LIVE VENTURES INCORPORATED For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and six months endedMarch 31, 2022 , this "Management's Discussion and Analysis of Financial Condition and Results of Operations" (hereafter referred to as "MD&A") should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2021 (the "2021 Form 10-K").
Note about Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that constitute "forward-looking statements." These forward-looking statements are often characterized by the terms "may," "believes," "projects," "intends," "plans," "expects," or "anticipates," and do not reflect historical facts.
Specific forward-looking statements contained in this portion of the Annual Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements about the Chapter 11 Case, (vi) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months, and (vii) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity. Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2021 Form 10-K under Item 1A "Risk Factors" and Part II, Item 1A. "Risk Factors" below, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.liveventures.com or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.
Our Company
Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies. We work closely with consultants who help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses. Our principal offices are located at325 E. Warm Springs Road , Suite 102,Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which does not form part of this Quarterly Report Form 10-Q) is located at www.liveventures.com. Our common stock trades on the Nasdaq Capital Market under the symbol "LIVE". 19 --------------------------------------------------------------------------------
Retail Segment
Our Retail Segment is composed of
Vintage Stock
Vintage Stock Holdings LLC , Vintage Stock, V-Stock,Movie Trading Company and EntertainMart (collectively, "Vintage Stock") is an award-winning specialty entertainment retailer that offers a large selection of entertainment products, including new and pre-owned movies, video games and music products, as well as ancillary products, such as books, comics, toys and collectibles, in a single location. With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned movies, music, video games, electronics and collectibles through 66 retail locations strategically positioned acrossArkansas ,Colorado ,Idaho ,Illinois ,Kansas ,Missouri ,Nebraska ,New Mexico ,Oklahoma ,Texas , andUtah .ApplianceSmart ApplianceSmart is a household appliance retailer with two product categories: one consisting of typical and commonly available, innovative appliances, and the other consisting of affordable value-priced, offerings such as close-outs, factory overruns, discontinued models, and special-buy appliances, including open box merchandise and others. OnDecember 9, 2019 ,ApplianceSmart filed a voluntary petition (the "Chapter 11 Case") in theUnited States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court ") seeking relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The bankruptcy affectedLive Ventures' indirect subsidiaryApplianceSmart only and did not affect any other subsidiary ofLive Ventures , orLive Ventures itself.ApplianceSmart expected to continue to operate its business in the ordinary course of business as debtor-in-possession under the jurisdiction of theBankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and the orders of theBankruptcy Court . In addition, the Company reserved its right to file a motion seeking authority to use cash collateral of the lenders under the reserve-based revolving credit facility. The case was being administrated under the caption In re:ApplianceSmart, Inc. (case number 19-13887). Court filings and other information related to the Chapter 11 Case are available at the PACER Case Locator website for those registered to do so or at the Courthouse located at One Bowling Green,Manhattan, New York 10004. OnOctober 13, 2021 , a hearing was held to consider approval of the Disclosure Statement filed byApplianceSmart in conjunction with its bankruptcy proceedings. OnDecember 14, 2021 , a hearing was held to confirmApplianceSmart's plan for reorganization (the "Plan"). OnFebruary 28, 2022 , the court approvedApplianceSmart's plan for reorganization (the "Plan"), dischargingApplianceSmart of certain debts according to the Plan resulting in the Company recording a gain of approximately$11.4 million , which includes a write-off or adjustment of approximately$11.5 million on the settlement of debts and other liabilities, offset by payments subject to the bankruptcy that were not included as debtor-in-possession liabilities of approximately$149,000 .
As of
Flooring Manufacturing Segment
Our Flooring Manufacturing segment is comprised of
Marquis is a leading carpet manufacturer and distributor of carpet and hard-surface flooring products. Over the last decade, Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market's fastest-growing fiber category. Marquis focuses on the residential, niche commercial, and hospitality end-markets and serves thousands of customers. Since commencing operations in 1995, Marquis has built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies that differentiate its brands in the flooring marketplace. Marquis's state-of-the-art operations enable high quality products, unique customization, and exceptionally short lead-times. Furthermore, the Company has recently invested in additional capacity to grow several attractive lines of business, including printed carpet and yarn extrusion.
Steel Manufacturing Segment
Our Steel Manufacturing segment is comprised of
Precision Marshall is the North American leader in providing and manufacturing,
pre-finished de-carb free tool and die steel. For nearly 75 years, Precision
Marshall has served steel distributors through quick and accurate service.
Precision Marshall has led the industry with exemplary availability and
value-added processing that saves distributors time and processing costs.
20
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Founded in 1948, Precision Marshall "The Deluxe Company " has built a reputation
of high integrity, speed of service and doing things the "Deluxe Way ". The term
Deluxe refers to all aspects of the product and customer service to be head and
shoulders above the rest. From order entry to packaging and delivery, Precision
Marshall makes it easy to do business and backs all products and service with a
guarantee.
Precision Marshall provides four key products to over 500 steel distributors in
four product categories: Deluxe Alloy Plate, Deluxe Tool Steel Plate, Precision
Ground Flat Stock, and Drill Rod. With over 5,000 distinct size grade
combinations in stock every day, Precision Marshall arms tool steel distributors
with deep inventory availability and same day shipment to their place of
business or often ships direct to their customer saving time and handling.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with GAAP. Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information available prior to the issuance of our financial statements. Our actual realized results may differ materially from management's initial estimates as reported. Our significant accounting policies include Inventories,Goodwill , Revenue Recognition, Fair Value Measurements, Stock Based Compensation, Income Taxes, Segment Reporting and Concentrations of Credit Risk. For a summary of our significant accounting policies and the means by which we develop estimates thereon, see Part II, Item 8 - Financial Statements - Notes to unaudited condensed consolidated financial statements Note 2 - summary of significant accounting policies in our 2021 10-K.
Adjusted EBITDA
We evaluate the performance of our operations based on financial measures such as revenue and "Adjusted EBITDA." Adjusted EBITDA is defined as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business' ability to fund acquisitions and other capital expenditures, and to service its debt. Additionally, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate a company's financial performance, subject to certain adjustments. Adjusted EBITDA does not represent cash flows from operations, as defined by GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all of our cash needs. It is, however, a measurement that the Company believes is useful to investors in analyzing its operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities, and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure. As companies often define non-GAAP financial measures differently, Adjusted EBITDA, as calculated byLive Ventures Incorporated , should not be compared to any similarly titled measures reported by other companies. 21 --------------------------------------------------------------------------------
Results of Operations Three Months Ended
The following table sets forth certain statement of income items and as a percentage of revenue, for the three months endedMarch 31, 2022 and 2021 (in$000 's): For the Three For the Three Months Ended Months Ended March 31, 2022 March 31, 2021 Selected Data: Revenue $ 69,706 $ 70,890 Cost of revenue 44,753 44,400 General and administrative expenses 13,154 12,565 Sales and marketing expenses 3,350 2,800 Interest expense, net (858 ) (1,649 ) Provision for income taxes 3,523 3,228 Net income $ 15,358 $ 8,695 Adjusted EBITDA (a) Retail business $ 3,610 $ 5,456 Flooring Manufacturing business 4,579 6,726 Steel Manufacturing business 2,828 2,034 Corporate and Other (762 ) (894 ) Total Adjusted EBITDA $ 10,255 $ 13,322 Adjusted EBITDA as a percentage of revenue Retail business 17.4 % 22.7 % Flooring Manufacturing business 14.0 % 20.4 % Steel Manufacturing business 20.2 % 14.7 % Corporate and Other -35.2 % -732.8 % Consolidated adjusted EBITDA as a percentage of revenue 14.7 % 18.8 %
(a) See reconciliation of net income to Adjusted EBITDA below.
The following table sets forth revenues by segment (in
For the Three Months Ended March For the Three Months Ended March
31, 2022 31, 2021
% of % of
Net Total Net Total
Revenue Revenue Revenue Revenue
Revenue
Retail
Movies, Music, Games and Other $ 20,616 29.6 % $ 23,651 33.4 %
Appliances 125 0.2 % 352 0.5 %
Flooring Manufacturing 32,772 47.0 % 32,972 46.5 %
Steel Manufacturing 14,027 20.1 % 13,793 19.5 %
Corporate and Other 2,166 3.1 % 122 0.2 %
Total Revenue $ 69,706 100.0 % $ 70,890 100.0 %
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The following table sets forth gross profit earned by segment and gross profit
as a percentage of total revenue for each segment (in
For the Three Months Ended March 31 ,
For the Three Months Ended
2022 2021
Gross Gross
Gross Profit % of Gross Profit % of
Profit Total Revenue Profit Total Revenue
Gross Profit
Retail
Movies, Music, Games and Other $ 11,003 15.8 % $ 12,813 18.1 %
Appliances 107 0.2 % 157 0.2 %
Flooring Manufacturing 8,580 12.3 % 10,022 14.1 %
Steel Manufacturing 4,252 6.1 % 3,380 4.8 %
Corporate and Other 1,011 1.5 % 118 0.2 %
Total Gross Profit $ 24,953 35.8 % $ 26,490 37.4 %
Revenue
Revenue decreased approximately $1.2 million , or 1.7%, to approximately $70.0
million for the three months ended March 31, 2022 , as compared to the
corresponding prior year period. The decrease is primarily attributable to
decreased revenue in the Retail segment of approximately $3.3 million , offset by
increased revenue in Corporate and Other of approximately $2.0 million . The
decrease in revenue in the Retail segment was primarily due to additional
stimulus payments and timely tax refunds received by our Retail segment customer
base during Q2 2021 that allowed for more discretionary consumer spending. The
increase in revenue in the Corporate and Other segment as compared to the prior
year period was due to the consolidation of SW Financial in June 2021 .
Cost of Revenue
Cost of revenue increased by 0.8% to approximately$44.8 million for the three months endedMarch 31, 2022 , as compared to approximately$44.4 million for the three months endedMarch 31, 2021 . Cost of revenue remained relatively unchanged from the prior year period. The increase is due to inflationary pressures, and the consolidation of SW Financial inJune 2021 .
General and Administrative Expense
General and Administrative expenses increased by 4.7% to approximately$13.2 million for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 , primarily due to increases in employee compensation and related costs as a result of our Retail segment opening new locations.
Selling and Marketing Expense
Selling and marketing expense increased by 19.6% to approximately$3.4 million for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 , primarily due to increased convention and trade show activity, which was largely canceled during COVID, as well as compensation associated with the Marquis sales force. Interest Expense, net Interest expense, net, decreased by 48% to approximately$858,000 for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 . The decrease is primarily due to the payoff of debt and related debt discount, favorable interest rates obtained from Precision's credit facility refinancing (see Note 8 of the unaudited consolidated financial statements), and the forgiveness of loans received under the Paycheck Protection Program ("PPP loan").
Results of Operations Six Months Ended
The following table sets forth certain statement of income items and as a
percentage of revenue, for the six months ended
23
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For the Six For the Six
Months Ended Months Ended
March 31, 2022 March 31, 2021
Select Data:
Revenue $ 144,864 $ 133,344
Cost of revenue 92,295 84,585
General and administrative expenses 27,311 24,844
Sales and marketing expenses 6,402 5,499
Operating income 18,856 18,416
Interest expense, net (1,875 ) (3,119 )
Provision for income taxes 6,483 4,678
Net income $ 21,904 $ 13,974
Adjusted EBITDA (a)
Retail business $ 8,813 $ 10,594
Flooring Manufacturing business 9,834 11,824
Steel Manufacturing business 4,672 2,531
Corporate and Other (964 ) (1,697 )
Total Adjusted EBITDA $ 22,355 $ 23,252
Adjusted EBITDA as a percentage of revenue
Retail business 18.8 % 22.8 %
Flooring Manufacturing business 15.0 % 18.7 %
Steel Manufacturing business 17.7 % 10.8 %
Corporate and Other -16.4 % -681.5 %
Consolidated adjusted EBITDA as a percentage
of revenue 15.4 % 17.4 %
(a) See reconciliation of net income to Adjusted EBITDA below.
The following table sets forth revenues by segment (in
For the Six Months Ended March 31, 2022 For the Six Months Ended March 31, 2021
Net % of Net % of Total
Revenue Total Revenue Revenue Total Revenue
Revenue
Retail
Movies, Music, Games and Other$ 46,731 32.3 %$ 45,725 34.3 % Appliances 221 0.2 % 648 0.5 % Flooring Manufacturing 65,644 45.3 % 63,194 47.4 % Steel Manufacturing 26,393 18.2 % 23,528 17.6 % Corporate and Other 5,875 4.1 % 249 0.2 % Total Revenue$ 144,864 100.0 %$ 133,344 100.0 %
The following table sets forth gross profit earned by segment and gross profit
as a percentage of total revenue for each segment (in
For the Six Months Ended March 31, For the Six Months Ended March 31,
2022 2021
Gross Gross
Gross Profit % of Gross Profit % of
Profit Total Revenue Profit Total Revenue
Gross Profit
Retail
Movies, Music, Games and Other $ 24,403 52.2 % $ 24,729 54.1 %
Appliances 97 43.9 % 288 44.4 %
Flooring Manufacturing 17,609 26.8 % 18,347 29.0 %
Steel Manufacturing 7,867 29.8 % 5,156 21.9 %
Corporate and Other 2,593 44.1 % 239 96.0 %
Total Gross Profit $ 52,569 36.3 % $ 48,759 36.6 %
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Revenue
Revenue increased approximately$11.5 million , or 8.6%, to$144.9 million for the six months endedMarch 31, 2022 , as compared to the corresponding prior year period. The increase is primarily attributable to the increased revenue in Corporate and Other of approximately$5.6 million , the Steel Manufacturing Segment of approximately$2.9 million , and the Flooring Manufacturing segment of approximately$2.5 million . The increase in revenue for Corporate and Other is primarily due to the consolidation of SW Financial in fiscal 2021. The increase in revenue in the Steel Manufacturing and Flooring Manufacturing segments was primarily due to increased customer demand, as well as the passing on of product cost increases to customers. Cost of Revenue Cost of revenue increased by 9.1% to approximately$92.3 million for the six months endedMarch 31, 2022 , as compared to approximately$84.6 million for the six months endedMarch 31, 2021 . The increase is primarily attributable to the increases in revenues.
General and Administrative Expense
General and Administrative expenses increased by 9.9% to approximately$27.3 million for the six months endedMarch 31, 2022 , as compared to the six months endedMarch 31, 2021 , primarily due to increases in employee compensation and related costs as a result of our Retail segment opening new locations.
Selling and Marketing Expense
Selling and marketing expense increased by 16.4% to approximately$6.4 million for the six months endedMarch 31, 2022 , as compared to the six months endedMarch 31, 2021 , primarily due to increased convention and trade show activity, which was largely canceled during COVID, as well as compensation associated with the Marquis sales force. Interest Expense, net Interest expense, net, decreased by 39.9% to approximately$1.9 million for the six months endedMarch 31, 2022 , as compared to the six months endedMarch 31, 2021 . The decrease is primarily due to the payoff of debt and related debt discount, favorable interest rates obtained from Precision's credit facility refinancing (see Note 8 of the unaudited consolidated financial statements), and the forgiveness of loans received under the Paycheck Protection Program ("PPP loan").
Results of Operations by Segment
For the Three Months Ended March 31, 2022 For the Three Months Ended March 31, 2021
Flooring Steel Corporate Flooring Steel Corporate
Retail Manufacturing Manufacturing and Other Total Retail Manufacturing Manufacturing and Other Total
Revenue $ 20,741 $ 32,772 $ 14,027 $
2,166
$ 122 $ 70,890 Cost of Revenue 9,631 24,192 9,775 1,155 44,753 11,033 22,950 10,413 4 44,400 Gross Profit 11,110 8,580 4,252 1,011 24,953 12,970 10,022 3,380 118 26,490 General and
Administrative
Expense 7,888 1,586 1,395 2,285 13,154 7,700 1,609 1,441 1,815 12,565 Selling and Marketing Expense 90 3,119 138 3 3,350 199 2,402 197 2 2,800 Operating Income (Loss)$ 3,132 $ 3,875 $ 2,719 $
(1,277 )
$ (1,699 ) $ 11,125 Retail Segment Segment results for Retail include Vintage Stock andApplianceSmart . Revenue for the three months endedMarch 31, 2022 decreased by approximately$3.3 million , or 14%, as compared to the prior year, primarily due to additional stimulus payments and timely tax refunds received by our Retail segment customer base during the second quarter of 2021, that allowed for more discretionary consumer spending at our Vintage Stock locations. Additionally, sales byApplianceSmart continued to decrease, primarily due to increased competition. Cost of revenue decreased proportionately with the decrease in revenue. Operating income for the three months endedMarch 31, 2022 was approximately$3.1 million , as compared to operating income of approximately$5.1 million for the prior year period. 25 --------------------------------------------------------------------------------
Flooring Manufacturing Segment
Segment results for Flooring Manufacturing includes Marquis. Revenue for the three months endedMarch 31, 2022 decreased by approximately$200,000 , or 1%, as compared to the prior year period, primarily due to reduced customer demand. Cost of revenue for the three months endedMarch 31, 2022 increased, as compared to the prior year period, primarily due to increases in raw material costs. Sales and marketing expenses increased by approximately$717,000 for the three months endedMarch 31, 2022 primarily due to increased convention and trade show activity, as well as increased compensation associated with the Marquis sales force. Operating income for the three months endedMarch 31, 2022 was approximately$3.9 million , as compared to operating income of approximately$6.0 million for the prior year period.
Steel Manufacturing Segment
Segment results for Steel Manufacturing includes Precision Marshall. Revenue for the three months endedMarch 31, 2022 increased by approximately$234,000 , or 2%, as compared to the prior year period, primarily due to increased sales prices resulting from rising costs. Cost of revenue for the three months endedMarch 31, 2022 decreased, as compared to the prior year period, as a percentage of sales due to improved manufacturing efficiencies and increased revenue due to price increases. Operating income for the three months endedMarch 31, 2022 was approximately$2.7 million , as compared to operating income of approximately$1.7 in the prior period. The increase in operating income is primarily due to an increase in gross profit.
Corporate and Other Segment
Segment results for Corporate and Other includes our directory services business and our investment in SW Financial. Revenues for the three months endedMarch 31, 2022 increased by$2.0 million primarily due to the addition of SW Financial as a VIE during fiscal 2021. Cost of revenue for the three months endedMarch 31, 2022 increased proportionately with revenue for the reason stated. Operating loss for the three months endedMarch 31, 2022 was approximately$1.3 million , as compared to a loss of approximately$1.7 million in the prior period. Revenues and operating income for our directory services business continue to decline due to decreasing renewals. We expect revenue and operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory services business. We anticipate revenues from our investment in SW Financial to trend upward in the future For the Six Months Ended March 31, 2022 For the Six Months Ended March 31, 2021 Flooring Steel Corporate Flooring Steel Corporate Retail Manufacturing Manufacturing
and Other Total Retail Manufacturing Manufacturing and Other Total Revenue
$ 46,952 $ 65,644 $ 26,393 $
5,875
$ 249 $ 133,344 Cost of Revenue 22,452 48,035 18,526 3,282 92,295 21,356 44,847 18,372 10 84,585 Gross Profit 24,500 17,609 7,867 2,593 52,569 25,017 18,347 5,156 239 48,759
General and
Administrative
Expense 16,342 3,225 3,216 4,528 27,311 15,120 3,550 2,968 3,206 24,844 Selling and Marketing Expense 216 5,901 278 7 6,402 333 4,636 302 228 5,499 Operating Income (Loss)$ 7,942 $ 8,483 $ 4,373 $
(1,942 )
$ (3,195 ) $ 18,416 Retail Segment Segment results for Retail include Vintage Stock andApplianceSmart . Revenue for the six months endedMarch 31, 2022 increased by approximately$579,000 , or 1%, as compared to the prior year, primarily due to increased retail pricing and additional locations added at Vintage Stock, offset by decreasing sales byApplianceSmart , primarily due to decreases in sales resulting from increased competition. Retail price increases were primarily due to higher product costs relating to inflationary pressures that were passed on to customers. Retail sales at our Vintage Stock locations during the six months endedMarch 31, 2022 were impacted by the lack of stimulus payments and timely tax refunds customers received during the six months endedMarch 31, 2021 . Cost of revenue increased due to changes in product mix, as well as other inflationary pressures. Operating income for the six months endedMarch 31, 2022 was approximately$7.9 million , as compared to operating income of approximately$9.6 million for the prior year period. 26 --------------------------------------------------------------------------------
Flooring Manufacturing Segment
Segment results for Flooring Manufacturing includes Marquis. Revenue for the six months endedMarch 31, 2022 increased by approximately$2.5 million , or 4%, as compared to the prior year period, primarily due to greater demand for various grades of flooring, as well increases in sales prices. The shift in demand in flooring grades was generally toward higher priced product. Sales price increases were primarily due to higher product costs relating to inflationary pressures that were passed on to customers. Cost of revenue for the six months endedMarch 31, 2022 increased primarily due to increases in raw material costs, as compared to the prior year period. Sales and marketing expenses increased by approximately$1.3 million for the six months endedMarch 31, 2022 primarily due to increased convention and trade show activity, as well as increased compensation associated with the Marquis sales force. Operating income for the six months endedMarch 31, 2022 was approximately$8.5 million , as compared to operating income of approximately$10.2 million for the prior year period.
Steel Manufacturing Segment
Segment results for Steel Manufacturing includes Precision Marshall. Revenue for the six months endedMarch 31, 2022 increased by$2.9 million , or 12%, as compared to the prior year period, primarily due to increased sales prices resulting from rising costs. Cost of revenue for the six months endedMarch 31, 2022 increased moderately, as compared to the prior year period, as a percentage of sales due to improved manufacturing efficiencies and increased revenue due to price increases. Operating income for the six months endedMarch 31, 2022 was approximately$4.4 million , as compared to operating income of approximately$1.9 in the prior period. The increase in operating income is primarily due to an increase in gross profit.
Corporate and Other Segment
Results for Corporate and Other includes our directory services business and our investment in SW Financial. Revenues for the six months endedMarch 31, 2022 increased by$5.6 million primarily due to the addition of SW Financial as a VIE during fiscal 2021. Cost of revenue for the six months endedMarch 31, 2022 increased proportionately with revenue due to inflationary pressures and the consolidation of SW Financial inJune 2021 . Operating loss for the six months endedMarch 31, 2022 was approximately$1.9 million , as compared to a loss of approximately$3.2 million in the prior period. Revenues and operating income for our directory services business continue to decline due to decreasing renewals. We expect revenue and operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory services business. We anticipate revenues from our investment in SW Financial to trend upward in the future.
Adjusted EBITDA Reconciliation
The following tables present a reconciliation of Adjusted EBITDA from net income
for the three and six months ended
For the Three Months Ended For the Six Months Ended
March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021
Net income $ 15,358 $ 8,695 $ 21,904 $ 13,974
Depreciation and
amortization 1,496 1,706 3,045 3,420
Stock-based
compensation 19 270 37 287
Interest expense,
net 858 1,649 1,875 3,119
Income tax expense 3,523 3,228 6,483 4,678
Gain on bankruptcy
settlement (11,362 ) (1,115 ) (11,352 ) (1,115 )
Gain/loss on
extinguishment of
debt 363 (1,382 ) 363 (1,382 )
Non-recurring loan
costs - 271 - 271
Adjusted EBITDA $ 10,255 $ 13,322 $ 22,355 $ 23,252
27-------------------------------------------------------------------------------- Adjusted EBITDA decreased by approximately$3.1 million , or 23%, for the three months endedMarch 31, 2022 , as compared to the prior year period. The decrease is primarily due to decreases in revenue and increases in SG&A expenses, as discussed above. Adjusted EBITDA decreased by approximately$900,000 , or 4%, for the six months endedMarch 31, 2022 , as compared to the prior year period. The decrease is primarily due to increases in cost of revenue and increases in SG&A expenses, as discussed above.
Liquidity and Capital Resources
As ofMarch 31, 2022 , we had total cash on hand of approximately$6.2 million and approximately$31.8 million of available borrowing under our revolving credit facilities. As we continue to pursue acquisitions and other strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities. The amount, nature, and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and, overall market conditions. Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to do the following: fund our operations; pay our scheduled loan payments; ability to repurchase shares under our share buyback program; and, pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors, for at least the next 12 months. Working Capital We had working capital of approximately$53.0 million as ofMarch 31, 2022 , as compared to working capital of approximately$33.8 million as ofSeptember 30, 2021 ; an increase of approximately$19.2 million . The increase is primarily due to increases in cash and inventories of approximately$10.1 million , and decreases in debtor-in-possession liabilities and accrued liabilities of approximately$16.1 million , partially offset by increases in accounts payable and the current portion of long-term debt of approximately$7.9 million .
Cash Flows from Operating Activities
The Company's cash, as ofMarch 31, 2022 , was approximately$6.2 million compared to approximately$4.7 million as ofSeptember 30, 2021 , an increase of approximately$1.5 million . Net cash provided by operations was approximately$5.3 million for the six months endedMarch 31, 2022 , as compared to net cash provided by operations of approximately$20.9 million for the six months endedMarch 31, 2021 . The decrease was primarily due to purchases of inventory, as well as payments on accrued liabilities. Our primary sources of cash inflows are from customer receipts from sales on account, factored accounts receivable proceeds, receipts for securities sales commissions, and net remittances from directory services customers processed in the form of ACH billings. Our most significant cash outflows include payments for raw materials and general operating expenses, including payroll costs and general and administrative expenses that typically occur within close proximity of expense recognition.
Cash Flows from Investing Activities
Our cash flows used in investing activities of approximately$7.5 million for the six months endedMarch 31, 2022 consisted of purchases of property and equipment. Our cash flows used in investing activities of approximately$5.5 million for the six months endedMarch 31, 2021 consisted of purchases of property and equipment.
Cash Flows from Financing Activities
Our cash flows provided by financing activities of approximately$3.8 million during the six months endedMarch 31, 2022 consisted of proceeds from notes payable of approximately$9.0 million , and approximately$4.9 million in net proceeds under revolver loans, partially offset by payments of notes payable and financing leases of approximately$8.1 million , and purchases of treasury stock in the amount of approximately$2.1 million . Our cash flows used in financing activities of approximately$12.5 million during the six months endedMarch 31, 2021 consisted of payments on notes payable and related notes payable of approximately$9.9 million , net borrowings under revolver loans of approximately$4.6 million , and purchases of treasury stock in the amount of approximately$383,000 , partially offset by the issuance of notes payable of approximately$2.3 million associated with the acquisition of a facility by Marquis. 28 -------------------------------------------------------------------------------- Currently, we are not issuing common shares for liquidity purposes. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically. Occasionally, as our Company history has demonstrated, we will issue stock and derivative instruments linked to stock for services or debt settlement.
Future Sources of Cash; New Products and Services
We may require additional debt financing or capital to finance new acquisitions,
refinance existing indebtedness or other strategic investments in our business.
Other sources of financing may include stock issuances and additional loans; or
other forms of financing. Any financing obtained by us may further dilute or
otherwise impair the ownership interest of our existing stockholders.
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