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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

(Mark One)

 

QUARTERLY Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended December 31, 2021

 

TRANSITION Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _____________ to _______________

 

Commission File Number 001-33937

 

Live Ventures Incorporated

(Exact name of registrant as specified in its charter)

 

Nevada

85-0206668

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

 

325 E. Warm Springs Road, Suite 102

Las Vegas, Nevada

89119

(Address of principal executive offices)

(Zip Code)

 

(702) 997-5968

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

LIVE

 

The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 ☐

Accelerated filer

 ☐

Non-accelerated filer

 ☒

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

The number of shares of the issuer’s common stock, par value $0.001 per share, outstanding as of February 8, 2022 was 1,582,334.

 


 

INDEX TO FORM 10-Q FILING

FOR THE THREE MONTHS ENDED DECEMBER 31, 2021

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

PART I

 

 

 

 

 

 

 

 

 

FINANCIAL INFORMATION

 

3

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2021 (Unaudited) and September 30, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) for the Three Months Ended December 31, 2021 and 2020

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended December 31, 2021 and 2020

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended December 31, 2021 and 2020

 

6

 

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

29

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

29

 

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

OTHER INFORMATION

 

31

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

31

 

 

 

 

 

Item 1A.

 

Risk Factors

 

31

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

 

 

 

 

 

Item 3.

 

Defaults upon Senior Securities

 

31

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

32

 

 

 

 

 

Item 5.

 

Other Information

 

32

 

 

 

 

 

Item 6.

 

Exhibits

 

33

 

 

 

 

 

SIGNATURES

 

34

 

2


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

LIVE VENTURES INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)

 

 

 

December 31, 2021

 

 

September 30, 2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash

 

$

10,031

 

 

$

4,664

 

Trade receivables, net of allowance for doubtful accounts of $61 at December 31, 2021 and September 30, 2021

 

 

19,117

 

 

 

21,559

 

Inventories, net of reserves of approximately $1.9 million at December 31, 2021, and approximately $1.8 million at September 30, 2021

 

 

73,898

 

 

 

70,747

 

Prepaid expenses and other current assets

 

 

2,042

 

 

 

1,640

 

Debtor in possession assets

 

 

143

 

 

 

180

 

Total current assets

 

 

105,231

 

 

 

98,790

 

Property and equipment, net of accumulated depreciation of approximately $21.8 million at December 31, 2021, and approximately $20.6 million at September 30, 2021

 

 

37,440

 

 

 

35,632

 

Right of use asset - operating leases

 

 

29,090

 

 

 

30,466

 

Deposits and other assets

 

 

1,345

 

 

 

682

 

Intangible assets, net of accumulated amortization of approximately $2.5 million at December 31, 2021 and approximately $2.2 million at September 30, 2021

 

 

4,410

 

 

 

4,697

 

Goodwill

 

 

41,471

 

 

 

41,471

 

Total assets

 

$

218,987

 

 

$

211,738

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

9,713

 

 

$

10,644

 

Accrued liabilities

 

 

14,304

 

 

 

17,048

 

Income taxes payable

 

 

734

 

 

 

876

 

Current portion of lease obligations - operating leases

 

 

7,196

 

 

 

7,202

 

Current portion of long-term debt

 

 

17,553

 

 

 

16,055

 

Current portion of notes payable related parties

 

 

2,000

 

 

 

2,000

 

Debtor-in-possession liabilities

 

 

11,184

 

 

 

11,135

 

Total current liabilities

 

 

62,684

 

 

 

64,960

 

Long-term debt, net of current portion

 

 

40,305

 

 

 

37,559

 

Lease obligation long term - operating leases

 

 

28,008

 

 

 

29,343

 

Notes payable related parties, net of current portion

 

 

2,000

 

 

 

2,000

 

Deferred taxes

 

 

4,346

 

 

 

2,796

 

Total liabilities

 

 

137,343

 

 

 

136,658

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Series B convertible preferred stock, $0.001 par value, 1,000,000 shares authorized,
   
315,790 shares issued and outstanding at December 31, 2021 and September 30, 2021, respectively

 

 

 

 

 

 

Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 47,840
  shares issued and outstanding at December 31, 2021 and September 30, 2021, respectively, with a
  liquidation preference of $
0.30 per share outstanding

 

 

 

 

 

 

Common stock, $0.001 par value, 10,000,000 shares authorized, 1,582,334 and 1,582,334 shares issued
   and outstanding at December 31, 2021 and September 30, 2021, respectively

 

 

2

 

 

 

2

 

Paid in capital

 

 

65,302

 

 

 

65,284

 

Treasury stock common 534,520 shares as of December 31, 2021 and September 30, 2021, respectively

 

 

(4,519

)

 

 

(4,519

)

Treasury stock Series E preferred 50,000 shares as of December 31, 2021 and
   of September 30, 2021, respectively

 

 

(7

)

 

 

(7

)

Retained earnings

 

 

21,314

 

 

 

14,768

 

Equity attributable to Live stockholders

 

 

82,092

 

 

 

75,528

 

Non-controlling interest

 

 

(448

)

 

 

(448

)

Total stockholders' equity

 

 

81,644

 

 

 

75,080

 

Total liabilities and stockholders' equity

 

$

218,987

 

 

$

211,738

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

LIVE VENTURES, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(dollars in thousands, except per share)

 

 

 

 

For the Three Months Ended December 31,

 

 

 

 

2021

 

 

2020

 

Revenues

 

 

$

75,158

 

 

$

62,454

 

Cost of revenues

 

 

 

47,542

 

 

 

40,185

 

Gross profit

 

 

 

27,616

 

 

 

22,269

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

General and administrative expenses

 

 

 

14,157

 

 

 

12,279

 

Sales and marketing expenses

 

 

 

3,052

 

 

 

2,699

 

Total operating expenses

 

 

 

17,209

 

 

 

14,978

 

Operating income

 

 

 

10,407

 

 

 

7,291

 

Other (expense) income:

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(1,017

)

 

 

(1,470

)

Gain on disposal of fixed assets

 

 

 

 

 

 

129

 

Loss on bankruptcy settlement

 

 

 

(10

)

 

 

 

Other income

 

 

 

126

 

 

 

779

 

Total other expense, net

 

 

 

(901

)

 

 

(562

)

Income before provision for income taxes

 

 

 

9,506

 

 

 

6,729

 

Provision for income taxes

 

 

 

2,960

 

 

 

1,450

 

Net income

 

 

 

6,546

 

 

 

5,279

 

Net income attributable to non-controlling interest

 

 

 

 

 

 

134

 

Net income attributable to Live stockholders

 

 

$

6,546

 

 

$

5,413

 

 

 

 

 

 

 

 

 

Income per share:

 

 

 

 

 

 

 

Basic

 

 

$

4.14

 

 

$

3.45

 

Diluted

 

 

$

2.04

 

 

$

1.63

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

 

1,582,334

 

 

 

1,568,213

 

Diluted

 

 

 

3,202,057

 

 

 

3,319,088

 

 

 

 

 

 

 

 

 

Dividends declared - series B convertible preferred stock

 

 

$

 

 

$

 

Dividends declared - series E convertible preferred stock

 

 

$

 

 

$

 

Dividends declared - common stock

 

 

$

 

 

$

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

LIVE VENTURES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(dollars in thousands)

 

 

 

 

For the Three Months Ended December 31,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

6,546

 

 

$

5,279

 

Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,549

 

 

 

1,714

 

Gain or loss on disposal of property and equipment

 

 

 

 

 

(129

)

Loss on bankruptcy settlement

 

 

10

 

 

 

 

Amortization of debt issuance cost

 

 

24

 

 

 

266

 

Stock based compensation expense

 

 

18

 

 

 

17

 

Amortization of right-of-use assets

 

 

68

 

 

 

106

 

Change in reserve for uncollectible accounts

 

 

 

 

 

658

 

Change in reserve for obsolete inventory

 

 

(59

)

 

 

590

 

Changes in assets and liabilities:

 

 

 

 

 

 

Trade receivables

 

 

2,413

 

 

 

1,909

 

Inventories

 

 

(3,016

)

 

 

(716

)

Income taxes payable/receivable

 

 

(142

)

 

 

70

 

Prepaid expenses and other current assets

 

 

(431

)

 

 

478

 

Change in deferred income taxes

 

 

1,550

 

 

 

1,290

 

Deposits and other assets

 

 

(663

)

 

 

(366

)

Accounts payable

 

 

(981

)

 

 

(898

)

Accrued liabilities

 

 

(2,655

)

 

 

(2,256

)

Change in other

 

 

13

 

 

 

(344

)

Net cash provided by operating activities

 

 

4,244

 

 

 

7,668

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,070

)

 

 

(3,258

)

Net cash used in investing activities

 

 

(3,070

)

 

 

(3,258

)

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

Net borrowings (payments) under revolver loans

 

 

2,040

 

 

 

(3,289

)

Proceeds from issuance of notes payable

 

 

5,500

 

 

 

2,130

 

Purchase of common treasury stock

 

 

 

 

 

(383

)

Debtor-in-possession cash

 

 

19

 

 

 

92

 

Payments on financing leases

 

 

(33

)

 

 

 

Payments on notes payable

 

 

(3,333

)

 

 

(4,712

)

Net cash provided by (used in) financing activities

 

 

4,193

 

 

 

(6,162

)

 

 

 

 

 

 

 

Increase (decrease) in cash

 

 

5,367

 

 

 

(1,752

)

Cash, beginning of period

 

 

4,664

 

 

 

8,984

 

Cash, end of period

 

$

10,031

 

 

$

7,232

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Interest paid

 

$

890

 

 

$

1,223

 

Income taxes paid

 

$

1,538

 

 

$

 

Noncash financing and investing activities:

 

 

 

 

 

 

Settlement of debt in exchange for property and equipment

 

$

 

 

$

1,000

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

LIVE VENTURES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(dollars in thousands)

 

 

 

 

Series B
Preferred Stock

 

 

Series E
Preferred Stock

 

 

Common Stock

 

 

 

 

 

Series E
Preferred
Stock

 

 

Common
Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-In
Capital

 

 

Treasury
Stock

 

 

Treasury
Stock

 

 

Retained
 Earnings

 

 

Non-controlling Interest

 

 

Total
Equity

 

Balance, September 30, 2021

 

 

315,790

 

 

$

 

 

 

47,840

 

 

$

 

 

 

1,582,334

 

 

$

2

 

 

$

65,284

 

 

$

(7

)

 

$

(4,519

)

 

$

14,768

 

 

$

(448

)

 

$

75,080

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,546

 

 

 

 

 

 

6,546

 

Balance, December 31, 2021

 

 

315,790

 

 

$

 

 

 

47,840

 

 

$

 

 

 

1,582,334

 

 

$

2

 

 

$

65,302

 

 

$

(7

)

 

$

(4,519

)

 

$

21,314

 

 

$

(448

)

 

$

81,644

 

 

 

 

Series B
Preferred Stock

 

 

Series E
Preferred Stock

 

 

Common Stock

 

 

 

 

 

Series E
Preferred
Stock

 

 

Common
Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-In
Capital

 

 

Treasury
Stock

 

 

Treasury
Stock

 

 

Accumulated
Deficit

 

 

Non-controlling Interest

 

 

Total
Equity

 

Balance, September 30, 2020

 

 

214,244

 

 

$

 

 

 

47,840

 

 

$

 

 

 

1,589,101

 

 

$

2

 

 

$

64,472

 

 

$

(7

)

 

$

(4,098

)

 

$

(16,429

)

 

$

(268

)

 

$

43,672

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Purchase of common treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,926

)

 

 

 

 

 

 

 

 

 

 

 

(383

)

 

 

 

 

 

 

 

 

(383

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,413

 

 

 

(134

)

 

 

5,279

 

Balance, December 31, 2020

 

 

214,244

 

 

$

 

 

 

47,840

 

 

$

 

 

 

1,555,175

 

 

$

2

 

 

$

64,489

 

 

$

(7

)

 

$

(4,481

)

 

$

(11,016

)

 

$

(402

)

 

$

48,585

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

LIVE VENTURES INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020

(dollars in thousands, except per share)

Note 1: Background and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Live Ventures Incorporated, a Nevada corporation, and its subsidiaries (collectively, “Live Ventures” or the “Company”). Live Ventures is a diversified holding company with a strategic focus on value-oriented acquisitions of domestic middle-market companies. The Company has three operating segments: Retail, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other. The Retail segment includes (i) Vintage Stock, Inc. (“Vintage Stock”), which is engaged in the retail sale of new and used movies, music, collectibles, comics, books, games, game systems and components and (ii) ApplianceSmart, Inc. (“ApplianceSmart”), which is engaged in the sale of new major appliances through a retail store. The Flooring Manufacturing segment included Marquis Industries, Inc. (“Marquis”), which is engaged in the manufacture and sale of carpet and the sale of vinyl and wood floorcoverings. The Steel Manufacturing Segment includes Precision Industries, Inc. (“Precision Marshall”), which is engaged in the manufacture and sale of alloy and steel plates, ground flat stock and drill rods.

The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of the Company’s management, this interim information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results of operations for three months ended December 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2022. This financial information should be read in conjunction with the consolidated financial statements and related notes thereto as of September 30, 2021 and for the fiscal year then ended included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 28, 2021 (the “2021 10-K”).

Coronavirus

The global outbreak of COVID-19 (Coronavirus) has resulted in changes in global supply of certain products. The outbreak or pandemic has continued to create significant uncertainties. The pandemic continues to have an unprecedented impact on the U.S. economy as federal, state, and local governments react to this public health crisis. These significant uncertainties and unprecedented impacts include, but are not limited to, an adverse effect on the economy; the Company’s supply chain partners; its employees and customers; customer sentiment in general; and traffic within shopping centers, and, where applicable, malls, containing its stores. As the pandemic continues, consumer fear about becoming ill, as well as recommendations or mandates from federal, state, and local authorities to avoid large gatherings of people or self-quarantine, are continuing to increase; this has already affected, and may continue to affect, traffic to the stores. For example, by March 31, 2020, Vintage Stock had closed all of its retail locations in response to the crisis. Beginning May 1, 2020, Vintage Stock began to reopen certain locations in compliance with government regulations. Then, as of June 30, 2020, all Vintage Stock retail locations were reopened, while maintaining compliance with government mandates. The Company is unable to predict if additional periods of store closures will be needed or mandated. For the Company’s other segments, during March and April 2020, Marquis conducted rolling layoffs for certain employees; however, by May 2020, most employees returned to their respective locations. Continued impacts of the pandemic materially adversely affect the near-term and long-term revenues, earnings, liquidity, and cash flows, and may require a variety of responsive actions, including but not limited to, employee furloughs, reduced store hours, store closings, expense reductions or discounting of pricing of products—all in an effort to mitigate such impacts. The extent of the uncertainties and impacts of the pandemic on the Company’s business and financial results will depend largely on future developments, including the duration of the pandemic within the U.S., the impact on capital and financial markets and the related impact on consumer confidence and spending—all of which are highly uncertain and cannot be predicted. This situation is changing rapidly and additional impacts of which the Company is not aware may arise.

Note 2: Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company, its majority owned subsidiaries over which the Company exercises control and a variable interest entity. The Company records a non-controlling interest within stockholders’ equity for the portion of the entity’s equity attributed to the consolidated entities that are not wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

7


 

the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates made in connection with the accompanying consolidated financial statements include the estimated reserve for doubtful accounts, the estimated reserve for excess and obsolete inventory, estimated warranty reserve, estimated fair value for stock-based compensation, fair values in connection with the analysis of goodwill, other intangibles and long-lived assets for impairment, valuation allowance against deferred tax assets, and estimated useful lives for intangible assets and property and equipment.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modified the impairment model for available-for-sale debt securities and provided a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 and the interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of adopting this new accounting standard on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 is part of the FASB’s overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. The updated guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company has implemented this update in the current quarter. The adoption of this ASU had no material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), codified as ASC 848 (“ASC 848”). The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. The guidance may be applied upon issuance of ASC 848 through December 31, 2022. The Company is currently assessing the impact of adopting this new accounting standard on its consolidated financial statements and related disclosures.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This update provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. This update is effective for the Company’s fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of adopting this new accounting standard on its Consolidated Financial Statements and related disclosures. 

Note 3: Leases

The Company leases retail stores, warehouse facilities, and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates through 2040 with various renewal options for additional periods. The agreements, which have been classified as operating leases, generally provide for minimum and, in some cases percentage rent, and require us to pay all insurance, taxes, and other maintenance costs. As a result, the Company recognizes assets and liabilities for all leases with lease terms greater than 12 months. The amounts recognized reflect the present value of remaining lease payments for all leases. The discount rate used is an estimate of the Company’s blended incremental borrowing rate based on information available associated with each subsidiary’s debt outstanding at lease commencement. In considering the lease asset value, the Company considers fixed and variable payment terms, prepayments and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.

As of December 31, 2021, the weighted average remaining lease term is 8.37 years and our weighted average discount rate is 6.44%. Total cash payments for the three months ended December 31, 2021 and 2020 were approximately $2.5 million and $2.2 million, respectively. Additionally, we obtained right-of-use assets in exchange for lease liabilities of approximately $1.0 million upon commencement of operating leases during the three months ended December 31, 2021.

8


 

The following table details our right of use assets and lease liabilities as of December 31, 2021 and September 30, 2021 (000's):

 

 

 

December 31, 2021

 

September 30, 2021

 

Right of use asset - operating leases

 

$

29,090

 

$

30,466

 

Operating lease liabilities:

 

 

 

 

 

Current

 

 

7,196

 

 

7,202

 

Long term

 

 

28,008

 

 

29,343

 

 

Total present value of future lease payments as of December 31, 2021:

 

Twelve months ended June 30,

 

 

 

2022

 

$

9,194

 

2023

 

 

7,466

 

2024

 

 

5,773

 

2025

 

 

4,263

 

2026

 

 

2,885

 

Thereafter

 

 

12,511

 

Total

 

 

42,092

 

Less implied interest

 

 

(6,888

)

Present value of payments

 

$

35,204

 

 

During the three months ended December 31, 2021 and 2020, the Company recorded no gain or loss settlements, nor did it record impairment charges relating to any of its leases.

Note 4: Inventory

The following table details the Company's inventory as of December 31, 2021 and September 30, 2021 (in 000's):