LIVE VENTURES Inc 10-Q

ITEM 2. 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 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 This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in this portion of the Quarterly 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) 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. Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2020 Form 10-K under Item 1A “Risk Factors”, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.liveventures.com or any other websites referenced in this Quarterly Report are not part of this Quarterly Report. Our Company Live Ventures Incorporated is a holding company of diversified businesses, which, together with our subsidiaries, we refer to as the “Company”, “Live Ventures”, “we”, “us” or “our”. We acquire and operate companies in various industries that have historically demonstrated a strong history of earnings power. We currently have three segments to our business: Retail, Flooring Manufacturing, and Steel Manufacturing. Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies. 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 Quarterly Report Form 10-Q) is located at www.liveventures.com. Our common stock trades on the Nasdaq Capital Market under the symbol “LIVE”. Retail Segment Our Retail Segment is composed of Vintage Stock and ApplianceSmart. Vintage Stock 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 more than 60 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, New Mexico, Oklahoma, Texas and Utah. 23 ApplianceSmart ApplianceSmart, Inc. (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, 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”). The bankruptcy affects Live Ventures’ indirect subsidiary ApplianceSmart only and does not affect any other subsidiary of Live Ventures, or Live Ventures itself. ApplianceSmart expects to continue to operate its business in the ordinary course of business as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. In addition, the Company reserves its right to file a motion seeking authority to use cash collateral of the lenders under the reserve-based revolving credit facility. The case is being administrated under the caption In re: ApplianceSmart, Inc . (case number 19-13887). Court filings and other information related to the Chapter 11 Case are available at the PACER Case Locator website for those registered to do so or at the Courthouse located at One Bowling Green, Manhattan, New York 10004. Flooring Manufacturing Segment Our Flooring Manufacturing segment is comprised of Marquis. Marquis is a leading carpet manufacturer and distributor of carpet and hard surface flooring products. Over the last decade, Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market’s fastest-growing fiber category. We focus on the residential, niche commercial, and hospitality end-markets and serve thousands of customers. Since commencing operations in 1995, Marquis has built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies that differentiate its brands in the flooring marketplace. Marquis’s state-of-the-art operations enable high quality products, unique customization, and exceptionally short lead-times. Furthermore, the Company has recently invested in additional capacity to grow several attractive lines of business, including printed carpet and yarn extrusion. Steel Manufacturing Segment Our Steel Manufacturing segment is comprised of Precision Industries, Inc. (“Precision Marshall”) . Precision Marshall is the North American leader in providing and manufacturing pre-finished de-carb free tool and die steel. For over 70 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. Founded in 1948, Precision Marshall “The Deluxe Company” has built a reputation of high integrity, speed of service and doing things the “Deluxe Way”. The term Deluxe refers to all aspects of the product and customer service to be head and shoulders above the rest. From order entry to packaging and delivery, Precision Marshall makes it easy to do business and backs all products and service with a guarantee. Precision Marshall provides four key products to over 500 steel distributors in four product categories: Deluxe Alloy Plate, Deluxe Tool Steel Plate, Precision Ground Flat Stock, and Drill Rod. With over 5,000 distinct size grade combinations in stock every day, Precision Marshall arms tool steel distributors with deep inventory availability and same day shipment to their place of business or often ships direct to their customer saving time and handling. Critical Accounting Policies Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information available prior to the issuance of our financial statements. Our actual realized results may differ materially from management’s initial estimates as reported. Our critical and significant accounting policies include Trade and Other Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, Stock Based Compensation, Income Taxes, Segment Reporting and Concentrations of Credit Risk. 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. 24 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: For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 % of Total Revenue % of Total Revenue Statement of Income Data: Revenues $ 70,890 100.0 % $ 46,431 100.0 % Cost of revenues 44,400 62.6 % 28,655 61.7 % Gross profit 26,490 37.4 % 17,776 38.3 % General and administrative expenses 12,565 17.7 % 11,701 25.2 % Sales and marketing expenses 2,800 3.9 % 3,007 6.5 % Operating income 11,125 15.7 % 3,068 6.6 % Interest expense, net (1,649 ) (2.3 )% (1,270 ) (2.7 )% Gain on lease settlement, net — 0.0 % 837 1.8 % Gain on Payroll Protection Program loan forgiveness 1,382 1.9 % — 0.0 % Gain on disposal of fixed assets (129 ) -0.2 % — 0.0 % Gain on bankruptcy settlement 1,115 1.6 % — 0.0 % Other income (expense) 79 0.1 % (125 ) (0.3 )% Income before provision for income taxes 11,923 16.8 % 2,510 5.4 % Provision for income taxes 3,228 4.6 % 629 1.4 % Net income $ 8,695 12.3 % $ 1,881 4.1 % The following table sets forth revenues by segment: For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 Net Revenue % of Total Revenue Net Revenue % of Total Total Revenue Revenue Retail Movies, Music, Games and Other $ 23,651 33.4 % $ 17,445 37.6 % Appliances 352 0.5 % 1,541 3.3 % Flooring Manufacturing 32,972 46.5 % 27,301 58.8 % Steel Manufacturing 13,793 19.5 % — 0.0 % Corporate & other 122 0.2 % 144 0.3 % Total Revenue $ 70,890 100.0 % $ 46,431 100.0 % The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment: For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 Gross Profit Gross Profit % of Total Revenue Gross Profit Gross Profit % of Total Revenue Gross Profit Retail Movies, Music, Games and Other $ 12,813 54.2 % $ 9,988 57.3 % Appliances 157 44.6 % 342 22.2 % Flooring Manufacturing 10,022 30.4 % 7,313 26.8 % Steel Manufacturing 3,380 24.5 % — 0.0 % Corporate & other 118 96.7 % 133 92.4 % Total Gross Profit $ 26,490 37.4 % $ 17,776 38.3 % Revenue 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. 25 Retail : 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 $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 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 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 March 31, 2021 as compared to the three months ended March 31, 2020 . Interest Expense, net 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. 26 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 % of Total Revenue % of Total Revenue Statement of Income Data: Revenues $ 133,344 100.0 % $ 88,432 100.0 % Cost of revenues 84,585 63.4 % 54,030 61.1 % Gross profit 48,759 36.6 % 34,402 38.9 % General and administrative expenses 24,844 18.6 % 22,510 25.5 % Sales and marketing expenses 5,499 4.1 % 5,337 6.0 % Operating income 18,416 13.8 % 6,555 7.4 % Interest expense, net (3,119 ) (2.3 )% (2,627 ) (3.0 )% Gain on lease settlement, net — 0.0 % 223 0.3 % Gain on Payroll Protection Program loan forgiveness 1,382 1.0 % — 0.0 % Gain on bankruptcy settlement 1,115 0.8 % — 0.0 % Other income (expense) 858 0.6 % (306 ) -0.3 % Income before provision for income taxes 18,652 14.0 % 3,845 4.3 % Provision for income taxes 4,678 3.5 % 979 1.1 % Net income $ 13,974 10.5 % $ 2,866 3.2 % The following table sets forth revenues by segment: For the Six Months Ended March 31, 2021 For the Six Months Ended March 31, 2020 Net Revenue % of Total Revenue Net Revenue % of Total Total Revenue Revenue Retail Movies, Music, Games and Other $ 45,725 34.3 % $ 37,720 42.7 % Appliances 648 0.5 % 2,754 3.1 % Flooring Manufacturing 63,194 47.4 % 47,668 53.9 % Steel Manufacturing 23,528 17.6 % — 0.0 % Corporate & other 249 0.2 % 290 0.3 % Total Revenue $ 133,344 100.0 % $ 88,432 100.0 % 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 Gross Profit Gross Profit % of Total Revenue Gross Profit Gross Profit % of Total Revenue Gross Profit Retail Movies, Music, Games and Other $ 24,729 54.1 % $ 20,886 55.4 % Appliances 288 44.4 % 569 20.7 % Flooring Manufacturing 18,347 29.0 % 12,676 26.6 % Steel Manufacturing 5,156 21.9 % — #DIV/0 ! Corporate & other 239 96.0 % 271 93.4 % Total Gross Profit $ 48,759 36.6 % $ 34,402 38.9 % Revenue 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. Retail: 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. Appliance 27 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. 28 Results of Operations by Segment For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020 Retail Flooring Manufacturing Steel Manufacturing Corporate & Other Total Retail Flooring Manufacturing Steel Manufacturing Corporate & Other Total Revenue $ 24,003 $ 32,972 $ 13,793 $ 122 $ 70,890 $ 18,986 $ 27,301 $ — $ 144 $ 46,431 Cost of Revenue 11,033 22,950 10,413 4 44,400 8,656 19,988 — 11 28,655 Gross Profit 12,970 10,022 3,380 118 26,490 10,330 7,313 — 133 17,776 General and Administrative Expense 7,700 1,609 1,441 1,815 12,565 8,568 2,038 — 1,095 11,701 Selling and Marketing Expense 199 2,402 197 2 2,800 431 2,572 — 4 3,007 Operating Income (Loss) $ 5,071 $ 6,011 $ 1,742 $ (1,699 ) $ 11,125 $ 1,331 $ 2,703 $ — $ (966 ) $ 3,068 Retail Segment Segment results for Retail include Vintage Stock and ApplianceSmart. 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 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 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. For the Six Months Ended March 31, 2021 For the Six Months Ended March 31, 2020 Retail Flooring Manufacturing Steel Manufacturing Corporate & Other Total Retail Flooring Manufacturing Steel Manufacturing Corporate & Other Total Revenue $ 46,373 $ 63,194 $ 23,528 $ 249 $ 133,344 $ 40,474 $ 47,668 $ — $ 290 $ 88,432 Cost of Revenue 21,356 44,847 18,372 10 84,585 19,019 34,992 — 19 54,030 Gross Profit 25,017 18,347 5,156 239 48,759 21,455 12,676 — 271 34,402 General and Administrative Expense 15,120 3,550 2,968 3,206 24,844 17,336 3,170 — 2,004 22,510 Selling and Marketing Expense 333 4,636 302 228 5,499 924 4,405 — 8 5,337 Operating Income (Loss) $ 9,564 $ 10,161 $ 1,886 $ (3,195 ) $ 18,416 $ 3,195 $ 5,101 $ — $ (1,741 ) $ 6,555 29 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 Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities, and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to fund our operations, pay our scheduled loan payments, repurchase shares under our share buyback 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. 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, 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 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. 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. Coronavirus In March 2020, there was a global outbreak of COVID-19 (Coronavirus) which continues to create challenges and unprecedented conditions. Although there are effective vaccines for COVID-19 that have been approved for use, distribution of the vaccines did not begin until late 2020, and a majority of the public will likely not have access to a vaccination until sometime in 2021. Accordingly, there remains significant uncertainty about the duration and the extent of the impact of the COVID-19 pandemic. These uncertainties include, but are not limited to, the potential adverse effect of the pandemic on the Company’s supply chain partners, its employees and customers, customer sentiment in general, and traffic within shopping centers, and, where applicable, malls, containing its stores. Recommendations and/or mandates from federal, state, and local authorities to avoid large gatherings of people or self-quarantine have previously affected, and may continue to affect, traffic to the stores. As of March 31, 2020, Vintage Stock had closed all of its retail locations in response to the crisis. Beginning May 1, 2020, Vintage Stock began to reopen certain locations in compliance with government regulations and, at June 30, 2020, all Vintage Stock retail locations were reopened while maintaining compliance with government mandates. The Company is 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, 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 30 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. and the effect of the vaccines , the impact on capital and financial markets and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted. This situation is changing rapidly, and additional impacts may arise that the Company is not aware of currently . Working Capital 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 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. Our most significant cash outflows include payments for raw materials and general operating expenses, including payroll costs and general and administrative expenses that typically occur within close proximity of expense recognition. Cash Flows from Investing Activities 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 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. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically. Sources of Liquidity We utilize cash on hand and cash generated from operations and have funds available to us under our revolving loan facilities to cover normal and seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash equivalents are carried at cost and consist primarily of demand deposits with commercial banks. Our term debt facilities are not revolving credit facilities and require scheduled payments of principal and interest . 31 TCB Revolver Vintage Stock may borrow funds for operations under the TCB Revolver subject to availability as described in Note 5 to the consolidated financial statements. The following tables summarize the TCB Revolver for the period: During the six months ended March 31, 2021 2020 Cumulative borrowing during the period $ 44,915 $ 35,808 Cumulative repayment during the period 46,544 37,831 Maximum borrowed during the period 8,930 11,798 Weighted average interest for the period 2.38 % 4.02 % March 31, 2021 September 30, 2020 Total availability $ 6,514 $ 5,520 Total outstanding 5,486 7,115 BofA Revolver Marquis may borrow funds for operations under the BofA Revolver subject to availability as described in Note 5 to the consolidated financial statements. The following tables summarize the BofA Revolver for the period: During the six months ended March 31, 2021 2020 Cumulative borrowing during the period $ 62,263 $ 60,479 Cumulative repayment during the period 66,973 55,035 Maximum borrowed during the period — 11,347 Weighted average interest for the period 0.00 % 3.52 % March 31, 2021 September 30, 2020 Total availability $ 29,207 $ 21,732 Total outstanding — — Encina Revolver 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 six months ended March 31, 2021 2020 Cumulative borrowing during the period $ 19,525 $ — Cumulative repayment during the period 22,185 — Maximum borrowed during the period 1,100 — Weighted average interest for the period 6.50 % 0.00 % March 31, 2021 September 30, 2020 Total availability $ 1,606 $ 421 Total outstanding 12,227 14,886 Future Sources of Cash; New Products and Services We may require additional debt financing and/or capital to finance new acquisitions, refinance existing indebtedness or other strategic investments in our business. Other sources of financing may include stock issuances and additional loans or other forms of financing. Any financing obtained may further dilute or otherwise impair the ownership interest of our existing stockholders. 32 ITEM 3. 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.