B. RILEY FINANCIAL, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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

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

Risk factors that could cause actual results to differ from those contained in
the forward-looking statements include but are not limited to risks related to:
volatility in our revenues and results of operations; changing conditions in the
financial markets; 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, including increasing inflation; the continuing
effects of the COVID-19 pandemic, or other pandemics or severe public health
crises, and other related impacts including supply chain disruptions, labor
shortages and increased labor costs; 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 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 Annual 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) ("B. Riley" or the "Company") is a
diversified financial services platform and opportunistically invests in
companies or assets with attractive risk-adjusted return profiles to benefit its
shareholders. Through its affiliated subsidiaries, B. Riley provides a full
suite of investment banking, corporate finance research, sales, and trading, as
well as advisory, valuation, and wealth management, services. The Company's
major business lines include:

? B. Riley Securities, a leading, full service investment bank that provides

corporate finance, lending, research, securities lending and sales and trading

services to corporate, institutional, and high net worth individual clients. It

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

B. Riley Securities was established from the merger of B. Riley & Co, LLC and

FBR Capital Markets & Co. in 2017.



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? B. Riley Wealth Management, which provides comprehensive wealth management and

brokerage services to individuals and families, corporations and non-profit

organizations, including qualified retirement plans, trusts, foundations, and

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

the Company acquired in July 2017.

? National Holdings Corporation (“National”), which provides wealth management,

brokerage, insurance brokerage, tax preparation and advisory services, was

   acquired in February 2021.



? B. Riley Capital Management, which is a Securities and Exchange Commission

(“SEC”) registered investment advisor, that includes B. Riley Asset Management,

an advisor to and/or manager of certain private funds.

? B. Riley Advisory Services, which provides expert witness, bankruptcy,

financial advisory, forensic accounting, valuation and appraisal, and

operations management services to companies, financial institutions, and the

legal community. B. Riley Advisory Services is primarily comprised of the

bankruptcy and restructuring, forensic accounting, litigation support, and

appraisal and valuation practices.

? B. Riley Retail Solutions, which is a leading provider of asset disposition,

liquidation, and auction solutions to a wide range of retail and industrial

   clients.




? B. Riley Real Estate, which advises companies, financial institutions,

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

core focus of B. Riley Real Estate, LLC is the restructuring of lease

obligations in both distressed and non-distressed situations, both inside and

outside of the bankruptcy process, on behalf of corporate tenants.

? B. Riley Principal Investments, which identifies attractive investment

opportunities and seeks to control or influence the operations of our portfolio

company investments to deliver financial and operational improvements that will

maximize the Company’s free cash flow, and therefore, shareholder returns. The

team concentrates on opportunities presented by distressed companies or

divisions that exhibit challenging market dynamics. Representative transactions

include recapitalization, direct equity investment, debt investment, active

minority investment and buyouts.

? Communications consist of United Online, Inc. (“UOL” or “United Online”), which

was acquired in July 2016, magicJack VocalTec Ltd. (“magicJack”), which was

acquired in November 2018, a 40% equity interest in Lingo Management, LLC

(“Lingo”), which was acquired in November 2020, and a mobile virtual network

operator business (“Marconi Wireless“), which was acquired in October 2021.

Upon receipt of certain regulatory approvals, the Company has the right to

acquire an additional 40% equity interest in Lingo. The following briefly

describes each such business:

? UOL is a communications company that offers consumer subscription services and

products, consisting of Internet access services and devices under the NetZero

   and Juno brands.



? magicJack is a Voice over IP (“VoIP”) cloud-based technology and services and

wireless mobile communications provider.

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

? Marconi Wireless is a mobile virtual network operator business that provides

mobile phone voice, text, and data services and devices.

? BR Brand Holding (“BR Brands”), in which the Company owns a majority interest,

provides licensing of certain brand trademarks. BR Brands owns the assets and

intellectual property related to licenses of six brands: Catherine Malandrino,

English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well

as investments in the Hurley and Justice brands with Bluestar Alliance LLC

   ("Bluestar"), a brand management company.




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We are headquartered in Los Angeles with over 44 offices throughout the United
States
including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro
Washington D.C., West Palm Beach, and Boca Raton.

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

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

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

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 investment strategists
and B. Riley Securities' proprietary equity 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. Our scale and pool of resources allow us to offer our services
across North America as well as parts of Europe, Asia, and Australia. Our
Auction and Liquidation segment operates through two main divisions, retail
store liquidations and wholesale and industrial assets dispositions. Our
wholesale and industrial assets dispositions division operates through limited
liability companies that are controlled by us.

Financial Consulting Segment. Our Financial Consulting segment provides services
to law firms, corporations, financial institutions, lenders, and private equity
firms. These services primarily include bankruptcy, financial advisory, forensic
accounting, litigation support, operations management consulting, real estate
consulting, and valuation and appraisal services. Our Financial Consulting
segment operates through limited liability companies that are wholly owned or
majority owned by us.

Principal Investments - Communications Segment. Our Principal Investments -
Communications segment consists of businesses which have been acquired primarily
for attractive investment return characteristics. Currently, this segment
includes, among other investments, UOL, through which we provide consumer
Internet access, magicJack, through which we provide VoIP communication and
related product and subscription services, and Marconi Wireless, through which
we provide mobile phone services and devices.

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


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Recent Developments
On January 19, 2022, we acquired FocalPoint Securities, LLC, an independent
investment bank based in Los Angeles. The combination is expected to
significantly expand B. Riley Securities' mergers and acquisitions ("M&A")
advisory business and enhance its debt capital markets and financial
restructuring capabilities. Founded in 2002, FocalPoint specializes in M&A,
private capital advisory, financial restructuring, and special situation
transactions. The firm includes approximately 50 investment banking
professionals with deep industry specialization in high-growth sectors such as
aerospace and defense, industrials, business services, consumer, healthcare, and
technology/media/telecom. Our acquisition of FocalPoint builds upon the momentum
and proven execution capabilities of both firms and is in line with our stated
intent to expand capabilities in M&A advisory and fixed income. This combination
provides strategic and financial sponsor clients with access to both firms'
proven execution capabilities and a full suite of end-to-end services from a
single platform.

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 fourth
quarter of 2021, the full impact of the COVID-19 outbreak continued to evolve,
with the emergence of variant strains and breakthrough infections becoming
prevalent both in the U.S. and worldwide. As the U.S. economy recovers, aided by
stimulus packages and fiscal and monetary policies, inflation has been rising at
historically high rates, and the Federal Reserve has signaled that it will begin
increasing the target federal funds effective rate. The impact of the COVID-19
outbreak and these related matters on our results of operations, financial
position and cash flows will depend on future developments, including the
duration and spread of the outbreak and related advisories and restrictions and
the success of vaccines and natural immunity in controlling the pandemic. These
developments and the impact of the COVID-19 outbreak on the financial markets
and the overall economy continue to be highly uncertain and cannot be predicted.
If the financial markets and/or the overall economy continue to be impacted, our
results of operations, financial position and cash flows may be materially
adversely affected.

Results of Operations

The following period to period comparisons of our financial results and our
interim results are not necessarily indicative of future results. A discussion
of changes in our results of operations during the year ended December 31,
2020 compared to the year ended December 31, 2019 has been omitted from this
Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our Annual
Report on Form 10-K during the year ended December 31, 2020, filed with the SEC
on March 4, 2021, which discussion is incorporated herein by reference and which
is available free of charge on the SEC's website at www.sec.gov.


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                       Consolidated Statements of Income
                             (Dollars in thousands)



                               Year Ended                     Year Ended
                            December 31, 2021             December 31, 2020                  Change
                          Amount            %            Amount           %           Amount           %
Revenues:
Services and fees       $ 1,172,957          67.4 %    $  667,069          73.9 %    $ 505,888          75.8 %
Trading income and
fair value
adjustments on loans        386,676          22.2 %       104,018          11.5 %      282,658           n/m
Interest income -
Loans and securities
lending                     122,723           7.1 %       102,499          11.4 %       20,224          19.7 %
Sale of goods                58,205           3.3 %        29,135           3.2 %       29,070          99.8 %
Total revenues            1,740,561         100.0 %       902,721         100.0 %      837,840          92.8 %

Operating expenses:
Direct cost of
services                     54,390           3.1 %        60,451           6.7 %       (6,061 )       (10.0 %)
Cost of goods sold           26,953           1.5 %        12,460           1.4 %       14,493         116.3 %
Selling, general and
administrative
expenses                    906,196          52.1 %       428,537          47.5 %      477,659         111.5 %
Restructuring charge              -           0.0 %         1,557           0.2 %       (1,557 )      (100.0 %)
Impairment of
tradenames                        -           0.0 %        12,500           1.4 %      (12,500 )      (100.0 %)
Interest expense -
Securities lending
and loan
participations sold          52,631           3.0 %        42,451           4.7 %       10,180          24.0 %
Total operating
expenses                  1,040,170          59.7 %       557,956          61.9 %      482,214          86.4 %
Operating income            700,391          40.2 %       344,765          38.2 %      355,626         103.2 %
Other income
(expense):
Interest income                 229           0.0 %           564           0.1 %         (335 )       (59.4 %)
Gain on
extinguishment of
loans and other               3,796           0.2 %             -           0.0 %        3,796         100.0 %
Income (loss) on
equity investments            2,801           0.2 %          (623 )        (0.1 %)       3,424           n/m
Interest expense            (92,455 )        (5.3 %)      (65,249 )        (7.2 %)     (27,206 )        41.7 %
Income before income
taxes                       614,762          35.3 %       279,457          31.0 %      335,305         120.0 %
Provision for income
taxes                      (163,960 )        (9.4 %)      (75,440 )        (8.4 %)     (88,520 )       117.3 %
Net income                  450,802          25.9 %       204,017          22.6 %      246,785         121.0 %
Net income (loss)
attributable to
noncontrolling
interests                     5,748           0.3 %        (1,131 )        (0.1 %)       6,879           n/m
Net income
attributable to B.
Riley Financial, Inc.       445,054          25.6 %       205,148          22.7 %      239,906         116.9 %
Preferred stock
dividends                     7,457           0.4 %         4,710           0.5 %        2,747          58.3 %
Net income available
to common
shareholders            $   437,597          25.1 %    $  200,438          22.2 %    $ 237,159         118.3 %



n/m – Not applicable or not meaningful.


                                       55




Revenues

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

                               Year Ended                    Year Ended
                            December 31, 2021            December 31, 2020                 Change
                          Amount            %           Amount           %          Amount           %
Revenues - Services
and fees
Capital Markets
segment                 $   575,317          33.1 %   $  339,877          37.7 %   $ 235,440          69.3 %
Wealth Management
segment                     374,361          21.5 %       72,345           8.0 %     302,016           n/m
Auction and
Liquidation segment          20,169           1.2 %       63,101           7.0 %     (42,932 )       (68.0 )%
Financial Consulting
segment                      94,312           5.4 %       91,622          10.1 %       2,690           2.9 %
Principal Investments
- Communications
segment                      88,490           5.1 %       83,666           9.3 %       4,824           5.8 %
Brands segment               20,308           1.1 %       16,458           1.8 %       3,850          23.4 %
Subtotal                  1,172,957          67.4 %      667,069          73.9 %     505,888          75.8 %

Revenues - Sale of
goods
Auction and
Liquidation segment          53,348           3.1 %       25,663           2.8 %      27,685         107.9 %
Principal Investments
- Communications
segment                       4,857           0.2 %        3,472           0.4 %       1,385          39.9 %
Subtotal                     58,205           3.3 %       29,135           3.2 %      29,070          99.8 %

Trading income and
fair value
adjustments on loans
Capital Markets
segment                     379,053          21.8 %      103,214          11.4 %     275,839           n/m
Wealth Management
segment                       7,623           0.4 %          804           0.1 %       6,819           n/m
Subtotal                    386,676          22.2 %      104,018          11.5 %     282,658           n/m

Interest income -
Loans and securities
lending
Capital Markets
segment                     122,723           7.1 %      102,499          11.4 %      20,224          19.7 %

Total revenues          $ 1,740,561         100.0 %   $  902,721         100.0 %   $ 837,840          92.8 %



n/m – Not applicable or not meaningful.



Total revenues increased approximately $837.8 million to $1,740.6 million during
the year ended December 31, 2021 from $902.7 million during the year ended
December 31, 2020. The increase in revenues during the year ended December 31,
2021 was primarily due to an increase in revenue from services and fees of
$505.9 million, an increase in revenue from trading income and fair value
adjustments on loans of $282.7 million, an increase in revenue from sale of
goods of $29.1 million, and an increase in revenue from interest income - loans
and securities lending of $20.2 million, as further described below. The
increase in revenue from services and fees of $505.9 million was primarily due
to increases in revenue of $302.0 million in the Wealth Management segment,
$235.4 million in the Capital Markets segment, $4.8 million in the Principal
Investments - Communications segment, $3.9 million in the Brands segment, and
$2.7 million in the Financial Consulting segment, partially offset by a decrease
of $42.9 million in the Auction and Liquidation segment, as further described
below.


Revenues from services and fees in the Capital Markets segment increased
approximately $235.4 million, to $575.3 million during the year ended December
31, 2021 from $339.9 million during the year ended December 31, 2020. The
increase in revenues was primarily due to increases in revenue of $203.2 million
from corporate finance, consulting and investment banking fees, $26.0 million
from the acquisition of National, $5.5 million in dividends, and $1.4 million in
other income, partially offset by a decrease in revenue of $0.6 million from
asset management fees.


                                       56



Revenues from services and fees in the Wealth Management segment increased
$302.0 million, to $374.4 million during the year ended December 31, 2021 from
$72.3 million during the year ended December 31, 2020. The increase in revenues
was primarily due to increases in revenue of $280.9 million from the acquisition
of National, $20.7 million from wealth and asset management fees, and $0.5
million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased
$42.9 million, to $20.2 million during the year ended December 31, 2021 from
$63.1 million during the year ended December 31, 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
$2.7 million, to $94.3 million during the year ended December 31, 2021 from
$91.6 million during the year ended December 31, 2020. The increase in revenues
was primarily due to an increase in revenue of $2.4 million from advisory
services.


Revenues from services and fees in the Principal Investments - Communications
segment increased $4.8 million to $88.5 million during the year ended December
31, 2021 from $83.7 million during the year ended December 31, 2020. The
increase in revenues was primarily due to $12.4 million from the acquisition of
a mobile phone services business during Q4 2021, partially offset by a decrease
in revenues of $7.6 million from subscription services.


Revenues from services and fees in the Brands segment increased approximately
$3.9 million, to $20.3 million during the year ended December 31, 2021 from
$16.4 million during the year ended December 31, 2020. The primary source of
revenue included in this segment is the licensing of trademarks.

Trading income and fair value adjustments on loans increased $282.7 million to
income of $386.7 million during the year ended December 31, 2021 compared to
$104.0 million during the year ended December 31, 2020. This was primarily due
to increases of $275.8 million in the Capital Markets segment and $6.8 million
in the Wealth Management segment. The gain of $386.7 million during the year
ended December 31, 2021 included realized and unrealized amounts earned on
investments made in our proprietary trading accounts of $376.2 million and
unrealized amounts on our loans receivable, at fair value of $10.5 million.

Interest income - loans and securities lending increased $20.2 million, to
$122.7 million during the year ended December 31, 2021 from $102.5 million
during the year ended December 31, 2020. Interest income from securities lending
was $66.1 million and $51.3 million during the year ended December 31, 2021 and
2020, respectively. Interest income from loans was $56.6 million and $51.2
million during the year ended December 31, 2021 and 2020, 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 $873.2 million as of December 31, 2021 from $390.7 million
as of December 31, 2020.

Revenues - Sale of Goods

Revenues from the sale of goods increased $29.1 million, to $58.2 million during
the year ended December 31, 2021 from $29.1 million during the year ended
December 31, 2020. Revenues from sale of goods were primarily attributable to
$46.1 million of sales of retail goods related to retail liquidation engagements
in Europe, $6.1 million of sales of retail goods related to a retail liquidation
engagement in the U.S., and $2.7 million in sales of magicJack devices that were
sold in connection with VoIP services, partially offset by a decrease of $25.7
million from sales of goods related to multiple liquidation engagements that
ended in 2020. Cost of goods sold during the years ended December 31, 2021 and
2020 was $27.0 million and $12.5 million, respectively, resulting in a gross
margin of 53.7% and 57.2%, respectively.


                                       57




Operating Expenses

Direct Cost of Services
Total direct costs decreased $6.1 million, to $54.4 million during the year
ended December 31, 2021 from $60.5 million during the year ended December 31,
2020. Direct costs of services decreased by $10.0 million in the Auction and
Liquidation segment, partially offset by an increase of $4.0 million in the
Principal Investments - Communications segment. The decrease in direct costs in
the Auction and Liquidation segment was primarily due to a decrease in the
number of retail fee type engagements performed during the year ended December
31, 2021, partially offset by an increase of $11.7 million of direct costs
incurred on a retail liquidation engagement in Europe, where we purchased
inventory for resale and as part of the retail liquidation engagement we
incurred costs related to the store operations which primarily related to
expenses for occupancy, payroll and other store operating costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the years ended December 31,
2021
and 2020 were comprised of the following:

                  Selling, General and Administrative Expenses

                                         Year Ended                 Year Ended
                                     December 31, 2021          December 31, 2020               Change
                                     Amount          %          Amount          %         Amount          %
Capital Markets segment            $  347,591        38.4 %   $  201,348        47.0 %   $ 146,243        72.6 %
Wealth Management segment             366,050        40.3 %       70,248        16.4 %     295,802         n/m
Auction and Liquidation segment        14,069         1.6 %       12,359         2.9 %       1,710        13.8 %
Financial Consulting segment           77,418         8.5 %       68,579   
    16.0 %       8,839        12.9 %
Principal Investments -
Communications segment                 36,240         4.0 %       31,363         7.3 %       4,877        15.6 %
Brands segment                          5,923         0.7 %        5,747         1.3 %         176         3.1 %
Corporate and Other segment            58,905         6.5 %       38,893   
     9.1 %      20,012        51.5 %
Total selling, general &
administrative expenses            $  906,196       100.0 %   $  428,537       100.0 %   $ 477,659       111.5 %


Total selling, general and administrative expenses increased $477.7 million to
$906.2 million during the year ended December 31, 2021 from $428.5 million
during the year ended December 31, 2020. The increase of $477.7 million in
selling, general and administrative expenses was due to increases of
$146.2 million in the Capital Markets segment, $295.8 million in the Wealth
Management segment, $1.7 million in the Auction and Liquidation segment,
$8.8 million in the Financial Consulting segment, $4.9 million in the Principal
Investments - Communications segment, $0.2 million in the Brands segment, and
$20.0 million in the Corporate and Other segment, as described below.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment
increased by $146.2 million to $347.6 million during the year ended December 31,
2021 from $201.3 million during the year ended December 31, 2020. The increase
was primarily due to increases of $85.4 million in payroll and related expenses,
$32.1 million in consulting expenses, $18.7 million from the acquisition of
National, and $10.3 million in investment banking deal expenses, partially
offset by a decrease in depreciation and amortization of $0.3 million.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment
increased by $295.8 million to $366.1 million during the year ended December 31,
2021 from $70.2 million during the year ended December 31, 2020. The increase
was primarily due to increases of $280.8 million from the acquisition of
National and $16.7 million in payroll and related expenses, partially offset by
decreases of $1.3 million in legal expenses and $0.5 million in other expenses.


                                       58




Auction and Liquidation
Selling, general and administrative expenses in the Auction and Liquidation
segment increased by $1.7 million to $14.1 million during the year ended
December 31, 2021 from $12.4 million during the year ended December 31, 2020.
The increase was primarily due to an increase of $3.5 million in other business
development activities, partially offset by decreases of $0.7 million in payroll
and related expenses, $0.6 million in outside contractors, and $0.4 million in
foreign currency fluctuations.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment
increased by $8.8 million to $77.4 million during the year ended December 31,
2021 from $68.6 million during the year ended December 31, 2020. The increase
was primarily due to increases of $5.7 million in payroll and related expenses,
$1.8 million in legal expenses, $0.7 million in other expenses, $0.6 million in
travel and entertainment expenses, and $0.2 million in occupancy expenses.

Principal Investments – Communications

Selling, general and administrative expenses in the Principal Investments -
Communications segment increased by $4.9 million to $36.2 million during the
year ended December 31, 2021 from $31.4 million during the year ended December
31, 2020. The increase was primarily due to increases of $1.2 million in
communications expenses, $0.9 million in payroll and related expenses,
$0.8 million due to a legal settlement accrual release in 2020, $0.8 million in
transaction costs, $0.7 million in other expenses, and $0.5 million in other
business development activities expenses.

Brands

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

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment
increased $20.0 million to $58.9 million during the year ended December 31, 2021
from $38.9 million during the year ended December 31, 2020. The increase was
primarily due to increases of $18.9 million in payroll and related expenses,
$8.0 million in gains on extinguishment of debt, and $4.0 million from the
consolidation of special purpose acquisition corporations ("SPACs"), partially
offset by decreases of $8.7 million in legal settlement accrual, primarily due
to recording a pre-acquisition litigation claim related to one of our acquired
subsidiaries,$1.8 million in other expenses, and $0.8 million in legal expenses.

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

During the year ended December 31, 2020, we repurchased bonds with an aggregate
face value of $3.4 million for $1.8 million resulting in a gain net of expenses
of $1.6 million. As part of the repurchase, we 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 and the Company recognized
impairment charges of $12.5 million during the year ended December 31, 2020.
There was no impairment recognized during the year ended December 31, 2021.

Other Income (Expense). Other income included interest income of $0.2 million
during the year ended December 31, 2021 compared to $0.6 million during the year
ended December 31, 2020. Gain on extinguishment of loans and other in the amount
of $3.8 million during the year ended December 31, 2021 was primarily due to a
gain of $6.5 million from National PPP loans that were forgiven by the SBA,
partially offset by a loss of $2.7 million due to changes in fair value of
warrant liabilities. Income on equity investments was $2.8 million during the
year ended December 31, 2021 compared to a loss of $0.6 million during the year
ended December 31, 2020. Interest expense was $92.5 million during the year
ended December 31, 2021 compared to $65.2 million during the year ended December
31, 2020. The increase in interest expense was primarily due to increases in
interest expense of $20.2 million from the issuance of senior notes, $5.9
million from the Nomura term loan, and $1.9 million from the Nomura revolver.


                                       59




Income Before Income Taxes. Income before income taxes increased $335.3 million
to $614.8 million during the year ended December 31, 2021 from $279.5 million
during the year ended December 31, 2020. The increase in income before income
taxes was primarily due to increases in revenues of approximately
$837.8 million, gain on extinguishment of loans and other of $3.8 million, and
income from equity investments of $3.4 million, partially offset by increases in
operating expenses of $482.2 million, interest expense of $27.2 million, and a
decrease in interest income of $0.3 million.

Provision for Income Taxes. Provision for income taxes was $164.0 million during
the year ended December 31, 2021 compared to $75.4 million during the year ended
December 31, 2020. The effective income tax rate was a provision of 26.7% during
the year ended December 31, 2021 as compared to a provision of 27.0% during the
year ended December 31, 2020.

Net Income (Loss) Attributable to Noncontrolling Interest. Net income
attributable to noncontrolling interests represents the proportionate share of
net income (loss) generated by membership interests of partnerships that we do
not own. The net income attributable to noncontrolling interests was
$5.7 million during the year ended December 31, 2021 compared to a net loss of
$1.1 million during the year ended December 31, 2020.

Net Income Attributable to the Company. Net income attributable to the Company
during the year ended December 31, 2021 was $445.1 million, an increase of
$239.9 million, from net income attributable to the Company of $205.1 million
during the year ended December 31, 2020. The increase was primarily due to
increases in operating income of $355.6 million, gain on extinguishment of loans
and other of $3.8 million, and income from equity investments of $3.4 million,
partially offset by increases in provision for income taxes of $88.5 million,
interest expense of approximately $27.2 million, net income attributable to
noncontrolling interests of $6.9 million, and a decrease in interest income of
$0.3 million.

Preferred Stock Dividends. Holders of Series A Preferred Stock, when and as
authorized by the board of directors of the Company, are entitled to cumulative
cash dividends at the rate of 6.875% per annum of the $25,000 liquidation
preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or
$1.71875 per Depositary Share). Dividends are payable quarterly in arrears. On
January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary
Share, which was paid on January 29, 2021 to holders of record as of the close
of business on January 21, 2021. On April 5, 2021, the Company declared a cash
dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to
holders of record as of the close of business on April 20, 2021. On July 8,
2021, the Company declared a cash dividend $0.4296875 per Depositary Share,
which was paid on August 2, 2021 to holders of record as of the close of
business on July 21, 2021. On October 6, 2021, the Company declared a cash
dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to
holders of record as of the close of business on October 21, 2021.

Holders of Series B Preferred Stock, when and as authorized by the board of
directors of the Company, are entitled to cumulative cash dividends at the rate
of 7.375% per annum of the $25,000 liquidation preference ($25.00 per Depositary
Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).
Dividends are payable quarterly in arrears. On January 11, 2021, the Company
declared a cash dividend $0.4609375 per Depositary Share, which was paid on
January 29, 2021 to holders of record as of the close of business on January 21,
2021. On April 5, 2021, the Company declared a cash dividend $0.4609375 per
Depositary Share, which was paid on April 30, 2021 to holders of record as of
the close of business on April 20, 2021. On July 8, 2021, the Company declared a
cash dividend $0.4609375 per Depositary Share, which was paid on August 2,
2021 to holders of record as of the close of business on July 21, 2021. On
October 6, 2021, the Company declared a cash dividend $0.4609375 per Depositary
Share, which was paid on November 1, 2021 to holders of record as of the close
of business on October 21, 2021.

Net Income Available to Common Shareholders. Net income available to common
shareholders during the year ended December 31, 2021 was $437.6 million, an
increase of $237.2 million, from net income available to common shareholders of
$200.4 million during the year ended December 31, 2020. The increase was
primarily due to increases in operating income of $355.6 million, gain on
extinguishment of loans and other of $3.7 million, and income from equity
investments of $3.4 million, partially offset by increases in provision for
income taxes of $88.5 million, interest expense of approximately $27.2 million,
net income attributable to noncontrolling interests of $6.9 million, preferred
stock dividends of $2.7 million, and a decrease in interest income of $0.3
million.


                                       60



Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on hand, cash
generated from operations, borrowings under our senior notes payable, term loans
and credit facilities, and special purpose financing arrangements. During the
years ended December 31, 2021 and 2020, we generated net income attributable to
the Company of $445.1 million and $205.2 million, respectively. Our cash flows
and profitability are impacted by capital markets engagements performed on a
quarterly and annual basis and amounts realized from the sale of our investments
in marketable securities.

As of December 31, 2021, we had $278.9 million of unrestricted cash and cash
equivalents, $0.9 million of restricted cash, $1,532.1 million of securities and
other investments, at fair value, $873.2 million of loans receivable, at fair
value, and $2,033.3 million of borrowings outstanding. The borrowings
outstanding of $2,033.3 million as of December 31, 2021 included $1,606.6
million of borrowings from the issuance of the series of senior notes that are
due at various dates ranging from May 31, 2024 to August 31, 2028 with interest
rates ranging from 5.00% to 6.75%, $346.4 million term loans borrowed pursuant
to the BRPAC Credit Agreement and Nomura Credit Agreement discussed below, $80.0
million of revolving credit facility under the Nomura credit facility discussed
below, and $0.4 million of notes payable.

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

Cash Flow Summary

Following is a summary of our cash flows provided by (used in) operating
activities, investing activities and financing activities during the years ended
December 31, 2021 and 2020. A discussion of cash flows during the year
ended December 31, 2019 has been omitted from this Annual Report on Form 10-K,
but may be found in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," under the heading "Liquidity and Capital
Resources" in our Annual Report on Form 10-K during the year ended December 31,
2020, filed with the SEC on March 4, 2021, which discussion is incorporated
herein by reference and which is available free of charge on the SEC's website
at www.sec.gov.

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

                                                                 Year Ended December 31,
                                                                    2021            2020
                                                                  (Dollars in thousands)
Net cash provided by (used in):
Operating activities                                           $       50,894     $  57,689
Investing activities                                                 (956,534 )      21,790
Financing activities                                                1,081,045       (80,692 )
Effect of foreign currency on cash                                       

(382 ) 1,311
Net increase in cash, cash equivalents and restricted cash $ 175,023 $ 98



                                       61




Cash provided by operating activities was $50.9 million during the year ended
December 31, 2021 compared to cash provided by operating activities of $57.7
million during the year ended December 31, 2020. Cash provided by operating
activities during the year ended December 31, 2021 included net income of
$450.8 million adjusted for noncash items of $91.5 million and changes in
operating assets and liabilities of $491.4 million. Noncash items of
$91.5 million included deferred income taxes of $61.8 million, share-based
compensation of $36.0 million, depreciation and amortization of $25.9 million,
loss on extinguishment of debt of $6.1 million, dividends from equity
investments of $2.1 million, provision for doubtful accounts of $1.5 million,
effect of foreign currency on operations of $0.1 million, and income allocated
for mandatorily redeemable noncontrolling interests of $0.9 million, partially
offset by interest and other of $22.3 million, fair value adjustments of
$7.6 million, gain on extinguishment of loans of $6.5 million, gain on equity
investments of $3.5 million, income from equity investments of $2.8 million, and
impairment of leaseholds, intangibles and lease loss accrual and gain on
disposal of fixed assets of $0.1 million. Cash provided by operating activities
during the year ended December 31, 2020 included net income of $204.0 million
adjusted for noncash items of $123.4 million and changes in operating assets and
liabilities of $269.7 million. Noncash items of $123.4 million included deferred
income taxes of $61.6 million, noncash fair value adjustments of $22.0 million,
depreciation and amortization of $19.4 million, share-based compensation of
$18.6 million, other noncash interest and other of $16.8 million, impairment of
leaseholds, intangibles and lease loss accrual and gain on disposal of fixed
assets of $14.1 million, provision for doubtful accounts of $3.4 million, gain
on extinguishment of debt of $1.6 million, dividends from equity investments of
$1.3 million, income allocated for mandatorily redeemable noncontrolling
interests of $1.2 million, and loss on equity investments of $0.6 million.


Cash used in investing activities was $956.5 million during the year ended
December 31, 2021 compared to cash provided by investing activities of $21.8
million during the year ended December 31, 2020. During the year ended December
31, 2021, cash used in investing activities consisted of cash used for purchases
of loans receivable of $738.9 million, cash of $345.0 million used to fund two
trust accounts for the future redemption of our subsidiaries' redeemable common
stock, cash used for acquisition of businesses of $28.3 million, cash used for
repayments of loan participations sold of $15.2 million, cash used for purchases
of property and equipment and intangible assets of $0.7 million, and purchases
of equity investments of $0.6 million, partially offset by cash received from
loans receivable repayment of $172.1 million. During the year ended December 31,
2020, cash provided by investing activities consisted of funds received from
trust account of subsidiary of $320.5 million, cash received from loans
receivable repayment of $90.1 million, loan participations sold of $6.9 million,
and proceeds from sale of loans receivable to related party of $1.8 million,
partially offset by cash used for purchases of loans receivable of
$207.5 million, cash of $176.8 million used to fund a trust account for the
future redemption of one of our subsidiaries' redeemable common stock, cash used
for purchases of equity investments of $7.5 million, repayments of loan
participations sold of $2.2 million, cash used for acquisition of businesses of
$1.5 million and cash used for purchases of property and equipment and
intangible assets of $2.0 million.


Cash provided by financing activities was $1,081.0 million during the year ended
December 31, 2021 compared to cash used in financing activities of $80.7 million
during the year ended December 31, 2020. During the year ended December 31,
2021, cash provided by financing activities primarily consisted of
$1,249.1 million proceeds from issuance of senior notes, $345.0 million proceeds
from initial public offering of subsidiaries, $300.0 million proceeds from our
term loan, $80.0 million proceeds from revolving line of credit, $64.7 million
proceeds from our offering of common stock, $13.7 million contributions from
noncontrolling interests, $14.7 million proceeds from our offering of preferred
stock, partially offset by $507.3 million used to repurchase our senior notes,
$347.1 million used to pay dividends on our common shares, $37.6 million used to
repay our notes payable, $33.4 million used to pay debt issuance costs,
$20.7 million used for repayment on our term loan, $16.5 million distribution to
noncontrolling interests, $9.6 million used for payment of employment taxes on
vesting of restricted stock, $7.5 million used to pay dividends on our preferred
shares, $2.7 million used to repurchase our common stock, and $3.7 million used
for payment of participating note payable and contingent consideration. During
the year ended December 31, 2020, cash used in financing activities primarily
consisted of $318.8 million used for redemption of subsidiary temporary equity
and distributions, $67.3 million used for repayment on our term loan,
$48.2 million used to repurchase our common stock, $38.8 million used to pay
dividends on our common shares, $37.1 million used for repayment of our asset
based credit facility, $22.6 million used for payment of employment taxes on
vesting of restricted stock, $9.8 million used to pay debt issuance and offering
costs, $4.7 million used to pay dividends on our preferred shares, $4.3 million
used for payment of participating note payable and contingent consideration,
$3.8 million distribution to noncontrolling interests, $1.8 million used to
repurchase our senior notes, and $0.4 million used to repay our other notes
payable, partially offset by $186.8 million proceeds from issuance of senior
notes, $175.0 million proceeds from initial public offering of subsidiaries,
$75.0 million proceeds from our term loan, $39.5 million proceeds from our
offering of preferred stock, and $0.6 million contributions from noncontrolling
interests.


                                       62




Credit Agreements

Nomura Credit Agreement

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

On December 17, 2021 (the "Amendment Date"), we, the Primary Guarantor, and the
Borrower entered into a Second Incremental Amendment to Credit Agreement (the
"Second Amendment"), by and among us, the Primary Guarantor, the Borrower, each
of the subsidiary guarantors signatory thereto, each of the lenders party
thereto, the Administrative Agent and the Collateral Agent, pursuant to which
the Borrower established an incremental facility in an aggregate principal
amount of $100.0 million (the "Incremental Facility" and the incremental term
loans made thereunder, the "Incremental Term Loans") of secured term loans under
the Credit Agreement on terms identical to those applicable to the Term Loan
Facility. The Borrower borrowed the full amount of the Incremental Term Loans on
the Amendment Date. The Term Loan Facility, Revolving Credit Facility, and
Incremental Facility, together, ("Credit Facilities"), mature on June 23, 2025,
subject to acceleration or prepayment.

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

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

The Credit Agreement and the Second Amendment contain certain affirmative and
negative covenants customary for financings of this type that, among other
things, limit our, the Primary Guarantor's, the Borrower's, and the Borrower's
subsidiaries' ability to incur additional indebtedness or liens, to dispose of
assets, to make certain fundamental changes, to enter into restrictive
agreements, to make certain investments, loans, advances, guarantees and
acquisitions, to prepay certain indebtedness and to pay dividends or to make
other distributions or redemptions/repurchases in respect of their respective
equity interests. In addition, the Credit Agreement and the Second Amendment
contain a financial covenant that requires us to maintain Operating EBITDA of at
least $135.0 million and the Primary Guarantor to maintain net asset value of at
least $1,100.0 million. The Credit Agreement and the Second Amendment contain
customary events of default, including with respect to a failure to make
payments under the credit facilities, cross-default, certain bankruptcy and
insolvency events and customary change of control events.

Commencing on September 30, 2022, the Term Loan Facility and Incremental
Facility will amortize in equal quarterly installments of 1.25% of the aggregate
principal amount of the term loan as of the closing date with the remaining
balance due at final maturity. Quarterly installments from September 30, 2022 to
March 31, 2025 are in the amount of $3.8 million per quarter.


As of December 31, 2021, the outstanding balance on the Term Loan Facility and
Incremental Facility was $292.7 million (net of unamortized debt issuance costs
of $7.4 million). Interest on the term loan during the year ended December 31,
2021 was $5.9 million (including amortization of deferred debt issuance costs of
$0.8 million). The interest rate on the term loan as of December 31, 2021 was
4.72%.


We had an outstanding balance of $80.0 million under the Revolving Credit
Facility as of December 31, 2021. Interest on the revolving facility during the
year ended December 31, 2021 was $1.9 million (including unused commitment fees
of $0.08 million and amortization of deferred financing costs of $0.3 million).
The interest rate on the Revolving Credit Facility as of December 31, 2021 was
4.67%.

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

                                       63



Wells Fargo Credit Agreement

On April 21, 2017, we amended the asset based credit facility agreement (as
amended, the "Credit Agreement") with Wells Fargo Bank to increase the maximum
borrowing limit from $100.0 million to $200.0 million. Such amendment, among
other things, also extended the expiration date of the credit facility from July
15, 2018 to April 21, 2022. The Credit Agreement continues to allow for
borrowings under a separate credit agreement (a "UK Credit Agreement") dated
March 19, 2015 with an affiliate of Wells Fargo Bank which provides for the
financing of transactions in the United Kingdom with borrowings up to 50.0
million British Pounds. Any borrowing on the UK Credit Agreement reduces the
availability of the asset based $200.0 million credit facility. The UK Credit
Agreement is cross collateralized and integrated in certain respects with the
Credit Agreement. The Credit Agreement continues to include the addition of our
Canadian subsidiary, from the October 5, 2016 amendment to the Credit Agreement,
to facilitate borrowings to fund retail liquidation transactions in Canada. From
time to time, we utilize this credit facility to fund costs and expenses
incurred in connection with liquidation engagements. We also utilize this credit
facility in order to issue letters of credit in connection with liquidation
engagements conducted on a guaranteed basis. Subject to certain limitations and
offsets, we are permitted to borrow up to $200.0 million under the credit
facility, less the aggregate principal amount borrowed under the UK Credit
Agreement (if in effect). Borrowings under the credit facility are only made at
the discretion of the lender and are generally required to be repaid within 180
days. The interest rate for each revolving credit advance under the related
credit agreement is, subject to certain terms and conditions, equal to the LIBOR
plus a margin of 2.25% to 3.25% depending on the type of advance and the
percentage such advance represents of the related transaction for which such
advance is provided. The credit facility is secured by the proceeds received for
services rendered in connection with the liquidation service contracts pursuant
to which any outstanding loan or letters of credit are issued and the assets
that are sold at liquidation related to such contract, if any. The credit
facility also provides for success fees in the amount of 2.5% to 17.5% of the
net profits, if any, earned on liquidation engagements that are financed under
the credit facility as set forth in the related credit agreement. We typically
seek borrowings on an engagement-by-engagement basis. The Credit Agreement
contains certain covenants, including covenants that limit or restrict our
ability to incur liens, incur indebtedness, make investments, dispose of assets,
make certain restricted payments, merge, or consolidate and enter into certain
transactions with affiliates. There was no outstanding balance on this credit
facility as of December 31, 2021 or 2020. As of December 31, 2021, there were no
open letters of credit outstanding.

We are in compliance with all financial covenants in the asset based credit
facility as of December 31, 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 ours, in
the capacity of borrowers, entered into a credit agreement (the "BRPAC Credit
Agreement") with Banc of California, N.A. in its capacity as agent (the "Agent")
and lender and with the other lenders party (the "Closing Date Lenders"). Under
the BRPAC Credit Agreement, we borrowed $80.0 million due December 19, 2023.
Pursuant to the terms of the BRPAC Credit Agreement, we may request additional
optional term loans in an aggregate principal amount of up to $10.0 million at
any time prior to the first anniversary of the agreement date. On February 1,
2019, the Borrowers entered into the First Amendment to Credit Agreement and
Joinder with City National Bank as a new lender in which the new lender extended
to Borrowers the additional $10.0 million.

On December 31, 2020, the Borrowers, the Secured Guarantors, the Agent, and the
Closing Date Lenders, entered into the Second Amendment to Credit Agreement (the
"Second Amendment") pursuant to which, among other things, (i) the Lenders
agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of
which the Borrowers' will use to repay the outstanding principal amount of the
existing Terms Loans and Optional Loans and for other general corporate
purposes, (ii) the Borrowers were permitted to make a one-time Permitted
Distribution (as defined in the Second Amendment) in the amount of $30.0 million
on the date of the Second Amendment, (iii) the maturity date of the new Term
Loans is five (5) years from the date of the Second Amendment, (iv) the interest
rate margin was increased by 25 basis points as set forth in the Second
Amendment, (v) the Borrowers agreed to make mandatory prepayments of the Term
Loans from a portion of the Consolidated Excess Cash Flow (as defined in the
Credit Agreement), (vi) the maximum Consolidated Total Funded Debt Ratio (as
defined in the Credit Agreement) was increased as set forth in the Second
Amendment and (vii) the Company and B. Riley Principal Investments, LLC entered
into a reaffirmation of their guarantees of the Borrowers' obligations under the
Credit Agreement. Additionally, the Borrowers paid a commitment fee and an
arrangement fee, each based on a percentage of the aggregate commitments, in
each case upon the closing of the Second Amendment.


                                       64



On December 16, 2021, the Borrowers, the Secured Guarantors, the Agent, and the
Closing Date Lenders, entered into the Third Amendment to Credit Agreement (the
"Third Amendment") pursuant to which, among other things, replaced LIBOR with
the Secured Overnight Financing Rate ("SOFR") reference rate and the Borrowers
were permitted to make a one-time Permitted Distribution (as defined in the
Third Amendment) in the amount of $30.0 million on the date of the Third
Amendment.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to
the SOFR rate plus a margin of 2.75% to 3.25% depending on the Borrowers'
consolidated total funded debt ratio as defined in the BRPAC Credit
Agreement. As of December 31, 2021 and 2020, the interest rate on the amended
BRPAC Credit Agreement was at 3.17% and 3.40%, respectively.

Principal outstanding under the amended BRPAC Credit Agreement is due in
quarterly installments. Quarterly installments from March 31, 2022 to December
31, 2022 are in the amount of $4.1 million per quarter, from March 31, 2023 to
December 31, 2023 are in the amount of $3.6 million per quarter, from March 31,
2024 to December 31, 2024 are in the amount of $3.1 million per quarter, from
March 31, 2025 to December 31, 2025 are $2.8 million per quarter, and the
remaining principal balance is due at final maturity on December 31, 2025.

As of December 31, 2021 and 2020, the outstanding balance on the term loan was
$53.7 million (net of unamortized debt issuance costs of $0.6 million), and
$74.2 million (net of unamortized debt issuance costs of $0.8 million),
respectively. Interest expense on the term loan during the years ended December
31, 2021 and 2020, was $2.5 million (including amortization of deferred debt
issuance costs of $0.3 million) and $2.4 million (including amortization of
deferred debt issuance costs of $0.3 million), respectively.

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

Preferred Stock Offering

On September 4, 2020, the Company closed its public offering of Depositary
Shares, each representing 1/1000th of a share of 7.375% Series B Cumulative
Perpetual Preferred Stock. The liquidation preference of each share of Series A
Preferred Stock is $25,000 ($25.00 per Depositary Share). As a result of the
offering the Company issued 1,300 shares of Series B Preferred Stock represented
by 1,300,000 depositary shares. The offering resulted in gross proceeds of
approximately $32.5 million.

Senior Note Offerings

During the year ended December 31, 2021, we issued $223.4 million of senior
notes due with maturities dates ranging from May 2023 to August 2028 pursuant to
At the Market Issuance Sales Agreements with B. Riley Securities, which governs
the program of at-the-market sales of our senior notes. We filed a series of
prospectus supplements with the SEC which allowed us to sell these senior notes.

On January 25, 2021, we issued $230.0 million of senior notes due in January
2028 ("6.0% 2028 Notes"). Interest on the 6.0% 2028 Notes is payable quarterly
at 6.0%. The 6.0% 2028 Notes are unsecured and due and payable in full
on January 31, 2028. In connection with the issuance of the 6.0% 2028 Notes, we
received net proceeds of $225.7 million (after underwriting commissions, fees,
and other issuance costs of $4.3 million). The Notes bear interest at the rate
of 6.0% per annum.

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

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

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


                                       65




On August 4, 2021, we issued $316.3 million of senior notes due in August 2028
("5.25% 2028 Notes"). Interest on the 5.25% 2028 Notes is payable quarterly
at 5.25%. The 5.25% 2028 Notes are unsecured and due and payable in full
on August 31, 2028. In connection with the issuance of the 5.25% 2028 Notes, we
received net proceeds of $308.7 million (after underwriting commissions, fees,
and other issuance costs of $7.6 million). The Notes bear interest at the rate
of 5.25% per annum.

On September 4, 2021, we redeemed, in full, $137.5 million aggregate principal
amount of our 7.375% Senior Notes due 2023 ("7.375% 2023 Notes") pursuant to the
fifth supplemental indenture dated September 11, 2018. The redemption price was
equal to 101.5% of the aggregate principal amount, plus accrued and unpaid
interest up to, but excluding, the redemption date. The total redemption payment
included approximately $1.0 million in accrued interest and $2.1 million in
premium. In connection with the full redemption, the 7.375% 2023 Notes under the
ticker symbol "RILYH," were delisted from NASDAQ.

On October 22, 2021, we redeemed, in full, $115.7 million aggregate principal
amount of our 6.875% Senior Notes due 2023 (the "6.875% 2023 Notes") pursuant to
the fifth supplemental indenture dated September 11, 2018. The redemption price
was equal to 101% of the aggregate principal amount, plus accrued and unpaid
interest, up to, but excluding, the redemption date. The total redemption
payment included approximately $1.8 million in accrued interest and $1.2 million
in premium. In connection with the full redemption, the 6.875% 2023 Notes under
the ticker symbol "RILYI," were delisted from NASDAQ.

On December 3, 2021, we issued $322.7 million of senior notes due in December
2026 ("5.00% 2026 Notes"). Interest on the 5.00% 2026 Notes is payable quarterly
at 5.00%. The 5.00% 2026 Notes are unsecured and due and payable in full
on December 31, 2026. In connection with the issuance of the 5.00% 2026 Notes,
we received net proceeds of $317.6 million (after underwriting commissions,
fees, and other issuance costs of $5.0 million). The Notes bear interest at the
rate of 5.00% per annum.

As of December 31, 2021 and December 31, 2020, the total senior notes
outstanding was $1,606.6 million (net of unamortized debt issue costs of $21.5
million) and $870.8 million (net of unamortized debt issue costs of $9.6
million) with a weighted average interest rate of 5.69% and 6.95%, respectively.
Interest on senior notes is payable on a quarterly basis. Interest expense on
senior notes totaled $81.5 million and $61.2 million, during the years ended
December 31, 2021 and 2020, respectively.

The most recent sales agreement prospectus was filed by us with the SEC on
January 5, 2022 (the "January 2022 Sales Agreement Prospectus"), supplementing
the prospectus filed on August 11, 2021, the prospectus filed on April 6, 2021,
and the prospectus filed on January 28, 2021. This program provides for the sale
by the Company of up to $250.0 million of certain of the Company's senior notes.
As of December 31, 2021, the Company had $111.9 million remaining availability
under the January 2022 Sales Agreement.


Off Balance Sheet Arrangements

Information about our off-balance sheet arrangements is included in Note 17 of
the Notes to Consolidated Financial Statements. Such information is hereby
incorporated by reference.


Dividends


From time to time, we may decide to pay dividends which will be dependent upon
our financial condition and results of operations. During the years ended
December 31, 2021 and 2020, we paid cash dividends on our common stock of $347.1
million and $38.8 million, respectively. On February 23, 2022, the Company
declared a regular quarterly dividend of $1.00 per share, which will be paid on
or about March 23, 2022 to stockholders of record as of March 9, 2022. On
October 28, 2021, we declared a regular dividend of $1.00 per share and special
dividend of $3.00 per share that will be paid on or about November 23, 2021 to
stockholders of record as of November 9, 2021. On July 29, 2021, we declared a
regular dividend of $0.50 per share and special dividend of $1.50 per share that
was paid on August 26, 2021 to stockholders of record as of August 13, 2021. On
May 3, 2021, we declared a regular dividend of $0.50 per share and special
dividend of $2.50 per share that was paid on May 28, 2021 to stockholders of
record as of May 17, 2021. On October 28, 2021, the Board of Directors announced
an increase to the regular quarterly dividend from $0.50 per share to $1.00 per
share. While it is the Board's current intention to make regular dividend
payments of $1.00 per share each quarter and special dividend payments dependent
upon exceptional circumstances from time to time, our Board of Directors may
reduce or discontinue the payment of dividends at any time for any reason it
deems relevant. The declaration and payment of any future dividends or
repurchases of our common stock will be made at the discretion of our Board of
Directors and will be dependent upon our financial condition, results of
operations, cash flows, capital expenditures, and other factors that may be
deemed relevant by our Board of Directors.



                                       66



A summary of our common stock dividend activity during the years ended December
31, 2021
and 2020 was as follows:

                                                              Regular         Special         Total
      Date                Date             Stockholder       Dividend        Dividend        Dividend
    Declared              Paid             Record Date        Amount          Amount          Amount
October 28, 2021    November 23, 2021   November 9, 2021    $     1.000    
$     3.000     $    4.000
July 29, 2021       August 26, 2021     August 13, 2021           0.500           1.500          2.000
May 3, 2021         May 28, 2021        May 17, 2021              0.500           2.500          3.000
February 25, 2021   March 24, 2021      March 10, 2021            0.500           3.000          3.500
October 28, 2020    November 24, 2020   November 10, 2020         0.375    
      0.000          0.375
July 30, 2020       August 28, 2020     August 14, 2020           0.300           0.050          0.350
May 8, 2020         June 10, 2020       June 1, 2020              0.250           0.000          0.250
March 3, 2020       March 31, 2020      March 17, 2020            0.250           0.100          0.350


Holders of Series A Preferred Stock, when and as authorized by the board of
directors of the Company, are entitled to cumulative cash dividends at the rate
of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per
Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary
Share). Dividends are payable quarterly in arrears. As of December 31, 2021,
dividends in arrears in respect of the Depositary Shares were $0.8 million. On
January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary
Share, which was paid on January 29, 2021 to holders of record as of the close
of business on January 21, 2021. On April 5, 2021, the Company declared a cash
dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to
holders of record as of the close of business on April 20, 2021. On July 8,
2021, the Company declared a cash dividend $0.4296875 per Depositary Share,
which was paid on August 2, 2021 to holders of record as of the close of
business on July 21, 2021. On October 6, 2021, the Company declared a cash
dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to
holders of record as of the close of business on October 21, 2021. On January
10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share,
which was paid on January 31, 2022 to holders of record as of the close of
business on January 21, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of
directors of the Company, are entitled to cumulative cash dividends at the rate
of 7.375% per annum of the $25 thousand liquidation preference ($25.00 per
Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary
Share). Dividends are payable quarterly in arrears. As of December 31, 2021,
dividends in arrears in respect of the Depositary Shares were $0.5 million. On
January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary
Share, which was paid on January 29, 2021 to holders of record as of the close
of business on January 21, 2021. On April 5, 2021, the Company declared a cash
dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to
holders of record as of the close of business on April 20, 2021. On July 8,
2021, the Company declared a cash dividend $0.4609375 per Depositary Share,
which was paid on August 2, 2021 to holders of record as of the close of
business on July 21, 2021. On October 6, 2021, the Company declared a cash
dividend $0.4609375 per Depositary Share, which was paid on November 1, 2021 to
holders of record as of the close of business on October 21, 2021. On January10,
2022, the Company declared a cash dividend $0.4609375 per Depositary Share,
which was paid January 31, 2022 to holders of record as of the close of business
on January 21, 2022.

Critical Accounting Policies
Our financial statements and the notes thereto contain information that is
pertinent to management's discussion and analysis. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Management bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. On a continual basis, management
reviews its estimates utilizing currently available information, changes in
facts and circumstances, historical experience and reasonable assumptions. After
such reviews, and if deemed appropriate, management's estimates are adjusted
accordingly. Actual results may vary from these estimates and assumptions under
different and/or future circumstances. Management considers an accounting
estimate to be critical if:

? it requires assumptions to be made that were uncertain at the time the estimate

   was made; and



? changes in the estimate, or the use of different estimating methods that could

   have been selected, could have a material impact on results of operations or
   financial condition.




                                       67




Use of Estimates. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Estimates are used when accounting for certain items such
as valuation of securities, reserves for accounts receivable, the fair value of
loans receivable, intangible assets and goodwill, share based arrangements and
accounting for income tax valuation allowances, recovery of contract assets and
sales returns and allowances. Estimates are based on historical experience,
where applicable, and assumptions that management believes are reasonable under
the circumstances. Due to the inherent uncertainty involved with estimates,
actual results may differ.

On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. During the fourth
quarter of 2021, the full impact of the COVID-19 outbreak continued to evolve,
with the emergence of variant strains and breakthrough infections becoming
prevalent both in the U.S. and worldwide. As the U.S. economy recovers, aided by
stimulus packages and fiscal and monetary policies, inflation has been rising at
historically high rates, and the Federal Reserve has signaled that it will begin
increasing the target federal funds effective rate. The impact of the COVID-19
outbreak and these related matters on our results of operations, financial
position and cash flows will depend on future developments, including the
duration and spread of the outbreak and related advisories and restrictions and
the success of vaccines and natural immunity in controlling the pandemic. These
developments and the impact of the COVID-19 outbreak on the financial markets
and the overall economy continue to be highly uncertain and cannot be predicted.
If the financial markets and/or the overall economy continue to be impacted, our
results of operations, financial position and cash flows may be materially
adversely affected.

Our significant accounting policies are described in Note 2 to the consolidated
financial statements included elsewhere in this Annual Report. Management
believes that the following critical accounting policies reflect the more
significant estimates and assumptions used in the preparation of our financial
statements.

Revenue Recognition. We recognize revenues under Accounting Standards
Codification (“ASC”) 606 – Revenue from Contracts with Customers

Revenues are recognized when control of the promised goods or performance
obligations for services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled to in exchange for the goods
or services.

Revenues from contracts with customers in the Capital Markets segment, Wealth
Management segment, Auction and Liquidation segment, Financial Consulting
segment, Principal Investments - Communications segment and Brands segment are
primarily comprised of the following:

Capital Markets Segment - Fees earned from corporate finance and investment
banking services are derived from debt, equity and convertible securities
offerings in which the Company acted as an underwriter or placement agent. Fees
from underwriting activities are recognized as revenues when the performance
obligation for the services related to the underwriting transaction is satisfied
under the terms of the engagement and is not subject to any other contingencies.
Fees are also earned from financial advisory and consulting services rendered in
connection with client mergers, acquisitions, restructurings, recapitalizations
and other strategic transactions. The performance obligation for financial
advisory services is satisfied over time as work progresses on the engagement
and services are delivered to the client. The performance obligation for
financial advisory services may also include success and performance based fees
which are recognized as revenue when the performance obligation is no longer
constrained and it is not probable that the revenue recognized would be subject
to significant reversal in a future period. Generally, it is probable that the
revenue recognized is no longer subject to significant reversal upon the closing
of the investment banking transaction.

Fees from asset management services are recognized over the period the
performance obligation for the services are provided. Asset management fees are
primarily comprised of fees for asset management services and are generally
based on the dollar amount of the assets being managed.

                                       68




Revenues from sales and trading are recognized when the performance obligation
is satisfied and include commissions resulting from equity securities
transactions executed as agent or principal and are recorded on a trade date
basis and fees paid for equity research.

Revenues from other sources in the Capital Markets segment is primarily
comprised of (i) interest income from loans receivable and securities lending
activities, (ii) related net trading gains and losses from market making
activities, the commitment of capital to facilitate customer orders, (iii)
trading activities from our Principal Investments in equity and other securities
for the Company's account, and (iv) other income.

Interest income from securities lending activities consists of interest income
from equity and fixed income securities that are borrowed from one party and
loaned to another. The Company maintains relationships with a broad group of
banks and broker-dealers to facilitate the sourcing, borrowing and lending of
equity and fixed income securities in a "matched book" to limit the Company's
exposure to fluctuations in the market value or securities borrowed and
securities loaned.

Other revenues include (i) net trading gains and losses from market making
activities in our fixed income group, (ii) carried interest from our asset
management recognized as earnings from financial assets within the scope of ASC
323 - Investments - Equity Method and Joint Ventures, and therefore will not be
in the scope of ASC 606 - Revenue from Contracts with Customers. In accordance
with ASC 323 - Investments - Equity Method and Joint Ventures, the Company will
record equity method income (losses) as a component of investment income based
on the change in our proportionate claim on net assets of the investment fund,
including performance-based capital allocations, assuming the investment fund
was liquidated as of each reporting date pursuant to each fund's governing
agreements, and (iii) other miscellaneous income.

Wealth Management segment - Fees from wealth management asset advisory services
consist primarily of investment advisory fees that are recognized over the
period the performance obligation for the services provided. Investment advisory
and asset management fees are primarily comprised of fees for investment
services and are generally based on the dollar amount of the assets being
managed. Investment advisory fee revenues as a principal registered investment
advisor (RIA) are recognized on a gross basis. Asset management fee revenues as
an agent are recognized on a net basis.

Revenues from sales and trading are recognized when the performance obligation
is satisfied and include commissions resulting from equity securities
transactions executed as agent and are recorded on a trade date basis.

Auction and Liquidation segment - Commission and fees earned on the sale of
goods at Auction and Liquidation sales are recognized when evidence of a
contract or arrangement exists, the transaction price has been determined, and
the performance obligation has been satisfied when control of the product and
risks of ownership has been transferred to the buyer. The commission and fees
earned for these services are included in revenues in the accompanying
consolidated statements of income. Under these types of arrangements, revenues
also include contractual reimbursable costs.

Revenues earned from Auction and Liquidation services contracts where the
Company guarantees a minimum recovery value for goods being sold at auction or
liquidation are recognized over time when the performance obligation is
satisfied. We generally use the cost-to-cost measure of progress for our
contracts because it best depicts the transfer of services to the customer which
occurs as we incur costs on our contracts. Under the cost-to-cost measure of
progress, the extent of progress towards completion is measured based on the
ratio of costs incurred to date to the total estimated costs at completion of
the performance obligation. Revenues, including estimated fees or profits, are
recorded proportionally as costs are incurred. Costs to fulfill the contract
include labor and other direct costs incurred by the Company related to the
contract. Due to the nature of the guarantees and performance obligations under
these contracts, the estimation of revenue that is ultimately earned is complex
and subject to many variables and requires significant judgment. It is common
for these contracts to contain provisions that can either increase or decrease
the transaction price upon completion of our performance obligations under the
contract. Estimated amounts are included in the transaction price at the most
likely amount it is probable that a significant reversal of revenue will not
occur. Our estimates of variable consideration and determination of whether or
not to include estimated amounts in the transaction price are based on an
assessment of our anticipated performance under the contract taking into
consideration all historical, current and forecasted information that is
reasonably available to us. Costs that directly relate to the contract and
expected to be recoverable are capitalized as an asset and included in advances
against customer contracts in the accompanying consolidated balance sheets.
These costs are amortized as the services are transferred to the customer over
the contract period, which generally does not exceed six months, and the expense
is recognized as a component of direct cost of services. If, during the auction
or liquidation sale, the Company determines that the total costs to be incurred
on a performance obligation under a contract exceeds the total estimated
revenues to be earned, a provision for the entire loss on the performance
obligation is recognized in the period the loss is determined.


                                       69




If the Company determines that the variable consideration used in the initial
determination of the transaction price for the contract is such that the total
recoveries from the auction or liquidation will not exceed the guaranteed
recovery values or advances made in accordance with the contract, the
transaction price will be reduced and a loss or negative revenue could result
from the performance obligation. A provision for the entire loss as negative
revenue on the performance obligation is recognized in the period the loss is
determined.

Financial Consulting Segment - Revenues in the Financial Consulting segment are
primarily comprised of fees earned from providing bankruptcy, financial
advisory, forensic accounting, real estate consulting and valuation and
appraisal services. Fees earned from bankruptcy, financial advisory, forensic
accounting and real estate consulting services are rendered to clients over time
as work progresses on the engagement and services are delivered to the client.
Fees may also include success and performance based fees which are recognized as
revenue when the performance obligation is no longer constrained and it is not
probable that the revenue recognized would be subject to significant reversal in
a future period. Revenues for valuation and appraisal services are recognized
when the performance obligation is completed and is generally at the point in
time upon delivery of the report to the customer. Revenues in the Financial
Consulting segment also include contractual reimbursable costs.

Principal Investments - Communications Segment - Revenues in the Principal
Investments - Communications segment are primarily comprised of subscription
services revenues which consist of fees charged to United Online pay accounts;
revenues from the sale of the magicJack access rights; revenues from access
rights renewals and mobile apps; prepaid minutes revenues; revenues from access
and wholesale charges; service revenue from UCaaS hosting services; and revenues
from mobile phone voice, text, and data services. Products revenues consist of
revenues from the sale of magicJack, mobile phone, and mobile broadband service
devices, including the related shipping and handling and installation fees, if
applicable. This segment's revenues also include advertising revenues which
consist primarily of amounts from the Company's Internet search partner that are
generated as a result of users utilizing the partner's Internet search services
and amounts generated from display advertisements. The Company recognizes such
advertising revenues in the period in which the advertisement is displayed or,
for performance-based arrangements, when the related performance criteria are
met.

Subscription service revenues are recognized over time in the service period in
which the transaction price has been determinable and the related performance
obligations for services are provided to the customer. Fees charged to customers
in advance are initially recorded in the consolidated balance sheets as deferred
revenue and then recognized ratably over the service period as the performance
obligations are provided.

Product revenues for hardware and shipping are recognized at the time of
delivery. Revenues from sales of devices and services represent revenues
recognized from sales of the magicJack devices to retailers, wholesalers, or
direct to customers, net of returns, and rights to access the Company's servers
over the period associated with the access right period, and from sales of
mobile phones and voice, text, and data services. The transaction price for
devices is allocated between equipment and service based on stand-alone selling
prices. Revenues allocated to devices are recognized upon delivery (when control
transfers to the customer), and service revenue is recognized ratably over the
service term. The Company estimates the return of magicJack device direct sales
as part of the transaction price using a six month rolling average of historical
returns.


                                       70



Brands Segment - Licensing revenue results from various license agreements that
provide revenue based on guaranteed minimum royalty amounts and
advertising/marketing fees with additional royalty revenue based on a percentage
of defined sales. Guaranteed minimum royalty amounts are recognized as revenue
on a straight-line basis over the full contract term. Royalty payments exceeding
the guaranteed minimum amounts in a specific contract year are recognized only
subsequent to when the guaranteed minimum amount has been achieved. Other
licensing fees are recognized at a point in time once the performance
obligations have been satisfied.

Payments received as consideration for the grant of a license are recorded as
deferred revenue at the time payment is received and recognized ratably as
revenue over the term of the license agreement. Advanced royalty payments are
recorded as deferred revenue at the time payment is received and recognized as
revenue when earned. Revenue is not recognized unless collectability is
probable.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts
for estimated losses inherent in our accounts receivable portfolio. In
establishing the required allowance, management utilizes the expected loss
model. Management also considers historical losses adjusted for current market
conditions and the customers' financial condition, the amount of receivables in
dispute, and the current receivables aging and current payment patterns. Account
balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. The bad
debt expense is included as a component of selling, general and administrative
expenses in the accompanying consolidated statements of income.

Goodwill and Other Intangible Assets. We account for goodwill and intangible
assets in accordance with the accounting guidance which requires that goodwill
and other intangibles with indefinite lives be tested for impairment annually or
on an interim basis if events or circumstances indicate that the fair value of
an asset has decreased below its carrying value.

Goodwill includes the excess of the purchase price over the fair value of net
assets acquired in business combinations and the acquisition of noncontrolling
interests. The Codification requires that goodwill be tested for impairment at
the reporting unit level (operating segment or one level below an operating
segment). Application of the goodwill impairment test requires judgment,
including the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value. The Company operates five reporting units, which are
the same as its reporting segments described in Note 22 to the consolidated
financial statements. Significant judgment is required to estimate the fair
value of reporting units which includes estimating future cash flows,
determining appropriate discount rates and other assumptions. Changes in these
estimates and assumptions could materially affect the determination of fair
value and/or goodwill impairment.


                                       71




When testing goodwill for impairment, in accordance with ASU 2017-04,
Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment, the Company made a qualitative assessment of the impact of the
COVID-19 outbreak on goodwill and other intangible assets. Based on the
Company's qualitative assessments during 2020, the Company concluded that a
positive assertion can be made from the qualitative assessment that it is more
likely than not that the fair value of the reporting units exceeded their
carrying values and no impairments were identified.

The Company reviews the carrying value of its amortizable intangibles and other
long-lived assets for impairment at least annually or whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets is measured by comparing the
carrying amount of the asset or asset group to the undiscounted cash flows that
the asset or asset group is expected to generate. If the undiscounted cash flows
of such assets are less than the carrying amount, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
or asset group, if any, exceeds its fair market value. During the year ended
December 31, 2020, the Company determined that the COVID-19 outbreak was a
triggering event for testing the indefinite-lived tradenames in the Brands
segment during the first quarter and again in the second quarter and determined
that the indefinite-lived tradenames in the Brands segment were impaired. As a
result, the Company recognized impairment charges of $12,500, during the year
ended December 31, 2020, which are included in restructuring charge in the
Company's consolidated statements of income. During the year ended December 31,
2021, the Company recognized no impairment of intangibles.

Fair Value Measurements. The Company records securities and other investments
owned, securities sold not yet purchased, and mandatorily redeemable
noncontrolling interests that were issued after November 5, 2003 at fair value
with fair value determined in accordance with the Codification. Our mandatorily
redeemable noncontrolling interests are measured at fair value on a recurring
basis and are categorized using the three levels of fair value hierarchy. 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. Our 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 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.

Investments in partnership interests include investments in private equity
partnerships that primarily invest in equity securities, bonds, and direct
lending funds. We also invest in priority investment funds and the underlying
securities held by these funds are primarily corporate and asset-backed fixed
income securities and restrictions exist on the redemption of amounts invested
by the Company. The Company's partnership and investment fund interests are
valued based on the Company's proportionate share of the net assets of the
partnerships and funds; the value for these investments is derived from the most
recent statements received from the general partner or fund administrator. These
partnership and investment fund interests are valued at net asset value ("NAV")
in accordance with ASC 820 - Fair Value Measurements.

The carrying amounts reported in the consolidated financial statements for cash,
restricted cash, accounts receivable, accounts payable and accrued expenses and
other current liabilities approximate fair value based on the short-term
maturity of these instruments. The carrying amounts of the notes payable
(including credit lines used to finance liquidation engagements), long-term debt
and capital lease obligations approximate fair value because the contractual
interest rates or effective yields of such instruments are consistent with
current market rates of interest for instruments of comparable credit risk.
                                       72




Share-Based Compensation. The Company's share based payment awards principally
consist of grants of restricted stock and restricted stock units. Share based
payment awards also include grants of membership interests in the Company's
majority owned subsidiaries. The grants of membership interests consist of
percentage interests in the Company's majority owned subsidiaries as determined
at the date of grant. In accordance with the accounting guidance share based
payment awards are classified as either equity or a liability. For
equity-classified awards, the Company measures compensation cost for the grant
of membership interests at fair value on the date of grant and recognizes
compensation expense in the consolidated statements of income over the requisite
service or performance period the award is expected to vest.

In June 2018, the Company adopted the 2018 Employee Stock Purchase Plan
("Purchase Plan") which allows eligible employees to purchase common stock
through payroll deductions at a price that is 85% of the market value of the
common stock on the last day of the offering period. In accordance with the
provisions of ASC 718 - Compensation - Stock Compensation, the Company is
required to recognize compensation expense relating to shares offered under the
Purchase Plan.

Income Taxes. The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect during the year in
which the differences are expected to reverse. The Company estimates the degree
to which tax assets and credit carryforwards will result in a benefit based on
expected profitability by tax jurisdiction, the eligible carryforward period,
and other circumstances. 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 establishes a valuation allowance if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Tax benefits of operating loss and tax
credit carryforwards are evaluated on an ongoing basis, including a review of
historical and projected future operating results, the eligible carryforward
period, and other circumstances. As a result of the common stock offering that
was completed on June 5, 2014, the Company had a more than 50% ownership shift
in accordance with Internal Revenue Code Section 382. Accordingly, the Company
is limited to the amount of net operating loss that may be utilized in future
taxable years depending on the Company's actual taxable income. As of December
31, 2019, the Company believes that the net operating loss that existed as of
the more than 50% ownership shift will be utilized in future tax periods and it
is more-likely-than-not that future taxable earnings will be sufficient to
realize its deferred tax assets and has not provided an allowance.

Recent Accounting Standards

See Note 2(ac) to the accompanying financial statements for recent accounting
standards we have not yet adopted and recently adopted.


                                       73

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