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, 2024 September 30, 2023 (Unaudited) Assets Cash $ 4,711 $ 4,309 Trade receivables, net of allowance for doubtful accounts of $ 1.2 million at June 30, 2024 and $ 1.6 million at September 30, 2023 48,887 41,194 Inventories, net 129,478 131,314 Income taxes receivable — 1,116 Prepaid expenses and other current assets 4,442 4,919 Total current assets 187,518 182,852 Property and equipment, net 82,671 80,703 Right of use asset - operating leases 59,687 54,544 Deposits and other assets 1,449 1,282 Intangible assets, net 26,359 26,568 Goodwill 79,132 75,866 Total assets $ 436,816 $ 421,815 Liabilities and Stockholders' Equity Liabilities: Accounts payable $ 31,262 $ 27,190 Accrued liabilities 34,774 31,826 Income taxes payable 624 — Current portion of lease obligations - operating leases 12,938 11,369 Current portion of lease obligations - finance leases 347 359 Current portion of long-term debt 42,186 23,077 Current portion of notes payable related parties 5,400 4,000 Seller notes - related parties 2,500 — Total current liabilities 130,031 97,821 Long-term debt, net of current portion 59,887 78,710 Lease obligation long term - operating leases 52,009 48,156 Lease obligation long term - finance leases 40,950 32,942 Notes payable related parties, net of current portion 5,929 6,914 Seller notes - related parties 39,661 38,998 Deferred taxes 8,974 14,035 Other non-current obligations 6,665 4,104 Total liabilities 344,106 321,680 Commitments and contingencies Stockholders' equity: Series E convertible preferred stock, $ 0.001 par value, 200,000 shares authorized, 47,840 shares issued and outstanding at June 30, 2024 and September 30, 2023, respectively, with a liquidation preference of $ 0.30 per share outstanding — — Common stock, $ 0.001 par value, 10,000,000 shares authorized, 3,131,633 and 3,164,330 shares issued and outstanding at June 30, 2024 and September 30, 2023, respectively 2 2 Paid in capital 69,642 69,387 Treasury stock common 694,414 and 660,063 shares as of June 30, 2024 and September 30, 2023, respectively ( 9,068 ) ( 8,206 ) Treasury stock Series E preferred 80,000 shares as of June 30, 2024 and September 30, 2023, respectively ( 7 ) ( 7 ) Retained earnings 32,141 38,959 Total stockholders' equity 92,710 100,135 Total liabilities and stockholders' equity $ 436,816 $ 421,815 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents LIVE VENTURES INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED) (dollars in thousands, except per-share amounts) For the Three Months Ended June 30, For the Nine Months Ended June 30, 2024 2023 2024 2023 Revenue $ 123,878 $ 91,516 $ 360,097 $ 251,624 Cost of revenue 86,833 59,347 251,258 165,903 Gross profit 37,045 32,169 108,839 85,721 Operating expenses: General and administrative expenses 30,062 23,226 87,565 60,443 Sales and marketing expenses 5,852 3,382 17,440 10,198 Total operating expenses 35,914 26,608 105,005 70,641 Operating income 1,131 5,561 3,834 15,080 Other expense: Interest expense, net ( 4,233 ) ( 3,485 ) ( 12,563 ) ( 8,767 ) Salomon Whitney settlement — 1,000 — 2,000 Loss on disposition of Salomon Whitney — ( 1,696 ) — ( 1,696 ) Loss on disposition of Johnson ( 301 ) — ( 301 ) — Other expense ( 420 ) ( 23 ) ( 197 ) ( 693 ) Total other expense, net ( 4,954 ) ( 4,204 ) ( 13,061 ) ( 9,156 ) (Loss) income before provision for income taxes ( 3,823 ) 1,357 ( 9,227 ) 5,924 (Benefit) provision for income taxes ( 968 ) 297 ( 2,409 ) 1,462 Net (loss) income $ ( 2,855 ) $ 1,060 $ ( 6,818 ) $ 4,462 (Loss) income per share: Basic $ ( 0.91 ) $ 0.33 $ ( 2.16 ) $ 1.43 Diluted $ ( 0.91 ) $ 0.33 $ ( 2.16 ) $ 1.42 Weighted average common shares outstanding: Basic 3,140,191 3,166,842 3,153,034 3,123,177 Diluted 3,140,191 3,186,904 3,153,034 3,143,634 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, 2024 2023 Operating Activities: Net (loss) income $ ( 6,818 ) $ 4,462 Adjustments to reconcile net (loss) income to net cash provided by operating activities, net of acquisition: Depreciation and amortization 12,832 9,978 Loss on disposal of fixed assets — 29 Amortization of seller note discount 2,048 — Amortization of debt issuance cost 64 223 Stock based compensation expense 274 396 Amortization of right-of-use assets 2,913 2,069 Disposition of SW Financial, net of cash retained — 1,509 Loss on disposition of Johnson 301 — Change in allowance for doubtful accounts ( 396 ) 62 Change in reserve for obsolete inventory 2,065 1,030 Changes in assets and liabilities, net of acquisitions: Trade receivables ( 3,216 ) 2,940 Inventories 3,274 2,917 Income taxes payable/receivable 1,741 316 Prepaid expenses and other current assets 1,324 3,482 Deposits and other assets ( 167 ) ( 1,002 ) Accounts payable 1,649 ( 1,039 ) Accrued liabilities 164 ( 5,656 ) Change in deferred income taxes ( 4,175 ) 4,227 Other liabilities — 63 Net cash provided by operating activities 13,877 26,006 Investing Activities: Acquisition of CRO ( 1,034 ) — Acquisition of Johnson ( 500 ) — Acquisition of Flooring Liquidators, net of cash acquired — ( 33,929 ) Acquisition of Midwest Grinding ( 1,000 ) — Acquisition of Central Steel, net of cash acquired ( 10,474 ) — Acquisition of Cal Coast Carpets — ( 1,300 ) Purchase of property and equipment ( 4,994 ) ( 3,499 ) Net cash used in investing activities ( 18,002 ) ( 38,728 ) Financing Activities: Net borrowings under revolver loans 1,990 3,133 Net borrowings under related party revolver loans 1,300 — Proceeds from issuance of notes payable 2,711 9,878 Payments on notes payable ( 5,064 ) ( 5,555 ) Proceeds from issuance of related party notes payable — 7,000 Payments on related party notes payable ( 900 ) — Payments for debt acquisition costs — ( 98 ) Purchase of common treasury stock ( 862 ) ( 988 ) Payments on financing leases ( 2,497 ) ( 1,621 ) Cash paid for net settlement of stock option exercise ( 20 ) ( 29 ) Proceeds from failed sales and leaseback transaction 7,869 — Payments on seller finance arrangements — ( 51 ) Net cash provided by financing activities 4,527 11,669 Change in cash 402 ( 1,053 ) Cash, beginning of period 4,309 4,600 Cash, end of period $ 4,711 $ 3,547 Supplemental cash flow disclosures: Interest paid $ 10,306 $ 7,443 Income taxes paid, net $ — $ 102 Noncash financing and investing activities: Noncash items related to Flooring Liquidators acquisition $ — $ 36,900 Noncash stock options exercise $ 94 $ 327 PMW goodwill adjustment $ 233 $ — Noncash items related to Central Steel acquisition $ 3,400 $ — Noncash items related to CRO acquisition $ 725 $ — Noncash items related to Johnson acquisition $ 1,501 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents LIVE VENTURES INCORPORATED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (dollars in thousands) Series E Preferred Stock Common Stock Series E Preferred Stock Common Stock Shares Amount Shares Amount Paid-In Capital Treasury Stock Treasury Stock Retained Earnings Non-controlling Interest Total Equity Balance, September 30, 2023 47,840 $ — 3,164,330 $ 2 $ 69,387 $ ( 7 ) $ ( 8,206 ) $ 38,959 $ — $ 100,135 Stock based compensation — — — — 50 — — — — 50 Purchase of common treasury stock — — ( 4,346 ) — — — ( 106 ) — — ( 106 ) Net loss — — — — — — — ( 682 ) — ( 682 ) Balance, December 31, 2023 47,840 $ — 3,159,984 $ 2 $ 69,437 $ ( 7 ) $ ( 8,312 ) $ 38,277 $ — $ 99,397 Stock based compensation — — — 50 — — — — 50 Purchase of common treasury stock — — ( 11,849 ) — — — ( 298 ) — — ( 298 ) Net loss — — — — — — — ( 3,281 ) — ( 3,281 ) Balance, March 31, 2024 47,840 $ — 0 3,148,135 $ 2 $ 69,487 $ ( 7 ) $ ( 8,610 ) $ 34,996 $ — $ 95,868 Stock based compensation — — — — 175 — — — — 175 Stock options exercise — — 2 — — — — — — — Taxes paid on net settlement of stock options exercised — — — — ( 20 ) — — — — ( 20 ) Purchase of common treasury stock — — ( 18 ) — — — ( 458 ) — — ( 458 ) Net loss — — — — — — — ( 2,855 ) — ( 2,855 ) Balance, June 30, 2024 47,840 $ — 3,131,633 $ 2 $ 69,642 $ ( 7 ) $ ( 9,068 ) $ 32,141 $ — $ 92,710 6 Table of Contents Series E Preferred Stock Common Stock Series E Preferred Stock Common Stock 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 Taxes paid on net settlement of stock options exercised — — — — ( 29 ) — — — — ( 29 ) Stock options exercised — — 12,148 — — — — — — — Net income — — — — — — — 1,060 — 1,060 Balance, June 30, 2023 #REF! 47,840 $ — 3,164,432 $ 2 $ 68,888 $ ( 7 ) $ ( 8,203 ) $ 43,971 $ ( 448 ) $ 104,203 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, 2024 AND 2023 (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, The Kinetic Co., Inc. (“Kinetic”), which is engaged in the production of industrial knives and hardened wear products for the tissue and metals industries, Precision Metal Works, Inc. (“PMW”), which is engaged in metal forming, assembly, and finishing solutions across diverse industries, including appliance, automotive, hardware, electrical, electronic, medical products, and devices, and CSF Holdings, LLC (“Central Steel”), a Chicago-based manufacturer of specialized fabricated metal products primarily for data centers and the communications industry. PMW reports on a 13-week quarter, as opposed to the Company's calendar quarter reporting. However, the Company has determined that the difference in reporting periods has no material effect on its reported financial results. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. 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, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2024. The financial information included in these statements should be read in conjunction with the consolidated financial statements and related notes thereto as of September 30, 2023, 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 22, 2023 (the “2023 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. All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications Certain amounts in the prior period have been reclassified to conform to the current period presentation. These reclassifications have no material effect on the reported financial results. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in connection with the accompanying consolidated financial statements include the estimated reserve for doubtful current trade receivables, the estimated reserve for excess and obsolete inventory, fair values in connection with the analysis of goodwill, other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets, lease terminations, and estimated useful lives for intangible assets and property and equipment. 8 Table of Contents Revenue Recognition General The Company accounts for its sales revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”) . Topic 606 provides a five-step revenue recognition model that is applied to the Company’s customer contracts. Under this model we (i) identify the contract with the customer, (ii) identify our performance obligations in the contract, (iii) determine the transaction price for the contract, (iv) allocate the transaction price to our performance obligations and (v) recognize revenue when or as we satisfy our performance obligations. Revenue is recognized upon transfer of control of the promised goods or the performance of the services to customers in an amount that reflects the consideration expected to be receive in exchange for those goods or services. The Company enters into contracts that may include various combinations of products and services, which are generally distinct and accounted for as separate performance obligations. Retail - Entertainment Segment The Retail-Entertainment Segment derives revenue primarily from direct sales of entertainment products. Sales are generally of a cash-and-carry nature, and contain a single performance obligation. Consequently, revenue is recorded at the point in time in which the sale is made. Revenues are recorded net of sales taxes collected from customers. Retail - Flooring Segment The Retail-Flooring Segment derives revenue primarily from the sale of flooring products and installation services, which are recognized at the point-of-sale and over time, respectively. Retail sales are generally of a cash-and-carry nature, and contain a single performance obligation. Consequently, revenue is recorded at the point in time in which the sale is made. Installation services generally contain multiple performance obligations requiring revenue to be recognized over a period of time based on percentage of completion. All direct costs are either paid and or accrued for in the period in which the sale is recorded. Revenues are recorded net of sales taxes collected from customers. Flooring and Steel Manufacturing Segments The Flooring Manufacturing Segment derives revenue primarily from the sale of carpet and hard surface flooring products, including shipping and handling amounts. The Steel Manufacturing Segments derives revenue primarily from the sale of steel plates, ground flat stock and drill rods, fabricated products, and tooling, including shipping and handling amounts. Revenue for these segments generally contain a single performance obligation and is recognized at the point title passes to the customer. At the time revenue is recognized, the Company records a provision for the estimated amount of future returns based primarily on historical experience and any known trends or conditions that exist at the time revenue is recognized. Revenues are recorded net of taxes collected from customers. All direct costs are either paid and or accrued for in the period in which the sale is recorded. Spare Parts For spare parts sales, the Company transfers control and recognizes a sale when it ships the product to the customer or when the customer receives product based upon agreed shipping terms. Each unit sold is considered an independent, unbundled performance obligation. The Company has no additional performance obligations other than spare parts sales that are material in the context of the contract. The amount of consideration received and revenue recognized varies due to sales incentives and returns offered to customers. When customers retain the right to return eligible products, the Company reduces revenue for the estimate of the expected returns, which is primarily based on an analysis of historical experience. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the Chief Operating Decision Maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures. 9 Table of Contents In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Note 3: Acquisitions Acquisition of Midwest Grinding On June 10, 2024, pursuant to an Asset Purchase Agreement, Kinetic acquired certain assets and assumed certain liabilities of Midwest Grinding, a Milwaukee grinding house dedicated to precision Blanchard and specialty surface grinding of small to extra-large capacity. Total consideration for the acquisition was $ 600,000 . In connection with the acquisition, Kinetic also acquired the building being used in the business for $ 400,000 . Total consideration for both the business and building acquisition was $ 1.0 million, paid in cash at close. The fair value of the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 10, 2024, as calculated by management. The table below outlines the purchase price allocation of the purchase for Midwest Grinding to the acquired identifiable assets and liabilities assumed as of June 30, 2024 (in $000’s): Total purchase price $ 1,000 Accounts payable 1 Total consideration 1,001 Accounts receivable 152 Other current assets 71 Property and equipment 738 Intangible Assets Customer relationships $ 16 Trade names 15 Non-compete agreement 9 Intangible assets 40 Total assets acquired 1,001 Total goodwill $ — Acquisition of Central Steel On May 15, 2024, Precision Marshall acquired Central Steel Fabricators (“Central Steel”), a Chicago-based manufacturer of specialized fabricated metal products primarily for data centers and the communications industry. Total consideration for the acquisition was approximately $ 14.1 million, comprised of $ 10.7 million paid at closing, a seller note of $ 1.1 million, a holdback in the amount $ 300,000 , and contingent consideration of $ 2.0 million paid in the form of a five-year earn-out. The consideration paid at close was funded in part by borrowings under Precision Marshall's credit facility of approximately $ 3.3 million, and proceeds from a sale and leaseback transaction, discussed below. The acquisition involved no issuance of stock of the Company. Simultaneous to the acquisition, the Company entered into a sales and leaseback transaction with Legacy West Partners, LLC, an unrelated party, for one of Central Steel's properties located in Broadview, Illinois. The sales price for the real property subject to the sales and leaseback transaction was approximately $ 8.3 million, with total proceeds received by the Company of approximately $ 7.9 million, net of approximately $ 0.4 million in seller's fees. The lease agreement includes a 20-year lease term with two five-year renewal options. The base rent under the lease agreement is $ 58,795 per month for the first year of the term and a 2 % per annum escalator thereafter. The lease agreement is a “net lease,” such that Central Steel is also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the real property incurred by Central Steel. Due to the highly specialized nature of the leased property, the Company currently believes it is more likely than not that each of the two five-year options will be exercised. Consequently, because the aggregate term of the lease at its conclusion will represent approximately 75% of the 10 Table of Contents economic life of the building, the Company concluded that the lease is a financing transaction and a failed sale and leaseback transaction, as defined under ASC 842. The proceeds, net of closing fees, from the sale and leaseback transaction were used to assist in funding the acquisition of Central Steel. No gain was recognized as a result of the sale. The fair value of the purchase price components was approximately $ 14.1 million, as detailed below (in $000's): Purchase price $ 11,758 Fair value of contingent consideration 2,000 Holdback 300 Net purchase price $ 14,058 Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $ 2.8 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed over the fair value of the identifiable assets acquired. The Company anticipates all of the goodwill arising from the acquisition to be fully deductible for tax purposes. The table below outlines the purchase price allocation, as revised, for the purchase of Central Steel to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s): Total purchase price $ 14,058 Accounts payable 464 Accrued liabilities 969 Total liabilities assumed 1,433 Total purchase price plus liabilities assumed 15,491 Cash 184 Accounts receivable 2,418 Inventory 2,425 Property and equipment 5,034 Intangible assets Trade names 400 Customer relationships 900 Non-compete 825 Subtotal intangible assets 2,125 Other assets 476 Total assets acquired 12,662 Total goodwill $ 2,829 Acquisition of CRO On October 13, 2023, Flooring Liquidators acquired certain assets and assumed certain liabilities of Carpet Remnant Outlet, Inc. (“CRO”), a floor covering retailer and installer serving residential and commercial customers throughout Northwest Arkansas. Total consideration for the acquisition was approximately $ 1.4 million and was comprised of cash at close of approximately $ 1.0 million, an indemnification holdback amount of $ 300,000 , and additional consideration valued at $ 89,000 . The fair value of the purchase price components was $ 1.4 million, as detailed below (in $000's): Cash $ 1,034 Additional consideration 89 Holdback 300 Purchase price $ 1,423 Under the preliminary purchase price allocation, the Company recognized goodwill of $ 89,000 , which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets 11 Table of Contents acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of October 13, 2023, as calculated by an independent third-party firm. The value of the additional consideration was calculated by management. During the three months ended June 30, 2024, the Company recorded a noncash fair value adjustment related to the value of the additional consideration in the amount of approximately $ 336,000 . The Company anticipates the $ 89,000 of goodwill arising from the acquisition to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for CRO to the acquired identifiable assets, liabilities assumed and goodwill as of June 30, 2024 (in $000’s): Total purchase price $ 1,423 Accounts payable 770 Accrued liabilities 1,298 Total liabilities assumed 2,068 Total consideration 3,491 Accounts receivable 259 Inventory 1,406 Property and equipment 261 Intangible assets 1,190 Other assets 286 Total assets acquired 3,402 Total goodwill $ 89 Acquisition of Johnson On November 30, 2023, CRO acquired certain assets and assumed certain liabilities of Johnson Floor & Home (“Johnson”), a floor covering retailer and installer serving residential and commercial customers through four locations in the Tulsa, Oklahoma area, and one in Joplin, Missouri. Total consideration for the acquisition was $ 2.0 million, comprised of cash at close of $ 500,000 , deferred consideration in the form of a seller note of $ 1.2 million, with additional consideration paid in the form of an earnout valued at approximately $ 300,000 . The deferred consideration is payable in 12 Table of Contents three $ 400,000 installments due annually on the first three anniversary dates following the closing date. Each installment will accrue interest at 6.0 % per annum until paid. The fair value of the purchase price components outlined above was approximately $ 2.0 million, as detailed below (in $000's): Cash $ 500 Deferred consideration 1,200 Earnout 301 Purchase price $ 2,001 The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of November 30, 2023, as calculated by management. The table below outlines the purchase price allocation of the purchase for Johnson to the acquired identifiable assets and liabilities assumed as of June 30, 2024 (in $000’s): Total purchase price $ 2,001 Accounts payable 1,017 Accrued liabilities 1,141 Total liabilities assumed 2,158 Total consideration 4,159 Accounts receivable 1,252 Inventory 1,127 Property and equipment 157 Intangible assets Customer relationships $ 1,301 Non-compete agreement 306 Subtotal intangible assets 1,607 Other assets 16 Total assets acquired 4,159 Total goodwill $ — On May 24, 2024, CRO entered into an asset purchase agreement with the original seller of Johnson under which the original seller agreed to purchase certain assets and assume certain obligations acquired by CRO under the original asset 13 Table of Contents purchase agreement. Consequently, CRO recorded a loss on deconsolidation of Johnson’s assets and liabilities of approximately $ 301,000 , as detailed in the table below (in $000's): Accounts payable and accrued liabilities $ 475 Earnout 307 Seller note 1,230 Lease liabilities 2,703 Total deconsolidation of liabilities 4,715 Inventory 613 Property and equipment 206 ROU assets 2,692 Intangible assets Customer relationships 1,224 Non-compete agreement 281 Subtotal intangible assets 1,505 Total deconsolidation of assets 5,016 Total loss on deconsolidation $ ( 301 ) Acquisition of Harris Flooring Group® Brands On September 20, 2023, Marquis acquired the Harris Flooring Group® brands from Q.E.P., a designer, manufacturer, and distributor of a broad range of best-in-class flooring and installation solutions for commercial and home improvement projects. Specifically, Marquis acquired the Harris Flooring Group brands, inventory, and book of business and intends to retain all sales representatives. The purchase price was $ 10.1 million, consisting of $ 3.0 million in cash at close, and the recording of a deferred payment of $ 5.1 million and holdback of $ 2.0 million. The acquisition was determined to be an asset acquisition for accounting purposes. The entirety of the purchase price was allocated to inventory. Acquisition of PMW On July 20, 2023 (“Effective Date”), the Company acquired 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, plus closing cash, and subject to working capital adjustments, 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 and leaseback transaction of approximately $ 8.6 million. The acquisition involved no issuance of stock of the Company. As of the Effective Date, the Company entered into a sales and leaseback transaction for two properties acquired, one located in Frankfort, Kentucky, and the other located in Louisville, Kentucky, with Legacy West Kentucky Portfolio, LLC (“Lessor”). The aggregate sales price of the real estate was approximately $ 14.5 million. The Louisville, Kentucky property was acquired on the Effective Date for $ 5.1 million in connection with an option of PMW to purchase that property. The provisions of each of the two lease agreements include a 20-year lease term with two five-year renewal options. The base rent under the Frankfort lease agreement is $ 34,977 per month for the first year of the term and a 2 % per annum escalator thereafter. The base rent under the Louisville lease agreement is $ 63,493 per month for the first year of the term and a 2 % per annum escalator thereafter. Both lease agreements are “net leases,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the real property incurred by the lessor. Due to the highly specialized nature of the leased assets, the Company currently believes it is more likely than not that each of the two five-year options will be exercised. The proceeds of $ 14.5 million, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of PMW. The fair value of the purchase price components outlined above was $ 26.8 million due to fair value adjustments for the contingent consideration, cash acquired, and working capital adjustments, as detailed below (in $000’s): 14 Table of Contents Purchase price $ 25,000 Fair value of earnout 2,675 Cash from balance sheet 1,602 Working capital adjustment ( 2,500 ) Net purchase price $ 26,777 Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $ 4.0 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of July 20, 2023, as calculated by an independent third-party firm. Because the transaction was considered a stock purchase for tax purposes, none of the goodwill arising from the acquisition will be deductible for tax purposes. During the three months ended December 31, 2023, the Company recorded noncash fair value adjustments related to inventory and other liabilities assumed, as well as an adjustment to deferred tax liabilities in the aggregate amount of $ 652,000 . The table below outlines the purchase price allocation of the purchase for PMW to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s): Net purchase price $ 26,777 Accounts payable 10,788 Accrued liabilities 4,995 Total liabilities assumed 15,783 Total consideration 42,560 Cash 1,602 Accounts receivable 12,613 Inventory 6,266 Property and equipment 13,616 Intangible assets 3,600 Other assets 849 Total assets acquired 38,546 Total goodwill $ 4,014 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. 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. The table below outlines the purchase price allocation of the purchase for Cal Coast to the acquired identifiable assets (in $000’s): Property 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 15 Table of Contents 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. (“EBS”), 7 Day Stone, Inc., Floorable, LLC, K2L Leasing, LLC, and SJ & K Equipment, Inc. (collectively, the “Acquired Companies”). The Acquired Companies are leading retailers and installers of floors, carpets, and countertops to consumers, builders and contractors in California and Nevada. The acquisition was 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 of the purchase price components outlined above was $ 78.7 million due to fair value adjustments for the Note, and restricted stock, as detailed below (in $000's). Purchase price $ 83,800 Fair value adjustment, sellers note ( 3,300 ) Fair value adjustment, restricted stock ( 1,800 ) Net purchase price $ 78,700 Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $ 31.4 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. During the three months ended December 31, 2023, the Company recorded a fair value adjustment related to its contingent 16 Table of Contents consideration of $ 1 million. The table below outlines the purchase price allocation, as revised, of the purchase for Flooring Liquidators to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s): Purchase price $ 78,700 Accounts payable 5,189 Accrued liabilities 10,700 Debt 60 Total liabilities assumed 15,949 Total consideration 94,649 Cash 9,131 Accounts receivable 4,824 Inventory 19,402 Property and equipment 4,643 Intangible assets Trade names $ 13,275 Customer relationships 7,700 Non-compete agreements 1,625 Other 49 Subtotal intangible assets 22,649 Other 2,581 Total assets acquired 63,230 Total goodwill $ 31,419 Pro Forma Information The table below presents selected proforma information for the Company for the three and nine-month periods ended June 30, 2023, assuming that the acquisition had occurred on October 1, 2022 (the beginning of the Company’s 2023 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, 2023 Flooring Liquidators Unaudited Three Months Ended June 30, 2023 Adjustments (1) Live for the Three Months Ended June 30, 2023 Net revenue $ 91,516 $ 4,222 $ 95,738 Net income $ 1,060 $ ( 2,188 ) $ ( 300 ) $ ( 1,428 ) Earnings per basic common share $ 0.33 $ ( 0.45 ) Earnings per basic diluted share $ 0.33 $ ( 0.45 ) As Reported Adjustments Proforma Live Unaudited Nine Months Ended June 30, 2023 Flooring Liquidators Unaudited Nine Months Ended June 30, 2023 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 17 Table of Contents (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 revenue and costs of revenue associated with sales between Flooring Liquidators and the Company prior to acquisition. Note 4: Inventory The following table details the Company's inventory as of June 30, 2024 and September 30, 2023 (in $000's): Inventory, net June 30, 2024 September 30, 2023 Raw materials $ 29,451 $ 32,590 Work in progress 9,481 9,028 Finished goods 52,947 50,082 Merchandise 43,487 43,438 135,366 135,138 Less: Inventory reserves ( 5,888 ) ( 3,824 ) Total inventory, net $ 129,478 $ 131,314 Note 5: Property and Equipment The following table details the Company's property and equipment as of June 30, 2024 and September 30, 2023 (in $000's): June 30, 2024 September 30, 2023 Property and equipment, net: Land $ 3,469 $ 2,029 Building and improvements 39,966 35,684 Transportation equipment 2,685 2,062 Machinery and equipment 71,508 67,575 Furnishings and fixtures 6,238 6,028 Office, computer equipment and other 5,032 4,569 128,898 117,947 Less: Accumulated depreciation ( 46,227 ) ( 37,244 ) Total property and equipment, net $ 82,671 $ 80,703 Depreciation expense was $ 3.1 million and $ 2.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 9.2 million and $ 7.8 million for the nine months ended June 30, 2024 and 2023, respectively. Note 6: 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 rent 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 18 Table of Contents 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. The following table details the Company's right of use assets and lease liabilities as of June 30, 2024 and September 30, 2023 (in $000's): June 30, 2024 September 30, 2023 Right of use asset - operating leases $ 59,687 $ 54,544 Lease liabilities: Current - operating 12,938 11,369 Current - finance 347 359 Long term - operating 52,009 48,156 Long term - finance 40,950 32,942 As of June 30, 2024, the weighted average remaining lease term for operating leases is 10.5 years. The Company's weighted average discount rate for operating leases is 9.8 %. Total cash payments for operating leases for the nine months ended June 30, 2024 and 2023 were approximately $ 13.8 million and $ 8.2 million, respectively. Additionally, the Company recognized approximately $ 18.8 million in right of use assets and liabilities upon commencement of operating leases during the nine months ended June 30, 2024. As of June 30, 2024, the weighted average remaining lease term for finance leases is 27.5 years. The Company's weighted average discount rate for finance leases is 11.4 %. Total cash payments for finance leases for the nine months ended June 30, 2024 and 2023 were approximately $ 2.5 million and $ 1.6 million, respectively. During the nine months ended June 30, 2024, the Company recognized finance right-of-use assets and liabilities of approximately $ 7.9 million. The Company records finance lease right-of-use assets as property and equipment. The balance, as of June 30, 2024 and September 30, 2023 is as follows (in $000’s): June 30, 2024 September 30, 2023 Property and equipment, at cost $ 26,226 $ 22,526 Accumulated depreciation $ ( 1,262 ) $ ( 702 ) Property and equipment, net $ 24,964 $ 21,824 Total present value of future lease payments of operating leases as of June 30, 2024 (in $000's): Twelve months ended June 30, 2025 $ 18,189 2026 15,833 2027 13,216 2028 9,862 2029 6,206 Thereafter 34,511 Total 97,817 Less implied interest ( 32,870 ) Present value of payments $ 64,947 19 Table of Contents Total present value of future lease payments of finance leases as of June 30, 2024 (in $000's): Twelve months ended June 30, 2025 $ 3,898 2026 3,932 2027 4,011 2028 4,123 2029 4,251 Thereafter 127,145 Total 147,360 Less implied interest ( 106,063 ) Present value of payments $ 41,297 In connection with the disposition of certain of Johnson’s assets and liabilities (see Note 3), during the three months ended June 30, 2024, the Company derecognized right-of-use assets in the amount of approximately $ 2.7 million and lease liabilities in the amount of approximately $ 2.7 million. During the nine months ended June 30, 2024 and 2023, the Company recorded no impairment charges relating to any of its leases. Note 7: Intangibles The following table details the Company's intangibles as of June 30, 2024 and September 30, 2023 (in $000's): June 30, 2024 September 30, 2023 Intangible assets, net: Intangible assets - Tradenames $ 15,356 $ 14,940 Intangible assets - Customer relationships 14,799 13,874 Intangible assets - Other 4,330 2,316 34,485 31,130 Less: Accumulated amortization ( 8,126 ) ( 4,562 ) Total intangibles, net $ 26,359 $ 26,568 Amortization expense was $ 1.2 million and approximately $ 1.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 3.7 million and $ 2.2 million for the nine months ended June 30, 2024 and 2023, respectively. The following table summarizes estimated future amortization expense related to intangible assets that have net balances (in $000’s): Twelve months ending June 30, 2025 $ 5,023 2026 5,023 2027 4,925 2028 4,736 2029 3,990 Thereafter 2,662 $ 26,359 20 Table of Contents In connection with the disposition of Johnson’s assets and liabilities (see note 3), during the three months ended June 30, 2024, the Company derecognized customer relationships in the amount of approximately $ 1.2 million and other intangibles in the amount of approximately $ 0.3 million. Note 8: Goodwill The following table details the Company's goodwill as of September 30, 2023 and June 30, 2024 (in $000's): Retail - Entertainment Retail - Flooring Flooring Manufacturing Steel Manufacturing Total September 30, 2023 36,947 30,419 807 7,693 75,866 CRO acquisition — 425 — — 425 Central Steel acquisition — — — 2,829 2,829 CRO adjustment — ( 336 ) — — ( 336 ) PMW adjustment — — — ( 652 ) ( 652 ) Flooring Liquidators adjustment — 1,000 — — 1,000 June 30, 2024 $ 36,947 $ 31,508 $ 807 $ 9,870 $ 79,132 During the nine months ended June 30, 2024, the Company made fair value adjustments, in the amount of approximately $ 652,000 related to the acquisition of PMW, $ 336,000 related to the CRO acquisition, and $ 1.0 million related to the acquisition of Flooring Liquidators (see Note 3). As of June 30, 2024, the Company did not identify any triggering events that would require impairment testing. Note 9: Accrued Liabilities The following table details the Company's accrued liabilities as of June 30, 2024 and September 30, 2023 (in $000's): June 30, 2024 September 30, 2023 Accrued liabilities: Accrued payroll and bonuses $ 7,447 $ 5,802 Accrued sales and use taxes 1,632 1,529 Accrued bank overdrafts 1,025 — Accrued customer deposits 5,149 4,579 Accrued gift card and escheatment liability 1,845 1,819 Accrued interest payable 787 669 Accrued inventory 9,545 5,700 Accrued professional fees 181 3,146 Accrued expenses - other 7,163 8,582 Total accrued liabilities $ 34,774 $ 31,826 21 Table of Contents Note 10: Long-Term Debt Long-term debt as of June 30, 2024 and September 30, 2023 consisted of the following (in $000's): June 30, 2024 September 30, 2023 Revolver loans $ 58,769 $ 56,779 Equipment loans 12,659 15,486 Term loans 15,045 14,290 Other notes payable 16,108 15,789 Total notes payable 102,581 102,344 Less: unamortized debt issuance costs ( 508 ) ( 557 ) Net amount 102,073 101,787 Less: current portion ( 42,186 ) ( 23,077 ) Total long-term debt $ 59,887 $ 78,710 Future maturities of long-term debt at June 30, 2024, are as follows which does not include related party debt separately stated (in $000's): Twelve months ending June 30, 2025 $ 42,186 2026 5,328 2027 39,412 2028 4,418 2029 1,208 Thereafter 9,521 Total future maturities of long-term debt $ 102,073 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, 2024 and September 30, 2023, the outstanding balance was approximately $ 13.7 million and $ 6.1 million, respectively. Loan with Fifth Third Bank (Precision Marshall) 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 acquisitions of Kinetic and Central Steel, the existing revolving facility was amended to add Kinetic and Central Steel as borrowers. 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. 22 Table of Contents As of June 30, 2024 and September 30, 2023, the outstanding balance on the revolving loan was approximately $ 22.8 million and $ 23.0 million, respectively, and the outstanding balance on the original M&E lending, which is documented as a term note, was approximately $ 2.0 million and $ 2.3 million, respectively. The revolving loan has a variable interest rate and matures in January 2027. As of June 30, 2024 and September 30, 2023, the outstanding balance on Kinetic Term Loan #1 was approximately $ 2.9 million and $ 3.3 million, respectively. As of September 30, 2023, the Kinetic Term Loan #2 was fully repaid. 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. Additionally, during June 2024, in connection with Kinetic's acquisition of Midwest Grinding (see Note 3), Precision Marshall took an additional advance against its Capex term lending in the amount of approximately $ 403,000 . The loan matures January 2027 and bears interest on the same terms as for Capex lending as stated above. As of June 30, 2024 and September 30, 2023, the outstanding balance on the Capex loan was approximately $ 1.7 million and 1.4 million, respectively. 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, 2024 and September 30, 2023, the outstanding balance on the Eclipse Revolver was approximately $ 9.3 million and $ 8.2 million, respectively, and the outstanding balance on the Eclipse M&E loan was approximately $ 1.9 million and $ 2.4 million, respectively. Loan with Fifth Third Bank (PMW) In connection with the acquisition of PMW (see Note 3), on July 20, 2023, PMW entered into a revolving credit facility with Fifth Third Bank (the "Revolving Credit Facility"). The facility consists of $ 15.0 million in revolving credit ("Fifth Third Revolver") and approximately $ 5.0 million in M&E lending (the "Fifth Third M&E Loan"). The Fifth Third Revolver is a three-year , asset-based facility that is secured by substantially all of PMW's assets. Availability under the Fifth Third Revolver is subject to a monthly borrowing base calculation. PMW's ability to borrow under the Fifth Third Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with Fifth Third. Loans made under the Revolving Credit Facility are considered Reference Rate Loans, and bear interest at a rate equal to the sum of the Reference Rate plus the Applicable Margin. Reference Rate means the greater of (a) 3.0 % or (b) the Lender’s publicly announced prime rate (which is not intended to be Lender’s lowest or most favorable rate in effect at any time) in effect from time to time. The Applicable Margin for revolving loans is zero , while for the M&E Term Loan or any Capital Expenditure Term Loan, it is 50 basis points ( 0.5 %). The credit facility matures in July 2026. As of June 30, 2024, the Company concluded that PMW was in default of its Fixed Cost Coverage Ratio (“FCCR”) covenant, as specified in the credit agreement governing the Revolving Credit Facility. This default provides the creditor rights to accelerate and made immediately due the borrowings under the Revolving Credit Facility and Fifth Third M&E Loan. As of the date of the filing of this 10-Q, Fifth Third Bank has not exercised these rights and management is actively working with Fifth Third Bank to resolve the default. As such, as of June 30, 2024, PMW’s long-term debt balances, in the amount of approximately $ 15.1 million, have been reclassified to current liabilities. As of June 30, 2024 and September 30, 2023, the outstanding balance on the Revolving Credit Facility was approximately $ 11.2 million and $ 11.0 million, respectively, and the balance on the Fifth Third M&E loan was approximately $ 4.3 million and $ 4.8 million, respectively. Bank Midwest Revolver Loan On October 17, 2023, Vintage entered into a $ 15.0 million credit agreement with Bank Midwest (“Bank Midwest Revolver”), replacing a revolving credit facility between Vintage and Texas Capital Bank (“TCB Revolver”), which was entered into in November 2016 and set to mature in November 2023. In connection with the entry into the Credit Agreement, the revolving credit facility between Vintage Stock and Texas Capital Bank was terminated and the balance outstanding was repaid. The Bank Midwest Revolver interest accrues daily on the outstanding principal at a rate of the greater of (a) the one-month forward-looking term rate based on SOFR, plus 2.36 % per annum, or (b) 6.5 % per annum, and 23 Table of Contents matures on October 17, 2024. As of June 30, 2024, the outstanding balance on the Bank Midwest Revolver was approximately $ 1.7 million. As of September 30, 2023, the outstanding balance on the TCB Revolver was approximately $ 5.3 million. 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, 2024: Note #3 was for approximately $ 3.7 million, secured by equipment. The Equipment Loan #3 matured in December 2023. As of June 30, 2024 and September 30, 2023, the balance was $ 0 and $ 154,000 , respectively. Note #4 was for approximately $ 1.1 million, secured by equipment. The Equipment Loan #4 matured in December 2023. As of June 30, 2024 and September 30, 2023, the balance was $ 0 and $ 47,000 , 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, 2024 and September 30, 2023, the balance was approximately $ 325,000 and $ 799,000 , 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, 2024 and September 30, 2023, the balance was approximately $ 196,000 and $ 317,000 , respectively. 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, 2024 and September 30, 2023, the balance was approximately $ 2.5 million and $ 2.9 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, 2024 and September 30, 2023, the balance was approximately $ 1.7 million and $ 2.0 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, 2024 and September 30, 2023, the balance was approximately $ 3.1 million and $ 3.9 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, 2024 and September 30, 2023, the balance was approximately $ 4.8 million and $ 5.3 million. Loan Covenant Compliance As of June 30, 2024, the Company and its subsidiaries were in compliance with all covenants under their respective existing revolving and other loan agreements, with the exception of PMW which was in default under its Revolving Credit Facility and Fifth Third M&E Loan with Fifth Third Bank, as discussed above. 24 Table of Contents Note 11: Notes Payable-Related Parties Long-term debt payable to related parties (see Note 16) as of June 30, 2024 and September 30, 2023 consisted of the following (in $000's): June 30, 2024 September 30, 2023 Isaac Capital Group, LLC, 12.5 % interest rate, matures May 2025 $ 2,000 $ 2,000 Spriggs Investments, LLC, 10 % interest rate, matures July 2025 1,100 2,000 Spriggs Investments, LLC for Flooring Liquidators, 12 % interest rate, matures July 2025 1,000 1,000 Isaac Capital Group, LLC revolver, 12 % interest rate, matures April 2025 2,300 1,000 Isaac Capital Group, LLC for Flooring Liquidators, 12 % interest rate, matures January 2028 5,000 5,000 Total notes payable - related parties 11,400 11,000 Less: unamortized debt issuance costs ( 71 ) ( 86 ) Net amount 11,329 10,914 Less: current portion ( 5,400 ) ( 4,000 ) Total long-term portion, related parties $ 5,929 $ 6,914 Twelve months ending June 30, 2025 $ 5,400 2026 1,000 2029 4,929 Total future maturities of long-term debt, related parties $ 11,329 25 Table of Contents Note 12: Related Party Seller Notes Seller notes as of June 30, 2024 and September 30, 2023 consisted of the following (in $000’s): June 30, 2024 September 30, 2023 Seller of Flooring Liquidators, 8.24 % interest rate, matures January 2028 $ 34,000 $ 34,000 Seller of PMW, 8.0 % interest rate, matures July 2028 2,500 2,500 Seller of Kinetic, 7.0 % interest rate, matures September 2027 3,000 3,000 Seller of Central Steel, 8.0 % interest rate, matures May 2029 1,114 — Total Related party seller notes payable 40,614 39,500 Unamortized debt premium (discount) 1,547 ( 502 ) Net amount 42,161 38,998 Less current portion ( 2,500 ) — Long-term portion of Related party seller notes payable $ 39,661 $ 38,998 Future maturities of seller notes at June 30, 2024 are as follows (in $000’s): Twelve months ending June 30, 2025 $ 2,500 2026 1,115 2027 3,000 2028 35,546 Total $ 42,161 Kinetic In connection with the purchase of Kinetic, on June 28, 2022, Kinetic entered into an employment agreement with the previous owner of Kinetic to serve as its Head of Equipment Operations. The employment agreement is for an initial term of five years and shall be automatically extended in 90 -day increments unless either party provides notice as required under the agreement. Additionally, Precision Marshall entered into a seller financed loan in the amount of $ 3.0 million with the previous owner of Kinetic. The Seller Subordinated Acquisition Note bears interest at 7.0 % per annum, with interest payable quarterly in arrears (the "Seller Subordinated Acquisition Note"). The Seller Subordinated Acquisition Note has a maturity date of September 27, 2027. As of June 30, 2024 and September 30, 2023, the remaining principal balance was $ 3.0 million. Flooring Liquidators In connection with the purchase of Flooring Liquidators (see Note 3), on January 18, 2023, the Company entered into an employment agreement with the previous owner of Flooring Liquidators to serve as its Chief Executive Officer. The employment agreement is for an initial term of five years and shall be automatically extended in 90-day increments unless either party provides notice as required under the agreement. Additionally, the Company entered into a seller financed mezzanine loan (the "Seller Note"), which is fully guaranteed by the Company, in the amount of $ 34.0 million with the previous owners of Flooring Liquidators. The Seller Note bears interest at 8.24 % per annum, with interest payable monthly in arrears beginning on January 18, 2024. The Seller Note has a maturity date of January 18, 2028. The fair value assigned to the Selles 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 the effective interest rate method, as required by GAAP, over the term of the Seller Note. As of June 30, 2024 and September 30, 2023, the carrying value of the Seller Note was approximately $ 35.4 million and $ 33.5 million, respectively. PMW In connection with the purchase of PMW (see Note 3), on July 20, 2023, the Company entered into a consulting agreement with the previous owner of PMW to serve as its part-time President and Chief Executive Officer . The consulting agreement shall terminate upon the later of (i) Sellers’ receipt of earn-out payments in an aggregate amount equal to $ 3.0 million and (ii) the full satisfaction and payment of all amounts due and to that are to become due under the seller note, unless earlier terminated in accordance with the terms set forth in the consulting agreement . Additionally, PMW entered into two seller financed loans, in the aggregate amount of $ 2.5 million, which are fully guaranteed by the Company (the "Seller Financed 26 Table of Contents Loans"). The Seller Financed Loans bear interest at 8.0 % per annum, with interest payable quarterly in arrears. As of June 30, 2024, the Company concluded that PMW was in default of its Fixed Cost Coverage Ratio (“FCCR”) covenant, as specified in the credit agreement governing the Revolving Credit Facility (see Note 10) . The Seller Financed Loans stipulate that payment of the notes will be due and payable upon any event of default under the Revolving Credit Facility, and the Live Ventures Incorporated guarantee shall go into effect. Consequently, as of June 30, 2024, the balances on the Seller Financed Loans, in the amount of $ 2.5 million in the aggregate, have been reclassified to current liabilities. The Company is in the process of resolving the default with Fifth Third Bank. The Seller Financed Loans have a maturity date of July 18, 2028. As of June 30, 2024 and September 30, 2023, the carrying value of the seller financed loans was approximately $ 2.5 million. Central Steel In connection with the purchase of Central Steel, on May 15, 2024, Precision Marshall entered into an employment agreement with the previous owner of Central Steel to serve as its President. The employment agreement is for an initial term of two years and shall be automatically extended in 90 -day increments unless either party provides notice as required under the agreement. Additionally, Precision Marshall entered into a seller financed loan in the amount of $ 1.1 million with the previous owner of Central Steel (the "Sellers Subordinated Promissory Note"). The Sellers Subordinated Promissory Note bears interest at 8.0 % per annum, with interest payable quarterly in arrears. The Sellers Subordinated Promissory Note has a maturity date of May 15, 2029. As of June 30, 2024, the remaining principal balance was $ 1.1 million. Note 13: Stockholders’ Equity Series E Convertible Preferred Stock As of June 30, 2024 and September 30, 2023, there were 47,840 shares of Series E Convertible Preferred Stock issued and outstanding, respectively. Treasury Stock As of June 30, 2024 and September 30, 2023, the Company had 694,414 and 660,063 shares of Treasury Stock, respectively. During the nine months ended June 30, 2024 and 2023, the Company repurchased 34,351 and 38,990 shares of its common stock for approximately $ 862,000 and $ 988,000 , respectively. During the nine months ended June 30, 2024 and 2023, the average price paid per share was $ 25.09 and $ 25.35 , respectively. 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. 27 Table of Contents The following table summarizes stock option activity for the fiscal year ended September 30, 2023 and the nine months ended June 30, 2024: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Intrinsic Value 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 Outstanding at September 30, 2023 53,750 $ 21.51 1.54 $ 540 Granted 17,500 $ 40.00 Exercised ( 6,250 ) $ 15.00 Forfeited ( 5,000 ) $ 40.00 Outstanding at June 30, 2024 60,000 $ 26.04 1.54 $ 317 Exercisable at June 30, 2024 60,000 $ 26.04 1.54 $ 317 The Company recognized compensation expense of approximately $ 175,000 and $ 287,000 during the three months ended June 30, 2024 and 2023, respectively, and approximately $ 275,000 and $ 396,000 during the nine months ended June 30, 2024 and 2023, 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, 2024, the Company had no unrecognized compensation expense associated with stock option awards. 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. 28 Table of Contents 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, 2024 2023 2024 2023 Basic Net (loss) income $ ( 2,855 ) $ 1,060 $ ( 6,818 ) $ 4,462 Less: preferred stock dividends — — — — Net (loss) income applicable to common stock $ ( 2,855 ) $ 1,060 $ ( 6,818 ) $ 4,462 Weighted average common shares outstanding 3,140,191 3,166,842 3,153,034 3,123,177 Basic (loss) earnings per share $ ( 0.91 ) $ 0.33 $ ( 2.16 ) $ 1.43 Diluted Net (loss) income applicable to common stock $ ( 2,855 ) $ 1,060 $ ( 6,818 ) $ 4,462 Add: preferred stock dividends — — — — Net (loss) income applicable to diluted earnings per share $ ( 2,855 ) $ 1,060 $ ( 6,818 ) $ 4,462 Weighted average common shares outstanding 3,140,191 3,166,842 3,153,034 3,123,177 Add: Options — 19,823 — 20,218 Add: Series E Preferred Stock — 239 — 239 Assumed weighted average common shares outstanding 3,140,191 3,186,904 3,153,034 3,143,634 Diluted (loss) earnings per share $ ( 0.91 ) $ 0.33 $ ( 2.16 ) $ 1.42 Basic earnings per common share ("EPS") is computed by dividing net income by the weighted average number of shares of Common Stock outstanding for the period. Diluted EPS is computed by dividing net income by the sum of the weighted average number of shares of Common Stock outstanding and the effect of dilutive securities. No diluted EPS computation was made for the three and nine months ended June 30, 2024, as the Company recorded a net loss. Had the Company calculated diluted EPS for the three and nine months ended June 30, 2024, the total assumed weighted average common shares outstanding would have been 3,155,546 and 3,168,619 , respectively, and there would have been 35,000 options to purchase shares of common stock that were anti-dilutive. For the three and nine months ended June 30, 2023, there were 38,500 options to purchase shares of common stock that were anti-dilutive, and not included in the diluted EPS computation. Note 16: Related Party Transactions Transactions with Isaac Capital Group, LLC As of June 30, 2024, Isaac Capital Group, LLC (“ICG”) beneficially owns 49.3 % 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. On January 13, 2023, the expiration date for Mr. Isaac's options was extended from January 15, 2023 to January 15, 2025. ICG Term Loan During 2015, Marquis entered into a mezzanine loan in the amount of up to $ 7.0 million (the “ICF Loan”) with Isaac Capital Fund I, LLC (“ICF”), a private lender whose managing member is Jon Isaac. On July 10, 2020, (i) ICF released and discharged Marquis from all obligations under the loan, (ii) ICF assigned all of its rights and obligations under the instruments, documents, and agreements with respect to the ICF Loan to ICG, of which Jon Isaac, the Company’s President and Chief Executive Officer, is the sole member, and (iii) Live Ventures borrowed 29 Table of Contents $ 2.0 million (the “ICG Loan”) from ICG. The ICG Loan bears interest at 12.5 % and matures in May 2025. As of June 30, 2024 and September 30, 2023, the outstanding balance on this note 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”). On June 23, 2022, as approved by unanimous consent of the Board of Directors of the Company, the amount of available revolving credit under the facility was increased to $ 6.0 million. No other terms of the Note were changed. On April 1, 2023, the Company entered into the Second Amendment of the ICG Revolver that extended the maturity date to April 8, 2024, increased the interest rate from 10 % to 12 % per annum, and decreased the amount of available revolving credit under the facility to $ 1.0 million. On January 11, 2024, the Company entered into the Third Amendment of the ICG Revolver that extended the maturity date to April 8, 2025 and increased the amount of available revolving credit under the facility to $ 5.0 million. As of June 30, 2024 and September 30, 2023, the outstanding balance on the ICG Revolver was $ 2.3 million and 1.0 million, 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, 2024 and September 30, 2023, the outstanding balance on this note was $ 5.0 million. Transactions with JanOne Inc. Tony Isaac, a member of the Company's board of directors, and father of the Company's Chief Executive Officer, 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, previously rented 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 $ 35,000 and $ 55,000 in rent and other reimbursed expenses for three months ended June 30, 2024 and 2023, respectively, and $ 109,000 and $ 160,000 for the nine months ended June 30, 2024 and 2023, respectively. Purchase Agreement with ARCA Recycling On April 5, 2022, the Company entered into a Purchasing Agreement with ARCA Recycling, Inc. ("ARCA"), which was a wholly owned subsidiary of JanOne until March 2023. 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 shall be paid back by ARCA in full plus an additional five percent surcharge or broker-type fee. As of June 30, 2024, the Company had a full allowance of approximately $ 690,000 recorded in the reserve for doubtful accounts for the amount due. On February 7, 2024, the Company converted outstanding receivables from JanOne and amounts due under the Purchase Agreement with ARCA Recycling into a promissory note with JanOne. On March 6, 2024, the Company entered into a Note Sale Agreement (“NSA”) with an unaffiliated third party under which the third party acquired the promissory note for approximately $ 700,000 . The NSA requires payment of 50 % of the amount due upon execution, and the balance due no later than three days following 60 days after the date of execution. On March 11, 2024, the Company received payment of approximately $ 350,000 , which was recorded as other income, and recorded a receivable for the deferred payment, which was subsequently received on April 29, 2024. In connection with the execution of the NSA, the Company recognized a gain of approximately $ 0.6 million in the second quarter. 30 Table of Contents 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. Under the modification agreement, 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. On February 29, 2024, the Company entered into a loan modification agreement of the Spriggs Loan I. Under the loan modification agreement, the Company was required to make a principal payment of $ 600,000 to Spriggs Investments within five business days following the effective date of the loan modification agreement, and make principal payments of not less than $ 300,000 each 90 -day period thereafter, beginning on April 1, 2024, until the Spriggs Promissory Note I is fully repaid. Further, under the loan modification agreement, the maturity date of the Spriggs Promissory Note I was extended to July 31, 2025 . All monthly payments under the original Spriggs Promissory Note I remain in effect through the maturity date as amended. As of June 30, 2024 and September 30, 2023, the principal amount owed was $ 1.1 million and $ 2.0 million, respectively. 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. On February 29, 2024, the Company entered into a loan modification agreement of the Spriggs Loan II. Under the loan modification agreement, upon full principal repayment of the Spriggs Promissory Note I (see above), the Company will make principal payments of not less than $ 300,000 , per each 90 -day period, until the Spriggs Loan II is fully repaid. Further, under the loan modification agreement, the maturity date of the Spriggs Loan II was extended to July 31, 2025 . All monthly payments under the original Spriggs Loan II remain in effect through the maturity date as amended. As of June 30, 2024 and September 30, 2023, the principal 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 certain assets and intellectual property of Better Backers, Inc., 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. Transactions with Flooring Liquidators CEO Stephen Kellogg is the Chief Executive Officer of Flooring Liquidators, a wholly owned subsidiary of the Company. Flooring Liquidators leases four properties from K2L Property Management, and one from Railroad Investments, each of which Mr. Kellogg is a member. Additionally, Flooring Liquidators leases two properties from Stephen Kellogg and Kimberly Hendrick as a couple, and properties from each of The Stephen Kellogg and Kimberly Hendrick Trust, The Stephen Kellogg Trust, and Mr. Kellogg personally. Ms. Hendrick is Mr. Kellogg's spouse. 31 Table of Contents Seller Notes The Company routinely enters into related-party seller notes in conjunction with its acquisitions. See Note 12 for the details related to existing seller notes. Procedures for Approval of Related Party Transactions In accordance with its charter, the Audit Committee reviews and approves 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, approval, or ratification 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 was 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 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 had 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 is currently in the midst of discovery. Fact discovery was completed on May 20, 2024. The parties are currently engaged in expert discovery, which is set to conclude on August 26, 2024. The Company Defendants strongly dispute and deny the allegations and intend to continue to defend themselves vigorously against the claims. 32 Table of Contents Sieggreen Class Action On August 13, 2021, Daniel E. Sieggreen, individually and on behalf of all others similarly situated claimants (the "Plaintiff"), filed a class action complaint for violation of federal securities laws in the United States District Court for the District of 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. The Motion to Dismiss is set for hearing on August 28, 2024. 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 Industries, Inc. filed a civil complaint in the Court of Chancery of the State of Delaware. The complaint alleged that the Company violated the terms of an agreement and plan of merger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $ 2,500,000 . The Chancery Court dismissed that action for lack of jurisdiction. On January 12, 2023, the representative re-filed the same action in the United States District Court for the Western District of Pennsylvania. On October 26, 2023, the Company counterclaimed against the representative and all represented shareholders for fraudulently misrepresenting the seller’s inventory and accounting methodology and asserting damages in excess of $ 4,500,000 . On April 10, 2024, the District Court dismissed the individual shareholders, leaving intact the company's misrepresentation claims against the shareholder representative. The Court subsequently denied the shareholder representative's motion for leave to amend to assert statute of limitation defenses. The Company expects discovery to last for approximately one year . 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, which was transferred to Stanislaus County. 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 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. The parties have agreed to participate in mediation on October 30, 2024, in an effort to minimize litigation costs and seek resolution. General 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. 33 Table of Contents The following tables summarize segment information (in $000's): For the Three Months Ended June 30, For the Nine Months Ended June 30, 2024 2023 2024 2023 Revenue Retail-Entertainment $ 16,503 $ 18,009 $ 53,930 $ 60,388 Retail-Flooring 36,981 27,449 103,332 48,218 Flooring Manufacturing 31,264 27,424 94,689 84,195 Steel Manufacturing 39,047 18,409 107,889 56,306 Corporate & Other 83 225 257 2,517 Total revenue $ 123,878 $ 91,516 $ 360,097 $ 251,624 Gross profit Retail-Entertainment $ 9,552 $ 9,845 $ 30,916 $ 32,606 Retail-Flooring 13,525 10,386 38,259 18,128 Flooring Manufacturing 7,731 6,388 22,913 18,377 Steel Manufacturing 6,161 5,381 16,513 15,420 Corporate & Other 76 169 238 1,190 Total gross profit $ 37,045 $ 32,169 $ 108,839 $ 85,721 Operating income (loss) Retail-Entertainment $ 1,332 $ 1,548 $ 6,305 $ 7,542 Retail-Flooring ( 1,498 ) 1,049 ( 4,433 ) 833 Flooring Manufacturing 1,856 2,022 4,779 5,179 Steel Manufacturing 1,370 2,703 3,225 6,972 Corporate & Other ( 1,929 ) ( 1,761 ) ( 6,042 ) ( 5,446 ) Total operating income $ 1,131 $ 5,561 $ 3,834 $ 15,080 Depreciation and amortization Retail-Entertainment $ 208 $ 316 $ 700 $ 949 Retail-Flooring 1,304 1,107 3,931 2,102 Flooring Manufacturing 1,036 1,067 3,148 3,259 Steel Manufacturing 1,796 1,146 5,040 3,353 Corporate & Other 5 47 13 315 Total depreciation and amortization $ 4,349 $ 3,683 $ 12,832 $ 9,978 Interest expense Retail-Entertainment $ 41 $ 134 $ 278 $ 423 Retail-Flooring 1,277 1,200 3,751 2,221 Flooring Manufacturing 1,126 1,028 3,126 3,082 Steel Manufacturing 1,577 903 4,756 2,531 Corporate & Other 212 220 652 510 Total interest expense $ 4,233 $ 3,485 $ 12,563 $ 8,767 Net (loss) income before provision for income taxes Retail-Entertainment $ 1,327 $ 1,418 $ 6,282 $ 7,155 Retail-Flooring ( 3,223 ) ( 338 ) ( 9,338 ) ( 1,729 ) Flooring Manufacturing 635 840 1,297 1,741 Steel Manufacturing ( 1,105 ) 1,485 ( 3,180 ) 3,469 34 Table of Contents Corporate & Other ( 1,457 ) ( 2,048 ) ( 4,288 ) ( 4,712 ) Total (loss) net income before provision for income taxes $ ( 3,823 ) $ 1,357 $ ( 9,227 ) $ 5,924 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. 35 Table of Contents