Live Ventures rporated(US:LIVE)2020-05-15 19:41PART I FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis, market risk, and internal controls assessment Financial Statements The unaudited condensed consolidated financial statements show asset growth and improved net income despite lower revenues for the period Condensed Consolidated Balance Sheets Total assets increased to $158.5 million due to acquisitions and new lease accounting, with a corresponding rise in liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 (Unaudited) | September 30, 2019 | | :--- | :--- | :--- | | Total Current Assets | $67,477 | $55,752 | | Total Assets | $158,505 | $122,453 | | Total Current Liabilities | $58,893 | $35,025 | | Total Liabilities | $121,890 | $88,324 | | Total Stockholders' Equity | $36,615 | $34,129 | Condensed Consolidated Statements of Income Net income significantly increased for both periods despite slightly lower revenues, driven by cost reductions and a lease settlement gain Income Statement Summary (in thousands, except per share) | Metric | Q2 2020 | Q2 2019 | 6 Months 2020 | 6 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $46,431 | $46,973 | $88,432 | $100,169 | | Gross Profit | $17,776 | $18,651 | $34,402 | $37,988 | | Operating Income | $3,068 | $2,046 | $6,555 | $4,137 | | Net Income | $2,285 | $473 | $2,832 | $2,004 | | Diluted EPS | $0.66 | $0.13 | $0.81 | $0.53 | Condensed Consolidated Statements of Cash Flows Operating cash flow slightly decreased, with significant cash used in investing and financing activities, leading to a net decrease in cash Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $6,571 | $6,986 | | Net Cash from Investing Activities | ($2,412) | $3,347 | | Net Cash from Financing Activities | ($5,344) | ($9,783) | | Net Change in Cash | ($1,185) | $550 | | Cash at End of Period | $1,496 | $3,292 | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, business segments, and significant events, including acquisitions, COVID-19 impact, and a subsidiary's bankruptcy - The company's business strategy, initiated in fiscal 2015, is to acquire profitable companies in various industries. It currently operates three segments: Manufacturing (Marquis), Retail (Vintage Stock, ApplianceSmart), and Online and Services23 - The COVID-19 pandemic led to the temporary closure of all Vintage Stock retail locations as of March 31, 2020, and rolling layoffs at Marquis, creating significant uncertainty for future revenues and cash flows25 - On November 1, 2019, the company's subsidiary Marquis acquired Lonesome Oak Trading Co., Inc. for $2.0 million, resulting in $631 thousand of goodwill7576 - On December 9, 2019, subsidiary ApplianceSmart, Inc. filed for Chapter 11 bankruptcy protection. The company continues to consolidate ApplianceSmart's financial results153168171 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, noting revenue decline offset by increased operating income from cost reductions, and assesses liquidity amidst COVID-19 uncertainty Results of Operations Net income significantly increased for both periods despite revenue declines, primarily due to reduced operating expenses and a lease settlement gain - For Q2 2020, a significant decrease in retail appliance revenue was offset by an increase in carpet and hard surface product revenue from the Lonesome Oak acquisition194 - Operating income for Q2 2020 increased by 50% to $3.1 million, primarily due to lower G&A and selling expenses from ApplianceSmart store closures and a $1.4 million net gain on lease settlement197198199201 - For the six months ended March 31, 2020, revenue decreased by 12% to $88.4 million, while operating income increased by 58% to $6.6 million, driven by cost reductions at ApplianceSmart206211 Segment Performance Retail and Online segment revenue declined but operating income improved, while Manufacturing segment revenue and income grew from an acquisition Segment Operating Income (Loss) for the Three Months Ended March 31 (in thousands) | Segment | 2020 | 2019 | | :--- | :--- | :--- | | Retail & Online | $237 | ($129) | | Manufacturing | $2,698 | $2,021 | | Services | $132 | $154 | | Total | $3,068 | $2,046 | - The Retail and Online segment's revenue decreased by 28% for the six-month period due to ApplianceSmart store closures, but operating income improved to $1.2 million from a loss of $0.4 million in the prior year224 - The Manufacturing segment's revenue increased by 10% for the six-month period, driven by the Lonesome Oak acquisition, leading to a higher operating income of $5.1 million225 Liquidity and Capital Resources The company maintained $1.5 million in cash and $21.2 million in available credit, securing additional financing post-quarter to enhance liquidity amidst COVID-19 Liquidity Position as of March 31, 2020 (in thousands) | Item | Amount | | :--- | :--- | | Cash on hand | $1,496 | | BofA Revolver Availability | $17,725 | | TCB Revolver Availability | $3,433 | - Subsequent to quarter-end, the Marquis subsidiary received a $4.8 million PPP loan under the CARES Act173229 - On April 9, 2020, the company secured a new $1.0 million unsecured revolving credit facility from Isaac Capital Group, LLC, a related party172230 Quantitative and Qualitative Disclosures about Market Risk The company reports no material exposure to market risks, including foreign currency exchange or commodity price fluctuations - The company reports no material exposure to market risks, including foreign currency or commodity price fluctuations245 Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to identified material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2020246 - Identified material weaknesses include: insufficient segregation of duties, lack of written documentation of internal control policies, and inadequate procedures for evaluating internal controls250252 PART II OTHER INFORMATION This section provides disclosures on legal proceedings, equity sales, and other miscellaneous information, including exhibits Legal Proceedings The company refers to previously filed reports for information regarding material pending legal proceedings - For details on legal proceedings, the company refers to previously filed reports254 Risk Factors As a smaller reporting company, the company is not required to provide risk factor disclosures in this report - The company is a smaller reporting company and is not required to provide risk factor disclosures in its Form 10-Q255 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 64,868 shares for $416,000 under its $10 million stock repurchase program, with $8.1 million remaining available Common Stock Repurchases (Q2 2020) | Period | Number of Shares Repurchased | Average Price Paid | | :--- | :--- | :--- | | January 2020 | 21,757 | $7.65 | | February 2020 | 16,956 | $6.26 | | March 2020 | 26,155 | $5.29 | | Total | 64,868 | - | Defaults upon Senior Securities The company reported no defaults upon senior securities - None257 Mine Safety Disclosures The company reported no mine safety disclosures - None258 Other Information The company reported no other information - None259 Exhibits This section lists the exhibits filed with or incorporated by reference into the Quarterly Report, including certifications Signatures This section contains the required signatures for the quarterly report