B. Riley & Co., LLC Firm Update - January, 2010

Dear Friends & Colleagues: 

With 2009 in the history books, we are pleased to report an exceptionally good year for our firm and a record year for corporate financings. More so, we expect brisk activity to continue into 2010, supporting our early optimism for a market recovery in 2010.  

Looking back, 2009 was an extreme roller coaster ride.  With the Dow now up in the mid-10,000 range, it’s difficult to fathom that the Dow hit a low of 6,440.08 last March. 

The first half of the year was a near freeze. With investor portfolios dropping in sync with the stock market and commercial banks under government mandate to meet stress tests, there was neither available equity nor credit to finance a deal.  U.S. (as well as global) banking activities recoiled to a trickle—with the modest exception of a few strategic M&As and some distressed financing restructures. Companies went into survival mode; aggressively slashing operating expenses. To a large extent, this resulted in those companies reporting much better than expected numbers in the second half of the year. At the same time, sidelined money regained footing and began to trickle back into the markets. 

At B. Riley, we did our best to read the changing economic landscape, which included unprecedented government intervention into financial markets. Our analysis led to a strategic effort to position ourselves and our clients to best take advantage of opportunities that, we forecasted, would surface in the second half of the year. 

Research is the core of our business. Continued consolidation in the financial markets has created a steadily growing pool of small cap stocks that lack Research coverage. At B. Riley, however, we remain as committed to the sector as we were 14 years ago, when the first B. Riley Research report was issued.  Recent hires, noted below, have allowed us to expand our Research Universe in 2010 into sectors that may prove advantageous to investors. 

Below is a recap of activity in our various departments and our outlook for 2010.  

INVESTMENT BANKING NEWS:  

As noted above, 2009 was a record year for corporate financings in our banking practice. We have successfully consummated a large number of transactions of various types, including SPACS, Registered Direct Offerings (RDOs) and other equity raises, plus M&A Advisory assignments for both public and privately held companies. Several of those transactions have been detailed in our earlier communiqués with you. 

Looking ahead to 2010, we believe the M&A environment will continue to improve and anticipate deal activity to increase as companies, which were successful in improving their balance sheets, now begin eyeing accretive acquisitions. 

We open 2010 with the successful closing of an M&A advisory engagement involving the sale of our client Bullet Freight Systems, Inc. to a subsidiary of Roadrunner Transportation Services Holdings, Inc. (RRTS), a portfolio company of Thayer | Hidden Creek. 

B. Riley is currently engaged in a number of banking assignments, which we hope to report in the coming months .

Venture capital firms, looking to lower risk, have been adding to the pool of available capital by joining traditional institutional investors in Registered Direct Offerings (RDO).  

As the market continues to stabilize, we anticipate a return of the traditional IPO, as well as ample cash for follow-ons, RDOs and other equity raises in 2010.   

Corporate Governance Advisory Services: 
 
B. Riley has been engaged in more than 35 corporate governance assignments, all of which have been successful. We are pleased to report that a 2009 engagement involving Milpitas-based California Micro Devices (Nasdaq: CAMD) has resulted in a positive outcome for shareholders.  On December 14, 2009, Phoenix-based microchip manufacturer ON Semiconductor (ONNN) announced its intent to purchase CAMD for $107 million, representing a 54% premium to its closing price the prior trading day.  

OTCQX assignments:  

Earlier in the year, we announced that B. Riley was approved as an investment bank Designated Advisor for Disclosure (DAD) for OTCQX-listed companies.  To date, we have announced three such assignments, including Proxim (PRXM.PK), Craftmade International, Inc. (CRFT.PK) and Synergy Brands (SYBR.PK).   

These OTCQX assignments are part of B. Riley’s Issuer Advisory Group, also launched in 2009. We will continue to be selective in taking on DAD assignments; engaging with companies that want to be proactive in maintaining good corporate governance and that are sensitive to shareholder needs for transparency and proper disclosure.  A move to the OTCQX can represent meaningful savings to smaller companies, and we believe that transitions to the exchange will increase in 2010. 

UPCOMING EVENTS:  

Activist Investor Conference, January 21-22, 2010, New York City: 

Join me in NYC at the Activist Investor Conference, hosted by DealFlow Media, when I will be presenting a case study on Thursday, January 21, 2 PM entitled:  "The First-Time Activist..." with our client Dialectic Capital.  To learn more about the presentation, please log onto: http://www.dealflowmedia.com/activist.  

As noted above, B. Riley has been engaged in 2009 by both companies and shareholders to assist with activist issues.  These add to more than three dozen successfully completed engagements over the years. For more information on our capabilities, please contact B.  Riley’s Corporate Advisory Services Group-- Sal Kamalodine at 310-689-2217 or skamalodine@brileyco.com 

Registered Direct Roadshow Show: 

To help companies understand the Registered Direct Offerings (RDO), B. Riley is partnering with Bingham McCutchen, BDO, Donnelley Financial Printers and DealFlow Media for an overview of the accounting, legal and regulatory issues surrounding Registered Direct Offerings.  The morning session is scheduled 7:30-9:30 AM on Wednesday, February 10, 2010 at Big Canyon Country Club in Newport Beach, California. 

Chris Cox, Partner at Bingham, former chairman of the SEC and former US House Leader will kick off the morning with an overview of SEC rule changes that have affected the capital raising abilities of smaller public companies.   

We hope you will join us.  

RESEARCH: 

In Q4, B. Riley welcomed ranked Senior Research Analyst David Kang to our expanding Research team to cover the optical components sector.  

While many investment banks abandoned conferences in 2009, we believe that during market turmoil, companies need more, not less, communication with shareholders. In 2009 we hosted two institutional investor conferences, a sector-specific institutional investor tour with companies, and had a significant analyst presence at the November AeA Financial Classic.   

Our plans for 2010 include the 11^th Annual B. Riley Investor Conference, as well as several sector specific conferences and investor tours.   

Please mark your calendars for May 24-26, 2010 when the B. Riley 11^th Annual Investor Conference moves to the Loews Santa Monica Beach Hotel. With sun, sand and surf as a backdrop, our award winning research team will present what it believes are some of the most interesting opportunities in small caps. In addition to company presentations, we will hold a variety of panels focused on capital raising and corporate governance issues.  

A reminder that if you’re not a California beach “local”, May is a beautiful time to be here. With lots of nearby attractions, you might want to bring the family! Check our website: www.brileyco.com, for a preliminary list of presenting companies. We’ll provide e-mail updates as the date approaches.   

Virtual Management Presentations: 

Our weekly virtual management presentation series, launched last summer, has been so well received, that we will continue the effort in 2010.  Almost 30 have been hosted to date, with the calendar fully scheduled through March. Feedback from both investors and management has been very positive. Companies interested in being considered for a virtual investor presentation should contact our Research Department at 310-966-1443. Investors interested in participating are welcome to contact our Sales Desk at 310-966-1440.    

RECOGNITION, RANKINGS & AWARDS:  

It’s been a good year for top rankings and recognitions.  

Throughout the year, we’ve been updating you on the #1 Rankings our Research Department has earned from independent sources such as Dow Jones and Integrity Research Associates.  In August, Dow ranked B. Riley #1 among “Specialized and Regional Banks” in terms of Buy/Sell Performance of our Call Recommendations; significantly outperforming the #1 bulge bracket firms. 

In its mid-year report, Integrity ranked B. Riley research #1 for “Returns in Basis Points per Day” and “Returns per Correct Call.”  Earlier, it ranked B. Riley analysts #1 in more categories than any other firm of all sizes. 

Those of you who are long time clients know that we don’t chase the markets and we stay away from story stocks.  The strategy has paid off, as evidenced by the above recognition.  We remain steadfast in our commitment to providing independent, unbiased research and will strive for similar recognition in 2010.  

NEW HIRES: 

In addition to Research, B. Riley has been in a fortunate position throughout the year to hire outstanding talent for a variety of divisions.  In Q4 we added Alan Howe , Nicholas Capuano and Grant Hustedt. 

Alan joined our Corporate Governance Advisory Services Group. His experience serving on numerous public company boards will help us work with company management engaged in shareholder issues.  

Nick joined B. Riley’s Institutional Sales Department in Los Angeles from Imperial Capital, where he was Director of Equity Research. Prior to that Nick, work at Trust Company of the West for 14 years. 

Grant joined our Corporate Finance Department in Newport Beach as an Associate.  He will be responsible for providing industry research, deal structuring, client services, financial modeling, due diligence and other transactional support to both public and private companies.  Previously, Grant was with Deloitte Tax LLP for 5 years, most recently as a Tax Senior.  

We are continuing our search for high quality professionals in banking, research, sales and trading, and expect to make announcements in the coming weeks. 

IN CONCLUSION:   

This update has been filled with many positives—particularly encouraging in light of the tumultuous year we have all experienced.  

We thank you for taking the time to read this 2010 outlook and 2009 review. As always, we appreciate your interest and value your continued business. 

Sincerely,

Bryant R. Riley

Chairman