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Kahn and our investment in Freedom VCM.
−Removed: For example, in light of Mr.
−Removed: Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr.
−Removed: Kahn, including those that collateralize the Amended and Restated Note.
−Removed: If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan.
If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit.
+Added: The Company has not accrued for any such contingent liabilities, but such contingent liabilities could be realized which could have a material adverse impact on the Company’s financial condition.
+Added: On July 11, 2025, the Company’s subsidiary, B.
+Added: Riley Securities, Inc.
+Added: ("BRS"), received a demand letter from certain parties that invested in a special purpose entity (the “SPV”) that in turn invested in the going private transaction (the “Transaction”) in August 2023 of Franchise Group, Inc.
+Added: An arbitration demand (the “Demand”) was filed by such parties with the American Arbitration Association on October 10, 2025 against BRS and related entities (the “BR Defendants”).
+Added: The Demand alleges that the BR Defendants (i) failed to disclose certain material facts regarding FRG and the Transaction in violation of certain securities laws, (ii) committed fraud and/or civil conspiracy, and (iii) breached fiduciary duties and aided and abetted the breach of fiduciary duties.
+Added: Such investors seek rescission of the aggregate investment amount of $37.5 million plus interest thereon and related fees and expenses.
+Added: The Company believes such claims are meritless and intends to defend such action.
On February 14, 2025, a stockholder derivative complaint was filed by Michael Marchner in the Delaware Chancery Court on behalf of the Company and against the members of the Company’s Board of Directors.
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Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr.
−Removed: Kahn or any of his affiliates.
+Added: or any of his affiliates.
The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred.
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Riley are responding to the subpoenas and are fully cooperating with the SEC.
−Removed: On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4,
−Removed: 2021 and December 2, 2021 (the “Note Offerings”).
−Removed: The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, against the Company, certain of the Company's officers and directors, and the underwriters of the Note Offerings.
−Removed: The complaint alleged that defendants knew or should have known that Mr.
−Removed: Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud.
−Removed: On September 27, 2024, the plaintiff filed an amended complaint.
−Removed: The amended complaint also asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended, and alleges that defendants knew or should have known that the risk to the Company from its investments in businesses affiliated with Mr.
−Removed: Kahn and loans to Mr.
−Removed: Kahn and his affiliates was greater than disclosed in the offering documents used in connection with the Note Offerings.
+Added: On May 2, 2024, a putative class action was filed by Ted Donaldson in the Superior Court for the State of California, County of Los Angeles on behalf of all persons who acquired the Company’s senior notes pursuant to the shelf registration statement filed with the SEC on Form S-3 dated January 28, 2021, and the prospectuses filed and published on August 4, 2021 and December 2, 2021 (the “Offerings”).
+Added: The action asserts claims under §§ 11, 12, and 15 of the Securities Act of 1933, as amended (the "Securities Act") against the Company, some of the Company's current and former officers and directors, and the financial institutions that served as underwriters and book runners for the Offerings.
+Added: An amended complaint was filed on September 27, 2024.
+Added: The amended complaint alleges that the offering documents failed to advise investors that Brian Kahn and/or one or more of his controlled entities was engaged in illicit business activities, that the Company, despite the foregoing, continued to finance transactions for Kahn, eventually enabling him and others to take FRG private, and that the foregoing was reasonably likely to draw regulatory scrutiny and reputational harm to the Company.
The Company believes these claims are meritless and intends to defend this action.
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Federal District Court, Central District of California, against the Company, Mr.
−Removed: Riley, Tom Kelleher and Phillip Ahn (“Defendants”).
+Added: Riley, Tom Kelleher and Phillip Ahn.
The purported class includes persons and entities that purchased shares of the Company’s common stock between May 10, 2023 and November 9, 2023.
−Removed: The complaint alleges that (a) the Company failed to disclose to investors that (i) Mr.
−Removed: Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Mr.
−Removed: Kahn and others in connection with a going private transaction involving FRG, and (b) as a result of the foregoing, the Company engaged in securities fraud in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
A second putative class action lawsuit was filed on March 15, 2024 by the KL Kamholz Joint Revocable Trust (“Kamholz”).
−Removed: This complaint asserts similar allegations as the Coan complaint and covers an alleged class period between February 28, 2022 and November 9, 2023.
−Removed: The Kamholz complaint further alleges that Defendants knew or should have known that Mr.
−Removed: Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction.
+Added: On August 8, 2024, this matter was consolidated with the Kamholz matter and an amended complaint was then filed on April 21, 2025.
+Added: The amended complaint alleges that the Company failed to disclose to investors material financial details concerning a going private transaction involving FRG, and that the Company made false or misleading statements concerning the Company’s lending practices, its high concentration of risk in transactions involving Mr.
+Added: Kahn and his affiliates, the condition and composition of the Company’s loan portfolio, the Company’s due diligence and risk management procedures, and the Company’s level of concern and internal scrutiny concerning Mr.
+Added: Kahn after it learned he was potentially implicated in a fraud involving an unrelated third party.
+Added: The amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
The Company cannot estimate the amount of potential liability, if any, that could arise from these matters and believes these claims are meritless and intends to defend these actions.
−Removed: On September 21, 2023, the Company received a demand alleging that certain payments in the aggregate amount of approximately $32,166 made by Sorrento Therapeutics, Inc.
+Added: On September 21, 2023, the Company’s wholly owned subsidiary, B.
+Added: Riley Commercial Capital, LLC (“BRCC”), received a demand alleging that certain payments to BRCC in the aggregate amount of approximately $32.2 million made by Sorrento Therapeutics, Inc.
(“Sorrento”), a chapter 11 debtor in U.S.
−Removed: Bankruptcy Court, Southern District of Texas, to B.
−Removed: Riley Commercial Capital, LLC (“BRCC”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers.
−Removed: The parties have entered into a tolling agreement.
−Removed: The Company believes the Sorrento Unsecured Creditors Committee’s preference claims lack merit, and the Company intends to assert its statutory defenses to defeat the claim.
+Added: Bankruptcy Court, Southern District of Texas (the “Court”), pursuant to that certain Bridge Loan Agreement dated September 30, 2022 between Sorrento and BRCC, are avoidable as preferential transfers (the “Alleged Preferences”).
+Added: On June 16, 2025, the liquidating trustee (the “Trustee”) on behalf of the Sorrento Liquidating Trust filed a complaint with the Court in an adversary proceeding seeking to avoid and recover the Alleged Preferences.
+Added: On September 12, 2025, the Court denied BRCC’s motion to dismiss.
+Added: The Company believes that the liquidating trustee’s claims lack merit and intends to continue to assert its statutory defenses to defeat such claims.
In light of the significant factual issues to be resolved with respect to the asserted claims and other proceedings described above and uncertainties regarding unasserted claims described above, at the present time reasonably possible losses cannot be estimated with respect to the asserted and unasserted claims described in the preceding paragraphs.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.