Live Ventures Incorporated (LIVE) Q1 2017 Earnings Report, Transcript and Summary

Good day, everyone and welcome to the Live Ventures Quarterly Call. At this time, all participants are in listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note that this call maybe recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Jules Abraham with JQA Inc. Please go ahead, sir.

Thank you, David. Good afternoon and welcome to the Live Ventures Incorporated Fiscal First Quarter 2017 Conference Call. Earlier today, the Company filed its Form 10-Q for the fiscal quarter ended December 31, 2016 with the SEC. Just after the opening of the U.S. financial markets. This filing can be found at the Company’s website www.live-ventures.com in the Investor Relations section as well as on the SEC website at www.sec.gov. Joining us with Live Ventures today are Jon Isaac, Chief Executive Officer and Virland Johnson, Chief Financial Officer as well as Rodney Spriggs, President of Vintage Stock Incorporated. Before I turn the call over to Mr. Johnson, please note that some of the remarks you will hear today may contain forward-looking statements about the Company's performance. As well, there may be forward-looking statements during the Q&A session following the prepared remarks. These statements are neither promises nor guarantees and there are number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in company’s filings and periodic reports filed with the SEC. Copies of which are available on the Live Ventures’ website or maybe requested directly from the Company. Forward-looking statements are made as of today’s date and the Company does not undertake any obligation to update any forward-looking statements made during today’s call. With that, I’ll now turn the call over to Mr. Johnson. Virland?

Thank you, Jules and thank you to everyone for joining us today for our first fiscal quarter 2017 call. I would also like to thank and express my appreciation to our management and associates of Live Ventures for the outstanding quarter we've had. During our call today, we will cover our Company’s operating and financial results for the quarter. And then we answer your questions at the end of our prepared remarks. Our last fiscal year through the first fiscal quarter of 2017 to-date, has demonstrated a seismic shift in our corporate performance. Largely due to the change in our focus from being an online resource for restaurants and retail consumer deals to becoming a growing diversified holding company focused on creating value for our shareholders by identifying, acquiring and operating profitable revenue positive businesses that have reached a tipping point for growth. When we acquire these companies, our goal is to provide them with the resources they need, in order to continue on their current path to success, while not interfering with their existing business plans and cultures. This approach allows these companies to continue their expansion in growth with the security and resources are being held by our larger entity that can protect their interests. Following our acquisition of Marquis Industries, it was clear that this model was to be a successful one and spread on our subsequent acquisition of our most recent acquisition Vintage Stock. We really encouraged by the results we have seen to-date and anticipate additional milestones regarding these portfolio companies as well as making additional acquisitions in the future. I would now like to provide a financial summary of the quarter and outline some of the highlights from the quarter. The company reported record quarterly revenue of $32.1 million representing an increase of 60.1% over the same period last year. And quarterly earnings per share of $0.71, an increase of 1,083% over last year, when adding back one-time charges related to the acquisition costs of Vintage Stock, earnings per basic share of $0.88 increased 1,366% over the same period last year. As of December 31, 2016 revenues were $32.1 million, which compared to the same period a year ago, marked an improvement of 60.1%. Gross profit for the quarter was almost $12.7 million which is up 97.3% from the same period during fiscal 2016. In addition, our operating income was almost $3.68 million compared to the same period last year of $1.047 million, a 251% improvement and net income was $1.42 million compared to just above $300,000 a difference of 711%. As of December 31, 2016, the Company reported approximately $1.5 million of cash on hand plus $12.5 million available credit on the Company's revolving lines of credit. During the first fiscal quarter of 2017 total assets topped $120 million for the first time. Net cash flow provided by operating activities was approximately $5 million for the first quarter. Approximately $4.8 million of new capital equipment was purchased and placed into service primarily at Marquis. Vintage opened eight new stores, working capital as of December 31, 2016 was approximately $24.3 million. Lastly stockholders equity increased approximately $4.8 million or 20% to $29 million over the prior quarter. For additional financial information in details I invite you to review our press release distributed this morning which contains the unaudited condensed consolidated financial statements and view our Form 10-Q filing on either our website or the SEC’s website. As I mentioned earlier, the last fiscal year and first fiscal quarter of 2017 was an important time for Live Ventures. We have transitioned from our LiveDeal model and are reaping the returns from our acquisition of Marquis Industries. In November, we acquired Vintage Stock for approximately $57.3 million net of cash acquired, a retail media superstore chain that provides new released content from home videos, themes and memorabilia that provided a search in our operating results for the quarter. During the quarter, we invested more than $4.7 million in new capital equipment that was placed into service at Marquis creating new productivity capacity for our carpet and synthetic turf product lines. We expect gross profit margins to again improve as a result of this investment. We continue to reverse common stock split, one for six in December in order to make our stock price more attractive to an expanded potential investor base. Jon Isaac, our CEO demonstrated as long-term commitment to our company and our shareholders through the creation of a new series of convertible preferred stock. Jon voluntarily agreed to exchanges common stock for new Series B convertible preferred stock and have them locked up for a period of five years. In addition you agree to the same lockup conditions for its outstanding warrants. Our focus remains on seeking out the best acquisition opportunities and growing our existing portfolio of companies or minimizing our cost of capital and enhancing shareholder value. On a personal note, I’m excited and energized about being part of the leadership here at Live Ventures since joining the company. Jon earlier this year committed to improve Investor Relations and transparency on part of management. This first fiscal quarter 2017 call and Q&A session is a significant step toward that commitment. And we look forward to providing frequent updates on our performance and results in the quarters and years ahead. With that, I thank you very much for your participation on this call and your continued interest in Live Ventures, Incorporated. At this time, Jon and I welcome any questions that you may have.

All right, it looks like we have one question from Ana Vasevalp [ph].

Hi, guys. Yes, hello. Can you hear me?

I can hear you.

Hello.

Hello?

Yes, hello.

Yes, can you hear us?

Yes. Can you hear me?

We can hear you fine, you are broadcasting. Go ahead.

Yes, I actually have several questions for you guys. One is about your goodwill in acquisition of Vintage Stock. Will you please explain to me how did you came up with that number? Because it seemed to me when you acquired Vintage Stock you didn’t have any goodwill neither did Vintage Stock had a lot of it?

Goodwill is the excess of purchased price over net assets, net of liabilities acquired. And because we paid a premium over net assets acquired of liabilities, goodwill was created at that point in time. Going forward goodwill will be measured for impairments depending upon how the company performs on an ongoing basis.

I understand that. What I'm trying to figure out is, is that goodwill assign to an existing store is that Vintage Stock already had when you acquired it?

It's assigned to the entire business of Vintage Stock. It would be all of their stores.

And how…

There’s an ongoing business of Vintage Stock.

And how much do you actually guys expect to realize of it and...

I would direct you to our 8-K that was filed with regards to Vintage acquisition, the historical financial statements of Vintage Stock are within that SEC filing and you will note that they have had increasing revenues in cash flows and earnings over their history.

This is Jon speaking, the eight stores that we're opened, our stores that were already established maybe Rodney can spend a minute explaining the significance of the eight stores, because they are not just any eight stores that Vintage opened. Rodney?

Thanks, Jon. These were actually former Hastings locations, which was a competitor of ours that we had competed very well against over the years. And what we did is we were kind of a predator sometimes, we opened brand new stores. And we also take over existing stores that have good operations the EntertainMart brand is an example of that. That was a competitor of ours. And we bought them out. There's only one left that we haven't. We're actually in the process of looking at that final location also. So in that situation Hastings still had 100 and some operating stores, they had very large amount and were still very profitable, but as a whole of the company was not performing well and had a lot of overhead. So we cherry picked and had a list of 25 stores and settled on these seven bankruptcy sides very messy. And those stores had a soft opening with – they were turned over to us November 1. And we were doing this closing on this transaction also. So we did have a soft opening and got them open my Black Friday, which is pretty good for any retailer to say you acquire them within 21 days. You have 25,000 to 30,000 square foot stores stocked supplied employees in place and operating. Now the one small detriment to that was we were operating under the Hastings banner still because to get signage produced and permits with cities and things like that, take a little bit of time. So those signs are currently summer already up and all signs should be up within the next two weeks, and which time we will do a grand opening. But those stores alone we are seeing continued growth week over week on those. And so we do expect to have a positive earnings report for those in the first year for those locations.

So would you say that 39 new and would be more into those new stores that you just open and supposed to be what you already have. Because when I look at your 8-K, it looks like you had only two new in goodwill right. And then there is 39, that's been assigned in pretty much the acquisition. This is what I'm trying to – are you assigning it to the new stores. I understand is the whole business, but where is it mostly – where do you expect that goodwill to come in mostly from?

Is it more of a subjective question that you're asking?

No, no, no, no. I’m sorry – you have two new – the Vintage Stock had two new of goodwill on their balance sheets right. And then the 39 new and is it more – are you more leaning towards the new stores if you open that, that goodwill is going to come out of or…

Due to the purchase price that we made of Vintage Stock, the prior goodwill that Vintage had, had to do with an acquisition they made on their own, before Live Ventures acquired Vintage Stock. And goodwill is just a number. That's the excess of the purchase price that we paid for Vintage Stock. Net of the assets and liabilities that we have assumed in the acquisition, it's pertinent to the entire business. You can’t relate the two amounts together.

Okay.

I think we have some additional questions from some other people. And we probably, we should go – did you have other questions, Ana?

Yes, yes. I actually do. I have two more. Sorry, I'm taking that long.

All right.

I have another question in that's regards actually to your 10-K for 2016. And I was wondering if you can explain to me what is a bargain purchase gain on acquisition, because sales driven I just don't understand what that is a $4.5 million?

The accounting literature provides that when you assign values to assets and liabilities. They have to be a fair value at the time of the acquisition. And that initially when the Marquis acquisition was taken on, there was a provisional fair value determination made that was extremely low at that time. And the literature talks about being able to provide a complete in full measurements of fair value within year’s period of time from acquisition. At the time of the full measurement determination gain or loss is recognized in the current period. And either in bargain purchase gain is booked or there are adjustments made to other assets such as goodwill. In this specific case, the assets were valued higher than the initial provisional value triggering a bargain purchase gain. It’s a very rare occurrence, but it does happen. And in this specific case that was the result.

So and why wasn't there is a goodwill. This is what I'm trying to understand, because it looks more like goodwill.

Goodwill only occurs if the fair values are less than the overall purchase price. In this specific case purchase price was less than the fair values.

I see. Thank you very much. And one last question and that's regarding your recent filing on trade and other receivables. You have the total amount of trade receivables factored was $8.2 million in December 2016. Is that part of the $32 million?

That is correct, those receivables that we factored with accounts receivable factors. We received cash and exchange for our receivables. That was the amount of – revenue and receivables that we factored during the period.

So you actually received $8.2 million pushed on in those receivables, is that correct?

Correct, yes.

Okay. And the rest that is left in your balance sheet is $8.3 million.

Correct.

Okay. So for the total…

Those are non-factored receivables, yes.

I see. Thank you very much guys.

Thank you.

We'll take our next question from Ray Bitar.

Ray Bitar. Hello Ray?

Hello, can you hear me?

We can hear you.

So my question is for Rodney, I'm an investor in Live Ventures. I just want to ask you what’s the difference between you and GameStop between the Vintage Stock and the GameStop.

Ray, that’s a good question. The one thing as I view a lot of these families that like them especially there are one-trick pony. So and they're even a little bit worsen there. GameStop is a very good company. I think they've been managed well for years and had a large expansion. But they are trapped and basically 1,200 square foot locations. So that being said when they talk about trends, which is toys, movie related merchandise things like that, that is a big growth category for them. We've been doing trend since 1980. We had original Star Wars figures, G.I. Joe figures, Ty Beanie Babies, all the stuff. So we've been doing it forever. It's not a new thing for us, its toys and collectibles. So when they do that, they lose square footage. And again that’s why they can only carry the newest of the new in the system. So they would have PS4 and Xbox One Games in there, but as that expands you noticed that there are 360, the previous generation systems. So Xbox 360 or PS3, the space shrinks and they have less and less room for it. That impacts their bottom line. And that’s where you’re getting a lot more use sales, which if you look at our report and the margins we make on use. We would of course rather sell used every day. But that’s the one thing that we carry product all the way back to the original Atari in the NES systems. And there’s a lot of value to that and we sell a lot of those original systems we have actually two repair centers that are in our company that repair old systems, very high margin items and there’s actually systems are made called RetroN systems that play two and three different systems like they might play a Super Nintendo or in NES. And those systems you will sell 300 or 400 those a month. There’s only one reason people buy those and that’s to get those old games. And so you see, I think that pays attention to GameStop is actually circle back and they’re trying to get back into the classic game market. Another sign of that and why that’s such a good thing is you look at this NES Classic many that just came out in November, and has 30 building games on it. It’s a plug and play system. You can’t put any other card to that, first go for $60. It’s sold for $200 at Christmas. It’s still going for like $130 to $140. So that value of Nintendo and the Nintendo brand is very strong and we still sell that Classic stuff. So a big difference between us and GameStop is that we’re carrying every video game system that’s ever been made. And we continue to carry those games. And our store sizes, we do have a few 3,000 square foot stores, it’s because the real estate is so good that we make it work in those types of spaces. But most of our stores are bigger in that 7,000 to as much as 50,000 square foot stores. And we have a different floor plan and footprint for every type of market. So that being said, whereas Hastings was here, they were a company has been around long time, but they really haven’t changed what they’ve done forever. They had a heavy amount of rental still. They were still heavy into the books. They buys they were not real strong on buys they would turn product away and we never turn product away. The way that we control our inventories is that we actually buy it cheaper. So again, it might be that we’re only paying $0.25 for Lord of the Rings movie and we might have 500 of them in our warehouse. And sometimes might have a 1,000 or 3,000, but we have outlets where we sell loads of movies that you’ll see previously viewed movies and grocery stores and truck stops and things like that. So we have – it’s another revenue stream for us. So we’re really integrated on products and always getting the yes with customer, we do compete with Amazon, because that’s definitely a competitor. So because of our buy-sell trade model and they typically have a lot of new, they use they don’t control, because that is being individual selling it same thing eBay. Again we’re a bigger company that people can be assured that they’re going to get the products, it’s going to be quality product, its going to not have the issues with it. So all of these times, we didn’t ship to people’s house. I mean that’s another thing that we do as when if we don’t have it in the store at the current time. Then we can check all of our 57 locations and see if we’ve got it and mostly directly to somebody’s house. So we’ve got competitive things that we do with our different types of competitors whether they’re brick and mortar or whether they are an online retailer. We also have something that’s proprietary card is our C2C, it’s cooler than cash card. That card we actually offer 50% more in trade value, some of our competitors do that every now and then, GameStop does it periodically for maybe a week at a time. But that’s our all day, everyday deal. So if we’re going to give you $20 for whatever you bring in, you can get $30 on this cooler than cash gift card and use it for anything in the store. You’re not just tied to video games or somebody who sold movies or something like that. And it’s you can use it for Monster drinks and stuff like that also. So again, our difference is we have deep inventory, we have huge selections, nobody’s got the selection we have, Walmart, Best Buy all those guys, our selection is deeper than anybody by far.

Got you.

I hope that answer your question.

Yes, you did. I have another question which I think a lot of people want answers to and maybe Jon. Mr. Jon Isaac, the CEO can help to answer it. The Seeking Alpha article is you think the points raised by the Seeking Alpha article – and pretty much anyone, but maybe Jon can answer that question for us.

Yes, I realize that created a lot of questions I’ve received dozens upon dozens maybe hundreds of questions in e-mails about this. But the information contained within Seeking Alpha’s article is false and we believe that is as part of the short and dump scheme to value our shares. All other negative media in the form of attorney advertisements and press release is simply cites back to the false Seeking Alpha article and nothing more. Live has been investigating and will continue to investigate the perpetrators of this short and dump scheme. And we have reading the question whether the author even exists as a human being. He may be using a pseudonym and his opinions quote-unquote lack any evident there we support. We are committed to comparing the fraudulent and illegal manipulation of our stock price and we will avail of all legal and administrative remedies at a time and place of our choosing.

Okay. Thank you, Jon. I appreciate it. I’m sure, although like I said I look the company solid numbers, I think the stock should be much higher. So best of luck to all of you.

Thank you, Ray.

Thank you.

All right. Our next question is coming from Joseph Kowalsky with Upstream Investment Partners.

Jon, good afternoon. Thank you for my call. I actually, I have three questions. I’ll just maybe four I’m not sure. I’ll present them all to you and then you can divide them up as you see fit. The first is with regards to woman was asking about the goodwill, I think what you’re trying to get at was, if you paid more for something then the assign value to it. Where do you think you’re going to get that value that you’re paying the extra for? I think that’s what she was trying to ask I’m not sure. So that sort of one question that might be out there. The second one is there now are a bunch of Class X Monsters and would you say they sincerely back to that article. What’s going to happen with those? I mean these guys clearly…

Joseph, let me stop you right there.

Sure.

They have been no lawsuits filed, none, zero.

I’m sorry, forgive me. You’re right. I’m not speaking clearly. There have been a number of lawyers out there trolling for four things, which I’ve seen. Is there anything that needs to be done to get rid of those or will they just disappear of their own ways when they find that there is nothing to really grab on?

Joseph, so we think that’s – you want to ask your three questions and then we’ll go one by one.

I’m happy to wait, if you’d rather response them in that time. That’s fine.

Okay. Rodney will answer maybe first question on the goodwill.

The goodwill, we expect to see value as a result of the net cash flows that we’re going to enjoy being the owner of vintage stock. And the exciting things that broaden in this crew are going to be able to do with Vintage going forward. Ultimately value that’s paid for companies in the goodwill, we paid is realized in the form of cash flows over time. So that’s how we expect to see value in return on the goodwill that we paid for the company.

Right. Yes, I understand that. And I just I was trying – I just thought I would try – what I thought make clear what she was trying to ask. But, yes, that I do understand I appreciate that.

On the class action lawsuits or the threats of lawsuits. Number one, no one has filed anything; number two, no one has even called us, e-mail us, any communication with us whatsoever. We are not being investigated by any regulatory bodies that we know of no one not even a letter, not an e-mail, nothing that would indicate that anyone is looking at us. And we strongly believe that the lawyers and the Seeking Alpha are all in the one group together scheming and manipulating our stock, which is clearly to find the stock product by the SEC to go to sec.gov you’ll see what it is. And all the end of the space of lawyers advertisements are based solidly on Seeking Alpha’s fake news article. We haven’t been contact that are sued by any lawyers and if it happens we will aggressively, then we will repeat, we will aggressively defense and seek sanctions against the filings attorneys. We are not settling for any amount of dollars, not even $100, this is not about money; this is really about protecting our name as a company. We’ve done nothing wrong and we are prepare to go to court and go to discovery and open up all of our books because we have done nothing wrong and we will defend it all the way to – whatever it takes in order to clear our name.

I appreciate that very much, as a shareholder myself and also because number of my clients are shareholders. So the other questions are these, with regard to Vintage Stock, there was some comments and forgive me for, I think it was actually in that article where you’d made some comment about it being just a reincarnation I think this is a blockbuster, which I haven’t seen anything like that. And I just wanted to have – I know you’ve taken over a number of locations of other stores you already commented on that a little bit. Is there anything to that as far as the history of the organization, I just – I’ve tried…

There is no history and there is no comparison really. Our rental income as you reviewed our filing for Q1. I think we had about $177,000 of rental income in Q1. We are clearly not dependent on rental income. Rental income is not a major revenue stream for us at all; it’s an ancillary revenue stream. And I’ll turn it over to Rodney to really address the question in terms of our marketing focus, but rental is strictly ancillary. Rodney?

So, yes that’s – I’m glad you ask that question too. We actually part of the company Movie Trading Company was purchased from blockbuster. And the interesting thing was they’d ran it up to about 47 locations and then they got spun-off from Viacom then blockbuster hit their cash flow problem. And we purchase that company from them. It wasn’t really what blockbuster did. It’s a buy-sell trade model. This tie in actually is that the same guy that operated that and sold that’s blockbuster started the EntertainMart brand that we are also gobbling at. And he also was the founder of CD Warehouse. Now all business models they were all different. Of course when we took over Movie Trading Company we brought in all of our mix of products, all of the different things and that actually when we spread rental to all of our locations because we understood how it work then and its likely we’ve already got more inventory than anybody and more selection than anybody so why not we’re the one stop shop. When people talk about what we have done and how we do it and how we’re still going and how we’re growing and how our EBITDA continues to grow, because we’ve invested a lot of money and technology in our POS system and we’ve invested and have long-term employees that get the buy-sell trade model. And we are in front as all the trends. When there is a new trend we will have that product in our stores before any of the national retailers did by the time they jump in like Pop Figures for example or something like cards against humanity that target now, Gary. We’ve had it for a year and a half and by way it’s already dying. So those type of things when you say there are some slight comparisons there are we took over three borders locations there V-Stock brand stores in St. Louis market, we started the book store in 1980 that got out of books and because we knew how to do them and the malls wanted us because again they don’t need the 83 closing store. They wanted us to possibly continue books if we could and that was part of the negotiation. And also by the way it gets better rent rates because that makes us desirable to the malls, we said we would do it, we know how to do it and we make money of it. And then also made the Hastings locations more palatable even though we were taken the top locations, book sales were still at pretty good chunk of the sales it was double-digits sales, it went 20% but it was in the 10% to 15% of their sales the problem – one of the problems was that the rental side was still about 10% of their business and I believe that was a fatal fall in their plan that they had $0.99 rentals on movies that were just a little bit older say a year old. For us we are a shelter company. Rental is just something we can do and its like finding money on the sidewalk. But we want to sell it to the customer and why would I rent it for $0.99 I’d rather sell it for $3.99 to $5.99 the customer turns around keeps its for however long they want and then they turn around bring it back to us and sell it to us for $0.25 to $1 and the whole practice starts over and over again. That’s why even though – we have an online sales department, we sell online but we also don’t push it really, really hard yet because we want that product to stay in our markets, we are the biggest buyer in our markets of product, whether it’s a movie, a video game, music CD, a toy, a collectable. If it goes outside the market, it never comes back. So again that’s a part of it and we invest a lot of money – our trucks and shipping we are moving product and smoothing inventory between our 57 stores that every store, every three week gets shipment. And so that’s a big reason that we’re successful than everybody else is we will work harder at it and we do it better and smarter. And we keep that inventory smooth.

I appreciate and I like that model, when I was in college I worked in a pawn shop and we had a similar model with regard to jewelry and I guess the only concern that I would have with regard to this model in this arena is there a time where this all becomes electronic and transferable electronically…

And my answer on that is, again nobody’s got a crystal ball, but you are seeing a slowdown of all of the different mediums whether it streaming or digital downloading, digital downloading actually is slowdown significantly and had minimal growth year-over-year. Streaming still little bit but the big thing is, when you say Netflix or if you say an Amazon and their growth. There has been a little of picking winners and losers. So if you say the site of Amazon giving an 8% to 10% head start by them not collecting sales tax is a serious issue and government agencies again it shameful and they should be shame but Amazon voluntarily added 10 states because they know its coming, and they are trying head off something worse. So that’s kind of even the – but not just for us that every brick and mortar. And again for the state and tax receipts they got to be something because, its not difficult thing to see what’s going on imply that’s having to a lot of retailers so once that happens we expect some sort of uptick because of that and that will happen across all the Internet sales, it will be taxed. Streaming, if you want say with Netflix again they had a good betting deal with Stars, that if you look at what they offer two years ago and the price now is a little bit higher of course the racing the race, because their cost are super expensive for content. And if you look, they are going to have some issues long-term, again its best, best and best and I get it but they are starting off unless selection because their cost of the product is going at – and the studios are getting smarter about it again, its all about revenue stream, just like I said, we are now taking 500 some gift cards of other retailers. It’s a revenue stream that we wouldn’t want to impact and the studios have been really good about impacting their revenue streams either it was, here is a theater and then okay we’re going to have VOD which they had tried for years and then okay with it. But now they are making them pay for the content, they are not selling it off or giving it out cheap. And so that’s going to change things a little bit too. One of the other things, is that one of our strongest markets is the Kansas City market, and everybody wants to – I’ve seen some things or people say, oh, well because you are in the Midwest basically and your Internet speeds are slow and that’s not really true. And Kansas City has Google Fiber, which is the fastest Internet and that’s our one of our best performing markets, its not the best performing market we have in the whole chain, and we’re in Dallas-Fort Worth metro from city metro, and also metro St. Louis. So again while there is a little bit truth if Netflix one here and Amazon one here, it would be scary how much money we had coming through that. It just another competitor and again as time change its not going to happen soon, because there have been an issue in 10 or 15 years that this are gone maybe but again that’s we’re a buy-sell trade model. We’ll be selling something else and doing something else.

Sure.

So we’re not blind to what goes on the technology but you are seeing big slowdown. So we’re very aware of that. But we’re also not going to just throw everything out and here is the huge cash – and say, you know we’re just going to ignore all that or just kind of go all the online sales or something like that. We’ll just integrate whatever else we got to do. That’s why we have an online site, as we go forward that will be doing that and doing it better.

Well, thank you. I really appreciate all of your time and the answers to my questions. And wish you lot of luck. Things look really good to me and I really appreciate it.

Thank you, Joseph. One of the things that does, this is Jon I wanted to mention that I realize that some of our stockholders they don't see what we see as management. In other words, they haven’t locked the stores of Vintage. They haven’t locked the seven or eight plants we have at Marquis Industries. So one of the things that we've decided to do as management was to hire a third-party company to create extensive videos of each company that we have including a question-and-answer with the CEOs of each respective company. So we have a – we've done professional videos and we'll be releasing them soon. With the goal that the video crew has – videographers was to make every shareholder, anyone who's interested or an existing shareholder to see what we see. Because I realize you're reading Marquis on the pieces of paper on 8-Ks in filings which is great. But I think something that you can click on and actually tour the sites will be very valuable. So we've done this and those will be released very soon, we’re actually very excited to be publishing those for you to see.

We are going to put them on our website.

Yes, they will be on the website and we'll probably announce them as well as soon as they're available.

Okay, we will take our next question from Brandon Negron from Forte Capital [ph]. Ladies and gentlemen, if quick and hold that question to one. We have queue of questions that are still we apparently have approximately 20 minutes left for the call. Brandon?

How are you guys doing today? Can you hear me?

We can hear you. Go ahead.

All right, I just wanted to know what your debt policy is moving forward, because obviously you’re a highly leveraged company.

What our debt policy is?

Yes.

Good question. We clearly did use debt in terms of our Vintage acquisition. Our policy is to use debt worries opportunistic for us. In terms of the difference between shareholder capital and the cost of debt capital, we do realize that we do have some higher interest rate debts and our strategy frankly is to pay that debt down and/or find ways to restructure that debt into lower cost – cost of debt. So we don't have a specific policy. But our – I guess our ongoing direct event strategies is to keep our debt low and lower with use of our cash.

When we made the acquisition of Vintage, we had various ways of raise in capital. We could go out and borrow at 2%, 3% from some banks or we can go out and sell stock and raise the capital needed for the acquisitions. So we obviously did not do the latter. And I don't think we would for some time and so we decided to talk to our banks and raise the equity we financing for through that.

Thank you, Brandon.

Thank you.

Next question is from very Jay Bar [ph], Private Investor. Jay?

Hey, gentlemen congratulations on a great quarter. Just wondering if you give an update on your stock repurchase program any thing you see in the future on Verizon for that, where that’s at right now?

You want to take that or do you want me to take that?

Go ahead.

We look for opportunities to step-in and continue buying shares. As a warrant in the capital markets dictates or right now our focus is probably more towards paying down debts. In terms of improving our shareholder equity and position, but it's still on the forefront and we will do share repurchases, when we have available cash to do so.

All right, thank you.

You’re welcome.

Next question is from Raman Patel. Raman?

Yes, thank you for taking my call. Congratulation and I also want to compliment that you providing with a nice stockholder later was very, very informative. I want to ask you why is there a difference in number of share between 2015 and 2016 by 800,000 or so.

That's a very good question and Jon can talk to this directly or I’ll answer it. We exchange approximately 760,000 shares of common stock for Series B preferred shares. This brought that many shares out of circulation for the common and he is agreed to lock up those shares for a period of five years. So that's the largest reason.

Those shares have common equivalent. So the shares that you would buy on the open market and the shares that are in Series B are identical. There's no extra bonuses or this or anything like this and I was not paid any amount of money to lock them up either this voluntarily for various reasons.

So in your calculation then, the number of shares as a float in the marketplace, they’re much less than what you have listing as weighted average shares, right?

That was indicated in our 10-Q filings. The amount of floated shares right now is just below $2 million on a weighted average basis.

Okay, so that's what I was thinking that way but I think the market has misunderstood that line item. My other question is that what you guys are talking about video and increasing perception. I'm a Professor at NYU, so I know how this perception business was. So I was – due to first spend money and effort in fixing the website. Because right now the website is inviting me is only Live Ventures. Because the company had a two phase named Live Venture. So it doesn't make any sense in the business wise other than that you are acquiring other companies or we’re acquiring, I am shareholder. So what I am thinking like – and you fix the website making money writing to shareholders, people who are looking for other than being acquired by you. And like many things going to like somebody said on the phone call or conference call today about how you handle Vintage store. How are you different than GameStop so these are all important things to me because I'm trying to access where is this company going next five-year?

Appreciate the input, Raman. We will definitely pass this information along to our IT team and we'll make sure that your suggestions are addressed we really appreciate it.

Thank you.

Thank you.

Our next caller is David Cockrell, a Private Investor. David?

Yes, guys. Thanks for taking my call. And I'm sorry that my largest question with the exact same one that Raman just asked regarding the common and diluted shares and thank you for that answer. The other question I have was regarding the income taxes both State and Federal. You having that lower amount on one line and then expensed it out on the lower line. Can you explain that please?

Sure. We have a very large net operating loss carry forward and as a result of that net operating loss carry forward we can only use about 90% of that on current period income. So we pay federal income tax on about 10% of our current income. And we also have to pay state income taxes specifically in states that we don't have any NOL carry forwards. So our state income tax liability will be real and present every quarter going forward that we have income. And we will also be experiencing a current portion for federal income tax that we do not have NOL coverage for that. Does that answer your question?

And I want to reemphasize what Raman had said earlier on that previous question that I think a lot of us maybe don't understand the commitment that Jon made regarding that lockup because until I heard it on a conference call. I really install that line this morning I was not clear about that.

It’s a significant thing because he is agreeing not to share, sell, margin, dispose of the shares in any way for a period of five years as a permanent commitment.

Yes. I understand that and like I said – I think that many people don’t understand – why the float went down.

That’s why the float went down.

Okay. Thanks very much. I appreciate…

I said that because – I’m happy to explain some of the reasons that a lot of people had some concerns that when stock is up, Jon is going to sell and he is going to exit and this and that. What I wanted to broadcast was that this is to me, this is not a trade by any means. This is a very, very long term hold. I was considering a lot longer than five years, to be honest with you. We set five years and there's one fine print to this – it is that, all the stock that Isaac Capital Group owns is locked up. I still have these shares that I acquired on the open market, those are the ones that were bought several weeks ago, compliments to Seeking Alpha one stock went down and made it gave me an optimistic buy. And for several months prior to that those were all acquired on the open market. Those are not locked up and but all the other shares are locked up and the warrants as well, on conversion, on exercise, they're all locked up as well. So I just want to send this message out to all shareholders that this is definitely a long-term play for us and really it doesn't matter. Today for us. I mean if we woke up today and the stock was at $18 or was at $35. It's really, we're still coming to work and we're still working for you guys, the shareholders to bring value to you. And to be quite frank with you the most important metric here in our office is not really the stock price of the day. It's really the book value of our Company. This is the most important number in our mind or the shareholders' equity, it's the stuff that you guys the shareholders we all own together. So we're working hard on building that number and increasing that number year after year after year, because we know for a fact that the stock price should mimic or reflect directly, should be directly correlated with our book value. So we don’t, although we like to look at the stock price and it's nice to look at it given that nice feeling when its up it really doesn't affect us greatly and we feel that our very own stock price is that it will cover or dance around our shareholder equity. So the higher the shareholder equity, the higher the stock price, and that's how we've become more and more valuable year after year.

Okay, thanks guys. Appreciate it, keep up the good work.

Thank you, David. Our next question is from Michael Malthouse [ph]. Michael.

Hello, can you guys hear me?

Yep. go ahead.

Okay. My question is that, the $5 million capital expenditure in the fourth quarter and in the first quarter. Okay that was for Marquis. Is this anticipated that you're going to have this sort of or is this a recurring, you're going to be spending $5 million a quarter of a year on capital – on these kind of capital expenditure for Marquis.

This is not a recurring capital requirement. This was to bring up and expand capacity for Marquis, as well as replace some of their older equipment with newer equipment. Specifically in their heat tests, their twisting capability, and their extrusion capabilities.

What percentage, like they've given, if you could give me an example. What how much would it expand the capacity let's say capacity was the 100%.

We don't have an exact number. I mean we could pose the question, Tim Bailey is not with us on the phone today. But what Roland said was less true. It is growth CapEx that we've invested in Marquis. A lot of the procedures that they were undergoing they were actually giving it to a third party company an outsider to go in and do heat set and the tough thing and all the other things that’s needed to bring the carpet to retail stores and the dealers. So our investment in this CapEx will keep all of this in-house and so that we don't need too much outsourcing. So it will definitely improve the bottom line as a result of those investments or else we would not have made those investments obviously.

My next question is. Have you – what kind of increase would there have been pump in the revenue had you acquired Vintage on October 1, instead of November or whatever it was. Or what kind of increase in revenue, what do you think you would have had for that quarter.

I think what you're trying to ask is, we closed, we acquired Vintage on the November 3, 4. And our quarter – our first quarter started on October 1. So I think it's just bringing out and that the first quarter we own Vintage for only period of less than two months. So on a going forward bases or on a “normalized basis”, the revenues that we generated in Vintage should be a little bit higher. Because we only own the four, two out of the three months during the quarter. So the quarter, the Q2 2017, which is the quarter that we're in now will reflect Vintage an entire quarter for Vintage. And by the way the Vintage is historically the one of the busy seasons in February and March. And same with Marquis, February, March, April, those are the busiest months for both Marquis and Vintage. Any other questions Michael?

Yes. I mean – I think Rodney has answered the question, there is a few stores of 3,000 square feet. And then you have, what’s the average square footage about 10,000 square feet for Vintage stores?

Rodney?

Well. Okay. Quickly, we have – again different footprints, different plans for different size markets. So there's really not an average, that is the one good thing about us, is again we have a group of stores most are Vintage stock branded stores are generally in that 4,000 to 10,000 range and same with maybe trading. But then we have a mid-range group in that 10 to 15-ish. And then we've got this other group that is 25,000 to 50,000 square feet. And again it's all about population density and what the market can handle. We are tending to go towards a little bit bigger stores when those opportunities do arise and we're again because of real estate and again we’re a contrarian. And so if people are moving away from bigger box, again that's an opportunity for us predatory company to make very good real estate deals, that we can actually expand our product lines carry a lot more product, do some stuff that draws in, the younger groups of people, where there's a little more show and stuff like that. We have some movie theatres in stores. We have a game play systems, where you can play the systems and stuff like that – like we have eight different ones like that. So things like that. So again there's not a standard model, it’s just that all of our stores are profitable and they all do well, but it depends on the market and the population density and market for all of those particular areas.

Now these Hastings stores are they bigger stores?

They are 25,000 to 30,000 square feet. And that was basically that was the average footprint for Hastings location. I do want to touch on some real quick to Jon because you’d asked about sales numbers and your December of course is our strongest month, but we're more of a stable company. Where you'll see a lot of companies that do three four times sales at Christmas like it's a toys of rush or even a lot of major retailers. We're more of a 1.7 times in December than a normal month. But February is our second strongest month out of the year, and it's basically because of the tax return money. So February and March are huge for us and January is really strong for again, because of gift card returns and then also because of cold weather and you know a lot more people being inside watching movies, playing games, things like that. Same thing to July is a very strong month. Because extreme heat again drives people more inside and not out as much.

So for with the square footage, I mean your sales or square foot, across the board is it level or is it much lower in the bigger stores and much higher in smaller stores.

And then that answer is of course, the answer is, yes. I mean just as you look at any big box anchor retailer, you're talking a lot of times those numbers are smaller in those big boxes. But again, it's about the volume and the profit margins we can drive out of them rent is not the – rent in the sales per square foot is not necessarily the 100% driver on the bottom line. And we've got otherwise that we make more money out of those locations too.

Okay, thank you. One last question, is a 100% this is the Verellen [ph] is a 100% of the retail and online segment now attributable to Vintage or do we still have modern whatever it is and LiveDeal are these still products out there that are…

Most of the, I would say 98% of the revenue is Vintage in the retail online segment right now.

Okay. Okay, thank you.

Thanks Michael.

Thank you, Michael.

Our next question comes from Luigi Rovedo [ph]. Luigi.

Congratulations guys. Great quarter. Really appreciate your work, fantastic you did it tremendous good job. Most of the questions that I had already have been asked, so for you guys I only have one probably that you can give one approximately. What do you seeing that we have on this flooring in short position if there any nugget as a matter of fact if you are aware of it that’s my question if you have any update on this.

We don’t have an exact number yet, we hired a company recently that deals with people who illegally trade our stock and leak it naked shorting and all this. And we’re running reports it’s a fast firm and once we have that data we will be speaking with the institutions who are holding naked short positions in our stock and we will be using every regulation and a lot is provided to us in order to make sure that they are – that our stock is trading efficiently and with integrity. So we’re definitely aware that there might be something there and that’s why we’re investigating it, it’s our duty to our shareholders that we investigate, keep the trading in our stock to make sure that everything is done legally. And we should have something back soon. And we’ll be addressing it.

I appreciate it, and I also appreciate your sacrifice that – your investment that you did with steptographically to buy back share at the open market between you and the Gov, and also with management I really appreciate, and may the Lord bless you abundantly about it.

Luigi thank you very much and I know you by name. Because I’ve meet you years ago, you’ve been a long, long-term shareholder back from in the days of YP.com and LiveDeal and I’ve known you many years and probably one of the few people that attend our annual meetings. You physically arrived and so I want to thank you for being a loyal shareholder, I really do.

Alright good luck, delightful – its delightful to sharing time with you guys, so it really appreciate, without you we will not be around anymore. We really appreciate your work that you did. You really did a lot and I really with my all my heart I’m really happy about it. And thank you very much for everything. The only thing I have to say, you just mentioned that that topic was distressed on today especially with those outstanding number. I was hoping the other way around and say it was negative, do you have any intention to probably step in and take advantage of it like before.

I can’t comment as to when we’ll be buying stock, but we will mention those in 8-K’s and 10-Q’s or whatever we have to legally. We have to as required by law. But again the long-term shareholder like yourself and like myself a lot of other people on the call we’ll appreciate that probably in the long-term, a lower price will probably help shareholders in the long-term – value investors that will hold, buy and hold for a long time. because its true a lower share price will enable us to buy stock and decrease our outstanding share account and increase our EPS for the future for all shareholders that are holding on long-term. So in my view when the stocks up, I’m happy when the stock is down, I’m also happy because long-term the stock will reflect the performance of our Company.

Absolutely, it gives an opportunity to step-in, people they left – they missed the train before, that’s great too. Congratulations great job.

Thank you, thank you.

Thank you, Luigi.

You and your father Tony and all the management, I really appreciate it. Thanks a lot. And may God bless you and if you say that for all the things you have to open door for you and everything you do. Thank you very, very much.

Thank you.

Thank you, Luigi.

Next question is from Raman Patel. Raman?

Hi, Jon. Just want to remind you one thing, is that the first offshore action, personal action on this 15 year old shares, it such a mathematically is it a demand scores and I just calculated some of those shares. And I want to tell you that it is as if you are gong to buy 20% of the company. So its not an insignificant point, I think your company people have missed the line in amplifying this message. And the second thing is that the rate of percentage that you're projecting in the line items in your press release is $0.71 that has the significant massage also in the next quarters to come. I’m not asking you to say anything right now. But your primarily have not amplify that also in the current rate of percentage over 1000%. You're pushing this company into a significant growth rate on an EPS basis for 2017. So in the next quarter when you write the message, I would probably like you to or urge you to probably pay attention to those two things.

For sure. And there's a lot of ways that we have in store to boost that number, Raman. Obviously acquisition is one way to do it but also we believe that both of our companies will enjoy organic growth in 2017. And again refinancing the debt that’s connected to Vintage Stock is probably one of the top things on our list. Probably, a number 1 or number 2 on our list and that alone recalculate – probably would added about $52 a share. That would go right to the bottom line, just by refinancing. And the reason I will tell you, we went with the more expensive that was because of the timing. We closed on Vintage right before the holiday rush. And so we strongly believe that the time that closing earlier and not having to wait until January or February to close the transaction that the additional net profit generated in the months that we would own this, this company with far offset the additional or the incremental cost of paying a higher rate on interest rate. So this was more of a let's close this thing tomorrow type of a fee that we paid, and we realized that that’s there and we probably the first one or two things on our list.

Thank you.

Thank you. Raman. Are there any other questions? If so please announce yourself in terms of the instructions that you have. We currently don't have any questions in the queue right now. Will give it a couple of minutes here, in case some of you come up.

While we waiting here, I would urge our shareholders and potential shareholders to look at our performance not on just a quarter by quarter basis because companies are built over many, many years. What I would look at is our performance over the last five years. When we took over the company five years ago, the company's book value was around $2 a share, today it's closer to the $15 a share in just a few short years. At the time, that we took over the company it’s a really nice story. $4 million of revenues and losses of $5 million, which is just in a few years. Our book value grew at a compounded rate of 100% per year since December 2011 until the core of that you're looking at right now December 31 2016. So when you look at it from that perspective from a 30,000 foot view. And hopefully shareholders will appreciate that. Management is allocating the shareholders' money as efficiently as possible, we've done – we've made some mistakes, but those mistakes are probably one of the very, very valuable assets that we have that you don't see on the balance sheet. Because those mistakes are ones that we learn from quickly and we iterate very, very quickly and we work hard to rectify any of those mistakes. So to tell you we never made mistakes, would not be true. We've made mistakes and probably in the future will make some mistakes, but we will be very, very calculated and everything that we do. And the last five years has not been the product of luck or coincidence. Success as I say is series of right decisions and I believe that our numbers will describe or will speak to that.

No other questions.

Well. Thank you for participating on the call again today. We will be holding another quarterly call at the end of our Q2 results. And we will schedule and then send out information about it in advance. Thank you and good day.

This does conclude today’s program. Thank you for your participation. You may disconnect at anytime.