UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37503

B. RILEY FINANCIAL, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware		27-0223495
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

11100 Santa Monica Blvd., Suite 800 Los Angeles, CA		90025
(Address of Principal Executive Offices)		(Zip Code)

(310) 966-1444
(Registrant’s telephone number, including area code)

~~21255 Burbank Boulevard, Suite 400~~

~~Woodland Hills, CA 91367~~

~~(Former Address)~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	RILY	Nasdaq Global Market
Depositary Shares, each representing a 1/1000th fractional interest in a 6.875% share of Series A Cumulative Perpetual Preferred Stock	RILYP	Nasdaq Global Market
Depositary Shares, each representing a 1/1000th fractional interest in a 7.375% share of Series B Cumulative Perpetual Preferred Stock	RILYL	~~Nasdaq Global Market~~
~~7.25% Senior Notes due 2027~~	~~RILYG~~	~~Nasdaq Global Market~~
~~7.50% Senior Notes due 2027~~	~~RILYZ~~	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
7.375% Senior Notes due 2023	RILYH	Nasdaq Global Market
6.875% Senior Notes due 2023	RILYI	Nasdaq Global Market
6.00% Senior Notes due 2028	RILYT	Nasdaq Global Market
5.50% Senior Notes due 2026	RILYK	Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

	Large accelerated filer ☐	Accelerated filer ☒
	Non-accelerated filer ☐
	Emerging growth company ☐	Smaller reporting company ☐
	~~Emerging growth company ☐~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 27, 2020,~~July 26, 2021, there were ~~25,431,575~~27,580,300 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

B. Riley Financial, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended ~~September~~June 30, ~~2020~~2021

Table of Contents

~~Table of Contents~~

			Page

PART I. FINANCIAL INFORMATION			1
Item 1.	Financial Statements		1
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020		1
	Condensed Consolidated Statements of ~~Income~~Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020		2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020		3
	Condensed Consolidated Statements of Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020		4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020		56
	Notes to Unaudited Condensed Consolidated Financial Statements		67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2937
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4757
Item 4.	Controls and Procedures		4858

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1.	~~Legal Proceedings~~	1A.	49Risk Factors	59
~~Item 1A.~~	~~Risk Factors~~		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4960
Item 3.	Defaults Upon Senior Securities		4960
Item 4.	Mine Safety Disclosures		4960
Item 5.	Other Information		4960
Item 6.	~~Exhibits~~	Exhibits	4960

SIGNATURES			5161

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

~~B. RILEY FINANCIAL, INC.~~

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)

	September 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
	(Unaudited)						(Unaudited)
Assets
Assets:
Cash and cash equivalents	$	169,676		$	104,268		$	297,396		$	103,602
Restricted cash		1,410			471			1,335			1,235
Due from clearing brokers		19,589			23,818			424,949			7,089
Securities and other investments owned, at fair value		459,480			408,213			1,278,773			777,319
Securities borrowed		676,423			814,331			1,140,023			765,457
Accounts receivable, net		45,654			46,624			57,853			46,518
Due from related parties		3,766			5,832			734			986
Advances against customer contracts		900			27,347			200			200
Loans receivable, at fair value (includes $236,018 from related parties at September 30, 2020)		344,339			43,338
Loans receivable, at cost (includes $157,080 from related parties at December 31, 2019)		—			225,848
Loans receivable, at fair value (includes $131,379 and $295,809 from related parties at June 30, 2021 and December 31, 2020, respectively)								270,295			390,689
Prepaid expenses and other assets		87,560			81,808			119,400			87,262
Operating lease right-of-use assets		43,514			47,809			60,933			48,799
Property and equipment, net		11,986			12,727			14,447			11,685
Goodwill		227,046			223,697			236,005			227,046
Other intangible assets, net		194,516			220,525			200,304			190,745
Deferred income taxes		14,223			31,522
Deferred tax assets, net								4,080			4,098
Total assets	$	2,300,082		$	2,318,178		$	4,106,727		$	2,662,730
Liabilities and Equity
Liabilities:
Accounts payable	$	4,226		$	4,477		$	6,101		$	2,722
Accrued expenses and other liabilities		127,036			130,714			220,603			168,478
Deferred revenue		70,565			67,121			68,398			68,651
Deferred tax liabilities, net								90,325			34,248
Due to related parties and partners		777			1,750			230			327
Due to clearing brokers								—			13,672
Securities sold not yet purchased		48,125			41,820			272,088			10,105
Securities loaned		667,109			810,495			1,134,359			759,810
Mandatorily redeemable noncontrolling interests		4,462			4,616			4,105			4,700
Operating lease liabilities		55,790			61,511			73,761			60,778
Notes payable		714			38,167			357			37,967
Loan participations sold		13,919			12,478			4,444			17,316
Term loan		52,452			66,666
Senior notes payable		854,926			688,112
Term loans, net								257,104			74,213
Senior notes payable, net								1,213,105			870,783
Total liabilities		1,900,101			1,927,927			3,344,980			2,123,770

Commitments and contingencies (Note 14)
B. Riley Financial, Inc. stockholders' equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 3,831 and 2,349 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively; liquidation preference of $95,773 and $58,723 as of September 30, 2020 and December 31, 2019, respectively.		—			—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 25,431,575 and 26,972,332 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.		3			3
Commitments and contingencies (Note 13)
B. Riley Financial, Inc. equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,275 and 3,971 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; and liquidation preference of $106,882 and $99,260 as of June 30, 2021 and December 31, 2020, respectively								—			—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,580,300 and 25,777,796 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively								3			3
Additional paid-in capital		332,085			323,109			387,084			310,326
Retained earnings		43,938			39,536			338,260			203,080
Accumulated other comprehensive loss		(2,167	)		(1,988	)		(1,178	)		(823	)
Total B. Riley Financial, Inc. stockholders' equity		373,859			360,660
Total B. Riley Financial, Inc. stockholders’ equity								724,169			512,586
Noncontrolling interests		26,122			29,591			37,578			26,374
Total equity		399,981			390,251			761,747			538,960
Total liabilities and equity	$	2,300,082		$	2,318,178		$	4,106,727		$	2,662,730

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

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

~~B. RILEY FINANCIAL, INC.~~

Condensed Consolidated Statements of ~~Income~~Operations

(Unaudited)

(Dollars in thousands, except share data)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenues:
Services and fees	$	144,823		$	113,111		$	429,799		$	356,975		$	266,143		$	125,595		$	555,612		$	284,976
Trading income (loss) and fair value adjustments on loans		31,753			40,268			(36,142	)		71,730
Trading income (losses) and fair value adjustments on loans														32,679			114,547			299,621			(67,895	)
Interest income - Loans and securities lending		26,026			25,766			72,383			54,147			25,491			24,506			62,411			46,357
Sale of goods		23,651			918			26,475			4,023			12,457			1,820			19,285			2,824
Total revenues		226,253			180,063			492,515			486,875			336,770			266,468			936,929			266,262
Operating expenses:
Direct cost of services		23,264			7,936			51,201			41,715			12,094			7,985			23,416			27,937
Cost of goods sold		9,813			911			11,442			3,835			3,626			860			8,952			1,629
Selling, general and administrative expenses		97,143			101,092			291,449			287,963			199,922			106,562			391,266			194,306
Restructuring charge		1,557			—			1,557			1,699
Impairment of tradenames		—			—			12,500			—			—			8,500			—			12,500
Interest expense - Securities lending and loan participations sold		10,975			10,273			30,669			22,579			10,983			11,221			30,172			19,694
Total operating expenses		142,752			120,212			398,818			357,791			226,625			135,128			453,806			256,066
Operating income		83,501			59,851			93,697			129,084			110,145			131,340			483,123			10,196
Other income (expense):
Interest income		67			361			537			1,329			56			224			105			470
Income (loss) from equity investments		409			1,113			(145	)		(4,049	)
Gain on extinguishment of loans														6,509			—			6,509			—
(Loss) income from equity investments														(852	)		(318	)		23			(554	)
Interest expense		(16,374	)		(12,772	)		(48,537	)		(35,130	)		(20,856	)		(16,509	)		(40,642	)		(32,163	)
Income before income taxes		67,603			48,553			45,552			91,234
Provision for income taxes		(18,711	)		(14,409	)		(13,380	)		(26,802	)
Net income		48,892			34,144			32,172			64,432
Net income (loss) attributable to noncontrolling interests		513			(158	)		(1,382	)		(50	)
Net income attributable to B. Riley Financial, Inc.		48,379			34,302			33,554			64,482
Income (loss) before income taxes														95,002			114,737			449,118			(22,051	)
(Provision) benefit for income taxes														(19,902	)		(32,208	)		(117,420	)		5,331
Net income (loss)														75,100			82,529			331,698			(16,720	)
Net (loss) income attributable to noncontrolling interests														(576	)		(1,311	)		1,366			(1,895	)
Net income (loss) attributable to B. Riley Financial, Inc.													$	75,676		$	83,840		$	330,332		$	(14,825	)
Preferred stock dividends		1,088			—			3,230			—			1,789			1,087			3,538			2,142
Net income available to common shareholders	$	47,291		$	34,302		$	30,324		$	64,482
Net income (loss) available to common shareholders													$	73,887		$	82,753		$	326,794		$	(16,967	)

Basic income per common share	$	1.86		$	1.29		$	1.18		$	2.45
Diluted income per common share	$	1.75		$	1.21		$	1.14		$	2.37
Basic income (loss) per common share													$	2.70		$	3.23		$	12.03		$	(0.66	)
Diluted income (loss) per common share													$	2.58		$	3.07		$	11.39		$	(0.66	)

Weighted average basic common shares outstanding		25,446,292			26,556,223			25,699,735			26,351,839			27,344,184			25,627,085			27,159,257			25,827,849
Weighted average diluted common shares outstanding		27,050,448			28,233,423			26,689,700			27,251,837			28,668,465			26,992,823			28,690,444			25,827,849

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

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

~~B. RILEY FINANCIAL, INC.~~

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollars in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net income $ 48,892 $ 34,144 $ 32,172 $ 64,432
Other comprehensive income (loss):
Change in cumulative translation adjustment 526 (521 ) (179 ) (184 )
Other comprehensive income (loss), net of tax 526 (521 ) (179 ) (184 )
Total comprehensive income 49,418 33,623 31,993 64,248
Comprehensive income (loss) attributable to noncontrolling interests 513 (158 ) (1,382 ) (50 )
Comprehensive income attributable to B. Riley Financial, Inc. $ 48,905 $ 33,781 $ 33,375 $ 64,298
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net income (loss) $ 75,100 $ 82,529 $ 331,698 $ (16,720 )
Other comprehensive income (loss):
Change in cumulative translation adjustment 281 515 (355 ) (705 )
Other comprehensive income (loss), net of tax 281 515 (355 ) (705 )
Total comprehensive income (loss) 75,381 83,044 331,343 (17,425 )
Comprehensive (loss) income attributable to noncontrolling interests (576 ) (1,311 ) 1,366 (1,895 )
Comprehensive income (loss) attributable to B. Riley Financial, Inc. $ 75,957 $ 84,355 $ 329,977 $ (15,530 )
The accompanying notes are an integral part of these condensed consolidated financial statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
~~B. RILEY FINANCIAL, INC.~~
Condensed Consolidated Statements of Equity
(Unaudited)
(Dollars in thousands, except share data)
~~Three Months Ended September 30, 2020 and 2019~~
Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total
Shares Amount Shares Amount Capital Earnings Loss Interests Equity
Balance, July 1, 2020 2,531 $ — 25,864,393 $ 3 $ 306,772 $ 5,927 $ (2,693 ) $ 26,210 $ 336,219
Preferred stock issued 1,300 — — — 31,377 — — — 31,377
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 41,984 — (273 ) — — — (273 )
Common stock repurchased and retired — — (474,802 ) — (10,569 ) — — — (10,569 )
Share based payments — — — — 4,778 — — — 4,778
Dividends on common stock ($0.35 per share) — — — — — (9,280 ) — — (9,280 )
Dividends on preferred stock ($429.69 per share) — — — — — (1,088 ) — — (1,088 )
Net income — — — — — 48,379 — 513 48,892
Distributions to noncontrolling interests — — — — — — — (601 ) (601 )
Other comprehensive income — — — — — — 526 — 526
Balance, September 30, 2020 3,831 $ — 25,431,575 $ 3 $ 332,085 $ 43,938 $ (2,167 ) $ 26,122 $ 399,981

Balance, July 1, 2019 — $ — 26,919,941 $ 3 $ 255,865 $ 22,424 $ (1,824 ) $ 710 $ 277,178
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 51,730 — (335 ) — — — (335 )
Common stock repurchased and retired — — (50,171 ) — (1,021 ) — — — (1,021 )
Share based payments — — — — 4,728 — — — 4,728
Dividends on common stock ($0.50 per share) — — — — — (14,769 ) — — (14,769 )
Net income — — — — — 34,302 — (158 ) 34,144
Other comprehensive income — — — — — — (521 ) — (521 )
Balance, September 30, 2019 — $ — 26,921,500 $ 3 $ 259,237 $ 41,957 $ (2,345 ) $ 552 $ 299,404

~~Nine~~
Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~
2020
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, 2020 2,349 $ — 26,972,332 $ 3 $ 323,109 $ 39,536 $ (1,988 ) $ 29,591 $ 390,251
Preferred stock issued 1,482 — — — 36,007 — — — 36,007
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 561,991 — (2,950 ) — — — (2,950 )
Common stock repurchased and retired — — (2,102,748 ) — (38,348 ) — — — (38,348 )
Share based payments — — — — 14,267 — — — 14,267
Dividends on common stock ($0.95 per share) — — — — — (25,922 ) — — (25,922 )
Dividends on preferred stock ($1,289.07 per share) — — — — — (3,230 ) — — (3,230 )
Net income — — — — — 33,554 — (1,382 ) 32,172
Distributions to noncontrolling interests — — — — — — — (2,087 ) (2,087 )
Other comprehensive loss — — — — — — (179 ) — (179 )
Balance, September 30, 2020 3,831 $ — 25,431,575 $ 3 $ 332,085 $ 43,938 $ (2,167 ) $ 26,122 $ 399,981

Balance, January 1, 2019 — $ — 26,603,355 $ 2 $ 258,638 $ 1,579 $ (2,161 ) $ 602 $ 258,660
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes — — 556,077 1 (2,627 ) — — — (2,626 )
Common stock repurchased and retired — — (237,932 ) — (4,273 ) — — — �� (4,273 )
Common stock warrants repurchased — — — — (2,777 ) — — — (2,777 )
Share based payments — — — — 10,276 — — — 10,276
Dividends on common stock ($0.84 per share) — — — — — (24,104 ) — — (24,104 )
Net income — — — — — 64,482 — (50 ) 64,432
Other comprehensive income — — — — — — (184 ) — (184 )
Balance, September 30, 2019 — $ — 26,921,500 $ 3 $ 259,237 $ 41,957 $ (2,345 ) $ 552 $ 299,404
Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total
Shares Amount Shares Amount Capital Earnings Loss Interests Equity
Balance, April 1, 2021 3,971 $ — 27,194,909 $ 3 $ 380,543 $ 352,910 $ (1,459 ) $ 33,823 $ 765,820
Preferred stock issued 304 — — — 8,281 — — — 8,281
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 385,391 — (10,348 ) — — — (10,348 )
Share based payments — — — — 8,608 — — — 8,608
Dividends on common stock ($3.00 per share) — — — — — (88,537 ) — — (88,537 )
Dividends on preferred stock — — — — — (1,789 ) — — (1,789 )
Net income — — — — — 75,676 — (576 ) 75,100
Distributions to noncontrolling interests — — — — — — — (2,597 ) (2,597 )
Contributions from noncontrolling interests — — — — — — — 6,928 6,928
Other comprehensive income — — — — — — 281 — 281
Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178 ) $ 37,578 $ 761,747

Balance, April 1, 2020 2,531 $ — 25,988,565 $ 3 $ 308,472 $ (70,232 ) $ (3,208 ) $ 27,986 $ 263,021
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 481,709 — (2,157 ) — — — (2,157 )
Common stock repurchased and retired �� — (605,881 ) — (3,711 ) — — — (3,711 )
Share based payments — — — — 4,168 — — — 4,168
Dividends on common stock ($0.25 per share) — — — — — (6,594 ) — — (6,594 )
Dividends on preferred stock — — — — — (1,087 ) — — (1,087 )
Net income — — — — — 83,840 — (1,311 ) 82,529
Distributions to noncontrolling interests — — — — — — — (465 ) (465 )
Other comprehensive income — — — — — — 515 — 515
Balance, June 30, 2020 2,531 $ — 25,864,393 $ 3 $ 306,772 $ 5,927 $ (2,693 ) $ 26,210 $ 336,219
The accompanying notes are an integral part of these condensed consolidated financial statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of ~~Cash Flows~~Equity (Continued)
(Unaudited)
(Dollars in thousands, except share data)
~~(Unaudited)~~
~~(Dollars in thousands)~~Six months ended June 30, 2021 and 2020

Nine Months Ended
September 30,
2020 2019
Cash flows from operating activities:
Net income $ 32,172 $ 64,432
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,765 14,217
Provision for doubtful accounts 2,438 1,646
Share-based compensation 14,267 10,276
Fair value adjustments, non-cash 21,755 (13,343 )
Non-cash interest and other (12,901 ) (14,941 )
Effect of foreign currency on operations (602 ) 8
Loss from equity investments 145 4,049
Deferred income taxes 17,312 6,358
Impairment of intangibles and loss on disposal of fixed assets 14,057 (327 )
Gain on extinguishment of debt (1,556 ) —
Income allocated for mandatorily redeemable noncontrolling interests 779 857
Change in operating assets and liabilities:
Due from clearing brokers 4,230 9,947
Securities and other investments owned (36,859 ) (32,122 )
Securities borrowed 137,908 211,139
Accounts receivable and advances against customer contracts 25,336 (8,645 )
Prepaid expenses and other assets (3,507 ) (9,619 )
Accounts payable, accrued expenses and other liabilities (10,297 ) 31,473
Amounts due to/from related parties and partners 1,093 (4,574 )
Securities sold, not yet purchased 6,304 (8,531 )
Deferred revenue 3,444 (502 )
Securities loaned (143,386 ) (215,575 )
Net cash provided by operating activities 86,897 46,223
Cash flows from investing activities:
Purchases of loans receivable (169,100 ) (350,695 )
Repayments of loans receivable 75,982 98,742
Sale of loan receivable to related party 1,800 —
Proceeds from loan participations sold 2,400 31,806
Repayment of loan participations sold (1,131 ) (3,175 )
Purchases of property, equipment and other (1,517 ) (2,885 )
Proceeds from sale of property, equipment and intangible assets 1 504
Purchase of equity investments (6,486 ) (33,391 )
Proceeds from sale of division of magicJack — 6,196
Dividends and distributions from equity investments 1,005 1,454
Acquisition of other businesses (1,500 ) –
Net cash used in investing activities (98,546 ) (251,444 )
Cash flows from financing activities:
Repayment of asset based credit facility (37,096 ) —
Repayment of notes payable (357 ) (357 )
Proceeds from term loan — 10,000
Repayment of term loan (14,429 ) (17,924 )
Proceeds from issuance of senior notes 171,417 244,497
Redemption of senior notes (1,829 ) —
Payment of debt issuance costs (2,761 ) (4,212 )
Payment of employment taxes on vesting of restricted stock (2,950 ) (2,626 )
Common dividends paid (25,822 ) (25,049 )
Preferred dividends paid (3,230 ) —
Repurchase of common stock (38,348 ) (4,273 )
Repurchase of warrants — (2,777 )
Distribution to noncontrolling interests (3,013 ) (1,095 )
Proceeds from issuance of preferred stock 36,007 —
Net cash provided by financing activities 77,589 196,184
Increase (decrease) in cash, cash equivalents and restricted cash 65,940 (9,037 )
Effect of foreign currency on cash, cash equivalents and restricted cash 407 (183 )
Net increase (decrease) in cash, cash equivalents and restricted cash 66,347 (9,220 )
Cash, cash equivalents and restricted cash, beginning of period 104,739 180,278
Cash, cash equivalents and restricted cash, end of period $ 171,086 $ 171,058

Supplemental disclosures:
Interest paid $ 75,231 $ 52,931
Taxes paid $ 1,460 $ 5,029
Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Retained Comprehensive Noncontrolling Total
Shares Amount Shares Amount Capital Earnings Loss Interests Equity
Balance, January 1, 2021 3,971 $ — 25,777,796 $ 3 $ 310,326 $ 203,080 $ (823 ) $ 26,374 $ 538,960
Common stock issued, net of offering costs — — 1,413,045 — 64,713 — — — 64,713
Preferred stock issued 304 — — — 8,281 — — — 8,281
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 389,459 — (10,370 ) — — — (10,370 )
Share based payments — — — — 14,134 — — — 14,134
Dividends on common stock ($6.50 per share) — — — — — (191,614 ) — — (191,614 )
Dividends on preferred stock — — — — — (3,538 ) — — (3,538 )
Net income — — — — — 330,332 — 1,366 331,698
Distributions to noncontrolling interests — — — — — — — (13,854 ) (13,854 )
Contributions from noncontrolling interests — — — — — — — 10,650 10,650
Acquisition of noncontrolling interests — — — — — — — 13,042 13,042
Other comprehensive loss — — — — — — (355 ) — (355 )
Balance, June 30, 2021 4,275 $ — 27,580,300 $ 3 $ 387,084 $ 338,260 $ (1,178 ) $ 37,578 $ 761,747

Balance, January 1, 2020 2,349 $ — 26,972,332 $ 3 $ 323,109 $ 39,536 $ (1,988 ) $ 29,591 $ 390,251
Preferred stock issued 182 — — — 4,630 — — — 4,630
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes — — 520,007 — (2,677 ) — — — (2,677 )
Common stock repurchased and retired — — (1,627,946 ) — (27,779 ) — — — (27,779 )
Share based payments — — — — 9,489 — — — 9,489
Dividends on common stock ($0.60 per share) — — — — — (16,642 ) — — (16,642 )
Dividends on preferred stock — — — — — (2,142 ) — — (2,142 )
Net loss — — — — — (14,825 ) — (1,895 ) (16,720 )
Distributions to noncontrolling interests — — — — — — — (1,486 ) (1,486 )
Other comprehensive loss — — — — — — (705 ) — (705 )
Balance, June 30, 2020 2,531 $ — 25,864,393 $ 3 $ 306,772 $ 5,927 $ (2,693 ) $ 26,210 $ 336,219
The accompanying notes are an integral part of these condensed consolidated financial statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net income (loss) $ 331,698 $ (16,720 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization 12,924 9,879
Provision for doubtful accounts 755 2,081
Share-based compensation 14,134 9,489
Fair value adjustments, non-cash (10,046 ) 21,975
Non-cash interest and other (9,091 ) (6,943 )
Effect of foreign currency on operations (1,486 ) (73 )
(Income) loss from equity investments (23 ) 554
Dividends from equity investments 610 797
Deferred income taxes 51,242 (14,340 )
Impairment of intangibles and gain on disposal of fixed assets — 12,550
Gain on extinguishment of loans (6,509 ) —
Loss (gain) on extinguishment of debt 919 (1,556 )
Gain on equity investment (3,544 ) —
Income allocated for mandatorily redeemable noncontrolling interests 347 397
Change in operating assets and liabilities:
Due from clearing brokers (424,062 ) (5,271 )
Securities and other investments owned (316,181 ) 20,009
Securities borrowed (374,565 ) 27,967
Accounts receivable and advances against customer contracts 808 27,601
Prepaid expenses and other assets (25,870 ) (19,707 )
Accounts payable, accrued expenses and other liabilities (22,983 ) 738
Amounts due to/from related parties and partners 155 4,404
Securities sold, not yet purchased 261,476 (32,017 )
Deferred revenue (3,158 ) 3,896
Securities loaned 374,549 (31,481 )
Net cash (used in) provided by operating activities (147,901 ) 14,229
Cash flows from investing activities:
Purchases of loans receivable (87,309 ) (152,228 )
Repayments of loans receivable 95,522 74,450
Sale of loan receivable to related party — 1,800
Proceeds from loan participations sold — 2,400
Repayment of loan participations sold (10,772 ) (940 )
Acquisition of business, net of $34,924 cash acquired (390 ) (1,500 )
Purchases of property, equipment and other (288 ) (851 )
Proceeds from sale of property, equipment and intangible assets — 1
Purchase of equity investments (10,485 ) (6,486 )
Net cash used in investing activities (13,722 ) (83,354 )
Cash flows from financing activities:
Repayment of asset based credit facility — (37,096 )
Repayment of notes payable (37,610 ) (357 )
Repayment of term loan (11,484 ) (9,620 )
Proceeds from term loan 200,000 —
Proceeds from issuance of senior notes 475,698 171,078
Redemption of senior notes (128,156 ) (1,829 )
Payment of debt issuance costs (15,661 ) (2,760 )
Payment for contingent consideration (411 ) —
Payment of employment taxes on vesting of restricted stock (10,370 ) (2,678 )
Common dividends paid (181,269 ) (17,489 )
Preferred dividends paid (3,538 ) (2,142 )
Repurchase of common stock — (27,779 )
Distribution to noncontrolling interests (14,792 ) (2,143 )
Contribution from noncontrolling interests 10,650 —
Proceeds from issuance of common stock 64,713 —
Proceeds from issuance of preferred stock 8,281 4,630
Net cash provided by financing activities 356,051 71,815
Increase in cash, cash equivalents and restricted cash 194,428 2,690
Effect of foreign currency on cash, cash equivalents and restricted cash (534 ) (705 )
Net increase in cash, cash equivalents and restricted cash 193,894 1,985
Cash, cash equivalents and restricted cash, beginning of period 104,837 104,739
Cash, cash equivalents and restricted cash, end of period $ 298,731 $ 106,724

Supplemental disclosures:
Interest paid $ 66,359 $ 45,934
Taxes paid $ 63,987 $ 608
The accompanying notes are an integral part of these condensed consolidated financial statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS OPERATIONS

B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) provide investment banking and financial services to corporate, institutional and high net worth clients, and asset disposition, ~~valuation and~~financial consulting, appraisal and capital advisory services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms throughout the United States, Australia, Canada, and Europe and consumer Internet access and cloud communication services through its wholly-owned subsidiaries United Online, Inc. (“UOL” or “United Online”) and magicJack VocalTec Ltd. (“magicJack”). The Company ~~acquired~~also has a majority ownership interest in BR ~~Brand~~Brands Holding, LLC (“BR ~~Brand”~~Brands” or “Brands”) ~~on October 28, 2019,~~, which provides licensing of trademarks.

On February 25, 2021, the Company completed the acquisition of all of the outstanding shares of National Holdings Corporation (“National”) not already owned by the Company. The total cash consideration for the approximately 55% of National outstanding shares that the Company did not previously own and settlement of outstanding share based awards amounted to $35,314. The Company used the acquisition method of accounting for this acquisition. The acquisition expands the Company’s investment banking, wealth management and financial planning offerings by adding National’s brokerage, insurance, tax preparation and advisory services. As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented.

The Company operates in 5six operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, ~~consulting,~~ 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; (iv)~~services; (v) Principal Investments - United Online and magicJack, through which the Company provides consumer Internet access and related subscription services from United Online and cloud communication services primarily through the magicJack devices; and ~~(v)~~(vi) Brands, which is focused on generating revenue through the licensing of trademarks.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. During the second quarter of 2021, the full impact of the COVID-19 outbreak continues to evolve. As the U.S. economy recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries across the world continue to manage repeated waves of the pandemic, including variant strains of COVID-19, amid uneven progress toward vaccination. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions and the success of vaccines in slowing or halting the pandemic. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy continue to be highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted, the Company’s results of operations, financial position and cash flows may be materially adversely affected.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly-owned and majority-owned subsidiaries. The condensed consolidated financial statements also include the accounts of (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, and (b) National Asset Management, Inc. (“NAM”), a federally-registered investment adviser providing asset management advisory services to retail clients for a fee based upon a percentage of assets managed. NAM has a majority voting interest in Innovation X Management, LLC (“Innovation X”), which together serve as the investment manager of an investment fund (see Variable Interest Entities below). Because NAM has the majority voting interest in Innovation X, the results of operations of Innovation X are included in the Company's consolidated financial statements, and the amount attributable to the other investor is recorded as a non-controlling interest. The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange 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, ~~2019,~~2020, filed with the SEC on March ~~10, 2020.~~4, 2021. The results of operations for the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

(b) Use of Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities and ~~loan~~loans receivables, allowance for doubtful accounts, the fair value of intangible assets and goodwill, the fair value of mandatorily redeemable noncontrolling interests, fair value of share based arrangements, accounting for income tax valuation allowances, recovery of contract assets, ~~and~~ sales returns and ~~allowances.~~allowances and contingencies. 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.

(c) Interest Expense — Securities Lending Activities and Loan Participations Sold

Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled ~~$10,530~~$10,725 and ~~$9,721~~$10,802 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$29,253~~$29,446 and ~~$22,027~~$18,723 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Loan participations sold as of ~~September~~June 30, 2021 and 2020 totaled $4,444 and ~~2019 totaled $13,919 and $28,872,~~$14,109, respectively. Interest expense from loan participations sold totaled ~~$445~~$258 and $419 for the three months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~$1,416~~$726 and $971 for the ~~nine~~six months ended ~~September~~June 30, ~~2020. Interest expense from loan participations sold totaled $552 for the three~~2021 and ~~nine months ended September 30, 2019.~~2020, respectively.

(d) Concentration of Risk

Revenues in the Capital Markets, ~~Valuation and Appraisal~~Financial Consulting, Wealth Management, Brands and Principal Investments — United Online and magicJack 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. ~~Revenues in the Brands segment are primarily generated in the United States and Canada.~~

The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements.

The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements.

(e) Advertising Expenses

The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled ~~$560~~$578 and ~~$437~~$864 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$2,264~~$1,156 and ~~$1,383~~$1,704 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Advertising expense is included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of ~~income.~~operations.

(f) Share-Based Compensation

The Company’s share-based payment awards principally consist of grants of restricted stock, restricted stock units and costs associated with the Company’s employee stock purchase plan. In accordance with the applicable accounting guidance, share-based payment awards are classified as either equity or liabilities. For equity-classified awards, the Company measures compensation cost for the grant of membership interests at fair value on the date of grant and recognizes compensation expense in the condensed consolidated statements of ~~income~~operations over the requisite service or performance period the award is expected to vest.

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan (“Purchase Plan”) which allows eligible employees to purchase common stock through payroll deductions at a price that is 85% of the market value of the common stock on the last day of the offering period. In accordance with the provisions of Accounting Standards Codification 718, Compensation — Stock Compensation (“ASC 718”), the Company is required to recognize compensation expense relating to shares offered under the Purchase Plan. For the three months ended June 30, 2021 and 2020, the Company recognized compensation expense of $115 and $59, respectively, related to the Purchase Plan. For the six months ended June 30, 2021 and 2020, the Company recognized compensation expense of $342 and $224, respectively, related to the Purchase Plan.

(g) Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. Tax benefits of operating loss carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense.

(h) Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

(i) Restricted Cash

As of ~~September~~June 30, 2021, restricted cash included $864 of cash collateral for foreign exchange contracts and leases and $471 related to one of the Company’s telecommunication suppliers. In June 2021, National’s Paycheck Protection Program (“PPP”) which the Company assumed as part of the acquisition of National on February 25, 2021 was forgiven, and $6,553 of restricted cash related to the loans was returned to the Company. As of December 31, 2020, restricted cash included ~~$939~~$764 of cash collateral for foreign exchange contracts and $471 ~~of collateral~~ related to one of the Company’s telecommunication suppliers. ~~As of December 31, 2019, restricted cash included $471 of collateral related to one of the Company’s telecommunication suppliers.~~

(j) Securities Borrowed and Securities Loaned

Securities borrowed and securities loaned are recorded based upon the amount of cash advanced or received. Securities borrowed transactions facilitate the settlement process and require the Company to deposit cash or other collateral with the lender. With respect to securities loaned, the Company receives collateral in the form of cash. The amount of collateral required to be deposited for securities borrowed, or received for securities loaned, is an amount generally in excess of the market value of the applicable securities borrowed or loaned. The Company monitors the market value of the securities borrowed and loaned on a daily basis, with additional collateral obtained, or excess collateral recalled, when deemed appropriate.

The Company accounts for securities lending transactions in accordance with ASC “Topic 210: Balance Sheet,” which requires companies to report disclosures of offsetting assets and liabilities. The Company does not net securities borrowed and securities loaned and these items are presented on a gross basis in the condensed consolidated balance sheets.

(k) Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Property and equipment held under finance leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Depreciation and amortization expense on property and equipment was ~~$967~~$1,031 and ~~$1,163~~$899 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$2,798~~$1,904 and ~~$4,186~~$1,831 for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

(l) Loans Receivable

The Company adopted the new credit loss standard effective January 1, 2020. Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost. Under the fair value option, loans ~~receivable~~receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of ~~income.~~operations. These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes. The impact of adopting ASC 326 was immaterial to the ~~condensed~~ consolidated financial statements.

Loans receivable, at fair value totaled ~~$344,339~~$270,295 and ~~$43,338~~$390,689 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The loans have various maturities through ~~December 2024.~~March 2027. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the historical cost of loans receivable accounted for under the fair value option was ~~$355,413~~$274,624 and ~~$32,578,~~$405,064, respectively, which included principal balances of ~~$360,500~~$284,664 and ~~$32,691~~$416,401, respectively, and unamortized costs, origination fees, premiums and discounts, totaling ~~$5,087~~$10,040 and ~~$113,~~$11,337, respectively. During the three ~~and nine~~ months ended ~~September~~June 30, 2021 and 2020, the Company recorded unrealized ~~gains (losses) of $141 and ($21,835), respectively~~losses on the loans receivable at fair value of $680 and $4,049, respectively, and during the six months ended June 30, 2021 and 2020, unrealized gains of $10,046 and losses of $21,975, respectively, which is included in trading income (losses) and fair value adjustments on loans on the condensed consolidated ~~statement~~statements of ~~income.~~

Prior to the adoption of the new credit loss standard effective January 1, 2020, at December 31, 2019 loans receivable, at historical cost totaled $225,848. Loans receivable, at cost are reported at their outstanding principal balances of $232,118 net of $6,270 of unearned income, and loan origination costs which includes unamortized deferred fees and costs on originated loans, and for purchased loans, net of any unamortized premiums or discounts.operations.

The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending ~~customers.~~clients. At ~~September~~June 30, ~~2020,~~2021, the Company has ~~provided~~outstanding limited ~~guarantees~~guarantee arrangements with respect to ~~the Franchise Group, Inc. (collectively with all of its affiliates, “FRG”) as further described in Note 17 and~~ Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note ~~14(c).~~13. In accordance with the new credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. At ~~September~~June 30, ~~2020,~~2021, the Company has not recorded any provision for credit losses on the ~~FRG and~~ B&W guarantees since ~~the underlying guaranteed loans are senior to most of the outstanding debt of FRG and B&W and~~ the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure. ~~The maximum amount of credit exposure related to these limited guarantees is approximately $205,000.~~

Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated ~~statement~~statements of ~~income.~~operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology.

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

Securities ~~and other investments~~ owned consist of marketable securities and investments in partnership interests and other securities recorded at fair value. Securities sold, but not yet purchased represents obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:

September 30, December 31,
2020 2019
Securities and other investments owned:
Equity securities $ 392,674 $ 353,162
Corporate bonds 5,956 19,020
Other fixed income securities 3,557 8,414
Partnership interests and other 57,293 27,617
$ 459,480 $ 408,213

Securities sold not yet purchased:
Equity securities $ 42,086 $ 5,360
Corporate bonds 4,490 33,436
Other fixed income securities 1,549 3,024
$ 48,125 $ 41,820

June 30, December 31,
2021 2020
Securities and other investments owned:
Equity securities $ 1,129,217 $ 697,288
Corporate bonds 42,912 3,195
Other fixed income securities 3,227 1,913
Partnership interests and other 103,417 74,923
$ 1,278,773 $ 777,319

Securities sold not yet purchased:
Equity securities $ 261,314 $ 4,575
Corporate bonds 10,675 4,288
Other fixed income securities 99 1,242
$ 272,088 $ 10,105

(n) Fair Value Measurements

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety ~~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.

The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments ~~are~~is derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) in accordance with ASC “Topic 820: Fair Value Measurements.”

Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. Any investments adjusted to their fair value by applying the measurement alternative are disclosed as nonrecurring fair value measurements, including the level in the fair value hierarchy that was used. As of June 30, 2021 and December 31, 2020, investments in nonpublic entities valued using a measurement alternative of $42,931 and $26,948, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets.

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

The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at September 30, 2020 Using
Fair value at
September 30, Quoted prices in active markets for identical assets Other observable inputs Significant unobservable inputs
2020 (Level 1) (Level 2) (Level 3)
Assets:
Securities and other investments owned:
Equity securities $ 392,674 $ 290,425 $ — $ 102,249
Corporate bonds 5,956 — 5,956 —
Other fixed income securities 3,557 — 3,557 —
Investment funds valued at net asset value⁽¹⁾ 57,293
Total securities and other investments owned 459,480 290,425 9,513 102,249
Loans receivable, at fair value 344,339 — — 344,339
Total assets measured at fair value $ 803,819 $ 290,425 $ 9,513 $ 446,588

Liabilities:
Securities sold not yet purchased:
Equity securities $ 42,086 $ 42,086 $ — $ —
Corporate bonds 4,490 — 4,490 —
Other fixed income securities 1,549 — 1,549 —
Total securities sold not yet purchased 48,125 42,086 6,039 —
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,462 — — 4,462
Total liabilities measured at fair value $ 52,587 $ 42,086 $ 6,039 $ 4,462

Financial Assets and Liabilities Measured at Fair Value
on a Recurring Basis at December 31, 2019 Using
Fair value at
December 31,
2019 Quoted prices in active markets for identical assets
(Level 1) Other observable inputs
(Level 2) Significant unobservable inputs
(Level 3)
Assets:
Securities and other investments owned:
Equity securities $ 353,162 $ 243,911 $ — $ 109,251
Corporate bonds 19,020 — 19,020 —
Other fixed income securities 8,414 — 8,414 —
Investment funds valued at net asset value⁽¹⁾ 27,617
Total securities and other investments owned 408,213 243,911 27,434 109,251
Loans receivable, at fair value 43,338 — — 43,338
Total assets measured at fair value $ 451,551 $ 243,911 $ 27,434 $ 152,589

Liabilities:
Securities sold not yet purchased:
Equity securities $ 5,360 $ 5,360 $ — $ —
Corporate bonds 33,436 — 33,436 —
Other fixed income securities 3,024 — 3,024 —
Total securities sold not yet purchased 41,820 5,360 36,460 —

Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,616 — — 4,616
Total liabilities measured at fair value $ 46,436 $ 5,360 $ 36,460 $ 4,616

⁽¹⁾

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy in accordance with ASC “Topic 820 Fair Value Measurements.” The fair value amounts presented in the tables above for investment funds valued at net asset value are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheets.

	Financial Assets and Liabilities Measured at Fair Value
	on a Recurring Basis at June 30, 2021 Using
			Quoted prices in		Other		Significant
	Fair value at		active markets for		observable		unobservable
	June 30,		identical assets		inputs		inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities and other investments owned:
Equity securities	$	1,086,286	$	767,788	$	—	$	318,498
Corporate bonds		42,912		—		42,912		—
Other fixed income securities		3,227		—		3,227		—
Total securities and other investments owned		1,132,425		767,788		46,139		318,498
Loans receivable, at fair value		270,295		—		—		270,295
Total assets measured at fair value	$	1,402,720	$	767,788	$	46,139	$	588,793

Liabilities:
Securities sold not yet purchased:
Equity securities	$	261,314	$	261,314	$	—	$	—
Corporate bonds		10,675		—		10,675		—
Other fixed income securities		99		—		99		—
Total securities sold not yet purchased		272,088		261,314		10,774		—
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,105		—		—		4,105
Total liabilities measured at fair value	$	276,193	$	261,314	$	10,774	$	4,105

	Financial Assets and Liabilities Measured at Fair Value
	on a Recurring Basis at December 31, 2020 Using
			Quoted prices in		Other		Significant
	Fair value at		active markets for		observable		unobservable
	December 31		identical assets		inputs		inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities and other investments owned:
Equity securities	$	670,340	$	521,048	$	—	$	149,292
Corporate bonds		3,195		—		3,195		—
Other fixed income securities		1,913		—		1,913		—
Total securities and other investments owned		675,448		521,048		5,108		149,292
Loans receivable, at fair value		390,689		—		—		390,689
Total assets measured at fair value	$	1,066,137	$	521,048	$	5,108	$	539,981

Liabilities:
Securities sold not yet purchased:
Equity securities	$	4,575	$	4,575	$	—	$	—
Corporate bonds		4,288		—		4,288		—
Other fixed income securities		1,242		—		1,242		—
Total securities sold not yet purchased		10,105		4,575		5,530		—
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,700		—		—		4,700
Total liabilities measured at fair value	$	14,805	$	4,575	$	5,530	$	4,700

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were ~~$446,588~~$588,793 and ~~$152,589,~~$539,981, respectively, or ~~19.4%~~14.3% and ~~6.6%~~20.3%, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity.

The following table summarizes the significant unobservable inputs in the fair value measurement of level 3 financial assets and liabilities by category of investment and valuation technique as of ~~September~~June 30, ~~2020:~~2021:

Fair value at

September 30,

Weighted

June 30,

Weighted

2020

Valuation Technique

Unobservable Input

Range

Average

2021

Valuation Technique

Unobservable Input

Range

Average

Assets:

Equity securities

102,249

Market approach

Multiple of revenue

2.49x - 6.29x

4.92x

279,648

Market approach

Multiple of EBITDA

5.85x - 12.00x

7.31x

Multiple of EBITDA

5.50x - 10.00x

5.70x

Multiple of PV-10

0.65x

Multiple of PV-10

.28x

Multiple of Sales

2.13x

Market price of related security

$0.43 - $4.00/share

$1.39

Market price of related security

$0.83

Option pricing model

Annualized volatility

107.0%

38,850

Option pricing model

Annualized volatility

0.21 - 2.83

$0.67

Loans receivable at fair value

344,339

Discounted cash flow

Market interest rate

4.9%-17.3%

15%

270,295

Discounted cash flow

Market interest rate

4.9% - 37.5%

16.9%

Market approach

Market price of related security

$0.43/share

$0.43

Total level 3 assets measured at fair value

446,588

588,793

Liabilities:

Mandatorily redeemable noncontrolling interests issued after November 5, 2003

4,462

Market approach

Operating income multiple

6.0x

4,105

Market approach

Operating income multiple

6.0x

The changes in Level 3 fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are as follows:

Level 3 Level 3 Changes During the Period Level 3
Balance at Fair Relating to Purchases, Transfer in Balance at
Beginning of Value Undistributed Sales and and/or out End of
Year Adjustments Earnings Settlements of Level 3 Period
Nine Months Ended September 30, 2020
Equity securities $ 109,251 $ (11,314 ) $ — $ 4,984 $ (672 ) $ 102,249
Loans receivable at fair value 43,338 (21,834 ) 3,134 93,853 225,848 344,339
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,616 — (154 ) — — 4,462
Nine Months Ended September 30, 2019
Equity securities $ 24,577 $ 715 $ 1,424 $ 24,215 $ — $ 50,931
Loans receivable at fair value 33,731 11,648 1,621 (11,489 ) — 35,511
Mandatorily redeemable noncontrolling interests issued after November 5, 2003 4,633 — (238 ) — — 4,395

	Level 3		Level 3 Changes During the Period												Level 3
	Balance at		Fair			Relating to			Purchases,			Transfer in			Balance at
	Beginning of		Value			Undistributed			Sales and			and/or out			End of
	Year		Adjustments			Earnings			Settlements			of Level 3			Period
Six Months Ended June 30, 2021
Equity securities	$	149,292	$	53,074		$	—		$	119,745		$	(3,613	)	$	318,498
Loans receivable at fair value		390,689		10,141			4,473			(135,008	)		—			270,295
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,700		—			(595	)		—			—			4,105
Six Months Ended June 30, 2020
Equity securities	$	109,251	$	(2,462	)	$	—		$	1,000		$	—		$	107,789
Loans receivable at fair value		43,338		(21,974	)		2,462			75,843			225,848			325,517
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,616		—			(265	)		—			—			4,351

The Company adopted ASU 2016-13 and its amendment ASU 2019-05 effective January 1, 2020. Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the irrevocable fair value option for all outstanding loans receivable that were measured at amortized cost as of December 31, 2019. The loans receivable, at fair value are included in transfers into level 3 fair value assets in the above table.

The amount reported in the table above for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 includes the amount of undistributed earnings attributable to the noncontrolling interests that is distributed on a quarterly basis. The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments.

As of ~~September~~June 30, 2021 and December 31, 2020, the senior notes payable had a carrying amount of ~~$854,926~~$1,213,105 and $870,783, respectively, and fair value of ~~$845,227.~~$1,262,750 and $898,606, respectively. The carrying amount of the term ~~loan~~loans approximates fair value because the effective yield of such ~~instrument is~~instruments are consistent with current market rates of interest for instruments of comparable credit risk.

The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in trading income (losses) and fair value adjustments on loans on the condensed consolidated statements of operations. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

The following table sets forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2021. This investment was measured due to an observable price change during the three months ended June 30, 2021.

	Fair Value Measurement Using
			Quoted prices in		Other		Significant
			active markets for		observable		unobservable
			identical assets		inputs		inputs
	Total		(Level 1)		(Level 2)		(Level 3)
As of June 30, 2021
Investments in nonpublic entities that do not report NAV	$	2,536	$	—	$	2,536	$	—
As of December 31, 2020
Investments in nonpublic entities that do not report NAV	$	—	$	—	$	—	$	—

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, except for the impact of the intangible impairment charge in 2020 as described in Note 7-6 - Goodwill and ~~Other~~ Intangible Assets, there were no additional assets or liabilities measured at fair value on a non-recurring basis. The fair value of the indefinite-lived intangible assets was determined based on a discounted cash flow model using a rate of 13.8%. The indefinite-lived intangible assets are level 3 assets in the fair value hierarchy.

(o) Derivative and Foreign Currency Translation

The Company periodically uses derivative instruments, which primarily consist of the purchase of forward exchange contracts, for certain loans receivable and Auction and Liquidation engagements with operations outside the United States. During the nine months ended September 30, 2020, the Company’s use of derivatives consisted of the purchase of forward exchange contracts in the amount of 12,700 Euros, of which 2,000 Euros were settled. As of ~~September~~June 30, 2021 and December 31, 2020, forward exchange contracts in the amount of ~~10,700~~20,200 Euros and 6,000 Euros, respectively, were outstanding. ~~The Company did not use any derivative contracts during the nine months ended September 30, 2019.~~

The forward exchange contracts were entered into to improve the predictability of cash flows related to a retail store liquidation engagement and a loan receivable. The net ~~loss~~gain from forward exchange contracts was ~~$16~~$363 and $673 during the ~~nine~~three and six months ended ~~September~~June 30, 2021, respectively. There was no forward exchange contract activity during the three and six months ended June 30, 2020. This amount is reported as a component of ~~Selling,~~selling, general and administrative expenses in the consolidated statements of ~~income.~~operations.

The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Transaction ~~(loss) gains~~losses were ~~($97)~~$390 and ~~$446~~$438 during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$413~~gains were $166 and ~~$121~~$510 during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. These amounts are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of ~~income.~~operations.

(p) ~~Common Stock Warrants~~Equity Investment

At June 30, 2021 and December 31, 2020, equity investments of $48,851 and $54,953, respectively, were included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets. The ~~Company issued 821,816 warrants to purchase common stock~~Company’s share of earnings or losses from equity method investees is included in gain (loss) from equity investments in the ~~Company (the “Wunderlich Warrants”) in connection with the acquisition~~accompanying condensed consolidated statements of Wunderlich Securities, Inc. (“Wunderlich”) on July 3, 2017. The Wunderlich Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $17.50 per share, subject to, among other matters, the proper completion 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. On May 16, 2019, the Company repurchased 638,311 warrants for $2,777 ($4.35 per warrant). On June 11, 2020, 167,352 warrants held in escrow from the acquisition of Wunderlich were cancelled in accordance with the terms of the escrow instructions. The Wunderlich Warrants expire on July 3, 2022. As of September 30, 2020, Wunderlich Warrants to purchase 16,153 shares of common stock were outstanding.operations.

On October 28, 2019, the Company issued 200,000 warrants to purchase common stock of the Company (the “BR Brands Warrants”) in connection with the acquisition of a majority ownership interest in BR Brand Holdings LLC. The BR Brand Warrants entitle the holders of the warrants to acquire shares of the Company’s common stock from the Company at an exercise price of $26.24 per share. One-third of the BR Brand Warrants immediately vested and became exercisable upon issuance, and the remaining two-thirds of warrants will vest and become exercisable following the first and/or second anniversaries of the closing, subject to BR Brand’s (or another related joint venture with Bluestar Alliance LLC) satisfaction of specified financial performance targets. The BR Brand warrants expire three years after the last vesting event occurs.

~~(q) Equity Investments~~

bebe stores, inc.

At ~~September~~June 30, 2021 and December 31, 2020, the Company had a ~~30.5%~~39.5% ownership interest in bebe stores, inc. (“bebe”). On November 10, 2020, the Company purchased an additional 1,500,000 shares of newly issued common stock of bebe for $7,500 and increased its’ ownership interest increased from 31.5% to 39.5%. The equity ownership in bebe iswas accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

As of June 30, 2021, the carrying value of the Company’s equity investment in bebe exceeded the fair value based on the quoted market prices. In consideration of these facts, the Company evaluated its investment for impairment. The Company did not utilize bright-line tests in the evaluation. Based on the available facts and information regarding the operating results of bebe, the Company’s ability and intent to hold the investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying values, the Company concluded that recognition of impairment losses in earnings was not required. However, the Company will continue to monitor the investment and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.

National Holdings Corporation

In 2018, the Company entered into an agreement to acquire shares of National Holdings Corporation (“National Holdings”), a Nasdaq-listed issuer, from Fortress Biotech, Inc. for an aggregate purchase price totaling approximately $22.9 million. The transaction was completed in two tranches. In the first tranche, which was completed in the fourth quarter of 2018, the Company acquired shares representing 24% of the total outstanding shares of National Holdings. The second tranche was completed in the first quarter of 2019. As of ~~September 30,~~December 31, 2020, the Company owned ~~6,159,550 shares~~approximately 45% of the commons stock of National ~~Holdings’ common stock, representing 45.3% of National Holdings’ outstanding shares. The carrying value for the National Holdings investment is~~which was included in prepaid expenses and other assets in the condensed consolidated balance sheets. The equity ownership in National ~~Holdings is~~was accounted for under the equity method of ~~accounting.~~accounting for periods prior to February 25, 2021. On February 25, 2021, the Company completed the acquisition of National by acquiring the 55% of common stock not previously owned by the Company pursuant to an agreement and plan of merger dated January 10, 2021, following the successful completion of a tender offer commenced by us on January 27, 2021. The cash consideration for the purchase of the 55% of common stock not previously owned by the Company and settlement of outstanding share based awards was $35,314. National’s operating results subsequent to February 25, 2021 is included in the Company’s condensed consolidated financial statements.

As of September 30, 2020, the carrying values of the Company’s investments in bebe and National Holdings exceeded their fair values based on their quoted market prices. In light of these facts, the Company evaluated its investments in bebe and National Holdings for impairment. The Company utilized no bright- line tests in such evaluations. Based on the available facts and information regarding the operating results of both entities, the Company’s ability and intent to hold the investments until recovery, the relative amount of the declines, and the length of time that the fair values were less than the carrying values, the Company concluded that recognition of impairment losses in earnings was not required. However, the Company will continue to monitor these investments and it is possible that impairment losses will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.Other Equity Investments

The Company has other equity investments over which the Company exercises significant influence but which do not meet the requirements for consolidation, including B. Riley Principal 150 Merger Corp., B. Riley Principal 250 Merger Corp., and 40% ownership interest in Lingo Management, LLC. The equity ownership in these other investments was accounted for under the equity method of accounting and is included in prepaid expenses and other assets in the condensed consolidated balance sheets.

~~(r)~~(q) Loan Participations Sold

As of ~~September~~June 30, ~~2020,~~2021, the Company has sold investments (“Loan Participations Sold”) to third parties (“Participants”) that are accounted for as secured borrowings under ASC Topic 860, Transfers and Servicing. Under ASC Topic 860, a partial loan transfer does not qualify for sale accounting in order for sale treatment to be allowed. A participation or other partial loan transfer that meets the definition of a participating interest is classified as loan receivable and the portion transferred is recorded as a secured borrowing under loan participations sold in the condensed consolidated balance ~~sheet.~~sheets. The Participants are entitled to payments made by the borrower of the related loan equal to the current Loan Participations Sold outstanding at the interest rates for the respective investment. In the event that the borrower defaults, the Participants have rights to payments from such borrower, but do not have recourse to the Company. The terms of the Loan Participations Sold are commensurate with the terms of the related loan.

As of ~~September~~June 30, 2021 and December 31, 2020, the Company had entered into participation agreements for a total of ~~$13,919.~~$4,444 and $17,316, respectively. In addition, the interest income and interest expense related to the Loan Participations Sold resulted in interest income and interest expense which is presented gross on the condensed consolidated ~~statement~~statements of ~~income.~~operations.

~~(s)~~(r) Supplemental Non-cash Disclosures

During the ~~nine~~six months ended ~~September~~June 30, 2021, non-cash investing activities included the repayment of a loan receivable in full in the amount of $133,453 with equity securities. In addition, $35,000 of loans receivable were exchanged for $35,000 of newly issued debt securities and a $36,000 note receivable was issued for the sale of equity securities to a third party. During the six months ended June 30, 2020, non-cash investing activities included $4,633 non-cash conversion of an equity method investment and ~~$9,778~~$6,170 conversion of ~~loans~~a loan receivable to shares of stock.

~~(t)~~(s) Reclassifications

~~As of December 31, 2019, loans receivable recorded at fair value of $43,338 were previously included~~Certain amounts reported in ~~securities~~the Capital Markets segment for the three and ~~other investments owned, at fair value. These loans receivable amounts~~six months ended June 30, 2020 have been reclassified and reported in ~~loans receivable, at fair value~~the Financial Consulting and Wealth Management segments for the three and six months ended June 30, 2020 as a result of the organizational changes that created the new Financial Consulting segment in the fourth quarter of 2020 and Wealth Management segment in the first quarter of 2021.

For the six months ended June 30, 2020, $797 of dividends received from equity method investments that were previously included in cash flows from investing activities have been reclassified and included in cash flows from operating activities to conform to the ~~2020~~2021 presentation. During the three and nine months ended September 30, 2019, trading income and fair value adjustments on loans of $40,268 and $71,730, respectively were previously included in services and fees income in the capital markets segment. These trading income and fair value adjustments on loans amounts have been reclassified and reported in trading income and fair value adjustments on loans to conform to the 2020 presentation. During the three and nine months ended September 30, 2019, expenses of $4,505 and $13,495, respectively, were previously included in direct cost of services in the valuation and appraisal segment. These expenses have been reclassified and reported in selling, general and administrative expenses to conform to the 2020 presentation.

~~(u)~~(t) Variable Interest ~~Entity~~Entities

In 2018, the operations of GACP II, LP, a private debt investment limited partnership (the “Partnership”) commenced operations. The ~~Company’s investment in the~~ Partnership is a variable interest entity (“VIE”) since the unaffiliated limited partners do not have substantive ~~kick- out~~kick-out or participating rights to remove the Company’s subsidiary that is the general partner managing the Partnership. The Company has determined that it is not the primary beneficiary due to the fact that its fee arrangements are considered at-market and thus not deemed to be variable interests, and it does not hold any other interests in the Partnership that are considered to be more than insignificant. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed.

In November 2020, the Company invested in Lingo Management, LLC (“Lingo”), a joint venture with an unaffiliated third party. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo). Lingo is a VIE because the entity does not have enough equity at risk to finance its activities without additional subordinated financial support. The Company has determined that it is not the primary beneficiary because it does not have the power to direct the activities of the VIE that most significantly impact the entity’s financial performance. The Company’s variable interests in Lingo include loans receivable, at fair value and an equity investment accounted for under the equity method of accounting.

The Company, through its newly acquired subsidiary, National, has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance. These Funds are established primarily to make and manage investments in equity or convertible debt securities of privately held companies that the Company, as investment advisor to the Funds, believes possess innovative or disruptive technologies and present opportunities for an initial public offering (“IPO”) or other similar liquidity event within approximately one to five years from the date of investment. The Funds intend to hold the investments until an IPO or other similar liquidity event and then to make distributions to its investors when contractually permitted, estimated at approximately six months following such IPO or liquidity event.

The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC 323 as an equity method investment with changes in allocation recorded currently in the results of operations. Once fund investors have received distributions in an amount equal to one hundred percent (100%) of their total capital contributions, the Company as the manager of the Funds will be entitled to share in any profits of the Funds to the extent of the carried interest. As the fee arrangements under such agreements are arm's length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs.

Placement agent fees attributable to such arrangements from acquisition date through June 30, 2021 were $25,382 and are included in services and fees in the condensed consolidated statements of operations.

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

			June 30, 2021
Partnership investments	$	20,308	$	23,516
Equity Investment				2,255
Due from related party		372		536
Loans receivable, at fair value				57,400
Maximum exposure to loss	$	20,680	$	83,707

~~(v)~~(u) Recent Accounting Standards

Not yet adopted

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective through December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes on investments, performing intra-period allocations, and calculating income taxes in interim periods. The ASU also adds guidance to reduce the complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The revised guidance will be applied prospectively and is effective for SEC filers for annual periods or interim periods with fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not been issued.31, 2022. The Company ~~has not yet adopted this update and~~ is currently ~~evaluating~~assessing the ~~effect this new standard will~~potential impacts the adoption of ASU 2020-04 may have on its ~~financial condition and~~consolidated results of ~~operations.~~operations, cash flows, financial position or disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This Update addresses issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. In addition to eliminating certain accounting models, the ASU also provides guidance to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. Additionally, the ASU amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions, and to amend the related EPS guidance. The amendments in this update are effective for public business entities for fiscal periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company has not yet adopted this update and is currently evaluating the effect, if any, this new standard will have on its financial condition and results of operations.

Recently adopted

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes on investments, performing intra-period allocations, and calculating income taxes in interim periods. The ASU also adds guidance to reduce the complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The revised guidance will be applied prospectively and is effective for SEC filers for annual periods or interim periods with fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not been issued. The Company adopted the ASU effective January 1, 2021. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position and disclosures.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs. The amendments in this Update clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The Update is intended to clarify the Codification and make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The amendments in this update are effective for public business entities for fiscal periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is not permitted. The Company ~~has not yet~~ adopted ~~this update and is currently evaluating~~ the ~~effect, if any, this new standard will have on its financial condition and~~ASU effective January 1, 2021. The impact of adopting the ASU was immaterial to the consolidated results of operations, cash flows, financial position and disclosures.

~~Recently adopted~~

In ~~June 2016,~~October 2020, the FASB issued ASU ~~2016-13, Financial Instruments − Credit Losses (Topic 326): Measurement~~2020-10, Codification Improvements. The Update contains amendments that improve the consistency of ~~Credit Losses~~the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the Amendments arose because the Board provided an option to give certain information either on ~~Financial Instruments (“ASC 326”)~~the face of the financial statements or in the notes to financial statements and that option was only included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). ~~This standard~~These amendments are not expected to change current practice but are intended to improve the Codification by ensuring that all guidance that requires or provides an ~~allowance~~option for an entity to provide information in the notes to financial statements is included in the Disclosure Section of the Codification, thus reducing the likelihood that the disclosure requirement would be ~~recorded for all expected credit losses for certain financial assets.~~missed. The ~~new standard introduces an approach, based on expected losses,~~Board does not anticipate that the amendments will result in any changes to ~~estimate credit losses on certain types of financial instruments. In May 2019,~~current GAAP. The amendments in the FASB issued ASU No. 2019-05, Financial Instruments − Credit Losses (Topic 326); Targeted Transition Relief,” which allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. ASU 2016-13 and ASU 2019-05Update are effective for ~~public companies for interim and~~ annual ~~period~~periods beginning after December 15, ~~2019.~~

2020, for public business entities. Early application of the amendments is permitted for public business entities for any annual or interim period for which financial statements have not been issued. The amendments in the Update should be applied retrospectively. The Company adopted the ~~new credit losses standard~~ASU effective January 1, 2020. Pursuant to ASU 2016-13 and its amendment ASU 2019-05, the Company elected the irrevocable fair value option for all outstanding loans receivable that were previously measured at amortized cost. Under the fair value option, loans receivable are now measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the consolidated statements of income. These loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes.2021. The impact of adopting ~~ASC 326~~the ASU was immaterial to the ~~condensed~~ consolidated results of operations, cash flows, financial ~~statements.~~

~~NOTE 3—ACQUISITIONS~~

~~Membership Interest Purchase Agreement with BR Brand Acquisition LLC~~

~~On October 11, 2019, the Company~~position and B. Riley Brand Management LLC, an indirect wholly-owned subsidiary of the Company (the “B. Riley Member”), entered into a Membership Interest Purchase Agreement (the “MIPA”) with BR Brand Acquisition LLC (the “BR Brand Member”) and BR Brand, pursuant to which the B. Riley Member acquired a majority of the equity interest in BR Brand. The closing of the transactions in accordance with the MIPA (the “Closing”) occurred on October 28, 2019.disclosures.

The B. Riley Member completed the Closing of a majority of the equity interest in BR Brand pursuant to the terms of the MIPA in exchange for (i) aggregate consideration of $116,500 in cash and (ii) warrant consideration of $990 from the issuance by the Company to Bluestar Alliance LLC (“Bluestar”), an affiliate of the BR Brand Member, of a warrant to purchase up to 200,000 shares of the Company’s common stock at an exercise price per share equal to $26.24. One-third of the shares of common stock issuable under the warrant immediately vested and became exercisable upon issuance at the Closing, and the remaining two-thirds of such shares of common stock will vest and become exercisable following the first and/or second anniversaries of the Closing, subject to BR Brand’s (or another related joint venture with Bluestar) satisfaction of specified financial performance targets. The fair value of the non-controlling interest in the amount of $29,373 was determined based on the relative fair value of the net assets acquired. The Company incurred $570 of transaction costs in connection with the acquisition.NOTE 3—RESTRUCTURING CHARGE

In connection with the Closing, (i) the BR Brand Member has caused the transfer of certain trademarks, domain names, license agreements and related assets from existing brand owners to BR Brand and (ii) the Company, Bluestar and certain of their affiliates (including the B. Riley Member and the BR Brand Member) entered into an amended and restated operating agreement for BR Brand and certain other commercial agreements.

The Company evaluated the transaction under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and Accounting Standards Update (“ASU”) 2017-01, Business Combinations: Clarifying the Definition of a Business. Based on this evaluation, the Company has determined that the acquisition did not meet the definition of a business and, therefore, has accounted for the transaction as an acquisition of assets. The fair value of the assets acquired, including transaction costs, have been reflected in the accompanying financial statements as follows:

Consideration paid by B. Riley:
Cash acquisition consideration $ 116,500
Transaction costs 570
Total cash consideration 117,070
Warrant consideration 990
Total consideration $ 118,060

Tangible assets acquired and assumed:
Cash and cash equivalents $ 2,160
Accounts receivable 1,751
Deferred revenue (1,332 )
Tradename 136,176
Customer list 8,678
Non-controlling interest (29,373 )
Total $ 118,060

~~NOTE 4—RESTRUCTURING CHARGE~~

~~The Company recorded restructuring charges of $1,557 for the three months and nine months ended September 30, 2020. The Company recorded no~~record any restructuring charges for the three and six months ended ~~September~~June 30, ~~2019. The Company recorded restructuring charges of $1,557~~2021 and ~~$1,699 for the nine months ended September 30, 2020 and 2019, respectively.~~

The restructuring charges during the three and nine months ended September 30, 2020 were primarily related to impairment of certain acquired tradename intangibles associated with the Company’s brand realignment across its subsidiary companies to provide greater external consistency and affiliation.

The restructuring charges during the nine months ended September 30, 2019 were primarily related to severance costs for magicJack employees from a reduction in workforce and lease termination costs in the Principal Investments – United Online and magicJack segment.

2020. The following tables summarize the changes in accrued restructuring charge during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Balance, beginning of period $ 979 2,642 1,600 3,855
Restructuring charge 1,557 — 1,557 1,699
Cash paid (189 ) (779 ) (820 ) (3,827 )
Non-cash items (1,554 ) 60 (1,544 ) 196
Balance, end of period $ 793 $ 1,923 $ 793 $ 1,923

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Balance, beginning of period	$	702		$	1,284		$	727		$	1,600
Cash paid		(29	)		(315	)		(57	)		(631	)
Non-cash items		3			10			6			10
Balance, end of period	$	676		$	979		$	676		$	979

~~The following tables summarize the restructuring activities by reportable segment during the three and nine months ended September 30, 2020 and 2019:~~NOTE 4— SECURITIES LENDING

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Principal Principal
Auction Investments -
United Online Auction Investments -
United Online
Capital and and Capital and and
Markets Liquidation magicJack Total Markets Liquidation magicJack Total
Restructuring charge:
Impairment of intangibles 1,417 140 — 1,557 — — — —
Total restructuring charge $ 1,417 $ 140 $ — $ 1,557 $ — $ — $ — $ —

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Principal Principal
Auction Investments -
United Online Auction Investments -
United Online
Capital and and Capital and and
Markets Liquidation magicJack Total Markets Liquidation magicJack Total
Restructuring charge:
Employee termination — — — — — — 1,594 1,594
Impairment of intangibles 1,417 140 — 1,557 — — — —
Facility closure and consolidation — — — — (4 ) — 109 105
Total restructuring charge $ 1,417 $ 140 $ — $ 1,557 $ (4 ) $ — $ 1,703 $ 1,699

~~NOTE 5—SECURITIES LENDING~~

The following table presents the contractual gross and net securities borrowing and lending balances and the related offsetting amount as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Gross amounts recognized Gross amounts offset
in the consolidated balance
sheets⁽¹⁾ Net amounts included
in the consolidated
balance sheets Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default⁽²⁾ Net amounts
As of September 30, 2020
Securities borrowed $ 676,423 $ — $ 676,423 $ 676,423 $ —
Securities loaned $ 667,109 $ — $ 667,109 $ 667,109 $ —
As of December 31, 2019
Securities borrowed $ 814,331 $ — $ 814,331 $ 814,331 $ —
Securities loaned $ 810,495 $ — $ 810,495 $ 810,495 $ —

							Amounts not
							offset in the
							consolidated balance
			Gross amounts		Net amounts		sheets but eligible
			offset in the		included in the		for offsetting
	Gross amounts		consolidated		consolidated		upon counterparty
	recognized		balance sheets ⁽¹⁾		balance sheets		default⁽²⁾		Net amounts
As of June 30, 2021
Securities borrowed	$	1,140,023	$	—	$	1,140,023	$	1,140,023	$	—
Securities loaned	$	1,134,359	$	—	$	1,134,359	$	1,134,359	$	—
As of June 30, 2020
Securities borrowed	$	786,363	$	—	$	786,363	$	786,363	$	—
Securities loaned	$	779,013	$	—	$	779,013	$	779,013	$	—

⁽¹⁾

Includes financial instruments subject to enforceable master netting provisions that are permitted to be offset to the extent an event of default has occurred.

⁽²⁾

Includes the amount of cash collateral held/posted.

NOTE 6—5— ACCOUNTS RECEIVABLE

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

	September 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
Accounts receivable	$	38,421		$	36,385		$	33,917		$	33,604
Investment banking fees, commissions and other receivables		4,247			8,043			20,817			10,316
Unbilled receivables		5,738			3,710			6,684			5,712
Total accounts receivable		48,405			48,138			61,418			49,632
Allowance for doubtful accounts		(2,752	)		(1,514	)		(3,565	)		(3,114	)
Accounts receivable, net	$	45,654		$	46,624		$	57,853		$	46,518

Unbilled receivables represent the amount of contractual reimbursable costs and fees for services performed in connection with fee and service based auction and liquidation contracts.

Additions and changes to the allowance for doubtful accounts consist of the following:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Balance, beginning of period $ 2,760 $ 1,360 $ 1,514 $ 696
Add: Additions to reserve 356 615 2,438 1,681
Less: Write-offs (364 ) (376 ) (1,200 ) (759 )
Less: Recovery — (138 ) — (157 )
Balance, end of period $ 2,752 $ 1,461 $ 2,752 $ 1,461

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Balance, beginning of period $ 3,526 $ 2,238 $ 3,599 $ 1,514
Add: Additions to reserve 353 940 755 2,081
Less: Write-offs (320 ) (418 ) (821 ) (835 )
Less: Recovery 6 — 32 —
Balance, end of period $ 3,565 $ 2,760 $ 3,565 $ 2,760

NOTE 7—6— GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill was $236,005 and $227,046 at ~~September~~June 30, ~~2020~~2021 and ~~$223,697 at~~ December 31, ~~2019.~~2020, respectively.

The changes in the carrying amount of goodwill for the six months ended June 30, 2021 were as follows:

									Principal
									Investments-
	Capital		Wealth		Auction and		Financial		United Online
	Markets		Management		Liquidation		Consulting		and magicJack
	Segment		Segment		Segment		Segment		Segment		Total
Balance as of December 31, 2020	$	50,806	$	28,396	$	1,975	$	23,680	$	122,189	$	227,046
Goodwill acquired during the period:
Acquisition of business		—		8,959		—		—		—		8,959
Balance as of June 30, 2021	$	50,806	$	37,355	$	1,975	$	23,680	$	122,189	$	236,005

Intangible assets consisted of the following:

As of September 30, 2020 As of December 31, 2019
Gross Gross
Carrying Accumulated Intangibles Carrying Accumulated Intangibles
Useful Life Value Amortization Net Value Amortization Net
Amortizable assets:
Customer relationships 2 to 16 Years $ 98,898 $ 37,023 $ 61,875 $ 99,008 $ 27,269 $ 71,739
Domain names 7 Years 235 140 95 233 117 116
Advertising relationships 8 Years 100 53 47 100 44 56
Internally developed software and other intangibles 0.5 to 5 Years 11,775 6,490 5,285 11,765 4,843 6,922
Trademarks 7 to 10 Years 2,850 912 1,938 4,600 1,324 3,276
Total 113,858 44,618 69,240 115,706 33,597 82,109

Non-amortizable assets:
Tradenames 125,276 — 125,276 138,416 — 138,416
Total intangible assets $ 239,134 $ 44,618 $ 194,516 $ 254,122 $ 33,597 $ 220,525

		As of June 30, 2021						As of December 31, 2020
		Gross						Gross
		Carrying		Accumulated		Intangibles		Carrying		Accumulated		Intangibles
	Useful Life	Value		Amortization		Net		Value		Amortization		Net
Amortizable assets:
Customer relationships	0.1 to 13 Years	$	116,858	$	50,153	$	66,705	$	98,898	$	40,281	$	58,617
Domain names	7 Years		235		165		70		235		148		87
Advertising relationships	8 Years		100		62		38		100		56		44
Internally developed software and other intangibles	0.5 to 5 Years		11,775		7,757		4,018		11,775		6,913		4,862
Trademarks	7 to 10 Years		5,469		1,272		4,197		2,850		991		1,859
Total			134,437		59,409		75,028		113,858		48,389		65,469

Non-amortizable assets:
Tradenames			125,276		—		125,276		125,276		—		125,276
Total intangible assets		$	259,713	$	59,409	$	200,304	$	239,134	$	48,389	$	190,745

Amortization expense was ~~$3,919~~$5,134 and ~~$3,310~~$4,024 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$11,967~~$11,020 and ~~$10,031~~$8,048 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. At ~~September~~June 30, ~~2020,~~2021, estimated future amortization expense was ~~$3,769, $14,961, $14,307, $12,316~~$10,159, $17,193, $14,686, $10,745 and ~~$8,376~~$7,518 for the years ended December 31, ~~2020~~2021 (remaining ~~three~~six months), ~~2021,~~ 2022, 2023, 2024 and ~~2024,~~2025, respectively. The estimated future amortization expense after December 31, ~~2024~~2025 was ~~$15,512.~~$14,727.

In the first quarter of 2020, in accordance with ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the Company made a qualitative assessment of the impact of the COVID-19 outbreak on goodwill and other intangible assets. The Company determined that the COVID-19 outbreak was a triggering event for testing the indefinite-lived tradenames in the Brands segment and made a determination that the indefinite-lived tradenames in the Brands segment were ~~impaired and~~impaired. In the three months ended March 31, 2020, the Company recognized an impairment charge of ~~$4,000. As a result of~~$4,000 for the ~~continuing impact and duration of the COVID-19 outbreak on the operations of~~indefinite-lived tradenames in the Brands ~~segment, the~~segment. The Company also determined that there was ~~another~~a further triggering event for testing the indefinite-lived tradenames in the Brands segment in the second quarter of 2020 and made a determination that the indefinite-lived tradenames in the Brands segment were impaired and ~~the Company recognized~~ an additional impairment charge of $8,500 was recorded in the second quarter of 2020. There have been no triggering events subsequent to the second quarter of 2020 for testing indefinite-lived tradenames in the Brands segment. The Company will continue to monitor the impacts of the COVID-19 outbreak in future quarters. Changes in our forecasts could cause the book values of indefinite-lived tradenames to exceed fair values which may result in additional impairment charges in future periods.

NOTE 8—7— NOTES PAYABLE

Asset Based Credit Facility

On April 21, 2017, the Company amended its credit agreement (as amended, the “Credit Agreement”) governing its asset based credit facility with Wells Fargo Bank, National Association (“Wells Fargo Bank”) to increase the maximum borrowing limit from $100,000 to $200,000. Such amendment, among other things, also extended the expiration date of the credit facility from July 15, 2018 to April 21, 2022. The Credit Agreement continues to allow for borrowings under 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~~50,000 British Pounds. Any borrowings on the UK Credit Agreement reduce the availability on the asset based $200,000 credit facility. The UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement. Cash advances and the issuance of letters of credit under the credit facility are made at the lender’s discretion. The letters of credit issued under this facility are furnished by the lender to third parties for the principal purpose of securing minimum guarantees under liquidation services ~~contracts.~~contracts more fully described in Note 2(c) 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 LIBOR plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided. The credit facility also provides for success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on the liquidation engagements funded under the Credit Agreement as set forth therein. Interest expense totaled ~~$109~~$108 and ~~$240~~$143 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$529~~$216 and ~~$826~~$420 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. There was no outstanding balance on this credit facility at ~~September~~June 30, ~~2020. The outstanding balance on this credit facility was $37,096 at~~2021 or December 31, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, there were no open letters of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility at ~~September~~June 30, ~~2020.~~2021.

~~Other Notes Payable~~Paycheck Protection Program

On April 10, 2020, NSC (a subsidiary of National) entered into a Promissory Note (the “NSC Note”) with Axos Bank as the lender (the “Lender”), pursuant to which the Lender agreed to make a loan to NSC under the Paycheck Protection Program (the “NSC Loan”) offered by the U.S. Small Business Administration (the “SBA”) pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to qualified small businesses (the “PPP”) in a principal amount of $5,524. On April 15, 2020, WEC (another subsidiary of National) also entered into a Promissory Note (the “WEC Note” and together with the NSC Note, the “PPP Notes”) with the Lender, pursuant to which the Lender agreed to make a loan to WEC under the PPP (the “WEC Loan” and together with the NSC Loan, the “PPP Loans”) in a principal amount of $973.

The interest rate on each PPP Note is a fixed rate of 1% per annum. Interest is calculated by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. The applicable borrower is required to make monthly payments commencing on the first day of the first full calendar month following the end of a statutorily defined deferral period (the “Deferral Period”), and such payments shall continue to be due and payable on the first day of each calendar month thereafter until the date that is two years following the funding date (the “Maturity Date”), or April 13, 2022 in the case of the NSC Note and April 16, 2022 in the case of the WEC Note. Monthly payment amounts are based on repayment of interest accrued during the Deferral Period, interest accruing until and including the Maturity Date, and full amortization of the outstanding principal balance. The PPP loans are included in notes payable in the condensed consolidated balance sheets.

According to the terms of the PPP, all or a portion of loans under the PPP may be forgiven if certain conditions set forth in the CARES Act and the rules of the SBA are met. In order to be forgiven, the proceeds of each PPP Loan are to be used to pay for payroll costs, continuation of group health care benefits during periods of paid sick, medical, or family leave, or insurance premiums; salaries or commissions or similar compensation; rent; utilities; and interest on certain other outstanding debt; however, 60% of the proceeds of each PPP Loan must be used for payroll purposes.

Each PPP Note includes events of default, the occurrence and continuation of which would provide the Lender with the right to exercise remedies against NSC or WEC, as applicable, including the right to declare the entire unpaid principal balance under the applicable PPP Note and all accrued unpaid interest immediately due. Upon completion of the acquisition of National, in accordance with the provisions of the Small Business Administration regarding changes of ownership of an entity that has received PPP funds, the Company was required to place $6,553 of cash in a restricted cash account with the PPP lender.

In June 2021, the full amount of the Company’s PPP loans and accrued interest were forgiven in the amount of $6,509, and the Company recorded a gain on extinguishment of loans for this amount in the accompanying Condensed Consolidated Statement of Operations.

Other Notes Payable

Notes payable include notes payable to a clearing organization for one of the Company’s broker dealers. The notes payable accrue interest at the prime rate plus 2.0% ~~(6.75%~~(5.25% at ~~September~~June 30, ~~2020)~~2021) payable annually, maturing January 31, 2022. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the outstanding balance for the notes payable was ~~$714~~$357 and ~~$1,071,~~$714, respectively. Interest expense was ~~$12~~$5 and ~~$22~~$48 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$75~~$12 and ~~$66~~$63 for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

~~NOTE 9—TERM LOAN~~

Also included in notes payable at December 31, 2020, was a $37,253 note payable to Garrison TNCI LLC which was assumed as part of the Company’s investment in Lingo Management LLC. The note accrued interest at 12.5% per annum and had a maturity date of March 31, 2021. During the six months ended June 30, 2021, interest expense on the note was $238. The note was paid in full in January 2021.

NOTE 8 — TERM LOANS

Nomura Credit Agreement

On June 23, 2021, the Company, and its wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, for a four-year $200,000 secured term loan credit facility (the “Term Loan Facility”) and a four-year $80,000 secured revolving loan credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

Eurodollar loans under the Credit Facilities will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans will accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the facility for the immediately preceding fiscal quarter.

Subject to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities. If borrowings under the facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess. The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain Operating EBITDA of at least $115,000 and the Primary Guarantor to maintain net asset value of at least $900,000. 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.

Commencing on September 30, 2022, the Term Loan Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity. Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $2,500 per quarter.

At June 30, 2021, the outstanding balance on the credit facility’s term loan was $194,218 (net of unamortized debt issuance costs of $5,782). Interest on the term loan for the three and six months ended June 30, 2021, was $236 (including amortization of deferred debt issuance costs of $30). The interest rate on the term loan at June 30, 2021 was 4.64%.

The Company had not made any borrowings under the Revolving Credit Facility at June 30, 2021. The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $30 (including amortization of deferred financing costs of $13). The interest rate on the revolving facility at June 30, 2021 was 4.65%. Subsequent to June 30, 2021, the Company drew down the full $80,000 of the Revolving Credit Facility.

The Company is in compliance with all financial covenants in the Nomura Credit Agreement at June 30, 2021.

BRPAC Credit Agreement

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A. in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”). Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and together with the Borrowers, the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, ~~(“BRPI”),~~ the parent corporation of BRPAC and a subsidiary of the Company, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.

The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India; and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel. Such security interests are evidenced by pledge, security and other related agreements.

The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios. The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding BRPAC Credit Agreement.

Under the BRPAC Credit Agreement, the Company borrowed $80,000 due December 19, 2023. Pursuant to the terms of the BRPAC Credit Agreement, the Company may request additional optional term loans in an aggregate principal amount of up to $10,000 at any time prior to the first anniversary of the agreement date (the “Option Loan”) with a final maturity date of December 19, 2023. On February 1, 2019, the Credit Parties, the Closing Date Lenders, the Agent and City National Bank, as a new lender (the “New Lender”), entered into the First Amendment to the Credit Agreement and Joinder (the “First Amendment”) pursuant to which, among other things, (i) New Lender became a party to the BRPAC Credit Agreement, (ii) the New Lender extended to Borrowers the Option Loan in the amount of $10,000, (iii) the aggregate outstanding principal amount of the term loans was increased from $80,000 to $90,000; and (iv) the amortization schedule under the BRPAC was amended as set forth in the First Amendment. Additionally, in connection with the Option Loan, the Borrowers executed a term note in favor of New Lender dated February 1, 2019 in the amount of $10,000.

On December 31, 2020, the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which, among other things, (i) the Lenders agreed to make a new $75,000 term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing Terms Loans and Optional Loans and will use for other general corporate purposes, (ii) the Borrowers were permitted to make a one-time Permitted Distribution (as defined in the Second Amendment) in the amount of $30,000 on the date of the Second Amendment, (iii) the maturity date of the new Term Loans was set at five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B. Riley Principal Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement. Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second Amendment. Borrowings under the BRPAC Credit Agreement bear interest at a rate equal to (a) the LIBOR rate for Eurodollar loans, plus (b) the applicable margin rate, which ranges from ~~two and one-half percent (2.5%)~~2.75% to ~~three percent (3.0%)~~3.25% per annum, based upon the Borrowers’ ratio of consolidated funded indebtedness to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the preceding four fiscal quarters or other applicable period. At ~~September~~June 30, 2021 and December 31, 2020, the interest rate on the BRPAC Credit Agreement was ~~at 2.90%. Interest payments are to be made each one, three or six months.~~ 3.36% and 3.40%, respectively.

Amounts outstanding under the Amended BRPAC Credit Agreement are due in quarterly installments commencing on March 31, ~~2019 with any remaining amounts outstanding due at maturity. For the $80,000 loan, quarterly~~2021. Quarterly installments from September 30, ~~2020~~2021 to December 31, 2021 are in the amount of $4,750 per quarter, from March 31, 2022 to December 31, 2022 are in the amount of ~~$4,244~~$4,250 per quarter, ~~and~~ from March 31, 2023 to December 31, 2023 are ~~$2,122~~in the amount of $3,750 per ~~quarter. For the $10,000 loan, quarterly installments~~quarter, from ~~September 30, 2020~~March 31, 2024 to December 31, ~~2022~~2024 are ~~$566~~in the amount of $3,250 per quarter, and from March 31, ~~2023~~2025 to December 31, ~~2023~~2025 are ~~$265~~in the amount of $2,750 per quarter.

As of ~~September~~June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, the outstanding balance on the term loan was ~~$52,452~~$62,885 (net of unamortized debt issuance costs of ~~$385)~~$631) and ~~$66,666~~$74,213 (net of unamortized debt issuance costs of ~~$600)~~$787), respectively. Interest expense on the term loan during the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019~~ was ~~$497~~$663 (including amortization of deferred debt issuance costs of ~~$67)~~$77) and ~~$1,118~~$586 (including amortization of deferred debt issuance costs of ~~$87)~~$72), respectively. Interest expense on the term loan during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019~~ was ~~$1,912~~$1,377 (including amortization of deferred debt issuance costs of ~~$216)~~$157) and ~~$3,653~~$1,415 (including amortization of deferred debt issuance costs of ~~$268)~~$148), respectively.

~~We are~~The Company is in compliance with all financial covenants in the BRPAC Credit Agreement at ~~September~~June 30, ~~2020.~~2021.

NOTE ~~10—~~9—SENIOR NOTES PAYABLE

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

September 30, December 31,
2020 2019
7.50% Senior notes due May 31, 2027 $ 125,536 $ 117,954
7.25% Senior notes due December 31, 2027 122,545 120,126
7.375% Senior notes due May 31, 2023 127,697 122,140
6.875% Senior notes due September 30, 2023 113,109 105,952
6.75% Senior notes due May 31, 2024 110,476 106,589
6.50% Senior notes due September 30, 2026 134,657 124,226
6.375% Senior notes due February 28, 2025 130,942 —
864,962 696,987
Less: Unamortized debt issuance costs (10,036 ) (8,875 )
$ 854,926 $ 688,112

	June 30,			December 31,
	2021			2020
7.500% Senior notes due May 31, 2027	$	—		$	128,156
7.250% Senior notes due December 31, 2027		122,793			122,793
7.375% Senior notes due May 31, 2023		137,454			137,454
6.875% Senior notes due September 30, 2023		115,219			115,168
6.750% Senior notes due May 31, 2024		111,171			111,170
6.500% Senior notes due September 30, 2026		152,573			134,657
6.375% Senior notes due February 28, 2025		139,218			130,942
6.000% Senior notes due January 31, 2028		255,718			—
5.500% Senior notes due March 31, 2026		192,858			—
		1,227,004			880,340
Less: Unamortized debt issuance costs		(13,899	)		(9,557	)
	$	1,213,105		$	870,783

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company issued ~~$39,167~~$85,327 of senior notes due with maturity dates ranging from May 2023 to ~~December 2027~~January 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. ~~(fka B. Riley FBR, Inc.) (“B. Riley Securities”),~~ which governs the program of at-the-market sales of the Company’s senior notes. A series of prospectus supplements were filed by the Company with the SEC in respect of the Company’s offerings of these senior notes.

On ~~February 12, 2020,~~January 25, 2021, the Company issued ~~$132,250~~$230,000 of senior notes due in ~~February 2025~~January 2028 (“~~6.375% 2025~~6.0% 2028 Notes”) pursuant to ~~the~~a prospectus supplement dated February ~~10,~~12, 2020. Interest on the ~~6.375% 2025~~6.0% 2028 Notes is payable quarterly at ~~6.375%~~6.0%. The ~~6.375% 2025~~6.0% 2028 Notes are unsecured and due and payable in full on ~~February 28, 2025.~~January 31, 2028. In connection with the issuance of the ~~6.375% 2025~~6.0% 2028 Notes, the Company received net proceeds of ~~$129,213~~$225,723 (after underwriting commissions, fees and other issuance costs of ~~$3,037)~~$4,277). The 6.0% 2028 Notes bear interest at the rate of 6.0% per annum.

~~During~~On March ~~2020,~~29, 2021, the Company ~~repurchased bonds~~issued $159,493 of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to a prospectus supplement dated January 28, 2021. Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with ~~an aggregate face value of $3,443 for $1,829 resulting in a gain net of expenses and original issue discount of $1,556 during~~ the ~~nine months ended September 30, 2020. As part~~issuance of the ~~repurchase,~~5.5% 2026 Notes, the Company ~~paid $30 in~~received net proceeds of $156,260 (after underwriting commissions, fees and other issuance costs of $3,233). The 5.5% 2026 Notes bear interest ~~accrued through~~at the ~~date~~rate of ~~each respective repurchase.~~ 5.5% per annum.

On March 31, 2021, the Company exercised its option for early redemption at par $128,156 of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1,602 in accrued interest.

On June 24, 2021, the Company announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the "Redemption Date"). The Notes have an aggregate principal amount of $122,793. The redemption price is equal to 100% of the aggregate principal amount, plus any accrued and unpaid interest up to, but excluding, the Redemption Date. The Notes, which are listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.

On July 26, 2021, the Company redeemed, in full, $122,793 aggregate principal amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017. The total redemption payment included approximately $2,127 in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the total senior notes outstanding was ~~$854,926~~$1,213,105 (net of unamortized debt issue costs of ~~$10,036)~~$13,900) and ~~$688,112~~$870,783 (net of unamortized debt issue costs of ~~$8,875)~~$9,557) with a weighted average interest rate of ~~6.94%~~6.49% and ~~7.05%~~6.95%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled ~~$15,562~~$19,970 and ~~$11,255~~$15,588 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$45,543~~$38,564 and ~~$30,181~~$29,980 for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

Sales Agreement Prospectus to Issue Up to $150,000 of Senior Notes

~~On February 14, 2020,~~The most recent sales agreement prospectus was filed by us with the ~~Company entered into a new At Market Issuance~~SEC on April 6, 2021 (the “April 2021 Sales Agreement Prospectus”) supplementing the prospectus filed with the SEC on January 28, 2021 (the ~~“February 2020~~“January 2021 Sales ~~Agreement”~~Agreement Prospectus”) ~~with B. Riley Securities, governing a program of at-the-market sales of certain of the Company’s senior notes.~~. This program provides for the sale by the Company of up to $150,000 of certain of the Company’s senior notes. As of ~~September~~June 30, ~~2020,~~2021, the Company had ~~$148,076~~$64,673 remaining availability under the ~~February 2020~~April 2021 Sales Agreement.

NOTE ~~11—~~10—REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue from contracts with customers by reportable segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 is as follows:

	Three Months Ended September 30, 2020																						Principal
	Reportable Segment																						Investments -
							Principal							Capital			Wealth		Auction and		Financial		United Online and
							Investments -							Markets			Management		Liquidation		Consulting		magicJack		Brands
	Capital		Auction and		Valuation and		United Online and							Segment			Segment		Segment		Segment		Segment		Segment			Total
	Markets		Liquidation		Appraisal		magicJack		Brands		Total

Revenues from contracts with customers:													��
Revenues for the three months ended June 30, 2021
Corporate finance, consulting and investment banking fees	$	45,970	$	—	$	—	$	—	$	—	$	45,970		$	107,224		$	—	$	—	$	14,513	$	—	$	—		$	121,737
Wealth and asset management fees		16,500		—		—		—		—		16,500			1,994			67,017		—		—		—		—			69,011
Commissions, fees and reimbursed expenses		9,053		17,278		9,655		—		—		35,986			11,265			18,132		4,749		9,222		—		—			43,369
Subscription services		—		—		—		17,948		—		17,948			—			—		—		—		17,255		—			17,255
Service contract revenues		—		4,195		—		—		—		4,195			—			—		784		—		—		—			784
Advertising, licensing and other		—		22,712		—		3,654		4,000		30,366
Advertising, licensing and other ⁽¹⁾															—			—		11,743		—		2,391		4,501			18,635
Total revenues from contracts with customers		71,523		44,185		9,655		21,602		4,000		150,965			120,483			85,149		17,277		23,735		19,646		4,501			270,791

Other sources of revenue:
Interest income - Loans and securities lending		26,026		—		—		—		—		26,026			25,491			—		—		—		—		—			25,491
Trading gains on investments		31,613		—		—		—		—		31,613			30,577			2,865		—		—		—		(83	)		33,359
Fair value adjustment on loans		140		—		—		—		—		140			(680	)		—		—		—		—		—			(680	)
Other		17,509		—		—		—		—		17,509			5,514			2,295		—		—		—		—			7,809
Total revenues	$	146,811	$	44,185	$	9,655	$	21,602	$	4,000	$	226,253		$	181,385		$	90,309	$	17,277	$	23,735	$	19,646	$	4,418		$	336,770

Three Months Ended September 30, 2019
Reportable Segment
Principal
Investments -
Capital Auction
and Valuation
and United
Online
and
Markets Liquidation Appraisal magicJack Brands Total

Revenues from contracts with customers:
Corporate finance, consulting and investment banking fees $ 37,827 $ — $ — $ — $ — $ 37,827
Wealth and asset management fees 18,984 — — — — 18,984
Commissions, fees and reimbursed expenses 9,077 4,151 10,818 — — 24,046
Subscription services — — — 19,425 — 19,425
Service contract revenues — 7,081 — — — 7,081
Advertising, licensing and other — 54 — 4,438 — 4,492
Total revenues from contracts with customers 65,888 11,286 10,818 23,863 — 111,855

Other sources of revenue:
Interest income - Loans and securities lending 25,766 — — — — 25,766
Trading gains on investments 32,564 — — — — 32,564
Fair value adjustment on loans 7,704 — — — — 7,704
Other 2,174 — — — — 2,174
Total revenues $ 134,096 $ 11,286 $ 10,818 $ 23,863 $ — $ 180,063

(1)

Includes sale of goods of $11,743 in Auction and Liquidation and $714 in Principal Investments - United Online and magicJack.

Revenues for the three months ended June 30, 2020
Corporate finance, consulting and investment banking fees	$	38,498		$	—	$	—	$	11,155	$	—	$	—	$	49,653
Wealth and asset management fees		3,641			15,060		—		—		—		—		18,701
Commissions, fees and reimbursed expenses		12,785			—		2,596		7,668		—		—		23,049
Subscription services		—			—		—		—		18,287		—		18,287
Service contract revenues		—			—		4,610		—		—		—		4,610
Advertising, licensing and other ⁽¹⁾		—			—		1,045		—		3,145		3,206		7,396
Total revenues from contracts with customers		54,924			15,060		8,251		18,823		21,432		3,206		121,696

Interest income - Loans and securities lending		24,506			—		—		—		—		—		24,506
Trading gains on investments		118,128			467		—		—		—		—		118,595
Fair value adjustment on loans		(4,049	)		—		—		—		—		—		(4,049	)
Other		5,440			258		—		22		—		—		5,720
Total revenues	$	198,949		$	15,785	$	8,251	$	18,845	$	21,432	$	3,206	$	266,468

(1)

Includes sale of goods of $1,045 in Auction and Liquidation and $775 in Principal Investments - United Online and magicJack.

Nine Months Ended September 30, 2020
Reportable Segment
Principal
Investments -
Capital Auction
and Valuation
and United
Online
and
Markets Liquidation Appraisal magicJack Brands Total
Revenues from contracts with customers:
Corporate finance, consulting and investment banking fees $ 163,004 $ — $ — $ — $ — $ 163,004
Wealth and asset management fees 55,522 — — — — 55,522
Commissions, fees and reimbursed expenses 36,308 36,052 26,112 — — 98,472
Subscription services — — — 55,067 — 55,067
Service contract revenues — 13,288 — — — 13,288
Advertising, licensing and other — 23,757 — 10,688 11,007 45,452
Total revenues from contracts with customers 254,834 73,097 26,112 65,755 11,007 430,805
Other sources of revenue:
Interest income - Loans and securities lending 72,383 — — — — 72,383
Trading losses on investments (14,307 ) — — — — (14,307 )
Fair value adjustment on loans (21,835 ) — — — — (21,835 )
Other 25,469 — — — — 25,469
Total revenues $ 316,544 $ 73,097 $ 26,112 $ 65,755 $ 11,007 $ 492,515

	Nine Months Ended September 30, 2019																		Principal
	Reportable Segment																		Investments -
							Principal						Capital		Wealth		Auction and		Financial		United Online and
							Investments -						Markets		Management		Liquidation		Consulting		magicJack		Brands
	Capital		Auction and		Valuation and		United Online and						Segment		Segment		Segment		Segment		Segment		Segment		Total
	Markets		Liquidation		Appraisal		magicJack		Brands		Total
Revenues from contracts with customers:
Revenues for the six months ended June 30, 2021
Corporate finance, consulting and investment banking fees	$	95,260	$	—	$	—	$	—	$	—	$	95,260	$	254,293	$	—	$	—	$	27,940	$	—	$	—	$	282,233
Wealth and asset management fees		55,028		—		—		—		—		55,028		4,878		117,528		—		—		—		—		122,406
Commissions, fees and reimbursed expenses		30,350		39,250		29,143		—		—		98,743		26,809		31,600		11,807		17,204		—		—		87,420
Subscription services		—		—		—		62,894		—		62,894		—		—		—		—		34,499		—		34,499
Service contract revenues		—		26,431		—		—		—		26,431		—		—		1,085		—		—		—		1,085
Advertising, licensing and other		—		1,230		—		14,282		—		15,512
Advertising, licensing and other ⁽¹⁾												—		—		17,835		—		5,676		8,889		32,400
Total revenues from contracts with customers		180,638		66,911		29,143		77,176		—		353,868		285,980		149,128		30,727		45,144		40,175		8,889		560,043
Other sources of revenue:

Interest income - Loans and securities lending		54,147		—		—		—		—		54,147		62,411		—		—		—		—		—		62,411
Trading gains on investments		58,387		—		—		—		—		58,387		284,354		5,221		—		—		—		—		289,575
Fair value adjustment on loans		13,343		—		—		—		—		13,343		10,046		—		—		—		—		—		10,046
Other		7,130		—		—		—		—		7,130		10,996		3,858		—		—		—		—		14,854
Total revenues	$	313,645	$	66,911	$	29,143	$	77,176	$	—	$	486,875	$	653,787	$	158,207	$	30,727	$	45,144	$	40,175	$	8,889	$	936,929

(1)

Includes sale of goods of $17,835 in Auction and Liquidation and $1,450 in Principal Investments - United Online and magicJack.

Revenues for the six months ended June 30, 2020
Corporate finance, consulting and investment banking fees	$	94,386		$	—	$	—	$	22,648	$	—	$	—	$	117,034
Wealth and asset management fees		5,304			33,718		—		—		—		—		39,022
Commissions, fees and reimbursed expenses		27,255			—		18,774		16,457		—		—		62,486
Subscription services		—			—		—		—		37,120		—		37,120
Service contract revenues		—			—		9,093		—		—		—		9,093
Advertising, licensing and other ⁽¹⁾		—			—		1,045		—		7,034		7,007		15,086
Total revenues from contracts with customers		126,945			33,718		28,912		39,105		44,154		7,007		279,841

Interest income - Loans and securities lending		46,357			—		—		—		—		—		46,357
Trading losses on investments		(45,960	)		40		—		—		—		—		(45,920	)
Fair value adjustment on loans		(21,975	)		—		—		—		—		—		(21,975	)
Other		7,018			487		—		454		—		—		7,959
Total revenues	$	112,385		$	34,245	$	28,912	$	39,559	$	44,154	$	7,007	$	266,262

(1)

Includes sale of goods of $1,044 in Auction and Liquidation and $1,780 in Principal Investments - United Online and magicJack.

Contract Balances

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. The Company records a receivable when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance ~~obligations~~obligation(s) are satisfied. Receivables related to revenues from contracts with customers totaled ~~$45,654~~$57,853 and ~~$46,624~~$46,518 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company had no significant impairments related to these receivables during the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020. The Company also has $6,684 and $5,712 of unbilled receivables at June 30, 2021 and December 31, 2020, respectively, and advances against customer contracts of $200 at June 30, 2021 and December 31, 2020. The Company’s deferred revenue primarily relates to retainer and milestone fees received from corporate finance and investment banking advisory engagements, asset management agreements, ~~Valuation and Appraisal~~financial consulting engagements, ~~and~~ subscription services where the performance obligation has not yet been ~~satisfied.~~satisfied and license agreements with guaranteed minimum royalty payments and advertising/marketing fees with additional royalty revenue based on a percentage of defined sales. Deferred revenue at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$70,565~~$68,398 and ~~$67,121,~~$68,651, respectively. The Company expects to recognize the deferred revenue of $68,398 at June 30, 2021 as service and fee revenues when the performance obligation is met during the years December 31, 2021 (remaining six months), 2022, 2023, 2024 and 2025 in the amount of $37,452, $11,493, $7,632, $5,212, and $3,025, respectively. The Company expects to recognize the deferred revenue of $3,584 after December 31, 2025.

During the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized revenue of ~~$8,102~~$9,370 and ~~$9,166~~$10,087 that was recorded as deferred revenue at the beginning of the respective year. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized revenue of ~~$32,176~~$26,649 and ~~$34,331~~$24,074 that was recorded as deferred revenue at the beginning of the respective year.

Contract Costs

Contract costs include: (1) costs to fulfill contracts associated with corporate finance and investment banking engagements are capitalized where the revenue is recognized at a point in time and the costs are determined to be recoverable; (2) costs to fulfill Auction and Liquidation services contracts where the Company guarantees a minimum recovery value for goods being sold at auction or liquidation where the revenue is recognized over time when the performance obligation is satisfied; and (3) commissions paid to obtain magicJack contracts which are recognized ratably over the contract term and third party support costs for magicJack and related equipment purchased by customers which are recognized ratably over the service period.

The capitalized costs to fulfill a contract were ~~$448~~$242 and ~~$450~~$279 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and are recorded in prepaid expenses and other assets in the condensed consolidated balance sheets. For the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized expenses of ~~$68~~$51 and ~~$246~~$70 related to capitalized costs to fulfill a contract, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized expenses of ~~$210~~$109 and ~~$1,277~~$142 related to capitalized costs to fulfill a contract, respectively. There were no significant impairment charges recognized in relation to these capitalized costs during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

Remaining Performance Obligations and Revenue Recognized from Past Performance

The Company does not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material at ~~September~~June 30, ~~2020.~~2021. Corporate finance and investment banking fees and retail liquidation engagement fees that are contingent upon completion of a specific milestone and fees associated with certain distribution services are also excluded as the fees are considered variable and not included in the transaction price at ~~September~~June 30, ~~2020.~~2021.

NOTE ~~12—~~11— INCOME TAXES

The Company’s effective income tax rate was ~~29.4%~~a provision of 26.1% and benefit of 24.2% for ~~both~~ the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019.~~respectively.

As of ~~September~~June 30, ~~2020,~~2021, the Company had federal net operating loss carryforwards of ~~$53,932~~$60,422 and state net operating loss carryforwards of ~~$64,088.~~$72,058. The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, ~~2032~~2031 through December 31, ~~2037.~~2038. The state net operating loss carryforwards will expire in the tax years commencing in December 31, ~~2029.~~2025.

The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of ~~September~~June 30, ~~2020,~~2021, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of ~~$61,945~~$61,315 against these deferred tax assets.

The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, ~~2016~~2017 to ~~2019.~~2020.

NOTE ~~13—~~12— EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding, after giving effect to all dilutive potential common shares outstanding during the period. Basic common shares outstanding exclude 387,365 common shares in 2019 that were held in escrow and subject to forfeiture. The 387,365 common shares held in escrow were forfeited and cancelled on June 11, 2020 to indemnify the Company for certain representations and warranties and related claims pursuant to a related acquisition agreement. Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted net income per share were ~~1,059,919~~936,727 and ~~1,369,674~~1,365,738 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~1,212,563~~832,360 and ~~1,474,104~~1,592,958 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, because to do so would have been anti-dilutive.

Basic and diluted earnings per share were calculated as follows:

	Three Months Ended				Nine Months Ended				Three Months Ended						Six Months Ended
	September 30,				September 30,				June 30,						June 30,
	2020		2019		2020		2019		2021			2020			2021			2020
Net income attributable to B. Riley Financial, Inc.	$	48,379	$	34,302	$	33,554	$	64,482
Net income (loss) attributable to B. Riley Financial, Inc.									$	75,676		$	83,840		$	330,332		$	(14,825	)
Preferred stock dividends		1,088		—		3,230		—		(1,789	)		(1,087	)		(3,538	)		(2,142	)
Net income applicable to common shareholders	$	47,291	$	34,302	$	30,324	$	64,482
Net income (loss) applicable to common shareholders									$	73,887		$	82,753		$	326,794		$	(16,967	)

Weighted average common shares outstanding:
Basic		25,446,292		26,556,223		25,699,735		26,351,839		27,344,184			25,627,085			27,159,257			25,827,849
Effect of dilutive potential common shares:
Restricted stock units and warrants		1,604,156		1,613,993		989,965		836,791		1,324,281			1,365,738			1,531,187			—
Contingently issuable shares		—		63,207		—		63,207
Diluted		27,050,448		28,233,423		26,689,700		27,251,837		28,668,465			26,992,823			28,690,444			25,827,849

Basic income per common share	$	1.86	$	1.29	$	1.18	$	2.45
Diluted income per common share	$	1.75	$	1.21	$	1.14	$	2.37
Basic income (loss) per common share									$	2.70		$	3.23		$	12.03		$	(0.66	)
Diluted income (loss) per common share									$	2.58		$	3.07		$	11.39		$	(0.66	)

NOTE ~~14—~~13 — COMMITMENTS AND CONTINGENCIES

(a) Legal Matters

The Company is subject to certain legal and other claims that arise in the ordinary course of its business. In particular, the Company and its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including lawsuits, arbitration claims, class actions, and regulatory matters. Some of these claims seek substantial compensatory, punitive, or indeterminate damages. The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties, injunctions, and other relief. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. Notwithstanding this uncertainty, the Company does not believe that the results of these claims are likely to have a material effect on its financial position or results of operations.

On January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”)~~, a~~ and National Securities Corporation, each an indirect broker-dealer subsidiary of ~~B. Riley Securities (fka FBR),~~the Company, as ~~a defendant~~defendants in putative class action lawsuits alleging claims under the Securities Act, in connection with the offerings of Miller Energy Resources, Inc. (“Miller”), have been consolidated. The ~~Master~~ Consolidated Complaint, styled Gaynor v. Miller et al., is pending in the ~~United States District~~Circuit Court for ~~the Eastern District of~~Morgan County, Tennessee, and, like its predecessor complaints, continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013; May 8, 2013; June 28, 2013; September 26, 2013; October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately $151,000. ~~The~~A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution. In December 2019, the Court remanded the case to state court. In July 2020, the Company agreed to settle this matter, subject to court approval which is expected byin 2021. An accrual for the ~~end of 2020 or~~settlement is included in ~~early 2021.~~the accompanying condensed consolidated financial statements.

~~(b) Franchise Group Commitment Letter and Loan Participant Guaranty~~

~~Commitment Letter~~

On February 14, 2020, affiliates of Franchise Group, Inc. (collectively with all of its affiliates, “FRG”) entered into an ABL Credit Agreement (the “Franchise Credit Agreement”), with GACP Finance Co., LLC (“GACP Finance”) as administrative agent and collateral agent, and the lenders from time to time party thereto, pursuant to which the lenders provided an asset based credit facility to FRG in an aggregate principal amount of $100.0 million. The obligations under the Franchise Credit Agreement were refinanced in full on September 23, 2020 (the “Refinancing”). In connection with the Franchise Credit Agreement, the Company entered into a commitment letter (as amended, the “Commitment Letter”), pursuant to which the Company committed to provide a $100.0 million asset based lending facility to FRG five days prior to the maturity date of the Franchise Credit Agreement if, on or before such date, the obligations under the Franchise Credit Agreement are not refinanced in full. Such commitment terminated upon the consummation of the Refinancing.

~~The Loan Participant Guaranty~~

On July 3, 2019, a lawsuit was filed against National Securities Corporation, (“NSC”) National Asset Management, Inc., National, National’s current board members and certain former board members, certain officers of National, John Does 1–10, and the National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the plaintiff directly. As part of the derivative claims, the complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer. As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common law, or conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages in favor of the Company, an order directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs. On February ~~14,~~2, 2020, ~~FRG,~~ the ~~lenders from time~~plaintiff filed an amended complaint presenting additional causes of action. The Company has notified its insurer of the lawsuit and believes it has valid defenses to ~~time party thereto~~the asserted claims of the complaint. On March 18, 2020, the defendants filed a motion to dismiss the amended complaint. The plaintiff filed an opposition to the defendants’ motion to dismiss on April 15, 2020, and ~~GACP Finance as administrative agent,~~the defendants filed a reply in further support of the motion to dismiss on May 6, 2020. On August 20, 2020, the parties entered into mediation with a ~~Credit Agreement (the “Term Loan Credit Agreement”), pursuant to which the lenders provided a term loan facility to FRG~~private mediator in an ~~aggregate principal amount~~attempt to settle the action and, on January 15, 2021, as a result of ~~$575,000.~~the mediation, a settlement was reached. In March 2021, a settlement agreement and release was executed by the parties and all claims have been dismissed.

The New York Department of Financial Services (the “Department”) completed its investigation of NSC’s compliance with the Department’s Cybersecurity Requirements for Financial Services Companies (the “Regulations”). The Regulations establish standards for the cybersecurity programs of entities the Department licenses or otherwise regulates, including NSC. On April 14, 2021, NSC paid the Department a fine of $3,000 as a result of the Department’s finding that NSC violated certain of the Regulations.

NSC is a respondent in several Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of National on February ~~19, 2020,~~25, 2021. Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain registered representatives. NSC is evaluating each arbitration claim on its own merits. GPB and its affiliates have been the subject of various civil claims and fraud investigations over the past few years and, in February 2021, the U.S. Department of Justice indicted certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to funds managed by GPB. At the present time, the Company ~~entered into a limited~~continues to vigorously defend these actions and is not able to determine the ultimate resolution of these matters. Adverse judgments in these matters in the aggregate could materially and adversely affect the Company and its financial condition.

(b) Babcock & Wilcox Commitments and Guarantees

On June 30, 2021, the Company agreed to guaranty (the ~~“Loan Participant~~“B. Riley Guaranty”) up to ~~one~~$110,000 of ~~the lenders under the Term Loan Credit Agreement (the “Loan Participant”~~obligations that Babcock & Wilcox Enterprises, Inc. (“B&W”) ~~pursuant~~may owe to ~~which the Company guaranteed the payment when due~~providers of cash collateral pledged in connection with B&W’s debt financing. The B. Riley Guaranty is enforceable in certain ~~obligations,~~circumstances, including, ~~principal, interest, and other amounts payable to the Loan Participant under the Term Loan Credit Agreement in an amount not to exceed $50,000 plus~~among others, certain expenses of the Loan Participant and certain protective advances related to such guaranteed obligations (the “Loan Participant Guaranteed Obligations”). The Loan Participant may require payment of the Loan Participant Guaranteed Obligations by the Company upon the occurrence of certain guarantor events of default ~~including payment or bankruptcy events~~and the acceleration of ~~default,~~B&W’s obligations under a reimbursement agreement with respect to such cash collateral. B&W will pay the Company $935 per annum in ~~each case pursuant~~connection with the B. Riley Guaranty. B&W has agreed to reimburse the Company to the ~~Term Loan Credit Agreement. The Loan Participant~~extent the B. Riley Guaranty ~~remains in effect until the date that the Loan Participant Guaranteed Obligations have been paid in full.~~is called upon.

The Loan Participant Guaranteed Obligations are unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other existing and future unsecured and unsubordinated indebtedness. The Loan Participant Guaranteed Obligations are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries, including trade payables.

~~(c) Babcock & Wilcock Commitments and Guarantee~~

On May 14, 2020, the Company entered into an a agreement to provide Babcock & Wilcox Enterprises, Inc. (“B&W”) future commitments to loan B&W up to $40,000 at various dates starting in November 2020 and the Company provided a limited guaranty of B&W’s obligations under B&W’s amended credit facility as more fully described in Note 17 - Related Party Transactions.

On August 10, 2020, the Company entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the ~~Indemnity~~“Indemnity Agreement”). Pursuant to the Indemnity Rider, the Company agreed to indemnify Berkley in connection with a default by B&W under the Indemnity Agreement relating to a $29,970 payment and performance bond issued by Berkley in connection with a construction project undertaken by B&W. In consideration for providing the Indemnity Rider, B&W paid the Company fees in the amount of $600 on August 26, 2020.

~~(d) BRPM II Equity Commitment Letter~~

On May 14, 2020, the Company entered into an agreement to provide B&W future commitments to loan B&W up to $40,000 at various dates starting in November 2020, of which, at June 30, 2021, no amounts remain available. The Company isprovided a limited guaranty of B&W’s obligations under B&W’s credit facility with Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (the “BOA Credit Facility”), which was paid off and the Company’s obligations relating thereto terminated as of June 30, 2021, as more fully described in Note 16 - Related Party Transactions

(c) Other Commitments

On June 19, 2020, the Company participated in a loan facility agreement to provide a total loan commitment up to 33,000 EUROS to a retailer in Europe. The Company made an initial funding of 6,600 EUROS in July 2020. No additional borrowings have been made since the initial funding, leaving unused future commitments available of up to 26,400 EUROS as of June 30, 2021 and December 31, 2020.

At June 30, 2021, the Company had an outstanding commitment to purchase a loan pursuant to an ~~Equity Commitment Letter~~assignment agreement with ~~B. Riley Principal Merger Corp. II and B. Riley Principal Sponsor Co. II, LLC, as disclosed below~~a client in ~~Note 17 – Related Party Transactions.~~the amount of $77,477 that was funded on July 2, 2021. Simultaneously with the funding of the loan on July 2, 2021, the Company received a principal payment on the loan for $27,477 reducing the loans receivable balance to $50,000.

NOTE ~~15—~~14— SHARE-BASED PAYMENTS ~~AND COMMON STOCK~~

(a) Employee Stock Incentive Plans

Share-based compensation expense for restricted stock units under the Company’s Amended and Restated 2009 Stock Incentive Plan (the “Plan”) was ~~$4,680~~$8,493 and ~~$4,660~~$4,109 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$13,945~~$13,792 and ~~$10,013~~$9,265 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, in connection with employee stock incentive plans, the Company granted ~~606,063~~365,050 restricted stock units with a ~~weighted average~~ grant date fair value of ~~$18.77 per share.~~$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 three 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, ~~achieving a set threshold~~ during the 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.

(b) Employee Stock Purchase Plan

In connection with the Company’s Purchase Plan, share based compensation was ~~$96~~$115 and ~~$68~~$59 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$320~~$342 and ~~$263~~$224 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. At ~~September~~June 30, ~~2020,~~2021, there were ~~524,891~~471,973 shares reserved for issuance under the Purchase Plan.

(c) Common Stock

On October 30, 2018, the Company’s Board of Directors authorized a share repurchase program of up to $50,000 of its outstanding common shares. All share repurchases were effected on the open market at prevailing market prices or in privately negotiated transactions. The share repurchase program expired on October 31, 2019. On both October 31, 2019 and 2020, the Company’s Board of Directors authorized share repurchase programs of up to $50,000 of its outstanding common shares. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company repurchased ~~1,715,383~~2,165,383 shares of common stock for $48,248. The shares repurchased under the program were retired. During the six months ended June 30, 2021, the Company did not repurchase any shares of its common ~~stock for $38,348 which represents an average price of $22.36 per common share.~~ stock.

On ~~July 1, 2020,~~January 15, 2021, the Company ~~entered into an agreement to repurchase 900,000~~issued 1,413,045 shares of its common stock for $19,800 ($22.00 per common share) from one of its shareholders. In accordance with the agreement, the Company repurchased 450,000 shares for $9,900 on July 2, 2020 and the remaining 450,000 shares are required to be repurchased for $9,900 at a mutually agreeable date prior to January 1, 2021. In addition to the repurchases of common stock ~~387,365~~inclusive of 184,310 shares issued pursuant to the full exercise of the Underwriter’s option to purchase additional shares of ~~the Company’s~~ common stock ~~that were previously held in escrow in connection with the acquisition~~at a price of ~~a wealth management company in 2017 were forfeited~~$46.00 per share for net proceeds of approximately $64,713 after underwriting fees and ~~cancelled on June 11, 2020 to indemnify the Company for certain representations and warranties and related claims pursuant to a related acquisition agreement.~~costs.

(d) Preferred Stock

~~The~~During the six months ended June 30, 2021, the Company ~~has~~ issued 76,417 depository shares ~~equivalent to 2,531 shares~~ of the Series A Preferred ~~Stock with dividends payable at a rate of 6.875% per annum.~~Stock. There were ~~2,531 shares~~2,657 and ~~2,349~~2,581 shares issued and outstanding as of ~~September~~June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, respectively. ~~The Series A has a liquidation preference of $25 per 1/1000 depository share or $25,000 per preferred share.~~ Total liquidation preference for the Series A Preferred Stock at ~~September~~June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, was ~~$63,273~~$66,430 and ~~$58,723,~~$64,519, respectively. Dividends on the Series A preferred paid during the ~~three and nine~~six months ended ~~September~~June 30, ~~2020,~~2021, were ~~$0.4296875 and $1.29~~$0.859375 per depository ~~share, respectively.~~share.

During the ~~three~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company issued 228,477 depository shares ~~equivalent to 1,300 shares~~ of the Series B Preferred ~~Stock with dividends payable at a rate~~Stock. There were 1,618 and 1,390 shares issued and outstanding as of ~~7.375% per annum. The Series B has a liquidation preference of $25 per 1/1000 depository share or $25,000 per preferred share.~~June 30, 2021 and December 31, 2020, respectively. Total liquidation preference for the Series B Preferred Stock at ~~September~~June 30, 2021 and December 31, 2020, was ~~$32,500. No dividends were paid~~$40,452 and $34,741, respectively. Dividends on the Series B preferred paid during the ~~three~~six months ended ~~September~~June 30, ~~2020.~~2021, were $0.921875 per depository share.

NOTE ~~16—~~15— NET CAPITAL REQUIREMENTS

B. Riley Securities ~~and~~(“BRS”), B. Riley Wealth Management (“BRWM”), and National Securities Corporation (“NSC”), 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 ~~the SEC’s~~SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the ~~subsidiaries to maintain~~maintenance of minimum net capital and ~~provides~~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 ~~September~~June 30, ~~2020, B. Riley Securities~~2021, BRS had net capital of ~~$137,777,~~$329,063, which was ~~$134,273~~$324,101 in excess of ~~its~~ required minimum net capital of ~~$3,504; and~~$4,962; BRWM had net capital of ~~$4,090~~$10,073, which was ~~$3,444~~$9,328 in excess of ~~its~~ required minimum net capital of ~~$646.~~$745; NSC had net capital of $7,162 which was $6,162 in excess of required minimum net capital of $1,000; Winslow, Evans & Crocker, Inc (“WEC”), a subsidiary of National also subject to Rule 15c3-1, had net capital of $2,599 which was $2,460 in excess of required minimum net capital of $139.

NOTE ~~17—~~16— RELATED PARTY TRANSACTIONS

At ~~September~~June 30, ~~2020,~~2021, amounts due from related parties of ~~$3,766~~$734 included ~~$23~~$1 from GACP I, L.P. (“GACP I”) and ~~$372~~$536 from GACP II, L.P. (“GACP II”) for management fees and other operating expenses, and ~~$3,371~~$197 due from CA Global Partners (“CA Global”) for operating expenses related to wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global ~~Ptrs.~~Partners. At December 31, ~~2019,~~2020, amounts due from related parties of ~~$5,832~~$986 included ~~$145~~$9 from GACP I, L.P. (“GACP I”) and ~~$12~~$544 from GACP II, L.P. (“GACP II”) for management fees and other operating expenses, ~~$13~~and $433 due from ~~B. Riley Principal Merger Corp, a company that consummated its initial public offering on April 11, 2019,~~CA Global Partners (“CA Global”) for which our wholly owned subsidiary, B. Riley Principal Sponsor Co. LLC, was the Sponsor, and $3,846 due from John Ahn, who at the time was the President of Great American Capital Partners, LLC, our indirect wholly owned subsidiary (“GACP”), pursuant to a Secured Line of Promissory Noteoperating expenses related to ~~a Transfer Agreement as further discussed below. During the nine months ended September~~wholesale and industrial liquidation engagements managed by CA Global on behalf of GA Global Partners.

At June 30, ~~2020, the Company sold a portion of a loan receivable to GACP for $1,800. At September 30, 2020,~~2021, the Company had sold loan participations to BRC Partners Opportunity Fund, LP (“BRCPOF”), a private equity fund managed by one of its subsidiaries, in the amount of ~~$13,919,~~$1,975, and recorded interest expense of ~~$1,416~~$133 and $479 during the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 related to BRCPOF’s loan ~~participations.~~participations, respectively. The Company also recorded commission income of $93 and $422 from introducing trades on behalf of BRCPOF during the three and six months ended June 30, 2021, respectively. Our executive officers and members of our board of directors have a ~~43.8%~~65.6% financial interest, which includes a financial interest of Bryant Riley, our Co-Chief Executive Officer, of ~~38.5%~~52.8% in the BRCPOF at ~~September~~June 30, ~~2020.~~2021. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had outstanding loan to participations to BRCPOF in the amount of ~~$13,919~~$1,975 and ~~$12,478,~~$14,816, respectively.

~~On April 1, 2019,~~In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P. (“Whitehawk”), a ~~Transfer Agreement (the “Transfer Agreement”) with GACP II, a fund managed~~limited partnership controlled by ~~GACP, and John~~Mr. J. Ahn, who is the brother of Phil Ahn, the Company’s Chief Financial Officer and Chief Operating Officer. The Transfer Agreement provides for among other things, the transfer to Mr. J. Ahn of 55.56% of the Company’s limited partnership interest in GACP II (the “Transferred Interest”), which represents a capital commitment in the aggregate amount of $5,000. In connection with the Transfer Agreement, the Company provided Mr. J. Ahn with a non-recourse, secured line of credit in an aggregate amount of up to $5,003 pursuant to the terms of a Secured Line of Credit Promissory Note (the “Note”) dated April 1, 2019, to fund the purchase price of the Transferred Interest. We also entered into a Security Agreement with Mr. J. Ahn on April 1, 2019, which granted to the Company a security interest in the Transferred Interest to secure Mr. J. Ahn’s obligations under the Note. The Note is subject to an interest rate per annum of 7.00%. As of December 31, 2019, the principal and accrued interest on the Note were $3,798 and $48, respectively. In June 2020, the Company entered into an investment advisory services agreement with Whitehawk Capital Partners, L.P., a limited partnership controlled by Mr. J. Ahn, (“Whitehawk”). Whitehawk has agreed to provide investment advisory services for GACP I and GACP II. ~~In accordance with the terms of the Note, Mr. Ahn surrendered the Transferred Interest to the Company in exchange for the cancellation of the Note.~~ During the ~~nine~~three and six months ended ~~September~~June 30, ~~2020, interest payments received on the Note were $121 and~~2021, management fees paid for investment advisory services by Whitehawk was ~~$731.~~$236 and $1,446, respectively.

The Company periodically participates in loans and financing arrangements for which the Company has an equity ownership and representation on the board of directors (or similar governing body). The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows:

BRPM 150

On ~~May 22, 2020,~~February 23, 2021, the Company earned ~~$3,275~~$3,366 of underwriting fees from the initial public offering of B. Riley Principal 150 Merger ~~Corp. II,~~Corp, (“BRPM ~~II”~~150”), which was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “BRPM II150 IPO”). The Company has also agreed to loan BRPM II150 up to $300 for operating expenses. The loan is interest free and there were no amounts outstanding at ~~September 30,~~December 31, 2020. ~~On September 7,~~Subsequent to December 31, 2020, BRPM II entered into an agreement and plan of merger (the “Merger Agreement”) to acquire Eos Energy Storage LLC, a Delaware limited liability company, a privately held company that is not related to the Company ~~(the “Proposed Acquisition”).~~loaned BRPM 150 $40 which was repaid in full on March 1, 2021, using proceeds from the BRPM 150 IPO.

~~The Proposed Acquisition is expected to be completed in the fourth quarter of 2020, subject to certain customary conditions, including, among other things, approval by the~~ BRPM II’s stockholders of the Merger Agreement and the business combination. In addition, closing is subject to certain other conditions, including, among other things, that BRPM II maintain a certain level of cash (before taking into account certain transaction expenses, but after taking into account any redemptions by the BRPM II’s public stockholders) available from the trust account established in connection with the BRPM II IPO and from other equity financing sources.250

~~In order~~During the three months ended June 30, 2021, the Company earned $3,337 of underwriting fees from the initial public offering of B. Riley Principal 250 Merger Corp, (“BRPM 250”), which was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “BRPM 250 IPO”). The Company has also agreed to ~~help meet~~loan BRPM 250 up to $300 for operating expenses. The loan is interest free and there were no amounts outstanding at December 31, 2020. Subsequent to December 31, 2020, the ~~condition under~~Company loaned BRPM 250 $100 which was repaid in full on May 17, 2021, using proceeds from the ~~Merger Agreement that~~ BRPM ~~II maintain a certain level of cash available upon the closing (before taking into account certain transaction expenses),~~250 initial public offering.

Sonim

On June 30, 2021, the Company and EF Hutton, division of Benchmark Investments, LLC (the “Sales Agents”), as sales agents, entered into an ~~Equity Commitment Letter~~At Market Issuance Sales Agreement (the “Sonim Sales Agreement”) with ~~BRPM II and B. Riley Principal Sponsor Co. II, LLC, pursuant~~Sonim Technologies, Inc. (“Sonim”) to ~~which the Company committed to provide~~sell shares of Sonim’s common stock, $0.001 par value per share (the “Sonim Common Stock”), having an aggregate offering price of up to ~~$40,000 in equity financing at closing, less~~$10,000 (the “Sonim Shares”) through the ~~number~~Sales Agents. Under the Sonim Sales Agreement, the Sales Agents will be entitled to compensation of ~~shares~~up to 3.0% of ~~BRPM II’s common stock already issued pursuant to subscription agreements entered into with investors prior to~~ the ~~closing.~~gross proceeds from each sale of Sonim Shares sold through the Sales Agents.

In addition to the above, the Company from time to time participates in loans and financing arrangements in respect of companies in which the Company has an equity ownership and representation on the board of directors or equivalent body. The Company may also provide consulting services or investment banking services to raise capital for these companies. These transactions can be summarized as follows:

~~Sonim~~

The Company had a loan receivable due from Sonim Technologies, Inc. (“Sonim”) that was included in loans receivable at fair value with a fair value of $9,603 at December 31, 2019. Interest is payable at 10.0% per annum with a maturity date of September 1, 2022. The original loan was made in October 2017 in connection with the Company’s initial investment in common stock and preferred stock that was purchased from Sonim’s existing shareholders. In October 2017, the Company also entered into a management services agreement with Sonim to provide advisory and consulting services for management fees of up to $200 per year. The management services agreement was terminated in September 2019.

In June 2020, Sonim repaid $4,000 of the outstanding loan balance in cash and the remaining principal amount, accrued interest and other amounts outstanding of $6,170 under the loan converted into shares of common stock of Sonim at the then public offering price of shares of Sonim’s common stock.

Babcock and Wilcox

The Company ~~has~~had a last-out term loan receivable due from B&W that iswas included in loans receivable, at fair value with a fair value of ~~$164,539~~$176,191 at ~~September 30, 2020. As of~~ December 31, ~~2019,~~2020. On June 1, 2021 the Company agreed to settle the outstanding balance and accrued interest on the last-out term loan ~~was included~~receivable in ~~loans receivable, at cost~~exchange for $848 and 2,916,880 shares of B&W’s 7.75% Series A Cumulative Perpetual Preferred Stock. Additionally, the Company holds senior notes from B&W with a ~~carrying~~fair value of ~~$109,147.~~ $21,415 at June 30, 2021.

On January 31, 2020, the Company provided B&W with an additional $30,000 of last-out term loans pursuant to ~~new~~ amendments to B&W’s ~~credit agreement.~~BOA Credit Facility. On May 14, 2020, the Company provided B&W with another $30,000 of last-out term loans pursuant to a further amendment to ~~B&W’s credit agreement~~the BOA Credit Facility which also included future commitments for the Company to loan B&W $40,000 at various dates starting in November 2020 and a limited guaranty ~~by the Company~~ of B&W’s obligations under the amended ~~credit facility,~~BOA Credit Facility, (the “Amendment Transactions”). ~~Interest is payable quarterly at~~In November 2020, an additional $10,000 was funded under the fixed rate of 12.0% per annum in common stock of B&W at $2.28 per common share through December 31, 2020 and in cash thereafter. All of these loans were made to B&W as part of various amendments to B&W’s existing credit agreement with other lenders not related to the Company.Amendment Transactions. As part of the Amendment Transactions, the Company entered into the following agreements: (i) an Amendment and Restatement Agreement, dated as of May 14, 2020, among B&W, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto, including ~~the Company;~~us; (ii) a Fee Letter, dated as of May 14, 2020, among ~~the Company~~B&W and ~~B&W;~~us; (iii) a Fee and Interest Equitization Agreement, dated May 14, 2020, between ~~the Company, B. Riley Securities,~~B&W and ~~B&W;~~us; (iv) a Termination Agreement, dated as of May 14, 2020, ~~the Company and~~among us, B&W and acknowledged by Bank of America, N.A. with respect to the Backstop Commitment ~~Letter;~~Letter described below (the “Termination Agreement”); and (v) a Limited Guaranty Agreement, dated as of May 14, 2020, among ~~the Company,~~ B&W, ~~and~~ Bank of America, ~~N.A.~~N.A and the Company. On June 30, 2021, the amended BOA Credit Facility was paid off and the Company’s obligations relating thereto terminated.

~~In connection with making~~On February 12, 2021, B&W issued the ~~loan~~Company an aggregate $35,000 in principal amount of 8.125% senior notes due 2026 in consideration for the cancellation or deemed prepayment of $35,000 principal amount of Tranche A Term Loans made by the Company to B&W ~~in April 2019~~pursuant to the ~~Company received warrants to purchase 1,666,667 shares of common stock of B&W with an exercise price of $0.01 per share. The option to exercise the warrants expires on April 5, 2022.~~new BOA Credit Facility.

During the three and six months ended June 30, 2021, the Company earned $1,710 and $12,348, respectively, of underwriting and financial advisory and other fees from B&W in connection with B&W’s capital raising activities.

One of the Company’s wholly owned subsidiaries entered into a services agreement with B&W that provided for the President of the Company to serve as the Chief Executive Officer of B&W until November 30, 2020 (the “Executive Consulting Agreement”), unless terminated by either party with thirty days written notice. The agreement was extended through December 31, 2023. Under this agreement, fees for services provided are $750 per annum, paid monthly. In addition, subject to the achievement of certain performance objectives as determined by B&W’s compensation committee of the board, a bonus or bonuses may also be earned and payable to the Company.

The Company is also a party to an Indemnity Rider with B&W, and the B. Riley Guaranty, each as disclosed above in Note 1413 – Commitments and Contingencies.

Maven

The Company has loans receivable due from the Maven, Inc. (“Maven”) that are included in loans receivable, at fair value of ~~$71,479~~$60,491 and $56,552 at ~~September~~June 30, ~~2020. At~~2021 and December 31, 2019, the Company had a loan receivable due from Maven that is included in loans receivable at fair value of $21,150 and another loan receivable from Maven that is included in loans receivable at historical cost with a carrying value of $47,933 (which is comprised of the principal balance due in the amount of $49,921, less original issue discount of $1,988).2020, respectively. Interest on these loans is payable at ~~12.0% to 15.0%~~10% per annum with maturity dates through ~~June~~December 2022.

On October 28, 2020, in connection with a capital raise by Maven, the Company converted $3,367 of Maven notes receivable ~~that is included in notes receivable from related party at September 30, 2020~~ into 3,367 shares of Maven Series K Preferred stock. In November 2020, the Company earned $441 of financial advisory fees from Maven in connection with providing services with their capital raising activities. On December 30, 2020, the Company converted loans receivable with a principal value of $9,991 and accrued but unpaid interest of $2,698 into 38,376,090 shares of Maven common stock at an average price of ~~Maven.~~$0.33 per share.

~~Franchise Group~~Lingo

The Company has a loan receivable due from ~~Vitamin Shoppe, a subsidiary of FRG,~~Lingo Management LLC (“~~Vitamin Shoppe”~~Lingo”) ~~that was~~ included in loans receivable, at fair value with a fair value of ~~$4,951~~$56,335 and $55,066 at June 30, 2021 and December 31, ~~2019. Interest was payable~~2020, respectively. The term loan bears interest at ~~13.7%~~16.0% per annum with a maturity date of December ~~16,~~1, 2022. The ~~principal balance~~term loan has a conversion feature under which $17,500 will convert to additional equity ownership upon receipt of ~~$4,697 on~~certain regulatory approval. If those regulatory approvals are received, the ~~Vitamin Shoppe~~conversion would increase the Company’s ownership interest in Lingo from 40% to 80%. On March 10, 2021, the Company also extended a promissory note to Lingo Communications, LLC (a wholly owned subsidiary of Lingo) in the amount of $1,100. The note bears interest at 6% per annum with a maturity date of March 31, 2022.

bebe

The Company has a loan receivable ~~was repaid~~due from bebe stores, Inc. included in ~~May~~loans receivable, at fair value with a fair value of $7,900 and $8,000 at June 30, 2021 and December 31, 2020, respectively. The term loan bears interest at 16.0% per annum with a maturity date of November 10, 2021.

Other

The Company has loans receivable due from Dash Holding Company, Inc. with a fair value of $3,020 and ~~the final interest payment~~Rumble On, Inc. with a fair value of ~~$31 was paid on~~$2,568 included in loans receivable, at fair value at June ~~1, 2020. During the nine months ended September~~ 30, ~~2020,~~2021. On March 2, 2021, the Company ~~earned $4,329~~purchased a $2,400 minority equity interest in Dash Medical Holdings, LLC (“Dash”). The Company also loaned Dash Holding Company, Inc. (together with Dash Medical Holdings, LLC, “Dash”), $3,000 pursuant to that certain Subordinated Working Capital Promissory Note (the “Note”) and Subordination Agreement entered into on March 2, 2021. The Note bears interest at 12.0% per annum with a maturity date of ~~underwriting fees from FRG~~March 1, 2027. Dash is controlled by a member of our Board of Directors. On March 12, 2021, the Company loaned Rumble On, Inc. $2,500, a company in ~~connection with FRG’s capital raising activities. In~~which two of the ~~second quarter of 2020, B. Riley no longer had representation~~Company’s senior executives serve on the board of directors, orwhich bears interest at 12% and is due on September 30, 2021.

During the ~~right to appoint members~~six months ended June 30, 2021, the Company earned $2,957 and $1,234 of underwriting and financial advisory and other fees from Rumble On, Inc and Applied Blockchain, Inc, a company in which a senior executive of the Company and the spouse of a senior executive of the Company serve on the board of directors and in which employees and executives of ~~FRG and no longer exercised significant influence over FRG. As such, FRG is no longer a related party.~~the Company are investors, respectively, in connection with capital raising activities.

NOTE 17— BUSINESS SEGMENTS

~~As of September 30, 2020, the Company is party to a Loan Participant Guaranty with FRG as disclosed above in Note 14 – Commitments and Contingencies.~~

~~NOTE 18—BUSINESS SEGMENTS~~

The Company’s business is classified into the Capital Markets segment, Wealth Management segment, Auction and Liquidation segment, ~~Valuation and Appraisal~~Financial Consulting segment, Principal Investments — United Online and magicJack segment, and Brands segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure.

As a result of the National acquisition, the Company realigned its segment reporting structure in the first quarter of 2021 to reflect organizational management changes for its wealth management business. Under the new structure, the wealth management business previously reported in the Capital Markets segment are now reported in the Wealth Management segment. Under the new structure, there is a new segment for Wealth Management. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented.

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Capital Markets segment:
Revenues - Services and fees	$	89,032		$	68,062		$	280,303		$	187,768		$	125,997		$	60,364		$	296,976		$	133,964
Trading income (losses) and fair value adjustments on loans		31,753			40,268			(36,142	)		71,730
Trading income and fair value adjustments on loans														29,897			114,080			294,400			(67,935	)
Interest income - Loans and securities lending		26,026			25,766			72,383			54,147			25,491			24,506			62,411			46,357
Total revenues		146,811			134,096			316,544			313,645			181,385			198,950			653,787			112,386
Selling, general and administrative expenses		(68,442	)		(70,140	)		(204,183	)		(196,570	)		(65,473	)		(56,623	)		(151,613	)		(84,924	)
Restructuring (charge) recovery		(1,417	)		—			(1,417	)		4
Interest expense - Securities lending and loan participations sold		(10,975	)		(10,273	)		(30,669	)		(22,579	)		(10,983	)		(11,221	)		(30,172	)		(19,694	)
Depreciation and amortization		(1,166	)		(1,281	)		(3,362	)		(3,844	)		(247	)		(595	)		(1,012	)		(1,191	)
Segment income		64,811			52,402			76,913			90,656			104,682			130,511			470,990			6,577
Wealth Management segment:
Revenues - Services and fees														87,444			15,318			152,986			34,205
Trading income and fair value adjustments on loans														2,865			467			5,221			40
Total revenues														90,309			15,785			158,207			34,245
Selling, general and administrative expenses														(88,702	)		(15,283	)		(150,174	)		(32,831	)
Depreciation and amortization														(2,340	)		(470	)		(4,739	)		(953	)
Segment (loss) income														(733	)		32			3,294			461
Auction and Liquidation segment:
Revenues - Services and fees		21,473			11,232			49,340			65,681			5,534			7,206			12,892			27,867
Revenues - Sale of goods		22,712			54			23,757			1,230			11,743			1,045			17,835			1,045
Total revenues		44,185			11,286			73,097			66,911			17,277			8,251			30,727			28,912
Direct cost of services		(18,373	)		(2,371	)		(36,406	)		(21,584	)		(7,540	)		(3,217	)		(14,120	)		(18,033	)
Cost of goods sold		(9,046	)		(126	)		(9,360	)		(992	)		(3,105	)		(285	)		(7,579	)		(314	)
Selling, general and administrative expenses		(4,625	)		(2,835	)		(8,880	)		(9,045	)		(3,077	)		(2,729	)		(4,566	)		(4,255	)
Restructuring (charge) recovery		(140	)		—			(140	)		—
Depreciation and amortization		(1	)		(1	)		(2	)		(5	)		—			—			—			(1	)
Segment income		12,000			5,953			18,309			35,285			3,555			2,020			4,462			6,309
Valuation and Appraisal segment:
Financial Consulting segment:
Revenues - Services and fees		9,655			10,818			26,112			29,143			23,735			18,845			45,144			39,559
Selling, general and administrative expenses		(6,632	)		(7,331	)		(19,643	)		(21,492	)		(19,471	)		(15,268	)		(37,460	)		(30,997	)
Depreciation and amortization		(51	)		(36	)		(139	)		(100	)		(89	)		(73	)		(187	)		(140	)
Segment income		2,972			3,451			6,330			7,551			4,175			3,504			7,497			8,422
Principal Investments - United Online and magicJack segment:
Revenues - Services and fees		20,663			22,999			63,037			74,383			18,932			20,656			38,725			42,374
Revenues - Sale of goods		939			864			2,718			2,793			714			775			1,450			1,779
Total revenues		21,602			23,863			65,755			77,176			19,646			21,431			40,175			44,153
Direct cost of services		(4,891	)		(5,565	)		(14,795	)		(20,131	)		(4,554	)		(4,768	)		(9,296	)		(9,904	)
Cost of goods sold		(767	)		(785	)		(2,082	)		(2,843	)		(521	)		(575	)		(1,373	)		(1,315	)
Selling, general and administrative expenses		(4,840	)		(5,895	)		(14,352	)		(18,410	)		(4,768	)		(4,049	)		(9,638	)		(9,512	)
Depreciation and amortization		(2,736	)		(2,956	)		(8,466	)		(9,719	)		(2,528	)		(2,851	)		(5,062	)		(5,730	)
Restructuring charge		—			—			—			(1,703	)
Segment income		8,368			8,662			26,060			24,370			7,275			9,188			14,806			17,692
Brands segment:
Revenues - Services and fees		4,000			—			11,007			—			4,501			3,206			8,889			7,007
Trading loss and fair value adjustments on loans														(83	)		—			—			—
Total revenues														4,418			3,206			8,889			7,007
Selling, general and administrative expenses		(994	)		—			(2,207	)		—			(690	)		(309	)		(1,366	)		(1,213	)
Depreciation and amortization		(714	)		—			(2,143	)		—			(715	)		(715	)		(1,429	)		(1,429	)
Impairment of tradenames		—			—			(12,500	)		—			—			(8,500	)		—			(12,500	)
Segment income (loss)		2,292			—			(5,843	)		—			3,013			(6,318	)		6,094			(8,135	)
Consolidated operating income from reportable segments		90,443			70,468			121,769			157,862			121,967			138,937			507,143			31,326

Corporate and other expenses		(6,942	)		(10,617	)		(28,072	)		(28,778	)		(11,822	)		(7,597	)		(24,020	)		(21,130	)
Interest income		67			361			537			1,329			56			224			105			470
Income (loss) on equity investments		409			1,113			(145	)		(4,049	)
Gain on extinguishment of loans														6,509			—			6,509			—
(Loss) income on equity investments														(852	)		(318	)		23			(554	)
Interest expense		(16,374	)		(12,772	)		(48,537	)		(35,130	)		(20,856	)		(16,509	)		(40,642	)		(32,163	)
Income before income taxes		67,603			48,553			45,552			91,234
Provision for income taxes		(18,711	)		(14,409	)		(13,380	)		(26,802	)
Net income		48,892			34,144			32,172			64,432
Net income (loss) attributable to noncontrolling interests		513			(158	)		(1,382	)		(50	)
Net income attributable to B. Riley Financial, Inc.		48,379			34,302			33,554			64,482
Income (loss) before income taxes														95,002			114,737			449,118			(22,051	)
(Provision) benefit for income taxes														(19,902	)		(32,208	)		(117,420	)		5,331
Net income (loss)														75,100			82,529			331,698			(16,720	)
Net (loss) income attributable to noncontrolling interests														(576	)		(1,311	)		1,366			(1,895	)
Net income (loss) attributable to B. Riley Financial, Inc.														75,676			83,840			330,332			(14,825	)
Preferred stock dividends		1,088			—			3,230			—			1,789			1,087			3,538			2,142
Net income available to common shareholders	$	47,291		$	34,302		$	30,324		$	64,482
Net income (loss) available to common shareholders													$	73,887		$	82,753		$	326,794		$	(16,967	)

The following table presents revenues by geographical area:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenues:
Revenues - Services and fees:
North America $ 123,106 $ 113,111 $ 405,611 $ 356,899
Australia 6,094 — 7,796 15
Europe 15,623 — 16,392 61
Total Revenues - Services and fees $ 144,823 $ 113,111 $ 429,799 $ 356,975

Trading income (losses) and fair value adjustments on loans
North America $ 31,753 $ 40,268 $ (36,142 ) $ 71,730

Revenues - Sale of goods
North America $ 4,242 $ 918 $ 6,028 $ 4,023
Europe 19,409 — 20,447 —
Total Revenues - Sale of Goods $ 23,651 $ 918 $ 26,475 $ 4,023

Revenues - Interest income - Loans and securities lending:
North America $ 26,026 $ 25,766 $ 72,383 $ 54,147

Total Revenues:
North America $ 185,127 $ 180,063 $ 447,880 $ 486,799
Australia 6,094 — 7,796 15
Europe 35,032 — 36,839 61
Total Revenues $ 226,253 $ 180,063 $ 492,515 $ 486,875

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues:
Revenues - Services and fees:
North America	$	265,097	$	124,039	$	554,082	$	282,505
Australia		—		1,038		—		1,702
Europe		1,046		518		1,530		769
Total Revenues - Services and fees	$	266,143	$	125,595	$	555,612	$	284,976

Trading income (losses) and fair value adjustments on loans
North America	$	32,679	$	114,547	$	299,621	$	(67,895	)

Revenues - Sale of goods
North America	$	709	$	1,820	$	7,537	$	2,824
Europe		11,748		—		11,748		—
Total Revenues - Services and fees	$	12,457	$	1,820	$	19,285	$	2,824

Revenues - Interest income - Loans and securities lending:
North America	$	25,491	$	24,506	$	62,411	$	46,357

Total Revenues:
North America	$	323,976	$	264,912	$	923,651	$	263,791
Australia		—		1,038		—		1,702
Europe		12,794		518		13,278		769
Total Revenues	$	336,770	$	266,468	$	936,929	$	266,262

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 long-lived assets, which consist of property and equipment and other assets, of ~~$11,986~~$14,447 and ~~$12,727,~~$11,685, respectively, were located in North America.

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

~~NOTE 19—SUBSEQUENT EVENTS~~

From time to time, the Company may decide to pay dividends which will be dependent upon our financial condition and results of operations. On October 28, 2020, the Board of Directors announced an increase to the regular quarterly dividend from $0.30 per share to $0.375 per share. On October 28, 2020, the Company declared a regular quarterly dividend of $0.375 per share, which will be paid on or about November 24, 2020 to stockholders of record as of November 10, 2020. While it is the Board’s current intention to make regular dividend payments 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 on 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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “seek,” “likely,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations.

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.”

Risk factors that could cause actual results to differ ~~materially~~ from those contained in the forward-looking statements include but are not limited to risks related to: volatility in our revenues and results of operations; the unpredictable and ongoing impact of the COVID-19 pandemic; changing conditions in the financial markets; our ability to generate sufficient revenues to achieve and maintain profitability; our exposure to credit risk; the short term nature of our engagements; the accuracy of our estimates and valuations of inventory or assets in “guarantee” based engagements; competition in the asset management business; potential losses related to our auction or liquidation engagements; our dependence on communications, information and other systems and third parties; potential losses related to purchase transactions in our auction and liquidations business; the potential loss of financial institution clients; potential losses from or illiquidity of our proprietary investments; changing economic and market conditions; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; potential mark-downs in inventory in connection with purchase transactions; failure to successfully compete in any of our segments; loss of key personnel; our ability to borrow under our credit facilities or at-the-market offering as necessary; failure to comply with the terms of our credit agreements or senior notes; our ability to meet future capital requirements; our ability to realize the benefits of our completed acquisitions, including our ability to achieve anticipated opportunities and operating cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management or at all; the diversion of management time on acquisition- related issues; the failure of our brand investment portfolio licensees to pay us royalties; and the intense competition to which our brand investment portfolio is subject. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Except as otherwise required by the context, references in this Quarterly Report to the “Company,” “B. Riley,” “B. Riley Financial,” “we,” “us” or “our” refer to the combined business of B. Riley Financial, Inc. and all of its subsidiaries.

Overview

General

B. Riley Financial, Inc. (NASDAQ: RILY) and its subsidiaries provide collaborative financial services and solutions through several operating subsidiaries including:

●

B. Riley Securities, Inc. (“B. Riley Securities”) is a leading, full service investment bank providing financial advisory, corporate finance, research, securities lending and sales and trading services to corporate, institutional and high net worth individual clients. B. Riley Securities, (fka B. Riley FBR) was formed in November 2017 through the merger of B. Riley & Co, LLC and FBR Capital Markets & Co., which the Company acquired in June 2017.

	●	B. Riley Wealth Management, Inc. (“B. Riley Wealth Management”) provides comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations and endowments. B. Riley Wealth Management was formerly Wunderlich Securities, Inc., which the Company acquired on July 3, 2017 and whose name was changed ~~the name~~ in June 2018.

	●	National Holdings Corporation (“National”) provides wealth management, brokerage, insurance, tax preparation and advisory services. On February 25, 2021, the Company completed a tender offer to acquire all of the outstanding shares of National not already owned by the Company. The merger expands the Company’s investment banking, wealth management and financial planning offerings.

	●	B. Riley Capital Management, LLC, a Securities and Exchange Commission (“SEC”) registered investment advisor, which includes:

	o○	B. Riley Asset Management, an advisor to certain private funds and to institutional and high net worth ~~investors.~~investors;

	o○	Great American Capital Partners, LLC (“GACP”), the general partner of two private funds, GACP I, L.P. and GACP II, L.P., both direct lending funds managed by WhiteHawk Capital Partners, L.P. pursuant to an investment advisory services agreement, that provide senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies.

	●	~~Our subsidiaries doing business as~~ B. Riley Advisory ~~Services:~~Services provides expert witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services.

GlassRatner Advisory & Capital Group LLC (“GlassRatner”), a specialty financial advisory services firm that provides consulting services to shareholders, creditors and companies, including due diligence, fraud investigations, corporate litigation support, crisis management and bankruptcy services. We acquired GlassRatner on August 1, 2018. GlassRatner strengthens B. Riley’s diverse platform and compliments the restructuring services provided by B. Riley Securities.

~~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.~~

	●	B. Riley Retail Solutions, LLC (fka Great American Group, LLC), a leading provider of asset disposition and auction solutions to a wide range of retail and industrial clients.

We also pursue a strategy of investing in or acquiring companies which we believe have attractive investment return characteristics. We acquired United Online, Inc. (“UOL” or “United Online”) on July 1, 2016 and magicJack VocalTec Ltd. (“magicJack”) on November 14, 2018 as part of our principal investment strategy.

	●	B. Riley Real Estate works with real estate owners and tenants through all stages of the real estate life cycle. Our real estate advisors advise companies, financial institutions, investors, family offices and individuals on real estate projects worldwide. A core focus of B. Riley real estate is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.

	●	B. Riley Principal Investments identifies attractive investment opportunities and aims to deliver financial and operational improvement to its portfolio companies. Our team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics. Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts. B. Riley Principal Investments seeks to control or influence the operations of our investments to deliver financial and operational improvements that will maximize free cash flow, and therefore, shareholder returns. As part of our principal investment strategy, we acquired United Online, Inc. (“UOL” or “United Online”) on July 1, 2016, magicJack VocalTec Ltd. (“magicJack”) on November 14, 2018 and on November 30, 2020 we acquired a 40% equity interest in with Lingo Management, LLC (“Lingo”), with the ability to acquire an additional 40% equity interest therein.

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

	●○	magicJack is a Voice over IP (“VoIP”) cloud-based technology and services communications provider.

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

●

BR Brand Holding, LLC (“BR Brands”), in which the Company owns a majority interest, provides licensing of certain brand trademarks. BR Brands owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management company.

BR Brand, in which the Company owns a majority interest, provides licensing of a brand investment portfolio. BR Brand owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore.

We are headquartered in Los Angeles with offices in major cities throughout the United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington ~~D.C and~~D.C., West Palm ~~Beach.~~Beach, and Boca Raton.

During the fourth quarter of 2020, the Company realigned its segment reporting structure to reflect organizational management changes. Under the new structure, the valuation and appraisal businesses are reported in the Financial Consulting segment and our bankruptcy, financial advisory, forensic accounting, and real estate consulting businesses that were previously reported in the Capital Markets segment are now reported as part of the Financial Consulting segment. In conjunction with the new reporting structure, the Company recast its segment presentation for all periods presented. During the first quarter of 2021, in connection with the acquisition of National on February 25, 2021, the Company further realigned its segment reporting structure to reflect organizational management changes in the Company’s wealth management business and created a new Wealth Management segment that was previously reported as part of the Capital Markets segment in 2020. In conjunction with the new reporting structures, the Company recast its segment presentation for all periods presented.

For financial reporting purposes we classify our businesses into ~~five~~six operating segments: (i) Capital Markets, (ii) Wealth Management, (iii) Auction and Liquidation, ~~(iii) Valuation and Appraisal,~~ (iv) Financial Consulting, (v) Principal Investments – United Online and magicJack and ~~(v)~~(vi) Brands.

Capital Markets Segment. Our Capital Markets segment provides a full array of investment banking, corporate finance, consulting, financial advisory, research, securities lending ~~wealth management~~ and sales and trading services to corporate, institutional and ~~high net worth~~individual clients. Our corporate finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements. In addition, we trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries. Our Capital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.

Wealth Management Segment. Our Wealth Management segment provides wealth management and tax services to corporate, and high net worth clients. We offer comprehensive wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending & liquidity resources, and settlement solutions. Our wealth management services for individual client services provide investment management, education planning, retirement planning, risk management, trust coordination, lending & liquidity solutions, legacy planning, and wealth transfer. In addition, we supply market insights to provide unbiased guidance to make important financial decisions. Wealth management resources include market views from our highly regarded Chief Investment Strategist and Capital Markets segment’s research.

Auction and Liquidation Segment. Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges and distressed circumstances. Furthermore, our scale and pool of resources allow us to offer our services across North ~~American~~America as well as parts of Europe, Asia and Australia. Our Auction and Liquidation segment operates through two main divisions, retail store liquidations and wholesale and industrial assets dispositions. Our wholesale and industrial assets dispositions division operates through limited liability companies that are controlled by us.

~~Valuation and Appraisal~~Financial Consulting Segment. Our ~~Valuation and Appraisal~~Financial 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~~bankruptcy, financial advisory, forensic accounting, litigation support, real estate consulting and valuation ~~of assets (i) for purposes of determining~~ and ~~monitoring the value of collateral securing financial transactions and loan arrangements and (ii) in connection with potential business combinations.~~appraisal services. Our ~~Valuation and Appraisal~~Financial Consulting segment operates through limited liability companies that are wholly owned or majority owned by us.

Principal Investments - United Online and magicJack Segment. Our Principal Investments - United Online and magicJack segment consists of businesses which have been acquired primarily for attractive investment return characteristics. Currently, this segment includes UOL, through which we provide consumer Internet access, and magicJack, through which we provide VoIP communication and related product and subscription services.

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

Recent Developments

On June 23, 2021, we and our wholly owned subsidiaries, BR Financial Holdings, LLC, a Delaware limited liability company (the “Primary Guarantor”), and BR Advisory & Investments, LLC, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Credit Agreement”) by and among us, Primary Guarantor, the Borrower, the lenders party thereto, Nomura Corporate Funding Americas, LLC, as administrative agent and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million secured revolving loan credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment. On the closing date, the Borrower borrowed the full $200.0 million under the Term Loan Facility. The Revolving Credit Facility is available for borrowing from time to time prior to the final maturity of the Revolving Credit Facility. Subsequent to June 30, 2021, we borrowed the full $80.0 million that was available under the Revolving Credit Facility.

On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal amount of its 7.25% Senior Notes due 2027 (“7.25% 2027 Notes”) pursuant to the third supplemental indenture dated December 31, 2017. The total redemption payment included approximately $2.1 million in accrued interest. In connection with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. ~~The~~During the second quarter of 2021, the full impact of the COVID-19 outbreak continues to evolve. As the U.S. economy recovers, aided by additional stimulus packages and positive momentum in the domestic vaccine rollout, countries across the world continue to manage repeated waves of the pandemic, including variant strains of COVID-19, amid uneven progress toward vaccination. The impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and ~~restrictions.~~restrictions and the success of vaccines in slowing or halting the pandemic. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy ~~are~~continue to be highly uncertain and cannot be predicted. If the financial markets and/or the overall economy ~~are~~continue to be impacted, ~~for an extended period,~~ our results of operations, financial position and cash flows may be materially adversely affected.

Results of Operations

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

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020

Condensed Consolidated Statements of ~~Income~~Operations

(Dollars in thousands)

													Three Months Ended
	Three Months Ended September 30,						Change						June 30,			June 30,			Change
	2020			2019			Amount			%			2021			2020			Amount			%
Revenues:
Services and fees	$	144,823		$	113,111		$	31,712			28.0	%	$	266,143		$	125,595		$	140,548			111.9	%
Trading income and fair value adjustments on loans		31,753			40,268			(8,515	)		(21.1	)%		32,679			114,547			(81,868	)		(71.5	%)
Interest income - Loans and securities lending		26,026			25,766			260			1.0	%		25,491			24,506			985			4.0	%
Sale of goods		23,651			918			22,733			n/m			12,457			1,820			10,637			n/m
Total revenues		226,253			180,063			46,190			25.7	%		336,770			266,468			70,302			26.4	%

Operating expenses:
Direct cost of services		23,264			7,936			15,328			193.1	%		12,094			7,985			4,109			51.5	%
Cost of goods sold		9,813			911			8,902			n/m			3,626			860			2,766			n/m
Selling, general and administrative expenses		97,143			101,092			(3,949	)		(3.9	)%		199,922			106,562			93,360			87.6	%
Restructuring charge		1,557			—			1,557			100.0	%
Impairment of tradenames														—			8,500			(8,500	)		(100.0	%)
Interest expense - Securities lending and loan participations sold		10,975			10,273			702			6.8	%		10,983			11,221			(238	)		(2.1	%)
Total operating expenses		142,752			120,212			22,540			18.8	%		226,625			135,128			91,497			67.7	%
Operating income		83,501			59,851			23,650			39.5	%		110,145			131,340			(21,195	)		(16.1	%)
Other income (expense):
Interest income		67			361			(294	)		(81.4	)%		56			224			(168	)		(75.0	%)
Income from equity investments		409			1,113			(704	)		(63.3	)%
Gain on extinguishment of loans														6,509			—			6,509			100.0	%
Loss from equity investments														(852	)		(318	)		(534	)		167.9	%
Interest expense		(16,374	)		(12,772	)		(3,602	)		28.2	%		(20,856	)		(16,509	)		(4,347	)		26.3	%
Income before income taxes		67,603			48,553			19,050			39.2	%		95,002			114,737			(19,735	)		(17.2	%)
Provision for income taxes		(18,711	)		(14,409	)		(4,302	)		29.9	%		(19,902	)		(32,208	)		12,306			(38.2	%)
Net income		48,892			34,144			14,748			43.2	%		75,100			82,529			(7,429	)		(9.0	%)
Net income (loss) attributable to noncontrolling interests		513			(158	)		671			n/m
Net loss attributable to noncontrolling interests														(576	)		(1,311	)		735			(56.1	%)
Net income attributable to B. Riley Financial, Inc.		48,379			34,302			14,077			41.0	%		75,676			83,840			(8,164	)		(9.7	%)
Preferred stock dividends		1,088			—			1,088			100.0	%		1,789			1,087			702			64.6	%
Net income available to common shareholders	$	47,291		$	34,302		$	12,989			37.9	%	$	73,887		$	82,753		$	(8,866	)		(10.7	%)

~~n/m - Not applicable or not meaningful.~~

n/m

- Not applicable or not meaningful.

~~Revenues~~

Revenues

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

	Three Months Ended September 30,										Three Months Ended
	2020		2019		Change						June 30,			June 30,		Change
	Amount		Amount		Amount			%			2021			2020		Amount			%
Revenues - Services and fees:
Capital Markets segment	$	89,032	$	68,062	$	20,970			30.8	%	$	125,997		$	60,364	$	65,633			108.7	%
Wealth Management segment												87,444			15,318		72,126			n/m
Auction and Liquidation segment		21,473		11,232		10,241			91.2	%		5,534			7,206		(1,672	)		-23.2	%
Valuation and Appraisal segment		9,655		10,818		(1,163	)		-10.8	%
Financial Consulting segment												23,735			18,845		4,890			25.9	%
Principal Investments - United Online and magicJack segment		20,663		22,999		(2,336	)		-10.2	%		18,932			20,656		(1,724	)		-8.3	%
Brands		4,000		—		4,000			100.0	%
Brands segment												4,501			3,206		1,295			40.4	%
Subtotal		144,823		113,111		31,712			28.0	%		266,143			125,595		140,548			111.9	%

Revenues - Sale of goods:
Auction and Liquidation segment		22,712		54		22,658			n/m			11,743			1,045		10,698			n/m
Principal Investments - United Online and magicJack segment		939		864		75			8.7	%		714			775		(61	)		-7.9	%
Subtotal		23,651		918		22,733			n/m			12,457			1,820		10,637			n/m

Trading income and fair value adjustments on loans
Trading income (loss) and fair value adjustments on loans
Capital Markets segment		31,753		40,268		(8,515	)		-21.1	%		29,897			114,080		(84,183	)		-73.8	%
Wealth Management segment												2,865			467		2,398			n/m
Brands segment												(83	)		—		(83	)		100.0	%
Subtotal		31,753		40,268		(8,515	)		-21.1	%		32,679			114,547		(81,868	)		-71.5	%

Interest income - Loans and securities lending:
Capital Markets segment		26,026		25,766		260			1.0	%		25,491			24,506		985			4.0	%
Total revenues	$	226,253	$	180,063	$	46,190			25.7	%	$	336,770		$	266,468	$	70,302			26.4	%

n/m

- Not applicable or not meaningful.

~~n/m - Not applicable or not meaningful.~~

Total revenues increased approximately ~~$46.2~~$70.3 million to ~~$226.3~~$336.8 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$180.1~~$266.5 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The increase in revenues during the three months ended ~~September~~June 30, ~~2020~~2021 was primarily due to ~~increases~~an increase in revenue from services and fees of ~~$31.7~~$140.5 million, ~~sales~~revenue from sale of goods of ~~$22.7~~$10.6 million, and interest income -from loans and securities lending of ~~$0.3~~$1.0 million, ~~partially~~ offset by ~~decreases~~a decrease in revenue from trading income and fair value adjustments on loans of ~~$8.5~~$81.9 million. The increase in revenue from services and fees ~~of $31.7 million~~ in the three months ended ~~September~~June 30, ~~2020 was primarily due to~~2021 consisted of increases in revenue of ~~$21.0~~$65.6 million in the Capital Markets segment, ~~$10.2~~$72.1 million in the Wealth Management segment, $4.9 million in the Financial Consulting segment, and $1.3 million in the Brands segment, offset by decreases in revenues of $1.7 million in both the Auction and Liquidation segment and ~~$4.0 million in the Brands segment partially offset by decreases in revenue of $1.2 million in the Valuation and Appraisal segment and $2.3 million in~~ the Principal Investments — United Online and magicJack segment.

Revenues from services and fees in the Capital Markets segment increased ~~$21.0~~$65.6 million, to ~~$89.0~~$126.0 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$68.1~~$60.4 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The increase in revenues was primarily due to increases in revenue of ~~$8.1~~$64.4 million from corporate finance, consulting and investment banking fees and ~~other income, including investment dividends,~~$4.3 million from the acquisition of ~~$15.3 million,~~National in the first quarter of 2021, partially offset by ~~a decrease~~decreases in asset management fees of ~~$2.5~~$1.6 million and commissions of $1.5 million.

Revenues from services and fees in the Wealth Management segment increased $72.1 million, to $87.4 million during the three months ended June 30, 2021 from $15.3 million during the three months ended June 30, 2020. The increase in revenues was primarily due to increases in revenue of $63.7 million from the acquisition of National and $8.4 million from wealth and asset management fees.

Revenues from services and fees in the Auction and Liquidation segment ~~increased $10.2~~decreased $1.7 million, to ~~$21.5~~$5.5 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$11.2~~$7.2 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~increase~~decrease in revenues ~~in the Auction and Liquidation segment~~ was primarily due ~~an increase in~~to fewer large retail fee liquidation ~~engagements during the quarter. In June 2020, a number of retail liquidation engagements resumed as a number of states allowed the reopening of retail stores.~~engagements.

Revenues from services and fees in the ~~Valuation and Appraisal~~Financial Consulting segment ~~decreased $1.2~~increased $4.9 million, to ~~$9.7~~$23.7 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$10.8~~$18.8 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase in revenues ~~in the Valuation and Appraisal segment is~~was primarily due to ~~a decrease~~an increase in ~~revenues for appraisal engagements~~revenue of $3.8 million in advisory services, $0.7 million ~~where we perform valuations for the monitoring of collateral for financial institutions, lenders, and private equity investors and $0.5 million for appraisal engagements~~in real estate engagement fees where we provide lease modification services for corporate ~~valuation services~~tenants, and ~~the valuation of machinery and equipment.~~$0.4 million due to a newly formed operations management group during fiscal year 2021.

Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased ~~$2.3~~$1.7 million to $18.9 million during the three months ended June 30, 2021 from $20.7 million during the three months ended ~~September~~June 30, ~~2020 from $23.0 million during the three months ended September 30, 2019.~~2020. The decrease in revenues ~~from services and fees is a result of a decrease~~was primarily due to decreases in subscription services of ~~$1.5~~$1.0 million and ~~a decrease~~ in advertising licensing and other of $0.8 million. Management expects revenues from the Principal Investments - United Online and magicJack segment to continue to decline year over year.

Revenues from services and fees in the Brands segment ~~were $4.0~~increased $1.3 million ~~for~~to $4.5 million during the three months ended ~~September~~June 30, ~~2020. We established~~2021 from $3.2 million during the ~~Brands segment in 2019 following the acquisition of a majority interest in BR Brands on October 28, 2019.~~three months ended June 30, 2020. The primary source of revenue included in this segment is the licensing of trademarks.

Revenues from sales of goods increased $22.7 million to $23.7 million for the three months ended September 30, 2020 from $0.9 million for the three months ended September 30, 2019. The increase in revenue from sales of goods of $22.7 million in the three months ended September 30, 2020 was primarily due to increases in revenue of $22.7 million in the Auction and Liquidation segment as a result of the sale of goods for certain retail liquidation engagements where we acquired the title to inventory goods in Europe and operated the retail stores as part of a going-out-of-business sale.

Trading income and fair value adjustments on loans decreased ~~$8.5~~$81.9 million to ~~$31.8~~$32.7 million during the three months ended June 30, 2021 compared to $114.5 million for the three months ended ~~September~~June 30, ~~2020 from $40.3~~2020. The $81.9 million decrease for the three months ended June 30, 2021 was primarily due to a decrease of $84.2 million in the Capital Markets segment partially offset by an increase of $2.4 million in the Wealth Management segment. The gain of $32.7 million for the three months ended ~~September~~June 30, ~~2019. The $31.8 million gain for the three months ended September 30, 2020 includes~~2021 included realized and unrealized ~~gains~~amounts earned on investments made in our proprietary trading ~~account~~accounts of ~~$31.6~~$33.4 million ~~and~~partially offset by an unrealized ~~gains~~loss on our loans receivable, ~~that are measured~~ at fair value of ~~$0.2~~$0.7 million.

Interest income – loans and securities lending increased ~~$0.3~~$1.0 million, to ~~$26.0~~$25.5 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$25.8~~$24.5 million during the three months ended ~~September~~June 30, ~~2019.~~2020. Interest income from securities lending was ~~$13.3~~$13.9 million and ~~$12.2~~$13.5 million during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Interest income from loans was ~~$12.7~~$11.6 million and ~~$13.6~~$11.0 million during the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. The increase in interest income on loans was primarily due to the increase in lending activities in our Capital Markets segment which included an increase in loans receivable to $344.3 million at September 30, 2020 from $295.9 million at September 30, 2019.

Revenues – Sale of Goods ~~Cost of Goods Sold and Gross Margin~~

Three Months Ended
September 30, 2020 Three Months Ended
September 30, 2019
Principal Principal
Investments - Investments -
Auction and United Online and Auction and United Online and
Liquidation magicJack Liquidation magicJack
Segment Segment Total Segment Segment Total
Revenues - Sale of Goods $ 22,712 $ 939 $ 23,651 $ 54 $ 864 $ 918
Cost of goods sold 9,046 767 9,813 126 785 911
Gross margin on sale of goods $ 13,666 $ 172 $ 13,838 $ (72 ) $ 79 $ 7

Gross margin percentage 60.2 % 18.3 % 58.5 % (133.3 )% 9.1 % 0.8 %

Revenues from the sale of goods increased ~~$22.7~~$10.6 million, to ~~$23.7~~$12.5 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$0.9~~$1.8 million during the three months ended ~~September~~June 30, ~~2019. The increase in revenues~~2020. Revenues from sale of goods ~~was~~were primarily attributable to ~~the sale~~$11.7 million of sales of retail goods ~~for certain~~related to a retail liquidation ~~engagements where we acquired the title to inventory goods~~engagement in Europe and ~~operated the retail stores as part~~$0.7 million of ~~a going-out-of-business sale.~~sales of magicJack devices that were sold in connection with VoIP services. Cost of goods sold for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$9.8~~$3.6 million, resulting in a gross margin of ~~58.5%~~70.9%.

Operating Expenses

Direct Cost of ~~Services.~~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, 2020 and 2019 are as follows:~~

Three Months Ended
September 30, 2020 Three Months Ended
September 30, 2019
Principal Principal
Investments - Investments -
Auction and United Online and Auction and United Online and
Liquidation magicJack Liquidation magicJack
Segment Segment Total Segment Segment Total
Revenues - Services and fees $ 21,473 $ 20,663 $ 11,232 $ 22,999
Direct cost of services 18,373 4,891 $ 23,264 2,371 5,565 $ 7,936
Gross margin on services and fees $ 3,100 $ 15,772 $ 8,861 $ 17,434

Gross margin percentage 14.4 % 76.3 % 78.9 % 75.8 %

~~Total direct costs~~ increased ~~$15.3~~$4.1 million, to ~~$23.3~~$12.1 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$7.9~~$8.0 million during the three months ended ~~September~~June 30, ~~2019.~~2020. Direct costs of services increased by ~~$16.0~~$4.3 million in the Auction and Liquidation segment and decreased ~~$0.7~~by $0.2 million in the Principal Investments — United Online and magicJack segment. The increase in direct costs in the Auction and Liquidation segment was primarily due to a retail liquidation engagement in Europe where we purchased inventory for resale using the ~~costs incurred to operate~~existing stores of the client. As part of the retail ~~stores where~~liquidation engagement, we ~~acquired title~~incurred costs related to ~~inventory goods in Europe~~the store operations which primarily related to expenses for occupancy, payroll and ~~operated a going-out-of-business sale.~~other store operating costs. The decrease in direct costs in the Principal Investments — United Online and magicJack segment was primarily asdue to a ~~result of declining sales.~~

~~Auction and Liquidation~~

~~Gross margin~~corresponding decrease in ~~the Auction and Liquidation segment~~revenues from subscription based customers for ~~services and fees decreased to 14.4% of revenues during~~ the three months ended ~~September~~June 30, ~~2020,~~2021 as compared to ~~78.9% of revenues during~~ the three months ended ~~September~~June 30, 2019. The decrease in margin in the Auction and Liquidation segment was primarily due to the costs incurred to operate the retail stores where we acquired title to inventory goods in Europe and operated a going-out-of-business sale.2020.

~~Principal Investments — United Online and magicJack~~

Gross margins in the Principal Investments — United Online and magicJack segment increased to 76.3% of revenues during the three months ended September 30, 2020, as compared to 75.8% of revenues during the three months ended September 30, 2019. The increase in margin in the Principal Investments — United Online and magicJack segment is primarily due to cost savings for magicJack.

Selling, General and Administrative ~~Expenses.~~Expenses

Selling, general and administrative expenses during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were comprised of the following:

	Three Months Ended June 30, 2021					Three Months Ended June 30, 2020					Change
	Amount		%			Amount		%			Amount		%
Capital Markets segment	$	65,720		33.0	%	$	57,218		53.6	%	$	8,502		14.9	%
Wealth Management segment		91,042		45.5	%		15,753		14.8	%		75,289		n/m
Auction and Liquidation segment		3,077		1.5	%		2,729		2.6	%		348		12.8	%
Financial Consulting segment		19,560		9.8	%		15,341		14.4	%		4,219		27.5	%
Principal Investments - United Online and magicJack segment		7,296		3.6	%		6,900		6.5	%		396		5.7	%
Brands segment		1,405		0.7	%		1,024		1.0	%		381		37.2	%
Corporate and Other segment		11,822		5.9	%		7,597		7.1	%		4,225		55.6	%
Total selling, general & administrative expenses	$	199,922		100.0	%	$	106,562		100.0	%	$	93,360		87.6	%

~~Selling, General and Administrative Expenses~~

Three Months Ended September 30,
2020 2019 Change
Amount % Amount % Amount %
Capital Markets segment $ 69,608 71.6 % $ 71,421 70.6 % $ (1,813 ) (2.5 )%
Auction and Liquidation segment 4,626 4.8 % 2,836 2.8 % 1,790 63.1 %
Valuation and Appraisal segment 6,683 6.9 % 7,367 7.3 % (684 ) (9.3 )%
Principal Investments - United Online and magicJack segment 7,576 7.8 % 8,851 8.8 % (1,275 ) (14.4 )%
Brands segment 1,708 1.8 % — 0.0 % 1,708 100.0 %
Corporate and Other segment 6,942 7.1 % 10,617 10.5 % (3,675 ) (34.6 )%
Total selling, general & administrative expenses $ 97,143 100.0 % $ 101,092 100.0 % $ (3,949 ) (3.9 )%

Total selling, general and administrative expenses ~~decreased~~increased approximately ~~$3.9~~$93.4 million to ~~$97.1~~$199.9 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$101.1~~$106.6 million for the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase of approximately ~~$3.9~~$93.4 million in selling, general and administrative expenses was due to ~~decreases~~increases of ~~$1.8~~$8.5 million in the Capital Markets segment, ~~$0.7~~$75.3 million in the ~~Valuation~~Wealth Management segment, $0.3 million in the Auction and ~~Appraisal~~Liquidation segment, ~~$1.3~~$4.2 million in the Financial Consulting segment, $0.4 million in the Principal Investments — United Online and magicJack segment, $0.4 million in the Brands segment, and ~~$3.7~~$4.2 million in the Corporate and Other ~~segment, partially offset by increases of $1.8 million in the Auction and Liquidation segment and $1.7 million in the Brands~~ segment.

~~Capital Markets~~

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment ~~decreased~~increased by ~~$1.8~~$8.5 million to ~~$69.6~~$65.7 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$71.4~~$57.2 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~decreases~~increases of ~~$0.6 million in occupancy expenses, $2.0~~$17.7 million in payroll and related expenses, $1.5 million from the acquisition of National, and ~~$0.7~~$2.0 million in investment banking deal expenses, partially offset by a decrease of $12.6 million in consulting expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $75.3 million to $91.0 million during the three months ended June 30, 2021 from $15.8 million during the three months ended June 30, 2020. The increase was primarily due to increases of $69.6 million from the acquisition of National, $6.1 million in payroll and related expenses, $0.2 million in software and equipment expenses, $0.1 million in office expenses, and $0.1 million in travel and entertainment expenses, partially offset by ~~increases~~decreases of ~~$1.5~~$0.3 million in legal expenses, $0.3 million in occupancy expenses, and $0.3 million in other expenses.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased ~~by $1.8~~$0.3 million to ~~$4.6~~$3.1 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$2.8~~$2.7 million during the three months ended ~~September~~June 30, 2019. The increase in selling, general and administrative expenses in the Auction and Liquidation segment was primarily due to increases of $0.8 million in losses from foreign currency exchange and $0.9 million in business development expenses.2020.

~~Valuation and Appraisal~~Financial Consulting

Selling, general and administrative expenses in the ~~Valuation and Appraisal~~Financial Consulting segment ~~decreased~~increased by ~~$0.7~~$4.2 million to ~~$6.7~~$19.6 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$7.4~~$15.3 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease in selling, general and administrative expenses in the Valuation and Appraisal segment~~increase was primarily due to ~~a decrease~~increases of ~~$0.6~~$3.1 million in payroll and related expenses, $0.3 million in other expenses, $0.3 million in travel and entertainment expenses, $0.2 million in legal expenses, and $0.2 million in outside contractor expenses.

Principal Investments — United Online and magicJack

Selling, general and administrative expenses in the Principal Investments — United Online and magicJack segment ~~decreased by $1.3~~increased $0.4 million to ~~$7.6~~$7.3 million for the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$8.9~~$6.9 million for the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease in selling, general and administrative expenses in the Principal Investments — United Online and magicJack segment~~increase was primarily due to a $1.0 million legal settlement accrual release in the three months ended June 30, 2020, partially offset by decreases of ~~$0.4~~$0.3 million in depreciation and amortization expenses, $0.2 million in payroll and related expenses, and ~~$0.6~~$0.2 million in ~~legal~~business promotion and marketing expenses.

Brands

Selling, general and administrative expenses in the Brands segment ~~was $1.7~~increased by $0.4 million ~~for~~to $1.4 million during the three months ended ~~September~~June 30, 2021 from $1.0 million during the three months ended June 30, 2020. ~~We established the Brands segment~~The increase was primarily due to increases of $0.2 million in ~~2019 following the acquisition of a majority equity interest~~payroll and related expenses and $0.2 million in ~~BR Brands on October 28, 2019.~~other expenses.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment ~~decreased~~increased approximately ~~$3.7~~$4.2 million to ~~$6.9~~$11.8 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$10.6~~$7.6 million for the three months ended ~~September~~June 30, 2019. The decrease in expenses in the Corporate and Other segment for the three months ended September 30, 2020 was primarily due to a decrease of $2.3 million in payroll and related expenses and a decrease in professional fees and other expenses of $1.3 million.

~~Restructuring Charge.~~ Restructuring charges of $1.6 million during the three months ended September 30, 2020 were primarily related to impairment of certain acquired tradename intangibles associated with the Company’s brand realignment across its subsidiary companies to provide greater external consistency and affiliation. There were no restructuring charges during the three months ended September 30,2019.

~~Other Income (Expense).~~ Other income included interest income of $0.1 million during the three months ended September 30, 2020 and $0.4 million during the three months ended September 30, 2019. Interest expense was $16.4 million during the three months ended September 30, 2020 compared to $12.8 million during the three months ended September 30, 2019. The increase in interest expense during the three months ended September 30, 2020 was primarily due to an increase in interest expense of $4.3 million from the issuance of additional senior notes, partially offset by a decrease in interest expense of $0.6 million from the term loan dated December 2018. Other income in the three months ended September 30, 2020 also included income from equity investments of $0.4 million, a decrease from $1.1 million in the prior year period.

~~Income Before Income Taxes~~. Income before income taxes was $67.6 million during the three months ended September 30, 2020 compared to income before income taxes of $48.6 million during the three months ended September 30, 2019. The increase in income before income taxes was primarily due to increases in segment income of $12.4 million in the Capital Markets segment, $6.0 million in the Auction and Liquidation segment and $2.3 million in the Brands segment, partially offset by an increase in interest expense of $3.6 million.

~~Provision for Income Taxes.~~ Provision for income taxes was $18.7 million during the three months ended September 30, 2020 compared to $14.4 million during the three months ended September 30, 2019. The effective income tax rate was 27.7% for the three months ended September 30, 2020 as compared to 29.7% for the three months ended September 30, 2019.

~~Net Income (Loss) Attributable to Noncontrolling Interest~~. Net income attributable to noncontrolling interests represents the proportionate share of net income generated by BR Brand, 20% of the membership interest of which we do not own and Great American Global Partners, LLC, 50% of the membership interest of which we do not own. The net income attributable to noncontrolling interests was $0.5 million during the three months ended September 30, 2020 compared to net loss attributable to noncontrolling interests of $0.2 million during the three months ended September 30, 2019.

~~Net Income Attributable to the Company~~. Net income attributable to the Company for the three months ended September 30, 2020 increased to $48.4 million, an increase of $14.1 million, from net income attributable to the Company of $34.3 million for the three months ended September 30, 2019. The increase in net income attributable to the Company during the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to an increase in operating income of $23.7 million and an increase in income attributable to noncontrolling interest of $0.7 million, partially offset by an increase in provision for income taxes of $4.3 million, an increase in interest expense of $3.6 million and a decrease in income from equity investments of $0.7 million.

~~Preferred Stock Dividends~~. On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYP”), par value $0.0001 per share. Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October. On July 7, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 31, 2020 to holders of record as of the close of business on July 21, 2020. On October 8, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which will be paid on or around October 31, 2020, to holders of record as of the close of business on October 21, 2020.

On September 4, 2020, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share. Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October. On October 8, 2020, the Company declared a cash dividend $0.29193 per Depositary Share, which will be paid on or around October 31, 2020, to holders of record as of the close of business on October 21, 2020.

~~Net Income Available to Common Shareholders~~. Net income available to common shareholders for the three months ended September 30, 2020 was $47.3 million, from net income available to common shareholders of $34.3 million for the three months ended September 30, 2019. The increase in net income available to common shareholders during the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to an increase in operating income of $23.7 million, partially offset by an increase in provision for income taxes of $4.3 million, an increase in interest expense of $3.6 million, an increase in income attributable to noncontrolling interest of $0.7 million and preferred stock dividends of $1.1 million and a decrease in income from equity investments of $0.7 million.

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

~~Condensed Consolidated Statements of Income~~

~~(Dollars in thousands)~~

Nine Months Ended
September 30, Change
2020 2019 Amount %
Revenues:
Services and fees $ 429,799 $ 356,975 $ 72,824 20.4 %
Trading (losses) income and fair value adjustments on loans (36,142 ) 71,730 (107,872 ) (150.4 )%
Interest income - Loans and securities lending 72,383 54,147 18,236 33.7 %
Sale of goods 26,475 4,023 22,452 n/m
Total revenues 492,515 486,875 5,640 1.2 %

Operating expenses:
Direct cost of services 51,201 41,715 9,486 22.7 %
Cost of goods sold 11,442 3,835 7,607 198.4 %
Selling, general and administrative expenses 291,449 287,963 3,486 1.2 %
Restructuring charge 1,557 1,699 (142 ) (8.4 )%
Impairment of tradenames 12,500 — 12,500 100.0 %
Interest expense - Securities lending and loan participations sold 30,669 22,579 8,090 35.8 %
Total operating expenses 398,818 357,791 41,027 11.5 %
Operating income 93,697 129,084 (35,387 ) (27.4 )%
Other income (expense):
Interest income 537 1,329 (792 ) (59.6 )%
Loss from equity investments (145 ) (4,049 ) 3,904 (96.4 )%
Interest expense (48,537 ) (35,130 ) (13,407 ) 38.2 %
Income before income taxes 45,552 91,234 (45,682 ) (50.1 )%
Provision for income taxes (13,380 ) (26,802 ) 13,422 (50.1 )%
Net income 32,172 64,432 (32,260 ) (50.1 )%
Net loss attributable to noncontrolling interests (1,382 ) (50 ) (1,332 ) n/m
Net income attributable to B. Riley Financial, Inc. 33,554 64,482 (30,928 ) (48.0 )%
Preferred stock dividends 3,230 — 3,230 100.0 %
Net income available to common shareholders $ 30,324 $ 64,482 $ (34,158 ) (53.0 )%

~~n/m - Not applicable or not meaningful.~~

~~Revenues~~

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

Nine Months Ended
September 30,
2020 2019 Change
Amount Amount Amount %
Revenues - Services and fees:
Capital Markets segment $ 280,303 $ 187,768 $ 92,535 49.3 %
Auction and Liquidation segment 49,340 65,681 (16,341 ) -24.9 %
Valuation and Appraisal segment 26,112 29,143 (3,031 ) -10.4 %
Principal Investments - United Online and magicJack segment 63,037 74,383 (11,346 ) -15.3 %
Brands 11,007 — 11,007 100.0 %
Subtotal 429,799 356,975 72,824 20.4 %

Revenues - Sale of goods:
Auction and Liquidation segment 23,757 1,230 22,527 n/m
Principal Investments - United Online and magicJack segment 2,718 2,793 (75 ) -2.7 %
Subtotal 26,475 4,023 22,452 n/m

Trading (losses) income and fair value adjustments on loans
Capital Markets segment (36,142 ) 71,730 (107,872 ) n/m
Subtotal (36,142 ) 71,730 (107,872 ) n/m

Interest income - Loans and securities lending:
Capital Markets segment 72,383 54,147 18,236 33.7 %
Total revenues $ 492,515 $ 486,875 $ 5,640 1.2 %

~~n/m - Not applicable or not meaningful.~~

Total revenues increased approximately $5.6 million to $492.5 million during the nine months ended September 30, 2020 from $486.9 million during the nine months ended September 30, 2019. The increase in revenues during the nine months ended September 30, 2020 was primarily due to increases in revenue from services and fees of $72.8 million, revenues from sales of goods of $22.5 million and interest income - loans and securities lending of $18.2 million, partially offset by a decrease in revenue from trading losses and fair value adjustments on loans of $107.9 million. The increase in revenue from services and fees of $72.8 million during the nine months ended September 30, 2020 was primarily due to increases in revenue of $92.5 million in the Capital Markets segment and $11.0 million in the Brands segment, partially offset by decreases in revenue of $16.3 million in the Auction and Liquidation segment, $3.0 million in the Valuation and Appraisal segment and $11.3 million in the Principal Investments — United Online and magicJack segment.

Revenues from services and fees in the Capital Markets segment increased $92.5 million, to $280.3 million during the nine months ended September 30, 2020 from $187.8 million during the nine months ended September 30, 2019. The increase in revenues was primarily due to increases in revenue of $67.7 million from corporate finance, consulting and investment banking fees, in commissions of $6.0 million and in other income, including investment dividends of $18.3 million.

Revenues from services and fees in the Auction and Liquidation segment decreased $16.3 million to $49.3 million during the nine months ended September 30, 2020 from $65.7 million during the nine months ended September 30, 2019. The decrease in revenues in the Auction and Liquidation segment was primarily due to fewer large retail liquidation engagements during the first half of 2020 and the impact of COVID-19 which resulted in delays and temporary stoppage in certain retail liquidation engagements. In June 2020, a number of retail liquidation engagements resumed as a number of states allowed the reopening of retail stores.

Revenues from services and fees in the Valuation and Appraisal segment decreased $3.0 million to $26.1 million during the nine months ended September 30, 2020 from $29.1 million during the nine months ended September 30, 2019. The decrease in revenues in the Valuation and Appraisal segment is primarily due to a decrease in revenues of $1.3 million for appraisal engagements where we perform valuations for the monitoring of collateral for financial institutions, lenders, and private equity investors and $1.7 million for appraisal engagements where we provide corporate valuation services and the valuation of machinery and equipment.

Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased $11.3 million to $63.0 million during the nine months ended September 30, 2020 from $74.4 million during the nine months ended September 30, 2019. The decrease in revenues from services and fees is a result of a decrease in subscription services of $7.8 million and a decrease in advertising licensing and other of $3.6 million. Management expects revenues from the Principal Investments - United Online and magicJack segment to continue to decline year over year.

Revenues from services and fees in the Brands segment were $11.0 million for the nine months ended September 30, 2020. We established the Brands segment in 2019 following the acquisition of a majority interest in BR Brands on October 28, 2019. The primary source of revenue included in this segment is the licensing of trademarks.

Trading (losses) income and fair value adjustments on loans decreased $107.9 million to a loss of $36.1 million for the nine months ended September 30, 2020 from a gain of $71.7 million for the nine months ended September 30, 2019. The $36.1 million loss for the nine months ended September 30, 2020 includes realized and unrealized loss amounts on investments made in our proprietary trading account of $14.3 million and unrealized losses on our loans receivable at fair value of $21.8 million.

Interest income – loans and securities lending increased $18.2 million, to $72.4 million during the nine months ended September 30, 2020 from $54.1 million during the nine months ended September 30, 2019. Interest income from securities lending was $36.9 million and $29.2 million during the nine months ended September 30, 2020 and 2019, respectively. Interest income from loans was $35.4 million and $24.9 million during the nine months ended September 30, 2020 and 2019, respectively. The increase in interest income on loans was primarily due to the increase in lending activities in our Capital Markets segment which included an increase in loans receivable to $344.3 million at September 30, 2020 from $295.9 million at September 30, 2019.

~~Sale of Goods, Cost of Goods Sold and Gross Margin~~

Nine Months Ended
September 30, 2020 Nine Months Ended
September 30, 2019
Principal Principal
Investments - Investments -
Auction and United Online and Auction and United Online and
Liquidation magicJack Liquidation magicJack
Segment Segment Total Segment Segment Total
Revenues - Sale of Goods $ 23,757 $ 2,718 $ 26,475 $ 1,230 $ 2,793 $ 4,023
Cost of goods sold 9,360 2,082 11,442 992 2,843 3,835
Gross margin on sale of goods $ 14,397 $ 636 $ 15,033 $ 238 $ (50 ) $ 188

Gross margin percentage 60.6 % 23.4 % 56.8 % 19.3 % (1.8 )% 4.7 %

Revenues from the sale of goods increased $22.5 million, to $26.5 million during the nine months ended September 30, 2020 from $4.0 million during the nine months ended September 30, 2019. The increase in revenues from sale of goods was primarily attributable to the sale of goods for certain retail liquidation engagements where we acquired the title to inventory goods in Europe and operated the retail stores as part of a going-out-of-business sale. Cost of goods sold for the nine months ended September 30, 2020 was $11.4 million, resulting in a gross margin of 56.8%.

~~Operating Expenses~~

~~Direct 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, 2020 and 2019 were as follows:~~

Nine Months Ended
September 30, 2020 Nine Months Ended
September 30, 2019
Principal Principal
Investments - Investments -
Auction and United Online and Auction and United Online and
Liquidation magicJack Liquidation magicJack
Segment Segment Total Segment Segment Total
Revenues - Services and fees $ 49,340 $ 63,037 $ 65,681 $ 74,383
Direct cost of services 36,406 14,795 $ 51,201 21,584 20,131 $ 41,715
Gross margin on services and fees $ 12,934 $ 48,242 $ 44,097 $ 54,252

Gross margin percentage 26.2 % 76.5 % 67.1 % 72.9 %

Total direct costs increased $9.5 million, to $51.2 million during the nine months ended September 30, 2020 from $41.7 million during the nine months ended September 30, 2019. Direct costs of services increased by $14.8 million in the Auction and Liquidation segment and decreased by $5.3 million in the Principal Investments — United Online and magicJack segment. The increase in direct costs in the Auction and Liquidation segment was primarily due to the costs incurred to operate the retail stores where we acquired title to inventory goods in Europe and operated a going-out-of-business sale. The decrease in direct costs in the Principal Investments — United Online and magicJack segment was primarily a result of the sale of a division of magicJack in May of 2019 and reduced costs in magicJack in 2020.

~~Auction and Liquidation~~

Gross margin in the Auction and Liquidation segment for services and fees decreased to 26.2% of revenues during the nine months ended September 30, 2020, as compared to 67.1% of revenues during the nine months ended September 30, 2019. The decrease in margin in the Auction and Liquidation segment is due to the costs incurred to operate the retail stores where we acquired title to inventory goods in Europe and operated a going-out-of-business sale.

~~Principal Investments — United Online and magicJack~~

Gross margins in the Principal Investments — United Online and magicJack segment increased to 76.5% of revenues during the nine months ended September 30, 2020, as compared to 72.9% of revenues during the nine months ended September 30, 2019. The increase in margin in the Principal Investments — United Online and magicJack segment is primarily due to the sale of a division of magicJack in May of 2019 and declining sales.

~~Selling, General and Administrative Expenses.~~ ~~Selling, general and administrative expenses during the nine months ended September 30, 2020 and 2019 were comprised of the following:~~

~~Selling, General and Administrative Expenses~~

Nine Months Ended September 30,
2020 2019 Change
Amount % Amount % Amount %
Capital Markets segment $ 207,545 71.3 % $ 200,414 69.6 % $ 7,131 3.6 %
Auction and Liquidation segment 8,882 3.0 % 9,050 3.1 % (168 ) (1.9 )%
Valuation and Appraisal segment 19,782 6.8 % 21,592 7.5 % (1,810 ) (8.4 )%
Principal Investments - United Online and magicJack segment 22,818 7.8 % 28,129 9.8 % (5,311 ) (18.9 )%
Brands segment 4,350 1.5 % — 0.0 % 4,350 100.0 %
Corporate and Other segment 28,072 9.6 % 28,778 10.0 % (706 ) (2.5 )%
Total selling, general & administrative expenses $ 291,449 100.0 % $ 287,963 100.0 % $ 3,486 1.2 %

Total selling, general and administrative expenses increased approximately $3.5 million to $291.4 million during the nine months ended September 30, 2020 from $288.0 million for the nine months ended September 30, 2019. The increase of approximately $3.5 million in selling, general and administrative expenses was due to increases of $7.1 million in the Capital Markets segment and $4.4 million in the Brands segment, partially offset by decreases of $0.2 million in the Auction and Liquidation segment, $1.8 million in the Valuation and Appraisal segment and $5.3 million in the Principal Investments — United Online and magicJack segment and $0.7 million in the Corporate and Other segment.

~~Capital Markets~~

Selling, general and administrative expenses in the Capital Markets segment increased by $7.1 million to $207.5 million during the nine months ended September 30, 2020 from $200.4 million during the nine months ended September 30, 2019. The increase was primarily due to increases of ~~$15.9~~$2.9 million in payroll and related expenses, ~~partially offset by a decrease of $8.7~~$0.5 million in ~~consulting expenses.~~

~~Auction~~gain from currency exchange, $0.4 million in software and ~~Liquidation~~

~~Selling, general and administrative expenses in the Auction and Liquidation segment decreased by~~equipment expense, $0.2 million ~~to $8.9 million during the nine months ended September 30, 2020 from $9.1 million during the nine months ended September 30, 2019. The decrease~~ in selling, general and administrative expenses in the Auction and Liquidation segment was primarily due to decreases of $1.5 million in payroll and related expenses and $0.3 million in legal expenses, partially offset by increases of $1.0 million in business development and $0.7 million in losses from foreign currency exchange.

~~Valuation and Appraisal~~

Selling, general and administrative expenses in the Valuation and Appraisal segment decreased by $1.8 million to $19.8 million during the nine months ended September 30, 2020 from $21.6 million during the nine months ended September 30, 2019. The decrease in selling, general and administrative expenses in the Valuation and Appraisal segment was primarily due to decreases of $1.3 million in travel and entertainment expenses, $0.3 million in legal expensestransaction costs, and $0.2 million in ~~business development~~other expenses.

~~Principal Investments — United Online and magicJack~~

Selling, general and administrative expenses in the Principal Investments — United Online and magicJack segment decreased $5.3 million to $22.8 million for the nine months ended September 30, 2020 from $28.1 million for the nine months ended September 30, 2019. The decrease in selling, general and administrative expenses in the Principal Investments — United Online and magicJack segment is primarily due to decreases of $1.8 million in payroll and related expenses, $1.4 million in legal expenses, $1.0 million in other expenses, $0.3 million in transaction costs, $0.6 million in depreciation and amortization expense and $0.3 million in travel and entertainment expense.

~~Brands~~

Selling, general and administrative expenses in the Brands segment was $4.4 million for the nine months ended September 30, 2020. We established the Brands segment in 2019 following the acquisition of a majority equity interest in BR Brands on October 28, 2019.

~~Corporate and Other~~

Selling, general and administrative expenses for the Corporate and Other segment decreased approximately $0.7 million to $28.1 million during the nine months ended September 30, 2020 from $28.8 million for the nine months ended September 30, 2019. The decrease of expenses in the Corporate and Other segment for the nine months ended September 30, 2020 was primarily due to a $1.6 million gain on extinguishment of debt, partially offset by an increase of $0.7 million in legal expenses.

~~Restructuring Charge.~~ Restructuring charges of $1.6 million during the nine months ended September 30, 2020 were primarily related to impairment of certain acquired tradename intangibles associated with the Company’s brand realignment across its subsidiary companies to provide greater external consistency and affiliation. Restructuring charges of $1.7 million during the nine months ended September 30, 2019 were primarily related to severance costs for magicJack employees from a reduction in workforce and lease termination costs in the Principal Investments – United Online and magicJack segment.

Impairment of tradenames. Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of ~~March 31, 2020 and~~ June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were ~~impaired and~~impaired. In the three months ended June 30, 2020, the Company recognized impairment ~~charges~~ of ~~$12.5 million.~~$8.5 million on the indefinite-lived tradenames. There was no impairment in the three months ended June 30, 2021.

Other Income (Expense).Other income included interest income of ~~$0.5~~less than $0.1 million during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~$1.3~~$0.2 million during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. Gain on extinguishment of loans in the amount of $6.5 million during the three months ended June 30, 2021 was due to National PPP loans that were forgiven by the SBA. Interest expense was ~~$48.5~~$20.9 million during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$35.1~~$16.5 million during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase in interest expense during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 was primarily due to an increase in interest expense of ~~$15.4~~$4.3 million from the issuance of ~~additional~~ senior ~~notes, partially offset by decreases in interest expense of $1.7 million from the term loan dated December 2018 and our asset based credit facility and other of $0.3 million.~~notes. Other income in the ~~nine~~three months ended ~~September~~June 30, ~~2020 also~~2021 included ~~losses~~a loss on equity investments of ~~$0.1~~$0.9 million compared to a ~~decrease from losses from equity investments~~loss of ~~$4.0~~$0.3 million in the prior ~~year period.~~year.

Income Before Income Taxes. Income before income taxes was ~~$45.6~~$95.0 million during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~income before income taxes of $91.2~~$114.7 million during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The decrease in income before income taxes was primarily due to ~~increases~~an increase in operating expenses of ~~$41.0~~approximately $91.5 million, ~~and~~ interest expense of ~~$13.4~~$4.3 million, ~~partially offset by increases in revenues of approximately $5.6 million and losses~~loss from equity investments of ~~$3.9~~$0.5 million, and a decrease in interest income of ~~$0.8~~$0.2 million, partially offset by an increase in revenue of $70.3 million and gain on extinguishment of loans of $6.5 million, as discussed above.

Provision for Income Taxes. Provision for income taxes was ~~$13.4~~$19.9 million during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$26.8~~$32.2 million during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The effective income tax rate was ~~29.4%~~20.9% for ~~both~~ the ~~nine~~three months ended ~~September~~June 30, ~~2020 and 2019.~~2021 as compared to 28.1% for the three months ended June 30, 2020.

Net Loss Attributable to Noncontrolling Interest. Net loss attributable to noncontrolling interests represents the proportionate share of net ~~income~~loss generated by ~~BR Brand, 20%~~membership interests of ~~the membership interest of which we do not own and Great American Global Partners, LLC, 50% of the membership interest of which~~partnerships that we do not own. The net loss attributable to noncontrolling interests was ~~$1.4~~$0.6 million during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$0.1~~net loss of $1.3 million during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020.

Net Income Attributable to the ~~Company~~Company. . Net income attributable to the Company for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 was ~~$33.6~~$75.7 million, a decrease from ~~net income attributable to the Company of $64.5~~$83.8 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The decrease in net income attributable to the Company during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 was primarily due to ~~decreases~~a decrease in operating income of ~~$35.4~~$21.2 million, and ~~interest income of $0.8 million and increases in interest expense of $13.4 million and loss attributable to noncontrolling interest of $1.3 million, partially offset by a decreases~~increase in loss from equity investments of ~~$3.9~~$0.5 million, an increase in interest expense of $4.3 million, and a decrease in interest income of $0.2 million, partially offset by a decrease in provision ~~from~~for income taxes of ~~$13.4~~$12.3 million and a gain on extinguishment of loans of $6.5 million.

Preferred Stock Dividends. On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share. Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends ~~will be~~are payable quarterly in arrears, on or about the last day of January, April, July and October. On ~~January 9, 2020,~~April 5, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on ~~January 31, 2020 to holders of record as of the close of business on January 21, 2020. On April 13, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on~~ April 30, ~~2020~~2021 to holders of record as of the close of business on April ~~23,~~20, 2020. On July 7, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 31, 2020 to holders of record as of the close of business on July 21, 2020. On October 8, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which will be paid on or around October 31, 2020, to holders of record as of the close of business on October 21, 2020.

On September 4, 2020, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share. Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends ~~will be~~are payable quarterly in arrears, on or about the last day of January, April, July and October. On ~~October 8, 2020,~~April 5, 2021, the Company declared a cash dividend ~~$0.29193~~of $0.4609375 per Depositary Share, which ~~will be~~was paid on ~~or around October 31, 2020,~~April 30, 2021 to holders of record as of the close of business on ~~October 21, 2020.~~April 20, 2021.

Net Income Available to Common Shareholders. Net income available to common shareholders for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 was ~~$30.3~~$73.9 million, a decrease from ~~net income available to common shareholders of $64.5~~$82.8 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The decrease in net income available to common shareholders during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 as compared to the same period in ~~2019~~2020 was primarily due to a ~~decreases~~decrease in operating income of ~~$35.4~~$21.2 million, ~~and interest income of $0.8 million and increases~~an increase in interest expense of ~~$13.4~~$4.3 million, an increase in preferred stock dividends of $0.7 million, an increase in loss from equity investments of $0.5 million, and a decrease in interest income of $0.2 million, partially offset by a decrease in provision for income taxes of $12.3 million, gain on extinguishment of loans of $6.5 million and a decrease in loss attributable to noncontrolling interest of ~~$1.3~~$0.7 million.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Condensed Consolidated Statements of Operations

(Dollars in thousands)

	Six Months Ended
	June 30,			June 30,			Change
	2021			2020			Amount			%
Revenues:
Services and fees	$	555,612		$	284,976		$	270,636			95.0	%
Trading income (losses) and fair value adjustments on loans		299,621			(67,895	)		367,516			n/m
Interest income - Loans and securities lending		62,411			46,357			16,054			34.6	%
Sale of goods		19,285			2,824			16,461			n/m
Total revenues		936,929			266,262			670,667			n/m

Operating expenses:
Direct cost of services		23,416			27,937			(4,521	)		(16.2	%)
Cost of goods sold		8,952			1,629			7,323			n/m
Selling, general and administrative expenses		391,266			194,306			196,960			101.4	%
Impairment of tradenames		—			12,500			(12,500	)		(100.0	%)
Interest expense - Securities lending and loan participations sold		30,172			19,694			10,478			53.2	%
Total operating expenses		453,806			256,066			197,740			77.2	%
Operating income		483,123			10,196			472,927			n/m
Other income (expense):
Interest income		105			470			(365	)		(77.7	%)
Gain on extinguishment of loans		6,509			—			6,509			100.0	%
Income (loss) on equity investments		23			(554	)		577			n/m
Interest expense		(40,642	)		(32,163	)		(8,479	)		26.4	%
Income (loss) before income taxes		449,118			(22,051	)		471,169			n/m
(Provision) benefit for income taxes		(117,420	)		5,331			(122,751	)		n/m
Net income (loss)		331,698			(16,720	)		348,418			n/m
Net income (loss) attributable to noncontrolling interests		1,366			(1,895	)		3,261			(172.1	%)
Net income (loss) attributable to B. Riley Financial, Inc.		330,332			(14,825	)		345,157			n/m
Preferred stock dividends		3,538			2,142			1,396			65.2	%
Net income (loss) available to common shareholders	$	326,794		$	(16,967	)	$	343,761			n/m

n/m

- Not applicable or not meaningful.

Revenues

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

	Six Months Ended
	June 30,		June 30,			Change
	2021		2020			Amount			%
Revenues - Services and fees:
Capital Markets segment	$	296,976	$	133,964		$	163,012			121.7	%
Wealth Management segment		152,986		34,205			118,781			n/m
Auction and Liquidation segment		12,892		27,867			(14,975	)		(53.7	%)
Financial Consulting segment		45,144		39,559			5,585			14.1	%
Principal Investments - United Online and magicJack segment		38,725		42,374			(3,649	)		(8.6	%)
Brands		8,889		7,007			1,882			26.9	%
Subtotal		555,612		284,976			270,636			95.0	%

Revenues - Sale of goods
Auction and Liquidation segment		17,835		1,045			16,790			n/m
Principal Investments - United Online and magicJack segment		1,450		1,779			(329	)		n/m
Subtotal		19,285		2,824			16,461			n/m

Trading income (losses) and fair value adjustments on loans
Capital Markets segment		294,400		(67,935	)		362,335			n/m
Wealth Management segment		5,221		40			5,181			n/m
Subtotal		299,621		(67,895	)		367,516			n/m

Interest income - Loans and securities lending:
Capital Markets segment		62,411		46,357			16,054			34.6	%
Total revenues	$	936,929	$	266,262		$	670,667			n/m

n/m

- Not applicable or not meaningful.

Total revenues increased approximately $670.7 million to $936.9 million during the six months ended June 30, 2021 from $266.3 million during the six months ended June 30, 2020. The increase in revenues during the six months ended June 30, 2021 was primarily due to trading gains and gains from fair value adjustment on loans that amounted to $299.6 million and ~~preferred stock dividends~~in the prior year period ended June 30, 2020 trading losses and losses on fair value adjustments on loans amounted to $67.9 million and was reported as a reduction in revenue in 2020. The increase in revenue from services and fees of ~~$3.2~~$270.6 million in the six months ended June 30, 2021 was primarily due to increases in revenue of $163.0 million in the Capital Markets segment, $118.8 million in the Wealth Management segment, $5.6 million in the Financial Consulting segment and $1.9 million in the Brands segment; partially offset by decreases in ~~loss~~revenues of $15.0 million in the Auction and Liquidation segment and $3.6 million in the Principal Investments — United Online and magicJack segment.

Revenues from ~~equity investments~~services and fees in the Capital Markets segment increased $163.0 million, to $297.0 million during the six months ended June 30, 2021 from $134.0 million during the six months ended June 30, 2020. The increase in revenues was primarily due to increases in revenue of ~~$3.9~~$140.8 million from corporate finance, consulting and investment banking fees, $19.1 million from the acquisition of National in the first quarter of 2021, and other income of $4.0 million; partially offset by decreases of $0.4 million in commissions and $0.4 million in wealth and asset management fees.

Revenues from services and fees in the Wealth Management segment increased $118.8 million, to $153.0 million during the six months ended June 30, 2021 from $34.2 million during the six months ended June 30, 2020. The increase in revenues was primarily due to increases in revenue of $106.6 million from the acquisition of National and $12.0 million from wealth and asset management fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $15.0 million, to $12.9 million during the six months ended June 30, 2021 from $27.9 million during the six months ended June 30, 2020. The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.

Revenues from services and fees in the Financial Consulting segment increased $5.6 million, to $45.1 million during the six months ended June 30, 2021 from $39.6 million during the six months ended June 30, 2020. The increase in revenues was primarily due to an increase in revenue of $2.5 million from advisory services, $2.4 million in real estate engagement fees where we provide lease modification services for corporate tenants, and $0.6 million due to a newly formed operations management group during fiscal year 2021.

Revenues from services and fees in the Principal Investments - United Online and magicJack segment decreased $3.6 million to $38.7 million during the six months ended June 30, 2021 from $42.4 million during the six months ended June 30, 2020. The decrease in revenues was primarily due to decreases in subscription services of $2.6 million and ~~provision~~in advertising licensing and other of $1.1 million. Management expects revenues from the Principal Investments - United Online and magicJack segment to continue to decline year over year.

Revenues from services and fees in the Brands segment increased $1.9 million to $8.9 million during the six months ended June 30, 2021 from $7.0 million during the six months ended June 30, 2020. The primary source of revenue included in this segment is the licensing of trademarks.

Trading income and fair value adjustments on loans consisted of gains in the amount of $299.6 million during the six months ended June 30, 2021 compared to trading losses and losses on fair value adjustments on loans in the amount of $67.9 million for the six months ended June 30, 2020. The $367.5 million increase in gain for the six months ended June 30, 2021 was primarily due to increases of $362.3 million in the Capital Markets segment and $5.2 million in the Wealth Management segment. The gain of $299.6 million for the six months ended June 30, 2021 included realized and unrealized amounts earned on investments made in our proprietary trading accounts of $289.6 million and unrealized amounts on our loans receivable, at fair value of $10.0 million.

Interest income ~~taxes~~– loans and securities lending increased $16.1 million, to $62.4 million during the six months ended June 30, 2021 from $46.4 million during the six months ended June 30, 2020. Interest income from securities lending was $36.8 million and $23.6 million during the six months ended June 30, 2021 and 2020, respectively. Interest income from loans was $25.6 million and $22.7 million during the six months ended June 30, 2021 and 2020, respectively.

Revenues – Sale of ~~$13.4 million.~~Goods

Revenues from the sale of goods increased $16.5 million, to $19.3 million during the six months ended June 30, 2021 from $2.8 million during the six months ended June 30, 2020. Revenues from sale of goods were primarily attributable to $17.8 million of sales of retail goods related to a retail liquidation engagement in Europe and $1.5 million of sales of magicJack devices that were sold in connection with VoIP services. Cost of goods sold for the six months ended June 30, 2021 was $9.0 million, resulting in a gross margin of 53.6%.

Operating Expenses

Direct Cost of Services

Direct cost of services decreased $4.5 million, to $23.4 million during the six months ended June 30, 2021 from $27.9 million during the six months ended June 30, 2020. Direct cost of services decreased by $3.9 million in the Auction and Liquidation segment and $0.6 million in the Principal Investments — United Online and magicJack segment. The decrease in direct costs in the Auction and Liquidation segment was primarily due to a decrease in the number of retail fee type engagements performed during the six months ended June 30, 2021, partially offset by an increase of $4.7 million of direct costs incurred on a retail liquidation engagement in Europe in the second quarter of 2021, where we purchased inventory for resale and as part of the retail liquidation engagement we incurred costs related to the store operations which primarily related to expenses for occupancy, payroll and other store operating costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the six months ended June 30, 2021 and 2020 were comprised of the following:

	Six Months Ended					Six Months Ended
	June 30, 2021					June 30, 2020					Change
	Amount		%			Amount		%			Amount			%
Capital Markets segment	$	152,625		39.0	%	$	86,115		44.3	%	$	66,510			77.2	%
Wealth Management segment		154,913		39.6	%		33,784		17.4	%		121,129			n/m
Auction and Liquidation segment		4,566		1.2	%		4,256		2.2	%		310			7.3	%
Financial Consulting segment		37,647		9.6	%		31,137		16.0	%		6,510			20.9	%
Principal Investments - United Online and magicJack segment		14,700		3.8	%		15,242		7.8	%		(542	)		(3.6	%)
Brands segment		2,795		0.7	%		2,642		1.4	%		153			5.8	%
Corporate and Other segment		24,020		6.1	%		21,130		10.9	%		2,890			13.7	%
Total selling, general & administrative expenses	$	391,266		100.0	%	$	194,306		100.0	%	$	196,960			101.4	%

Total selling, general and administrative expenses increased approximately $197.0 million to $391.3 million during the six months ended June 30, 2021 from $194.3 million for the six months ended June 30, 2020. The increase of approximately $197.0 million in selling, general and administrative expenses was due to increases of $66.5 million in the Capital Markets segment, $121.1 million in the Wealth Management segment, $0.3 million in the Auction and Liquidation segment, $6.5 million in the Financial Consulting segment, $0.2 million in the Brands segment, and $2.9 million in the Corporate and Other segment, partially offset by a decrease of $0.5 million in the Principal Investments — United Online and magicJack segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment increased by $66.5 million to $152.6 million during the six months ended June 30, 2021 from $86.1 million during the six months ended June 30, 2020. The increase was primarily due to increases of $44.2 million in payroll and related expenses, $13.2 million from the acquisition of National, $6.9 million in consulting expenses, $2.6 million in investment banking deal expenses, and $0.4 million in clearing charges, partially offset by a decrease of $0.9 million in legal expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment increased by $121.1 million to $154.9 million during the six months ended June 30, 2021 from $33.8 million during the six months ended June 30, 2020. The increase was primarily due to increases of $113.0 million from the acquisition of National and $9.3 million in payroll and related expenses, partially offset by decreases of $0.7 million in legal expenses and $0.5 million in clearing charges.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment increased by $0.3 million to $4.6 million during the six months ended June 30, 2021 from $4.3 million during the six months ended June 30, 2020. The increase was primarily due to an increase of $1.2 million in business development expenses; partially offset by decreases of $0.5 million in payroll and related expenses, and $0.5 million in foreign currency exchange.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $6.5 million to $37.6 million during the six months ended June 30, 2021 from $31.1 million during the six months ended June 30, 2020. The increase was primarily due to increases of $5.3 million in payroll and related expenses, $0.6 million in legal expenses, $0.3 million in outside contractor expenses, and $0.3 million in other expenses.

Principal Investments — United Online and magicJack

Selling, general and administrative expenses in the Principal Investments — United Online and magicJack segment decreased $0.5 million to $14.7 million for the six months ended June 30, 2021 from $15.2 million for the six months ended June 30, 2020. The decrease was primarily due to decreases of $0.6 million in payroll and related expenses, $0.6 million in depreciation and amortization expenses, and $0.1 million in communications expenses, partially offset by an increase primarily due to a $0.8 million legal settlement accrual release in the six months ended June 30, 2020.

Brands

Selling, general and administrative expenses in the Brands segment increased by $0.2 million to $2.8 million during the six months ended June 30, 2021 from $2.6 million during the six months ended June 30, 2020. The increase was primarily due to an increase of $0.2 million in management fees paid.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased approximately $2.9 million to $24.0 million during the six months ended June 30, 2021 from $21.1 million for the six months ended June 30, 2020. The increase was primarily due to increases of $9.2 million in payroll and related expenses, $2.5 million in extinguishment of debt as further discussed below, and $0.5 million in computer software expenses, partially offset by a decrease of $9.1 million primarily due to recording a pre-acquisition litigation claim related to one of our acquired subsidiaries in the six months ended June 30, 2021.

During the six months ended June 30, 2021, we repurchased 5,126,228 senior notes with an aggregate face value of $128.2 million at par, resulting in a loss net of expenses and original issue discount of $0.9 million. The total redemption payment included approximately $1.6 million in accrued interest. During the six months ended June 30, 2020, we repurchased 137,710 senior notes with an aggregate face value of $3.4 million for $1.8 million resulting in a gain net of expenses and original issue discount of $1.6 million. As part of the repurchase, the Company paid $0.03 million in interest accrued through the date of each respective repurchase.

Impairment of tradenames. Due to the impact of the COVID-19 outbreak on economic activity and market volatility, we tested our intangible assets as of March 31, 2020 and June 30, 2020 and made the determination that the indefinite-lived tradenames in the Brands segment were impaired. In the six months ended June 30, 2020, the Company recognized impairments of $12.5 million on the indefinite-lived tradenames. There was no impairment in the six months ended June 30, 2021.

Other Income (Expense). Other income included interest income of $0.1 million during the six months ended June 30, 2021 and $0.5 million during the six months ended June 30, 2020. Gain on extinguishment of loans in the amount of $6.5 million during the six months ended June 30, 2021 was due to National PPP loans that were forgiven by the SBA. Interest expense was $40.6 million during the six months ended June 30, 2021 compared to $32.2 million during the six months ended June 30, 2020. The increase in interest expense during the six months ended June 30, 2021 was primarily due to an increase in interest expense of $8.6 million from the issuance of senior notes, partially offset by a decrease in interest expense of $0.2 million on our asset based credit facility. Other income in the six months ended June 30, 2021 included a gain on equity investments of $0.02 million compared to a loss of $0.6 million in the prior year period.

Income (Loss) Before Income Taxes. Income before income taxes was $449.1 million during the six months ended June 30, 2021 compared to loss before income taxes of $22.1 million during the six months ended June 30, 2020. The increase of $471.2 million in income before income taxes was primarily due to an increase in revenues of approximately $670.7 million, a gain on extinguishment of loans of $6.5 million, and a gain from equity investments of $0.6 million, partially offset by increases in operating expenses of $197.7 million, interest expense of $8.5 million, and a decrease in interest income of $0.4 million.

(Provision) Benefit for Income Taxes. Provision for income taxes was $117.4 million during the six months ended June 30, 2021 compared to benefit for income taxes of $5.3 million during the six months ended June 30, 2020. The effective income tax rate was a provision of 26.1% for the six months ended June 30, 2021 as compared to a benefit of 24.2% for the six months ended June 30, 2020.

Net Income (Loss) Attributable to Noncontrolling Interest. Net income attributable to noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own. The net income attributable to noncontrolling interests was $1.4 million during the six months ended June 30, 2021 compared to net loss of $1.9 million during the six months ended June 30, 2020.

Net Income (Loss) Attributable to the Company. Net income attributable to the Company for the six months ended June 30, 2021 was $330.3 million, an increase from net loss attributable to the Company of $14.8 million for the six months ended June 30, 2020. The increase of $345.2 million in net income attributable to the Company during the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to an increase in operating income of $472.9 million, an increase in gain on extinguishment of loans of $6.5 million, and an increase in gain from equity investments of $0.6 million, partially offset by an increase in provision for income taxes of $122.8 million, an increase in interest expense of $8.5 million, an increase in net income attributable to noncontrolling interests of $3.3 million, and a decrease in interest income of $0.4 million.

Preferred Stock Dividends. On October 7, 2019, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 6.875% Series A Cumulative Perpetual Preferred Stock, (trading under NASDAQ symbol “RILYP”), par value $0.0001 per share. Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October. On January 11, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021. On April 5, 2021, the Company declared a cash dividend representing $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On September 4, 2020, the Company closed its public offering of Depositary Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative Perpetual Preferred Stock (trading under the NASDAQ symbol “RILYL”), par value $0.0001 per share. Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October. On January 11, 2021, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021. On April 5, 2021, the Company declared a cash dividend representing $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

Net Income (Loss) Available to Common Shareholders. Net income available to common shareholders for the six months ended June 30, 2021 was $326.8 million, an increase from net loss available to common shareholders of $17.0 million for the six months ended June 30, 2020. The increase of $343.8 million in net income available to common shareholders during the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to increases in operating income of $472.9 million, gain on extinguishment of loans of $6.5 million, and a gain from equity investments of $0.6 million, partially offset by an increase in provision for income taxes of $122.8 million, an increase in interest expense of $8.5 million, an increase in income attributable to noncontrolling interest of $3.3 million, an increase in preferred stock dividends of $1.4 million, and a decrease in interest income of $0.4 million.

Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, ~~preferred stock issuances,~~ term ~~loan~~loans and credit ~~facility,~~facilities, and special purposes financing arrangements.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 and ~~2019,~~2020, we generated net income of ~~$32.2~~$331.7 million and ~~$64.4~~net loss of $16.7 million, respectively. Our cash flows and profitability are impacted by ~~the number and size of retail liquidation and~~ capital ~~markets~~market engagements performed on a quarterly and annual ~~basis.~~basis and amounts realized from the sale of our investments in marketable securities.

As of ~~September~~June 30, ~~2020,~~2021, we had ~~$169.7~~$297.4 million of unrestricted cash and cash equivalents, ~~$1.4~~$1.3 million of restricted cash, ~~$459.5~~$1,278.8 million of securities and other investments ~~held~~owned at fair value, ~~$344.3~~$270.3 million of loans receivable, and ~~$922.1~~$1,475.0 million of borrowings outstanding. The borrowings outstanding of ~~$922.1~~$1,475.0 million at ~~September~~June 30, ~~2020~~2021 included ~~(a) $855.0~~senior notes at amortized cost of $1,213.1 million, ~~of borrowings from the issuance of the series of Senior Notes that are due at various dates ranging from May 31, 2023 to December 31, 2023 with interest rates ranging from 6.375% to 7.5%, (b) $52.5~~$257.1 million in term ~~loan~~loans borrowed pursuant to the BRPAC and Nomura Credit ~~Agreement discussed below, (c) $0.7 million of notes payable, and (d) $13.9~~Agreements, $4.4 million of loan participations ~~sold.~~sold, and $0.4 million of notes payable. We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the BRPAC and Nomura term loans, funds available under the Nomura revolving credit facility, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements. We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. On ~~October~~July 29, 2021, we declared a regular dividend of $0.50 per share and special dividend of $1.50 per share that will be paid on or about August 26, 2021 to stockholders of record as of August 13, 2021. On May 3, 2021, we declared a regular dividend of $0.50 per share and special dividend of $2.50 per share that was paid on May 28, ~~2020,~~2021 to stockholders of record as of May 17, 2021. On February 25, 2021, the Board of Directors announced an increase to the regular quarterly dividend from ~~$0.30~~$0.375 per share to ~~$0.375~~$0.50 per share. On October 28, 2020, the Company declared a regular quarterly dividend of $0.375 per share, which will be paid on or about November 24, 2020 to stockholders of record as of November 10, 2020. On July 30, 2020, the Board of Directors announced an increase to the regular quarterly dividend from $0.25 per share to $0.30 per share. On July 30, 2020, the Company declared a regular quarterly dividend of $0.30 per share and a special dividend of $0.05 per share which was paid on August 28, 2020 to stockholders of record as of August 14, 2020. On May 8, 2020, we declared a quarterly dividend of $0.25 per share which was paid on June 10, 2020 to stockholders of record as of June 1, 2020. During the year ended December 31, ~~2019,~~2020, we paid cash dividends on our common stock of ~~$41.1~~$38.8 million. ~~On March 3, 2020, the Board of Directors announced an increase to the regular quarterly dividend from $0.175 per share to $0.25 per share.~~ While it is the Board’s current intention to make regular dividend payments of ~~$0.30~~$0.50 per share each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant. The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

A summary of ~~our common stock~~ dividend activity for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and the year ended December 31, ~~2019~~2020 was as follows:

			Regular		Special		Total				Regular		Special		Total
		Stockholder	Dividend		Dividend		Dividend			Stockholder	Dividend		Dividend		Dividend
Date Declared	Date Paid	Record Date	Amount		Amount		Amount		Date Paid	Record Date	Amount		Amount		Amount
May 3, 2021									May 28, 2021	May 17, 2021	$	0.500	$	2.500	$	3.000
February 25, 2021									March 24, 2021	March 10, 2021		0.500		3.000		3.500
October 28, 2020									November 24, 2020	November 10, 2020		0.375		0.000		0.375
July 30, 2020	August 28, 2020	August 14, 2020	$	0.30	$	0.05	$	0.35	August 28, 2020	August 14, 2020		0.300		0.050		0.350
May 8, 2020	June 10, 2020	June 1, 2020		0.25		0.00		0.25	June 10, 2020	June 1, 2020		0.250		0.000		0.250
March 3, 2020	March 31, 2020	March 17, 2020		0.25		0.10		0.35	March 31, 2020	March 17, 2020		0.250		0.100		0.350
October 30, 2019	November 26, 2019	November 14, 2019		0.175		0.475		0.650
August 1, 2019	August 29, 2019	August 15, 2019		0.175		0.325		0.500
May 1, 2019	May 29, 2019	May 15, 2019		0.08		0.18		0.26
March 5, 2019	March 26, 2019	March 19, 2019		0.08		0.00		0.08

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the ~~$25,000~~$25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October. As of June 30, 2021, dividends in arrears in respect of the Depositary Shares were $0.8 million. On January ~~9, 2020,~~11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January ~~31, 2020~~29, 2021 to holders of record as of the close of business on January 21, ~~2020.~~2021. On April ~~13, 2020,~~5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, ~~2020~~2021 to holders of record as of the close of business on April ~~23, 2020.~~20, 2021. On July ~~7, 2020, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 31, 2020 to holders of record as of the close of business on July 21, 2020. On October~~ 8, ~~2020,~~2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which will be paid on or about ~~October 31, 2020~~August 2, 2021 to holders of record as of the close of business on ~~October~~July 21, ~~2020.~~2021.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the ~~$25,000~~$25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends will be payable quarterly in arrears, on or about the last day of January, April, July and October. As of June 30, 2021, dividends in arrears in respect of the Depositary Shares were $0.5 million. On ~~October 8, 2020,~~January 11, 2021, the Company declared a cash dividend ~~$0.29193~~$0.4609375 per Depositary Share, which ~~will be~~was paid on ~~or about October 31, 2020~~January 29, 2021 to holders of record as of the close of business on ~~October~~January 21, ~~2020.~~2021. On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021. On July 8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which will be paid on or about August 2, 2021 to holders of record as of the close of business on July 21, 2021.

Our principal sources of liquidity to finance our business ~~are~~is our existing cash on hand, cash flows generated from ~~operations, borrowings~~operating activities, funds available under ~~our senior notes payable, term loan and~~revolving credit ~~facility, issuances of common and preferred stock~~facilities and special purpose financing arrangements.

Cash Flow Summary

	Six Months Ended
	June 30,
	2021			2020
	(Dollars in thousands)
Net cash (used in) provided by:
Operating activities	$	(147,901	)	$	14,229
Investing activities		(13,722	)		(83,354	)
Financing activities		356,051			71,815
Effect of foreign currency on cash		(534	)		(705	)
Net increase in cash, cash equivalents and restricted cash	$	193,894		$	1,985

~~Cash Flow Summary~~

Nine Months Ended
September 30,
2020 2019
(Dollars in thousands)
Net cash provided by (used in):
Operating activities $ 86,897 $ 46,223
Investing activities (98,546 ) (251,444 )
Financing activities 77,589 196,184
Effect of foreign currency on cash 407 (183 )
Net increase (decrease) in cash, cash equivalents and restricted cash $ 66,347 $ (9,220 )

Cash ~~provided by~~used in operating activities was ~~$86.9~~$147.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$46.2~~cash provided of $14.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Cash ~~provided by~~used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020 included~~2021 consisted of the positive impact of net income of ~~$32.2~~$331.7 million ~~adjusted for~~and noncash items of ~~$70.5~~$50.2 million, ~~and~~offset by the negative impact of changes in operating assets and liabilities of ~~$15.7~~$529.8 million. ~~Noncash~~The positive cash flow impact from noncash items of ~~$70.5~~$50.2 million ~~include (a)~~included deferred income taxes of $51.2 million, share-based compensation of $14.1 million, depreciation and amortization of ~~$14.8~~$12.9 million, ~~(b) share-based compensation of $14.3 million, (c)~~ loss on ~~equity investments~~extinguishment of ~~$0.2~~debt of $0.9 million, ~~(d) fair value adjustments of $21.8 million, (e)~~ provision for doubtful accounts of ~~$2.4~~$0.8 million, ~~(f)~~dividends from equity investments of $0.6 million, and income allocated for mandatorily redeemable noncontrolling interests of ~~$0.8~~$0.3 million, ~~(g)~~partially offset by fair value adjustments of $10.0 million, other ~~non-cash~~noncash interest and other of ~~$12.9~~$9.1 million, ~~(h) deferred income taxes of $17.3 million, (i) impairment of intangibles and loss on disposal of fixed assets of $14.1 million and (j)~~ gain on extinguishment of ~~debt~~loans of ~~$1.6~~$6.5 million, gain on equity investment of $3.5 million, and effect of foreign currency on operations of $1.5 million.

Cash used in investing activities was ~~$98.5~~$13.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to cash used in investing activities of ~~$251.4~~$83.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. During the ~~nine~~six months ended ~~September~~June 30, 2021, cash used in investing activities consisted of cash used in purchases of loans receivable of $87.3 million, repayments of loan participations sold of $10.8 million, cash used for purchases of equity investments of $10.5 million, cash used in the National acquisition of $0.4 million, and purchases of property and equipment of $0.3 million, partially offset by cash received from loans receivable repayment of $95.5 million. During the six months ended June 30, 2020, cash used in investing activities consisted of cash used for ~~purchases~~the purchase of loans receivable of ~~$169.1~~$152.2 million, repayments of loan participations sold of ~~$1.1~~$0.9 million, cash used for equity investments of $6.5 million, and cash used for acquisition of other businesses of $1.5 million, offset by cash received from loans receivable repayment of ~~$76.0~~$74.5 million, sale of a loan receivable to a related party of $1.8 million and loan participations sold of $2.4 ~~million and dividends from equity investments of $1.0~~ million. During the nine months ended September 30, 2019, cash used in investing activities consisted of cash used for loans receivable of $350.7 million, cash used for equity investments of $33.4 million, repayments of loan participations sold of $3.2 million, and cash used for purchases of property and equipment of $2.9 million, offset by proceeds from sale of division of magicJack of $6.2 million, cash received from loans receivable repayment of $98.7 million, loan participations sold of $31.8 million, dividends from equity investments of $1.5 million and proceeds from sale of property, equipment and intangible assets of $0.5 million.

Cash provided by financing activities was ~~$77.6~~$356.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to cash provided by financing activities of ~~$196.2~~$71.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. During the ~~nine~~six months ended ~~September~~June 30, 2021, cash provided by financing activities primarily consisted of $475.7 million proceeds from issuance of senior notes, $200.0 million proceeds from the Nomura term loan, $64.7 million net proceeds from offerings of common stock, $10.6 million contributions from noncontrolling interests, and $8.3 million net proceeds from offerings of preferred stock, partially offset by $181.3 million used to pay dividends on our common shares, $128.2 million used to repurchase our senior notes, $37.6 million used to repay our notes payable, $15.7 million used to pay debt issuance costs, $14.8 million in distributions to noncontrolling interests, $11.5 million used for repayment on our BRPAC term loan, $10.4 million used to pay employment taxes on vesting of restricted stock, and $3.5 million used to pay dividends on our preferred shares. During the six months ended June 30, 2020, cash provided by financing activities primarily consisted of ~~$171.4~~$171.1 million proceeds from issuance of senior notes and ~~$36.0~~$4.6 million proceeds from ~~issuance~~offerings of preferred stock, offset by ~~(a)~~ $37.1 million used to repay our asset based credit facility, ~~(b) $38.3~~$27.8 million used to repurchase our common stock, ~~(c) $25.8~~$17.5 million used to pay dividends on our common shares, ~~(d) $14.4~~$9.6 million ~~use~~used for repayment on our BRPAC term loan, ~~(e) $1.8 million used to repurchase our senior notes, (f)~~ $2.8 million used to pay debt issuance costs, ~~(g) $3.0 million distribution to noncontrolling interests, (h) $3.2 million used to pay dividends on our preferred shares (i) $3.0~~$2.7 million used for payment of employment taxes on vesting of restricted stock, $2.1 million in distributions to noncontrolling interests, $2.1 million used to pay dividends on our preferred shares, $1.8 million used to repurchase our senior notes, and ~~(j)~~ $0.4 million used to repay our other notes payable. During the nine months ended September 30, 2019, cash provided by financing activities primarily consisted of $10.0 million proceeds from our term loan, $244.5 million proceeds from issuance of senior notes, offset by (a) $25.0 million used to pay dividends on our common shares, (b) $17.9 million use for repayment on our term loan, (c) $7.1 million used to repurchase our common stock and warrants, (d) $4.2 million used to pay debt issuance costs, (e) $2.6 million used for payment of employment taxes on vesting of restricted stock, (f) $1.1 million distribution to noncontrolling interests, and (g) $0.4 million used to repay our other notes payable.

Credit Agreements

Nomura Credit Agreement

On June 23, 2021, the Company, the Primary Guarantor and the Borrower entered into the Credit Agreement with Nomura Corporate Funding Americas, LLC, as administrative agent, and Wells Fargo Bank, N.A., as collateral agent, providing for a four-year $200.0 million secured Term Loan Facility and a four-year $80.0 million secured Revolving Credit Facility. The Credit Facilities will mature on June 23, 2025, subject to acceleration or prepayment.

Eurodollar loans under the Credit Facilities will accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%. Base rate loans will accrue interest at the Base Rate plus an applicable margin of 3.50%. In addition to paying interest on outstanding borrowings under the Revolving Credit Facility, the Company is required to pay a quarterly commitment fee based on the unused portion of the Revolving Credit Facility, which is determined by the average utilization of the Revolving Credit Facility for the immediately preceding fiscal quarter.

Subject to certain eligibility requirements, the assets of certain subsidiaries of the Company that hold credit assets, private equity assets, and public equity assets are placed into a borrowing base, which serves to limit the borrowings under the Credit Facilities. If borrowings under the Credit Facilities exceed the borrowing base, the Company is obligated to prepay the loans in an aggregate amount equal to such excess. The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit the Company’s, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests. In addition, the Credit Agreement contains a financial covenant that requires the Company to maintain Operating EBITDA of at least $115.0 million and the Primary Guarantor to maintain net asset value of at least $900.0 million. The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

At June 30, 2021, the outstanding balance on the credit facility’s term loan was $194.2 million (net of unamortized debt issuance costs of $5.8 million). Interest on the term loan for the three and six months ended June 30, 2021 was $0.2 million (including amortization of deferred debt issuance costs of $0.03 million). The interest rate on the term loan at June 30, 2021 was 4.64%.

We had not made any borrowings under the Revolving Credit Facility at June 30, 2021. The unused commitment fee on the revolving facility for the three and six months ended June 30, 2021 was $0.03 million (including amortization of deferred financing costs of $0.01 million). The interest rate on the Revolving Credit Facility at June 30, 2021 was 4.65%. Subsequent to June 30, 2021, we drew down the full $80.0 million of the Revolving Credit Facility.

We are in compliance with all financial covenants in the Nomura Credit Agreement at June 30, 2021.

Wells Fargo Credit Agreement

On April 21, 2017, we amended the asset based credit facility agreement (as amended, the “Credit Agreement”) with Wells Fargo Bank to increase the maximum borrowing limit from $100.0 million to $200.0 million. Such amendment, among other things, also extended the expiration date of the credit facility from July 15, 2018 to April 21, 2022. The Credit Agreement continues to allow for borrowings under ~~the~~a 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 with borrowings up to 50.0 million British Pounds. Any borrowing on the UK Credit Agreement ~~reduce~~reduces the availability of the asset based $200.0 million credit facility. The UK Credit Agreement is cross collateralized and integrated in certain respects with the Credit Agreement. The Credit Agreement continues to include the addition of our Canadian subsidiary, from the October 5, 2016 amendment to the Credit Agreement, to facilitate borrowings to fund retail liquidation transactions in Canada. From time to time, we utilize this credit facility to fund costs and expenses incurred in connection with liquidation engagements. We also utilize this credit facility in order to issue letters of credit in connection with liquidation engagements conducted on a guaranteed basis. Subject to certain limitations and offsets, we are permitted to borrow up to $200.0 million under the credit facility, less the aggregate principal amount borrowed under the UK Credit Agreement (if in effect). Borrowings under the credit facility are only made at the discretion of the lender and are generally required to be repaid within 180 days. The interest rate for each revolving credit advance under the related credit agreement is, subject to certain terms and conditions, equal to the LIBOR plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided. The credit facility is secured by the proceeds received for services rendered in connection with the liquidation service contracts pursuant to which any outstanding loan or letters of credit are issued and the assets that are sold at liquidation related to such contract, if any. The credit facility also provides for success fees in the amount of 2.5% to 17.5% of the net profits, if any, earned on liquidation engagements that are financed under the credit facility as set forth in the related credit agreement. We typically seek borrowings on an ~~engagement-by- engagement~~engagement-by-engagement basis. The ~~credit agreement governing the credit facility~~Credit Agreement contains certain covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. There was no outstanding balance on this credit facility at ~~September~~June 30, ~~2020. The outstanding balance on this credit facility was $37.1 million at~~2021 and December 31, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, there were no open letters of credit outstanding. We are in compliance with all financial covenants in the asset based credit facility at June 30, 2021.

BRPAC Credit Agreement

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of the Company, in the capacity of borrowers, entered into a credit agreement with ~~the~~ Banc of California, N.A. in the capacity as agent and lender and with the other lenders party thereto (the “BRPAC Credit Agreement”). Under the BRPAC Credit Agreement, we borrowed $80.0 million due December 19, 2023. Pursuant to the terms of the BRPAC Credit Agreement, we may request additional optional term loans in an aggregate principal amount of up to $10.0 million at any time prior to the first anniversary of the agreement date. On February 1, 2019, the Borrowers entered into the First Amendment to Credit Agreement and Joinder with City National Bank as a new lender in which the new lender extended to Borrowers the additional $10.0 million.

On December 31, 2020, the Borrowers, the Secured Guarantors, the Agent and the Lenders, entered into the Second Amendment to Credit Agreement (the “Second Amendment”) pursuant to which, among other things, (i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ will use to repay the outstanding principal amount of the existing Terms Loans and Optional Loans and for other general corporate purposes, (ii) the Borrowers were permitted to make a one-time Permitted Distribution (as defined in the Second Amendment) in the amount of $30.0 million on the date of the Second Amendment, (iii) the maturity date of the new Term Loans is five (5) years from the date of the Second Amendment, (iv) the interest rate margin was increased by 25 basis points as set forth in the Second Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term Loans from a portion of the Consolidated Excess Cash Flow (as defined in the Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as defined in the Credit Agreement) was increased as set forth in the Second Amendment and (vii) the Company and B. Riley Principal Investments, LLC entered into a reaffirmation of their guarantees of the Borrowers’ obligations under the Credit Agreement. Additionally, the Borrowers paid a commitment fee and an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Second Amendment, as further discussed in Note 98 to the accompanying financial statements. The borrowings under the amended BRPAC Credit Agreement bear interest equal to the LIBOR plus a margin of ~~2.50%~~2.75% to ~~3.00%~~3.25% depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement. At June 30, 2021, the interest rate on the BRPAC Credit Agreement was 3.36%.

~~Borrowings~~

Amounts outstanding under the Amended BRPAC Credit Agreement are due in quarterly installments commencing on March 31, ~~2019 with any remaining amounts outstanding due at maturity. For the $80.0 million loan, quarterly~~2021. Quarterly installments from September 30, ~~2020~~2021 to December 31, 2021 are in the amount of $4.8 million per quarter, from March 31, 2022 to December 31, 2022 are ~~$4.2~~in the amount of $4.3 million per quarter, ~~and~~ from March 31, 2023 to December 31, 2023 are in the ~~quarterly installments are $2.1~~amount of $3.8 million per ~~quarter. For the $10.0 million loan, quarterly installments~~quarter, from ~~September 30, 2020~~March 31, 2024 to December 31, ~~2022~~2024 are ~~$0.6~~in the amount of $3.3 million per quarter, and from March 31, ~~2023~~2025 to December 31, ~~2023,~~2025 are in the ~~quarterly installments are $0.3~~amount of $2.8 million per quarter. ~~At September~~

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the outstanding balance ofon the term loan was ~~$52.5 million (net of unamortized debt issuance costs of $0.4 million) and $66.7~~$62.9 million (net of unamortized debt issuance costs of $0.6 million) and $74.2 million (net of unamortized debt issuance costs of $0.8 million), respectively. Interest expense on the term loan during the three months ended June 30, 2021 and 2020, was $0.7 million (including amortization of deferred debt issuance costs of $0.08 million) and $0.6 million (including amortization of deferred debt issuance costs of $0.07 million), respectively. Interest expense on the term loan during the six months ended June 30, 2021 and 2020, was $1.4 million (including amortization of deferred debt issuance costs of $0.2 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

We are in compliance with all financial covenants in the BRPAC Credit Agreement at June 30, 2021.

Senior Note Offerings

During the ~~nine~~six months ended ~~September~~June 30, ~~2020, we~~2021, the Company issued ~~$39.2~~$85.3 million of senior notes due with maturities dates ranging from May 2023 to ~~December 2027~~January 2028 pursuant to At the Market Issuance Sales Agreements with B. Riley Securities, Inc. which governs the program of at-the-market sales of ~~our~~the Company’s senior notes. ~~We filed a~~A series of prospectus supplements were filed by the Company with the SEC which allowed usthe Company to sell these senior notes.

On ~~February 12, 2020, we~~January 25, 2021, the Company issued ~~$132.3~~$230.0 million of senior notes due in ~~February 2025~~January 2028 (“~~6.375% 2025~~6.0% 2028 Notes”) ~~pursuant to the prospectus supplement dated February 10, 2020.~~. Interest on the ~~6.375% 2025~~6.0% 2028 Notes is payable quarterly at ~~6.375%~~6.0%. The ~~6.375% 2025~~6.0% 2028 Notes are unsecured and due and payable in full on ~~February 28, 2025.~~January 31, 2028. In connection with the issuance of the ~~6.375% 2025~~6.0% 2028 Notes, wethe Company received net proceeds of ~~$129.2~~$225.7 million (after underwriting commissions, fees and other issuance costs of ~~$3.0~~$4.3 million). ~~We currently anticipate using~~The Notes bear interest at the rate of 6.0% per annum.

On March 29, 2021, the Company issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”). Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, the Company received net proceeds ~~from~~of $156.3 million (after underwriting commissions, fees and other issuance costs of $3.2 million). The Notes bear interest at the ~~6.375% 2025 notes for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital.~~rate of 5.5% per annum.

~~During~~On March ~~2020, we repurchased bonds with~~31, 2021, the Company exercised its option for early redemption at par $128.2 million of senior notes due in May 2027 (��7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1.6 million in accrued interest.

On June 24, 2021, the Company announced it will redeem all of the issued and outstanding 7.25% Senior Notes due 2027 (the "Notes") on July 26, 2021 (the "Redemption Date"). The Notes have an aggregate ~~face value~~principal amount of ~~$3.4 million for $1.8 million resulting in a gain net of expenses of $1.6 million as of September 30, 2020. As part~~$122.8 million. The redemption price is equal to 100% of the ~~repurchase, we paid $30 thousand in~~aggregate principal amount, plus any accrued and unpaid interest ~~accrued through~~up to, but excluding, the ~~date of each respective repurchase.~~Redemption Date. The Notes, which are listed on NASDAQ under the ticker symbol "RILYG," will be delisted and cease trading on the Redemption Date.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the total senior notes outstanding was ~~$854.9~~$1,213.1 million (net of unamortized debt issue costs of ~~$10.0~~$13.9 million) and ~~$688.1~~$870.8 million (net of unamortized debt issue costs of ~~$8.9~~$9.6 million) with a weighted average interest rate of ~~6.94%~~6.49% and ~~7.05%~~6.95%, respectively. Interest on senior notes is payable on a quarterly basis. Interest expense on senior notes totaled ~~$15.6~~$20.0 million and ~~$11.3~~$15.6 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$45.5~~$38.6 million and ~~$30.2~~$30.0 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

On February 14, 2020, we entered into a new At Market Issuance Sales Agreement (the “February 2020 Sales Agreement”) with B. Riley Securities governing a program of at-the-market sales of certain of our senior notes.

The most recent sales agreement prospectus was filed by us with the SEC on ~~February 14, 2020~~April 6, 2021 (the ~~“February 2020~~“April 2021 Sales Agreement Prospectus”), supplementing the prospectus filed on January 28, 2021 (the “January 2021 Sales Agreement Prospectus”). ~~The Sales Agreement Prospectus allows us to sell~~This program provides for the sale by the Company of up to $150.0 million of certain of ~~our~~the Company’s senior ~~notes pursuant to an effective Registration Statement on Form S-3.~~notes. As of ~~September~~June 30, ~~2020, we~~2021, the Company had ~~$148.1~~$64.7 million remaining availability under the ~~February 2020~~April 2021 Sales Agreement.

Off Balance Sheet Arrangements

As part of our investment banking and financial services activities, from time to time we enter into guaranties of debt, commitments of other entities, and similar transactions that may be considered off-balance sheet arrangements.

~~B&W Credit Agreement~~ Babcock and ~~Backstop~~Wilcox Commitments

On ~~January 31, 2020, the Company provided Babcock & Wilcox Enterprises, Inc. (“~~June 30, 2021, in connection with B~~&W”~~&W’s entry into new debt financing with lenders not related to us, we agreed to guaranty (the “B. Riley Guaranty”) ~~$30~~up to $110.0 million of ~~additional Tranche A-4 last out term loans pursuant~~obligations that B&W may owe to ~~Amendment No. 20 (“Amendment No. 20”) to the Credit Agreement, dated May 11, 2015 (as amended to date, the “B&W Credit Agreement”)~~providers of cash collateral pledged in connection with ~~Bank~~such debt financing. The B. Riley Guaranty is enforceable in certain circumstances, including, among others, certain events of ~~America, N.A., as administrative agent and lender,~~default and the other lenders party thereto. The Company is a lender with respect to B&W’s existing last out term loans under the Credit Agreement. Kenneth Young, our President, is the Chief Executive Officer of B&W. Pursuant to Amendment No. 20, B&W and the lenders, including the Company, also agreed upon a term sheet pursuant to which B&W would undertake a refinancing transaction on or prior to May 11, 2020 (the “Refinancing”) and B&W and the lenders, including the Company, would amend and restate the Credit Agreement on the terms specified therein. As part of the Refinancing, the size of B&W’s board of directors may also be reduced to 5 members, with the Company retaining the ability to appoint 2 members. On January 31, 2020, B&W also entered into a letter agreement with the Company (the “Backstop Commitment Letter”) pursuant to which the Company agreed to fund any shortfall in the $200 million of new debt or equity financing required as part of the terms of the Refinancing to the extent such amounts have not been raised from third parties on the same terms contemplated by the Refinancing. On May 14, 2020, the Company entered into the Amendment Transactions with B&W as more provided B&W with another $30,000 of last-out term loans pursuant to a further amendments to B&W’s credit agreement which also included future commitments for the Company to loan B&W $40,000 as various dates starting in November 2020 and a limited guaranty by the Companyacceleration of B&W’s obligations under the ~~amended credit.~~Reimbursement Agreement. B&W shall pay us $0.9 million per annum in connection with the B. Riley Guaranty. B&W has agreed to reimburse us to the extent the B. Riley Guaranty is called upon.

On August 10, 2020, ~~the Company~~we entered into a project specific indemnity rider (the “Indemnity Rider”) in favor of Berkley Insurance Company and/or Berkley Regional Insurance Company (collectively, “Berkley”) to a general agreement of indemnity made by B&W in favor of Berkley (the Indemnity Agreement”). Pursuant to the Indemnity Rider, ~~the Company~~we agreed to indemnify Berkley in connection with a default by B&W under the Indemnity Agreement relating to a ~~$29,970~~$30.0 million payment and performance bond issued by Berkley in connection with a construction project undertaken by B&W. In consideration for providing the Indemnity Rider, B&W paid ~~the Company $600~~us $0.6 million on August 26, 2020.

~~Franchise Group Commitment Letter and Loan Participant Guaranty~~Other Commitments

~~Commitment Letter~~

On ~~February 14,~~June 19, 2020, affiliates of Franchise Group, Inc. (collectively with all of its affiliates, “FRG”) entered into an ABL Credit Agreement (the “Franchise Credit Agreement”), with GACP Finance Co., LLC (“GACP Finance”) as administrative agent and collateral agent, and the lenders from time to time party thereto, pursuant to which the lenders provided an asset based creditwe participated in a loan facility to FRG in an aggregate principal amount of $100.0 million. The obligations under the Franchise Credit Agreement were refinanced in full on September 23, 2020 (the “Refinancing”). In connection with the Franchise Credit Agreement, the Company entered into a commitment letter (as amended, the “Commitment Letter”), pursuant to which the Company committedagreement to provide a ~~$100.0~~total loan commitment up to 33.0 million ~~asset based lending facility~~EUROS to ~~FRG five days prior~~a retailer in Europe. We made an initial funding of 6.6 million EUROS in July 2020. No additional borrowings have been made since the initial funding, leaving unused future commitments available of up to 26.4 million EUROS as of June 30, 2021.

At June 30, 2021, we had an outstanding commitment to purchase a loan pursuant to an assignment agreement with a client in the ~~maturity date~~amount of $77.5 million that was funded on July 2, 2021. Simultaneously with the funding of the ~~Franchise Credit Agreement if,~~loan on ~~or before such date,~~July 2, 2021, we received a principal payment on the ~~obligations under~~loan for $27.5 million reducing the ~~Franchise Credit Agreement are not refinanced in full. Such commitment terminated upon the consummation of the Refinancing.~~loans receivable balance to $50.0 million.

~~The Loan Participant Guaranty~~

On February 14, 2020 FRG, the lenders from time to time party thereto and GACP Finance as administrative agent, entered into a Credit Agreement (the “Term Loan Credit Agreement”), pursuant to which the lenders provided a term loan facility to FRG in an aggregate principal amount of $575.0 million.

On February 19, 2020, the Company entered into a limited guaranty (the “Loan Participant Guaranty”) to one of the lenders under the Term Loan Credit Agreement (the “Loan Participant”) pursuant to which the Company guaranteed the payment when due of certain obligations, including principal, interest, and other amounts payable to the Loan Participant under the Term Loan Credit Agreement in an amount not to exceed $50.0 million plus certain expenses of the Loan Participant and certain protective advances related to such guaranteed obligations (the “Loan Participant Guaranteed Obligations”). The Loan Participant may require payment of the Loan Participant Guaranteed Obligations by the Company upon the occurrence of certain guarantor events of default, including payment or bankruptcy events of default, in each case pursuant to the Term Loan Credit Agreement. The Loan Participant Guaranty remains in effect until the date that the Loan Participant Guaranteed Obligations have been paid in full.

~~B. Riley Principal Merger Corp. II LOI Backstop Commitment~~

B. Riley Principal Merger Corp. II (“BRPM II”) was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. BRPM II entered into an agreement and plan of merger (the “Merger Agreement”) to acquire Eos Energy Storage LLC, a Delaware limited liability company, a privately held company that is not related to the Company (the “Proposed Acquisition”). Closing is subject to certain other conditions, including, among other things, that BRPM II maintain a certain level of cash (before taking into account certain transaction expenses, but after taking into account any redemptions by the BRPM II’s public stockholders) available from the trust account established in connection with the BRPM II IPO and from other equity financing sources.

Except as disclosed above, we have no material obligations, assets or liabilities which would be considered off-balance sheet arrangements and do not participate 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.

Contractual Obligations

~~In February 2020,~~On January 25, 2021, we issued ~~$132.3~~$230.0 million of ~~our 6.375% 2025~~senior notes due in January 2028 (“6.0% 2028 Notes”) pursuant to the prospectus supplement dated February 12, 2020. Interest on the 6.0% 2028 Notes ~~which~~is payable quarterly at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full on ~~February~~January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, we received net proceeds of $225.7 million (after underwriting commissions, fees and other issuance costs of $4.3 million). The Notes bear interest at the rate of 6.0% per annum.

On March 31, 2021, we exercised our option for early redemption at par $128.2 million of senior notes due in May 2027 (“7.50% 2027 Notes”) pursuant to the second supplemental indenture dated May 31, 2017. The total redemption payment included $1.6 million in accrued interest.

On March 29, 2021, we issued $159.5 million of senior notes due in March 2026 (“5.5% 2026 Notes”) pursuant to the prospectus supplement dated January 28, ~~2025.~~ 2021. Interest on the 5.5% 2026 Notes is payable quarterly at 5.5%. The 5.5% 2026 Notes are unsecured and due and payable in full on March 31, 2026. In connection with the issuance of the 5.5% 2026 Notes, we received net proceeds of $156.3 million (after underwriting commissions, fees and other issuance costs of $3.2 million). The Notes bear interest at the rate of 5.5% per annum.

As a result of the above, our total senior notes payable (including interest) increased to ~~$1,161.2~~$1,497.4 million as of ~~September~~June 30, 2021, and comparing June 30, 2021 to December 31, 2020, ~~and~~ our senior notes payable due in one year or less increased by $137.1 million, our senior notes payable due in 1-3 years increased by $128.5 million, our senior notes due in 4-5 years increased by $360.4 million while our senior notes due in more than 5 years decreased by $220.3 million. Additionally, our total contractual obligations increased to ~~$459.4~~$1,860.1 million at June 30, 2021 and comparing June 30, 2021 to December 31, 2020, our total payments due in one year or less increased by $102.2 million, our payments due in 1-3 years increased $152.5 million, our payments due in 4-5 years increased by $541.7 million, while our payments due in more than 5 years decreased by $215.1 million.

There were no other material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Recent Accounting Standards

See Note ~~2(v)~~2(u) to the accompanying financial statements for recent accounting pronouncements we have not yet adopted and recently adopted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

B. Riley’s primary exposure to market risk consists of risk related to changes in interest rates. B. Riley has not used derivative financial instruments for speculation or trading purposes.

Interest Rate Risk

Our primary exposure to market risk consists of risk related to changes in interest rates. We utilize borrowings under our senior notes payable and credit facilities to fund costs and expenses incurred in connection with our ~~investments,~~ acquisitions and retail liquidation engagements. Borrowings under our senior notes payable are at fixed interest rates and borrowings under our credit facilities bear interest at a floating rate of interest. We invest in loans receivable that primarily bear interest at floating rates of interest.

The primary objective of our investment activities is to preserve capital for the purpose of funding operations while at the same time maximizing the income that we receive from investments without significantly increasing risk. To achieve these objectives, our investments allow us to maintain a portfolio of cash equivalents, short-term investments through a variety of securities owned that primarily includes common stocks, corporate bonds and investments in partnership interests, and loans receivable. Our cash and cash equivalents through ~~September~~June 30, ~~2020~~2021 included amounts in bank checking and liquid money market accounts. We may be exposed to interest rate risk through trading activities in convertible and fixed income securities as well as U.S. Treasury securities, however, based on our daily monitoring of this risk, we believe we currently have limited exposure to interest rate risk in these activities.

Foreign Currency Risk

The majority of our operating activities are conducted in U.S. dollars. Revenues generated from our foreign subsidiaries totaled ~~$44.6~~$13.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 or ~~9.1%~~1.4% of our total revenues of ~~$492.5~~$936.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The financial statements of our foreign subsidiaries are translated into U.S. dollars at period-end rates, with the exception of revenues, costs and expenses, which are translated at average rates during the reporting period. We include gains and losses resulting from foreign currency transactions in income, while we exclude those resulting from translation of financial statements from income and include them as a component of accumulated other comprehensive ~~loss.~~income (loss). Transaction gains (losses), which were included in our condensed consolidated statements of operations, amounted to ~~gains~~a gain of ~~$0.4~~$0.2 million and ~~$0.1~~$0.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. We may be exposed to foreign currency risk; however, our operating results during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 included ~~$44.6~~$13.3 million of revenues from our foreign subsidiaries and a 10% appreciation of the U.S. dollar relative to the local currency exchange rates would result in ~~a $0.7~~less than $0.1 million increase in our operating income and a 10% depreciation of the U.S. dollar relative to the local currency exchange rates would have resulted in a net decrease in our operating income of ~~$0.7~~less than $0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the foregoing evaluation, our Co-Chief Executive Officers and our Chief Financial Officer concluded that as of ~~September~~June 30, ~~2020~~2021 our disclosure controls and procedures were effective ~~as of such date.~~at the reasonable assurance level.

~~Remediation of Material Weakness~~

Since the quarter ended December 31, 2019, management undertook remediation measures related to the previously reported material weakness in internal control over financial reporting. We completed these remediation measures in the quarter ended June 30, 2020, including testing of the design and concluding on the operating effectiveness of the related controls. Specifically, we enhanced the related party policies and procedures, with a specific focus on related party disclosures, that included the creation of a related party oversight function and increasing the frequency of related party controls.

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well- designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

On January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co. (“MLV”)~~, a~~ and National Securities Corporation, each an indirect broker-dealer subsidiary of ~~B. Riley Securities (fka FBR),~~the Company, as ~~a defendant~~defendants in putative class action lawsuits alleging claims under the Securities Act, in connection with the offerings of Miller Energy Resources, Inc. (“Miller”), have been consolidated. The ~~Master~~ Consolidated Complaint, styled Gaynor v. Miller et al., is pending in the ~~United States District~~Circuit Court for ~~the Eastern District of~~Morgan County, Tennessee, and, like its predecessor complaints, continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013; May 8, 2013; June 28, 2013; September 26, 2013; October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately ~~$151,000. The~~$151.0 million. A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution. In December 2019, the Court remanded the case to state court. In July 2020, the Company ~~signed a binding term sheet~~agreed to settle this matter, subject to court approval which is expected ~~to be received~~in 2021. An accrual for the settlement is included in the accompanying condensed consolidated financial statements.

On July 3, 2019, a lawsuit was filed against National Securities Corporation, (“NSC”) National Asset Management, Inc., National, National’s current board members and certain former board members, certain officers of National, John Does 1–10, and the National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v. National Securities Corporation, et al., Case No. 1:19-cv-06197-LTS. The complaint presents three purported derivative causes of action on behalf of the Company, and five causes of action by the ~~end~~plaintiff directly. As part of the derivative claims, the complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer. As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common law, or conspired to do so. The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s compensation. The complaint seeks monetary damages in favor of the Company, an order directing the Company’s board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’ fees and costs. On February 2, 2020, orthe plaintiff filed an amended complaint presenting additional causes of action. The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint. On March 18, 2020, the defendants filed a motion to dismiss the amended complaint. The plaintiff filed an opposition to the defendants’ motion to dismiss on April 15, 2020, and the defendants filed a reply in ~~early 2021.~~further support of the motion to dismiss on May 6, 2020. On August 20, 2020, the parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021, as a result of the mediation, a settlement was reached. In March 2021, a settlement agreement and release was executed by the parties and all claims have been dismissed.

The New York Department of Financial Services (the “Department”) completed its investigation of NSC’s compliance with the Department’s Cybersecurity Requirements for Financial Services Companies (the “Regulations”). The Regulations establish standards for the cybersecurity programs of entities the Department licenses or otherwise regulates, including NSC. On April 14, 2021, NSC paid the Department a fine of $3.0 million as a result of the Department’s finding that NSC violated certain of the Regulations.

NSC is a respondent in several Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of National on February 25, 2021. Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain registered representatives. NSC is evaluating each arbitration claim on its own merits. GPB and its affiliates have been the subject of various civil claims and fraud investigations over the past few years, and, in February 2021, the U.S. Department of Justice indicted certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to funds managed by GPB. At the present time, the Company continues to vigorously defend these actions and is not able to determine the ultimate resolution of these matters. Adverse judgments in these matters in the aggregate could materially and adversely affect the Company and its financial condition.

Item 1A. Risk Factors.

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors was included in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission on March ~~9, 2020 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, filed with the Securities and Exchange Commission on May 11, 2020.~~4, 2021. 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, 2019 and the Quarterly Report on Form 10-Q for the three months ended March~~ 31, 2020, 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, ~~2019 and the Quarterly Report on Form 10-Q for the three months ended March 31,~~ 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~On July 27, 2021, the Compensation Committee (the “Committee”) of the Company’s Board of Directors approved an annual incentive cash compensation program for the Company’s named executive officers. Rather than continue to establish financial targets pursuant to the Company’s Management Bonus Plan which in preceding years provided annual cash bonuses based upon the achievement of certain annual EBITDA thresholds, the Committee elected, following consultation with its outside compensation advisors, to implement a discretionary bonus program based upon the Company’s performance and the individual executive’s contributions. The Committee has determined that a discretionary annual bonus for the named executive officers enables the Committee (i) to tailor compensation based upon individual performance, (ii) to consider long versus short term goals, (iii) to evaluate the Company’s overall financial performance (or a business unit or subsidiary performance, as the case may be), and (iv) to appraise the attainment of other Company objectives.

Item 6. Exhibits.

The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference.

Exhibit Index

		~~Incorporated by Reference~~
~~Exhibit No.~~	~~Description~~	~~Form~~	~~Exhibit~~	~~Filing Date~~

31.1*	~~Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934~~

31.2*	~~Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934~~

31.3*	~~Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934~~

32.1**	~~Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

32.2**	~~Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

32.3**	~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

101.INS*	~~XBRL Instance Document~~

101.SCH*	~~XBRL Taxonomy Extension Schema Document~~

101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document~~

101.LAB*	~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~104~~	~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)~~

		Incorporated by Reference
Exhibit No.	Description	Form	Exhibit	Filing Date

10.1	Credit Agreement dated June 23, 2021, among B. Riley Financial, Inc., BR Financial Holdings, LLC, BR Advisory & Investments LLC, each of the lenders from time to time parties thereto, Nomura Corporate Funding Americas, LLC, and Wells Fargo Bank, N.A.	8-K	10.1	6/25/2021

10.2#	Form of Restricted Stock Unit Award Agreement (Time-Vesting) under the B. Riley Financial, Inc. 2021 Stock Incentive Plan.	8-K	10.1	6/3/2021

31.1*	Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

31.2*	Certification of Co-Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

31.3*	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

32.1**	Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**	Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema Document

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

The Company has omitted certain information contained in this exhibit pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and, if publicly disclosed, would likely cause competitive harm to the Company. Certain schedules and annexes to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or annex will be furnished to the U.S. Securities and Exchange Commission or its staff upon request.

Filed herewith.

Furnished herewith.

Management contract or compensatory plan or arrangement

Pursuant to Item 601(b)(10) of Regulation S-K, certain annexes to the agreement have not been filed herewith. The registrant agrees to furnish supplementally a copy of any omitted annex to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	B. Riley Financial, Inc.

Date: ~~October 29, 2020~~July 30, 2021	By:	/s/ PHILLIP J. AHN
		Name:	Phillip J. Ahn
		Title:	Chief Financial Officer and Chief Operating Officer
		(Principal Financial Officer)

5161

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																Accumulated
										Additional						Other
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Noncontrolling			Total
	Shares		Amount		Shares			Amount		Capital			Earnings			Loss			Interests			Equity
Balance, July 1, 2020		2,531	$	—		25,864,393		$	3	$	306,772		$	5,927		$	(2,693	)	$	26,210		$	336,219
Preferred stock issued		1,300		—		—			—		31,377			—			—			—			31,377
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes		—		—		41,984			—		(273	)		—			—			—			(273	)
Common stock repurchased and retired		—		—		(474,802	)		—		(10,569	)		—			—			—			(10,569	)
Share based payments		—		—		—			—		4,778			—			—			—			4,778
Dividends on common stock ($0.35 per share)		—		—		—			—		—			(9,280	)		—			—			(9,280	)
Dividends on preferred stock ($429.69 per share)		—		—		—			—		—			(1,088	)		—			—			(1,088	)
Net income		—		—		—			—		—			48,379			—			513			48,892
Distributions to noncontrolling interests		—		—		—			—		—			—			—			(601	)		(601	)
Other comprehensive income		—		—		—			—		—			—			526			—			526
Balance, September 30, 2020		3,831	$	—		25,431,575		$	3	$	332,085		$	43,938		$	(2,167	)	$	26,122		$	399,981

Balance, July 1, 2019		—	$	—		26,919,941		$	3	$	255,865		$	22,424		$	(1,824	)	$	710		$	277,178
ESPP shares issued and vesting of restricted stock, net of shares withheld for employer taxes		—		—		51,730			—		(335	)		—			—			—			(335	)
Common stock repurchased and retired		—		—		(50,171	)		—		(1,021	)		—			—			—			(1,021	)
Share based payments		—		—		—			—		4,728			—			—			—			4,728
Dividends on common stock ($0.50 per share)		—		—		—			—		—			(14,769	)		—			—			(14,769	)
Net income		—		—		—			—		—			34,302			—			(158	)		34,144
Other comprehensive income		—		—		—			—		—			—			(521	)		—			(521	)
Balance, September 30, 2019		—	$	—		26,921,500		$	3	$	259,237		$	41,957		$	(2,345	)	$	552		$	299,404

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	32,172		$	64,432
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,765			14,217
Provision for doubtful accounts		2,438			1,646
Share-based compensation		14,267			10,276
Fair value adjustments, non-cash		21,755			(13,343	)
Non-cash interest and other		(12,901	)		(14,941	)
Effect of foreign currency on operations		(602	)		8
Loss from equity investments		145			4,049
Deferred income taxes		17,312			6,358
Impairment of intangibles and loss on disposal of fixed assets		14,057			(327	)
Gain on extinguishment of debt		(1,556	)		—
Income allocated for mandatorily redeemable noncontrolling interests		779			857
Change in operating assets and liabilities:
Due from clearing brokers		4,230			9,947
Securities and other investments owned		(36,859	)		(32,122	)
Securities borrowed		137,908			211,139
Accounts receivable and advances against customer contracts		25,336			(8,645	)
Prepaid expenses and other assets		(3,507	)		(9,619	)
Accounts payable, accrued expenses and other liabilities		(10,297	)		31,473
Amounts due to/from related parties and partners		1,093			(4,574	)
Securities sold, not yet purchased		6,304			(8,531	)
Deferred revenue		3,444			(502	)
Securities loaned		(143,386	)		(215,575	)
Net cash provided by operating activities		86,897			46,223
Cash flows from investing activities:
Purchases of loans receivable		(169,100	)		(350,695	)
Repayments of loans receivable		75,982			98,742
Sale of loan receivable to related party		1,800			—
Proceeds from loan participations sold		2,400			31,806
Repayment of loan participations sold		(1,131	)		(3,175	)
Purchases of property, equipment and other		(1,517	)		(2,885	)
Proceeds from sale of property, equipment and intangible assets		1			504
Purchase of equity investments		(6,486	)		(33,391	)
Proceeds from sale of division of magicJack		—			6,196
Dividends and distributions from equity investments		1,005			1,454
Acquisition of other businesses		(1,500	)		–
Net cash used in investing activities		(98,546	)		(251,444	)
Cash flows from financing activities:
Repayment of asset based credit facility		(37,096	)		—
Repayment of notes payable		(357	)		(357	)
Proceeds from term loan		—			10,000
Repayment of term loan		(14,429	)		(17,924	)
Proceeds from issuance of senior notes		171,417			244,497
Redemption of senior notes		(1,829	)		—
Payment of debt issuance costs		(2,761	)		(4,212	)
Payment of employment taxes on vesting of restricted stock		(2,950	)		(2,626	)
Common dividends paid		(25,822	)		(25,049	)
Preferred dividends paid		(3,230	)		—
Repurchase of common stock		(38,348	)		(4,273	)
Repurchase of warrants		—			(2,777	)
Distribution to noncontrolling interests		(3,013	)		(1,095	)
Proceeds from issuance of preferred stock		36,007			—
Net cash provided by financing activities		77,589			196,184
Increase (decrease) in cash, cash equivalents and restricted cash		65,940			(9,037	)
Effect of foreign currency on cash, cash equivalents and restricted cash		407			(183	)
Net increase (decrease) in cash, cash equivalents and restricted cash		66,347			(9,220	)
Cash, cash equivalents and restricted cash, beginning of period		104,739			180,278
Cash, cash equivalents and restricted cash, end of period	$	171,086		$	171,058

Supplemental disclosures:
Interest paid	$	75,231		$	52,931
Taxes paid	$	1,460		$	5,029

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	331,698		$	(16,720	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		12,924			9,879
Provision for doubtful accounts		755			2,081
Share-based compensation		14,134			9,489
Fair value adjustments, non-cash		(10,046	)		21,975
Non-cash interest and other		(9,091	)		(6,943	)
Effect of foreign currency on operations		(1,486	)		(73	)
(Income) loss from equity investments		(23	)		554
Dividends from equity investments		610			797
Deferred income taxes		51,242			(14,340	)
Impairment of intangibles and gain on disposal of fixed assets		—			12,550
Gain on extinguishment of loans		(6,509	)		—
Loss (gain) on extinguishment of debt		919			(1,556	)
Gain on equity investment		(3,544	)		—
Income allocated for mandatorily redeemable noncontrolling interests		347			397
Change in operating assets and liabilities:
Due from clearing brokers		(424,062	)		(5,271	)
Securities and other investments owned		(316,181	)		20,009
Securities borrowed		(374,565	)		27,967
Accounts receivable and advances against customer contracts		808			27,601
Prepaid expenses and other assets		(25,870	)		(19,707	)
Accounts payable, accrued expenses and other liabilities		(22,983	)		738
Amounts due to/from related parties and partners		155			4,404
Securities sold, not yet purchased		261,476			(32,017	)
Deferred revenue		(3,158	)		3,896
Securities loaned		374,549			(31,481	)
Net cash (used in) provided by operating activities		(147,901	)		14,229
Cash flows from investing activities:
Purchases of loans receivable		(87,309	)		(152,228	)
Repayments of loans receivable		95,522			74,450
Sale of loan receivable to related party		—			1,800
Proceeds from loan participations sold		—			2,400
Repayment of loan participations sold		(10,772	)		(940	)
Acquisition of business, net of $34,924 cash acquired		(390	)		(1,500	)
Purchases of property, equipment and other		(288	)		(851	)
Proceeds from sale of property, equipment and intangible assets		—			1
Purchase of equity investments		(10,485	)		(6,486	)
Net cash used in investing activities		(13,722	)		(83,354	)
Cash flows from financing activities:
Repayment of asset based credit facility		—			(37,096	)
Repayment of notes payable		(37,610	)		(357	)
Repayment of term loan		(11,484	)		(9,620	)
Proceeds from term loan		200,000			—
Proceeds from issuance of senior notes		475,698			171,078
Redemption of senior notes		(128,156	)		(1,829	)
Payment of debt issuance costs		(15,661	)		(2,760	)
Payment for contingent consideration		(411	)		—
Payment of employment taxes on vesting of restricted stock		(10,370	)		(2,678	)
Common dividends paid		(181,269	)		(17,489	)
Preferred dividends paid		(3,538	)		(2,142	)
Repurchase of common stock		—			(27,779	)
Distribution to noncontrolling interests		(14,792	)		(2,143	)
Contribution from noncontrolling interests		10,650			—
Proceeds from issuance of common stock		64,713			—
Proceeds from issuance of preferred stock		8,281			4,630
Net cash provided by financing activities		356,051			71,815
Increase in cash, cash equivalents and restricted cash		194,428			2,690
Effect of foreign currency on cash, cash equivalents and restricted cash		(534	)		(705	)
Net increase in cash, cash equivalents and restricted cash		193,894			1,985
Cash, cash equivalents and restricted cash, beginning of period		104,837			104,739
Cash, cash equivalents and restricted cash, end of period	$	298,731		$	106,724

Supplemental disclosures:
Interest paid	$	66,359		$	45,934
Taxes paid	$	63,987		$	608

	Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2020 Using
	Fair value at September 30,		Quoted prices in active markets for identical assets		Other observable inputs		Significant unobservable inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Securities and other investments owned:
Equity securities	$	392,674	$	290,425	$	—	$	102,249
Corporate bonds		5,956		—		5,956		—
Other fixed income securities		3,557		—		3,557		—
Investment funds valued at net asset value⁽¹⁾		57,293
Total securities and other investments owned		459,480		290,425		9,513		102,249
Loans receivable, at fair value		344,339		—		—		344,339
Total assets measured at fair value	$	803,819	$	290,425	$	9,513	$	446,588

Liabilities:
Securities sold not yet purchased:
Equity securities	$	42,086	$	42,086	$	—	$	—
Corporate bonds		4,490		—		4,490		—
Other fixed income securities		1,549		—		1,549		—
Total securities sold not yet purchased		48,125		42,086		6,039		—
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,462		—		—		4,462
Total liabilities measured at fair value	$	52,587	$	42,086	$	6,039	$	4,462

	Financial Assets and Liabilities Measured at Fair Value
	on a Recurring Basis at December 31, 2019 Using
	Fair value at December 31, 2019		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Securities and other investments owned:
Equity securities	$	353,162	$	243,911	$	—	$	109,251
Corporate bonds		19,020		—		19,020		—
Other fixed income securities		8,414		—		8,414		—
Investment funds valued at net asset value⁽¹⁾		27,617
Total securities and other investments owned		408,213		243,911		27,434		109,251
Loans receivable, at fair value		43,338		—		—		43,338
Total assets measured at fair value	$	451,551	$	243,911	$	27,434	$	152,589

Liabilities:
Securities sold not yet purchased:
Equity securities	$	5,360	$	5,360	$	—	$	—
Corporate bonds		33,436		—		33,436		—
Other fixed income securities		3,024		—		3,024		—
Total securities sold not yet purchased		41,820		5,360		36,460		—

Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,616		—		—		4,616
Total liabilities measured at fair value	$	46,436	$	5,360	$	36,460	$	4,616

	Level 3		Level 3 Changes During the Period												Level 3
	Balance at		Fair			Relating to			Purchases,			Transfer in			Balance at
	Beginning of		Value			Undistributed			Sales and			and/or out			End of
	Year		Adjustments			Earnings			Settlements			of Level 3			Period
Nine Months Ended September 30, 2020
Equity securities	$	109,251	$	(11,314	)	$	—		$	4,984		$	(672	)	$	102,249
Loans receivable at fair value		43,338		(21,834	)		3,134			93,853			225,848			344,339
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,616		—			(154	)		—			—			4,462
Nine Months Ended September 30, 2019
Equity securities	$	24,577	$	715		$	1,424		$	24,215		$	—		$	50,931
Loans receivable at fair value		33,731		11,648			1,621			(11,489	)		—			35,511
Mandatorily redeemable noncontrolling interests issued after November 5, 2003		4,633		—			(238	)		—			—			4,395

Consideration paid by B. Riley:
Cash acquisition consideration	$	116,500
Transaction costs		570
Total cash consideration		117,070
Warrant consideration		990
Total consideration	$	118,060

Tangible assets acquired and assumed:
Cash and cash equivalents	$	2,160
Accounts receivable		1,751
Deferred revenue		(1,332	)
Tradename		136,176
Customer list		8,678
Non-controlling interest		(29,373	)
Total	$	118,060

	Three Months Ended September 30, 2020								Three Months Ended September 30, 2019
					Principal								Principal
			Auction		Investments - United Online						Auction		Investments - United Online
	Capital		and		and				Capital		and		and
	Markets		Liquidation		magicJack		Total		Markets		Liquidation		magicJack		Total
Restructuring charge:
Impairment of intangibles		1,417		140		—		1,557		—		—		—		—
Total restructuring charge	$	1,417	$	140	$	—	$	1,557	$	—	$	—	$	—	$	—

	Gross amounts recognized		Gross amounts offset in the consolidated balance sheets⁽¹⁾		Net amounts included in the consolidated balance sheets		Amounts not offset in the consolidated balance sheets but eligible for offsetting upon counterparty default⁽²⁾		Net amounts
As of September 30, 2020
Securities borrowed	$	676,423	$	—	$	676,423	$	676,423	$	—
Securities loaned	$	667,109	$	—	$	667,109	$	667,109	$	—
As of December 31, 2019
Securities borrowed	$	814,331	$	—	$	814,331	$	814,331	$	—
Securities loaned	$	810,495	$	—	$	810,495	$	810,495	$	—

	Three Months Ended September 30, 2020									Three Months Ended September 30, 2019
				Principal									Principal
				Investments -									Investments -
	Auction and			United Online and						Auction and			United Online and
	Liquidation			magicJack						Liquidation			magicJack
	Segment			Segment			Total			Segment			Segment			Total
Revenues - Sale of Goods	$	22,712		$	939		$	23,651		$	54		$	864		$	918
Cost of goods sold		9,046			767			9,813			126			785			911
Gross margin on sale of goods	$	13,666		$	172		$	13,838		$	(72	)	$	79		$	7

Gross margin percentage		60.2	%		18.3	%		58.5	%		(133.3	)%		9.1	%		0.8	%

	Three Months Ended September 30,
	2020					2019					Change
	Amount		%			Amount		%			Amount			%
Capital Markets segment	$	69,608		71.6	%	$	71,421		70.6	%	$	(1,813	)		(2.5	)%
Auction and Liquidation segment		4,626		4.8	%		2,836		2.8	%		1,790			63.1	%
Valuation and Appraisal segment		6,683		6.9	%		7,367		7.3	%		(684	)		(9.3	)%
Principal Investments - United Online and magicJack segment		7,576		7.8	%		8,851		8.8	%		(1,275	)		(14.4	)%
Brands segment		1,708		1.8	%		—		0.0	%		1,708			100.0	%
Corporate and Other segment		6,942		7.1	%		10,617		10.5	%		(3,675	)		(34.6	)%
Total selling, general & administrative expenses	$	97,143		100.0	%	$	101,092		100.0	%	$	(3,949	)		(3.9	)%

	Nine Months Ended September 30, 2020									Nine Months Ended September 30, 2019
				Principal									Principal
				Investments -									Investments -
	Auction and			United Online and						Auction and			United Online and
	Liquidation			magicJack						Liquidation			magicJack
	Segment			Segment			Total			Segment			Segment			Total
Revenues - Sale of Goods	$	23,757		$	2,718		$	26,475		$	1,230		$	2,793		$	4,023
Cost of goods sold		9,360			2,082			11,442			992			2,843			3,835
Gross margin on sale of goods	$	14,397		$	636		$	15,033		$	238		$	(50	)	$	188

Gross margin percentage		60.6	%		23.4	%		56.8	%		19.3	%		(1.8	)%		4.7	%

	Nine Months Ended September 30,
	2020					2019					Change
	Amount		%			Amount		%			Amount			%
Capital Markets segment	$	207,545		71.3	%	$	200,414		69.6	%	$	7,131			3.6	%
Auction and Liquidation segment		8,882		3.0	%		9,050		3.1	%		(168	)		(1.9	)%
Valuation and Appraisal segment		19,782		6.8	%		21,592		7.5	%		(1,810	)		(8.4	)%
Principal Investments - United Online and magicJack segment		22,818		7.8	%		28,129		9.8	%		(5,311	)		(18.9	)%
Brands segment		4,350		1.5	%		—		0.0	%		4,350			100.0	%
Corporate and Other segment		28,072		9.6	%		28,778		10.0	%		(706	)		(2.5	)%
Total selling, general & administrative expenses	$	291,449		100.0	%	$	287,963		100.0	%	$	3,486			1.2	%