depreciation and amortization (2,340 ) (470 ) (4,739 ) (953 ) Segment (loss) income (733 ) 32 3,294 461 Auction and Liquidation segment: Revenues - Services and fees 5,534 7,206 12,892 27,867 Revenues - Sale of goods 11,743 1,045 17,835 1,045 Total revenues 17,277 8,251 30,727 28,912 Direct cost of services (7,540 ) (3,217 ) (14,120 ) (18,033 ) Cost of goods sold (3,105 ) (285 ) (7,579 ) (314 ) Selling, general and administrative expenses (3,077 ) (2,729 ) (4,566 ) (4,255 ) Depreciation and amortization — — — (1 ) Segment income 3,555 2,020 4,462 6,309 Financial Consulting segment: Revenues - Services and fees 23,735 18,845 45,144 39,559 Selling, general and administrative expenses (19,471 ) (15,268 ) (37,460 ) (30,997 ) Depreciation and amortization (89 ) (73 ) (187 ) (140 ) Segment income 4,175 3,504 7,497 8,422 Principal Investments - United Online and magicJack segment: Revenues - Services and fees 18,932 20,656 38,725 42,374 Revenues - Sale of goods 714 775 1,450 1,779 Total revenues 19,646 21,431 40,175 44,153 Direct cost of services (4,554 ) (4,768 ) (9,296 ) (9,904 ) Cost of goods sold (521 ) (575 ) (1,373 ) (1,315 ) Selling, general and administrative expenses (4,768 ) (4,049 ) (9,638 ) (9,512 ) Depreciation and amortization (2,528 ) (2,851 ) (5,062 ) (5,730 ) Segment income 7,275 9,188 14,806 17,692 Brands segment: Revenues - Services and fees 4,501 3,206 8,889 7,007 Trading loss and fair value adjustments on loans (83 ) — — — Total revenues 4,418 3,206 8,889 7,007 Selling, general and administrative expenses (690 ) (309 ) (1,366 ) (1,213 ) Depreciation and amortization (715 ) (715 ) (1,429 ) (1,429 ) Impairment of tradenames — (8,500 ) — (12,500 ) Segment income (loss) 3,013 (6,318 ) 6,094 (8,135 ) Consolidated operating income from reportable segments 121,967 138,937 507,143 31,326 Corporate and other expenses (11,822 ) (7,597 ) (24,020 ) (21,130 ) Interest income 56 224 105 470 Gain on extinguishment of loans 6,509 — 6,509 — (Loss) income on equity investments (852 ) (318 ) 23 (554 ) Interest expense (20,856 ) (16,509 ) (40,642 ) (32,163 ) Income (loss) before income taxes 95,002 114,737 449,118 (22,051 ) (Provision) benefit for income taxes (19,902 ) (32,208 ) (117,420 ) 5,331 Net income (loss) 75,100 82,529 331,698 (16,720 ) Net (loss) income attributable to noncontrolling interests (576 ) (1,311 ) 1,366 (1,895 ) Net income (loss) attributable to B. Riley Financial, Inc. 75,676 83,840 330,332 (14,825 ) Preferred stock dividends 1,789 1,087 3,538 2,142 Net income (loss) available to common shareholders $ 73,887 $ 82,753 $ 326,794 $ (16,967 ) Six Months Ended
June 30,2022 2021 2022 2021 Capital Markets segment: Revenues - Services and fees $ 67,426 $ 125,997 $ 136,510 $ 296,976 Trading (loss) income and fair value adjustments on loans (225,455) 29,897 (294,367) 294,400 Interest income - Loans and securities lending 62,399 25,491 123,825 62,411 Total revenues (95,630) 181,385 (34,032) 653,787 Selling, general and administrative expenses (45,865) (65,473) (79,982) (151,613) Interest expense - Securities lending and loan participations sold (14,544) (10,983) (26,310) (30,172) Depreciation and amortization (2,204) (247) (4,097) (1,012) Segment (loss) income (158,243) 104,682 (144,421) 470,990 Wealth Management segment: Revenues - Services and fees 60,861 87,444 137,818 152,986 Trading income and fair value adjustments on loans 1,528 2,865 2,050 5,221 Total revenues 62,389 90,309 139,868 158,207 Selling, general and administrative expenses (68,394) (88,702) (154,136) (150,174) Depreciation and amortization (1,308) (2,340) (3,141) (4,739) Segment (loss) income (7,313) (733) (17,409) 3,294 Auction and Liquidation segment: Revenues - Services and fees 2,488 5,534 5,843 12,892 Revenues - Sale of goods — 11,743 — 17,835 Interest income - Loans and securities lending 1,436 — 1,436 — Total revenues 3,924 17,277 7,279 30,727 Direct cost of services (1,296) (7,540) (3,631) (14,120) Cost of goods sold — (3,105) — (7,579) Selling, general and administrative expenses (2,177) (3,077) (3,997) (4,566) Segment income (loss) 451 3,555 (349) 4,462 Financial Consulting segment: Revenues - Services and fees 24,310 23,735 50,246 45,144 Selling, general and administrative expenses (19,948) (19,471) (40,891) (37,460) Depreciation and amortization (78) (89) (159) (187) Segment income 4,284 4,175 9,196 7,497 Principal Investments - Communications and Other segment: Revenues - Services and fees 40,646 18,932 71,432 38,725 Revenues - Sale of goods 1,887 714 3,765 1,450 Total revenues 42,533 19,646 75,197 40,175 Direct cost of services (16,489) (4,554) (25,805) (9,296) Cost of goods sold (1,994) (521) (4,245) (1,373) Selling, general and administrative expenses (12,808) (4,768) (21,836) (9,638) Depreciation and amortization (3,595) (2,528) (6,820) (5,062) Segment income 7,647 7,275 16,491 14,806 Brands segment: Revenues - Services and fees 5,174 4,501 9,731 8,889 Trading loss and fair value adjustments on loans — (83) — — Total revenues 5,174 4,418 9,731 8,889 Selling, general and administrative expenses (818) (690) (1,574) (1,366) Depreciation and amortization (583) (715) (1,166) (1,429) Segment income 3,773 3,013 6,991 6,094 Consolidated operating (loss) income from reportable segments (149,401) 121,967 (129,501) 507,143 Corporate and other expenses (9,358) (11,822) (24,536) (24,020) Interest income 500 56 567 105 Change in fair value of financial instruments and other 4,321 6,509 10,302 6,509 (Loss) income from equity investments (3,399) (852) 3,376 23 Interest expense (31,764) (20,856) (62,200) (40,642) (Loss) income before income taxes (189,101) 95,002 (201,992) 449,118 Benefit from (provision for) income taxes 52,513 (19,902) 56,208 (117,420) Net (loss) income (136,588) 75,100 (145,784) 331,698 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 3,571 (576) 4,437 1,366 Net (loss) income attributable to B. Riley Financial, Inc. (140,159) 75,676 (150,221) 330,332 Preferred stock dividends 2,002 1,789 4,004 3,538 Net (loss) income available to common shareholders $ (142,161) $ 73,887 $ (154,225) $ 326,794 Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Revenues: Revenues - Services and fees: North America $ 265,097 $ 124,039 $ 554,082 $ 282,505 Australia — 1,038 — 1,702 Europe 1,046 518 1,530 769 Total Revenues - Services and fees $ 266,143 $ 125,595 $ 555,612 $ 284,976 Trading income (losses) and fair value adjustments on loans North America $ 32,679 $ 114,547 $ 299,621 $ (67,895 ) Revenues - Sale of goods North America $ 709 $ 1,820 $ 7,537 $ 2,824 Europe 11,748 — 11,748 — Total Revenues - Services and fees $ 12,457 $ 1,820 $ 19,285 $ 2,824 Revenues - Interest income - Loans and securities lending: North America $ 25,491 $ 24,506 $ 62,411 $ 46,357 Total Revenues: North America $ 323,976 $ 264,912 $ 923,651 $ 263,791 Australia — 1,038 — 1,702 Europe 12,794 518 13,278 769 Total Revenues $ 336,770 $ 266,468 $ 936,929 $ 266,262 Six Months Ended
June 30,2022 2021 2022 2021 Revenues: Revenues - Services and fees: North America $ 197,648 $ 265,097 $ 406,370 $ 554,082 Europe 3,257 1,046 5,210 1,530 Total Revenues - Services and fees 200,905 266,143 $ 411,580 $ 555,612 Trading income (losses) and fair value adjustments on loans North America (223,927) 32,679 $ (292,317) $ 299,621 Revenues - Sale of goods North America 1,887 709 $ 3,765 $ 7,537 Europe — 11,748 — 11,748 Total Revenues - Sale of goods 1,887 12,457 $ 3,765 $ 19,285 Revenues - Interest income - Loans and securities lending: North America 63,835 25,491 $ 125,261 $ 62,411 Total Revenues: North America 39,443 323,976 $ 243,079 $ 923,651 Europe 3,257 12,794 5,210 13,278 Total Revenues $ 42,700 $ 336,770 $ 248,289 $ 936,929 20212022 and December 31, 20202021, long-lived assets, which consist of property and equipment and other assets, of $14,447$14,182 and $11,685,$12,870, respectively, were located in North America.Company'sCompany’s Chief Operating Decision Maker to allocate resources to, or assess performance of, the segments and therefore, total segment assets have not been disclosed.Six Months Ended June 30, 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 $ — $ (345,000) $ (345,000) Net cash used in investing activities $ (13,722) $ (345,000) $ (358,722) Cash flows from financing activities: Proceeds from initial public offering of subsidiaries $ — $ 345,000 $ 345,000 Net cash provided by financing activities $ 356,051 $ 345,000 $ 701,051 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.subject; and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.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:●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 individualto a wide range of retail and industrial 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.•B. Riley Principal Investments, which identifies attractive investment opportunities and seeks to control or influence the operations of our portfolio company investments to deliver financial and operational improvements that will maximize the Company’s free cash flow, and therefore, shareholder returns. The team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics. Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts.●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 Brands owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management company.During the fourth quarter of 2020, the Company realigned its segment reporting structure to reflect organizational management changes. Under the new structure, the valuation and appraisal businesses are reported in the Financial Consulting segment and our bankruptcy, financial advisory, forensic accounting, and real estate consulting businesses that were previously reported in the Capital Markets segment are now reported as part of the Financial Consulting segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented. During the first quarter of 2021, in connection with the acquisition of National on February 25, 2021, the Company further realigned its segment reporting structure to reflect organizational management changes in the Company’s wealth management business and created a new Wealth Management segment that was previously reported as part of the Capital Markets segment in 2020. In conjunction with the new reporting structures, the Company recast its segment presentation for all periods presented.United OnlineCommunications and magicJackOther and (vi) Brands.SegmentSegment.. Our Capital Markets segment provides a full array of investment banking, corporate finance, consulting, financial advisory, research, securities lending and sales and trading services to corporate, institutional, and individual clients. Our corporate finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements. In addition, we trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries. Our Capital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.highly regarded Chief Investment Strategistinvestment strategists and Capital Markets segment’sB. Riley Securities’ proprietary equity research.Furthermore, ourOur scale and pool of resources allow us to offer our services across North America as well as parts of Europe, Asia, and Australia. Our Auction and Liquidation segment operates through two main divisions, retail store liquidations and wholesale and industrial assets dispositions. Our wholesale and industrial assets dispositions division operates through limited liability companies that are controlled by us.United OnlineCommunications and magicJackOther 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.
Recent Developments
On June 23, 2021, we andMay 31, 2022, our wholly owned subsidiaries, BR Financial Holdings, LLC,ownership interest in Lingo increased from 40% to 80% as a Delaware limited liability company (the “Primary Guarantor”), and BR Advisory & Investments, LLC, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Credit Agreement”) by and among us, Primary Guarantor, the Borrower, the lenders party thereto, Nomura Corporate Funding Americas, LLC, as administrative agent and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment. On the closing date, the Borrower borrowed the full $200.0 million under the Term Loan Facility. The Revolving Credit Facility is available for borrowing from time to time prior to the final maturityresult of the Revolving Credit Facility. Subsequentconversion of $17.5 million of existing debt owed by Lingo to equity. As a result of the consolidation of Lingo, the pre-existing equity investment was remeasured at fair value resulting in the recognition of a gain of $6.8 million, which is included in trading (losses) income and fair value adjustments on loans in the condensed consolidated statement of operations for the three and six months ended June 30, 2021,2022. In accordance with ASC 805, we borrowedused the full $80.0acquisition method of accounting. The total fair value of the assets of Lingo was $115.8 million and the fair value of the 20% noncontrolling interest was $8.0 million at May 31, 2022. Goodwill of $32.0 million and other intangible assets of $65.2 million were recorded as a result of the
On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuantThere continues to the third supplemental indenture dated December 31, 2017. The total redemption payment included approximately $2.1 million in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes were delistedbe widespread impact from NASDAQ.
On January 30, 2020,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 second quarter of 2021,social, business, travel, and government activities and functions; however, the full impact of the COVID-19 outbreak continues to evolve. Asevolve with the U.S. economy recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries across the world continue to manage repeated wavesemergence of the pandemic, includingnew variant strains of COVID-19, amid uneven progress toward vaccination.and breakthrough infections. The continuing impact of the COVID-19 outbreak onpandemic, higher inflation, the actions by the Federal Reserve to address inflation, Russia's invasion of Ukraine, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our 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.
The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.
Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 2020
Condensed Consolidated Statements of Operations
(Dollars in thousands)
| Three Months Ended | ||||||||||||||||
| June 30, | June 30, | Change | ||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 266,143 | $ | 125,595 | $ | 140,548 | 111.9 | % | ||||||||
| Trading income and fair value adjustments on loans | 32,679 | 114,547 | (81,868 | ) | (71.5 | %) | ||||||||||
| Interest income - Loans and securities lending | 25,491 | 24,506 | 985 | 4.0 | % | |||||||||||
| Sale of goods | 12,457 | 1,820 | 10,637 | n/m | ||||||||||||
| Total revenues | 336,770 | 266,468 | 70,302 | 26.4 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 12,094 | 7,985 | 4,109 | 51.5 | % | |||||||||||
| Cost of goods sold | 3,626 | 860 | 2,766 | n/m | ||||||||||||
| Selling, general and administrative expenses | 199,922 | 106,562 | 93,360 | 87.6 | % | |||||||||||
| Impairment of tradenames | — | 8,500 | (8,500 | ) | (100.0 | %) | ||||||||||
| Interest expense - Securities lending and loan participations sold | 10,983 | 11,221 | (238 | ) | (2.1 | %) | ||||||||||
| Total operating expenses | 226,625 | 135,128 | 91,497 | 67.7 | % | |||||||||||
| Operating income | 110,145 | 131,340 | (21,195 | ) | (16.1 | %) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 56 | 224 | (168 | ) | (75.0 | %) | ||||||||||
| Gain on extinguishment of loans | 6,509 | — | 6,509 | 100.0 | % | |||||||||||
| Loss from equity investments | (852 | ) | (318 | ) | (534 | ) | 167.9 | % | ||||||||
| Interest expense | (20,856 | ) | (16,509 | ) | (4,347 | ) | 26.3 | % | ||||||||
| Income before income taxes | 95,002 | 114,737 | (19,735 | ) | (17.2 | %) | ||||||||||
| Provision for income taxes | (19,902 | ) | (32,208 | ) | 12,306 | (38.2 | %) | |||||||||
| Net income | 75,100 | 82,529 | (7,429 | ) | (9.0 | %) | ||||||||||
| Net loss attributable to noncontrolling interests | (576 | ) | (1,311 | ) | 735 | (56.1 | %) | |||||||||
| Net income attributable to B. Riley Financial, Inc. | 75,676 | 83,840 | (8,164 | ) | (9.7 | %) | ||||||||||
| Preferred stock dividends | 1,789 | 1,087 | 702 | 64.6 | % | |||||||||||
| Net income available to common shareholders | $ | 73,887 | $ | 82,753 | $ | (8,866 | ) | (10.7 | %) | |||||||
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Services and fees | $ | 200,905 | $ | 266,143 | $ | (65,238) | (24.5) | % | |||||||||||||||
| Trading (losses) income and fair value adjustments on loans | (223,927) | 32,679 | (256,606) | n/m | |||||||||||||||||||
| Interest income - Loans and securities lending | 63,835 | 25,491 | 38,344 | 150.4 | % | ||||||||||||||||||
| Sale of goods | 1,887 | 12,457 | (10,570) | (84.9) | % | ||||||||||||||||||
| Total revenues | 42,700 | 336,770 | (294,070) | (87.3) | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Direct cost of services | 17,785 | 12,094 | 5,691 | 47.1 | % | ||||||||||||||||||
| Cost of goods sold | 1,994 | 3,626 | (1,632) | (45.0) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 167,136 | 199,922 | (32,786) | (16.4) | % | ||||||||||||||||||
| Interest expense - Securities lending and loan participations sold | 14,544 | 10,983 | 3,561 | 32.4 | % | ||||||||||||||||||
| Total operating expenses | 201,459 | 226,625 | (25,166) | (11.1) | % | ||||||||||||||||||
| Operating (loss) income | (158,759) | 110,145 | (268,904) | n/m | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 500 | 56 | 444 | n/m | |||||||||||||||||||
| Change in fair value of financial instruments and other | 4,321 | 6,509 | (2,188) | (33.6) | % | ||||||||||||||||||
| Loss from equity investments | (3,399) | (852) | (2,547) | n/m | |||||||||||||||||||
| Interest expense | (31,764) | (20,856) | (10,908) | 52.3 | % | ||||||||||||||||||
| (Loss) income before income taxes | (189,101) | 95,002 | (284,103) | n/m | |||||||||||||||||||
| Benefit from (provision for) income taxes | 52,513 | (19,902) | 72,415 | n/m | |||||||||||||||||||
| Net (loss) income | (136,588) | 75,100 | (211,688) | n/m | |||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 3,571 | (576) | 4,147 | n/m | |||||||||||||||||||
| Net (loss) income attributable to B. Riley Financial, Inc. | (140,159) | 75,676 | (215,835) | n/m | |||||||||||||||||||
| Preferred stock dividends | 2,002 | 1,789 | 213 | 11.9 | % | ||||||||||||||||||
| Net (loss) income available to common shareholders | $ | (142,161) | $ | 73,887 | $ | (216,048) | n/m | ||||||||||||||||
| n/m - Not applicable or not meaningful. | |||||||||||||||||||||||
Revenues
The table below and the discussion that follows are based on how we analyze our business.
| Three Months Ended | ||||||||||||||||
| June 30, | June 30, | Change | ||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||
| Revenues - Services and fees: | ||||||||||||||||
| Capital Markets segment | $ | 125,997 | $ | 60,364 | $ | 65,633 | 108.7 | % | ||||||||
| Wealth Management segment | 87,444 | 15,318 | 72,126 | n/m | ||||||||||||
| Auction and Liquidation segment | 5,534 | 7,206 | (1,672 | ) | -23.2 | % | ||||||||||
| Financial Consulting segment | 23,735 | 18,845 | 4,890 | 25.9 | % | |||||||||||
| Principal Investments - United Online and magicJack segment | 18,932 | 20,656 | (1,724 | ) | -8.3 | % | ||||||||||
| Brands segment | 4,501 | 3,206 | 1,295 | 40.4 | % | |||||||||||
| Subtotal | 266,143 | 125,595 | 140,548 | 111.9 | % | |||||||||||
| Revenues - Sale of goods: | ||||||||||||||||
| Auction and Liquidation segment | 11,743 | 1,045 | 10,698 | n/m | ||||||||||||
| Principal Investments - United Online and magicJack segment | 714 | 775 | (61 | ) | -7.9 | % | ||||||||||
| Subtotal | 12,457 | 1,820 | 10,637 | n/m | ||||||||||||
| Trading income (loss) and fair value adjustments on loans | ||||||||||||||||
| Capital Markets segment | 29,897 | 114,080 | (84,183 | ) | -73.8 | % | ||||||||||
| Wealth Management segment | 2,865 | 467 | 2,398 | n/m | ||||||||||||
| Brands segment | (83 | ) | — | (83 | ) | 100.0 | % | |||||||||
| Subtotal | 32,679 | 114,547 | (81,868 | ) | -71.5 | % | ||||||||||
| Interest income - Loans and securities lending: | ||||||||||||||||
| Capital Markets segment | 25,491 | 24,506 | 985 | 4.0 | % | |||||||||||
| Total revenues | $ | 336,770 | $ | 266,468 | $ | 70,302 | 26.4 | % | ||||||||
| Three Months Ended June 30, | Change | ||||||||||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||||||||||
| Revenues - Services and fees: | |||||||||||||||||||||||
| Capital Markets segment | $ | 67,426 | $ | 125,997 | $ | (58,571) | (46.5) | % | |||||||||||||||
| Wealth Management segment | 60,861 | 87,444 | (26,583) | (30.4) | % | ||||||||||||||||||
| Auction and Liquidation segment | 2,488 | 5,534 | (3,046) | (55.0) | % | ||||||||||||||||||
| Financial Consulting segment | 24,310 | 23,735 | 575 | 2.4 | % | ||||||||||||||||||
| Principal Investments - Communications and Other segment | 40,646 | 18,932 | 21,714 | 114.7 | % | ||||||||||||||||||
| Brands segment | 5,174 | 4,501 | 673 | 15.0 | % | ||||||||||||||||||
| Subtotal | 200,905 | 266,143 | (65,238) | (24.5) | % | ||||||||||||||||||
| Revenues - Sale of goods: | |||||||||||||||||||||||
| Auction and Liquidation segment | — | 11,743 | (11,743) | (100.0) | % | ||||||||||||||||||
| Principal Investments - Communications and Other segment | 1,887 | 714 | 1,173 | 164.3 | % | ||||||||||||||||||
| Subtotal | 1,887 | 12,457 | (10,570) | (84.9) | % | ||||||||||||||||||
| Trading (losses) income and fair value adjustments on loans | |||||||||||||||||||||||
| Capital Markets segment | (225,455) | 29,897 | (255,352) | n/m | |||||||||||||||||||
| Wealth Management segment | 1,528 | 2,865 | (1,337) | (46.7) | % | ||||||||||||||||||
| Brands segment | — | (83) | 83 | (100.0) | % | ||||||||||||||||||
| Subtotal | (223,927) | 32,679 | (256,606) | n/m | |||||||||||||||||||
| Interest income - Loans and securities lending: | |||||||||||||||||||||||
| Capital Markets segment | 62,399 | 25,491 | 36,908 | 144.8 | % | ||||||||||||||||||
| Auction and Liquidation segment | 1,436 | — | 1,436 | 100.0 | % | ||||||||||||||||||
| Subtotal | 63,835 | $ | 25,491 | 38,344 | 150.4 | % | |||||||||||||||||
| Total revenues | $ | 42,700 | $ | 336,770 | $ | (294,070) | (87.3) | % | |||||||||||||||
Total revenues increaseddecreased approximately $70.3$294.1 million to $42.7 million during the three months ended June 30, 2022 from $336.8 million during the three months ended June 30, 2021 from $266.5 million during the three months ended June 30, 2020.2021. The increasedecrease in revenues during the three months ended June 30, 20212022 was primarily due to an increasedecreases in revenue fromthe fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $256.6 million, which is included in trading (losses) income and fair value adjustments on loans above, services and fees of $140.5$65.2 million revenue fromand sale of goods of $10.6 million, andpartially offset by an increase in interest income from loans and securities lending of $1.0 million, offset by a$38.3 million. The decrease in revenue from trading income andthe fair value adjustments on loans of $81.9 million.the portfolio of securities and other investments owned as of June 30, 2022 was primarily due to the decrease in overall values in the stock market. The increasedecrease in revenue from services and fees in the three months ended June 30, 20212022 consisted of increasesdecreases in revenue of $65.6$58.6 million in the Capital Markets segment, $72.1$26.6 million in the Wealth Management segment $4.9and $3.0 million in the Auction and Liquidation segment, partially offset by increases in revenues of $21.7 million in the Principal Investments — Communications and Other segment, $0.7 million in the Brands segment, and $0.6 million in the Financial Consulting segment, and $1.3 million in the Brands segment, offset by decreases in revenues of $1.7 million in both the Auction and Liquidation segment and the Principal Investments — United Online and magicJack segment.
Revenues from services and fees in the Wealth Management segment increased $72.1decreased $26.6 million to $60.9 million during the three months ended June 30, 2022 from $87.4 million during the three months ended June 30, 2021 from $15.3 million during the three months ended June 30, 2020.2021. The increasedecrease in revenues was primarily due to increasesdecreases in revenue of $63.7$14.8 million from the acquisition of Nationalin commission fees and $8.4$13.7 million fromin wealth and asset management fees.
Revenues from services and fees in the Auction and Liquidation segment decreased $1.7$3.0 million to $2.5 million during the three months ended June 30, 2022 from $5.5 million during the three months ended June 30, 2021 from $7.2 million during the three months ended June 30, 2020.2021. The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.
Revenues from services and fees in the Financial Consulting segment increased $4.9$0.6 million to $23.7$24.3 million during the three months ended June 30, 20212022 from $18.8$23.7 million during three months ended June 30, 2021.
Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased $1.7 million to $18.9 million during the three months ended June 30, 2021 from $20.7 million during the three months ended June 30, 2020. The decrease in revenues was primarily due to decreases in subscription services of $1.0$12.4 million from the acquisition of Marconi Wireless in the fourth quarter of 2021 and $10.7 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022 and an increase in advertising licensing and other revenue of $0.8 million. Management expects revenues from$1.2 million, partially offset by a decrease of $2.5 million in subscription services for UOL and magicJack. We expect the Principal Investments - United OnlineUOL and magicJack segmentsubscription revenues to continue to decline year over year.
Revenues from services and fees in the Brands segment increased $1.3$0.7 million to $5.2 million during the three months ended June 30, 2022 from $4.5 million during the three months ended June 30, 2021 from $3.2 million during the three months ended June 30, 2020.2021. The primary source of revenue included in this segment is the licensing of trademarks.
Trading (losses) income and fair value adjustments on loans decreased $81.9$256.6 million to a loss of $223.9 million during the three months ended June 30, 2022 compared to income of $32.7 million during the three months ended June 30, 2021 compared to $114.5 million for the three months ended June 30, 2020. The $81.9 million2021. This decrease for the three months ended June 30, 2021 was primarily due to a decreasedecreases of $84.2$255.4 million in the Capital Markets segment partially offset by an increase of $2.4and $1.3 million in the Wealth Management segment. The gainloss of $32.7$223.9 million forduring the three months ended June 30, 2021 included2022 was primarily due to realized and unrealized amounts earnedlosses on investments made in our proprietary trading accounts of $33.4$219.8 million partially offset by anand unrealized loss on our loans receivable, at fair value of $0.7$11.0 million, partially offset by a realized gain on disposal of an equity method investment of $6.8 million.
Interest income – loans and securities lending increased $1.0$38.3 million to $63.8 million during the three months ended June 30, 2022 from $25.5 million during the three months ended June 30, 20212021. Interest income from $24.5securities lending was $18.7 million and $13.9 million during the three months ended June 30, 2020.2022 and 2021, respectively. Interest income from securities lendingloans was $13.9$45.1 million and $13.5$11.6 million during the three months ended June 30, 2022 and 2021, and 2020, respectively. Interest income
Revenues – Sale of Goods
2022 from $12.5 million during three months ended June 30, 2021. Revenues from the sale of goods were attributable to a decrease of $11.7 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $1.4 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 June 30, 2022 was $2.0 million, resulting in a negative gross margin of 5.7%.
Operating Expenses
Direct Cost of Services
Direct cost of services increased $4.1 million, to $12.1 million during the three months ended June 30, 20212021. The activity is primarily driven by an increase of $11.9 million from $8.0
Selling, General and Administrative Expenses
Selling, general and administrative expenses during the three months ended June 30, 20212022 and 20202021 were comprised of the following:
| Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Capital Markets segment | $ | 48,069 | 28.7 | % | $ | 65,720 | 33.0 | % | $ | (17,651) | (26.9) | % | |||||||||||||||||||||||
| Wealth Management segment | 69,702 | 41.8 | % | 91,042 | 45.5 | % | (21,340) | (23.4) | % | ||||||||||||||||||||||||||
| Auction and Liquidation segment | 2,177 | 1.3 | % | 3,077 | 1.5 | % | (900) | (29.2) | % | ||||||||||||||||||||||||||
| Financial Consulting segment | 20,026 | 12.0 | % | 19,560 | 9.8 | % | 466 | 2.4 | % | ||||||||||||||||||||||||||
| Principal Investments -Communications and Other segment | 16,403 | 9.8 | % | 7,296 | 3.6 | % | 9,107 | 124.8 | % | ||||||||||||||||||||||||||
| Brands segment | 1,401 | 0.8 | % | 1,405 | 0.7 | % | (4) | (0.3) | % | ||||||||||||||||||||||||||
| Corporate and Other segment | 9,358 | 5.6 | % | 11,822 | 5.9 | % | (2,464) | (20.8) | % | ||||||||||||||||||||||||||
| Total selling, general & administrative expenses | $ | 167,136 | 100.0 | % | $ | 199,922 | 100.0 | % | $ | (32,786) | (16.4) | % | |||||||||||||||||||||||
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Change | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Capital Markets segment | $ | 65,720 | 33.0 | % | $ | 57,218 | 53.6 | % | $ | 8,502 | 14.9 | % | ||||||||||||
| Wealth Management segment | 91,042 | 45.5 | % | 15,753 | 14.8 | % | 75,289 | n/m | ||||||||||||||||
| Auction and Liquidation segment | 3,077 | 1.5 | % | 2,729 | 2.6 | % | 348 | 12.8 | % | |||||||||||||||
| Financial Consulting segment | 19,560 | 9.8 | % | 15,341 | 14.4 | % | 4,219 | 27.5 | % | |||||||||||||||
| Principal Investments - United Online and magicJack segment | 7,296 | 3.6 | % | 6,900 | 6.5 | % | 396 | 5.7 | % | |||||||||||||||
| Brands segment | 1,405 | 0.7 | % | 1,024 | 1.0 | % | 381 | 37.2 | % | |||||||||||||||
| Corporate and Other segment | 11,822 | 5.9 | % | 7,597 | 7.1 | % | 4,225 | 55.6 | % | |||||||||||||||
| Total selling, general & administrative expenses | $ | 199,922 | 100.0 | % | $ | 106,562 | 100.0 | % | $ | 93,360 | 87.6 | % | ||||||||||||
Total selling, general and administrative expenses increaseddecreased approximately $93.4$32.8 million to $167.1 million during the three months ended June 30, 2022 from $199.9 million during the three months ended June 30, 2021 from $106.6 million for the three months ended June 30, 2020.2021. The increasedecrease was primarily due to decreases of approximately $93.4$21.3 million in selling, general and administrative expenses was due to increases of $8.5the Wealth Management segment, $17.7 million in the Capital Markets segment, $75.3$2.5 million in the Wealth ManagementCorporate and Other segment, $0.3and $0.9 million in the Auction and Liquidation segment $4.2 million in the Financial Consulting segment, $0.4partially offset by increases of $9.1 million in the Principal Investments — United OnlineCommunications and magicJackOther segment $0.4and $0.5 million in the Brands segment, and $4.2 million in the Corporate and OtherFinancial Consulting segment.
Capital Markets
Selling, general and administrative expenses in the Capital Markets segment increaseddecreased by $8.5$17.7 million to $48.1 million during the three months ended June 30, 2022 from $65.7 million during the three months ended June 30, 2021 from $57.2 million during the three months ended June 30, 2020.2021. The increasedecrease was primarily due to increasesdecreases of $17.7$14.8 million in consulting expenses and $12.1 million in payroll and related expenses $1.5 million from the acquisition of National, and $2.0 million in investment banking deal expenses, partially offset by increases of $4.9 million from the settlement of a decrease of $12.6regulatory matter, $2.0 in depreciation and amortization expenses, $1.1 million gain from foreign currency exchange, and $1.1 million in consultingbusiness development expenses.
Wealth Management
Selling, general and administrative expenses in the Wealth Management segment increaseddecreased by $75.3$21.3 million to $69.7 million during the three months ended June 30, 2022 from $91.0 million during the three months ended June 30, 2021 from $15.8 million during the three months ended June 30, 2020.2021. The increasedecrease was primarily due to increases of $69.6 million from the acquisition of National, $6.1 milliona decrease in payroll and related expenses $0.2of $27.8 million, in software and equipment expenses, $0.1 million in office expenses, and $0.1 million in travel and entertainment expenses, partially offset by decreasesan increase of $0.3$4.9 million in legal expenses, $0.3 million in occupancy expenses, and $0.3 million in other expenses.
Auction and Liquidation
Selling, general and administrative expenses in the Auction and Liquidation segment increased $0.3decreased $0.9 million to $2.2 million during the three months ended June 30, 2022 from $3.1 million during the three months ended June 30, 2021 from $2.72021.
Financial Consulting
Selling, general and administrative expenses in the Financial Consulting segment increased by $4.2$0.5 million to $20.0 million during the three months ended June 30, 2022 from $19.6 million during the three months ended June 30, 2021 from $15.3 million during the three months ended June 30, 2020. The increase was primarily due to increases of $3.1 million in payroll and related expenses, $0.3 million in other expenses, $0.3 million in travel and entertainment expenses, $0.2 million in legal expenses, and $0.2 million in outside contractor expenses.
Principal Investments — United OnlineCommunications and magicJack
Selling, general and administrative expenses in the Principal Investments — United OnlineCommunications and magicJackOther segment increased $0.4$9.1 million to $16.4 million for the three months ended June 30, 2022 from $7.3 million for the three months ended June 30, 2021 from $6.9 million for the three months ended June 30, 2020.2021. The increase was primarily due to a $1.0increases of $4.1 million legal settlement accrual releasefrom the acquisition of additional equity interest in Lingo in the three months ended June 30, 2020, partially offset by decreasessecond quarter of $0.32022, $1.6 million in depreciation and amortization expenses, $0.2transaction costs, $1.3 million in payroll and related expenses, $1.1 million in depreciation and amortization, $0.7 million in communications expenses, $0.2 million in software and equipment expenses, and $0.2 million in business promotion and marketingdevelopment expenses.
Brands
Selling, general and administrative expenses in the Brands segment increased by $0.4 million toremained flat at $1.4 million during the three months ended June 30, 2021 from $1.0 million during the three months ended June 30, 2020. The increase was primarily due to increases of $0.2 million in payroll2022 and related expenses and $0.2 million in other expenses.
Corporate and Other
Selling, general and administrative expenses for the Corporate and Other segment increaseddecreased approximately $4.2$2.5 million to $9.4 million during the three months ended June 30, 2022 from $11.8 million during the three months ended June 30, 2021 from $7.6 million for the three months ended June 30, 2020.2021. The increasedecrease was primarily due to decreases of $4.5 million change in the fair value of contingent consideration, $2.2 million in loss from foreign currency exchange, partially offset by increases of $2.9$3.9 million in payroll and related expenses, $0.5 million in gain from currency exchange, $0.4 million in software and equipment expense, $0.2 million in transaction costs, and $0.2 million in other expenses.
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 June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired. In the three months ended June 30, 2020, the Company recognized impairment of $8.5 million on the indefinite-lived tradenames. There was no impairment in the three months ended June 30, 2021.
Other Income (Expense). Other income included interest income of less than$0.5 million and $0.1 million during the three months ended June 30, 2022 and 2021, respectively. Change in fair value of financial instruments and $0.2other in the amount of $4.3 million during the three months ended June 30, 2020. Gain on extinguishment2022 was primarily due to the change in fair value of loanswarrant liabilities and the forgiveness of a Paycheck Protection Program loan issued to FocalPoint prior to its acquisition by the Company in the amountfirst quarter of $6.52022. Interest expense was $31.8 million during the three months ended June 30, 2021 was due2022 compared to National PPP loans that were forgiven by the SBA. Interest expense was $20.9 million during the three months ended June 30, 20212021. The increase in interest expense was primarily due to increases in interest expense of $5.0 million from the issuance of senior notes and $4.5 million and $1.2 million from the Nomura term loan and revolving credit facility, respectively, entered into during the second quarter of 2021. During the three months ended June 30, 2022, loss from equity investments was $3.4 million compared to $16.5$0.9 million during the three months ended June 30, 2020.2021. The increase was primarily due to the $3.7 million loss recognized from the conversion of debt to equity in interest expensethe acquisition of Lingo during the second quarter of 2022.
Income Before Income Taxes. Income before income taxes was $95.0 million during the three months ended June 30, 2021 compared2021. The change was primarily due to $114.7a decrease in revenue of $294.1 million, increase in interest expense of $10.9 million, increase in loss from equity investments of $2.5 million, and a decrease in change in fair value of financial instruments and other of $2.2 million, partially offset by a decrease in operating expenses of approximately $25.2 million and an increase in interest income of $0.4 million.
Provision for Income Taxes. Provision for income taxes was $19.9 million during the three months ended June 30, 2021 compared to $32.2 million during2021. The effective income tax rate was 27.8% for the three months ended June 30, 2020. The effective income tax rate was2022 as compared to 20.9% for the three months ended June 30, 2021 as compared to 28.1% for the three months ended June 30, 2020.
Net LossIncome (Loss) Attributable to Noncontrolling InterestInterests and Redeemable Noncontrolling Interests. Net lossincome (loss) attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net lossincome generated by membership interests of partnerships that we do not own. The net lossincome attributable to
Net Income Attributable2022 compared to the Company. Netnet income attributable to the Company for the three months ended June 30, 2021 wasof $75.7 million a decrease from $83.8 million for the three months ended June 30, 2020. The decrease in net income attributable to the Company during the three months ended June 30, 2021 as compared to the same period in 20202021. The change was primarily due to a decrease inchange from operating income to loss of $21.2$268.9 million, increase in interest expense of $10.9 million, increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $4.1 million, increase in loss from equity investments of $0.5 million, an increase in interest expense of $4.3$2.5 million, and a decrease in interest incomechange in fair value of $0.2financial instruments and other of $2.2 million, partially offset by a decrease inchange from provision for to benefit from income taxes of $12.3$72.4 million and a gain on extinguishmentan increase in interest income of loans of $6.5$0.4 million.
Preferred Stock Dividends. On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share. Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day ofarrears. On January April, July and October. On April 5, 2021,10, 2022, the Company declared a cash dividend representing$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 30, 202129, 2022 to holders of record as of the close of business on April 20, 2020.
19, 2022. On September 4, 2020,July 7, 2022, the Company closed its public offeringdeclared a cash dividend $0.4296875 per Depositary Share, which was paid on July 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 July 19, 2022.
Net (Loss) Income Available to Common Shareholders. Net incomeloss available to common shareholders for the three months ended June 30, 2021 was $73.9$142.2 million a decrease from $82.8 million for the three months ended June 30, 2020. The decrease in net income available to common shareholders during the three months ended June 30, 2021 as2022 compared to net income available to common shareholders of $73.9 million during the same period in 2020three months ended June 30, 2021. The change was primarily due to a decrease inchange from operating income to loss of $21.2$268.9 million, an increase in interest expense of $4.3$10.9 million, increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $4.1 million, increase in loss from equity investments of $2.5 million, decrease in change in fair value of financial instruments and other of $2.2 million, and an increase in preferred stock dividends of $0.7 million, an increase in loss from equity investments of $0.5 million, and a decrease in interest income of $0.2 million, partially offset by a decrease inchange from provision for to benefit from income taxes of $12.3 million, gain on extinguishment of loans of $6.5$72.4 million and a decreasean increase in loss attributable to noncontrolling interest income of $0.7$0.4 million.
Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 2020
Condensed Consolidated Statements of Operations
(Dollars in thousands)
| Six Months Ended | ||||||||||||||||
| June 30, | June 30, | Change | ||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 555,612 | $ | 284,976 | $ | 270,636 | 95.0 | % | ||||||||
| Trading income (losses) and fair value adjustments on loans | 299,621 | (67,895 | ) | 367,516 | n/m | |||||||||||
| Interest income - Loans and securities lending | 62,411 | 46,357 | 16,054 | 34.6 | % | |||||||||||
| Sale of goods | 19,285 | 2,824 | 16,461 | n/m | ||||||||||||
| Total revenues | 936,929 | 266,262 | 670,667 | n/m | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 23,416 | 27,937 | (4,521 | ) | (16.2 | %) | ||||||||||
| Cost of goods sold | 8,952 | 1,629 | 7,323 | n/m | ||||||||||||
| Selling, general and administrative expenses | 391,266 | 194,306 | 196,960 | 101.4 | % | |||||||||||
| Impairment of tradenames | — | 12,500 | (12,500 | ) | (100.0 | %) | ||||||||||
| Interest expense - Securities lending and loan participations sold | 30,172 | 19,694 | 10,478 | 53.2 | % | |||||||||||
| Total operating expenses | 453,806 | 256,066 | 197,740 | 77.2 | % | |||||||||||
| Operating income | 483,123 | 10,196 | 472,927 | n/m | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 105 | 470 | (365 | ) | (77.7 | %) | ||||||||||
| Gain on extinguishment of loans | 6,509 | — | 6,509 | 100.0 | % | |||||||||||
| Income (loss) on equity investments | 23 | (554 | ) | 577 | n/m | |||||||||||
| Interest expense | (40,642 | ) | (32,163 | ) | (8,479 | ) | 26.4 | % | ||||||||
| Income (loss) before income taxes | 449,118 | (22,051 | ) | 471,169 | n/m | |||||||||||
| (Provision) benefit for income taxes | (117,420 | ) | 5,331 | (122,751 | ) | n/m | ||||||||||
| Net income (loss) | 331,698 | (16,720 | ) | 348,418 | n/m | |||||||||||
| Net income (loss) attributable to noncontrolling interests | 1,366 | (1,895 | ) | 3,261 | (172.1 | %) | ||||||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | 330,332 | (14,825 | ) | 345,157 | n/m | |||||||||||
| Preferred stock dividends | 3,538 | 2,142 | 1,396 | 65.2 | % | |||||||||||
| Net income (loss) available to common shareholders | $ | 326,794 | $ | (16,967 | ) | $ | 343,761 | n/m | ||||||||
| Six Months Ended June 30, | Change | ||||||||||||||||||||||
| 2022 | 2021 | Amount | % | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Services and fees | $ | 411,580 | $ | 555,612 | $ | (144,032) | (25.9) | % | |||||||||||||||
| Trading (losses) income and fair value adjustments on loans | (292,317) | 299,621 | (591,938) | (197.6) | % | ||||||||||||||||||
| Interest income - Loans and securities lending | 125,261 | 62,411 | 62,850 | 100.7 | % | ||||||||||||||||||
| Sale of goods | 3,765 | 19,285 | (15,520) | (80.5) | % | ||||||||||||||||||
| Total revenues | 248,289 | 936,929 | (688,640) | (73.5) | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Direct cost of services | 29,436 | 23,416 | 6,020 | 25.7 | % | ||||||||||||||||||
| Cost of goods sold | 4,245 | 8,952 | (4,707) | (52.6) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 342,335 | 391,266 | (48,931) | (12.5) | % | ||||||||||||||||||
| Interest expense - Securities lending and loan participations sold | 26,310 | 30,172 | (3,862) | (12.8) | % | ||||||||||||||||||
| Total operating expenses | 402,326 | 453,806 | (51,480) | (11.3) | % | ||||||||||||||||||
| Operating (loss) income | (154,037) | 483,123 | (637,160) | (131.9) | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 567 | 105 | 462 | n/m | |||||||||||||||||||
| Change in fair value of financial instruments and other | 10,302 | 6,509 | 3,793 | 58.3 | % | ||||||||||||||||||
| Income from equity investments | 3,376 | 23 | 3,353 | n/m | |||||||||||||||||||
| Interest expense | (62,200) | (40,642) | (21,558) | 53.0 | % | ||||||||||||||||||
| (Loss) income before income taxes | (201,992) | 449,118 | (651,110) | (145.0) | % | ||||||||||||||||||
| Benefit from (provision for) income taxes | 56,208 | (117,420) | 173,628 | (147.9) | % | ||||||||||||||||||
| Net (loss) income | $ | (145,784) | 331,698 | (477,482) | (144.0) | % | |||||||||||||||||
| Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests | 4,437 | 1,366 | 3,071 | n/m | |||||||||||||||||||
| Net (loss) income attributable to B. Riley Financial, Inc. | $ | (150,221) | $ | 330,332 | $ | (480,553) | (145.5) | % | |||||||||||||||
| Preferred stock dividends | 4,004 | 3,538 | 466 | 13.2 | % | ||||||||||||||||||
| Net (loss) income available to common shareholders | $ | (154,225) | $ | 326,794 | $ | (481,019) | (147.2) | % | |||||||||||||||
| n/m - Not applicable or not meaningful. | |||||||||||||||||||||||
Revenues
The table below and the discussion that follows are based on how we analyze our business.
| Six Months Ended | ||||||||||||||||
| June 30, | June 30, | Change | ||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||
| Revenues - Services and fees: | ||||||||||||||||
| Capital Markets segment | $ | 296,976 | $ | 133,964 | $ | 163,012 | 121.7 | % | ||||||||
| Wealth Management segment | 152,986 | 34,205 | 118,781 | n/m | ||||||||||||
| Auction and Liquidation segment | 12,892 | 27,867 | (14,975 | ) | (53.7 | %) | ||||||||||
| Financial Consulting segment | 45,144 | 39,559 | 5,585 | 14.1 | % | |||||||||||
| Principal Investments - United Online and magicJack segment | 38,725 | 42,374 | (3,649 | ) | (8.6 | %) | ||||||||||
| Brands | 8,889 | 7,007 | 1,882 | 26.9 | % | |||||||||||
| Subtotal | 555,612 | 284,976 | 270,636 | 95.0 | % | |||||||||||
| Revenues - Sale of goods | ||||||||||||||||
| Auction and Liquidation segment | 17,835 | 1,045 | 16,790 | n/m | ||||||||||||
| Principal Investments - United Online and magicJack segment | 1,450 | 1,779 | (329 | ) | n/m | |||||||||||
| Subtotal | 19,285 | 2,824 | 16,461 | n/m | ||||||||||||
| Trading income (losses) and fair value adjustments on loans | ||||||||||||||||
| Capital Markets segment | 294,400 | (67,935 | ) | 362,335 | n/m | |||||||||||
| Wealth Management segment | 5,221 | 40 | 5,181 | n/m | ||||||||||||
| Subtotal | 299,621 | (67,895 | ) | 367,516 | n/m | |||||||||||
| Interest income - Loans and securities lending: | ||||||||||||||||
| Capital Markets segment | 62,411 | 46,357 | 16,054 | 34.6 | % | |||||||||||
| Total revenues | $ | 936,929 | $ | 266,262 | $ | 670,667 | n/m | |||||||||
| Six Months Ended June 30, | Change | |||||||||||||||||||||||||
| 2022 | 2021 | Amount | % | |||||||||||||||||||||||
| Revenues - Services and fees: | ||||||||||||||||||||||||||
| Capital Markets segment | $ | 136,510 | $ | 296,976 | $ | (160,466) | (54.0) | % | ||||||||||||||||||
| Wealth Management segment | 137,818 | 152,986 | (15,168) | (9.9) | % | |||||||||||||||||||||
| Auction and Liquidation segment | 5,843 | 12,892 | (7,049) | (54.7) | % | |||||||||||||||||||||
| Financial Consulting segment | 50,246 | 45,144 | 5,102 | 11.3 | % | |||||||||||||||||||||
| Principal Investments - Communications and Other segment | 71,432 | 38,725 | 32,707 | 84.5 | % | |||||||||||||||||||||
| Brands segment | 9,731 | 8,889 | 842 | 9.5 | % | |||||||||||||||||||||
| Subtotal | 411,580 | 555,612 | (144,032) | (25.9) | % | |||||||||||||||||||||
| Revenues - Sale of goods: | ||||||||||||||||||||||||||
| Auction and Liquidation segment | — | 17,835 | (17,835) | (100.0) | % | |||||||||||||||||||||
| Principal Investments - Communications and Other segment | 3,765 | 1,450 | 2,315 | 159.7 | % | |||||||||||||||||||||
| Subtotal | 3,765 | 19,285 | (15,520) | (80.5) | % | |||||||||||||||||||||
| Trading (losses) income and fair value adjustments on loans | ||||||||||||||||||||||||||
| Capital Markets segment | (294,367) | 294,400 | (588,767) | n/m | ||||||||||||||||||||||
| Wealth Management segment | 2,050 | 5,221 | (3,171) | (60.7) | % | |||||||||||||||||||||
| Subtotal | (292,317) | 299,621 | (591,938) | (197.6) | % | |||||||||||||||||||||
| Interest income - Loans and securities lending: | ||||||||||||||||||||||||||
| Capital Markets segment | 123,825 | 62,411 | 61,414 | 98.4 | % | |||||||||||||||||||||
| Auction and Liquidation segment | 1,436 | — | 1,436 | 100.0 | % | |||||||||||||||||||||
| 125,261 | 62,411 | 62,850 | 100.7 | % | ||||||||||||||||||||||
| Total revenues | $ | 248,289 | $ | 936,929 | $ | (688,640) | (73.5) | % | ||||||||||||||||||
Total revenues increaseddecreased approximately $670.7$688.6 million to $248.3 million during the six months ended June 30, 2022 from $936.9 million during the six months ended June 30, 2021 from $266.3 million during the six months ended June 30, 2020.2021. The increasedecrease in revenues during the six months ended June 30, 20212022 was primarily due to trading gains and gains fromdecreases in the fair value adjustment on loans that amounted to $299.6 millionof the portfolio of securities and in the prior year period ended June 30, 2020 trading lossesother investments owned and losses on fair value adjustments on loans amounted to $67.9of $591.9 million, which is included in trading (losses) income and fair value adjustments on loans above, services and fees of $144.0 million, and sale of goods of $15.5 million, partially offset by an increase in interest income from loans and securities lending of $62.9 million. The decrease in the fair value of the portfolio of securities and other investments owned as of June 30, 2022 was reported as a reductionprimarily due to the decrease in revenueoverall values in 2020.the stock market. The increasedecrease in revenue from services and fees of $270.6 million in the six months ended June 30, 2021 was primarily due to increases2022 consisted of decreases in revenue of $163.0$160.5 million in the Capital Markets segment, $118.8$15.2 million in the Wealth Management segment, $5.6and $7.0 million in the Auction and Liquidation segment, partially offset by increases in revenues of $32.7 million in the Principal Investments — Communications and Other segment, $5.1 million in the Financial Consulting segment, and $1.9$0.8 million in the Brands segment; partially offset by decreases in revenues of $15.0 million in the Auction and Liquidation segment and $3.6 million in the Principal Investments — United Online and magicJack segment.
Revenues from services and fees in the Wealth Management segment increased $118.8decreased $15.2 million to $137.8 million during the six months ended June 30, 2022 from $153.0 million during the six months ended June 30, 2021 from $34.2 million during the six months ended June 30, 2020.2021. The increasedecrease in revenues was primarily due to increasesa decrease in revenue of $106.6$15.4 million from the acquisition of National and $12.0 million from wealth and asset managementcommission fees.
Revenues from services and fees in the Auction and Liquidation segment decreased $15.0$7.0 million to $5.8 million during the six months ended June 30, 2022 from $12.9 million during the six months ended June 30, 2021 from $27.9 million during the six months ended June 30, 2020.2021. The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.
Revenues from services and fees in the Financial Consulting segment increased $5.6$5.1 million to $45.1$50.2 million during the six months ended June 30, 20212022 from $39.6$45.1 million during six months ended June 30, 2021. The increase in revenues was primarily due to increases of $1.8 million within our Advisory Services divisions and $3.3 million within our Real Estate division.
Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased $3.6 million to $38.7 million during the six months ended June 30, 2021 from $42.4 million during the six months ended June 30, 2020. The decrease in revenues was primarily due to decreases in subscription services of $2.6$24.8 million from the acquisition of Marconi Wireless in the fourth quarter of 2021 and $10.7 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022 and an increase in advertising licensing and other revenue of $1.1 million. Management expects revenues from$1.6 million, partially offset by a decrease of $4.3 million in subscription services for UOL and magicJack. We expect the Principal Investments - United OnlineUOL and magicJack segmentsubscription revenues to continue to decline year over year.
Revenues from services and fees in the Brands segment increased $1.9$0.8 million to $9.7 million during the six months ended June 30, 2022 from $8.9 million during the six months ended June 30, 2021 from $7.0 million during the six months ended June 30, 2020.2021. The primary source of revenue included in this segment is the licensing of trademarks.
Trading (losses) income and fair value adjustments on loans consisteddecreased $591.9 million to a loss of gains in$292.3 million during the amountsix months ended June 30, 2022 compared to income of $299.6 million during the six months ended June 30, 2021 compared to trading losses and losses on fair value adjustments on loans in the amount of $67.9 million for the six months ended June 30, 2020. The $367.5 million increase in gain for the six months ended June 30, 20212021. This decrease was primarily due to increasesdecreases of $362.3$588.8 million in the Capital Markets segment and $5.2$3.2 million in the Wealth Management segment. The gainloss of $299.6$292.3 million forduring the six months ended June 30, 2021 included2022 was primarily due to realized and unrealized amounts earnedlosses on investments made in our proprietary trading accounts of $289.6$299.1 million, and unrealized amountspartially offset by realized gain on our loans receivable, at fair valuedisposal of $10.0equity method investment of $6.8 million.
Interest income – loans and securities lending increased $16.1$62.9 million to $125.3 million during the six months ended June 30, 2022 from $62.4 million during the six months ended June 30, 20212021. Interest income from $46.4securities lending was $33.7 million and $36.8 million during the six months ended June 30, 2020.2022 and 2021, respectively. Interest income from securities lendingloans was $36.8$91.5 million and $23.6$25.6 million during the six months ended June 30, 2022 and 2021, and 2020, respectively. Interest income
Revenues – Sale of Goods
2022 from $19.3 million during six months ended June 30, 2021. Revenues from the sale of goods were attributable to a decrease of $17.8 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $2.6 million from sales of retail goods due to the acquisition of Marconi Wireless in the fourth quarter of 2021. Cost of goods sold for six months ended June 30, 2022 was $4.2 million, resulting in a negative gross margin of 12.7%.
Operating Expenses
Direct Cost of Services
Direct cost of services decreased $4.5 million, to $23.4 million during the six months ended June 30, 2021 from $27.9 million during the six months ended June 30, 2020. Direct2021. The increase in direct cost of services decreasedwas primarily driven by $3.9an increase of $16.5 million in the Principal Investments — Communications and Other segment, partially offset by a decrease of $10.5 million in the Auction and Liquidation segment and $0.6 millionsegment. The increase in the Principal Investments — United Online
Selling, General and Administrative Expenses
Selling, general and administrative expenses during the six months ended June 30, 20212022 and 20202021 were comprised of the following:
| Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change | |||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Capital Markets segment | $ | 84,079 | 24.5 | % | $ | 152,625 | 39.0 | % | $ | (68,546) | (44.9) | % | |||||||||||||||||||||||
| Wealth Management segment | 157,277 | 45.9 | % | 154,913 | 39.6 | % | 2,364 | 1.5 | % | ||||||||||||||||||||||||||
| Auction and Liquidation segment | 3,997 | 1.2 | % | 4,566 | 1.2 | % | (569) | (12.5) | % | ||||||||||||||||||||||||||
| Financial Consulting segment | 41,050 | 12.0 | % | 37,647 | 9.6 | % | 3,403 | 9.0 | % | ||||||||||||||||||||||||||
| Principal Investments -Communications and Other segment | 28,656 | 8.4 | % | 14,700 | 3.8 | % | 13,956 | 94.9 | % | ||||||||||||||||||||||||||
| Brands segment | 2,740 | 0.8 | % | 2,795 | 0.7 | % | (55) | (2.0) | % | ||||||||||||||||||||||||||
| Corporate and Other segment | 24,536 | 7.2 | % | 24,020 | 6.1 | % | 516 | 2.1 | % | ||||||||||||||||||||||||||
| Total selling, general & administrative expenses | $ | 342,335 | 100.0 | % | $ | 391,266 | 100.0 | % | $ | (48,931) | (12.5) | % | |||||||||||||||||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, 2021 | June 30, 2020 | Change | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Capital Markets segment | $ | 152,625 | 39.0 | % | $ | 86,115 | 44.3 | % | $ | 66,510 | 77.2 | % | ||||||||||||
| Wealth Management segment | 154,913 | 39.6 | % | 33,784 | 17.4 | % | 121,129 | n/m | ||||||||||||||||
| Auction and Liquidation segment | 4,566 | 1.2 | % | 4,256 | 2.2 | % | 310 | 7.3 | % | |||||||||||||||
| Financial Consulting segment | 37,647 | 9.6 | % | 31,137 | 16.0 | % | 6,510 | 20.9 | % | |||||||||||||||
| Principal Investments - United Online and magicJack segment | 14,700 | 3.8 | % | 15,242 | 7.8 | % | (542 | ) | (3.6 | %) | ||||||||||||||
| Brands segment | 2,795 | 0.7 | % | 2,642 | 1.4 | % | 153 | 5.8 | % | |||||||||||||||
| Corporate and Other segment | 24,020 | 6.1 | % | 21,130 | 10.9 | % | 2,890 | 13.7 | % | |||||||||||||||
| Total selling, general & administrative expenses | $ | 391,266 | 100.0 | % | $ | 194,306 | 100.0 | % | $ | 196,960 | 101.4 | % | ||||||||||||
Total selling, general and administrative expenses increaseddecreased approximately $197.0$48.9 million to $342.3 million during the six months ended June 30, 2022 from $391.3 million during the six months ended June 30, 2021 from $194.3 million for the six months ended June 30, 2020.2021. The increase of approximately $197.0 million in selling, general and administrative expensesdecrease was primarily due to increasesdecrease of $66.5$68.5 million in the Capital Markets segment $121.1 million in the Wealth Management segment, $0.3and $0.6 million in the Auction and Liquidation segment, $6.5partially offset by increases of $14.0 million in the Principal Investments — Communications and Other segment, $3.4 million in the Financial Consulting segment, $0.2$2.4 million in the BrandsWealth Management segment, and $2.9$0.5 million in the Corporate and Other segment, partially offset by a decrease of $0.5 million in the Principal Investments — United Online and magicJack segment.
Capital Markets
Selling, general and administrative expenses in the Capital Markets segment increaseddecreased by $66.5$68.5 million to $84.1 million during the six months ended June 30, 2022 from $152.6 million during the six months ended June 30, 2021 from $86.1 million during the six months ended June 30, 2020.2021. The increasedecrease was primarily due to increasesdecreases of $44.2$43.2 million in consulting expenses and $36.2 million in payroll and related expenses, $13.2partially offset by increases of $4.9 million from the acquisitionsettlement of National, $6.9a regulatory matter, $3.1 million in consulting expenses, $2.6depreciation and amortization, $1.9 million in investment banking dealother expenses and $0.4$1.3 million in clearing charges, partially offset by a decrease of $0.9 million in legalbusiness development expenses.
Wealth Management
Selling, general and administrative expenses in the Wealth Management segment increased by $121.1$2.4 million to $157.3 million during the six months ended June 30, 2022 from $154.9 million during the six months ended June 30, 2021 from $33.8 million during the six months ended June 30, 2020.2021. The increase was primarily due to increasesan increase of $113.0$4.9 million from the acquisitionsettlement of National and $9.3 million in payroll and related expenses,a regulatory matter, partially offset by decreases of $0.7$1.6 million in legal expensesdepreciation and $0.5amortization and $0.2 million in clearing charges.
Auction and Liquidation
Selling, general and administrative expenses in the Auction and Liquidation segment increased by $0.3decreased $0.6 million to $4.0 million during the six months ended June 30, 2022 from $4.6 million during the six months ended June 30, 2021 from $4.3 million during the six months ended June 30, 2020.2021. The increasedecrease was primarily due to an increase of $1.2 million in business development expenses; partially offset by decreases of $0.5 million in payroll and related expenses, and $0.5 million in foreign currency exchange.
Selling, general and administrative expenses in the Financial Consulting segment increased by $6.5$3.4 million to $41.1 million during the six months ended June 30, 2022 from $37.6 million during the six months ended June 30, 2021 from $31.1 million during the six months ended June 30, 2020.2021. The increase was primarily due to increases of $5.3$2.7 million in payroll and related expenses $0.6and $0.8 million in legal expenses, $0.3 million in outside contractor expenses,travel and $0.3 million in otherentertainment expenses.
Principal Investments — United OnlineCommunications and magicJack
Selling, general and administrative expenses in the Principal Investments — United OnlineCommunications and magicJackOther segment decreased $0.5increased $14.0 million to $28.7 million for the six months ended June 30, 2022 from $14.7 million for the six months ended June 30, 2021 from $15.2 million for the six months ended June 30, 2020.2021. The decreaseincrease was primarily due to decreasesincreases of $0.6$4.1 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022, $3.2 million in payroll and related expenses, $0.6$1.8 million in depreciation and amortization, expenses, and $0.1$1.6 million in communications expenses, partially offset by an increase primarily due to a $0.8$1.1 million legal settlement accrual release in the six months ended June 30, 2020.
Brands
Selling, general and administrative expenses in the Brands segment increased by $0.2 million toremained flat at $2.8 million during the six months ended June 30, 2021 from $2.6 million during the six months ended June 30, 2020. The increase was primarily due to an increase of $0.2 million in management fees paid.
Corporate and Other
Selling, general and administrative expenses for the Corporate and Other segment increased approximately $2.9$0.5 million to $24.0$24.5 million during the six months ended June 30, 20212022 from $21.1$24.0 million for the six months ended June 30, 2020.2021. The increase was primarily due to increases of $9.2$8.3 million in payroll and related expenses, $2.5 million in extinguishment of debt as further discussed below, and $0.5 million in computer software expenses, partially offset by a decreasedecreases of $9.1$4.5 million primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiarieschange in the six months ended June 30, 2021.
During the six months ended June 30, 2021, we repurchased 5,126,228 senior notes with an aggregate facefair value of $128.2 million at par, resulting in a loss net of expensescontingent consideration and original issue discount of $0.9 million. The total redemption payment included approximately $1.6$3.4 million in accrued interest. During the six months ended June 30, 2020, we repurchased 137,710 senior notes with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses and original issue discount of $1.6 million. As part of the repurchase, the Company paid $0.03 million in interest accrued through the date of each respective repurchase.
Impairment of tradenames. Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of March 31, 2020 and June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired. In the six months ended June 30, 2020, the Company recognized impairments of $12.5 million on the indefinite-lived tradenames. There was no impairment in the six months ended June 30, 2021.
Other Income (Expense).Other income included interest income of $0.6 million and $0.1 million during the six months ended June 30, 2022 and 2021, respectively. Change in fair value of financial instruments and $0.5other in the amount of $10.3 million during the six months ended June 30, 2020. Gain on extinguishment2022 was primarily due to the change in fair value of loans inwarrant liabilities and the amountforgiveness of $6.5a Paycheck Protection Program loan issued to FocalPoint prior to its acquisition by the Company during the first quarter of 2022. Interest expense was $62.2 million during the six months ended June 30, 2021 was due2022 compared to National PPP loans that were forgiven by the SBA. Interest expense was $40.6 million during the six months ended June 30, 20212021. The increase in interest expense was primarily due to increases in interest expense of $10.7 million from the issuance of senior notes, and $8.6 million and $2.3 million from the Nomura term loan and revolving credit facility, respectively, entered into during the second quarter of 2021. During the six months ended June 30, 2022, income from equity investments was $3.4 million compared to $32.2$0.02 million during the six months ended June 30, 2020.2021. The increase was primarily due to $7.0 million in interest expenseearnings related to the bebe equity method investment, partially offset by $3.7 million loss recognized from the conversion of debt to equity in the acquisition of Lingo during the second quarter of 2022.
Income (Loss) Before Income Taxes. Income before income taxes was $449.1 million during the six months ended June 30, 2021 compared2021. The change was primarily due to loss beforea decrease in revenue of $688.6 million and increase in interest expense of $21.6 million, partially offset by a decrease in operating expenses of approximately $51.5 million, increase in change in fair value of financial instruments and other of $3.8 million, increase in income from equity investments of $3.4 million, and an increase in interest income of $0.5 million.
(Provision) Benefit for Income Taxes. Provision for income taxes was $117.4 million during the six months ended June 30, 2021 compared to benefit2021. The effective income tax rate was 27.8% for income taxes of $5.3 million during the six months ended June 30, 2020. The effective income tax rate was a provision of2022 as compared to 26.1% for the six months ended June 30, 2021 as compared to a benefit of 24.2% for the six months ended June 30, 2020.
Net Income (Loss) Attributable to Noncontrolling InterestInterests and Redeemable Noncontrolling Interests. Net income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own. The net income attributable to
Net Income (Loss) Attributable2022 compared to the Company. Netnet income attributable to the Company for the six months ended June 30, 2021 wasof $330.3 million an increase from net loss attributable to the Company of $14.8 million for the six months ended June 30, 2020. The increase of $345.2 million in net income attributable to the Company during the six months ended June 30, 2021 as compared to the same period in 20202021. The change was primarily due to an increase ina change from operating income to loss of $472.9$637.2 million, an increase in gain on extinguishment of loans of $6.5 million, and an increase in gain from equity investments of $0.6 million, partially offset by an increase in provision for income taxes of $122.8 million, an increase in interest expense of $8.5$21.6 million, and an increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $3.3$3.1 million, partially offset by a change from provision for to benefit from income taxes of $173.6 million, increase in change in fair value of financial instruments and other of $3.8 million, increase in income from equity investments of $3.4 million, and a decreasean increase in interest income of $0.4$0.5 million.
Preferred Stock Dividends
.19, 2022. On September 4, 2020,July 7, 2022, the Company closed its public offeringdeclared a cash dividend $0.4296875 per Depositary Share, which was paid on July 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 July 19, 2022.
Net (Loss) Income (Loss) Available to Common Shareholders. Net income available to common shareholders for the six months ended June 30, 2021 was $326.8 million, an increase from net loss available to common shareholders of $17.0was $154.2 million for the six months ended June 30, 2020. The increase of $343.8 million in net income available to common shareholders during the six months ended June 30, 2021 as2022 compared to net income available to common shareholders of $326.8 million during the same period in 2020six months ended June 30, 2021. The change was primarily due to increases ina change from operating income to loss of $472.9$637.2 million, gain on extinguishment of loans of $6.5 million, and a gain from equity investments of $0.6 million, partially offset by an increase in provision for income taxes of $122.8 million, an increase in interest expense of $8.5$21.6 million, an increase in net income attributable to noncontrolling interestinterests and redeemable noncontrolling interests of $3.3$3.1 million, and an increase in preferred stock dividends of $1.4$0.5 million, partially offset by a change from provision for to benefit from income taxes of $173.6 million, increase in change in fair value of financial instruments and other of $3.8 million, increase in income from equity investments of $3.4 million, and a decreasean increase in interest income of $0.4$0.5 million.
Liquidity and Capital Resources
Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements.
During the six months ended June 30, 2021 2022 and 2020,2021, we generated a net loss of $145.8 million and net income of $331.7 million, andrespectively. Our net loss of $16.7$145.8 million respectively.included $292.3 million of losses that primarily related to a decrease in the fair value of our portfolio of securities and other investments owned during the six months ended June 30, 2022. Our cash flows and profitability are impacted by capital market engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments in marketable securities.
As of June 30, 2021,2022, we had $297.4$216.1 million of unrestricted cash and cash equivalents, $1.3$0.9 million of restricted cash, $1,278.8$1,144.9 million of securities and other investments owned at fair value, $270.3$770.8 million of loans receivable, at fair value, and $1,475.0$2,115.8 million of borrowings outstanding. The borrowings outstanding of $1,475.0$2,115.8 million atas of June 30, 20212022 included $1,644.8 million of borrowings from the issuance of the series of senior notes that are due at amortized cost of $1,213.1 million, $257.1various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $367.8 million in term loans borrowed pursuant to the BRPACBRPI Acquisition Co LLC (“BRPAC”) and Nomura Credit Agreements $4.4discussed below, $80.0 million of loan participations sold,revolving credit under the Nomura Credit Agreement discussed below, and $0.4$23.2 million of notes payable.
From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. On July 29, 2021,28, 2022, we declared a regular dividend of $0.50 per share and special dividend of $1.50$1.00 per share that will be paid on or about August 26, 202123, 2022 to stockholders of record as of August 13, 2021.11, 2022. On 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 was paid on 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.
A summary of dividend activity for the six months ended June 30, 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 | |||||||||||||||||||||||||||
| April 28, 2022 | May 20, 2022 | May 11, 2022 | $ | 1.000 | $ | — | $ | 1.000 | ||||||||||||||||||||||||
| February 23, 2022 | March 23, 2022 | March 9, 2022 | 1.000 | — | 1.000 | |||||||||||||||||||||||||||
| October 28, 2021 | November 23, 2021 | November 9, 2021 | 1.000 | 3.000 | 4.000 | |||||||||||||||||||||||||||
| July 29, 2021 | August 26, 2021 | August 13, 2021 | 0.500 | 1.500 | 2.000 | |||||||||||||||||||||||||||
| May 3, 2021 | May 28, 2021 | May 17, 2021 | 0.500 | 2.500 | 3.000 | |||||||||||||||||||||||||||
| February 25, 2021 | March 24, 2021 | March 10, 2021 | 0.500 | 3.000 | 3.500 | |||||||||||||||||||||||||||
| Regular | Special | Total | ||||||||||||||
| Stockholder | Dividend | Dividend | Dividend | |||||||||||||
| Date Declared | Date Paid | Record Date | Amount | Amount | Amount | |||||||||||
| 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 | |||||||||||
| 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 | |||||||||||
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 June 30, 2021,2022, dividends in arrears in respect of the Depositary Shares were $0.8 million. On January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021. On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021. On July 8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which will bewas paid on or about August 2, 2021 to holders of record as of the close of business on July 21, 2021.
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 June 30, 2021,2022, dividends in arrears in respect of the Depositary Shares were $0.5 million. On January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021. On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021. On July 8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which will bewas paid on or about August 2, 2021 to holders of record as of the close of business on July 21, 2021.
Cash Flow Summary
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| (Dollars in thousands) | ||||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (147,901 | ) | $ | 14,229 | |||
| Investing activities | (13,722 | ) | (83,354 | ) | ||||
| Financing activities | 356,051 | 71,815 | ||||||
| Effect of foreign currency on cash | (534 | ) | (705 | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | $ | 193,894 | $ | 1,985 | ||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | (49,899) | $ | (147,901) | |||||||
| Investing activities | 523 | (358,722) | |||||||||
| Financing activities | (10,431) | 701,051 | |||||||||
| Effect of foreign currency on cash | (3,027) | (534) | |||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (62,834) | $ | 193,894 | |||||||
Cash used in operating activities was $49.9 million during the six months ended June 30, 2022 compared to cash used in operating activities of $147.9 million during the six months ended June 30, Cash used in investing activities was Credit Agreements Nomura Credit Agreement On June 23, 2021, Eurodollar loans under the Credit Facilities Subject to certain eligibility requirements, the assets of certain subsidiaries of The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity. Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of We had We are in compliance with all financial covenants in the Wells Fargo Credit Agreement BRPAC Credit Agreement On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of As of June 30, 2021 compared to cash provided of $14.2 million during2021. Cash used in operating activities for the six months ended June 30, 2020.2022 consisted of the negative impact of net loss of $145.8 million, noncash items of $70.4 million, and changes in operating assets and liabilities of $166.2 million. The negative cash flow impact from noncash items of $70.4 million included deferred income taxes of $95.3 million, fair value adjustments of $13.6 million, gain on equity investment of $6.8 million, income from equity investments of $3.4 million, noncash interest and other of $1.2 million, and gain on extinguishment of loan of $1.1 million, partially offset by share-based compensation of $31.2 million, depreciation and amortization of $15.8 million, dividends from equity investments of $1.9 million, provision for doubtful accounts of $1.3 million, income allocated for mandatorily redeemable noncontrolling interests of $0.4 million, effect of foreign currency of $0.3 million, and loss on disposal of fixed assets of $0.1 million. Cash used in operating activities for the six months ended June 30, 2021 consisted of the positive impact of net income of $331.7 million and noncash items of $50.2 million, partially offset by the negative impact of changes in operating assets and liabilities of $529.8 million. The positive cash flow impact from noncash items of $50.2 million included deferred income taxes of $51.2 million, share-based compensation of $14.1 million, depreciation and amortization of $12.9 million, loss on extinguishment of debt of $0.9 million, provision for doubtful accounts of $0.8 million, dividends from equity investments of $0.6 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, partially offset by fair value adjustments of $10.0 million, other noncash interest and other of $9.1 million, gain on extinguishment of loans of $6.5 million gain on equity investment of $3.5 million, and effect of foreign currency on operations of $1.5 million.$13.7$0.5 million during the six months ended June 30, 20212022 compared to cash used in investing activities of $83.4$358.7 million for the six months ended June 30, 2020.2021. During the six months ended June 30, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $199.1 million, acquisition of businesses of $38.4 million, purchases of equity and other investments of $2.8 million, and purchases of property and equipment of $0.9 million, partially offset by cash received from loans receivable repayment of $241.7 million. During the six months ended June 30, 2021, cash used in investing activities consisted of cash used into fund a trust account for the future redemption of one of our subsidiaries’ redeemable common stock of $345.0 million, purchases of loans receivable of $87.3 million, repayments of loan participations sold of $10.8 million, cash used for purchases of equity and other investments of $10.5 million, cash used in the National acquisition of business of $0.4 million, and purchases of property and equipment of $0.3 million, partially offset by cash received from loans receivable repayment of $95.5 million. During the six months ended June 30, 2020, cash investing activities consisted of cash used for the purchase of loans receivable of $152.2 million, repayments of loan participations sold of $0.9 million, cash used for equity investments of $6.5 million, and cash used for acquisition of other businesses of $1.5 million, offset by cash received from loans receivable repayment of $74.5 million, sale of a loan receivable to a related party of $1.8 million and loan participations sold of $2.4 million.Cash provided by financing activities was $356.1$10.4 million during the six months ended June 30, 20212022 compared to cash provided by financing activities of $71.8$701.1 million during the six months ended June 30, 2020.2021. During the six months ended June 30, 2022, cash used in financing activities primarily consisted of $62.0 million used to pay dividends on our common shares, $54.3 million used in the repayment of term loan, $6.4 million used in payment of employment taxes on vesting of restricted stock, $4.0 million used to pay dividends on our preferred shares, $2.4 million in distributions to noncontrolling interests, $0.5 million used in the payment of contingent consideration, $0.5 million used in the payment of debt issuancenet proceeds from offeringsissuance of common stock, $10.6$10.7 million contributions from noncontrolling interests, and $8.3 million net proceeds from offerings of preferred stock, partially offset by $181.3 million used to pay dividends on our common shares, $128.2 million used to repurchase our senior notes, $37.6 million used to repay our notes payable, $15.7 million used to pay debt issuance costs, $14.8 million in distributions to noncontrolling interests, $11.5 million used for repayment on ourthe BRPAC term loan, $10.4 million used to pay employment taxes on vesting of restricted stock, and $3.5 million used to pay dividends on our preferred shares. During the six months ended June 30, 2020, cash provided by financing activities primarily consisted of $171.1 million proceeds from issuance of senior notes and $4.6 million proceeds from offerings of preferred stock, offset by $37.1 million used to repay our asset based credit facility, $27.8 million used to repurchase our common stock, $17.5 million used to pay dividends on our common shares, $9.6 million used for repayment on our BRPAC term loan, $2.8 million used to pay debt issuance costs, $2.7 million used for payment of employment taxes on vesting of restricted stock, $2.1 million in distributions to noncontrolling interests, $2.1 million used to pay dividends on our preferred shares, $1.8 million used to repurchase our senior notes, and $0.4 million used to repay our other notes payable.the Company, the Primary Guarantorwe, and the Borrowerour wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (as amended,the Credit Agreement“Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Administrative Agent”), and Wells Fargo Bank, N.A., as collateral agent providing(the “Collateral Agent”), for a four-year $200.0 million secured Termterm loan credit facility (the “Term Loan FacilityFacility”) and a four-year $80.0 million revolving loan credit facility (the “Revolving Credit Facility”).Facility. The Credit Facilities willFacility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment. will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans will accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company iswe are required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the Revolving Credit Facility for the immediately preceding fiscal quarter.the Companyours that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities. If borrowings under the Credit Facilities exceed the borrowing base, the Company iswe are obligated to prepay the loans in an aggregate amount equal to such excess. The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.the Company’s,our, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. In addition, the Credit Agreement contains a financial covenant that requires the Companyus to maintain Operating EBITDAoperating earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of at least $115.0$135.0 million and the Primary Guarantor to maintain net asset value of at least $900.0$1,100.0 million. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.$2.5$3.8 million per quarter.AtAs of June 30, 2022 and December 31, 2021, the outstanding balancebalances on the credit facility’s term loan was $194.2Term Loan Facility and Incremental Facility were $293.7 million (net of unamortized debt issuance costs of $5.8$6.3 million). and $292.7 million (net offorduring the three and six months ended June 30, 2022 and 2021 was $4.7 million (including amortization of deferred debt issuance costs of $0.5 million) and $0.2 million (including amortization of deferred debt issuance costs of $0.03 million)., respectively. Interest on the term loan during the six months ended June 30, 2022 and 2021 was $8.8 million (including amortization of deferred debt issuance costs of $1.0 million) and $0.2 million (including amortization of deferred debt issuance costs of $0.03 million), respectively. The interest rate on the term loan atas of June 30, 2022 and December 31, 2021 was 4.64%.6.65% and 4.72%, respectively.not made any borrowingsan outstanding balance of $80.0 million under the Revolving Credit Facility atas of June 30, 2022 and December 31, 2021. Interest on the revolving facility during the three and six months ended June 30, 2022 was $1.2 million (including amortization of deferred financing costs of $0.1 million) and $2.3 million (including amortization of deferred financing costs of $0.3 million), respectively. The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $0.03 million (including amortization of deferred financing costs of $0.01 million). The interest rate on the Revolving Credit Facility atas of June 30, 2022 and December 31, 2021 was 4.65%. Subsequent to June 30, 2021, we drew down the full $80.0 million of the Revolving Credit Facility.Nomura Credit Agreement atas of June 30, 2021.On April 21, 2017, we amended the asset basedWe are party to a 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 June 30, 20212022 and December 31, 2020. At2021. As of June 30, 2022 and December 31, 2021, there were no open letters of credit outstanding.atas of June 30, 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”). Underwe borrowed $80.0 million due December 19, 2023. Pursuant to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal amount of up to $10.0 million at any time prior to the first anniversary of the agreement date. On February 1, 2019, the Borrowers entered into the First Amendment to Credit Agreement and Joinder with City National Bank as a new lender in which the new lender extended to Borrowers the additional $10.0 million.On December 31, 2020,(the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders entered intoagreed to the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which,following, among other things,things: (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ will useused to repay the outstanding principal amount of the existing Terms Loansterms loans and Optional Loansoptional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make a one-time Permitted Distribution (as defined incertain distributions to the Second Amendment) in the amount of $30.0 million on the dateparent company of the Second Amendment, (iii) the maturity date of the new Term Loans is five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B. Riley Principal Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement. Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second Amendment, as further discussed in Note 8 to the accompanying financial statements. Borrowers.LIBORSOFR rate plus a margin of 2.75% to 3.25%3.50% per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPACAtAs of June 30, 2022 and December 31, 2021, the interest rate on the amended BRPAC Credit Agreement was 3.36%.Amounts Principal outstanding under the Amendedamended BRPAC Credit Agreement areis due in quarterly installments commencing on March 31, 2021.installments. Quarterly installments from September 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$2.8 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $3.8$4.7 million per quarter, from March 31, 2024 to December 31, 20242026 are in the amount of $3.3$3.8 million per quarter, and fromon March 31, 2025 to December 31, 2025 are2027 is in the amount of $2.8 million, per quarter.20212022 and December 31, 2020,2021, the outstanding balance on the term loan was $62.9$74.1 million (net of unamortized debt issuance costs of $0.9 million), and $53.7 million (net of unamortized debt issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively. Interest expense on the term loan during the three months ended June 30, 2022 and 2021 was $0.6 million (including amortization of deferred debt issuance costs of $0.1 million) and 2020, was $0.7 million (including amortization of deferred debt issuance costs of $0.08 million) and $0.6 million (including amortization of deferred debt issuance costs of $0.07 million), respectively. Interest expense on the term loan during the six months ended June 30, 2022 and 2021 was $0.6 million (including amortization of deferred debt issuance costs of $0.1 million) and 2020, was $1.4 million (including amortization of deferred debt issuance costs of $0.2 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.
We are in compliance with all financial covenants in the amended BRPAC Credit Agreement atas of June 30, 2021.
Senior Note Offerings
During the three months ended June 30, 2022 and 2021, we issued $15.8 million and $72.5 million, respectively, of senior notes, and during the six months ended June 30, 2022and 2021, the Companywe issued $35.9 million and $85.3 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.
On June 24, 2021, the Company announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the "Redemption Date"). The Notes have an aggregate principal amount of $122.8 million. The redemption price is equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date. The Notes, which are listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.
At June 30, 20212022 and December 31, 2020,2021, the total senior notes outstanding was $1,213.1$1,644.8 million (net of unamortized debt issue costs of $13.9$19.1 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%5.70% and 6.95%5.69%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $20.0$24.7 million and $15.6$20.0 million for the three months ended June 30, 20212022 and 2020,2021, respectively, and $38.6totaled $49.1 million and $30.0$38.6 million for the six months ended June 30, 2022 and 2021, and 2020, respectively.
The most recent sales agreement prospectus was filed by us with the SEC on 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 June 30, 2022, and December 31, 2021 the Company had $64.7$76.0 million and $111.9 million, respectively, remaining availability under the April 2021January 2022 Sales Agreement.
Off Balance Sheet Arrangements
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.
Babcock and Wilcox Commitments
On June 30, 2021, in connection with B&W’s entry into new debt financing with lenders not related to us, we agreed to guaranty (the “B. Riley Guaranty”) up to $110.0 million of obligations that B&W may owe to providers of cash collateral pledged in connection with such debt financing. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of default and the acceleration of B&W’s obligations under the Reimbursement Agreement. B&W shall pay us $0.9 million per annum in connection with the B. Riley Guaranty. B&W has agreed to reimburse us to the extent the B. Riley Guaranty is called upon.
On August 10, 2020, we entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the Indemnity Agreement”). Pursuant to the Indemnity Rider, we agreed to indemnify Berkley in connection with a default by B&W under the Indemnity Agreement relating to a $30.0 million payment and performance bond issued by Berkley in connection with a construction project undertaken by B&W. In consideration for providing the Indemnity Rider, B&W paid us $0.6 million on August 26, 2020.
Other Commitments
On June 19, 2020, we participated in a loan facility agreement to provide a total loan commitment up to 33.0 million EUROS to a retailer in Europe. We made an initial funding of 6.6 million EUROS in July 2020. No additional borrowings have been made since the initial funding, leaving unused future commitments available of up to 26.4 million EUROS as of June 30, 2021.
At June 30, 2021, we had an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the amount of $77.5 million that was funded on July 2, 2021. Simultaneously with the funding of the loan on July 2, 2021, we received a principal payment on the loan for $27.5 million reducing the loans receivable balance to $50.0 million.
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 Obligations
On January 25, 2021, we 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, we received net proceeds of $225.7 million (after underwriting commissions, fees and other issuance costs of $4.3 million). The Notes bear interest at the rate of 6.0% per annum.
On March 31, 2021, we exercised our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1.6 million in accrued interest.
On March 29, 2021, we issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to the prospectus supplement dated January 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, we received net proceeds of $156.3 million (after underwriting commissions, fees and other issuance costs of $3.2 million). The Notes bear interest at the rate of 5.5% per annum.
On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017. The total redemption payment included approximately $2.1 million in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.
As a result of the above, our total senior notes payable (including interest) increased to $1,497.4 million as of June 30, 2021, and comparing June 30, 2021 to December 31, 2020, our senior notes payable due in one year or less increased by $137.1 million, our senior notes payable due in 1-3 years increased by $128.5 million, our senior notes due in 4-5 years increased by $360.4 million while our senior notes due in more than 5 years decreased by $220.3 million. Additionally, our total contractual obligations increased to $1,860.1 million at June 30, 2021 and comparing June 30, 2021 to December 31, 2020, our total payments due in one year or less increased by $102.2 million, our payments due in 1-3 years increased $152.5 million, our payments due in 4-5 years increased by $541.7 million, while our payments due in more than 5 years decreased by $215.1 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.
Recent Accounting Standards
See Note 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 exposure
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.
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 June 30, 20212022 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.
Foreign Currency Risk
The majority of our operating activities are conducted in U.S. dollars. Revenues generated from our foreign subsidiaries totaled $13.3 million for the six months ended June 30, 2021 or 1.4% of our total revenues of $936.9$5.2 million during the six months ended June 30, 2021.2022 or 2.1% of our total revenues of $248.3 million during the six months ended June 30, 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 $0.2$1.1 million and $0.5$0.2 million during the six months ended June 30, 20212022 and 2020,2021, respectively. We may be exposed to foreign currency risk; however, our operating results during the six months ended June 30, 20212022 included $13.3$5.2 million of revenues and $3.1 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 $0.5 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 six months ended June 30, 2021.
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.
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.
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. 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”) 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 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.
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, 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.
| Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| April 1 through April 30, 2022 | — | — | — | — | ||||||||||||||||||||||
| May 1 through May 31, 2022 | 106,982 | $ | 49.56 | — | — | |||||||||||||||||||||
| June 1 through June 30, 2022 | 32,488 | $ | 54.07 | — | — | |||||||||||||||||||||
| Total | 139,470 | |||||||||||||||||||||||||
None.
None.
Not applicable.
On July 27, 2021, the Compensation Committee (the “Committee”) of the Company’s Board of Directors approved an annual incentive cash compensation program for the Company’s named executive officers. Rather than continue to establish financial targets pursuant to the Company’s Management Bonus Plan which in preceding years provided annual cash bonuses based upon the achievement of certain annual EBITDA thresholds, the Committee elected, following consultation with its outside compensation advisors, to implement a discretionary bonus program based upon the Company’s performance and the individual executive’s contributions. The Committee has determined that a discretionary annual bonus for the named executive officers enables the Committee (i) to tailor compensation based upon individual performance, (ii) to consider long versus short term goals, (iii) to evaluate the Company’s overall financial performance (or a business unit or subsidiary performance, as the case may be), and (iv) to appraise the attainment of other Company objectives.
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.
Exhibit Index
| Description | Form | Exhibit | Filing Date | |||||||||||||||||||||||
| 10.1* | ||||||||||||||||||||||||||
| 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). | |||||||||||||||||||||||||
SIGNATURES
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.
| B. Riley Financial, Inc. | |||||||||
| Date: July | By: | ||||||||
| Name: | Phillip J. Ahn | ||||||||
| Title: | Chief Financial Officer and
| ||||||||
(Principal Financial Officer) | |||||||||
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