| Reclassification and Restatement |
Our previously
issued consolidated financial statements for year ended September 30, 2016 have been reclassified and restated.
Classification
of Marquis line of credit with both a subjective acceleration clause and lock box arrangement was not properly classified as a
current liability according to ASC 470. The Company determined that $222,590 of long-term debt should have been classified as
a current liability in the consolidated balance sheet.
Characterization
of deposits (advance payments) on the purchase of Marquis carpet manufacturing equipment and the related cash flow presentation
(operating vs. investing) in the statement of cash flows was an error and not presented correctly. The Company determined that
cash from operations was understated and cash used in investing were understated by $1,816,855 in the consolidated statement of
cash flows.
Deferred
income tax liabilities related to the Marquis Industries, Inc (“Marquis”) acquisition were not reflected in the final
purchase accounting. The Company also had unrecorded deferred tax assets relating to non-qualified stock options and restricted
stock from fiscal years 2013-2016, which would have been fully reserved until the valuation allowance was released in 2016 as
a result of the purchase of Marquis. In addition, the pre-tax net income on the tax provision did not agree to the audited consolidated
financial statements included in the Form 10-K primarily attributable to the adjustments made to the bargain purchase gain. As
a result of these errors, the Company determined that the bargain purchase gain was overstated, and deferred tax benefit was understated
by $3,074,623 in the consolidated statement of operations. In addition, the components of deferred taxes that were misstated are
within Note 17 – Income Taxes.
Management
has evaluated the impact of the above referenced errors. The impact on our previously issued Form 10-Q’s for quarters ended
December 31, 2016, March 31, 2017 and June 30, 2017 are as follows, in error and will be amended to reflect the following changes:
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Fiscal Quarter Ended December 31, 2016 |
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Fiscal Quarter Ended March 31, 2017 |
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Fiscal Quarter Ended June 30, 2017 |
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As |
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|
As |
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|
As |
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| |
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Previously |
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Previously |
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Previously |
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| |
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Reported |
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Change |
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|
(Restated) |
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|
Reported |
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Change |
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|
(Restated) |
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|
Reported |
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Change |
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|
(Restated) |
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| Current portion
of long- term debt |
|
$ |
6,226,454 |
|
|
$ |
14,278,689 |
|
|
$ |
20,505,143 |
|
|
$ |
5,832,567 |
|
|
$ |
15,378,332 |
|
|
$ |
21,210,899 |
|
|
$ |
5,847,194 |
|
|
$ |
17,375,442 |
|
|
$ |
23,222,636 |
|
| Long-term debt, net of current
portion |
|
|
67,287,070 |
|
|
|
(14,278,689 |
) |
|
|
53,008,381 |
|
|
|
69,019,133 |
|
|
|
(15,378,332 |
) |
|
|
53,640,801 |
|
|
|
70,104,445 |
|
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|
(17,375,442 |
) |
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|
52,729,003 |
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| Total liabilities |
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|
91,328,118 |
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|
|
|
|
|
91,328,118 |
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|
90,550,517 |
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|
|
|
|
|
|
90,550,517 |
|
|
|
93,105,215 |
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|
|
|
|
|
|
93,105,215 |
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| |
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|
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|
|
|
|
|
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|
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| Paid in capital |
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|
56,705,679 |
|
|
|
6,249,254 |
|
|
|
62,954,933 |
|
|
|
56,773,754 |
|
|
|
6,249,254 |
|
|
|
63,023,008 |
|
|
|
56,841,245 |
|
|
|
6,249,254 |
|
|
|
63,090,499 |
|
| Accumulated deficit |
|
|
(27,408,969 |
) |
|
|
(6,238,516 |
) |
|
|
(33,647,485 |
) |
|
|
(25,568,783 |
) |
|
|
(6,238,516 |
) |
|
|
(31,807,299 |
) |
|
|
(23,441,219 |
) |
|
|
(6,238,516 |
) |
|
|
(29,679,735 |
) |
| Series E convertible preferred
stock |
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
| Total shareholders' equity |
|
|
29,009,849 |
|
|
|
– |
|
|
|
29,009,849 |
|
|
|
30,918,112 |
|
|
|
– |
|
|
|
30,918,112 |
|
|
|
32,616,801 |
|
|
|
– |
|
|
|
32,616,801 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Prepaid expenses and other
current liabilities |
|
|
1,990,407 |
|
|
|
(1,816,855 |
) |
|
|
173,552 |
|
|
|
2,520,099 |
|
|
|
(1,816,855 |
) |
|
|
703,244 |
|
|
|
2,104,859 |
|
|
|
(1,816,855 |
) |
|
|
288,004 |
|
| Net cash provided by operations |
|
|
4,994,685 |
|
|
|
(1,816,855 |
) |
|
|
3,177,830 |
|
|
|
5,209,543 |
|
|
|
(1,816,855 |
) |
|
|
3,392,688 |
|
|
|
8,830,128 |
|
|
|
(1,816,855 |
) |
|
|
7,013,273 |
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| |
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|
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
| Purchases of property and
equipment |
|
|
(4,869,153 |
) |
|
|
1,816,855 |
|
|
|
(3,052,298 |
) |
|
|
(7,100,362 |
) |
|
|
1,816,855 |
|
|
|
(5,283,507 |
) |
|
|
(7,753,755 |
) |
|
|
1,816,855 |
|
|
|
(5,936,900 |
) |
| Net cash used in investing
activities |
|
|
(62,180,053 |
) |
|
|
1,816,855 |
|
|
|
(60,363,198 |
) |
|
|
(54,507,921 |
) |
|
|
1,816,855 |
|
|
|
(52,691,066 |
) |
|
|
(55,150,965 |
) |
|
|
1,816,855 |
|
|
|
(53,334,110 |
) |
Conversion
features on convertible notes and related warrants issued in 2012, 2013 and 2014 required bifurcation and derivative liability
accounting due to the down round protection features included within the agreements in accordance with ASC 815. On December 22,
2014, the Company executed an amendment to remove the down round provisions for the convertible notes and warrants. As a result
of these errors, the Company determined that accumulated deficit and additional paid-in capital were understated by $6,238,516
in the stockholders’ equity section of the consolidated balance sheet and consolidated statement of changes in stockholder’s
equity.
We reclassified
$10,738 from Series E Preferred Stock to additional paid in capital.
The following
table presents the impact of the corrections on the Company's previously issued consolidated financial statements as of and for
the year ended September 30, 2016:
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As |
|
|
|
|
|
|
|
| |
|
Previously |
|
|
|
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|
As |
|
| |
|
Reported |
|
|
Change |
|
|
Restated |
|
| Consolidated Balance Sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Current portion of long-term debt |
|
$ |
1,789,290 |
|
|
$ |
222,590 |
|
|
$ |
2,011,880 |
|
| Long-term debt, net of current portion |
|
|
13,682,872 |
|
|
|
(222,590 |
) |
|
|
13,460,282 |
|
| Total liabilities |
|
|
29,271,588 |
|
|
|
– |
|
|
|
29,271,588 |
|
| Paid in capital |
|
|
53,319,217 |
|
|
|
6,249,254 |
|
|
|
59,568,471 |
|
| Accumulated deficit |
|
|
(28,837,063 |
) |
|
|
(6,238,516 |
) |
|
|
(35,075,579 |
) |
| Series E convertible preferred stock |
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
| Total stockholders' equity |
|
|
24,195,812 |
|
|
|
– |
|
|
|
24,195,812 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statement of Income: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Bargain purchase gain on acquisition |
|
$ |
4,573,968 |
|
|
$ |
(3,074,623 |
) |
|
$ |
1,499,345 |
|
| Total other income (expense), net |
|
|
3,142,581 |
|
|
|
(3,074,623 |
) |
|
|
67,958 |
|
| Income before provision for income taxes |
|
|
5,460,830 |
|
|
|
(3,074,623 |
) |
|
|
2,386,207 |
|
| Benefit for income taxes |
|
|
(12,493,221 |
) |
|
|
(3,074,623 |
) |
|
|
(15,567,844 |
) |
| Net income attributed to Live Ventures Incorporated |
|
|
17,829,857 |
|
|
|
– |
|
|
|
17,829,857 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statement of Cashflows: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on bargain purchase of acquisition |
|
$ |
(4,573,968 |
) |
|
$ |
3,074,623 |
|
|
|
(1,499,345 |
) |
| Change in deferred income taxes |
|
|
(12,524,582 |
) |
|
|
(3,074,623 |
) |
|
|
(15,599,205 |
) |
| Change in prepaid expenses and other current assets |
|
|
(3,423,650 |
) |
|
|
1,816,855 |
|
|
|
(1,606,795 |
) |
| Net cash provided by operations |
|
|
6,061,778 |
|
|
|
1,816,855 |
|
|
|
7,878,633 |
|
| Purchases of property and equipment |
|
|
(1,376,685 |
) |
|
|
(1,816,855 |
) |
|
|
(3,193,540 |
) |
| Net cash used by investing activities |
|
|
(722,828 |
) |
|
|
(1,816,855 |
) |
|
|
(2,539,683 |
) |
| Increase (decrease) in cash and cash equivalents |
|
|
(1,956,923 |
) |
|
|
– |
|
|
|
(1,956,923 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statement of Changes in Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Paid in capital - at September 30, 2015 |
|
$ |
52,965,036 |
|
|
$ |
6,249,254 |
|
|
$ |
59,214,290 |
|
| Paid in capital - at September 30, 2016 |
|
|
53,319,217 |
|
|
|
6,249,254 |
|
|
|
59,568,471 |
|
| Accumulated deficit - at September 30, 2015 |
|
|
(46,665,003 |
) |
|
|
(6,238,516 |
) |
|
|
(52,903,519 |
) |
| Accumulated deficit - at September 30, 2016 |
|
|
(28,837,063 |
) |
|
|
(6,238,516 |
) |
|
|
(35,075,579 |
) |
| Series E convertible preferred stock - at September 30, 2015 |
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
| Series E convertible preferred stock - at September 30, 2016 |
|
|
10,866 |
|
|
|
(10,738 |
) |
|
|
128 |
|
|