LIVE VENTURES Inc 10-Q

Item 1. Financial Statements LIVE VENTURES INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per-share amounts) June 30, 2023 September 30, 2022 (Unaudited) Assets Cash $ 3,547 $ 4,600 Trade receivables, net of allowance for doubtful accounts of $ 194,000 at June 30, 2023 and $ 132,000 at September 30, 2022 27,358 25,665 Inventories, net of reserves of $ 3.5 million at June 30, 2023 and $ 2.4 million at September 30, 2022 114,075 97,659 Income taxes receivable 4,087 4,403 Prepaid expenses and other current assets 3,249 2,477 Total current assets 152,316 134,804 Property and equipment, net of accumulated depreciation of $ 34.3 million at June 30, 2023, and $ 26.7 million at September 30, 2022 65,431 64,590 Right of use asset - operating leases 45,321 33,659 Deposits and other assets 1,593 647 Intangible assets, net of accumulated amortization of $ 3.4 million at June 30, 2023 and $ 2.1 million at September 30, 2022 24,117 3,844 Goodwill 71,389 41,093 Total assets $ 360,167 $ 278,637 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 14,808 $ 10,899 Accrued liabilities 22,748 16,486 Current portion of lease obligations - operating leases 10,582 7,851 Current portion of lease obligations - finance leases 355 217 Current portion of long-term debt 23,689 18,935 Current portion of notes payable related parties 1,000 2,000 Total current liabilities 73,182 56,388 Long-term debt, net of current portion 64,519 59,704 Lease obligation long term - operating leases 39,588 30,382 Lease obligation long term - finance leases 20,004 19,568 Notes payable related parties, net of current portion 44,773 5,000 Deferred taxes 13,046 8,818 Other non-current obligations 852 1,615 Total liabilities 255,964 181,475 Commitments and contingencies Stockholders' equity: Series E convertible preferred stock, $ 0.001 par value, 200,000 shares authorized, 47,840 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively, with a liquidation preference of $ 0.30 per share outstanding — — Common stock, $ 0.001 par value, 10,000,000 shares authorized, 3,164,432 and 3,074,833 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively 2 2 Paid in capital 68,888 65,321 Treasury stock common 659,961 and 620,971 shares as of June 30, 2023 and September 30, 2022, respectively ( 8,203 ) ( 7,215 ) Treasury stock Series E preferred 80,000 shares as of June 30, 2023 and September 30, 2022, respectively ( 7 ) ( 7 ) Retained earnings 43,971 39,509 Equity attributable to Live stockholders 104,651 97,610 Non-controlling interest ( 448 ) ( 448 ) Total stockholders' equity 104,203 97,162 Total liabilities and stockholders' equity $ 360,167 $ 278,637 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents LIVE VENTURES INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands, except per-share amounts) For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Revenues $ 91,516 $ 68,269 $ 251,624 $ 213,133 Cost of revenues 59,347 45,920 165,903 138,215 Gross profit 32,169 22,349 85,721 74,918 Operating expenses: General and administrative expenses 23,226 13,407 60,443 40,718 Sales and marketing expenses 3,382 3,078 10,198 9,480 Total operating expenses 26,608 16,485 70,641 50,198 Operating income 5,561 5,864 15,080 24,720 Other (expense) income: Interest expense, net ( 3,485 ) ( 674 ) ( 8,767 ) ( 2,549 ) Gain (loss) on debt extinguishment — 279 — ( 84 ) Gain on disposal of fixed assets ( 29 ) ( 443 ) ( 22 ) ( 444 ) Loss on write-off of ROU asset — ( 522 ) — ( 522 ) Salomon Whitney settlement 1,000 — 2,000 — Loss on disposition of Salomon Whitney ( 1,696 ) — ( 1,696 ) — Gain on bankruptcy settlement — — — 11,352 Other income (expense) 6 333 ( 671 ) 751 Total other income (expense), net ( 4,204 ) ( 1,027 ) ( 9,156 ) 8,504 Income before provision for income taxes 1,357 4,837 5,924 33,224 Provision for income taxes 297 1,365 1,462 7,848 Net income 1,060 3,472 4,462 25,376 Net income attributable to Live stockholders $ 1,060 $ 3,472 $ 4,462 $ 25,376 Income per share: Basic $ 0.33 $ 1.12 $ 1.43 $ 8.11 Diluted $ 0.33 $ 1.11 $ 1.42 $ 8.01 Weighted average common shares outstanding: Basic 3,166,842 3,090,321 3,123,177 3,128,813 Diluted 3,186,904 3,130,925 3,143,634 3,169,258 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents LIVE VENTURES INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands) For the Nine Months Ended June 30, 2023 2022 Operating Activities: Net income $ 4,462 $ 25,376 Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 9,978 4,616 (Gain)/loss on disposal of property and equipment 29 443 Gain on bankruptcy settlement — ( 11,501 ) Amortization of debt issuance cost 223 ( 95 ) Stock based compensation expense 396 37 Amortization of right-of-use assets 2,069 8,517 Write-off of ROU asset — 522 Change in reserve for uncollectible accounts 62 ( 6 ) Change in reserve for obsolete inventory 1,030 431 Change in deferred income taxes 4,227 2,529 Disposition of SW Financial, net of cash retained 1,509 — Changes in assets and liabilities, net of acquisitions: Trade receivables 2,940 ( 362 ) Inventories 2,917 ( 18,582 ) Income taxes payable/receivable 316 ( 481 ) Prepaid expenses and other current assets 3,482 ( 450 ) Deposits and other assets ( 1,002 ) ( 362 ) Accounts payable ( 1,039 ) 3,741 Accrued liabilities ( 5,656 ) ( 3,553 ) Other Liabilities 63 24 Net cash provided by operating activities 26,006 10,844 Investing Activities: Acquisition of Flooring Liquidators, net of cash acquired ( 33,929 ) — Acquisition of Kinetic — ( 24,355 ) Acquisition of Cal Coast Carpets ( 1,300 ) — Purchase of property and equipment ( 3,499 ) ( 8,304 ) Net cash used in investing activities ( 38,728 ) ( 32,659 ) Financing Activities: Net borrowings under revolver loans 3,133 18,179 Proceeds from issuance of notes payable 9,878 20,292 Payments on notes payable ( 5,555 ) ( 15,122 ) Proceeds from issuing related party notes payable 7,000 — Payments for debt acquisition costs ( 98 ) — Purchase of common treasury stock ( 988 ) ( 2,528 ) Payments on financing leases ( 1,621 ) ( 120 ) Payments on seller financing arrangements ( 51 ) — Cash paid for taxes on net settlement of stock option exercise ( 29 ) — Debtor-in-possession cash — 75 Net cash provided by financing activities 11,669 20,776 Decrease in cash ( 1,053 ) ( 1,039 ) Cash, beginning of period 4,600 4,664 Cash, end of period $ 3,547 $ 3,625 Supplemental cash flow disclosures: Interest paid $ 7,443 $ 2,496 Income taxes paid $ 102 $ 5,795 Noncash financing and investing activities: Noncash items related to Flooring Liquidators acquisition $ 36,900 $ — Noncash stock options exercise $ 327 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents LIVE VENTURES INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (dollars in thousands) Series B Preferred Stock Series E Preferred Stock Common Stock Series E Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Paid-In Capital Treasury Stock Treasury Stock Retained Earnings Non-controlling Interest Total Equity Balance, September 30, 2022 — $ — 47,840 $ — 3,074,833 $ 2 $ 65,321 $ ( 7 ) $ ( 7,215 ) $ 39,509 $ ( 448 ) $ 97,162 Purchase of common treasury stock — — — — ( 24,710 ) — — — ( 621 ) — — ( 621 ) Net income — — — — — — — — — 1,844 — 1,844 Balance, December 31, 2022 — $ — 47,840 $ — 3,050,123 $ 2 $ 65,321 $ ( 7 ) $ ( 7,836 ) $ 41,353 $ ( 448 ) $ 98,385 Purchase of common treasury stock — — — — ( 674 ) — — — ( 17 ) — — ( 17 ) Stock based compensation — — — — — — 109 109 Issuance of common stock — — — — 116,441 — 3,200 — — — 3,200 Net income — — — — — — — — — 1,558 — 1,558 Balance, March 31, 2023 — $ — 47,840 $ — 3,165,890 $ 2 $ 68,630 $ ( 7 ) $ ( 7,853 ) $ 42,911 $ ( 448 ) $ 103,235 Purchase of common treasury stock — — — — ( 13,606 ) — — — ( 350 ) — — ( 350 ) Stock based compensation — — — — — — 287 — — — — 287 Stock options exercised — — — — 12,148 — — — — — — — Taxes paid on net settlement of stock options exercised — — — — — — ( 29 ) — — — — ( 29 ) Issuance of common stock — — — — — — — — — — — Net income — — — — — — — — — 1,060 — 1,060 Balance, June 30, 2023 — $ — 47,840 $ — 3,164,432 $ 2 $ 68,888 $ ( 7 ) $ ( 8,203 ) $ 43,971 $ ( 448 ) $ 104,203 6 Table of Contents Series B Preferred Stock Series E Preferred Stock Common Stock Series E Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Paid-In Capital Treasury Stock Treasury Stock Retained Earnings Non-controlling Interest Total Equity Balance, September 30, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,284 $ ( 7 ) $ ( 4,519 ) $ 14,768 $ ( 448 ) $ 75,080 Stock based compensation — — — — — — 18 — — — 18 Net income — — — — — — — — — 6,546 — 6,546 Balance, December 31, 2021 315,790 $ — 47,840 $ — 1,582,334 $ 2 $ 65,302 $ ( 7 ) $ ( 4,519 ) $ 21,314 $ ( 448 ) $ 81,644 Stock based compensation — — — — — — 19 — — — — 19 Purchase of common treasury stock — — — — ( 65,668 ) — — — ( 2,084 ) — — ( 2,084 ) Conversion of Series B preferred stock ( 315,790 ) — — — 1,578,950 — — — — — — — Net income — — — — — — — — — 15,358 — 15,358 Balance, March 31, 2022 — $ — 47,840 $ — 3,095,616 $ 2 $ 65,321 $ 65,321 $ ( 7 ) $ ( 6,603 ) $ 36,672 $ ( 448 ) $ 94,937 Purchase of common treasury stock — — — — ( 14,160 ) — — — ( 444 ) — — ( 444 ) Net income — — — — — — — 3,472 — 3,472 Balance, June 30, 2022 — 0 $ — 47,840 $ — 3,081,456 $ 2 $ 65,321 $ ( 7 ) $ ( 7,047 ) $ 40,144 $ ( 448 ) $ 97,965 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents LIVE VENTURES INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 AND 2022 (dollars in thousands, except per-share amounts) Note 1: Background and Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Live Ventures Incorporated, a Nevada corporation, and its subsidiaries (collectively, “Live Ventures” or the “Company”). Live Ventures is a diversified holding company with a strategic focus on value-oriented acquisitions of domestic middle-market companies. The Company has five operating segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other. The Retail-Entertainment segment includes Vintage Stock, Inc. (“Vintage Stock”), which is engaged in the retail sale of new and used movies, music, collectibles, comics, books, games, game systems and components. The Retail-Flooring segment includes Flooring Liquidators, Inc. (“Flooring Liquidators”), which is engaged in the retail sale and installation of floors, carpets, and countertops. The Flooring Manufacturing segment includes Marquis Industries, Inc. (“Marquis”), which is engaged in the manufacture and sale of carpet and the sale of vinyl and wood floor coverings. The Steel Manufacturing Segment includes Precision Industries, Inc. (“Precision Marshall”), which is engaged in the manufacture and sale of alloy and steel plates, ground flat stock and drill rods, and The Kinetic Co., Inc. (“Kinetic”), which is engaged in the production of industrial knives and hardened wear products for the tissue and metals industries. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. 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 the three and nine months ended June 30, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023. The financial information included in these statements should be read in conjunction with the condensed consolidated financial statements and related notes thereto as of September 30, 2022 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 16, 2022 (the “2022 Form 10-K”). Note 2: Summary of Significant Accounting Policies Principles of Consolidation The unaudited condensed financial statements include the accounts of the Company and its majority owned subsidiaries over which the Company exercises control. The Company records a non-controlling interest within stockholders’ equity for the portion of the entity’s equity attributed to the consolidated entities that are not wholly owned. All intercompany accounts and transactions have been eliminated in consolidation. These reclassifications have no material effect on the reported financial results. Reclassifications Certain amounts in the prior period have been reclassified to conform to the current period presentation. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in connection with the accompanying condensed consolidated financial statements include the estimated reserve for doubtful accounts, the estimated reserve for excess and obsolete inventory, fair values of goodwill, other intangibles and long-lived assets in connection with an acquisition, fair values in connection with the analysis of goodwill, other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets, and estimated useful lives for intangible assets and property and equipment. 8 Table of Contents Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), codified as ASC 848 (“ASC 848”). The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. Effective December 31, 2021, the Secured Overnight Financing Rate (“SOFR”) replaced the USD London Interbank-Offered Rate (“LIBOR”) for most financial benchmarking. The guidance may be applied upon issuance of ASC 848 through December 31, 2022. The Company has adopted this new accounting standard on its condensed consolidated financial statements and related disclosures; however, adoption of this ASU had no material impact on the Company's financial statements. Note 3: Acquisitions Acquisition of Flooring Liquidators On January 18, 2023, Live Ventures acquired 100 % of the issued and outstanding equity interests (the “Equity Interests”) of Flooring Liquidators, Inc., Elite Builder Services, Inc., 7 Day Stone, Inc., Floorable, LLC, K2L Leasing, LLC, and SJ & K Equipment, Inc. (collectively, the “Acquired Companies”). The Acquired Companies are leading retailers and installers of floors, carpets, and countertops to consumers, builders and contractors in California and Nevada (see Note 11). The acquisition was effected pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with an effective date of January 18, 2023 by and among the Company, and Stephen J. Kellogg, as the seller representative of the equity holders of the Acquired Companies and individually in his capacity as an equity holder of the Acquired Companies, and the other equity holders of the Acquired Companies (collectively, the “Seller”). The purchase price for the Equity Interests was $ 83.8 million before any fair value considerations, and is comprised of the following: • $ 41.8 million in cash to the Seller; • $ 34.0 million (the “Note Amount”) to certain trusts for the benefit of Kellogg and members of his family (the “Kellogg Trusts”) pursuant to the issuance by the Company of a subordinated promissory note (the “Note”) in favor of the Kellogg Trusts; • $ 4.0 million to the Kellogg 2022 Family Irrevocable Nevada Trust by issuance of 116,441 shares of Company Common Stock (as defined in the Purchase Agreement) (the “Share Amount”), calculated in the manner described in the Purchase Agreement; • $ 2.0 million holdback; and • $ 2.0 million of contingent consideration, comprised of $ 1.0 million in cash and $ 1.0 million in restricted stock units. The fair value the purchase price components outlined above was $ 78.7 million due to fair value adjustments for the Note, restricted stock, and contingent consideration. Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $ 30.6 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of January 18, 2023, as calculated by an independent third-party firm. The Company anticipates approximately $ 13.4 million of the goodwill arising from the acquisition to be fully deductible for tax purposes. The table 9 Table of Contents below outlines the purchase price allocation of the purchase for Flooring Liquidators to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s): Purchase price $ 78,700 Accounts payable 5,189 Accrued liabilities 11,484 Debt 60 Total liabilities assumed 16,733 Total consideration 95,433 Cash 7,871 Accounts receivable 4,824 Inventory 19,102 Property, plant and equipment 4,678 Intangible assets Trade names $ 13,275 Customer relationships 7,700 Non-compete agreements 1,625 Other 49 Subtotal intangible assets 22,649 Other 5,701 Total assets acquired 64,825 Total goodwill $ 30,608 During the three months ended June 30, 2023, the Company recorded a fair value adjustment to increase goodwill by $ 1.9 million. The increase relates to an increase in the value of other assets acquired of $ 1.3 million, as well as an increase in the value of accrued liabilities assumed of $ 2.3 million, partially offset by a reduction in inventory acquired of $ 842,000 . Pro Forma Information The table below presents selected proforma information for the Company for the nine-month period ended June 30, 2023, and the three and nine month period ended June 30, 2022 assuming that the acquisition had occurred on October 1, 2021 (the beginning of the Company’s 2022 fiscal year), pursuant to ASC 805-10-50 (in $000’s). This proforma information 10 Table of Contents does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods. As Reported Adjustments Proforma Live Unaudited Three Months Ended June 30, 2022 Flooring Liquidators Unaudited Three Months Ended June 30, 2022 Adjustments (1) Live for the Three Months Ended June 30, 2022 Net revenue $ 68,269 $ 32,525 $ 100,794 Net income $ 3,472 $ 2,562 $ ( 2,008 ) $ 4,026 Earnings per basic common share $ 1.12 $ 1.30 Earnings per basic diluted share $ 1.11 $ 1.29 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2023 Flooring Liquidators Unaudited Nine Months Ended June 30, 2023 (2) Adjustments (1) Live for the Nine Months Ended June 30, 2023 Net revenue $ 251,624 $ 37,702 $ 289,326 Net income 4,462 $ ( 1,033 ) $ ( 2,226 ) $ 1,203 Earnings per basic common share $ 1.43 $ 0.39 Earnings per basic diluted share $ 1.42 $ 0.38 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2022 Flooring Liquidators Unaudited Nine Months Ended June 30, 2022 Adjustments (1) Live for the Nine Months Ended June 30, 2022 Net revenue $ 213,133 $ 92,375 $ 305,508 Net income $ 25,376 $ 7,783 $ ( 5,826 ) $ 27,333 Earnings per basic common share $ 8.11 $ 8.74 Earnings per basic diluted share $ 8.01 $ 8.62 (1) Adjustments are related to adjustments made for the following: • Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date. • Interest expense has been adjusted to include proforma interest expense that would have been incurred as a result of the acquisition financing obtained by the Company. • Elimination of revenues and costs of revenues associated with sales between Flooring Liquidators and the Company prior to acquisition. (2) Amounts presented are for predecessor period. Acquisition of Cal Coast Carpets On June 2, 2023, Flooring Liquidators acquired certain fixed assets and other intangible assets of Cal Coast Carpets, Inc. (“Cal Coast”), and its Shareholders, which was effected through two Asset Purchase Agreements (“Agreement”, or collectively, “Agreements”). No liabilities were assumed as part of either transaction. The purchase price for the fixed assets acquired from Cal Coast was $ 35,000 , and the intangible assets acquired from the Shareholders was approximately $ 1.265 million, for a total combined purchase price of $ 1.3 million. The intangible assets acquired were comprised of customer relationships, trade name, and non-compete agreements. The acquisition was determined to be an asset acquisition for accounting purposes and, as such, no goodwill was recorded as part of the transaction. The values assigned to the assets acquired are based on their estimates of fair value available as of June 2, 2023, as calculated by management. 11 Table of Contents The table below outlines the purchase price allocation of the purchase for Cal Coast to the acquired identifiable assets (in $000’s): Property, plant and equipment $ 35 Intangible assets Customer relationships 785 Trade name 425 Non-compete agreement 55 Total intangible assets 1,265 Total assets acquired $ 1,300 Acquisition of Kinetic On June 28, 2022, Precision Marshall (“Precision”) acquired 100 % of the issued and outstanding shares of common stock of The Kinetic Co., Inc. (“Kinetic”), a Wisconsin corporation, which was effected through a Purchase Agreement (the “Purchase Agreement”). In connection with the Purchase Agreement, Precision also entered into a Real Estate Purchase Agreement with Plant B-6, LLC, an affiliate of Kinetic, pursuant to which Precision received all of Kinetic's right, title, and interest in and to the land and improvements (collectively, the “Real Estate”) that Kinetic uses in its operations. The combined purchase price for the Kinetic shares and Real Estate was approximately $ 24.7 million, which was funded with approximately $ 11.0 million in borrowings under the company’s credit facility, approximately $ 8.3 million in proceeds from the sale and leaseback of the Real Estate, a subordinated promissory note in the principal amount of $ 3.0 million for the benefit of the Seller of Kinetic, $ 1.7 million of cash on-hand, a contingent earn-out liability valued at $ 997,000 , a working capital adjustment of approximately $ 400,000 , which was paid in cash, and a final fair value adjustment of approximately $ 312,000 , which was noncash. As of the date of acquisition, Precision entered into a sale and leaseback agreement with a third-party, independent of the Kinetic sellers, for the Real Estate. The sale price of the Real Estate was approximately $ 8.9 million, subject to closing fees of approximately $ 547,000 . The provisions of the lease agreement include a 20 -year lease term with two five-year renewal options. The base rent under the lease agreement is $ 600,000 for the first year of the term and a 2 % per annum escalator. The Lease Agreement is a “net lease,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the Real Property incurred by the lessor. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that each of the two five-year options will be exercised. The proceeds, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of Kinetic. Under the purchase price allocation, the Company recognized goodwill of approximately $ 3.0 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 28, 2022, as calculated by an independent third-party firm. Goodwill arising from the acquisition is 12 Table of Contents expected to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for Kinetic to the acquired identifiable assets, liabilities assumed and goodwill as of June 30, 2023 (in $000’s): Total purchase price $ 24,732 Accounts payable 571 Accrued liabilities 1,848 Total liabilities assumed 2,419 Total consideration 27,151 Cash 287 Accounts receivable 3,073 Inventory 6,429 Property, plant and equipment 12,855 Intangible assets 1,000 Other assets 480 Total assets acquired 24,124 Total goodwill $ 3,027 Pro Forma Information The table below presents selected proforma information for the Company for the three and nine-month periods ended June 30, 2022, assuming that the acquisition had occurred on October 1, 2021 (the beginning of the Company’s 2022 fiscal year), pursuant to ASC 805-10-50 (in $000's). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods. As Reported Adjustments Proforma Live Unaudited Three Months Ended June 30, 2022 Kinetic Unaudited Three Months Ended June 30, 2022 Adjustments (1) Live for the Three Months Ended June 30, 2022 Net revenue $ 68,269 $ 5,696 $ 73,965 Net income $ 3,472 $ 712 $ ( 69 ) $ 4,115 Earnings per basic common share $ 1.12 $ 1.33 Earnings per basic diluted share $ 1.11 $ 1.31 As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2022 Kinetic Unaudited Nine Months Ended June 30, 2022 Adjustments (1) Live for the Nine Months Ended June 30, 2022 Net revenue $ 213,133 $ 15,418 $ 228,551 Net income $ 25,376 $ 1,286 $ ( 207 ) $ 26,455 Earnings per basic common share $ 8.11 $ 8.46 Earnings per basic diluted share $ 8.01 $ 8.35 (1) Adjustments are related to adjustments made for the following: • Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date. • Interest expense has been adjusted to include proforma interest expense that would have been incurred as a result of the acquisition financing obtained by the Company. • Certain other expenses have been adjusted to reflect the post-acquisition operating environment. 13 Table of Contents Acquisition of Better Backers On July 1, 2022, Live acquired certain assets and intellectual property of Better Backers, a Georgia corporation, which was effected through an Asset Purchase Agreement (the “Asset Purchase Agreement”). No liabilities were assumed as part of the acquisition. The purchase price, which is subject to certain post-closing adjustments, was approximately $ 3.2 million, which is comprised of $ 1.8 million that was paid upon closing, and the $ 1.4 million present value of $ 1.5 million of non-compete payments to be made over a 24 -month period. In order to expedite the transaction, the acquisition was originally made by Live, and the $ 1.8 million paid upon closing was funded with borrowings under Live’s credit line with Isaac Capital Group (“ICG”). On August 18, 2022, Marquis repaid the $ 1.8 million to ICG and assumed ownership of Better Backers. In connection with the acquisition, Marquis entered into two 20-year building leases with Spyglass Estate Planning, LLC, a related party (see Note 16), with two options to renew for an additional five years each. The fair value of the buildings and improvement is approximately $ 9.3 million. The provisions of the lease agreements include an initial 24 -month month-to-month rental period, during which the lessee may cancel with 90 -day notice, followed by a 20 -year lease term with two five-year renewal options. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that it will not cancel during the initial 24 -month term, and that each of the two five-year options will be exercised. The base rent under the lease agreements is approximately $ 73,000 and $ 32,000 per month, respectively, for the first year of the term, and each lease agreement has a 2.5 % per annum escalator. The lease agreements are each “net leases”, such that the lessee is also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the property. The Company has evaluated each lease and determined the rent amounts to be at market rates. These leases are being treated as finance leases for accounting purposes, as described in ASC 842 “ Leases”. Under the purchase price allocation, no goodwill was recognized. The values assigned to the assets acquired are based on their estimates of fair value available as of July 1, 2022, as calculated by management. The table below outlines the purchase price allocation of the purchase for Better Backers to the acquired identifiable assets (in $000’s): Total purchase price $ 3,166 Inventory 748 Property, plant and equipment 2,118 Intangible assets 300 Total assets acquired 3,166 Note 4: Variable Interest Entity On March 31, 2023, the Company entered into a Settlement Agreement and Mutual Release (“Agreement”) with Angia Holdings, LLC and Thomas Diamante and Lawrence Zelin (“Principals”). The Agreement stipulated that the Principals would pay the Company $ 1,000,000 within 10 days of the effective date of the Agreement, and an additional $ 1,000,000 within 45 days of the effective date of the Agreement if a joint venture, with terms acceptable to the Company, was not formed. The Principals made the initial $ 1,000,000 payment in April 2023, and, having failed to form a joint venture, as described above, made the second $ 1,000,000 payment in May 2023. Consequently, employment of the Principals was terminated, and operations of SW Financial were shut down. The Company recorded a gain on receipt of the settlement amounts of $ 2,000,000 and a loss on deconsolidation of SW Financial's assets and liabilities of approximately $ 1.7 million, as detailed in the table below (in $000’s): 14 Table of Contents Accounts payable $ 242 Lease liabilities 728 Total deconsolidation of liabilities 970 Cash 187 Accounts receivable 130 Other current assets 187 Intangible assets Customer Relationships 1,348 Tradenames 72 Subtotal Intangible Assets 1,420 Right-of-use assets 687 Other assets 55 Total deconsolidation of assets 2,666 Total loss on deconsolidation $ ( 1,696 ) Note 5: Leases The Company leases retail stores, warehouse facilities, and office space. These assets and properties are generally leased under noncancelable agreements that expire at various future dates with many agreements containing renewal options for additional periods. The agreements, which have been classified as either operating or finance leases, generally provide for minimum and, in some cases, percentage rent, and require the Company to pay all insurance, taxes, and other maintenance costs. As a result, the Company recognizes assets and liabilities for all leases with lease terms greater than 12 months. 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 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. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. As of June 30, 2023, the weighted average remaining lease term for operating leases is 7.2 years. The Company's weighted average discount rate for operating leases is 8.4 %. Total cash payments for operating leases for the nine months ended June 30, 2023 and 2022 were approximately $ 8.2 million and $ 7.2 million, respectively. Additionally, we obtained right-of-use assets in exchange for operating lease liabilities of approximately $ 19.9 million upon commencement of operating leases during the nine months ended June 30, 2023. As of June 30, 2023, the weighted average remaining lease term for finance leases is 26.9 years. The Company's weighted average discount rate for finance leases is 13.2 %. Total cash payments for finance leases for the nine months ended June 30, 2023 and 2022 were approximately $ 1.6 million and $ 0 , respectively. Additionally, we obtained right-of-use assets in exchange for finance lease liabilities of approximately $ 443,000 upon commencement of operating leases during the nine months ended June 30, 2023. The following table details our right of use assets and lease liabilities as of June 30, 2023 and September 30, 2022 (in $000's): June 30, 2023 September 30, 2022 Right of use asset - operating leases $ 45,321 $ 33,659 Lease liabilities: Current - operating 10,582 7,851 Current - finance 355 217 Long term - operating 39,588 30,382 Long term - finance 20,004 19,568 15 Table of Contents The Company records finance lease right of use assets as property and equipment. The balance, as of June 30, 2023 and September 30, 2022 is as follows (in $000’s): Property and equipment, at cost $ 16,471 $ 16,029 Accumulated depreciation $ ( 514 ) $ ( 130 ) Property and equipment, net $ 15,957 $ 15,899 Total present value of future lease payments of operating leases as of June 30, 2023 (in $000's): Twelve months ended June 30, 2023 $ 13,855 2024 11,515 2025 9,655 2026 7,525 2027 4,987 Thereafter 15,462 Total 62,999 Less implied interest ( 12,829 ) Present value of payments $ 50,170 Total present value of future lease payments of finance leases as of June 30, 2023 (in $000's): Twelve months ended June 30, 2023 $ 2,175 2024 2,222 2025 2,223 2026 2,268 2027 2,345 Thereafter 72,260 Total 83,493 Less implied interest ( 63,134 ) Present value of payments $ 20,359 In connection with the acquisition of Flooring Liquidators (see Note 3), as of June 30, 2023, the Company obtained right-of-use assets in exchange for operating lease liabilities of $ 16.8 million, and right-of-use assets in exchange for finance lease liabilities of $ 443,000 . In connection with the disposition of SW Financial (see Note 4), the Company deconsolidated approximately $ 687,000 of right-of-use assets and $ 728,000 of operating lease liabilities, which were included in the calculation of the loss on disposition. During the nine months ended June 30, 2023 and 2022, the Company recorded no impairment charges relating to any of its leases. 16 Table of Contents Note 6: Inventory The following table details the Company's inventory as of June 30, 2023 and September 30, 2022 (in $000's): Inventory, net June 30, 2023 September 30, 2022 Raw materials $ 32,810 $ 35,829 Work in progress 7,623 7,539 Finished goods 34,327 32,814 Merchandise 42,916 23,900 117,676 100,082 Less: Inventory reserves ( 3,601 ) ( 2,423 ) Total inventory, net $ 114,075 $ 97,659 Note 7: Property and Equipment The following table details the Company's property and equipment as of June 30, 2023 and September 30, 2022 (in $000's): June 30, 2023 September 30, 2022 Property and equipment, net: Land $ 2,029 $ 2,029 Building and improvements 28,073 26,761 Transportation equipment 3,384 622 Machinery and equipment 55,923 53,739 Furnishings and fixtures 6,019 4,407 Office, computer equipment and other 4,281 3,699 99,709 91,257 Less: Accumulated depreciation ( 34,278 ) ( 26,667 ) $ 65,431 $ 64,590 Depreciation expense was $ 2.7 million and $ 1.4 million, respectively, for the three months ended June 30, 2023 and 2022, and $ 7.8 million and $ 3.9 million for the nine months ended June 30, 2023 and 2022. Note 8: Intangibles The following table details the Company's intangibles as of June 30, 2023 and September 30, 2022 (in $000's): June 30, 2023 September 30, 2022 Intangible assets, net: Intangible assets - Tradenames $ 14,390 $ 808 Intangible assets - Customer relationships 10,824 4,598 Intangible assets - Other 2,316 587 27,530 5,993 Less: Accumulated amortization ( 3,413 ) ( 2,149 ) Total intangibles, net $ 24,117 $ 3,844 In connection with the disposition of SW Financial (see Note 4), the Company deconsolidated approximately $ 1.3 million of customer relationships, net, and $ 72,000 of domain names, net, which were included in the calculation of the loss on disposition. 17 Table of Contents Amortization expense was $ 978,000 and $ 210,000 , respectively, for the three months ended June 30, 2023 and 2022, and $ 2.2 million and $ 706,000 for the nine months ended June 30, 2023 and 2022. The following table summarizes estimated future amortization expense related to intangible assets that have net balances (in $000’s): Twelve months ending June 30, 2024 $ 3,968 2025 3,910 2026 3,910 2027 3,812 2028 3,668 Thereafter 4,849 $ 24,117 Note 9: Goodwill The following table details the Company's goodwill as of June 30, 2023 (in $000's): Retail - Entertainment Retail - Flooring Flooring Manufacturing Steel Manufacturing Total September 30, 2022 36,947 — 807 3,339 41,093 Kinetic fair value adjustment — — — ( 312 ) ( 312 ) Flooring Liquidators acquisition — 27,277 — — 27,277 Flooring Liquidators tax adjustment — 3,331 — — 3,331 Impairment — — — — — June 30, 2023 $ 36,947 $ 30,608 $ 807 $ 3,027 $ 71,389 As of June 30, 2023, the Company did not identify any triggering events that would require impairment testing. Note 10: Accrued Liabilities The following table details the Company's accrued liabilities as of June 30, 2023 and September 30, 2022, respectively (in $000's): June 30, 2023 September 30, 2022 Accrued liabilities: Accrued payroll and bonuses $ 4,446 $ 4,838 Accrued sales and use taxes 2,219 1,905 Accrued customer deposits 3,579 — Accrued gift card and escheatment liability 1,792 1,696 Accrued interest payable 1,503 390 Accrued accounts payable and bank overdrafts 1,085 1,731 Accrued professional fees 3,042 1,924 Accrued expenses - other 5,082 4,002 Total accrued liabilities $ 22,748 $ 16,486 18 Table of Contents Note 11: Long-Term Debt Long-term debt as of June 30, 2023 and September 30, 2022 consisted of the following (in $000's): June 30, 2023 September 30, 2022 Revolver loans $ 46,240 $ 43,107 Equipment loans 16,486 13,716 Term loans 9,901 7,941 Other notes payable 16,155 14,501 Total notes payable 88,782 79,265 Less: unamortized debt issuance costs ( 574 ) ( 626 ) Net amount 88,208 78,639 Less: current portion ( 23,689 ) ( 18,935 ) Total long-term debt $ 64,519 $ 59,704 Future maturities of long-term debt at June 30, 2023, are as follows which does not include related party debt separately stated (in $000's): Twelve months ending June 30, 2024 $ 23,689 2025 5,654 2026 13,557 2027 33,188 2028 1,406 Thereafter 10,714 Total future maturities of long-term debt $ 88,208 Eclipse Business Capital Loans In connection with the acquisition of Flooring Liquidators (see Note 3), on January 18, 2023, Flooring Liquidators entered into a credit facility with Eclipse Business Capital, LLC (“Eclipse”). The facility consists of $ 25.0 million in revolving credit (“Eclipse Revolver”) and $ 3.5 million in M&E lending (“Eclipse M&E”). The Eclipse Revolver is a three-year , asset-based facility that is secured by substantially all of Flooring Liquidators’ assets. Availability under the Eclipse Revolver is subject to a monthly borrowing base calculation. Flooring Liquidators’ ability to borrow under the Eclipse Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with Eclipse. The Eclipse Revolver bears interest at 4.5 % per annum in excess of Adjusted Term SOFR prior to April 1, 2023, and 3.5 % per annum in excess of Adjusted Term SOFR after April 1, 2023. The Eclipse M&E loan bears interest at 6.0 % per annum in excess of Adjusted Term SOFR prior to April 1, 2023, and 5.0 % per annum in excess of Adjusted Term SOFR after April 1, 2023. The credit facility matures in January 2026. As of June 30, 2023, the outstanding balance on the Eclipse Revolver was approximately $ 7.8 million, and the outstanding balance on the Eclipse M&E loan was approximately $ 2.6 million. Bank of America Revolver Loan On January 31, 2020 , Marquis entered into an amended $ 25.0 million revolving credit agreement (“BofA Revolver”) with Bank of America Corporation (“BofA”). The BofA Revolver is a five-year , asset-based facility that is secured by substantially all of Marquis’ assets. Availability under the BofA Revolver is subject to a monthly borrowing base calculation. Marquis’ ability to borrow under the BofA Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with BofA. The BofA Revolver has a variable interest rate and matures in January 2025. As of June 30, 2023 and September 30, 2022, the outstanding balance was approximately $ 5.8 million and $ 10.1 million, respectively. 19 Table of Contents Loan with Fifth Third Bank On January 20, 2022, Precision Marshall refinanced its Encina Business Credit loans with Fifth Third Bank, and the balance outstanding was repaid. The refinanced credit facility, totaling $ 29 million, is comprised of $ 23.0 million in revolving credit, $ 3.5 million in M&E lending, and $ 2.5 million for Capex lending. Advances under the new credit facility will bear interest at the 30-day SOFR plus 200 basis points for lending under the revolving facility, and 30-day SOFR plus 225 basis points for M&E and Capex lending. The refinancing of the Borrower’s existing credit facility reduces interest costs and improves the availability and liquidity of funds by approximately $ 3.0 million at the close. The facility terminates on January 20, 2027 , unless terminated earlier in accordance with its terms. In connection with the acquisition of Kinetic, the existing revolving facility was amended to add Kinetic as a borrower. In addition, two additional term loans were executed to fund the purchase of Kinetic. Approximately $ 6.0 million was drawn from the revolving facility, and the two term loans were opened in the amounts of $ 4.0 million and $ 1.0 million, respectively. The $ 4.0 million term loan (“Kinetic Term Loan #1”), which matures on January 20, 2027 , bears interest on the same terms as for M&E term lending as stated above. The $ 1.0 million term loan (“Kinetic Term Loan #2”), which matures on June 28, 2025 , is a “Special Advance Term Loan”, and bears interest at SOFR plus 375 basis points. As of June 30, 2023 and September 30, 2022, the outstanding balance on the revolving loan was approximately $ 26.0 million and $ 23.6 million, respectively, and the outstanding balance on the original M&E lending, which is documented as a term note, was approximately $ 2.5 million and $ 3.2 million, respectively. The revolving loan has a variable interest rate and matures in January 2027. As of June 30, 2023 and September 30, 2022, the outstanding balance on Kinetic Term Loan #1 was approximately $ 3.4 million and $ 3.9 million, respectively. As of June 30, 2023 and September 30, 2022, the outstanding balance on Kinetic Term Loan #2 was $ 0 and $ 917,000 , respectively. On April 12, 2023, in connection with its existing credit facility with Fifth Third Bank, Precision Marshall took an advance against its Capex term lending in the amount of approximately $ 1.4 million. The loan matures January 2027 and bears interest on the same terms as for Capex lending as stated above. The first payment under this loan is due in February 2024. As of June 30, 2023, the outstanding balance on this Capex loan was $ 1.4 million. Texas Capital Bank Revolver Loan On November 3, 2016, Vintage Stock entered into an amended $ 12.0 million credit agreement with Texas Capital Bank (“TCB Revolver”). The TCB Revolver is a five-year , asset-based facility that is secured by substantially all of Vintage Stock’s assets. Availability under the TCB Revolver is subject to a monthly borrowing base calculation. The TCB Revolver has a variable interest rate and matures in November 2023. The effective rate, as of June 30, 2023, was 7.23 %. As of June 30, 2023 and September 30, 2022, the balance outstanding was approximately $ 6.7 million and $ 9.4 million, respectively. Equipment Loans On June 20, 2016 and August 5, 2016, Marquis entered into a transaction that provided for a master agreement and separate loan schedules (the “Equipment Loans”) with Banc of America Leasing & Capital, LLC that provided for the following as of June 30, 2023: Note #3 is for approximately $ 3.7 million, secured by equipment. The Equipment Loan #3 is due December 2023, payable in 84 monthly payments of $ 52,000 beginning January 2017, bearing interest rate at 4.8 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 306,000 and $ 751,000 , respectively. Note #4 is for approximately $ 1.1 million, secured by equipment. The Equipment Loan #4 is due December 2023, payable in 81 monthly payments of $ 16,000 beginning April 2017, bearing interest at 4.9 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 94,000 and $ 231,000 , respectively. Note #5 is for approximately $ 4.0 million, secured by equipment. The Equipment Loan #5 is due December 2024, payable in 84 monthly payments of $ 55,000 beginning January 2018, bearing interest at 4.7 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 953,000 and $ 1.4 million, respectively. Note #6 is for $ 913,000 , secured by equipment. The Equipment Loan #6 is due July 2024, payable in 60 monthly payments of $ 14,000 beginning August 2019, with a final payment of $ 197,000 , bearing interest at 4.7 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 356,000 and $ 471,000 , respectively. 20 Table of Contents Note #7 is for $ 5.0 million, secured by equipment. The Equipment Loan #7 is due February 2027, payable in 84 monthly payments of $ 59,000 beginning March 2020, with the final payment of $ 809,000 , bearing interest at 3.2 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 3.1 million and $ 3.5 million, respectively. Note #8 is for approximately $ 3.4 million, secured by equipment. The Equipment Loan #8 is due September 2027, payable in 84 monthly payments of $ 46,000 beginning October 2020, bearing interest at 4.0 %. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 2.2 million and $ 2.5 million, respectively. In December 2021, Marquis funded the acquisition of $ 5.5 million of new equipment under Note #9 of its master agreement. The Equipment Loan #9, which is secured by the equipment, matures December 2026, and is payable in 60 monthly payments of $ 92,000 beginning January 2022, with the final payment in the amount of approximately $ 642,000 , bearing interest at 3.75 % per annum. As of June 30, 2023 and September 30, 2022, the balance was approximately $ 4.1 million and $ 4.8 million, respectively. In December 2022, Marquis funded the acquisition of $ 5.7 million of new equipment under Note #10 of its master agreement. The Equipment Loan #10, which is secured by the equipment, matures December 2029, and is payable in 84 monthly payments of $ 79,000 , beginning January 2023, with the final payment in the amount of approximately $ 650,000 , bearing interest at 6.50 %. As of June 30, 2023, the balance was approximately $ 5.4 million. Loan Covenant Compliance As of June 30, 2023, the Company was in compliance with all covenants under its existing revolving and other loan agreements. Note 12: Notes Payable-Related Parties Long-term debt payable to related parties (see Note 16) as of June 30, 2023 and September 30, 2022 consisted of the following (in $000's): June 30, 2023 September 30, 2022 Isaac Capital Group, LLC, 12.5 % interest rate, matures May 2025 $ 2,000 $ 2,000 Spriggs Investments, LLC, 10 % interest rate, matures July 2024 2,000 2,000 Spriggs Investments, LLC for Flooring Liquidators, 12 % interest rate, matures July 2024 1,000 — Isaac Capital Group, LLC revolver, 12 % interest rate, matures April 2024 1,000 — Isaac Capital Group, LLC for Flooring Liquidators, 12 % interest rate, matures January 2028 5,000 — Seller of Flooring Liquidators, 8.24 % interest rate, matures January 2028 34,000 — Seller of Kinetic, 7 .% interest rate, matures September 2027 3,000 3,000 Total notes payable - related parties 48,000 7,000 Less: unamortized debt issuance costs ( 2,227 ) — Net amount 45,773 7,000 Less: current portion ( 1,000 ) ( 2,000 ) Total long-term portion, related parties $ 44,773 $ 5,000 Twelve months ending June 30, 2024 $ 1,000 2025 3,000 2026 2,000 Thereafter 42,000 Total future maturities of long-term debt, related parties $ 48,000 21 Table of Contents Note 13: Stockholders’ Equity Series E Convertible Preferred Stock As of June 30, 2023 and September 30, 2022, there were 47,840 shares of Series E Convertible Preferred Stock issued and outstanding, respectively. Treasury Stock As of June 30, 2023 and September 30, 2022, the Company had 659,961 and 620,971 shares of Treasury Stock, respectively. During the nine months ended June 30, 2023 and 2022, respectively, the Company repurchased 38,990 and 79,828 shares of its common stock for approximately $ 988,000 and $ 2.5 million, respectively. On June 13, 2023, Tony Isaac, a member of the Company's board of directors, and father of the Company's CEO, Jon Isaac, exercised stock options for which he received 9,904 shares of the Company's common stock. On June 30, 2023, the Company repurchased Mr. Isaac's 9,904 shares of the Company's common stock for $ 25.85 per share, the closing market price on June 28, 2023, or approximately $ 256,000 (see Note 16). Note 14: Stock-Based Compensation Our 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) authorizes the issuance of distribution equivalent rights, incentive stock options, non-qualified stock options, performance stock, performance units, restricted ordinary shares, restricted stock units, stock appreciation rights, tandem stock appreciation rights and unrestricted ordinary shares to our directors, officer, employees, consultants and advisors. The Company has reserved up to 300,000 shares of common stock for issuance under the 2014 Plan. From time to time, the Company grants stock options to directors, officers, and employees. These awards are valued at the grant date by determining the fair value of the instruments. 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 fiscal year ended September 30, 2022 and the nine months ended June 30, 2023: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Intrinsic Value Outstanding at September 30, 2021 87,500 $ 18.81 1.78 $ 1,626 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Exercisable at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Outstanding at September 30, 2022 87,500 $ 18.81 0.78 $ 771 Granted 17,500 $ 35.00 Exercised ( 31,250 ) $ 14.64 Outstanding at June 30, 2023 73,750 $ 24.42 1.38 $ 762 Exercisable at June 30, 2023 73,750 $ 24.42 1.38 $ 762 The following table presents the number and weighted average fair value ("WAFV") of unvested restricted stock awards: Series A Restricted Stock Awards WAFV Outstanding at September 30, 2022 — $ — Granted 27,307 $ 36.62 Vested — $ — Canceled — $ — Non-vested at June 30, 2023 27,307 $ 36.62 22 Table of Contents The Company recognized compensation expense of approximately $ 287,000 and $ 0 during the three months ended June 30, 2023 and 2022, respectively, and approximately $ 396,000 and $ 37,000 during the nine months ended June 30, 2023 and 2022, respectively, related to stock option awards and restricted stock awards granted to certain employees and officers based on the grant date fair value of the awards, and the revaluation for existing options whereby the expiration date was extended. As of June 30, 2023, the Company had approximately $ 911,000 of unrecognized compensation expense associated with stock option awards and Restricted Stock Units outstanding. Note 15: Earnings Per Share Net income per share is calculated using the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding shares in the Company’s Condensed Consolidated Balance Sheet. Diluted net income per share is computed using the weighted average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares consist of the additional common shares issuable in respect of restricted share awards, stock options and convertible preferred stock. Preferred stock dividends are subtracted from net earnings to determine the amount available to common stockholders. The following table presents the computation of basic and diluted net earnings per share (in $000's): Three Months Ended June 30, Nine Months Ended June 30, 2023 2022 2023 2022 Basic Net income $ 1,060 $ 3,472 $ 4,462 $ 25,376 Less: preferred stock dividends — — — — Net income applicable to common stock $ 1,060 $ 3,472 $ 4,462 $ 25,376 Weighted average common shares outstanding 3,166,842 3,090,321 3,123,177 3,128,813 Basic earnings per share $ 0.33 $ 1.12 $ 1.43 $ 8.11 Diluted Net income applicable to common stock $ 1,060 $ 3,472 $ 4,462 $ 25,376 Add: preferred stock dividends — — — — Net income applicable for diluted earnings per share $ 1,060 $ 3,472 $ 4,462 $ 25,376 Weighted average common shares outstanding 3,166,842 3,090,321 3,123,177 3,128,813 Add: Options 19,823 40,365 20,218 40,206 Add: Series B Preferred Stock — — — — Add: Series B Preferred Stock Warrants — — — — Add: Series E Preferred Stock 239 239 239 239 Assumed weighted average common shares outstanding 3,186,904 3,130,925 3,143,634 3,169,258 Diluted earnings per share $ 0.33 $ 1.11 $ 1.42 $ 8.01 There are 38,500 and 21,000 options to purchase shares of common stock that are anti-dilutive, and are not included in the three and nine months ended June 30, 2023 and 2022 diluted earnings per share computations, respectively. 23 Table of Contents Note 16: Related Party Transactions Transactions with Isaac Capital Group, LLC As of June 30, 2023, Isaac Capital Group, LLC (“ICG”) beneficially owns 48.8 % of the Company’s issued and outstanding capital stock. Jon Isaac, the Company's President and Chief Executive Officer, is the President and sole member of ICG, and, accordingly, has sole voting and dispositive power with respect to these shares. Mr. Isaac also personally owns 219,177 shares of common stock and holds options to purchase up to 25,000 shares of common stock at an exercise price of $ 10.00 per share, all of which are currently exercisable. Mr. Isaac's options to purchase 25,000 shares of common stock were originally scheduled to expire on January 15, 2023, but, as amended on January 13, 2023, the expiration date was extended to January 15, 2025. ICG Term Loan As of June 30, 2023, the Company was a party to a term loan with ICG in the amount of $ 2.0 million (the “ICG Loan”). The ICG Loan matures on May 1, 2025 and bears interest at a rate of 12.5 %. Interest is payable in arrears on the last day of each month. As of June 30, 2023 and September 30, 2022, the outstanding balance on this loan was $ 2.0 million. ICG Revolving Promissory Note On April 9, 2020, the Company, as borrower, entered into an unsecured revolving line of credit promissory note whereby ICG agreed to provide the Company with a $ 1.0 million 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. On April 1, 2023, the Company entered into the First Amendment of the ICG Revolver that extended the maturity to April 8, 2024 and increased the interest rate to 12 % per annum. As of June 30, 2023 and September 30, 2022, the outstanding balance on this note was $ 1.0 million and $ 0 , respectively. ICG Flooring Liquidators Note On January 18, 2023, in connection with the acquisition of Flooring Liquidators, Flooring Affiliated Holdings, LLC, a wholly-owned subsidiary of the Company, as borrower, entered into a promissory note for the benefit of ICG in the amount of $ 5.0 million (“ICG Flooring Liquidators Loan”). The ICG Flooring Liquidators Loan matures on January 18, 2028 , and bears interest at 12 %. Interest is payable in arrears on the last day of each calendar month. The note is fully guaranteed by the Company. As of June 30, 2023, the outstanding balance on this loan was $ 5.0 million. Transaction with Tony Isaac On June 13, 2023, Tony Isaac, a member of the Company's board of directors, and father of the Company's CEO, Jon Isaac, exercised stock options for which he received 9,904 shares of the Company's common stock. On June 30, 2023, the Company repurchased Mr. Isaac's 9,904 shares of the Company's common stock for $ 25.85 per share, the closing market price on June 28, 2023, for approximately $ 256,000 (see Note 13). Transactions with JanOne Inc. Tony Isaac,a member of the Company's board of directors, and father of the Company's CEO, Jon Isaac, is the Chief Executive Officer and a director of JanOne Inc.(“JanOne”). Richard Butler, a member of the Company's board of directors, is a director of JanOne. Lease Agreement Customer Connexx LLC, formerly a subsidiary of JanOne, rents approximately 9,900 square feet of office space from the Company at its Las Vegas office, which totals 16,500 square feet. JanOne paid the Company $ 55,000 and $ 52,000 in rent and other reimbursed expenses for three months ended June 30, 2023 and 2022 and $ 160,000 and $ 163,000 in rent and other reimbursed expenses for the nine months ended June 30, 2023 and 2022, respectively. Purchase Agreement with ARCA Recycling On April 5, 2022, the Company entered into a Purchasing Agreement with ARCA Recycling, Inc. (“ARCA”), then a wholly-owned subsidiary of JanOne. Pursuant to the agreement, the Company agreed to purchase inventory from time to time for ARCA as set forth in submitted purchase orders. The inventory is owned by the Company until ARCA installs it in customer's homes, and payment by ARCA to the Company is due upon ARCA's receipt of payment from the customer. All purchases made by the Company must be paid back by ARCA in full, plus an additional five percent surcharge or broker- 24 Table of Contents type fee. The initial term of the Agreement was for one year , and automatically renews for successive one-year terms if not terminated by either party. Due to significant doubt that the full balance due from ARCA will be paid, on May 24, 2023 the parties entered into a Promissory Note in the aggregate principal amount of $ 583,894 , which represented the principal balance due as of that date, payable by ARCA for the benefit of the Company, to repay the outstanding receivables balance (“ARCA Note”). The ARCA Note bears interest at a rate of 10 % per annum with payments of $ 75,000 due each month beginning on June 1, 2023, until the promissory note is repaid in full, and accrues late fees if payments are delinquent. The Company also recorded an allowance of approximately $ 300,000 against the amount due. As of June 30, 2023, the amount due from ARCA was approximately $ 300,000 , net of the allowance recorded. Transactions with Vintage Stock CEO Rodney Spriggs, the President and Chief Executive Officer of Vintage Stock, Inc., a wholly owned subsidiary of the Company, is the sole member of Spriggs Investments, LLC (“Spriggs Investments”). Spriggs Promissory Note I On July 10, 2020, the Company executed a promissory note (the “Spriggs Promissory Note I”) in favor of Spriggs Investments that memorializes a loan by Spriggs Investments to the Company in the initial principal amount of $ 2.0 million (the “Spriggs Loan I”). The Spriggs Loan I originally matured on July 10, 2022; however, the maturity date was extended to July 10, 2023, pursuant to unanimous written consent of the Board of Directors. The Spriggs Promissory Note I bears simple interest at a rate of 10.0 % per annum. On January 19, 2023, the Company entered into a modification agreement of the Spriggs Loan I. Consequently, the Spriggs Promissory Note I will bear interest at a rate of 12 % per annum, and the maturity date was extended to July 31, 2024. As of June 30, 2023 and September 30, 2022, the amount owed was $ 2.0 million. Spriggs Promissory Note II On January 19, 2023, in connection with the acquisition of Flooring Liquidators, the Company executed a promissory note in favor of Spriggs Investments in the initial principal amount of $ 1.0 million (the “Spriggs Loan II”). The Spriggs Loan II matures on July 31, 2024, and bears interest at a rate of 12 % per annum. As of June 30, 2023, the amount owed was $ 1.0 million. Transactions with Spyglass Estate Planning, LLC Jon Isaac, the Company's President and Chief Executive Officer, is the sole member of Spyglass Estate Planning, LLC (“Spyglass”). Building Leases On July 1, 2022, in connection with its acquisition of Better Backers, Marquis entered into two building leases with Spyglass. The building leases are for 20 years with two options to renew for an additional five years each. The provisions of the lease agreements include an initial 24 -month month-to-month rental period, during which the lessee may cancel with 90-day notice, followed by a 20-year lease term with two five-year renewal options. The Company has evaluated each lease and determined the rental amounts to be at market rates. Sellers Notes Note Payable to the Sellers of Kinetic In connection with the purchase of Kinetic (see Note 3), on June 28, 2022, Precision Marshall entered into a seller financed loan in the amount of $ 3.0 million with the previous owners of Kinetic. The Sellers Subordinated Acquisition Note bears interest at 7.0 % per annum, with interest payable quarterly in arrears. The Sellers Subordinated Acquisition Note has a maturity date of September 27, 2027 . As of June 30, 2023, the remaining principal balance was $ 3.0 million. Note Payable to the Seller of Flooring Liquidators In connection with the purchase of Flooring Liquidators, on January 18, 2023, Flooring Affiliated Holdings, LLC (“Buyer”) entered into a seller financed mezzanine loan, which is fully guaranteed by the Company, in the amount of $ 34.0 million with the previous owners of Flooring Liquidators. The Seller Subordinated Acquisition Note (“Sellers Note”) bears interest at 8.24 % per annum, with interest payable monthly in arrears beginning on January 18, 2024. The Sellers Note has a maturity date of January 18, 2028 . The fair value assigned to the Sellers Note, as calculated by an independent third-party firm, was $ 31.7 million, or a discount of $ 2.3 million. The $ 2.3 million discount is being accreted to interest expense, using 25 Table of Contents the effective interest rate method, as required by GAAP, over the term of the Sellers Note. As of June 30, 2023, the carrying value of the Sellers Note was approximately $ 31.9 million. Procedures for Approval of Related Party Transactions In accordance with its charter, the Audit Committee reviews and determines whether to approve all related party transactions (as such term is defined for purposes of Item 404 of Regulation S-K). The Audit Committee participated in the review and approval of the transactions described above. Note 17: Commitments and Contingencies Litigation SEC Investigation On February 21, 2018, the Company received a subpoena from the Securities and Exchange Commission (“SEC”) and a letter from the SEC stating that it is conducting an investigation. The subpoena requested documents and information concerning, among other things, the restatement of the Company’s financial statements for the quarterly periods ended December 31, 2016, March 31, 2017, and June 30, 2017, the acquisition of Marquis Industries, Inc., Vintage Stock, Inc., and ApplianceSmart, Inc., and the change in auditors. On August 12, 2020, three of the Company’s corporate executive officers (together, the “Executives”) each received a “Wells Notice” from the Staff of the SEC relating to the Company’s SEC investigation. On October 7, 2020, the Company received a “Wells Notice” from the Staff of the SEC relating to the Company’s previously-disclosed SEC investigation. The Wells Notices related to, among other things, the Company’s reporting of its financial performance for its fiscal year ended September 30, 2016, certain disclosures related to executive compensation, and its previous acquisition of ApplianceSmart, Inc. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives to allege certain violations of the federal securities laws. On October 1, 2018, the Company received a letter from the SEC requesting information regarding a potential violation of Section 13(a) of the Securities Exchange Act of 1934, based upon the timing of the Company’s Form 8-K filed on February 14, 2018. The Company cooperated fully with the SEC inquiry and provided a response to the SEC on October 26, 2018. On August 2, 2021, the SEC filed a civil complaint in the United States District Court for the District of Nevada naming the Company and two of its executive officers - Jon Isaac, the Company’s current President and Chief Executive Officer, and Virland Johnson, the Company’s former Chief Financial Officer, as defendants (collectively, the “Company Defendants”) as well as certain other related third parties (the “SEC Complaint”). The SEC Complaint alleges various financial, disclosure, and reporting violations related to income and earnings per share data, purported undisclosed stock promotion and trading, purported inaccurate disclosure regarding beneficial ownership of common stock, and undisclosed executive compensation from 2016 through 2018. The violations are brought under Section 10(b) of the Exchange Act and Rule 10b-5; Sections 13(a), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-14, 13a-13, 13b2-1, 13b2-2; Section 14(a) of the Exchange Act and Rule 14a-3; and Section 17(a) of the Securities Act of 1933. The SEC seeks permanent injunctions against the Company Defendants, permanent officer-and-director bars, disgorgement of profits, and civil penalties. The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm. On October 1, 2021, the Company Defendants and third-party defendants moved to dismiss the SEC complaint. On September 7, 2022, the court denied the Company Defendants’ motion to dismiss, but granted one of the third-party defendant’s motions to dismiss, granting the SEC leave to file an amended complaint. On September 21, 2022, the SEC filed an amended complaint to which the Company Defendants filed an answer on October 11, 2022, denying liability. The court subsequently entered a discovery scheduling order and the parties exchanged initial disclosures. The parties participated in a mediation in June 2023. The mediation was not successful and the case will now proceed through discovery. The Company Defendants strongly dispute and deny the allegations and intend to continue to defend themselves vigorously against the claims. Sieggreen Class Action On August 13, 2021, Daniel E. Sieggreen, individually and on behalf of all others similarly situated claimants ("Plaintiff"), filed a class action complaint for violation of federal securities laws in the United States District Court for the District of 26 Table of Contents Nevada, naming the Company, Jon Isaac, the Company's current President and Chief Executive Officer, and Virland Johnson, the Company's former Chief Financial Officer, as defendants (collectively, the "Company Defendants"). The allegations asserted are similar to those in the SEC Complaint. Among other sought relief, the complaint seeks damages in connection with the purchases and sales of the Company’s securities between December 28, 2016 and August 3, 2021. As of December 17, 2021, the judge granted a stipulation to stay proceedings pending the resolutions of the motions to dismiss in the SEC Complaint. On February 1, 2023, the final motion to dismiss relating to the SEC Complaint was denied, which was subsequently noticed in the Sieggreen action on February 2, 2023. Plaintiff filed an Amended Complaint on March 6, 2023. On May 5, 2023, the Company Defendants filed a Motion to Dismiss the Amended Complaint, and the briefing on that motion is now complete. Discovery is automatically stayed in this case until after the disposition of the Motion to Dismiss. If the Motion to Dismiss is not successful, the case will proceed to discovery. The Company Defendants strongly dispute and deny the allegations at issue in this case and intend to continue to defend themselves vigorously against these claims. Holdback Matter On October 10, 2022, a representative for the former shareholders of Precision Marshall filed a civil complaint in the Court of Chancery of the State of Delaware. The complaint alleges that the Company violated the terms of the Agreement and Plan of Merger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $ 2,500,000 . Plaintiff alleged that he effectuated service of the complaint on the Company, but the Company did not receive notification of the action until it received an Application for Default Judgment filed with the court on December 26, 2022. On December 28, 2022, the Court issued a letter order questioning its jurisdiction over the matter and directed plaintiff’s counsel to submit briefing as to why it believes jurisdiction is proper. Plaintiff filed its brief on January 13, 2023. On April 13, 2023, the Court dismissed the action in its entirety for lack of jurisdiction, rendering the Application for Default Judgment moot. On January 12, 2023, and after jurisdiction over the case was questioned by the Court of Chancery, State of Delaware, plaintiff filed a substantially identical complaint in the Western District of Pennsylvania. After the Delaware action was dismissed, plaintiff requested that counsel waive service of the Pennsylvania complaint. On April 19, 2023, the Company agreed to waive service. The Company’s response to the Complaint was filed on August 7, 2023. The Company intends to defend itself vigorously against these claims. Wage and Hour Matter On July 27, 2022, Irma Sanchez, a former employee of Elite Builder Services, Inc. (“Elite Builders”), filed a class action complaint against Elite Builders in the Superior Court of California, County of Alameda. The complaint alleges that Elite Builders failed to pay all minimum and overtime wages, failed to provide lawful meal periods and rest breaks, failed to provide accurate itemized wage statements, and failed to pay all wages due upon separation as required by California law. The complaint was later amended as a matter of right on October 4, 2022. Further, Ms. Sanchez has put the Labor & Workforce Development Agency on notice to exhaust administrative remedies and enable her to bring an additional claim under the California Labor Code Private Attorneys General Act, which permits an employee to assert a claim for violations of certain California Labor Code provisions on behalf of all aggrieved employees to recover statutory penalties. A Motion for Change of Venue to Stanislaus County was filed by Elite Builders on December 7, 2022. The hearing on the motion was heard on February 8, 2023 and the motion was granted. The Company believes that Ms. Sanchez’s claims lack merit and intends to defend this action vigorously. The Company is currently unable to estimate the range of possible losses associated with this proceeding since no discovery has commenced and the scope of class is not yet known. Consumer Protection Act On December 4, 2022, Sheila Thompson and Dennis Thompson filed a Complaint in the 21st Judicial Circuit Court of St. Louis County, Missouri asserting putative class claims arising under the Telephone Consumer Protection Act, 47 U.S.C. 227, and related Missouri state law claims pertaining to purportedly unsolicited text message advertisements. Vintage Stock, Inc. (“Vintage”) was served on December 13, 2022. On January 11, 2023, Vintage timely removed the case from the state court into federal court. On February 8, 2023, Vintage filed a Motion to Dismiss and Motion to Strike Class Allegations. On March 1, 2023, plaintiffs filed their First Amended Complaint that mooted the pending motion. On March 15, 2023, Vintage moved to dismiss and/or strike the First Amended Complaint. The motion is fully briefed and stands submitted to the Court for decision. Vintage disputes the allegations and intends to defend itself vigorously against the claims in the First Amended Complaint. As the case is still in the pleading stage, it is premature to estimate potential liability. 27 Table of Contents Salomon Whitney Settlement Effective March 31, 2023, the Company entered into a settlement agreement in which the principals of Salomon Whitney, LLC agreed to pay the Company $ 1.0 million within 10 days of the effective date, and agreed to pay an additional $ 1.0 million within 45 days of the effective date if certain conditions of the settlement agreement were not met. The Company recorded a receivable for the initial payment of $ 1.0 million on March 31, 2023, which it has recorded as other income in its condensed consolidated statements of income, and payment was received on April 17, 2023. The Company received and recorded payment for the additional $ 1.0 million on May 16, 2023. Generally The Company is involved in various claims and lawsuits arising in the normal course of business. The ultimate results of claims and litigation cannot be predicted with certainty. The Company currently believes that the ultimate outcome of such lawsuits and proceedings will not, individually, or in the aggregate, have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows. As applicable, liabilities pertaining to these matters, that are probable and estimable, have been accrued. Note 18: Segment Reporting The Company operates in five operating segments which are characterized as: (1) Retail-Entertainment, (2) Retail-Flooring, (3) Flooring Manufacturing, (4) Steel Manufacturing, and (5) Corporate and Other. The Retail-Entertainment segment consists of Vintage Stock; the Retail-Flooring segment consists of Flooring Liquidators; the Flooring Manufacturing Segment consists of Marquis; and the Steel Manufacturing Segment consists of Precision Marshall and Kinetic. The following tables summarize segment information (in $000's): For the Three Months Ended June 30, For the Nine Months Ended June 30, 2023 2022 2023 2022 Revenues Retail-Entertainment $ 18,009 $ 19,227 $ 60,388 $ 66,179 Retail-Flooring 27,449 — 48,218 — Flooring Manufacturing 27,424 32,188 84,195 97,832 Steel Manufacturing 18,409 14,974 56,306 41,367 Corporate & Other 225 1,880 2,517 7,755 Total revenues $ 91,516 $ 68,269 $ 251,624 $ 213,133 Gross profit Retail-Entertainment $ 9,845 $ 10,226 $ 32,606 $ 34,726 Retail-Flooring 10,386 — 18,128 — Flooring Manufacturing 6,388 7,466 18,377 25,075 Steel Manufacturing 5,381 4,010 15,420 11,877 Corporate & Other 169 647 1,190 3,240 Total gross profit $ 32,169 $ 22,349 $ 85,721 $ 74,918 Operating income (loss) Retail-Entertainment $ 1,548 $ 2,202 $ 7,542 $ 10,144 Retail-Flooring 1,049 — 833 — Flooring Manufacturing 2,022 3,289 5,179 11,772 Steel Manufacturing 2,703 1,268 6,972 5,641 Corporate & Other ( 1,761 ) ( 895 ) ( 5,446 ) ( 2,837 ) Total operating income $ 5,561 $ 5,864 $ 15,080 $ 24,720 Depreciation and amortization Retail-Entertainment $ 316 $ 290 $ 949 $ 926 28 Table of Contents Retail-Flooring 1,107 — 2,102 — Flooring Manufacturing 1,067 768 3,259 2,327 Steel Manufacturing 1,146 376 3,353 891 Corporate & Other 47 137 315 472 Total depreciation and amortization $ 3,683 $ 1,571 $ 9,978 $ 4,616 Interest expense Retail-Entertainment $ 134 $ 73 $ 423 $ 309 Retail-Flooring 1,200 — 2,221 — Flooring Manufacturing 1,028 261 3,082 1,155 Steel Manufacturing 903 195 2,531 674 Corporate & Other 220 145 510 411 Total interest expenses $ 3,485 $ 674 $ 8,767 $ 2,549 Net income before provision for income taxes Retail-Entertainment $ 1,418 $ 1,574 $ 7,155 $ 20,867 Retail-Flooring ( 338 ) — ( 1,729 ) — Flooring Manufacturing 840 2,898 1,741 10,280 Steel Manufacturing 1,485 736 3,469 4,051 Corporate & Other ( 2,048 ) ( 371 ) ( 4,712 ) ( 1,974 ) Total net income before provision for income taxes $ 1,357 $ 4,837 $ 5,924 $ 33,224 Note 19: Subsequent Events The Company has evaluated subsequent events through the filing of this Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to disclosures in its condensed consolidated financial statements other than as discussed below: Acquisition of Precision Metal Works On July 20, 2023, the Company acquired Precision Metal Works, Inc. (“PMW”), a Kentucky-based Metal Stamping and Value-Added Manufacturing Company. PMW was acquired for total consideration of approximately $ 28 million, comprised of a $ 25 million purchase price, with additional consideration of up to $ 3 million paid in the form of an earn-out. The purchase price was funded in part by a $ 2.5 million seller note, borrowings under a credit facility of $ 14.4 million, and proceeds under a sale-lease back transaction. The acquisition involved no issuance of stock of the Company. Management will assess the fair value of total consideration in accordance with Accounting Standards Codification 805, Business Combinations, in connection with the application of purchase accounting . 29 Table of Contents