Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2016 | Dec. 19, 2016 | Mar. 31, 2016 | |
OptionsToPurchaseSharesOfCommonStockMember | |||
Entity Registrant Name | LIVE VENTURES Inc | ||
Entity Central Index Key | 1,045,742 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 23,434,284 | ||
Entity Common Stock, Shares Outstanding | 2,847,636 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Assets | ||
Cash and cash equivalents | $ 770,895 | $ 2,727,818 |
Trade and other receivables, net | 8,334,801 | 8,243,992 |
Inventories, net | 11,053,085 | 13,335,598 |
Prepaid expenses and other current assets | 5,059,981 | 1,522,027 |
Total current assets | 25,218,762 | 25,829,435 |
Property and equipment, net | 14,014,501 | 12,481,901 |
Deposits and other assets | 19,765 | 36,090 |
Deferred taxes | 12,524,582 | 0 |
Intangible assets, net | 1,689,791 | 1,516,930 |
Goodwill | 0 | 800,000 |
Total assets | 53,467,400 | 40,664,356 |
Liabilities: | ||
Accounts payable | 5,402,654 | 5,536,796 |
Accrued liabilities | 6,396,772 | 3,660,949 |
Income tax payable | 0 | 376,000 |
Current portion of long term debt | 1,789,290 | 1,443,036 |
Total current liabilities | 13,588,716 | 11,016,781 |
Notes payable, net of current portion | 13,682,872 | 14,568,190 |
Note payable, related party | 2,000,000 | 6,495,825 |
Contingent consideration from business combination | 0 | 316,000 |
Total Liabilities | 29,271,588 | 32,396,796 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 127,840 shares issued and outstanding at September 30, 2016 and September 30, 2015, liquidation preference $38,352 | 10,866 | 10,866 |
Common stock, $0.001 par value, 10,000,000 shares authorized, 2,819,327 shares issued and 2,789,205 shares outstanding at September 30, 2016; 2,817,169 shares issued and 2,817,169 shares outstanding at September 30, 2015 | 2,819 | 2,817 |
Paid in capital | 53,319,217 | 52,965,036 |
Treasury stock (30,122 shares) | (300,027) | 0 |
Accumulated deficit | (28,837,063) | (46,665,003) |
Total Live Ventures stockholders' equity | 24,195,812 | 6,313,716 |
Noncontrolling interest | 0 | 1,953,844 |
Total equity | 24,195,812 | 8,267,560 |
Total liabilities and equity | $ 53,467,400 | $ 40,664,356 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Stockholders' equity: | ||
Series E convertible preferred stock, par value | $ 0.001 | $ 0.001 |
Series E convertible preferred stock, shares authorized | 200,000 | 200,000 |
Series E convertible preferred stock, issued | 127,840 | 127,840 |
Series E convertible preferred stock, outstanding | 127,840 | 127,840 |
Series E convertible preferred stock, liquidation preference | $ 38,352 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 2,819,327 | 2,817,169 |
Common stock, shares outstanding | 2,789,205 | 2,817,169 |
Treasury stock, shares | 30,122 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 78,954,247 | $ 33,369,866 |
Cost of revenues | 58,979,377 | 22,115,472 |
Gross profit | 19,974,870 | 11,254,394 |
Operating expenses: | ||
General and administrative expenses | 8,543,877 | 10,992,356 |
Sales and marketing expenses | 9,112,744 | 6,684,833 |
Impairment of intangible assets | 0 | 3,713,472 |
Total operating expenses | 17,656,621 | 21,390,661 |
Operating income (loss) | 2,318,249 | (10,136,267) |
Other income (expense): | ||
Interest expense, net | (4,020,547) | (4,485,661) |
Other income | 2,589,160 | 202,063 |
Bargain purchase gain on acquisition | 4,573,968 | 0 |
Gain on deriative liability | 0 | 83,580 |
Total other income (expense), net | 3,142,581 | (4,200,018) |
Income (loss) before provision for income taxes | 5,460,830 | (14,336,285) |
Current tax expense: | ||
Federal | 0 | 320,000 |
State | 31,361 | 56,000 |
Total Current tax expense | 31,361 | 376,000 |
Deferred tax expense | ||
Federal | (12,524,582) | 0 |
State | 0 | 0 |
Total Deferred Tax Expense | (12,524,582) | 0 |
Total provision (benefit) for income taxes | (12,493,221) | 376,000 |
Net income (loss) | 17,954,051 | (14,712,285) |
Net income (loss) attributed to noncontrolling interest | 124,194 | (46,156) |
Net income (loss) attributed to Live Ventures Incorporated | $ 17,829,857 | $ (14,666,129) |
Earnings (loss) per share - basic | $ 6.33 | $ (5.58) |
Earnings (loss) per share - diluted | $ 5.40 | $ (5.58) |
Weighted average common shares outstanding - basic | 2,815,072 | 2,627,636 |
Weighted average common shares outstanding - diluted | 3,303,698 | 2,627,636 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Preferred Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Total Equity [Member] | Noncontrolling Interest | Total |
Beginning balance, shares at Sep. 30, 2014 | 2,420 | 127,840 | ||||||
Beginning balance, value at Sep. 30, 2014 | $ 2,420,875 | $ 10,866 | $ 45,050,287 | $ 0 | $ (31,996,953) | $ 13,066,620 | $ 0 | $ 13,066,620 |
Series E preferred stock dividends | (1,921) | (1,921) | (1,921) | |||||
Stock based compensation | 712,538 | 712,538 | 712,538 | |||||
Repricing of stock option exercise price | 54,677 | 54,677 | 54,677 | |||||
Value of warrants issued with debt conversion | 1,853,473 | 1,853,473 | 1,853,473 | |||||
Beneficial conversion feature on convertible debt | 100,000 | 100,000 | 100,000 | |||||
Issuance of common stock for services, shares | 131,856 | |||||||
Issuance of common stock for services, value | $ 132 | 2,015,927 | 2,016,059 | 2,016,059 | ||||
Issuance of common stock for cash, shares | 25,833 | |||||||
Issuance of common stock for cash, value | $ 26 | 538,415 | 538,441 | 538,441 | ||||
Issuance of common stock for conversion of debt, shares | 133,563 | |||||||
Issuance of common stock for conversion of debt, value | $ 134 | 635,622 | 635,756 | 635,756 | ||||
Issuance of common stock for loan fees, shares | 105,042 | |||||||
Issuance of common stock for loan fees, value | $ 105 | 2,004,097 | 2,004,202 | 2,004,202 | ||||
Fair value of noncontrolling interest | 2,000,000 | 2,000,000 | ||||||
Purchase of noncontrolling interest | 0 | |||||||
Net income/loss | (14,666,129) | (14,666,129) | (46,156) | (14,712,285) | ||||
Ending balance, shares at Sep. 30, 2015 | 2,817,169 | 127,840 | ||||||
Ending balance, value at Sep. 30, 2015 | $ 2,817 | $ 10,866 | 52,965,036 | 0 | (46,665,003) | 6,313,716 | 1,953,844 | 8,267,560 |
Series E preferred stock dividends | (1,917) | (1,917) | (1,917) | |||||
Stock based compensation | 256,146 | 256,146 | 256,146 | |||||
Issuance of common stock for services, shares | 2,158 | |||||||
Issuance of common stock for services, value | $ 2 | 19,997 | 19,999 | 19,999 | ||||
Purchase of noncontrolling interest | 78,038 | 78,038 | (2,078,038) | (2,000,000) | ||||
Purchase of treasury stock | (300,027) | (300,027) | (300,027) | |||||
Net income/loss | 17,829,857 | 17,829,857 | 124,194 | 17,954,051 | ||||
Ending balance, shares at Sep. 30, 2016 | 2,819,327 | 127,840 | ||||||
Ending balance, value at Sep. 30, 2016 | $ 2,819 | $ 10,866 | $ 53,319,217 | $ (300,027) | $ (28,837,063) | $ 24,195,812 | $ 0 | $ 24,195,812 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING ACTIVITIES: | ||
Net income (loss) | $ 17,954,051 | $ (14,712,285) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 3,125,311 | 1,047,752 |
Non-cash interest expense associated with convertible debt and warrants | 4,749 | 2,198,003 |
Non-cash interest expense associated with loan fees | 2,801,732 | 2,004,202 |
Non-cash change in fair value of derivative liability | 0 | (83,580) |
Non-cash note and agreement reductions due to settlement | (962,941) | 0 |
Stock based compensation expense | 256,146 | 712,538 |
Repricing of stock option exercise price | 0 | 54,677 |
Non-cash issuance of common stock for services | 19,999 | 2,016,059 |
Provision for uncollectible accounts | 53,727 | 24,819 |
Non-cash write-down of inventory | 1,080,051 | 0 |
Reserve for obsolete inventory | 703,532 | 255,110 |
Change in deferred taxes | (12,524,582) | 0 |
Change in contingent liability | (316,000) | 0 |
(Gain) on Bargain purchase of acquisition | (4,573,968) | 0 |
(Gain) Loss on disposal of property and equipment | 71,670 | (104,966) |
Impairment of intangible assets | 0 | 3,713,472 |
Changes in assets and liabilities: | ||
Accounts receivable | (144,536) | (152,040) |
Prepaid expenses and other current assets | (3,423,650) | (124,550) |
Inventories | 1,578,981 | 1,913,796 |
Deposits and other assets | 16,325 | 29,071 |
Accounts payable | (134,142) | (885,921) |
Accrued liabilities | 851,323 | 700,442 |
Income tax payable | (376,000) | 376,000 |
Net cash provided by (used in) operating activities | 6,061,778 | (1,017,401) |
INVESTING ACTIVITIES: | ||
Acquisition of businesses, net of cash acquired | 0 | (5,503,056) |
Proceeds from the sale of property and equipment | 653,857 | 153,500 |
Expenditures for intangible assets | 0 | (64,820) |
Purchases of property and equipment | (1,376,685) | (151,937) |
Net cash used in investing activities | (722,828) | (5,566,313) |
FINANCING ACTIVITIES: | ||
Net borrowings under revolver loans | 1,739,825 | 0 |
Issuance of common stock for cash, net of issuance costs | 0 | 538,441 |
Payments on notes payable | (17,109,250) | (1,886,859) |
Payments on notes payable, related party | (4,495,825) | 0 |
Payments on debt issue costs | (415,757) | 0 |
Payments of preferred stock dividends | (1,917) | (1,921) |
Purchase of treasury stock | (300,027) | |
Contribution of noncontrolling interest | 0 | 1,200,000 |
Payment for the purchase of the noncontrolling interest | (2,000,000) | 0 |
Proceeds from issuance of notes payable | 15,287,078 | 1,247,185 |
Proceeds from issuance of convertible debt | 0 | 100,000 |
Net cash provided by (used in) financing activities | (7,295,873) | 1,196,850 |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (1,956,923) | (5,386,864) |
CASH AND CASH EQUIVALENTS, beginning of period | 2,727,818 | 8,114,682 |
CASH AND CASH EQUIVALENTS, end of period | 770,895 | 2,727,818 |
Supplemental cash flow disclosures: | ||
Interest paid | 1,247,659 | 24,312 |
Income taxes paid | 466,000 | 0 |
Non-cash changes in Fair Value of Assets Acquired - Marquis Industries | ||
Goodwill | (800,000) | 0 |
Intangible - Customer Relationships | 439,039 | 0 |
Inventory | 1,080,051 | 0 |
Prepaid expenses | 114,304 | 0 |
Machinery & Equipment | 2,659,104 | 0 |
Buildings & Land | 1,081,470 | 0 |
Total Non-cash changes in Fair Value of Assets Acquired - Marquis Industries | 4,573,968 | 0 |
Recognition of contingent beneficial conversion feature | 0 | 100,000 |
Conversion of notes payable and accrued interest into common stock | 0 | 635,756 |
Accrued and unpaid dividends | 959 | 959 |
Note payable issued for purchase of noncontrolling interest | $ 500,000 | $ 0 |
1. Background and Basis of Pres
1. Background and Basis of Presentation | 12 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background and Basis of Presentation | The accompanying 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 for fiscal years 2016 and 2015 – Manufacturing, Marketplace Platform 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. Although the Company will continue to operate LiveDeal.com and our other subsidiaries that are online consumer products retailers, the Company will no longer limit its operations to the online marketplace. 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. Effective October 7, 2015, the Company changed its corporate name from LiveDeal, Inc. to Live Ventures Incorporated. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Principles of Consolidation The accompanying consolidated financial statements for fiscal years 2016 and 2015 include the accounts 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. 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, 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 Local Exchange Carrier (“LEC”) 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 $4,545,269 and $4,772,004 for fiscal years 2016 and 2015, respectively. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts, which includes allowances for accounts and factored trade and other receivables, customer refunds, dilution and fees from LEC billing aggregators and other uncollectible accounts. The allowance 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 allowance 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 September 30, 2016 and 2015, the allowance for doubtful accounts was $1,161,434 and $1,107,707, respectively. Inventories 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 an allowance is made to reduce the carrying value for inventory for such excess and or obsolete inventory. At September 30, 2016 and 2015, the allowance for obsolete inventory was $1,105,810 and $402,278, 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 $2,895,132 and $472,220 for the years ended September 30, 2016 and 2015, respectively. Goodwill and Intangibles The Company accounts for purchased goodwill and intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other 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, A ccounting 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. The Company recorded goodwill of $1,169,904 related to its acquisition of Modern Everyday, Inc. in fiscal year 2014 and a provisional $800,000 of goodwill related to its acquisition of Marquis in fiscal 2015. It has subsequently been determined that there will be no goodwill related to its acquisition of Marquis. The final purchase price allocation for Marquis and applicable adjustments to record purchased assets and assumed liabilities at fair value was completed in the fourth quarter of 2016. See Footnote 16. As of September 30, 2016 and 2015, the Company performed the required impairment review. During the impairment review at September 30, 2015, the Company determined that based upon the projected future discounted cash flows generated that its goodwill purchased associated with Modern Everyday, Inc. was impaired and took a charge to earnings of $1,169,904. During the year ended September 30, 2015, the Company also determined that based upon the projected future cash flows generated that certain of its intangible assets were impaired and took a charge to earnings of $2,543,568. There were no impairment losses associated with goodwill or other intangibles for the year ended September 30, 2016. 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. MarketPlace Platform Segment The MarketPlace Platform Segment derives product revenue primarily from direct and fulfillment partner sales. Product revenue is recognized when the following revenue recognition criteria are met: there is persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Currently, all direct and fulfillment partner product revenue is recorded on a gross basis, as the Company is the primary obligor. Revenues are recorded net of taxes collected from customers. In addition, the MarketPlace Platform 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 For both Deals revenue and product revenue, 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. 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. Advertising Expense Advertising expense is charged to operations as incurred. Advertising expense totaled $1,247,383 and $177,249 for the years ended September 30, 2016 and 2015. Legal Expense The Company expenses legal costs associated with loss contingencies as incurred. Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fiar 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. The Company’s derivative instruments were reported at fair value using Level 2 inputs as discussed in Note 5. Also, the Company had a purchase price contingency that is discussed in Note 13. The Company uses Level 2 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. Income Taxes The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Operations. Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods. 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 Segment Reporting ASC Topic 280, “ Segment Reporting 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 September 30, 2016 and 2015, respectively. Reclassifications Certain amounts in the prior year 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 May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers In August, 2015, the FASB issued ASU No. 2015-04, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date In January 2015, the FASB issued Accounting Standards Update No. 2015-01, Income Statement – Extraordinary and Unusual items (Subtopic 225-20) In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805 In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Subtopic 740-10): Balance Sheet Classification of Deferred Taxes. In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) 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 financial statements. |
3. Balance Sheet Detail Informa
3. Balance Sheet Detail Information | 12 Months Ended |
Sep. 30, 2016 | |
Disclosure Text Block Supplement [Abstract] | |
Balance Sheet Detail Information | Balance Sheet information is as follows: September 30, September 30, 2016 2015 Trade and other receivables, current, net: Accounts receivable, current $ 9,151,663 $ 9,007,127 Less: Allowance for doubtful accounts (816,862 ) (763,135 ) $ 8,334,801 $ 8,243,992 Trade and other receivables, long term, net: Accounts receivable, long term $ 344,572 $ 344,572 Less: Allowance for doubtful accounts (344,572 ) (344,572 ) $ – $ – Total trade and other receivables, net: Gross trade and other receivables $ 9,496,235 $ 9,351,699 Less: Allowance for doubtful accounts (1,161,434 ) (1,107,707 ) $ 8,334,801 $ 8,243,992 Components of allowance for doubtful accounts are as follows: Allowance for dilution and fees on amounts due from billing aggregators $ 1,063,617 $ 1,063,617 Allowance for customer refunds 1,230 1,715 Allowance for other trade receivables 96,587 42,375 $ 1,161,434 $ 1,107,707 Inventory Raw materials $ 6,664,286 $ 6,715,298 Work in progress 773,238 836,837 Finished goods 4,721,371 6,185,741 12,158,895 13,737,876 Less: Obsolescence reserve (1,105,810 ) (402,278 ) $ 11,053,085 $ 13,335,598 Property and equipment, net: Land and improvements $ – $ 687,999 Building and improvements 6,780,959 4,202,000 Transportation equipment 77,419 77,419 Machinery and equipment 10,211,565 7,676,561 Furnishings and fixtures 192,701 211,701 Office, computer equipment and other 216,793 244,674 17,479,437 13,100,354 Less: Accumulated depreciation (3,464,936 ) (618,453 ) $ 14,014,501 $ 12,481,901 Intangible assets, net: Domain name and marketing related intangibles $ 18,957 $ 18,957 Website and technology related intangibles – 25,300 Customer Relationships intangible 402,452 – Purchased software 1,500,000 1,500,000 1,921,409 1,544,257 Less: Accumulated amortization (231,619 ) (27,327 ) $ 1,689,790 $ 1,516,930 Accrued liabilities: Accrued payroll and bonuses $ 685,410 $ 731,782 Accrued software costs 584,500 1,500,000 Accrued fee due Kingston Diversified Holdings LLC 2,800,000 – Accrued expenses - other 2,326,862 1,429,167 $ 6,396,772 $ 3,660,949 |
4. Goodwill and Other Intangibl
4. Goodwill and Other Intangibles | 12 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangibles | The Company’s intangible assets consist of licenses for the use of internet domain names, Universal Resource Locators, or URL’s, capitalized website development costs, other information technology licenses, software, a covenant not to compete, and marketing and technology related intangibles acquired through the acquisition of LiveDeal, Inc. As a result of the acquisition of Modern Everyday Inc., the Company recorded goodwill of $1,169,904. In addition as a result of the acquisition of Marquis Industries, Inc., the Company initially recorded provisional goodwill of $800,000. As a result of management finalizing the fair values of assets and liabilities in the fourth quarter of fiscal 2016, provisional goodwill was removed and a new intangible asset, customer relationships – Marquis was recorded in the sum of $439,039. 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; website and technology – 3 to 5 years; software – 5 years, customer relationships – 15 years and covenant not to compete – 4 years. Goodwill is not amortized, but evaluated for impairment on at least an annual basis. During the year ended September 30, 2015, the Company purchased software for $1,500,000. Effective September 15, 2016 the Company and the licenser and developer of the software reached agreement whereby the company would pay for the software by issuing to licensor 58,333 of the Company’s common shares to settle the accrued but unpaid obligation. The shares were not issued prior to September 30, 2016, and the accrued obligation of $584,500 will remain in accrued expense until the shares are issued. As a result of this agreement, the Company recorded $915,500 of other income. During the year ended September 30, 2015, the Company determined that certain of its long-lived intangible assets and goodwill were impaired and took a charge to earnings of $2,543,568 and $1,169,904, respectively for a total of $3,713,472. The following summarizes estimated future amortization expense related to intangible assets that have net balances as of September 30, 2016: 2017 $ 245,179 2018 243,555 2019 243,555 2020 243,555 2021 243,555 Thereafter 470,392 $ 1,689,791 |
5. Derivative Liability
5. Derivative Liability | 12 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liability | The February 2014 convertible note discussed in Note 6 had a reset provision and a dilutive issuance clause that gave rise to a derivative liability. The reset provision provided for the conversion price to be adjusted downward in the event that the Company issued any securities at a price per share lower than the then-current conversion price; provided, however, that in no event shall the conversion price per common share be less than $1.00. The fair value of the derivative liability was recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability were recorded in the consolidated statement of operations under other income (expense). 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 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. The range of significant assumptions which the Company used to measure the fair value of the derivative liability at September 30, 2014 was as follows: Inception September 30, 2014 Stock price $ 42.84 $ 17.88 Risk free rate 0.11% 0.13% Volatility 142% 94% Exercise prices $ 48.72 $ 17.58 Term (years) 1.00 0.42 The February 2014 convertible note was repaid during the year ended September 30, 2015; therefore there was not a related derivative liability at September 30, 2015. There were no new derivative liabilities for year ended September 30, 2016. Derivative liability balance, September 30, 2014 $ 83,580 Issuance of derivative liability during the year ended September 30, 2015 – Change in derivative liability during the year ended September 30, 2015 (83,580 ) Derivative liability balance, September 30, 2015 $ – |
6. Notes Payable
6. Notes Payable | 12 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | Revolver Loan and Term Loan In connection with the purchase of Marquis Industries Inc. and subsidiaries (“Marquis”), the Company entered into an agreement with Bank of America for a Term and Revolving Loan for approximately $7.8 million for the term component and approximately $15 million for the revolving component. As part of the Bank of America Revolving Loan, Marquis may borrow up to $15 million (based on eligibility). The Bank of America term 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 which determine the interest rate to be charged, is based on the fixed charge coverage ratio. Fixed Coverage Ratio Table 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% The Revolver and Term loans are cross-collateralized with substantially all real and personal property of Marquis. As of September 30, 2016 the Company was at Level IV and on September 30, 2015 the Company was at Level II. The Term Loan component is due and payable in July 2020, which is when the Revolving Loan component terminates. The Revolver and Term loans contain covenants that require, among other things, for the Company 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. 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 table. Real Estate Transaction On June 14, 2016, the Company entered into a transaction with Store Capital Acquisitions, LLC. The transaction included a sale-leaseback of land owned by Marquis Industries, Inc. (“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. The company recognized a loss of $43,520 on the sale of the land. In connection with the transaction, the Company entered into a lease with a 15 year term commencing on the closing of the transaction, which provides the Company 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 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, the Company incurred $415,757 in transaction costs that are being recognized as a debt issuance costs that will be amortized to interest expense over the term of the note payable. February 2014 Convertible Note Transaction On February 27, 2014, the Company issued a one year convertible note to an otherwise unaffiliated, non-institutional third party in the principal amount of $323,595. The note (i) was unsecured, (ii) bears interest at the rate of six percent per annum, and (iii) was issued without any original issue discount. The principal is convertible into shares of the Company’s common stock at any time and from time-to-time at the instance of either the Company or the holder. The per-share conversion price is an amount equal to ninety percent (90%) of the 10-day volume weighted average closing bid price for the company’s common stock, as reported by The NASDAQ Stock Market, Inc. for the ten (10) trading days immediately preceding the date of the notice of conversion, subject to downward adjustment in the event that the Company issues any securities at a price per share lower than the then-current conversion price; provided, however, that in no event shall the conversion price per share be less than $1.00. The Company provided the holder with certain negative covenants and events of default, each standard for transactions of this nature. Due to the “reset” and “dilutive issuance” clause in this note relating to the conversion price from dilutive share issuance, the Company has determined that the conversion feature is considered a derivative liability for the Company, which is detailed in Note 5. The Company determined an initial derivative liability value of $139,852, which is recorded as a derivative liability as of the date of issuance while also recording an $139,852 debt discount on its balance sheet in relation to the bifurcation of the embedded conversion options of the note. The debt discount was being amortized over the one year term. The note was repaid during the year ended September 30, 2015, therefore the remaining unamortized debt discount of $57,665 was written off to interest expense. Also, as a result of the note being repaid, the derivative liability associated with this convertible note was reduced to $0. The Company recorded $83,580 of non-cash “change in fair value of derivative” income during the year ended September 30, 2015. ICG Convertible Note Transaction On January 23, 2014, the Company issued a note to Isaac Capital Group (“ICG”), a related party, in the principal amount of $500,000. Because the conversion price of $13.74 per common share was less than the stock price, this gave rise to a beneficial conversion feature valued at $500,000. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital. The debt discount was being amortized over the one year term of the note. On December 3, 2014, ICG converted the note into 112,395 shares of common stock; therefore the remaining debt discount of $158,219 was written off and recognized as interest expense. In addition, upon the conversion of the note, the Company issued to ICG a warrant to acquire 112,395 additional shares of the Company’s common stock at an exercise price of $5.70 per share. The fair value of the warrants issued in connection with the conversion of the note was $1,853,473 and was immediately recognized as interest expense. Kingston Convertible Note Transaction ($10 Million Line of Credit) On January 7, 2014, the Company entered into a Note Purchase Agreement (the “Kingston Purchase Agreement”) with Kingston Diversified Holdings LLC (“Kingston”), pursuant to which the Investor agreed to purchase for cash up to $5,000,000 in aggregate principal amount of the Company’s Convertible Notes (“Notes”). The Kinston Purchase Agreement and the Notes, which were unsecured, provided that all amounts payable by the Company to Kinston under the Notes will be due and payable on the second (2 nd On October 16, 2014, the Company issued a Note to Kingston in the principal amount of $100,000. Because the conversion price of $4.74 was less than the stock price on the date of issuance, this gave rise to a beneficial conversion feature valued at $100,000. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital. The debt discount is being amortized over a one year term. On November 17, 2014, Kingston converted the note into 21,168 shares of common stock; therefore the debt discount of $100,000 was written off and recognized as interest expense. On October 29, 2014, the Company entered into an amended convertible note purchase agreement with Kingston whereby the Company and Kingston agreed to (i) increase the maximum principal amount of the notes from $5 Million to $10 Million in principal amount, (ii) eliminate the original issue discount provision of the agreement and replace it with an execution payment equal to 5% of the maximum loan amount, and (iii) provide certain additional adjustments to the note conversion price. In addition, as a result of the October 29, 2014 amendment, the Company was required to issue to Kingston, the original issue discount payment equal to 5% of the maximum loan in shares of the Company’s common stock based upon the conversion price of the first conversion which was $4.74 per share. The Company issued 105,042 shares of common stock that had a fair value of $2,004,202 which was immediately recognized as interest expense. Cathay Bank Notes and Credit Line In connection with the purchase of Modern Everyday, Inc., the Company assumed a credit line and two additional notes from Cathay bank (“Cathay”). The credit line was paid in full on April 20, 2016. The two remaining notes, each $250,000 due Cathay, mature December 31, 2017, and bear interest at 6% and 5.25%, respectively. The Cathay notes are collateralized by all the assets of Modern Everyday, Inc. and are guaranteed Tony Isaac, a related party and Director of the Company. Equipment Loan On June 20, 2016 and August 5, 2016, Marquis entered into a transaction (“the Equipment Loan”) with Banc of America Leasing & Capital, LLC., which provided $5 Million, secured by equipment. The Equipment Loan is due September 24, 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. Notes Payable as of September 30, 2016 and 2015 consisted of the following: September 30, September 30, Base Rate Revolver Loan- interest rate based on prime rate adjusted for fixed coverage ratio (table below), maturity date July 6, 2020 $ 222,590 $ 7,225,745 Base Rate Term Loan- interest rate based on prime rate adjusted for fixed coverage ratio (table below) fixed coverage ratio, maturity date July 6, 2020 – 7,628,438 Note Payable to Bank, due September 24, 2021. 59 monthly payments of $84,273 with a final payment in the amount of $584,273, interest at 3.8905%, secured by Equipment 4,931,937 – Note payable to STORE Capital Acquisitions, LLC, due June 13, 2056, monthly principal and interest payments of $73,970, interest at 9.25% per annum, secured by land and buildings 9,351,796 – Note Payable to Bank, due December 31, 2017, with interest at 6.25% 198,569 – Note Payable to Bank, due December 31, 2017, with interest at 5% 249,765 – Credit line due January 1, 2024, with interest rate of 2.75% – 669,351 Note payable to individual, payable on demand, interest at 10.0% per annum, unsecured – 92,441 Acquisition note payable, due September 6, 2016, as amended, non-interest bearing – 395,251 Note payable to individual, payable within 90 days of a written demand notice, interest at 11% per annum, unsecured 206,529 – Note payable to individual, payable within 90 days of a written demand notice, interest at 10% per annum, unsecured 500,000 – Note payable to individual, payable within 120 days of a written demand notice, interest at 8.25% per annum, unsecured 225,000 – Total debt 15,886,186 16,011,226 Less unamortized debt issuance costs (414,025 ) – Net amount 15,472,161 16,011,226 Less current portion (1,789,289 ) (1,443,036 ) Long-term portion $ 13,682,872 $ 14,568,190 Future maturities of debt at September 30, 2016 are as follows: 2017 $ 1,789,289 2018 1,341,409 2019 929,918 2020 1,190,954 2021 1,425,828 Thereafter 9,208,788 |
7. Note Payable, Related Party
7. Note Payable, Related Party | 12 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Note Payable, Related Party | In connection with the purchase of Marquis Industries, Inc., the Company 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 and Financial 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 (six months after the final payments are due under the Bank of America Term and Revolving Loans). As of September 30, 2016 and 2015, there was $2,000,000 and $6,495,825 outstanding on this mezzanine loan. |
8. Stockholders' Equity
8. Stockholders' Equity | 12 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | 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. During the years ended September 30, 2016 and 2015, the Company accrued dividends of $1,917 and $1,921, respectively, payable to holders of Series E preferred stock. At September 30, 2016 unpaid dividends were $959. Common Stock During the year ended September 30, 2016, the Company issued: 2,158 shares of common stock for services rendered valued at $20,000. The value was based on the market value of the Company’s common stock on the date of issuance. During the year ended September 30, 2015, the Company issued: 31,856 shares of common stock for services rendered valued at $498,059. The value was based on the market value of the Company’s common stock on the date of issuance; 100,000 shares of common stock issued to officers of the Company as bonuses for services rendered in fiscal years 2012, 2013 and 2014 valued at $1,518,000. The value was based on the market value of the Company’s common stock on the date of issuance; 25,833 shares of common stock for net cash proceeds of $538,441; 135,063 shares of common stock for the conversion of convertible notes and accrued interest of $635,756; 105,042 shares of common stock as payment for the original issue discount fees associated with the Kingston Agreement. The value of the shares was $2,004,202 based on the market value of the Company’s common stock at 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. At-the-Market Offerings of Common Stock (Chardan Capital Markets LLC) On January 7, 2014, the company entered into an Engagement Agreement (the “January 2014 Engagement Agreement”) with Chardan Capital Markets LLC (Chardan”) pursuant to which the Company agreed to issue and sell up to a maximum aggregate amount of 330,000 of its common stock from time to time through Chardan as its sales agent, under its shelf Registration Statement on Form S-3. On May 16, 2014, the Company entered into another Engagement Agreement (the “May 2014 Engagement Agreement”) with Chardan pursuant to which the Company may issue and sell up to a maximum aggregate amount of 1,666,667 shares of its common stock from time to time through Chardan as its sales agent, under its shelf Registration Statement on Form S-3. The Company will pay Chardan a commission equal to up to 3% of the gross proceeds from the sale of the common stock. Such commissions were $0 and $8,211 for the years ended September 30, 2016 and 2015, respectively. During the years ended September 30, 2016 and 2015, the Company sold 0 and 25,833 shares, respectively, of its common stock for net proceeds of $0 and $538,441, 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. |
9. Warrants
9. Warrants | 12 Months Ended |
Sep. 30, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
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 September 30, 2016: Number of Weighted Weighted Intrinsic Outstanding at September 30, 2015 590,146 $ 4.14 2.73 $ 3,493,092 Granted – Exercised – Outstanding at September 30, 2016 590,146 $ 4.14 1.73 $ 4,307,493 Exercisable at September 30, 2016 590,146 $ 4.14 1.73 $ 4,307,493 Most of the above warrants were issued in connection with the conversion of convertible notes from Isaac Capital Group. When the debts is converted and warrants are issued, the Company determines the fair value of the warrants using the Black-Scholes-Merton model and takes a charge to interest expense at the date of issuance. The exercise price for the warrants outstanding and exercisable at September 30, 2016 is as follows: Outstanding Exercisable Number of Exercise Number of Exercise 271,981 $ 3.30 271,981 $ 3.30 89,286 3.36 89,286 3.36 61,914 4.86 61,914 4.86 166,965 5.70 166,965 5.70 590,146 590,146 |
10. Stock-based Compensation
10. Stock-based Compensation | 12 Months Ended |
Sep. 30, 2016 | |
Share-based Compensation [Abstract] | |
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 years ended September 30, 2016 and 2015: Weighted Weighted Average Average Number of Exercise Remaining Shares Price Contractual Life Intrinsic Value Outstanding at September 30, 2015 175,000 $ 11.22 4.76 $ 225,750 Granted – Exercised – Forfeited – Outstanding at September, 30 2016 175,000 $ 11.22 3.75 $ 346,500 Exercisable at September 30, 2016 168,750 $ 10.68 3.55 $ 346,500 The Company recognized compensation expense of $256,145 and $712,538 during the years ended September 30, 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 September 30, 2016 the Company had $3,653 of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects will be recognized through June of 2017. During the year ended September 30, 2015, the Company reduced the exercise price by 50% for the 100,000 stock options then outstanding. The Company recognized compensation expense of $54,677 related to the re-pricing of the exercise price for these options. The exercise price for stock options outstanding and exercisable at September 30, 2016 is as follows: Outstanding Exercisable Number of Exercise Number of Exercise 31,250 $ 4.98 31,250 $ 4.98 25,000 7.50 25,000 7.50 31,250 10.02 31,250 10.02 6,250 12.48 6,250 12.48 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 September 2016: Weighted-Average Number of Grant-Date Non-vested Shares Shares Fair Value Non-vested at September 30, 2015 62,500 $ 8.64 Granted – Vested (56,250 ) Non-vested at September 30, 2016 6,250 $ 8.64 For stock options granted during 2015 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $11.52 and the weighted-average exercise price of such options was $15.18. 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 are 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% |
11. Earnings (Loss) Per Share
11. Earnings (Loss) Per Share | 12 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Net earnings (loss) 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 (loss) 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 (loss) to determine the amount available to common stockholders. The following table presents the computation of basic and diluted net earnings (loss) per share: Year Ending September 30, 2016 2015 Basic Net income (loss) attributed to Live Ventures Incorporated $ 17,829,857 $ (14,666,129 ) Less: preferred stock dividends (1,917 ) (1,921 ) Net income (loss) applicable to common stock $ 17,827,940 $ (14,668,050 ) Weighted average common shares outstanding 2,815,072 2,627,636 Basic earnings (loss) per share $ 6.33 $ (5.58 ) Diluted Net income (loss) applicable to common stock $ 17,827,940 $ (14,668,050 ) Add: preferred stock dividends 1,917 1,921 Net income (loss) applicable for diluted earnings (loss) per share $ 17,829,857 $ (14,666,129 ) Weighted average common shares outstanding 2,815,072 2,627,636 Add: Options 21,166 – Add: Warrants 339,620 – Add: preferred stock 127,840 – Assumed weighted average common shares outstanding 3,303,698 2,627,636 Diluted earnings (loss) per share $ 5.40 $ (5.58 ) The following potentially dilutive securities were excluded from the calculation of diluted net loss per share for year ended September 30, 2015 because the effects were anti-dilutive based on the application of the treasury stock method and because the Company incurred net losses during the period: Options to purchase shares of common stock 175,000 Warrants to purchase shares of common stock 590,146 Series E convertible preferred stock 127,840 Total potentially dilutive shares 892,986 |
12. Related Party Transactions
12. Related Party Transactions | 12 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | The Company entered into a Note Purchase Agreement with Isaac Capital Group (“ICG”), an entity owned by Jon Isaac, the Company’s President and Chief Executive Officer and a director of the Company, and subsequently issued a series of Subordinated Convertible Notes thereunder to ICG. In connection with these transactions, the Company received gross proceeds of $500,000 during the year ended September 30, 2014. Because the conversion price under ICG’s notes was less than the fair market value of the stock on the date of issuance, the Company recognized a beneficial conversion feature which was treated as a debt discount and amortized on a straight line basis as interest expense until the date of conversion, at which time all remaining debt discount was recognized as interest expense. Additionally, the fair value of the warrants that were contingently issuable to ICG upon conversion was recognized as additional interest expense. During the years ended September 30, 2016 and 2015, the Company recognized total interest expense of $583,233 and $2,018,803, respectively, associated with the ICG notes. Also see Note 6, 7 and 13. |
13. Commitments and Contingenci
13. Commitments and Contingencies | 12 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Purchase Price Contingency In connection with the acquisition of Modern Everyday, Inc. in August 2014; the company issued 8,333 shares of the Company’s common stock as part of the consideration for the acquisition. The company guaranteed the holder of the 8,333 shares that the value of those shares will be at least $48.00 per share 30 months after the acquisition date. The Company agreed to compensate the holder, if the share price was less than $48.00 at the 30 month anniversary date of the acquisition, the difference between $48.00 and the share price at the 30 month anniversary date times the number of shares still owned by the holder. The Company reached an agreement with the holder of these shares that would not require the company to compensate the holder if the value of the shares was under $48.00 per share; therefore the Company removed the contingent liability during the quarter ended March 31, 2016 and recorded other income of $316,000. 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 September 30, 2016, results of operations, cash flows or liquidity of the Company. Operating Leases and Service Contracts The company leases its office space, certain equipment and a building (from a related party) under long-term operating leases expiring through fiscal year 2016. Rent expense under these leases was $518,877 and $581,750 for the years ended September 30, 2016 and 2015, respectively. The Company has also entered into several non-cancelable service contracts. As of September 30, 2016, future minimum annual payments under operating lease agreements for fiscal years ending September 30 are as follows: 2017 $ 116,124 2018 72,870 2019 85,407 2020 100,092 2021 117,312 Thereafter 2,948,078 $ 3,439,883 |
14. Income Taxes
14. Income Taxes | 12 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Income tax expense for the years ended September 30, 2016 and 2015 is as follows: 2016 2015 Current expense: Federal $ – $ 320,000 State 31,161 56,000 31,161 376,000 Deferred expense: Federal (12,524,582 ) – State – – – – Total income tax expense $ (12,493,221 ) $ 376,000 A reconciliation of the differences between the effective and statutory income tax rates for years ended September 30: 2016 2015 Amount Percent Amount Percent Federal statutory rates $ 1,830,150 34% $ (4,874,337 ) 34% State income taxes 161,484 3% (123,292 ) 1% Permanent differences (852,646 ) -16% 2,794,987 -19% Net operating loss adjustment (1,083,866 ) -20% 327,477 -2% Valuation allowance against net deferred tax assets (12,284,278 ) -228% 2,251,165 -16% Other (264,065 ) -5% – 0% Effective rate $ (12,493,221 ) -227% $ 376,000 -3% At September 30, deferred income tax assets and liabilities were comprised of: 2016 2015 Deferred income tax asset, current: Book to tax differences in accounts receivable $ 406,733 $ 374,621 Book to tax differences in prepaid expenses – 65,467 Book to tax difference in accrued expenses 241,536 144,961 Book to tax differences in inventory 414,575 – Total deferred income tax asset, current 1,062,844 585,049 Less: valuation allowance – (585,049 ) Deferred income tax asset, current, net 1,062,844 – Deferred income tax asset, long-term: Net operation loss carryforwards 9,915,371 10,801,243 Book to tax differences in intangible assets 633,869 632,557 Book to tax differences in organizational costs 160,586 272,239 Book to tax differences in depreciation 751,912 (6,810 ) Total deferred income tax asset, long-term 11,461,738 11,669,229 Less: valuation allowance – (11,669,229 ) Deferred income tax asset, net 11,461,738 – Total deferred income tax asset $ 12,524,582 $ – The Company has recorded as of September 30, 2016 and 2015 a valuation allowance of $0 and $12,284,278, respectively. We reduced our valuation allowance by $12,284,278 based on the profitable operations of our Marquis subsidiary that can be offset against our net operation loss carryforwards. The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2016. The Company has net operating loss carry-forwards of approximately $35.5 million. Such amounts are subject to IRS code section 382 limitations and expire in 2027. The 2011 to 2014 tax years are still subject to audit. |
15. Concentration of Credit Ris
15. Concentration of Credit Risk | 12 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | The Company maintains cash balances at banks in California, Nevada and Georgia. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of September 30, 2016. At times, balances may exceed federally insured limits. |
16. Acquisitions
16. Acquisitions | 12 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisition of Marquis Industries, Inc. On July 6 and July 7, 2015, the Company entered into a series of agreements in connection with its indirect purchase of Marquis Industries, Inc., a Georgia corporation, and its subsidiaries (“Marquis”). The Marquis acquisition has been accounted for under the acquisition method and, accordingly, is included in the consolidated financial statements from the effective date of acquisition. Initially the Company acquired 80% of Marquis indirectly through a wholly-owned subsidiary, Marquis Affiliated Holdings LLC, a Delaware limited liability company. Effective November 30, 2015, the Company acquired the remaining 20% interest in Marquis for $2,000,000. The purchase price was paid through a combination of debt financing that was provided by (i) Bank of America through a Term and Revolving Loan in the aggregate amount of (a) approximately $7.8 million for the term component and (b) approximately $15 million for the revolving component and (ii) a mezzanine loan in the amount of up to $7.0 million provide by Isaac Capital Fund – see Notes 6 and 7. A summary of the final purchase price allocation at fair value is presented below. The Company finalized its estimates after it was able to determine that it had obtained all necessary information that existed as of the acquisition date related to these matters. Total Cash $ 496,944 Accounts receivable 7,262,188 Inventory 11,717,113 Prepaid and other current assets 1,518,430 Property, plant and equipment 16,392,695 Customer Relationships 439,039 Bargain Purchase Gain (4,573,968 ) Accounts payable (4,139,830 ) Accrued expenses (433,989 ) Non-controlling interest (2,000,000 ) Purchase price $ 26,678,622 (1) – includes $4,800,000 of cash, $6,495,825 from a mezzanine loan from Isaac Capital fund, and $15,382,797 from Bank of America Term and Revolver Loan. (2) – Non-controlling interest was valued at the price paid by the Company when it subsequently purchased the remaining 20% of Marquis. The revenue from the Marquis acquisition included in the results of operations from the date of acquisition on July 7, 2015 to September 30, 2015 was $16,006,683. The estimated fair value of the Customer Relationships related to Marquis was determined using the income approach, which discounts expected future cash flows to present value. The Company estimated the fair value of this intangible asset using the residual method and a present value discount rate of 18%. Customer relationships relate to the Company’s ability to sell existing and future versions of products. The Company is amortizing the Customer relationships intangible asset on a straight-line basis over an estimated life of 15 years. After determining and recording the fair value associated with the assets and liabilities acquired, the Company recorded a gain on the acquisition of $4,573,968 included in ―Gain on acquisition in the Consolidated Statement of Operations for the year ended September 31, 2016. Due to the measurement period extending into the fourth quarter of fiscal 2016, the following would have been recorded in the Company’s consolidated statement of operations for year ending September 30, 2015. Instead, according to ASU 2015-16 they are being recorded at the end of the measurement period in the fourth quarter of fiscal 2016 when management completed its analysis of fair value as it relates to the Marquis acquisition. Depreciation expense $ 227,654 Amortization expense 6,117 Cost sales 1,080,051 Bargain Purchase – Gain on Acquisition 4,573,968 |
17. Segment Reporting
17. Segment Reporting | 12 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Reporting | The Company operates in three segments which are characterized as: (1) Manufacturing, (2) Marketplace Platform and (3) Services. The Manufacturing Segment consists of Marquis Industries, Inc., the Marketplace Platform segment consists of livedeal.com and Modern Everyday, Inc., and the Services segment consists of the Local Exchange Carrier billings business and Velocity Local. The following tables summarize segment information for the years ended September 30, 2016 and 2015: Twelve Months Ended September 30, 2016 2015 Revenues Marketplace platform $ 5,438,007 $ 15,868,448 Manufacturing 72,509,357 16,006,683 Services 1,006,883 1,494,735 $ 78,954,247 $ 33,369,866 Gross profit Marketplace platform $ 1,238,317 $ 5,724,186 Manufacturing 17,771,735 4,187,026 Services 964,818 1,343,182 $ 19,974,870 $ 11,254,394 Operating income (loss) Marketplace platform $ (5,172,406 ) $ (11,807,737 ) Manufacturing 6,529,469 563,503 Services 961,186 1,107,967 $ 2,318,249 $ (10,136,267 ) Depreciation and amortization Marketplace platform $ 284,593 $ 633,732 Manufacturing 2,840,718 402,250 Services – 11,770 $ 3,125,311 $ 1,047,752 Interest Expenses Marketplace platform $ 2,947,294 $ 4,214,171 Manufacturing 1,073,253 271,490 Services – – $ 4,020,547 $ 4,485,661 Provision for income taxes Marketplace platform $ (12,907,201 ) $ – Manufacturing 413,980 376,000 Services – – $ (12,493,221 ) $ 376,000 Net income (loss) Marketplace platform $ 6,604,121 $ (15,435,765 ) Manufacturing 9,250,473 (184,841 ) Services 2,099,457 954,477 $ 17,954,051 $ (14,666,129 ) As of As of Total Assets Marketplace platform $ 15,053,993 $ 6,811,977 Manufacturing 38,333,437 33,714,344 Services 79,970 138,035 $ 53,467,400 $ 40,664,356 Intangible assets Marketplace platform $ 1,287,338 $ 1,516,930 Manufacturing 402,452 800,000 Services – – $ 1,689,790 $ 2,316,930 |
18. Subsequent Events
18. Subsequent Events | 12 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Vintage Stock Acquisition 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”). The purchase and financing transactions were, in the aggregate, valued at approximately $60 million. The purchase was effectuated between VSAH and the shareholders of Vintage Stock, with VSAH acquiring 100% of the outstanding capital stock of Vintage Stock. In connection with the purchase and finance transactions, various persons and entities entered into a series of agreements (each of which is dated the Closing Date, with funding initiated on the Closing Date and concluded on November 4, 2016), certain of which are listed below: · Stock Purchase Agreement (the “SPA”) among VSAH, Vintage Stock, the trustees of the five trusts (the “Trusts”) that held all of the outstanding capital stock Vintage Stock, and the trustees of three of the Trusts, Rodney Spriggs, Kenneth Caviness, and Steven Wilcox acting in their respective individual capacities (the trustees and such three individuals, collectively, the “Sellers”), and Rodney Spriggs, in his capacity as the representative of the Sellers for certain purposes of the SPA (the “Sellers’ Representative”); · Subordinated Promissory Note by VSAH payable to certain Sellers, in an aggregate principal amount of $10,000,000 (the “Subordinated Acquisition Note”); · Employment Agreement between Vintage Stock and Rodney Spriggs; · Stock Option Agreement between Live Ventures and Rodney Spriggs with a five-year installment vesting term; · Employment Agreement between Vintage Stock and Steve Wilcox; · Loan Agreement (the “Revolving Loan Agreement”) between Vintage Stock (the “Revolving Loan Borrower”) and Texas Capital Bank, National Association, as the Lender thereunder (the “Revolving Loan Lender”); · Security Agreement by the Revolving Loan Borrower in favor of the Revolving Loan Lender; · Term Loan Agreement (the “Term Loan Agreement”) among VSAH and Vintage Stock (VSAH and Vintage Stock, together, the “Term Loan Borrowers”), the Lenders under and as defined in the Term Loan Agreement (the “Term Loan Lenders”), Capitala Private Credit Fund V, L.P., in its capacity as lead arranger, and Wilmington Trust, National Association, as administrative and collateral agent on behalf of the Term Loan Lenders (the “Term Loan Administrative Agent”); and · Security and Pledge Agreement among the Term Loan Borrowers and the Term Loan Administrative Agent for the Secured Parties (as defined in the Term Loan Agreement). The purchase price for the capital stock of Vintage Stock was approximately $58 million. The purchase price and related transaction expenses of approximately $2 million were paid through a combination of (a) debt financing that was provided by (i) the Revolving Loan Lender under the Revolving Loan Agreement in the amount of approximately $12 million and (ii) the Term Loan Lenders under the Term Loan Agreement in the aggregate amount of $30 million, (b) the Subordinated Acquisition Note in the amount of $10 million, and (c) capital provided by Live Ventures in the amount of $8 million. In connection with operations of Vintage Stock after the closing of the purchase transaction, Vintage Stock may borrow up to an additional approximately $8 million under the Revolving Loan Agreement (based on availability and eligibility under the Revolving Loan Agreement). The term loans under the Term Loan Agreement bear interest at either 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 plus 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 plus 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. The revolving loans under the Revolving Loan Agreement bear interest at a varying rate of interest, which is the LIBOR rate plus 2.75%. The LIBOR rate under the Revolving Loan Agreement 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. The payment obligations under the Revolving Loan Agreement include monthly payments of interest and all outstanding principal and accrued interest thereon due in November 2020, which is when the revolving loan availability under the Revolving Loan Agreement terminates. The Revolving Loan Agreement contains certain mandatory prepayment triggers that are customarily required for similar financings. Each of the Term Loan Agreement and the Revolving Loan Agreement contains certain representations and warranties, certain affirmative covenants, certain negative covenants, certain financial covenants, and certain conditions that are customarily required for similar financings. Vintage Stock had audited revenue and net income of approximately $61.6 million and $12.2 million, respectively, for the year ended December 31, 2015. The Company is unable to make all the disclosures required by ASC 805-10-50-2 at this time as the initial accounting and pro forma analysis for this business combination is incomplete. Audited financial statements for calendar year 2015 and 2014 are complete for Vintage Stock. The Company is making several interim adjustments to Vintage Stock’s carrying value of inventory, depreciation expense and cost of sales prior to being able to prepare Vintage Stock unaudited fiscal year balance sheets and statements of operation for years ending September 30, 2015 and 2016, respectively. Upon completion of the unaudited Vintage Stock fiscal year balance sheets and statements of operation for years ending September 30, 2015 and 2016, respectively; unaudited pro forma condensed combined financial information will then be prepared with the applicable pro forma adjustments and disclosed in Form 8-K/A within the required timeframe. In addition, the Company is preparing a preliminary purchase price allocation which is subject to change. The Company will complete its analysis to determine the fair value of inventory, property and equipment, Revolving Loan, Term Loan and Subordinated Note on the acquisition date. Once this analysis is complete, the Company will adjust, if necessary, the provisional amounts assigned to inventory, property and equipment, Revolving Loan, Term Loan and Subordinated Note in the accounting period in which the analysis is completed. The preliminary purchase price allocation will be disclosed in Form 8-K/A within the required timeframe. Reverse Stock Split 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. Novalk Apps S.A.S. agreement On December 7, 2016, the Company and Novalk Apps S.A.S. (“Novalk”), a licensor and developer of certain software the Company purchased in fiscal year 2015, memorialized an agreement which is effective September 15, 2016 that changes the terms and conditions relating to payment of the outstanding software license fee of $1,500,000. The software fee will be settled in exchange for to be issued and certificated 58,333 shares of the Company’s common stock subsequent to year ending September 30, 2016. As a result of this agreement, the Company is recording $915,500 of other income in September 2016 and maintaining an accrued liability to Novalk for $584,500 to be settled when the common shares are issued to Novalk after year ending September 30, 2016. Kingston Diversified Holdings LLC agreement 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 is recording $2,800,000 of interest expense in September 2016 and accruing a liability to Kingston for the same amount to be settled when the common shares are issued to Kingston after year ending September 30, 2016. Convertible Series B Preferred Shares On December 27, 2016 the Company established a new series of preferred shares, convertible Series B preferred stock. Our Series B Convertible Preferred Stock, as of the date of this Report, has 0 shares issued and outstanding. The shares, as a series, are entitled to dividends on our Common Stock are 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 such series are convertible into shares of Common Stock at a ratio of one 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. |
2. Summary of Significant Acc25
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements for fiscal years 2016 and 2015 include the accounts 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. All intercompany transactions and balances have been eliminated in consolidation. |
Noncontrolling Interest | 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, 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 | 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 Local Exchange Carrier (“LEC”) 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 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 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 | 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 $4,545,269 and $4,772,004 for fiscal years 2016 and 2015, respectively. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts, which includes allowances for accounts and factored trade and other receivables, customer refunds, dilution and fees from LEC billing aggregators and other uncollectible accounts. The allowance 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 allowance 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 September 30, 2016 and 2015, the allowance for doubtful accounts was $1,161,434 and $1,107,707, respectively. |
Inventories | Inventories 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 an allowance is made to reduce the carrying value for inventory for such excess and or obsolete inventory. At September 30, 2016 and 2015, the allowance for obsolete inventory was $1,105,810 and $402,278, respectively. |
Property and Equipment | 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 $2,895,132 and $472,220 for the years ended September 30, 2016 and 2015, respectively. |
Goodwill and Intangibles | Goodwill and Intangibles The Company accounts for purchased goodwill and intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other 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, A ccounting 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. The Company recorded goodwill of $1,169,904 related to its acquisition of Modern Everyday, Inc. in fiscal year 2014 and a provisional $800,000 of goodwill related to its acquisition of Marquis in fiscal 2015. It has subsequently been determined that there will be no goodwill related to its acquisition of Marquis. The final purchase price allocation for Marquis and applicable adjustments to record purchased assets and assumed liabilities at fair value was completed in the fourth quarter of 2016. See Footnote 16. As of September 30, 2016 and 2015, the Company performed the required impairment review. During the impairment review at September 30, 2015, the Company determined that based upon the projected future discounted cash flows generated that its goodwill purchased associated with Modern Everyday, Inc. was impaired and took a charge to earnings of $1,169,904. During the year ended September 30, 2015, the Company also determined that based upon the projected future cash flows generated that certain of its intangible assets were impaired and took a charge to earnings of $2,543,568. There were no impairment losses associated with goodwill or other intangibles for the year ended September 30, 2016. |
Revenue Recognition | 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. MarketPlace Platform Segment The MarketPlace Platform Segment derives product revenue primarily from direct and fulfillment partner sales. Product revenue is recognized when the following revenue recognition criteria are met: there is persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Currently, all direct and fulfillment partner product revenue is recorded on a gross basis, as the Company is the primary obligor. Revenues are recorded net of taxes collected from customers. In addition, the MarketPlace Platform 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 For both Deals revenue and product revenue, 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. 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 | 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. |
Advertising Expense | Advertising Expense Advertising expense is charged to operations as incurred. Advertising expense totaled $1,247,383 and $177,249 for the years ended September 30, 2016 and 2015. |
Legal Expense | Legal Expense The Company expenses legal costs associated with loss contingencies as incurred |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fiar 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. The Company’s derivative instruments were reported at fair value using Level 2 inputs as discussed in Note 5. Also, the Company had a purchase price contingency that is discussed in Note 13. The Company uses Level 2 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Operations. Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods. |
Stock-Based Compensation | 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 Earnings (Loss) per share is calculated in accordance with ASC 260, “ Earnings Per share |
Segment Reporting | Segment Reporting ASC Topic 280, “ Segment Reporting |
Derivative Financial Instruments | 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 September 30, 2016 and 2015, respectively. |
Reclassifications | Reclassifications Certain amounts in the prior year 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 | Recently Issued Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers In August, 2015, the FASB issued ASU No. 2015-04, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date In January 2015, the FASB issued Accounting Standards Update No. 2015-01, Income Statement – Extraordinary and Unusual items (Subtopic 225-20) In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805 In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Subtopic 740-10): Balance Sheet Classification of Deferred Taxes. In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) 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 financial statements. |
3. Balance Sheet Detail Infor26
3. Balance Sheet Detail Information (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Balance sheet detail information | September 30, September 30, 2016 2015 Trade and other receivables, current, net: Accounts receivable, current $ 9,151,663 $ 9,007,127 Less: Allowance for doubtful accounts (816,862 ) (763,135 ) $ 8,334,801 $ 8,243,992 Trade and other receivables, long term, net: Accounts receivable, long term $ 344,572 $ 344,572 Less: Allowance for doubtful accounts (344,572 ) (344,572 ) $ – $ – Total trade and other receivables, net: Gross trade and other receivables $ 9,496,235 $ 9,351,699 Less: Allowance for doubtful accounts (1,161,434 ) (1,107,707 ) $ 8,334,801 $ 8,243,992 |
Components of allowance for doubtful accounts | Components of allowance for doubtful accounts are as follows: Allowance for dilution and fees on amounts due from billing aggregators $ 1,063,617 $ 1,063,617 Allowance for customer refunds 1,230 1,715 Allowance for other trade receivables 96,587 42,375 $ 1,161,434 $ 1,107,707 |
Schedule of inventory | Inventory Raw materials $ 6,664,286 $ 6,715,298 Work in progress 773,238 836,837 Finished goods 4,721,371 6,185,741 12,158,895 13,737,876 Less: Obsolescence reserve (1,105,810 ) (402,278 ) $ 11,053,085 $ 13,335,598 |
Schedule of property and equipment | Property and equipment, net: Land and improvements $ – $ 687,999 Building and improvements 6,780,959 4,202,000 Transportation equipment 77,419 77,419 Machinery and equipment 10,211,565 7,676,561 Furnishings and fixtures 192,701 211,701 Office, computer equipment and other 216,793 244,674 17,479,437 13,100,354 Less: Accumulated depreciation (3,464,936 ) (618,453 ) $ 14,014,501 $ 12,481,901 |
Schedule of intangible assets | Intangible assets, net: Domain name and marketing related intangibles $ 18,957 $ 18,957 Website and technology related intangibles – 25,300 Customer Relationships intangible 402,452 – Purchased software 1,500,000 1,500,000 1,921,409 1,544,257 Less: Accumulated amortization (231,619 ) (27,327 ) $ 1,689,790 $ 1,516,930 |
Schedule of accrued liabilities | Accrued liabilities: Accrued payroll and bonuses $ 685,410 $ 731,782 Accrued software costs 584,500 1,500,000 Accrued fee due Kingston Diversified Holdings LLC 2,800,000 – Accrued expenses - other 2,326,862 1,429,167 $ 6,396,772 $ 3,660,949 |
4. Goodwill and Other Intangi27
4. Goodwill and Other Intangibles (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Future amortization expense related to intangible assets | 2017 $ 245,179 2018 243,555 2019 243,555 2020 243,555 2021 243,555 Thereafter 470,392 $ 1,689,791 |
5. Derivative Liability (Tables
5. Derivative Liability (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Assumptions used | Inception September 30, 2014 Stock price $ 42.84 $ 17.88 Risk free rate 0.11% 0.13% Volatility 142% 94% Exercise prices $ 48.72 $ 17.58 Term (years) 1.00 0.42 |
Schedule of derivative liabilities | Derivative liability balance, September 30, 2014 $ 83,580 Issuance of derivative liability during the year ended September 30, 2015 – Change in derivative liability during the year ended September 30, 2015 (83,580 ) Derivative liability balance, September 30, 2015 $ – |
6. Notes Payable (Tables)
6. Notes Payable (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Fixed coverage ratio table | 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% |
Schedule of credit line debt | September 30, September 30, Base Rate Revolver Loan- interest rate based on prime rate adjusted for fixed coverage ratio (table below), maturity date July 6, 2020 $ 222,590 $ 7,225,745 Base Rate Term Loan- interest rate based on prime rate adjusted for fixed coverage ratio (table below) fixed coverage ratio, maturity date July 6, 2020 – 7,628,438 Note Payable to Bank, due September 24, 2021. 59 monthly payments of $84,273 with a final payment in the amount of $584,273, interest at 3.8905%, secured by Equipment 4,931,937 – Note payable to STORE Capital Acquisitions, LLC, due June 13, 2056, monthly principal and interest payments of $73,970, interest at 9.25% per annum, secured by land and buildings 9,351,796 – Note Payable to Bank, due December 31, 2017, with interest at 6.25% 198,569 – Note Payable to Bank, due December 31, 2017, with interest at 5% 249,765 – Credit line due January 1, 2024, with interest rate of 2.75% – 669,351 Note payable to individual, payable on demand, interest at 10.0% per annum, unsecured – 92,441 Acquisition note payable, due September 6, 2016, as amended, non-interest bearing – 395,251 Note payable to individual, payable within 90 days of a written demand notice, interest at 11% per annum, unsecured 206,529 – Note payable to individual, payable within 90 days of a written demand notice, interest at 10% per annum, unsecured 500,000 – Note payable to individual, payable within 120 days of a written demand notice, interest at 8.25% per annum, unsecured 225,000 – Total debt 15,886,186 16,011,226 Less unamortized debt issuance costs (414,025 ) – Net amount 15,472,161 16,011,226 Less current portion (1,789,289 ) (1,443,036 ) Long-term portion $ 13,682,872 $ 14,568,190 |
Future maturities of debt | 2017 $ 1,789,289 2018 1,341,409 2019 929,918 2020 1,190,954 2021 1,425,828 Thereafter 9,208,788 |
9. Warrants (Tables)
9. Warrants (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrant activity | Number of Weighted Weighted Intrinsic Outstanding at September 30, 2015 590,146 $ 4.14 2.73 $ 3,493,092 Granted – Exercised – Outstanding at September 30, 2016 590,146 $ 4.14 1.73 $ 4,307,493 Exercisable at September 30, 2016 590,146 $ 4.14 1.73 $ 4,307,493 |
Warrants outstanding and exercisable | Outstanding Exercisable Number of Exercise Number of Exercise 271,981 $ 3.30 271,981 $ 3.30 89,286 3.36 89,286 3.36 61,914 4.86 61,914 4.86 166,965 5.70 166,965 5.70 590,146 590,146 |
10. Stock-based Compensation (T
10. Stock-based Compensation (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Share-based Compensation [Abstract] | |
Stock option activity | Weighted Weighted Average Average Number of Exercise Remaining Shares Price Contractual Life Intrinsic Value Outstanding at September 30, 2015 175,000 $ 11.22 4.76 $ 225,750 Granted – Exercised – Forfeited – Outstanding at September, 30 2016 175,000 $ 11.22 3.75 $ 346,500 Exercisable at September 30, 2016 168,750 $ 10.68 3.55 $ 346,500 |
Stock option exercise price | Outstanding Exercisable Number of Exercise Number of Exercise 31,250 $ 4.98 31,250 $ 4.98 25,000 7.50 25,000 7.50 31,250 10.02 31,250 10.02 6,250 12.48 6,250 12.48 6,250 15.00 – 15.00 75,000 15.18 75,000 15.18 175,000 168,750 |
Non-vested share activity | Weighted-Average Number of Grant-Date Non-vested Shares Shares Fair Value Non-vested at September 30, 2015 62,500 $ 8.64 Granted – Vested (56,250 ) Non-vested at September 30, 2016 6,250 $ 8.64 |
Assumptions used | Risk-free interest rate 1.01% Expected life of the options 2.5 to 3.5 years Expected volatility 140% Expected dividend yield 0% |
11. Earnings (Loss) Per Share (
11. Earnings (Loss) Per Share (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Basic and diluted net loss per share | Year Ending September 30, 2016 2015 Basic Net income (loss) attributed to Live Ventures Incorporated $ 17,829,857 $ (14,666,129 ) Less: preferred stock dividends (1,917 ) (1,921 ) Net income (loss) applicable to common stock $ 17,827,940 $ (14,668,050 ) Weighted average common shares outstanding 2,815,072 2,627,636 Basic earnings (loss) per share $ 6.33 $ (5.58 ) Diluted Net income (loss) applicable to common stock $ 17,827,940 $ (14,668,050 ) Add: preferred stock dividends 1,917 1,921 Net income (loss) applicable for diluted earnings (loss) per share $ 17,829,857 $ (14,666,129 ) Weighted average common shares outstanding 2,815,072 2,627,636 Add: Options 21,166 – Add: Warrants 339,620 – Add: preferred stock 127,840 – Assumed weighted average common shares outstanding 3,303,698 2,627,636 Diluted earnings (loss) per share $ 5.40 $ (5.58 ) |
Potentially dilutive securities | Options to purchase shares of common stock 175,000 Warrants to purchase shares of common stock 590,146 Series E convertible preferred stock 127,840 Total potentially dilutive shares 892,986 |
13. Commitments and Contingen33
13. Commitments and Contingencies (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum annual payments under operating lease agreements | 2017 $ 116,124 2018 72,870 2019 85,407 2020 100,092 2021 117,312 Thereafter 2,948,078 $ 3,439,883 |
14. Income Taxes (Tables)
14. Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of income tax expense | 2016 2015 Current expense: Federal $ – $ 320,000 State 31,161 56,000 31,161 376,000 Deferred expense: Federal (12,524,582 ) – State – – – – Total income tax expense $ (12,493,221 ) $ 376,000 |
Reconciliation between effective and statutory income tax rates | 2016 2015 Amount Percent Amount Percent Federal statutory rates $ 1,830,150 34% $ (4,874,337 ) 34% State income taxes 161,484 3% (123,292 ) 1% Permanent differences (852,646 ) -16% 2,794,987 -19% Net operating loss adjustment (1,083,866 ) -20% 327,477 -2% Valuation allowance against net deferred tax assets (12,284,278 ) -228% 2,251,165 -16% Other (264,065 ) -5% – 0% Effective rate $ (12,493,221 ) -227% $ 376,000 -3% |
Schedule of deferred income tax assets and liabilities | 2016 2015 Deferred income tax asset, current: Book to tax differences in accounts receivable $ 406,733 $ 374,621 Book to tax differences in prepaid expenses – 65,467 Book to tax difference in accrued expenses 241,536 144,961 Book to tax differences in inventory 414,575 – Total deferred income tax asset, current 1,062,844 585,049 Less: valuation allowance – (585,049 ) Deferred income tax asset, current, net 1,062,844 – Deferred income tax asset, long-term: Net operation loss carryforwards 9,915,371 10,801,243 Book to tax differences in intangible assets 633,869 632,557 Book to tax differences in organizational costs 160,586 272,239 Book to tax differences in depreciation 751,912 (6,810 ) Total deferred income tax asset, long-term 11,461,738 11,669,229 Less: valuation allowance – (11,669,229 ) Deferred income tax asset, net 11,461,738 – Total deferred income tax asset $ 12,524,582 $ – |
16. Acquisitions (Tables)
16. Acquisitions (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Purchase Price Allocation | Total Cash $ 496,944 Accounts receivable 7,262,188 Inventory 11,717,113 Prepaid and other current assets 1,518,430 Property, plant and equipment 16,392,695 Customer Relationships 439,039 Bargain Purchase Gain (4,573,968 ) Accounts payable (4,139,830 ) Accrued expenses (433,989 ) Non-controlling interest (2,000,000 ) Purchase price $ 26,678,622 |
Marquis Acquisition | Depreciation expense $ 227,654 Amortization expense 6,117 Cost sales 1,080,051 Bargain Purchase – Gain on Acquisition 4,573,968 |
17. Segment Reporting (Tables)
17. Segment Reporting (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment reporting | Twelve Months Ended September 30, 2016 2015 Revenues Marketplace platform $ 5,438,007 $ 15,868,448 Manufacturing 72,509,357 16,006,683 Services 1,006,883 1,494,735 $ 78,954,247 $ 33,369,866 Gross profit Marketplace platform $ 1,238,317 $ 5,724,186 Manufacturing 17,771,735 4,187,026 Services 964,818 1,343,182 $ 19,974,870 $ 11,254,394 Operating income (loss) Marketplace platform $ (5,172,406 ) $ (11,807,737 ) Manufacturing 6,529,469 563,503 Services 961,186 1,107,967 $ 2,318,249 $ (10,136,267 ) Depreciation and amortization Marketplace platform $ 284,593 $ 633,732 Manufacturing 2,840,718 402,250 Services – 11,770 $ 3,125,311 $ 1,047,752 Interest Expenses Marketplace platform $ 2,947,294 $ 4,214,171 Manufacturing 1,073,253 271,490 Services – – $ 4,020,547 $ 4,485,661 Provision for income taxes Marketplace platform $ (12,907,201 ) $ – Manufacturing 413,980 376,000 Services – – $ (12,493,221 ) $ 376,000 Net income (loss) Marketplace platform $ 6,604,121 $ (15,435,765 ) Manufacturing 9,250,473 (184,841 ) Services 2,099,457 954,477 $ 17,954,051 $ (14,666,129 ) As of As of Total Assets Marketplace platform $ 15,053,993 $ 6,811,977 Manufacturing 38,333,437 33,714,344 Services 79,970 138,035 $ 53,467,400 $ 40,664,356 Intangible assets Marketplace platform $ 1,287,338 $ 1,516,930 Manufacturing 402,452 800,000 Services – – $ 1,689,790 $ 2,316,930 |
2. Summary of Significant Acc37
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Trade receivables factored | $ 4,545,269 | $ 4,772,004 |
Allowance for doubtful accounts | 1,161,434 | 1,107,707 |
Deferred Revenue | 0 | 0 |
Allowance for obsolete inventory | 1,105,810 | 402,278 |
Depreciation expense | 2,895,132 | 472,220 |
Allowance for obsolete inventory | 1,105,810 | 402,278 |
Goodwill and Asset Impairment Charges | 0 | 2,543,568 |
Advertising Expense | 1,247,383 | 177,249 |
Derivative Financial Instruments | $ 0 | 0 |
Marquis Affiliated Holdings, LLC [Member] | Marquis Industries, Inc. [Member] | ||
Percentage owned in subsidiary | 100.00% | |
Goodwill and Asset Impairment Charges | $ 1,169,904 |
3. Balance Sheet Detail Infor38
3. Balance Sheet Detail Information (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Trade and other receivables, current, net: | ||
Accounts receivable, current | $ 9,151,663 | $ 9,007,127 |
Less: Allowance for doubtful accounts | (816,862) | (763,135) |
Trade and other receivables, current, net | 8,334,801 | 8,243,992 |
Trade and other receivables, long term, net: | ||
Accounts receivable, long term | 344,572 | 344,572 |
Less: Allowance for doubtful accounts | (344,572) | (344,572) |
Trade and other receivables, long term, net | 0 | 0 |
Total trade and other receivables, net: | ||
Gross receivables | 9,496,235 | 9,351,699 |
Less: Allowance for doubtful accounts | (1,161,434) | (1,107,707) |
Total trade and other receivables, net | 8,334,801 | 8,243,992 |
Allowance for dilution and fees on amounts due from billing aggregators | 1,063,617 | 1,063,617 |
Allowance for customer refunds | 1,230 | 1,715 |
Allowance for other trade receivables | 96,587 | 42,375 |
Total allowances | 1,161,434 | 1,107,707 |
Inventory | ||
Raw materials | 6,664,286 | 6,715,298 |
Work in progress | 773,238 | 836,837 |
Finished goods | 4,721,371 | 6,185,741 |
Total inventory, gross | 12,158,895 | 13,737,876 |
Less: obsolescence reserve | (1,105,810) | (402,278) |
Total inventory, net | 11,053,085 | 13,335,598 |
Property and equipment, net: | ||
Land and improvements | 0 | 687,999 |
Building and improvements | 6,780,959 | 4,202,000 |
Transportation equipment | 77,419 | 77,419 |
Machinery and equipment | 10,211,565 | 7,676,561 |
Furnishings and fixtures | 192,701 | 211,701 |
Office, computer equipment and other | 216,793 | 244,674 |
Plant Property and Equipment,Gross | 17,479,437 | 13,100,354 |
Less: Accumulated depreciation | (3,464,936) | (618,453) |
Property and equipment, net | 14,014,501 | 12,481,901 |
Intangible assets, net: | ||
Domain name and marketing related intangibles | 18,957 | 18,957 |
Website and technology related intangibles | 0 | 25,300 |
Customer Relationships intangible | 402,452 | 0 |
Purchased software | 1,500,000 | 1,500,000 |
Intangible assets, gross | 1,921,409 | 1,544,257 |
Less: Accumulated amortization | (231,619) | (27,327) |
Intangible assets, net | 1,689,791 | 1,516,930 |
Accrued liabilities: | ||
Accrued payroll and bonuses | 685,410 | 731,782 |
Accrued software costs | 584,500 | 1,500,000 |
Accrued fee due Kingston Diversified Holdings LLC | 2,800,000 | 0 |
Accrued expenses - other | 2,326,862 | 1,429,167 |
Total accrued liabilities | $ 6,396,772 | $ 3,660,949 |
4. Goodwill and Other Intangi39
4. Goodwill and Other Intangibles (Details) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense, 2017 | $ 245,179 | |
Amortization expense, 2018 | 243,555 | |
Amortization expense, 2019 | 243,555 | |
Amortization expense, 2020 | 243,555 | |
Amortization expense, 2021 | 243,555 | |
Amortization expense, thereafter | 470,392 | |
Total future amortization expense | $ 1,689,791 | $ 1,516,930 |
4. Goodwill and Other Intangi40
4. Goodwill and Other Intangibles (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Software purchased | $ 1,500,000 | |
Shares to be issued for software purchased | 58,333 | |
Accrued expense | $ 584,500 | |
Other income | 915,500 | |
Long-lived intangible assets impaired | 0 | $ 2,543,568 |
Goodwill impaired | 1,169,904 | |
Impairment of intangible assets | $ 0 | $ 3,713,472 |
Domain Name and Marketing [Member] | ||
Useful lifes of intangible assets | 3-20 years | |
Website and Technology [Member] | ||
Useful lifes of intangible assets | 3-5 years | |
Software [Member] | ||
Useful lifes of intangible assets | 5 years | |
Customer Relationships [Member] | ||
Useful lifes of intangible assets | 15 years | |
Covenant Not To Compete [Member] | ||
Useful lifes of intangible assets | 4 years |
5. Derivative Liability (Detail
5. Derivative Liability (Details) | 12 Months Ended |
Sep. 30, 2015USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liability, beginning balance | $ 83,580 |
Issuance of derivative liability during year | 0 |
Change in derivative liability during the year | (83,580) |
Derivative liability, ending balance | $ 0 |
6. Notes Payable (Details - Not
6. Notes Payable (Details - Note Payable) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Total Debt | $ 15,886,186 | $ 16,011,226 |
Less: unamortized debt issuance costs | (414,025) | 0 |
Current portion | (1,789,290) | (1,443,036) |
Long-term portion | 13,682,872 | 14,568,190 |
Credit line [Member] | ||
Total Debt | 0 | 669,351 |
Note Payable to Bank [Member] | ||
Total Debt | 4,931,937 | 0 |
Note Payable - Store Capital [Member] | ||
Total Debt | 9,351,796 | 0 |
Note Payable to Bank [Member] | ||
Total Debt | 198,569 | 0 |
Note Payable to Bank [Member] | ||
Total Debt | 249,765 | 0 |
Term Loan [Member] | ||
Total Debt | 0 | 7,628,438 |
Acquisition note payable [Member] | ||
Total Debt | 50,000 | 395,251 |
Note payable to individual [Member] | ||
Total Debt | 0 | 92,441 |
Acquisition Note Payable [Member] | ||
Total Debt | 0 | 395,251 |
Note Payable - Individual [Member] | ||
Total Debt | 500,000 | 0 |
Note Payable - Individual [Member] | ||
Total Debt | 225,000 | 0 |
Revolver Loan [Member] | ||
Total Debt | $ 222,590 | $ 7,225,745 |
6. Notes Payable (Details - N43
6. Notes Payable (Details - Note Payable details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | |
Credit line [Member] | ||
Debt maturity date | Jan. 1, 2024 | |
Debt interest rate description | 2.75% | |
Note Payable to Bank [Member] | ||
Debt maturity date | Sep. 24, 2021 | |
Debt interest rate description | 3.8905% | |
Monthly principal and interest payments | $ 84,273 | |
Note Payable to Bank [Member] | ||
Debt maturity date | Dec. 31, 2017 | |
Debt interest rate description | 6.25% | |
Note Payable to Bank [Member] | ||
Debt maturity date | Dec. 31, 2017 | |
Debt interest rate description | 5% | |
Term Loan [Member] | ||
Debt maturity date | Jul. 6, 2020 | |
Debt interest rate description | Prime rate adjusted for fixed coverage ratio | |
Note Payable - Store Capital [Member] | ||
Debt maturity date | Jun. 13, 2056 | |
Debt interest rate description | 9.25% per annum | |
Monthly principal and interest payments | $ 73,970 | |
Note Payable - Individual [Member] | ||
Debt interest rate description | 10.0% | |
Acquisition note payable [Member] | ||
Debt maturity date | Sep. 6, 2016 | |
Debt interest rate description | non-interest bearing | |
Note Payable - Individual [Member] | ||
Debt interest rate description | 11% unsecured | |
Note Payable - Individual [Member] | ||
Debt interest rate description | 8.25% unsecured | |
Revolver Loan [Member] | ||
Debt maturity date | Jul. 6, 2020 | |
Debt interest rate description | Prime rate adjusted for fixed coverage ratio |
6. Notes Payable (Details - Fut
6. Notes Payable (Details - Future Maturities) | Sep. 30, 2016USD ($) |
Debt Disclosure [Abstract] | |
Future maturity 2017 | $ 1,789,289 |
Future maturity 2018 | 1,341,409 |
Future maturity 2019 | 929,918 |
Future maturity 2020 | 1,190,954 |
Future maturity 2021 | 1,425,828 |
Future maturity thereafter | $ 9,208,788 |
6. Notes Payable (Details Narr
6. Notes Payable (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Proceeds from note payable | $ 15,287,078 | $ 1,247,185 | |
Store Capital Acquisitions, LLC [Member] | |||
Proceeds from sale of land | 644,479 | ||
Proceeds from note payable | 9,355,521 | ||
Loss on sale of property | (43,520) | ||
Debt issuance costs | $ 415,757 | 415,757 | |
Annual lease rate | 59,614 | ||
Note payable | $ 10,000,000 | $ 10,000,000 | |
Debt stated interest rate | 9.25% | 9.25% | |
Debt maturity date | Jun. 13, 2056 | ||
Revolver Loan [Member] | |||
Credit line maximum | $ 15,000,000 | $ 15,000,000 | |
Debt maturity date | Jul. 6, 2020 | ||
Term Loan [Member] | |||
Credit line maximum | $ 7,800,000 | $ 7,800,000 | |
Credit line maturity date | Jul. 31, 2020 | ||
Debt maturity date | Jul. 6, 2020 |
7. Note Payable, Related Party
7. Note Payable, Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Loan outstanding | $ 2,000,000 | $ 6,495,825 |
Mezzanine Loan [Member] | ||
Loan maximum borrowing amount | 7,000,000 | |
Loan outstanding | $ 2,000,000 | $ 6,495,825 |
Maturity date | Jan. 31, 2021 | |
Interest rate | 12.50% |
8. Stockholders' Equity (Detail
8. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Accrued dividends | $ 1,917 | $ 1,921 |
Unpaid dividends | 959 | |
Issuance of common stock for services, value | $ 19,999 | 2,016,059 |
Issuance of common stock for cash, value | 538,441 | |
Issuance of common stock for conversion of debt, value | 635,756 | |
Issuance of common stock for loan fees, value | 2,004,202 | |
Treasury stock purchased, shares | 30,122 | |
Payment for treasury stock | $ 300,027 | |
Payment of stock issuance costs | $ 0 | $ 8,211 |
Common Stock | ||
Common stock exchanged for preferred stock, common shares exchanged | 2,197 | |
Issuance of common stock for services, shares | 2,158 | 31,856 |
Issuance of common stock for services, value | $ 20,000 | $ 498,059 |
Issuance of common stock for cash, shares | 25,833 | |
Issuance of common stock for conversion of debt, shares | 135,063 | |
Issuance of common stock for loan fees, shares | 105,042 | |
Common Stock | Officers [Member] | ||
Issuance of common stock for services, shares | 100,000 | |
Issuance of common stock for services, value | $ 1,518,000 | |
Series E Preferred Stock [Member] | ||
Common stock exchanged for preferred stock, preferred shares issued | 127,840 |
9. Warrants (Details - Warrants
9. Warrants (Details - Warrants Outstanding) - Warrants [Member] | 12 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Number of units | |
Outstanding, beginning of period | 590,146 |
Granted | 0 |
Exercised | 0 |
Outstanding, end of period | 590,146 |
Exercisable, end of period | 590,146 |
Weighted Average Exercise Price | |
Outstanding, beginning of period | $ / shares | $ 4.14 |
Granted | $ / shares | |
Outstanding, end of period | $ / shares | 4.14 |
Exercisable, end of period | $ / shares | $ 4.14 |
Weighted Average Remaining Contractual Term (in years) | |
Outstanding, beginning of period | 2 years 8 months 23 days |
Outstanding, end of period | 1 year 8 months 23 days |
Exercisable, end of period | 1 year 8 months 23 days |
Intrinsic value outstanding, beginning of period | $ | $ 3,493,092 |
Intrinsic value outstanding, end of period | $ | $ 4,307,493 |
Exercisable, end of period | 4,307,493 |
9. Warrants (Details - Exercise
9. Warrants (Details - Exercise price) - Warrants [Member] - $ / shares | Sep. 30, 2016 | Sep. 30, 2015 |
Number of warrants outstanding | 590,146 | 590,146 |
Warrants exercise price, outstanding | $ 4.14 | $ 4.14 |
Number of warrants exercisable | 590,146 | |
$3.30 [Member] | ||
Number of warrants outstanding | 271,981 | |
Warrants exercise price, outstanding | $ 3.30 | |
Number of warrants exercisable | 271,981 | |
Warrants exercise price, exercisable | $ 3.30 | |
$3.36 [Member] | ||
Number of warrants outstanding | 89,286 | |
Warrants exercise price, outstanding | $ 3.36 | |
Number of warrants exercisable | 89,286 | |
Warrants exercise price, exercisable | $ 3.36 | |
$4.86 [Member] | ||
Number of warrants outstanding | 61,914 | |
Warrants exercise price, outstanding | $ 4.86 | |
Number of warrants exercisable | 61,914 | |
Warrants exercise price, exercisable | $ 4.86 | |
$5.70 [Member] | ||
Number of warrants outstanding | 166,965 | |
Warrants exercise price, outstanding | $ 5.70 | |
Number of warrants exercisable | 166,965 | |
Warrants exercise price, exercisable | $ 5.70 |
10. Stock-based Compensation (D
10. Stock-based Compensation (Details - Option activity) - Stock Options [Member] - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Number of Shares | ||
Outstanding, beginning balance | 175,000 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending balance | 175,000 | 175,000 |
Exercisable | 168,750 | |
Weighted Average Exercise Price | ||
Outstanding, beginning balance | $ 11.22 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending balance | 11.22 | $ 11.22 |
Exercisable | $ 10.68 | |
Weighed Average Remaining Contractual Life | ||
Outstanding, ending balance | 3 years 9 months | 4 years 9 months 4 days |
Exercisable | 3 years 6 months 18 days | |
Intrinsic value outstanding, beginning balance | $ 225,750 | |
Intrinsic value outstanding, ending balance | 346,500 | |
Exercisable | $ 346,500 |
10. Stock-based Compensation 51
10. Stock-based Compensation (Details - Option price) - Stock Options [Member] - $ / shares | Sep. 30, 2016 | Sep. 30, 2015 |
Number of options outstanding | 175,000 | 175,000 |
Option exercise price outstanding | $ 11.22 | $ 11.22 |
Number of options exercisable | 168,750 | |
Option exercise price exercisable | $ 10.68 | |
$4.98 [Member] | ||
Number of options outstanding | 31,250 | |
Option exercise price outstanding | $ 4.98 | |
Number of options exercisable | 31,250 | |
Option exercise price exercisable | $ 4.98 | |
$7.50 [Member] | ||
Number of options outstanding | 25,000 | |
Option exercise price outstanding | $ 7.50 | |
Number of options exercisable | 25,000 | |
Option exercise price exercisable | $ 7.50 | |
$10.02 [Member] | ||
Number of options outstanding | 31,250 | |
Option exercise price outstanding | $ 10.02 | |
Number of options exercisable | 31,250 | |
Option exercise price exercisable | $ 10.02 | |
$12.48 [Member] | ||
Number of options outstanding | 6,250 | |
Option exercise price outstanding | $ 12.48 | |
Number of options exercisable | 6,250 | |
Option exercise price exercisable | $ 12.48 | |
$15.00 [Member] | ||
Number of options outstanding | 6,250 | |
Option exercise price outstanding | $ 15 | |
Number of options exercisable | 0 | |
Option exercise price exercisable | $ 15 | |
$15.18 [Member] | ||
Number of options outstanding | 75,000 | |
Option exercise price outstanding | $ 15.18 | |
Number of options exercisable | 75,000 | |
Option exercise price exercisable | $ 15.18 |
10. Stock-based Compensation 52
10. Stock-based Compensation (Details - Non vested) - Stock Options [Member] | 12 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Number of shares | |
Outstanding, beginning balance | 62,500 |
Granted | |
Vested | (56,250) |
Outstanding, ending balance | 6,250 |
Weighted-Average Grant-Date Fair Value | |
Per share price nonvested options outstanding, end of period | $ / shares | $ 8.64 |
10. Stock-based Compensation 53
10. Stock-based Compensation (Details - Assumptions) - Stock Options [Member] | 12 Months Ended |
Sep. 30, 2016 | |
Risk-free interest rate | 0.101% |
Expected life of the options | 2.5 to 3.5 years |
Expected volatility | 140.00% |
Expected dividend yield | 0.00% |
10. Stock-based Compensation 54
10. Stock-based Compensation (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Stock-based compensation expense | $ 256,146 | $ 712,538 |
Unrecognized compensation expense | $ 3,653 | |
Re-pricing of stock options [Member] | ||
Stock-based compensation expense | $ 54,677 |
11. Earnings (Loss) Per Share55
11. Earnings (Loss) Per Share (Details - Computation of loss per share) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Basic | ||
Net income (loss) attributed to Live Ventures Incorporated | $ 17,829,857 | $ (14,666,129) |
Less: preferred stock dividends | (1,917) | (1,921) |
Net income (loss) applicable to common stock | $ 17,827,940 | $ (14,668,050) |
Weighted average common shares outstanding | 2,815,072 | 2,627,636 |
Basic earnings (loss) per share | $ 6.33 | $ (5.58) |
Diluted | ||
Net income (loss) applicable to common stock | $ 17,827,940 | $ (14,668,050) |
Add: preferred stock dividends | 1,917 | 1,921 |
Net income (loss) applicable for diluted earnings (loss) per share | $ 17,829,857 | $ (14,666,129) |
Weighted average common shares outstanding | 2,815,072 | 2,627,636 |
Add: Options | 21,166 | 0 |
Add: Warrants | 339,620 | 0 |
Add: preferred stock | 127,840 | 0 |
Assumed weighted average common shares outstanding | 3,303,698 | 2,627,636 |
Diluted earnings (loss) per share | $ 5.40 | $ (5.58) |
11. Earnings (Loss) Per Share56
11. Earnings (Loss) Per Share (Details - Antidilutive securities) | 12 Months Ended |
Sep. 30, 2015shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 892,986 |
Stock Options [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 175,000 |
Warrants [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 590,146 |
Series E Convertible Preferred Stock [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount | 127,840 |
12. Related Party Transactions
12. Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
IGC [Member] | ||
Interest expense | $ 583,233 | $ 2,018,803 |
13. Commitments and Contingen58
13. Commitments and Contingencies (Details - Leases) | Sep. 30, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Year ending 2017 | $ 116,124 |
Year ending 2018 | 72,870 |
Year ending 2019 | 85,407 |
Year ending 2020 | 100,092 |
Year ending 2021 | 117,312 |
Thereafter | 2,948,078 |
Total future minimum payments | $ 3,439,883 |
13. Commitments and Contingen59
13. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Other income | $ 915,500 | |
Rent expense | $ 581,750 | |
Modern Everyday, Inc. [Member] | ||
Other income | 316,000 | |
Rent expense | $ 518,877 |
14. Income Taxes (Details - Inc
14. Income Taxes (Details - Income tax expense) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Current expense: | ||
Federal | $ 0 | $ 320,000 |
State | 31,361 | 56,000 |
Total current | 31,361 | 376,000 |
Deferred expense: | ||
Federal | (12,524,582) | 0 |
State | 0 | 0 |
Total deferred | (12,524,582) | 0 |
Total income tax expense | $ (12,493,221) | $ 376,000 |
14. Income Taxes (Details - rec
14. Income Taxes (Details - reconciliation) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income tax reconciliation | ||
Federal statutory rates | $ 1,830,150 | $ (4,874,337) |
State income taxes | 161,484 | (123,292) |
Permanent differences | (852,646) | 2,794,987 |
Income not offset by net operating losses | (1,083,866) | 327,477 |
Valuation allowance against net deferred tax assets | (12,284,278) | 2,251,165 |
Other | (264,065) | 0 |
Effective rate | $ (12,493,221) | $ 376,000 |
Income tax rate reconciliation | ||
Federal statutory rates | 34.00% | 34.00% |
State income taxes | 3.00% | 1.00% |
Permanent differences | (16.00%) | (19.00%) |
Income not offset by net operating losses | (20.00%) | (2.00%) |
Valuation allowance against net deferred tax assets | (228.00%) | (16.00%) |
Other | (5.00%) | 0.00% |
Effective rate | (227.00%) | (3.00%) |
14. Income Taxes (Details - Def
14. Income Taxes (Details - Deferred tax assets) - USD ($) | Sep. 30, 2016 | Sep. 30, 2015 |
Deferred income tax asset, current: | ||
Book to tax differences in accounts receivable | $ 406,733 | $ 374,621 |
Book to tax differences in prepaid expenses | 0 | 65,467 |
Book to tax differences in accrued expenses | 241,536 | 144,961 |
Book to tax differences in inventory | 414,575 | 0 |
Total deferred income tax asset, current | 1,062,844 | 585,049 |
Less: valuation allowance | 0 | (585,049) |
Deferred income tax asset, current, net | 1,062,844 | 0 |
Deferred income tax asset, long-term: | ||
Net operation loss carryforwards | 9,915,371 | 10,801,243 |
Book to tax differences in intangible assets | 633,869 | 632,557 |
Book to tax differences in organizational costs | 160,586 | 272,239 |
Book to tax differences in depreciation | 751,912 | (6,810) |
Total deferred income tax asset, long-term | 11,461,738 | 11,669,229 |
Less: valuation allowance | 0 | (11,669,229) |
Deferred income tax asset, net | 11,461,738 | 0 |
Total deferred income tax asset | $ 12,524,582 | $ 0 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||
Valuation allowance | $ 0 | $ 12,284,278 |
Change in valuation allowance | (12,284,278) | $ 2,251,165 |
Net operating loss carryforward | $ 35,500,000 | |
Operating loss carryforward expiration date | Dec. 31, 2027 |
16. Acquisitions (Details - Pur
16. Acquisitions (Details - Purchase allocation) - Marquis Industries, Inc. [Member] | Sep. 30, 2016USD ($) |
Cash | $ 496,944 |
Accounts receivable | 7,262,188 |
Inventory | 11,717,113 |
Prepaid and other current assets | 1,518,430 |
Property, plant and equipment | 16,392,695 |
Customer Relationships | 439,039 |
Bargain Purchase Gain | (4,573,968) |
Accounts payable | (4,139,830) |
Accrued expenses | (433,989) |
Non-controlling interest | (2,000,000) |
Purchase price | $ 26,678,622 |
16. Acquisitions (Details - Acq
16. Acquisitions (Details - Acquisition Income) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Depreciation | $ 2,895,132 | $ 472,220 |
Bargain Purchase - Gain on Acquisition | 4,573,968 | $ 0 |
Marquis Industries, Inc. [Member] | ||
Depreciation | 227,654 | |
Amortization | 6,117 | |
Cost of sales | 1,080,051 | |
Bargain Purchase - Gain on Acquisition | $ 4,573,968 |
17. Segment Reporting (Details)
17. Segment Reporting (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Net revenues | $ 78,954,247 | $ 33,369,866 |
Gross profit | 19,974,870 | 11,254,394 |
Operating income (loss) | 2,318,249 | (10,136,267) |
Depreciation and amortization | 3,125,311 | 1,047,752 |
Interest expenses | 4,020,547 | 4,485,661 |
Provision for income taxes | (12,493,221) | 376,000 |
Net income (loss) | 17,954,051 | (14,712,285) |
Total Assets | 53,467,400 | 40,664,356 |
Intangible assets (including goodwill) | 1,689,790 | 2,316,930 |
Marketplace Platform [Member] | ||
Net revenues | 5,438,007 | 15,868,448 |
Gross profit | 1,238,317 | 5,724,186 |
Operating income (loss) | (5,172,406) | (11,807,737) |
Depreciation and amortization | 284,593 | 633,732 |
Interest expenses | 2,947,294 | 4,214,171 |
Provision for income taxes | (12,907,201) | 0 |
Net income (loss) | 6,604,121 | (15,435,765) |
Total Assets | 15,053,993 | 6,811,977 |
Intangible assets (including goodwill) | 1,287,338 | 1,516,930 |
Manufacturing [Member] | ||
Net revenues | 72,509,357 | 16,006,683 |
Gross profit | 17,771,735 | 4,187,026 |
Operating income (loss) | 6,529,469 | 563,503 |
Depreciation and amortization | 2,840,718 | 402,250 |
Interest expenses | 1,073,253 | 271,490 |
Provision for income taxes | 413,980 | 376,000 |
Net income (loss) | 9,250,473 | (184,841) |
Total Assets | 38,333,437 | 33,714,344 |
Intangible assets (including goodwill) | 402,452 | 800,000 |
Services [Member] | ||
Net revenues | 1,006,883 | 1,494,735 |
Gross profit | 964,818 | 1,343,182 |
Operating income (loss) | 961,186 | 1,107,967 |
Depreciation and amortization | 0 | 11,770 |
Interest expenses | 0 | 0 |
Provision for income taxes | 0 | 0 |
Net income (loss) | 2,099,457 | 954,477 |
Total Assets | 79,970 | 138,035 |
Intangible assets (including goodwill) | $ 0 | $ 0 |