LIVE VENTURES Inc: Form 10-Q for the period ended Mar 31, 2026

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, 2026, 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, 2025 (the “2025 Form 10-K”).

Note about Forward-Looking Statements

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

Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements 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.

Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2025 Form 10-K under Item 1A “Risk Factors” and Part II, Item 1A. "Risk Factors" below, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may generally affect our business, results of operations, and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements except as required by federal securities laws. Any information contained on our website www.liveventures.com (http://www.liveventures.com) or any other websites referenced in this Quarterly Report are not incorporated into and should not be deemed a part of this Quarterly Report.

Our Company

Live Ventures Incorporated is a holding company of diversified businesses, which, together with our subsidiaries, we refer to as the “Company”, “Live Ventures”, “we”, “us” or “our”. We acquire and operate companies in various industries that have historically demonstrated a strong history of earnings power. We currently have five segments to our business: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other.

Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies. We work closely with consultants who help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses.

Our principal offices are located at 8548 Rozita Lee Ave., Suite 305, Las Vegas, Nevada 89113, our telephone number is (702) 997-5968, and our corporate website (which does not form part of this Quarterly Report on Form 10-Q) is located at www.liveventures.com (http://www.liveventures.com). Our common stock trades on the Nasdaq Capital Market under the symbol “LIVE”.

Retail-Entertainment Segment

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 Alabama, Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, Montana, Nebraska, New Mexico, Oklahoma, Tennessee, Texas, and Utah.

Retail-Flooring Segment

Our Retail-Flooring Segment is composed of Flooring Liquidators, Inc. (“Flooring Liquidators”).

Flooring Liquidators is a leading retailer and installer of flooring, carpeting, and countertops to consumers, builders, and contractors in California and Nevada, operating 28 warehouse-format stores and a design center. Over the years, the company has established a strong reputation for innovation, efficiency, and service in the home renovation and improvement market. Flooring Liquidators serves retail and builder customers through two businesses: retail customers through its Flooring Liquidators retail stores, and builder and contractor customers through Elite Builder Services, Inc.

Flooring Manufacturing Segment

Our Flooring Manufacturing segment is comprised of Marquis Industries, Inc. (“Marquis”).

Marquis is a leading carpet manufacturer and distributor of carpet and hard-surface flooring products. Over the last decade, Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market’s fastest-growing fiber category. Marquis focuses on the residential, niche commercial, and hospitality end-markets and serves thousands of customers.

Since commencing operations in 1995, Marquis has built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies that differentiate its brands in the flooring marketplace. Marquis’s state-of-the-art operations enable high quality products, unique customization, and short lead-times. Furthermore, the Company has recently invested in additional capacity to grow several attractive lines of business, including printed carpet and yarn extrusion.

Steel Manufacturing Segment

Our Steel Manufacturing segment is comprised of Precision Metal Works, Inc. (“PMW”), Precision Industries, Inc. (“Precision Marshall”), and its wholly-owned subsidiaries The Kinetic Co., Inc. (“Kinetic”), and Central Steel Fabricators, LLC. (“Central Steel”).

Precision Marshall is the North American leader in providing and manufacturing, pre-finished de-carb free tool and die steel. For over 75 years, Precision Marshall has served steel distributors through quick and accurate service. Precision Marshall has led the industry with exemplary availability and value-added processing that saves distributors time and processing costs.

Founded in 1948, Precision Marshall “The Deluxe Company” has built a reputation of high integrity, speed of service and doing things the “Deluxe Way”. The term Deluxe refers to all aspects of the product and customer service to be head and shoulders above the rest. From order entry to packaging and delivery, Precision Marshall makes it easy to do business and backs all products and service with a guarantee.

Precision Marshall provides four key products to over 500 steel distributors in four product categories: Deluxe Alloy Plate, Deluxe Tool Steel Plate, Precision Ground Flat Stock, and Drill Rod. With over 5,000 distinct size grade combinations in stock every day, Precision Marshall arms tool steel distributors with deep inventory availability and same day shipment to their place of business or often ships direct to their customer saving time and handling.

On June 28, 2022, Precision Marshall acquired Kinetic. Kinetic is a highly recognizable and regarded brand name in the production of industrial knives and hardened wear products for the tissue, metals, and wood industries and is known as a one-stop shop for in-house grinding, machining, and heat-treating. Kinetic is headquartered in Greendale, Wisconsin. Kinetic manufactures more than 90 types of knives and numerous associated parts with modifications and customizations available to each. Kinetic employs approximately 100 non-union employees.

On July 20, 2023, Live acquired PMW. Founded 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.

On May 17, 2024, Precision Marshall acquired Central Steel. Founded in 1969 in Chicago, Illinois, Central Steel is a manufacturer of specialized fabricated metal products. Central Steel offers over 2,300 unique products to more than 500 customers. Its extensive product line, primarily for data centers, includes cable racks, auxiliary framing, hardware, insulation products, and network bays.

Corporate and Other Segment

Our Corporate and Other segment consists of certain corporate general and administrative costs, and operations of certain legacy products and service offerings for which we are no longer accepting new customers.

Intercompany Eliminations

Intercompany eliminations include the elimination of intercompany sales, cost of goods sold, profit in inventory, and intercompany accounts payable and receivable in consolidation. Segment results are presented before these eliminations.

Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information available prior to the issuance of our financial statements. Our actual realized results may differ materially from management’s initial estimates as reported. Our critical and significant accounting policies include Trade Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, and Income Taxes. For a summary of our significant accounting policies and the means by which we develop estimates thereon, see Part II, Item 8 – Financial Statement and Supplementary Data - Notes to Consolidated Financial Statements Note 2 – Summary of Significant Accounting Policies in our 2025 Form 10-K.

Adjusted EBITDA

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. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business’ ability to fund acquisitions and other capital expenditures, and to service its debt. Additionally, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. 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 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 GAAP. 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, 2026 and 2025

The following table sets forth certain statement of income items and as a percentage of revenue, for the three months ended March 31, 2026 and 2025 (in $000’s):

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

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

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):

Revenue

Revenue decreased approximately $4.1 million, or 3.8%, to $102.9 million for the quarter ended March 31, 2026, compared to $107.0 million in the prior-year period. The decrease primarily reflects a decline of approximately $7.2 million in the Retail-Flooring segment, partially offset by an increase of approximately $2.7 million in the Retail-Entertainment segment.

Gross Profit

Gross profit decreased approximately $0.6 million, or 1.6%, to $34.6 million for the quarter ended March 31, 2026, compared to $35.1 million in the prior-year period, driven primarily by lower revenues in the Retail-Flooring segment. Gross margin increased 80 basis points to 33.6%, compared to 32.8% in the prior-year period, reflecting improved margins in the Steel Manufacturing, Flooring Manufacturing, and Retail - Flooring segments as well as a more favorable revenue mix, as the higher-margin Retail-Entertainment segment represented a larger share of consolidated revenue.

General and Administrative Expense

General and Administrative expenses decreased by 2.3% to approximately $27.7 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease was driven primarily by targeted cost‑reduction initiatives in our Retail‑Flooring and Flooring Manufacturing segments, including lower compensation expense and reduced professional fees, partially offset by increased compensation and occupancy costs in our Retail-Entertainment segment.

Sales and Marketing Expense

Sales and marketing expense increased 3.4% to approximately $4.9 million for the three months ended March 31, 2026, compared with the three months ended March 31, 2025, primarily reflecting higher sales and marketing activity in the Retail Flooring segment.

Impairment of Goodwill

During the three months ended March 31, 2026, PMW recognized a $4.0 million goodwill impairment charge due to sustained operating losses and revenue and gross margin performance below internal projections (see Note 7). No goodwill impairment charges were recognized during the three months ended March 31, 2025.

Interest Expense, net

Interest expense, net, was approximately $3.9 million for the three months ended March 31, 2026, and flat as compared to the three months ended March 31, 2025 due to lower average debt balances.

Results of Operations Six Months Ended March 31, 2026 and 2025

The following table sets forth certain statement of income items and as a percentage of revenue, for the six months ended March 31, 2026 and 2025 (in $000’s):

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

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

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):

Revenue

Revenue decreased approximately $7.1 million, or 3.2%, to $211.4 million for the six months ended March 31, 2026, compared to revenue of $218.5 million in the prior-year period. Net of intercompany sales eliminations, the decrease primarily reflects a decline of approximately $12.2 million in the Retail-Flooring, Flooring Manufacturing, and Steel Manufacturing segments, partially offset by an increase of approximately $5.1 million in the Retail-Entertainment segment.

Gross Profit

Gross profit decreased by approximately $0.6 million, or 0.8%, to approximately $69.9 million for the six months ended March 31, 2026, compared to $70.5 million in the prior-year period, primarily due to lower revenue in the Retail-Flooring segment. Gross margin increased 80 basis points to 33.1%, compared to 32.3% in the prior-year period, reflecting improved operating efficiencies in the Flooring Manufacturing and Steel Manufacturing segments, as well as a more favorable revenue mix, as the higher-margin Retail-Entertainment segment represented a larger share of consolidated revenue.

General and Administrative Expense

General and Administrative expenses decreased by 4.9% to approximately $55.5 million for the six months ended March 31, 2026, as compared to the prior-year period. The decrease was driven primarily by targeted cost‑reduction initiatives in our Retail‑Flooring, Flooring Manufacturing, and Corporate and Other segments, including lower compensation expense and reduced professional fees, partially offset by increased compensation and occupancy costs in our Retail-Entertainment segment.

Sales and Marketing Expense

Sales and marketing expense decreased by 3.3% to approximately $9.0 million for the six months ended March 31, 2026, as compared to the prior-year period, primarily due to reduced sales and marketing activities in our Flooring Manufacturing segment.

Impairment of Goodwill

During the six months ended March 31, 2026, PMW recognized a $4.0 million goodwill impairment charge due to sustained operating losses and revenue and gross margin performance below internal projections (see Note 7). No goodwill impairment charges were recognized during the six months ended March 31, 2025.

Interest Expense, net

Interest expense, net, decreased by approximately $0.6 million for the six months ended March 31, 2026 as compared to the six months ended March 31, 2025 due to lower average debt balances.

Results of Operations by Segment for the Three Months Ended March 31, 2026 and 2025

Retail-Entertainment Segment

Retail-Entertainment segment revenue for the quarter ended March 31, 2026 was $21.2 million, an increase of approximately $2.7 million, or 14.8%, compared to $18.5 million in the prior-year period. The revenue growth was driven by strong consumer demand across all product lines. Gross margin for the quarter decreased to 57.9%, from 59.1% in the prior-year period, reflecting a shift in the sales mix toward new products, which typically have lower margins. Operating income for the quarter ended March 31, 2026 was $3.3 million compared to y $2.5 million in the prior-year period. Strong revenue growth and disciplined management of general and administrative expenses drove the improvement in operating results.

Retail-Flooring Segment

Retail-Flooring segment revenue for the quarter ended March 31, 2026 was $20.2 million, a decrease of approximately $7.2 million, or 26.2%, compared to $27.4 million in the prior-year period. The decline was primarily driven by lower retail and contractor sales due to the continued headwinds in the new-home construction and home-refurbishment markets. Gross margin for the quarter was 34.9%, compared to 34.4% in the prior-year period. The increase was primarily due to sales mix. Operating loss for the quarter ended March 31, 2026 was $4.6 million, compared to an operating loss of $2.7 million in the prior-year period. The increase in operating loss was driven mainly by lower revenue and gross profit, partially offset by lower general and administrative expenses resulting from cost-reduction initiatives implemented during fiscal year 2025.

Flooring Manufacturing Segment

Flooring Manufacturing segment revenue for the quarter ended March 31, 2026 was $30.3 million, a decrease of approximately $1.0 million, or 3.2%, compared to $31.3 million in the prior-year period. The decline was primarily attributable to reduced demand in the new-home construction and home-refurbishment markets. Net of intercompany eliminations, revenue decreased approximately $0.6 million compared to the prior-year period. Gross margin for the quarter increased to 26.9%, compared to 26.5% in the prior-year period. The increase in gross margin was primarily due to improved manufacturing efficiency. Operating income for the quarter ended March 31, 2026 was $2.0 million, compared to $1.6 million for the prior-year period. The increase in operating income was primarily due to improved gross margins and lower operating expenses resulting from cost-reduction initiatives.

Steel Manufacturing Segment

Steel Manufacturing segment revenue for the quarter ended March 31, 2026 was $32.5 million, an increase of approximately $1.1 million, or 3.4%, compared to $31.5 million in the prior-year period. The increase in revenue was primarily driven by higher sales volumes in the fabricated, hardened wear, and tool and die businesses, partially offset by lower revenue in the metal forming, assembly, and finishing solutions business. Net of intercompany eliminations, revenue increased approximately $0.9 million compared to the prior-year period. Gross margin was 22.1% for the quarter, compared to 21.0% for the prior-year period. The increase in gross margin was primarily due to a more favorable sales mix. Operating loss was $1.7 million for the quarter ended March 31, 2026 compared to operating income of $2.2 million in the prior-year period, representing a $3.9 million year-over-year decrease. The decrease was primarily driven by a non-cash goodwill impairment charge of a $4.0 million related to PMW.

Corporate and Other Segment

Corporate and Other segment operating loss was $0.9 million and $1.3 million for the quarters ended March 31, 2026, and 2025, respectively. The reduction in operating loss was primarily attributable to lower corporate expenses, including compensation and professional fees.

Results of Operations by Segment for the Six Months Ended March 31, 2026 and 2025

Retail-Entertainment Segment

Retail-Entertainment segment revenue for the six months ended March 31, 2026 was $44.8 million, an increase of approximately $5.1 million, or 12.8%, compared to $39.7 million in the prior-year period. The revenue growth was driven by strong consumer demand across all product lines. Gross margin for the six months ended March 31, 2026 was 57.7%, essentially flat compared to 57.8% in the prior-year period. Operating income for the six months ended March 31, 2026 was $8.0 million compared to $5.9 million in the prior-year period. Strong revenue growth and disciplined management of general and administrative expenses drove continued improvement in operating results.

Retail-Flooring Segment

Retail Flooring segment revenue for the six months ended March 31, 2026 was $45.5 million, a decrease of approximately $13.6 million, or 23.0%, compared to $59.1 million in the prior-year period. The decline was primarily driven by lower retail and contractor sales due to the continued headwinds in the new-home construction and home-refurbishment markets. Gross margin for the six months ended March 31, 2026 was 33.1%, compared to 35.9% in the prior-year period. The decrease in gross margin was primarily due to a less favorable overall product mix. Operating loss for the six months ended March 31, 2026 was $8.3 million, compared to an operating loss of $4.9 million in the prior-year period. The increase in operating loss was driven mainly by lower revenue and gross margin, partially offset by reduced operating expenses resulting from cost-reduction initiatives implemented during fiscal year 2025.

Flooring Manufacturing Segment

Flooring Manufacturing segment revenue for the six months ended March 31, 2026 was $59.1 million, a decrease of approximately $1.3 million, or 2.2%, compared to $60.5 million in the prior-year period. The decline was primarily attributable to reduced demand in the new-home construction and home-refurbishment markets. Net of intercompany eliminations, revenue increased approximately $1.3 million compared to the prior‑year period. Gross margin for the six months ended March 31, 2026 increased to 26.0% from 24.1% in the prior‑year period, primarily due to improved manufacturing efficiency. Operating income for the six months ended March 31, 2026, was $4.3 million, an increase of 92.0%, compared to $2.2 million for the prior-year period. The improvement in operating income reflects the combined impact of higher gross margins and the ongoing benefits of cost‑reduction actions implemented across the segment.

Steel Manufacturing Segment

Steel Manufacturing segment revenue for the six months ended March 31, 2026 was $64.4 million, a decrease of approximately $0.4 million, or 0.6%, compared to $64.8 million in the prior-year period. The decline in revenue was primarily attributable to lower sales in the metal forming, assembly, and finishing solutions business, partially offset by increased sales volumes in the fabricated, hardened wear, and tool and die businesses. Net of intercompany sales eliminations, revenue increased approximately $0.2 million compared to the prior-year period. Gross margin increased to 21.0% for the six months ended March 31, 2026, compared to 19.4% for the prior-year period. The increase in gross margin was primarily due to a more favorable sales mix. Operating loss for the six months ended March 31, 2026 was $50,000, compared to operating income of $3.4 million in the prior-year period, a decrease of approximately $3.3 million driven primarily by a non-cash goodwill impairment charge of approximately $4.0 million related to PMW.

Corporate and Other Segment

Corporate and Other segment operating loss was $2.1 million and $2.9 million for the six months ended March 31, 2026, and 2025, respectively. The reduction in operating loss was primarily attributable to lower corporate expenses, including compensation and professional fees.

Adjusted EBITDA Reconciliation

The following table presents a reconciliation of net income to Adjusted EBITDA for the three and six months ended March 31, 2026 and 2025 (in 000's):

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Adjusted EBITDA for the quarter ended March 31, 2026 was approximately $5.9 million, a decrease of approximately $0.6 million, or 8.8%, compared to the prior-year period. The decrease is primarily due to a decrease in gross profit, as discussed above.

Adjusted EBITDA for the six months ended March 31, 2026 was approximately $13.7 million, an increase of approximately $1.5 million, or 12.2%, compared to the prior-year period. The increase is primarily due to a decrease in operating expenses.

Liquidity and Capital Resources

As of March 31, 2026, we had total cash on hand of approximately $15.2 million and approximately $24.6 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. The amount, nature, and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.

During the three months ended March 31, 2026, the Company determined that PMW was in default of the Fixed Charge Coverage Ratio (“FCCR”) covenant under the credit agreement governing its Revolving Credit Facility. As a result of this default, the lender has the right to accelerate the obligations and declare all amounts outstanding under the Revolving Credit Facility and Fifth Third M&E Loan immediately due and payable. On March 24, 2026, PMW entered into a Forbearance Agreement and Fifth Amendment to its Revolving Credit Facility with Fifth Third Bank. Under the agreement, Fifth Third Bank agreed to abstain from exercising its rights and remedies with respect to certain existing events of default through June 15, 2026. The forbearance is subject to customary conditions, including, among other things, the requirement that PMW (i) deliver an executed commitment letter for a replacement credit facility sufficient to refinance the outstanding obligations in full by March 31, 2026, and PMW has executed and delivered the required commitment letter, and (ii) provide evidence of a fully committed refinancing by May 31, 2026, with closing to occur no later than June 15, 2026. As of March 31, 2026, all of PMW’s outstanding long‑term debt obligations, totaling approximately $10.5 million, have been reclassified to current liabilities. As of March 31, 2026 and September 30, 2025, the outstanding balance on the Fifth Third Revolver was approximately $7.3 million and $7.2 million, respectively, and the balance on the Fifth Third M&E Loan was approximately $3.2 million and $3.6 million, respectively.

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; 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 $74.4 million as of March 31, 2026, as compared to working capital of approximately $62.1 million as of September 30, 2025; an increase of approximately $12.3 million. The increase was primarily driven by an aggregate decrease in current liabilities of approximately $6.0 million, reflecting reductions in the current portion of long‑term debt and income taxes payable. These changes were partially offset by an aggregate increase in current assets of approximately $6.3 million, driven by increases in cash and inventories.

Cash Flows from Operating Activities

The Company’s cash, as of March 31, 2026, was approximately $15.2 million compared to approximately $8.8 million as of September 30, 2025, an increase of approximately $6.4 million. Net cash provided by operations was approximately $7.1 million and $9.6 million for the six months ended March 31, 2026 and 2025, respectively. The decrease was primarily driven by an increase in inventory levels to support operational demand, which represented a use of cash compared to the prior period. Operating cash flows were also unfavorably impacted by an increase in income taxes receivable resulting from the timing of tax payments relative to expense accruals. These uses of cash were partially offset by a favorable change in accrued liabilities, reflecting the timing of accrued obligations, as well as a normalization of vendor payment timing in accounts payable compared to the prior period.

Our primary sources of cash inflows are from customer receipts from sales on account and factored accounts receivable proceeds. 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 $3.3 million for the six months ended March 31, 2026 consisted of 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 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 provided by financing activities of approximately $2.5 million during the six months ended March 31, 2026 consisted of proceeds from the issuance of notes payable of approximately $9.8 million and net borrowings under revolver loans, partially offset by payments on notes payable of approximately $8.3 million, payments for finance leases of approximately $2.1 million, payments for debt issuance costs of approximately $0.9 million, and payments on related party seller notes of approximately $140,000.

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 million, 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.

Currently, we are not issuing common shares for liquidity purposes. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically. Occasionally, as our Company history has demonstrated, we will issue stock and derivative instruments linked to stock for services or debt settlement.

Future Sources of Cash; New Products and Services

We may require additional debt financing or capital to finance new acquisitions, refinance existing indebtedness or other strategic investments in our business. Other sources of financing may include stock issuances and additional loans; or other forms of financing. Any financing obtained by us may further dilute or otherwise impair the ownership interest of our existing stockholders.

During the three months ended March 31, 2026, the Company determined that PMW was in default of the Fixed Charge Coverage Ratio (“FCCR”) covenant under the credit agreement governing its Revolving Credit Facility. As a result of this default, the lender has the right to accelerate the obligations and declare all amounts outstanding under the Revolving Credit Facility and Fifth Third M&E Loan immediately due and payable. On March 24, 2026, PMW entered into a Forbearance Agreement and Fifth Amendment to its Revolving Credit Facility with Fifth Third Bank. Under the agreement, Fifth Third Bank agreed to abstain from exercising its rights and remedies with respect to certain existing events of default through June 15, 2026. The forbearance is subject to customary conditions, including, among other things, the requirement that PMW (i) deliver an executed commitment letter for a replacement credit facility sufficient to refinance the outstanding obligations in full by March 31, 2026, and PMW has executed and delivered the required commitment letter, and (ii) provide evidence of a fully committed refinancing by May 31, 2026, with closing to occur no later than June 15, 2026. As of March 31, 2026, all of PMW’s outstanding long‑term debt obligations, totaling approximately $10.5 million, have been reclassified to current liabilities. As of March 31, 2026 and September 30, 2025, the outstanding balance on the Fifth Third Revolver was approximately $7.3 million and $7.2 million, respectively, and the balance on the Fifth Third M&E Loan was approximately $3.2 million and $3.6 million, respectively.

Evaluation of Disclosure Control and Procedures. We carried out an evaluation, under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, as of March 31, 2026, we concluded that the Company's disclosure, controls, and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial reporting will prevent or detect all errors and all fraud. A control system, regardless of how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following: judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes, controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Our management assessed the design and effectiveness of our internal control over financial reporting as of March 31, 2026. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission of 2013 regarding Internal Control – Integrated Framework. Based on our assessment using those criteria, as of March 31, 2026, our management concluded that our internal controls over financial reporting were effective.

There were no changes in our internal control over financial reporting that occurred during the six months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.