☒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 | ||||
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(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) | ||||||||||||
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Large accelerated filer |
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Non-accelerated filer |
| Smaller reporting company | x | ||||||||
Emerging growth company | o |
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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 2022 industries, and Precision Metal Works, Inc. (“PMW”), which is engaged in metal forming, assembly, and finishing solutions across diverse industries, including appliance, automotive, hardware, electrical, electronic, medical products, and devices. PMW reports on a 13-week quarter, as opposed to the Company's calendar quarter reporting. However, the Company has determined that the difference in reporting periods has no material effect on its reported financial results. Principles of Consolidation Use of Estimates Recently Issued Accounting Pronouncements disclosures. Acquisition of PMW purchase that property. PMW. 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 Cal Coast Carpets Total purchase price $ 3,166 Inventory 748 Property, plant and equipment 2,118 Intangible assets 300 Total assets acquired 3,166 consideration of $1 million. The table below outlines the purchase price allocation, as revised, of the purchase for Flooring Liquidators to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s): 2023. The 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 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 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 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 summarizes estimated future amortization expense related to intangible assets that have net balances (in $000’s): The following table details the Company's goodwill as of September 30, 2023 and December 31, 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, 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 Long-term debt as of December 31, 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): (Precision Marshall) $4.5 million. As of September 30, 2023, the outstanding balance on the TCB Revolver was approximately $5.3 million. 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, 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, 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 2023: 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. Recycling due. LLC be completed by May 20, 2024. approximately one year. 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 Tulsa, Oklahoma and Joplin, Missouri. 2023 Form 10-K. 2022 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 % other businesses. Flooring Liquidators, which historically has generated higher margins. segment, as well as the acquisition of Flooring Liquidators. 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 three months ended December 31, 2023, CRO acquired certain assets and assumed certain liabilities of Johnson. year. 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 receivable and decrease in deferred income tax liabilities. $670,000. 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) Filed herewith Live Ventures Incorporated Dated: February /s/ Jon Isaac President and Chief Executive Officer (Principal Executive Officer) Dated: February /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, respectivelyDecember 31, 2023 September 30, 2023 (Unaudited) Assets Cash $ 5,569 $ 4,309 Trade receivables, net of allowance for doubtful accounts of $1.5 million at December 31, 2023 and $1.6 million at September 30, 2023 42,350 41,194 Inventories, net 132,455 131,314 Income taxes receivable — 1,116 Prepaid expenses and other current assets 4,751 4,919 Total current assets 185,125 182,852 Property and equipment, net 79,683 80,703 Right of use asset - operating leases 65,799 54,544 Deposits and other assets 1,240 1,282 Intangible assets, net 28,163 26,568 Goodwill 76,639 75,866 Total assets $ 436,649 $ 421,815 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 25,406 $ 27,190 Accrued liabilities 39,123 31,826 Income taxes payable 431 — Current portion of lease obligations - operating leases 12,799 11,369 Current portion of lease obligations - finance leases 361 359 Current portion of long-term debt 21,223 23,077 Current portion of notes payable related parties 4,000 4,000 Total current liabilities 103,343 97,821 Long-term debt, net of current portion 78,357 78,710 Lease obligation long term - operating leases 58,291 48,156 Lease obligation long term - finance leases 32,981 32,942 Notes payable related parties, net of current portion 6,919 6,914 Seller notes - related parties 39,672 38,998 Deferred taxes 11,714 14,035 Other non-current obligations 5,975 4,104 Total liabilities 337,252 321,680 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 December 31, 2023 and September 30, 2023, respectively, with a liquidation preference of $0.30 per share outstanding — — Common stock, $0.001 par value, 10,000,000 shares authorized, 3,159,984 and 3,164,330 shares issued and outstanding at December 31, 2023 and September 30, 2023, respectively 2 2 Paid in capital 69,437 69,387 Treasury stock common 664,409 and 660,063 shares as of December 31, 2023 and September 30, 2023, respectively (8,312) (8,206) Treasury stock Series E preferred 80,000 shares as of December 31, 2023 and September 30, 2023, respectively (7) (7) Retained earnings 38,277 38,959 Total stockholders' equity 99,397 100,135 Total liabilities and stockholders' equity $ 436,649 $ 421,815 per share)For the Three Months Ended December 31, 2023 2022 Revenues $ 117,593 $ 68,986 Cost of revenues 81,266 47,042 Gross profit 36,327 21,944 Operating expenses: General and administrative expenses 27,679 14,600 Sales and marketing expenses 5,107 2,777 Total operating expenses 32,786 17,377 Operating income 3,541 4,567 Other expense: Interest expense, net (4,163) (2,047) Other expense (284) (61) Total other expense, net (4,447) (2,108) (Loss) income before provision for income taxes (906) 2,459 (Benefit) provision for income taxes (224) 615 Net (loss) income $ (682) $ 1,844 (Loss) income per share: Basic $ (0.22) $ 0.60 Diluted $ (0.22) $ 0.60 Weighted average common shares outstanding: Basic 3,163,541 3,059,035 Diluted 3,163,541 3,089,741 For the Three Months Ended December 31, 2023 2022 Operating Activities: Net (loss) income $ (682) $ 1,844 Adjustments to reconcile net (loss) income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 4,295 2,651 Amortization of seller note discount 673 — Amortization of debt issuance cost 21 16 Stock based compensation expense 50 — Amortization of right-of-use assets 1,143 540 Change in reserve for uncollectible accounts (32) 20 Change in reserve for obsolete inventory 1,001 (48) Changes in assets and liabilities, net of acquisitions: Trade receivables 386 5,066 Inventories 267 223 Income taxes payable/receivable 1,547 558 Prepaid expenses and other current assets 468 100 Deposits and other assets 42 (173) Accounts payable (3,572) (3,416) Accrued liabilities 3,700 (1,050) Change in deferred income taxes (1,435) 56 Other Liabilities — (133) Net cash provided by operating activities 7,872 6,254 Investing Activities: Acquisition of CRO (1,034) — Acquisition of Johnson (500) — Purchase of property and equipment (1,655) (1,282) Net cash used in investing activities (3,189) (1,282) Financing Activities: Net payments under revolver loans (756) (51) Proceeds from issuance of notes payable — 5,709 Payments on notes payable (1,767) (1,362) Purchase of common treasury stock (107) (622) Payments on financing leases (793) (481) Net cash (used in) provided by financing activities (3,423) 3,193 Increase in cash 1,260 8,165 Cash, beginning of period 4,309 4,600 Cash, end of period $ 5,569 $ 12,765 Supplemental cash flow disclosures: Interest paid $ 3,271 $ 1,927 Income taxes received $ 346 $ — Noncash financing and investing activities: Kinetic goodwill adjustment $ — $ 312 PMW goodwill adjustment $ 233 $ — Noncash items related to CRO acquisition $ 725 $ — Noncash items related to Johnson acquisition $ 1,501 $ —
Preferred Stock
Preferred Stock
Preferred
Stock
Stock
Capital
Stock
Stock
Earnings
Equity
Preferred Stock
Preferred Stock
Preferred
Stock
Stock
Capital
Stock
Stock
Deficit
EquitySeries E
Preferred StockCommon Stock Series E
Preferred
StockCommon
StockShares Amount Shares Amount Paid-In
CapitalTreasury
StockTreasury
StockRetained
EarningsNon-controlling
InterestTotal
EquityBalance, September 30, 2023 47,840 $ — 3,164,330 $ 2 $ 69,387 $ (7) $ (8,206) $ 38,959 $ — $ 100,135 Stock based compensation — — — — 50 — — — — 50 Purchase of common treasury stock — — (4,346) — — — (106) — — (106) Net loss — — — — — — — (682) — (682) Balance, December 31, 2023 47,840 $ — 3,159,984 $ 2 $ 69,437 $ (7) $ (8,312) $ 38,277 $ — $ 99,397 Series E
Preferred StockCommon Stock Series E
Preferred
StockCommon
StockShares 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 20222023 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.20222023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023. This2024. The 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, 20222023 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, 202222, 2023 (the “2022“2023 Form 10-K”).control, and a variable interest entity (“VIE”). 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.control. All intercompany accounts and transactions have been eliminated in consolidation. These reclassifications have no material effect on the reported financial results.accounts,current and long-term trade and other receivables, the estimated reserve for excess and obsolete inventory, fair values in connection with the analysis of goodwill, other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets, lease terminations, and estimated useful lives for intangible assets and property and equipment.June 2016,November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU No. 2016-13, Measurement2023-07"). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularlyestimate credit losses on certain typesthe CODM, as well as the aggregate amount of financial instruments based on expected losses insteadother segment items included in the reported measure 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.segment profit or loss. ASU No. 2016-132023-07 is effective for smaller reporting companies for fiscal years beginning after December 15, 20212023, and the interim periods within those fiscal years.years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company has adoptedis evaluating the impact of this new accounting standardguidance 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.7March 2020,December 2023, the FASB issued ASU No. 2020-04 - Reference Rate Reform2023-09, Income Taxes (Topic 848), codified as ASC 848 (“ASC 848”740): Improvements to Income Tax Disclosures ("ASU 2023-09"). The purpose of ASC 848ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates to alternative reference rates. ASC 848 applies only to contracts, hedging relationships,effective for fiscal years beginning after December 15, 2024, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. Effective December 31, 2021, the Secured Overnight Financing Rate (“SOFR”) replaced the USD London Interbank-Offered Rate (“LIBOR”) for most financial benchmarking. The guidance may be applied upon issuance of ASC 848 through December 31, 2022.adopted on a prospective or retrospective basis. Early adoption is permitted. The Company has adoptedis evaluating the impact of this new accounting standardguidance on its consolidated financial statements and related disclosures; however, adoptiondisclosures.this ASUCROCash $ 1,034 Additional consideration 425 Holdback 300 Purchase price $ 1,759 anticipatedcalculated as the excess of both the consideration exchanged and liabilities assumed as compared to have no material impactthe 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 October 13, 2023, as calculated by an independent third-party firm. The value of the additional consideration was calculated by management. The Company anticipates the $425,000 of goodwill arising from the acquisition to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for CRO to the acquired identifiable assets, liabilities assumed and goodwill as of December 31, 2023 (in $000’s):Total purchase price $ 1,759 Accounts payable 770 Accrued liabilities 1,298 Total liabilities assumed 2,068 Total consideration 3,827 Accounts receivable 259 Inventory 1,406 Property, plant and equipment 261 Intangible assets Non-compete agreement 1,190 Subtotal intangible assets 1,190 Other assets 286 Total assets acquired 3,402 Total goodwill $ 425 Company's financial statements.In May 2021,first three anniversary dates following the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260)closing date. Each installment will accrue interest at 6.0% per annum until paid.Cash $ 500 Deferred consideration 1,200 Earnout 301 Purchase price $ 2,001 Total purchase price $ 2,001 Accounts payable 1,017 Accrued liabilities 1,141 Total liabilities assumed 2,158 Total consideration 4,159 Accounts receivable 1,252 Inventory 1,127 Property, plant and equipment 157 Intangible assets Customer relationships $ 1,301 Non-compete agreement 306 Subtotal intangible assets 1,607 Other assets 16 Total assets acquired 4,159 Total goodwill $ — Debt—Modificationsa designer, manufacturer, 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 exchangedistributor of a freestanding equity-classified written call option that is not withinbroad range of best-in-class flooring and installation solutions for commercial and home improvement projects. Specifically, Marquis acquired the scopeHarris Flooring Group brands, inventory, and book of another Topic. This update is effectivebusiness and intends to retain all sales representatives. The purchase price was $10.1 million, consisting of $3.0 million in cash at close, and the recording of a deferred payment of $5.1 million and holdback of $2.0 million. The acquisition was determined to be an asset acquisition for accounting purposes. The entirety of 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 anticipatedpurchase was allocated to have no material impact on the Company's financial statements.inventory.8Note 3: AcquisitionsKineticJune 28, 2022, Precision MarshallJuly 20, 2023 (“Precision”) acquired 100% of the issued and outstanding shares of common stock of The Kinetic Co., Inc. (“Kinetic”Effective Date”), the Company acquired PMW, a Wisconsin corporation, whichKentucky-based metal stamping and value-added manufacturing company. PMW was accomplished throughacquired for total consideration of approximately $28 million, comprised of 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$25 million purchase price, forplus closing cash, and subject to working capital adjustments, with additional consideration of up to $3 million paid in the Kinetic shares and Real Estate was approximately $24.7 million, whichform of an earn-out. The purchase price was funded with approximately $11.0in part by a $2.5 million inseller note, borrowings under the company’sa credit facility approximately $8.3of $14.4 million, inand proceeds from sale and leaseback of the Real Estate, a subordinated promissory note in the amount of $3.0 million to the Seller of Kinetic, $1.7 million of cash on-hand, a contingent earn-out liability valued at $997,000, a working capital adjustment of approximately $400,000, which was paid in cash, and a final fair value adjustment of approximately $312,000, which was noncash.As of the date of acquisition, Precision entered intounder a sale and leaseback agreement with a third-party, independenttransaction of approximately $8.6 million. The acquisition involved no issuance of stock of the Kinetic sellers,Company.Real Estate.other located in Louisville, Kentucky, with Legacy West Kentucky Portfolio, LLC (“Lessor”). The saleaggregate sales price of the Real Estatereal estate was approximately $8.9$14.5 million. The Louisville, Kentuckysubjectin connection with an option of PMW to closing fees of approximately $547,000.agreementagreements include a 20-year lease term with two five-year renewal options. The base rent under the Frankfort lease agreement is $600,000$34,977 per month for the first year of the term and a 2%2% per annum escalator.escalator thereafter. The Lease Agreementbase rent under the Louisville lease agreement is $63,493 per month for the first year of the term and a 2% per annum escalator thereafter. Both lease agreements are “net lease,leases,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the Real Propertyreal 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 of $14.5 million, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of Kinetic.Purchase price $ 25,000 Fair value of earnout 2,675 Cash from balance sheet 1,602 Working capital adjustment (2,500) Net purchase price $ 26,777 $3.0$4.0 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,July 20, 2023, as calculated by an independent third-party firm. GoodwillBecause the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition is expected towill be fully deductible for tax purposes. During the three months ended December 31, 2023, the Company recorded noncash fair value adjustments related to inventory and other liabilities assumed, as well as an adjustment to deferred tax liabilities in the aggregate amount of $652,000. The table below outlines the purchase price allocation of the purchase for KineticPMW to the acquired identifiable assets, liabilities assumed and goodwill as of December 31, 2022 (in $000’s):Net purchase price $ 26,777 Accounts payable 10,788 Accrued liabilities 4,995 Total liabilities assumed 15,783 Total consideration 42,560 Cash 1,602 Accounts receivable 12,613 Inventory 6,266 Property, plant and equipment 13,616 Intangible assets 3,600 Other assets 849 Total assets acquired 38,546 Total goodwill $ 4,014 Better BackersJuly 1, 2022, LiveJune 2, 2023, Flooring Liquidators acquired certain fixed assets and intellectual propertyother intangible assets of Better Backers, a Georgia corporation, which was accomplished through an Asset Purchase Agreement (the “Asset Purchase Agreement”Cal Coast Carpets, Inc. (“Cal Coast”)., and its shareholders. No liabilities were assumed as part of the acquisition.either transaction. The purchase price which is subject to certain post-closing adjustments,for the fixed assets acquired from Cal Coast was $35,000, and the intangible assets acquired from the shareholders was approximately $3.2$1.265 million, which isfor a total combined purchase price of $1.3 million. The intangible assets acquired were comprised of $1.8 million thatcustomer relationships, trade name, and non-compete agreements. The acquisition was paid upon closing, and the $1.4 million present value of $1.5 million of non-compete paymentsdetermined to be made over a 24-month period. In order to expedite the transaction, thean asset acquisition was originally made by Live, and the $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 million to ICG and assumed ownership of Better Backers.9In connection with the acquisition, Marquis entered into two 20-year building leases with Spyglass Estate Planning, LLC, a related party (see Note 14), with two options to renew for an additional five years each. The fair value of the buildings and improvement is approximately $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 and $32,000 per month, respectively, for the first year of the term, and a 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 and, as described in ASC 842 “Leases”.Under the purchase price allocation,such, no goodwill was recognized.recorded as part of the transaction. The values assigned to the assets acquired are based on their estimates of fair value available as of July 1, 2022,June 2, 2023, as calculated by management.Better BackersCal Coast to the acquired identifiable assets (in $000’s):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 Purchase price $ 83,800 Fair value adjustment, sellers note (3,300) Fair value adjustment, restricted stock (1,800) Net purchase price $ 78,700 Purchase price $ 78,700 Accounts payable 5,189 Accrued liabilities 10,700 Debt 60 Total liabilities assumed 15,949 Total consideration 94,649 Cash 9,131 Accounts receivable 4,824 Inventory 19,402 Property, plant and equipment 4,643 Intangible assets Trade names $ 13,275 Customer relationships 7,700 Non-compete agreements 1,625 Other 49 Subtotal intangible assets 22,649 Other 2,581 Total assets acquired 63,230 Total goodwill $ 31,419 Inventory, net December 31, 2023 September 30, 2023 Raw materials $ 29,690 $ 32,590 Work in progress 9,682 9,028 Finished goods 51,806 50,082 Merchandise 46,098 43,438 137,276 135,138 Less: Inventory reserves (4,821) (3,824) Total inventory, net $ 132,455 $ 131,314 December 31, 2023 September 30, 2023 Property and equipment, net: Land $ 2,029 $ 2,029 Building and improvements 36,417 35,684 Transportation equipment 2,088 2,062 Machinery and equipment 68,202 67,575 Furnishings and fixtures 6,287 6,028 Office, computer equipment and other 4,941 4,569 119,964 117,947 Less: Accumulated depreciation (40,281) (37,244) Total property and equipment, net $ 79,683 $ 80,703 December 31, 2023 September 30, 2023 Right of use asset - operating leases $ 65,799 $ 54,544 Lease liabilities: Current - operating 12,799 11,369 Current - finance 361 359 Long term - operating 58,291 48,156 Long term - finance 32,981 32,942 2022,2023, the weighted average remaining lease term for operating leases is 9.1210.3 years. The Company's weighted average discount rate for operating leases is 6.13%9.9%. Total cash payments for operating leases for the three months ended December 31, 20222023 and 20212022 were approximately $2.4$4.3 million and $2.5$2.4 million, respectively. Additionally, we obtained right-of-usethe Company recognized approximately $14.9 million in right of use assets in exchange for leaseand liabilities of approximately $1.8 million upon commencement of operating leases during the three months ended December 31, 2022.2022,2023, the weighted average remaining lease term for finance leases is 27.4727.4 years. The Company's weighted average discount rate for finance leases is 13.24%11.7%. Total cash payments for finance leases for the three months20222023 and 20212022 were approximately $481,000$793,000 and $0,$481,000, respectively. No additional finance leasesright-of-use assets or liabilities were commencedrecognized during the three months ended December 31, 2022.2023.following table details ourCompany records finance lease right of use assets as property and lease liabilitiesequipment. The balance, as of December 31, 20222023 and September 30, 2022 (000's)2023 is as follows (in $000’s):10December 31, 2023 September 30, 2023 Property and equipment, at cost $ 22,526 $ 22,526 Accumulated depreciation $ (861) $ (702) Property and equipment, net $ 21,665 $ 21,824 20222023 (in $000’s)$000's):Twelve months ended December 31, 2024 $ 18,564 2025 16,784 2026 14,155 2027 12,252 2028 8,107 Thereafter 36,737 Total 106,599 Less implied interest (35,509) Present value of payments $ 71,090 20222023 (in $000’s)$000's):Twelve months ended December 31, 2024 $ 3,167 2025 3,197 2026 3,241 2027 3,320 2028 3,425 Thereafter 104,066 Total 120,416 Less implied interest (87,074) Present value of payments $ 33,342 20222023 and 2021,2022, the Company recorded no gain or loss settlements, nor did it record impairment charges relating to any of its leases.5: Inventory7: Intangiblesinventoryintangibles as of December 31, 20222023 and September 30, 20222023 (in 000's)$000's):December 31, 2023 September 30, 2023 Intangible assets, net: Intangible assets - Tradenames $ 14,940 $ 14,940 Intangible assets - Customer relationships 15,175 13,874 Intangible assets - Other 3,811 2,316 33,926 31,130 Less: Accumulated amortization (5,763) (4,562) Total intangibles, net $ 28,163 $ 26,568 11Note 6: Property, Plant & EquipmentThe following table details the Company's property, plant & equipment as of December 31, 2022 and September 30, 2022 (in 000's):DepreciationAmortization expense was $2.4$1.2 million and $1.3 million, respectively,$253,000 for the three months ended December 31, 2023 and 2022, and 2021.Twelve months ending December 31, 2024 $ 4,984 2025 4,984 2026 4,945 2027 4,866 2028 4,335 Thereafter 4,049 $ 28,163 7:8: Goodwill2022 and September 30, 20222023 (in 000's)$000's):Retail - Entertainment Retail - Flooring Flooring Manufacturing Steel Manufacturing Total September 30, 2023 36,947 30,419 807 7,693 75,866 CRO acquisition — 425 — — 425 PMW adjustment — — — (652) (652) Flooring Liquidators adjustment — 1,000 — — 1,000 December 31, 2023 $ 36,947 $ 31,844 $ 807 $ 7,041 $ 76,639 2022,2023, the Company made a final fair value adjustment,adjustments, in the amount of approximately $312,000,$652,000, related to the purchase priceacquisition of PMW, and $1.0 million related to the Kinetic acquisition of Flooring Liquidators (see Note 3).8:9: Accrued Liabilities20222023 and September 30, 2022,2023, respectively (in 000's)$000's):December 31, 2023 September 30, 2023 Accrued liabilities: Accrued payroll and bonuses $ 5,775 $ 5,802 Accrued sales and use taxes 1,921 1,529 Accrued customer deposits 6,093 4,579 Accrued gift card and escheatment liability 1,873 1,819 Accrued interest payable 697 669 Accrued inventory 7,262 5,700 Accrued professional fees 5,454 3,146 Accrued expenses - other 10,048 8,582 Total accrued liabilities $ 39,123 $ 31,826 9:10: Long-Term Debt20222023 and September 30, 20222023 consisted of the following (in 000's)$000's):December 31, 2023 September 30, 2023 Revolver loans $ 56,022 $ 56,779 Equipment loans 14,419 15,486 Term loans 13,669 14,290 Other notes payable 16,011 15,789 Total notes payable 100,121 102,344 Less: unamortized debt issuance costs (541) (557) Net amount 99,580 101,787 Less: current portion (21,223) (23,077) Total long-term debt $ 78,357 $ 78,710 2022,2023, are as follows which does not include related party debt separately stated:13Twelve months ending December 31, 2024 $ 21,223 2025 7,504 2026 28,217 2027 31,134 2028 1,306 Thereafter 10,196 Total future maturities of long-term debt $ 99,580 , 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 base20222023 and September 30, 2022,2023, the outstanding balance was approximately $11.7$6.5 million and $10.1$6.1 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.20222023 and September 30, 2022,2023, the outstanding balance on the revolving loan was approximately $25.8$26.0 million and $23.6$23.0 million, respectively, and the outstanding balance on the original M&E lending, which is documented as a term note, was approximately $3.0$2.2 million and $3.2$2.3 million, respectively. The revolving loan has a variable interest rate and matures in January 2027. As of December 31, 2022,2023 and September 30, 2022,2023, the outstanding balance on the two term loans to fundKinetic Term Loan #1 was approximately $3.1 million and $3.3 million, respectively. As of September 30, 2023, the Kinetic Term Loan #2 was fully repaid.were approximately $4.5 million and $4.8 million, respectively.Texas Capital Bank Revolver LoanOn November 3, 2016, Vintage Stockof Flooring Liquidators (see Note 3), on January 18, 2023, Flooring Liquidators entered into an amended $12.0 milliona credit agreementfacility with TexasEclipse Business Capital, BankLLC (“TCB Revolver”Eclipse”). The TCBfacility consists of $25.0 million in revolving credit (“Eclipse Revolver”) and $3.5 million in M&E lending (“Eclipse M&E”). The Eclipse Revolver is a five-year,three-year, asset-based facility that is secured by substantially all of Vintage Stock’sFlooring Liquidators’ assets. Availability under the TCBEclipse Revolver is subject to a monthly borrowing base calculation. Flooring Liquidators’ ability to borrow under the Eclipse Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with Eclipse. The TCBEclipse Revolver has a variablebears interest rateat 4.5% per annum in excess of Adjusted Term SOFR prior to April 1, 2023, and 3.5% per annum in excess of Adjusted Term SOFR after April 1, 2023. The Eclipse M&E loan bears interest at 6.0% per annum in excess of Adjusted Term SOFR prior to April 1, 2023, and 5.0% per annum in excess of Adjusted Term SOFR after April 1, 2023. The credit facility matures in November 2023.January 2026. As of December 31, 2022,2023 and September 30, 2022,2023, the outstanding balance on the Eclipse Revolver was approximately $8.8 million and $8.2 million, respectively, and the outstanding balance on the Eclipse M&E loan was approximately $2.3 million and $2.4 million, respectively.$5.6 million and $9.4 million, respectively.2022:$3.7$3.7 million, secured by equipment. The Equipment Loan #3 is due matured in 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, 20222023 and September 30, 2022,2023, the balance was approximately $600,000$0 and $751,000,$154,000, respectively.$1.1$1.1 million, secured by equipment. The Equipment Loan #4 is due matured in 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, 20222023 and September 30, 2022,2023, the balance was approximately $186,000$0 and $231,000,$47,000, 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, 2022,2023 and September 30, 2022,2023, the balance was approximately $1.3 million$643,000 and $1.4 million,$799,000, 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, 20222023 and September 30, 2022,2023, the balance was approximately $433,000$277,000 and $471,000,$317,000, 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, 2022,2023 and September 30, 2022,2023, the balance was approximately $3.4$2.8 million and $3.5$2.9 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, 20222023 and September 30, 2022,2023, the balance was approximately $2.4$1.9 million and $2.5$2.0 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, 20222023 and September 30, 2022,2023, the balance was approximately $4.6$3.6 million and $4.8$3.9 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, 2022,2023 and September 30, 2023, the balance was approximately $$5.1 million and $5.3 million.5.7 million.Sellers NotesSellers notes consistTable of the following:ContentsOther Notes PayableOther notes payable consists of the following:-
written notice
written notice2022,2023, the Company was in compliance with all covenants under its existing revolving and other loan agreements.1510:11: Notes Payable, RelatedPayable-Related Parties20222023 and September 30, 20222023 consisted of the following (in 000's)$000's):December 31, 2023 September 30, 2023 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 1,000 Isaac Capital Group, LLC revolver, 12% interest rate, matures April 2024 1,000 1,000 Isaac Capital Group, LLC for Flooring Liquidators, 12% interest rate, matures January 2028 5,000 5,000 Total notes payable - related parties 11,000 11,000 Less: unamortized debt issuance costs (81) (86) Net amount 10,919 10,914 Less: current portion (4,000) (4,000) Total long-term portion, related parties $ 6,919 $ 6,914 Twelve months ending December 31, 2024 $ 4,000 2025 2,000 2028 5,000 Total future maturities of long-term debt, related parties $ 11,000 December 31,
2023September 30,
2023Seller of Flooring Liquidators, 8.24% interest rate, matures January 2028 $ 34,000 $ 34,000 Seller of PMW, 8.0% interest rate, matures July 2028 2,500 2,500 Seller of Kinetic, 7.0% interest rate, matures September 2027 3,000 3,000 Total Related party seller notes payable 39,500 39,500 Unamortized debt premium (discount) 172 (502) Net amount 39,672 38,998 Less current portion — — Long-term portion of Related party seller notes payable $ 39,672 $ 38,998 Twelve months ending December 31, 2026 500 2027 3,500 2028 35,672 Total $ 39,672 11:13: Stockholders’ Equity2022,2023 and September 30, 2022,2023, there were 47,840 shares of Series E Convertible Preferred Stock issued and outstanding.20222023 and September 30, 2022,2023, the Company had 529,631664,409 and 504,921660,063 shares of Treasury Stock, respectively. ForDuring the three months ended December 31, 2023 and 2022, the Company purchased repurchased 4,346 and 24,710 shares of its common stock on the open market for approximately $622,000. No shares were acquired during$106,532 and $622,000, respectively. During the three months ended December 31, 2021.2023 and 2022, the average price paid per share was $24.51 and $25.16, respectively.12:14: Stock-Based Compensation20222023 and the three months ended December 31, 2022:
Shares
Average
Exercise
Price
Average
Remaining
Contractual Life
Value16Number of
SharesWeighted
Average
Exercise
PriceWeighted
Average
Remaining
Contractual LifeIntrinsic
ValueOutstanding 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 Outstanding at September 30, 2023 53,750 $ 21.51 1.54 $ 540 Outstanding at December 31, 2023 53,750 $ 21.51 1.29 $ 450 Exercisable at December 31, 2023 53,750 $ 21.51 1.29 $ 450 $0.00approximately $50,000 and approximately $18,000$0 during the three months ended December 31, 20222023 and 2021,2022, 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.At2022,2023, the Company had no unrecognized compensation expense associated with stock option awards, and no non-vested stock options outstanding.awards.13:15: Earnings Per Share000's)$000's):There are 17,000Three Months Ended December 31, 2023 2022 Basic Net (loss) income $ (682) $ 1,844 Less: preferred stock dividends — — Net (loss) income applicable to common stock $ (682) $ 1,844 Weighted average common shares outstanding 3,163,541 3,059,035 Basic (loss) earnings per share $ (0.22) $ 0.60 Diluted Net (loss) income applicable to common stock $ (682) $ 1,844 Add: preferred stock dividends — — Net (loss) income applicable for diluted earnings per share $ (682) $ 1,844 Weighted average common shares outstanding 3,163,541 3,059,035 Add: Options — 30,467 Add: Series E Preferred Stock — 239 Assumed weighted average common shares outstanding 3,163,541 3,089,741 Diluted (loss) earnings per share $ (0.22) $ 0.60 4,000the effect of dilutive securities. No diluted EPS computation was made for the three months ended December 31, 2023, as the Company recorded a net loss. Had the Company calculated diluted EPS for the three months ended December 31, 2023, the total assumed weighted average common shares outstanding would have been 3,182,083. For the three months ended December 31, 2022, there were 17,000 options to purchase shares of common stock that arewere anti-dilutive, and are not included in the three months ended December 31, 2022 and 2021, diluted earnings per share computations, respectively.EPS computation.14:16: Related Party TransactionsFund and Capital Group, LLC2022,2023, Isaac Capital Group, LLC (“ICG”) owned 1,299,510 sharesbeneficially owns 48.9% 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.17AsDecember 31, 2022,up to $7.0 million (the “ICF Loan”) with Isaac Capital Fund I, LLC (“ICF”), a private lender whose managing member is Jon Isaac. On July 10, 2020, (i) ICF released and discharged Marquis from all obligations under the Company was a partyloan, (ii) ICF assigned all of its rights and obligations under the instruments, documents, and agreements with respect to a term loan withthe ICF Loan to ICG, of which Jon Isaac, the Company’s President and Chief Executive Officer, is the sole member, in the amount of $2.0and (iii) Live Ventures borrowed $2.0 million (the “ICG Loan”). from ICG. The ICG Loan matures on May 1, 2025 and bears interest at a rate of 12.5%. Interest is payable12.5% and matures in arrears on the last day of each month.May 2025. As of December 31, 2022,2023 and September 30, 2022, there was $2.0 million2023, the outstanding balance on this loan.note was $2.0 million.$1.0$1.0 million revolving credit facility (the “ICG Revolver”). TheOn June 23, 2022, as approved by unanimous consent of the Board of Directors of the Company, the amount of available revolving credit under the facility was increased to $6.0 million. No other terms of the Note were changed. On April 1, 2023, the Company entered into the First Amendment of the ICG Revolver bearsthat extended the maturity date to April 8, 2024 and increased the interest at 10.0%rate from 10% to 12% per annum and provides for the paymentannum. As of interest monthly in arrears and matures April 2023. Aseach of December 31, 2022,2023 and September 30, 2023, the Company has not drawn on the revolving promissory note.TransactionsICG Revolver was $1.0 million.JanOne Inc.Lease agreementCustomer Connexxthe acquisition 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 December 31, 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$36,000 and $55,000$52,000 in rent and other reimbursed expenses for the three months ended December 31, 2023 and 2022, and 2021, respectively. Tony Isaac is the President and Board of Directors member, of JanOne.Recycling.Inc. (“ARCA”("ARCA"), which was a wholly-ownedwholly owned subsidiary of JanOne.JanOne, Inc. until March 2023. Pursuant to the agreement, the Company 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 shall be paid back by ARCA in full plus an additional five percent surcharge or broker-type fee. The term of the Agreement is one year, and automatically renews if not terminated by either party. As of December 31, 2022,2023, the Company has a full allowance of approximately $690,000 recorded in the reserve for doubtful accounts for the amount due from ARCA was approximately $560,000, and 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, 2023 and September 30, 2023, the amount owed was $2.0 million.20222023 and September 30, 2022,2023, the amount owed was $$1.0 million.LLC.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 ContingenciesMatterInvestigationiswas conducting an investigation. The subpoena requested documents and information concerning, among other things, the restatement of the Company’s financial statements for the quarterly periods ended December 31, 2016, March 31, 2017, and June 30, 2017, the acquisition of Marquis Industries, Inc., Vintage Stock, Inc., and ApplianceSmart, Inc., and the change in auditors. On August 12, 2020, three of the Company’s corporate executive officers (together, the “Executives”) each received a “Wells Notice” from the Staff of the SEC relating to the Company’s SEC investigation. On October 7, 2020, the Company received a “Wells Notice” from the Staff of the SEC relating to the Company’s previously-disclosed SEC investigation. The Wells Notices related to, among other things, the Company’s reporting of its financial performance for its fiscal year ended September 30, 2016, certain disclosures related to executive compensation, and its previous acquisition of ApplianceSmart, Inc. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. The Wells Notices informed the Company and the Executives that the SEC Staff hashad made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives to allege certain violations of the federal securities laws. On October 1, 2018, the Company received a letter from the SEC requesting information regarding a potential violation of Section 13(a) of the Securities Exchange Act of 1934, based upon the timing of the Company’s Form 8-K filed on February 14, 2018. The Company cooperated fully with the SEC inquiry and provided a response to the SEC on October 26, 2018. (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 the case is currently in the midst of discovery. Discovery deadlines have been extended because counsel for JanOne Inc. and Virland Johnson moved to continuewithdraw on August 18, 2023, which motion the remaindercourt granted on October 2, 2023. Since that time, JanOne Inc. and Virland Johnson have obtained new counsel who have appeared in the case. In light of the new counsel in this case, the Court approved a stipulated order to extend the discovery until after the mediation, scheduledperiod approximately 45 days. Fact discovery is now set 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. AsAsPlaintiff 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.allegesalleged that the Company violated the terms of an agreement and plan of merger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $2,500,000. Plaintiff allegesThe Chancery Court dismissed that it effectuated serviceaction for lack of jurisdiction. On January 12, 2023, the representative re-filed the same action in the United States District Court for the Western District of Pennsylvania. On October 26, 2023, the Company counterclaimed against the representative and all represented shareholders for fraudulently misrepresenting the seller’s inventory and accounting methodology and asserting damages in excess of $4,500,000. Several of the complaint onindividual shareholders have moved to dismiss the counterclaim. The Company but the Company did not receive notification of the action until it received an Applicationexpects discovery to last for Default Judgment filed with the court on December 26, 2022. On December 28, 2022, the court 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 exercise jurisdiction over the matter. The Company’s counsel has had contacted plaintiff’s counsel regarding the case and advised that 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 will 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 MotionThe Court has set this for Change of Venuea Case Management Conference on September 30, 2024 after the parties have had a chance to Stanislaus County was filed byexchange discovery regarding the claims. Elite Builders on December 7, 2022. The hearing on the motion was heard on February 8, 2023. The Company believesmaintains 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 noas we are in the early stages of 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 December 31, 2023 2022 Revenues Retail-Entertainment $ 20,586 $ 23,273 Retail-Flooring 34,319 — Flooring Manufacturing 29,245 26,432 Steel Manufacturing 33,354 17,981 Corporate & Other 89 1,300 Total revenues $ 117,593 $ 68,986 Gross profit Retail-Entertainment $ 11,528 $ 12,210 Retail-Flooring 13,032 — Flooring Manufacturing 6,422 4,661 Steel Manufacturing 5,262 4,392 Corporate & Other 83 681 Total gross profit $ 36,327 $ 21,944 Operating income (loss) Retail-Entertainment $ 3,143 $ 3,664 Retail-Flooring 90 — Flooring Manufacturing 945 751 Steel Manufacturing 982 1,455 Corporate & Other (1,619) (1,303) Total operating income $ 3,541 $ 4,567 Depreciation and amortization Retail-Entertainment $ 266 $ 311 Retail-Flooring 1,352 — Flooring Manufacturing 1,056 1,111 Steel Manufacturing 1,617 1,093 Corporate & Other 4 136 Total depreciation and amortization $ 4,295 $ 2,651 Interest expense Retail-Entertainment $ 164 $ 154 Retail-Flooring 1,200 — Flooring Manufacturing 984 987 Steel Manufacturing 1,622 787 Corporate & Other 193 119 Total interest expense $ 4,163 $ 2,047 Net (loss) income before provision for income taxes Retail-Entertainment $ 3,055 $ 3,538 Retail-Flooring (1,628) — Flooring Manufacturing (163) (313) Steel Manufacturing (1,018) 268 Corporate & Other (1,152) (1,034) Total (loss) net income before provision for income taxes $ (906) $ 2,459 17:19: Subsequent Eventsstatements other than as discussed below:statements.AcquisitionTable of Flooring Liquidators and Related EntitiesOn January 18, 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, as the seller representative 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”). 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;Contents•$34.0 million (the “Note Amount”) to certain trusts for the benefit of Kellogg and members of his family (the “Kellogg Trusts”) pursuant to the issuance by Buyer of a subordinated promissory note (the “Note”) in favor of the Kellogg Trusts; •$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.222022,2023, 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, 20222023 (the “2022“2023 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.20222023 Form 10-K under Item 1A “Risk Factors” and Part II, Item 1A. "Risk Factors" below, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.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. improvement market. Flooring Liquidators serves retail and builder customers through two businesses: retail customers through its Flooring Liquidators retail stores, and builder and contractor customers through Elite Builder Services, Inc.February 28, 2022, the court approved ApplianceSmart’s plan for reorganization (the “Plan”), discharging ApplianceSmart ofOctober 13, 2023, Flooring Liquidators acquired 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 debtsassets and other liabilities, offset by payments subject to the bankruptcy that were not included as debtor-in-possessionassumed certain liabilities of approximately $149,000. AsCRO, a floor covering retailer and installer serving residential and commercial customers throughout Northwest Arkansas.April 1, 2022, we have ceased operations of its one existing location,Johnson, a floor covering retailer and areinstaller serving residential and commercial customers through locations 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”). and its wholly-owned subsidiary The Kinetic Co., Inc. (“Kinetic”), and Precision Metal Works, Inc. (“PMW”).nearlyover 75 years, Precision Marshall has served steel distributors through quick and accurate service. Precision Marshall has led the industry with exemplary availability and value-added processing that saves distributors time and processing costs.24 was founded by the Masters family in 1948 and is headquartered in Greendale, Wisconsin. Kinetic manufactures more than 90 types of knives and numerous associated parts with modifications and customizations available to each. Kinetic employs approximately 100 non-union employees.10-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, 20222023 and 2021and 2021 (in 000's)$000’s):
Revenue
RevenueThree Months Ended
December 31, 2023Three Months Ended
December 31, 2022% of Total
Revenue% of Total
RevenueSelected Data Revenues $ 117,593 $ 68,986 Cost of revenues 81,266 69.1 % 47,042 68.2 % General and administrative expenses 27,679 23.5 % 14,600 21.2 % Sales and marketing expenses 5,107 4.3 % 2,777 4.0 % Interest expense, net 4,163 3.5 % 2,047 3.0 % (Loss) income before provision for income taxes (906) (0.8 %) 2,459 3.6 % (Benefit) provision for income taxes (224) (0.2 %) 615 0.9 % Net (loss) income $ (682) (0.6 %) $ 1,844 2.7 % Adjusted EBITDA (a) Retail-Entertainment $ 3,667 $ 4,003 Retail-Flooring 1,303 — Flooring Manufacturing 1,877 1,785 Steel Manufacturing 2,802 2,525 Corporate & Other (953) (774) Total Adjusted EBITDA $ 8,696 $ 7,539 Adjusted EBITDA as a percentage of revenue Retail-Entertainment 17.8 % 17.2 % Retail-Flooring 3.8 % N/A Flooring Manufacturing 6.4 % 6.8 % Steel Manufacturing 8.4 % 14.0 % Corporate & Other N/A N/A Consolidated adjusted EBITDA as a percentage of revenue 7.4 % 10.9 % 000's)$000's):
Revenue
Total
Revenue
Revenue
Total
Revenue26For the Three Months Ended December 31, 2023 For the Three Months Ended December 31, 2022 Net
Revenue% of
Total
RevenueNet
Revenue% of
Total
RevenueRevenue Retail-Entertainment $ 20,586 17.5 % $ 23,273 33.7 % Retail-Flooring 34,319 29.2 % — 0.0 % Flooring Manufacturing 29,245 24.9 % 26,432 38.3 % Steel Manufacturing 33,354 28.4 % 17,981 26.1 % Corporate & Other 89 0.1 % 1,300 1.9 % Total Revenue $ 117,593 100.0 % $ 68,986 100.0 % 000's)$000's):
Profit
Profit % of Total Revenue
Profit
Profit % of Total RevenueFor the Three Months Ended December 31, 2023 For the Three Months Ended December 31, 2022 Gross
ProfitGross
Profit % of Total RevenueGross
ProfitGross
Profit % of Total RevenueGross Profit Retail-Entertainment $ 11,528 9.8 % $ 12,210 17.7 % Retail-Flooring 13,032 11.1 % — — % Flooring Manufacturing 6,422 5.5 % 4,661 6.8 % Steel Manufacturing 5,262 4.5 % 4,392 6.4 % Corporate & Other 83 0.1 % 681 1.0 % Total Gross Profit $ 36,327 30.9 % $ 21,944 31.8 % decreasedincreased approximately $6.2$48.6 million, or 8.2%70.5%, to approximately $69.0$117.6 million for the three months ended December 31, 2022,2023, as compared to the corresponding prior year period. The decreaseincrease is primarily dueattributable to reduced demand due to inflationary pressures in all segments,Flooring Liquidators and PMW, both of which were acquired after the first quarter of fiscal year 2023, as well as supply chain issues and overall product mixan increase of approximately $2.8 million in the Flooring Manufacturing segment. The increase was partially offset by decreased revenues of approximately $6.2 million in our Retail Segment. The increase in revenue for our Steel Manufacturing segment was primarily due to the acquisition of Kinetic.2022 as compared to 63.3% for the three months ended December 31, 2021.2022. The increase iswas primarily attributable to the decreasesacquisition of PMW, which historically has generated lower margins, as well as a decrease in revenues,margins in our Steel Manufacturing segment as a whole due to decreased production, partially offset by inflationary cost increases and the acquisition of Kinetic.3.1%89.6% to approximately $14.6$27.9 million for the three months ended December 31, 2022,2023, as compared to the three months ended December 31, 20212022. The increase is primarily due to the acquisitionacquisitions of Kinetic, partially offset by decreases in professional feesFlooring Liquidators and other General and Administrative expenses.PMW during fiscal 2023.SellingSellingdecreasedincreased by 9.0%83.9% to approximately $2.8$5.1 million for the three months ended December 31, 2022,2023, as compared to the three months ended December 31, 2021,2022, primarily due to decreasedincreased compensation for sales personnel acquired as part of the acquisition of the Harris Flooring Group® brands from Q.E.P, and increased convention and trade show and convention activity related toin our Flooring Manufacturing segment.$1.0$2.1 million for the three months ended December 31, 2022,2023, as compared to the three months ended December 31, 2021,2022, primarily due to increased debt balances as well asrelated to the acquisitions of Flooring Liquidators and PMW, and to fund operations, and increased interest rates.
Manufacturing
Manufacturing
& Other
Manufacturing
Manufacturing
& Other
Administrative
Expense
Marketing
Expense
(Loss)27Retail for the Three Months Ended December 31, 2023 and 2022For the Three Months Ended December 31, 2023 For the Three Months Ended December 31, 2022 Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Retail-Entertainment Retail-Flooring Flooring
ManufacturingSteel
ManufacturingCorporate
& OtherTotal Revenue $ 20,586 $ 34,319 $ 29,245 $ 33,354 $ 89 $ 117,593 $ 23,273 $ — $ 26,432 $ 17,981 $ 1,300 $ 68,986 Cost of Revenue 9,058 — 21,287 — 22,823 — 28,092 — 6 81,266 11,063 — — 21,771 — 13,589 — 619 47,042 Gross Profit 11,528 13,032 6,422 5,262 83 36,327 12,210 — 4,661 4,392 681 21,944 General and Administrative Expense 8,200 12,019 1,605 4,157 1,698 27,679 8,385 — 1,491 2,792 1,932 14,600 Selling and Marketing Expense 185 923 3,872 123 4 5,107 161 — 2,419 145 52 2,777 Operating Income (Loss) $ 3,143 $ 90 $ 945 $ 982 $ (1,619) $ 3,541 $ 3,664 $ — $ 751 $ 1,455 $ (1,303) $ 4,567 20222023 decreased by approximately $2.9$2.7 million, or 11.2%11.5%, as compared to the prior year, primarily due to reduced consumer demand asand a resultshift in sales mix toward used products, which generally have lower ticket sales with higher margins. The shift in sales mix also contributed to the increase in gross margin to 56.0% for the quarter ended December 31, 2023, compared to 52.5% for the prior year period. Operating income for the quarter ended December 31, 2023, was approximately $3.1 million, compared to operating income of inflationary factors, supply chain issues,approximately $3.7 million for the prior year period.overall product mix. Further, effective April 2022, ApplianceSmart shut down its operations. Costcost of revenue as a percentage of revenue was 47.5% for the three months ended December 31, 2022, as opposed to 48.9% for the three months ended December 31, 2021.62.0%. Operating income for the three months ended December 31, 20222023 was approximately $3.7 million, as compared to operating income$90,000. During the three months ended December 31, 2023, Flooring Liquidators acquired certain assets and assumed certain liabilities of approximately $4.8 million forCRO. Additionally, during the prior year period.2022 decreased2023 increased by approximately $6.4$2.8 million, or 19.6%10.6%, as compared to the prior year period,period. The gross margin was 22.0% for the quarter ended December 31, 2023, compared to 17.6% for the prior year period. The increase in revenue and gross margin is primarily due to reduced demandthe buildup of the sales force as a result of inflationary factors. Costthe acquisition of revenue as a percentagethe Harris Flooring Group® brands in the fourth quarter of revenue was 82.4% for the three months ended December 31, 2022, as opposed to 72.5% for the three months ended December 31, 2021. The increase is primarily due to increases in raw material costs, as compared to the priorfiscal year period.2023. Operating income for the three monthsyear ended December 31, 20222023, was approximately $750,000, as$0.95 million, compared to operating income of approximately $4.6$0.75 million for the prior year period.20222023 increased by $5.6approximately $15.4 million, or 45.4%85.5%, as compared to the prior year period,period. The increase is primarily due to increased revenues of approximately $18.3 million at The Kinetic Co., Inc. and PMW, partially offset by a $2.9 million decrease in our other Steel Manufacturing business. This decrease is primarily due to reduced customer demand as a result of general economic conditions. The gross margin was 15.8% for the quarter ended December 31, 2023, compared to 24.4% for the prior year period. The decrease in gross margin is primarily due to the acquisition of Kinetic. CostPMW, which has historically generated lower margins and decreased margins in the Steelincreases in raw material costs, as compared to the prior year period, as well as the acquisition of Kinetic.reduced production. Operating income for the three monthsyear ended December 31, 20222023, was approximately $1.5$1.0 million, as compared to operating income of approximately $1.7$1.5 million in the prior year period.Segment results for Corporate and Other includes our directory services business and our investment in SW Financial. 20222023 decreased by approximately $2.4$1.2 million, or 65%93.2%, as compared to the prior year period, primarily due to 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 well as a decrease in commissions derived from initial public offerings and private placements due to reduced activity. Cost of revenue as a percentage of revenue was 47.6% for the three months ended December 31, 2022, as opposed to 57.3% for the three months ended December 31, 2021. Operating loss for the three months ended December 31, 2022 was approximately $1.3 million, as compared to a loss of approximately $665,000 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 business 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.Adjusted EBITDA ReconciliationThe following table presents a reconciliation of Adjusted EBITDA from net income (in 000's):Adjusted EBITDA decreased by approximately $4.6 million, or 37.7%, for three months ended December 31, 2022, as compared to the prior year period. The decrease was primarily due to the closure of SW Financial in May 2023. Operating loss for the quarter ended December 31, 2023, was approximately $1.6 million, compared to a loss of approximately $1.3 million in the prior year.For the Three Months Ended December 31, 2023 December 31, 2022 Net (loss) income $ (682) $ 1,844 Depreciation and amortization 4,295 2,651 Stock-based compensation 50 — Interest expense, net 4,163 2,047 Income tax (benefit) expense (224) 615 Debt refinancing costs 183 — Acquisition costs 406 382 Other noncash charges 505 — Adjusted EBITDA $ 8,696 $ 7,539 revenue and gross profit, which is primarily due to our Flooring Manufacturing segment,operating income, as discussed above.282022,2023, we had total cash and restricted cashon hand of approximately $12.8$5.6 million and approximately $21.2$39.4 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$81.8 million as of December 31, 2022,2023, as compared to working capital of approximately $78.4$85.0 million as of September 30, 2022.2023; a decrease of approximately $3.2 million. The decrease is primarily due to increases in accrued liabilities and the current portion of operating lease obligations, and a decrease in prepaid expenses of approximately $8.6 million, partially offset by decreases in accounts payable, and increases in accounts receivable, inventories, and cash of approximately $5.3 million. cash and restricted cash, as of December 31, 2022,2023, was approximately $12.8$5.6 million compared to approximately $4.6$4.3 million as of September 30, 2022,2023, an increase of approximately $8.2$1.3 million. Net cash provided by operations was approximately $7.9 million for the three months ended December 31, 2023, as compared to net cash provided by operations of approximately $6.3 million for the three months ended December 31, 2022 as compared to net cash provided by operations of approximately $4.2 million for the three months ended December 31, 2021.2022. The increase was primarily due to receipts of accounts receivable,increases in accrued liabilities, depreciation and amortization expense, and allowance for obsolete inventory, partially offset by timing of payments onan increase in accounts payable.wereof approximately $1.3$3.2 million for the three months ended December 31, 2023 consisted of the acquisitions of CRO by Flooring Liquidators, and $3.1Johnson by CRO, and purchases of property and equipment. Our cash flows used in investing activities of approximately $1.3 million for the three months ended December 31, 2022 and 2021, respectively, and consisted of purchases of property and equipment. net proceeds from notes payable of approximately $5.7 million, partially offset by payments of notes payable and financing leases of approximately $1.8 million, and purchases of treasury stock in the amount of approximately $620,000.Our cash flows provided by financing activities of approximately $4.2 million during the three months ended December 31, 2021 consisted ofand net proceeds from notes payable of approximately $5.5 million, and approximately $2.0 million in net paymentsborrowings under revolver loans partially offset by payments of notes payable and financing leases of approximately $3.4 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.292022,2023, 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.controlControl and Procedures. We carried out an evaluation, under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, as of December 31, 2022, 2023, we concluded that the Company's disclosure, controls, and procedures were effectiveeffective.2022.2023. 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, 2022,2023, our management concluded that our internal controls over financial reporting were operating effectively.quarterthree months ended December 31, 20222023 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 Annual Report on2023 Form 10-K for the year ended September 30, 2022 for information regarding material pending legal proceedings. Except as set forth therein and below,herein, there have been no new material legal proceedings and no material developments in the legal proceedings previously disclosed.SEC MatterOn February 21, 2018, the Company received a subpoena from the Securities and Exchange Commission (“SEC”) and a letter from the SEC stating that it is conducting an investigation. The subpoena requested documents and information concerning, among other things, the restatement of the Company’s financial statements for the quarterly periods ended December 31, 2016, March 31, 2017, and June 30, 2017, the acquisition of Marquis Industries, Inc., Vintage Stock, Inc., and ApplianceSmart, Inc., and the change in auditors. On August 12, 2020, three of the Company’s corporate executive officers (together, the “Executives”) each received a “Wells Notice” from the Staff of the SEC relating to the Company’s SEC investigation. On October 7, 2020, the Company received a “Wells Notice” from the Staff of the SEC relating to the Company’s previously-disclosed SEC investigation. The Wells Notices related to, among other things, the Company’s reporting of its financial performance for its fiscal year ended September 30, 2016, certain disclosures related to executive compensation, and its previous acquisition of ApplianceSmart, Inc. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives to allege certain violations of the federal securities laws. On October 1, 2018, the Company received a letter from the SEC requesting information regarding a potential violation of Section 13(a) of the Securities Exchange Act of 1934, based upon the timing of the Company’s Form 8-K filed on February 14, 2018. The Company cooperated fully with the SEC inquiry and provided a response to the SEC on October 26, 2018.On August 2, 2021, the SEC filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and two of its executive officers as defendants (collectively, the "Company Defendants") as well as certain other third parties. The SEC Complaint alleges various financial, disclosure, and reporting violations related to income and earnings per share, purported undisclosed stock promotion and trading, 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 Defendants, 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.On October 1, 2021, the Company Defendants and third party-defendants moved to dismiss the 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 participate in a mediation and to continue the remainder of discovery until after the mediation, scheduled to take place in April 2023.The Company Defendants strongly dispute and deny the allegations and intend to continue to defend themselves vigorously against the claims.On August 13, 2021, Daniel E. Sieggreen, individually and on behalf of all others similarly situated, filed a class action complaint for violation of federal securities laws in the United States District Court for the District of Nevada, naming as defendants the Company and the two executive officers named in the SEC Complaint. The allegations asserted are similar to those in the SEC Complaint. Among other 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. 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. As a result, the plaintiff in this action has until on or about April 3, 2023 to file an amended complaint. The Company and its executives anticipate moving to dismiss the amended complaint as they strongly dispute and deny the allegations at issue in this case and intend to continue to defend themselves vigorously against these claims.31Holdback MatterOn October 10, 2022, a representative for the former shareholders of Precision Industries, Inc. 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 agreement and plan of merger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $2,500,000. Plaintiff alleges that it effectuated service of the complaint on 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 court 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 exercise jurisdiction over the matter. The Company’s counsel has had contacted plaintiff’s counsel regarding the case and advised that 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 will vigorously defend against these claims.Wage and Hour MatterOn July 27, 2022, Irma Sanchez, a former employee Elite Builder Services, Inc. (“Elite Builders”) (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. The Company believes that Ms. Sanchez’s claims lack merit and intends to vigorously defend this action. 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.2022,2023, the Company repurchased 24,710 of at a cost of approximately $620,000. As of December 31, 2022,made the Company has approximately $3.4 million available for repurchases under this program.following repurchases:Month Number of Shares Purchased Average Purchase Price Paid Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Amount that May be Purchased Under the Announced Plan or Program October 2023 — $ — — $ 3,299,685 November 2023 — — — 3,299,685 December 2023 4,346 24.51 4,346 3,193,153 Totals 4,346 $ 24.51 4,346 $ 3,193,153 3.1 8-K 001-33937 3.1 08/15/07 3.8 10-Q 001-33937 3.8 08/14/18 10.122 8-K 001-33937 10.122 10/23/23 10.123 8-K 001-33937 10.123 10/23/23 10.124 8-K 001-33937 10.124 10/23/23 10.125 * 10.126 *† 10.127 *† 10.128 *† 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)
Number
Number*Filed herewith9, 20239, 202334