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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.
−Removed: Notwithstanding the uncertainties described in this paragraph, the Company does not believe that the results of these asserted or unasserted claims are likely to have a material effect on its financial statements.
+Added: On July 9, 2024, a putative class action was filed by Brian Gale, Mark Noble, Terry Philippas and Lawrence Bass in the Delaware Chancery Court against Freedom VCM, Mr.
+Added: Kahn, Andrew Laurence, Matthew Avril and the Company.
+Added: This complaint alleges that former shareholders of FRG suffered damages due to alleged breaches of fiduciary duties by officers, directors and other participants in the August 2023 management-led take private transaction of FRG and that the Company aided and abetted those alleged breaches of fiduciary duties.
+Added: The claim seeks an award of unspecified damages, rescissory damages and/or quasi-appraisal damages, disgorgement of profits, attorneys’ fees and expenses, and interest thereon.
+Added: The Company believes these claims are meritless and intends to defend this action.
+Added: On July 3, 2024, each of the Company and Bryant Riley, Chairman and Co-Chief Executive Officer, received a subpoena from the U.S.
+Added: Securities and Exchange Commission (the “SEC”) requesting the production of certain documents and other information primarily related to (i) the Company’s business dealings with Brian Kahn, (ii) certain transactions in an unrelated public company’s securities, and (iii) the communications and related compliance and other policies and procedures of certain of its regulated subsidiaries.
+Added: On November 22, 2024, each of the Company and Mr.
+Added: Riley received an additional SEC subpoena requesting the production of certain additional documents and information relating to Franchise Group, Inc.
+Added: (including its holding company, Freedom VCM Holdings, LLC) as well as Mr.
+Added: Riley’s personal loan and his pledge of shares of the Company’s common stock as collateral for such loan.
+Added: As previously disclosed on April 23, 2024, the Audit Committee of the Company’s Board of Directors, with the assistance of Sullivan & Cromwell LLP, the Company’s legal counsel, conducted an internal review, and separately the Audit Committee retained Winston & Strawn LLP, independent legal counsel, to conduct an independent investigation, to review transactions among Mr.
+Added: Kahn (and his affiliates) and the Company (and its affiliates).
+Added: The review and the investigation both confirmed that the Company and its executives, including Mr.
+Added: Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Mr.
+Added: Kahn or any of his affiliates.
+Added: The receipt of subpoenas is not an indication that the SEC or its staff has determined that any violations of law have occurred.
+Added: Both the Company and Mr.
+Added: Riley are responding to the subpoenas and are fully cooperating with the SEC.
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 “Note Offerings”).
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 alleges that defendants knew or should have known that Brian Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud.
+Added: The complaint alleged that defendants knew or should have known that Mr.
+Added: Kahn was engaged in illegal activities, including an alleged conspiracy to commit fraud.
+Added: On September 27, 2024, the plaintiff filed an amended complaint.
+Added: 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.
+Added: Kahn and loans to Mr.
+Added: Kahn and his affiliates was greater than disclosed in the offering documents used in connection with the Note Offerings.
The Company believes these claims are meritless and intends to defend this action.
On January 24, 2024, a putative securities class action complaint was filed by Mike Coan in U.S.
−Removed: Federal District Court, Central District of California, against the Company, Bryant Riley, Tom Kelleher and Phillip Ahn (“Defendants”).
+Added: Federal District Court, Central District of California, against the Company, Mr.
+Added: Riley, Tom Kelleher and Phillip Ahn (“Defendants”).
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) Brian Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Brian 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.
+Added: The complaint alleges that (a) the Company failed to disclose to investors that (i) Mr.
+Added: Kahn, had been implicated in a conspiracy to defraud third party investors, and (ii) the Company financed Mr.
+Added: Kahn and others in connection with a going private transaction involving FRG, and (b) as a result of the foregoing, the Company engaged in
+Added: 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”).
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 Brian Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction.
+Added: The Kamholz complaint further alleges that Defendants knew or should have known that Mr.
+Added: Kahn was engaged in illegal activities, including a conspiracy to commit fraud, and nonetheless proceeded with the FRG going-private transaction.
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.
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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: 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.