Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

___________



(Mark One)



þQUARTERLY
Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934



For the quarterly period ended June 30,
2017



oTRANSITION
Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934



For the transition period from _____________
to _______________



Commission File Number 001-33937



Live Ventures Incorporated

(Exact name of registrant as specified in
its charter)



|Nevada
        (State or other jurisdiction of incorporation
        or organization)                          | 85-0206668
        (IRS Employer Identification No.)
|-------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------
|                                                                                                               |                                                     
|325 E. Warm Springs Road, Suite 102
        Las Vegas, Nevada
        (Address of principal executive offices) | 89119
        (Zip Code)                            





(702) 939-0231

(Registrant’s telephone number, including
area code)



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YesþNoo



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). YesþNoo





Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging
growth company” in Rule 12b-2 of the Exchange Act. (Check one)



| | Large accelerated filer  o | Accelerated filer  o        
| | -------------------------- | ----------------------------
| |                            |                             
| | Non-accelerated filer  o   | Smaller reporting company  þ
| |                            |                             
| | Emerging growth company  o |                             



If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNoþ



The number of shares
of the issuer’s common stock, par value $.001 per share, outstanding as of June 30, 2017 was 2,010,413.























INDEX TO FORM 10-Q FILING



FOR THE QUARTER ENDED JUNE 30, 2017



TABLE OF CONTENTS



PART I



FINANCIAL INFORMATION



| |         |                                                                                                                               | Page
| | ------- | ----------------------------------------------------------------------------------------------------------------------------- | ----
| | Item 1. | Financial Statements                                                                                                          | 2   
| |         |                                                                                                                               |     
| |         | Condensed Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and September 30, 2016                                  | 2   
| |         |                                                                                                                               |     
| |         | Condensed Consolidated Statements of Income (Unaudited) for the Three months and Nine months ended June 30, 2017 and 2016     | 3   
| |         |                                                                                                                               |     
| |         | Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three months and Nine months ended June 30, 2017 and 2016 | 4   
| |         |                                                                                                                               |     
| |         | Notes to the Condensed Consolidated Financial Statements (Unaudited)                                                          | 5   
| |         |                                                                                                                               |     
| | Item 2. | Management’s Discussion and analysis of Financial Condition and Results of Operations                                         | 27  
| |         |                                                                                                                               |     
| | Item 3. | Quantitative and Qualitative Disclosures about Market Risk                                                                    | 37  
| |         |                                                                                                                               |     
| | Item 4. | Controls and Procedures                                                                                                       | 38  



PART II



OTHER INFORMATION



| | Item 1.    | Legal Proceedings                                           | 39
| | ---------- | ----------------------------------------------------------- | --
| |            |                                                             |   
| | Item 1A.   | Risk Factors                                                | 39
| |            |                                                             |   
| | Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds | 42
| |            |                                                             |   
| | Item 3.    | Defaults upon Senior Securities                             | 42
| |            |                                                             |   
| | Item 4.    | Mine Safety Disclosures                                     | 42
| |            |                                                             |   
| | Item 5.    | Other Information                                           | 42
| |            |                                                             |   
| | Item 6.    | Exhibits                                                    | 43
| |            |                                                             |   
| | Signatures |                                                             | 44











i







PART I – FINANCIAL INFORMATION



| | ITEM 1. | FINANCIAL STATEMENTS
| | ------- | --------------------





LIVE VENTURES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS







|                                                                                                                                                                                                                        |  | June 30, |             |   | September 30, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ----------- | - | ------------- | -
|                                                                                                                                                                                                                        |  | 2017     |             |   | 2016          |  
|                                                                                                                                                                                                                        |  |          | (Unaudited) |   |               |  
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Assets                                                                                                                                                                                                                  |  |          |             |   |               |  
|Cash and cash equivalents                                                                                                                                                                                               |  | $        | 4,275,052   |   |               | $
|Trade and other receivables, net                                                                                                                                                                                        |  |          | 11,376,486  |   |               |  
|Inventories, net                                                                                                                                                                                                        |  |          | 33,746,102  |   |               |  
|Prepaid expenses and other current assets                                                                                                                                                                               |  |          | 3,815,575   |   |               |  
|Total current assets                                                                                                                                                                                                    |  |          | 53,213,215  |   |               |  
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Property and equipment, net                                                                                                                                                                                             |  |          | 21,081,840  |   |               |  
|Deposits and other assets                                                                                                                                                                                               |  |          | 77,520      |   |               |  
|Deferred taxes                                                                                                                                                                                                          |  |          | 9,504,029   |   |               |  
|Intangible assets, net                                                                                                                                                                                                  |  |          | 2,779,351   |   |               |  
|Goodwill                                                                                                                                                                                                                |  |          | 39,066,061  |   |               |  
|Total assets                                                                                                                                                                                                            |  | $        | 125,722,016 |   |               | $
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Liabilities and Stockholders' Equity                                                                                                                                                                                    |  |          |             |   |               |  
|Liabilities:                                                                                                                                                                                                            |  |          |             |   |               |  
|Accounts payable                                                                                                                                                                                                        |  | $        | 9,741,460   |   |               | $
|Accrued liabilities                                                                                                                                                                                                     |  |          | 5,093,972   |   |               |  
|Income taxes payable                                                                                                                                                                                                    |  |          | 318,144     |   |               |  
|Current portion of notes payable                                                                                                                                                                                        |  |          | 5,847,194   |   |               |  
|Total current liabilities                                                                                                                                                                                               |  |          | 21,000,770  |   |               |  
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Notes payable, net of current portion                                                                                                                                                                                   |  |          | 70,104,445  |   |               |  
|Note payable, related party                                                                                                                                                                                             |  |          | 2,000,000   |   |               |  
|Total liabilities                                                                                                                                                                                                       |  |          | 93,105,215  |   |               |  
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Commitment and contingencies                                                                                                                                                                                            |  |          |             |   |               |  
|                                                                                                                                                                                                                        |  |          |             |   |               |  
|Stockholders' equity:                                                                                                                                                                                                   |  |          |             |   |               |  
|Series B convertible preferred stock, $0.001 par value, 1,000,000 shares authorized, 214,244 shares issued and outstanding at June 30, 2017 and no shares issued and outstanding at September 30, 2016                  |  |          | 214         |   |               |  
|Series E convertible preferred stock, $0.001 par value, 200,000 shares authorized, 127,840 shares issued and outstanding at June 30, 2017 and at September 30, 2016, with a liquidation preference $38,352              |  |          | 10,866      |   |               |  
|Common stock, $0.001 par value, 10,000,000 shares authorized, 2,088,186 shares issued and 2,010,413 shares outstanding at June 30, 2017; 2,819,327 shares issued and 2,789,205 shares outstanding at September 30, 2016 |  |          | 2,088       |   |               |  
|Paid in capital                                                                                                                                                                                                         |  |          | 56,841,245  |   |               |  
|Treasury stock (77,773 shares)                                                                                                                                                                                          |  |          | (796,393    | ) |               |  
|Accumulated deficit                                                                                                                                                                                                     |  |          | (23,441,219 | ) |               |  
|Total stockholders' equity                                                                                                                                                                                              |  |          | 32,616,801  |   |               |  
|Total liabilities and stockholders' equity                                                                                                                                                                              |  | $        | 125,722,016 |   |               | $





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.









2









LIVE VENTURES, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



|                                                     |  | Three Months Ended June 30, |            |   | Nine Months Ended June 30, |  
|---------------------------------------------------- |  | --------------------------- | ---------- | - | -------------------------- | -
|                                                     |  | 2017                        |            |   | 2016                       |  
|                                                     |  |                             |            |   |                            |  
|Revenues                                             |  | $                           | 41,377,493 |   |                            | $
|Cost of revenues                                     |  |                             | 24,383,596 |   |                            |  
|Gross profit                                         |  |                             | 16,993,897 |   |                            |  
|                                                     |  |                             |            |   |                            |  
|Operating expenses:                                  |  |                             |            |   |                            |  
|General and administrative expenses                  |  |                             | 9,335,904  |   |                            |  
|Sales and marketing expenses                         |  |                             | 2,274,866  |   |                            |  
|Total operating expenses                             |  |                             | 11,610,770 |   |                            |  
|Operating income                                     |  |                             | 5,383,127  |   |                            |  
|Other (expense) income:                              |  |                             |            |   |                            |  
|Interest expense, net                                |  |                             | (2,127,790 | ) |                            |  
|Other income                                         |  |                             | 12,652     |   |                            |  
|Total other (expense) income, net                    |  |                             | (2,115,138 | ) |                            |  
|Income before provision for income taxes             |  |                             | 3,267,989  |   |                            |  
|Provision for income taxes                           |  |                             |            |   |                            |  
|Current tax expense:                                 |  |                             |            |   |                            |  
|Federal                                              |  |                             | 29,685     |   |                            |  
|State                                                |  |                             | (40,998    | ) |                            |  
|Total Current tax expense                            |  |                             | (11,313    | ) |                            |  
|Deferred tax expense (benefit):                      |  |                             |            |   |                            |  
|Federal                                              |  |                             | 1,114,588  |   |                            |  
|State                                                |  |                             | 36,671     |   |                            |  
|Total Deferred tax expense (benefit)                 |  |                             | 1,151,259  |   |                            |  
|Total provision  (benefit) for income taxes          |  |                             | 1,139,946  |   |                            |  
|Net income                                           |  |                             | 2,128,043  |   |                            |  
|Net income attributed to noncontrolling interest     |  |                             | –          |   |                            |  
|Net income attributed to Live Ventures, Incorporated |  | $                           | 2,128,043  |   |                            | $
|                                                     |  |                             |            |   |                            |  
|Earnings per share:                                  |  |                             |            |   |                            |  
|Basic                                                |  | $                           | 1.04       |   |                            | $
|Diluted                                              |  | $                           | 0.55       |   |                            | $
|                                                     |  |                             |            |   |                            |  
|Weighted average common shares outstanding:          |  |                             |            |   |                            |  
|Basic                                                |  |                             | 2,044,767  |   |                            |  
|Diluted                                              |  |                             | 3,869,248  |   |                            |  





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.









3









LIVE VENTURES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)





|                                                                                                                    |  | Nine
    Months Ended June 30, |            
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | -----------
|                                                                                                                    |  | 2017                           |            
|OPERATING ACTIVITIES:                                                                                               |  |                                |            
|Net income                                                                                                          |  | $                              | 5,397,282  
|Adjustments to reconcile
    net income to net cash provided by (used in) operating activities, net of acquisition: |  |                                |            
|Depreciation and amortization                                                                                       |  |                                | 3,112,786  
|Amortization of debt issuance cost                                                                                  |  |                                | 157,158    
|Stock based compensation expense                                                                                    |  |                                | 137,011    
|Loss on disposal of property and equipment                                                                          |  |                                | 55,703     
|Non-cash interest expense associated with convertible
    debt and warrants                                         |  |                                | –          
|Non-cash issuance of common stock for services                                                                      |  |                                | –          
|Change in reserve for uncollectible accounts                                                                        |  |                                | (39,865    
|Change in reserve for obsolete inventory                                                                            |  |                                | (771,971   
|Change in contingent liability                                                                                      |  |                                | –          
|Change in deferred income taxes                                                                                     |  |                                | 3,020,553  
|Changes in assets and liabilities:                                                                                  |  |                                |            
|Accounts receivable                                                                                                 |  |                                | (2,888,320 
|Prepaid expenses and other current assets                                                                           |  |                                | 2,104,859  
|Inventories                                                                                                         |  |                                | (1,760,954 
|Deposits and other assets                                                                                           |  |                                | (57,755    
|Accounts payable                                                                                                    |  |                                | 495,296    
|Accrued liabilities                                                                                                 |  |                                | (449,799   
|Income taxes payable                                                                                                |  |                                | 318,144    
|                                                                                                                    |  |                                |            
|Net cash provided by operating
    activities                                                                       |  |                                | 8,830,128  
|                                                                                                                    |  |                                |            
|INVESTING ACTIVITIES:                                                                                               |  |                                |            
|Acquisition of business, net of cash acquired
    and seller financing provided                                     |  |                                | (47,310,900
|Purchase of intangible assets - Software                                                                            |  |                                | (124,230   
|Proceeds from the sale of property and equipment                                                                    |  |                                | 37,920     
|Purchases of property and
    equipment                                                                             |  |                                | (7,753,755 
|                                                                                                                    |  |                                |            
|Net cash used in investing
    activities                                                                           |  |                                | (55,150,965
|                                                                                                                    |  |                                |            
|FINANCING ACTIVITIES:                                                                                               |  |                                |            
|Net borrowings under revolver loans                                                                                 |  |                                | 17,152,852 
|Payments of debt issuance costs                                                                                     |  |                                | (1,155,000 
|Payment for the purchase of the noncontrolling
    interest                                                         |  |                                | –          
|Proceeds from issuance of notes payable                                                                             |  |                                | 36,984,434 
|Payment of series E preferred stock dividends                                                                       |  |                                | (959       
|Purchase of treasury stock                                                                                          |  |                                | (496,366   
|Payments on notes payable                                                                                           |  |                                | (2,659,967 
|Payments on notes payable,
    related party                                                                        |  |                                | –          
|                                                                                                                    |  |                                |            
|Net cash provided by (used
    in) financing activities                                                             |  |                                | 49,824,994 
|                                                                                                                    |  |                                |            
|INCREASE IN CASH AND CASH EQUIVALENTS                                                                               |  |                                | 3,504,157  
|                                                                                                                    |  |                                |            
|CASH AND CASH EQUIVALENTS, beginning of period                                                                      |  |                                | 770,895    
|                                                                                                                    |  |                                |            
|CASH AND CASH EQUIVALENTS, end of period                                                                            |  | $                              | 4,275,052  
|                                                                                                                    |  |                                |            
|Supplemental cash flow disclosures:                                                                                 |  |                                |            
|Interest paid                                                                                                       |  | $                              | 4,340,486  
|Income taxes paid                                                                                                   |  | $                              | 103,704    
|Noncash financing and investing activities:                                                                         |  |                                |            
|Notes payable issued
    to sellers of Vintage Stock                                                                |  | $                              | 10,000,000 
|Conversion of accrued
    expense liabilities into common stock                                                     |  | $                              | 584,500    
|Conversion of accrued
    expense liability to Series B preferred stock                                             |  | $                              | 2,800,000  
|Accrued and unpaid dividends                                                                                        |  | $                              | 479        
|Note payable issued for
    purchase of noncontrolling interest                                                     |  | $                              | –          





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.





4







LIVE VENTURES INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)

FOR THE NINE MONTHS ENDED JUNE 30, 2017
AND 2016



| | Note 1: | Background and Basis of Presentation
| | ------- | ------------------------------------





The accompanying condensed consolidated
financial statements include the accounts of Live Ventures, Incorporated, a Nevada corporation, and its subsidiaries (collectively
the “Company”). Commencing in fiscal year 2015, the Company began a strategic shift in its business plan away from
providing online marketing solutions for small and medium sized business to acquiring profitable companies in various industries
that have demonstrated a strong history of earnings power. The Company continues to actively develop, revise and evaluate its products,
services and its marketing strategies in its businesses. The Company has three operating segments Manufacturing, Retail and Online
(our new name for the previously named Marketplace Platform segment) and Services. With Marquis Industries, Inc., the Company is
engaged in the manufacture and sale of carpet and the sale of vinyl and wood floorcoverings. With Vintage Stock, Inc. (“Vintage
Stock”), the Company is engaged in the sale of new and used movies, music, collectibles, comics, books, games, game systems
and components.



The accompanying unaudited Condensed Consolidated
Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles
(“GAAP”) for audited financial statements. In the opinion of the Company’s management, this interim information
includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for
the interim periods. The results of operations for three months and nine months ended June 30, 2017 are not necessarily indicative
of the results to be expected for the fiscal year ending September 30, 2017. This financial information should be read in conjunction
with the consolidated financial statements and related notes thereto as of September 30, 2016 and for the fiscal year then ended
included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 filed with the U.S. Securities
and Exchange Commission (the “SEC”) on December 29, 2016 (the “2016 10-K”).



All data for common stock, options and
warrants have been adjusted to reflect the 1-for-6 reverse stock split (which took effect on December 5, 2016) for all periods
presented. In addition, all common stock prices, and per share data for all periods presented have been adjusted to reflect the
1-for-6 reverse stock split.



| | Note 2: | Summary
of Significant Accounting Policies
| | ------- | ------------------------------------------



Principles of Consolidation



The accompanying
condensed consolidated financial statements represent the consolidated financial position, results of operations and cash flows
of Live Ventures Incorporated and its wholly-owned subsidiaries. On July 6, 2015, the Company acquired 80% of Marquis Industries,
Inc. and subsidiaries (“Marquis”). Effective November 30, 2015, the Company acquired the remaining 20% of Marquis.
On November 3, 2016, the Company acquired 100% of Vintage Stock, Inc., a Missouri corporation (“Vintage Stock”), through
its newly formed, wholly-owned subsidiary, Vintage Stock Affiliated Holdings LLC (“VSAH”). All intercompany transactions
and balances have been eliminated in consolidation.



Non-Controlling Interest



The Company follows Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,”
which governs the accounting for and reporting of non-controlling interests (“NCI’s”) in partially owned consolidated
subsidiaries and the loss control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI’s
be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership
interest that leave control intact be treated as an equity transaction rather than as step acquisitions or dilution gains or losses,
and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might results in
a deficit balance. This standard also required changes to certain presentation and disclosure requirements.



he 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.











5







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 assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



Significant estimates made in connection
with the accompanying consolidated financial statements include the estimate of dilution and fees associated with billings, the
estimated reserve for doubtful current and long-term trade and other receivables, the estimated reserve for excess and obsolete
inventory, estimated fair value and 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 short term notes payable approximate fair value because of the short maturity of these instruments. The
fair value of the long-term debt is calculated based on interest rates available for debt with terms and maturities similar to
the Company’s existing debt arrangements, unless quoted market prices were available (Level 2 inputs).





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 which
is recorded as general and administrative expense. 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 $27,373,263 and $26,835,303 for the nine months ended June 30, 2017 and 2016, respectively.



Reserve for Doubtful Accounts



The Company maintains a reserve for doubtful
accounts, which includes reserves for accounts and other receivables, customer refunds, dilution and fees from local exchange carrier
billing aggregators and other uncollectible accounts. The reserve for doubtful accounts is based upon historical bad debt experience
and periodic evaluations of the aging and collectability of the trade and other receivables. This reserve is maintained at a level
which the Company believes is sufficient to cover potential credit losses and trade and other receivables are only written off
to bad debt expense as uncollectible after all reasonable collection efforts have been made. The Company has also purchased accounts
receivable credit insurance to cover non-factored trade and other receivables which helps reduce potential losses due to doubtful
accounts. At June 30, 2017 and September 30, 2016, the allowance for doubtful accounts was $1,121,569 and $1,161,434, respectively.



Inventories



Manufacturing Segment



Inventories are valued at the lower of
the inventory’s cost (first in, first out basis) or the net realizable of the inventory. Management compares the cost of
inventory with its net realizable value and an allowance is made to write down inventory to net realizable value, if lower. Management
also reviews inventory to determine if excess or obsolete inventory is present and a reserve is made to reduce the carrying value
for inventory for such excess and or obsolete inventory. At June 30, 2017 and September 30, 2016, the reserve for obsolete inventory
was $91,940.









6







Retail and Online Segment





Merchandise Inventories are valued at the
lower of cost or market generally using the average cost method which approximates first in first out or FIFO. Under the average
cost method, as new product is received from vendors, its current cost is added to the existing cost of product on-hand and this
amount is re-averaged over the cumulative units in inventory available for sale. Pre-owned products traded in by customers are
recorded as merchandise inventory for the amount of cash consideration or store credit less any premiums given to the customer.
Management reviews the merchandise inventory to make required adjustments to reflect potential obsolescence or over-valuation as
a result of cost exceeding market. In valuing merchandise inventory, management considers quantities on hand, recent sales, potential
price protections, returns to vendors and other factors. Management’s ability to assess these factors is dependent upon forecasting
customer demand and to provide a well-balanced merchandise assortment. Merchandise Inventory valuation is adjusted based on anticipated
physical inventory losses or shrinkage and actual losses resulting from periodic physical inventory counts. Merchandise inventory
reserves as of June 30, 2017 and September 30, 2016 were $1,634,821 and $1,013,870, respectively.



Property and Equipment



Property and Equipment are stated at cost
less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred and additions and improvements
that significantly extend the lives of assets are capitalized. Upon sale or other retirement of depreciable property, the cost
and accumulated depreciation are removed from the related accounts and any gain or loss is reflected in operations. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets ranging from three to forty years. Depreciation
expense was $976,296 and $504,063 for the three months ended June 30, 2017 and 2016, respectively. Depreciation expense was
$2,677,039 and $1,449,221 for the nine months ended June 30, 2017 and 2016, respectively.



We periodically review our property and
equipment when events or changes in circumstances indicate that their carrying amounts may not be recoverable or their depreciation
or amortization periods should be accelerated. We assess recoverability based on several factors, including our intention with
respect to our stores and those stores projected undiscounted cash flows. An impairment loss would be recognized for the amount
by which the carrying amount of the assets exceeds their fair value, as approximated by the present value of their projected discounted
cash flows.



Goodwill and Intangibles



The Company accounts for
purchased goodwill and intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Under ASC
350, purchased goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on
at least an annual basis. Goodwill represents the excess of purchase price over the underlying net assets of business acquired.
Intangible assets with finite lives are amortized over their useful lives. Upon acquisition, critical estimates are made in valuing
acquired intangible assets, which include but are not limited to: future expected cash flows from customer contracts, customer
lists, and estimating cash flows from projects when completed; tradename and market position, as well as assumptions about the
period of time that customer relationships will continue; and discount rates. Management's estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from the assumptions used in determining the fair values.



The Company assesses whether
goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining
whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects not to perform a qualitative
assessment, a quantitative assessment is performed using a two-step approach required by ASC 350 to determine whether a goodwill
impairment exists.



The first
step of the quantitative test is to compare the carrying amount of the reporting unit's assets to the fair value of the reporting
unit. If the fair value exceeds the carrying value, no further evaluation is required and no impairment loss is recognized. If
the carrying amount exceeds the fair value, then the second step is required to be completed, which involves allocating the fair
value of the reporting unit to each asset and liability using the guidance in ASC 805 (“Business Combinations, Accounting
for Identifiable Intangible Assets in a Business Combination”), with the excess being applied
to goodwill. An impairment loss occurs if the amount of the recorded goodwill exceeds the implied goodwill. The determination of
the fair value of our reporting units is based, among other things, on estimates of future operating performance of the reporting
unit being valued. We are required to complete an impairment test for goodwill and record any resulting impairment losses at least
annually. Changes in market conditions, among other factors, may have an impact on these estimates and require interim impairment
assessments.



When performing the two-step
quantitative impairment test, the Company's methodology includes the use of an income approach which discounts future net cash
flows to their present value at a rate that reflects the Company's cost of capital, otherwise known as the discounted cash flow
method ("DCF"). These estimated fair values are based on estimates of future cash flows of the businesses. Factors affecting
these future cash flows include the continued market acceptance of the products and services offered by the businesses, the development
of new products and services by the businesses and the underlying cost of development, the future cost structure of the businesses,
and future technological changes. The Company also incorporates market multiples for comparable companies in determining the fair
value of our reporting units. Any such impairment would be recognized in full in the reporting period in which it has been identified.







7







The Company’s intangible assets consist
of goodwill, customer relationships intangible, licenses for the use of internet domain names, Universal Resource Locators, or
URL’s, software, and marketing and technology related intangibles. All such assets are capitalized at their original cost
and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 3
to 5 years, customer relationships – 15 years. Goodwill is not amortized, but evaluated for impairment on at least an annual
basis. Intangible amortization expense is $113,245 and $435,747 for the three months and nine months ended June 30, 2017. Intangible
amortization expense is $57,930 and $173,796 for the three months and nine months ended June 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.



Retail and Online Segment



The Retail and Online Segment derives product
revenue primarily from in-store, direct online and fulfillment partner sales of new and used products.



In-Store product revenue is recognized
when the following revenue recognition criteria are met: the sales price is fixed or determinable, collection is reasonably assured
and the customer takes possession of the merchandise. Revenue from the sales or our products is recognized at the time of sale,
net of sales discounts and net of an estimated sales return reserve, based on historical return rates.



We provide customers with the opportunity
to trade in used merchandise in exchange for cash consideration or merchandise credit. Merchandise inventory is recorded at a cost
equal to the cash offered to the customer. If a customer chooses merchandise credit, credit is issued for the amount of the cash
offer plus a premium. Premiums associated with merchandise credit issued as a result of trade in transactions are recorded as expense
in the period in which the credits are issued. Customer liabilities and other deferred revenues for our gift cards and customer
credits are included in Accrued Liabilities.



Currently, all direct online and fulfillment
partner product revenue is recorded on a gross basis, as the Company is the primary obligor.



In addition, the Retail and Online Segment
derives revenue from its sales through its strategic publishing partners of discounted goods and services offered by its merchant
clients (“Deals”) when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred,
the price to the buyer is fixed or determinable, and collectability is reasonably assured. These criteria are met when the number
of customers who purchase the daily deal exceeds the predetermined threshold, where, if applicable, the Deal has been electronically
delivered to the purchaser and a listing of Deals sold has been made available to the merchant. At that time, the Company’s
remaining obligations to the merchant, for which it is serving as an agent, are substantially complete. The Company’s remaining
obligations, which are limited to remitting payment to the merchant, are inconsequential or perfunctory. The Company recognizes
revenue in an amount equal to the net amount it retains from the sale of Deals after paying an agreed upon percentage of the purchase
price to the featured merchant excluding any applicable taxes. Revenue is recorded on a net basis because the Company is acting
as an agent of the merchant in the transaction.



The Company evaluates the criteria outlined
in ASC Topic 605-45, Principal Agent Considerations, in determining whether it is appropriate to record the gross amount
of product sales and related costs or the net amount earned as commissions. When the Company is the primary obligor in a transaction,
is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these
indicators, revenue is recorded gross. If the Company is not the primary obligor in the transaction and amounts earned are determined
using a fixed percentage, revenue is recorded on a net basis.



Revenues do not include sales taxes or
other taxes collected from customers.









8







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.



Customer Liabilities



The Company establishes a liability upon
the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards
are redeemed. In addition, breakage is recognized quarterly on unused customer liabilities older than two years to the extent that
our management believes the likelihood of redemption by the customer is remote, based on historical redemption patterns. To the
extent that future redemption patterns differ from those historically experienced, there will be variations in the recorded breakage.
Breakage for the three months ended June 30, 2017 was $25,092. Breakage of $98,183 for the period of November 3, 2016 through June
30, 2017 is recorded in other income in our consolidated financial statements.



Fair Value Measurements



ASC Topic 820, “Fair Value Measurements
and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC topic 825, “Financial
Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement
that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
Level 1 - inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level 2
– to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.



Income Taxes



Income taxes are accounted for using the
asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance would be
provided for those deferred tax assets for which if it is more-likely-than-not that the related benefit will not be realized. The
Company classifies tax-related penalties and interest as a component of income tax expense for financial statement presentation.
As of June 30, 2017 there are no uncertain tax positions for federal or state income tax purposes. The Company is not under audit
in any jurisdiction. The Company’s policy is to record uncertain tax positions as a component of income tax expense.



Lease Accounting



We lease retail stores, warehouse facilities
and office space. These assets and properties are generally leased under noncancelable agreements that expire at various dates
through 2022 with various renewal options for additional periods. The agreements, which have been classified as operating leases,
generally provide for minimum and, in some cases percentage rentals and require us to pay all insurance, taxes and other maintenance
costs. Leases with step rent provisions, escalation clauses or other lease concessions are accounted for on a straight-line basis
over the lease term, which includes renewal option periods when we are reasonably assured of exercising the renewal options and
includes “rent holidays” (periods in which we are not obligated to pay rent). Cash or lease incentives received upon
entering into certain store leases (“tenant improvement allowances”) are recognized on a straight-line basis as a reduction
to rent expense over the lease term, which includes renewal option periods when we are reasonably assured of exercising the renewal
options. We record the unamortized portion of tenant improvement allowances as a part of deferred rent. We do not have leases with
capital improvement funding. Percentage rentals are based on sales performance in excess of specified minimums at various stores
and are accounted for in the period in which the amount of percentage rentals can be accurately estimated.









9







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 Per Share



Earnings per share is calculated in accordance
with ASC 260, “Earnings Per share”. Under ASC 260 basic net earnings per share is computed using the weighted
average number of common shares outstanding during the period except that it does not include unvested restricted stock subject
to cancellation. Diluted net Earnings per share is computed using the weighted average number of common shares and, if dilutive,
potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable
upon the exercise of warrants, options, restricted shares and convertible preferred stock. The dilutive effect of outstanding restricted
shares, options and warrants is reflected in diluted earnings per share by application of the treasury stock method. Convertible
preferred stock is reflected on an if-converted basis.



Segment Reporting



ASC Topic 280, “Segment Reporting,”
requires use of the “management approach” model for segment reporting. The management approach model is based on the
way a company’s management organizes segments within the company for making operating decisions and assessing performance.
The Company determined it has three reportable segments (See Note 16).



Derivative Financial Instruments



The Company evaluates all of its agreements
to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based
derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value stock-based
derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative
instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within 12 months of the balance sheet date. There were no derivative financial instruments as of June
30, 2017 and September 30, 2016, respectively.



Reclassifications



Certain amounts in the prior year consolidated
financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect
on the previously reported net income or stockholders’ equity.



Recently Issued Accounting Pronouncements



In May 2014, the FASB issued Accounting
Standards Update No. 2014-09, Revenue from Contracts with Customers ASU 2014-09, which supersedes nearly all existing revenue
recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods
or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates
may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for
annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods:
(i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to
elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09
recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. In August
2015, the FASB issued ASU No. 2015-04, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.
The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities,
certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting
periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted
only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting
period. The Company has determined that it does not use contracts with its customers. The Company is assessing the remaining provisions
of the new revenue guidance and determine the impact of matching direct selling costs to revenues and what effect it might have
on our financial statements. We are continuing to evaluate the impact of the transition methods on our financial statements.









10







In March 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-08, Revenue from Contracts
with customers. The standard addresses the implementation guidance on principal versus agent considerations in the new revenue
recognition standard. The ASI clarifies how an entity should identify the unit of accounting (i.e. the specified good or service)
for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The ASU
is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017, with early adoption
permitted.



In March 2016, the FASB issued ASU 2016-04,
Recognition of Breakage for Certain Prepaid Stored-Value Products. The standard specifies how prepaid stored-value product
liabilities should be derecognized, thereby eliminating the current and potential future diversity in practice. The ASU is effective
for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. We
are currently evaluating the impact that this standard will have on our consolidated financial statements.



In February 2016, the FASB issued ASU 2016-02,
Leases. The standard requires a lessee to recognize a liability to make lease payments and a right-of-use asset representing
a right to use the underlying asset for the lease term on the balance sheet. The ASU is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact
that this standard will have on our consolidated financial statements.



In July 2015, the FASB issued ASU 2015-11,
Simplifying the Measurement of Inventory. This standard changes the measurement principle for inventory from the lower of
cost or market to the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in
the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This standard is
effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We have adopted
this standard and do not anticipate that this standard will have a material impact on our consolidated financial statements.



ASU 2017-04 - ASU 2017-04, Simplifying
the Test for Goodwill Impairment, eliminates step 2 from the goodwill impairment test.  As amended, the goodwill impairment
test will consist of one step comparing the fair value of a reporting unit with its carrying amount.  An entity should recognize
a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  An
entity may still perform the optional qualitative assessment for a reporting unit to determine if it is more likely than not that
goodwill is impaired.  The ASU is required for public business entities and other entities that have goodwill reported in
their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.



The ASU has staggered effective dates. 
A public business entity that is an SEC filer should prospectively adopt the ASU for its annual or any interim goodwill impairment
tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment
tests performed on testing dates after January 1, 2017. We are currently evaluating the impact that this standard will have on
our consolidated financial statements.



ASU 2016-18, Restricted Cash, updates
Topic 230, Statement of Cash Flows, to require that a statement of cash flows explain the change during the period in restricted
cash or restricted cash equivalents, in addition to changes in cash and cash equivalents.  That is, restricted cash and restricted
cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total
amounts shown on the statement of cash flows.  Consequently, transfers between cash and restricted cash will not be presented
as a separate line item in the operating, investing or financing sections of the cash flow statement. The ASU is effective
for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. 
For all other entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal
years beginning after December 15, 2019.  The amendments should be applied retrospectively to each period presented. 
Early adoption is permitted, including adoption in an interim period.  If an entity early adopts the amendments in an interim
period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We are currently
evaluating the impact that this standard will have on our consolidated financial statements.









11







ASU 2016-09, Improvements to
Employee Share-Based Payment Accounting, introduces targeted amendments intended to simplify the accounting for stock
compensation. Specifically, the ASU requires all excess tax benefits and tax deficiencies (including tax benefits of
dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The
tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they
occur. An entity also should recognize excess tax benefits, and assess the need for a valuation allowance, regardless
of whether the benefit reduces taxes payable in the current period. That is, off balance sheet accounting for net
operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be
recognized when they arise. Existing net operating losses that are currently tracked off balance sheet would be
recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of
adoption.  Entities will no longer need to maintain and track an “APIC pool.” The ASU also requires
excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash
flows. In addition, the ASU elevates the statutory tax withholding threshold to qualify for equity classification up to
the maximum statutory tax rates in the applicable jurisdiction(s). The ASU also clarifies that cash paid by an employer
when directly withholding shares for tax withholding purposes should be classified as a financing activity. The ASU
provides an optional accounting policy election (with limited exceptions), to be applied on an entity-wide basis, to either
estimate the number of awards that are expected to vest (consistent with existing U.S. GAAP) or account for forfeitures when
they occur. The ASU is effective for public business entities for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. Early adoption is permitted in any interim or annual period for which the
financial statements have not been issued or made available to be issued. Certain detailed transition provisions apply
if an entity elects to early adopt. We are currently evaluating the impact that this standard will have on our consolidated
financial statements.



ASU 2017-09, Scope of Modification Accounting,
clarifies Topic 718, Compensation – Stock Compensation, such that an entity must apply modification accounting to
changes in the terms or conditions of a share-based payment award unless all of the following criteria are met: (1) the fair
value of the modified award is the same as the fair value of the original award immediately before the modification. The
ASU indicates that if the modification does not affect any of the inputs to the valuation technique used to value the award, the
entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified
award are the same as the vesting conditions of the original award immediately before the modification; and (3) the classification
of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award
immediately before the modification.  The ASU is effective for all entities for fiscal years beginning after December 15,
2017, including interim periods within those years.  Early adoption is permitted, including adoption in an interim period.
We are currently evaluating the impact that this standard will have on our consolidated financial statements.



Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated
financial statements.









12









| | Note 3: | Balance
Sheet Detail Information
| | ------- | --------------------------------





|                                                                      |  | June 30, |            |   | September 30, |  
|--------------------------------------------------------------------- |  | -------- | ---------- | - | ------------- | -
|                                                                      |  | 2017     |            |   | 2016          |  
|Trade and other receivables, current, net:                            |  |          |            |   |               |  
|Accounts receivable, current                                          |  | $        | 12,153,483 |   |               | $
|Less: Reserve for doubtful accounts                                   |  |          | (776,997   | ) |               |  
|                                                                      |  | $        | 11,376,486 |   |               | $
|Trade and other receivables , long term, net:                         |  |          |            |   |               |  
|Accounts receivable, long term                                        |  | $        | 344,572    |   |               | $
|Less: Reserve for doubtful accounts                                   |  |          | (344,572   | ) |               |  
|                                                                      |  | $        | –          |   |               | $
|Total trade and other receivables, net:                               |  |          |            |   |               |  
|Gross trade and other receivables                                     |  | $        | 12,498,055 |   |               | $
|Less: Reserve for doubtful accounts                                   |  |          | (1,121,569 | ) |               |  
|                                                                      |  | $        | 11,376,486 |   |               | $
|Components of reserve for doubtful accounts are as follows:           |  |          |            |   |               |  
|Reserve for dilution and fees on amounts due from billing aggregators |  | $        | 1,063,617  |   |               | $
|Reserve for customer refunds                                          |  |          | 1,042      |   |               |  
|Reserve for other trade receivables                                   |  |          | 56,910     |   |               |  
|                                                                      |  | $        | 1,121,569  |   |               | $
|Inventory                                                             |  |          |            |   |               |  
|Raw materials                                                         |  | $        | 7,708,749  |   |               | $
|Work in progress                                                      |  |          | 796,707    |   |               |  
|Finished goods, includes merchandise                                  |  |          | 26,967,407 |   |               |  
|                                                                      |  |          | 35,472,863 |   |               |  
|Less: Inventory reserves                                              |  |          | (1,726,761 | ) |               |  
|                                                                      |  | $        | 33,746,102 |   |               | $
|Property and equipment, net:                                          |  |          |            |   |               |  
|Building and improvements                                             |  | $        | 7,515,236  |   |               | $
|Transportation equipment                                              |  |          | 77,419     |   |               |  
|Machinery and equipment                                               |  |          | 17,317,941 |   |               |  
|Furnishings and fixtures                                              |  |          | 1,951,439  |   |               |  
|Office, computer equipment and other                                  |  |          | 214,807    |   |               |  
|                                                                      |  |          | 27,076,842 |   |               |  
|Less: Accumulated depreciation                                        |  |          | (5,995,002 | ) |               |  
|                                                                      |  | $        | 21,081,840 |   |               | $
|Intangible assets, net:                                               |  |          |            |   |               |  
|Domain name and marketing related intangibles                         |  | $        | 18,957     |   |               | $
|Website and software related intangibles                              |  |          | 1,525,308  |   |               |  
|Customer Relationships intangible                                     |  |          | 439,039    |   |               |  
|Purchased software                                                    |  |          | 1,500,000  |   |               |  
|                                                                      |  |          | 3,483,304  |   |               |  
|Less: Accumulated amortization                                        |  |          | (703,953   | ) |               |  
|                                                                      |  | $        | 2,779,351  |   |               | $
|Accrued liabilities:                                                  |  |          |            |   |               |  
|Accrued payroll and bonuses                                           |  | $        | 1,078,686  |   |               | $
|Accrued software costs                                                |  |          | –          |   |               |  
|Accrued fee due Kingston Diversified Holdings LLC                     |  |          | –          |   |               |  
|Accrued sales and property taxes                                      |  |          | 597,555    |   |               |  
|Deferred rent                                                         |  |          | 440,684    |   |               |  
|Accrued gift card liability                                           |  |          | 289,520    |   |               |  
|Accrued interest payable                                              |  |          | 467,506    |   |               |  
|Accrued uncashed checks                                               |  |          | 815,338    |   |               |  
|Customer deposits                                                     |  |          | 303,568    |   |               |  
|Accrued expenses - other                                              |  |          | 1,101,115  |   |               |  
|                                                                      |  | $        | 5,093,972  |   |               | $









13









| | Note 4; | Acquisition
| | ------- | -----------



Vintage Stock Inc.





On November 3, 2016 (the “Closing
Date”), the Company, through its newly formed, wholly-owned subsidiary, VSAH, entered into a series of agreements in connection
with its purchase of Vintage Stock. Vintage Stock is a retailer that sells, buys and trades new and used movies, books, collectibles,
games, comics, music and other retail products.



Total consideration paid was $57,653,698.
The following table summarizes our preliminary allocation of the consideration paid to the respective fair values of the assets
acquired and liabilities assumed in the Vintage Stock acquisition as of the closing date:





|Cash and cash equivalents                 |  | $ | 342,798    |  
|----------------------------------------- |  | - | ---------- | -
|Trade and other receivables               |  |   | 113,500    |  
|Inventory                                 |  |   | 20,160,092 |  
|Prepaid expenses and other current assets |  |   | 860,453    |  
|Property and equipment                    |  |   | 2,084,246  |  
|Intangible - software                     |  |   | 1,401,078  |  
|Goodwill                                  |  |   | 39,066,061 |  
|Notes payable                             |  |   | (542,074   | )
|Accounts payable                          |  |   | (3,843,510 | )
|Accrued expenses                          |  |   | (1,988,946 | )
|Consideration paid                        |  | $ | 57,653,698 |  







The preliminary purchase price allocation
is subject to change. We will complete this analysis to determine the fair value of inventory, prepaid expenses and other current
assets, property and equipment, intangibles, notes payable and accrued expenses on the acquisition date. The provisional goodwill
recorded of $39,066,061 is the amount of the consideration given, less the preliminary purchase price allocation given to assets
less liabilities assumed. Goodwill is not deductible for tax purposes. Once this analysis is complete, we will adjust, if necessary,
the provisional amounts assigned to inventory, prepaid expenses and other current assets, property and equipment, intangibles,
notes payable and accrued expenses in the accounting period in which the analysis is completed.



In connection with the purchase of Vintage,
there were no additional one-time expenses incurred during the last six months ended June 30, 2017. However, we incurred bank fees
of $15,000, appraisal fees of $20,497, legal fees of $192,339 and consulting fees of $119,774 – for a total of $347,610 in
one-time expenses; all of which was recorded as general and administrative expense during the first three months ended December
31, 2016. The Company issued $10,000,000 in subordinated acquisition notes payable to the sellers of Vintage Stock as more fully
described in Note 6.



The operating results of VSAH and Vintage
Stock have been included in our unaudited condensed consolidated financial statements beginning on November 3, 2016 and are reported
in our Retail and Online segment.



The unaudited pro forma information below
present statement of income data for the three and nine months ended June 30, 2016 as if the acquisition of Vintage took place
on October 1, 2015.



|                                | (Unaudited) |                   
|------------------------------- | ----------- | ------------------
|                                |             | Three Months Ended
|                                |             | June 30, 2016     
|Net revenue                     |             | $                 
|Gross profit                    |             |                   
|Operating income                |             |                   
|Net income                      |             |                   
|Earnings per basic common share |             | $                 









14







| | Note 5: | Goodwill
and Other Intangibles
| | ------- | ------------------------------



The Company’s intangible assets consist
of goodwill, customer relationships intangible, licenses for the use of internet domain names, Universal Resource Locators, or
URL’s, software, and marketing and technology related intangibles. All such assets are capitalized at their original cost
and amortized over their estimated useful lives as follows: domain name and marketing – 3 to 20 years; software – 5
years, customer relationships – 15 years. Goodwill is not amortized, but evaluated for impairment on at least an annual basis.



The following summarizes estimated future
amortization expense related to intangible assets that have net balances as of June 30, 2017:





|2018       |  | $ | 751,991   | 
|---------- |  | - | --------- | 
|2019       |  |   | 751,991   | 
|2020       |  |   | 500,534   | 
|2021       |  |   | 243,555   | 
|2022       |  |   | 243,555   | 
|Thereafter |  |   | 287,725   | 
|           |  | $ | 2,779,351 | 





| | Note 6: | Notes Payable
| | ------- | -------------



Bank of America Revolver Loan



On July 6, 2015, Marquis entered into a
$15 million revolving credit agreement with Bank of America Corporation (“BofA Revolver”). The BofA Revolver is a five-year,
asset-based facility that is secured by substantially all of Marquis assets. Availability under the Bank of America Revolver is
subject to a monthly borrowing base calculation.



Payment obligations under the BofA Revolver
include monthly payments of interest and all outstanding principal and accrued interest thereon due in July 2020, which is when
the BofA Revolver loan agreement terminates.



Borrowing availability under the BofA Revolver
is limited to a borrowing base which allows Marquis to borrow up to 85% of eligible accounts receivable, plus the lesser of 1)
$7,500,000; 2) 65% of the value of eligible inventory; or 3) 85% of the appraisal value of the eligible inventory. For purposes
of clarity and definition of the advance rate for inventory – it shall be 55.3% for raw materials, 0% for work-in-process
and 70% for finished goods subject to eligibility, special reserves and advance limit. Letters of credit reduce the amount available
to borrow under the BofA Revolver by an amount equal to the face value of the letters of credit.



As of February 22, 2017, Marquis’s
ability to make prepayments against Marquis subordinated debt including the related party loan with Isaac Capital Group and pay
cash dividends is generally permitted if 1) excess availability under the BofA Revolver is more than $4 million, and has been for
each of the 90 days preceding the requested distribution and 2) excess availability under the BofA Revolver is more than $4 million,
and the fixed charge coverage ratio, as calculated on a pro-forma basis for the prior 12 months is 2:1 or greater. Restrictions
apply to our ability to make additional prepayments against Marquis subordinated debt and pay cash dividends if the fixed charge
coverage ratio, as calculated on a pro-forma basis for the prior 12 months is less than 2:1 and excess availability under the BofA
Revolver is less than $4 million at the time of payment or distribution. There is no restriction on dividends that can be taken
by the Company so long as Marquis maintains $4 million of current availability at the time of the dividend or distribution. This
translates to having no restriction on Net Income so long as the Company retains sufficient assets to establish $4 million of current
availability and continues to meet the required fixed charge coverage ratio of 2:1 as stated above.



The BofA Revolver places certain restrictions
and covenants on Marquis, including a limitation on asset sales, additional liens, investment, loans, guarantees, acquisitions,
incurrence of additional indebtedness for Marquis to maintain a fixed charge coverage ratio of at least 1.05 to 1, tested as of
the last day of each month for the twelve consecutive months ending on such day.



The Bank of America Revolver Loan bears
interest at a variable rate based on a base rate plus a margin. The current base rate is the greater of (a) Bank of America prime
rate, (b) the current federal funds rate plus 0.50%, or (c) 30-day LIBOR plus 1.00% plus the margin, which varies, depending on
the fixed coverage ratio table below. Levels I – IV determine the interest rate to be charged Marquis which is based on the
fixed charge coverage ratio achieved.









15











|Level |  | Fixed Charge Coverage Ratio     |  | Base Rate Revolver |  | LIBOR Revolver |  | Base Rate Term |  | LIBOR Term Loans
|----- |  | ------------------------------- |  | ------------------ |  | -------------- |  | -------------- |  | ----------------
|I     |  | >2.00 to 1.00                   |  | 0.50%              |  | 1.50%          |  | 0.75%          |  | 1.75%           
|II    |  | <2.00 to 1.00 but >1.50 to 1.00 |  | 0.75%              |  | 1.75%          |  | 1.00%          |  | 2.00%           
|III   |  | <1.50 to 1.00 but >1.20 to 1.00 |  | 1.00%              |  | 2.00%          |  | 1.25%          |  | 2.25%           
|IV    |  | <1.2 to 1.00                    |  | 1.25%              |  | 2.25%          |  | 1.50%          |  | 2.50%           



On October 20, 2016, it was agreed that
Level IV interest rates would be applicable until October 20, 2017, and then the Level would be adjusted up or down on a quarterly
basis going forward based upon the above fixed coverage ratio achieved by Marquis.



The BofA Revolver provides for customary
events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply
with covenants, change in control of Marquis, a material representation or warranty made by us or the borrowers proving to be false
in any material respect, certain bankruptcy, insolvency or receivership events affecting Marquis or its subsidiaries, defaults
relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Marquis or certain of
its subsidiaries. During the period of October 1, 2016 through June 30, 2017, Marquis cumulatively borrowed $68,597,210 and repaid
$63,553,469 under the BofA Revolver. Our maximum borrowings outstanding during the same period were $7,770,651. Our weighted average
interest rate on those outstanding borrowings for the period of October 1, 2016 through June 30, 2017 was 3.42%. As of June 30,
2017, total additional availability under the BofA Revolver was $6,989,630; with $5,266,331 outstanding, and outstanding standby
letters of credit of $72,715.



Real Estate Transaction



On June 14, 2016, Marquis entered into
a transaction with Store Capital Acquisitions, LLC. The transaction included a sale-leaseback of land owned by Marquis and a loan
secured by the improvements on such land. The total aggregate proceeds received from the sale of the land and the loan was $10,000,000,
which consisted of $644,479 from the sale of the land and a note payable of $9,355,521. In connection with the transaction, Marquis
entered into a lease with a 15 year term commencing on the closing of the transaction, which provides Marquis an option to extend
the lease upon the expiration of its term. The initial annual lease rate is $59,614. The proceeds from this transaction were used
to pay down the Bank of America Revolver and Term loans, and related party loan, as well as purchasing a building from the previous
owners of Marquis that was not purchased in the July 2015 transaction. The note payable bears interest at 9.25% per annum, with
principal and interest due monthly. The note payable matures June 13, 2056. For the first five years of the note payable, there
is a pre-payment penalty of 5%, which declines by 1% for each year the loan remains un-paid. At the end of 5 years, there is no
pre-payment penalty. In connection with the note payable, Marquis incurred $457,757 in transaction costs that are being recognized
as a debt issuance cost that is being amortized and recorded as interest expense over the term of the note payable.



Kingston Diversified Holdings LLC Agreement
($2 Million Line of Credit)



On December 21, 2016, the Company and Kingston
Diversified Holdings LLC (“Kingston”) entered into an agreement modifying its agreement between the parties. This agreement,
effective September 15, 2016, memorializes an October 2015 interim agreement to extend the maturity date by twelve months for 55,888
shares of to be issued and certificated Series B Convertible Preferred shares with a value on September 15, 2016 of $2,800,000
as a compromise between the parties in respect of certain of their respective rights and duties under the agreement. The agreement
also decreases the maximum principal amount of the Notes from $10,000,000 in principal amount to $2,000,000 in principal amount,
and eliminates any and all actual, contingent, or other obligations of the Company to issue to the Purchaser any shares of the
Company’s common stock, or to grant any rights, warrants, options, or other derivatives that are exercisable or convertible
into shares of the Company’s common stock.



Kingston acknowledges that from the effective
date through and including December 31, 2021, it shall not sell, transfer, assign, hypothecate, pledge, margin, hedge, trade, or
otherwise obtain or attempt to obtain any economic value from any of the shares or any shares into which they may be converted
or from which they may be exchanged. As a result of this agreement, the Company recorded $2,800,000 as an outstanding accrued liability
as of September 30, 2016. As of June 30, 2017 and September 30, 2016, the Company had no borrowings on the Kingston line of credit.
On December 29, 2016 the Company issued 55,888 shares of Series B Convertible Preferred shares in settlement of the outstanding
accrued liability due Kingston of $2,800,000.









16







Equipment Loans



On June 20, 2016 and August 5, 2016, Marquis
entered into a transaction which provided for a master agreement and separate loan schedules (“the Equipment Loans”)
with Banc of America Leasing & Capital, LLC which provided:



Note #1 is $5 million,
secured by equipment. The Equipment Loan #1 is due September 23, 2021, payable in 59 monthly payments of $84,273 beginning September
23, 2016, with a final payment in the sum of $584,273, interest at 3.8905% per annum.



Note #2 is $2,209,807,
secured by equipment. The Equipment Loan #2 is due January 30, 2022, payable in 59 monthly payments of $34,768 beginning January
30, 2017, with a final payment in the sum of $476,729, interest at 4.63% per annum.



Note #3 is $3,679,514,
secured by equipment. The Equipment Loan #3 is due December 30, 2023, payable in 84 monthly payments of $51,658 beginning January
30, 2017, with a final payment due December 30, 2023, interest rate at 4.7985% per annum.



Note #4 is $1,095,113,
secured by equipment. The Equipment Loan#4 is due December 30, 2023, payable in 81 monthly payments of $15,901 beginning April
30, 2017, with final payment due December 30, 2023, interest at 4.8907% per annum.



Texas Capital Bank Revolver Loan



On November 3, 2016, Vintage Stock entered
into a $20 million credit agreement with Texas Capital Bank (“TCB Revolver”). The TCB Revolver is a five-year, asset-based
facility that is secured by substantially all of Vintage Stock’s assets. Availability under the TCB Revolver is subject to
a monthly borrowing base calculation.



Payment obligations under the TCB Revolver
include monthly payments of interest and all outstanding principal and accrued interest thereon due in November 2020, which is
when the TCB Revolver loan agreement terminates.



Borrowing availability under the TCB Revolver
is limited to a borrowing base which allows Vintage Stock to borrow up to 95% of the appraisal value of the inventory, plus 85%
of eligible receivables, net of certain reserves. The borrowing base provides for borrowing up to 95% of the appraisal value for
the period of November 4, 2016 through December 31, 2016, then 90% of the appraisal value during the fiscal months of January through
September and 92.5% of the appraisal value during the fiscal months of October through December. Letters of credit reduce the amount
available to borrow under the TCB Revolver by an amount equal to the face value of the letters of credit.



Vintage Stock’s ability to make prepayments
against Vintage Stock subordinated debt including the Capitala Term Loan and pay cash dividends is generally permitted if 1) excess
availability under the TCB Revolver is more than $2 million, and is projected to be within 12 months after such payment and 2)
excess availability under the TCB Revolver is more than $2 million, and the fixed charge coverage ratio, as calculated on a pro-forma
basis for the prior 12 months is 1.2:1.0 or greater. Restrictions apply to our ability to make additional prepayments against Vintage
subordinated debt including the Capitala Term Loan and pay cash dividends if the fixed charge coverage ratio, as calculated on
a pro-forma basis for the prior 12 months is less than 1.2:1.0 and excess availability under the TCB Revolver is less than $2 million
at the time of payment or distribution. There is no restriction on dividends that can be taken by the Company so long as Vintage
maintains $2 million of current availability at the time of the dividend or distribution. This translates to having no restriction
on Net Income so long as the Company retains sufficient assets to establish $2 million of current availability and continues to
meet the required fixed charge coverage ratio of 1.2:1 as stated above.



The TCB Revolver places certain restrictions
on Vintage Stock, including a limitation on asset sales, a limitation of 25 new leases in any fiscal year, additional liens, investment,
loans, guarantees, acquisitions and incurrence of additional indebtedness.



The per annum interest rate under the TCB
Revolver is variable and is equal to the one-month LIBOR rate for deposits in United States Dollars that appears on Thomson Reuters
British Bankers Association LIBOR Rates Page (or the successor thereto) as of 11:00 a.m., London, England time, on the applicable
determination date plus a margin of 2.75%.









17









The TCB Revolver provides for customary
events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply
with covenants, change in control of Vintage Stock, a material representation or warranty made by us or the borrowers proving to
be false in any material respect, certain bankruptcy, insolvency or receivership events affecting Vintage Stock, defaults relating
to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of Vintage Stock. During the period
of November 3, 2016 through June 30, 2017, Vintage Stock cumulatively borrowed $59,904,850 and repaid $47,795,739 under the TCB
Revolver. Our maximum borrowings outstanding during the period of November 3, 2016 through June 30, 2017 were $14,460,716. Our
weighted average interest rate on those outstanding borrowings for the period of November 3, 2016 through June 30, 2017 was 3.45560%.
As of June 30, 2017, total additional availability under the TCB Revolver was $2,789,415, with $12,109,111 outstanding; and outstanding
standby letters of credit of $0. In connection with the TCB Revolver, Vintage incurred $25,000 in transaction cost that is being
recognized as debt issuance cost that is being amortized and recorded as interest expense over the term of the TCB Revolver.



Capitala Term Loan



On November 3, 2016, the Company, through
VSAH, entered into a series of agreements in connection with its purchase of Vintage Stock. As a part of those agreements, VSAH
and Vintage Stock (the “Term Loan Borrowers”) obtained $29,871,650 of mezzanine financing from the Lenders as defined
in the term loan agreement (the “Term Loan Lenders”), and Capitala Private Credit Fund V, L.P., in its capacity as
lead arranger. Wilmington Trust, National Association, acts as administrative and collateral agent on behalf of the Term Loan Lenders
(the “Term Loan Administrative Agent”).



The Term loans under the term loan agreement
(collectively the “Capitala Term Loan”) bear interest at the LIBO rate (as described below) or base rate, plus an applicable
margin in each case. In their loan notice to the Term Loan Administrative Agent, the Term Loan Borrowers selected the LIBO rate
for the initial term loans made under the term loan agreement on the Closing Date.



The interest rate for LIBO rate
loans under the term loan agreement is equal to the sum of (a) the greater of (i) a rate per annum equal to (A) the offered
rate for deposits in United States Dollars for the applicable interest period and for the amount of the applicable loan that
is a LIBOR loan that appears on Bloomberg ICE LIBOR Screen (or any successor thereto) that displays an average ICE Benchmark
Administration Limited Interest Settlement Rate for deposits in United States Dollars (for delivery on the first day of such
interest period) with a term equivalent to such interest period, determined as of approximately 11:00 a.m. (London time)
two business days prior to the first day of such interest period, divided by (B) the sum of one minus the daily average
during such interest period of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under
Regulation D of the Federal Reserve Board for “Eurocurrency Liabilities” (as defined therein), and
(ii) 0.50% per annum, plus (b) the sum of (i) 12.50% per annum in cash pay plus(ii) 3.00% per
annum payable in kind by compounding such interest to the principal amount of the obligations under the Term Loan Agreement
on each interest payment date.



The interest rate for base rate loans under
the term loan agreement is equal to the sum of (a) the highest of (with a minimum of 1.50%) (i) the federal funds rate plus 0.50%,
(ii) the prime rate, and (iii) the LIBO rate plus 1.00%, plus (b) the sum of (i) 11.50% per annum payable in cash plus (ii)
3.00% per annum payable in kind by compounding such interest to the principal amount of the obligations under the Term Loan Agreement
on each interest payment date.



The payment obligations under the term
loan agreement include (i) monthly payments of interest and (ii) principal installment payments in an amount equal to $725,000
due on March 31, June 30, September 30, and December 31 of each year, with the first such payment due on December 31, 2016. The
outstanding principal amounts of the term loans and all accrued interest thereon under the Term Loan Agreement are due and payable
in November 2021.



The Term Loan Borrowers may prepay the
term loans under the term loan agreement from time to time, subject to the payment (with certain exceptions described below) of
a prepayment premium of: (i) an amount equal to 2.0% of the principal amount of the term loan prepaid if prepaid during the period
of time from and after the Closing Date up to the first anniversary of the Closing Date; (ii) 1.0% of the principal amount of the
term loan prepaid if prepaid during the period of time from and after the first anniversary of the Closing Date up to the second
anniversary of the Closing Date; and (iii) zero if prepaid from and after the second anniversary of the Closing Date.



The Term Loan Borrowers may make the following
prepayments of the term loans under term loan agreement without being required to pay any prepayment premium:



| | (i) | an amount not to exceed $3 million of the term loans;
| | --- | -----------------------------------------------------

| | (ii) | in addition to any amount prepaid in respect of item (i), an additional amount not to exceed $1.45
million, but only if that additional amount is paid prior to the first anniversary of the Closing Date; and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | in addition to any amount prepaid in respect of item (i), an additional amount not to exceed the
difference between $2.9 million and any amount prepaid in respect of item (ii), but only if that additional amount is paid from
and after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











18









There are also various mandatory prepayment
triggers under the term loan agreement, including in respect of excess cash flow, dispositions, equity and debt issuances, extraordinary
receipts, equity contributions, change in control, and failure to obtain required landlord consents. Our weighted average interest
rate on our Capitala Term Loan outstanding borrowings for the period of November 3, 2016 through June 30, 2017 was 16.31554%. In
connection with the Capitala Term Loan, Vintage incurred $1,088,000 in transaction cost that is being recognized as debt issuance
cost that is being amortized and recorded as interest expense over the term of the Capitala Term Loan.



Sellers Subordinated Acquisition Note



In connection with the purchase of Vintage
Stock., on November 3, 2016, VSAH and Vintage Stock entered into a seller financed mezzanine loan in the amount of $10 million
with the previous owners of Vintage Stock. The Sellers Subordinated Acquisition Note bears interest at 8% per annum, with interest
payable monthly in arrears. The Sellers Subordinated Acquisition Note matures five years and six months from November 3, 2016.



We are currently in compliance with all
covenants under our existing revolving and other loan agreements.



Notes payable as of June 30, 2017 and September
30, 2016 consisted of the following:





|                                                                                                                                                                                                                                                                                                                                                                          |  | June 30, |            |   | September 30, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---------- | - | ------------- | -
|                                                                                                                                                                                                                                                                                                                                                                          |  | 2017     |            |   | 2016          |  
|Bank of America Revolver Loan - variable interest rate based upon a base rate plus a
    margin, interest payable monthly, maturity date July 2020, secured by substantially all Marquis assets                                                                                                                                                                           |  | $        | 5,266,331  |   |               | $
|Texas Capital Bank Revolver Loan - variable interest rate based upon the one-month LIBOR rate
    plus a margin, interest payable monthly, maturity date November 2020, secured by substantially all Vintage Stock assets                                                                                                                                                 |  |          | 12,109,111 |   |               |  
|Note Payable Capitala Term Loan - variable interest rate based upon a base rate plus a margin,
    3% per annum interest payable in kind, with the balance of interest payable monthly in cash, principal due quarterly in the
    amount of $725,000, maturity date November 2021, note subordinate to Texas Capital Bank Revolver Loan, secured by Vintage Stock Assets |  |          | 28,415,651 |   |               |  
|Note Payable to the Sellers of Vintage Stock, interest at
    8% per annum, with interest payable monthly, maturity date May 2022, note subordinate to both Texas Capital Bank Revolver and
    Capitala Term Loan, secured by Vintage Stock Assets                                                                                                                       |  |          | 10,000,000 |   |               |  
|Note #1 Payable to Banc of America Leasing & Capital LLC - interest at 3.8905% per annum,
    with interest and principal payable monthly in the amount of $84,273 for 59 months, beginning September 23, 2016,
    with a final payment due in the amount of $584,273, maturity date September 2021, secured by equipment                                                |  |          | 4,309,354  |   |               |  
|Note #2 Payable to Banc of America Leasing & Capital LLC - interest at 4.63% per annum,
    with     interest and principal payable monthly in the amount of $34,768 for 59 months, beginning January 30, 2017, with a
    final payment due in the amount of $476,729, maturity date January 2022, secured by equipment                                                  |  |          | 2,050,830  |   |               |  
|Note #3 Payable to Banc of America Leasing & Capital LLC - interest at 4.7985% per annum
    with interest and principal payable monthly  in the amount of $51,658 for 84 months, beginning January 30, 2017, secured by equipment.                                                                                                                                       |  |          | 3,455,617  |   |               |  
|Note #4 Payable to Banc of America Leasing & Capital LLC - interest at 4.8907% per annum,
    with interest and principal payable monthly  in the amount of $15,901 for 81 months, beginning April 30, 2017, secured by equipment.                                                                                                                                        |  |          | 1,060,659  |   |               |  
|Note Payable to Store Capital Acquisitions, LLC, - interest at 9.25% per annum, with interest
    and principal payable monthly in the amount of $73,970 for 480 months, beginning July 1, 2016, maturity date of June 2056, secured by Marquis land and buildings                                                                                                        |  |          | 9,334,312  |   |               |  
|Note Payable to Cathay Bank, variable interest rate, Prime Rate plus 2.50%, with interest
    payable monthly, maturity date December 2017, secured by substantially all Modern Everyday assets                                                                                                                                                                           |  |          | 180,346    |   |               |  
|Note Payable to Cathay Bank, variable interest rate, Prime Rate plus 1.50%, with interest
    payable monthly, maturity date December 2017, secured by substantially all Modern Everyday assets                                                                                                                                                                           |  |          | 249,766    |   |               |  
|Note payable to individual, interest at 11% per annum, payable on a 90 day written notice, unsecured                                                                                                                                                                                                                                                                      |  |          | 206,529    |   |               |  
|Note payable to individual, interest at 10% per annum, payable on a 90 day written notice, unsecured                                                                                                                                                                                                                                                                      |  |          | 500,000    |   |               |  
|Note payable to individual, interest at 8.25% per annum, payable on a 120 day written demand notice, unsecured                                                                                                                                                                                                                                                            |  |          | 225,000    |   |               |  
|Total notes payable                                                                                                                                                                                                                                                                                                                                                       |  |          | 77,363,506 |   |               |  
|Less unamortized debt issuance costs                                                                                                                                                                                                                                                                                                                                      |  |          | (1,411,867 | ) |               |  
|Net amount                                                                                                                                                                                                                                                                                                                                                                |  |          | 75,951,639 |   |               |  
|Less current portion                                                                                                                                                                                                                                                                                                                                                      |  |          | (5,847,194 | ) |               |  
|Long-term portion                                                                                                                                                                                                                                                                                                                                                         |  | $        | 70,104,445 |   |               | $











19









Future maturities of debt at June 30, 2017
are as follows which does not include related party debt separately stated:





|Years ending June 30, |  |   |            | 
|--------------------- |  | - | ---------- | 
|2018                  |  | $ | 6,081,238  | 
|2019                  |  |   | 4,801,499  | 
|2020                  |  |   | 10,153,524 | 
|2021                  |  |   | 17,085,972 | 
|2022                  |  |   | 18,889,319 | 
|Thereafter            |  |   | 20,351,954 | 
|Total                 |  | $ | 77,363,506 | 





| | Note 7: | Note
Payable, Related Party
| | ------- | ---------------------------



In connection with the purchase of Marquis
by the Company, Marquis entered into a mezzanine loan in the amount of up to $7,000,000 with Isaac Capital Fund, a private lender
whose managing member is Jon Isaac, the Chief Executive Officer of the Company.



The Isaac Capital Fund mezzanine loan bears
interest at 12.5% with payment obligations of interest each month and all principal due in January 2021. As of June 30, 2017 and
September 30, 2016, there was $2,000,000 outstanding on this mezzanine loan.



| | Note 8: | Stockholders’
Equity
| | ------- | --------------------



Series B Convertible Preferred Stock



On December 27, 2016 the Company established
a new series of preferred stock, Series B Convertible Preferred Stock. The shares, as a series, are entitled to dividends on our
Common Stock as declared by the Board of Directors, in an amount equal to $1.00 (in the aggregate for all then-issued and outstanding
shares of Series B Convertible Preferred Stock). The series does not have any redemption rights [or Stock basis, except as otherwise
required by the Nevada Revised Statutes. The series does not provide for any specific allocation of seats on the Board of Directors.
At any time and from time to time, the shares of Series B Convertible Preferred Stock are convertible into shares of Common Stock
at a ratio of one series B preferred share into five shares of common stock, subject to equitable adjustment in the event of forward
stock splits and reverse stock splits.



The holders of shares of the Series B Convertible
Stock have agreed not to sell transfer, assign, hypothecate, pledge, margin, hedge, trade, or otherwise obtain or attempt to obtain
any economic value from any of such shares or any shares into which they may be converted (e.g., common stock) or for which they
may be exchanged. This “lockup” agreement expires on December 31, 2021. Our Warrant Agreements with ICG have been amended
to provide that the shares underlying those warrants are exercisable into shares of Series B Convertible Preferred Stock, which
warrant shares are also subject to the same “lockup” agreement as the currently outstanding shares of Series B Convertible
Preferred Stock.



During the nine months ended June 30, 2017,
the Company issued:



55,888 shares of Series B Convertible Preferred
Stock were issued to Kingston Diversified Holdings LLC on December 29, 2016 to settle and pay for an outstanding accrued liability
in the amount of $2,800,000. The 55,888 shares of Series B Convertible Preferred Stock issued is convertible at an exchange ratio
of (five) shares of common stock for each share of Series B Convertible Preferred Stock, or 279,440 shares of common stock.



158,356 shares of Series B Convertible
Preferred Stock were issued to Isaac Capital Group (“ICG”) on December 27, 2016 in exchange for 791,758 shares of our
common stock at an exchange ratio of (five) shares of common stock for each share of Series B Convertible Preferred Stock.



Series E Convertible Preferred Stock



Pursuant to an existing offer, holders
of 2,197 shares of the Company’s common stock exchanged their shares for 127,840 shares of series E convertible preferred
stock, at the then $5.10 market value per share of the common stock. The shares carry a $0.30 per share liquidation preference
and accrue dividends at the rate of 5% per annum on the liquidation preference per share, payable quarterly from legally available
funds. If such funds are not available, dividends shall continue to accumulate until they can be paid from legally available funds.
Holders of the preferred shares are entitled, after two years from issuance, to convert them into common shares on a one-to-one
basis together with payment of $85.50 per converted share.



Series E Convertible Preferred Stock
Dividends



During the nine months ended June 30, 2017
and June 30, 2016, the Company accrued dividends of $1,438 and $1,438, respectively, payable to holders of Series E preferred stock.
As of June 30, 2017 and September 30, 2016 unpaid dividends were $479 and $959, respectively.











20







Common Stock



On November 22, 2016, the Company’s
board of directors authorized a one-for-six reverse stock split and a contemporaneous one-for-six (1:6) reduction in the number
of authorized shares of common stock from 60,000,000 to 10,000,000 shares, to take effect for stockholders of record as of December
5, 2016. No fractional shares were issued.



All share, option and warrant related information
presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the decreased number
of shares resulting in this action.



During the three months ended June 30,
2017, the Company did not issue any common shares.



During the nine months ended June 30, 2017,
the Company issued:



58,334 of common stock were issued to Novalk
Apps S.A.S. on December 28, 2016 to settle and pay for an outstanding accrued liability in the amount of $584,500. The value was
based on the market value of the Company’s common stock on the date of issuance.



2,284 of common stock were issued to various
holders of fractional shares of the Company’s common stock pursuant to the 1:6 stock split effective for stockholders of
record on December 5, 2016. All fractional shares of the Company’s common stock were eliminated.



During the nine months ended June 30, 2016,
the Company issued:



2,158 shares of common stock for services
rendered at $20,000. The value was based on the market value of the Company’s common stock on the date of issuance.



Treasury Stock



For the year ended September 30, 2016,
the Company purchased 30,122 shares of its common stock in the open market (treasury shares) for $300,027. For the three month
and nine month periods ended June 30, 2017, the Company purchased 47,651 additional shares of its common stock in the open market
(treasury shares) for $496,366. The Company accounted for the purchase of these treasury shares using the cost method.



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. The Company’s stockholders approved the 2014 Plan on July 11, 2014.



| | Note 9: | Series
B Convertible Preferred Stock Warrants
| | ------- | ---------------------------------------------



The Company issued several notes in prior
periods and converted them resulting in the issuance of warrants. The following table summarizes information about the Company’s
warrants outstanding at June 30, 2017:





|                                  |  | Number of 
units - Series B
 Convertible
 preferred 
warrants |         |  | WeightedAverage Exercise Price |   |       | Weighted
 Average
 Remaining
 Contractual
 Term
 (in years) |  |  | Intrinsic
 Value | 
|--------------------------------- |  | ------------------------------------------------------------- | ------- |  | ------------------------------ | - | ----- | ----------------------------------------------------------- |  |  | ---------------- | 
|Outstanding at September 30, 2016 |  |                                                               | 118,029 |  |                                | $ | 20.80 |                                                             |  |  | 1.73             | 
|Granted                           |  |                                                               | –       |  |                                |   |       |                                                             |  |  |                  | 
|Exercised                         |  |                                                               | –       |  |                                |   |       |                                                             |  |  |                  | 
|Outstanding at June 30, 2017      |  |                                                               | 118,029 |  |                                | $ | 10.34 |                                                             |  |  | 0.98             | 
|Exercisable at June 30, 2017      |  |                                                               | 118,029 |  |                                | $ | 10.34 |                                                             |  |  | 0.98             | 











21







Most of the above warrants were issued
in connection with the conversion of convertible notes from ICG. When the debts were converted and warrants were issued; the Company
determined the fair value of the warrants using the Black-Scholes-Merton model and took a charge to interest expense at the date
of issuance.



On December 27, 2016, ICG and the Company
agreed to amend and exchange the common stock warrants for warrants to purchase shares of Series B Convertible Preferred Stock,
and the number of warrants held adjusted by an exchange ratio of 5:1 shares of common stock for shares of Series B Convertible
Preferred Stock. ICG, the holder of the warrants outstanding, is not permitted to sell, transfer, assign, hypothecate, pledge,
margin, hedge, trade or otherwise obtain or attempt to obtain any economic value from the shares of Series B Convertible Preferred
Stock should the warrants be exercised prior to December 31, 2021. All warrant related information presented in these condensed
consolidated financial statements and accompanying footnotes has been retroactively adjusted to reflect the conversion of all common
stock warrants outstanding to warrants to purchase shares of Series B Convertible Preferred Stock resulting in this action.



The exercise price for the warrants outstanding
and exercisable into shares of Series B Convertible Preferred Stock at June 30, 2017 is as follows:





|Series B Convertible Preferred |        
|------------------------------ | -------
|Outstanding                    |        
|Number of                      |        
|Warrants                       |        
|                               | 54,396 
|                               | 17,857 
|                               | 12,383 
|                               | 33,393 
|                               | 118,029







| | Note 10: | Stock-Based
Compensation
| | -------- | ------------------------



From time to time, the Company grants stock
options and restricted stock awards to directors, officers and employees. These awards are valued at the grant date by determining
the fair value of the instruments, net of estimated forfeitures. The value of each award is amortized on a straight-line basis
over the requisite service period.



Stock Options





The following table summarizes stock option activity for the
nine months ended June 30, 2017:





|                                  |  |           |         |  | Weighted |   |       | Weighted         |  |  |                 | 
|--------------------------------- |  | --------- | ------- |  | -------- | - | ----- | ---------------- |  |  | --------------- | 
|                                  |  |           |         |  | Average  |   |       | Average          |  |  |                 | 
|                                  |  | Number of |         |  | Exercise |   |       | Remaining        |  |  |                 | 
|                                  |  | Shares    |         |  | Price    |   |       | Contractual Life |  |  | Intrinsic Value | 
|Outstanding at September 30, 2016 |  |           | 175,000 |  |          | $ | 11.22 |                  |  |  | 3.75            | 
|Granted                           |  |           | 36,668  |  |          |   |       |                  |  |  |                 | 
|Exercised                         |  |           | –       |  |          |   |       |                  |  |  |                 | 
|Forfeited                         |  |           | –       |  |          |   |       |                  |  |  |                 | 
|Outstanding at June 30, 2017      |  |           | 211,668 |  |          | $ | 13.19 |                  |  |  | 3.73            | 
|Exercisable at June 30, 2017      |  |           | 175,000 |  |          | $ | 9.29  |                  |  |  | 2.49            | 



The Company recognized compensation expense
of $67,491 and $79,824 for the three months ended June 30, 2017 and 2016, respectively. The Company recognized compensation expense
of $137,011 and $254,710 during the nine months ended June 30, 2017 and 2016, 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 June 30, 2017, the Company has $428,306
of unrecognized compensation expense (net of estimated forfeitures) associated with stock option awards which the company expects
to recognize as compensation expense through December of 2021.









22







The exercise price for stock options outstanding
and exercisable outstanding at June 30, 2017 is as follows:





|Outstanding |         |  | Exercisable |  
|----------- | ------- |  | ----------- | -
|Number of   |         |  | Exercise    |  
|Options     |         |  | Price       |  
|            | 31,250  |  |             | $
|            | 25,000  |  |             |  
|            | 31,250  |  |             |  
|            | 4,167   |  |             |  
|            | 4,167   |  |             |  
|            | 4,167   |  |             |  
|            | 4,167   |  |             |  
|            | 6,250   |  |             |  
|            | 6,250   |  |             |  
|            | 75,000  |  |             |  
|            | 4,000   |  |             |  
|            | 4,000   |  |             |  
|            | 4,000   |  |             |  
|            | 4,000   |  |             |  
|            | 4,000   |  |             |  
|            | 211,668 |  |             |  



The following table summarizes information
about the Company’s non-vested shares outstanding as of June 30, 2017:





|                                 |  |           |        |   | Weighted   |  
|-------------------------------- |  | --------- | ------ | - | ---------- | -
|                                 |  |           |        |   | Average    |  
|                                 |  | Number of |        |   | Grant-Date |  
|Non-vested Shares                |  | Shares    |        |   | Fair Value |  
|Non-vested at September 30, 2016 |  |           | 6,250  |   |            | $
|Granted                          |  |           | 36,668 |   |            | $
|Vested                           |  |           | (6,250 | ) |            | $
|Non-vested at June 30, 2017      |  |           | 36,668 |   |            | $











Options were granted during 2017 and 2016,
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 were as follows:



|Risk-free interest rate      |  | 1.25%            
|---------------------------- |  | -----------------
|Expected life of the options |  | 5.0 to 10.0 years
|Expected volatility          |  | 107%             
|Expected dividend yield      |  | 0%               



| | Note 11: | Earnings Per Share
| | -------- | ------------------



Net earnings per share is calculated using
the weighted average number of shares of common stock outstanding during the applicable period. Basic weighted average shares of
common stock outstanding do not include shares of restricted stock that have not yet vested, although such shares are included
as outstanding shares in the Company’s Consolidated Balance Sheet. Diluted net earnings per share is computed using the weighted
average number of common shares outstanding and if dilutive, potential common shares outstanding during the period. Potential shares
of common stock consist of the additional shares of common stock issuable in respect of restricted share awards, stock options
and convertible preferred stock. Preferred stock dividends are subtracted from net earnings to determine the amount available to
common stockholders.









23









The following table presents the computation of basic and diluted
net earnings per share:





|                                                     |  | Three Months Ended June 30, |           |   | Nine Months Ended June 30, |  
|---------------------------------------------------- |  | --------------------------- | --------- | - | -------------------------- | -
|                                                     |  | 2017                        |           |   | 2016                       |  
|Basic                                                |  |                             |           |   |                            |  
|                                                     |  |                             |           |   |                            |  
|Net income attributed to Live Ventures Incorporated  |  | $                           | 2,128,043 |   |                            | $
|Less: preferred stock dividends                      |  |                             | (479      | ) |                            |  
|Net income applicable to common stock                |  | $                           | 2,127,564 |   |                            | $
|                                                     |  |                             |           |   |                            |  
|Weighted average common shares outstanding           |  |                             | 2,044,767 |   |                            |  
|                                                     |  |                             |           |   |                            |  
|Basic earnings per share                             |  | $                           | 1.04      |   |                            | $
|                                                     |  |                             |           |   |                            |  
|                                                     |  |                             |           |   |                            |  
|                                                     |  |                             |           |   |                            |  
|Diluted                                              |  |                             |           |   |                            |  
|                                                     |  |                             |           |   |                            |  
|Net income (loss) applicable to common stock         |  | $                           | 2,127,564 |   |                            | $
|Add: preferred stock dividends                       |  |                             | 479       |   |                            |  
|Net income applicable for diluted earnings per share |  | $                           | 2,128,043 |   |                            | $
|                                                     |  |                             |           |   |                            |  
|Weighted average common shares outstanding           |  |                             | 2,044,767 |   |                            |  
|Add: Options                                         |  |                             | 35,296    |   |                            |  
|Add: Common Stock Warrants                           |  |                             | –         |   |                            |  
|Add: Series B Preferred Stock                        |  |                             | 1,071,200 |   |                            |  
|Add: Series B Preferred Stock Warrants               |  |                             | 590,145   |   |                            |  
|Add: Series E Preferred Stock                        |  |                             | 127,840   |   |                            |  
|Assumed weighted average common shares outstanding   |  |                             | 3,869,248 |   |                            |  
|                                                     |  |                             |           |   |                            |  
|Diluted earnings per share                           |  | $                           | 0.55      |   |                            | $







There are 124,168 and 111,668 common stock
options that are anti-dilutive that are not included in the three month and nine months ended June 30, 2017 diluted earnings per
share computations, respectively.



| | Note 12: | Related
Party Transactions
| | -------- | --------------------------



For the three months ended June 30, 2017
and 2016, the Company recognized total interest expense of $63,194 and $127,280, respectively. During the nine months ended June
30, 2017 and June 30, 2016, the Company recognized total interest expense of $189,583 and $498,510, respectively, associated with
the ICG notes. The two outstanding Cathay Bank notes are guaranteed by Tony Isaac, a director of the company.



Also see Notes 7, 8 and 9.



| | Note 13: | Commitments
and Contingencies
| | -------- | -----------------------------



Litigation



The Company is party to certain legal proceedings
from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or
treble dames or non-monetary relief. The nature of legal proceedings is such that the Company cannot assure the outcome of any
particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial
position, results of operations and cash flows in the period which a ruling or settlement occurs. However, based on information
available to the Company’s management to date, 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 June
30, 2017, results of operations, cash flows or liquidity of the Company.









24







| | Note 14: | Income
Taxes
| | -------- | ------------



The income tax rate for the six months
ended June 30, 2017 and June 30, 2016 was 39.5% and (388.6)% respectively. The effective income tax rate differs than the U.S.
federal statuary rate primarily due to state taxes, changes in valuation allowances, and certain non-deductible expenses. As of
June 30, 2017, and June 30, 2016 the Company had no uncertain tax positions. There was no goodwill impairment. The Company is subject
to taxation and files income tax returns in the U.S., and various state jurisdictions. The Company is subject to audit for U.S.
purposes for the current and prior three years; and for state purposes the current and prior four years. The Company has net operating
loss carry-forwards of approximately $23.3 million for U.S. income tax purposes, these net operating loss carryforwards are subject
to IRC Section 382 limitations and begin to expire in 2027.



In June of 2016, the Company removed and
released $12,174,931 of valuation allowance relative to its deferred tax assets. ASC 740-10-30 provides that a valuation allowance
should be recorded for any portion of a company’s deferred tax assets not expected to be realized in the future. All available
evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, a valuation
allowance for deferred tax assets. Future realization of the tax benefit ultimately depends on the existence of sufficient taxable
income. In consideration of all of the available evidence, management made the decision that it is more likely than not the Company’s
entire deferred tax asset will be realized in future years and the valuation allowance should be removed.



| | Note 15: | Concentration of Credit Risk
| | -------- | ----------------------------



The Company maintains cash balances at
banks in California, Idaho, New Mexico, Colorado, Texas, Missouri, Nevada, Oklahoma, Illinois, Arkansas and Georgia. Accounts are
insured by the Federal Deposit Insurance Corporation up to $250,000 per institution as of June 30, 2017. At times, balances may
exceed federally insured limits.



| | Note 16: | Segment
Reporting
| | -------- | -----------------



The Company operates in three segments
which are characterized as: (1) Manufacturing, (2) Retail and Online and (3) Services. The Manufacturing Segment consists of Marquis
Industries, the Retail and Online segment consists of Vintage Stock, Modern Everyday and LiveDeal.com, and the Services segment
consists of the directory services business.









25







The following tables summarize segment information for the three
and nine months ended June 30, 2017 and 2016:





|                                                    |  | Three Months Ended June 30, |            |  | Nine Months Ended June 30, |  
|--------------------------------------------------- |  | --------------------------- | ---------- |  | -------------------------- | -
|                                                    |  | 2017                        |            |  | 2016                       |  
|Revenues                                            |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 19,267,959 |  |                            | $
|Manufacturing                                       |  |                             | 21,898,645 |  |                            |  
|Services                                            |  |                             | 210,889    |  |                            |  
|                                                    |  | $                           | 41,377,493 |  |                            | $
|                                                    |  |                             |            |  |                            |  
|Gross profit                                        |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 10,953,602 |  |                            | $
|Manufacturing                                       |  |                             | 5,839,412  |  |                            |  
|Services                                            |  |                             | 200,883    |  |                            |  
|                                                    |  | $                           | 16,993,897 |  |                            | $
|                                                    |  |                             |            |  |                            |  
|Operating income (loss)                             |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 2,268,438  |  |                            | $
|Manufacturing                                       |  |                             | 2,915,516  |  |                            |  
|Services                                            |  |                             | 199,173    |  |                            |  
|                                                    |  | $                           | 5,383,127  |  |                            | $
|                                                    |  |                             |            |  |                            |  
|Depreciation and amortization                       |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 329,416    |  |                            | $
|Manufacturing                                       |  |                             | 760,125    |  |                            |  
|Services                                            |  |                             | –          |  |                            |  
|                                                    |  | $                           | 1,089,541  |  |                            | $
|                                                    |  |                             |            |  |                            |  
|Interest expenses                                   |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 1,600,589  |  |                            | $
|Manufacturing                                       |  |                             | 527,201    |  |                            |  
|Services                                            |  |                             | –          |  |                            |  
|                                                    |  | $                           | 2,127,790  |  |                            | $
|                                                    |  |                             |            |  |                            |  
|Net income (loss) before provision for income taxes |  |                             |            |  |                            |  
|Retail and Online                                   |  | $                           | 797,504    |  |                            | $
|Manufacturing                                       |  |                             | 2,175,749  |  |                            |  
|Services                                            |  |                             | 294,736    |  |                            |  
|                                                    |  | $                           | 3,267,989  |  |                            | $
|                                                    |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  
|Total assets                                        |  |                             |            |  |                            |  
|Retail and Online                                   |  |                             |            |  |                            |  
|Manufacturing                                       |  |                             |            |  |                            |  
|Services                                            |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  
|Goodwill and intangible assets                      |  |                             |            |  |                            |  
|Retail and Online                                   |  |                             |            |  |                            |  
|Manufacturing                                       |  |                             |            |  |                            |  
|Services                                            |  |                             |            |  |                            |  
|                                                    |  |                             |            |  |                            |  









| | Note 17: | Subsequent Events
| | -------- | -----------------



None.







26











| | ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | ------- | -------------------------------------------------------------------------------------



For a description of our significant accounting
policies and an understanding of the significant factors that influenced our performance during the three months and nine months
ended June 30, 2017, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
(hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements,
including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our 2016 Form 10-K.



Note about Forward-Looking Statements



This Quarterly Report on Form 10-Q includes
statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by
the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,”
or “anticipates,” and do not reflect historical facts.



Specific forward-looking statements contained
in this portion of the Quarterly Report include, but are not limited to (i) statements that are based on current projections and
expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic
conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating
to our future operations and prospects, (v) statements about future results and future performance, (vi) statements that the cash
on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity
will provide the company with sufficient liquidity for the next 12 months; and (vii) statements that the outcome of pending legal
proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.



Forward-looking statements involve risks,
uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from
those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance
and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those
identified in our 2016 Form 10-Kunder Item 1A “Risk Factors”, as well as other factors that we are currently unable
to identify or quantify, but that may exist in the future.



In addition, the foregoing factors may
generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date
the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements.
Any information contained on our website www.live-ventures.com or any other websites referenced in this Quarterly Report are not
part of this Quarterly Report.



Our Company



Live Ventures Incorporated is a holding
company for diversified businesses, which, together with our subsidiaries, we refer to as the “Company”, “Live
Ventures”, “we”, “us” or “our.” We acquire and operate profitable companies in various
industries that have demonstrated a strong history of earnings power. We currently have three segments to our business, Manufacturing,
Retail and Online, and Services.



Under the Live Ventures brand we seek opportunities
to acquire profitable and well-managed companies. We will work closely with consultants who will help us identify target companies
that fit within the criteria we have established for opportunities that will provide synergies with our businesses.



Our principal offices are located at 325
E. Warm Springs Road, Suite 102, Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which
does not form part of this report) is located at www.live-ventures.com. Our common stock trades on the NASDAQ Capital Market under
the symbol “LIVE”.



Manufacturing Segment



Marquis Industries



Our Manufacturing segment is composed of
Marquis Affiliated Holdings LLC and wholly-owned subsidiaries (“Marquis”). Marquis is a leading carpet manufacturer
and a manufacturer of innovative yarn products, as well as a reseller of hard surface flooring products. Over the last decade,
Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market’s fastest-growing
fiber category. We focus on the residential, niche commercial, and hospitality end-markets and serve over 2,000 customers.









27







Since its founding in 1990, Marquis has
built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies
that differentiate its brands in the flooring marketplace. Marquis’s state-of-the-art operations enable high quality products,
unique customization, and exceptionally short lead-times. Furthermore, the Company has recently invested in additional capacity
to grow several attractive lines of business, including printed carpet and yarn extrusion. Through its A-O Division, utilizes its
state-of-the-art yarn extrusion capacity to market monofilament textured yarn products to the artificial turf industry.



Retail and Online Segment



Our Retail and Online Segment is composed
of Vintage Stock Affiliated Holdings LLC and wholly-owned subsidiaries (“Vintage”), Modern Everyday, Inc. (“MEI”) and LiveDeal Inc. (“LiveDeal”).



Vintage Stock



On November 3, 2016, Live Ventures through
its wholly-owned subsidiary Vintage Stock Holdings LLC acquired 100% of Vintage Stock, V-Stock, Movie Trading Company and Entertainment
(collectively “Vintage Stock”). Vintage Stock is a leading
specialty entertainment retailer. Since its founding in 1980, Vintage Stock has established a strong reputation for being America’s
largest entertainment superstore. Vintage Stock offers a large selection of entertainment products including new and pre-owned
movies, video games and music products, as well as ancillary products such as books, comics, toys and collectibles all available
in a single location. With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned
movies, music, video games, electronics and collectibles through 33 Vintage Stock, 3 V-Stock, 13 Movie Trading company and 8 EntertainMart
retail locations strategically positioned across Texas, Idaho, Oklahoma, Kansas, Missouri, Colorado, Illinois, Arkansas and New
Mexico.



Modern Everyday



Modern Everyday, Inc. (“MEI”)
was a specialty retailer offering consumers a selection of products that range from home, kitchen and dining products, apparel
and sporting goods to children's toys and beauty products. Some of MEI’s products remain available for sale on amazon.com.
The Company has decided not to invest additional funds in this line of business and is in the process of selling the remaining
inventory.



LiveDeal



LiveDeal Inc. operatesLiveDeal.com, a real
time “deal engine” connecting restaurants with consumers. LiveDeal.com provides marketing solutions to restaurants
to boost customer awareness and merchant visibility on the internet. The marketing solutions that LiveDeal.com provides have not
provided any revenue to date. The Company is evaluating possibilities for using the LiveDeal.com deal engine for alternative marketable
purposes.



Services Segment



Telco





Telco Billing Inc. (“Telco”)
provides legacy services primarily under our InstantProfile ® line of directory listing services. We no
longer accept new customers under our legacy service offerings.



Critical Accounting Policies



Our unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and do not include all disclosures required under GAAP for complete financial statements. Preparation
of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact
on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information
available prior to the issuance of our financial statements. Our actual realized results may differ materially from management’s
initial estimates as reported. For a summary of significant accounting policies and the means by which we develop estimates thereon,
see (“Part 1, Item 1 of this 10-Q report – Financial Statements - Notes to unaudited condensed consolidated financial
statements Note 2 – summary of significant accounting policies), which are an integral component of this filing.









28







Results of Operations



The following table sets forth certain statement of operations
items and as a percentage of revenue, for the periods indicated:





|                                       |  | Three Months Ended |            |   | Three Months Ended | 
|-------------------------------------- |  | ------------------ | ---------- | - | ------------------ | 
|                                       |  | June 30, 2017      |            |   | June 30, 2016      | 
|Statement of Income Data:              |  |                    |            |   |                    | 
|Revenue                                |  | $                  | 41,377,493 |   |                    | 
|Cost of Revenue                        |  |                    | 24,383,596 |   |                    | 
|Gross Profit                           |  |                    | 16,993,897 |   |                    | 
|General and Administrative Expense     |  |                    | 9,335,904  |   |                    | 
|Selling & Marketing Expense            |  |                    | 2,274,866  |   |                    | 
|Operating Income                       |  |                    | 5,383,127  |   |                    | 
|Interest Expense, Net                  |  |                    | (2,127,790 | ) |                    | 
|Other Income                           |  |                    | 12,652     |   |                    | 
|Net Income before Income taxes         |  |                    | 3,267,989  |   |                    | 
|Provision (benefit) for Income Taxes   |  |                    | 1,139,946  |   |                    | 
|Net Income attributed to Live Ventures |  | $                  | 2,128,043  |   |                    | 





The following tables set forth revenues for key product categories,
percentages of total revenue and gross profits earned by key product category and gross profit percent as compared to revenues
for each key product category indicated:





|                                    |  | Three Months Ending |            |  | Three Months Ending | 
|----------------------------------- |  | ------------------- | ---------- |  | ------------------- | 
|                                    |  | June 30, 2017       |            |  | June 30, 2016       | 
|                                    |  | Net                 |            |  | Percent             | 
|                                    |  | Revenue             |            |  | of Total            | 
|Revenue                             |  |                     |            |  |                     | 
|Used Movies, Music, Games and Other |  | $                   | 11,538,897 |  |                     | 
|New Movies, Music, Games and Other  |  |                     | 7,407,257  |  |                     | 
|Rentals, Concessions and Other      |  |                     | 312,878    |  |                     | 
|Kitchen and Home Products           |  |                     | 8,927      |  |                     | 
|Carpets                             |  |                     | 15,356,111 |  |                     | 
|Hard Surface Products               |  |                     | 4,696,210  |  |                     | 
|Synthetic Turf Products             |  |                     | 1,846,324  |  |                     | 
|Directory Services                  |  |                     | 210,889    |  |                     | 
|Total Revenue                       |  | $                   | 41,377,493 |  |                     | 







|                                    |  | Three Months Ending |            |   | Three Months Ending | 
|----------------------------------- |  | ------------------- | ---------- | - | ------------------- | 
|                                    |  | June 30, 2017       |            |   | June 30, 2016       | 
|                                    |  | Gross               |            |   | Gross               | 
|                                    |  | Profit              |            |   | Profit %            | 
|Gross Profit                        |  |                     |            |   |                     | 
|Used Movies, Music, Games and Other |  | $                   | 8,965,104  |   |                     | 
|New Movies, Music, Games and Other  |  |                     | 1,911,963  |   |                     | 
|Rentals, Concessions and Other      |  |                     | 203,494    |   |                     | 
|New Kitchen and Home Products       |  |                     | (126,959   | ) |                     | 
|Carpets                             |  |                     | 4,514,597  |   |                     | 
|Hard Surface Products               |  |                     | 1,002,955  |   |                     | 
|Synthetic Turf Products             |  |                     | 321,860    |   |                     | 
|Directory Services                  |  |                     | 200,883    |   |                     | 
|Total Gross Profit                  |  | $                   | 16,993,897 |   |                     | 











29







Revenue



Revenue increased $21,383,130, or 106.9% for the three months
ended June 30, 2017 as compared to the three months ended June 30, 2016.



The increase in revenue was primarily attributable to the following:



Revenue from our new acquisition of Vintage
Stock – Used Movies, Music, Games and Other $11,538,897 or 27.9% of total revenue, New Movies, Music, Games and Other $7,407,257
or 17.9% of total revenue, Rentals, Concessions and Other $312,878 or 0.8% of total revenue.



Revenue increased in the following categories as compared to
the prior year period:



Hard Surface Products $1,954,113 or 71.3%, Synthetic Turf Products
$574,084 or 45.1% and Carpets $127,429 or 0.8%.



The revenue increases were partially offset by the following
decreases in revenue as compared to the prior year period:



Kitchen and Home Products $499,172 or 98.2%, and Directory Services
$32,356 or 13.3%.



Cost of Revenue



Cost of revenue increased $9,488,647, or
63.7% for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016, primarily because of the change
in revenue discussed above as well as the changes in gross profit discussed below.



Gross Profit



Gross profit increased $11,894,483 or 233.3%, for the three
months ended June 30, 2017 as compared to the three months ended June 30, 2016.



The increase in gross profit was primarily attributable to the
following:



Gross Profits from Vintage Stock -Used
Movies, Music, Games and Other $8,965,104 or 77.7% gross profit margin, New Movies, Music, Games and Other $1,911,963 or 25.8%
gross profit margin, Rentals, Concessions and Other $203,494 or 65.0% gross profit margin.



Gross profit increased in the following categories as compared
to the prior year period:



Hard Surface Products gross profit increased
$429,194 or 74.8%. Hard surface products gross profit margin increased to 21.4% from 20.9% or 5bps due to improved cost of goods
sold. Kitchen and Home Products gross profit increased $489,795 or 79.4% but still showed a gross loss of $126,959. Kitchen and
Home Products gross profit margin decreased to (1422.2)% from (121.4)% due to final close out and adjustment to net realizable
value of the remaining inventory, the mix of products sold and aggressive discounting of remaining inventory held for sale.



Gross profit increases were partially offset by the following
decreases in gross profit as compared to the prior year period.



Carpets gross profit decreased $52,473 or 1.1%. Carpets gross
profit margin decreased to 29.4% from 30.0% or 6bps due to some raw material increases and mix of carpet between the different
carpet divisions. Synthetic Turf Products gross profit decreased $21,205 or 6.2%. Synthetic Turf Products gross profit margin decreased
to 17.4% from 27.0% or 96bps due to a competitor adding extrusion capability and an influx of yarns from China. Raw materials were
also up approximately 15% in this division.



Directory Services gross profit decreased $31,389 or 13.5%.
Directory Services gross profit margin decreased to 95.3% from 95.5% or 2bps due to increased billing processing fees.



General and Administrative Expense



General and Administrative expense increased
$7,163,538 or 329.8%, for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The increase
in general and administrative expense was primarily attributable to general and administrative expense from Vintage Stock of $7,595,168,
an increase of $95,142 associated with Marquis and an increase of $132 associated with our Directory services business Telco; partially
offset by a decrease in general and administrative expense associated with Kitchen and Home products of $526,904.









30







Selling and Marketing Expense



Selling and marketing expense increased
$405,036 or 21.7%, for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The increase in
selling and marketing expense was primarily attributable an increase from our new acquisition Vintage Stock of $325,218 and an
increase in Marquis selling and marketing expense of $250,239; partially offset by a decrease in selling and marketing expense
associated with Kitchen and Home products of $170,421 due to declining revenue.



Operating Income



Because of the factors described above, operating income of
$5,383,127 for the three months ended June 30, 2017, represented an increase of $4,325,909 over the comparable prior year period
of $1,057,218, or 409.2%.



Interest Expense, net



Interest expense net increased $1,857,783 or 688.0%, for the
three months ended June 30, 2017 as compared to the three months ended June 30, 2016 primarily due to the new financing related
to the acquisition of Vintage Stock as more fully discussed in Notes 4 and 6 of the unaudited condensed consolidated financial
statements.



Other Income and Expense



Other income and expense decreased $314,056
or 96.1%, for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.



Provision for Income Taxes



Provision for income taxes increased $13,394,224,
for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The increase in provision for income
taxes is primarily attributable to the increase in pre-tax income and the application of an estimated effective tax rate of 37.7%,
and the release of the valuation allowance in 2016. The income tax provision is primarily deferred due to the Company’s approximately
$23.3 million of net operating loss carryforwards for federal income tax purposes.



Net Income



The factors described above led to net
income of $2,128,043 for the three months ended June 30, 2017, or an 84.1% decrease from net income of $13,368,197 for the three
months ended June 30, 2016.



The following table sets forth certain statement of operations
items and as a percentage of revenue, for the periods indicated:





|                                                 |  | Nine Months Ended |             |   | Nine Months Ended | 
|------------------------------------------------ |  | ----------------- | ----------- | - | ----------------- | 
|                                                 |  | June 30, 2017     |             |   | June 30, 2016     | 
|Statement of Income Data:                        |  |                   |             |   |                   | 
|Revenue                                          |  | $                 | 112,102,582 |   |                   | 
|Cost of Revenue                                  |  |                   | 65,988,083  |   |                   | 
|Gross Profit                                     |  |                   | 46,114,499  |   |                   | 
|General and Administrative Expense               |  |                   | 25,544,443  |   |                   | 
|Selling & Marketing Expense                      |  |                   | 6,237,004   |   |                   | 
|Operating Income                                 |  |                   | 14,333,052  |   |                   | 
|Interest Expense, Net                            |  |                   | (5,612,319  | ) |                   | 
|Other Income                                     |  |                   | 197,814     |   |                   | 
|Net Income before Income taxes                   |  |                   | 8,918,547   |   |                   | 
|Provision (benefit) for Income Taxes             |  |                   | 3,521,265   |   |                   | 
|Net Income before Noncontrolling Interest        |  |                   | 5,397,282   |   |                   | 
|Net Income attributed to Noncontrolling Interest |  |                   | –           |   |                   | 
|Net Income attributed to Live Ventures           |  | $                 | 5,397,282   |   |                   | 











31







The following tables set forth revenues
for key product categories, percentages of total revenue and gross profits earned by key product category and gross profit percent
as compared to revenues for each key product category indicated:





|                                    |  | Nine Months Ending |             |  | Nine Months Ending | 
|----------------------------------- |  | ------------------ | ----------- |  | ------------------ | 
|                                    |  | June 30, 2017      |             |  | June 30, 2016      | 
|                                    |  | Net                |             |  | Percent            | 
|                                    |  | Revenue            |             |  | of Total           | 
|Revenue                             |  |                    |             |  |                    | 
|Used Movies, Music, Games and Other |  | $                  | 30,649,693  |  |                    | 
|New Movies, Music, Games and Other  |  |                    | 22,431,088  |  |                    | 
|Rentals, Concessions and Other      |  |                    | 810,530     |  |                    | 
|Kitchen and Home Products           |  |                    | 128,904     |  |                    | 
|Carpets                             |  |                    | 41,918,688  |  |                    | 
|Hard Surface Products               |  |                    | 11,164,743  |  |                    | 
|Synthetic Turf Products             |  |                    | 4,346,440   |  |                    | 
|Directory Services                  |  |                    | 652,496     |  |                    | 
|Total Revenue                       |  | $                  | 112,102,582 |  |                    | 







|                                    |  | Nine Months Ending |            |   | Nine Months Ending | 
|----------------------------------- |  | ------------------ | ---------- | - | ------------------ | 
|                                    |  | June 30, 2017      |            |   | June 30, 2016      | 
|                                    |  | Gross              |            |   | Gross              | 
|                                    |  | Profit             |            |   | Profit %           | 
|Gross Profit                        |  |                    |            |   |                    | 
|Used Movies, Music, Games and Other |  | $                  | 23,798,787 |   |                    | 
|New Movies, Music, Games and Other  |  |                    | 5,897,796  |   |                    | 
|Rentals, Concessions and Other      |  |                    | 493,160    |   |                    | 
|New Kitchen and Home Products       |  |                    | (83,879    | ) |                    | 
|Carpets                             |  |                    | 12,000,954 |   |                    | 
|Hard Surface Products               |  |                    | 2,390,197  |   |                    | 
|Synthetic Turf Products             |  |                    | 997,636    |   |                    | 
|Directory Services                  |  |                    | 619,848    |   |                    | 
|Total Gross Profit                  |  | $                  | 46,114,499 |   |                    | 









Revenue



Revenue increased $52,163,862, or 87.0% for the nine months
ended June 30, 2017 as compared to the nine months ended June 30, 2016.



The increase in revenue was primarily attributable to the following:



Revenue from Vintage Stock for the short period of November
3, 2016 through June 30, 2017–Used Movies, Music, Games and Other $30,649,693 or 27.3% of total revenue, New Movies, Music,
Games and Other $22,431,088 or 20.0% of total revenue, Rentals, Concessions and Other $810,530 or 0.7% of total revenue.



Revenue increased in the following categories as compared to
the prior year period:



Hard Surface Products $3,354,028 or 42.9%, Synthetic Turf Products
$871,847 or 25.1%.



The revenue increases were partially offset by the following
decreases in revenue as compared to the prior year period:



Kitchen and Home Products $5,155,947 or 97.6%



Carpets $677,147 or 1.6%



Directory Services $120,230 or 15.6%



Cost of Revenue



Cost of revenue increased $23,164,851,
or 54.1% for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016, primarily because of the change
in revenue discussed above as well as the changes in gross profit discussed below.









32







Gross Profit



Gross profit increased $28,999,011 or 169.4%, for the nine months
ended June 30, 2017 as compared to the nine months ended June 30, 2016.



The increase in gross profit was primarily attributable to the
following:



Gross Profits from Vintage Stock for the short period of November
3, 2016 through June 30, 2017-Used Movies, Music, Games and Other $23,798,787 or 77.6% gross profit margin, New Movies, Music,
Games and Other $5,897,796 or 26.3% gross profit margin, Rentals, Concessions and Other $493,160 or 60.8% gross profit margin.



Gross profit increased in the following categories as compared
to the prior year period:



Hard Surface Products gross profit increased
$880,276 or 58.3%. Hard surface products gross profit margin increased to 21.4% from 19.3% or 21bps due to improved cost of goods
sold. Carpets gross profit increased $1,153,494 or 10.6%. Carpets gross profit margin increased to 28.6% from 25.5% or 31bps due
to an increase in cut order business and sales of some new styles with higher margins in the mix.



Gross profit increases were partially offset by the following
decreases in gross profit as compared to the prior year period.



Kitchen and Home Products gross profit decreased $1,317,584
or 106.8%. Kitchen and Home Products gross profit margin decreased to -65.1% from 23.3% due to final mix of products sold, final
adjustments to net realizable value and aggressive discounting of remaining inventory available for sale.



Synthetic Turf Products gross profit decreased $1,788,346 or
64.2%. Synthetic Turf Products gross profit margin decreased to 23.0% from 80.2% due to a competitor adding extrusion capability,
an influx of yarns from China and raw materials up approximately 15% in this division.



Directory Services gross profit decreased $118,572 or 16.1%.
Directory Services gross profit margin decreased to 95.0% from 95.6% or 6bps due to increased billing processing fees.



General and Administrative Expense



General and Administrative expense increased
$18,847,806 or 281.5%, for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The increase
in general and administrative expense was primarily attributable to general and administrative expense from Vintage Stock for the
short period of November 3, 2016 through March 31, 2017 of $20,320,520, of which $347,610 were one-time expenses related to Vintage
acquisition expenses – see Note 4; partially offset by a decrease of general and administrative expense associated with Kitchen
and Home products of $1,407,099, a decrease of $64,732 associated with Marquis and a decrease of $883 associated with our Directory
services business Telco.



Selling and Marketing Expense



Selling and marketing expense decreased
$878,899 or 12.4%, for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The decrease in
selling and marketing expense was primarily attributable to the decrease in selling and marketing expense associated with Kitchen
and Home products of $1,824,994 due to declining revenue; partially offset by an increase from our new acquisition Vintage Stock
of $857,737 and an increase in Marquis selling and marketing expense of $88,358.



Operating Income



Because of the factors described above, operating income of
$14,333,052 for the nine months ended June 30, 2017, represented an increase of $11,030,104 over the comparable prior year period
of $3,302,948, or 333.9%.



Interest Expense, net



Interest expense net increased $4,661,843 or 490.5%, for the
nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016 primarily due to the new financing related to
the acquisition of Vintage Stock as more fully discussed in Notes 4 and 6 of the unaudited condensed consolidated financial statements.









33







Other Income and Expense



Other income and expense decreased $496,463
or 71.5%, for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The decrease in other income
and expense was primarily the result of the absence of the Modern Everyday Inc. contingency purchase price adjustment gain of $316,000.



Provision for Income Taxes



Provision for income taxes increased $15,361,563,
for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The increase in provision for income
taxes is primarily attributable to the increase in pre-tax income and the application of an estimated effective tax rate of 37.7%,
and the release of the valuation allowance in 2016. The income tax provision is primarily deferred due to the Company’s approximately
$23.3 million of net operating loss carryforwards for federal income tax purposes.



Net Income



The factors described above led to net
income of $5,397,282 for the nine months ended June 30, 2017, or a 63.4% decrease from net income of $14,762,853 for the nine months
ended June 30, 2016.



Segment Performance





We report our business in the following
segments: Retail and Online, Manufacturing and Services. We identified these segments based on a combination of business type,
customers serviced and how we divide management responsibility. Our revenues and profits are driven through our physical stores,
e-commerce, individual sales reps and our internet services.



Operating income (loss) by operating segment,
is defined as income (loss) before net interest expense, other income and expense, provision for income taxes and income (loss)
attributable to non-controlling interest.





|                                       |  | Three Months Ended June 30, 2017 |            |  | Three Months Ended June 30, 2016 |  
|-------------------------------------- |  | -------------------------------- | ---------- |  | -------------------------------- | -
|                                       |  | Segments in $                    |            |  | Segments - $                     |  
|                                       |  | Retail &                         |            |  |                                  |  
|                                       |  | Online                           |            |  | Mfg                              |  
|Revenue                                |  | $                                | 19,267,959 |  |                                  | $
|Cost of Revenue                        |  |                                  | 8,314,357  |  |                                  |  
|Gross Profit                           |  |                                  | 10,953,602 |  |                                  |  
|General and Administrative
    Expense |  |                                  | 8,320,919  |  |                                  |  
|Selling and Marketing Expense          |  |                                  | 364,245    |  |                                  |  
|Operating Income (Loss)                |  | $                                | 2,268,438  |  |                                  | $







|                                       |  | Three Months Ended June 30, 2017 |        |  | Three Months Ended June 30, 2016 | 
|-------------------------------------- |  | -------------------------------- | ------ |  | -------------------------------- | 
|                                       |  | Segments in %                    |        |  | Segments - %                     | 
|                                       |  | Retail &                         |        |  |                                  | 
|                                       |  | Online                           |        |  | Mfg                              | 
|Revenue                                |  |                                  | 100.0% |  |                                  | 
|Cost of Revenue                        |  |                                  | 43.2%  |  |                                  | 
|Gross Profit                           |  |                                  | 56.8%  |  |                                  | 
|General and Administrative
    Expense |  |                                  | 43.2%  |  |                                  | 
|Selling and Marketing Expense          |  |                                  | 1.9%   |  |                                  | 
|Operating Income (Loss)                |  |                                  | 11.8%  |  |                                  | 







Retail and Online Segment



Segment results for Retail and Online include
Vintage, Modern Everyday and LiveDeal. Revenue for the three months ended June 30, 2017 increased $18,759,860, or 3692.2%, as compared
to the prior year period, as a result of the acquisition of the Vintage business on November 3, 2016 which provided $11,538,898
of Used movies, music, games and other revenue; $7,407,257 of New movies, music, games and other revenue; $312,878 of Movie Rental,
concession and other revenue; partially offset by a decrease in New kitchen and home products revenue of $499,172, or 98.2% from
the prior year period. Cost of revenue for the three months ended June 30, 2017 increased $9,488,647, or 63.7%, because of the
Vintage business which had cost of revenue for Used movies, music, games and other of $2,573,793; New movies, music, games and
other of $5,495,294; Movie Rental, concession and other of $109,384; partially offset by a decrease in cost of revenue for New
Kitchen and home products of $988,967, or 87.9% from the prior year period. Operating income for the three months ended June 30,
2017 increased $4,347,295, because of increased gross profit of $11,570,356, partially offset by an increase in general and administrative
expense of $7,068,264, which included one-time acquisition related expense related to Vintage Stock of $347,610, and an increase
in selling and marketing expense of $154,797.









34







Manufacturing Segment



Segment results for Manufacturing include
Marquis, which is our carpet, hard surface and synthetic turf products business. Revenue for the three months ended June 30, 2017
increased $2,655,626, or 13.8%, as compared to the prior year period, because of increased sales of hard surface products of $1,954,113,
synthetic turf products of $574,084 and carpets of $127,429. Cost of revenue for the three months ended June 30, 2017 increased
$2,300,110, or 16.7%, as compared to the prior year period, because of an increase in cost of revenue for synthetic turf products
of $595,289, hard surface products of $1,524,919 and carpets of $179,902. Operating income for the three months ended June 30,
2017 increased $10,135, or 0.3%, as compared to the prior year period, because of an increase in gross profit of $355,516, an increase
in general and administrative expense of $95,142 and an increase in selling and marketing expense of $250,239.





Services Segment



Segment results for Services include Telco
results, which is our directory services business. Revenues for the three months ended June 30, 2017 decreased $32,356, or 13.3%,
as compared to the prior year period, because of decreasing renewals. Operating earnings for the three months ended June 30, 2017
decreased $31,521, or 13.7% compared to the prior year period, primarily due to decreased renewal revenues. We expect revenue and
operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory
services business.





|                                   |  | Nine Months Ended June 30, 2017 |            |  | Nine Months Ended June 30, 2016 |  
|---------------------------------- |  | ------------------------------- | ---------- |  | ------------------------------- | -
|                                   |  | Segments in $                   |            |  | Segments - $                    |  
|                                   |  | Retail &                        |            |  |                                 |  
|                                   |  | Online                          |            |  | Mfg                             |  
|Revenue                            |  | $                               | 54,020,215 |  |                                 | $
|Cost of Revenue                    |  |                                 | 23,914,351 |  |                                 |  
|Gross Profit                       |  |                                 | 30,105,864 |  |                                 |  
|General and Administrative Expense |  |                                 | 22,588,786 |  |                                 |  
|Selling and Marketing Expense      |  |                                 | 969,514    |  |                                 |  
|Operating Income (Loss)            |  | $                               | 6,547,564  |  |                                 | $







|                                   |  | Nine Months Ended June 30, 2017 |        |  | Nine Months Ended June 30, 2016 | 
|---------------------------------- |  | ------------------------------- | ------ |  | ------------------------------- | 
|                                   |  | Segments in %                   |        |  | Segments - %                    | 
|                                   |  | Retail &                        |        |  |                                 | 
|                                   |  | Online                          |        |  | Mfg                             | 
|Revenue                            |  |                                 | 100.0% |  |                                 | 
|Cost of Revenue                    |  |                                 | 44.3%  |  |                                 | 
|Gross Profit                       |  |                                 | 55.7%  |  |                                 | 
|General and Administrative Expense |  |                                 | 41.8%  |  |                                 | 
|Selling and Marketing Expense      |  |                                 | 1.8%   |  |                                 | 
|Operating Income (Loss)            |  |                                 | 12.1%  |  |                                 | 





Retail and Online Segment



Segment results for Retail and Online include
Vintage, Modern Everyday and LiveDeal. Revenue for the nine months ended June 30, 2017 increased $48,735,364, or 922.2%, as compared
to the prior year period, as a result of the acquisition of the Vintage business on November 3, 2016 which provided $30,649,693
of Used movies, music, games and other revenue; $22,431,088 of New movies, music, games and other revenue; $810,530 of Movie Rental,
concession and other revenue; partially offset by a decrease in New kitchen and home products revenue of $5,155,947, or 97.6% from
the prior year period. Cost of revenue for the nine months ended June 30, 2017 increased $19,863,205, or 490.3%, because of the
Vintage business which had cost of revenue for Used movies, music, games and other of $6,850,907; New movies, music, games and
other of $16,533,292; Movie Rental, concession and other of $317,370; partially offset by a decrease in cost of revenue for New
Kitchen and home products of $3,838,363, or 94.7% from the prior year period. Operating income for the nine months ended June 30,
2017 increased $10,925,995, because of increased gross profit of $28,872,159, partially offset by an increase in general and administrative
expense of $18,913,421, which included one-time acquisition related expense related to Vintage Stock of $347,610, and a decrease
in selling and marketing expense of $967,257.



Manufacturing Segment



Segment results for Manufacturing include
Marquis, which is our carpet, hard surface and synthetic turf products business. Revenue for the nine months ended June 30, 2017
increased $3,548,728, or 6.6%, as compared to the prior year period, because of increased sales of hard surface products of $3,354,028,
synthetic turf products of $871,847, partially offset by a decrease in carpet sales of $677,147. Cost of revenue for the nine months
ended June 30, 2017 increased $3,303,304, or 8.5%, as compared to the prior year period, because of an increase in the cost of
revenue of synthetic turf products of $2,660,193, hard surface products of $2,473,752; partially offset by a decrease in cost of
revenue of carpets of $1,830,641. Operating income for the nine months ended June 30, 2017 increased $221,798, or 3.2%, as compared
to the prior year period, because of an increase in gross profit of $245,424 and a decrease in general and administrative expense
of $64,732; partially offset by an increase in selling and marketing expense of $88,358.









35







Services Segment



Segment results for Services include Telco
results, which is our directory services business. Revenues for the nine months ended June 30, 2017 decreased $120,230, or 15.6%,
as compared to the prior year period, because of decreasing renewals. Operating earnings for the nine months ended June 30, 2017
decreased $117,689, or 16.0%, compared to the prior year period, primarily due to decreased renewal revenues. We expect revenue
and operating income from this segment to continue to decrease in the future. We are no longer accepting new customers in our directory
services business.



Liquidity and Capital Resources



Overview



Based on our current operating plans, we
believe that available cash balances, cash generated from our operating activities and funds available under the BofA Revolver
and the TCB Revolver, together will provide sufficient liquidity to fund our operations, our continued investments in store openings
and remodeling activities, share repurchases and the payment of dividends on our series E preferred shares as declared by the Board
of Directors, for at least the next 12 months.



As of June 30, 2017, we had total cash
on hand of $4,275,052 and an additional $6,989,630 of available borrowing under the BofA Revolver and an additional $2,789,415
of available borrowing under the TCB Revolver. As we continue to pursue acquisitions, and other strategic transactions to expand
and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public
or private sales of debt or equity securities. The amount, nature and timing of any borrowings or sales of debt or equity securities
will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature
and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.



Cash Flows



During the nine months ended June 30, 2017,
cash provided by operations was $8,830,128, compared to $7,055,523 during the nine months ended June 30, 2016. The increase in
cash provided by operations of $1,774,605 as compared to the prior period; was primarily due to an increase in the change to deferred
income taxes of $15,274,831, an increase in non-cash expenses of $256,631; partially offset by a decrease in net income of $9,489,765
and a decrease in cash provided by operations for working capital purposes of $4,267,092. The decrease in net income was primarily
attributable to the release of our deferred tax assets in 2016; partially offset by new net income provided by our Vintage Stock
acquisition effective November 3, 2017.



The increase in non-cash expenses was primarily
due to an increase in depreciation and amortization expense of $1,489,773 from new equipment put into service at Marquis and new
depreciation because of the Vintage acquisition, and a charge to the inventory reserves to close out remaining Modern Everyday
inventory by reducing carrying values to net realizable value of $1,475,503.



Some of the significant changes in cash
provided by or used by operations for working capital purposes (net of effect of acquisition), as compared to the prior year period
include:



Cash provided by a decrease in prepaid
expenses and other current assets of $2,049,010 was the primary result of financing deposits initially placed with equipment manufacturers
from Banc of America Leasing & Capital LLC upon receiving and putting into service certain new equipment at Marquis.



Cash used to increase inventory of $3,629,297
was primarily the result of stocking and opening eight new stores for Vintage and value purchases of raw materials inventory for
Marquis.



Cash used to increase accounts receivable
of $2,461,576 was primarily the result of increased sales at Marquis.



Cash provided by income taxes payable of
$694,144 was the primary result of new accruals for current income taxes payable because of increased taxable income due to federal
and state taxing authorities.



Cash used in investing activities was $55,150,965
and $2,690,080 for the nine months ended June 30, 2017 and the nine months ended June 30, 2016, respectively. The $52,460,885 increase
in cash used in investing activities, as compared to the prior period, is primarily attributable to the acquisition of Vintage
Stock for $57,310,900 of consideration given, net of cash acquired, and including the $10,000,000 of seller financing provided,
and the purchase and placement into service of new equipment of $7,753,755, primarily for Marquis.









36







Cash provided by financing activities was
$49,824,994 and used by financing activities of $3,959,839 for the nine months ended June 30, 2017 and the nine months ended June
30, 2016, respectively. The $53,784,833 increase in cash provided, as compared to the prior period, was attributable to increased
net borrowings on our two revolver loans of $19,638,398, $11,492,658 of which was used to help acquire Vintage Stock; proceeds
from the Capitala Term Loan of $30,000,000, both of which were used to help acquire Vintage Stock; proceeds from Banc of America
Leasing & Capital LLC in the amount of $6,984,434 for equipment financing at Marquis; partially offset by prior year financing
proceeds in the amount of $10,050,521, an increase in debt issuance costs of $739,243, a decrease in payments of notes payable
of $1,740,147, reduction in payment of non-controlling interests of $2,000,000, reduction in payment of related party notes payable
of $4,505,979, and an increase in purchases of Treasury Stock of $294,361.



Sources of Liquidity



We utilize cash on hand and cash generated
from operations and have funds available to us under our two revolving loan facilities ( BofA Revolver and TCB Revolver) to cover
normal and seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash equivalents are
carried at cost and consist primarily of demand deposits with commercial banks.



BofA Revolver





Marquis may borrow funds for operations
under the BofA Revolver subject to availability as described in Note 6 to the unaudited condensed financial statements. On June
30, 2017 and September 30, 2016, we had $6,989,630 and $11,071,138 of additional borrowing availability on the BofA Revolver, respectively.
Maximum borrowing under the BofA Revolver is $15 million. A total of approximately $72,715 of letters of credit was outstanding
at June 30, 2017. The weighted average interest rate for the period of October 1, 2016 through June 30, 2017 was 3.42%. We borrowed
$68,597,210 and repaid $63,553,469 on the BofA Revolver during the nine months ended June 30, 2017; leaving an outstanding balance
on the BofA Revolver of $5,266,331 and $222,590 at June 30, 2017 and September 30, 2016, respectively.



TCB Revolver



Vintage Stock may borrow funds for operations
under the TCB Revolver subject to availability as described in Note 6 to the unaudited condensed financial statements. On June
30, 2017 and November 3, 2016 – we had $2,789,415 and $2,562,782 of additional borrowing availability on the TCB Revolver,
respectively. Maximum borrowing under the TCB Revolver is $20 million. No letters of credit were outstanding at any time during
the period of November 3, 2016 through June 30, 2017. The weighted average interest rate for the period of November 3, 2016 through
June 30, 2017 was 3.45560%. We borrowed $59,904,850 and repaid $47,795,739 on the TCB Revolver during the period of November 3,
2016 through June 30, 2017; leaving an outstanding balance on the TCB Revolver of $12,109,111 at June 30, 2017.



We are currently in compliance with all
covenants under our existing revolving and other loan agreements.



Future Sources of Cash; New Acquisitions,
Products and Services



We may require additional debt financing
and or capital to finance new acquisitions, refinance existing indebtedness or other strategic investments in our business. Other
sources of financing may include stock issuances and additional loans; or other forms of financing. Any financing obtained may
further dilute or otherwise impair the ownership interest of our existing stockholders.



Off-Balance Sheet Arrangements



At June 30, 2017, we had no off-balance
sheet arrangements, commitments or guarantees that require additional disclosure or measurement.



| | ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | ------- | ----------------------------------------------------------



As of June 30, 2017, we did not participate
in any market risk-sensitive commodity instruments for which fair value disclosure would be required. We believe we are not subject
in any material way to other forms of market risk, such as foreign currency exchange risk, foreign customer purchases or commodity
price risk.









37







| | ITEM 4. | CONTROLS AND PROCEDURES
| | ------- | -----------------------



Evaluation of Disclosure control and
Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal
financial officer concluded that, as of the end of period covered in this report, our disclosure controls and procedures were not
effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required
disclosure.



Notwithstanding the foregoing, a control
system, no matter how well designed and operated, can provide only reasonable, not absolute assurance that it will detect or uncover
failures within the Company to disclose material information otherwise required to be set forth in our periodic reports. Management
has concluded that adequate definition and documentation of existing accounting processes, internal controls and the testing thereof
are not in place to be deemed adequate and reliable. The Company and its management are working to remediate these deficiencies
in our financial reporting.



Changes in Internal Control over Financial
Reporting. There was no change in our internal control over our existing financial reporting (with the exception of the Vintage
Stock, Inc. acquisition as described below and elsewhere in this 10-Q report) during our most recently completed three month period
ended June 30, 2017 that have materially affected, or is reasonably likely, to materially affect our internal control over financial
reporting.



In November, 2016, we acquired Vintage
Stock. We are currently in the process of integrating Vintage Stock. into our assessment of our internal control over financial
reporting. Vintage Stock represents a significant portion of our operations on a consolidated basis and we expect this integration
effort to have a significant effect on our internal control over financial reporting. Vintage Stock represented 46.5% of our consolidated
assets as of June 30, 2017 and 48.1% of our consolidated net revenues and 48.9% of consolidated pre-tax net income for the fiscal
nine months ended June 30, 2017.









38







PART II – OTHER INFORMATION





| | ITEM 1. | Legal Proceedings
| | ------- | -----------------



The Company is party to certain legal
proceedings from time to time incidental to the conduct of tits business. These proceedings could result in fines, penalties,
compensatory or treble dames or non-monetary relief. The nature of legal proceedings is such that we cannot assume 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 in 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 our consolidated
financial position as of June 30, 2017, our annual results of operations, cash flows, or our liquidity.



| | ITEM 1A. | Risk Factors
| | -------- | ------------



You should carefully consider the factors
discussed in “Item 1.A. Risk Factors” in our fiscal 2016 Form 10-K. These risks could materially and adversely affect
our business, financial condition and results of operations, cash flows and liquidity. On November 3, 2016, we purchased Vintage
Stock Inc., a retailer that buys sells and trades new and pre-owned movies, music, games, collectibles, electronics, toys and other
retail products for technology enthusiasts and general consumers. Accordingly, in addition to the risk factors disclosed in our
fiscal 2016 Form 10-K, we disclose the following:



If economic conditions do not improve,
demand for the products we sell may decline.



Sales of our products involve discretionary
spending by consumers. Consumers are typically more likely to make discretionary purchases, including purchasing movies, games,
music and other discretionary products when there are favorable economic conditions. In recent years, poor economic conditions
have led consumers to delay or reduce discretionary spending, including purchases of the products we sell. If conditions do not
improve, or deteriorate, these delays or reductions may continue, which could negatively impact our business, results of operations,
financial condition, cash flow and liquidity.



The video game industry is cyclical
and affected by the introduction of next-generation consoles, which could negatively impact the demand for existing products or
our pre-owned business.



The video game industry has been cyclical
in nature in response to the introduction and maturation of new technology. Following the introduction of new video game platforms,
sales of these platforms and related software and accessories generally increase due to initial demand, while sales of older platforms
and related products generally decrease as customers migrate toward the new platforms. A new console cycle began when Nintendo
launched the Wii U in November 2012 and Sony and Microsoft each launched their next generation of consoles, the PlayStation 4 and
Xbox One, respectively, in November 2013. If the new video game platforms do not continue to be successful, our sales of video
game products could decline. The introduction of these next-generation consoles could negatively impact the demand for existing
products or our pre-owned business, which could have a negative impact on our business, results of operations, financial condition,
cash flow and liquidity.



Technological advances in the delivery
and types of video, video games and PC entertainment software, as well as changes in consumer behavior related to these new technologies,
could lower our sales



While it is currently possible to down
load video, video game content and music to the current generation of video and gaming systems, downloading is somewhat constrained
by bandwidth capacity and video game and movie file sizes. However, broadband speeds are increasing and downloading technology
is becoming more prevalent and continues to evolve rapidly. The current game consoles from Sony and Microsoft have facilitated
download technology. If these consoles and other advances in technology continue to expand our customers’ ability to access
and download the current format of video, music and games and incremental content from their games and videos through these and
other sources, our customers may no longer choose to purchase videos, DVDs, video games and music in our stores or reduce their
purchases in favor of other forms of video, digital and game delivery. As a result, our sales and earnings could decline.









39







We may not compete effectively as
browser, mobile and social video viewing and gaming becomes more popular.



Listening to music, gaming and viewing
video and digital content continues to evolve rapidly. The popularity of browser, mobile and social viewing and gaming have increased
greatly and this popularity is expected to continue to grow. Browser, mobile and social video viewing, listening to music and gaming
is accessed through hardware other than the game consoles and traditional hand-held video and game devices we currently sell. [If
we are unable to respond to this growth in popularity of browser, mobile and social viewing and gaming and transition our business
to take advantage of these new forms of viewing movies, listening to music and playing video games, our financial position, results
of operations, cash flows and liquidity could be impacted negatively.



As a seller of certain consumer products,
we are subject to various federal, state, local and international laws, regulations, and statutes related to product safety and
consumer protection.



While we take steps to comply with these
laws, there can be no assurance that we will be in compliance, and failure to comply with these laws could result in penalties
which could have a negative impact on our business, financial condition and results of operations, cash flows and liquidity. We
may also be subject to involuntary or voluntary product recalls or product liability lawsuits. Direct costs or reputational damage
associated with product recalls or product liability lawsuits, individually or in the aggregate, could have a negative impact on
future revenues and results of operations, cash flows and liquidity.



International events could delay
or prevent the delivery of products to our suppliers



Some of our suppliers rely on foreign sources,
primarily in Asia, to manufacture a portion of the products we purchase from them. As a result, any event causing a disruption
of imports, including natural disasters or the imposition of import restrictions or trade restrictions in the form of tariffs or
quotas, could increase the cost and reduce the supply of products available to us, which could lower our sales and profitability.



If we are unable to renew or enter
into new leases on favorable terms, our revenue growth may decline.



All of our retail stores are located in
leased premises. If the cost of leasing existing stores increases, we cannot assure you that we will be able to maintain our existing
store locations as leases expire. In addition, we may not be able to enter into new leases on favorable terms or at all, or we
may not be able to locate suitable alternative sites or additional sites for new store expansion in a timely manner. Our revenues
and earnings may decline if we fail to maintain existing store locations, enter into new leases, locate alternative sites or find
additional sites for new store expansion.



An adverse trend in sales during
the holiday selling season could impact our financial results.



Our retail business, like that of many
retailers, is seasonal, with a major portion of our sales and operating profit realized during the first fiscal quarter, which
includes the holiday selling season. Any adverse trend in sales during the holiday selling season could lower our results of operations
for the first fiscal quarter and the entire fiscal year.



Our results of operations may fluctuate
from quarter to quarter.



Our results of operations may fluctuate
from quarter to quarter depending upon several factors, some of which are beyond our control. These factors include, but are not
limited to:



| | • | The timing and allocations of new product releases;
| | - | ---------------------------------------------------

| | • | The timing of new store openings or closings;
| | - | ---------------------------------------------

| | • | Shifts in the timing or content or certain promotions or service offerings;
| | - | ---------------------------------------------------------------------------

| | • | The effect of changes in tax rates in the jurisdictions in which we are operating;
| | - | ----------------------------------------------------------------------------------

| | • | Acquisition costs and the integration of companies we acquire or invest in;
| | - | ---------------------------------------------------------------------------

| | • | The costs associated with the exit of unprofitable markets or stores
| | - | --------------------------------------------------------------------



These and other factors could affect our
business, financial condition and results of operations, cash flows and liquidity, and this makes the prediction of our financial
results on a quarterly basis difficult. Also, it is possible that our quarterly financial results may be below the expectations
of public market analysts.











40







Failure to effectively manage our
new store openings could lower our sales and profitability.



Our growth strategy depends in part upon
opening new stores and operating them profitably. Our ability to open new stores and operate them profitability depends upon a
number of factors, some of which may be beyond our control. These factors include:



| | • | The ability to identify new store locations, negotiate suitable leases and build out the stores
in a timely and cost efficient manner;
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| | • | The ability to hire and train skilled associates;
| | - | -------------------------------------------------

| | • | The ability to integrate new stores into our existing operations; and
| | - | ---------------------------------------------------------------------

| | • | The ability to increase sales at new store locations.
| | - | -----------------------------------------------------



If we fail to manage new store openings
in a timely and cost efficient manner, our growth or profits may decrease.



We rely on centralized facilities
for refurbishment of our pre-owned products. Any disruption to these facilities could adversely affect our profitability.



We rely on centralized facilities for the
refurbishment of all pre-owned products that we sell. If any disruption occurred at these facilities, whether due to natural disaster
or severe weather, or events such as fire, accidents, power outages, systems failures, or other unforeseen causes, sales of our
pre-owned products could decrease. Since we generally obtain higher margins on our pre-owned products, any adverse effect on their
sales could adversely affect our profitability.



If our management information systems
fail to perform or are inadequate, our ability to manage our business could be disrupted.



We rely on computerized inventory and management
systems to coordinate and manage the activities in our stores and distribution centers. We use inventory replenishment systems
to track sales and inventory. Our ability to rapidly process incoming shipments of new products and deliver them to all of our
stores, enables us to meet peak demand and replenish stores to keep our stores in stock at optimum levels and to move inventory
efficiently. If our inventory or management information systems fail to adequately perform these functions, our business could
be adversely affected. In addition, if operations in any of our distribution centers were to shut down or be disrupted for a prolonged
period of time of if these centers were unable to accommodate the continued store growth in a particular region, our business would
suffer.



Data breaches involving customer
or employee data stored by us could adversely affect our reputation and revenues.



We store confidential information with
respect to our customers and employees. A compromise of our data security systems or those of businesses with which we interact
could result in information related to our customers or employees being obtained by unauthorized persons. Any such breach of our
systems could lead to fraudulent activity resulting in claims and lawsuits against us or other operational problems or interruptions
in connection with such breaches. Any breach or unauthorized access in the future could result in significant legal and financial
exposure and damage to our reputation that could potentially have an adverse effect on our business. While we also seek to obtain
assurances that others with whom we interact will protect confidential information, there is a risk the confidentiality of data
held or accessed by others may be compromised. If a compromise of our data security or function of our computer systems or website
were to occur, it could have a material adverse effect on our operating results and financial condition, cash flows and liquidity
and possibly, subject us to additional legal, regulatory and operating costs and damage our reputation in the marketplace.



Also, the interpretation and enforcement
of data protection laws in the United States are uncertain and, in certain circumstances contradictory. These laws may be interpreted
and enforced in a manner that is inconsistent with our policies and practices. If we are subject to data security breaches or government-imposed
fines, we may have a loss in sales or be forced to pay damages or other amounts, which could adversely affect profitability, or
be subject to substantial costs related to compliance.



We may record future goodwill impairment
charges or other asset impairment charges which could negatively impact our future results of operations and financial condition.



In our most current reporting period we
have recorded significant goodwill as a result of our acquisition of Vintage Stock Because we have grown in part through acquisitions,
goodwill and other acquired intangible assets represent a substantial portion of our assets. We also have long-lived assets consisting
of property and equipment and other identifiable intangible assets which we review both on an annual basis as well as when events
or circumstances indicate that the carrying amount of an asset may not be recoverable. If a determination is made that a significant
impairment in value of goodwill, other intangible assets or long-lived assets has occurred, such determination could require us
to impair a substantial portion of our assets. Asset impairments could have a material adverse effect on our financial condition
and results of operations.











41







Because of our floating rate credit
facilities, we may be adversely affected by interest rate changes.



Our financial position may be affected
by fluctuations in interest rates, as our floating rate credit facilities are subject to floating interest rates. Interest rates
are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political
conditions and other factors beyond our control. If we were to borrow against our float rate credit facilities, a significant increase
in interest rates could have an adverse effect on our financial condition and results of operations.



| | ITEM 2. | Unregistered Sales of Equity Securities and Use
of Proceeds
| | ------- | -----------------------------------------------------------



None.



| | ITEM 3. | Defaults
Upon Senior Securities
| | ------- | -------------------------------



None.



| | ITEM 4. | Mine Safety Disclosures
| | ------- | -----------------------



None.



| | ITEM 5. | Other Information
| | ------- | -----------------



Compensation Change – Chief Financial
Officer



Salary compensation for our Chief Financial
Officer, Virland A. Johnson will change from $180,000 per year to $125,000 per year effective with this 10-Q filing. The Compensation
Committee of the Board of Directors has approved of this change in compensation for Mr. Johnson.









42







| | ITEM 6. | EXHIBITS
| | ------- | --------



The following exhibits are being filed
herewith:





|Exhibit Number |  | Description                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|31.2           |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1           |  | Section 1350 Certification of the Principal Executive Officer                                         
|32.2           |  | Section 1350 Certification of the Principal Financial Officer                                         
|101.INS        |  | XBRL Instance Document *                                                                              
|101.SCH        |  | XBRL Schema Document *                                                                                
|101.CAL        |  | XBRL Calculation Linkbase Document *                                                                  
|101.DEF        |  | XBRL Definition Linkbase Document *                                                                   
|101.LAB        |  | XBRL Label Linkbase Document *                                                                        
|101.PRE        |  | XBRL Presentation Linkbase Document *                                                                 



* To be filed by amendment













43







SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





|                       | Live Ventures Incorporated
|---------------------- | --------------------------
|                       |                           
|Dated: August 10, 2017 | By:                       
|                       |                           
|                       |                           
|                       |                           
|Dated: August 10, 2017 |                           
|                       |                           
|                       |                           





















44