☒x QUARTERLY Report Pursuant to SectionREPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act ofOR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐o TRANSITION Report Pursuant to SectionREPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act ofOR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Incorporated
Nevada | 85-0206668 | ||||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||||
| 89119 | ||||
(Address of principal executive offices) | (Zip Code) | ||||
(702)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock, $0.001 par value per share | LIVE | The Nasdaq Stock Market LLC (The Nasdaq Capital Market) | ||||||||||||
o
o
Large accelerated filer |
| Accelerated filer |
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Non-accelerated filer |
| Smaller reporting company | x | ||||||||
Emerging growth company | o |
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o
June 30, 2023
December 31, 2022 September 30, 2022 (Unaudited) Assets Cash $ 12,765 $ 4,600 Trade receivables, net of allowance for doubtful accounts of $152 at December 31, 2022, and $132 at September 30, 2022 20,579 25,665 Inventories, net of reserves of $2.4 million at December 31, 2022, and September 30, 2022 97,484 97,659 Income taxes receivable 3,845 4,403 Prepaid expenses and other current assets 2,377 2,477 Total current assets 137,050 134,804 Property and equipment, net of accumulated depreciation of $29.1 million at December 31, 2022, and $26.7 million at September 30, 2022 63,474 64,590 Right of use asset - operating leases 33,388 33,659 Deposits and other assets 820 647 Intangible assets, net of accumulated amortization of $2.4 million at December 31, 2022 and $2.1 million at September 30, 2022 3,591 3,844 Goodwill 40,781 41,093 Total assets $ 279,104 $ 278,637 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 7,483 $ 10,899 Accrued liabilities 15,124 16,486 Income taxes payable — — Current portion of lease obligations - operating leases 8,071 7,851 Current portion of lease obligations - finance leases 214 217 Current portion of long-term debt 26,064 18,935 Current portion of notes payable related parties 2,000 2,000 Total current liabilities 58,956 56,388 Long-term debt, net of current portion 59,889 62,704 Lease obligation long term - operating leases 29,890 30,382 Lease obligation long term - finance leases 19,631 19,568 Notes payable related parties, net of current portion 2,000 2,000 Deferred taxes 8,874 8,818 Other non-current obligations 1,479 1,615 Total liabilities 180,719 181,475 Commitments and contingencies Stockholders' equity: Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 47,840 — — Common stock, $0.001 par value, 10,000,000 shares authorized, 3,050,123 and 3,074,833 shares issued 2 2 Paid in capital 65,321 65,321 Treasury stock common 645,681 and 620,971 shares as of December 31, 2022 and September 30, 2022, respectively (7,836 ) (7,215 ) Treasury stock Series E preferred 50,000 shares as of December 31, 2022 and (7 ) (7 ) Retained earnings 41,353 39,509 Equity attributable to Live stockholders 98,833 97,610 Non-controlling interest (448 ) (448 ) Total stockholders' equity 98,385 97,162 Total liabilities and stockholders' equity $ 279,104 $ 278,637 For the Three Months Ended December 31, 2022 2021 Revenues $ 68,986 $ 75,158 Cost of revenues 47,042 47,542 Gross profit 21,944 27,616 Operating expenses: General and administrative expenses 14,600 14,157 Sales and marketing expenses 2,777 3,052 Total operating expenses 17,377 17,209 Operating income 4,567 10,407 Other (expense) income: Interest expense, net (2,047 ) (1,017 ) Loss on bankruptcy settlement — (10 ) Other income (expense) (61 ) 126 Total other expense, net (2,108 ) (901 ) Income before provision for income taxes 2,459 9,506 Provision for income taxes 615 2,960 Net income 1,844 6,546 Net income attributable to non-controlling interest — — Net income attributable to Live stockholders $ 1,844 $ 6,546 Income per share: Basic $ 0.60 $ 4.14 Diluted $ 0.60 $ 2.04 Weighted average common shares outstanding: Basic 3,059,035 1,582,334 Diluted 3,089,741 3,202,057 Dividends declared - series B convertible preferred stock $ — $ — Dividends declared - series E convertible preferred stock $ — $ — Dividends declared - common stock $ — $ — per-share amounts) For the Three Months Ended December 31, 2022 2021 Operating Activities: Net income $ 1,844 $ 6,546 Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 2,651 1,549 Loss on bankruptcy settlement — 10 Amortization of debt issuance cost 16 24 Stock based compensation expense — 18 Amortization of right-of-use assets 540 68 Change in reserve for uncollectible accounts 20 — Change in reserve for obsolete inventory (48 ) (59 ) Changes in assets and liabilities: Trade receivables 5,066 2,413 Inventories 223 (3,016 ) Income taxes payable/receivable 558 (142 ) Prepaid expenses and other current assets 100 (431 ) Change in deferred income taxes 56 1,550 Deposits and other assets (173 ) (663 ) Accounts payable (3,416 ) (981 ) Accrued liabilities (1,050 ) (2,655 ) Other Liabilities (133 ) 13 Net cash provided by operating activities 6,254 4,244 Investing Activities: Purchase of property and equipment (1,282 ) (3,070 ) Net cash used in investing activities (1,282 ) (3,070 ) Financing Activities: Net borrowings (payments) under revolver loans (51 ) 2,040 Proceeds from issuance of notes payable 5,709 5,500 Payments on notes payable (1,362 ) (3,333 ) Purchase of common treasury stock (622 ) — Payments on financing leases (481 ) (33 ) Debtor-in-possession cash — 19 Net cash provided by financing activities 3,193 4,193 Increase in cash 8,165 5,367 Cash, beginning of period 4,600 4,664 Cash, end of period $ 12,765 $ 10,031 Supplemental cash flow disclosures: Interest paid $ 1,927 $ 890 Income taxes paid $ — $ 1,538 Noncash financing and investing activities: Kinetic goodwill adjustment $ 312 $ — Series B Series E Common Stock Series E Common Shares Amount Shares Amount Shares Amount Paid-In Treasury Treasury Retained Non-controlling Interest Total Balance, September 30, 2022 — $ — 47,840 $ — 3,074,833 $ 2 $ 65,321 $ (7 ) $ (7,215 ) $ 39,509 $ (448 ) $ 97,162 Purchase of common treasury stock — — — — (24,710 ) — — — (621 ) — — (621 ) Net income — — — — — — — — — 1,844 — 1,844 Balance, December 31, 2022 — $ — 47,840 $ — 3,050,123 $ 2 $ 65,321 $ (7 ) $ (7,836 ) $ 41,353 $ (448 ) $ 98,385 Series B Series E Common Stock Series E Common Shares Amount Shares Amount Shares Amount Paid-In Treasury Treasury Accumulated Non-controlling Interest Total Balance, September 30, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,284 $ (7 ) $ (4,519 ) $ 14,768 $ (448 ) $ 75,080 Stock based compensation — — — — — — 18 — — — 18 Net income — — — — — — — — — 6,546 — 6,546 Balance, December 31, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,302 $ (7 ) $ (4,519 ) $ 21,314 $ (448 ) $ 81,644 Principles of Consolidation Reclassifications Note 3: Acquisitions $41.8 million in cash to the Seller; $547,000. Total purchase price $ 24,732 Accounts payable 571 Accrued liabilities 1,848 Total liabilities assumed 2,419 Total consideration 27,151 Cash 287 Accounts receivable 3,073 Inventory 6,429 Property, plant and equipment 12,855 Intangible assets 1,000 Other assets 480 Total assets acquired 24,124 Total goodwill $ 3,027 Total purchase price $ 3,166 Inventory 748 Property, plant and equipment 2,118 Intangible assets 300 Total assets acquired 3,166 Note 4: Variable Interest Entity June 30, 2023. The following table details our right of use assets and lease liabilities as of December 31, 2022 September 30, 2022 Right of use asset - operating leases $ 33,388 $ 33,659 Lease liabilities: Current - operating 8,071 7,851 Current - finance 214 217 Long term - operating 29,890 30,382 Long term - finance 19,631 19,568 The Company records finance lease right of use assets as property and equipment. The balance, as of June 30, 2023 and September 30, 2022 is as follows (in $000’s): Twelve months ended December 31, 2023 $ 9,671 2024 8,335 2025 6,566 2026 4,953 2027 3,765 Thereafter 14,067 Total 47,357 Less implied interest (9,396 ) Present value of payments $ 37,961 Twelve months ended December 31, 2023 $ 1,591 2024 2,015 2025 2,090 2026 2,172 2027 2,262 Thereafter 73,867 Total 83,997 Less implied interest (64,152 ) Present value of payments $ 19,845 The following table details the Company's inventory as of December 31, 2022 September 30, 2022 Inventory, net Raw materials $ 34,919 $ 35,829 Work in progress 8,301 7,539 Finished goods 33,803 32,814 Merchandise 23,009 23,900 100,032 100,082 Less: Inventory reserves (2,548 ) (2,423 ) Total inventory, net $ 97,484 $ 97,659 The following table details the Company's property December 31, 2022 September 30, 2022 Property and equipment, net: Land $ 2,029 $ 2,029 Building and improvements 26,904 26,761 Transportation equipment 643 622 Machinery and equipment 54,739 53,739 Furnishings and fixtures 4,491 4,407 Office, computer equipment and other 3,732 3,699 92,538 91,257 Less: Accumulated depreciation (29,064 ) (26,667 ) Total property and equipment, net $ 63,474 $ 64,590 The following table details the Company's goodwill as of Retail Flooring Manufacturing Steel Manufacturing Corporate Total September 30, 2022 36,947 807 3,339 — 41,093 Additions — — — — — Kinetic fair value adjustment — — (312 ) — (312 ) Impairment — — — — — December 31, 2022 $ 36,947 $ 807 $ 3,027 $ — $ 40,781 The following table details the Company's accrued liabilities as of December 31, 2022 September 30, 2022 Accrued liabilities: Accrued payroll and bonuses $ 4,573 $ 4,838 Accrued sales and use taxes 2,225 1,905 Accrued gift card and escheatment liability 1,816 1,696 Accrued interest payable 503 390 Accrued accounts payable and bank overdrafts 1,365 1,731 Accrued professional fees 1,391 1,924 Accrued expenses - other 3,251 4,002 Total accrued liabilities $ 15,124 $ 16,486 Note Long-term debt as of December 31, 2022 September 30, 2022 Revolver loans $ 43,056 $ 43,107 Equipment loans 18,552 13,716 Term loans 7,589 7,941 Sellers notes 5,500 5,500 Other notes payable 11,863 12,001 Total notes payable 86,560 82,265 Less unamortized debt issuance costs (607 ) (626 ) Net amount 85,953 81,639 Less current portion (26,064 ) (18,935 ) Total long-term debt $ 59,889 $ 62,704 Twelve months ending December 31, 2023 $ 26,064 2024 5,691 2025 4,350 2026 4,832 2027 33,603 Thereafter 11,413 Total future maturities of long-term debt $ 85,953 stated (in $000's): As of June 30, 2023 and September 30, 2022, the outstanding balance on Kinetic Term Loan #2 was $0 and $917,000, respectively. June 30, 2023: December 31, 2022 September 30, 2022 Note Payable to the Sellers of Kinetic, 7.0% interest rate, matures September 2027 $ 3,000 $ 3,000 Note payable to the Sellers of Precision Marshall, no stated or implied interest rate, buyer holdback 2,500 2,500 Total Sellers notes $ 5,500 $ 5,500 December 31, 2022 September 30, 2022 Note Payable to Store Capital Acquisitions, LLC, 9.3% interest rate, matures June 2056 $ 9,161 $ 9,171 Notes payable JCM Holdings, 6.0% interest rate, matures January 2030 $ 1,610 $ 1,656 Note payable to individual, 11.0% interest rate, payable on 90-day $ 207 $ 207 Note payable to individual, 10.0% interest rate, payable on 90-day $ 500 $ 500 Note payable to individual, noninterest bearing, monthly payments of $19 through March 2023 $ 57 $ 139 Note payable to individual, 7.0% interest rate, five-year notes, unsecured $ 198 $ 198 Note payable RSSI/(VSSS), no stated or implied interest rate, matures March 2023 $ 130 $ 130 Total other notes payable $ 11,863 $ 12,001 Loan Covenant Compliance Long-term debt payable to related parties (see Note 16) as of December 31, 2022 September 30, 2022 Isaac Capital Group, LLC, 12.5% interest rate, matures May 2025 $ 2,000 $ 2,000 Spriggs Investments, LLC, 10% interest rate, matures July 2023 2,000 2,000 Total notes payable - related parties 4,000 4,000 Less current portion (2,000 ) (2,000 ) Total long-term portion, related parties $ 2,000 $ 2,000 Twelve months ending December 31, 2023 $ 2,000 2024 — 2025 2,000 Total future maturities of long-term debt, related parties $ 4,000 outstanding, respectively. The following table summarizes stock option activity for the fiscal year ended September 30, 2022 and the Number of Weighted Weighted Intrinsic Outstanding at September 30, 2021 87,500 $ 18.81 1.78 $ 1,626 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Exercisable at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Outstanding at December 31, 2022 87,500 $ 18.81 0.52 $ 1,201 Exercisable at December 31, 2022 87,500 $ 18.81 0.52 $ 1,201 The following table presents the computation of basic and diluted net earnings per share (in Three Months Ended December 31, 2022 2021 Basic Net income $ 1,844 $ 6,546 Less: preferred stock dividends — — Net income applicable to common stock $ 1,844 $ 6,546 Weighted average common shares outstanding 3,059,035 1,582,334 Basic earnings per share $ 0.60 $ 4.14 Diluted Net income applicable to common stock $ 1,844 $ 6,546 Add: preferred stock dividends — — Net income applicable for diluted earnings per share $ 1,844 $ 6,546 Weighted average common shares outstanding 3,059,035 1,582,334 Add: Options 30,467 40,534 Add: Series B Preferred Stock — 1,578,950 Add: Series B Preferred Stock Warrants — — Add: Series E Preferred Stock 239 239 Assumed weighted average common shares outstanding 3,089,741 3,202,057 Diluted earnings per share $ 0.60 $ 2.04 Mr. Isaac's options to purchase 25,000 shares of common stock were originally scheduled to expire on January 15, 2023, but, as amended on January 13, 2023, the expiration date was extended to January 15, 2025. loan was $2.0 million. Recycling allowance recorded. The Spriggs Loan II matures on July 31, 2024, and bears interest at a rate of 12% per annum. As of June 30, 2023, the amount owed was $1.0 million. LLC case will now proceed through discovery. The following tables summarize segment information (in For the Three Months Ended December 31, 2022 2021 Revenues Retail $ 23,273 $ 26,211 Flooring Manufacturing 26,432 32,872 Steel Manufacturing 17,981 12,366 Corporate & Other 1,300 3,709 Total revenues $ 68,986 $ 75,158 Gross profit Retail $ 12,210 $ 13,390 Flooring Manufacturing 4,661 9,029 Steel Manufacturing 4,392 3,615 Corporate & Other 681 1,582 Total gross profit $ 21,944 $ 27,616 Operating income (loss) Retail $ 3,664 $ 4,810 Flooring Manufacturing 751 4,608 Steel Manufacturing 1,455 1,654 Corporate & Other (1,303 ) (665 ) Total operating income $ 4,567 $ 10,407 Depreciation and amortization Retail $ 311 $ 340 Flooring Manufacturing 1,111 779 Steel Manufacturing 1,093 234 Corporate & Other 136 196 Total depreciation and amortization $ 2,651 $ 1,549 Interest expense Retail $ 154 $ 152 Flooring Manufacturing 987 431 Steel Manufacturing 787 298 Corporate & Other 119 136 Total interest expenses $ 2,047 $ 1,017 Net income before provision for income taxes Retail $ 3,538 $ 4,700 Flooring Manufacturing (313 ) 4,045 Steel Manufacturing 268 1,313 Corporate & Other (1,034 ) (552 ) Total net income before provision for income taxes $ 2,459 $ 9,506 Precision Metal Works builder and contractor customers through Elite Builder Services, Inc. 2022 Form 10-K. For the Three Months Ended December 31, 2022 For the Three Months Ended December 31, 2021 % of Total % of Total Selected Data Revenues $ 68,986 $ 75,158 Cost of revenues 47,042 68.2 % 47,542 63.3 % General and administrative expenses 14,600 21.2 % 14,157 18.8 % Sales and marketing expenses 2,777 4.0 % 3,052 4.1 % Interest expense, net 2,047 3.0 % 1,017 1.4 % Income before provision for income taxes 2,459 3.6 % 9,506 12.6 % Provision for income taxes 615 0.9 % 2,960 3.9 % Net income $ 1,844 2.7 % $ 6,546 8.7 % Adjusted EBITDA (a) Retail business $ 4,003 $ 5,202 Flooring Manufacturing business 1,785 5,255 Steel Manufacturing business 2,525 1,844 Corporate & Other (774 ) (199 ) Total Adjusted EBITDA $ 7,539 $ 12,102 Adjusted EBITDA as a percentage of revenue Retail business 17.2 % 19.8 % Flooring Manufacturing business 6.8 % 16.0 % Steel Manufacturing business 14.0 % 14.9 % Corporate & Other -59.5 % -5.4 % Consolidated adjusted EBITDA as a percentage of revenue 10.9 % 16.1 % For the Three Months Ended December 31, 2022 For the Three Months Ended December 31, 2021 Net % of Net % of Revenue Retail $ 23,273 33.7 % $ 26,211 34.9 % Flooring Manufacturing $ 26,432 38.3 % 32,872 43.7 % Steel Manufacturing $ 17,981 26.1 % 12,366 16.5 % Corporate & Other $ 1,300 1.9 % 3,709 4.9 % Total Revenue $ 68,986 100.0 % $ 75,158 100.0 % For the Three Months Ended December 31, 2022 For the Three Months Ended December 31, 2021 Gross Gross Gross Gross Gross Profit Retail $ 12,210 17.7 % $ 13,390 17.8 % Flooring Manufacturing $ 4,661 6.8 % 9,029 12.0 % Steel Manufacturing $ 4,392 6.4 % 3,615 4.8 % Corporate & Other $ 681 1.0 % 1,582 2.1 % Total Gross Profit $ 21,944 31.8 % $ 27,616 36.7 % pressures. Kinetic, which historically have generated higher margins. rates during the period. For the Three Months Ended December 31, 2022 For the Three Months Ended December 31, 2021 Retail Flooring Steel Corporate Total Retail Flooring Steel Corporate Total Revenue $ 23,273 $ 26,432 $ 17,981 $ 1,300 $ 68,986 $ 26,211 $ 32,872 $ 12,366 $ 3,709 $ 75,158 Cost of Revenue 11,063 21,771 13,589 619 47,042 12,821 23,843 8,751 2,127 47,542 Gross Profit 12,210 4,661 4,392 681 21,944 13,390 9,029 3,615 1,582 27,616 General and 8,385 1,491 2,792 1,932 14,600 8,454 1,639 1,821 2,243 14,157 Selling and 161 2,419 145 52 2,777 126 2,782 140 4 3,052 Operating Income $ 3,664 $ 751 $ 1,455 $ (1,303 ) $ 4,567 $ 4,810 $ 4,608 $ 1,654 $ (665 ) $ 10,407 Liquidators, which we acquired in January 2023. Revenue for the three months ended The increase is due to the acquisition of Kinetic. For the Three Months Ended December 31, 2022 December 31, 2021 Net income $ 1,844 $ 6,546 Depreciation and amortization 2,651 1,549 Stock-based compensation — 18 Interest expense, net 2,047 1,017 Income tax expense 615 2,960 Acquisition costs 382 12 Adjusted EBITDA $ 7,539 $ 12,102 above, partially offset by increases in non-operating and other non-recurring expenses. Our cash flows used in investing activities of approximately $32.7 million for the nine months ended June 30, 2022 consisted primarily of the Kinetic acquisition, as well as purchases of property and equipment. $988,000. Proceeds from borrowings under revolver loans, and the issuance of notes payable was primarily associated with the acquisition of Kinetic. effective. case will now proceed through discovery. Filed herewith Exhibit Number Exhibit Description Form File Exhibit Filing Date 3.1 8-K 000-24217 3.1 08/15/07 3.2 8-K 001-333937 3.1 09/07/10 3.3 8-K 001-333937 3.1 03/11/13 3.4 10-Q 001-333937 3.1 02/14/14 3.5 8-K 001-333937 3.1.4 10/08/15 3.6 8-K 001-333937 3.1.5 11/25/16 3.7 10-K 001-333937 3.1.6 12/29/16 3.8 10-Q 001-33937 3.8 08/14/18 10.104 Employment Agreement between Live Ventures Incorporated and Wayne Ipsen, effective October 24, 2022 8-K 001-33937 10.104 10/28/22 31.1 * 31.2 * 32.1 * 32.2 * 101.INS * Inline XBRL Instance Document 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) Dated: August 10, 2023 /s/ Jon Isaac President and Chief Executive Officer (Principal Executive Officer) Dated: /s/ David Verret Chief Financial Officer (Principal Financial Officer)per shareper-share amounts)
shares issued and outstanding at December 31, 2022 and September 30, 2022, respectively, with a
liquidation preference of $0.30 per share outstanding
and outstanding at December 31, 2022 and September 30, 2022, respectively
of September 30, 2022, respectivelyJune 30, 2023 September 30, 2022 (Unaudited) Assets Cash $ 3,547 $ 4,600 Trade receivables, net of allowance for doubtful accounts of $194,000 at June 30, 2023 and $132,000 at September 30, 2022 27,358 25,665 Inventories, net of reserves of $3.5 million at June 30, 2023 and $2.4 million at September 30, 2022 114,075 97,659 Income taxes receivable 4,087 4,403 Prepaid expenses and other current assets 3,249 2,477 Total current assets 152,316 134,804 Property and equipment, net of accumulated depreciation of $34.3 million at June 30, 2023, and $26.7 million at September 30, 2022 65,431 64,590 Right of use asset - operating leases 45,321 33,659 Deposits and other assets 1,593 647 Intangible assets, net of accumulated amortization of $3.4 million at June 30, 2023 and $2.1 million at September 30, 2022 24,117 3,844 Goodwill 71,389 41,093 Total assets $ 360,167 $ 278,637 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 14,808 $ 10,899 Accrued liabilities 22,748 16,486 Current portion of lease obligations - operating leases 10,582 7,851 Current portion of lease obligations - finance leases 355 217 Current portion of long-term debt 23,689 18,935 Current portion of notes payable related parties 1,000 2,000 Total current liabilities 73,182 56,388 Long-term debt, net of current portion 64,519 59,704 Lease obligation long term - operating leases 39,588 30,382 Lease obligation long term - finance leases 20,004 19,568 Notes payable related parties, net of current portion 44,773 5,000 Deferred taxes 13,046 8,818 Other non-current obligations 852 1,615 Total liabilities 255,964 181,475 Commitments and contingencies Stockholders' equity: Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 47,840 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively, with a liquidation preference of $0.30 per share outstanding — — Common stock, $0.001 par value, 10,000,000 shares authorized, 3,164,432 and 3,074,833 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively 2 2 Paid in capital 68,888 65,321 Treasury stock common 659,961 and 620,971 shares as of June 30, 2023 and September 30, 2022, respectively (8,203) (7,215) Treasury stock Series E preferred 80,000 shares as of June 30, 2023 and September 30, 2022, respectively (7) (7) Retained earnings 43,971 39,509 Equity attributable to Live stockholders 104,651 97,610 Non-controlling interest (448) (448) Total stockholders' equity 104,203 97,162 Total liabilities and stockholders' equity $ 360,167 $ 278,637 per share)For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Revenues $ 91,516 $ 68,269 $ 251,624 $ 213,133 Cost of revenues 59,347 45,920 165,903 138,215 Gross profit 32,169 22,349 85,721 74,918 Operating expenses: General and administrative expenses 23,226 13,407 60,443 40,718 Sales and marketing expenses 3,382 3,078 10,198 9,480 Total operating expenses 26,608 16,485 70,641 50,198 Operating income 5,561 5,864 15,080 24,720 Other (expense) income: Interest expense, net (3,485) (674) (8,767) (2,549) Gain (loss) on debt extinguishment — 279 — (84) Gain on disposal of fixed assets (29) (443) (22) (444) Loss on write-off of ROU asset — (522) — (522) Salomon Whitney settlement 1,000 — 2,000 — Loss on disposition of Salomon Whitney (1,696) — (1,696) — Gain on bankruptcy settlement — — — 11,352 Other income (expense) 6 333 (671) 751 Total other income (expense), net (4,204) (1,027) (9,156) 8,504 Income before provision for income taxes 1,357 4,837 5,924 33,224 Provision for income taxes 297 1,365 1,462 7,848 Net income 1,060 3,472 4,462 25,376 Net income attributable to Live stockholders $ 1,060 $ 3,472 $ 4,462 $ 25,376 Income per share: Basic $ 0.33 $ 1.12 $ 1.43 $ 8.11 Diluted $ 0.33 $ 1.11 $ 1.42 $ 8.01 Weighted average common shares outstanding: Basic 3,166,842 3,090,321 3,123,177 3,128,813 Diluted 3,186,904 3,130,925 3,143,634 3,169,258 For the Nine Months Ended June 30, 2023 2022 Operating Activities: Net income $ 4,462 $ 25,376 Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 9,978 4,616 (Gain)/loss on disposal of property and equipment 29 443 Gain on bankruptcy settlement — (11,501) Amortization of debt issuance cost 223 (95) Stock based compensation expense 396 37 Amortization of right-of-use assets 2,069 8,517 Write-off of ROU asset — 522 Change in reserve for uncollectible accounts 62 (6) Change in reserve for obsolete inventory 1,030 431 Change in deferred income taxes 4,227 2,529 Disposition of SW Financial, net of cash retained 1,509 — Changes in assets and liabilities, net of acquisitions: Trade receivables 2,940 (362) Inventories 2,917 (18,582) Income taxes payable/receivable 316 (481) Prepaid expenses and other current assets 3,482 (450) Deposits and other assets (1,002) (362) Accounts payable (1,039) 3,741 Accrued liabilities (5,656) (3,553) Other Liabilities 63 24 Net cash provided by operating activities 26,006 10,844 Investing Activities: Acquisition of Flooring Liquidators, net of cash acquired (33,929) — Acquisition of Kinetic — (24,355) Acquisition of Cal Coast Carpets (1,300) — Purchase of property and equipment (3,499) (8,304) Net cash used in investing activities (38,728) (32,659) Financing Activities: Net borrowings under revolver loans 3,133 18,179 Proceeds from issuance of notes payable 9,878 20,292 Payments on notes payable (5,555) (15,122) Proceeds from issuing related party notes payable 7,000 — Payments for debt acquisition costs (98) — Purchase of common treasury stock (988) (2,528) Payments on financing leases (1,621) (120) Payments on seller financing arrangements (51) — Cash paid for taxes on net settlement of stock option exercise (29) — Debtor-in-possession cash — 75 Net cash provided by financing activities 11,669 20,776 Decrease in cash (1,053) (1,039) Cash, beginning of period 4,600 4,664 Cash, end of period $ 3,547 $ 3,625 Supplemental cash flow disclosures: Interest paid $ 7,443 $ 2,496 Income taxes paid $ 102 $ 5,795 Noncash financing and investing activities: Noncash items related to Flooring Liquidators acquisition $ 36,900 $ — Noncash stock options exercise $ 327 $ — Series B
Preferred StockSeries E
Preferred StockCommon Stock Series E
Preferred
StockCommon
StockShares Amount Shares Amount Shares Amount Paid-In
CapitalTreasury
StockTreasury
StockRetained
EarningsNon-controlling
InterestTotal
EquityBalance, September 30, 2022 — $ — 47,840 $ — 3,074,833 $ 2 $ 65,321 $ (7) $ (7,215) $ 39,509 $ (448) $ 97,162 Purchase of common treasury stock — — — — (24,710) — — — (621) — — (621) Net income — — — — — — — — — 1,844 — 1,844 Balance, December 31, 2022 — $ — 47,840 $ — 3,050,123 $ 2 $ 65,321 $ (7) $ (7,836) $ 41,353 $ (448) $ 98,385 Purchase of common treasury stock — — — — (674) — — — (17) — — (17) Stock based compensation — — — — — — 109 109 Issuance of common stock — — — — 116,441 — 3,200 — — — 3,200 Net income — — — — — — — — — 1,558 — 1,558 Balance, March 31, 2023 — $ — 47,840 $ — 3,165,890 $ 2 $ 68,630 $ (7) $ (7,853) $ 42,911 $ (448) $ 103,235 Purchase of common treasury stock — — — — (13,606) — — — (350) — — (350) Stock based compensation — — — — — — 287 — — — — 287 Stock options exercised — — — — 12,148 — — — — — — — Taxes paid on net settlement of stock options exercised — — — — — — (29) — — — — (29) Issuance of common stock — — — — — — — — — — — Net income — — — — — — — — — 1,060 — 1,060 Balance, June 30, 2023 — $ — 47,840 $ — 3,164,432 $ 2 $ 68,888 $ (7) $ (8,203) $ 43,971 $ (448) $ 104,203
Preferred Stock
Preferred Stock
Preferred
Stock
Stock
Capital
Stock
Stock
Earnings
Equity
Preferred Stock
Preferred Stock
Preferred
Stock
Stock
Capital
Stock
Stock
Deficit
EquitySeries B
Preferred StockSeries E
Preferred StockCommon Stock Series E
Preferred
StockCommon
StockShares Amount Shares Amount Shares Amount Paid-In
CapitalTreasury
StockTreasury
StockRetained
EarningsNon-controlling
InterestTotal
EquityBalance, September 30, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,284 $ (7) $ (4,519) $ 14,768 $ (448) $ 75,080 Stock based compensation — — — — — — 18 — — — 18 Net income — — — — — — — — — 6,546 — 6,546 Balance, December 31, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,302 $ (7) $ (4,519) $ 21,314 $ (448) $ 81,644 Stock based compensation — — — — — — 19 — — — — 19 Purchase of common treasury stock — — — — (65,668) — — — (2,084) — — (2,084) Conversion of Series B preferred stock (315,790) — — — 1,578,950 — — — — — — — Net income — — — — — — — — — 15,358 — 15,358 Balance, March 31, 2022 — $ — 47,840 $ — 3,095,616 $ 2 $ 65,321 $ 65,321 $ (7) $ (6,603) $ 36,672 $ (448) $ 94,937 Purchase of common treasury stock — — — — (14,160) — — — (444) — — (444) Net income — — — — — — — 3,472 — 3,472 Balance, June 30, 2022 — 0 $ — 47,840 $ — 3,081,456 $ 2 $ 65,321 $ (7) $ (7,047) $ 40,144 $ (448) $ 97,965 DECEMBER 31,JUNE 30, 2023 AND 2022 AND 2021per share)per-share amounts)fourfive operating segments: Retail,Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other. The RetailRetail-Entertainment segment includes Vintage Stock, Inc. (“Vintage Stock”), which is engaged in the retail sale of new and used movies, music, collectibles, comics, books, games, game systems and components. The Retail-Flooring segment includes Flooring Liquidators, Inc. (“Flooring Liquidators”), which is engaged in the retail sale and installation of floors, carpets, and countertops. The Flooring Manufacturing segment includes Marquis Industries, Inc. (“Marquis”), which is engaged in the manufacture and sale of carpet and the sale of vinyl and wood floorcoverings.floor coverings. The Steel Manufacturing Segment includes Precision Industries, Inc. (“Precision Marshall”), which is engaged in the manufacture and sale of alloy and steel plates, ground flat stock and drill rods, and The Kinetic Co., Inc. (“Kinetic”), which is engaged in the production of industrial knives and hardened wear products for the tissue and metals industries.December 31, 2022June 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023. ThisThe financial information included in these statements should be read in conjunction with the condensed consolidated financial statements and related notes thereto as of September 30, 2022 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 16, 2022 (the “2022 Form 10-K”).control, and a variable interest entity (“VIE”).control. The Company records a non-controlling interest within stockholders’ equity for the portion of the entity’s equity attributed to the consolidated entities that are not wholly owned. All intercompany accounts and transactions have been eliminated in consolidation. These reclassifications have no material effect on the reported financial results.In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modified the impairment model for available-for-sale debt securities and provided a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for smaller reporting companies for fiscal years beginning after December 15, 2021 and the interim periods within those fiscal years. Early adoption is permitted. The Company has adopted this new accounting standard on its consolidated financial statements and related disclosures; however, adoption of this ASU is anticipated to have no material impact on the Company's financial statements.7is anticipated to havehad no material impact on the Company's financial statements.In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This update provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. This update is effective for the Company’s fiscal years beginning after December 15, 2021. The Company has adopted this new accounting standard on its consolidated financial statements and related disclosures; however, adoption of this ASU is anticipated to have no material impact on the Company's financial statements.8Purchase price $ 78,700 Accounts payable 5,189 Accrued liabilities 11,484 Debt 60 Total liabilities assumed 16,733 Total consideration 95,433 Cash 7,871 Accounts receivable 4,824 Inventory 19,102 Property, plant and equipment 4,678 Intangible assets Trade names $ 13,275 Customer relationships 7,700 Non-compete agreements 1,625 Other 49 Subtotal intangible assets 22,649 Other 5,701 Total assets acquired 64,825 Total goodwill $ 30,608 As Reported Adjustments Proforma Live Unaudited Three Months Ended June 30, 2022 Flooring Liquidators Unaudited Three Months Ended June 30, 2022 Live for the Three Months Ended June 30, 2022 Net revenue $ 68,269 $ 32,525 $ 100,794 Net income $ 3,472 $ 2,562 $ (2,008) $ 4,026 Earnings per basic common share $ 1.12 $ 1.30 Earnings per basic diluted share $ 1.11 $ 1.29 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2023 Flooring Liquidators Unaudited Nine Months Ended June 30, 2023 (2) Live for the Nine Months Ended June 30, 2023 Net revenue $ 251,624 $ 37,702 $ 289,326 Net income 4,462 $ (1,033) $ (2,226) $ 1,203 Earnings per basic common share $ 1.43 $ 0.39 Earnings per basic diluted share $ 1.42 $ 0.38 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2022 Flooring Liquidators Unaudited Nine Months Ended June 30, 2022 Live for the Nine Months Ended June 30, 2022 Net revenue $ 213,133 $ 92,375 $ 305,508 Net income $ 25,376 $ 7,783 $ (5,826) $ 27,333 Earnings per basic common share $ 8.11 $ 8.74 Earnings per basic diluted share $ 8.01 $ 8.62 Property, plant and equipment $ 35 Intangible assets Customer relationships 785 Trade name 425 Non-compete agreement 55 Total intangible assets 1,265 Total assets acquired $ 1,300 100%100% of the issued and outstanding shares of common stock of The Kinetic Co., Inc. (“Kinetic”), a Wisconsin corporation, which was accomplishedeffected through a Purchase Agreement (the “Purchase Agreement”). In connection with the Purchase Agreement, Precision also entered into a Real Estate Purchase Agreement with Plant B-6, LLC, an affiliate of Kinetic, pursuant to which Precision received all of Kinetic's right, title, and interest in and to the land and improvements (collectively, the “Real Estate”) that Kinetic uses in its operations. The combined purchase price for the Kinetic shares and Real Estate was approximately $24.7$24.7 million, which was funded with approximately $11.0$11.0 million in borrowings under the company’s credit facility, approximately $8.3$8.3 million in proceeds from the sale and leaseback of the Real Estate, a subordinated promissory note in the principal amount of $3.0$3.0 million tofor the benefit of the Seller of Kinetic, $1.7$1.7 million of cash on-hand, a contingent earn-out liability valued at $997,000,$997,000, a working capital adjustment of approximately $400,000,$400,000, which was paid in cash, and a final fair value adjustment of approximately $312,000,$312,000, which was noncash.$8.9$8.9 million, subject to closing fees of approximately $547,000.$600,000$600,000 for the first year of the term and a 2%2% per annum escalator. The Lease Agreement is a “net lease,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the Real Property incurred by the lessor. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that each of the two five-year options will be exercised. The proceeds, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of Kinetic.$3.0$3.0 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 28, 2022, as calculated by an independent third-party firm. Goodwill arising from the acquisition isDecember 31, 2022June 30, 2023 (in $000’s):Total purchase price $ 24,732 Accounts payable 571 Accrued liabilities 1,848 Total liabilities assumed 2,419 Total consideration 27,151 Cash 287 Accounts receivable 3,073 Inventory 6,429 Property, plant and equipment 12,855 Intangible assets 1,000 Other assets 480 Total assets acquired 24,124 Total goodwill $ 3,027 As Reported Adjustments Proforma Live Unaudited Three Months Ended June 30, 2022 Kinetic Unaudited Three Months Ended June 30, 2022 Live for the Three Months Ended June 30, 2022 Net revenue $ 68,269 $ 5,696 $ 73,965 Net income $ 3,472 $ 712 $ (69) $ 4,115 Earnings per basic common share $ 1.12 $ 1.33 Earnings per basic diluted share $ 1.11 $ 1.31 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2022 Kinetic Unaudited Nine Months Ended June 30, 2022 Live for the Nine Months Ended June 30, 2022 Net revenue $ 213,133 $ 15,418 $ 228,551 Net income $ 25,376 $ 1,286 $ (207) $ 26,455 Earnings per basic common share $ 8.11 $ 8.46 Earnings per basic diluted share $ 8.01 $ 8.35 accomplishedeffected through an Asset Purchase Agreement (the “Asset Purchase Agreement”). No liabilities were assumed as part of the acquisition. The purchase price, which is subject to certain post-closing adjustments, was approximately $3.2$3.2 million, which is comprised of $1.8$1.8 million that was paid upon closing, and the $1.4$1.4 million present value of $1.5$1.5 million of non-compete payments to be made over a 24-month period. In order to expedite the transaction, the acquisition was originally made by Live, and the $1.8$1.8 million paid upon closing was funded with borrowings under the Live’s credit line with Isaac Capital Group (“ICG”). On August 18, 2022, Marquis repaid the $1.8$1.8 million to ICG and assumed ownership of Better Backers.914)16), with two options to renew for an additional five years each. The fair value of the buildings and improvement is approximately $9.3$9.3 million. The provisions of the lease agreements include an initial 24-month month-to-month rental period, during which the lessee may cancel with 90-day notice, followed by a 20-year lease term with two five-year renewal options. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that it will not cancel during the initial 24-month term, and that each of the two five-year options will be exercised. The base rent under the lease agreements is approximately $73,000$73,000 and $32,000$32,000 per month, respectively, for the first year of the term, and each lease agreement has a 2.5%2.5% per annum escalator. The lease agreements are each “net leases”, such that the lessee is also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the property. The Company has evaluated each lease and determined the rent amounts to be at market rates. These leases are being treated as finance leases for accounting purposes, as described in ASC 842 “Leases”.Total purchase price $ 3,166 Inventory 748 Property, plant and equipment 2,118 Intangible assets 300 Total assets acquired 3,166 Accounts payable $ 242 Lease liabilities 728 Total deconsolidation of liabilities 970 Cash 187 Accounts receivable 130 Other current assets 187 Intangible assets Customer Relationships 1,348 Tradenames 72 Subtotal Intangible Assets 1,420 Right-of-use assets 687 Other assets 55 Total deconsolidation of assets 2,666 Total loss on deconsolidation $ (1,696) December 31, 2022,June 30, 2023, the weighted average remaining lease term for operating leases is 9.127.2 years. The Company's weighted average discount rate for operating leases is 6.13%8.4%. Total cash payments for operating leases for the threenine months ended December 31,June 30, 2023 and 2022 and 2021 were approximately $2.4$8.2 million and $2.5$7.2 million, respectively. Additionally, we obtained right-of-use assets in exchange for operating lease liabilities of approximately $1.8$19.9 million upon commencement of operating leases during the threenine months ended December 31, 2022.December 31, 2022,June 30, 2023, the weighted average remaining lease term for finance leases is 27.4726.9 years. The Company's weighted average discount rate for finance leases is 13.24%13.2%. Total cash payments for finance leases for the threenine months ended December 31,June 30, 2023 and 2022 and 2021 were approximately $481,000$1.6 million and $0,$0, respectively. No additionalAdditionally, we obtained right-of-use assets in exchange for finance lease liabilities of approximately $443,000 upon commencement of operating leases were commenced during the threenine months ended December 31, 2022.June 30, 2023.December 31, 2022June 30, 2023 and September 30, 2022 (000's)(in $000's):June 30, 2023 September 30, 2022 Right of use asset - operating leases $ 45,321 $ 33,659 Lease liabilities: Current - operating 10,582 7,851 Current - finance 355 217 Long term - operating 39,588 30,382 Long term - finance 20,004 19,568 10Property and equipment, at cost $ 16,471 $ 16,029 Accumulated depreciation $ (514) $ (130) Property and equipment, net $ 15,957 $ 15,899 December 31, 2022June 30, 2023 (in $000’s)$000's):Twelve months ended June 30, 2023 $ 13,855 2024 11,515 2025 9,655 2026 7,525 2027 4,987 Thereafter 15,462 Total 62,999 Less implied interest (12,829) Present value of payments $ 50,170 December 31, 2022June 30, 2023 (in $000’s)$000's):Twelve months ended June 30, 2023 $ 2,175 2024 2,222 2025 2,223 2026 2,268 2027 2,345 Thereafter 72,260 Total 83,493 Less implied interest (63,134) Present value of payments $ 20,359 threenine months ended December 31,June 30, 2023 and 2022, and 2021, the Company recorded no gain or loss settlements, nor did it record impairment charges relating to any of its leases.5:6: InventoryDecember 31, 2022June 30, 2023 and September 30, 2022 (in 000's)$000's):Inventory, net June 30, 2023 September 30, 2022 Raw materials $ 32,810 $ 35,829 Work in progress 7,623 7,539 Finished goods 34,327 32,814 Merchandise 42,916 23,900 117,676 100,082 Less: Inventory reserves (3,601) (2,423) Total inventory, net $ 114,075 $ 97,659 116:7: Property Plant &and Equipmentplant &and equipment as of December 31, 2022June 30, 2023 and September 30, 2022 (in 000's)$000's):June 30, 2023 September 30, 2022 Property and equipment, net: Land $ 2,029 $ 2,029 Building and improvements 28,073 26,761 Transportation equipment 3,384 622 Machinery and equipment 55,923 53,739 Furnishings and fixtures 6,019 4,407 Office, computer equipment and other 4,281 3,699 99,709 91,257 Less: Accumulated depreciation (34,278) (26,667) $ 65,431 $ 64,590 $2.4$2.7 million and $1.3$1.4 million, respectively, for the three months ended December 31,June 30, 2023 and 2022, and 2021.$7.8 million and $3.9 million for the nine months ended June 30, 2023 and 2022.7:8: IntangiblesJune 30, 2023 September 30, 2022 Intangible assets, net: Intangible assets - Tradenames $ 14,390 $ 808 Intangible assets - Customer relationships 10,824 4,598 Intangible assets - Other 2,316 587 27,530 5,993 Less: Accumulated amortization (3,413) (2,149) Total intangibles, net $ 24,117 $ 3,844 Twelve months ending June 30, 2024 $ 3,968 2025 3,910 2026 3,910 2027 3,812 2028 3,668 Thereafter 4,849 $ 24,117 December 31, 2022 and SeptemberJune 30, 20222023 (in 000's)$000's):During the three months ended December 31, 2022,Retail - Entertainment Retail - Flooring Flooring Manufacturing Steel Manufacturing Total September 30, 2022 36,947 — 807 3,339 41,093 Kinetic fair value adjustment — — — (312) (312) Flooring Liquidators acquisition — 27,277 — — 27,277 Flooring Liquidators tax adjustment — 3,331 — — 3,331 Impairment — — — — — June 30, 2023 $ 36,947 $ 30,608 $ 807 $ 3,027 $ 71,389 made a final fair value adjustment, in the amount of approximately $312,000, related to the purchase price of the Kinetic acquisition (see Note 3).did not identify any triggering events that would require impairment testing.128:10: Accrued LiabilitiesDecember 31, 2022June 30, 2023 and September 30, 2022, respectively (in 000's)$000's):June 30, 2023 September 30, 2022 Accrued liabilities: Accrued payroll and bonuses $ 4,446 $ 4,838 Accrued sales and use taxes 2,219 1,905 Accrued customer deposits 3,579 — Accrued gift card and escheatment liability 1,792 1,696 Accrued interest payable 1,503 390 Accrued accounts payable and bank overdrafts 1,085 1,731 Accrued professional fees 3,042 1,924 Accrued expenses - other 5,082 4,002 Total accrued liabilities $ 22,748 $ 16,486 9:11: Long-Term DebtDecember 31, 2022June 30, 2023 and September 30, 2022 consisted of the following (in 000's)$000's):June 30, 2023 September 30, 2022 Revolver loans $ 46,240 $ 43,107 Equipment loans 16,486 13,716 Term loans 9,901 7,941 Other notes payable 16,155 14,501 Total notes payable 88,782 79,265 Less: unamortized debt issuance costs (574) (626) Net amount 88,208 78,639 Less: current portion (23,689) (18,935) Total long-term debt $ 64,519 $ 59,704 December 31, 2022,June 30, 2023, are as follows which does not include related party debt separately stated:13Twelve months ending June 30, 2024 $ 23,689 2025 5,654 2026 13,557 2027 33,188 2028 1,406 Thereafter 10,714 Total future maturities of long-term debt $ 88,208 , Marquis entered into an amended $25.0$25.0 million revolving credit agreement (“BofA Revolver”) with Bank of America Corporation (“BofA”). The BofA Revolver is a five-year, asset-based facility that is secured by substantially all of Marquis’ assets. Availability under the BofA Revolver is subject to a monthly borrowing base calculation. Marquis’ ability to borrow under the BofA Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with BofA. The BofA Revolver has a variable interest rate and matures in January 2025. As of December 31, 2022June 30, 2023 and September 30, 2022, the outstanding balance was approximately $11.7$5.8 million and $10.1$10.1 million, respectively.$29$29 million, is comprised of $23.0$23.0 million in revolving credit, $3.5$3.5 million in M&E lending, and $2.5$2.5 million for capital Capex lending. Advances under the new credit facility will bear interest at the 30-day SOFR plus 200 basis points for lending under the revolving facility, and 30-day SOFR plus 225 basis points for M&E and Capex lending (Effective December 31, 2021, SOFR replaced the USD LIBOR for most financial benchmarking).lending. The refinancing of the Borrower’s existing credit facility reduces interest costs and improves the availability and liquidity of funds by approximately $3.0$3.0 million at the close. The facility terminates on January 20, 2027,, unless terminated earlier in accordance with its terms.$6.0$6.0 million was drawn from the revolving facility, and the two term loans were opened in the amounts of $4.0$4.0 million and $1.0$1.0 million, respectively. The $4.0$4.0 million term loan (“Kinetic Term Loan #1”), which matures on January 20, 2027,, carries bears interest on the same terms as for M&E term lending as stated above. The $1.0$1.0 million term loan (“Kinetic Term Loan #2”), which matures on June 28, 2025,, is a “Special Advance Term Loan”, and bears interest at SOFR plus 375 basis points.December 31, 2022June 30, 2023 and September 30, 2022, the outstanding balance on the revolving loan was approximately $25.8$26.0 million and $23.6$23.6 million, respectively, and the outstanding balance on the original M&E lending, which is documented as a term note, was approximately $3.0$2.5 million and $3.2$3.2 million, respectively. The revolving loan has a variable interest rate and matures in January 2027. As of December 31, 2022,June 30, 2023 and September 30, 2022, the outstanding balance on the two term loans to fund the Kinetic acquisition wereTerm Loan #1 was approximately $4.5$3.4 million and $4.8$3.9 million, respectively.$12.0$12.0 million credit agreement with Texas Capital Bank (“TCB Revolver”). The TCB Revolver is a five-year,, asset-based facility that is secured by substantially all of Vintage Stock’s assets. Availability under the TCB Revolver is subject to a monthly borrowing base calculation. The TCB Revolver has a variable interest rate and matures in November 2023. The effective rate, as of June 30, 2023, was 7.23%. As of December 31, 2022,June 30, 2023 and September 30, 2022, the balance outstanding was approximately $5.6$6.7 million and $9.4$9.4 million, respectively.December 31, 2022:$3.7$3.7 million, secured by equipment. The Equipment Loan #3 is due December 2023,, payable in 84 monthly payments of $52,000$52,000 beginning January 2017,, bearing interest rate at 4.8%4.8% per annum. As of December 31, 2022June 30, 2023 and September 30, 2022, the balance was approximately $600,000$306,000 and $751,000,$751,000, respectively.$1.1$1.1 million, secured by equipment. The Equipment Loan #4 is due December 2023,, payable in 81 monthly payments of $16,000$16,000 beginning April 2017,, bearing interest at 4.9%4.9% per annum. As of December 31, 2022June 30, 2023 and September 30, 2022, the balance was approximately $186,000$94,000 and $231,000,$231,000, respectively.14$4.0$4.0 million, secured by equipment. The Equipment Loan #5 is due December 2024,, payable in 84 monthly payments of $55,000$55,000 beginning January 2018,, bearing interest at 4.7%4.7% per annum. As of December 31, 2022,June 30, 2023 and September 30, 2022, the balance was approximately $1.3$953,000 and $1.4 million, and $1.4 million, respectively.$913,000,$913,000, secured by equipment. The Equipment Loan #6 is due July 2024,, payable in 60 monthly payments of $14,000$14,000 beginning August 2019,, with a final payment of $197,000,$197,000, bearing interest at 4.7%4.7% per annum. As of December 31, 2022June 30, 2023 and September 30, 2022, the balance was approximately $433,000$356,000 and $$471,000, respectively.$5.0$5.0 million, secured by equipment. The equipment loanEquipment Loan #7 is due February 2027,, payable in 84 monthly payments of $59,000$59,000 beginning March 2020,, with the final payment of $809,000,$809,000, bearing interest at 3.2%3.2% per annum. As of December 31, 2022,June 30, 2023 and September 30, 2022, the balance was approximately $3.4$3.1 million and $3.5$3.5 million, respectively.$3.4$3.4 million, secured by equipment. The equipment loanEquipment Loan #8 is due September 2027,, payable in 84 monthly payments of $46,000$46,000 beginning October 2020,, bearing interest at 4.0%4.0%. As of December 31, 2022June 30, 2023 and September 30, 2022, the balance was approximately $2.4$2.2 million and $2.5$2.5 million, respectively.$5.5$5.5 million of new equipment under Note #9 of its master agreement. The note,Equipment Loan #9, which is secured by the equipment, matures December 2026, and is payable in 60 monthly installmentspayments of $92,000,$92,000 beginning January 2022, with the final payment in the amount of approximately $642,000, beginning January 2022,$642,000, bearing interest at 3.75%.3.75% per annum. As of December 31, 2022June 30, 2023 and September 30, 2022, the balance was approximately $4.6$4.1 million and $4.8$4.8 million, respectively.$5.7$5.7 million of new equipment under noteNote #10 of its master agreement. The note,Equipment Loan #10, which is secured by the equipment, matures December 2029, and is payable in 84 monthly installmentspayments of $79,000,$79,000, beginning January 2023, with the final payment in the amount of approximately $650,000, beginning January 2023,$650,000, bearing interest at 6.50%6.50%. As of December 31, 2022,June 30, 2023, the balance was approximately $5.7$5.4 million.Sellers NotesSellers notes consist of the following:Other Notes PayableOther notes payable consists of the following:-
written notice
written noticeDecember 31, 2022,June 30, 2023, the Company was in compliance with all covenants under its existing revolving and other loan agreements.1510:12: Notes Payable, RelatedPayable-Related PartiesDecember 31, 2022June 30, 2023 and September 30, 2022 consisted of the following (in 000's)$000's):June 30, 2023 September 30, 2022 Isaac Capital Group, LLC, 12.5% interest rate, matures May 2025 $ 2,000 $ 2,000 Spriggs Investments, LLC, 10% interest rate, matures July 2024 2,000 2,000 Spriggs Investments, LLC for Flooring Liquidators, 12% interest rate, matures July 2024 1,000 — Isaac Capital Group, LLC revolver, 12% interest rate, matures April 2024 1,000 — Isaac Capital Group, LLC for Flooring Liquidators, 12% interest rate, matures January 2028 5,000 — Seller of Flooring Liquidators, 8.24% interest rate, matures January 2028 34,000 — Seller of Kinetic, 7.% interest rate, matures September 2027 3,000 3,000 Total notes payable - related parties 48,000 7,000 Less: unamortized debt issuance costs (2,227) — Net amount 45,773 7,000 Less: current portion (1,000) (2,000) Total long-term portion, related parties $ 44,773 $ 5,000 Twelve months ending June 30, 2024 $ 1,000 2025 3,000 2026 2,000 Thereafter 42,000 Total future maturities of long-term debt, related parties $ 48,000 11:13: Stockholders’ EquityDecember 31, 2022,June 30, 2023 and September 30, 2022, there were 47,840 shares of Series E Convertible Preferred Stock issued and outstanding.December 31, 2022June 30, 2023 and September 30, 2022, the Company had 529,631659,961 and 504,921620,971 shares of Treasury Stock, respectively. ForDuring the threenine months ended December 31,June 30, 2023 and 2022, respectively, the Company purchased 24,710repurchased 38,990 and 79,828 shares of its common stock on the open market for approximately $622,000. No$988,000 and $2.5 million, respectively. On June 13, 2023, Tony Isaac, a member of the Company's board of directors, and father of the Company's CEO, Jon Isaac, exercised stock options for which he received 9,904 shares were acquired duringof the three months ended December 31, 2021.Company's common stock. On June 30, 2023, the Company repurchased Mr. Isaac's 9,904 shares of the Company's common stock for $25.85 per share, the closing market price on June 28, 2023, or approximately $256,000 (see Note 16).12:14: Stock-Based Compensationthreenine months ended December 31, 2022:June 30, 2023:Number of
SharesWeighted
Average
Exercise
PriceWeighted
Average
Remaining
Contractual LifeIntrinsic
ValueOutstanding at September 30, 2021 87,500 $ 18.81 1.78 $ 1,626 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Exercisable at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Granted 17,500 $ 35.00 Exercised (31,250) $ 14.64 Outstanding at June 30, 2023 73,750 $ 24.42 1.38 $ 762 Exercisable at June 30, 2023 73,750 $ 24.42 1.38 $ 762 Series A Restricted Stock Awards WAFV Outstanding at September 30, 2022 — $ — Granted 27,307 $ 36.62 Vested — $ — Canceled — $ — Non-vested at June 30, 2023 27,307 $ 36.62
Shares
Average
Exercise
Price
Average
Remaining
Contractual Life
Value16$0.00approximately $287,000 and approximately $18,000$0 during the three months ended December 31,June 30, 2023 and 2022, respectively, and 2021,approximately $396,000 and $37,000 during the nine months ended June 30, 2023 and 2022, respectively, related to stock option awards and restricted stock awards granted to certain employees and officers based on the grant date fair value of the awards, and the revaluation for existing options whereby the expiration date was extended.At December 31, 2022,noapproximately $911,000 of unrecognized compensation expense associated with stock option awards and no non-vested stock optionsRestricted Stock Units outstanding.13:15: Earnings Per Share000's)$000's):Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Basic Net income $ 1,060 $ 3,472 $ 4,462 $ 25,376 Less: preferred stock dividends — — — — Net income applicable to common stock $ 1,060 $ 3,472 $ 4,462 $ 25,376 Weighted average common shares outstanding 3,166,842 3,090,321 3,123,177 3,128,813 Basic earnings per share $ 0.33 $ 1.12 $ 1.43 $ 8.11 Diluted Net income applicable to common stock $ 1,060 $ 3,472 $ 4,462 $ 25,376 Add: preferred stock dividends — — — — Net income applicable for diluted earnings per share $ 1,060 $ 3,472 $ 4,462 $ 25,376 Weighted average common shares outstanding 3,166,842 3,090,321 3,123,177 3,128,813 Add: Options 19,823 40,365 20,218 40,206 Add: Series B Preferred Stock — — — — Add: Series B Preferred Stock Warrants — — — — Add: Series E Preferred Stock 239 239 239 239 Assumed weighted average common shares outstanding 3,186,904 3,130,925 3,143,634 3,169,258 Diluted earnings per share $ 0.33 $ 1.11 $ 1.42 $ 8.01 17,00038,500 and 4,00021,000 options to purchase shares of common stock that are anti-dilutive, and are not included in the three and nine months ended December 31,June 30, 2023 and 2022 and 2021, diluted earnings per share computations, respectively.14:16: Related Party TransactionsFund and Capital Group, LLCDecember 31, 2022,June 30, 2023, Isaac Capital Group, LLC (“ICG”) owned 1,299,510 sharesbeneficially owns 48.8% of commonthe Company’s issued and outstanding capital stock. Jon Isaac, the Company's President and Chief Executive Officer, is the President and sole member of ICG, and, accordingly, has sole voting and dispositive power with respect to these shares. ICG beneficially owns 42.6% of the Company’s outstanding capital stock. Mr. Isaac also personally owns 219,177 shares of common stock and holds options to purchase up to 25,000 shares of common stock at an exercise price of $10.00$10.00 per share, all of which are currently exercisable.17December 31, 2022,June 30, 2023, the Company was a party to a term loan with ICG of which Jon Isaac, the Company’s President and Chief Executive Officer, is the sole member, in the amount of $2.0$2.0 million (the “ICG Loan”). The ICG Loan matures on May 1, 2025 and bears interest at a rate of 12.5%12.5%. Interest is payable in arrears on the last day of each month. As of December 31, 2022,June 30, 2023 and September 30, 2022, there was $2.0 millionthe outstanding balance on this loan.$1.0$1.0 million revolving credit facility (the “ICG Revolver”). The ICG Revolver bears interest at 10.0%10.0% per annum and provides for the payment of interest monthly in arrears and matures April 2023. On April 1, 2023,. the Company entered into the First Amendment of the ICG Revolver that extended the maturity to April 8, 2024 and increased the interest rate to 12% per annum. As of December 31,June 30, 2023 and September 30, 2022, the Company has not drawnoutstanding balance on this note was $1.0 million and $0, respectively.revolving promissory note.Transactions with JanOne Inc.Lease agreementCustomer Connexxacquisition of Flooring Liquidators, Flooring Affiliated Holdings, LLC, a wholly-owned subsidiary of the Company, as borrower, entered into a promissory note for the benefit of ICG in the amount of $5.0 million (“ICG Flooring Liquidators Loan”). The ICG Flooring Liquidators Loan matures on January 18, 2028, and bears interest at 12%. Interest is payable in arrears on the last day of each calendar month. The note is fully guaranteed by the Company. As of June 30, 2023, the outstanding balance on this loan was $5.0 million.,. Richard Butler, a member of the Company's board of directors, is a director of JanOne.$52,000$55,000 and $55,000$52,000 in rent and other reimbursed expenses for three months ended June 30, 2023 and 2022 and $160,000 and $163,000 in rent and other reimbursed expenses for the threenine months ended December 31,June 30, 2023 and 2022, and 2021, respectively. Tony Isaac is the President and Board of Directors member, of JanOne.Recycling.agreesagreed to purchase inventory from time to time for ARCA as set forth in submitted purchase orders. The inventory is owned by the Company until ARCA installs it in customer's homes, and payment by ARCA to the Company is due upon ARCA's receipt of payment from the customer. All purchases made by the Company shallmust be paid back by ARCA in full, plus an additional five percent surcharge or broker-typebroker-iswas for one year, and automatically renews for successive one-year terms if not terminated by either party.December 31, 2022,June 30, 2023, the amount due from ARCA was approximately $560,000, and$300,000, net of the inventory balance was approximately $99,000. For the three months ended December 31, 2022, the Company recorded broker fees of approximately $15,000.CEO.Spriggs Promissory NoteOn July 10, 2020, the Company executed a promissory note (the “Spriggs Promissory Note”) in favor of Spriggs Investments, LLC (“Spriggs Investments”), a limited liability company whose sole member is CEOwholly-ownedwholly owned subsidiary of the Company, is the sole member of Spriggs Investments, LLC (“Spriggs Investments”).$2.0$2.0 million (the “Spriggs Loan”Loan I”). The Spriggs Loan I originally matured on July 10, 2022; however, the maturity date was extended to July 10, 2023, pursuant to unanimous written consent of the Board of Directors. The Spriggs Promissory Note I bears simple interest at a rate of 10.0%10.0% per annum. On January 19, 2023, the Company entered into a modification agreement of the Spriggs Loan I. Consequently, the Spriggs Promissory Note I will bear interest at a rate of 12% per annum, and the maturity date was extended to July 31, 2024. As of December 31, 2022June 30, 2023 and September 30, 2022, the amount owed was $2.0$2.0 million.18LLC.Spyglass Estate Planning, LLC, a limited liability company whose sole member is Jon Isaac, the Company’s President and Chief Executive Officer.Spyglass. The building leases are for 20-years20 years with two options to renew for an additional five years each. The provisions of the lease agreements include an initial 24-month month-to-month rental period, during which the lessee may cancel with 90-day notice, followed by a 20-year lease term with two five-year renewal options. The Company has evaluated each lease and determined the rentrental amounts to be at market rates.15:17: Commitments and ContingenciesMatterInvestigation (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and two of its executive officers - Jon Isaac, the Company’s current President and Chief Executive Officer, and Virland Johnson, the Company’s former Chief Financial Officer, as defendants (collectively, the "Company Defendants"“Company Defendants”) as well as certain other related third parties.parties (the “SEC Complaint”). The SEC Complaint alleges various financial, disclosure, and reporting violations related to income and earnings per share data, purported undisclosed stock promotion and trading, purported inaccurate disclosure regarding beneficial ownership of common stock, and undisclosed executive compensation from 2016 through 2018. The violations are brought under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5; Sections 13(a), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-14, 13a-13, 13b2-1, 13b2-2; Section 14(a) of the Exchange Act and Rule 14a-3; and Section 17(a) of the Securities Act of 1933. The SEC seeks permanent injunctions against the Company Defendants, permanent officer-and-director bars, disgorgement of profits, and civil penalties. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.third party-defendantsthird-party defendants moved to dismiss the SEC complaint. On September 7, 2022, the court denied the Company Defendants’ motion to dismiss, but granted one of the third-party defendant’s motions to dismiss, granting the SEC leave to file an amended complaint. On September 21, 2022, the SEC filed an amended complaint to which the Company Defendants filed an answer on October 11, 2022, denying liability. One third-party defendant moved to dismiss the amended complaint. The court subsequently entered a discovery scheduling order and the parties exchanged initial disclosures. On February 1, 2023, the court denied the third-party defendant’s motion to dismiss the amended complaint. The parties have agreed to participateparticipated in a mediation in June 2023. The mediation was not successful and to continue the remainder of discovery until after the mediation, scheduled to take place in April 2023.19Company and the two executive officers named in the SEC Complaint."Company Defendants"). The allegations asserted are similar to those in the SEC Complaint. Among other sought relief, the complaint seeks damages in connection with the purchases and sales of the Company’s securities between December 28, 2016 and August 3, 3021.2021. As of December 17, 2021, the judge granted a stipulation to stay proceedings pending the resolutions of the motions to dismiss in the SEC Complaint. On February 1, 2023, the final motion to dismiss relating to the SEC Complaint was denied, which was subsequently noticed in the Sieggreen action on February 2, 2023. AsPlaintiff filed an Amended Complaint on March 6, 2023. On May 5, 2023, the Company Defendants filed a result,Motion to Dismiss the plaintiffAmended Complaint, and the briefing on that motion is now complete. Discovery is automatically stayed in this action hascase until on or about April 3, 2023after the disposition of the Motion to file an amended complaint.Dismiss. If the Motion to Dismiss is not successful, the case will proceed to discovery. The Company and its executives anticipate moving to dismiss the amended complaint as theyDefendants strongly dispute and deny the allegations at issue in this case and intend to continue to defend themselves vigorously against these claims.Industries, Inc.Marshall filed a civil complaint in the Court of Chancery of the State of Delaware. The complaint alleges that the Company violated the terms of an agreementthe Agreement and planPlan of mergerMerger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $2,500,000. Plaintiff allegesalleged that ithe effectuated service of the complaint on the Company, but the Company did not receive notification of the action until it received an Application for Default Judgment filed with the court on December 26, 2022. On December 28, 2022, the courtCourt issued a letter order questioning its jurisdiction over the matter and directed plaintiff’s counsel to submit briefing as to why it believes jurisdiction is proper. Plaintiff filed its brief on January 13, 2023. The court has not ruled as to whether it will exerciseOn April 13, 2023, the Court dismissed the action in its entirety for lack of jurisdiction, rendering the Application for Default Judgment moot.matter.case was questioned by the Court of Chancery, State of Delaware, plaintiff filed a substantially identical complaint in the Western District of Pennsylvania. After the Delaware action was dismissed, plaintiff requested that counsel waive service of the Pennsylvania complaint. On April 19, 2023, the Company agreed to waive service. The Company’s counsel has had contacted plaintiff’s counsel regardingresponse to the case and advised that theComplaint was filed on August 7, 2023. The Company denies the allegations waged against it in the complaint and that it will abide by the court’s ruling on the threshold jurisdictional issue. The case will proceed once the court rules on the jurisdictional issue at which point the Company willintends to defend itself vigorously defend against these claims. . (see Note 17), filed a class action complaint against Elite Builders in the Superior Court of California, County of Alameda. The complaint alleges that Elite Builders failed to pay all minimum and overtime wages, failed to provide lawful meal periods and rest breaks, failed to provide accurate itemized wage statements, and failed to pay all wages due upon separation as required by California law. The complaint was later amended as a matter of right on October 4, 2022. Further, Ms. Sanchez has put the Labor & Workforce Development Agency on notice to exhaust administrative remedies and enable her to bring an additional claim under the California Labor Code Private Attorneys General Act, which permits an employee to assert a claim for violations of certain California Labor Code provisions on behalf of all aggrieved employees to recover statutory penalties. A Motion for Change of Venue to Stanislaus County was filed by Elite Builders on December 7, 2022. The hearing on the motion was heard on February 8, 2023.2023 and the motion was granted. The Company believes that Ms. Sanchez’s claims lack merit and intends to vigorously defend this action.action vigorously. The Company is currently unable to estimate the range of possible losses associated with this proceeding since no discovery has commenced and the scope of class is not yet known.2016:18: Segment Reportingfourfive operating segments which are characterized as: (1) Retail,Retail-Entertainment, (2) Retail-Flooring, (3) Flooring Manufacturing, (3)(4) Steel Manufacturing, and (4)(5) Corporate and Other. The RetailRetail-Entertainment segment consists of Vintage Stock; the Retail-Flooring segment consists of Flooring Liquidators; the Flooring Manufacturing Segment consists of Marquis; and the Steel Manufacturing Segment consists of Precision Marshall and Kinetic.000's)$000's):For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Revenues Retail-Entertainment $ 18,009 $ 19,227 $ 60,388 $ 66,179 Retail-Flooring 27,449 — 48,218 — Flooring Manufacturing 27,424 32,188 84,195 97,832 Steel Manufacturing 18,409 14,974 56,306 41,367 Corporate & Other 225 1,880 2,517 7,755 Total revenues $ 91,516 $ 68,269 $ 251,624 $ 213,133 Gross profit Retail-Entertainment $ 9,845 $ 10,226 $ 32,606 $ 34,726 Retail-Flooring 10,386 — 18,128 — Flooring Manufacturing 6,388 7,466 18,377 25,075 Steel Manufacturing 5,381 4,010 15,420 11,877 Corporate & Other 169 647 1,190 3,240 Total gross profit $ 32,169 $ 22,349 $ 85,721 $ 74,918 Operating income (loss) Retail-Entertainment $ 1,548 $ 2,202 $ 7,542 $ 10,144 Retail-Flooring 1,049 — 833 — Flooring Manufacturing 2,022 3,289 5,179 11,772 Steel Manufacturing 2,703 1,268 6,972 5,641 Corporate & Other (1,761) (895) (5,446) (2,837) Total operating income $ 5,561 $ 5,864 $ 15,080 $ 24,720 Depreciation and amortization Retail-Entertainment $ 316 $ 290 $ 949 $ 926 Retail-Flooring 1,107 — 2,102 — Flooring Manufacturing 1,067 768 3,259 2,327 Steel Manufacturing 1,146 376 3,353 891 Corporate & Other 47 137 315 472 Total depreciation and amortization $ 3,683 $ 1,571 $ 9,978 $ 4,616 Interest expense Retail-Entertainment $ 134 $ 73 $ 423 $ 309 Retail-Flooring 1,200 — 2,221 — Flooring Manufacturing 1,028 261 3,082 1,155 Steel Manufacturing 903 195 2,531 674 Corporate & Other 220 145 510 411 Total interest expenses $ 3,485 $ 674 $ 8,767 $ 2,549 Net income before provision for income taxes Retail-Entertainment $ 1,418 $ 1,574 $ 7,155 $ 20,867 Retail-Flooring (338) — (1,729) — Flooring Manufacturing 840 2,898 1,741 10,280 Steel Manufacturing 1,485 736 3,469 4,051 Corporate & Other (2,048) (371) (4,712) (1,974) Total net income before provision for income taxes $ 1,357 $ 4,837 $ 5,924 $ 33,224 17:19: Subsequent EventsFlooring Liquidators and Related EntitiesJanuary 18,July 20, 2023, Live Ventures acquired 100% of the issued and outstanding equity interests (“Equity Interests”) of Flooring Liquidators, Inc., Elite Builder Services, Inc., 7 Day Stone, Inc., Floorable, LLC, K2L Leasing, LLC, and SJ & K Equipment, Inc. (collectively, the “Acquired Companies”). The Acquired Companies are leading retailers and installers of floors, carpets, and countertops to consumers, builders and contractors in California and Nevada.The acquisition was pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with an effective date of January 18, 2023 (the “Effective Date”) by and among the Company Buyer, Stephen J. Kellogg, asacquired Precision Metal Works, Inc. (“PMW”), a Kentucky-based Metal Stamping and Value-Added Manufacturing Company. PMW was acquired for total consideration of approximately $28 million, comprised of a $25 million purchase price, with additional consideration of up to $3 million paid in the seller representativeform of the equity holders of the Acquired Companies and individually in his capacity as an equity holder of the Acquired Companies (“Kellogg” or the “Seller Representative”), and the other equity holders of the Acquired Companies (collectively with Kellogg, the “Sellers”).earn-out. The purchase price for the Equity Interests was $85.0 million less Estimated Indebtedness (other than Repaid Indebtedness), Estimated Selling Expenses (inclusive of $1.2 million of transaction bonuses which are deemed to be assumed liabilities for accounting purposes, such that the net purchase price for accounting purposes is $83.8 million), the RSU Value and the Retention Bonus (each as defined in the Purchase Agreement) (subject to adjustment, the “Purchase Price”). On the Effective Date, the Purchase Price was paid as follows:•$41.4 million in cash to the Seller Representative (on behalf of and for further distribution to the Sellers), calculated as follows: (A) the Purchase Price minus (B) the Holdback Amount of $2.0 million (defined in the Purchase Agreement), minus (C) the Note Amount (defined below) minus (D) the Share Amount (defined below), minus (E) Estimated Selling Expenses of $1.6 million (inclusive of $1.2 million of transaction bonuses), and minus (F) $2.0 million of additional consideration (described below) and was funded in part through cash in the Acquired Companies’ bank accounts on the Effective Date;•$34.0by a $2.5 million (the “Note Amount”) to certain trusts for the benefitseller note, borrowings under a credit facility of Kellogg$14.4 million, and membersproceeds under a sale-lease back transaction. The acquisition involved no issuance of his family (the “Kellogg Trusts”) pursuant to the issuance by Buyer of a subordinated promissory note (the “Note”) in favorstock of the Kellogg Trusts; Company. Management will assess the fair value of total consideration in accordance with Accounting Standards Codification 805, Business Combinations, in connection with the application of purchase accounting.•$4.0 million to the Kellogg 2022 Family Irrevocable Nevada Trust by issuance of 116,441 shares of Parent Common Stock (as defined in the Purchase Agreement) (the “Share Amount”), calculated in the manner described in the Purchase Agreement; and•$2.0 million of additional consideration, comprised of $1.0 million in cash and $1.0 million in restricted stock units.22December 31, 2022,June 30, 2023, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (the “2022 Form 10-K”).QuarterlyAnnual Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements about the Chapter 11 Case, (vi) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months, and (vii)(vi) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.statements.statements except as required by federal securities laws. Any information contained on our website www.liveventures.com or any other websites referenced in this Quarterly Report are not incorporated into and should not be deemed a part of this Quarterly Report.threefive segments to our business: Retail,Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate &and Other.23RetailRetailRetail-Entertainment Segment is composed of Vintage Stock, Inc. (“Vintage Stock”) and ApplianceSmart, Inc. (“ApplianceSmart”).Vintage StockVintage Stock Holdings LLC,, doing business as Vintage Stock, V-Stock, Movie Trading Company and EntertainMart (collectively, “Vintage Stock”).6970 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, Texas, and Utah.ApplianceSmartApplianceSmarthousehold applianceleading retailer with two product categories: one consistingand installer of typicalflooring, carpeting, and commonly available, innovative appliances,countertops to consumers, builders, and contractors in California and Nevada, operating 20 warehouse-format stores and a design center. Over the other consisting of affordable value-priced, offerings such as close-outs, factory overruns, discontinued models,years, the company has established a strong reputation for innovation, efficiency and special-buy appliances, including open box merchandise and others.On December 9, 2019, ApplianceSmart filed a voluntary petition (the “Chapter 11 Case”)service in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The bankruptcy affected Live Ventures’ indirect subsidiary ApplianceSmart onlyhome renovation and did not affect any other subsidiary of Live Ventures, or Live Ventures itself. On February 28, 2022, the court approved ApplianceSmart’s plan for reorganization (the “Plan”), discharging ApplianceSmart of certain debts according to the Plan resulting in the Company recording a gain of approximately $11.4 million, which includes a write-off or adjustment of approximately $11.5 million on the settlement of debtsimprovement market. Flooring Liquidators serves retail and other liabilities, offset by payments subject to the bankruptcy that were not included as debtor-in-possession liabilities of approximately $149,000. As of April 1, 2022, we have ceased operations ofbuilder customers through two businesses: retail customers through its one existing location,Flooring Liquidators retail stores, and are in the process of winding down operations, which will be immaterial to the consolidated financial statements.Marquis Affiliated Holdings LLC and wholly-owned subsidiaries (“Marquis”). “The Deluxe Company” has built a reputation of high integrity, speed of service and doing things the “Deluxe Way”. The term Deluxe refers to all aspects of the product and customer service to be head and shoulders above the rest. From order entry to packaging and delivery, Precision Marshall makes it easy to do business and backs all products and service with a guarantee.2410-K report as filed on December 16, 2022.revenue and “Adjusted EBITDA.”EBITDA”, which is a non-GAAP financial measure. We define Adjusted EBITDA is defined as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business’ ability to fund acquisitions and other capital expenditures, and to service its debt. Additionally, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate a company’scompany's financial performance, subject to certain adjustments. Adjusted EBITDA does not represent cash flows from operations, as defined by GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all of our cash needs. It is, however, a measurement that the Company believes is useful to investors in analyzing its operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities, and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure. As companies often define non-GAAP financial measures differently, Adjusted EBITDA, as calculated by Live Ventures Incorporated,the Company, should not be compared to any similarly titled measures reported by other companies.for the Three Months Ended December 31,June 30, 2023 and 2022 and 2021December 31,June 30, 2023 and 2022 and 2021 (in 000's)$000’s):
Revenue
RevenueThree Months Ended
June 30, 2023Three Months Ended
June 30, 2022% of Total
Revenue% of Total
RevenueSelected Data Revenues $ 91,516 $ 68,269 Cost of revenues 59,347 64.8 % 45,920 67.3 % General and administrative expenses 23,226 25.4 % 13,407 19.6 % Sales and marketing expenses 3,382 3.7 % 3,078 4.5 % Interest expense, net 3,485 3.8 % 674 1.0 % Income before provision for income taxes 1,357 1.5 % 4,837 7.1 % Provision for income taxes 297 0.3 % 1,365 2.0 % Net income $ 1,060 1.2 % $ 3,472 5.1 % Adjusted EBITDA (a) Retail-Entertainment $ 1,864 $ 2,456 Retail-Flooring 2,083 — Flooring Manufacturing 2,935 3,927 Steel Manufacturing 3,534 2,441 Corporate & Other (841) 16 Total Adjusted EBITDA $ 9,575 $ 8,840 Adjusted EBITDA as a percentage of revenue Retail-Entertainment 10.3 % 12.8 % Retail-Flooring 7.6 % N/A Flooring Manufacturing 10.7 % 12.2 % Steel Manufacturing 19.2 % 16.3 % Corporate & Other N/A 0.9 % Consolidated adjusted EBITDA as a percentage of revenue 10.5 % 12.9 % 000's)$000's):
Revenue
Total
Revenue
Revenue
Total
Revenue26For the Three Months Ended June 30, 2023 For the Three Months Ended June 30, 2022 Net
Revenue% of
Total
RevenueNet
Revenue% of
Total
RevenueRevenue Retail-Entertainment $ 18,009 19.7 % $ 19,227 28.2 % Retail-Flooring 27,449 30.0 % — 0.0 % Flooring Manufacturing 27,424 30.0 % 32,188 47.1 % Steel Manufacturing 18,409 20.1 % 14,974 21.9 % Corporate & Other 225 0.2 % 1,880 2.8 % Total Revenue $ 91,516 100.0 % $ 68,269 100.0 % 000's)$000's):
Profit
Profit % of Total Revenue
Profit
Profit % of Total RevenueFor the Three Months Ended June 30, 2023 For the Three Months Ended June 30, 2022 Gross
ProfitGross
Profit % of Total RevenueGross
ProfitGross
Profit % of Total RevenueGross Profit Retail-Entertainment $ 9,845 10.8 % $ 10,226 15.0 % Retail-Flooring 10,386 11.3 % — — % Flooring Manufacturing 6,388 7.0 % 7,466 10.9 % Steel Manufacturing 5,381 5.9 % 4,010 5.9 % Corporate & Other 169 0.2 % 647 0.9 % Total Gross Profit $ 32,169 35.2 % $ 22,349 32.7 % decreasedincreased approximately $6.2$23.2 million, or 8.2%34.1%, to approximately $69.0$91.5 million for the three months ended December 31, 2022,June 30, 2023, as compared to the corresponding prior year period. The decreaseincrease is primarily attributable to incremental revenue of approximately $34.4 million related to the recently acquired Flooring Liquidators and Kinetic. The increase was partially offset by decreased revenues of approximately $11.2 million in the other businesses, which is primarily due to reduced demand due toand inflationary pressures in all segments, as well as supply chain issues and overall product mix in our Retail Segment. The increase in revenue for our Steel Manufacturing segment was primarily due to the acquisition of Kinetic.68.2%64.8% for three months ended June 30, 2023 as compared to 67.3% for the three months ended December 31, 2022 as compared to 63.3% for the three months ended December 31, 2021.June 30, 2022. The increasedecrease is primarily attributable to the decreases in revenues, partially offset by inflationary cost increasesacquisitions of Flooring Liquidators and the acquisition of Kinetic.3.1%73.2% to approximately $14.6$23.2 million for the three months ended December 31, 2022,June 30, 2023, as compared to the three months ended December 31, 2021June 30, 2022. The increase is primarily due to increased General and Administrative expenses of approximately $9.2 million in the Retail-Flooring segment due to the acquisitions of Flooring Liquidators and $1.4 million in the Steel Manufacturing segment due to the acquisition of Kinetic, partially offset by decreases in professional fees and other General and Administrative expenses.Kinetic.SellingSellingdecreasedincreased by 9.0%9.9% to approximately $3.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to convention and trade show activity in our Flooring Manufacturing segment and Retail-Flooring segment due to the acquisition of Flooring Liquidators.December 31, 2022,June 30, 2023, as compared to the three months ended December 31, 2021,June 30, 2022, primarily due to increased debt balances related to the acquisitions of Flooring Liquidators and Kinetic, and to fund operations, and increased interest rates during the period.For the Nine Months Ended June 30, 2023 For the Nine Months Ended June 30, 2022 % of Total
Revenue% of Total
RevenueStatement of Income Data: Revenues $ 251,624 $ 213,133 Cost of revenues 165,903 65.9 % 138,215 64.8 % General and administrative expenses 60,443 24.0 % 40,718 19.1 % Sales and marketing expenses 10,198 4.1 % 9,480 4.4 % Interest expense, net 8,767 3.5 % 2,549 1.2 % Income before provision for income taxes 5,924 2.4 % 33,224 15.6 % Provision for income taxes 1,462 0.6 % 7,848 3.7 % Net income $ 4,462 1.8 % $ 25,376 11.9 % Adjusted EBITDA (a) Retail-Entertainment $ 8,519 $ 11,270 Retail-Flooring 3,194 — Flooring Manufacturing 8,082 13,761 Steel Manufacturing 9,729 7,113 Corporate & Other (3,224) (951) Total Adjusted EBITDA $ 26,300 $ 31,193 Adjusted EBITDA as a percentage of revenue Retail-Entertainment 14.1 % 17.0 % Retail-Flooring 6.6 % N/A Flooring Manufacturing 9.6 % 14.1 % Steel Manufacturing 17.3 % 17.2 % Corporate & Other N/A N/A Consolidated adjusted EBITDA as a percentage of revenue 10.5 % 14.6 % For the Nine Months Ended June 30, 2023 For the Nine Months Ended June 30, 2022 Net
Revenue% of
Total RevenueNet
Revenue% of Total
RevenueRevenue Retail-Entertainment $ 60,388 24.0 % $ 66,179 31.1 % Retail-Flooring 48,218 19.2 % — 0.0 % Flooring Manufacturing 84,195 33.5 % 97,832 45.9 % Steel Manufacturing 56,306 22.4 % 41,367 19.4 % Corporate & other 2,517 1.0 % 7,755 3.6 % Total Revenue $ 251,624 100.0 % $ 213,133 100.0 % For the Nine Months Ended June 30, 2023 For the Nine Months Ended June 30, 2022 Gross
ProfitGross
Profit % of Total RevenueGross
ProfitGross
Profit % of Total RevenueGross Profit Retail-Entertainment $ 32,606 13.0 % $ 34,726 16.3 % Retail-Flooring 18,128 7.2 % — — % Flooring Manufacturing 18,377 7.3 % 25,075 11.8 % Steel Manufacturing 15,420 6.1 % 11,877 5.6 % Corporate & other 1,190 0.5 % 3,240 1.5 % Total Gross Profit $ 85,721 34.1 % 0.340671001176358 $ 74,918 35.2 % and convention activity related toin our Flooring Manufacturing segment.segment and Retail-Flooring segment due to the acquisition of Flooring Liquidators.$1.0$6.2 million for the threenine months ended December 31, 2022,June 30, 2023, as compared to the threenine months ended December 31, 2021,June 30, 2022, primarily due to increased debt balances as well asrelated to the acquisitions of Flooring Liquidators and Kinetic, and to fund operations, and also increased interest rates.
Manufacturing
Manufacturing
& Other
Manufacturing
Manufacturing
& Other
Administrative
Expense
Marketing
Expense
(Loss)27Retail for the Three Months Ended June 30, 2023 and 2022For the Three Months Ended June 30, 2023 For the Three Months Ended June 30, 2022 Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Revenue $ 18,009 $ 27,449 $ 27,424 $ 18,409 $ 225 $ 91,516 $ 19,227 $ — $ 32,188 $ 14,974 $ 1,880 $ 68,269 Cost of Revenue 8,164 — 17,063 — 21,036 — 13,028 — 56 59,347 9,001 — — 24,722 — 10,964 — 1,233 45,920 Gross Profit 9,845 10,386 6,388 5,381 169 32,169 10,226 — 7,466 4,010 647 22,349 General and Administrative Expense 8,086 9,188 1,501 2,551 1,900 23,226 7,820 — 1,452 2,597 1,538 13,407 Selling and Marketing Expense 211 149 2,865 127 30 3,382 204 — 2,725 145 4 3,078 Operating Income (Loss) $ 1,548 $ 1,049 $ 2,022 $ 2,703 $ (1,761) $ 5,561 $ 2,202 $ — $ 3,289 $ 1,268 $ (895) $ 5,864 December 31, 2022June 30, 2023 decreased by approximately $2.9$1.2 million, or 11.2%6.3%, as compared to the prior year, primarily due to reduced demand as a result of inflationary factors, supply chain issues, and overall product mix. Further, effective April 2022, ApplianceSmart shut down its operations.demand. Cost of revenue as a percentage of revenue was 47.5%45.3% for the three months ended December 31, 2022,June 30, 2023, as opposed to 48.9%46.8% for the three months ended December 31, 2021.June 30, 2022. Operating income for the three months ended December 31, 2022June 30, 2023 was approximately $3.7$1.5 million, as compared to operating income of approximately $4.8$2.2 million for the prior year period.Manufacturing SegmentDecember 31, 2022June 30, 2023 was $27.4 million, and cost of revenue as a percentage of revenue was 62.2%. Operating income for the three months ended June 30, 2023 was approximately $1.0 million. During the three months ended June 30, 2023, Flooring Liquidators acquired certain assets of Cal Coast Carpet Warehouse, Inc.$6.4$4.8 million, or 19.6%14.8%, as compared to the prior year period, primarily due to reduced demand as a result of inflationary factors.customer demand. Cost of revenue as a percentage of revenue was 82.4%76.7% for the three months ended December 31, 2022,June 30, 2023, as opposed to 72.5%76.8% for the three months ended December 31, 2021. The increase is primarily due to increases in raw material costs, as compared to the prior year period.June 30, 2022. Operating income for the three months ended December 31, 2022June 30, 2023 was approximately $750,000,$2.0 million, as compared to operating income of approximately $4.6$3.3 million for the prior year period.December 31, 2022June 30, 2023 increased by $5.6approximately $3.4 million, or 45.4%22.9%, as compared to the prior year period, primarily due to the acquisition of Kinetic. Cost of revenue as a percentage of revenue was 75.6% for the three months ended December 31, 2022, as opposed to 70.8% for the three months ended December 31, 2021. The increase is primarily dueJune 30, 2023, as opposed to increases in raw material costs, as compared to73.2% for the prior year period, as well as the acquisition of Kinetic.three months ended June 30, 2022. Operating income for the three months ended December 31, 2022June 30, 2023 was approximately $1.5$2.7 million, as compared to operating income of approximately $1.7 million$1.3 in the prior year period.Segment results for Corporate and Other includes our directory services business and our investment in SW Financial. December 31,June 30, 2023 decreased by $1.7 million, or 88.0%, as compared to the prior year period. The decrease was primarily due to the shut-down of operations of SW Financial in May 2023. Cost of revenue was $56,000 for the three months ended June 30, 2023, as opposed to $1.2 million for the three months ended June 30, 2022. Operating loss for the three months ended June 30, 2023 was approximately $1.8 million, as compared to a loss of approximately $900,000 in the prior year period. As a result of the shut-down of operations of SW Financial, for the three months ended June 30, 2023, the Company recorded a gain on receipt of settlement amounts of $1.0 million and a loss on deconsolidation of SW Financial's assets and liabilities of approximately $1.7 million. Revenues and operating income forFor the Nine Months Ended June 30, 2023 For the Nine Months Ended June 30, 2022 Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Revenue $ 60,388 $ 48,218 $ 84,195 $ 56,306 $ 2,517 $ 251,624 $ 66,179 $ — $ 97,832 $ 41,367 $ 7,755 $ 213,133 Cost of Revenue 27,782 30,090 65,818 40,886 1,327 165,903 31,453 — 72,757 29,490 4,515 138,215 Gross Profit 32,606 18,128 18,377 15,420 1,190 85,721 34,726 — 25,075 11,877 3,240 74,918 General and Administrative Expense 24,528 17,061 4,430 8,019 6,405 60,443 24,162 — 4,677 5,813 6,066 40,718 Selling and Marketing Expense 536 234 8,768 429 231 10,198 420 — 8,626 423 11 9,480 Operating Income (Loss) $ 7,542 $ 833 $ 5,179 $ 6,972 $ (5,446) $ 15,080 $ 10,144 $ — $ 11,772 $ 5,641 $ (2,837) $ 24,720 $2.4$5.8 million, or 65%8.8%, as compared to the prior year, primarily due to reduced demand. Cost of revenue as a percentage of revenue was 46.0% for the nine months ended June 30, 2023, as opposed to 47.5% for the nine months ended June 30, 2022. Operating income for the nine months ended June 30, 2023 was approximately $7.5 million, as compared to operating income of approximately $10.1 million for the prior year period.decreased revenue for SW Financial. The decrease was primarily due to a decrease in commissions derived from stock market trading activity due to market volatility, as wellreduced customer demand as a decrease in commissions derived from initial public offerings and private placements due to reduced activity.result of inflationary factors. Cost of revenue as a percentage of revenue was 47.6%78.2% for the threenine months ended December 31, 2022,June 30, 2023, as opposed to 57.3%74.4% for the threenine months ended December 31, 2021.June 30, 2022. Operating income for the nine months ended June 30, 2023 was approximately $5.2 million, as compared to operating income of approximately $11.8 million for the prior year period.threenine months ended December 31, 2022June 30, 2023 was approximately $1.3$5.4 million, as compared to a loss of approximately $665,000$2.8 million in the prior period. Revenues and operating income for our directory services business continue to decline due to decreasing renewals. We expect revenue and operating income from this businesssegment to continue to decrease in the future. We are no longer accepting new customers in our directory services business. We anticipate revenues from our investment in SW Financial to trend upward in the future.from net incomefor the three and nine months ended June 30, 2023 (in 000's):For the Three Months Ended For the Nine Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net income $ 1,060 $ 3,472 $ 4,462 $ 25,376 Depreciation and amortization 3,683 1,571 9,978 4,616 Stock-based compensation 287 — 396 37 Interest expense, net 3,485 674 8,767 2,549 Income tax expense 297 1,365 1,462 7,848 Gain on bankruptcy settlement — — — (11,352) (Gain)/loss on extinguishment of debt — (279) — 84 SW Financial settlement gain (1,000) — (2,000) — Disposition of SW Financial 1,697 — 1,697 — Non-recurring costs for acquisitions 66 974 1,538 974 Write-off of fixed assets — 438 — 438 Write-off of ROU assets — 522 — 522 Other non-recurring company initiatives — 103 — 101 Adjusted EBITDA $ 9,575 $ 8,840 $ 26,300 $ 31,193 $4.6$4.9 million, or 37.7%15.7%, for threethe nine months ended December 31, 2022,June 30, 2023, as compared to the prior year period. The decrease is primarily due to decreases in revenue and gross profit, which is primarily due to our Flooring Manufacturing segment,operating income, as discussed above.28December 31, 2022,June 30, 2023, we had total cash and restricted cashon hand of approximately $12.8$3.5 million and approximately $21.2$28.8 million of available borrowing under our revolving credit facilities. The Company's restricted cash of approximately $890,000 is required collateral for a standby letter of credit for a customs bond, which is renewed annually. As we continue to pursue acquisitions and other strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities. The amount, nature, and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and, overall market conditions.operations,operations; pay our scheduled loan payments, allow for thepayments; ability to repurchase of shares under our share buyback program,program; and, pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors, for at least the next 12 months.$78.1$81.6 million as of December 31, 2022,June 30, 2023, as compared to working capital of approximately $78.4 million as of September 30, 2022.2022; an increase of approximately $3.2 million. The increase is primarily due to increases in inventories, trade receivables, and prepaid expenses of approximately $19.8 million, partially offset by increases in the current portion of long-term debt, accrued liabilities, accounts payable, and the current portion operating lease obligations of approximately $16.2 million.and restricted cash, as of December 31, 2022,June 30, 2023, was approximately $12.8$3.5 million compared to approximately $4.6 million as of September 30, 2022, an increasea decrease of approximately $8.2$1.1 million. Net cash provided by operations was approximately $6.3$26.0 million for the threenine months ended December 31, 2022June 30, 2023, as compared to net cash provided by operations of approximately $4.2$10.8 million for the threenine months ended December 31, 2021.June 30, 2022. The increase was primarily due to receiptsreduced purchases of inventory, reduced expenditures for prepaid expenses, and increased accounts receivable, partially offset by timing ofincreased accrued liabilities, payments for deposits, and payments on accounts payable.wereof approximately $1.3 million and $3.1$38.7 million for the threenine months ended December 31, 2022June 30, 2023 consisted of the acquisitions of Flooring Liquidators and 2021, respectively,Cal Coast Carpets, and consisted of purchases of property and equipment.$3.2$11.7 million during the threenine months ended December 31, 2022June 30, 2023 consisted of net proceeds from notes payable of approximately $5.7$9.9 million, proceeds from related party notes payable of approximately $7.0 million, net proceeds under revolver loans of approximately $3.1 million, partially offset by payments of notes payable, and financing leases, seller financing arrangements, debt acquisition costs and taxes paid for net settlement of stock options of approximately $1.8$7.3 million, and purchases of treasury stock in the amount of approximately $620,000.$4.2$20.8 million during the threenine months ended December 31, 2021June 30, 2022 consisted of net proceeds from notes payable of approximately $5.5$20.3 million, and approximately $2.0$18.2 million in net paymentsproceeds under revolver loans, partially offset by payments of notes payable and financing leases of approximately $3.4$15.2 million, and purchases of treasury stock in the amount of approximately $2.5 million.the Company iswe are not issuing common shares for liquidity purposes. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically. Occasionally, as our Company history has demonstrated, we will issue stock and derivative instruments linked to stock for services and/or debt settlement.29December 31, 2022,June 30, 2023, we did not participate in any market risk-sensitive commodity instruments for which fair value disclosure would be required. We believe we are not subject in any material way to other forms of market risk, such as foreign currency exchange risk or foreign customer purchases or commodity price risk. We believe we are not subject in any material way to other forms of market risk, such as foreign currency exchange risk or foreign customer purchases or commodity price risk., we concluded that the Company's disclosure, controls, and procedures were effective.December 31, 2022.June 30, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) of 2013 regarding Internal Control – Integrated Framework. Based on our assessment using those criteria, as of December 31, 2022,June 30, 2023, our management concluded that our internal controls over financial reporting were operating effectively.quarterthree or nine months ended December 31, 2022June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting."Item“Item 3. Legal Proceedings"Proceedings” in our 2022 Annual Report on Form 10-K for the year ended September 30, 2022 for information regarding material pending legal proceedings. Except as set forth therein and below, there have been no new material legal proceedings and no material developments in the legal proceedings previously disclosed.MatterInvestigation (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and two of its executive officers - Jon Isaac, the Company’s current President and Chief Executive Officer, and Virland Johnson, the Company’s former Chief Financial Officer, as defendants (collectively, the "Company Defendants"“Company Defendants”) as well as certain other related third parties.parties (the “SEC Complaint”). The SEC Complaint alleges various financial, disclosure, and reporting violations related to income and earnings per share data, purported undisclosed stock promotion and trading, purported inaccurate disclosure regarding beneficial ownership of common stock, and undisclosed executive compensation from 2016 through 2018. The violations are brought under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5; Sections 13(a), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-14, 13a-13, 13b2-1, 13b2-2; Section 14(a) of the Exchange Act and Rule 14a-3; and Section 17(a) of the Securities Act of 1933. The SEC seeks permanent injunctions against the Company Defendants, permanent officer-and-director bars, disgorgement of profits, and civil penalties. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.third party-defendantsthird-party defendants moved to dismiss the SEC complaint. On September 7, 2022, the court denied the Company Defendants’ motion to dismiss, but granted one of the third-party defendant’s motions to dismiss, granting the SEC leave to file an amended complaint. On September 21, 2022, the SEC filed an amended complaint to which the Company Defendants filed an answer on October 11, 2022, denying liability. One third-party defendant moved to dismiss the amended complaint. The court subsequently entered a discovery scheduling order and the parties exchanged initial disclosures. On February 1, 2023, the court denied the third-party defendant’s motion to dismiss the amended complaint. The parties have agreed to participateparticipated in a mediation in June 2023. The mediation was not successful and to continue the remainder of discovery until after the mediation, scheduled to take place in April 2023.Company and the two executive officers named in the SEC Complaint."Company Defendants"). The allegations asserted are similar to those in the SEC Complaint. Among other sought relief, the complaint seeks damages in connection with the purchases and sales of the Company’s securities between December 28, 2016 and August 3, 3021.2021. As of December 17, 2021, the judge granted a stipulation to stay proceedings pending the resolutions of the motions to dismissAsPlaintiff filed an Amended Complaint on March 6, 2023. On May 5, 2023, the Company Defendants filed a result,Motion to Dismiss the plaintiffAmended Complaint, and the briefing on that motion is now complete. Discovery is automatically stayed in this action hascase until on or about April 3, 2023after the disposition of the Motion to file an amended complaint.Dismiss. If the Motion to Dismiss is not successful, the case will proceed to discovery. The Company and its executives anticipate moving to dismiss the amended complaint as theyDefendants strongly dispute and deny the allegations at issue in this case and intend to continue to defend themselves vigorously against these claims.31Industries, Inc.Marshall filed a civil complaint in the Court of Chancery of the State of Delaware. The complaint alleges that the Company violated the terms of an agreementthe Agreement and planPlan of mergerMerger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $2,500,000. Plaintiff allegesalleged that ithe effectuated service of the complaint on the Company, but the Company did not receive notification of the action until it received an Application for Default Judgment filed with the court on December 26, 2022. On December 28, 2022, the courtCourt issued a letter order questioning its jurisdiction over the matter and directed plaintiff’s counsel to submit briefing as to why it believes jurisdiction is proper. Plaintiff filed its brief on January 13, 2023. The court has not ruled as to whether it will exerciseOn April 13, 2023, the Court dismissed the action in its entirety for lack of jurisdiction, rendering the Application for Default Judgment moot.matter.case was questioned by the Court of Chancery, State of Delaware, plaintiff filed a substantially identical complaint in the Western District of Pennsylvania. After the Delaware action was dismissed, plaintiff requested that counsel waive service of the Pennsylvania complaint. On April 19, 2023, the Company agreed to waive service. The Company’s counsel has had contacted plaintiff’s counsel regardingresponse to the case and advised that theComplaint was filed on August 7, 2023. The Company denies the allegations waged against it in the complaint and that it will abide by the court’s ruling on the threshold jurisdictional issue. The case will proceed once the court rules on the jurisdictional issue at which point the Company willintends to defend itself vigorously defend against these claims. (see Note 17 above), filed a class action complaint against Elite Builders in the Superior Court of California, County of Alameda. The complaint alleges that Elite Builders failed to pay all minimum and overtime wages, failed to provide lawful meal periods and rest breaks, failed to provide accurate itemized wage statements, and failed to pay all wages due upon separation as required by California law. The complaint was later amended as a matter of right on October 4, 2022. Further, Ms. Sanchez has put the Labor & Workforce Development Agency on notice to exhaust administrative remedies and enable her to bring an additional claim under the California Labor Code Private Attorneys General Act, which permits an employee to assert a claim for violations of certain California Labor Code provisions on behalf of all aggrieved employees to recover statutory penalties. A Motion for Change of Venue to Stanislaus County was filed by Elite Builders on December 7, 2022. The hearing on the motion was heard on February 8, 2023.2023 and the motion was granted. The Company believes that Ms. Sanchez’s claims lack merit and intends to vigorously defend this action.action vigorously. The Company is currently unable to estimate the range of possible losses associated with this proceeding since no discovery has commenced and the scope of class is not yet known.threenine months ended December 31, 2022,June 30, 2023, the Company repurchased 24,71038,990 shares of common stock under this program at a cost of approximately $620,000.$989,000. As of December 31, 2022,June 30, 2023, the Company has approximately $3.4$3.0 million available for repurchases under this program.3.1 8-K 001-33937 3.1 08/15/07 3.8 10-Q 001-33937 3.8 08/14/18 10.115 8-K 001-33937 10.115 06/16/23 10.116 8-K 001-33937 10.116 06/16/23 31.1 * 31.2 * 32.1 * 32.2 * 101.INS * Inline XBRL Instance Document 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
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NumberLive Ventures Incorporated Live Ventures IncorporatedDated: February 9, 2023February 9,August 10, 202334