2016 Annual Report



Live Oak Endeavors, LLC 2016 Annual Report


Annual Percentage Change

12/31/2016



Live Oak Endeavors, LLC (LO) was founded in 2015 with the objective of acquiring truly unique businesses that have the ability to produce high profit margins, whether those businesses be public or private. The logic is simple: a company that generates 15% net income for its owners each year will double in value in five years. Finding companies that can consistently do such and acquiring them at fair prices takes acumen and my job as the CEO of Live Oak is to get this done.

Live Oak Endeavors, LLC (LO) gained 21.89% in net worth per share and 29.54% in fair market value per share (FMV) in 2016. While both numbers are impressive and I’m pleased with the performance, I’d like to point out the difference in the calculation of these measures. Live Oak holds interest in four private companies and certain accounting principles require we hold those positions at cost or lower. If Live Oak has a controlling interest in a company, which it does, and that company has negative performance in a year, that company must be written down in value. However, any increase in corporate value for a private company may not be reflected in the net worth of the company. Regardless of the asymmetry, these are the rules and our net worth figure reflects such.


Management realizes this method could be detrimental to investors as the private companies held by LO increase in value over time. So, we calculate a fair market value that reflects both increases and decreases in the value of assets held. We will change FMV when deemed appropriate. FMV is also the price at which we raise new funds and liquidate investors. Over time those numbers should consolidate if we value properly and I’m pleased to report that both net worth and FMV were reasonably close in annual percentage change in 2016.


Holdings


CheyTac USA --- www.cheytac.com

CheyTac is the owner and exclusive manfucturer of the legendary M200 Intervention Firearm. The rifle system along with its brother, the Model 300, are the most accurate and farthest reaching anti-material firearms in the world. CheyTac’s firearms and ammuntion are propreitary and hits with our system are being recorded at distances approaching 4,300 yards (2.5miles)!


Live Oak acquired an 18% interest in CheyTac in the fall of 2016. The remainder of the company is owned and controlled by another LLC that I manage. As is the case with most hostile takeovers, this transaction was challenging to complete and it required pulling resources from my team at Warren Capital. But we have an extremely talented group and they have delivered.


CheyTac can now produce firearms in 30 days or less and we have built inventory on our ammunition, something the company has never achieved prior. Simultaneously, we decreased the cost of goods sold substantially, which brought our gross margin to 57%. (Gross margins and net income will be a recurring theme with all our investments in Live Oak.) We moved the production facility to Charleston, S.C. So, next time you visit Live Oak’s Charleston office I invite you to come see the most capable firearm on the planet. (Bring some sound proof earmuffs and long rage binoculars.)


Custom Label --- www.customlabelbottle.com

Custom Label provides sparking and still artesian water in privately labeled glass bottles. The bottles are one liter in size with a flip top and exclusively designed for each client. The flip top promotes our sustainable program where we drop off a supply of freshly filled bottles with tamper evident seals while we pick up the used bottles. The used bottles go back to the facility, get cleaned, refilled and ready for the next delivery. When running at full scale this refilling model produces extremely high margins, which is why Live Oak took interest in the company.


2016 was a year of foundation building for Custom Label. We secured a bottling relationship with one of the most select water sources in the country, which is located in Virginia. Distribution arrangements were established with two premier distributors in Washington, D.C., and Charleston, S.C., and those are the primary markets serviced at this time. Clients were secured in both markets and the Custom Label team is actively pursuing many more relationships. Live Oak held 189,900 shares of Custom Label at year’s end.


Rate Reset --- www.ratereset.com

Rate Reset provides loan acquisition, retention and reset software for financial institutions and 2016 was a banner year for the company. Dozens of financial institutions signed and implemented the services and over 7,000 clients of those institutions used Rate Reset’s software to eliminate the refinance process. It also developed pre-approval software for credit cards, auto loans, personal loans, home equity and CD renewals. The end result was that the company increased revenue by nearly 1,000% and ended the year with its highest level of net income in its history. It also issued a company stock buyback, which results in Live Oak owning more of the company. I expect that LO will receive a dividend payment from Rate Reset this year. LO held 38,000 shares of Rate Reset at year end.


Sweetgreen ---- www.sweetgreen.com

Sweetgreen provides simple, seasonal, healthy salads and grain bowls made from produce delivered each morning. Its formula is very effective and the company is turning into a powerhouse. They opened 24 stores in 2016 and ended this year with 63 locations in eight states. Most impressively its average unit volume is one of the highest in the quick service industry as they dominate the likes of Starbucks, Wendy’s and Chipotle. The beauty of the Sweetgreen model is that it’s done with much less square footage and its principle ingredient – salad – is inexpensive to supply. Hence, it has the highest 4-wall earnings in the industry.

I’ve had exposure through other investments to Sweetgreen for almost a decade. It’s grown from two D.C., locations to the preeminent salad chain in North America. I anticipate the company will achieve $250 million in sales by 2018 and evaluate its options at that time. Given Sweetgreen’s sales growth and emphasis on producing solid earnings, it has the flexibility to go in several directions. Live Oak will continue to benefit from this success as the company holds 68,592 shares.


In Summary


2016 was a hallmark year for Live Oak, for myself and for my Warren Capital team that helps me manage Live Oak. We’ve done everything from pushing loan resets to building thousands of rounds of precision ammo by hand. We can tell you the PH balance of artesian water, the steepness of the yield curve, the calorie count of a portabella taco bowl (650 calories), and the powder load on a .408 round. Not to boast, but our team has skills! The good news for Live Oak investors is that this effort produced tangible results. All told, our four private companies grew sales from $66 million to $128 million last year. They also did such while watching the bottom line, which is what really matters to us as investors. As shareholders, we are entitled to the profits of our holdings and those profits are starting to pay dividends.


I see each investor as my partner in Live Oak and I hope that you do the same. Live Oak has been open for less than two years and our 15 investment partners have accomplished much. But collectively, we can do more. Visit the websites of our companies and do your own analysis. Then tell the world about our product lines. Your friends will thank you for referring them to our businesses and we all will benefit.


Thank you for the continued trust and confidence.

Joe Warren

CEO

Live Oak Endeavors, LLC

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