What changed in this filing

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Item 1. Financial Statements

2020-08-14 compared with 2020-05-15 · 233 added, 168 removed, 792 unchanged (34% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share amounts)

March 31, 2020

June 30, 2020

September 30, 2019

27 unchanged sentences

Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 47,840 and 77,840

shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively, with a

shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively, with a

liquidation preference of $0.30 per share outstanding

Common stock, $0.001 par value, 10,000,000 shares authorized, 1,613,281 and 1,826,009 shares issued

and outstanding at March 31, 2020 and September 30, 2019, respectively

and outstanding at June 30, 2020 and September 30, 2019, respectively

Paid in capital

Treasury stock common 368,744 shares as of March 31, 2020 and 262,177 shares as of

Treasury stock common 474,905 shares as of June 30, 2020 and 262,177 shares as of

September 30, 2019

Treasury stock Series E preferred 80,000 shares as of March 31, 2020 and 50,000 shares as

Treasury stock Series E preferred 80,000 shares as of June 30, 2020 and 50,000 shares as

of September 30, 2019

6 unchanged sentences

(dollars in thousands, except per share)

For the Three Months Ended March 31,

For the Six Months Ended March 31,

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Cost of revenues

20 unchanged sentences

(dollars in thousands)

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

OPERATING ACTIVITIES:

1 unchanged sentence

Depreciation and amortization

Non-cash asset retirements

Gain on lease settlement, net

20 unchanged sentences

Lonesome Oak acquisition

Note receivable

Proceeds from the sale of property and equipment

23 unchanged sentences

Preferred Stock

Balance, December 31, 2019

Balance, March 31, 2020

Stock based compensation

1 unchanged sentence

Purchase of common treasury stock

Balance, March 31, 2020

Balance, June 30, 2020

Preferred Stock

Balance, December 31, 2018

Balance, March 31, 2019

Stock based compensation

Purchase of common treasury stock

Balance, March 31, 2019

Balance, June 30, 2019

The accompanying notes are an integral part of these condensed consolidated financial statements.

9 unchanged sentences

Purchase of Series E preferred stock

Balance, March 31, 2020

Balance, June 30, 2020

Preferred Stock

3 unchanged sentences

Purchase of common treasury stock

Balance, March 31, 2019

Balance, June 30, 2019

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2020 AND 2019

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020 AND 2019

(dollars in thousands, except per share)

6 unchanged sentences

With Marquis Industries, Inc.

(“Marquis”), the Company is engaged in the manufacture and sale of carpet and the sale of vinyl and wood floorcoverings.

(“Marquis”), the Company is engaged in the manufacture and sale of carpet and the sale of carpet, vinyl and rigid core floorcoverings.

With Vintage Stock, Inc.

6 unchanged sentences

In the opinion of the Company’s management, this interim information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods.

The results of operations for three and six months ended March 31, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2020.

The results of operations for three and nine months ended June 30, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2020.

This financial information should be read in conjunction with the consolidated financial statements and related notes thereto as of September 30, 2019 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K, filed with the U.S.

6 unchanged sentences

As of March 31, 2020, Vintage Stock had closed all of its retail locations in response to the crisis.

As of May 14, 2020, Vintage reopen all but four of its 62 retail locations and expects to reopen its remaining retail locations as soon as possible while maintaining compliance with government mandates.

We are unable to predict when all stores will reopen or if additional periods of store closures will be needed or mandated.

Beginning May 1, 2020, Vintage began to reopen certain locations in compliance with government regulations.

Additionally, as of June 30, 2020, all Vintage retail locations were reopened while maintaining compliance with government mandates.

We are unable to predict if additional periods of store closures will be needed or mandated.

During March and April 2020, Marquis conducted rolling layoffs for certain employees, however, during May 2020, all employees have returned to their respective locations.

10 unchanged sentences

Actual results could differ from those estimates.

Significant estimates made in connection with the accompanying consolidated financial statements include the estimate of dilution and fees associated with billings, the estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete inventory, estimated warranty reserve, estimated fair value and forfeiture rates for stock-based compensation, fair values in connection with the analysis of goodwill, other intangibles and l ong-lived assets for impairment, current portion of notes payable, valuation allowance against deferred tax assets, lease terminations, and estimated useful lives for intangible assets and property and equipment .

Significant e stimates made in connection with the accompanying consolidated financial statements include the estimate of dilution and fees associated with billings, the estimated reserve for doubtful current and long-term trade and other receivables, the estimated rese rve for excess and obsolete inventory, estimated warranty reserve, estimated fair value and forfeiture rates for stock-based compensation, fair values in connection with the analysis of goodwill, other intangibles and long-lived assets for impairment, curr ent portion of notes payable, valuation allowance against deferred tax assets, lease terminations, and estimated useful lives for intangible assets and property and equipment .

Financial Instruments

2 unchanged sentences

The fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements, unless quoted market prices are available (Level 2 inputs).

The carrying amounts of long-term debt at March 31, 2020 and September 30, 2019 approximate fair value.

The carrying amounts of long-term debt at June 30, 2020 and September 30, 2019 approximate fair value.

Cash and Cash Equivalents

13 unchanged sentences

The Company has also purchased accounts receivable credit insurance to cover non-factored trade and other receivables which helps reduce potential losses due to doubtful accounts.

At March 31, 2020 and September 30, 2019, the allowance for doubtful accounts was $1,111 and $936, respectively.

At June 30, 2020 and September 30, 2019, the allowance for doubtful accounts was $873 and $936, respectively.

Manufacturing Segment

2 unchanged sentences

Management also reviews inventory to determine if excess or obsolete inventory is present and a reserve is made to reduce the carrying value for inventory for such excess and or obsolete inventory .

At March 31, 2020 and September 30, 2019, the reserve for obsolete inventory was $92.

At June 30, 2020 and September 30, 2019, the reserve for obsolete inventory was $92.

Retail and Online Segment

2 unchanged sentences

Management also reviews inventory to determine if excess or obsolete inventory is present and a reserve is made to reduce the carrying value for inventory for such excess and or obsolete inventory .

Merchandise inventory reserves as of March 31, 2020 and September 30, 2019 were $298 and $590, respectively.

Merchandise inventory reserves as of June 30, 2020 and September 30, 2019 were $242 and $590, respectively.

Property and Equipment

4 unchanged sentences

The useful lives of building and improvements are 3 to 40 years, transportation equipment is 5 to 10 years, machinery and equipment are 5 to 10 years, furnishings and fixtures are 3 to 5 years and office and computer equipment are 3 to 5 years.

Depreciation expense was $1,227 and $1,067 for the three months ended March 31, 2020 and 2019, respectively.

Depreciation expense was $2,142 and $2,083 for the six months ended March 31, 2020 and 2019, respectively.

Depreciation expense was $1,316 and $982 for the three months ended June 30, 2020 and 2019, respectively.

Depreciation expense was $3,458 and $3,055 for the nine months ended June 30, 2020 and 2019, respectively.

We periodically review our property and equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation or amortization periods should be accelerated.

21 unchanged sentences

Any such impairment would be recognized in full in the reporting period in which it has been identified .

There was no goodwill impairment for the six months ended March 31, 2020 and 2019.

There was no goodwill impairment for the nine months ended June 30, 2020 and 2019.

Intangible Assets

9 unchanged sentences

When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determined lives may be adjusted.

Intangible amortization expense is $165 and $538 for the three months ended March 31, 2020 and 2019, respectively.

Intangible amortization expense was $335 and $892 for the six months ended March 31, 2020 and 2019, respectively.

Intangible amortization expense was $162 and $176 for the three months ended June 30, 2020 and 2019, respectively.

Intangible amortization expense was $497 and $1,068 for the nine months ended June 30, 2020 and 2019, respectively.

Revenue Recognition

39 unchanged sentences

The Company primarily offers assurance type warranties.

We sell certain extended service arrangements sepa rately from the sale of products.

We sell certain extended service arrangements separately from the sale of products.

During 2019, the Company became the principal for certain extended service arrangements.

Revenue related to these arrangements is recognized ratably over the contract term.

The warranty reserve of $ 257 and $292 is included in accrued liabilities on the consolidated balance sheet at March 31, 2020 and September 30, 2019, respectively.

The warranty reserve of $ 231 and $292 is included in accrued liabilities on the consolidated balance sheet at June 30 , 2020 and September 30, 2019, respectively.

Shipping and Handling

6 unchanged sentences

The Company establishes a liability upon the issuance of merchandise credits and the sale of gift cards.

Breakage income (expense) related to gift cards which are no longer reportable under state escheatment laws for the three months ended March 31, 2020 and 2019, was $(22) and $109, respectively and $(14) and $124 for the six months ended March 31, 2020 and 2019, respectively.

Breakage income related to gift cards which are no longer reportable under state escheatment laws for the three months ended June 30, 2020 and 2019, was $103 and $240, respectively and $89 and $369 for the nine months ended June 30, 2020 and 2019, respectively.

Fair Value Measurements

16 unchanged sentences

The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods .

Lease Accounting

Lease Accoun ting

We lease retail stores, warehouse facilities and office space.

2 unchanged sentences

For contracts entered into on or after October 1, 2019, we assess at contract inception whether the contract is, or contains, a lease.

Generally, we determine that a lease exists when (i) the contract involves the use of a distinct identifie d asset, (ii) we obtain the right to substantially all economic benefits from use of the asset and (iii) we have the right to direct the use of the asset.

Generally, we determine that a lease exists when (i) the contract involves the use of a distinct identified asset, (ii) we obtain the right to substantially all economic benefits from use of the asset and (iii) we have the right to direct the use of the asset.

In general, all of our leases are operating leases.

37 unchanged sentences

The management approach model is based on the way a Company’s management organizes segments within the Company for making operating decisions and assessing performance.

The Company determined it has three reportable segments.

The Company determined it has three reportable segments (See Note 16).

13 unchanged sentences

The amounts recognized reflect the present value of remaining lease payments for all leases.

The discount rate used is an estimate of the Company’s blended incremental borrowing rate based on information available at lease commencement.

The discount rate used is an estimate of the Company’s blended incremental borrowing rate based on information available associated with each subsidiary’s debt outstanding at lease commencement.

In considering the lease asset value, the company considers fixed and variable payment terms, prepayments and options to extend, terminate or purchase.

3 unchanged sentences

Our weighted average discount rate is 8.1%.

Total cash payments for the six months ended March 31, 2020 was $3,872.

We did not enter into any new leases during the six months ended March 31, 2020, however, upon completion of the Lonesome Oak acquisition (see Note 4), we recorded right of use assets and lease liabilities of $7,691 .

The following table details our right of use assets and lease liabilities as of March 31, 2020:

March 31, 2020

Total cash payments for the nine months ended June 30, 2020 was $5,961.

We did not enter into any new leases during the nine months ended June 30, 2020, however, upon completion of our acquisition of Lonesome Oak (see Note 4), we recorded right of use assets and lease liabilities of $7,691 .

The following table details our right of use assets and lease liabilities as of June 30, 2020:

June 30, 2020

Right of use asset - operating leases

Operating lease liabilities:

Total present value of future lease payments as of March 31, 2020:

Twelve months ended March 31,

Total present value of future lease payments as of June 30, 2020:

Twelve months ended June 30,

Less implied interest

Present value of payments

During the six months ended March 31, 2020 , the Company recorded a net gain on lease settlement of $241 which consisted of impairment charges of $1,207 related to the decision to close additional ApplianceSmart retail locations resulting in a decrease to the associated right of use asset related to these leases , offset by a gain on lease settlement of $1,448 resulting from the extinguishment of the lease liability associated with the closed retail locations.

During the nine months ended June 30, 2020, the Company recorded a net gain on lease settlement of $223 which consisted of impairment charges of $614 related to the decision to close additional ApplianceSmart retail locations resulting in a decrease to the associated right of use asset related to these leases, offset by a gain on lease settlement of $837 resulting from the extinguishment of the lease liability associated with the closed retail locations.

As of July 1, 2020, the Company entered into a lease agreement for office space in Nevada with an initial lease term through November 30, 2025.

The Company estimates the present value of the right of use asset and lease liability to be in the range of $1,000 to $1,500.

Lonesome Oak Acquisition

2 unchanged sentences

Pursuant to the LOTC Purchase Agreement, and on January 31, 2020, Marquis acquired from the sole shareholder of Lonesome Oak (the “LOTC Shareholder”) all of the issued and outstanding shares of capital stock of Lonesome Oak for $2,000.

After the closing of the transaction, Lonesome Oak entered into a lease agreement with the LOTC Shareholder regarding certain properties owned by affiliates of the LOTC Shareholder that are used in Lonesome Oak’s operations.

Marquis held $1,450 of the purchase price (the “Holdback Amount”) to satisfy claims for indemnity arising out of breaches of certain representations, warranties, and covenants, and certain other enumerated items, if any.

In connection with the closing of the transaction, the LOTC Shareholder entered into an employment agreement with a five-year term and serves as an Executive Vice President pursuant to the terms thereof.

In connection with the closing of the acquisition, Lonesome Oak entered into a lease agreement with the LOTC Shareholder regarding certain properties that are used in Lonesome Oak’s operations and that are owned by affiliates of the LOTC Shareholder.

Marquis held back $1,450 of the purchase price (the “Holdback Amount”) to satisfy claims for indemnity arising out of breaches of certain representations, warranties, and covenants, and certain other enumerated items, if any.

In connection with the closing of the transaction, the LOTC Shareholder entered into an employment agreement with a five-year term and serves as an Executive Vice President of Lonesome Oak pursuant to the terms thereof.

Subject to certain exceptions, the LOTC Shareholder has agreed to indemnify Marquis for breaches of certain representations, warranties, and covenants, and certain other enumerated items, if any.

1 unchanged sentence

The LOTC Shareholder is subject to a three-year non-competition and non-solicitation provisions.

On March 2, 2020, Lonesome Oak merged with and into Marquis, with Marquis surviving the merger and Lonesome Oak ceasing to exist as a separate entity.

The Company began consolidating the financial results of this acquisition in the unaudited Condensed Consolidated Financial Statements on January 31, 2020.

5 unchanged sentences

Balance Sheet Detail Information

March 31, 2020

June 30, 2020

September 30, 2019

37 unchanged sentences

The Company’s intangible assets consist of customer relationship intangibles, licenses for the use of internet domain names, URL’s, software, and marketing and technology related intangibles.

The following table summarizes estimated future amortization expense related to intangible assets that have net balances as of March 31, 2020:

The following table summarizes estimated future amortization expense related to intangible assets that have net balances as of June 30, 2020:

Long Term Debt

Bank of America Revolver Loan

On July 6, 2015 (amended January 31, 2020), Marquis entered into a $15,000 (as of January 31, 2020:

On July 6, 2015 (amended most recently January 31, 2020 and July 6, 2020), Marquis entered into a $15,000 (increased per an amendment to the BofA Revolver (as defined below) credit agreement as of January 31, 2020:

$25,000) revolving credit agreement with Bank of America Corporation (“BofA Revolver”).

11 unchanged sentences

Letters of credit reduce the amount available to borrow under the BofA Revolver by an amount equal to the face value of the letters of credit.

Distributions by Holdings to holders of its equity Interests so long as the following conditions are satisfied with respect to each such Distribution:

Distributions by Holdings may be made to holders of its equity Interests so long as the following conditions are satisfied with respect to each such Distribution:

(a) no Default or Event of Default has occurred or would result from such Distribution, (b) Lender has received the financial statements required under Section 10.1.2 (a)(ii), (c) Lender has received evidence that after giving effect to consummation of such Distribution, Borrowers shall maintain a Fixed Charge Coverage Ratio of at least 1.1 to 1.0 on a pro forma basis, measured as of the most recently ended month for which Obligors have delivered the financial statements required under Section 10.1.2(a) or (b), as the case may be, for the twelve month period then ended, (d) Availability on each day during the 60 day period immediately preceding such Distribution calculated on a pro forma basis assuming such Distribution occurred on the first day of such period (including any Loans made hereunder to finance such Distribution) shall be greater than or equal to $4,000 (as of January 31, 2020:

$5,000), and (e) Availability, on the date of such Distribution, immediately after giving pro forma effect to the consummation of such Distribution (including any Loans made hereunder to finance such Distribution) shall be greater than or equal to$4,000 (as of January 31 2020:

The BofA Revolver places certain restrictions and covenants on Marquis, including a limitation on asset sales, additional liens, investment, loans, guarantees, acquisitions, incurrence of additional indebtedness for Marquis to maintain a fixed charge coverage ratio of at least 1.05 to 1, tested as of the last day of each month for the twelve consecutive months ending on such day.

The BofA Revolver provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with covenants, change in control of Marquis, a material representation or warranty made by us or the borrowers proving to be false in any material respect, certain bankruptcy, insolvency or receivership events affecting Marquis or its subsidiaries, defaults relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Marquis or certain of its subsidiaries.

The BofA Revolver places certain restrictions and covenants on Marquis, including a limitation on asset sales, additional liens, investment, loans, guarantees, acquisitions, incurrence of additional indebtedness for Marquis to maintain a fixed charge coverage rati o of at least 1.05 to 1, tested as of the last day of each month for the twelve consecutive months ending on such day.

The BofA Revolver provides for customary events of default with corresponding grace periods, including failure to pay any principal or in terest when due, failure to comply with covenants, change in control of Marquis, a material representation or warranty made by us or the borrowers proving to be false in any material respect, certain bankruptcy, insolvency or receivership events affecting Marquis or its subsidiaries, defaults relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Marquis or certain of its subsidiaries.

The BofA Revolver Loan bears interest at a variable rate based on a base rate plus a margin.

The current base rate is the greater of (i) Bank of America prime rate, (ii) the current federal funds rate plus 0.50%, or (iii) 30-day LIBOR plus 1.00% plus the margi n, which varies, depending on the fixed coverage ratio table below.

The current base rate is the greater of (i) Bank of America prime rate, (ii) the current federal funds rate plus 0.50%, or (iii) 30-day LIBOR plus 1.00% plus the margin, which varies, depending on the fixed coverage ratio table below.

Levels I – V determine the interest rate to be charged Marquis which is based on the fixed charge coverage ratio achieved.

The Level V interest rate is adjusted up or down on a quarterly b asis going forward based upon the above fixed coverage ratio achieved by Marquis.

The Level V interest rate is adjusted up or down on a quarterly basis going forward based upon the above fixed coverage ratio achieved by Marquis.

Fixed Charge Coverage Ratio

4 unchanged sentences

>2.00 to 1.00

The following tables summarize the BofA Revolver for the six months ended March 31, 2020 and 2019 and as of March 31, 2020 and September 30, 2019:

During the six months ended March 31,

The following tables summarize the BofA Revolver for the nine months ended June 30, 2020 and 2019 and as of June 30, 2020 and September 30, 2019:

During the nine months ended June 30,

Cumulative borrowing during the period

2 unchanged sentences

Weighted average interest for the period

March 31, 2020

June 30, 2020

September 30, 2019

10 unchanged sentences

For the first five years of the note payable, there is a pre-payment penalty of 5%, which declines by 1% for each year the loan remains un-paid.

At the end of five years, there is no pre-payment penalty.

There is no pre-payment penalty following the tenth anniversary of the of the note.

In connection with the note payable, Marquis incurred $458 in transaction costs that are being recognized as a debt issuance cost that is being amortized and recorded as interest expense over the term of the note payable.

Kingston Diversified Holdings LLC Agreement ($2 Million Line of Credit)

On December 21, 2016, the Company and Kingston Diversified Holdings LLC (“Kingston”) entered into an agreement (the “December 21 Agreement”) modifying its then existing agreement between the parties to extend the maturity date of notes issued by Kingston to the Company (the “Kingston Notes”) by twelve months for 55,888 shares of the Company’s Series B Convertible Preferred Stock with a value on September 15, 2016 of $2,800, as a compromise between the parties in respect of certain of their respective rights and duties under the agreement.

The December 21 Agreement has a maximum principal amount of $2,000, and eliminates any and all actual, contingent, or other obligations of the Company to issue to Kingston any shares of the Company’s common stock, or to grant any rights, warrants, options, or other derivatives that are exercisable or convertible into shares of the Company’s common stock.

Kingston acknowledges that from the effective date through and including December 31, 2021, it shall not sell, transfer, assign, hypothecate, pledge, margin, hedge, trade, or otherwise obtain or attempt to obtain any economic value from any of the shares of Series B Preferred Stock or any shares into which they may be converted or from which they may be exchanged.

As of March 31, 2020, and September 30, 2019, the Company had no borrowings on the Kingston line of credit.

Equipment Loans

13 unchanged sentences

Lonesome Oak Equipment Loan

In connection with the Lonesome Oak acquisition (see Note 4), the Company assumed an unsecured equipment note in the amount payable to Extruded Fibers Inc.

In connection with the Lonesome Oak acquisition (see Note 4), the Company assumed an unsecured note in the amount payable to Extruded Fibers Inc.

The note is noninterest bearing, with principal payable monthly in the amount of $100 for 36 months, beginning March 31, 2020 maturity date March 3, 2023.

Seller Subordinated Acquisition Note – Marquis

In connection with the Lonesome Oak acquisition (see Note 4), the Company entered into a $1,450 unsecured note which represents the holdback amount of the purchase price.

The note bears interest at a rate of 3.0% per annum, with the principal and accrued interest due on July 31, 2021, the maturity date.

Seller Subordinated Acquisition Obligation – Marquis

In connection with the Lonesome Oak acquisition (see Note 4), under the terms of the LOTC Purchase Agreement, the Company incurred a contractual obligation of $1,450 which represents the holdback amount of the purchase price.

The obligation bears interest at a rate of 3.0% per annum, with the principal and accrued interest due on July 31, 2021, the maturity date.

Texas Capital Bank Revolver Loan

7 unchanged sentences

Letters of credit reduce the amount available to borrow under the TCB Revolver by an amount equal to the face value of the letters of credit .

Vintage Stock’s ability to make prepayments against Vintage Stock subordinated debt including the Comvest Term Loan and pay cash dividends is generally permitted if (i) excess availability under the TCB Revolver is more than $2,000, and is projected to be within 12 months after such payment and (ii) excess availability under the TCB Revolver is more than $2,000, and the fixed charge coverage ratio, as calculated on a pro-forma basis for the prior 12 months is 1.2:1.0 or greater.

Restrictions apply to our ability to make additional prepayments against Vintage Stock subordinated debt including the Comvest Term Loan and pay cash dividends if the fixed charge coverage ratio, as calculated on a pro-for ma basis for the prior 12 months is less than 1.2:1.0 and excess availability under the TCB Revolver is less than $2,000 at the time of payment or distribution.

There is no restriction on dividends that can be taken by the Company so long as Vintage Stock maintains $2,000 of current availability at the time of the dividend or distribution.

This translates to having no restriction on Net Income so long as the Company retains sufficient assets to establish $2,000 of current availability and continues to meet the required fixed charge coverage ratio of 1.2:1 as stated above.

Vintage Stock’s ability to make prepayments against Vintage Stock subordinated debt including the Comvest Term Loan and pay cash dividends is generally permitted if (i) excess availability under the TCB Revolver is more than $2,000, and is projected to be within 12 months after such payment and (ii) excess availability under the TCB Revolver is more than $2,000, and th e fixed charge coverage ratio, as calculated on a pro-forma basis for the prior 12 months is 1.2:1.0 or greater.

Restrictions apply to our ability to make additional prepayments against Vintage Stock subordinated debt including the Comvest Term Loan and pa y cash dividends if the fixed charge coverage ratio, as calculated on a pro-forma basis for the prior 12 months is less than 1.2:1.0 and excess availability under the TCB Revolver is less than $2,000 at the time of payment or distribution.

There is no rest riction on dividends that can be taken by the Company so long as Vintage Stock maintains $2,000 of current availability at the time of the dividend or distribution.

This translates to having no restriction on Net Income so long as the Company retains suffi cient assets to establish $2,000 of current availability and continues to meet the required fixed charge coverage ratio of 1.2:1 as stated above.

The TCB Revolver places certain restrictions on Vintage Stock, including a limitation on asset sales, a limitation of 25 new leases in any fiscal year, additional liens, investment, loans, guarantees, acquisitions and incurrence of additional indebtedness.

2 unchanged sentences

The TCB Waiver (i) waives , and in certain instances conditionally waives, certain financial covenant and other events of default that occurred under the Loan Agreement dated November 3, 2016 between Borrower and TCB (the “TCB Loan Agreement”), and the events of default that occurred under the Limited Waiver and Second Amendment as described in the foregoing paragraph, (ii) waives any testing of the fixed charge coverage ratio under the TCB Loan Agreement through the June 30, 2020 testing date, and (iii) waives the implementation by TCB of “availability reserves” under the TCB Loan Agreement until the earlier of (w) May 31, 2020, (x) April 22, 2020 unless the initial equity contribution contemplated by clause (viii) in the foregoing paragraph is made, (y) the date any default or event of default occurs under the TCB Loan Agreement, or (z) the date the Borrower fails to comply with any provision of the TCB Waiver, the Credit Agreement, or any other loan document contemplated by the Credit Agreement.

The following tables summarize the TCB Revolver for the six months ended March 31, 2020 and 2019 and as of March 31, 2020 and September 30, 2019:

During the six months ended March 31,

The following tables summarize the TCB Revolver for the nine months ended June 30, 2020 and 2019 and as of June 30, 2020 and September 30, 2019:

During the nine months ended June 30,

Cumulative borrowing during the period

2 unchanged sentences

Weighted average interest for the period

March 31, 2020

June 30, 2020

September 30, 2019

21 unchanged sentences

The Crossroads Revolver contains representations and warranties, events of default, affirmative and negative covenants and indemnities customary for loans of this nature.

As of March 31, 2020, and September 30, 2019, the Crossroads Revolver had a balance outstanding of $1,168 and $1,981, respectively.

As of June 30, 2020, and September 30, 2019, the Crossroads Revolver had a balance outstanding of $1,168 and $1,981, respectively.

The March 31, 2020 balance outstanding is included in Debtor-in-possession liabilities on the consolidated balance sheet.

In connection with the Crossroads Revolver, ApplianceSmart incurred $118 in transaction costs that are being recognized as debt issuance cost that is being amortized and recorded as interest expense over the term of the Crossroads Revolver.

On December 9, 2019, ApplianceSmart filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of Title 11 of the United States Code.

See Notes 13 and 14 for a complete discussion.

Comvest Term Loan

11 unchanged sentences

plus, to the extent the Borrower generates excess cash flow (as defined in the Credit Agreement), a percent of such excess cash flow (ranging from 50% to 100%), all in accordance with the terms of the Credit Agreement.

Under the Credit Agreement, any and all mandatory prepayments arising from any voluntary act of the Borrower are subject to a prepayment pr emium, ranging from 5.00% of the principal amount prepaid plus a make-whole amount to 1.00%, depending on when the mandatory prepayment is made.

Under the Credit Agreement, any and all mandatory prepayments arising from any voluntary act of the Borrower are subject to a prepayment premium, ranging from 5.00% of the principal amount prepaid pl us a make-whole amount to 1.00%, depending on when the mandatory prepayment is made.

There is no prepayment premium after June 7, 2021.

10 unchanged sentences

If the senior leverage ratio is less than 2.00:1.00 and is compliant with the loan covenants, Vintage Stock may only open more than five new retail locations within a twelve-month period.

Vintage Stock is required to maintain a declining maximum senior leverage ratio on a trailing twelve-month basis as follows:

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021 and thereafter

Vintage Stock is required to maintain a declining maximum senior leverage ratio on a trailing twelve-month basis of 2.25:1:00 declining to 1.55:1:00 through the term of the loan.

Vintage Stock is required to maintain on a trailing twelve-month basis a minimum fixed charge ratio of no less 1.40:1.00 as of March 31, 2020 through the remainder of the term of the loan.

However, all covenant restrictions are waived until September 30, 2020, due to COVID-19.

Vintage Stock may cure both payment and financial covenant defaults through infusion of equity cures as determined by the Credit Agreement.

1 unchanged sentence

In connection with the Comvest Term Loan, Vintage Stock incurred $ 1,429 in transaction cost that is being recognized as debt issuance cost that is being amortized and recorded as interest expense over the term of the Comvest Term Loan.

Marquis PPP Loan

On May 4, 2020, Marquis entered into a promissory note (the “Promissory Note”) with Bank of America, N.A.

that provides for a loan in the amount of $4,768 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Loan matures two years from the funding date of the PPP Loan and bears interest at a rate of 1.0% per annum.

Monthly amortized principal and interest payments are deferred for six months after the date of disbursement.

The Promissory Note contains events of default and other provisions customary for a loan of this type.

The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act.

The Company intends to apply for forgiveness of a portion of the loan in accordance with the terms of the CARES Act to the extent applicable.

No assurance is provided that forgiveness for all or any portion of the PPP Loan will be obtained.

On May 5, 2020, Marquis received the funds from the PPP Loan.

On May 4, 2020, in connection with the PPP Loan, Marquis Affiliated Holdings, LLC, a subsidiary of the Company and Marquis entered into a Ninth Amendment to Loan and Security Agreement with BofA (the “Ninth Amendment”).

The Ninth Amendment amends, modifies, restates or supplements the Loan and Security Agreement, dated as of July 6, 2015, as amended from time to time, among MAH, Marquis and BofA (the “Senior Credit Facility”) to, among other things, permit the incurrence of the PPP Loan.

Marquis expects to incur operational losses in the coming months as a result of COVID-19 and as such, Marquis cannot rely on any availability under the revolving line of credit with Bank of America to fund its operations.

Marquis believes that as a result of the effects of the COVID-19 pandemic and other economic conditions both globally and in the U.S., its access to the funds under the BofA Revolver may be limited.

Loan Covenant Compliance

We were in compliance as of March 31, 2020 with all covenants under our existing revolving and other loan agreements, with the exception of covenants related to the Crossroads Revolver .

Long-term debt as of March 31, 2020 and September 30, 2019 consisted of the following:

March 31, 2020

We were in compliance as of June 30, 2020 with all covenants under our existing revolving and other loan agreements, with the exception of covenants related to the Crossroads Revolver .

Long-term debt as of June 30, 2020 and September 30, 2019 consisted of the following:

June 30, 2020

September 30, 2019

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Note Payable to Store Capital Acquisitions, LLC

Paycheck Protection Program

Note payable to individual, noninterest bearing, monthly payments of $19 through March 2023

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Long-term portion

Future maturities of long-term debt at March 31, 2020, are as follows which does not include related party debt separately stated:

Twelve months ending March 31,

Future maturities of long-term debt as of June 30 , 2020 , are as follows which does not include related party debt separately stated:

Twelve months ending June 30,

Notes Payable, Related Parties

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On April 25, 2018, ASH delivered to the Seller that certain Promissory Note (the “ApplianceSmart Note”) in the original principal amount of $3,919 (the “Original Principal Amount”), as such amount may be adjusted per the terms of the ApplianceSmart Note.

The ApplianceSmart N ote is effective as of April 1, 2018 and matures on April 1, 2021 (the “Maturity Date”).

The ApplianceSmart Note is effective as of April 1, 2018 and matures on April 1, 2021 (the “Maturity Date”).

The ApplianceSmart Note bears interest at 5% per annum with interest payable monthly in arrears.

Ten percent of the outstanding principal amount will be repaid annuall y on a quarterly basis, with the accrued and unpaid principal due on the Maturity Date.

Ten percent of the outstanding principal amount will be repaid annually on a quarterly basis, with the accrued and unpaid principal due on the Maturity Date.

ApplianceSmart has agreed to guaranty repayment of the ApplianceSmart Note .

The remaining $2,581 of the Purchase Price was paid in cash by ASH to the Seller.

ASH may re borrow funds, and pay interest on such re-borrowings, from the Seller up to the Original Principal Amount.

As of March 31, 2020 , and September 30, 2019 , there was $2,826 principal outstanding on the ApplianceSmart Note.

ASH may reborrow funds, and pay interest on such re-borrowings, from the Seller up to the Original Principal Amount.

As of June 30, 2020, and September 30, 2019, there was $2,826 principal outstanding on the ApplianceSmart Note.

On December 26, 2018, ASH and the Seller amended and restated the ApplianceSmart Note to, among other things, grant the Seller a security interest in the assets of ASH and ApplianceSmart in accordance with the terms of separate security agreements entered into between ASH and ApplianceSmart, respectively, and the Seller.

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Isaac Capital Fund Mezzanine Loan

In connection with the acquisition of Marquis by the Company, the Company entered into a mezzanine loan in the amount of up to $7,000 with Isaac Capital Fund (“ICF”), a private lender whose managing member is Jon Isaac, our President and Chief Executive Officer.

During 2015, the Company entered into a mezzanine loan in the amount of up to $7,000 with Isaac Capital Fund (“ICF”), a private lender whose managing member is Jon Isaac, our President and Chief Executive Officer.

The ICF mezzanine loan bears interest at 12.5% per annum with payment obligations of interest each month and all principal due in May 2025.

As of March 31, 2020, and September 30, 2019, there was $2,000 outstanding on this mezzanine loan.

Notes payable, related parties as of March 31, 2020 and September 30, 2019 consisted of the following:

March 31, 2020

As of June 30, 2020, and September 30, 2019, there was $2,000 outstanding on this mezzanine loan.

Isaac Capital Fund Revolving Promissory Note

On April 9, 2020, the Company entered into an unsecured revolving line of credit promissory note whereby the Isaac Capital Group, LLC (“ICG”) agreed to provide the Company with a $1,000 revolving credit facility (the “ICG Revolver”) .

The ICG Revolver bears interest at 10.0% per annum and provides for the payment of interest monthly in arrears and matures April 2023.

The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities.

As of June 17, 2020, ICG is a record and beneficial owner of approximately 45.4% of the outstanding capital stock of the Company, and Jon Isaac, the Company’s President and Chief Executive Officer, and manager and sole member of ICG, is a record and beneficial owner of approximately 52.9% of the outstanding capital stock of the Company.

Notes payable, related parties as of June 30 , 2020 and September 30, 2019 consisted of the following:

June 30, 2020

September 30, 2019

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Long-term portion

Future maturities of notes payable, related parties at March 31, 2020 are as follows:

Twelve months ending March 31,

Future maturities of notes payable, related parties as of June 30, 2020 are as follows:

Twelve months ending June 30,

Stockholders’ Equity

Series E Convertible Preferred Stock

As of March 31, 2020, and September 30, 2019, there were 47,840 and 77,840 shares outstanding of Series a Preferred Stock, respectively.

During the six months ended March 31, 2020, the Company repurchased 30,000 shares of Series E Convertible Preferred Stock for an aggregate purchase price of $3.

As of June 30, 2020, and September 30, 2019, there were 47,840 and 77,840 shares outstanding of Series a Preferred Stock, respectively.

During the nine months ended June 30, 2020, the Company repurchased 30,000 shares of Series E Convertible Preferred Stock for an aggregate purchase price of $3.

Treasury Stock

For the six months ended March 31, 2020 and 2019, the Company purchased 106,567 and 43,347 shares of its common stock on the open market (treasury shares for $759 and $321, respectively).

For the nine months ended June 30, 2020 and 2019, the Company purchased 212,728 and 43,347 shares of its common stock on the open market (treasury shares for $1,433 and $631, respectively).

The warrants listed below expire at various timeframes over the next two years.

However, Company and ICG entered into an agreement whereby if the warrants are not exercised on or before the applicable expiration date, the applicable expiration date is deemed automatically extended for successive two-year periods immediately prior to such expiration.

During the three and six months ended March 31, 2020, the Company recorded a fair value adjustment of $102 and $368, respectively, related to the extension of warrants that expired during this period.

There was no such adjustment during the three and six months ended March 31, 2019.

The following table summarizes information about the Company’s warrants at March 31, 2020 and September 30, 2019, respectively:

During the three and nine months ended June 30 , 2020, the Company recorded a fair value adjustment of $nil and $368, respectively, related to the extension of warrants that expired during this period.

There was no such adjustment during the three and nine months ended June 30 , 2019.

The following table summarizes information about the Company’s warrants at June 30, 2020 and September 30, 2019, respectively:

Number of units -

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Outstanding and Exercisable at September 30, 2019

Outstanding and Exercisable at March 31, 2020

Outstanding and Exercisable at June 30, 2020

The warrants may be exchanged for shares of common stock at a ratio of one share of Series B Preferred Stock into five common shares.

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Outstanding and Exercisable at September 30, 2019

Outstanding and Exercisable at March 31, 2020

The exercise price for the Series B Convertible Preferred Stock warrants outstanding and exercisable at March 31, 2020 and September 30, 2019, are as follows:

Outstanding and Exercisable at June 30, 2020

The exercise price for the Series B Convertible Preferred Stock warrants outstanding and exercisable at June 30 , 2020 and September 30, 2019, are as follows:

Series B Convertible Preferred

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The value of each award is amortized on a straight-line basis over the requisite service period.

The following table summarizes stock option activity for the twelve months ended September 30, 2019 and the six mont hs ended March 31, 2020 :

The following table summarizes stock option activity for the twelve months ended September 30, 2019 and the nine months ended June 30, 2020:

Contractual Life

Outstanding at September 30, 2018

Forfeited/Expired

Outstanding at September 30, 2019

Exercisable at September 30, 2019

Outstanding at March 31, 2020

Exercisable at March 31, 2020

The Company recognized compensation expense of $19 and $31 during the three months ended March 31, 2020 and 2019, respectively, and $48 and $78 during the six months ended March 31, 2020 and 2019, respectively, related to stock option awards granted to certain employees and officers based on the grant date fair value of the awards, net of estimated forfeitures.

At March 31, 2020, the Company has $97 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects to recognize as compensation expense through October of 2022.

The exercise price for stock options outstanding and exercisable outstanding at March 31, 2020 is as follows:

Outstanding at September 30, 2019

Forfeited/Expired

Outstanding at June 30, 2020

Exercisable at June 30, 2020

The Company recognized compensation expense of $19 and $32 during the three months ended June 30, 2020 and 2019, respectively, and $67 and $110 during the nine months ended June 30, 2020 and 2019, respectively, related to stock option awards granted to certain employees and officers based on the grant date fair value of the awards, net of estimated forfeitures.

As of June 30, 2020, the Company has $78 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects to recognize as compensation expense through October of 2022.

The exercise price for stock options outstanding and exercisabl e outstanding as of June 30 , 2020 is as follows:

Number of Options

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Exercise Price ($)

The following table summarizes information about the Company’s non-vested shares outstanding as of March 31, 2020 and September 30, 2019:

The following table summarizes information about the Company’s non-vested shares outstanding as of June 30, 2020 and September 30, 2019:

Non-vested Shares

Non-vested at September 30, 2019

Non-vested at March 31, 2020

Non-vested at June 30, 2020

Earnings Per Share

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The following table presents the computation of basic and diluted net earnings per share:

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

preferred stock dividends

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Diluted earnings per share

There are 200,418 and 200,418 common stock options that are anti-dilutive that are not included in the three and six months ended March 31, 2020, diluted earnings per share computations, respectively.

There are 119,168 common stock options that are anti-dilutive that are not included in the three and six months ended June 30 , 2020 , diluted earnings per share computations, respectively.

Related Party Transactions

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The ICF mezzanine loan bears interest at a rate of 12.5% per annum with payment obligations of interest each month and all principal due in May 2025.

As of March 31, 2020, and September 30, 2019, respectively, there was $2,000 outstanding on this mezzanine loan.

During the three months ended March 31, 2020 and 2019, the Company recognized total interest expense of $64, associated with the ICF note.

During the six months ended March 31, 2020 and 2019, the Company recognized interest expense of $128 associated with the ICF note.

As of June 30, 2020, and September 30, 2019, respectively, there was $2,000 outstanding on this mezzanine loan.

During the three months ended June 30, 2020 and 2019, the Company recognized total interest expense of $62, associated with the ICF note.

During the nine months ended June 30, 2020 and 2019, the Company recognized interest expense of $190 associated with the ICF note.

Customer Connexx LLC, a wholly-owned subsidiary of JanOne Inc.

(“JanOne”), rents approximately 9,879 square feet of office space from the Company at its Las Vegas office which totals 11,100 square feet.

JanOne paid the Company $89 and $139 in rent and other reimbursed expenses for the three months ended March 31, 2020 and 2019, respectively.

JanOne paid the Company $181 and $183 in rent and other reimbursed expenses for the six months ended March 31, 2020 and 2019, respectively.

JanOne paid the Company $97 and $97 in rent and other reimbursed expenses for the three months ended June 30, 2020 and 2019, respectively.

JanOne paid the Company $278 and $285 in rent and other reimbursed expenses for the nine months ended June 30, 2020 and 2019, respectively.

Tony Isaac, a member of the Board of Directors of the Company and Virland Johnson, Chief Financial Officer of the Company, are Chief Executive Officer and Board of Directors member, and Chief Financial Officer of JanOne, respectively.

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At March 31, 2020 and September 30, 2019, respectively, there was $2,826 outstanding on this ApplianceSmart Note.

At June 30, 2020 and September 30, 2019, respectively, there was $2,826 outstanding on this ApplianceSmart Note.

On or about April 23, 2020, the Company sold ApplianceSmart Contracting Inc.

(“ApplianceSmart Contracting”) to a related party for $60.

In connection with the sale, and under the terms of a purchase and sale agreement and a secured promissory note (the “ASC Note”), the Company agreed to loan ApplianceSmart Contracting up to $382 to satisfy then outstanding sales tax obligations owed by ApplianceSmart Contracting.

Advances under the ASC Note are only made by the Company to ApplianceSmart Contracting upon the presentation of evidence by ApplianceSmart Contracting of the satisfaction of one or more outstanding state sales tax amounts.

Advances under the ASC Note bear interest at 8.0% per annum.

The loan matures on September 30, 2022 or on such earlier date as provided in the ASC Note.

The loan is guaranteed by the related party and secured by the assets of ApplianceSmart Contracting.

At the closing of the sale transaction, the Company advanced ApplianceSmart Contracting $55.

In connection with the acquisition of Vintage Stock on November 3, 2016, as amended, Rodney Spriggs, President of Vintage Stock, holds a 41% interest in the $10,000 Seller Subordinated Acquisition Note payable by VSAH.

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Interest paid to Mr.

Spriggs for the three months ended March 31, 2020 and 2019 , was $ 82 .

Spriggs for the three months ended June 30, 2020 and 2019, was $84.

Interest paid to Mr.

Spriggs for the six months ended March 31, 2020 and 2019 was $164.

Interest unpaid and accrued as of March 31, 2020 and September 30, 2019 is $27.

Spriggs for the nine months ended June 30, 2020 and 2019 was $250.

Interest unpaid and accrued as of June 30, 2020 and September 30, 2019 is $27.

On April 9, 2020, the Company entered into and delivered to Isaac Capital Group, LLC (“ICG”) an unsecured revolving line of credit promissory note whereby ICG agreed to provide the Company with a $1,000 revolving credit facility (the “Unsecured Revolving Credit Facility”).

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The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities.

As of January 29, 2020, the Lender is a record and beneficial owner of approximately 38.4% of the outstanding capital stock of the Company, and Jon Isaac, the Company’s President and Chief Executive Officer, and manager and sole member of the Lender, is a record and beneficial owner of approximately 45.9% of the outstanding capital stock of the Company.

As of June 17, 2020, the Lender is a record and beneficial owner of approximately 45.4% of the outstanding capital stock of the Company, and Jon Isaac, the Company’s President and Chief Executive Officer, and manager and sole member of the Lender, is a record and beneficial owner of approximately 52.9% of the outstanding capital stock of the Company.

Also see Notes 7 and 8.

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The letter from the SEC states that “this inquiry does not mean that the SEC has concluded that the Company or any of its officers and directors has broken the law or that the SEC has a negative opinion of any person, entity, or security.” The Company is cooperating with the SEC in its investigation .

During August 2020, three of the Company’s executives received a Wells Notice from the SEC.

See Note 17 for a complete discussion.

ApplianceSmart Bankruptcy and Other ApplianceSmart Related Litigation Matters

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On September 12, 2019, Fisher & Paykel Appliances, Inc.

initiated an arbitration against ApplianceSmart in San Diego alleging breach of contract and seeking damages in excess of $100.

This matter has been stayed as a result of the Chapter 11 Case.

(“F&P”) initiated an arbitration against ApplianceSmart in San Diego alleging breach of contract and seeking damages in excess of $100.

This matter was stayed as a result of the Chapter 11 Case.

On July 9, 2020, discontinued the arbitration.

On July 22, 2019, Trustee Main/270, LLC (the “Reynoldsburg Landlord”) filed a lawsuit against ApplianceSmart and JanOne Inc.

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The Company has asserted certain counterclaims against New Leaf.

This matter has been stayed as a result of the Chapter 11 Case.

This matter was stayed as a result of the Chapter 11 Case.

On June 29, 2020, this matter was dismissed by New Leaf with prejudice.

During 2019, the Company became the principal for certain extended warranties, as a result, warranty reserves are included in accrued liabilities in our consolidated balance sheet.

The following table summarizes the warranty reserve activity for the six months ended March 31, 2020:

The following table summarizes the warranty reserve activity for the nine months ended June 30 , 2020:

Beginning balance, September 30, 2019

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Warranty settlements

Ending balance, March 31, 2020

The income tax rate for the three months ended March 31, 2020 and 2019 was 26.8% and 29.9%, respectively.

The income tax rate for the six months ended March 31, 2020 and 2019 was 26.7% and 27.7%, respectively.

Ending balance, June 30, 2020

The income tax rate for the three months ended June 30, 2020 and 2019 was 27.8% and 27.5%, respectively.

The income tax rate for the nine months ended June 30, 2020 and 2019 was 26.8% and 27.6%, respectively.

The effective income tax rate differs from the U.S.

federal statuary rate primarily due to state taxes and certain non-deductible expenses.

As of March 31, 2020, the Company had no uncertain tax positions.

As of June 30, 2020, the Company had no uncertain tax positions.

The Company is subject to taxation and files income tax returns in the U.S., and various state jurisdictions.

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The Manufacturing Segment consists of Marquis Industries, the Retail and Online segment consists of Vintage Stock and ApplianceSmart, and the Services segment consists of the directory services business.

The following tables summarize segment information for the three and six months ended March 31, 2020 and 2019:

For the Three Months Ended March 31,

For the Six Months Ended March 31,

The following tables summarize segment information for the three and nine months ended June 30 , 2020 and 2019 :

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Retail and Online

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Manufacturing

Operating income (loss)

Operating income

Retail and Online

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Manufacturing

Net income (loss) before provision for income taxes

Net income (loss) before provision for income

Retail and Online

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Subsequent Events

Isaac Capital Fund Revolving Promissory Note

The Unsecured Revolving Credit Facility bears interest at 10.0% per annum and provides for the payment of interest monthly in arrears and matures April 2023.

The foregoing transaction did not include the issuance of any shares of the Company’s common stock, warrants, or other derivative securities.

As of January 29, 2020, ICG is a record and beneficial owner of approximately 38.4% of the outstanding capital stock of the Company, and Jon Isaac, the Company’s President and Chief Executive Officer, and manager and sole member of ICG, is a record and beneficial owner of approximately 45.9% of the outstanding capital stock of the Company.