2022 B. RILEY FINANCIAL, INC. Delaware 2022 (Loss) thousands, except share data) Contents 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. services from United Online, cloud communication services primarily through the magicJack devices, global cloud/unified communications and managed services from Lingo, and mobile phone voice, text, and data services and devices through a mobile virtual network operator; and (vi) Brands, which is focused on generating revenue through the licensing of trademarks. 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 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. 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. Equipment December 31, 2021, the principal outstanding for the Badcock Receivables was $309,355 and $400,000, respectively, and included in loans receivable, at fair value on the condensed consolidated balance sheets. The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain subsidiaries decreased by $172,500. 2021. The 1), were as follows: December 31, 2025. The Company does not believe that 2021. Basic and diluted earnings per share syndicated. 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 In connection with the 2022 and 2021, were $0.4609375 per depository share. $1,000. Partners. In March 2022, a $1,000 performance fee was approved in accordance with the Executive Consulting Agreement. six months ended June 30, 2022 and 2021, the Company earned $4,036 and $2,957, respectively, of fees related to these services. The following is a summary of certain financial data for each of the Company’s reportable segments: of $14,182 and $12,870, respectively, were located in North America. This segment also includes the results of operations of FocalPoint Securities, LLC ("FocalPoint") from the date of acquisition on January 19, 2022. devices. This segment also includes the results of operations of Lingo from the date of acquisition on May 31, 2022. 2021 subscription services for UOL and magicJack. We expect the UOL and magicJack subscription revenues to continue to decline year over year. Selling, General and Administrative business development expenses. Liquidation $0.2 million in payroll and related expenses. Selling, general and administrative expenses 2021. 2021. 2021 Nine Months Nine Months Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 n/m - Not applicable or not meaningful. Total revenues subscription services for UOL and magicJack. We expect the UOL and magicJack subscription revenues to continue to decline year over year. n/m - Not applicable or not meaningful. Liquidation Other six months ended June 30, 2021. The increase was primarily due to increases of $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, $1.8 million in depreciation and amortization, $1.6 million in communications expenses, $1.1 million in transaction costs, $0.7 million in marketing expenses, $0.5 million in software and equipment expenses, $0.4 million in business development expenses, and $0.3 million in other expenses. 2021. 2021. 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 an increase in interest income of $0.5 million. basis and amounts realized from the sale of our investments in marketable securities. gain on equity investment of $3.5 million, and effect of foreign currency on operations of $1.5 million. facility as of June 30, 2022. Information /FORM 10-Q(Mark One)☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934SeptemberJune 30, 2017☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Delaware27-022349527-0223495 (I.R.S. Employer
Identification No.)21255 Burbank Boulevard,400 Woodland Hills,8009136790025 (Address of Principal Executive Offices) (Zip Code) (818) 884-3737Title 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 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 ☐oand posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒x No ☐o (Check one) Large accelerated filer ☐x Accelerated filer ☒ o Non-accelerated filer ☐o Smaller reporting company ☐o Emerging growth company☐companyo ☐o☐o No ☒xNovember 6, 2017,July 22, 2022, there were 26,467,59428,290,458 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.The Quarterthe Quarterly Period Ended SeptemberJune 30, 2017 PagePage 3345673249495050515151515152 September 30, December 31, 2017 2016 (Unaudited) Assets Assets Cash and cash equivalents $ 102,409 $ 112,105 Restricted cash 9,269 3,294 Due from clearing brokers 21,580 — Securities and other investments owned, at fair value 95,965 16,579 Securities borrowed 730,022 — Accounts receivable, net 19,924 18,989 Due from related parties 6,082 3,009 Advances against customer contracts 5,298 427 Prepaid expenses and other assets 20,375 5,742 Property and equipment, net 13,105 5,785 Goodwill 100,903 48,903 Other intangible assets, net 59,671 41,166 Deferred income taxes 41,474 8,619 Total assets $ 1,226,077 $ 264,618 Liabilities and Equity Liabilities Accounts payable $ 4,046 $ 2,703 Accrued expenses and other liabilities 58,954 53,168 Deferred revenue 3,181 4,130 Due to related parties and partners 1,244 10,037 Securities sold not yet purchased 25,046 846 Securities loaned 728,201 — Mandatorily redeemable noncontrolling interests 12,830 4,019 Acquisition consideration payable — 10,381 Notes payable 2,364 — Senior notes payable 115,574 27,700 Contingent consideration — 1,242 Total liabilities 951,440 114,226 Commitments and contingencies B. Riley Financial, Inc. stockholders’ equity: Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued — — Common stock, $0.0001 par value; 40,000,000 shares authorized; 26,461,568 and 19,140,342 issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 2 2 Additional paid-in capital 259,047 141,170 Retained earnings 15,956 9,887 Accumulated other comprehensive loss (321 ) (1,712 ) Total B. Riley Financial, Inc. stockholders’ equity 274,684 149,347 Noncontrolling interests (47 ) 1,045 Total equity 274,637 150,392 Total liabilities and equity $ 1,226,077 $ 264,618 June 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 Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 Revenues: Services and fees $ 85,141 $ 50,300 $ 202,354 $ 90,505 Interest income - Securities lending 7,206 — 9,424 — Sale of goods 79 6,666 221 6,668 Total revenues 92,426 56,966 211,999 97,173 Operating expenses: Direct cost of services 10,138 12,841 46,224 25,084 Cost of goods sold 124 2,391 313 2,393 Selling, general and administrative expenses 70,962 22,727 132,836 48,844 Restructuring charge 4,896 3,585 11,484 3,585 Interest expense - Securities lending 4,950 — 6,515 — Total operating expenses 91,070 41,544 197,372 79,906 Operating income 1,356 15,422 14,627 17,267 Other income (expense): Interest income 76 26 358 32 Loss from equity investment (157 ) — (157 ) — Interest expense (2,510 ) (991 ) (5,195 ) (1,398 ) (Loss) income before income taxes (1,235 ) 14,457 9,633 15,901 Benefit from (provision for) income taxes 1,357 (6,083 ) 7,753 (6,184 ) Net income 122 8,374 17,386 9,717 Net (loss) income attributable to noncontrolling interests (246 ) (565 ) (283 ) 631 Net income attributable to B. Riley Financial, Inc. $ 368 $ 8,939 $ 17,669 $ 9,086 Basic income per share $ 0.01 $ 0.47 $ 0.80 $ 0.51 Diluted income per share $ 0.01 $ 0.47 $ 0.76 $ 0.50 Cash dividends per share $ 0.13 $ 0.03 $ 0.55 $ 0.03 Weighted average basic shares outstanding 26,059,490 18,977,072 22,180,808 17,805,127 Weighted average diluted shares outstanding 27,639,862 19,191,035 23,385,014 18,009,158 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 4 Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 Net income $ 122 $ 8,374 $ 17,386 $ 9,717 Other comprehensive income (loss): Change in cumulative translation adjustment 345 (23 ) 1,391 (40 ) Other comprehensive income (loss), net of tax 345 (23 ) 1,391 (40 ) Total comprehensive income 467 8,351 18,777 9,677 Comprehensive (loss) income attributable to noncontrolling interests (246 ) (565 ) (283 ) 631 Comprehensive income attributable to B. Riley Financial, Inc. $ 713 $ 8,916 $ 19,060 $ 9,046 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 5 thousands) 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, 2016 — $ — 16,448,119 $ 2 $ 116,799 $ (6,305 ) $ (1,058 ) $ (118 ) $ 109,320 Issuance of common stock for acquisition of MK Capital, LLC - contingent equity consideration on February 2, 2016 — — 166,667 — — — — — — Vesting of restricted stock — — 7,306 — — — — — — Offering of common stock, net of offering expenses — — 2,420,980 — 22,759 — — — 22,759 Share based payments — — — — 1,831 — — — 1,831 Dividends on common stock — — — — — (571 ) — — (571 ) Net income for the nine months ended September 30, 2016 — — — — — 9,086 — 1,209 10,295 Foreign currency translation adjustment — — — — — — (40 ) — (40 ) Balance, September 30, 2016 — $ — 19,043,072 $ 2 $ 141,389 $ 2,210 $ (1,098 ) $ 1,091 $ 143,594 Balance, January 1, 2017 — $ — 19,140,342 $ 2 $ 141,170 $ 9,887 $ (1,712 ) $ 1,045 $ 150,392 Issuance of common stock for acquisition of MK Capital, LLC - contingent equity consideration on February 2, 2017 — — 166,666 — 1,151 — — — 1,151 Issuance of common stock for acquisition of Dialectic general partner interests on April 13, 2017 — — 158,484 — 1,952 — — — 1,952 Issuance of common stock for acquisition of FBR & Co. on June 1, 2017 — — 4,779,354 — 73,472 — — — 73,472 Issuance of common stock and common stock warrants for acquisition of Wunderlich on July 3, 2017 — — 1,974,812 — 36,306 — — — 36,306 Vesting of restricted stock, net of shares withheld for employer taxes — — 241,910 — (2,683 ) — — — (2,683 ) Share based payments — — — — 7,679 — — — 7,679 Dividends on common stock — — — — — (11,600 ) — — (11,600 ) Net income for the nine months ended September 30, 2017 — — — — — 17,669 — (170 ) 17,499 Distributions to noncontrolling interest — — — — — — — (922 ) (922 ) Foreign currency translation adjustment — — — — — — 1,391 — 1,391 Balance, September 30, 2017 — $ — 26,461,568 $ 2 $ 259,047 $ 15,956 $ (321 ) $ (47 ) $ 274,637 Preferred 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 B. RILEY FINANCIAL, INC. AND SUBSIDIARIESCondensed Consolidated StatementsTable of Cash Flows(Unaudited)(Dollars in thousands) Nine Months Ended
September 30, 2017 2016 Cash flows from operating activities: Net income $ 17,386 $ 9,717 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 7,705 2,381 Provision (recoveries) for doubtful accounts 827 (178 ) Share-based compensation 7,679 1,831 Recovery of key man life insurance (6,000 ) — Non-cash interest and other 319 147 Effect of foreign currency on operations (1,022 ) 640 Loss from equity investment 157 — Deferred income taxes (24,560 ) 1,839 Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets 2,838 — Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 10,766 1,450 Change in operating assets and liabilities: Due from clearing brokers 13,258 — Securities and other investments owned (41,350 ) 16,515 Securities borrowed 129,998 — Accounts receivable and advances against customer contracts 1,635 (1,871 ) Goods held for sale or auction — (8,447 ) Prepaid expenses and other assets 15,522 1,410 Accounts payable, accrued payroll and related expenses, accrued value added tax payable and other accrued expenses (38,597 ) 3,032 Amounts due from related parties and partners (12,313 ) (488 ) Securities sold, not yet purchased 7,700 (343 ) Deferred revenue (1,302 ) 963 Securities loaned (139,425 ) — Auction and liquidation proceeds payable — (672 ) Net cash (used in) provided by operating activities (48,779 ) 27,926 Cash flows from investing activities: Acquisition of Wunderlich, net of cash acquired $4,259 (25,478 ) — Cash acquired from acquisition of FBR & Co. 15,738 — Acquisition of United Online, net of cash acquired $125,542 in 2016 (10,381 ) (33,430 ) Acquisition of other businesses (2,052 ) — Purchases of property and equipment (550 ) (297 ) Proceeds from key man life insurance 6,000 — Proceeds from sale of property and equipment and intangible asset 619 15 Equity investment (1,015 ) — Increase in restricted cash (5,797 ) (78,161 ) Net cash used in investing activities (22,916 ) (111,873 ) Cash flows from financing activities: Repayment of revolving line of credit — (272 ) Proceeds from asset based credit facility 65,987 56,255 Repayment of asset based credit facility (65,987 ) (56,255 ) Repayment of notes payable (8,214 ) — Borrowings from participating note payable — 61,400 Payment of contingent consideration (1,250 ) (1,250 ) Proceeds from issuance of senior notes 89,330 — Payment of debt issuance costs (2,093 ) — Proceeds from issuance of common stock — 22,999 Offering costs from issuance of common stock — (240 ) Payment of employment taxes on vesting of restricted stock (2,683 ) — Dividends paid (13,493 ) (571 ) Distribution to noncontrolling interests (2,878 ) (1,680 ) Net cash provided by financing activities 58,719 80,386 Decrease in cash and cash equivalents (12,976 ) (3,561 ) Effect of foreign currency on cash 3,280 23 Net decrease in cash and cash equivalents (9,696 ) (3,538 ) Cash and cash equivalents, beginning of year 112,105 30,012 Cash and cash equivalents, end of period $ 102,409 $ 26,474 Supplemental disclosures: Interest paid $ 11,513 $ 505 Taxes paid $ 11,668 $ 409 Preferred 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 7 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 1—1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIESOrganization and Nature of Operationsvaluation andfinancial 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 with the acquisition ofconsumer Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc. (“UOL” or “United Online”) on July 1, 2016, provide consumer Internet access, magicJack VocalTec Ltd. (“magicJack”), and related subscription services.four6 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; (ii)(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; (iii) Valuation and Appraisal,(iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services to clients with independent appraisals in connection with asset based loans, acquisitions, divestitures and other business needs; and (iv)services; (v) Principal Investments - United Online,Communications and Other, through which the Company provides consumer Internet access and related subscription services.2—2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a)Principles of Consolidation and Basis of Presentation (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) GA Retail Investments, L.P. whichtransactions have been eliminated upon consolidationcontrolled by the Companyprimary beneficiary of a Variable Interest Entity (“VIE”); to eliminate the solely 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 resultgroup, lose the power from voting rights or similar rights of its ownershipthose investments to direct the activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a 50% partnership interest, appointment of executive officers and significant influence over the operations. VIE.Commission.Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2021, filed with the Securities and Exchange Commission (“SEC”)SEC on March 10, 2017.February 28, 2022. The results of operations for the ninethree and six months ended SeptemberJune 30, 20172022 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.(b)Use of Estimatesreservesallowance for doubtful accounts, receivable and slow moving goods held for sale or auction, the carryingfair value of loans receivables, intangible assets and goodwill, the fair value of mandatorily redeemable noncontrolling interests, fair value of share-basedshare based arrangements, fair value of contingent consideration, in business combination’s and accounting for income tax valuation allowances, recovery of contract assets, and sales returns and allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.8 (c)Revenue RecognitionRevenues are recognized in accordance with the accounting guidance when persuasive evidence of an arrangement exists, the related services have been provided, the fee is fixed or determinable, and collection is reasonably assured.Revenues in the Capital Markets segment are primarily comprised of (i) fees earned from corporate finance, investment banking, restructuring and wealth management services; (ii) revenues from sales and trading activities; and (iii) interest income from securities lending activities.Fees earned from corporate finance and investment banking services are derived from debt, equity and convertible securities offerings in which the Company acted as an underwriter or placement agent and from financial advisory services rendered in connection with client mergers, acquisitions, restructurings, recapitalizations and other strategic transactions. Fees from underwriting activities are recognized in earnings when the services related to the underwriting transaction are completed under the terms of the engagement and when the income was determined and is not subject to any other contingencies.Fees earned from wealth management services consist primarily of investment management fees that are recognized over the period the services are provided. Investment management fees are primarily comprised of fees for investment management services and are generally based on the dollar amount of the assets being managed.Revenues from sales and trading include (i) commissions resulting from equity securities transactions executed as agent or principal and are recorded on a trade date basis; (ii) related net trading gains and losses from market making activities and from the commitment of capital to facilitate customer orders; (iii) fees paid for equity research; and (iv) principal transactions which include realized and unrealized gains and losses and interest and dividend income resulting from our principal investments in equity and other securities for the Company’s account.Revenues from securities lending activities consist of interest income from equity and fixed income securities that are borrowed from one party and loaned to another. The Company maintains relationships with a broad group of banks and broker-dealers to facilitate the sourcing, borrowing and lending of equity and fixed income securities in a “matched book” to limit the Company’s exposure to fluctuations in the market value or securities borrowed and securities loaned.Revenues in the Auction and Liquidation segment are comprised of (i) commissions and fees earned on the sale of goods at auctions and liquidations; (ii) revenues from auction and liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation; (iii) revenue from the sale of goods that are purchased by the Company for sale at auction or liquidation sales events; (iv) fees earned from real estate services and the origination of loans; (v) revenues from financing activities is recorded over the lives of related loans receivable using the interest method; and (vi) revenues from contractual reimbursable expenses incurred in connection with auction and liquidation contracts.Commission and fees earned on the sale of goods at auction and liquidation sales are recognized when evidence of an arrangement exists, the sales price has been determined, title has passed to the buyer and the buyer has assumed the risks of ownership, and collection is reasonably assured. The commission and fees earned for these services are included in revenues in the accompanying condensed consolidated statements of operations. Under these types of arrangements, revenues also include contractual reimbursable costs.Revenues earned from auction and liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation are recognized based on proceeds received. The Company records proceeds received from these types of engagements first as a reduction of contractual reimbursable expenses, second as a recovery of its guarantee and thereafter as revenue, subject to such revenue meeting the criteria of having been fixed or determinable. Contractual reimbursable expenses and amounts advanced to customers for minimum guarantees are initially recorded as advances against customer contracts in the accompanying condensed consolidated balance sheets. If, during the auction or liquidation sale, the Company determines that the proceeds from the sale will not meet the minimum guaranteed recovery value as defined in the auction or liquidation services contract, the Company accrues a loss on the contract in the period that the loss becomes known.The Company also evaluates revenue from auction and liquidation contracts in accordance with the accounting guidance to determine whether to report Auction and Liquidation segment revenue on a gross or net basis. The Company has determined that it acts as an agent in a substantial majority of its auction and liquidation services contracts and therefore reports the auction and liquidation revenues on a net basis.Revenues from the sale of goods are recorded gross and are recognized in the period in which the sale of goods held for sale or auction are completed, title to the property passes to the purchaser and the Company has fulfilled its obligations with respect to the transaction. These revenues are primarily the result of the Company acquiring title to merchandise with the intent of selling the items at auction or for augmenting liquidation sales. For liquidation contracts where we take title to retail goods, our net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional allowances and are recorded net of sales or value added tax.Revenues in the Valuation and Appraisal segment are primarily comprised of fees for valuation and appraisal services. Revenues are recognized upon the delivery of the completed services to the related customers and collection of the fee is reasonably assured. Revenues in the Valuation and Appraisal segment also include contractual reimbursable costs.Revenues in the Principal Investments - United Online segment are primarily comprised of services revenues, which are derived primarily from fees charged to pay accounts; advertising and other revenues; and products revenues, which are derived primarily from the sale mobile broadband service devices, including the related shipping and handling fees.Service revenues are derived primarily from fees charged to pay accounts and are recognized in the period in which fees are fixed or determinable and the related services are provided to the customer. The Company’s pay accounts generally pay in advance for their services by credit card, PayPal, automated clearinghouse or check, and revenues are then recognized ratably over the service period. Advance payments from pay accounts are recorded in the condensed consolidated balance sheets as deferred revenue. In circumstances where payment is not received in advance, revenues are only recognized if collectability is reasonably assured.Advertising revenues consist primarily of amounts from the Company’s Internet search partner that are generated as a result of users utilizing the partner’s Internet search services and amounts generated from display advertisements. The Company recognizes such advertising revenues in the period in which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met. In determining whether an arrangement exists, the Company ensures that a written contract is in place, such as a standard insertion order or a customer-specific agreement. The Company assesses whether performance criteria have been met and whether the fees are fixed or determinable based on a reconciliation of the performance criteria and the payment terms associated with the transaction. The reconciliation of the performance criteria generally includes a comparison of customer-provided performance data to the contractual performance obligation and to internal or third-party performance data in circumstances where that data is available.(d)Direct Cost of ServicesDirect cost of services relate to service and fee revenues. The costs consist of employee compensation and related payroll benefits, travel expenses, the cost of consultants assigned to revenue-generating activities and direct expenses billable to clients in the Valuation and Appraisal segment. Direct costs of services include participation in profits under collaborative arrangements in which the Company is a majority participant. Direct costs of services also include the cost of consultants and other direct expenses related to auction and liquidation contracts pursuant to commission and fee based arrangements in the Auction and Liquidation segment. Direct cost of services in the Principal Investments - United Online segment include cost of telecommunications and data center costs, personnel and overhead-related costs associated with operating the Company’s networks and data centers, depreciation of network computers and equipment, third party advertising sales commissions, license fees, costs related to providing customer support, costs related to customer billing and processing of customer credit cards and associated bank fees. Direct cost of services does not include an allocation of the Company’s overhead costs.(e)Interest Expense - Securities Lending ActivitiesCompany.(f)Concentration of RiskRevenue from one liquidation engagement represented 24.4% of total revenuesCompany and totaled $14,544 and $10,725 during the three months ended SeptemberJune 30, 20162022 and 15.6% of total revenues2021,ninesix months ended SeptemberJune 30, 2016. 2022 and 2021, respectively. Interest expense from loan participations sold totaled $258 and $726 during the three and six months ended June 30, 2021, respectively.Valuation and AppraisalFinancial Consulting, Wealth Management, Brands and Principal Investments - United Online— Communications and Other 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 liquidation services contract, the Company sometimes conducts operations with third parties through collaborative arrangements.(g)Advertising Expenses$183$2,594 and $339 for$578 during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $1,227$4,357 and $1,235 for$1,156 during the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Advertising expense iswas included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.(h)Share-Based Compensationand restricted stock units.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. The fairliability-classified award will be subsequently remeasured at each reporting date throughcommon stock on the settlement date. Change in fair value duringlast day of the requisite service period will be recognized asoffering period. In accordance with the provisions of Accounting Standards Codification (“ASC”) 718 - Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize compensation cost over that period.(i)Restructuring ChargeThe Company recorded a restructuring charge inexpense relating to shares offered under the amount of $11,484 duringPurchase Plan. During the ninethree months ended SeptemberJune 30, 2017. In the second2022 and third quarters of 2017,2021, the Company implemented costs savings measures taking into account the planned synergies as a resultrecognized compensation expense of the acquisition of FBR & Co. (“FBR”)$43 and Wunderlich Investment Company, Inc. (“Wunderlich”), as more fully described in Note 3, which included a reduction in force for some of the corporate executives of FBR’s and Wunderlich and a restructuring to integrate FBR and Wunderlich’s operations with the Company’s existing operations. These initiatives resulted in a restructuring charge of $6,105 in the second quarter of 2017 and $4,746 in the third quarters of 2017. The restructuring charges during the second and third quarter of 2017 included $2,400 related to severance and $884$115, respectively, related to the accelerated vestingPurchase Plan. During the six months ended June 30, 2022 and 2021, the Company recognized compensation expense of restricted stock awards to former corporate executives of FBR$196 and Wunderlich and $3,109 of severance and $1,710 related to accelerated vesting of stock awards to employees and $2,748 of lease loss accruals and impairments for the planned consolidation of office space related to operations of FBR and Wunderlich. Of the $10,851 of restructuring charges related to these initiatives, $7,245$342, respectively, related to the Capital Markets segment and $3,606 related to corporate overhead. The restructuring charge in 2017 also included employee termination costs of $150 and $633 in the third quarter and the nine months ended 2017, respectively, related to a reduction in personnel in the principal investments – United Online segment of our operations.The following table summarizes the changes in accrued restructuring charge during the nine months ended September 30, 2017: Nine Months Ended September 30, 2017 Accrued restructuring charge, beginning of year $ 694 Restructuring charge 11,484 Cash paid (4,880 ) Non-cash items (3,939 ) Accrued restructuring charge, end of period $ 3,359
(g) Income TaxesThe following tables summarize the restructuring activities during the three and nine months ended September 30, 2017 and 2016: Three Months Ended September 30, 2017 2016 Capital
Markets Principal
Investments -
United
Online Corporate Total Capital
Markets Principal
Investments -
United
Online Corporate Total Restructuring charge: Employee termination costs $ 2,285 $ 150 $ 1,102 $ 3,537 $ — $ 3,187 $ — $ 3,187 Facility closure and consolidation charge 1,037 — 322 1,359 — — 398 398 Total restructuring charge $ 3,322 $ 150 $ 1,424 $ 4,896 $ — $ 3,187 $ 398 $ 3,585 Nine Months Ended September 30, 2017 2016 Capital
Markets Principal
Investments -
United
Online Corporate Total Capital
Markets Principal
Investments -
United
Online Corporate Total Restructuring charge: Employee termination costs $ 4,819 $ 633 $ 3,284 $ 8,736 $ — $ 3,187 $ — $ 3,187 Facility closure and consolidation charge 2,426 — 322 2,748 — — 398 398 Total restructuring charge $ 7,245 $ 633 $ 3,606 $ 11,484 $ — $ 3,187 $ 398 $ 3,585 (j)Income Taxes(k)Cash and Cash Equivalents(l)Restricted CashSeptemberJune 30, 2017,2022 and December 31, 2021, restricted cash balance of $9,269 included $8,759 of cash collateral related to certain retail liquidation engagements$928 and $510 cash segregated in a special bank account for the benefit of customers related to our broker dealer subsidiary and collateral for one of our telecommunication supplier. As of December 31, 2016, restricted cash balance of $3,294 included $1,440 of cash collateral related to a retail liquidation engagement in Australia, $1,320$927 of cash collateral for foreign exchange contractsleases, respectively.$534restricted cash segregated in a special bank account forconsist of the benefit of customers related to our broker dealer subsidiaryfollowing: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 collateral for one of our telecommunication suppliers.Securities Loaned(m)Securities Borrowed and Securities LoanedAccounting Standards Update (“ASU”) 2013-01, “BalanceASC 210 - Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” requiring, 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.(n)Due from/to Brokers, Dealers, and Clearing OrganizationsThe Company clears all of its proprietarycustomer transactions through other broker-dealers on a fully disclosed basis. The amount receivable from or payable to the clearing brokers represents the net of proceeds from unsettled securities sold, the Company’s clearing deposit and amounts receivable for commissions less amounts payable for unsettled securities purchased by the Company and amounts payable for clearing costs and other settlement charges. This amount also includes the cash collateral received for securities loaned less cash collateral for securities borrowed. Any amounts payable would be fully collateralized by all of the securities owned by the Company and held on deposit at the clearing broker.(o)Accounts ReceivableAccounts receivable represents amounts due from the Company’s auction and liquidation, valuation and appraisal, capital markets and principal investments - United Online customers. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management utilizes a specific customer identification methodology. Management also considers historical losses adjusted for current market conditions and the customers’ financial condition and the current receivables aging and current payment patterns. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers. Bad debt expense and changes in the allowance for doubtful accounts for the three and nine months ended September 30, 2017 and 2016 are included in Note 5.(p)Advances Against Customer ContractsAdvances against customer contracts represent advances of contractually reimbursable expenses incurred prior to, and during the term of the auction and liquidation services contract. These advances are charged to expense in the period that revenue is recognized under the contract.(q)Property and Equipment and amortization is computed using the straight-line method over the estimated useful lives of the assets. Property and equipment held under capitalfinance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Depreciation expense on property and amortization expenseequipment was $1,243$1,021 and $531 for$1,031 during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $2,458$2,053 and $706$1,904 during the six months ended June 30, 2022 and 2021, respectively.nine months ended Septemberpurchase of certain consumer credit receivables of WSBC ("Badcock Receivables"), which was collateralized by the performance of the consumer credit receivables of WSBC. In connection with the Receivables Purchase Agreement, the Company entered into a Servicing Agreement (the “Servicing Agreement”) with WSBC pursuant to which WSBC will provide to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Receivables Purchase Agreement and the Servicing Agreement. As of June 30, 20172022 and 2016, respectively.(r)Securities Owned and Securities Sold Not Yet PurchasedSeptemberJune 30, 20172022 and December 31, 2016,2021, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities: September 30,
2017 December 31,
2016 Securities and other investments owned: Common stocks and warrants $ 41,412 $ 2,084 Corporate bonds 6,328 1,025 Loan receivable 26,868 — Partnership interests and other 21,357 13,470 $ 95,965 $ 16,579 Securities sold not yet purchased: Common stocks $ 23,570 $ — Corporate bonds 982 846 Partnership interests and other 494 — $ 25,046 $ 846 (s)Fair Value MeasurementsJune 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 falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. loans receivable and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets which 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’s partnership interests are valued based on the Company’s proportionate share of the net assets of the partnership which is derived from the most recent statements received from the general partner which are included in Level 2 of the fair value hierarchy. The Company also invests in proprietarypriority investment funds that are valued at net asset value (“NAV”) determined byand the fund administrator. The underlying securities held by these investment companiesfunds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. As a practical expedient, the Company reliesThe Company’s partnership and investment fund interests are valued based on the NAVCompany’s proportionate share of the net assets of the partnerships and funds; the value for these investments as their fair value. The NAVs that have been provided by the fund administrators areis derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC 820 - Fair Value Measurements. As of June 30, 2022 and December 31, 2021, partnership and investment fund interests valued at NAV of $78,965 and $77,383, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.valuesvalue and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the underlyingsame issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as ofnonrecurring fair value measurements, including the reporting date. In accordance with ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investmentslevel in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” (“ASU 2015-07”), these investment funds are not categorized within the fair value hierarchy.hierarchy that was used. As of June 30, 2022 and December 31, 2021, investments in nonpublic entities valued using a measurement alternative of $84,280 and $59,745, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.
Funds held in trust represents U.S. treasury bills that were purchased with funds raised through the initial public offerings of B. Riley Principal 150 Merger Corporation (“BRPM 150”) and B. Riley Principal 250 Merger Corporation (“BRPM 250”), consolidated special purpose acquisition corporations (“SPACs”). The funds raised are held in trust accounts that are restricted for use and may only be used for purposes of completing an initial business combination or redemption of the class A public common shares of the SPAC’s as set forth in their respective trust agreements. The funds held in trust are included within Level 1 of the fair value hierarchy and included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets.SeptemberJune 30, 20172022 and December 31, 2016. Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at September 30, 2017, Using Fair value at
September 30,
2017 Quoted prices in
active markets
identical assets
(Level 1) Other
observable inputs
(Level 2) Significant
unobservable
inputs
(Level 3) Assets: Securities and other investments owned: Common stocks and warrants $ 41,412 $ 31,430 $ — $ 9,982 Corporate bonds 6,328 — 6,328 — Loan receivable 26,868 — — 26,868 Partnership interests and other 16,505 4,462 187 11,856 Total assets measured at fair value $ 91,113 $ 35,892 $ 6,515 $ 48,706 Liabilities: Securities sold not yet purchased: Common stocks $ 23,569 $ 23,569 $ — $ — Corporate bonds 982 — 982 Partnership interests and other 495 — 495 — Total securities sold not yet purchased 25,046 23,569 1,477 — Mandatorily redeemable noncontrolling interests issued after November 5, 2003 12,830 — — 12,830 Total liabilities measured at fair value $ 37,876 $ 23,569 $ 1,477 $ 12,830 Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at December 31, 2016, Using Fair value at
December 31,
2016 Quoted prices in
active markets
identical assets
(Level 1) Other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3) Assets: Securities and other investments owned: Common stocks $ 2,084 $ 1,785 $ — $ 299 Corporate bonds 1,025 — 865 160 Partnership interests 13,470 — 44 13,426 Total assets measured at fair value $ 16,579 $ 1,785 $ 909 $ 13,885 Liabilities: Securities sold not yet purchased: $ 846 $ — $ 846 $ — Corporate bonds Mandatorily redeemable noncontrolling interests issued after November 5, 2003 3,214 — — 3,214 Contingent consideration 1,242 — — 1,242 Total liabilities measured at fair value $ 5,302 $ — $ 846 $ 4,456 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 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 SeptemberJune 30, 2017, securities and other investments owned included $4,852 of investment funds valued at NAV per share. As such, total securities and other investments owned of $95,965 in the condensed consolidated balance sheets at September 30, 2017 included investments in investment funds of $4,852 and securities and other investments owned in the amount of $91,113 as outlined in the fair value table above.As of September 30, 20172022 and December 31, 2016,2021, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $48,706$1,104,756 and $13,885,$1,250,735, respectively, or 4.0%18.8% and 5.2%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.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 ninesix months ended SeptemberJune 30, 20172022 and 2016 are2021 were 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 Period Adjustments Earnings Settlements of Level 3 Period Nine Months Ended September 30, 2017 Common stocks and warrants $ 299 $ (463 ) $ — $ 10,146 $ — $ 9,982 Corporate bonds 160 — — — (160 ) — Loan receivable — 1,375 — 25,493 — 26,868 Partnership interests and other 13,426 2,820 — (4,390 ) — 11,856 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 3,214 9,000 (190 ) — 806 12,830 Contingent consideration 1,242 8 — (1,250 ) — — Nine Months Ended September 30, 2016 Common stocks $ 290 $ (15 ) $ — $ — $ — $ 275 Corporate bonds — (409 ) — 569 — 160 Partnership interests 1,766 123 418 94 — 2,401 Mandatorily redeemable noncontrolling interests issued after November 5, 2003 2,330 — (96 ) — — 2,234 Contingent consideration 2,391 78 — (1,250 ) — 1,219 The fair value adjustment for contingent consideration of $8 and $78 represents imputed interest for the nine months ended September 30, 2017 and 2016, respectively. The Company had a triggering event in the second quarter of 2017 for the mandatorily redeemable noncontrolling interests that resulted in a fair value adjustment of $6,050 of the total fair value adjustment of $9,000 for the nine months ended September 30, 2017. In connection with this event, the Company received proceeds of $6,000 from key man life insurance. These amounts have been recorded in the condensed consolidated statements of operations in Selling, general and administrative expenses in the corporate segment. 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 also forduring the ninesix months ended SeptemberJune 30, 20172022 and 2016 includes2021 included the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis.accrued payroll and related, accrued value added tax, income taxes payable and accrued expenses and other current liabilities approximate fair value based on the short-term maturity of these instruments.senior notes payableterm loans approximates fair value because the contractual interest rates or effective yieldsyield of such instruments are consistent with current market rates of interest for instruments of comparable credit risk.Duringnine months ended September 30, 2017condensed 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 2016, there were noassumptions 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. or liabilities measured at fair value on a non-recurring basis.(t)Contingent ConsiderationIn connection withnonrecurring basis by level within the acquisition of MK Capital Advisors, LLC (“MK Capital”) on February 2, 2015, the purchase agreement required the payment of contingent consideration to the former members of MK Capital in the form of future cash payments of $1,250 and issuance of 166,667 shares of common stock on the first anniversary date of the closing (February 2, 2016) and a final cash payment of $1,250 and issuance of 166,666 shares of common stock on the second anniversary date of the closing (February 2, 2017). The contingent cash consideration was classified as a liability in the condensed consolidated balance sheets in accordance with ASC 805, “Business Combination” (“ASC 805”). The fair value hierarchy as of June 30, 2022. These investments were measured due to an observable price change or impairment during the contingent cash consideration was discounted at 8.0%. The balance of the contingent consideration liability in the condensed consolidated balance sheets was $1,242 (discount of $8) at December 31, 2016. Imputed interest expense totaled $23 for the threesix months ended SeptemberJune 30, 20162022.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 $8 and $78 for the nine months ended September 30, 2017 and 2016, respectively. The fair value of the contingent stock consideration was classified as equity in accordance with ASC 805.Foreign Currency TranslationThe contingent cash and stock consideration was payable on the first and second anniversary dates of the closing provided that MK Capital generated a minimum amount of gross revenues as defined in the purchase agreement for the twelve months following the first and second anniversary dates of the closing. MK Capital achieved the minimum amount of revenues for the first and second anniversary periods and the contingent cash consideration and contingent stock consideration for the first anniversary period was paid and issued on February 2, 2016 and for the second anniversary period was paid and issued on February 2, 2017. Upon the payment of the contingent stock consideration on February 2, 2017, the Company recorded a deferred tax asset and an increase to additional paid-in capital in the amount of $1,151 in accordance with ASC 805.(u)Derivative and Foreign Currency Translationauctionloans receivable and liquidationAuction and Liquidation engagements with operations outside the United States. During the nine months ended SeptemberAs of June 30, 2017, the Company’s use of derivatives consisted of the purchase of2022, there were no forward exchange contracts in the amountoutstanding. As of $25,000 Australian dollars that was settled on JanuaryDecember 31, 2017. During the nine months ended September 30, 2016, the Company’s use of derivatives consisted of the purchase of2021, 6,000€ forward exchange contracts (a) in the amount of $10,200 Canadian dollars that was settled at various periods prior to August 31, 2016, (b) in the amount of $20,000 Australian dollars that was settled on December 30, 2016, and (c) 5,600 Euro’s that was settled on December 30, 2016. were outstanding.contract wascontracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement that was completed in December 2016.and a loan receivable. The net lossgain from forward exchange contracts was $33zero and $103$363 during the three and nine months ended SeptemberJune 30, 2017,2022 and 2021, respectively, and $76$68 and $115$673 during the three and ninesix months ended SeptemberJune 30, 2016,2022 and 2021, respectively. This amount iswas reported as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.losses were $389gain was $834 and $511loss was $390 during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $919gains were $1,130 and $531$166 during the nine sixSeptemberJune 30, 20172022 and 2016,2021, respectively. These amounts arewere included in selling, general and administrative expenses in ourthe Company’s condensed consolidated statements of operations.(v)Common Stock Warrantsissued 821,816 warrantsrecords redeemable noncontrolling interests in equity of subsidiaries to purchasereflect the economic interests of the class A ordinary shareholders in BRPM 150 and BRPM 250 sponsored SPACs and the 20% noncontrolling interest of Lingo. These interests are presented as redeemable noncontrolling interests in equity of subsidiaries within the condensed consolidated balance sheet, outside of the permanent equity section. The class A ordinary shareholders of BRPM 150 and BRPM 250 have redemption rights that are considered to be outside of the Company’s control. The operating agreement with Lingo has provisions which result in the noncontrolling interest being accounted for as temporary equity. The total redeemable noncontrolling interest of Lingo amounted to $7,284 at June 30, 2022 and includes $127 of net losses, which is reflected in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in the condensed consolidated statement of operations. As of June 30, 2022 and December 31, 2021, the total carrying amount of the redeemable noncontrolling interests in equity of subsidiaries was $352,894 and $345,000, respectively. Remeasurements to the redemption value of the redeemable noncontrolling interest in equity of subsidiaries are recorded within retained earnings.connection withthese other investments was accounted for under the acquisitionequity method of Wunderlich on July 3, 2017. Theaccounting and was included in prepaid expenses and other assets in the condensed consolidated balance sheets.warrants entitle the holdersas part of the warrantspurchase 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 acquire sharesequity, 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.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 fromand one-third of one redeemable warrant, each whole warrant entitling the Companyholder thereof to purchase 1 share of BRPM 150 or BRPM 250 class A common stock at an exercise price of $11.50 per share. The BRPM 150 and BRPM 250 Units were each sold at a price of $17.50$10.00 per share (the “Exercise Price”unit, generating gross proceeds to BRPM 150 of $172,500 and BRPM 250 of $172,500. These proceeds which totaled $345,000 were deposited in a trust account established for the benefit of the BRPM 150 and BRPM 250 class A public shareholders and was included in prepaid expenses and other assets in the condensed balance sheet. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of BRPM 150 and BRPM 250. Under the terms of the BRPM 150 and BRPM 250 initial public offerings, BRPM 150 and BRPM 250 are required to consummate a business combination transaction within 24 months (or 27 months under certain circumstances) of the completion of their respective initial public offerings., subject in a reverse merger transaction resulting in BRPM 150 no longer being a VIE of the Company and no longer be included in the consolidated group of the Company. In connection with the de-consolidation of BRPM 150 subsequent to June 30, 2022, among other matters, the proper completionitems, prepaid expenses and other assets decreased by $172,762 related to funds held in a trust account and redeemable noncontrolling interests in equity of an exercise notice and payment. The Exercise Price and the number of shares of Company common stock issuable upon exercise are subject to customary anti-dilution and adjustment provisions, which include stock splits, subdivisions or reclassifications of the Company’s common stock. The common stock warrants expire on July 3, 2022.(w)Recent Accounting PronouncementsFebruary 2016,June 2022, the Financial Accounting Standards Board (the “FASB”(“FASB”) issued ASU No. 2016-02: LeasesAccounting Standards Update (“ASU”) 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 842) (“ASU 2016-02”)820).This update clarifies that a contractual restriction on the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. Therefore, a contractual sale restriction should not be considered when measuring an equity security's fair value. The update also prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. Specific disclosures related to equity securities subject to contractual sale restrictions are required and include the fair value of such equity securities on the balance sheet, the nature and remaining duration of the corresponding restrictions, and any circumstances that could cause a lapse in the restrictions. The amendments in this update require lessees, among other things, to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 will beare effective for the Company infor fiscal year 2019, butperiods beginning after December 15, 2023, including interim periods within those fiscal years, with early application isadoption permitted. The Company is currently evaluatingInvestment companies as defined by Topic 946 should apply the impact ofamendments in this update to an equity security with a contract containing a sale restriction that was executed or modified on or after the consolidated financial statements.In May 2014,date of adoption. For an equity security with a contract containing a sale restriction that was executed before the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Under this guidance, revenue is recognized atdate of adoption, investment companies should continue to account for the time when goodsequity security under their historical accounting policy for measuring such securities until the contractual restrictions expire or services are transferred to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. This standard sets forth a five-step revenue recognition model which replaces the current revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance. In March, April, May and December 2016, the FASB issued amendments to this new guidance relating to reporting revenue on a gross versus net basis, identifying performance obligations and licensing arrangements and other narrow scope improvements. This standard is effective in the first quarter of 2018 for public companies and requires either a retrospective or a modified retrospective approach to adoption. The Company believes the adoption of this standard may impact engagements that contain performance-based arrangements in which a success or completion fee is earned when and if certain predefined outcomes occur and engagements and contracts where services are provided under fixed-fees arrangements that have multiple performance obligations. The Company has not completed an assessment and has not yet determined whether the impact of the adoption of this standard on the consolidated financial statements will be material. The Company will adopt this standard on January 1, 2018 but have not concluded on a transition approach. The Company expects to complete the assessment process, including selecting a transition method for adoption during fourth quarter of 2017.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for us in our first quarter of fiscal year 2019, but early application is permitted.modified. The Company has not yet adopted this update and is currently evaluating the impact it may have on its financial condition and results of operations.In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This standard simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers for its annual oreffect, if any, interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not yet adopted this update and currently evaluating the effect this new standard will have on its financial conditionposition and results of operations.NOTE 3— ACQUISITIONSAcquisitionWunderlich Investmenttime to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The amendments applied only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which refined the scope of Topic 848 through optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships. The Company Inc.On May 17, 2017,adopted the Company entered into a Merger Agreement (the “Wunderlich Merger Agreement”) with Wunderlich, a Delaware Corporation. PursuantASU effective January 1, 2022. The impact of adopting the ASU was immaterial to the Wunderlich Merger Agreement, customary closing conditions were satisfiedconsolidated results of operations, cash flows, financial position, and disclosures.acquisition was completed on July 3, 2017. In connectionFASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with the Wunderlich acquisition on July 3, 2017, the total considerationCustomers to require acquiring entities to apply Topic 606 when recognizing and measuring contract assets and contract liabilities instead of $66,043 paid to Wunderlich shareholders was comprised of (a) cash in the amount of $29,737; (b) 1,974,812 newly issued shares of the Company’s common stockonly recognizing such items at closing which were valued at $31,414 for accounting purposes determined based on the closing market price of the Company’s shares of common stockfair value on the acquisition date on July 3, 2017, less a 13.3% discount for lack of marketability as the shares issued are subject to certain escrow provisions and restrictions that limit their trade or transfer; and (c) 821,816 newly issued common stock warrants with an estimated fair value of $4,892.date. The common stock and common stock warrants issued includes 387,365 common shares and 167,352 common stock warrants that are heldupdate addressed diversity in escrow and subject to forfeiture to indemnify the Company for certain representations and warranties in connection with the acquisition. The Company believes that the acquisition of Wunderlich will allow the Company to benefit from wealth management, investment banking, corporate finance, and sales and trading services provided by Wunderlich. The acquisition of Wunderlich is accounted for using the purchase method of accounting. The Company also entered into a registration rights agreement with certain shareholders of Wunderlich (the “Registration Rights Agreement”) on July 3, 2017 for the shares issued in connection with the Wunderlich Merger Agreement. The Registration Rights Agreement provides the Wunderlich shareholders with the right to notice of and, subject to certain conditions, the right to register shares of the Company’s common stock in certain future registered offerings of shares of the Company’s common stock.The assets and liabilities of Wunderlich, both tangible and intangible, were recorded at their estimated fair values as of the July 3, 2017 acquisition date for Wunderlich. The application of the purchase method of accounting resulted in goodwill of $33,568 which represents the benefits from synergies with our existing business and acquired workforce. Acquisition related costs, such as legal, accounting, valuation and other professional feespractice related to the acquisitionacquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The Company early adopted the ASU on January 1, 2022. The impact of Wunderlich, were charged against earnings inadopting the amount of approximately $53 and included in selling, general and administrative expenses inASU was immaterial to the condensed consolidated statementsresults of operations, for the nine months ended September 30, 2017. The preliminary purchase accounting for the acquisition has been accounted for as a stock purchase with all of the recognized goodwill is expected to be non-deductible for tax purposes.The preliminary purchase price allocation was as follows:Consideration paid by B. Riley: Cash paid $ 29,737 Fair value of 1,974,812 B. Riley common shares issued 31,414 Fair value of 821,816 B. Riley common stock warrants issued 4,892 Total consideration $ 66,043 The preliminary assets acquiredcash flows, financial position, and assumed was as follows:Tangible assets acquired and assumed: Cash and cash equivalents $ 4,259 Securities owned 1,413 Accounts receivable 3,193 Due from clearing broker 15,133 Prepaid expenses and other assets 10,248 Property and equipment 2,315 Deferred taxes 8,067 Accounts payable (517 ) Accrued payroll and related expenses (6,387 ) Accrued expenses and other liabilities (9,773 ) Securities sold, not yet purchased (1,707 ) Notes payable (10,579 ) Customer relationships 15,440 Trademarks 1,370 Goodwill 33,568 Total $ 66,043 The revenue and loss of Wunderlich included in our condensed consolidated financial statements for the period from Julydisclosures.2017 (the date of acquisition) through September 30, 2017 were $20,412 and $1,928, respectively. The loss from Wunderlich of $1,928 includes a restructuring charge in the amount of $1,387 related primarily to severance costs and lease loss accruals for the planned consolidation of office space related to operations in the Capital Markets segment.Acquisition of FBR & Co.On February 17, 2017, the Company entered into an Agreement and Plan of Merger (the “FBR Merger Agreement”) with FBR, pursuant to which FBR was to merge with and into the Company (or a subsidiary of the Company), with the Company (or its subsidiary) as the surviving corporation (the “Merger”). On May 1, 2017, the Company and FBR filed a registration statement for the planned Merger. The stockholders of the Company and FBR approved the acquisition on June 1, 2017, customary closing conditions were satisfied and the acquisition was completed on June 1, 2017. Subject to the terms and conditions of the FBR Merger Agreement, each outstanding share of FBR common stock (“FBR Common Stock”) was converted into the right to receive 0.671 of a share of the Company’s common stock as summarized below. — RESTRUCTURING CHARGEbelieves that the acquisition of FBR will allow the Company to benefit from investment banking,corporate finance, securities lending, research, and sales and tradingservices provided by FBR and planned synergies from the elimination of duplicate corporate overhead and management functions with the Company. The acquisition of FBR is accounted for using the purchase method of accounting.The assets and liabilities of FBR, both tangible and intangible, were recorded at their estimated fair values as of the June 1, 2017 acquisition date for FBR. The application of the purchase method of accounting resulted in goodwill of $14,528 which represents expected overhead synergies and acquired workforce. Acquisition related costs, such as legal, accounting, valuation and other professional fees related to the acquisition of FBR, were charged against earnings in the amount of approximately $1,389 and included in selling, general and administrative expenses in the condensed consolidated statement of operations for the nine months ended September 30, 2017. The preliminary purchase accounting for the acquisition has been accounted for as a stock purchase with all of the recognized goodwill is expected to be non-deductible for tax purposes.The preliminary purchase price allocation was as follows:Consideration paid by B. Riley: Number of FBR Common Shares outstanding at June 1, 2017 7,099,511 Stock merger exchange ratio 0.671 Number of B. Riley common shares 4,763,772 Number of B. Riley common shares to be issued from acceleration of vesting for outstanding FBR stock options, restricted stock and RSU awards 67,861 Total number of B. Riley common shares to be issued 4,831,633 Closing market price of B. Riley common shares on December 31, 2016 $ 14.70 Total value of B. Riley common shares 71,025 Fair value of RSU’s attributable to service period prior to June 1, 2017(a) 2,446 Total consideration $ 73,471 (a)Outstanding FBR restricted stock awards at June 1, 2017, the date of the acquisition, were adjusted in accordance with the FBR Merger Agreement with the right to receive 0.671 shares of the Company’s common stock for each outstanding FBR stock award unit. The fair value of the FBR restricted stock awards at June 1, 2017 was determined based on the closing price of the Company’s common stock of $14.70 on June 1, 2017. The fair value of the FBR restricted stock awards were apportioned as purchase consideration based on service provided to FBR as of June 1, 2017 with the remaining fair value of the FBR restricted stock awards to be recognized prospectively over the restricted stock and FBR restricted stock awards remaining vesting period.The preliminary assets acquired and assumed was as follows:Tangible assets acquired and assumed: Cash and cash equivalents $ 15,738 Securities owned 11,188 Securities borrowed 861,197 Accounts receivable 4,341 Due from clearing broker 29,169 Prepaid expenses and other assets 5,486 Property and equipment 8,663 Deferred taxes 14,514 Accounts payable (1,524 ) Accrued payroll and related expenses (7,182 ) Accrued expenses and other liabilities (22,411 ) Securities loaned (867,626 ) Customer relationships 5,600 Tradename and other intangibles 1,790 Goodwill 14,528 Total $ 73,471 The revenue and loss of FBR included in our condensed consolidated financial statements for the period from June 1, 2017 (the date of acquisition) through September 30, 2017 were $37,745 and $12,706, respectively. The loss from FBR of $12,706 includes transaction costs of $3,551 related to an employment agreement with the former Chief Executive Officer of FBR andhad no restructuring charges in the amount of $9,096 related primarily to severance costs and lease loss accruals for the planned consolidation of office space related to operations in the Capital Markets segment.Acquisition of Rights to Manage Dialectic Hedge FundsOn April 13, 2017, the Company entered into an Asset Purchase and Assignment Agreement with Dialectic Capital Management, L.P., Dialectic Capital, LLC and John Fichthorn (collectively “Dialectic”), pursuant to which Dialectic assigned and transferred the rights to manage certain hedge funds to the Company (the “Dialectic Acquisition”). In addition to obtaining the rights to manage certain hedge funds previously managed by Dialectic, the Company hired the employees that were previously employed by the management company that managed the Dialectic hedge funds and assumed Dialectic’s office lease. In connection with the Dialectic Acquisition, the Company paid the Dialectic parties $700 in cash consideration and 158,484 shares of common stock which has a fair value of approximately $1,952 for total purchase consideration of $2,652. The Dialectic Acquisition expands the Company’s assets under management in the Capital Markets segment and the Company believes such acquisition will allow the Company to benefit from planned synergies from the elimination of duplicate administrative functions of the Company. The acquisition of Dialecticis accounted for using the purchase method of accounting.The assets acquired from Dialectic were recorded at fair value as of April 13, 2017, the acquisition date of Dialectic. The application of the purchase method of accounting resulted in preliminary purchase allocation of $2,552 to goodwill, whichrepresents expected overhead synergies and acquired workforce,and $100 to other intangible assets - customer relationship for total acquisition consideration of $2,652. There were tangible assets or liabilities acquired in connection with Dialectic. The preliminary purchase accounting for the acquisition has been accounted for as an asset purchase with all of the recognized goodwill and other intangible assets expected to be deductible for tax purposes.The revenue and loss of Dialectic included in our condensed consolidated financial statements for the period from April 13, 2017 (the date of acquisition) through September 30, 2017 were $714 and $392, respectively.Acquisition of UOLOn May 4, 2016, the Company entered into a definitive agreement and plan of merger to acquire all of the outstanding common stock of UOL, a provider of consumer Internet access and related subscription services, for $11.00 per share, or approximately $169,354 in aggregate merger consideration plus an additional $1,352 of cash consideration paid to settle the legal matter as more fully described in Note 11. The shareholders of UOL approved the acquisition on June 29, 2016 and customary closing conditions were satisfied and the acquisition was completed on July 1, 2016. The acquisition of UOL allows the Company to benefit from the expected cash flows of UOL due in part to planned synergies from the elimination of duplicate overhead functions with the Company. The acquisition of UOL is accounted for using the purchase method of accounting.The assets and liabilities of UOL, both tangible and intangible, were recorded at their estimated fair values as of the July 1, 2016 acquisition date for UOL. The application of the purchase method of accounting resulted in goodwill of $14,375 which represents expected overhead synergies and acquired workforce. The revenue and earnings of UOL included in our condensed consolidated financial statements for the three months ended September 30, 2017 were $12,327 and $4,944, respectively, and $38,724 and $14,220 respectively, for the nine months ended September 30, 2017. The revenue and earnings of UOL included in the condensed consolidated financial statements forduring the three and ninesix months ended SeptemberJune 30, 2016 were $15,6462022 and $3,423, respectively.Pro Forma Financial Informationunaudited financial informationfollowing tables summarize the changes in accrued restructuring charge during the table below summarizes the combined results of operations of the Company, Wunderlich, FBRthree and UOL, as though the acquisitions had occurred as of January 1, of the respective periods presented. The pro forma financial information presented includes the effects of adjustments related to the amortization charges from the acquired intangible assetssix months ended June 30, 2022 and the elimination of certain activities excluded from the transaction and transaction related costs. The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor does it intend to be a projection of future results. Pro Forma (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Revenues $ 92,461 $ 111,340 $ 320,546 $ 298,118 Net (loss) income attributable to B. Riley Financial, Inc. $ (42 ) $ 2,843 $ 11,780 $ (13,657 ) Basic (loss) earnings per share $ (0.00 ) $ 0.11 $ 0.41 $ (0.55 ) Diluted (loss) earnings per share $ (0.00 ) $ 0.11 $ 0.41 $ (0.55 ) Weighted average basic shares outstanding 32,366,657 25,783,517 28,487,975 24,611,572 Weighted average diluted shares outstanding 32,366,657 25,997,480 28,692,181 24,611,572 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 LENDINGAs a result of the acquisition of FBR, the Company has an active securities borrowed and loaned business in which it borrows securities from one party and lends them to another. 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 securitiesborrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate.SeptemberJune 30, 2017 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 September 30, 2017 Securities borrowed $ 730,022 $ — $ 730,022 $ 730,022 $ — Securities loaned $ 728,201 $ — $ 728,201 $ 728,201 $ — 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 $ — (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 RECEIVABLE September 30, December 31, 2017 2016 Accounts receivable $ 14,218 $ 16,610 Investment banking fees, commissions and other receivables 5,074 576 Unbilled receivables 1,260 2,058 Total accounts receivable 20,552 19,244 Allowance for doubtful accounts (628 ) (255 ) Accounts receivable, net $ 19,924 $ 18,989 June 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 September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Balance, beginning of period $ 599 $ 86 $ 255 $ 89 Add: Additions to reserve 123 428 827 488 Less: Write-offs (94 ) (15 ) (262 ) (49 ) Less: Recoveries — (321 ) (192 ) (350 ) Balance, end of period $ 628 $ 178 $ 628 $ 178 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,
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 auction and liquidation contracts.NOTE 6— GOODWILL AND OTHER INTANGIBLE ASSETSGoodwill was $100,903 and $48,903 at September 30, 2017 and December 31, 2016, respectively. Goodwill at September 30, 2017 is comprised of $79,488 in the Capital Markets segment, $1,975contracts in the Auction and Liquidation segment, $3,713 in the Valuation and Appraisal segment and $15,727mobile handsets in the Principal Investments - United Online– Communications and Other segment, and consulting related engagements in the Financial Consulting segment.increased by $50,648 due to $33,568 from the acquisition of Wunderlich, $14,528 from the acquisition of FBR and $2,552 from the acquisition of Dialectic. GoodwillLingo in the Principal Investments - United Online– Communications and Other segment increased by $1,352 from the resolution of acquisition relatedlegal matter as more fully described(as previously discussed in Note 11.Goodwill at December 31, 2016 is comprised of $28,840 in the Capital Markets segment, $1,975 in the Auction and Liquidation segment, $3,713 in the Valuation and Appraisal segment and $14,375 in the Principal Investments - United Online segment.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 September 30, 2017 December 31, 2016 Gross Gross Carrying Accumulated Intangibles Carrying Accumulated Intangibles Useful Life Value Amortization Net Value Amortization Net Amortizable assets: Customer relationships 4 to 13 Years $ 58,440 $ 7,301 $ 51,139 $ 37,300 $ 3,100 $ 34,200 Domain names 7 Years 807 144 663 1,419 101 1,318 Advertising relationships 8 Years 100 16 84 100 6 94 Internally developed software and other intangibles 0.5 to 4 Years 3,373 1,245 2,128 3,333 550 2,783 Trademarks 7 to 9 Years 4,220 302 3,918 1,100 69 1,031 Total 66,940 9,008 57,932 43,252 3,826 39,426 Non-amortizable assets: Tradenames 1,740 — 1,740 1,740 — 1,740 Total intangible assets $ 68,680 $ 9,008 $ 59,672 $ 44,992 $ 3,826 $ 41,166 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 $2,172$6,940 and $1,465 for$5,134 during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $5,248$13,756 and $1,688 for$11,020 during the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. At SeptemberAs of June 30, 2017,2022, estimated future amortization expense is $2,205, $8,590, $8,470, $8,088was $14,825, $23,934, $19,814, $15,346, and $7,706$14,530 for the years ended December 31, 20172022 (remaining threesix months), 2018, 2019, 20202023, 2024, 2025 and 2021,2026, respectively. The estimated future amortization expense after December 31, 20212026 was $56,597.$22,872.NOTE 7— CREDIT FACILITIESCredit facilities consist of the following arrangements:(a)$200,000 Asset Based Credit FacilityOn April 21, 2017, the Company amended itsparty 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 million 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 $168$39 and $813 (including amortization of deferred loan fees of $23) for$108 during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $863$147 and $1,087 (including amortization of deferred loan fees of $69) for$216 during the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. There was no outstanding balance ofon this credit facility at Septemberas of June 30, 20172022 and December 31, 2016.2021. As of June 30, 2022, there were no open letters of credit outstanding.
The Company is in compliance with all financial covenants in the asset based credit facility as of June 30, 2022.The governingcontains certain covenants, including covenants that limit or restrict(the “Term Loan Facility”) and a four-year $80,000 secured revolving loan credit facility (the “Revolving Credit Facility”).Company’s abilityCompany, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to incur liens, incur indebtedness, make investments, disposeCredit Agreement, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of assets, make certain restricted payments, merge or consolidate$100,000 (the “Incremental Facility” and enter into certain transactions with affiliates. Upon the occurrenceincremental term loans made thereunder, the “Incremental Term Loans”) of an event of defaultsecured term loans under the Credit Agreement on terms identical to those applicable to the lender may cease makingTerm Loan Facility. The Borrower borrowed the full amount of the Incremental Term Loans on the Amendment Date. The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.terminateunder the Credit Facilities accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, 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.declareamortization (“EBITDA”) of at least $135,000 and the Primary Guarantor to maintain net asset value of at least $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.amounts outstanding underfinancial covenants in the Credit Agreement to be immediately dueas of June 30, 2022.payable. The Credit Agreement specifies a numberYMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of events of default (some of which are subject to applicable grace or cure periods), including, among other things, nonpayment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults, and material judgment defaults.(b)$20,000 UOL Line of CreditOn April 13, 2017, UOL,the Company, in the capacity as borrower,borrowers, entered into a credit agreement (the “UOL“BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender. The UOL Credit Agreement provides for a revolving credit facility under which UOL may borrow (or requestlender and with the issuance of letters of credit) up to $20,000 which amount is reduced by $1,500 commencing on June 30, 2017 and on the last day of each calendar quarter thereafter. The final maturity date is April 13, 2020. The proceedsother lenders party thereto (the “Closing Date Lenders”). Certain of the UOL Credit Agreement can be used (a) for working capital and general corporate purposes and/or (b) to pay dividends or permitted tax distributions to its parent company, subject to the terms of the UOL Credit Agreement. Borrowings under the UOL Credit Agreement will bear interest at a rate equal to (a) (i) the base rate (the greater of the federal funds rate plus one half of one percent (0.5%), or the prime rate) for U.S. dollar loans or (ii) at UOL’s option, the LIBOR Rate for Eurodollar loans, plus (b) the applicable margin rate, which ranges from two percent (2%) to three and one-half percent (3.5%) per annum, based upon UOL’s ratio of funded indebtedness to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the preceding four (4) fiscal quarters. Interest payments are to be made each one, three or six months for Eurodollar loans, and quarterly for U.S. dollar loans.UOL paid a commitment fee equal to 1.00% of the aggregate commitments upon the closing of the UOL Credit Agreement. The UOL Credit Agreement also provides for an unused line fee payable quarterly, in arrears, in an amount equal to: (a) 0.50% per annum times the amount of the unused revolving commitment that is less than or equal to the amount of the cash maintained in accounts with the agent (as depositary bank); plus (b) 1.00% per annum times the amount of the unused revolving commitment that is greater than the amount of the cash maintained in accounts with the agent (as depositary bank). Any amounts outstanding under the UOL Credit Facility are due at maturity. There was no outstanding balance under the UOL Credit Agreement at September 30, 2017.Each of UOL’sBorrowers’ U.S. subsidiaries is a guarantorare guarantors of all obligations under the UOLBRPAC Credit Agreement and are parties to the UOLBRPAC 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 UOLBRPAC and a subsidiary of the Company, are guarantors of the obligations under the UOLBRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of outstanding capital stock of UOLBRPAC are pledged as collateral.UOLBRPAC Credit Agreement are secured by first-priority liens on, and a first-priorityfirst priority security interest in, substantially all of the assets of UOL and the Secured Guarantors,Credit Parties, including a pledge of (a) 100% of the equity interests of the Secured Guarantors andCredit 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.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.UOLBRPAC Credit Agreement contains certain negative covenants, including those limiting UOL’sthe Credit Parties’, and itstheir 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 UOLBRPAC Credit Agreement requires UOL and its subsidiariesthe Credit Parties to maintain certain financial ratios. NOTE 8—NOTES PAYABLE(a) $34,034 Senior Notes PayableThe BRPAC Credit Agreement alsoOctoberunder the outstanding BRPAC Credit Agreement.At the interest rate on the BRPAC Credit Agreement was 4.66% and 3.17%, respectively.2017,2022 to December 31, 2022 are in the Company had $34,034amount of Senior Notes Payable (“$2,813 per quarter, from March 31, 2023 to December 31, 2023 are in the amount of $4,688 per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $3,750 per quarter, on March 31, 2027 is in the amount of $2,813, and the remaining principal balance is due at final maturity on June 30, 2027.Notes”) due in 2021, interest payable quarterly at 7.5%. On November 2, 2016, the Company issued $28,750outstanding balance on the term loan was $74,140 (net of 2021 Notesunamortized debt issuance costs of $860) and $53,735 (net of unamortized debt issuance costs of $582), respectively. Interest expense on the term loan during the three months ended SeptemberJune 30, 2017,2022 and 2021 was $578 (including amortization of deferred debt issuance costs of $99) and $663 (including amortization of deferred debt issuance costs of $77), respectively. Interest expense on the term loan during the six months ended June 30, 2022 and 2021 was $1,080 (including amortization of deferred debt issuance costs of $171) and $1,377 (including amortization of deferred debt issuance costs of $157), respectively.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 an additional $5,284$15,800 and $72,469, respectively, of senior notes, and during the six months ended June 30, 2022 and 2021, Notesthe Company issued $35,873 and $85,327, respectively, of senior notes with maturity dates ranging from May 2024 to August 2028 pursuant to an At Thethe MarketAgreement (the “Sales Agreement”) as further discussed below. The 2021 Notes are unsecured and due and payable in full on October 31, 2021. In connectionAgreements 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 issuanceSEC in respect of the Company’s offerings of these senior notes.Notes on November 2, 2016, the Company received net proceeds of $27,664 (after underwriting commissions, fees and other issuance costs of $1,086). In connection with the issuance of the 2021 Notes in 2017 pursuant to the Sales Agreement, the Company received net proceeds of $5,364 (after premiums less underwriting commissions, fees and other issuance costs of $80). Thetotal senior notes outstanding balance of the 2021 Notes was $33,224 (net of unamortized debt issue costs and premiums of $810) and $27,700$1,644,778 (net of unamortized debt issue costs of $1,050) at September 30, 2017$19,144) and December 31, 2016, respectively. In connection with the offering of 2021 Notes on November 2, 2016, certain members of management and the Board of Directors of the Company purchased $2,731 or 9.5% of the 2021 Notes offered by the Company. Interest expense on the 2021 Notes totaled $643 and $1,829 for the three and nine months ended September 30, 2017, respectively.(b) $84,047 Senior Notes Payable due May 31, 2027At September 30, 2017, the Company had $84,047 of Senior Notes Payable (“2027 Notes”) due in 2027, interest payable quarterly at 7.5%. On May 31, 2017, the Company issued $60,375 of 2027 Notes and during the three months ended September 30, 2017 the Company issued an additional $23,672 of 2027 Notes pursuant to the Sales Agreement as further discussed below. The 2027 Notes are unsecured and due and payable in full on May 31, 2027. In connection with the issuance of the 2027 Notes, the Company received net proceeds of $82,284 (after underwriting commissions, fees and other issuance costs of $1,763). The outstanding balance of the 2027 Notes was $82,350$1,606,560 (net of unamortized debt issue costs of $1,697) at September 30, 2017.$21,489) with a weighted average interest rate of 5.70% and 5.69%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled $24,650 and $19,970 for the 2027three months ended June 30, 2022 and 2021, respectively, and totaled $49,072 and $38,564 for the six months ended June 30, 2022 and 2021, respectively. totaled $1,407$1,810the prospectus filed with the SEC on January 28, 2021. This program provides for the sale by the Company of up to $250,000 of certain of the Company’s senior notes. As of June 30, 2022 and December 31, 2021, the Company had $76,038 and $111,911, respectively, remaining availability under the Sales Agreement Prospectus.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 ninesix months ended SeptemberJune 30, 2017.(c) At Market Issuance Sales Agreement2022 and 2021 was as follows: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 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 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 Issue Up to Aggregate of $39,625 of 2021 Notes or 2027 NotesOn June 28, 2017,payment and the Company entered intohas an unconditional right to payment. Alternatively, when payment precedes the Sales Agreement and filed a prospectus supplement, pursuant to whichprovision of the related services, the Company may sellrecords deferred revenue until the performance obligation(s) are satisfied. Receivables related to revenues from time to time, at the Company’s option up to an aggregate of $39,625 of 2021 Notes or 2027 Notes. The Notes sold pursuant to the Sales Agreement will be issued pursuant to a prospectus dated March 29, 2017, as supplemented by a prospectus supplement dated June 28, 2017, in each case filedcontracts with the Securitiescustomers totaled $52,935 and Exchange Commission pursuant to the Company’s effective Registration Statement on Form S-3 (File No. 333-216763), which was declared effective by the SEC on March 29, 2017. The Notes will be issued pursuant to the Indenture, dated$49,673 as of November 2, 2016, as supplemented by a First Supplemental Indenture, datedJune 30, 2022 and December 31, 2021, respectively. The Company had no significant impairments related to these receivables during the three and six months ended June 30, 2022 and 2021. The Company also had $16,491 and $12,315 of unbilled receivables included in prepaid expenses and other assets as of November 2, 2016June 30, 2022 and the Second Supplemental Indenture, datedDecember 31, 2021, respectively, and advances against customer contracts included in prepaid expenses and other assets of $200 as of MayJune 30, 2022 and December 31, 2017, each between2021. 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 Companyperformance obligation has not yet beenU.S. Bank, National Association, as trustee. Future sales of the 2021 Noteslicense agreements with guaranteed minimum royalty payments and 2027 Notes pursuant to the Sales Agreement will dependadvertising/marketing fees with additional royalty revenue based on a varietypercentage of factors including, but not limiteddefined sales. Deferred revenue as of June 30, 2022 and December 31, 2021 was $79,226 and $69,507, respectively. The Company expects to market conditions,recognize the trading pricedeferred revenue of $79,226 as of June 30, 2022 as service and fee revenues when the notesperformance obligation is met during the years December 31, 2022 (remaining six months), 2023, 2024, 2025 and 2026 in the Company’s capital needs. amount of $48,031, $12,620, $8,421, $4,792, and $2,247, respectively. The Company expects to recognize the deferred revenue of $3,115 after December 31, 2026.SeptemberJune 30, 2017,2022 and 2021, the Company issued $5,284recognized revenue of 2021 Notes$10,055 and $23,672$9,370 that was recorded as deferred revenue at the beginning of 2027 Notes. At Septemberthe respective year. During the six months ended June 30, 2017,2022 and 2021, the Company has an additional $10,669recognized revenue of 2021 Notes or 2027 Notes$24,994 and $26,649 that maywas recorded as deferred revenue at the beginning of the respective year.sold pursuantrecoverable; (2) costs to the Sales Agreement. There can be no assurance thatfulfill Auction and Liquidation services contracts where the Company will be successful in consummating future sales based on prevailing market conditionsguarantees a minimum recovery value for goods being sold at auction or inliquidation where the quantities or atrevenue is recognized over time when the prices thatperformance obligation is satisfied; and (3) commissions paid to obtain magicJack and Lingo contracts which are recognized ratably over the Company may deem appropriate.(d) Australian Dollar $80,000 Note PayableIn August 2016, the Company formed GA Retail Investments, L.P., a Delaware limited partnership, (the “Partnership”) which required the Company to contribute $15,350. The Partnership borrowed $80,000 Australian dollars from acontract term and third party investor in connection with its formationsupport costs for magicJack and related equipment purchased by customers which are recognized ratably over the $80,000 Australian dollarsservice period.exchanged for a 50% special limited partnership interest in the Partnership. The Partnership was formed to provide funding for the retail liquidation engagement the Company entered into to liquidate the Masters Home Improvement stores. The $80,000 Australian dollar participating note payable was non-interest bearing, shares in 50%$2,564 and $1,605 as of the all of the profits and losses of the Partnership and was subject to repayment upon the completion of the going-out-of-business sale of Masters Home Improvement stores as defined in the partnership agreement. Although the terms of the participating note payable included the issuance of a 50% equity interest in the Partnership, sharing in all profits and losses of the Partnership, and no repayment until certain events occur, in accordance with ASC 480 Distinguishing Liabilities From Equity, this financial instrument was classified as a participating note payable. The $80,000 Australian dollar participating note payable was repaid in December 2016 upon the completion of the going-out-of-business sale of Masters Home Improvement stores as defined in the partnership agreement. At SeptemberJune 30, 20172022 and December 31, 2016, $5242021, respectively, and $10,037, respectively, were payableare recorded in accordance with the participating note payable share of profitsprepaid expenses and is included in due to related parties and partnersother assets in the condensed consolidated balance sheets.(e) Other Notes PayableOther notes payable include notes payable During the three months ended June 30, 2022 and 2021, the Company recognized expenses of $175 and $51 related to capitalized costs to fulfill a clearing organization forcontract, respectively. During the six months ended June 30, 2022 and 2021, the Company recognized expenses of $1,090 and $109 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three and six months ended June 30, 2022 and 2021.Company’s broker dealers. The notes payable accrue interest at rates ranging from the prime rate plus 0.25% to 2.0% (4.5% to 6.25% at September 30, 2017) payable annually. The principal payments on the notes payablefees are due annuallyconsidered variable and not included in the amounttransaction price as of $121 on October 31, $214 on SeptemberJune 30, and $357 on January 31. The notes payable mature at various dates from January 31, 2018 through January 31, 2022. At September 30, 2017, the outstanding balance for the notes payable was $2,364.9—13 — INCOME TAXESbenefitprovision of 80.5%27.8% and an expense of 38.9%26.1% for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. During the nine months ended September 30, 2017, the Company elected to treat the acquisition of UOL as a taxable business combination for income tax purposes in accordance with Internal Revenue Code Section 338(g) (“IRS Code Section 338(g)”). This resulted in the Company foregoing the income tax attributes of UOL that existed at the acquisition date which included net operating loss carryforwards, capital loss carryforwards and foreign tax credits. The income tax election in accordance with IRS Code Section 338(g) provides the Company with a tax step-up in the basis of the intangible assets and goodwill acquired for tax purposes. In accordance with ASC 740, the impact of the election in accordance with IRS Code Section 338(g) on deferred income taxes resulted in the recording of a tax benefit in the amount of $8,389 during the nine months ended September 30, 2017. The effective income tax rate for the nine months ended September 30, 2016 was lower than the statutory federal and state income tax rate due to the tax differential on net income attributable to noncontrolling interests.SeptemberJune 30, 2017,2022, the Company had federal net operating loss carry forwardscarryforwards of approximately $65,500$48,869 and state net operating loss carry forwardscarryforwards of $77,200.$52,548. The Company’s federal net operating loss carry forwardscarryforwards will expire in the tax year endingyears commencing in December 31, 2036, the2031 through December 31, 2038. The state net operating loss carry forwardscarryforwards will expire in 2034, and the foreign tax credit carry forwards will expireyears commencing in 2023.carry forwardscarryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carry forwardcarryforward period, and other circumstances. As a result of the common stock offering by the Company that was completed on June 5, 2014, the Company had a more than 50% ownership shiftThe 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 SeptemberJune 30, 2017,2022, the Company believes that the existing net operating loss that existed as of the more than 50% ownership shiftcarryforwards will be utilized in future tax periods before the loss carry forwardscarryforwards 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 ana valuation allowance.20132018 to 2016.10—14 — EARNINGS PER SHAREBasic common shares outstanding exclude 453,365 common shares that are held in escrow and subject to forfeiture. The common shares held in escrow includes 66,000 common shares issuedRemeasurements to the former memberscarrying value of Great American Group, LLC thatthe redeemable noncontrolling interests in equity of subsidiaries are subjectnot deemed to forfeiture upon the final settlement of claims for goods held for sale in connection with the transaction with Alternative Asset Management Acquisition Corp. in 2009 and 387,365 common shares that are subjectbe a dividend (see Note 2(p)). According to forfeiture toindemnify the Company for certain representations and warranties in connection with the acquisition of Wunderlich. These sharesare subject to forfeiture upon the final settlement of claims as more fully describedASC 480 - Distinguishing Liabilities from Equity, there is no impact on earnings per share in the related escrow instructions. Dilutivecomputation of basic and diluted earnings per share to common shares outstanding includes contingently issuable sharesshareholders 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.are currentlycould potentially dilute basic net income per share in escrowthe future that were not included in the computation of diluted net income per share were 1,757,081 and subject to release if the conditions936,727 for the final settlement of claims in accordance withthree months ended June 30, 2022 and 2021, respectively, and 1,553,571 and 832,360 for the escrow instructions were satisfied at the end of the respective periods.six months ended June 30, 2022 and 2021, respectively, because to do so would have been anti-dilutive.waswere calculated as follows: Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 Net income attributable to B. Riley Financial, Inc. $ 368 $ 8,939 $ 17,669 $ 9,086 Weighted average shares outstanding: Basic 26,059,490 18,977,072 22,180,808 17,805,127 Effect of dilutive potential common shares: Restricted stock units and non-vested shares 1,193,007 169,311 816,841 159,376 Contingently issuable shares 387,365 44,652 387,365 44,655 Diluted 27,639,862 19,191,035 23,385,014 18,009,158 Basic income per share $ 0.01 $ 0.47 $ 0.80 $ 0.51 Diluted income per share $ 0.01 $ 0.47 $ 0.76 $ 0.50 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 11—15 — COMMITMENTS AND CONTINGENCIESourthe Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Someourthe 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 our company,the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, wethe 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.In 2012, Gladden v. Cumberland Trust, WSI, et al. filed a complaint in Circuit Court, Hamblen County, TN at Morristown, Case No. 12-CV-119. This complaint alleges the improper distributionmisappropriation of trust funds. The plaintiff seeks damages of no less than $3,925, an accounting, and among other things, punitive damages. In October 2017, the Tennessee Supreme Court remanded the case to the Tennessee State Trial Court for determination of which claims are subject to arbitration and which are not. At the present time, the financial impact toGuaranteesif any, cannot be estimated.In January 2015, Great American Group, LLC (“Great American Group”agreed to guaranty (the “B. Riley Guaranty”) was served with a lawsuitup to $110,000 of obligations that seeksB&W may owe to assert claimsproviders of breach of contract and other matterscash collateral pledged in connection with auction services providedB&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 a debtor. The proceeding insuch cash collateral. B&W will pay the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”) is pending in the bankruptcy case of the debtor and its affiliates (the “Debtor”). In the lawsuit, a former landlord of the Debtor generally alleges that Great American Group and a joint venture partner were responsible for contamination while performing servicesCompany $935 per annum in connection with the auction of certain assets ofB. Riley Guaranty. B&W has agreed to reimburse the Debtor and is seeking approximately $10,000 in damages. In January 2017, the parties filed a proposed scheduling order with the Bankruptcy Court. Discovery in the action is currently proceeding. Great American Group is vigorously defending this lawsuit. This lawsuit is ongoing, and the financial impactCompany to the extent the B. Riley Guaranty is called upon.if any, cannot be estimated.On July 5, 2016, Quadre Investments LP (“Quadre”) filedentered into a petition withproject specific indemnity rider to a general agreement of indemnity made by B&W in favor of one of its sureties. Pursuant to the Delaware Court of Chancery (the “Court”) seeking a determination of fair value for 943,769 shares of common stock of UOLindemnity rider, the Company agreed to indemnify the surety in connection with a default by B&W under the acquisition of UOLunderlying indemnity agreement relating to a $29,970 payment and performance bond issued by the Company. Such transaction gave rise to appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware. As a result, Quadre petitioned the Court to receive fair value as determined by the Court. On June 30, 2017, the parties settled the action and the petition was dismissed. As discussed in Note 3, the settlement of this action resulted in an increased in goodwill.In May 2014, Waterford Township Police & Fire Retirement System et al. v. Regional Management Corp et al., filed a complaint in the Southern District of New York (the “Court”), against underwriters alleging violations under sections 11 and 12 of the Securities Act of 1933, as amended (the “Securities Act”). FBR Capital Markets & Co. (“FBRCM”), a broker-dealer subsidiary of ours, was a co-manager of 2 offerings. On January 30, 2017, the Court denied the plaintiffs’ motion to file a first amended complaint, which would have revived claims previously dismissed by the Court on March 30, 2016. On March 1,2017, the plaintiffs filed a notice of appeal and an opening brief on June 21, 2017. Defendant’s opposition motion was filed on September 12, 2017. Appellants filed their reply brief on October 17, 2017 and oral argument has been scheduled for November 17, 2017. Regional Management continues to indemnify all of the underwriters, including FBRCM, pursuant to the operative underwriting agreement. On January5,2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”), a broker-dealer subsidiary of FBR, as a defendant in putative class action lawsuits alleging claims under the Securities Act,surety in connection with a construction project undertaken by B&W. In consideration for providing the offerings of Miller Energy Resources, Inc. (“Miller”) have been consolidated. The Master Consolidated Complaint, styledGaynor v. Miller et al.,is pendingindemnity rider, B&W paid the Company fees in the United States District Court foramount of $600 on August 26, 2020.Eastern DistrictCompany entered into a general agreement of Tennessee, and, like its predecessor complaints, continuesindemnity in favor of one of B&W’s sureties. Pursuant to allege claims under Sections 11 and 12 ofthis indemnity agreement, the Securities Act against nine underwriters for alleged material misrepresentations and omissions inCompany agreed to indemnify the registration statement and prospectuses issuedsurety in connection with six offerings (February 13, 2013; May 8, 2013; June 28, 2013; September 26, 2013; October 17, 2013 (as to MLV only)a default by B&W under a 30,000€ payment and August 21, 2014) with an alleged aggregate offering price of approximately $151,000. The plaintiffs seek unspecified compensatory damages and reimbursement of certain costs and expenses. In August 2017,performance bond issued by the Court granted Defendant’s Motion to Dismiss on Section 12 claims and found that the plaintiffs had not sufficiently alleged a corrective disclosure prior to August 6, 2015, when an SEC civil action was announced. Defendant’s answer was filed on September 25, 2017. Although MLV is contractually entitled to be indemnified by Millersurety in connection with this lawsuit, Miller fileda construction project undertaken by B&W. In consideration for bankruptcy in October 2015 and this likely will decrease or eliminate the value ofproviding the indemnity, that MLV receives from Miller. B&W paid the Company fees in the amount of $1,694 on January 20, 2022.
(c) Other CommitmentsApril 2017, two purported shareholdersthe normal course of FBR filed a putative class action against FBR andbusiness, the members ofCompany enters into commitments to its board of directors that challenged the disclosures madeclients in connection with the mergercapital raising transactions, such as firm commitment underwritings, equity lines of FBR withcredit, or other commitments to provide financing on specified terms and conditions. These commitments require the Company styledMichael Rubin v. FBR & Co., et al., Case No. 1:17-cv-00410-LMB-MSNto purchase securities at a specified price or otherwise provide debt or equity financing on specified terms. Securities underwriting exposes the Company to market andKim v. FBR & Co., et al. Case No.1:17-cv-004440LMB-IDD. The complaints alleged that the registration statement filed in connection with the Merger failed to disclose certain allegedly material information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and SEC Ru1e 14a-9 promulgated thereunder. On July 12, 2017, per stipulation, the complaints were dismissed - with prejudice as to the named plaintiffs only, without prejudice as to the class. In August 2017, a mootness fee was paid and the case was dismissed.In February 2017, certain former employees filed an arbitration claim with FINRA against Wunderlich Securities, Inc. (“WSI”) alleging misrepresentations credit risk, primarily in the recruitment of claimantsevent that, for any reason, securities purchased by the Company cannot be distributed at the anticipated price and to join WSI. Claimants also allege that WSI failed to support their mortgage trading business resultingbalance sheet risk in the loss of opportunities during their employment with WSI. Claimants are seeking $10 million in damages. WSI has counterclaimed allegingevent that claimants mispresented their process for doing business, particularly their capital needs, resulting in substantial losses to WSI. WSI believes the claims are meritless and intends to vigorously defend the action. A hearing has been scheduled for March 2018.In March 2017, United Online, Inc. received a letter from PeopleConnect, Inc. (formerly, Classmates, Inc.) (“Classmates”) regarding a notice of investigation received from the Consumer Protection Divisions of the District Attorneys’ offices of four California counties (“California DAs”). These entities suggest that Classmates may be in violation of California codes relating to unfair competition, falsedebt or deceptive advertising, and auto-renewal practices. Classmates asserts that these claims are indemnifiable claims under the purchase agreement between United Online, Inc. and the buyer of Classmates. A tolling agreement with the California DAs has been signed and informal discovery and production is in process. At the present time, the financial impact to the Company, if any,equity financing commitments cannot be estimated.In July 2017, an arbitration claim was filed with FINRA by Dominick & Dickerman LLC and Michael Campbell against WSI and Gary Wunderlich with respect to the acquisition by Wunderlich Investment Company, Inc. (“WIC”) (the parent corporation of WSI) of certain assets of Dominick & Dominick LLC in 2015. The Claimants allege that respondents overvalued WIC so that the purchase price paid to the Claimants in shares of WIC stock was artificially inflated. The Statement of Claim includes claims for common law fraud, negligent misrepresentation, and breach of contract. Claimants are seeking damages of approximately $8 million plus unspecified punitive damages. Respondents believe the claims are meritless and intend to vigorously defend the action.In September 2017, a statement of claim was filed in a FINRA arbitration naming FBRCM and other underwriters related to the underwriting of the now-bankrupt, Quantum Fuel Systems Technologies Worldwide, Inc. (“Quantum”). Claimants are seeking $37,000 in actual damages, plus $75,000 in punitive damages and attorney’s fees. On October 24, 2017, we joined in a motion with the other underwriters requesting that the claim be dismissed on the grounds that it is improper under FINRA Rules 12204 and 122205 which prohibit class actions and derivative claims, respectively. Our initial response is due in November 2017 and we have agreed to a dual representation arrangement with the other underwriters. At the present time, the financial impact to the Company, if any, cannot be estimated.12—16 — SHARE-BASED PAYMENTSDuring the nine months ended September 30, 2017, the Company granted restricted stock units representing 486,049 shares of common stock with a total fair value of $7,732 to certain employees of the Company under the Company’s Amended and Restated 2009 Stock Incentive Plan (the “Plan”). During the year ended December 31, 2016, the Company granted restricted stock units representing 544,605 shares of common stock with a total fair value of $5,301 to certain employees and directors of the Company under the Plan. on May 27, 2021. Share-based compensation expense for such restricted stock units under the Company’s 2021 Plan was $1,410$14,159 and $3,624$8,493 for the three and nine months ended SeptemberJune 30, 2017,2022 and 2021, respectively, and $31,019 and $13,792 for the six months ended June 30, 2022 and 2021, respectively. Share-based compensation expense for suchDuring the six months ended June 30, 2022, in connection with employee stock incentive plans, the Company granted 555,168 restricted stock units was $834with a grant date fair value of $31,670 and $1,831 for65,000 performance based restricted stock units with a grant date fair value of $2,329. During the three and ninesix months ended SeptemberJune 30, 2016, respectively.threefive years based on continued service. Performance based restricted stock units generally vest based on both the employee’s continued service and the achievement of a set threshold of the Company’s common stock price, as defined in the grant, during the two to three-year period following the grant. In determining the fair value of restricted stock units on the grant date, the fair value 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. As of September 30, 2017, the expected remaining unrecognized share-based compensationexpense of $9,271 will be expensed over a weighted average period of 2.2 years.A summary of equity incentive award activity under the for the nine months ended September 30, 2017 was as follows: Weighted Average Shares Fair Value Nonvested at December 31, 2016 680,135 $ 9.74 Granted 486,049 15.91 Vested (193,626 ) 10.32 Forfeited (29,724 ) 10.49 Nonvested at September 30, 2017 942,834 $ 12.78 The per-share weighted average grant-date fair value of restricted stock units was $15.91 during the nine months ended September 30, 2017. There were 193,626 restricted stock units with a fair value of $1,999 that vested during the nine months ended September 30, 2017 under the Plan.Amended and Restated FBR & Co. 2006 Long-Term Stock Incentive PlanacquisitionCompany’s Employee Stock Purchase Plan ("Purchase Plan"), share based compensation was $43 and $115 for the three months ended June 30, 2022 and 2021, respectively, and $196 and $342 for the six months ended June 30, 2022 and 2021, respectively. As of FBR on June 1, 2017, the equity awards previously granted or available30, 2022 and December 31, 2021, there were 398,442 and 450,717 shares reserved for issuance under the FBR & Co. 2006 Long-TermPurchase Plan, respectively. Incentive Plan (the “FBR Stock Plan”) may be issuedPlan. program are retired. On October 25, 2021, the share repurchase program was reauthorized by the Board of Directors for share repurchases up to $50,000 of its outstanding common shares and expires in October 2022.ninesix months ended SeptemberJune 30, 2017,2022 and 2021, the Company granted restricted stock units representing 784,638issued 19,659 and 76,417 depository shares of common stock with a total grant date fair valuethe Series A Preferred Stock, respectively. There were 2,834,144 and 2,814,485 shares issued and outstanding as of $13,129. Share-based compensation expense was $1,383June 30, 2022 and $1,687December 31, 2021, respectively. Total liquidation preference for the threeSeries A Preferred Stock as of June 30, 2022 and nineDecember 31, 2021, was $70,854 and $70,362, respectively. Dividends on the Series A preferred paid during the six months ended SeptemberJune 30, 2017, respectively, in connection with2022 and 2021, were $0.4296875 per depository share.13, 2017 restricted stock award. In connection with the restructuring discussed in Note 2(i),30, 2022 and 2021, the Company recorded share-based compensation expenseissued 3,941 and 228,477 depository shares of $2,391related to the accelerated vestingSeries B Preferred Stock. There were 1,701,075 and 1,697,134 shares issued and outstanding as of restricted stock awards. Of the $2,391, $884 related to former corporate executives of FBRJune 30, 2022 and $1,507 related to employees in the Capital Markets segment.As of September 30, 2017, the expected remaining unrecognized share-based compensation expense of $11,916 will be expensed over a weighted average period of 2.7 years.A summary of equity incentive award activityDecember 31, 2021, respectively. Total liquidation preference for the period fromSeries B Preferred Stock as of June 1, 2017,30, 2022 and December 31, 2021, was $42,527 and $42,428, respectively. Dividends on the date ofSeries B preferred paid during the acquisition of FBR, through Septembersix months ended June 30, 2017 was as follows: Weighted Average Shares Fair Value Nonvested at June 1, 2017, acquisition date of FBR resulting from the exchange of previously existing FBR awards 530,661 $ 14.70 Granted 784,638 16.73 Vested (200,905 ) 15.08 Forfeited (93,963 ) 15.93 Nonvested at September 30, 2017 1,020,431 $ 16.14 13—17 — NET CAPITAL REQUIREMENTS& Co., LLCSecurities (“BRC”BRS”), FBRCM, MLVB. Riley Wealth Management (“BRWM”), National Securities Corporation (“NSC”) and WunderlichFocalPoint Securities, Inc. (“WSI”LLC ("FocalPoint"), the Company’s broker-dealer subsidiaries, are registered with the SEC as broker-dealers and are 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 SeptemberJune 30, 2017, BRC2022, BRS had net capital of $12,052,$150,415, which was $11,728$146,305 in excess of required minimum net capital of $4,110; BRWM had net capital of $10,699, which was $10,029 in excess of required minimum net capital of $670; NSC had net capital of $363 which was $113 in excess of required minimum net capital of $250; and FocalPoint had net capital of $513 which was $271 in excess of the required minimum net capital of $242.$324, FBRCM$12,518; BRWM had net capital of $38,976,$13,833, which was $37,976$12,819 in excess of its required minimum net capital of $1,000, MLV$1,014; and NSC had net capital of $407,$1,959 which was $307$959 in excess of its required minimum net capital of $100, and WSI had net capital of $3,601, which was $2,891 in excess of its required net capital of $710.14—18 — RELATED PARTY TRANSACTIONSAt September2017,2022, amounts due from related parties include $5,452of $645 included $625 from GACP I, L.P. and $30 from GACP II, L.P.the Funds for management fees incentiveand other operating expenses. As of December 31, 2021, amounts due from related parties of $2,306 included $621 from the Funds for management fees and other operating expenses, and$600 $1,635 due from CA Global Partners LLC (“CA Global”) for advances on certain wholesale and industrial liquidation engagements. Amounts due to related parties includes $720 payable to CA Global for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global. At December 31, 2016, amounts due from related parties include $2,050 from GACP I, L.P. for management fees, incentive fees and other operating expenses and $959 from CA Global. Great American Capital Partners, LLC, a subsidiary of the Company, is the general partner of GACP I, L.P. CA Global is one of the members of Great American Global Partners, LLC (“GA Global Ptrs”). The amounts receivable and payable from CA Global are comprised of amounts due to and due from CA Global in connection with certain auctions of wholesale and industrial machinery and equipment that they were managed by CA Global on behalf of GA Global Ptrs.offeringsix months ended June 30, 2022 and 2021, the Company earned $64 and $12,348, respectively, of $28,750underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.2021 Notes as more fully described in Note 8, certain members of management and the Board of DirectorsCompany’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company purchased $2,731 or 9.5%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 Senior Notes offered byboard, a bonus or bonuses may also be earned and payable to the Company.NOTE 15— BUSINESS SEGMENTSCompany’s operating segments reflectCompany is also a party to indemnification agreements for the mannerbenefit of B&W, and the B. Riley Guaranty, each as disclosed above in whichNote 15 – Commitments and Contingencies.business is managed and how the Company allocates resources and assesses performance internally. Maven, Inc.)several operating subsidiariesloans receivable due from The Arena Group Holdings, Inc. (fka the Maven, Inc.) ("Arena") included in loans receivable, at fair value with a fair value of $68,047 and $69,835 as of June 30, 2022 and December 31, 2021, respectively. Interest on these loans is payable at 10% per annum with maturity dates through which it delivers specific services. TheDecember 2023. During the three and six months ended June 30, 2022, the Company provides investment banking, corporate finance, securities lending, restructuring, research, salesearned $2 and trading$2,023, respectively, in underwriting and wealth management services to corporate, institutionalfinancial advisory and high net worth clients. The Company also 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 and valuation and appraisal services to clients with independent appraisalsother fees from Arena in connection with asset based loans, acquisitions, divestituresArena's capital raising activities.otheraccrued interest pursuant to the Bridge Agreement was repaid upon closing of Faze’s business needs.combination (the “Business Combination”) with BRPM 150, which following the Business Combination changed its name to FazeacquisitionBusiness Combination, BRPM 150 is no longer a VIE of UOL onthe Company. On July 1, 2016,19, 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.consumerconsulting or investment banking services to raise capital for companies in which the Company has significant influence through equity ownership, representation on the board of directors (or similar governing body), or both. Other than the fees described above, during the three months ended June 30, 2022 and 2021, the Company earned $2,156 and $1,234, respectively, of fees related to these services and products overduring the Internet.ValuationFinancial Consulting segment, Principal Investments — Communications and AppraisalOther segment, and Principal Investments - United OnlineBrands segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. In 2022, the segment results in the Capital Markets segment include the operations of FocalPoint and the segment results in the Principal Investments – Communications and Other segment include the operations from Lingo (as previously discussed in Note 1) in each case from the date of acquisition Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Capital Markets reportable segment: Revenues - Services and fees $ 56,473 $ 10,063 $ 95,872 $ 22,799 Interest income - Securities lending 7,206 — 9,424 — Total revenues 63,679 10,063 105,296 22,799 Selling, general, and administrative expenses (53,955 ) (8,916 ) (87,753 ) (22,535 ) Restructuring costs (3,322 ) — (7,245 ) — Interest expense - Securities lending (4,950 ) — (6,515 ) — Depreciation and amortization (1,636 ) (138 ) (2,167 ) (406 ) Segment (loss) income (184 ) 1,009 1,616 (142 ) Auction and Liquidation reportable segment: Revenues - Services and fees 7,376 17,058 43,179 29,358 Revenues - Sale of goods 1 6,503 1 6,505 Total revenues 7,377 23,561 43,180 35,863 Direct cost of services (3,385 ) (4,365 ) (25,482 ) (9,870 ) Cost of goods sold (2 ) (2,223 ) (2 ) (2,225 ) Selling, general, and administrative expenses (1,963 ) (3,976 ) (6,562 ) (6,840 ) Depreciation and amortization (5 ) (6 ) (15 ) (22 ) Segment income 2,022 12,991 11,119 16,906 Valuation and Appraisal reportable segment: Revenues - Services and fees 9,043 7,696 24,799 22,865 Direct cost of services (3,778 ) (3,549 ) (11,031 ) (10,287 ) Selling, general, and administrative expenses (2,253 ) (2,136 ) (6,395 ) (6,379 ) Depreciation and amortization (43 ) (19 ) (130 ) (72 ) Segment income 2,969 1,992 7,243 6,127 Principal Investments - United Online segment: Revenues - Services and fees 12,249 15,483 38,504 15,483 Revenues - Sale of goods 78 163 220 163 Total revenues 12,327 15,646 38,724 15,646 Direct cost of services (2,975 ) (4,927 ) (9,711 ) (4,927 ) Cost of goods sold (122 ) (168 ) (311 ) (168 ) Selling, general, and administrative expenses (2,433 ) (2,139 ) (8,536 ) (2,139 ) Depreciation and amortization (1,703 ) (1,802 ) (5,313 ) (1,802 ) Restructuring costs (150 ) (3,187 ) (633 ) (3,187 ) Segment income 4,944 3,423 14,220 3,423 Consolidated operating income from reportable segments 9,751 19,415 34,198 26,314 Corporate and other expenses (including restructuring costs of $1,424 and $3,606 during the three and nine months ended September 30, 2017, respectively, and $398 during the three and nine months ended September 30, 2016) (8,395 ) (3,993 ) (19,571 ) (9,047 ) Interest income 76 26 358 32 Loss on equity investment (157 ) — (157 ) — Interest expense (2,510 ) (991 ) (5,195 ) (1,398 ) (Loss) income before income taxes (1,235 ) 14,457 9,633 15,901 Benefit from (provision for) income taxes 1,357 (6,083 ) 7,753 (6,184 ) Net income 122 8,374 17,386 9,717 Net (loss) income attributable to noncontrolling interests (246 ) (565 ) (283 ) 631 Net income attributable to B. Riley Financial, Inc. $ 368 $ 8,939 $ 17,669 $ 9,086 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
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 Revenues: Revenues - Services and fees: North America $ 85,128 $ 49,882 $ 200,500 $ 89,790 Australia — — 940 — Europe 13 418 914 715 Total Revenues - Services and fees $ 85,141 $ 50,300 $ 202,354 $ 90,505 Revenues - Sale of goods North America $ 79 $ 163 $ 221 $ 165 Europe — 6,503 — 6,503 Total Revenues - Sale of goods $ 79 $ 6,666 $ 221 $ 6,668 Revenues - Interest income - Securities lending: North America $ 7,206 $ — $ 9,424 $ — Total Revenues: North America $ 92,406 $ 50,045 $ 210,138 $ 89,955 Australia — — 940 — Europe 20 6,921 921 7,218 Total Revenues $ 92,426 $ 56,966 $ 211,999 $ 97,173 The following table presentsSix 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 consistsconsist of property and equipment and other assets, by geographical area: As of As of September 30, December 31, 2017 2016 Long-lived Assets - Property and Equipment, net: �� North America $ 13,105 $ 5,785 Australia — — Europe — — Total $ 13,105 $ 5,785 16— SUBSEQUENT EVENTSOn November 8, 2017,20 — REVISION OF PRIOR PERIOD FINANCIALSCompany’s Board of Directors approved a regular quarterly dividend of $0.08 per share and a special dividend of $0.04 per share, which will be paid on or about November 30, 2017 to stockholders of record on November 22, 2017.Acquisition of magicJack VocalTec Ltd.On November 9, 2017,prior year, the Company entered into an Agreement and Planidentified misstatements related to the consolidation of Merger with B. R. Acquisition Ltd., an Israeli corporation and wholly-owned subsidiarycertain VIE’s, which primarily resulted in a gross up of the balance sheet to reflect funds held in trust within prepaid expenses and other assets and the recording of temporary equity. Although the Company (“Merger Sub”), and magicJack VocalTec Ltd., an Israeli corporation (“magicJack”), pursuantconcluded that these misstatements were not material, either individually or in aggregate, to which Merger Sub will merge with and into magicJack, with magicJack continuing asits current or previously issued consolidated financial statements, the surviving corporation and as an indirect subsidiary of the Company. SubjectCompany has elected to revise its previously issued consolidated financial statements to correct for these misstatements.terms and conditionsaccompanying unaudited condensed consolidated statements of the Agreement and Plan of Merger, each outstanding share of magicJack will be converted into the right to receive $8.71 in cash without interest, representing approximately $143,500 in aggregate merger consideration. The closing of the transaction is subject to the receipt of certain regulatory approvals, the approval of the magicJack shareholder’s and the satisfaction of other closing conditions. It is anticipated that the acquisition of magicJack will close in the first half of 2018.flows are as follows: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 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 reaction to our recently completed acquisition of customers, employees and counterparties; and the diversion of management time on acquisition-related issues.issues; the failure of our brand investment portfolio licensees to pay us royalties; the intense competition to which our brand investment portfolio is 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.and its subsidiaries (NASDAQ: RILY) provide collaborative(“B. Riley” or the “Company”) is a diversified financial services platform and solutions through severalopportunistically invests in companies or assets with attractive risk-adjusted return profiles to benefit its shareholders. Through its affiliated subsidiaries, including:●B. Riley & Co., LLC (“BRC”), FBR Capital Markets & Co. and Wunderlich Securities, Inc., are mid-sized, full service investment banks providing financial advisory, corporate finance, research, securities lending and sales & trading services to corporate, institutional and high net worth individual clients. Wunderlich also provides wealth management services to high net worth individuals and families;●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;○B. Riley Wealth Management (formerly MK Capital Advisors), a multi-family office practice and wealth management firm focused on the needs of ultra-high net worth individuals and families; and○Great American Capital Partners, LLC (“GACP”), the general partner of a private fund, GACP I, L.P. a direct lending fund that provides senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies;●Great American Group, LLC, a leading provider of asset disposition and auction solutions to a wide range of retail and industrial clients; and●Great American Group Advisory and Valuation Services, LLC, a leading provider of appraisal and valuation services for asset based lenders, private equity firms and corporate clients.We also pursue a strategy of investing in or acquiring companies which we believe have attractive investment return characteristics. On July 1, 2016, we acquired United Online, Inc. (“UOL”) as part of our principal investment strategy.●UOL is a communications company that offerssubscription services and products, consisting of Internet access services and devices under the NetZero and Juno brands primarily sold in the United States.We are headquartered in Los Angeles with offices in major financial markets throughout the United States and Europe.For financial reporting purposes we classify our businesses into four segments: (i) capital markets, (ii) auction and liquidation, (iii) valuation and appraisal; and (vi) principal investments – United Online.Capital Markets Segment. Our capital markets segment provides a full arraysuite 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:wealth management,and sales and trading services to corporate, institutional, and high net worth individual clients. Itcapital marketsCapital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.Segment.Segment. Our auctionAuction and liquidationLiquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances. Furthermore, ourOur scale and pool of resources allow us to offer our services across North AmericanAmerica as well as parts of Europe, Asia, and Australia. Our auctionAuction and liquidationLiquidation 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.Valuation and Appraisal Segment.valuation and appraisalFinancial Consulting segment provides valuation and appraisal services to law firms, corporations, financial institutions, lenders, and private equity firms and other providers of capital.firms. These services primarily include the valuation of assets (i) for purposes of determiningbankruptcy, financial advisory, forensic accounting, litigation support, operations management consulting, real estate consulting, and monitoring the value of collateral securing financial transactions and loan arrangements and (ii) in connection with potential business combinations. Our valuation and appraisal services. Our Financial Consulting segment operates through limited liability companies that are wholly owned or majority owned by us.– United Online Segment.- Communications and Other Segment. Our principal investmentsPrincipal Investments - United OnlineCommunications and Other segment consists of businesses which have been acquired primarily for attractive investment return characteristics. Currently, this segment includes, among other investments, UOL, a company that offersthrough which we provide consumer Internet access, magicJack, through which we provide VoIP communication and related product and subscription services, consisting of Internet access under the NetZero and Juno brands. Internet access includes paid dial-up,Marconi Wireless, through which we provide mobile broadband and DSL subscription services. We also offer email, Internet security, web hostingphone services and other services.February 17, 2017, we entered into an Agreement and Plan of Merger (the “FBR Merger Agreement”) with FBR & Co. (“FBR”), pursuantMay 31, 2022, our ownership interest in Lingo increased from 40% to which FBR was to merge with and into the Company (or80% as a subsidiaryresult of the Company), withconversion of $17.5 million of existing debt owed by Lingo to equity. As a result of the Company (or its subsidiary) asconsolidation of Lingo, the surviving corporation (the “Merger”). On May 1, 2017,pre-existing equity investment was remeasured at fair value resulting in the Companyrecognition of a gain of $6.8 million, which is included in trading (losses) income and FBR filed a registrationfair value adjustments on loans in the condensed consolidated statement of operations for the planned Merger.three and six months ended June 30, 2022. In accordance with ASC 805, we used the acquisition method of accounting. The shareholderstotal fair value of the Company and FBR approved the acquisition on June 1, 2017, customary closing conditions were satisfiedassets of Lingo was $115.8 million and the acquisition was completed on June 1, 2017. Subject to the terms and conditionsfair value of the FBR Merger Agreement, each outstanding share20% noncontrolling interest was $8.0 million at May 31, 2022. Goodwill of FBR common stock (“FBR Common Stock”) was converted into$32.0 million and other intangible assets of $65.2 million were recorded as a result of the rightreceive 0.671 of a share ofexpand the services offered in our common stock.Principal Investments - Communications and Other segment.total acquisitionpurchase price consideration for FBR was estimated to be $73.5totaled $124.5 million, which includes theconsisted of $64.2 million in cash, $20.3 million in issuance ofapproximately 4,831,633 shares of our common stock, with an estimated fair value of $71.0and $39.9 million (based onin deferred cash and contingent consideration payable over the closing price of our common stock on June 1, 2017) and restricted stock awards with a fair value of $2.5 million attributable to the service period prior to June 1, 2017.next three years. We believe that the acquisition of FBR will allow us to benefit from investment banking,corporate finance, securities lending, research, and sales and tradingservices provided by FBR and planned synergies from the elimination of duplicate corporate overhead and management functions with us.On May 17, 2017, we entered into a Merger Agreement with Wunderlich Investment Company, Inc., a Delaware corporation (“Wunderlich”), and Stephen Bonnema, in his capacity as the Stockholder Representative (the “Stockholder Representative”), collectively (the “Wunderlich Merger Agreement”). Pursuant to the Wunderlich Merger Agreement, customary closing conditions were satisfied andused the acquisition was completed on July 3, 2017. We also entered into a registration rights agreement with certain shareholdersmethod of Wunderlich (the “Registration Rights Agreement”) on July 3, 2017. The Registration Rights Agreement provides the Wunderlich shareholder signatories with the right to noticeaccounting for this acquisition. Goodwill of and, subject to certain conditions, the right to register shares of our common stock in certain future registered offerings of shares of our common stock. In connection with the acquisition Wunderlich on July 3, 2017, the total consideration of $66.0 million included $29.7 million of cash and the issuance of approximately 1,974,812 shares of the Company’s common stock with an estimated fair value of $31.4$110.5 million and 821,816 newly issued common stock warrants with an estimated fair valueother intangible assets of $4.9 million.In connection with terms of the Wunderlich Merger Agreement, on July 5, 2017 the number of directors comprising our full Board of Directors$10.8 million that was increased by one, with Gary K. Wunderlich, Jr., Chief Executive Officer of Wunderlich, being appointed to fill the new seat in accordance with the terms of his employment agreement. Concurrently with the appointment of Mr. Wunderlich, the number of directors comprising our full Board of Directors was again increased by one, with Michael J. Sheldon appointed as an independent director to fill the new seat.In second and third quarters of 2017, we implemented costs savings measures taking into account the planned synergiesrecorded as a result of the acquisition of FBRwill be deductible for tax purposes. The acquisition is expected to expand B. Riley Securities’ mergers and Wunderlichacquisitions (“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.includedthe World Health Organization classified as a reductionpandemic in force for someMarch 2020. There has been a trend in many parts of the corporate executivesworld of FBRincreasing availability and Wunderlichadministration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and a restructuringgovernment activities and functions; however, the full impact of the COVID-19 outbreak continues to integrate FBRevolve with the emergence of new variant strains and Wunderlich’s operations withbreakthrough infections. The continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, Russia's invasion of Ukraine, and rising energy prices create uncertainty about the future economic environment which will continue to evolve and may impact our operations.business in future periods. These initiatives resulted in restructuring charges of $10.8 million indevelopments and the secondimpact on the financial markets and third quarters of 2017. Restructuring charges included $3.3 million related to severance and accelerated vesting of restricted stock awards to former corporate executives of FBR and Wunderlich and $4.8 million of severance, accelerated vesting of stock awards to employees and $2.7 million of lease loss accruals for the planned consolidation of office space related to operations in the Capital Markets segment.Critical Accounting PoliciesOur condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), which require management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and on other factors that management believesoverall economy continue to be reasonable. Actualhighly 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 differ from those estimates. Critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our condensed consolidated financial statements. A discussion of such critical accounting policies, which include revenue recognition, reserves for accounts receivable and slow moving goods held for sale or auction, the carrying value of goodwill and other intangible assets, fair value measurements, share-based compensation and accounting for income tax valuation allowances can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There have been no material changes to the policies noted above as of this quarterly report on Form 10-Q for the period ended September 30, 2017.SeptemberJune 30, 20172022 Compared to Three Months Ended SeptemberJune 30, 2016 Three Months
September 30, 2017 Three Months
September 30, 2016 Amount % Amount % Revenues: Services and fees $ 85,141 92.1 % $ 50,300 88.3 % Interest income - Securities lending 7,206 7.8 % — 0.0 % Sale of goods 79 0.1 % 6,666 11.7 % Total revenues 92,426 100.0 % 56,966 100.0 % Operating expenses: Direct cost of services 10,138 11.0 % 12,841 22.5 % Cost of goods sold 124 0.1 % 2,391 4.2 % Selling, general and administrative expenses 70,962 76.8 % 22,727 39.9 % Restructuring costs 4,896 5.3 % 3,585 6.3 % Interest expense - Securities lending 4,950 5.4 % — 0.0 % Total operating expenses 91,070 98.5 % 41,544 72.9 % Operating income 1,356 1.5 % 15,422 27.1 % Other income (expense): Interest income 76 0.1 % 26 0.0 % Loss from equity investment (157 ) (0.2 %) — 0.0 % Interest expense (2,510 ) (2.7 %) (991 ) (1.7 %) (Loss) income before income taxes (1,235 ) (1.3 %) 14,457 25.3 % Benefit from (provision for) income taxes 1,357 1.5 % (6,083 ) (10.7 %) Net income 122 0.1 % 8,374 14.7 % Net loss attributable to noncontrolling interests (246 ) (0.3 %) (565 ) (1.0 %) Net income attributable to B. Riley Financial, Inc. $ 368 0.4 % $ 8,939 15.7 % 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. Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016 Change Amount % Amount % Amount % Revenues - Services and Fees: Capital Markets segment $ 56,473 61.1 % $ 10,063 17.7 % $ 46,410 461.2 % Auction and Liquidation segment 7,376 8.0 % 17,058 29.9 % (9,682 ) -56.8 % Valuation and Appraisal segment 9,043 9.8 % 7,696 13.5 % 1,347 17.5 % Principal Investments - United Online segment 12,249 13.3 % 15,483 27.2 % (3,234 ) -20.9 % Subtotal 85,141 92.1 % 50,300 88.3 % 34,841 69.3 % Revenues - Sale of goods: Auction and Liquidation segment 1 0.0 % 6,503 11.4 % (6,502 ) 100.0 % Principal Investments - United Online segment 78 0.1 % 163 0.3 % (85 ) -52.1 % Subtotal 79 0.1 % 6,666 11.7 % (6,587 ) -98.8 % Interest income - Securities lending: Capital Markets segment 7,206 7.8 % — n/m 7,206 n/m Total revenues $ 92,426 100.0 % $ 56,966 100.0 % $ 35,460 62.2 % 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) % increased $35.5decreased approximately $294.1 million to $92.4$42.7 million during the three months ended SeptemberJune 30, 20172022 from $57.0$336.8 million during the three months ended SeptemberJune 30, 2016.2021. The increasedecrease in revenues during the three months ended SeptemberJune 30, 20172022 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $256.6 million, which is included in trading (losses) income and fair value adjustments on loans above, services and fees of $65.2 million and sale of goods of $10.6 million, partially offset by an increase in revenuesinterest income from loans and securities lending of $38.3 million. The decrease in the fair value of 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 decrease in revenue from services and fees in the three months ended June 30, 2022 consisted of $34.8decreases in revenue of $58.6 million in the Capital Markets segment, $26.6 million in the Wealth Management segment and increase$3.0 million in revenues from interest income – securities lending of $7.2 million,the Auction and Liquidation segment, partially offset by a decrease in revenues from the sale of goods of $6.5 million. The increase in revenues from services and fees of $34.8 million in 2017 was primarily due to an increaseincreases in revenues of $46.4$21.7 million in the capital marketsPrincipal Investments — Communications and Other segment, and $1.3$0.7 million in the valuationBrands segment, and appraisal segment, offset by a decrease in revenues of $9.7$0.6 million in the auction and liquidation segment and a decrease of $3.2 million in the principal investments – United OnlineFinancial Consulting segment. The increase of $7.2 million in interest income – securities lending was as a result of the acquisition of FBR on June 1, 2017. The decrease in revenues from sale of goods of $6.6 million was due to the sale of retail goods that we acquired title to in September 2016 from the bankruptcy trustee of MS Mode, a retailer of women’s apparel that operates 130 retail locations throughout the Netherlands.capital marketsCapital Markets segment increased $46.4decreased $58.6 million to $56.5$67.4 million during the three months ended SeptemberJune 30, 20172022 from $10.1$126.0 million during the three months ended SeptemberJune 30, 2016.2021. The decrease in revenues was primarily due to decreases in revenue of $71.8 million from corporate finance, consulting, and investment banking fees, partially offset by increases of $7.7 million in dividends, $2.9 million in other income, and $1.9 million in interest income.revenuessubscription services of $16.8 million from investment banking fees, $12.4 million from commissions, fees and other income primarily earned from research, sales and trading, $16.0 million from wealth management services and $1.2 million from trading income. The increase in revenues from investment banking fees was primarily due to an increase in the number of investment banking transactions where we acted as an advisor in 2017 as compared to the same period in 2016. Of the $16.8 million increase in investment banking fees, $14.4 million of the increase was primarily due to operations of FBR that we acquired on June 1, 2017 and Wunderlich that we acquired on July 3, 2017. The increase in revenues from commissions, fees and other income primarily earned from research, sales and trading, was primarily due to an increase in fees and commissions earned from research, sales and trading and incentive management fees earned from our various funds we manage which included $10.4 million of revenues from the acquisition of FBR on June 1, 2017Marconi Wireless in the fourth quarter of 2021 and Wunderlich on July 3, 2017. The increase in revenues from wealth management services included $15.9$10.7 million of revenues from the acquisition of Wunderlich on July 3, 2017. The increasean additional equity interest in revenues from trading incomeLingo in 2017 was primarily due tothe second quarter of 2022 and an increase in income we earned from trading activitiesadvertising licensing and other revenue of $1.2 million, partially offset by a decrease of $2.5 million in our propriety trading account.auction and liquidation solutions decreased $9.7Brands segment increased $0.7 million to $7.4$5.2 million during the three months ended SeptemberJune 30, 20172022 from $17.1$4.5 million during the three months ended SeptemberJune 30, 2016.2021. The decreaseprimary source of revenue included in revenuesthis segment is the licensing of $9.7trademarks. was primarily due to a decrease in revenuesloss of $10.1 million from services and fees from retail liquidation engagements, offset by an increase in revenues of $0.4 million from services and fees in our wholesale and industrial auction division. The decrease in revenues from services and fees from retail liquidation engagements in 2017 was primarily due to impact of the revenues we generated in the prior year from thegoing-out-of-business sale of 185 Hancock Fabric stores in the United States. In the third quarter of 2017, we did not have any similar large retail liquidation engagements that were completed.The increase in revenues from services and fees in our wholesale and industrial division was primarily due to an increase in the number of wholesale and industrial auction engagements in 2017 as compared to the same period in 2016. Revenues from services and fees in the valuation and appraisal segment increased $1.3 million, or 17.5%, to $9.0$223.9 million during the three months ended SeptemberJune 30, 2017 from $7.72022 compared to income of $32.7 million during the three months ended SeptemberJune 30, 2016.2021. This decrease was primarily due to decreases of $255.4 million in the Capital Markets segment and $1.3 million in the Wealth Management segment. The loss of $223.9 million during the three months ended June 30, 2022 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts of $219.8 million and unrealized loss on our loans receivable, at fair value of $11.0 million, partially offset by a realized gain on disposal of an equity method investment of $6.8 million.revenuesthe Principal Investments — Communications and Other segment was primarily due to increases of (a) $0.9$7.5 million related to appraisal engagements where we perform valuationsforfrom the monitoringacquisition of collateral for financial institutions, lenders, and private equity investorsand (b) $0.4 million related to appraisal engagements where we perform valuations of intellectual property and business valuations.Revenues from services and feesLingo in the principal investments - United Online segment decreased $3.2second quarter of 2022 and $5.2 million to $12.2 million duringfrom the three months ended September 30, 2017 from $15.5 million duringacquisition Marconi Wireless in the three months ended September 30, 2016.fourth quarter of 2021. The decrease in revenues was primarily due to lower paid subscribers to our servicesthe Auction and lower advertising impressions as a result of a decline in active accounts. Services revenues primarily from customer paid accounts related to our Internet access and related subscription services decreased $1.9 million to $9.3 million during the three months ended September 30, 2017 from $11.2 million during the three months ended September 30, 2016. Advertising revenues from Internet display advertising and search related to our email and Internet access services decreased $1.4 million to $2.9 million during the three months ended September 30, 2017 from $4.3 million during the three months ended September 30, 2016. Over the past several years revenues from paid subscription services have declined year over year as a result of a decline in the number of paid subscribers for our services. Management believes the decline in paid subscriber accounts is primarily attributable to the industry trends of consumers switching from dial-up Internet access to high speed Internet access such as cable and DSL. Management expects revenues in the principal investments - United Online segment to continue to decline year over year.Operating ExpensesDirect Cost of Services. Direct cost of services and direct cost of services measured as a percentage of revenues – services and fees by segment during the three months ended September 30, 2017 and 2016 are as follows: Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Principal Principal Auction and Valuation and Investments - Auction and Valuation and Investments - Liquidation Appraisal United Online Liquidation Appraisal United Online Segment Segment Segment Total Segment Segment Segment Total Revenues - Services and fees $ 7,376 $ 9,043 $ 12,249 $ 17,058 $ 7,696 $ 15,483 Direct cost of services 3,385 3,778 2,975 $ 10,138 4,365 3,549 4,927 $ 12,841 Gross margin on services and fees $ 3,991 $ 5,265 $ 9,274 $ 12,693 $ 4,147 $ 10,556 Gross margin percentage 54.1 % 58.2 % 75.7 % 74.4 % 53.9 % 68.2 % Total direct costs decreased $2.7 million, to $10.1 million during the three months ended September 30, 2017 from $12.8 million during the three months ended September 30, 2016. Direct costs of services decreased by $1.0 million in the auction and liquidation segment and $1.9 million in the principal investments - United Online, offset by an increase of $0.2 million in the valuation and appraisal segment. The decrease in direct costs in the auction and liquidationLiquidation segment was primarily due to a decrease in the number larger fee and commission retail liquidation engagements in 2017 as compared to the same period of 2016. The decrease in direct costs in the principal investments – United Online was primarily due to a decrease in costs to support the lower number of subscribers for dial-up internet service in 2017 as compared to the same period in 2016. The increase in direct costs of services in the valuation and appraisal segment was primarily due to an increase in payroll and related expenses in 2017 as compared to the same period in 2016.Gross margin in the auction and liquidation segment for services and fees decreased to 54.1% of revenues during the three months ended September 30, 2017, as compared to 74.4% of revenues during the three months ended September 30, 2016. The decrease was primarily due to the impact of the revenues and margin we generated in the prior year from thegoing-out-of-business sale of 185 Hancock Fabric stores in the United States. In the third quarter of 2017, we did not have any similar large retail liquidation engagementsEurope that were completed which resulted in lower gross margins from retail liquidation engagements.Gross margin in the valuation and appraisal segment for services and fees increased to 58.2% of revenues during the three months ended September 30, 2017, from 53.9% of revenues during the three months ended September 30, 2016. The increase in gross margin is primarily due to an increase in revenues due to higher average fees during the third quarter of 2017 and compared to the same period of 2016.Expenses.ExpensesSeptemberJune 30, 20172022 and 20162021 were comprised of the following:Selling, General and Administrative Expenses Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016 Change Amount % Amount % Amount % Capital Markets segment $ 55,591 78.4 % $ 9,054 39.9 % $ 46,537 514.0 % Auction and Liquidation segment 1,968 2.8 % 3,982 17.5 % (2,014 ) (50.6 %) Valuation and Appraisal segment 2,296 3.2 % 2,155 9.5 % 141 6.5 % Principal Investments - United Online segment 4,136 5.8 % 3,941 17.3 % 195 4.9 % Corporate and Other segment 6,971 9.8 % 3,595 15.8 % 3,376 93.9 % Total selling, general & administrative expenses $ 70,962 100.0 % $ 22,727 100.0 % $ 48,235 212.2 % Three Months Ended June 30, 2022 Three Months Ended
June 30, 2021Change 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) % increased $48.2decreased approximately $32.8 million to $71.0$167.1 million during the three months ended SeptemberJune 30, 20172022 from $22.7$199.9 million forduring the three months ended SeptemberJune 30, 2016.2021. The increasedecrease was primarily due to an increase in selling, general and administrative expensesdecreases of $46.5$21.3 million in the capital marketsWealth Management segment, $3.4 million in corporate and other segment, $0.2$17.7 million in the principal investments – United OnlineCapital Markets segment, and $0.1$2.5 million in the valuationCorporate and appraisalOther segment, offset by a decrease of $2.0and $0.9 million in the auctionAuction and liquidationLiquidation segment partially offset by increases of $9.1 million in the Principal Investments — Communications and Other segment and $0.5 million in the Financial Consulting segment.capital marketsCapital Markets segment increaseddecreased by $46.5$17.7 million to $55.6$48.1 million during the three months ended SeptemberJune 30, 20172022 from $9.1$65.7 million during the three months ended SeptemberJune 30, 2016.2021. The increase in expensesdecrease was primarily due to an increasedecreases of $14.8 million in (a)consulting expenses and $12.1 million in payroll and related expenses investment banking deal expenses, partially offset by increases of $15.2$4.9 million from the acquisitionsettlement of Wunderlich on July 3, 2017a regulatory matter, $2.0 in depreciation and $10.3amortization expenses, $1.1 million gain from the acquisition of FBR on June 1, 2017, (b) $11.7foreign currency exchange, and $1.1 million of operating expenses related to the acquisition of FBR and $5.2 million of operating expenses related to the acquisition of Wunderlich, (c) payroll and related expenses of $2.6 million primarily related to an increases in incentive compensation as a result of the increase in revenues from investment banking fees in 2017 as compared to the same period in 2016, and (d) other operating expenses of $1.5 million.Auction and Liquidationauction and liquidationWealth Management segment decreased $2.0by $21.3 million or 50.6%, to $2.0$69.7 million during the three months ended SeptemberJune 30, 20172022 from $4.0$91.0 million forduring the three months ended SeptemberJune 30, 2016.2021. The decrease in expenses was primarily due to a decrease in (a) payroll and related expenses inof $27.8 million, partially offset by an increase of $4.9 million from the amountsettlement of $1.3 million, (b) legala regulatory matter.professional fees of $0.5 million and (c) other administrative expenses of $0.2 million.Valuation and AppraisalvaluationAuction and appraisalLiquidation segment were $2.3decreased $0.9 million andto $2.2 million during the three months ended SeptemberJune 30, 20172022 from $3.1 million during the three months ended June 30, 2021.2016, respectively.Principal Investments - United Onlineprincipal investments - United OnlineFinancial Consulting segment increased $0.2by $0.5 million or 4.9%, to $4.1$20.0 million during the three months ended SeptemberJune 30, 20172022 from $3.9$19.6 million during the three months ended SeptemberJune 30, 2016. For the three months ended September 30, 2017, these expenses include $1.1 million of technology2021.development expenses, $0.3 million of sales and marketing expenses, $1.5 million of general and administrative expenses and $1.3 million of amortization of intangibles. For the three months ended September 30, 2016, these expenses include $1.2 million of technology and development expenses, $0.4 million of sales and marketing expenses, $1.0 million of general and administrative expenses and $1.4 million of amortization of intangibles. Technology and development expenses include expenses for product development, maintenance of existing software, technology and websites. Sales and marketing expenses include expenses associated personnel and overhead-related expenses for marketing, customer service, and advertising sales personnel to acquire and retain paid subscribers. Expenses associated with generating advertising revenues include sales commissions and personnel-related expenses. General and administrative expenses consist of personnel-related expenses for management in the principal investments - United Online segment, facilities, internal customer support personnel, personnel associated with operating our corporate systems and insurance recoveries. Amortization of intangibles includes amortization expense related to customer lists, advertising relationships, domain names and internally developed software.OtherCorporate and Otherfor corporatein the Principal Investments — Communications and otherOther segment increased $3.4$9.1 million to $7.0 million during the three months ended September 30, 2017 from $3.6$16.4 million for the three months ended SeptemberJune 30, 2016.2022 from $7.3 million for the three months ended June 30, 2021. The increase was primarily due to an increaseincreases of $4.1 million from the acquisition of additional equity interest in (a) fair value adjustment on mandatorily redeemable noncontrolling interestLingo in the second quarter of $2.8 million (b) transactions costs of $0.4 million incurred for professional fees that primarily related to the acquisitions of Wunderlich, FBR and Dialectic during the nine months ended September 30, 2017.Restructuring Charge.During the three months ended September 30 2017, we incurred a restructuring charge of $4.9 million. In second and third quarters of 2017, we implemented costs savings measures taking into account the planned synergies as a result of the acquisitions of FBR and Wunderlich which included a reduction in force for some of the corporate executives of FBR and a restructuring to integrate FBR and Wunderlich’s operations with our operations. These initiatives resulted in a restructuring charge of $4.72022, $1.6 million in the third quarter of 2017. The restructuring charge includedtransaction costs, $1.3 million in payroll and related expenses, $1.1 million related to severancein depreciation and accelerated vesting of restricted stock awards to former corporate executives of Wunderlich and $2.3amortization, $0.7 million of severance, accelerated vesting of stock awards to employees and $1.3 million of lease loss accruals for the planned consolidation of office space. The restructuring charge in 2017 also included employee termination costs ofcommunications expenses, $0.2 million related to a reduction in personnelsoftware and equipment expenses, and $0.2 million business development expenses.principal investments – United OnlineBrands segment of our operations.Restructuring charge of $3.6 million during the three months ended September 30, 2016 includes $3.2 million of employee termination costs related to a reduction in personnel in the corporate offices of UOL after our acquisition of UOL on July 1, 2016 and $0.4 million of charges related to combing our corporate office location with the offices of UOL.Other Income (Expense). Other income included interest income of less than $0.1 million during each of the three months ended September 30, 2017 and 2016. Interest expense was $2.5 million during the three months ended September 30, 2017 as compared to $1.0 million during the three months ended September 30, 2016. The increase in interest expense during the three months ended September 30, 2017 was primarily due to interest expense of $2.0 million incurred in 2017 from the issuance of senior notes due in 2021 and 2027.Income (Loss) Before Income Taxes. Income before income taxes decreased $15.7 million to loss before income taxes of $1.2 million during the three months ended September 30, 2017 from an income before income taxes of $14.5 million during the three months ended September 30, 2016. The decrease in income before income taxes was primarily due to (a) an increase in corporate and other expenses of $4.4 million, which includes an increase in restructuring charges of $1.0 million, (b) a decrease in operating income of $11.0 million in our auction and liquidation segment, (c) a decrease in operating income of $1.2 million in our capital markets segment, (d) an increase in interest expense of $1.5 million, and (e) loss on equity investment of $0.2 million, offset by (a) an increase in operating income of $1.5 million in our principal investments – United Online segment, (b) an increase in interest income of $0.1 million and (c) an increase in operating income of $1.0 million in our valuation and appraisal segment.Benefit from (Provision for) Income Taxes. Benefit from income taxes wasremained flat at $1.4 million during the three months ended SeptemberJune 30, 2017 compared2022 and 2021.provision for income taxes of $6.1$9.4 million during the three months ended SeptemberJune 30, 2016.2022 from $11.8 million during the three months ended June 30, 2021. The decrease 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 $3.9 million in payroll and related expenses.a benefit of 109.9%27.8% for the three months ended SeptemberJune 30, 20172022 as compared to a provision of 42.1%20.9% for the three months ended SeptemberJune 30, 2016.LossIncome (Loss) Attributable to Noncontrolling Interest.Interests and Redeemable Noncontrolling Interests. Net lossincome (loss) attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by Great American Global Partners, LLC, in which we have a 50% membership interestinterests of partnerships that we do not own. The net lossincome attributable to$0.2$3.6 million during the three months ended SeptemberJune 30, 20172022 compared to a net loss attributable to noncontrolling interests of $0.6 million during the three months ended SeptemberJune 30, 2016.Company.Company. Net incomeloss attributable to the Company forwas $140.2 million during the three months ended SeptemberJune 30, 2017 was $0.4 million, a decrease of net income of $8.6 million, from2022 compared to net income attributable to the Company of $8.9$75.7 million forduring the three months ended SeptemberJune 30, 2016. Decrease2021. The change was primarily due to a change from operating income to loss of $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 $2.5 million, and a decrease in change in fair value of financial instruments and other of $2.2 million, partially offset by a change from provision for to benefit from income taxes of $72.4 million and an increase in interest income of $0.4 million.SeptemberJune 30, 2017 as2022 compared to net income available to common shareholders of $73.9 million during the same period in 2016three months ended June 30, 2021. The change was primarily due to a change from operating income to loss of $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 $2.5 million, decrease in change in fair value of financial instruments and other of $2.2 million, and an increase in selling, general and administrate expensespreferred stock dividends of $48.2$0.2 million, partially offset by a change from provision for to benefit from income taxes of $72.4 million and an increase in total revenuesinterest income of $35.5 million and the impact of benefit from taxes as discussed above.$0.4 million.NineSeptemberJune 30, 20172022 Compared to NineSix Months Ended SeptemberJune 30, 2016
September 30, 2017
September 30, 2016 Amount % Amount % Revenues: Services and fees $ 202,354 95.5 % $ 90,505 93.1 % Interest income - Securities lending 9,424 4.4 % — 0.0 % Sale of goods 221 0.1 % 6,668 6.9 % Total revenues 211,999 100.0 % 97,173 100.0 % Operating expenses: Direct cost of services 46,224 21.8 % 25,084 25.8 % Cost of goods sold 313 0.1 % 2,393 2.5 % Selling, general and administrative expenses 132,836 62.7 % 48,844 50.3 % Restructuring costs 11,484 5.4 % 3,585 3.7 % Interest expense - Securities lending 6,515 3.1 % — 0.0 % Total operating expenses 197,372 93.1 % 79,906 82.2 % Operating income 14,627 6.9 % 17,267 17.8 % Other income (expense): Interest income 358 0.2 % 32 0.0 % Loss from equity investment (157 ) (0.1 %) — 0.0 % Interest expense (5,195 ) (2.5 %) (1,398 ) (1.4 %) Income before income taxes 9,633 4.5 % 15,901 16.4 % Benefit from (provision for) income taxes 7,753 3.7 % (6,184 ) (6.4 %) Net income 17,386 8.2 % 9,717 10.0 % Net (loss) income attributable to noncontrolling interests (283 ) (0.1 %) 631 0.5 % Net income attributable to B. Riley Financial, Inc. $ 17,669 8.3 % $ 9,086 9.4 % 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. Change Amount % Amount % Amount % Revenues - Services and fees: Capital Markets segment $ 95,872 45.2 % $ 22,799 23.5 % $ 73,073 320.5 % Auction and Liquidation segment 43,179 20.4 % 29,358 30.2 % 13,821 47.1 % Valuation and Appraisal segment 24,799 11.7 % 22,865 23.5 % 1,934 8.5 % Principal Investments - United Online segment 38,504 18.2 % 15,483 15.9 % 23,021 148.7 % Subtotal 202,354 95.5 % 90,505 93.1 % 111,849 123.6 % Revenues - Sale of goods: Auction and Liquidation segment 1 n/m 6,505 6.7 % (6,504 ) (100.0 %) Principal Investments - United Online segment 220 0.1 % 163 0.2 % 57 35.0 % Subtotal 221 0.1 % 6,668 6.9 % (6,447 ) (96.7 %) Interest income - Securities lending: Capital Markets segment 9,424 4.4 % — n/m 9,424 n/m Total revenues $ 211,999 100.0 % $ 97,173 100.0 % $ 114,826 118.2 % 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) % 40 ��increased $114.8decreased approximately $688.6 million to $212.0$248.3 million during the ninesix months ended SeptemberJune 30, 20172022 from $97.2$936.9 million during the ninesix months ended SeptemberJune 30, 2016.2021. The decrease in revenues during the six months ended June 30, 2022 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $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 primarily due to the decrease in overall values in the stock market. The decrease in revenue from services and fees in the six months ended June 30, 2022 consisted of decreases in revenue of $160.5 million in the Capital Markets segment, $15.2 million in the Wealth Management segment, and $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 $0.8 million in the Brands segment.during the nine months ended September 30, 2017 was primarily due to an increase in revenuesincreases of $1.8 million within our Advisory Services divisions and $3.3 million within our Real Estate division.of $111.8 million and revenues from interest income – securities lending of $9.4, offset by a decrease in revenues from the sale of goods of $6.4 million. The increase in revenues from services and fees of $111.8 million in 2017 was due to an increase in revenues of (a) $73.1 million in the capital markets segment, (b) $13.8 million in the auctionPrincipal Investments - Communications and liquidation segment, (c) $1.9 million in the valuation and appraisal segment, and (d) $23.0 million in the principal investments - United Online segment from the acquisition of UOL on July 1, 2016. Interest income from securities lending of $9.4 million in 2017 was as a result of the acquisition of FBR. The decrease in revenues from sale of goods of $6.4 million was primarily due to sale of certain products in the auction and liquidation segment in 2016.Revenues from servicesand fees in the capital marketsOther segment increased $73.1$32.7 million to $95.9$71.4 million during the ninesix months ended SeptemberJune 30, 20172022 from $22.8$38.7 millionduring the ninesix months ended SeptemberJune 30, 2016.2021. The increase in revenues was primarily due to an increase in revenuessubscription services of $33.3$24.8 million from investment banking fees, $20.1 million from commissions, fees and other income primarily earned from research, sales and trading, and $16.0 million from wealth management services and $3.7 million from trading income. The increase in revenues from investment banking fees was primarily due an increase in the number of investment banking transactions where we acted as an advisor in 2017 as compared to the same period in 2016. Of the $33.3 million increase in investment banking fees, $20.6 million of the increase was primarily due to operations of FBR that we acquired on June 1, 2017 and Wunderlich that we acquired on July 3, 2017. The increase in revenues from commissions, fees and other income primarily earned from research, sales and trading was primarily due to an increase in fees and commissions earned from research, sales and trading and incentive management fees earned from our various funds we manage which included $12.9 million of revenues from the acquisition of FBR on June 1, 2017Marconi Wireless in the fourth quarter of 2021 and Wunderlich on July 3, 2017. The increase in revenues from wealth management services included $15.9$10.7 million of revenues from the acquisition of Wunderlich on July 3, 2017. The increasean additional equity interest in revenues from trading incomeLingo in 2017 was primarily due tothe second quarter of 2022 and an increase in income we earned from trading activitiesadvertising licensing and other revenue of $1.6 million, partially offset by a decrease of $4.3 million in our propriety trading account.auction and liquidation solutionsBrands segment increased $13.8$0.8 million to $43.2$9.7 million during the ninesix months ended SeptemberJune 30, 20172022 from $8.9 million during the six months ended June 30, 2021. The primary source of revenue included in this segment is the licensing of trademarks.ninesix months ended SeptemberJune 30, 2016.2022 from $23.4 million during the six months ended June 30, 2021. The increase in revenuesdirect cost of $13.8 millionservices was primarily due todriven by an increase of $16.5 million in revenues of $15.7 million from servicesthe Principal Investments — Communications and fees from retail liquidation engagements,Other segment, partially offset by a decrease of $10.5 million in revenues of $1.9 million from servicesthe Auction and fees in our wholesale and industrial auction division.Liquidation segment. The increase in revenues from servicesthe Principal Investments —fees from retail liquidation engagements was primarily due to an increase in the number of fee and commission based retail liquidation engagements for store closings and going-out-of-business sales in 2017 as compared to the same period in 2016. The decrease in revenues from services and fees in our wholesale and industrial division was primarily due to a decrease in the number of wholesale and industrial auction engagements in 2017 as compared to the same period in 2016.Revenues from services and fees in the valuation and appraisalOther segment increased $1.9 million, or 8.5%, to $24.8 million during the nine months ended September 30, 2017 from $22.9 million during the nine months ended September 30, 2016. The increase in revenues was primarily due to increases of (a) $1.1$10.4 million related to appraisal engagements where we perform valuationsforfrom the monitoring of collateral for financial institutions, lenders, and private equity investors;(b) $0.2 million related to appraisal engagements where we perform valuations of machinery and equipment, and (c) $0.6 million related to appraisal engagements where we perform valuations of intellectual property and business valuations.Revenues from services and feesacquisition Marconi Wireless in the principal investments - United Online segment increased $23.0fourth quarter of 2021 and $7.5 million to $38.5 million during the nine months ended September 30, 2017 from $15.5 million during the nine months ended September 30, 2016. The increase was as a result of the acquisition of UOL on July 1, 2016. ForLingo in the ninesecond quarter of 2022. The decrease in the Auction and Liquidation segment was primarily due to retail liquidation engagements in Europe that ended.SeptemberJune 30, 2017,2022 and 2021 were comprised of the revenues include $29.8 million in services and fees primarily from customer paid accounts related to our Internet access and related subscription services and $8.7 million in advertising revenues from Internet display advertising and search related to our email and Internet access services. For the nine months ended September 30, 2016, the revenues include $11.2 million in services and fees from customer paid accounts and $4.3 million in advertising revenues. Over the past several years revenues from paid subscription services have declined year over year as a result of a decline in the number of paid subscribers for our services. Management believes the decline in paid subscriber accounts is primarily attributable to the industry trends of consumers switching from dial-up Internet access to high speed Internet access such as cable and DSL. Management expects revenues in the principal investments - United Online segment to continue to decline year over year.following: Six Months Ended
June 30, 2022Six Months Ended
June 30, 2021Change 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) % 41 Operating ExpensesDirect Cost of Services. Direct cost of services and direct cost of services measured as a percentage of revenues – services and fees by segment during the nine months ended September 30, 2017 and 2016 are as follows: Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Principal Principal Auction and Valuation and Investments - Auction and Valuation and Investments - Liquidation Appraisal United Online Liquidation Appraisal United Online Segment Segment Segment Total Segment Segment Segment Total Revenues - Services and fees $ 43,179 $ 24,799 $ 38,504 $ 29,358 $ 22,865 $ 15,483 Direct cost of services 25,482 11,031 9,711 $ 46,224 9,870 10,287 4,927 $ 25,084 Gross margin on services and fees $ 17,697 $ 13,768 $ 28,793 $ 19,488 $ 12,578 $ 10,556 Gross margin percentage 41.0 % 55.5 % 74.8 % 66.4 % 55.0 % 68.2 % Total direct costs increased $21.1 million, to $46.2 million during the nine months ended September 30, 2017 from $25.1 million during the nine months ended September 30, 2016. Direct costs of services increased by (a) $15.6 million in the auction and liquidation segment, (b) $0.7 million in the valuation and appraisal segment, and (c) $4.8 million in the principal investments - United Online segment as a result of the acquisition of UOL on July 1, 2016. The increase in direct costs in the auction and liquidation segment was primarily due to an increase in the number of fee and commission type engagements in 2017 compared to the same period in 2016. The increase in direct costs of services in the valuation and appraisal segment was primarily due to an increase in payroll and related expenses due to an increase headcount 2017 as compared to the same period in 2016.Gross margin in the auction and liquidation segment for services and fees decreased to 41.0% of revenues during the nine months ended September 30, 2017, as compared to 66.4% of revenues during the nine months ended September 30, 2016. The decrease in gross margin in 2017 is primarily due to the increase in the number of fee and commission type retail liquidation engagements as compared to the same period in 2016.Gross margin in the valuation and appraisal segment for services and fees increased to 55.5% of revenues during the nine months ended September 30, 2017, as compared to 55.0% of revenues during the nine months ended September 20, 2016.Selling, General and Administrative Expenses. Selling, general and administrative expenses during the nine months ended June, 2017 and 2016 were comprised of the following:Selling, General and Administrative Expenses Nine Months Ended Nine Months Ended September 30, 2017 September 30, 2016 Change Amount % Amount % Amount % Capital Markets segment $ 89,920 67.7 % $ 22,941 47.0 % $ 66,979 292.0 % Auction and Liquidation segment 6,577 5.0 % 6,862 14.0 % (285 ) (4.2 %) Valuation and Appraisal segment 6,525 4.9 % 6,451 13.2 % 74 1.1 % Principal Investments - United Online segment 13,849 10.4 % 3,941 8.1 % 9,908 251.4 % Corporate and Other segment 15,965 12.0 % 8,649 17.7 % 7,316 84.6 % Total selling, general & administrative expenses $ 132,836 100.0 % $ 48,844 100.0 % $ 83,992 172.0 % increased $84.0decreased approximately $48.9 million to $132.9$342.3 million during the ninesix months ended SeptemberJune 30, 20172022 from $48.8$391.3 million forduring the ninesix months ended SeptemberJune 30, 2016.2021. The decrease was primarily due to decrease of $68.5 million in the Capital Markets segment and $0.6 million in the Auction and Liquidation segment, partially offset by increases of $14.0 million in the Principal Investments — Communications and Other segment, $3.4 million in the Financial Consulting segment, $2.4 million in the Wealth Management segment, and $0.5 million in the Corporate and Other segment.in selling, general and administrative expenses of (a) $67.0$4.9 million from the settlement of a regulatory matter, partially offset by decreases of $1.6 million in the capital markets segment, (b) $9.9depreciation and amortization and $0.2 million in the principal investments - United Online segment as a result of the acquisition of UOL on July 1, 2016, (c) $7.3 million in corporateconsulting expenses.other, and (d) $0.1 million in the valuation and appraisal segment, offset by a decrease of $0.3 million in the auction and liquidation segment.Capital Marketscapital marketsAuction and Liquidation segment increased by $67.0decreased $0.6 million or 292.0% to $90.0$4.0 million during the ninesix months ended SeptemberJune 30, 20172022 from $22.9$4.6 million during the ninesix months ended SeptemberJune 30, 2016.2021. The increase in expensesdecrease was primarily due to (a) payrollbusiness development and related expenses of $15.2 million from the acquisition of Wunderlich on July 3, 2017 and $15.6 million from the acquisition of FBR on June 1, 2017, (b) $15.4 million operating expenses related to the acquisition of FBR and $5.2 million operating expenses related to the acquisition of Wunderlich, (c) payroll and related expenses of $9.8 primarily related to an increase in incentive compensation as a result of the increase in revenues from investment banking fees in 2017 as compared to the same period in 2016, and (d) other operating expenses of $1.3 million.42 Auction and Liquidationauction and liquidationFinancial Consulting segment were $6.6increased by $3.4 million and $6.9to $41.1 million during the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively.2022 from $37.6 million during the six months ended June 30, 2021. The decrease in expensesincrease was primarily due a decreaseto increases of $2.7 million in payroll and related expenses and $0.8 million in the amount of $0.5 milliontravel and legalentertainment expenses.professional fees of $0.2 million, offset by an increase in other expenses of $0.4 million.Valuation and AppraisalvaluationPrincipal Investments — Communications and appraisalOther segment was $6.5increased $14.0 million duringto $28.7 million for the ninesix months ended SeptemberJune 30, 2017, consistent with2022 from $14.7 million for the same 2016 period.Principal Investments - United Onlineprincipal investments - United OnlineBrands segment increased $9.9 million, or 251.4%, to $13.8remained flat at $2.8 million during the ninesix months ended SeptemberJune 30, 2017 from $3.9 million during the nine months ended September 30, 2016 as a result of the acquisition of UOL on July 1, 2016. For the nine months ended September 30, 2017, these expenses include $3.6 million of technology2022 and development expenses, $0.9 million of sales and marketing expenses, $5.2 million of general and administrative expenses and $4.1 million of amortization of intangibles. For the nine months ended September 30, 2016, these expenses include $1.2 million of technology and development expenses, $0.4 million of sales and marketing expenses, $1.0 million of general and administrative expenses and $1.4 million of amortization of intangibles. Technology and development expenses include expenses for product development, maintenance of existing software, technology and websites. Sales and marketing expenses include expenses associated personnel and overhead-related expenses for marketing, customer service, and advertising sales personnel to acquire and retain paid subscribers. Expenses associated with generating advertising revenues include sales commissions and personnel-related expenses. General and administrative expenses consist of personnel-related expenses for management in the principal investments - United Online segment, facilities, internal customer support personnel, personnel associated with operating our corporate systems and insurance recoveries. Amortization of intangibles includes amortization expense related to customer lists, advertising relationships, domain names and internally developed software.corporatethe Corporate and otherOther segment increased $7.3approximately $0.5 million to $16.0$24.5 million during the ninesix months ended SeptemberJune 30, 20172022 from $8.6$24.0 million for the ninesix months ended SeptemberJune 30, 2016.2021. The increase was primarily due to an increase in (a)fair value adjustmentincreases of $9.0$8.3 million in connection with the mandatorily redeemable noncontrolling interests, (b) payroll and related expenses, partially offset by decreases of $1.7$4.5 million of change in fair value of contingent consideration and $3.4 million in other expenses.(c) transactions costs of $1.6 $0.1 million incurred for professional fees that primarily related to the acquisition of Wunderlich, FBR and Dialectic during the secondsix months ended June 30, 2022 and third quarters2021, respectively. Change in fair value of 2017. These increases in corporate overhead were offset by an insurance recoveryfinancial instruments and other in the amount of $6.0 million related to key man life insurance on one of our executives in our appraisal segment.Restructuring Charge. During the nine months ended September 30 2017, we incurred a restructuring charge of $11.5 million.In the second and third quarters of 2017, we implemented costs savings measures taking into account the planned synergies as a result of the acquisitions of Wunderlich and FBR which included a reduction in force for some of the corporate executives of Wunderlich and FBR and a restructuring to integrate Wunderlich and FBR’s operations with our operations. These initiatives resulted in a restructuring charge of $10.9 million in the second and third quarter of 2017. The restructuring charge included $3.3 million related to severance and accelerated vesting of restricted stock awards to former corporate executives of Wunderlich and FBR and $4.8 million of severance, accelerated vesting of stock awards to employees and $2.8 million of lease loss accruals for the planned consolidation of office space related to operations. The restructuring charge in 2017 also included employee termination costs of $0.6 million related to a reduction in personnel in the principal investments – United Online segment of our operations.Restructuring charge of $3.6$10.3 million during the threesix months ended SeptemberJune 30, 2016 include $3.2 million2022 was primarily due to the change in fair value of employee termination costs relatedwarrant liabilities and the forgiveness of a Paycheck Protection Program loan issued to a reduction in personnel inFocalPoint prior to its acquisition by the corporate officesCompany during the first quarter of UOL after our acquisition of UOL on July 1, 2016 and $0.4 million of charges related to combing our corporate office location with the offices of UOL.Other Income (Expense). Other income (expense) included interest income of $0.42022. Interest expense was $62.2 million during the ninesix months ended SeptemberJune 30, 2017 and less than $0.12022 compared to $40.6 million during the ninesix months ended SeptemberJune 30, 2016. Interest expense was $5.2 million during the nine months ended September 30, 2017 as compared to $1.4 million during the nine months ended September 30, 2016.2021. The increase in interest expense during the nine months ended September 30, 2017 was primarily due to (a)increases in interest expense of $0.4$10.7 million incurred onfrom 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 $0.02 million during the six months ended June 30, 2021. The increase was primarily due to $7.0 million in earnings 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 consideration payable relatedof Lingo during the second quarter of 2022.our acquisitionincome of UOL on July 1, 2016 as$449.1 million during the six months ended June 30, 2021. The change was primarily due to a resultdecrease in revenue of the Quadre Litigation; (b) an$688.6 million and increase in interest expense of $0.2$21.6 million, incurred on borrowing under our asset based credit facility for retail liquidation engagements; and (c) interest expense of $3.6 million incurred in 2017 from the issuance of senior notes.Income Before Income Taxes. Income before income taxes decreased $6.3 million to $9.6 million during the nine months ended September 30, 2017 from $15.9 million during the nine months ended September 30, 2016. The decrease in income before income taxes was primarily due to (a) an increase in corporate and other expenses of $10.5 million, which includes an increase in restructuring charges of $3.2 million, (b)partially offset by a decrease in operating incomeexpenses of $5.8approximately $51.5 million, in our auction and liquidation segment, (c) an increase in interest expensechange in fair value of financial instruments and other of $3.8 million, and (d) loss on equity investment of $0.2 million, offset by (a) an increase in operating income from equity investments of $10.8$3.4 million, in our principal investments – United Online segment as a result of the acquisition of UOL on July 1, 2016, (b) an increase in operating income of $1.8 million in our capital markets segment, (c) an increase in operating income of $1.1 million in our valuation and appraisal segment, and (d) an increase in interest income of $0.3$0.5 million.$7.8$56.2 million during the ninesix months ended SeptemberJune 30, 20172022 compared to a provision for taxes of $6.2$117.4 million during the ninesix months ended SeptemberJune 30, 2016. The benefit for income taxes during the nine months ended September 30, 2017 included a tax benefit of $8.4 million related to our election to treat the acquisition of UOL as a taxable business combination for income tax purposes in accordance with Internal Revenue Code Section 338(g) as more fully discussed in note 9 in the condensed consolidated financial statements. The tax provision during the nine months ended September 30, 2017 also a tax benefit due to a non-taxable insurance recovery in the amount of $6.0 million that was received in the second quarter of 2017.2021. The effective income tax rate was a benefit of 80.5%27.8% for the ninesix months ended SeptemberJune 30, 20172022 as compared to provision of 38.9%26.1% for the ninesix months ended SeptemberJune 30, 2016. (Loss) Income Attributable to Noncontrolling Interest.Interests and Redeemable Noncontrolling Interests. Net income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by Great American Global Partners, LLC, in which we have a 50% membership interestinterests of partnerships that we do not own. The net income attributable tononcontrolling intereststhe Company was $0.3$150.2 million during the ninesix months ended SeptemberJune 30, 20172022 compared to net income attributable to noncontrolling intereststhe Company of $0.6$330.3 million during the ninesix months ended SeptemberJune 30, 2016.Net Income Attributable2021. The change was primarily due to the Company. Neta change from operating income attributable to the Company for the nine months ended September 30, 2017 was $17.7loss of $637.2 million, an increase in interest expense of $8.6$21.6 million, from $9.1 million for the nine months ended September 30, 2016. Theand an increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $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 an increase in interest income of $0.5 million.ninesix months ended SeptemberJune 30, 2017 as2022 compared to net income available to common shareholders of $326.8 million during the same period in 2016six months ended June 30, 2021. The change was primarily due to (a)a change from operating income from the principal investments - United Online segment as a resultto loss of the acquisition$637.2 million, increase in interest expense of UOL on July 1, 2016 as discussed above, (b)$21.6 million, increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $3.1 million, and an increase in operating income in the valuation and appraisal segment; (c) an increase in operating income in the capital markets segment; and (d) the impactpreferred stock dividends of the$0.5 million, partially offset by a change from provision for to benefit from income taxes as discussed above.proceeds from the issuance of common stock, and borrowings under our senior notes payable, term loans and credit facilityfacilities, and special purposes financing arrangements. On May 10, 2016, we completed a secondary offering of 2,420,980 shares of common stock at a price to the public of $9.50 per share. The net proceeds from the offering were $22.8 million after deducting underwriting commissions and other offering expenses. On November 2, 2016, we issued $28.8 million of Senior Notes due in 2021 (the “2021 Notes”), and during the third quarter of 2017, we issued an additional $5.3 million of 2021 Notes pursuant to an At The Market Issuance Sales Agreement (the “Sales Agreement”) as further discussed below. Interest on the 2021 Notes are payable quarterly at 7.5% commencing January 31, 2017. The 2021 Notes are unsecured and due and payable in full on October 31, 2021. In connection with the issuance of the 2021 Notes on November 2, 2016, we received net proceeds of $27.7 million (after underwriting commissions, fees and other issuance costs of $1.1 million). In connection with the issuance of the 2021 Notes in 2017 pursuant to the Sales Agreement, we received net proceeds of $5.4 million (after premium less underwriting commissions, fees and other issuance costs of $0.1 million). On May 31, 2017, we issued $60.4 million of Senior Notes due in 2027 (the “2027 Notes”), and during the third quarter of 2017, we issued an additional $23.7 million of 2027 Notes pursuant to the Sales Agreement. Interests are payable quarterly at 7.5% commencing July 31, 2017. The 2027 Notes are unsecured and due and payable in full on July 31, 2027. In connection with the issuance of the 2027 Notes, we received net proceeds of $82.3 million (after premium, underwriting commissions, fees and other issuance costs of $1.8 million). During the ninesix months ended SeptemberJune 30, 20172022 and year ended December 31, 2016,2021, we generated a net loss of $145.8 million and net income of $17.7$331.7 million, respectively. Our net loss of $145.8 million included $292.3 million of losses that primarily related to a decrease in the fair value of our portfolio of securities and $21.5 million, respectively.other investments owned during the six months ended June 30, 2022. Our cash flows and profitability are impacted by the number and size of retail liquidation and capital marketsmarket engagements performed on a quarterly and annual basis.SeptemberJune 30, 2017,2022, we had $102.4$216.1 million of unrestricted cash $9.3and cash equivalents, $0.9 million of restricted cash, investments in$1,144.9 million of securities and other investments owned at fair value, $770.8 million of $96.0 million,loans receivable, at fair value, and $117.9$2,115.8 million of borrowings outstanding. The borrowings outstanding of approximately $117.9$2,115.8 million at Septemberas of June 30, 20172022 included (a) $33.2$1,644.8 million of borrowings from the issuance of the 2021 Notes, (b) $82.4series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $367.8 million in term loans borrowed pursuant to the BRPI Acquisition Co LLC (“BRPAC”) and Nomura Credit Agreements discussed below, $80.0 million of borrowings fromrevolving credit under the issuanceNomura Credit Agreement discussed below, and $23.2 million of the 2027 Notes, and (c) other notes payable of $2.4 million. payable.UOL line offunds available under the BRPAC and Nomura term loans, funds available under the Nomura revolving credit facility, and cash expected to be generated from operating activities will be sufficient to meet our working nine months ended September 30, 2017 and year ended December 31, 2016,2021, we paid cash dividends of $11.6 million and $5.3 million, respectively, on our common stock.stock of $347.1 million. While it is the Board’s current intention to make regular dividend payments of $0.08$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.Date Declared Date Paid 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 Nine Months Ended
September 30, 2017 2016 (Dollars in thousands) Net cash (used in) provided by: Operating activities $ (48,779 ) $ 27,926 Investing activities (22,916 ) (111,873 ) Financing activities 58,719 80,386 Effect of foreign currency on cash 3,280 23 Net decrease in cash and cash equivalents $ (9,696 ) $ (3,538 ) 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 $48.8$49.9 million forduring the ninesix months ended SeptemberJune 30, 2017, an increase of $76.7 million, from2022 compared to cash provided byused in operating activities of $27.9$147.9 million forduring the ninesix months ended SeptemberJune 30, 2016.2021. Cash used in operating activities for the ninesix months ended SeptemberJune 30, 2017 includes2022 consisted of the negative impact of net incomeloss of $17.4$145.8 million, adjusted for noncash items of $70.4 million, and changes in operating assets and liabilities.liabilities of $166.2 million. The increase innegative cash used in operating activities of $76.7 million was primarily due to (a) a decrease in non-cash charges and otherflow impact from noncash items of $1.3$70.4 million which included recovery of key man life insurance of $(6.0) million and deferred income taxes of $(24.6)$95.3 million, effect on foreign currency on operationsfair value adjustments of $(1.0)$13.6 million, lossgain on equity investment of $0.2$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 $7.7$15.8 million, share-based compensation $7.7dividends from equity investments of $1.9 million, provision for doubtful accounts of $1.3 million, income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests of $10.8$0.4 million, and impairmenteffect of leaseholds lease loss accrualforeign currency of $0.3 million, and loss on disposal of fixed assets of $2.8$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 $0.3noncash items of $50.2 million, for non-cash interest and other, and (b)partially offset by the negative impact of changes in operating assets and liabilities that resulted in adecrease of $64.9$529.8 million. The positive cash flow impact from noncash items of $50.2 millionin cash flows 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 operations during the nine months ended September 30, 2017,equity investments of $0.6 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, partially offset by an increase in net incomefair value adjustments of $7.7$10.0 million, to $17.4noncash interest and other of $9.1 million, during the nine months ended September 30, 2017, from $9.7gain on extinguishment of loans of $6.5 million during the comparable period in 2016.$22.9$0.5 million during the ninesix months ended SeptemberJune 30, 20172022 compared to cash used in investing activities of $111.9$358.7 million for the ninesix months ended SeptemberJune 30, 2016.2021. During the ninesix months ended SeptemberJune 30, 2017,2022, cash used in investing activities consisted of (a) cash used to purchase Wunderlich and United Online in the amountsfor purchases of $25.4loans receivable of $199.1 million, and $10.4 million, respectively, (b) an increase in restricted cash of $5.8 million, (c) cash use of $2.1 million for the acquisition of businesses of $38.4 million, purchases of equity and other businesses, (d) cash useinvestments of $1.0$2.8 million, for an equity investment, and (e) cash use of $0.5 million for purchases of property and equipment of $0.9 million, partially offset by (a) cash acquiredreceived from the acquisitionloans receivable repayment of FBR of $15.7 million, (b) proceeds from key man life insurance of $6.0 million, and (c) proceeds from sale of property, equipment and other intangibles of $0.6$241.7 million. During the ninesix months ended SeptemberJune 30, 2016,2021, cash used in investing activities was primarily comprisedconsisted of an increase in restricted cash of $78.2 million and cash used to acquire United Onlinefund a trust account for the future redemption of $33.4one 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, purchases of equity and other investments of $10.5 million, 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.was $58.7of $701.1 million during the ninesix months ended SeptemberJune 30, 2017 compared to $80.4 million during2021. During the ninesix months ended SeptemberJune 30, 2016.2022, 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 issuanceninesix months ended SeptemberJune 30, 2017,2021, cash provided by financing activities primarily consisted of (a) $66.0 million proceeds from asset based credit facility and (b) $89.3$475.7 million proceeds from issuance of senior notes, $345.0 million proceeds from initial public offering of subsidiaries, $200.0 million proceeds from the Nomura term loan, $64.7 million proceeds from issuance of common stock, $10.7 million contributions from noncontrolling interests, and $8.3 million net proceeds from offerings of preferred stock, partially offset by (a) $66.0$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 the asset based credit facility, (b) $13.5our notes payable, $15.7 million used to pay cash dividends, (c) $8.2 million used to repay other notes payable in connection with the acquisition of Wunderlich, (d) $2.9debt issuance costs, $14.8 million distributions to noncontrolling interests, (e) $2.0$11.5 million used for debt issuance costs, (f) $1.3repayment on the BRPAC term loan, $10.4 million used for the payment of contingent consideration, and (g) $2.7 million used for the payment ofto pay employment taxes on vesting of restricted stock. During the nine months ended September 30, 2016, cash provided by financing activities primarily consisted of (a) $23.0 million of net proceeds from the issuance of common stock, in May 2016, (b) $61.4 million of borrowings in connection with the participating notes payable, (c) $1.3 million payment of contingent consideration in connection with the acquisition of MK Capital, (d) $0.3and $3.5 million used to repay a revolving line of credit, (e) $0.6 million ofpay dividends paid on our common stockpreferred shares.(f) $1.7 million of distributions to noncontrolling interest.45 Contingent ConsiderationIn connectionour wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement acquisition of MK Capital on February 2, 2015“Administrative Agent”), and Wells Fargo Bank, N.A., as collateral agent (the “Collateral Agent”), for a total purchase pricefour-year $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million revolving loan credit facility (the “Revolving Credit Facility”).$9.4$100.0 million at closing $2.5 million(the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility. The Borrower borrowed the full amount of the purchase price was paidIncremental Term Loans on the Amendment Date. The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.cashan aggregate amount equal to such excess. The Credit Agreement contains certain representations and 333,333 newly issued shareswarranties (subject to certain agreed qualifications) that are customary for financings of this kind.common stock withthe 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 fair valuefinancial covenant that requires us to maintain operating earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of $2.7 million were issued to the former members of MK Capital. The purchase agreement also required the payment of contingent consideration in the form of future cash payments with a fair value of $2.2at least $135.0 million and the issuance of shares of common stock with a fairPrimary Guarantor to maintain net asset value of $2.0at least $1,100.0 million. The contingent cash considerationCredit Agreement contains customary events of $2.2 million payabledefault, including with respect to a failure to make payments under the former memberscredit facilities, cross-default, certain bankruptcy and insolvency events and customary change of MK Capital representscontrol events.fair valueTerm Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25% of the contingent cash considerationaggregate principal amount of $1.25 million due on the first anniversary dateterm loan as of the closing (February 2, 2016)date with the remaining balance due at final maturity. Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $3.8 million per quarter.a final cash payment of $1.25 million dueDecember 31, 2021, the outstanding balances on the second anniversary dateTerm Loan Facility and Incremental Facility were $293.7 million (net of the closing (February 2, 2017)unamortized debt issuance costs of $6.3 million) and $292.7 million (net ofwith imputed interest expense calculated at 8% per annum. The contingent stock consideration of $2.0 million was comprised of the issuance of 166,667 shares of common stockrespectively. Interest on the first anniversary dateterm loan during the three months ended June 30, 2022 and 2021 was $4.7 million (including amortization of the closing (February 2, 2016)deferred debt issuance costs of $0.5 million) and 166,666 shares$0.2 million (including amortization of common stockdeferred debt issuance costs of $0.03 million), respectively. Interest on the second anniversary dateterm 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 closing (February 2, 2017)term loan as of June 30, 2022 and December 31, 2021 was 6.65% and 4.72%, respectively.contingent cash and stock consideration was payableinterest rate on the firstRevolving Credit Facility as of June 30, 2022 and second anniversary dates of the closing provided that MK Capital generated a minimum amount of gross revenues as definedDecember 31, 2021 was 6.13% and 4.67%, respectively.purchase agreement for the twelve months following the first and second anniversary datesCredit Agreement as of the closing. MK Capital achieved the minimum amount of revenues for the first and second anniversary periods. The contingent cash consideration for such first anniversary period of $1.25 million was paid and contingent stock consideration for such first anniversary period of 166,667 common shares was issuedJune 30, 2022.the former members of MK Capital on February 2, 2016. The contingent cash consideration for such second anniversary period of $1.25 million was paid and contingent stock consideration for such second anniversary period of 166,666 common shares was issued to the former members of MK Capital on February 2, 2017.Credit AgreementsOn April 21, 2017, we amended thea credit agreement (as amended, the “Credit Agreement”) governing our asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) to increase thewith 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 the separate credit agreement (a “UK Credit Agreement”) which was 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. The UK Credit Agreement is cross collateralized and integrated in certain respects with the credit agreement governing the credit facility. 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. We typically seek borrowings on an engagement-by- engagement basis.Credit Agreement. The credit agreement governingfacility also provides for funding fees in the amount of 0.05% to 0.20% of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale. There was no outstanding balance on this credit facility contains certain covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make investments, disposeas of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. At SeptemberJune 30, 20172022 and December 31, 2016,2021. As of June 30, 2022 and December 31, 2021, there were no borrowings oropen letters of credits outstanding undercredit outstanding.facility.April 13, 2017,December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity as borrower,of borrowers, entered into a credit agreement (the “UOL“BRPAC Credit Agreement”) with the Banc of California, N.A. in theits capacity as agent (the “Agent”) and lender. The UOLlender and with the other lenders party (the “Closing Date Lenders”).provides for a revolving credit facility under which UOL may borrow (or request the issuance of letters of credit) up to $20.0 million which amount is reduced by $1.5 million commencing(the “Fourth Amendment”) on June 30, 201721, 2022, the Borrowers, the Secured Guarantors, the Agent and on the last day of each calendar quarter thereafter. The final maturity date is April 13, 2020. TheClosing Date Lenders agreed to the following, among other things: (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the UOL Credit Agreement can beBorrowers’ used (a)to repay the outstanding principal amount of the existing terms loans and optional loans and will use for working capital andother general corporate purposes, and/or (b)(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 pay dividends orthe Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted taxto make certain distributions to itsthe parent company subjectof the Borrowers.termsSOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the UOL Borrowers’ consolidated total funded debt ratio as defined in the BRPACBorrowingsAs of June 30, 2022 and December 31, 2021, the interest rate on the amended BRPAC Credit Agreement was at 4.66% and 3.17%, respectively.UOLamended BRPAC Credit Agreement will bear interest at a rate equalis due in quarterly installments. Quarterly installments from September 30, 2022 to (a) (i) the base rate (the greater of the federal funds rate plus one half of one percent (0.5%), or the prime rate) for U.S. dollar loans or (ii) at UOL’s option, the LIBOR Rate for Eurodollar loans, plus (b) the applicable margin rate, which ranges from two percent (2%) to three and one-half percent (3.5%) per annum, based upon UOL’s ratio of funded indebtedness to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the preceding four (4) fiscal quarters. Interest paymentsDecember 31, 2022 are to be made each one, three or six months for Eurodollar loans, and quarterly for U.S. dollar loans.UOL paid a commitment fee equal to 1.00% of the aggregate commitments upon the closing of the UOL Credit Agreement. The UOL Credit Agreement also provides for an unused line fee payable quarterly, in arrears, in an amount equal to: (a) 0.50% per annum times the amount of the unused revolving commitment that is less than or equal$2.8 million per quarter, from March 31, 2023 to December 31, 2023 are in the amount of the cash maintained$4.7 million per quarter, from March 31, 2024 to December 31, 2026 are in accounts with the agent (as depositary bank); plus (b) 1.00% per annum times the amount of the unused revolving commitment that$3.8 million per quarter, on March 31, 2027 is greater thanin the amount of $2.8 million, cash maintained in accounts with the agent (as depositary bank). Any amounts outstanding under the UOL Credit Facility areremaining principal balance is due at maturity. At Septemberfinal maturity on June 30, 2017, there were no borrowings or letters2027.creditsJune 30, 2022 and December 31, 2021, the outstanding under this credit facility.On November 2, 2016, we issued $28.8balance on the term loan was $74.1 million (net of 2021 Notes,unamortized debt issuance costs of $0.9 million), and $53.7 million (net of unamortized debt issuance costs of $0.6 million), respectively. SeptemberJune 30, 2017, we issued an additional $5.32022 and 2021 was $0.6 million (including amortization of 2021 Notes, pursuant to Sales Agreement as further discussed below. Interest is payable quarterly at 7.5% commencing January 31, 2017. The 2021 Notes are unsecured and due and payable in full on October 31, 2021. In connection with the issuance of the 2021 Notes, we received net proceeds of $33.1 million (after premium, underwriting commissions, fees and otherdeferred debt issuance costs of $1.0$0.1 million) and $0.7 million (including amortization of deferred debt issuance costs of $0.08 million). The outstanding balance, 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 $1.4 million (including amortization of deferred debt issuance costs of $0.2 million), respectively.2021 Notes was $33.2 million (netamended BRPAC Credit Agreement as of unamortized debt issue costs and premiums of $0.9 million) at SeptemberJune 30, 2017. In connection with the offering of 2021 Notes, certain members of our management and the Board of Directors purchased $2.7 million or 9.5% of the 2021 Notes offered by us. On May 31, 2017, we issued $60.4 million of 2027 Notes,and during2022.SeptemberJune 30, 20172022 and 2021, we issued an additional $23.7$15.8 million and $72.5 million, respectively, of 2027 Notessenior notes, and during the six months ended June 30, 2022and 2021, we issued $35.9 million and $85.3 million, respectively, of senior notes due with maturities dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreement as further discussed below. Interest is payable quarterly at 7.5% commencing July 31, 2017. The 2027 Notes are unsecured and due and payable in full on May 31, 2027. In connectionAgreements 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 issuanceSEC which allowed the Company to sell these senior notes.2027 Notes, we received net proceeds of $82.3 million (after underwriting commissions, fees and other issuance costs of $1.8 million). Thetotal senior notes outstanding balance of the 2027 Notes was $82.4$1,644.8 million (net of unamortized debt issue costs of $1.7$19.1 million) at September 30, 2017.On June 28, 2017, we entered into the Sales Agreement and filed$1,606.6 million (net of unamortized debt issue costs of $21.5 million) with a prospectus supplement, pursuant to which we may sell from time to time, at our option up to an aggregateweighted average interest rate of $39.6 million of 2021 Notes or 2027 Notes.The Notes sold pursuant to the Sales Agreement will be issued pursuant to a prospectus dated March 29, 2017, as supplemented by a prospectus supplement dated June 28, 2017, in each case filed with the Securities5.70% and Exchange Commission pursuant to our effective Registration Statement5.69%, respectively. Interest on Form S-3 (File No. 333-216763), which was declared effective by the Securities and Exchange Commission on March 29, 2017. The Notes will be issued pursuant to the Indenture, dated as of November 2, 2016, as supplemented by a First Supplemental Indenture, dated as of November 2, 2016 and the Second Supplemental Indenture, dated as of May 31, 2017, each between us and U.S. Bank, National Association, as trustee.Future sales of the 2021 Notes and 2027 Notes pursuant to the Sales Agreement will dependsenior notes is payable on a variety of factors including, but not limited to, market conditions, the trading price of thequarterly basis. Interest expense on senior notes totaled $24.7 million and our capital needs.During$20.0 million for the three months ended SeptemberJune 30, 2017, we issued $5.32022 and 2021, respectively, and totaled $49.1 million and $38.6 million for the six months ended June 30, 2022 and 2021, respectively.2021 Notes and $23.7 million of 2027 Notes. At September 30, 2017, we have an additional $10.6 million of 2021 Notes or 2027 Notes that may be sold pursuant to the Sales Agreement.There can be no assurance we will be successful in consummating future sales based on prevailing market conditions or in the quantities or at the prices that we may deem appropriate.Other BorrowingsIn August 2016, we formedGA Retail Investments, L.P., a Delaware limited partnership, (the “Partnership”) which required us to contribute $15.4 million. The Partnership borrowed $80.0 million Australian dollars from a third party investor in connection with its formation and the $80.0 million Australian dollars was exchanged for a 50% special limited partnership interest in the Partnership. The Partnership was formed to provide funding for the retail liquidation engagement we entered into to liquidate the Masters Home Improvement stores. The $80.0 million Australian dollar participating note payable was non-interest bearing, shares in 50%certain of the allCompany’s senior notes. As of the profits and losses of the Partnership and the principal amount was repaid in December 2016 upon the completion of the going-out-of-business sale of Masters Home Improvement stores as defined in the partnership agreement. At SeptemberJune 30, 20172022, and December 31, 2016, $0.52021 the Company had $76.0 million and $10.0$111.9 million, respectively, was payable in accordance withremaining availability under the participating note payable share of profits and is included net income attributable to noncontrolling interests and amounts due to related parties and partners in the condensed consolidated financial statements.Other notes payable includenotes payable to a clearing organization for one of the Company’s broker dealers. The notes payable accrue interest at rates ranging from the prime rate plus 0.25% to 2.0% (4.5% to 6.25% at September 30, 2017) payable annually. The principal payments on the notes payable are due annually in the amount of $0.1 million on October 31, $0.2 million on September 30, and $0.4 million on January 31. The notes payable mature at various dates from January 31, 2018 through January 31, 2022. At September 30, 2017, the outstanding balance for the notes payable were $2.4 million. Off-Balance2022 Sales Agreement.We have no obligations, assets or liabilities which would be consideredand do not participateis included in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, established for the purpose of facilitating off-balance sheet arrangements. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.New Accounting StandardsIn February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02: Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require lessees, among other things, to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 will be effective for the Company in fiscal year 2019, but early application is permitted. The Company is currently evaluating the impact of this update on the consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Under this ASU and subsequently issued amendments, revenue are recognized at the time when goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. This standard sets forth a five-step revenue recognition model which replaces the current revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance. This standard is effective in the first quarter of 2018 for public companies and requires either a retrospective or a modified retrospective approach to adoption. The Company believes the adoption of this standard may impact engagements that contain performance-based arrangements in which a success or completion fee is earned when and if certain predefined outcomes occur and engagements and contracts where services are provided under fixed-fees arrangements that have multiple performance obligations. The Company has not completed an assessment and has not yet determined whether the impactNote 15 of the adoption of this standard onNotes to the consolidatedCondensed Consolidated Financial Statements. Such information is hereby incorporated by reference.will be material. The Company will adopt this standard on January 1, 2018 butfor recent accounting standards we have not concluded on a transition approach. The Company expects to complete the assessment process, including selecting a transition method for adoption during fourth quarter of 2017.In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments in this update do not change the core principle of the guidance as noted above at ASU No. 2014-09. The amendments clarify the implementation guidance on principal versus agent considerations. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of ASU No. 2014-09. The Company has not yet adopted this update and is currently evaluating the impact it may have on its financial condition and results of operations.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for us in our first quarter of fiscal year 2019, but early application is permitted. The Company has not yet adopted this update and is currently evaluating the impact it may have on its financial condition and results of operations.In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This standard simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for calendar year-end SEC filers for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not yet adopted this update and currently evaluating the effect this new standard will have on its financial condition and results of operations.Not applicable.ChiefCo-Chief Executive OfficerOfficers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.ChiefCo-Chief Executive OfficerOfficers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our ChiefCo-Chief Executive OfficerOfficers and our Chief Financial Officer concluded that as of SeptemberJune 30, 20172022 our disclosure controls and procedures were effective at the reasonable assurance level.ChiefCo-Chief Executive OfficerOfficers 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-designedwell- 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.ourthe 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 ourthe 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 our company,the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, wethe 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.In 2012, Gladden v. Cumberland Trust, WSI, et al. filed a complaint in Circuit Court, Hamblen County, TN at Morristown, Case No. 12-CV-119. This complaint alleges the improper distribution and misappropriation of trust funds. The plaintiff seeks damages of no less than $3.9 million, an accounting, and among other things, punitive damages. In October 2017, the Tennessee Supreme Court remanded the case to the Tennessee State Trial Court for determination of which claims are subject to arbitration and which are not. At the present time, the financial impact to the Company, if any, cannot be estimated.In January 2015, we were served with a lawsuit that seeks to assert claims of breach of contract and other matters in connection with auction services provided to a debtor. The proceeding in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”) is pending in the bankruptcy case of the debtor and its affiliates (the “Debtor”). In the lawsuit, a former landlord of the Debtor generally alleges that the Company and a joint venture partner were responsible for contamination while performing services in connection with the auction of certain assets of the Debtor and is seeking approximately $10.0 million in damages. In January 2017, the parties filed a proposed scheduling order with the Bankruptcy Court. Discovery in the action is currently proceeding. We intend to vigorously defending this lawsuit. This lawsuit is ongoing, and the financial impact to the Company, if any, cannot be estimated.On July 5, 2016, Quadre Investments LP (“Quadre”) filed a petition with the Delaware Court of Chancery (the “Court”) seeking a determination of fair value for 943,769 shares of common stock of UOL in connection with the acquisition of UOL by us. Such transaction gave rise to appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware. As a result, Quadre petitioned the Court to receive fair value as determined by the Court. On June 29, 2017, the parties settled the action and the petition was dismissed.In May 2014, Waterford Township Police & Fire Retirement System et al. v. Regional Management Corp et al., filed a complaint in the Southern District of New York (the “Court”), against underwriters alleging violations under sections 11 and 12 of the Securities Act of 1933, as amended (the “Securities Act”). FBR Capital Markets & Co. (“FBRCM”), a broker-dealer subsidiary of ours, was a co-manager of 2 offerings. On January 30, 2017, the Court denied the plaintiffs’ motion to file a first amended complaint, which would have revived claims previously dismissed by the Court on March 30, 2016. On March 1,2017, the plaintiffs filed a notice of appeal and an opening brief on June 21, 2017. Defendant’s opposition motion was filed on September 12, 2017. Appellants filed their reply brief on October 17, 2017 and oral argument has been scheduled for November 17, 2017. Regional Management continues to indemnify all of the underwriters, including FBRCM, pursuant to the operative underwriting agreement. On January5,2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”), a broker-dealer subsidiary of FBR, as a defendant 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 Master Consolidated Complaint, styled Gaynor v. Miller et al., is pending in the United States District Court for the Eastern District of 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. The plaintiffs seek unspecified compensatory damages and reimbursement of certain costs and expenses.In August 2017, the Court granted Defendant’s Motion to Dismiss on Section 12 claims and found that the plaintiffs had not sufficiently alleged a corrective disclosure prior to August 6, 2015, when an SEC civil action was announced. Defendant’s answer was filed on September 25, 2017. Although MLV is contractually entitled to be indemnified by Miller in connection with this lawsuit, Miller filed for bankruptcy in October 2015 and this likely will decrease or eliminate the value of the indemnity that MLV receives from Miller.In March 2017, United Online, Inc. received a letter from PeopleConnect, Inc. (formerly, Classmates, Inc.) (“Classmates”) regarding a notice of investigation received from the Consumer Protection Divisions of the District Attorneys’ offices of four California counties (“California DAs”). These entities suggest that Classmates may be in violation of California codes relating to unfair competition, false or deceptive advertising, and auto-renewal practices. Classmates asserts that these claims are indemnifiable claims under the purchase agreement between United Online, Inc. and the buyer of Classmates. A tolling agreement with the California DAs has been signed and informal discovery and production is in process. At the present time, the financial impact to the Company, if any, cannot be estimated.In April 2017, two purported shareholders of FBR filed a putative class action against FBR and the members of its board of directors that challenged the disclosures made in connection with the merger of FBR with the Company, styled Michael Rubin v. FBR & Co., et al., Case No. 1:17-cv-00410-LMB-MSN and Kim v. FBR & Co., et al. Case No.1:17-cv-004440LMB-IDD. The complaints alleged that the registration statement filed in connection with the Merger failed to disclose certain allegedly material information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and SEC Ru1e 14a-9 promulgated thereunder. On July 12, 2017, per stipulation, the complaints were dismissed - with prejudice as to the named plaintiffs only, without prejudice as to the class. In August 2017, a mootness fee was paid and the case was dismissed.In September 2017, a statement of claim was filed in a FINRA arbitration naming FBRCM and other underwriters related to the underwriting of the now-bankrupt, Quantum Fuel Systems Technologies Worldwide, Inc. (“Quantum”). Claimants are seeking $37.0 million in actual damages, plus $75.0 million in punitive damages and attorney’s fees. On October 24, 2017, we joined in a motion with the other underwriters requesting that the claim be dismissed on the grounds that it is improper under FINRA Rules 12204 and 122205 which prohibit class actions and derivative claims, respectively. Our initial response is due in November 2017 and we have agreed to a dual representation arrangement with the other underwriters. At the present time, the financial impact to the Company, if any, cannot be estimated.2016,2021, filed with the Securities and Exchange Commission on March 10, 2017.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, 20162021, 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, 2016.2021.None.Period 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 Information.Incorporated by Reference Exhibit No. 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). 51 B. Riley Financial, Inc. Date: November 9, 2017July 29, 2022By: s/s/ PHILLIP J. AHNName: Name: Phillip J. AhnTitle: Title: Chief Financial Officer and
Chief Operating Officer(Principal Financial Officer) 52 Exhibit Index*Filed herewith.†These exhibits are being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.#Management contract or compensatory plan or arrangement.(1)Incorporated by reference to the registrant’s Current Report on Form 8-K filed with the SEC on November 2, 2016.(2)Incorporated by reference to the registrant’s Current Report on Form 8-K filed with the SEC on May 31, 2017.(3)Incorporated by reference to the registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2017.(4)Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2017.