The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31,
2016 AND 2015
Note 1: Background and Basis of Presentation
The accompanying condensed consolidated
financial statements include the accounts of Live Ventures, Incorporated, a Nevada corporation, and its subsidiaries (collectively
the “Company”). Commencing in fiscal year 2015, the Company began a strategic shift in its business plan away from
providing online marketing solutions for small and medium business to acquiring profitable companies in various industries that
have demonstrated a strong history of earnings power. The company continues to actively develop, revise and evaluate its products,
services and its marketing strategies in its businesses. The Company has three operating segments Manufacturing, Retail and Online
– (our new name for - Marketplace Platform segment) and Services. Under the Live Ventures brand the Company seeks opportunities
to acquire profitable and well-managed companies. The Company believes that with the proper positioning and its investment capital
these companies can become very profitable. With its acquisition of Marquis Industries, Inc., the Company became engaged in the
manufacture and sale of carpet and the sale of vinyl and wood floorcoverings. With its acquisition of Vintage Stock, Inc., the
Company has expanded its engagement in the retail space with the sale of new and used movies, music, collectibles, comics, books,
games, game systems and components.
The accompanying unaudited Condensed Consolidated
Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles
(“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, 2016 are not necessarily indicative of the results
to be expected for the fiscal year ending September 30, 2017. The accompanying note disclosures related to the interim financial
information included herein are also unaudited. This financial information should be read in conjunction with the consolidated
financial statements and related notes thereto as of September 30, 2016 and for the fiscal year then ended included in the Company’s
Annual Report on Form 10-K filed with the SEC on December 29, 2016.
All data for common stock, options and
warrants have been adjusted to reflect the 1-for-6 reverse stock split (which took effect on December 5, 2016) for all periods
presented. In addition, all common stock prices, and per share data for all periods presented have been adjusted to reflect the
1-for-6 reverse stock split.
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying
condensed consolidated financial statements represent the consolidated financial position, results of operations and cash flows
of Live Ventures Incorporated and its wholly-owned subsidiaries. In addition, o
n July 6, 2015, The Company acquired 80%
of Marquis Industries, Inc. and subsidiaries (“Marquis”). The results of Marquis have been included in the consolidated
financial statements of the Company since that date. Effective November 30, 2015, the Company acquired the remaining 20% of Marquis.
On November 3, 2016, the Company acquired 100% of Vintage Stock, Inc. through is newly formed, wholly-owned subsidiary, Vintage
Stock Affiliated Holdings LLC. All intercompany transactions and balances have been eliminated in consolidation.
Non-Controlling Interest
On July 6, 2015, the Company, through Marquis
Affiliated Holdings, LLC, a wholly owned subsidiary of the Company, acquired 80% interest in Marquis. The transaction was accounted
for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets
acquired and liabilities assumed.
The Company follows Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “
Consolidation,
”
which governs the accounting for and reporting of non-controlling interests (“NCI’s”) in partially owned consolidated
subsidiaries and the loss control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI’s
be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership
interest that leave control intact be treated as an equity transaction rather than as step acquisitions or dilution gains or losses,
and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might results in
a deficit balance. This standard also required changes to certain presentation and disclosure requirements.
The net income (loss) attributed to the
NCI is separately designated in the accompanying consolidated statements of operations. Losses attributable to the NCI in a subsidiary
may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those
interests. The NCI shall continue to attribute its share of losses, if applicable, even if that attribution results in a deficit
NCI balance.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumption
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and 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 estimate of dilution and fees associated with billings, the
estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete
inventory, estimated forfeiture rates for stock-based compensation, fair values in connection with the analysis of goodwill, other
intangibles and long-lived assets for impairment, current portion of notes payable, valuation allowance against deferred tax assets
and estimated useful lives for intangible assets and property and equipment.
Financial Instruments
Financial instruments consist primarily
of cash equivalents, trade and other receivables, advances to affiliates and obligations under accounts payable, accrued expenses
and notes payable. The carrying amounts of cash equivalents, trade receivables and other receivables, accounts payable, accrued
expenses and notes payable approximate fair value because of the short maturity of these instruments.
Cash and Cash Equivalents
Cash and Cash equivalents consist of highly
liquid investments with a maturity of three months or less at the time of purchase. Fair value of cash equivalents approximates
carrying value.
Trade and Other Receivables
The Company grants trade credit to customers
under credit terms that it believes are customary in the industry it operates and does not require collateral to support customer
trade receivables. Some of the Company’s trade receivables are factored primarily through two factors. Factored trade receivables
are sold without recourse for substantially all of the balance receivable for credit approved accounts. The factor purchases the
trade receivable(s) for the gross amount of the respective invoice(s), less factoring commissions, trade and cash discounts. The
factor charges the Company a factoring commission for each trade account, which is between 0.75-1.00% of the gross amount of the
invoice(s) factored on the date of the purchase, plus interest calculated at 3.25%-6% per annum. The minimum annual commission
due the factor is $75,000 per contract year. The total amount of trade receivables factored was $8,280,697 and $7,985,899 for three
months ended December 31, 2016 and 2015, respectively.
Reserve for Doubtful Accounts
The Company maintains a reserve for doubtful
accounts, which includes reserves for accounts and factored trade and other receivables, customer refunds, dilution and fees from
local exchange carrier billing aggregators and other uncollectible accounts. The reserve for doubtful accounts is based upon historical
bad debt experience and periodic evaluations of the aging and collectability of the trade and other receivables. This reserve is
maintained at a level which the Company believes is sufficient to cover potential credit losses and trade and other receivables
are only written off to bad debt expense as uncollectible after all reasonable collection efforts have been made. The Company has
also purchased accounts receivable credit insurance to cover non-factored trade and other receivables which helps reduce potential
losses due to doubtful accounts. At December 31, 2016 and September 30, 2016, the allowance for doubtful accounts was $1,161,500
and $1,161,434, respectively.
Inventories
Manufacturing Segment
Inventories are valued at the lower of
the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost
of inventory with its market value and an allowance is made to write down inventory to market value, if lower. Management also
reviews inventory to determine if excess or obsolete inventory is present and a reserve is made to reduce the carrying value for
inventory for such excess and or obsolete inventory. At December 31, 2016 and September 30, 2016, the reserve for obsolete inventory
was $91,940 and $91,940, respectively.
Retail and Online Segment
Merchandise Inventories are valued at the
lower of cost or market generally using the average cost method. Under the average cost method, as new product is received from
vendors, its current cost is added to the existing cost of product on-hand and this amount is re-averaged over the cumulative units.
Pre-owned products traded in by customers are recorded as merchandise inventory for the amount of cash consideration or store credit
less any premiums given to the customer. Management reviews the merchandise inventory to make required adjustments to reflect potential
obsolescence or over-valuation as a result of cost exceeding market. In valuing merchandise inventory, management considers quantities
on hand, recent sales, potential price protections, returns to vendors and other factors. Management’s ability to assess
these factors is dependent upon forecasting customer demand and to provide a well-balanced merchandise assortment. Merchandise
Inventory valuation is adjusted based on anticipated physical inventory losses or shrinkage and actual losses resulting from periodic
physical inventory counts. Merchandise inventory reserves as of December 31, 2016 and September 30, 2016 were $2,490,405 and $1,013,870,
respectively.
Property and Equipment
Property and Equipment are stated at cost
less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred and additions and improvements
that significantly extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost
and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets ranging from three to forty years. Depreciation
expense was $870,516 and $487,901 for the three months ended December 31, 2016 and 2015, respectively.
We periodically review our property and
equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation
or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with
respect to our stores and those stores projected undiscounted cash flows. An impairment loss would be recognized for the amount
by which the carrying amount of the assets exceeds their fair value, as approximated by the present value of their projected discounted
cash flows.
Goodwill and Intangibles
The Company accounts for
purchased goodwill and intangible assets in accordance with ASC 350,
Intangibles—Goodwill and Other
. Under ASC
350, purchased goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on
at least an annual basis. Goodwill represents the excess of purchase price over the underlying net assets of business acquired.
Intangible assets with finite lives are amortized over their useful lives. Upon acquisition, critical estimates are made in valuing
acquired intangible assets, which include but are not limited to: future expected cash flows from customer contracts, customer
lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the
period of time that customer relationships will continue; and discount rates. Management's estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from the assumptions used in determining the fair values.
The Company assesses whether
goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining
whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects not to perform a qualitative
assessment, a quantitative assessment is performed using a two-step approach required by ASC 350 to determine whether a goodwill
impairment exists.
The first
step of the quantitative test is to compare the carrying amount of the reporting unit's assets to the fair value of the reporting
unit. If the fair value exceeds the carrying value, no further evaluation is required and no impairment loss is recognized. If
the carrying amount exceeds the fair value, then the second step is required to be completed, which involves allocating the fair
value of the reporting unit to each asset and liability using the guidance in ASC 805 (“
Business Combinations, Accounting
for Identifiable Intangible Assets in a Business Combination
”), with the excess being applied
to goodwill. An impairment loss occurs if the amount of the recorded goodwill exceeds the implied goodwill. The determination of
the fair value of our reporting units is based, among other things, on estimates of future operating performance of the reporting
unit being valued. We are required to complete an impairment test for goodwill and record any resulting impairment losses at least
annually. Changes in market conditions, among other factors, may have an impact on these estimates and require interim impairment
assessments.
When performing the two-step
quantitative impairment test, the Company's methodology includes the use of an income approach which discounts future net cash
flows to their present value at a rate that reflects the Company's cost of capital, otherwise known as the discounted cash flow
method ("DCF"). These estimated fair values are based on estimates of future cash flows of the businesses. Factors affecting
these future cash flows include the continued market acceptance of the products and services offered by the businesses, the development
of new products and services by the businesses and the underlying cost of development, the future cost structure of the businesses,
and future technological changes. The Company also incorporates market multiples for comparable companies in determining the fair
value of our reporting units. Any such impairment would be recognized in full in the reporting period in which it has been identified.
Revenue Recognition
Manufacturing Segment
The Manufacturing Segment derives revenue
primarily from the sale of carpet products; including shipping and handling amounts, which are recognized when the following criteria
are met: there is persuasive evidence that a sales agreement exists, delivery has occurred or services have been rendered, the
price to the buyer is fixed or determinable, and collectability is reasonably assured. Delivery is not considered to have occurred
until the customer takes title to the goods and assumes the risks and rewards of ownership, which is generally on the date of shipment.
At the time revenue is recognized, the Company records a provision for the estimated amount of future returns based primarily on
historical experience and any known trends or conditions that exist at the time revenue is recognized. Revenues are recorded net
of taxes collected from customers.
Retail and Online Segment
The Retail and Online Segment derives product
revenue primarily from in-store, direct online and fulfillment partner sales of new and used products.
In-Store product revenue is recognized
when the following revenue recognition criteria are met: the sales price is fixed or determinable, collection is reasonably assured
and the customer takes possession of the merchandise. Revenue from the sales or our products is recognized at the time of sale,
net of sales discounts and net of an estimated sales return reserve, based on historical return rates.
We provide customers with the opportunity
to trade in used merchandise in exchange for cash consideration or merchandise credit. Merchandise inventory is recorded at a cost
equal to the cash offered to the customer. If a customer chooses merchandise credit, credit is issued for the amount of the cash
offer plus a premium. Premiums associated with merchandise credit issued as a result of trade in transactions are recorded as expense
in the period in which the credits are issued. Customer liabilities and other deferred revenues for our gift cards and customer
credits are included in Accrued Liabilities.
Currently, all direct online and fulfillment
partner product revenue is recorded on a gross basis, as the Company is the primary obligor.
In addition, the Retail and Online Segment
derives revenue from its sales through its strategic publishing partners of discounted goods and services offered by its merchant
clients (“Deals”) when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred,
the price to the buyer is fixed or determinable, and collectability is reasonably assured. These criteria are met when the number
of customers who purchase the daily deal exceeds the predetermined threshold, where, if applicable, the Deal has been electronically
delivered to the purchaser and a listing of Deals sold has been made available to the merchant. At that time, the Company’s
remaining obligations to the merchant, for which it is serving as an agent, are substantially complete. The Company’s remaining
obligations, which are limited to remitting payment to the merchant, are inconsequential or perfunctory. The Company recognizes
revenue in an amount equal to the net amount it retains from the sale of Deals after paying an agreed upon percentage of the purchase
price to the featured merchant excluding any applicable taxes. Revenue is recorded on a net basis because the Company is acting
as an agent of the merchant in the transaction.
The Company evaluates the criteria outlined
in ASC Topic 605-45,
Principal Agent Considerations
, in determining whether it is appropriate to record the gross amount
of product sales and related costs or the net amount earned as commissions. When the Company is the primary obligor in a transaction,
is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these
indicators, revenue is recorded gross. If the Company is not the primary obligor in the transaction and amounts earned are determined
using a fixed percentage, revenue is recorded on a net basis.
Revenues do not include sales taxes or
other taxes collected from customers.
Services Segment
The Services Segment recognizes revenue
from directory subscription services as billed for and accepted by the customer. Directory services revenue is billed and recognized
monthly for directory services subscribed. The Company has utilized outside billing companies to perform direct ACH withdrawals.
For billings via ACH withdrawals, revenue is recognized when such billings are accepted by the customer. Customer refunds are recorded
as an offset to gross Services Segment revenue.
Revenue for billings to certain customers
that are billed directly by the Company and not through outside billing companies is recognized based on estimated future collections
which are reasonably assured. The Company continuously reviews this estimate for reasonableness based on its collection experience.
Shipping and Handling
The Company classifies shipping and handling
charged to customers as revenues and classifies costs relating to shipping and handling as cost of revenues.
Legal Expense
The Company expenses legal costs associated
with loss contingencies as incurred.
Customer Liabilities
The Company establishes a liability upon
the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards
are redeemed. In addition, breakage is recognized quarterly on unused customer liabilities older that two years to the extent that
our management believes the likelihood of redemption by the customer is remote, based on historical redemption patterns. To the
extent that future redemption patterns differ from those historically experienced, there will be variations in the recorded breakage.
Breakage is recorded in other income and expense in our consolidated financial statements.
Fair Value Measurements
ASC Topic 820, “Fair Value Measurements
and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC topic 825, “Financial
Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2
– to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Income Taxes
Income taxes are accounted for using the
asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance would be
provided for those deferred tax assets for which if it is more-likely-than-not that the related benefit will not be realized. The
Company classifies tax-related penalties and interest as a component of income tax expense for financial statement presentation.
Lease Accounting
We lease retail stores, warehouse facilities
and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates
through 2022 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 rentals and require us to pay all insurance, taxes and other maintenance
costs. Leases with step rent provisions, escalation clauses or other lease concessions are accounted for on a straight-line basis
over the lease term, which includes renewal option periods when we are reasonably assured of exercising the renewal options and
includes “rent holidays” (periods in which we are not obligated to pay rent). Cash or lease incentives received upon
entering into certain store leases (“tenant improvement allowances”) are recognized on a straight-line basis as a reduction
to rent expense over the lease term, which includes renewal option periods when we are reasonably assured of exercising the renewal
options. We record the unamortized portion of tenant improvement allowances as a part of deferred rent. We do not have leases with
capital improvement funding. Percentage rentals are based on sales performance in excess of specified minimums at various stores
and are accounted for in the period in which the amount of percentage rentals can be accurately estimated.
Stock-Based Compensation
The company from time to time grants restricted
stock awards and options to employees, non-employees and company executives and directors. Such awards are valued based on the
grant date fair-value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line
basis over the vesting period.
Earnings (Loss) Per Share
Earnings (Loss) per share is calculated
in accordance with ASC 260, “
Earnings Per share
”. Under ASC 260 basic net earnings (loss) per share is computed
using the weighted average number of common shares outstanding during the period except that it does not include unvested restricted
stock subject to cancellation. Diluted net Earnings (Loss) per share is computed using the weighted average number of common shares
and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common
shares issuable upon the exercise of warrants, options, restricted shares and convertible preferred stock. The dilutive effect
of outstanding restricted shares, options and warrants is reflected in diluted earnings (loss) per share by application of the
treasury stock method. Convertible preferred stock is reflected on an if-converted basis.
Segment Reporting
ASC Topic 280, “
Segment Reporting
,”
requires use of the “management approach” model for segment reporting. The management approach model is based on the
way a company’s management organizes segments within the company for making operating decisions and assessing performance.
The Company determined it has three reportable segments (See Note 16).
Derivative Financial Instruments
The Company evaluates all of its agreements
to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based
derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value stock-based
derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative
instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within 12 months of the balance sheet date. There were no derivative financial instruments as of December
31, 2016 and September 30, 2016, respectively.
Reclassifications
Certain amounts in the prior year consolidated
financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect
on the previously reported net income or stockholders’ equity.
Recently Issued Accounting Pronouncements
In March 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-08,
Revenue from Contracts
with customers
. The standard addresses the implementation guidance on principal versus agent considerations in the new revenue
recognition standard. The ASI clarifies how an entity should identify the unit of accounting (i.e. the specified good or service)
for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The ASU
is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017, with early adoption
permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-04,
Recognition of Breakage for Certain Prepaid Stored-Value Products
. The standard specifies how prepaid stored-value product
liabilities should be derecognized, thereby eliminating the current and potential future diversity in practice. The ASU is effective
for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. We
are currently evaluating the impact that this standard will have on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02,
Leases
. The standard requires a lessee to recognize a liability to make lease payments and a right-of-use asset representing
a right to use the underlying asset for the lease term on the balance sheet. The ASU is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact
that this standard will have on our consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes
. The standard amends the current requirement for organizations to present
deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organization will now be
required to classify all deferred tax assets and liabilities as noncurrent. The ASU is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company early adopted this standard
during the fourth quarter of fiscal 2016, utilizing retrospective applications as permitted. As such, prior period amounts have
been retrospectively adjusted to conform to the current presentation.
In September 2015, the FASB issued ASU
2015-06,
Simplifying the Accounting for Measurement-period Adjustments
. Under this standard, an acquirer in a business combination
must recognize measurement-period adjustments during the period in which the acquirer determines the amounts, including the effect
on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition
date, as opposed to retrospectively. This guidance is effective for fiscal years beginning after December 15, 2015 with early adoption
permitted. The Company early adopted this standard during the fourth quarter of fiscal 2016.
In July 2015, the FASB issued ASU 2015-11,
Simplifying the Measurement of Inventory
. This standard changes the measurement principle for inventory from the lower of
cost or market to the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in
the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This standard is
effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We do not
anticipate that adoption of this standard will have a material impact to our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs
. This standard requires that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2015, with
early application permitted. This standard will be applied retrospectively, and we do not expect the adoption of this standard
to materially impact our consolidated financial statements.
In May 2014, the FASB issued Accounting
Standards Update No. 2014-09,
Revenue from Contracts with Customers
ASU 2014-09, which supersedes nearly all existing revenue
recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods
or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates
may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for
annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods:
(i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to
elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09
recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. In August,
2015, the FASB issued ASU No. 2015-04,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
.
The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities,
certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting
periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted
only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting
period. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements
and has not yet determined the method by which it will adopt the standard.
Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated
financial statements.
Note 3: Balance
Sheet Detail Information
Balance Sheet information is as follows:
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
Trade and other receivables, current, net:
|
|
|
|
|
|
|
|
|
Accounts receivable, current
|
|
$
|
9,168,430
|
|
|
$
|
9,151,663
|
|
Less: Reserve for doubtful accounts
|
|
|
(816,928
|
)
|
|
|
(816,862
|
)
|
|
|
$
|
8,351,502
|
|
|
$
|
8,334,801
|
|
Trade and other receivables , long term, net:
|
|
|
|
|
|
|
|
|
Accounts receivable, long term
|
|
$
|
344,572
|
|
|
$
|
344,572
|
|
Less: Reserve for doubtful accounts
|
|
|
(344,572
|
)
|
|
|
(344,572
|
)
|
|
|
$
|
–
|
|
|
$
|
–
|
|
Total trade and other receivables, net:
|
|
|
|
|
|
|
|
|
Gross trade and other receivables
|
|
$
|
9,513,002
|
|
|
$
|
9,496,235
|
|
Less: Reserve for doubtful accounts
|
|
|
(1,161,500
|
)
|
|
|
(1,161,434
|
)
|
|
|
$
|
8,351,502
|
|
|
$
|
8,334,801
|
|
|
|
|
|
|
|
|
|
|
Components of reserve for doubtful accounts are as follows:
|
|
|
|
|
|
|
|
|
Reserve for dilution and fees on amounts due from billing aggregators
|
|
$
|
1,063,617
|
|
|
$
|
1,063,617
|
|
Reserve for customer refunds
|
|
|
1,230
|
|
|
|
1,230
|
|
Reserve for other trade receivables
|
|
|
96,653
|
|
|
|
96,587
|
|
|
|
$
|
1,161,500
|
|
|
$
|
1,161,434
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
6,314,767
|
|
|
$
|
6,664,286
|
|
Work in progress
|
|
|
932,267
|
|
|
|
773,238
|
|
Finished goods, includes merchandise
|
|
|
27,783,437
|
|
|
|
4,721,371
|
|
|
|
|
35,030,471
|
|
|
|
12,158,895
|
|
Less: Inventory reserves
|
|
|
(2,582,345
|
)
|
|
|
(1,105,810
|
)
|
|
|
$
|
32,448,126
|
|
|
$
|
11,053,085
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net:
|
|
|
|
|
|
|
|
|
Land and improvements
|
|
$
|
–
|
|
|
$
|
0
|
|
Building and improvements
|
|
|
6,780,959
|
|
|
|
6,780,959
|
|
Transportation equipment
|
|
|
77,419
|
|
|
|
77,419
|
|
Machinery and equipment
|
|
|
14,788,368
|
|
|
|
10,211,565
|
|
Furnishings and fixtures
|
|
|
1,817,153
|
|
|
|
192,701
|
|
Office, computer equipment and other
|
|
|
965,903
|
|
|
|
216,793
|
|
|
|
|
24,429,802
|
|
|
|
17,479,437
|
|
Less: Accumulated depreciation
|
|
|
(4,335,452
|
)
|
|
|
(3,464,936
|
)
|
|
|
$
|
20,094,350
|
|
|
$
|
14,014,501
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net:
|
|
|
|
|
|
|
|
|
Domain name and marketing related intangibles
|
|
$
|
18,957
|
|
|
$
|
18,957
|
|
Website and software related intangibles
|
|
|
1,401,078
|
|
|
|
–
|
|
Customer Relationships intangible
|
|
|
439,039
|
|
|
|
439,039
|
|
Purchased software
|
|
|
1,500,000
|
|
|
|
1,500,000
|
|
|
|
|
3,359,074
|
|
|
|
1,957,996
|
|
Less: Accumulated amortization
|
|
|
(329,703
|
)
|
|
|
(268,206
|
)
|
|
|
$
|
3,029,371
|
|
|
$
|
1,689,790
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Accrued payroll and bonuses
|
|
$
|
756,539
|
|
|
$
|
685,410
|
|
Accrued software costs
|
|
|
–
|
|
|
|
584,500
|
|
Accrued fee due Kingston Diversified Holdings LLC
|
|
|
–
|
|
|
|
2,800,000
|
|
Accrued expenses - other
|
|
|
6,033,279
|
|
|
|
2,326,862
|
|
|
|
$
|
6,789,818
|
|
|
$
|
6,396,772
|
|
Note 4: Acquisition
Vintage Stock Inc.
On November 3, 2016 (the “Closing
Date”), Live Ventures Incorporated (“Live Ventures”), through its newly formed, wholly-owned subsidiary, Vintage
Stock Affiliated Holdings LLC (“VSAH”), entered into a series of agreements in connection with its purchase of Vintage
Stock, Inc., a Missouri corporation (“Vintage Stock”). Vintage Stock is a retailer that sells buys and trades new and
used movies, books, collectibles, games, comics, music and other retail products.
Total consideration was $57,653,698. The
following table summarizes our preliminary allocation of the consideration and the respective fair values of the assets acquired
and liabilities assumed in the Vintage Stock acquisition as of the closing date:
Cash and cash equivalents
|
|
$
|
342,798
|
|
Trade and other receivables
|
|
|
113,500
|
|
Inventory
|
|
|
20,160,092
|
|
Prepaid expenses and other current assets
|
|
|
860,453
|
|
Property and equipment
|
|
|
2,084,246
|
|
Intangible - Software
|
|
|
1,401,078
|
|
Goodwill
|
|
|
39,066,061
|
|
Notes payable
|
|
|
(542,074
|
)
|
Accounts payable
|
|
|
(3,843,510
|
)
|
Accrued expenses
|
|
|
(1,988,946
|
)
|
Purchase price
|
|
$
|
57,653,698
|
|
The preliminary purchase price allocation
is subject to change. We will complete its analysis to determine the fair value of inventory, prepaid expenses and other current
assets, property and equipment, notes payable and accrued expenses on the acquisition date. Once this analysis is complete, we
will adjust, if necessary, the provisional amounts assigned to inventory, prepaid expenses and other current assets, property and
equipment, notes payable and accrued expenses in the accounting period in which the analysis is completed.
In connection with the purchase of Vintage,
we incurred bank fees of $15,000, appraisal fees of $20,497, legal fees of $192,339 and consulting fees of $119,774 – for
a total of $347,610 in one-time expenses; all of which was recorded as general and administrative expense in the three months ended
December 31, 2016.
The operating results of VSAH and Vintage
Stock have been included in our unaudited condensed consolidated financial statements beginning on November 3, 2016 and are reported
in our Retail and Online segment.
Note 5: Goodwill and other Intangibles
The Company’s intangible assets consist
of goodwill, customer relationships intangible, licenses for the use of internet domain names, Universal Resource Locators, or
URL’s, software, and marketing and technology related intangibles. All such assets are capitalized at their original cost
and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 5
years, customer relationships – 15 years. Goodwill is not amortized, but evaluated for impairment on at least an annual basis.
The following summarizes estimated future
amortization expense related to intangible assets that have net balances as of December 31, 2016:
2017
|
|
$
|
711,596
|
|
2018
|
|
|
710,581
|
|
2019
|
|
|
710,581
|
|
2020
|
|
|
243,555
|
|
2021
|
|
|
243,555
|
|
Thereafter
|
|
|
409,503
|
|
|
|
$
|
3,029,371
|
|
Note 6: Notes Payable
Bank of America Revolver Loan
On July 6, 2015, Marquis entered into a
$15 million credit agreement with Bank of America (“BofA Revolver”). The Bank of America Revolver is a five-year, asset-based
facility that is secured by substantially all of Marquis assets. Availability under the Bank of America Revolver is subject to
a monthly borrowing base calculation.
Payment obligations under the BofA Revolver
include monthly payments of interest and all outstanding principal and accrued interest thereon due in July 2020, which is when
the BofA Revolver loan agreement terminates.
Borrowing availability under the BofA Revolver
is limited to a borrowing base which allows Marquis to borrow up to 85% of eligible accounts receivable, plus the lessor of 1)
$7,500,000; 2) 65% of the value of eligible inventory; or 3) 85% of the appraisal value of the eligible inventory. For purposes
of clarity and definition of the advance rate for inventory – it shall be 55.3% for raw materials, 0% for work-in-process
and 70% for finished goods subject to eligibility, special reserves and advance limit. 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.
Marquis’s ability to make prepayments
against Marquis subordinated debt including the related party loan with ICG and pay cash dividends is generally permitted if 1)
excess availability under the BofA Revolver is more than $4 million, and is projected to be within 12 months after such payment
and 2) excess availability under the BofA Revolver is more than $4 million, and the fixed charge coverage ratio, as calculated
on a pro-forma basis for the prior 12 months is 1.25:1.0 or greater. Restrictions apply to our ability to make additional prepayments
against Marquis subordinated debt and pay cash dividends if the fixed charge coverage ratio, as calculated on a pro-forma basis
for the prior 12 months is less than 1.25:1.0 and excess availability under the BofA Revolver is less than $4 million at the time
of payment or distribution.
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 Bank of America Revolver Loan bears
interest at a variable rate based on a base rate plus a margin. The current base rate is the greater of (a) Bank of America prime
rate, (b) the current federal funds rate plus 0.50%, or (c) 30-day LIBOR plus 1.00% plus the margin, which varies, depending on
the fixed coverage ratio table below. Levels I – IV determine the interest rate to be charged Marquis which is based on the
fixed charge coverage ratio achieved.
Level
|
Fixed Charge Coverage Ratio
|
Base Rate Revolver
|
LIBOR Revolver
|
Base Rate Term
|
LIBOR Term Loans
|
I
|
>2.00 to 1.00
|
0.50%
|
1.50%
|
0.75%
|
1.75%
|
II
|
<2.00 to 1.00 but >1.50 to 1.00
|
0.75%
|
1.75%
|
1.00%
|
2.00%
|
III
|
<1.50 to 1.00 but >1.20 to 1.00
|
1.00%
|
2.00%
|
1.25%
|
2.25%
|
IV
|
<1.2 to 1.00
|
1.25%
|
2.25%
|
1.50%
|
2.50%
|
On October 20, 2016, it was agreed that
Level IV interest rates would be applicable until October 20, 2017, and then the Level would be adjusted up or down on a quarterly
basis going forward based upon the above fixed coverage ratio achieved by Marquis.
The BofA Revolver provides for customary
events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply
with covenants, change in control of Marquis, a material representation or warranty made by us or the borrowers proving to be false
in any material respect, certain bankruptcy, insolvency or receivership events affecting Marquis or its subsidiaries, defaults
relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Marquis or certain of
its subsidiaries. During the period of October 1, 2016 through December 31, 2016, Marquis cumulatively borrowed $26,850,312 and
repaid $24,281,897 under the BofA Revolver. Our maximum borrowings outstanding during the same period were $7,770,651. Our weighted
average interest rate on those outstanding borrowings for the period of October 1, 2016 through December 31, 2016 was 3.43%. As
of December 31, 2016, total additional availability under the BofA Revolver was $8,350,120; with $2,791,005 outstanding, and outstanding
standby letters of credit of $70,000.
Real Estate Transaction
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 $10,000,000,
which consisted of $644,479 from the sale of the land and a note payable of $9,355,521. 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 an option to extend
the lease upon the expiration of its term. The initial annual lease rate is $59,614. The proceeds from this transaction were used
to pay down the Bank of America Revolver and Term loans, and related party loan, as well as purchasing a building from the previous
owners of Marquis that was not purchased in the July 2015 transaction. The note payable bears interest at 9.25% 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 un-paid. At the end of 5 years, there is no
pre-payment penalty. In connection with the note payable, Marquis incurred $457,757 in transaction costs that are being recognized
as a debt issuance cost that is being amortized and recorded as interest expense over the term of the note payable.
Kingston Diversified Holdings LLC Agreement
($2 Million Line of Credit)
On December 21, 2016, the Company and Kingston
Diversified Holdings LLC (“Kingston”) entered into an agreement modifying its agreement between the parties. This agreement,
effective September 15, 2016, memorializes an October 2015 interim agreement to extend the maturity date by twelve months for 55,888
shares of to be issued and certificated Series B Convertible Preferred shares with a value on September 15, 2016 of $2,800,000
as a compromise between the parties in respect of certain of their respective rights and duties under the agreement. The agreement
also decreases the maximum principal amount of the Notes from $10,000,000 in principal amount to $2,000,000 in principal amount,
and eliminates any and all actual, contingent, or other obligations of the Company to issue to the Purchaser any shares of the
Company’s common stock, or to grant any rights, warrants, options, or other derivatives that are exercisable or convertible
into shares of the Company’s common stock.
Kingston acknowledges that from the effective
date through and including December 31, 2021, it shall not sell, transfer, assign, hypothecate, pledge, margin, hedge, trade, or
otherwise obtain or attempt to obtain any economic value from any of the shares or any shares into which they may be converted
or from which they may be exchanged. As a result of this agreement, the Company recorded $2,800,000 as an outstanding accrued liability
as of September 30, 2016. As of December 31, 2016 and September 30, 2016, the Company had no borrowings on the Kingston line of
credit. On December 29, 2016 the Company issued 55,888 shares of Series B Convertible Preferred shares in settlement of the outstanding
accrued liability due Kingston of $2,800,000.
Equipment Loans
On June 20, 2016 and August 5, 2016, Marquis
entered into a transaction which provided for a master agreement and separate loan schedules (“the Equipment Loans”)
with Banc of America Leasing & Capital, LLC which provided:
Note #1 is $5 million,
secured by equipment. The Equipment Loan #1 is due September 23, 2021, payable in 59 monthly payments of $84,273 beginning September
23, 2016, with a final payment in the sum of $584,273, interest at 3.8905% per annum.
Note #2 is $2,209,807,
secured by equipment. The Equipment Loan #2 is due January 30, 2022, payable in 59 monthly payments of $34,768 beginning January
30, 2017, with a final payment in the sum of $476,729, interest at 4.63% per annum.
Note is $3,679,514
which has been funded under the master agreement conditions as of December 31, 2016, but is not finalized or executed as an individual
note as of December 31, 2016, secured by equipment. The Equipment Loan is interest only until finalized, at the same variable interest
rate as the BofA Revolver loan. This Note is being recorded as a long-term liability. Banc of America Leasing & Capital, LLC
is waiting for delivery to Marquis and final acceptance of the equipment prior to executing the Note.
Texas Capital Bank Revolver Loan
On November 3, 2016, Vintage Stock entered
into a $20 million credit agreement with Texas Capital Bank (“TCB Revolver”). The TCB Revolver is a five-year, asset-based
facility that is secured by substantially all of Vintage Stock’s assets. Availability under the TCB Revolver is subject to
a monthly borrowing base calculation.
Payment obligations under the TCB Revolver
include monthly payments of interest and all outstanding principal and accrued interest thereon due in November 2020, which is
when the TCB Revolver loan agreement terminates.
Borrowing availability under the TCB Revolver
is limited to a borrowing base which allows Vintage Stock to borrow up to 95% of the appraisal value of the inventory, plus 85%
of eligible receivables, net of certain reserves. The borrowing base provides for borrowing up to 95% of the appraisal value for
the period of November 4, 2016 through December 31, 2016, then 90% of the appraisal value during the fiscal months of January through
September and 92.5% of the appraisal value during the fiscal months of October through December. Letters of credit reduce the amount
available to borrow under the TCB Revolver by an amount equal to the face value of the letters of credit.
Vintage Stock’s ability to make prepayments
against Vintage Stock subordinated debt including the Capitala Term Loan and pay cash dividends is generally permitted if 1) excess
availability under the TCB Revolver is more than $2 million, and is projected to be within 12 months after such payment and 2)
excess availability under the TCB Revolver is more than $2 million, and the fixed charge coverage ratio, as calculated on a pro-forma
basis for the prior 12 months is 1.2:1.0 or greater. Restrictions apply to our ability to make additional prepayments against Vintage
subordinated debt including the Capitala Term Loan and pay cash dividends if the fixed charge coverage ratio, as calculated on
a pro-forma basis for the prior 12 months is less than 1.2:1.0 and excess availability under the TCB Revolver is less than $2 million
at the time of payment or distribution.
The TCB Revolver places certain restrictions
on Vintage Stock, including a limitation on asset sales, a limitation of 25 new leases in any fiscal year, additional liens, investment,
loans, guarantees, acquisitions and incurrence of additional indebtedness.
The per annum interest rate under the TCB
Revolver is variable and is equal to the one-month LIBOR rate for deposits in United States Dollars that appears on Thomson Reuters
British Bankers Association LIBOR Rates Page (or the successor thereto) as of 11:00 a.m., London, England time, on the applicable
determination date plus a margin of 2.75%.
The TCB Revolver provides for customary
events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply
with covenants, change in control of Vintage Stock, a material representation or warranty made by us or the borrowers proving to
be false in any material respect, certain bankruptcy, insolvency or receivership events affecting Vintage Stock, defaults relating
to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Vintage Stock. During the period
of November 3, 2016 through December 31, 2016, Vintage Stock cumulatively borrowed $22,327,059 and repaid $10,839,375 under the
TCB Revolver. Our maximum borrowings outstanding during the same period were $13,545,684. Our weighted average interest rate on
those outstanding borrowings for the period of November 3, 2016 through December 31, 2016 was 3.32288%. As of December 31, 2016,
total additional availability under the TCB Revolver was $4,172,481, with $11,487,684 outstanding; and outstanding standby letters
of credit of $0. In connection with the TCB Revolver, Vintage incurred $25,000 in transaction cost that is being recognized as
debt issuance cost that is being amortized and recorded as interest expense over the term of the TCB Revolver.
Capitala Term Loan
On November 3, 2016, Live Ventures Incorporated
(“Live Ventures”), through its newly formed, wholly-owned subsidiary, Vintage Stock Affiliated Holdings LLC (“VSAH”),
entered into a series of agreements in connection with its purchase of Vintage Stock, Inc., a Missouri corporation (“Vintage
Stock”). As a part of those agreements, VSAH and Vintage Stock, Inc. (the “Term Loan Borrowers”) obtained $29,871,650
of mezzanine financing from the Lenders as defined in the Term Loan Agreement (the “Term Loan Lenders”), Capitala Private
Credit Fund V, L.P., in its capacity as lead arranger. Wilmington Trust, National Association, acts as administrative and collateral
agent on behalf of the Term Loan Lenders (the “Term Loan Administrative Agent”). In addition, the Term Loan Borrowers
paid $810,000 of debt issuance cost to the Term Loan Lenders which is being amortized to interest expense over the sixty month
term of the Term Loan Agreement.
The Term loans under the Term Loan Agreement
(collectively the “Capitala Term Loan”) bear interest at the LIBO rate (as described below) or base rate, plus an applicable
margin in each case. In their loan notice to the Term Loan Administrative Agent, the Term Loan Borrowers selected the LIBO rate
for the initial term loans made under the Term Loan Agreement on the Closing Date.
The interest rate for LIBO rate loans under
the Term Loan Agreement is equal to the sum of (a) the greater of (i) a rate per annum equal to (A) the offered rate for deposits
in United States Dollars for the applicable interest period and for the amount of the applicable loan that is a LIBOR loan that
appears on Bloomberg ICE LIBOR Screen (or any successor thereto) that displays an average ICE Benchmark Administration Limited
Interest Settlement Rate for deposits in United States Dollars (for delivery on the first day of such interest period) with a term
equivalent to such interest period, determined as of approximately 11:00 a.m. (London time) two business days prior to the
first day of such interest period, divided by (B) the sum of one minus the daily average during such interest period of the aggregate
maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the FRB for “Eurocurrency Liabilities”
(as defined therein), and (ii) 0.50% per annum,
plus
(b) the sum of (i) 12.50% per annum in cash pay
plus
(ii)
3.00% per annum payable in kind by compounding such interest to the principal amount of the obligations under the Term Loan Agreement
on each interest payment date.
The interest rate for base rate loans under
the Term Loan Agreement is equal to the sum of (a) the highest of (with a minimum of 1.50%) (i) the federal funds rate plus 0.50%,
(ii) the prime rate, and (iii) the LIBO rate plus 1.00%,
plus
(b) the sum of (i) 11.50% per annum payable in cash
plus
(ii)
3.00% per annum payable in kind by compounding such interest to the principal amount of the obligations under the Term Loan Agreement
on each interest payment date.
The payment obligations under the Term
Loan Agreement include (i) monthly payments of interest and (ii) principal installment payments in an amount equal to $725,000
due on March 31, June 30, September 30, and December 31 of each year, with the first such payment due on December 31, 2016. The
outstanding principal amounts of the term loans and all accrued interest thereon under the Term Loan Agreement are due and payable
in November 2021.
The Term Loan Borrowers may prepay the
term loans under the Term Loan Agreement from time to time, subject to the payment (with certain exceptions described below) of
a prepayment premium of: (i) an amount equal to 2.0% of the principal amount of the term loan prepaid if prepaid during the period
of time from and after the Closing Date up to the first anniversary of the Closing Date; (ii) 1.0% of the principal amount of the
term loan prepaid if prepaid during the period of time from and after the first anniversary of the Closing Date up to the second
anniversary of the Closing Date; and (iii) zero if prepaid from and after the second anniversary of the Closing Date.
The Term Loan Borrowers may make the following
prepayments of the term loans under Term Loan Agreement without being required to pay any prepayment premium:
|
(i)
|
an amount not to exceed $3 million of the term loans;
|
|
|
|
|
(ii)
|
in addition to any amount prepaid in respect of item (i), an additional amount not to exceed $1.45
million, but only if that additional amount is paid prior to the first anniversary of the Closing Date; and
|
|
|
|
|
(iii)
|
in addition to any amount prepaid in respect of item (i), an additional amount not to exceed the
difference between $2.9 million and any amount prepaid in respect of item (ii), but only if that additional amount is paid from
and after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date.
|
There are also various mandatory prepayment
triggers under the Term Loan Agreement, including in respect of excess cash flow, dispositions, equity and debt issuances, extraordinary
receipts, equity contributions, change in control, and failure to obtain required landlord consents. Our weighted average interest
rate on our Capitala Term Loan outstanding borrowings for the period of November 3, 2016 through December 31, 2016 was 16.07507%.
In connection with the Capitala Term Loan, Vintage incurred $1,088,000 in transaction cost that is being recognized as debt issuance
cost that is being amortized and recorded as interest expense over the term of the Capitala Term Loan.
Sellers Subordinated Acquisition Note
In connection with the purchase of Vintage
Stock, Inc., on November 3, 2016, VSAH and Vintage Stock entered into a seller financed mezzanine loan in the amount of $10 million
with the previous owners of Vintage Stock, Inc. The Sellers Subordinated Acquisition Note bears interest at 8% per annum, with
interest payable monthly in arrears. The Sellers Subordinated Acquisition Note matures five years and six months from November
3, 2016.
We are currently in compliance with all
covenants under our existing revolving and other loan agreements.
Notes Payable as of December 31, 2016 and
September 30, 2016 consisted of the following:
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2016
|
|
Bank of America Revolver Loan - variable interest rate based upon a base rate plus a margin,interest payable monthly, maturity date July 2020, secured by substantially all Marquis assets
|
|
$
|
2,791,005
|
|
|
$
|
222,590
|
|
Texas Capital Bank Revolver Loan - variable interest
rate based upon the one-month LIBOR rate plus a margin, interest payable monthly, maturity date November 2020, secured
by substantially all Vintage Stock assets
|
|
|
11,487,684
|
|
|
|
–
|
|
Note Payable Capitala Term Loan - variable interest rate
based upon a base rate plus a margin, 3% per annum interest payable in kind, with the balance of interest payable monthly in
cash, principal due quarterly in the amount of $725,000, maturity date November
2021, note subordinate to Texas Capital Bank Revolver Loan, secured by Vintage Stock Assets
|
|
|
29,427,451
|
|
|
|
–
|
|
Note Payable to the Sellers of Vintage Stock, interest
at 8% per annum, with interest payable monthly, maturity date May 2022, note subordinate to both Texas Capital Bank
Revolver and Capitala Term Loan, secured by Vintage Stock Assets
|
|
|
10,000,000
|
|
|
|
–
|
|
Note #1 Payable to Banc of America Leasing & Capital
LLC - interest at 3.8905% per annum, with interest and principal payable monthly in the amount of $84,273 for 59
months, beginning September 23, 2016, with a final payment due in the amount of
$584,273, maturity date September 2021, secured by equipment
|
|
|
4,726,422
|
|
|
|
4,931,937
|
|
Note #2 Payable to Banc of America Leasing & Capital
LLC - interest at 4.63% per annum, with interest and principal payable monthly in the amount of $34,768 for 59
months, beginning January 30, 2017, with a final payment due in the amount of
$476,729, maturity date January 2022, secured by equipment
|
|
|
2,209,807
|
|
|
|
–
|
|
Note Payable to Banc of America Leasing & Capital
LLC - variable interest rate, based upon a base rate plus a margin, interest payable monthly, note is funded but not executed
as of December 31, 2016
|
|
|
3,679,514
|
|
|
|
–
|
|
Note Payable to Store Capital Acquisitions, LLC, -
interest at 9.25% per annum, with interest and principal payable monthly in the amount of $73,970 for 480
months, beginning July 1, 2016, maturity date of June 2056, secured by Marquis land and
buildings
|
|
|
9,346,102
|
|
|
|
9,351,796
|
|
Note Payable to Cathay Bank, variable interest rate,
Prime Rate plus 2.25%, with interest payable monthly, maturity date December 2017, secured by substantially
all Modern Everyday assets
|
|
|
193,134
|
|
|
|
198,569
|
|
Note Payable to Cathay Bank, variable interest rate,
Prime Rate plus 1.50%, with interest payable monthly, maturity date December 2017, secured by substantially
all Modern Everyday assets
|
|
|
249,765
|
|
|
|
249,765
|
|
Note payable to individual, interest at 11% per annum,
payable on a 90 day written notice, unsecured
|
|
|
206,529
|
|
|
|
206,529
|
|
Note payable to individual, interest at 10% per annum,
payable on a 90 day written notice, unsecured
|
|
|
500,000
|
|
|
|
500,000
|
|
Note payable to individual, interest at 8.25% per
annum, payable on a 120 day written demand notice, unsecured
|
|
|
225,000
|
|
|
|
225,000
|
|
Total debt
|
|
|
75,042,413
|
|
|
|
15,886,186
|
|
Less unamortized debt issuance costs
|
|
|
(1,528,889
|
)
|
|
|
(414,025
|
)
|
Net amount
|
|
|
73,513,524
|
|
|
|
15,472,161
|
|
Less current portion
|
|
|
(6,226,454
|
)
|
|
|
(1,789,289
|
)
|
Long-term portion
|
|
$
|
67,287,070
|
|
|
$
|
13,682,872
|
|
Future maturities of debt at December 31,
2016 are as follows which includes related party debt separately stated:
2017
|
|
$
|
6,226,454
|
|
2018
|
|
|
4,932,015
|
|
2019
|
|
|
5,015,359
|
|
2020
|
|
|
7,893,210
|
|
2021
|
|
|
33,775,615
|
|
Thereafter
|
|
|
19,199,760
|
|
Note 7: Note Payable, Related Party
In connection with the purchase of Marquis
by the Company, Marquis entered into a mezzanine loan in the amount of up to $7,000,000 with Isaac Capital Fund, a private lender
whose managing member is Jon Isaac, the Chief Executive Officer of the Company.
The Isaac Capital Fund mezzanine loan bears
interest at 12.5% with payment obligations of interest each month and all principal due in January 2021. As of December 31, 2016
and September 30, 2016, there was $2,000,000 outstanding on this mezzanine loan.
Note 8: Stockholders’ Equity
Series B Convertible Preferred Stock
On December 27, 2016 the Company established
a new series of preferred stock, convertible Series B preferred stock. The shares, as a series, are entitled to dividends on our
Common Stock as declared by the Board of Directors, subject to a $1.00 (in the aggregate for all then-issued and outstanding shares
of Series B Convertible Preferred Stock). The series does not have any redemption rights or Stock basis, except as otherwise required
by the Nevada Revised Statutes. The series does not provide for any specific allocation of seats on the Board of Directors. At
any time and from time to time, the shares of Series B Convertible Preferred Stock; are convertible into shares of Common Stock
at a ratio of one series B preferred share into five common shares, subject to equitable adjustment in the event of forward stock
splits and reverse stock splits.
The holders of shares of the Series B Convertible
Stock have agreed not to sell transfer, assign, hypothecate, pledge, margin, hedge, trade, or otherwise obtain or attempt to obtain
any economic value from any of such shares or any shares into which they may be converted (e.g. Common Stock) or for which they
may be exchanged. This “lockup” agreement expires on December 31, 2021. Our Warrant Agreements with ICG have been amended
to provide that the shares underlying those warrants are exercisable into shares of Series B Convertible Preferred Stock, which
warrant shares are also subject to the same “lockup” agreement as the currently outstanding shares of Series B Convertible
Preferred Stock.
During the three months ended December
31, 2016, the Company issued:
55,888 shares of series B convertible preferred
stock were issued to Kingston Diversified Holdings LLC on December 29, 2016 to settle and pay for an outstanding accrued liability
in the amount of $2,800,000.
158,356 shares of Series B convertible
preferred stock were issued to Isaac Capital Group (“ICG”) on December 27, 2016 in exchange for 791,765 shares of our
common stock at an exchange ratio of (five) shares of common stock for each share of Series B convertible preferred stock.
Series E Convertible Preferred Stock
Pursuant to an existing tender offer, holders
of 2,197 shares of the Company’s common stock exchanged said shares for 127,840 shares of series E convertible preferred
stock, at the then $5.10 market value of the common stock. The shares carry a $0.30 per share liquidation preference and accrue
dividends at the rate of 5% per annum on the liquidation preference per share, payable quarterly from legally available funds.
If such funds are not available, dividends shall continue to accumulate until they can be paid from legally available funds. Holders
of the preferred shares are entitled, after two years from issuance, to convert them into common shares on a one-to-one basis together
with payment of $85.50 per converted share.
Series E Convertible Preferred Stock
Dividends
During the three months ended December
31, 2016 and December 31, 2015, the Company accrued dividends of $479 and $479, respectively, payable to holders of Series E preferred
stock. As of December 31, 2016 and September 30, 2016 unpaid dividends were $479 and $959, respectively.
Common Stock
On November 22, 2016, the Company’s
board of directors authorized a one-for-six reverse stock split and a contemporaneous one-for-six (1:6) reduction in the number
of authorized shares of common stock, par value $0.001 per share from 60,000,000 to 10,000,000 shares, to take effect for stockholders
of record as of December 5, 2016. No fractional shares will be issued.
All share, option and warrant related information
presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the decreased number
of shares resulting in this action.
During the three months ended December
31, 2016, the Company issued:
58,334 of common stock were issued to Novalk
Apps S.A.S. on December 28, 2016 to settle and pay for an outstanding accrued liability in the amount of $584,500. The value was
based on the market value of the Company’s common stock on the date of issuance.
During the three months ended December
31, 2015, the Company issued:
796 shares of common stock for services
rendered at $7,500. The value was based on the market value of the Company’s common stock on the date of issuance.
Treasury Stock
For year ended September 30, 2016, the
Company purchased 30,122 shares of its common stock on the open market (treasury shares) for $300,027. The Company accounted for
the purchase of these treasury shares using the cost method. There were no purchases of common stock by the Company on the open
market in the three months ended December 31, 2016 and 2015, respectively.
2014 Omnibus Equity Incentive Plan
On January 7, 2014, our Board of Directors
adopted the 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which authorizes issuance of distribution equivalent
rights, incentive stock options, non-qualified stock options, performance stock, performance units, restricted ordinary shares,
restricted stock units, stock appreciation rights, tandem stock appreciation rights and unrestricted ordinary shares to our directors,
officer, employees, consultants and advisors. The Company has reserved up to 300,000 shares of common stock for issuance under
the 2014 Plan. As required under Nasdaq Listing rule 5635(c), the company included a proposal at its 2014 Annual Meeting of Stockholders,
which was held on July 11, 2014, to obtain approval of the 2014 Plan. The 2014 Plan was approved.
Note 9: Series B Convertible Preferred Stock Warrants
The Company issued several notes in prior
periods and converted them resulting in the issuance of warrants. The following table summarizes information about the Company’s
warrants at December 31, 2016:
|
|
Number of
units - Series B
Convertible
preferred
warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
|
|
Intrinsic Value
|
|
Outstanding at September 30, 2016
|
|
|
118,029
|
|
|
$
|
20.80
|
|
|
|
1.73
|
|
|
$
|
4,307,493
|
|
Granted
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
118,029
|
|
|
$
|
20.80
|
|
|
|
1.48
|
|
|
$
|
11,719,727
|
|
Exercisable at December 31, 2016
|
|
|
118,029
|
|
|
$
|
20.80
|
|
|
|
1.48
|
|
|
$
|
11,719,727
|
|
Most of the above warrants were issued
in connection with the conversion of convertible notes from Isaac Capital Group. When the debts were converted and warrants were
issued; the Company determined the fair value of the warrants using the Black-Scholes-Merton model and took a charge to interest
expense at the date of issuance.
On December 27, 2016, ICG and the Company
agreed to amend and exchange the common stock warrants for warrants of series B convertible preferred shares, and the number of
warrants held adjusted by an exchange ratio of 5:1 common shares for series B convertible shares. ICG, the holder of the warrants
outstanding, is not permitted to sell, transfer, assign, hypothecate, pledge, margin, hedge, trade or otherwise obtain or attempt
to obtain any economic value from the series B convertible preferred shares should the warrants be exercised prior to December
31, 2021. All warrant related information presented in these condensed consolidated financial statements and accompanying footnotes
has been retroactively adjusted to reflect the conversion of all common stock warrants outstanding to series B convertible preferred
share warrants resulting in this action.
The exercise price for the warrants outstanding
and exercisable into series B convertible preferred shares at December 31, 2016 is as follows:
Series B Convertible Preferred
|
|
Outstanding
|
|
|
Exercisable
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
54,396
|
|
|
$
|
16.60
|
|
|
|
54,396
|
|
|
$
|
16.60
|
|
|
17,857
|
|
|
|
16.80
|
|
|
|
17,857
|
|
|
|
16.80
|
|
|
12,383
|
|
|
|
24.30
|
|
|
|
12,383
|
|
|
|
24.30
|
|
|
33,393
|
|
|
|
28.50
|
|
|
|
33,393
|
|
|
|
28.50
|
|
|
118,029
|
|
|
|
|
|
|
|
118,029
|
|
|
|
|
|
Note 10: Stock-Based Compensation
From time to time, the Company grants stock
options and restricted stock awards to directors, officers and employees. These awards are valued at the grant date by determining
the fair value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis
over the requisite service period.
Stock Options
The following table summarizes stock option activity for the
three months ended December 31, 2016:
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Remaining
|
|
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Contractual Life
|
|
|
Intrinsic Value
|
|
Outstanding at September 30, 2016
|
|
|
175,000
|
|
|
$
|
11.24
|
|
|
|
3.75
|
|
|
$
|
346,500
|
|
Granted
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
175,000
|
|
|
$
|
11.24
|
|
|
|
3.50
|
|
|
$
|
2,236,875
|
|
Exercisable at December 31, 2016
|
|
|
168,750
|
|
|
$
|
10.70
|
|
|
|
3.55
|
|
|
$
|
2,236,875
|
|
The Company recognized compensation expense
of $1,436 and $91,227 during the three months ended December 31, 2016 and 2015, respectively, related to stock option awards granted
to certain employees and officers based on the grant date fair value of the awards, net of estimated forfeitures.
At December 31, 2016 the Company had $2,217
of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects
will be recognized through June of 2017.
The exercise price for stock options outstanding
and exercisable at December 31, 2016 is as follows:
Outstanding
|
|
|
Exercisable
|
|
Number of
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
31,250
|
|
|
$
|
5.00
|
|
|
|
31,250
|
|
|
$
|
5.00
|
|
|
25,000
|
|
|
|
7.50
|
|
|
|
25,000
|
|
|
|
7.50
|
|
|
31,250
|
|
|
|
10.00
|
|
|
|
31,250
|
|
|
|
10.00
|
|
|
6,250
|
|
|
|
12.50
|
|
|
|
6,250
|
|
|
|
12.50
|
|
|
6,250
|
|
|
|
15.00
|
|
|
|
–
|
|
|
|
15.00
|
|
|
75,000
|
|
|
|
15.18
|
|
|
|
75,000
|
|
|
|
15.18
|
|
|
175,000
|
|
|
|
|
|
|
|
168,750
|
|
|
|
|
|
The following table summarizes information
about the Company’s non-vested shares as of December 31, 2016:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Grant-Date
|
|
Non-vested Shares
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested at September 30, 2016
|
|
|
6,250
|
|
|
$
|
14.22
|
|
Granted
|
|
|
–
|
|
|
|
|
|
Vested
|
|
|
–
|
|
|
|
|
|
Non-vested at December 31, 2016
|
|
|
6,250
|
|
|
$
|
14.22
|
|
No options were granted during 2016 and
2015, where the exercise price was less than the common stock price at the date of grant or where the exercise price was greater
than the common stock price at the date of grant.
The assumptions used in calculating the
fair value of stock options granted use the Black-Scholes option pricing model for options granted in 2015 were as follows:
Risk-free interest rate
|
1.01%
|
Expected life of the options
|
2.5 to 3.5 years
|
Expected volatility
|
140%
|
Expected dividend yield
|
0%
|
Note 11: Earnings Per Share
Net earnings per share is calculated using
the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average common shares
outstanding do not include shares of restricted stock that have not yet vested, although such shares are included as outstanding
shares in the Company’s Consolidated Balance Sheet. Diluted net earnings per share is computed using the weighted average
number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential common shares
consist of the additional common shares issuable in respect of restricted share awards, stock options and convertible preferred
stock. Preferred stock dividends are subtracted from net earnings to determine the amount available to common stockholders.
The following table presents the computation of basic and diluted
net earnings per share:
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to Live Ventures Incorporated
|
|
$
|
1,428,573
|
|
|
$
|
176,148
|
|
Less: preferred stock dividends
|
|
|
(479
|
)
|
|
|
(480
|
)
|
Net income (loss) applicable to common stock
|
|
$
|
1,428,094
|
|
|
$
|
175,668
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
1,999,983
|
|
|
|
2,817,516
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.71
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common stock
|
|
$
|
1,428,094
|
|
|
$
|
175,668
|
|
Add: preferred stock dividends
|
|
|
479
|
|
|
|
480
|
|
Net income (loss) applicable for diluted earnings (loss) per share
|
|
$
|
1,428,573
|
|
|
$
|
176,148
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
1,999,983
|
|
|
|
2,817,516
|
|
Add: Options
|
|
|
44,355
|
|
|
|
21,557
|
|
Add: Common Stock Warrants
|
|
|
–
|
|
|
|
342,868
|
|
Add: Series B Preferred Stock
|
|
|
1,071,200
|
|
|
|
–
|
|
Add: Series B Preferred Stock Warrants
|
|
|
590,145
|
|
|
|
–
|
|
Add: Series E Preferred Stock
|
|
|
127,840
|
|
|
|
127,840
|
|
Assumed weighted average common shares outstanding
|
|
|
3,833,523
|
|
|
|
3,309,782
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
0.37
|
|
|
$
|
0.05
|
|
Note 12: Related Party Transactions
During the three months ended December
31, 2016 and December 31, 2015, the Company recognized total interest expense of $62,500 and $196,973, respectively, associated
with the ICG notes.
The two outstanding Cathay Bank notes are
guaranteed by Tony Isaac, a director of the company.
Also see Notes 7, 8 and 9.
Note 13: Commitments and Contingencies
Litigation
The Company is party to certain legal proceedings
from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or
treble dames or non-monetary relief. The nature of legal proceedings is such that the Company cannot assure the outcome of any
particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial
position, results of operations and cash flows in the period which a ruling or settlement occurs. However, based on information
available to the Company’s management to date and other than as noted below, the Company’s management does not expect
that the outcome of any matter pending against us is likely to have a materially adverse effect on the Company’s consolidated
financial position as of December 31, 2016, results of operations, cash flows or liquidity of the Company.
Note 14: Income Taxes
The income tax rate for the three months
ended December 31, 2016 and December 31, 2015 was 37.1% and 57.9% respectively. The effective income tax rate differs than the
U.S. federal statuary rate primarily due to state taxes, goodwill impairment, and certain non-deductible expenses. As of December
31, 2016 and December 31, 2015 the Company had no uncertain tax positions. The Company is subject to taxation and files income
tax returns in the U.S., and various state jurisdictions. The Company is subject to audit for U.S. purposes for the current and
prior three years, and for state purposes the current and prior four years. The Company has net operating loss carry-forwards of
approximately $26.7M for U.S. income tax purposes, these net operating loss carryforwards are subject to IRC Section 382 limitations
and begin to expire in 2027.
Note 15: Concentration of Credit Risk
The Company maintains cash balances at
banks in California, Idaho, New Mexico, Colorado, Texas, Missouri, Nevada, Oklahoma, Illinois, Arkansas and Georgia. Accounts are
insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of December 31, 2016. At times, balances
may exceed federally insured limits.
Note 16: Segment Reporting
The Company operates in three segments
which are characterized as: (1) Manufacturing, (2) Retail and Online and (3) Services. The Manufacturing Segment consists of Marquis
Industries, the Retail and Online segment consists of Vintage Stock, Modern Everyday and LiveDeal.com, and the Services segment
consists of the directory services business.
The following tables summarize segment information for the three
months ended December 31, 2016 and 2015:
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Revenues
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
14,776,723
|
|
|
$
|
3,641,642
|
|
Manufacturing
|
|
|
17,187,534
|
|
|
|
16,190,030
|
|
Services
|
|
|
224,407
|
|
|
|
272,762
|
|
|
|
$
|
32,188,664
|
|
|
$
|
20,104,434
|
|
Gross profit
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
8,067,608
|
|
|
$
|
1,595,255
|
|
Manufacturing
|
|
|
4,363,293
|
|
|
|
4,553,674
|
|
Services
|
|
|
214,331
|
|
|
|
260,946
|
|
|
|
$
|
12,645,232
|
|
|
$
|
6,409,875
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
1,743,967
|
|
|
$
|
(903,805
|
)
|
Manufacturing
|
|
|
1,721,260
|
|
|
|
1,691,485
|
|
Services
|
|
|
213,841
|
|
|
|
259,572
|
|
|
|
$
|
3,679,068
|
|
|
$
|
1,047,252
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
228,431
|
|
|
$
|
68,276
|
|
Manufacturing
|
|
|
706,616
|
|
|
|
477,556
|
|
Services
|
|
|
–
|
|
|
|
0
|
|
|
|
$
|
935,047
|
|
|
$
|
545,832
|
|
Interest Expenses
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
1,079,306
|
|
|
$
|
66,907
|
|
Manufacturing
|
|
|
370,170
|
|
|
|
278,576
|
|
Services
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
1,449,476
|
|
|
$
|
345,483
|
|
Net income (loss) before provision for income taxes
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
851,110
|
|
|
$
|
(809,468
|
)
|
Manufacturing
|
|
|
1,206,531
|
|
|
|
1,274,763
|
|
Services
|
|
|
213,841
|
|
|
|
249,027
|
|
|
|
$
|
2,271,482
|
|
|
$
|
714,322
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2016
|
|
Total Assets
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
80,106,152
|
|
|
$
|
15,053,993
|
|
Manufacturing
|
|
|
40,162,883
|
|
|
|
38,333,437
|
|
Services
|
|
|
68,932
|
|
|
|
79,970
|
|
|
|
$
|
120,337,967
|
|
|
$
|
53,467,400
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
Retail and Online
|
|
$
|
2,634,236
|
|
|
$
|
1,287,338
|
|
Manufacturing
|
|
|
395,135
|
|
|
|
402,452
|
|
Services
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
3,029,371
|
|
|
$
|
1,689,790
|
|
Note 17: Subsequent Events
None.