Annual report [Section 13 and 15(d), not S-K Item 405]

Related Party Seller Notes

v3.25.3
Related Party Seller Notes
 12 Months Ended
Sep. 30, 2025
Debt Disclosure [Abstract]  
Related Party Seller Notes
Note 9: Long-Term Debt
Long-term debt as of September 30, 2025 and 2024 consisted of the following (in $000’s):
September 30,
2025		 September 30,
2024
Revolver loans $ 48,713  $ 60,199 
Equipment loans 9,617  13,346 
Term loans 8,749  10,465 
Other long-term debt
 11,509  15,227 
Total long-term debt
 78,588  99,237 
Less: unamortized debt issuance costs (426) (427)
Net amount 78,162  98,810 
Less: current portion (36,282) (43,816)
Total long-term debt, net of current portion
 $ 41,880  $ 54,994 
Future maturities of long-term debt at September 30, 2025 are as follows excluding related party debt (in $000’s):
Years ending September 30,
2026 $ 36,282 
2027 30,147 
2028 1,179 
2029 1,214 
2030 1,061 
Thereafter 8,279 
Total $ 78,162 
Bank of America Revolver Loan
On July 25, 2025, Marquis entered into an amended $28.0 million revolving credit agreement (“BofA Revolver”) with Bank of America Corporation (“BofA”). The BofA Revolver is an asset-based facility that is secured by substantially all of
Marquis’ assets, and matures on July 31, 2026. Availability under the BofA Revolver is subject to a monthly borrowing base calculation. Marquis’ ability to borrow under the BofA Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with BofA.
The BofA Revolver bears interest at a variable rate based on a base rate plus a margin. The current base rate is the greatest of (i) Bank of America prime rate, (ii) the current federal funds rate plus 0.50%, or (iii) 30-day Term SOFR plus 0.11448% credit spread adjustment plus the margin, which varies, depending on the fixed coverage ratio table below (Effective December 31, 2021, SOFR replaced the USD LIBOR for most financial benchmarking). Levels I – V determine the interest rate to be charged Marquis and is based on the fixed charge coverage ratio achieved. The BofA Revolver places certain restrictions and covenants on Marquis, including a limitation on asset sales, additional liens, investment, loans, guarantees, acquisitions, incurrence of additional indebtedness for Marquis to maintain a fixed charge coverage ratio of at least 1.05 to 1, tested as of the last day of each month for the twelve consecutive months ending on such day.
The advance rate in certain circumstances for inventory is 45.4% for raw materials, 0% for work-in-process, and 57.1% for finished goods subject to eligibility limited to 65.0%, and advance limit of $22.0 million or 65.0% of the value of eligible inventory. Letters of credit reduce the amount available to borrow under the BofA Revolver by an amount equal to the face value of the letters of credit.
Level
Fixed Charge Coverage Ratio
 Term SOFR Revolver Loan Base Rate
Revolver Loan
I
<1.20 to 1.00
2.50%
1.50%
II
>1.20 to 1.00 but <1.50 to 1.00
2.25%
1.25%
III
>1.50 to 1.00 but <1.75 to 1.00
2.00%
1.00%
IV
>1.75 to 1.00
1.75%
0.75%
The following tables summarize the BofA Revolver for the years ended and as of September 30, 2025 and 2024, respectively (in $000’s):
During the year ended September 30,
2025 2024
Cumulative borrowing during the period $ 119,175  $ 140,810 
Cumulative repayment during the period 124,980  129,298 
Maximum borrowed during the period 22,869  18,776 
Weighted average interest for the period 6.87 % 7.87 %
As of September 30,
2025 2024
Total availability $ 11,052  $ 7,298 
Total outstanding 11,809  17,614 
Loan with Fifth Third Bank (Precision Marshall)
On January 20, 2022, Precision Marshall refinanced its prior Encina Business Credit loans with Fifth Third Bank, and the balance outstanding was repaid. The refinanced credit facility, totaling $29 million, is comprised of $23.0 million in revolving credit, $3.5 million in M&E lending, and $2.5 million for capital Capex lending. Advances under the new credit facility will bear interest at the Prime Rate plus 0 basis points for lending under the revolving facility, and the Prime Rate plus 25 basis points for M&E and Capex lending. The refinancing of the Borrower’s existing credit facility reduces interest costs and improves the availability and liquidity of funds by approximately $3.0 million at the close. The facility terminates on January 20, 2027, unless terminated earlier in accordance with its terms.
In connection with the acquisitions of Kinetic and Central Steel (see Note 3), the existing revolving facility was amended to add Kinetic and Central Steel as borrowers. In addition, two additional term loans were executed to fund the purchase of Kinetic. Approximately $6.0 million was drawn from the revolving facility, and the term loans were opened in the amounts of $4.0 million and $1.0 million, respectively. The $4.0 million term loan (“Kinetic Term Loan #1”), which matures on January 20, 2027, carries the same terms for M&E term lending as stated above. The $1.0 million term loan (“Kinetic Term
Loan #2”), which matured on June 28, 2025, was a “Special Advance Term Loan”, and accrued interest at the Prime Rate plus 175 basis points.
As of September 30, 2025 and 2024, the outstanding balance on the revolving loan was approximately $23.0 million and $21.3 million, respectively, and the outstanding balance on the original M&E lending, which is documented as a term note, was approximately $1.3 million and $1.8 million, respectively. As of September 30, 2025 and 2024, the outstanding balance on Kinetic Term Loan #1 was $2.1 million and $2.7 million. As of September 30, 2025,, the Kinetic Term Loan #2 was fully repaid.
On April 12, 2023, in connection with its existing credit facility with Fifth Third Bank, Precision Marshall took an advance against its Capex term lending in the amount of approximately $1.4 million. Additionally, during June 2024, in connection with Kinetic's acquisition of Midwest Grinding (see Note 3), Precision Marshall took an additional advance against its Capex term lending in the amount of approximately $0.4 million. The loan matures January 2027 and bears interest on the same terms as for Capex lending as stated above. As of September 30, 2025 and 2024, the outstanding balance on this Capex loan was $1.7 million and $1.6 million, respectively.
The following tables summarize the Precision Marshall Fifth Third Bank Revolver Loan as of and for the years ended September 30, 2025 and 2024 (in $000’s):
During the year ended September 30,
2025 2024
Cumulative borrowing during the period $ 85,621  $ 66,134 
Cumulative repayment during the period 83,954  71,017 
Maximum borrowed during the period 1,200  1,700 
Weighted average interest for the period 7.37 % 8.46 %
As of September 30,
2025 2024
Total availability $ 6,767  $ 6,508 
Total outstanding 22,986  21,319 
Eclipse Business Capital Loans
In connection with the acquisition of Flooring Liquidators, on January 18, 2023, Flooring Liquidators entered into a credit facility with Eclipse Business Capital, LLC (“Eclipse”). The facility consists of $25.0 million in revolving credit (“Eclipse Revolver”) and $3.5 million in M&E lending (“Eclipse M&E”). The Eclipse Revolver is a three-year, asset-based facility that is secured by substantially all of Flooring Liquidators’ assets. Availability under the Eclipse Revolver is subject to a monthly borrowing base calculation. Flooring Liquidators’ ability to borrow under the Eclipse Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with Eclipse. The Eclipse Revolver bears interest at 3.5% per annum in excess of Adjusted Term SOFR. The Eclipse M&E loan bears interest at 5.0% per annum in excess of Adjusted Term SOFR . The credit facility matures in January 2026. As of September 30, 2025 and 2024, the outstanding balance on the Eclipse M&E loan was approximately $1.0 million and $1.8 million, respectively.
The following tables summarize the Eclipse Revolver as of and for the years ended September 30, 2025 and 2024 (in $000's):
During the year ended September 30,
2025 2024
Cumulative borrowing during the period $ 130,564  $ 138,632 
Cumulative repayment during the period 133,141  137,587 
Maximum borrowed during the period 10,656  10,700 
Weighted average interest for the period 10.67 % 11.72 %
As of September 30,
2025 2024
Total availability $ 1,178  $ 960 
Total outstanding 6,700  9,276 
Loan with Fifth Third Bank (PMW)
In connection with the acquisition of PMW, on July 20, 2023, PMW entered into a revolving credit facility (the "Revolving Credit Facility") with Fifth Third Bank. The facility consists of $15.0 million in revolving credit (the "Fifth Third Revolver") and approximately $5.0 million in M&E lending (the "Fifth Third M&E Loan"). The Fifth-Third Revolver is a three-year, asset-based facility that is secured by substantially all of PMW's assets. Availability under the Fifth-Third Revolver is subject to a monthly borrowing base calculation. PMW's ability to borrow under the Fifth-Third Revolver is subject to the satisfaction of certain conditions, including meeting all loan covenants under the credit agreement with Fifth-Third. Loans made under the Revolving Credit Facility are considered Reference Rate Loans, and bear interest at a rate equal to the sum of the Reference Rate plus the Applicable Margin. Reference Rate means the greater of (a) 3.0% or (b) the Lender’s publicly announced prime rate (which is not intended to be Lender’s lowest or most favorable rate in effect at any time) in effect from time to time. The Applicable Margin for revolving loans is zero, while for the M&E Term Loan or any Capital Expenditure Term Loan, it is 50 basis points (0.5%). The credit facility matures in July 2026. As of September 30, 2025 and 2024, the outstanding balance on the Fifth-Third M&E loan was approximately $3.6 million and $4.1 million, respectively.
The following tables summarize the PMW Fifth-Third Bank Revolver as of and for the years ended September 30, 2025 and 2024 (in $000's):
During the year ended September 30,
2025 2024
Cumulative borrowing during the period $ 52,999  $ 72,501 
Cumulative repayment during the period 55,891  73,364 
Maximum borrowed during the period 11,164  13,318 
Weighted average interest for the period 7.75 % 8.50 %
As of September 30,
2025 2024
Total availability $ 728  $ 1,078 
Total outstanding 7,220  10,112 
Bank Midwest Revolver Loan
On October 17, 2024, Vintage entered into an amended $10.0 million credit agreement with Bank Midwest (“Bank Midwest Revolver”). The amended Bank Midwest Revolver accrues interest daily on the outstanding principal at a rate of the greater of (a) the one-month forward-looking term rate based on SOFR, plus 2.36% per annum, or (b) 5.0% per annum, and matured on October 17, 2025. On October 25, 2025, Vintage entered into an amended $8.0 million credit agreement with Bank Midwest. The amended Bank Midwest Revolver carries the same interest rate as the prior amendment and matures on October 17, 2026.
The following tables summarize the Bank Midwest Revolver as of and for the years ended September 30, 2025 and 2024 (in $000's):
During the year ended September 30,
2025 2024
Cumulative borrowing during the period $ 6,846  $ 32,560 
Cumulative repayment during the period $ 8,724  $ 30,682 
Maximum borrowed during the period $ 4,106  $ 9,778 
Weighted average interest for the period 6.77 % 7.70 %
As of September 30,
2025 2024
Total availability $ 9,186  $ 10,423 
Total outstanding $ —  $ 1,878 
Note payable to JCM Holdings
During October 2020, Marquis purchased a manufacturing facility, which it had previously leased, for approximately $2.5 million. Marquis entered into a $2.0 million loan agreement, secured by the facility, with the seller of the facility, in order to complete the purchase of the facility. The loan bears interest at 6.0%, due monthly, and matures January 2030. As of September 30, 2025 and 2024, the outstanding principal balance was approximately $1.1 million and $1.3 million, respectively.
Equipment Loans
On June 20, 2016 and August 5, 2016, Marquis entered into a transaction that provided for a master agreement and separate loan schedules (the “Equipment Loans”) with Banc of America Leasing & Capital, LLC which provided for the following as of September 30, 2025:
Note #5 was for approximately $4.0 million, secured by equipment. Note #5 matured in December 2024, and was payable in 84 monthly payments of $55,000 beginning January 2018, bearing interest at 4.7% per annum. As of September 30, 2025 and 2024, the outstanding balance was approximately $0 and $164,000, respectively.
Note #7 is for $5.0 million, secured by equipment. Note #7 is due February 2027, and is payable in 84 monthly payments of $59,000 beginning March 2020, with the final payment of $809,000, bearing interest at 3.2% per annum. As of September 30, 2025 and 2024, the balance was approximately $1.7 million and $2.3 million, respectively.
Note #8 is for $3.4 million, secured by equipment. Note #8 is due September 2027, and is payable in 84 monthly payments of $46,000 beginning October 2020, bearing interest at 4.0%. As of September 30, 2025 and 2024, the outstanding balance was approximately $1.1 million and $1.6 million, respectively.
In December 2021, Marquis funded the acquisition of $5.5 million of new equipment under Note #9 of its master agreement. The note, which is secured by the equipment, matures December 2026, and is payable in 60 monthly payments of $92,000 beginning January 2022, bearing interest at 3.75%. As of September 30, 2025 and 2024, the outstanding balance was approximately $1.9 million and $2.9 million, respectively.
In December 2022, Marquis funded the acquisition of $5.7 million of new equipment under Note #10 of its master agreement. Note #10, which is secured by the equipment, matures December 2029, and is payable in 84 monthly payments of $79,000, beginning January 2023, with the final payment in the amount of approximately $650,000, bearing interest at 6.5%. As of September 30, 2025 and 2024, the outstanding balance was approximately $4.0 million and $4.6 million, respectively.
Note Payable to Store Capital Acquisitions, LLC
On June 14, 2016, Marquis entered into a transaction with Store Capital Acquisitions, LLC. The transaction included a sale-leaseback of land owned by Marquis and a loan secured by the improvements on such land. The total aggregate proceeds received from the sale of the land and the loan was $10.0 million, which consisted of approximately $644,000
from the sale of the land and a note payable of approximately $9.4 million. In connection with the transaction, Marquis entered into a lease with a 15-year term commencing on the closing of the transaction, which provides Marquis with an option to extend the lease upon the expiration of its term. The initial annual lease rate is $60,000. The proceeds from this transaction were used to pay down the BofA Revolver and Term loans, and related party loan, as well as to purchase a building from the previous owners of Marquis that was not purchased in the July 2015 transaction. The note payable bears interest at 9.3% per annum, with principal and interest due monthly. The note payable matures June 13, 2056. For the first five years of the note payable, there is a pre-payment penalty of 5%, which declines by 1% for each year the loan remains unpaid for the next five years. At the end of ten years, there is no pre-payment penalty. In connection with the note payable, Marquis incurred approximately $458,000 in transaction costs that are being recognized as a debt issuance cost and are being amortized and recorded as interest expense over the term of the note payable. The remaining principal balance was approximately $8.7 million and $9.1 million as of September 30, 2025 and 2024, respectively.
Loan Covenant Compliance
As of September 30, 2025, the Company was in compliance with all covenants under its existing revolving and other loan agreements.
Related Party Seller Notes
Seller notes as of September 30, 2025 and 2024 consisted of the following (in $000’s):
September 30,
2025		 September 30,
2024
Seller of PMW, 8.0% interest rate, matures July 2028
 $ —  $ 2,500 
Seller of Kinetic, 7.0% interest rate, matures September 2027
 3,000  3,000 
Seller of Central Steel, 8.0% interest rate, matures May 2029
 1,031  1,100 
Seller of Flooring Liquidators, 8.24% interest rate, matures January 2028
 —  34,000 
Seller of Flooring Liquidators, 8.24% interest rate, matures February 2028
 15,000  — 
Total Seller notes payable - related parties 19,031  40,600 
Unamortized debt premium (discount) (811) 2,261 
Net amount 18,220  42,861 
Less current portion (275) (2,500)
Long-term portion of Seller notes - related parties $ 17,945  $ 40,361 
Future maturities of seller notes at September 30, 2025 are as follows (in $000’s):
Years ending September 30,
2026 $ 275 
2027 3,275 
2028 14,464 
2029 206 
Total $ 18,220 
Note Payable to the Sellers of PMW
In connection with the purchase of PMW, on July 20, 2023, the Company entered into a consulting agreement with the previous owner of PMW to serve as its part-time President and Chief Executive Officer. The consulting agreement shall terminate upon the later of (i) sellers’ receipt of earn-out payments in an aggregate amount equal to $3.0 million and (ii) the full satisfaction and payment of all amounts due and that are to become due under the seller note, unless earlier terminated in accordance with the terms set forth in the consulting agreement. Additionally, PMW entered into two seller financed loans, in the aggregate amount of $2.5 million, which are fully guaranteed by the Company (the "Seller Financed Loans"). The Seller Financed Loans bear interest at 8.0% per annum, with interest payable quarterly in arrears.
On December 24, 2024, the Company entered into a Settlement Agreement and Release (“Settlement Agreement”) to settle the Seller Financed Loans of $2.5 million, plus accrued interest of approximately $0.1 million, for approximately $1.9 million with the previous owners of PMW. The funds to settle the loans were borrowed from Isaac Capital Group, LLC (“ICG”) (see Note 15). The Company evaluated this transaction under ASC 470-50 “Debt - Modification and Extinguishment”, and concluded that, because PMW was legally released as the primary obligor, and has no other debt with these lenders, this transaction should be accounted for as a debt extinguishment. As such, the Company recorded a gain on extinguishment of debt in the amount of approximately $0.7 million. Additionally, under the Settlement Agreement, the Company was released of claims for earnout payments, as stipulated under the Stock Purchase Agreement. Consequently, the Company recorded a gain on settlement of the earnout liability in the amount of approximately $2.8 million. As of September 30, 2025 and 2024, the carrying value of the seller financed loans was $0 and $2.5 million, respectively.
Note Payable to the Sellers of Kinetic
In connection with the purchase of Kinetic, Kinetic entered into an employment agreement with the previous owner of Kinetic to serve as its Head of Equipment Operations. The employment agreement is for an initial term of five years and shall be automatically extended in 90-day increments unless either party provides notice as required under the agreement. Additionally, Precision Marshall entered into a seller financed loan in the amount of $3.0 million with the previous owner
of Kinetic. The Sellers Subordinated Acquisition Note bears interest at 7.0% per annum, with interest payable quarterly in arrears. The Sellers Subordinated Acquisition Note has a maturity date of September 27, 2027. As of September 30, 2025 and 2024, the remaining principal balance was $3.0 million.
Note Payable to the Seller of Central Steel
In connection with the purchase of Central Steel (see Note 3), on May 15, 2024, Precision Marshall entered into an employment agreement with the previous owner of Central Steel to serve as its President. The employment agreement is for an initial term of two years and shall be automatically extended in 90-day increments unless either party provides notice as required under the agreement. Additionally, Precision Marshall entered into a seller financed loan in the amount of $1.1 million with the previous owner of Central Steel (the “Sellers Subordinated Promissory Note”). The Sellers Subordinated Promissory Note bears interest at 8.0% per annum, with interest payable quarterly in arrears. Beginning August 15, 2025, quarterly principal payments of $68,751 are due on the 15th of August, November, February, and May each year. The Sellers Subordinated Promissory Note has a maturity date of May 15, 2029. As of September 30, 2025 and 2024, the remaining principal balance was $1.0 million and $1.1 million, respectively.
Note Payable to the Seller of Flooring Liquidators
In connection with the purchase of Flooring Liquidators during January 2023, the Company entered into an employment agreement with the previous owner of Flooring Liquidators to serve as its Chief Executive Officer. The employment agreement is for an initial term of five years and shall be automatically extended in 90-day increments unless either party provides notice as required under the agreement. Additionally, the Company entered into a seller financed mezzanine loan, which is fully guaranteed by the Company, in the amount of $34.0 million with the previous owners of Flooring Liquidators. The Seller Subordinated Acquisition Note (“Sellers Note”) bears interest at 8.24% per annum, with interest payable monthly in arrears beginning on January 18, 2024. The Sellers Note has a maturity date of January 18, 2028. As of the acquisition date, an independent third-party valuation assigned the Seller Note a fair value of $31.7 million, reflecting a $2.3 million discount.
On February 25, 2025, Flooring Liquidators, Flooring Affiliated Holdings, and the Company entered into a binding Memorandum of Understanding (“MOU”) with the previous owner of Flooring Liquidators under which the principal amount of the Seller Note was reduced from $34.0 million to $15.0 million. The relevant portion of the MOU was later superseded by a Second Amendment to Seller Note. The Seller Note bears interest at 8.24% per annum effective January 1, 2025, and matures in February 2028, with interest payments due monthly beginning February 2025. The Company determined that the fair value of the amended Seller Note was approximately $14.0 million, or a discount of $1.0 million. In an event of default under the Seller Note, or if the Company defaults in making any payment it is required to make pursuant to the Seller Note, the note holders may revoke the principal reduction, in which case the aggregate outstanding principal balance of the Seller Note will increase by $19.0 million to $34.0 million.
In addition to the reduction in the principal amount of the Seller Note, the MOU provided for the following:
•An increase in the existing holdback principal amount of approximately $0.5 million to $1.5 million, and that no further claims against the holdback would be made or permitted. Under the MOU, the holdback accrued interest at 8.24% per annum effective January 1, 2025, with interest payments due monthly beginning February 28, 2025. Full payment of the holdback principal was due in August 2025. On September 12, 2025, the Company entered into an agreement with the former owner whereby certain assets and liabilities of Flooring Liquidators were sold in full satisfaction of the Company’s $1.5 million holdback obligation.
•The previous owner’s title was revised to be Founder and Vice President, his employment was made part-time, and he resigned from each other office and as director or manager of Flooring Liquidators and each of its related entities. Mr. Kellogg's tenure as Chief Executive Officer of Flooring Liquidators terminated effective May 13, 2025.
The Company evaluated this transaction under ASC 470-50 “Debt - Modification and Extinguishment”, and concluded that, because the change in present value of cash flows between the original and revised debt exceeded 10%, and the debt revision did not meet the accounting requirements for troubled debt restructuring, this transaction should be accounted for as a debt extinguishment. In accordance with the debt extinguishment guidance, the Company recorded a non-operating gain of approximately $22.8 million. As of September 30, 2025 and 2024, the carrying value of the Sellers Note was approximately $15.0 million and $36.3 million, respectively.