Related Party Transactions |
12 Months Ended |
|---|---|
Sep. 30, 2024 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
Note 16: Related Party Transactions
Transactions with Isaac Capital Group, LLC
As of December 6, 2024, Isaac Capital Group, LLC (“ICG”), together with Jon Isaac, the Company's President and CEO and the President and sole member of ICG, control approximately 49.3% of the outstanding voting power of the Company (assuming the exercise of all outstanding and exercisable warrants held by them).
ICG Term Loan
As of September 30, 2024, the Company was a party to a term loan with ICG in the amount of 2.0 million (the “ICG Loan”). The ICG Loan matures on May 1, 2025 and bears interest at a rate of 12.5% per annum. Interest is payable in arrears on the last day of each month. As of September 30, 2024 and 2023, the outstanding balance on this loan was 2.0 million (see Note 11).
ICG Revolving Promissory Note
As of September 30, 2024, the Company was a party to a revolving credit facility with ICG in the amount of $5.0 million (the “ICG Revolver”). The ICG Revolver matures on April 08, 2025 and bears interest at 12.0% per annum. As of September 30, 2024 and 2023, the outstanding balance on this note was $2.6 million and $1.0, respectively (see Note 11).
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 12.0%. Interest is payable in arrears on the last day of each calendar month. The note is fully guaranteed by the Company. As of September 30, 2024 and 2023, the outstanding balance on this loan was $5.0 million (see Note 11).
Transaction with Tony Isaac
Tony Isaac is a member of the Board and father of the Company's Chief Executive Officer, Jon Isaac.
Consulting Fee
In December 2023, subsequent to the fiscal year ended September 30, 2023, the Board approved the grant of a consulting fee to Tony Isaac in the amount of $100,000, for services rendered to the Company throughout 2023. This consulting fee is in addition to the compensation that he receives as a member of the Board.
Stock Options
On June 13, 2023, Tony Isaac exercised stock options for which he received 9,904 shares of the Company's common stock. On June 30, 2023, the Company repurchased Mr. Isaac's 9,904 shares of the Company's common stock for $25.85 per share, the closing market price on June 28, 2023, for approximately $256,000 (see Note 13).
Transactions with ALT5 Sigma Corporation, formerly JanOne Inc.
Tony Isaac, a member of the Company's board of directors, and father of the Company's CEO, Jon Isaac, is the President and a director of ALT5 Sigma Corporation (“ALT5”), formerly JanOne Inc. Richard Butler, a member of the Company's board of directors, is a director of ALT5.
Lease Agreement
Customer Connexx LLC, formerly a subsidiary of ALT5, previously rented approximately 9,900 square feet of office space from the Company at its Las Vegas office, which totals 16,500 square feet. ALT5 paid the Company $194,000 and $197,000 in rent and other reimbursed expenses for years ended September 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 ALT5 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.
On February 7, 2024, the Company converted outstanding receivables from ALT5 and amounts due under the Purchase Agreement with ARCA Recycling into a promissory note with ALT5. 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. Additionally, the Company has accrued a receivable for the balance due, which was also recorded as other income. In connection with the execution of the NSA, the Company recognized a gain of approximately $0.6 million in the second quarter. On April 29, 2024, the Company received the balance due.
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”). On February 29, 2024, the Company entered into a loan modification agreement of the Spriggs Loan I, under which the maturity date was extended to July 31, 2025 (see Note 11).
Spriggs Promissory Note II
On January 19, 2023, in connection with the acquisition of Flooring Liquidators (see Note 4), 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. 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 (see Note 11).
Transactions with Spyglass Estate Planning, LLC
Jon Isaac, the Company's President and Chief Executive Officer, is the sole member of Spyglass Estate Planning, LLC (“Spyglass”).
Building Leases
On July 1, 2022, in connection with its acquisition of Better Backers, Marquis entered into two building leases with Spyglass Estate Planning, LLC, a limited liability company whose sole member is Jon Isaac, the Company’s President and Chief Executive Officer. The building leases are for 20 years with two options to renew for an additional five years each (see Note 4 above). 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 rent amounts to be at market rates.
Transactions with Flooring Liquidators CEO
Stephen Kellogg is the Chief Executive Officer of Flooring Liquidators, Inc., a wholly owned subsidiary of the Company.
Building Leases
Flooring Liquidators leases four properties from K2L Property Management, and two 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, and The Stephen Kellogg Trust. Ms. Hendrick is Mr. Kellogg's spouse.
Sellers 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.
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