Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

Acquisitions

3 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisition of Midwest Grinding

On June 10, 2024, pursuant to an asset purchase agreement, Kinetic acquired certain assets and assumed certain liabilities of Midwest Grinding Corp., a Milwaukee grinding house dedicated to precision Blanchard and specialty surface grinding of small to extra-large capacity. Total consideration for the acquisition was $0.6 million. In connection with the acquisition, Kinetic also acquired the building being used in the business for $0.4 million. Total consideration for both the business and building acquisition was $1.0 million, paid in cash at close.

The fair value of the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 10, 2024, as calculated by management. The table below outlines the purchase price allocation of the purchase for Midwest Grinding to the acquired identifiable assets and liabilities assumed as of December 31, 2024 (in $000’s):


Total purchase price			$	1,000
Accounts payable			1
Total consideration			1,001
Accounts receivable			152
Other current assets			71
Property and equipment			738
Intangible Assets
Customer relationships	$	16
Trade names	15
Non-compete agreement	9
Intangible assets			40
Total assets acquired			1,001
Total goodwill			$	—

Acquisition of Central Steel

On May 15, 2024, Precision Marshall acquired Central Steel. Total consideration for the acquisition was approximately $13.9 million, comprised of $10.7 million paid at closing, a seller note of $1.1 million, a holdback, in the amount of $0.3 million, and contingent consideration of $2.0 million paid in the form of a five-year earn-out. The consideration paid at close was funded in part by borrowings under Precision Marshall's credit facility of approximately $3.3 million, and

proceeds from a sale and leaseback transaction, discussed below. The acquisition involved no issuance of stock of the Company.

Simultaneous to the acquisition, the Company entered into a sale and leaseback transaction with Legacy West Partners, LLC, an unrelated party, for one of Central Steel's properties located in Broadview, Illinois. The sales price for the real property subject to the sale and leaseback transaction was approximately $8.3 million, with total proceeds received by the Company of approximately $7.9 million, net of approximately $0.4 million in seller's fees.

The lease agreement includes a 20-year lease term with two five-year renewal options. The base rent under the lease agreement is $58,795 per month for the first year of the term and a 2.0% per annum escalator thereafter. The lease agreement is a “net lease,” such that Central Steel is also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the real property incurred by Central Steel. Due to the highly specialized nature of the leased property, the Company currently believes it is more likely than not that each of the two five-year options will be exercised. Consequently, because the aggregate term of the lease at its conclusion will represent approximately 75% of the economic life of the building, the Company concluded that the lease is a financing transaction and a failed sale and leaseback transaction, as defined under ASC 842. The proceeds, net of closing fees, from the failed sale and leaseback transaction were used to assist in funding the acquisition of Central Steel. No gain was recognized as a result of the sale.

The fair value of the purchase price components was approximately $13.9 million, as detailed below (in $000's):


Purchase price	$	11,758
Fair value of contingent consideration	2,000
Holdback	122
Net purchase price	$	13,880

Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $2.9 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed over the fair value of the identifiable assets acquired. The Company anticipates all of the goodwill arising from the acquisition to be fully deductible for tax purposes.

The table below outlines the purchase price allocation for the purchase of Central Steel to the acquired identifiable assets, liabilities assumed, and goodwill as of December 31, 2024 (in $000’s):


Total purchase price		$	13,880
Accounts payable		464
Accrued liabilities		969
Total liabilities assumed		1,433
Total purchase price plus liabilities assumed		15,313
Cash		184
Accounts receivable		2,418
Inventory		2,171
Property and equipment		5,034
Intangible assets
Trade names	400
Customer relationships	900
Non-compete	825
Subtotal intangible assets		2,125
Other assets		475
Total assets acquired		12,407
Total goodwill		$	2,906

Acquisition of Johnson

On November 30, 2023, CRO Affiliated, LLC ("CRO Affiliated"), a subsidiary of Live Ventures, acquired certain assets and assumed certain liabilities of Johnson Floor & Home (“Johnson”), a floor covering retailer and installer serving residential and commercial customers through four locations in the Tulsa, Oklahoma area, and one in Joplin, Missouri. Total consideration for the acquisition was $2.0 million, comprised of cash at close of $0.5 million, deferred consideration in the form of a seller note of $1.2 million, with additional consideration paid in the form of an earnout valued at approximately $0.3 million. The deferred consideration is payable in three $0.4 million installments due annually on the first three anniversary dates following the closing date. Each installment will accrue interest at 6.0% per annum until paid.

The fair value of the purchase price components outlined above was approximately $2.0 million, as detailed below (in $000's):


Cash	$	500
Deferred consideration	1,200
Earnout	301
Purchase price	$	2,001

The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of November 30, 2023, as calculated by management. The table below outlines the purchase price allocation of the purchase for Johnson to the acquired identifiable assets and liabilities assumed as of December 31, 2024:


Total purchase price			$	2,001
Accounts payable			1,017
Accrued liabilities			1,141
Total liabilities assumed			2,158
Total consideration			4,159
Accounts receivable			1,252
Inventory			1,127
Property, plant and equipment			157
Intangible assets
Customer relationships	$	1,301
Non-compete agreement	306
Subtotal intangible assets			1,607
Other assets			16
Total assets acquired			4,159
Total goodwill			$	—

On May 24, 2024, CRO Affiliated entered into an asset purchase agreement with the original seller of Johnson under which the original seller agreed to purchase certain assets and assume certain obligations acquired by CRO Affiliated under the

original asset purchase agreement. Consequently, CRO Affiliated recorded a loss on disposition of Johnson’s assets and liabilities of approximately $0.3 million, as detailed in the table below (in $000's):


Accounts payable and accrued liabilities		$	475
Earnout		307
Seller note		1,230
Lease liabilities		2,703
Total deconsolidation of liabilities		4,715
Inventory		613
Property and equipment		206
ROU assets		2,692
Intangible assets
Customer relationships	1,224
Non-compete agreement	281
Subtotal intangible assets		1,505
Total deconsolidation of assets		5,016
Total loss on disposition		$	(301)

Acquisition of CRO

On October 13, 2023, CRO Affiliated acquired certain assets and assumed certain liabilities of Carpet Remnant Outlet, Inc. (“CRO”), a floor covering retailer and installer serving residential and commercial customers throughout Northwest Arkansas. Total consideration for the acquisition was approximately $1.4 million and was comprised of cash at close of approximately $1.0 million, an indemnification holdback amount of $0.3 million, and additional consideration valued at $89,000.

The fair value of the purchase price components was $1.4 million, as detailed below (in $000's):


Cash	$	1,034
Additional consideration	89
Holdback	300
Purchase price	$	1,423

Under the preliminary purchase price allocation, the Company recognized goodwill of $89,000, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of October 13, 2023, as calculated by an independent third-party firm. The value of the additional

consideration was calculated by management. The Company anticipates the $89,000 of goodwill arising from the acquisition to be fully deductible for tax purposes.

The table below outlines the purchase price allocation of the purchase for CRO to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):


Total purchase price		$	1,423
Accounts payable		770
Accrued liabilities		1,298
Total liabilities assumed		2,068
Total consideration		3,491
Accounts receivable		259
Inventory		1,406
Property and equipment		261
Intangible assets
Non-compete agreement	1,190
Subtotal intangible assets		1,190
Other assets		286
Total assets acquired		3,402
Total goodwill		$	89