What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-17 compared with 2021-02-16 · 153 added, 68 removed, 180 unchanged (55% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three months ended December 31, 2020, 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, 2020 (the “2020 Form 10-K”).

For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and six months ended March 31, 2021, 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, 2020 (the “2020 Form 10-K”).

Note about Forward-Looking Statements

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Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies.

We will work closely with consultants who will help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses.

We work closely with third party advisors who will help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses.

Our principal offices are located at 325 E.

Warm Springs Road, Suite 102, Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which does not form part of this report Form 10-K) is located at www.liveventures.com.

Warm Springs Road, Suite 102, Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which does not form part of this Quarterly Report Form 10-Q) is located at www.liveventures.com.

Our common stock trades on the Nasdaq Capital Market under the symbol “LIVE”.

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Vintage Stock is an award-winning specialty entertainment retailer offering a large selection of entertainment products including new and pre-owned movies, video games and music products, as well as ancillary products such as books, comics, toys and collectibles all available in a single location.

With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned movies, music, video games, electronics and collectibles through 62 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, New Mexico, Oklahoma, Texas and Utah.

With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned movies, music, video games, electronics and collectibles through more than 60 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, New Mexico, Oklahoma, Texas and Utah.

ApplianceSmart

ApplianceSmart, Inc.

(collectively “ApplianceSmart”) operates one store in Ohio.

(collectively “ApplianceSmart”) operates one store in Reynoldsburg, Ohio.

ApplianceSmart is a household appliance retailer with two product categories:

one consisting of typical and commonly available, innovative appliances, and the other consisting of affordable value-priced, niche offerings such as close-outs, factory overruns, discontinued models, and special-buy appliances, including open box merchandise and others.

one consisting of typical and commonly available, innovative appliances, and the other consisting of affordable value-priced, offerings such as close-outs, factory overruns, discontinued models, and special-buy appliances, including open box merchandise and others.

On December 9, 2019, ApplianceSmart filed a voluntary petition (the “Chapter 11 Case”) 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”).

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For a summary of significant accounting policies and the means by which we develop estimates thereon, see Part II, Item 8 – Financial Statements - Notes to unaudited condensed consolidated financial statements Note 2 – summary of significant accounting policies in the Company’s 10-K report as filed on January 13, 2021.

Results of Operations Three Months Ended December 31, 2020 and 2019

Results of Operations Three Months Ended March 31, 202 1 and 2020

The following table sets forth certain statement of income items and as a percentage of revenue, for the periods indicated:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

Statement of Income Data:

Cost of Revenue

General and Administrative Expense

Selling and Marketing Expense

Cost of revenues

General and administrative expenses

Sales and marketing expenses

Operating income

Interest expense, net

Impairment charges

Gain on lease settlement, net

Gain on Payroll Protection Program loan forgiveness

Gain on disposal of fixed assets

Gain on bankruptcy settlement

Other income (expense)

Net Income before Income Taxes

Income before provision for income taxes

Provision for income taxes

Net Income before Income Taxes

Net loss attributable to non-controlling interest

Net income attributable to Live stockholders

The following table sets forth revenues by segment:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

Movies, Music, Games and Other

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Steel Manufacturing

Corporate and other

Corporate & other

Total Revenue

The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment:

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

Profit % of Total Revenue

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Steel Manufacturing

Corporate and other

Corporate & other

Total Gross Profit

Revenue increased $20,453 or 49% to $62,454 for three months ended December 31, 2020 as compared to the three months ended December 31, 2019 of $42,001.

The in crease in Movies, Music, Games and Other of $ 1,799 was primarily due the higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19 .

Revenue increased by 53% to $70,890 for the three months ended March 31, 2021 as compared to $46,431 for the three months ended March 31, 2020.

The increase in Movies, Music, Games and Other of $ 6,206 was primarily due the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19.

Appliance revenue decreased $ 1,189 due to the closure of certain retail locations were incurring continual decreases in sales resulting from increased competition.

Flooring Manufacturing revenues increased $9,855 as a result of the development of new products and the acquisition of Lonesome Oak in January 2020.

Flooring Manufacturing revenues increased $5,671 as a result of the development of new products and higher demand by residential consumers.

Steel Manufacturing revenues were $13,793 due to the acquisition of Precision Marshall during July 2020.

Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms.

Cost of Revenue

Cost of revenue increased $14,810, or 58% for the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, primarily due primarily to the increase in revenue.

Cost of revenue increased 55% to $44,400 for the three months ended March 31, 2021 as compared to $28,655 for the three months ended March 31, 2020, proportionately to the increase in revenue .

General and Administrative Expense

General and Administrative expense increased $1,470 or 14%, for the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, primarily due to expenses associated with Precision which was acquired during July 2020 and higher warehouse costs at Marquis, partially offset by a decrease in compensation and other administrative costs.

General and Administrative remained relatively flat for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 .

Selling and Marketing Expense

Selling and marketing expense remained relatively flat for the three months ended December 31, 2020 as compared to the three months ended December 31, 2019.

Selling and marketing expense remained relatively flat for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 .

Interest Expense, net

Interest expense, net remained relatively flat for the three months ended December 31, 2020 as compared to the three months ended December 31, 2019, due to a decrease in certain interest rates and the continued efforts to repay certain debt obligations, offset by debt incurred as part of the Precision acquisition during July 2020.

Impairment charges

During the three months ended December 31, 2019, the Company incurred $1,207 of impairment charges related to the decision to close additional ApplianceSmart retail locations.

These locations physically closed during the three months ended March 31, 2020.

There were no similar transactions during the three months ended December 31, 2020.

Gain on disposal of fixed assets

During the three months ended December 31, 2020, the Company incurred a $129 gain related to the disposal of equipment.

There were no similar transactions during the three months ended December 31, 2019.

Interest expense, net increased 30% for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, due to a decrease in certain interest rates and the continued efforts to repay certain debt obligations, offset by debt incurred as part of the Precision acquisition during July 2020 .

Gain on lease settlement, net

During the three months ended March 31, 2020, the Company recorded a net gain on lease settlement $837 resulting from the extinguishment of the lease liability associated with the closed ApplianceSmart retail locations.

There were no similar gains during the three months ended March 31, 2021.

Gain on Payroll Protection Program

During the three months ended March 31, 2021, the Company recorded a gain of $1,382 due to the forgiveness of Precision’s PPP Loan.

There were no similar transactions during the three months ended March 31, 2020.

Gain on Bankruptcy Settlement

During the three months ended March 31, 2021, the Company recorded a gain of $1,115 due to the discharge of certain payables from bankruptcy proceedings.

There were no similar transactions during the three months ended March 31, 2020.

Results of Operations Six Months Ended March 31, 2021 and 2020

The following table sets forth certain statement of income items and as a percentage of revenue, for the periods indicated:

For the Six Months Ended March 31, 2021

For the Six Months Ended March 31, 2020

Statement of Income Data:

Cost of revenues

General and administrative expenses

Sales and marketing expenses

Operating income

Interest expense, net

Gain on lease settlement, net

Gain on Payroll Protection Program loan forgiveness

Gain on bankruptcy settlement

Other income (expense)

During the three months ended December 31, 2020, the Company’s other income of $779 is primarily related to the settlement of certain lease liabilities and other payables.

During the three months ended December 31, 2019, the Company’s other expense of $181 is primarily related to the warrant extension fair value adjustment.

Income before provision for income taxes

Provision for income taxes

Provision for income taxes was $1,450, for the three months ended December 31, 2020 as compared to $195 for the three months ended December 31, 2019 primarily due to the variance in net income.

The following table sets forth revenues by segment:

For the Six Months Ended March 31, 2021

For the Six Months Ended March 31, 2020

Total Revenue

Movies, Music, Games and Other

Flooring Manufacturing

Steel Manufacturing

Corporate & other

Total Revenue

The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment:

For the Six Months Ended March 31, 2021

For the Six Months Ended March 31, 2020

Profit % of Total Revenue

Movies, Music, Games and Other

Flooring Manufacturing

Steel Manufacturing

Corporate & other

Total Gross Profit

Revenue increased by 51% to $133,344 for the six months ended March 31, 2021 as compared to $88,432 for the three months ended March 31, 2020.

The increase in Movies, Music, Games and Other of $8,005 was primarily due the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19.

revenue decreased $ 2,106 due to the closure of certain retail locations were incurring continual decreases in sales resulting from increased competition.

Flooring Manufacturing revenues increased $15,526 as a result of the development of new products, higher demand from residential consumers and the acquisition of Lonesome Oak in January 2020.

Steel Manufacturing revenues were $23,528 due to the acquisition of Precision Marshall during July 2020.

Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms.

Cost of Revenue

Cost of revenue increased 57% to $84,585 for the six months ended March 31, 2021 as compared to $54,030 for the six months ended March 31, 2020, proportionately to the increase in revenue .

General and Administrative Expense

General and Administrative expense increased $2,334 or 10%, for the six months ended March 31, 2021 as compared to the six months ended March 31, 2020, primarily due to expenses associated with Precision which was acquired during July 2020 and higher warehouse costs at Marquis, partially offset by a decrease in compensation and other administrative costs.

Selling and Marketing Expense

Selling and marketing expense remained relatively flat for the six months ended March 31, 2021 as compared to the six months ended March 31, 2020 .

Interest Expense, net

Interest expense, net increased 19% for the six months ended March 31, 2021 as compared to the six months ended March 31, 2020, due to a decrease in certain interest rates and the continued efforts to repay certain debt obligations, offset by debt incurred as part of the Precision acquisition during July 2020 .

Gain on lease settlement, net

During the six months ended March 31, 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.

There were no similar gains during the three months ended March 31, 2021.

Gain on Payroll Protection Program

During the six months ended March 31, 2021, the Company recorded a gain of $1,382 due to the forgiveness of Precision’s PPP Loan.

There were no similar transactions during the six months ended March 31, 2020.

Gain on Bankruptcy Settlement

During the three months ended March 31, 2021, the Company recorded a gain of $1,115 due to the discharge of certain payables from bankruptcy proceedings.

There were no similar transactions during the three months ended March 31, 2020.

Results of Operations by Segment

Three Months Ended December 31, 2020

Three Months Ended December 31, 2019

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

Flooring Manufacturing

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Segment results for Retail include Vintage Stock and ApplianceSmart.

Revenue for the three months ended December 31, 2020 remained relatively flat, as compared to the prior year, primarily due to the closure of certain ApplianceSmart retail locations during 2019, offset by higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19.

Operating income for the three months ended December 31, 2020 was $4,493, as compared to operating income of $1,859 the prior year period, primarily due to the decrease in general and administrative expense of $1,348 due to the closure of certain ApplianceSmart retail locations during 2019 and other cost saving measures.

Revenue for the three months ended March 31, 2021 increased $5,017 or 26%, as compared to the prior year, primarily due to the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19.

Operating income for the three months ended March 31, 2021 was $5,071, as compared to operating income of $1,331 the prior year period, primarily due to the decrease in general and administrative expense of $868 due other cost saving measures.

Flooring Manufacturing Segment

Segment results for Flooring Manufacturing includes Marquis.

Revenue for the three months ended December 31, 2020 increased $9,855, or 48 %, as compared to the prior year period, due to increased sales of carpets and hard surface products related to development of new products and the acquisition of Lonesome Oak.

Cost of revenue for the three months ended December 31, 2020 increased proportionately with revenue, as compared to the prior year period.

Operating income for the three months ended December 31, 2020 increased $1,747, or 73%, as compared to the prior year period.

Revenue for the three months ended March 31, 2021 increased $5,671, or 21%, as compared to the prior year period, due to increased sales of carpets and hard surface products related to development of new products.

Cost of revenue for the three months ended March 31, 2021 increased proportionately with revenue, as compared to the prior year period.

Operating income for the three months ended March 31, 2021 increased $3,308, or 122%, as compared to the prior year period.

Steel Manufacturing Segment

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The Company completed the acquisition of Precision Marshall in July 2020.

Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms.

Corporate and Other Segment

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We are no longer accepting new customers in our directory services business.

For the Six Months Ended March 31, 2021

For the Six Months Ended March 31, 2020

Flooring Manufacturing

Steel Manufacturing

Corporate & Other

Flooring Manufacturing

Steel Manufacturing

Corporate & Other

Cost of Revenue

Administrative Expense

Selling and Marketing

Operating Income (Loss)

Retail Segment

Segment results for Retail include Vintage Stock and ApplianceSmart.

Revenue for the six months ended March 31, 2021 increased $5,899 or 15%, as compared to the prior year, primarily due to the launch of new gaming systems and higher demand for home entertainment options as a result of public entertainment restrictions due to COVID-19.

Operating income for the six months ended March 31, 2021 was $9,564, as compared to operating income of $3,195 the prior year period, primarily due to the decrease in general and administrative expense of $2,216 due other cost saving measures.

Flooring Manufacturing Segment

Segment results for Flooring Manufacturing includes Marquis.

Revenue for the six months ended March 31, 2021 increased $15,526, or 33%, as compared to the prior year period, due to increased sales of carpets and hard surface products related to development of new products and the acquisition of Lonesome Oak.

Cost of revenue for the six months ended March 31, 2021 increased proportionately with revenue, as compared to the prior year period.

Operating income for the six months ended March 31, 2021 increased $5,060, or 99%, as compared to the prior year period.

Steel Manufacturing Segment

Segment results for Steel Manufacturing includes Precision Marshall.

The Company completed the acquisition of Precision Marshall in July 2020.

Steel manufacturing is experiencing higher demand as distributors look to replenish stock levels due to the stronger demand in the automotive market relating to new car platforms.

Corporate and Other Segment

Segment results for Corporate and Other includes our directory services business.

Revenues and operating income continue to decline due to decreasing renewals.

We expect revenue and operating income from this segment to continue to decrease in the future.

We are no longer accepting new customers in our directory services business.

Liquidity and Capital Resources

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We have the following three asset-based revolver lines of credit:

(i) Texas Capital Bank Revolver Loan (“TCB Revolver”) utilized by Vintage Stock, (ii) Bank of America Revolver Loan (“BofA Revolver”) utilized by Marquis, (iii) Encina Revolver Loan (“Encina Revolver”) utilized by Precision Marshall.

(i) Texas Capital Bank Revolver Loan (“TCB Revolver”) utilized by Vintage Stock, (ii) Bank of America Revolver Loan (“BofA Revolver”) utilized by Marquis, and (iii) Encina Revolver Loan (“Encina Revolver”) utilized by Precision Marshall.

Additionally, we have an unsecured revolving line of credit with Isaac Capital Group (“ICG Revolver”) utilized by the Company.

As of December 31, 2020 , we had total cash on hand of $ 7,232 and an additional $ 32,811 of available borrowing under our revolving credit facilities .

As of March 31, 2021, we had total cash on hand of $11,928 and an additional $38,327 of available borrowing under our revolving credit facilities.

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.

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

Continued impacts of the pandemic could materially adversely affect the near-term and long-term revenues, earnings, liquidity, and cash flows, and may require significant actions in response, including but not limited to, employee furloughs, reduced store hours, store closings, expense reductions or discounting of pricing of products, all in an effort to mitigate such impacts.

Continued impacts of the pandemic could materially adversely affect the near-term and long-term revenues, earnings, liquidity, and cash flows, and

may require significant actions in response, including but not limited to, employee furloughs, reduced store hours, store closings, expense reductions or discounting of pricing of products, all in an effort to mitigate such impacts.

The extent of the impact of the pandemic on the business and financial results will depend largely on future developments, including the duration of the spread of the outbreak within the U.S.

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Working Capital

We had working capital of $38,324 as of December 31, 2020 as compared to working capital of $38,566 as of September 30, 2020.

Such changes in working capital were primarily attributable to the increase in short term lease obligations due to the adoption of the new lease accounting standard, an increase in the current portion of debt, a decrease in trade receivables and net debtor in possession liabilities.

We had working capital of $41,927 as of March 31, 2021 as compared to working capital of $38,566 as of September 30, 2020.

Cash Flows from Operating Activities

The Company’s cash and cash equivalents as of December 31, 2020 was $7,232 compared to $8,984 as of September 30, 2020, a decrease of $1,752.

Net cash provided by operations was $8,668 for the three months ended December 31, 2020 as compared to net cash provided by operations of $2,999 for the same period in 2019 primarily due to the Result of operations discussed above.

The Company’s cash and cash equivalents as of March 31, 2021 was $11,928 compared to $8,984 as of September 30, 2020, an increase of $2,944.

Net cash provided by operations was $20,911 for the six months ended March 31, 2021 as compared to net cash provided by operations of $6,571 for the six months ended March 31, 2020 primarily due to the Result of operations discussed above.

Our primary source of cash inflows is from customer receipts from sales on account, factor accounts receivable proceeds and net remittances from directory services customers processed in the form of ACH billings.

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Cash Flows from Investing Activities

Our cash flows used in investing activities of $3,258 for the three months ended December 31, 2020 consisted primarily of purchases of property and equipment.

Our cash flows used in investing activities of $645 for the three months ended December 31, 2019 consisted primarily of purchases of property and equipment.

Our cash flows used in investing activities of $5,469 for the six months ended March 31, 2021 consisted primarily of purchases of property and equipment.

Our cash flows used in investing activities of $2,412 for the six months ended March 31, 2020 consisted primarily of purchases of property and equipment of $1,858 and a $550 payment associated with the Lonesome Oak acquisition .

Cash Flows from Financing Activities

Our cash flows used in financing activities during the three months ended December 31, 2020 consisted of $3,289 in net payments under revolver loans, payment on notes payable of $5,712, partially offset by the issuance of notes payable of $2,130 primarily associated with the acquisition of a facility by Marquis.

Our cash flows used in financing activities during the three months ended December 31, 2019 consisted of $972 net payments under revolver loans, purchase of treasury stock $343, payment on notes payable $2,042 and cash classified as debtor in possession of $173.

Our cash flows used in financing activities during the six months ended March 31, 2021 consisted of $4,554 in net payments under revolver loans, payment on notes payable of $9,931, purchase of treasury stock of $383 , partially offset by the issuance of notes payable of $2,258 primarily associated with the acquisition of a facility by Marquis.

Our cash flows used in financing activities during the six months ended March 31, 2020 consisted of $2,640 net borrowings under revolver loans, purchase of treasury stock of $759, payment on notes payable $12,035, proceeds on notes payable of $5,000 and cash classified as debtor-in-possession of $187.

Currently, the Company does not intend to issue shares of its common stock for liquidity purposes.

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The following tables summarize the TCB Revolver for the period:

During the three months ended December 31,

During the six months ended March 31,

Cumulative borrowing during the period

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Weighted average interest for the period

December 31, 2020

March 31, 2021

September 30, 2020

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The following tables summarize the BofA Revolver for the period:

During the three months ended December 31,

During the six months ended March 31,

Cumulative borrowing during the period

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Weighted average interest for the period

December 31, 2020

March 31, 2021

September 30, 2020

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Precision may borrow funds for operations under the Encina Revolver subject to availability as described in Note 5 to the consolidated financial statements.

During the three months ended December 31,

During the six months ended March 31,

Cumulative borrowing during the period

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Weighted average interest for the period

December 31, 2020

March 31, 2021

September 30, 2020

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Any financing obtained may further dilute or otherwise impair the ownership interest of our existing stockholders.

Off-Balance Sheet Arrangements

At December 31, 2020, we had no off-balance sheet arrangements, commitments, or guarantees that require additional disclosure or measurement.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2020, we did not participate in any market risk-sensitive commodity instruments for which fair value disclosure would be required.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2021, 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis