News

Audit Committee's Review Affirms the Company Acted Properly with Regard to the Management-Led Buyout of FRG;

B. Riley Financial and its Executives Had No Involvement with, or Knowledge of, Alleged Prophecy Misconduct

LOS ANGELES, Feb. 22, 2024 /PRNewswire/ -- The Board of Directors of B. Riley Financial, Inc. (Nasdaq: RILY) has provided the following statement regarding its review of the circumstances associated with the Company's participation in the management-led buyout of Franchise Group ("FRG") and related matters:

After B. Riley Financial learned from news reports in November 2023 that Brian Kahn was named as an unindicted co-conspirator in criminal charges against the former President and Chief Compliance Officer of Prophecy Asset Management, L.P., the Audit Committee of the B. Riley Financial Board of Directors retained outside counsel at Sullivan & Cromwell LLP to conduct a thorough, internal review of Mr. Kahn's dealings with B. Riley. The Audit Committee, pursuant to its charter, provided Sullivan & Cromwell with a broad mandate to review any and all aspects of these matters.

Over the last nine weeks, counsel – with the full cooperation and support from the Board and Company management – conducted its review of the facts and circumstances regarding Mr. Kahn's relationship with the Company, including all prior transactions, loans and underlying collateral. The review confirmed what the Company previously disclosed: that the Company and its executives, including Bryant Riley, had no involvement with, or knowledge of, any of the alleged misconduct concerning Prophecy.

Over the past year, persons acting to manipulate the price of the Company's stock and to profit from that manipulation have sought to overwhelm the Company and its partners, advisors, employees and clients with baseless claims of alleged wrongdoing by B. Riley Financial, often accompanied by outrageous personal harassment. Their actions have far exceeded the acceptable limits of financial research and are an attempt to actively damage our business to justify their inaccurate claims. Their behavior is inexcusable, and their claims lack merit. Critically, B. Riley Financial does not owe - and never owed - any debt, of any nature, to Mr. Kahn on account of the resolution of the Rent-A-Center litigation. There was not a "client revenue sharing agreement" with Mr. Kahn, and the transactions with Mr. Kahn and his companies were on market terms. B. Riley Financial has a perfected first-lien security interest in the ownership interests in Freedom VCM Holdings, LLC (FRG's post-transaction parent entity) currently collateralizing its loan with Vintage Capital, the certificates are in B. Riley Financial's possession, and the Board remains confident in the long-term investment thesis for Freedom and FRG.

Finally, the B. Riley Financial Board confirms its confidence in the integrity of the Company's reporting with respect to these matters, reiterates that the Company acted properly and in the best interests of shareholders with regard to the FRG transaction in August 2023, and remains committed to protecting the interests of all shareholders.

About B. Riley Financial
B. Riley Financial is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.

Forward-Looking Statements
Statements made in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of today's date. Such forward-looking statements include, but are not limited to, statements regarding our confidence in the long-term investment thesis for Freedom and FRG. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include, without limitation, the risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2023; June 30, 2023, and September 30, 2023 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). Additional information will be set forth in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023. These factors should be considered carefully, and you are cautioned not to place undue reliance on such forward-looking statements. All information is current as of today's date, and B. Riley Financial undertakes no duty to update this information.

SOURCE B. Riley Financial