Company: RILY
Filing Date: 2025-12-15
Form Type: 10-Q
Source: 0001464790-25-000029
Chunk: 294

Company: B. Riley Financial, Inc.
Filing Date: 2025-12-15
Form: 10-Q
Item: Part I, Item 8
Chunk 294
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 Amounts owing under the Amended and Restated Note may be repaid at any time without penalty. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM’s equity interests owned by Mr. Kahn, the chief executive officer (“CEO”) and a member of the board of directors of Freedom VCM as of December 31, 2023, and his spouse with a value, based on the transaction price of the take private transaction that included the acquisition of the Franchise Group, Inc. (“FRG”) by a buyer group that included members of senior management of FRG, led by Mr. Kahn, FRG’s then CEO (the “FRG take-private transaction”), of $227,296 as of August 21, 2023. On January 22, 2024, Mr. Kahn resigned as CEO and a member of the board of directors of Freedom VCM. In light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP (“Prophecy”). 

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On November 3, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 (“Chapter 11 Cases”) of Title 11 of the United States Bankruptcy Code (“Bankruptcy Code”), which impacted the collateral for this loan receivable. To the extent the loan balance and accrued interest exceed the underlying collateral value of the loan an unrealized loss will be recorded in the unaudited condensed consolidated statements of operations. On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral. The fair value of the VCM loan receivable was $1,468 and $2,057 as of June 30, 2025 and December 31, 2024, respectively. The remaining principal balance was $224,968 and $224,968 and exceeded the fair value of the loan receivable by $223,500 and $222,911 as of June 30, 2025 and December 31, 2024, respectively.On September 29, 2025, the SEC filed a complaint in the U.S. District Court for the District of New Jersey against Prophecy, Prophecy’s CEO and Mr. Kahn alleging violations of certain of the antifraud provisions of federal securities laws. On November 10