What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2025-02-07 · 169 added, 79 removed, 178 unchanged (58% of the section changed)

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

For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three months ended December 31, 2024, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “2024 Form 10-K”).

For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and six months ended March 31, 2025, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “2024 Form 10-K”).

Note about Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.

Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to:

Specific forward-looking statements contained in this portion of the Annual Report include, but are not limited to:

(i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months, and (vi) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.

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Our Retail-Entertainment Segment is composed of Vintage Stock, Inc., doing business as Vintage Stock, V-Stock, Movie Trading Company and EntertainMart (collectively, “Vintage Stock”).

Vintage Stock is an award-winning specialty entertainment retailer that offers a large selection of entertainment products, including new and pre-owned movies, video games and music products, as well as ancillary products, such as books,

comics, toys and collectibles, in a single location.

With its integrated buy-sell-trade business model, Vintage Stock buys, sells, and trades new and pre-owned movies, music, video games, electronics, and collectibles through 73 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, Texas, and Utah.

With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned movies, music, video games, electronics and collectibles through 73 retail locations strategically positioned across Alabama, Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, Montana, Nebraska, New Mexico, Oklahoma, Tennessee, Texas, and Utah.

Retail-Flooring Segment

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Founded nearly 76 years ago in 1947 in Louisville, Kentucky, PMW manufactures and supplies highly engineered parts and components across 400,000 square feet of manufacturing space.

PMW offers world-class metal forming, assembly, and finishing solutions across diverse industries, including appliance, automotive, hardware, electrical, electronic, medical products, and devices.

world-class metal forming, assembly, and finishing solutions across diverse industries, including appliance, automotive, hardware, electrical, electronic, medical products, and devices.

On May 17, 2024, Precision Marshall acquired Central Steel.

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Its extensive product line, primarily for data centers, includes cable racks, auxiliary framing, hardware, insulation products, and network bays.

On June 10, 2024, Kinetic acquired certain assets and assumed certain liabilities of Midwest Grinding Corp.

("Midwest Grinding").

Founded in 1961 in Milwaukee, Wisconsin, Midwest Grinding is a grinding house dedicated to precision Blanchard and specialty surface grinding of small to extra-large capacity.

Corporate and Other Segment

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Adjusted EBITDA

We evaluate the performance of our operations based on financial measures such as “Adjusted EBITDA”, which is a non-U.S.

GAAP financial measure.

We evaluate the performance of our operations based on financial measures such as “Adjusted EBITDA”, which is a non-GAAP financial measure.

We define Adjusted EBITDA as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges.

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Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate a company's financial performance, subject to certain adjustments.

Adjusted EBITDA does not represent cash flows from operations, as defined by U.S.

GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all our cash needs.

Adjusted EBITDA does not represent cash flows from operations, as defined by GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all our cash needs.

It is, however, a measurement that the Company believes is useful to investors in analyzing its operating performance.

Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities, and other measures of financial performance prepared in accordance with U.S.

As companies often define non-U.S.

GAAP financial measures differently, Adjusted EBITDA, as calculated by the Company, should not be compared to any similarly titled measures reported by other companies.

Results of Operations Three Months Ended December 31, 2024 and 2023

The following table sets forth certain statement of income items and as a percentage of revenue, for the three months ended December 31, 2024 and 2023 (in $000’s):

As companies often define non-GAAP financial measures differently, Adjusted EBITDA, as calculated by the Company, should not be compared to any similarly titled measures reported by other companies.

Results of Operations Three Months Ended March 31, 2025 and 2024

The following table sets forth certain statement of income items and as a percentage of revenue, for the three months ended March 31, 2025 and 2024 (in $000’s):

Three Months Ended

December 31, 2024 Three Months Ended

December 31, 2023

March 31, 2025 Three Months Ended

March 31, 2024

Revenue % of Total

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Income (loss) before provision for income taxes 21,103 19.7 % (4,498) (3.8 %)

Provision (benefit) for income taxes 81 0.1 % (224) (0.2 %)

Provision for (benefit from) income taxes 5,237 4.9 % (1,217) (1.0 %)

Net income (loss) $ 15,866 14.8 % $ (3,281) (2.8 %)

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The following table sets forth revenue by segment (in $000’s):

For the Three Months Ended December 31, 2024 For the Three Months Ended December 31, 2023

For the Three Months Ended March 31, 2025 For the Three Months Ended March 31, 2024

Retail-Entertainment $ 18,467 17.3 % $ 16,842 14.2 %

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The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment (in $000’s):

For the Three Months Ended December 31, 2024 For the Three Months Ended December 31, 2023

For the Three Months Ended March 31, 2025 For the Three Months Ended March 31, 2024

Profit % of Total Revenue Gross

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Total Gross Profit $ 35,148 32.8 % $ 35,467 29.9 %

Revenue decreased approximately $6.1 million, or 5.2%, to approximately $111.5 million for the three months ended December 31, 2024, as compared to the corresponding prior year period.

The decrease is primarily attributable to Flooring Manufacturing, Retail Flooring, and Steel Manufacturing, which decreased by approximately $6.7 million in aggregate.

Gross profit was 31.7% for three months ended December 31, 2024 as compared to 30.9% for the three months ended December 31, 2023.

Revenue decreased approximately $11.6 million, or 9.8%, to approximately $107.0 million for the quarter ended March 31, 2025, compared to revenue of approximately $118.6 million in the prior year period.

The decrease is attributable to the Retail-Flooring, Flooring Manufacturing, and Steel Manufacturing segments, which decreased by approximately $13.2 million in the aggregate.

Gross profit was 32.8% for three months ended March 31, 2025 as compared to 29.9% for the three months ended March 31, 2024.

The increase was primarily attributable to increased margins in our Steel Manufacturing segment primarily due to improved efficiencies, as well as the acquisition of Central Steel during May 2024, which has historically generated higher margins.

General and Administrative Expense

General and Administrative expenses increased by 8.6% to approximately $30.1 million for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023.

The increase is primarily due to increased compensation expense related to new store openings at Flooring Liquidators.

General and Administrative expenses decreased by 5% to approximately $28.3 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

The decrease is primarily due to targeted cost reduction initiatives at Flooring Liquidators.

Sales and Marketing Expense

Sales and marketing expense decreased by 11.3% to approximately $4.5 million for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, primarily due to reduced sales and marketing activities at Flooring Liquidators.

Sales and marketing expense decreased by 27% to approximately $4.7 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to reduced sales and marketing activities at Flooring Liquidators.

Interest Expense, net

Interest expense, net, remained consistent at approximately $4.2 million for the three months ended December 31, 2024 and 2023.

Results of Operations by Segment for the Three Months Ended December 31, 2024 and 2023

For the Three Months Ended December 31, 2024 For the Three Months Ended December 31, 2023

Interest expense, net, decreased by approximately 5.6% to approximately $3.9 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024 due to lower average debt balances.

Results of Operations Six Months Ended March 31, 2025 and 2024

The following table sets forth certain statement of income items and as a percentage of revenue, for the six months ended March 31, 2025 and 2024 (in $000’s):

For the Six Months Ended March 31, 2025 For the Six Months Ended March 31, 2024

Revenue % of Total

Statement of Income Data:

Revenue $ 218,521 $ 236,219

Gross profit 70,510 32.3 % 71,794 30.4 %

General and administrative expenses 58,392 26.7 % 57,503 24.3 %

Sales and marketing expenses 9,264 4.2 % 11,588 4.9 %

Interest expense, net 8,095 3.7 % 8,330 3.5 %

Income (loss) before provision for income taxes 21,676 9.9 % (5,404) (2.3 %)

Provision for (benefit from) income taxes 5,318 2.4 % (1,441) (0.6 %)

Net income (loss) $ 16,358 7.5 % $ (3,963) (1.7 %)

Adjusted EBITDA (a)

Retail-Entertainment $ 6,565 $ 5,867

Retail-Flooring (2,749) (546)

Flooring Manufacturing 3,023 4,774

Steel Manufacturing 6,543 5,133

Corporate & Other (1,191) (2,075)

Total Adjusted EBITDA $ 12,191 $ 13,153

Adjusted EBITDA as a percentage of revenue

Retail-Entertainment 16.5 % 15.7 %

Retail-Flooring (4.6 %) (0.8 %)

Flooring Manufacturing 5.4 % 7.5 %

Steel Manufacturing 10.3 % 7.5 %

Corporate & Other N/A N/A

Consolidated adjusted EBITDA as a percentage of revenue 5.6 % 5.6 %

(a) See reconciliation of net income to Adjusted EBITDA below.

The following table sets forth revenue by segment (in $000’s):

For the Six Months Ended March 31, 2025 For the Six Months Ended March 31, 2024

Total Revenue Net

Revenue % of Total

Retail-Entertainment $ 39,740 18.2 % $ 37,428 15.8 %

Retail-Flooring 59,146 27.1 % 66,351 28.1 %

Flooring Manufacturing 55,815 25.5 % 63,425 26.9 %

Steel Manufacturing 63,757 29.2 % 68,841 29.1 %

Corporate & other 63 — % 174 0.1 %

Total Revenue $ 218,521 100.0 % $ 236,219 100.0 %

The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment (in $000’s):

For the Six Months Ended March 31, 2025 For the Six Months Ended March 31, 2024

Profit % of Total Revenue Gross

Profit % of Total Revenue

Retail-Entertainment $ 22,951 10.5 % $ 21,364 9.0 %

Retail-Flooring 21,218 9.7 % 24,734 10.5 %

Flooring Manufacturing 13,716 6.3 % 15,182 6.4 %

Steel Manufacturing 12,571 5.8 % 10,352 4.4 %

Corporate & other 54 — % 162 0.1 %

Total Gross Profit $ 70,510 32.3 % 0.322669217146178 $ 71,794 30.4 %

Revenue decreased approximately $17.7 million, or 7.5%, to approximately $218.5 million for the six months ended March 31, 2025, compared to revenue of approximately $236.2 million in the prior year period.

The decrease is attributable to the Flooring Manufacturing, Retail-Flooring, and Steel Manufacturing segments, which decreased by approximately $20.0 million in the aggregate.

Gross profit was 32.3% for six months ended March 31, 2025 as compared to 30.4% for the six months ended March 31, 2024.

General and Administrative Expense

General and administrative expense remained generally consistent at approximately $58.4 million and $57.5 million for the six months ended March 31, 2025 and 2024, respectively.

Sales and Marketing Expense

Sales and marketing expense decreased by 20.1% to approximately $9.3 million for the six months ended March 31, 2025, as compared to the six months ended March 31, 2024, primarily due to reduced sales and marketing activities at Flooring Liquidators.

Interest Expense, net

Interest expense, net, remained generally consistent at approximately $8.1 million and $8.3 million for the six months ended March 31, 2025 and 2024, respectively.

Results of Operations by Segment for the Three Months Ended March 31, 2025 and 2024

For the Three Months Ended March 31, 2025 For the Three Months Ended March 31, 2024

Retail-Entertainment Retail-Flooring Flooring

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Retail-Entertainment Segment

Retail-Entertainment segment revenue for the quarter ended December 31, 2024 was approximately $21.3 million, an increase of approximately $0.7 million, or 3.3%, compared to prior year period revenue of approximately $20.6 million.

Revenue increased primarily due to increased consumer demand for used products.

The increase in used products contributed to the increase in gross margin to 56.6% for the quarter ended December 31, 2024, compared to 56.0% for the prior year period.

Operating income for the quarter ended December 31, 2024 was approximately $3.4 million, compared to operating income of approximately $3.1 million for the prior year period.

Retail-Entertainment segment revenue for the quarter ended March 31, 2025 was approximately $18.5 million, an increase of approximately $1.6 million, or 9.6%, compared to prior year period revenue of approximately $16.8 million.

Revenue increased primarily due to increased consumer demand for new products.

The increase in the sales of new products with higher margins contributed to the increase in gross margin to 59.1% for the quarter ended March 31, 2025, compared to 58.4% for the prior year period.

Operating income for the quarter ended March 31, 2025 was approximately $2.5 million, compared to operating income of approximately $1.8 million for the prior year period.

Retail-Flooring Segment

The Retail-Flooring segment revenue for the quarter ended December 31, 2024, was approximately $31.7 million, a decrease of approximately $2.6 million, or 7.5%, compared to the prior year period revenue of approximately $34.3 million.

The decrease was primarily due to reduced demand.

Gross margin for the quarter ended December 31, 2024 was 37.2%, compared to 38.0% for the prior year period.

The Retail-Flooring segment revenue for the quarter ended March 31, 2025, was approximately $27.4 million, a decrease of approximately $4.6 million, or 14.5%, compared to the prior year period revenue of approximately $32.0 million.

The decrease in revenue was primarily attributable to the disposition of certain Johnson Floor & Home Carpet One stores in May 2024.

Gross margin for the quarter ended March 31, 2025 was 34.4%, compared to 36.5% for the prior year period.

The decrease in gross margin was primarily driven by a change in product mix.

Operating loss for the quarter ended December 31, 2024 was approximately $2.2 million, compared to operating income of approximately $0.1 million for the prior year period.

The increase in operating loss was primarily due to additional wages and other costs related to new store openings during the quarter ended December 31, 2024.

Operating loss for the quarter ended March 31, 2025 was approximately $2.7 million, compared to an operating loss of approximately $3.0 million for the prior year period.

Flooring Manufacturing Segment

Revenue for the quarter ended December 31, 2024 was approximately $26.0 million, a decrease of approximately $3.2 million, or 11.1%, compared to prior year period revenue of approximately $29.2 million.

The decrease in revenue was primarily due to reduced consumer demand.

Gross margin was 21.2% for the quarter ended December 31, 2024, compared to 22.0% for the prior year period.

The decrease in gross margin was primarily due to changes in product mix.

Operating loss for the quarter ended December 31, 2024 was approximately $0.1 million, compared to operating income of approximately $0.9 million for the prior year period.

Revenue for the quarter ended March 31, 2025 was approximately $29.8 million, a decrease of approximately $4.4 million, or 12.8%, compared to prior year period revenue of approximately $34.2 million.

The decrease in revenue was primarily due to reduced consumer demand, as a result of the ongoing weakness in the housing market and uncertainty about the current economic outlook.

Gross margin was 27.5% for the quarter ended March 31, 2025, compared to 25.6% for the prior year period.

The increase in gross margin was primarily due to changes in product mix.

Operating income for the quarter ended March 31, 2025 was approximately $1.5 million, compared to approximately $2.0 million in the prior year period.

Steel Manufacturing Segment

Revenue for the quarter ended December 31, 2024 was approximately $32.4 million, a decrease of approximately $0.9 million or 2.8%, compared to prior year period revenue of approximately $33.4 million.

The decrease was primarily due to reduced customer demand, partially offset by revenue of $3.1 million at Central Steel Fabricators, LLC (“Central Steel”), which was acquired in May 2024.

Gross margin was 18.3% for the quarter ended December 31, 2024, compared to 15.8% for the prior year period.

The i ncrease in gross margin was primarily due to price increases, as well as the acquisition of Central Steel.

Operating income for the quarter ended December 31, 2024 was approximately $1.2 million, compared to operating income of approximately $1.0 million in the prior year period

Revenue for the quarter ended March 31, 2025 was approximately $31.3 million, a decrease of approximately $4.2 million, or 11.7%, compared to prior-year period revenue of approximately $35.5 million.

The decline was primarily driven by lower sales volumes at certain business units, partially offset by incremental revenue of $3.8 million at Central Steel Fabricators, LLC (“Central Steel”), which was acquired in May 2024.

Gross margin was 21.2% for the quarter ended March 31, 2025, compared to 14.3% for the prior-year period.

The increase in gross margin was primarily due to strategic price increases as well as the acquisition of Central Steel.

Operating income for the quarter ended March 31, 2025 was approximately $2.2 million, compared to approximately $0.9 million in the prior-year period.

Corporate and Other Segment

Revenue for the quarter ended December 31, 2024 was approximately $57,000, a decrease of approximately $32,000, or 36.0%, compared to prior year period revenue of approximately $89,000.

Operating loss for the quarters ended December 31, 2024 and 2023 were approximately $1.6 million.

Revenue for the quarter ended March 31, 2025 was approximately $6,000, a decrease of approximately $78,000, or 92.9%, compared to prior year period revenue of approximately $84,000.

Operating loss was approximately $1.3 million and $2.4 million for the quarters ended March 31, 2025 and 2024, respectively.

Results of Operations by Segment for the Six Months Ended March 31, 2025 and 2024

For the Six Months Ended March 31, 2025 For the Six Months Ended March 31, 2024

Retail-Entertainment Retail-Flooring Flooring

Manufacturing Steel

Manufacturing Corporate

& Other Total Retail-Entertainment Retail-Flooring Flooring

Manufacturing Steel

Manufacturing Corporate

& Other Total

Revenue $ 39,740 $ 59,146 $ 55,815 $ 63,757 $ 63 $ 218,521 $ 37,428 $ 66,351 $ 63,425 $ 68,841 $ 174 $ 236,219

Cost of Revenue 16,789 37,928 42,099 51,186 9 148,011 16,064 41,617 48,243 58,489 12 164,425

Gross Profit 22,951 21,218 13,716 12,571 54 70,510 21,364 24,734 15,182 10,352 162 71,794

General and Administrative Expense 16,735 25,792 3,963 8,959 2,943 58,392 16,074 25,491 3,471 8,204 4,263 57,503

Selling and Marketing Expense 311 340 8,352 250 11 9,264 317 2,178 8,788 293 12 11,588

Operating Income (Loss) $ 5,905 $ (4,914) $ 1,401 $ 3,362 $ (2,900) $ 2,854 $ 4,973 $ (2,935) $ 2,923 $ 1,855 $ (4,113) $ 2,703

Retail-Entertainment Segment

Retail-Entertainment segment revenue for the six months ended March 31, 2025 was approximately $39.7 million, an increase of approximately $2.3 million, or 6.2%, compared to prior year period revenue of approximately $37.4 million.

Revenue increased primarily due to increased consumer demand for new products.

The increase in the sales of new products with higher margins contributed to the increase in gross margin to 57.8% for the six months ended March 31, 2025, compared to 57.1% for the prior year period.

Operating income for the six months ended March 31, 2025 was approximately $5.9 million, compared to operating income of approximately $5.0 million for the prior year period.

Retail-Flooring Segment

The Retail-Flooring segment revenue for the six months ended March 31, 2025 was approximately $59.1 million, a decrease of approximately $7.2 million, or 10.9%, compared to the prior year period revenue of approximately $66.4 million.

The decrease was primarily attributable to the disposition of certain Johnson Floor & Home Carpet One stores in May 2024.

Gross margin for the six months ended March 31, 2025 was 35.9%, compared to 37.3% for the prior year period.

The decrease in gross margin was primarily driven by a change in product mix.

Operating loss for the six months ended March 31, 2025, was approximately $4.9 million, compared to an operating loss of approximately $2.9 million for the prior year period.

The increase in operating loss was primarily due to the decrease in revenues and gross margin, partially offset by targeted cost reduction initiatives implemented during the second quarter of fiscal 2025.

Flooring Manufacturing Segment

Revenue for the Flooring Manufacturing segment for the six months ended March 31, 2025 was approximately $55.8 million, a decrease of approximately $7.6 million, or 12.0%, compared to prior year period revenue of approximately $63.4 million.

The decrease in revenue was primarily due to reduced consumer demand as a result of the ongoing weakness in the housing market and uncertainty about the current economic outlook.

Gross margin was 24.6% for the six months ended March 31, 2025, compared to 23.9% for the prior year period.

The increase in gross margin was primarily due to changes in product mix.

Operating income for the six months ended March 31, 2025 was approximately $1.4 million, compared to operating income of approximately $2.9 million for the prior year period.

Steel Manufacturing Segment

Revenue for the six months ended March 31, 2025 was approximately $63.8 million, a decrease of approximately $5.0 million or 7.4%, compared to prior year period revenue of approximately $68.8 million.

The decline was primarily driven by lower sales volumes at certain business units partially offset by incremental revenue of $6.9 million at Central Steel, which was acquired in May 2024.

Gross margin was 19.7% for the six months ended March 31, 2025, compared to 15.0% for the prior year period.

The increase in gross margin was primarily due to strategic price increases, as well as the acquisition of Central Steel.

Operating income for the six months ended March 31, 2025 was approximately $3.4 million, compared to operating income of approximately $1.9 million in the prior year period.

Corporate and Other Segment

Revenue for the six months ended March 31, 2025 was approximately $63,000, a decrease of approximately $111,000, or 63.8%, compared to prior year period revenue of approximately $174,000.

Operating loss was approximately $2.9 million and $4.1 million for the six months ended March 31, 2025 and 2024, respectively.

Adjusted EBITDA Reconciliation

The following table presents a reconciliation of net income to Adjusted EBITDA for the three months ended December 31, 2024 (in 000's):

For the Three Months Ended

December 31, 2024 December 31, 2023

The following table presents a reconciliation of net income to Adjusted EBITDA for the three and six months ended March 31, 2025 and 2024 (in 000's):

For the Three Months Ended For the Six Months Ended

March 31, 2025 March 31, 2024 March 31, 2025 March 31, 2024

Net income (loss) $ 15,866 $ (3,281) $ 16,358 $ (3,963)

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Income tax expense (benefit) 5,237 (1,217) 5,318 (1,441)

Debt refinancing costs — 183

Gain on extinguishment of debt — — (713) —

Gain on modification of seller note (22,784) — (22,784) —

Gain on settlement of earnout liability — — (2,840) —

Acquisition costs — 468 — 874

Debt acquisition costs — — — 183

Other non-recurring charges (256) 82 (159) 587

Adjusted EBITDA $ 6,446 $ 4,457 $ 12,191 $ 13,153

Adjusted EBITDA decreased by approximately $3.0 million, or 33.9%, for the three months ended December 31, 2024, as compared to the prior year period.

The decrease was primarily due to an overall decrease in operating income, as discussed above.

Adjusted EBITDA for the quarter ended March 31, 2025 was approximately $6.4 million, an increase of approximately $2.0 million, or 44.6%, compared to the prior year period.

The increase is primarily due to decreases in operating expenses targeted cost reduction initiatives.

Adjusted EBITDA for the six months ended March 31, 2025 was approximately $12.2 million, a decrease of approximately $1.0 million, or 7.3%, compared to the prior year period.

The decrease is primarily due to a decrease in gross profit.

Liquidity and Capital Resources

As of December 31, 2024, we had total cash on hand of approximately $7.4 million and approximately $23.7 million of available borrowing under our revolving credit facilities.

As of December 31, 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-K, 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 December 31, 2024, PMW’s long-term debt balances, in the amount of approximately $13.0 million, have been classified as current liabilities.

As of March 31, 2025, we had total cash on hand of approximately $6.9 million and approximately $19.7 million of available borrowing under our revolving credit facilities.

As we continue to pursue acquisitions and other strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities.

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and overall market conditions.

Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to do the following for the next 12 months:

Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities, and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to do the following:

fund our operations;

pay our scheduled loan payments;

repurchase shares under our share buyback program;

and, pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors.

ability to repurchase shares under our share buyback program;

and, pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors, for at least the next 12 months.

Working Capital

We had working capital of approximately $51.0 million as of December 31, 2024, as compared to working capital of approximately $52.3 million as of September 30, 2024;

We had working capital of approximately $49.1 million as of March 31, 2025, as compared to working capital of approximately $52.3 million as of September 30, 2024;

a decrease of approximately $3.2 million.

The decrease is primarily due to decreases in accounts receivable prepaid and other expenses, and inventories, and an increase in the current portion of related party notes payable, income taxes payable, and the current portion of lease obligations of approximately $14.5

million in aggregate, partially offset by an increase in cash, and decreases in accounts payable, accrued liabilities the current portion of long-term debt, and the current portion of seller notes of approximately $13.2 million in the aggregate.

The decrease is primarily due to increases in accrued liabilities, the current portion of long-term debt, and the current portion of operating lease obligations, and a decrease in income taxes receivable, partially offset by decreases in the current portion of notes payable to related parties and accounts payable, and an increase in accounts receivable.

Cash Flows from Operating Activities

The Company’s cash, as of December 31, 2024, was approximately $7.4 million compared to approximately $4.6 million as of September 30, 2024, an increase of approximately $2.8 million.

Net cash provided by operations was approximately $9.4 million for the three months ended December 31, 2024, as compared to net cash provided by operations of approximately $7.9 million for the three months ended December 31, 2023.

The increase was primarily due to increases in net income, accounts receivable, inventories, accounts payable of approximately $13.6 million in aggregate, partially offset by decreases in adjustments to net income, accrued liabilities, and income taxes receivable of approximately $12.1 million in aggregate.

Our primary sources of cash inflows are from customer receipts from sales on account and factored accounts receivable proceeds.

The Company’s cash, as of March 31, 2025, was approximately $6.9 million compared to approximately $4.6 million as of September 30, 2024, an increase of approximately $2.3 million.

Net cash provided by operations was approximately $9.6 million and $2.1 million for the six months ended March 31, 2025 and 2024, respectively.

The increase was primarily due to collections of accounts receivable and reduction in inventory, partially offset by decreases in income taxes payable.

Our primary sources of cash inflows are from customer receipts from sales on account, factored accounts receivable proceeds, receipts for securities sales commissions, and net remittances from directory services customers processed in the form of ACH billings.

Our most significant cash outflows include payments for raw materials and general operating expenses, including payroll costs and general and administrative expenses that typically occur within close proximity of expense recognition.

Cash Flows from Investing Activities

Our cash flows used in investing activities of approximately $1.8 million for the three months ended December 31, 2024 consisted of the purchases of property and equipment.

Our cash flows used in investing activities of approximately $3.2 million for the three months ended December 31, 2023 consisted of the acquisitions of CRO by Flooring Liquidators, and Johnson by CRO, and purchases of property and equipment.

Our cash flows used in investing activities of approximately $4.3 million for the six months ended March 31, 2025 consisted of purchases of property and equipment.

Our cash flows used in investing activities of approximately $4.9 million for the six months ended March 31, 2024 consisted of the acquisitions of CRO by Flooring Liquidators, and Johnson by CRO, and purchases of property and equipment.

Cash Flows from Financing Activities

Our cash flows used in financing activities of approximately $4.8 million during the three months ended December 31, 2024 consisted of net borrowings under revolver loans of approximately $3.1 million, cash paid for the settlement of seller notes of $1.9 million, payments on notes payable of approximately $1.8 million, payments for finance leases of approximately $1.0 million, payments on related party notes payable of approximately $0.3 million, and purchases of treasury stock of approximately $0.2 million, partially offset by proceeds from the issuance of related party notes payable of approximately $1.9 million, and net borrowings under related party revolver loans of approximately $1.6 million.

Our cash flows used in financing activities of approximately $3.4 million during the three months ended December 31, 2023 consisted of payments on notes payable of approximately $1.8 million, purchases of treasury stock and payments for finance leases of approximately $0.9 million, and net payments under revolver loans of approximately $0.8 million.

Our cash flows used in financing activities of approximately $3.0 million during the six months ended March 31, 2025 consisted of payments on notes payable of approximately $3.4, payments for finance leases of approximately $2.0 million, cash paid for the settlement of seller notes of approximately $1.9 million, net borrowings under revolver loans of approximately $1.3 million, payments of related party notes payable of $0.6 million, and purchases of treasury stock of approximately $0.4 million, partially offset by net borrowings under related party revolver loans of approximately $4.3 million, proceeds from the issuance related party notes payable of approximately $1.9 million, and proceeds from the issuance of notes payable of approximately $0.5 million.

Our cash flows used in financing activities of approximately $3.0 million during the six months ended March 31, 2024 consisted of net borrowings under revolver loans of approximately $7.7 million, payments on notes payable of approximately $3.4 million, proceeds from related parties of $1.0 million, purchases of treasury stock and payments for finance leases of approximately $0.4 million, and payments of related party notes payable of $0.6 million.

Currently, we are not issuing common shares for liquidity purposes.

8 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis