Florida
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98-0534701
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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2400 North Dallas Parkway, Suite 230, Plano, Texas
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75093
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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PART I.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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(Unaudited)
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June 30,
2015 |
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December 31,
2014 |
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Assets
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Current assets:
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Cash and cash equivalents
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$
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6,436
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$
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2,606
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Marketable securities, at fair value
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5,967
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991
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Accounts receivable, net
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3,966
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450
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Inventory, net
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20,289
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14,759
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Other current assets
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3,373
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2,482
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Total current assets
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40,031
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21,288
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Restricted cash
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3,027
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—
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Sale leaseback security deposit
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4,414
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4,414
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Property, plant and equipment, net
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8,429
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8,191
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Leased property, net
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14,834
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15,361
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Goodwill
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5,246
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4,095
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Intangibles, net
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3,458
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3,558
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Other assets
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353
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400
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Total assets
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$
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79,792
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$
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57,307
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Liabilities and stockholders' equity
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Current liabilities:
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Accounts payable
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$
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12,515
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$
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8,436
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Related party payables, net
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635
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127
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Lines of credit
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99
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105
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Accrued commissions
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4,056
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3,319
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Accrued liabilities
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8,316
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4,612
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Deferred revenue
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2,490
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2,982
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Current portion of long-term debt
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949
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974
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Accrued taxes payable
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3,842
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2,693
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Other current liabilities
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3,027
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1,404
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Total current liabilities
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35,929
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24,652
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Long-term debt, net of current portion
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7,015
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4,316
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Lease liability, net of current portion
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15,765
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15,774
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Other long-term liabilities
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2,353
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3,582
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Total liabilities
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61,062
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48,324
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Commitments & contingencies (Note 9)
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Stockholders' equity:
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Preferred stock, par value $0.001 per share, 500,000 authorized
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—
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—
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Common stock, par value $0.0001 per share, 250,000,000 shares authorized; 34,367,095 and 27,599,012 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively
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4
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3
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Additional paid-in capital
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55,468
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37,097
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Accumulated other comprehensive income
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174
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321
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Accumulated deficit
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(38,730
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)
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(32,159
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)
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Total stockholders' equity attributable to CVSL Inc.
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16,916
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5,262
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Stockholders' equity attributable to non-controlling interest
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1,814
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3,721
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Total stockholders' equity
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18,730
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8,983
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Total liabilities and stockholders' equity
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$
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79,792
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$
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57,307
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2015
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2014
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2015
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2014
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Revenue
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$
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35,742
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$
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24,586
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$
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54,961
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$
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51,257
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Program costs and discounts
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(2,998
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)
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(5,220
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)
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(5,160
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)
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(10,196
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)
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Net revenue
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32,744
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19,366
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49,801
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41,061
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Costs of sales
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10,955
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5,863
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16,365
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13,879
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Gross profit
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21,789
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13,503
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33,436
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27,182
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Commissions and incentives
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12,612
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6,005
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18,480
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12,978
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Gain on sale of assets
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(40
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)
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(141
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)
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(83
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)
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(407
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)
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Selling, general and administrative
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10,829
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11,301
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20,269
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20,389
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Depreciation and amortization
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678
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445
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1,308
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1,066
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Impairment of goodwill
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192
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—
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192
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—
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Operating loss
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(2,482
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)
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(4,107
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)
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(6,730
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)
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(6,844
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)
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Loss on marketable securities
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—
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58
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7
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552
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Interest expense, net
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745
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213
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1,341
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|
479
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Loss from operations before income tax provision
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(3,227
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)
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(4,378
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)
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(8,078
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)
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(7,875
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)
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Income tax provision
|
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192
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|
213
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|
|
386
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|
492
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|
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Net loss
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(3,419
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)
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(4,591
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)
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(8,464
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)
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(8,367
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)
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Net loss attributable to non-controlling interest
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1,726
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1,046
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1,892
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1,686
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Net loss attributable to CVSL Inc.
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$
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(1,693
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)
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$
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(3,545
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)
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$
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(6,572
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)
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$
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(6,681
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)
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Basic and diluted loss per share:
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Weighted average common shares outstanding
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34,367,095
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24,400,893
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32,017,582
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24,403,486
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Loss per common share attributable to common stockholders, basic and diluted
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$
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(0.05
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)
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$
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(0.15
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)
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$
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(0.21
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)
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$
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(0.27
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)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net loss
|
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$
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(3,419
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)
|
|
$
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(4,591
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)
|
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$
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(8,464
|
)
|
|
$
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(8,367
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)
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Other comprehensive gain, net of tax:
|
|
|
|
|
|
|
|
|
|
|
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Unrealized gain on marketable securities
|
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—
|
|
|
184
|
|
|
7
|
|
|
653
|
|
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Foreign currency translation adjustment gain (loss)
|
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(463
|
)
|
|
44
|
|
|
(153
|
)
|
|
34
|
|
||||
Other comprehensive gain (loss)
|
|
(463
|
)
|
|
228
|
|
|
(146
|
)
|
|
687
|
|
||||
Comprehensive loss
|
|
$
|
(3,882
|
)
|
|
$
|
(4,363
|
)
|
|
$
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(8,610
|
)
|
|
$
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(7,680
|
)
|
Comprehensive loss attributable to non-controlling interests
|
|
1,726
|
|
|
1,046
|
|
|
1,892
|
|
|
1,686
|
|
||||
Comprehensive loss attributable to CVSL Inc.
|
|
(2,156
|
)
|
|
(3,317
|
)
|
|
(6,718
|
)
|
|
(5,994
|
)
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2015
|
|
2014
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(8,464
|
)
|
|
$
|
(8,367
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities net of effect of acquisitions
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
1,308
|
|
|
1,224
|
|
||
(Gain) Loss on marketable securities
|
|
7
|
|
|
552
|
|
||
Interest expense
|
|
—
|
|
|
400
|
|
||
Share-based compensation
|
|
(1,197
|
)
|
|
398
|
|
||
Provision for doubtful accounts
|
|
220
|
|
|
140
|
|
||
Provision for obsolete inventory
|
|
—
|
|
|
41
|
|
||
Gain on sales of assets
|
|
(83
|
)
|
|
(407
|
)
|
||
Deferred income tax
|
|
73
|
|
|
89
|
|
||
Goodwill impairment
|
|
192
|
|
|
—
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
|
|
|||
Accounts receivable
|
|
(748
|
)
|
|
(136
|
)
|
||
Inventory
|
|
754
|
|
|
1,182
|
|
||
Other current assets
|
|
5
|
|
|
(161
|
)
|
||
Accounts payable
|
|
522
|
|
|
(168
|
)
|
||
Related party payables, net
|
|
507
|
|
|
(277
|
)
|
||
Accrued commissions
|
|
737
|
|
|
666
|
|
||
Accrued liabilities
|
|
3,704
|
|
|
(100
|
)
|
||
Deferred revenue
|
|
(491
|
)
|
|
1,289
|
|
||
Taxes payable
|
|
1,077
|
|
|
811
|
|
||
Other liabilities
|
|
(3,798
|
)
|
|
(2,187
|
)
|
||
Net cash used in operating activities
|
|
(5,675
|
)
|
|
(5,011
|
)
|
||
Investing activities:
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(407
|
)
|
|
(645
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
187
|
|
|
1,831
|
|
||
Purchase of investments available for sale
|
|
(18,876
|
)
|
|
—
|
|
||
Sale of marketable securities
|
|
13,900
|
|
|
6,238
|
|
||
Proceeds from note receivable
|
|
1
|
|
|
—
|
|
||
Acquisitions, net of cash purchased
|
|
(3,137
|
)
|
|
2
|
|
||
Net cash (used in) provided by investing activities
|
|
(8,332
|
)
|
|
7,426
|
|
||
Financing activities:
|
|
|
|
|
|
|
||
Borrowings on long-term debt and revolving credit facility
|
|
3,137
|
|
|
42
|
|
||
Payments on debt
|
|
(477
|
)
|
|
(2,662
|
)
|
||
Stock issuances
|
|
18,357
|
|
|
—
|
|
||
Cash held as collateral
|
|
(3,027
|
)
|
|
—
|
|
||
Net cash (used in) provided by financing activities
|
|
17,990
|
|
|
(2,620
|
)
|
||
Effect of exchange rate changes on cash
|
|
(153
|
)
|
|
505
|
|
||
Increase in cash
|
|
3,830
|
|
|
300
|
|
||
Cash and cash equivalents at beginning of period
|
|
2,606
|
|
|
3,877
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
6,436
|
|
|
$
|
4,177
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||
Cash paid during the period for:
|
|
|
|
|
|
|
||
Interest
|
|
$
|
595
|
|
|
130
|
|
|
Income taxes
|
|
—
|
|
|
517
|
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Share based liability
|
|
$
|
25
|
|
|
$
|
1,222
|
|
|
|
Three Months Ended June 30, 2015
|
|
Six Months Ended June 30, 2015
|
||||
Change in fair value of liability
|
|
$
|
(37
|
)
|
|
$
|
(1,197
|
)
|
Subsidiary
|
|
Functional Currency
|
|
Reporting Currency
|
The Longaberger Company
|
|
USD
|
|
USD
|
Uppercase Acquisition, Inc.
|
|
USD
|
|
USD
|
CVSL TBT LLC
|
|
USD
|
|
USD
|
My Secret Kitchen, Ltd.
|
|
GBP
|
|
USD
|
Your Inspiration At Home Pty Ltd.
|
|
AUD
|
|
USD
|
Paperly, Inc.
|
|
USD
|
|
USD
|
Happenings Communications Group, Inc.
|
|
USD
|
|
USD
|
Agel Enterprises Inc.
|
|
USD
|
|
USD
|
Kleeneze Ltd.
|
|
GBP
|
|
USD
|
|
|
(in thousands)
|
||
Consideration
|
|
$
|
5,100
|
|
Amounts recognized for assets acquired and liabilities assumed:
|
|
|
||
Current assets
|
|
12,164
|
|
|
Other long-term assets
|
|
624
|
|
|
Current liabilities
|
|
9,030
|
|
|
Net assets acquired
|
|
$
|
3,758
|
|
|
|
|
||
Goodwill and intangible assets
|
|
$
|
1,342
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Operations
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
35,742
|
|
|
$
|
40,092
|
|
|
$
|
67,773
|
|
|
$
|
83,238
|
|
Net loss
|
|
(3,419
|
)
|
|
(4,049
|
)
|
|
(8,643
|
)
|
|
(7,366
|
)
|
||||
Net loss attributable to CVSL Inc.
|
|
(1,693
|
)
|
|
(3,003
|
)
|
|
(6,751
|
)
|
|
(5,680
|
)
|
||||
Loss per common share attributable to CVSL Inc., basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.23
|
)
|
•
|
Losses were incurred as a result of the write down of intercompany receivables in the amount of
$33.1 million
that were forgiven prior to and in accordance with the transaction. As these losses were direct and one-time events related specifically to the acquisition, we have excluded these items from the pro-forma financials above;
|
•
|
The pro-forma results above exclude
$113,000
in transaction costs.
|
|
|
Three Months Ended June 30, 2015
|
|
Six Months Ended June 30, 2015
|
||||
Revenues
|
|
$
|
13,116
|
|
|
$
|
13,485
|
|
|
|
|
|
|
||||
Net income (loss), net of intercompany items
|
|
$
|
22
|
|
|
$
|
(258
|
)
|
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
Raw material and supplies
|
|
$
|
3,083
|
|
|
$
|
3,052
|
|
Work in process
|
|
479
|
|
|
931
|
|
||
Finished goods
|
|
21,078
|
|
|
14,852
|
|
||
|
|
24,640
|
|
|
18,835
|
|
||
Inventory reserve
|
|
(4,351
|
)
|
|
(4,076
|
)
|
||
|
|
|
|
|
||||
Inventory, net
|
|
$
|
20,289
|
|
|
$
|
14,759
|
|
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
Land and improvements
|
|
$
|
499
|
|
|
$
|
699
|
|
Buildings and improvements
|
|
6,423
|
|
|
6,351
|
|
||
Equipment
|
|
3,939
|
|
|
2,978
|
|
||
Construction in progress
|
|
—
|
|
|
10
|
|
||
|
|
10,861
|
|
|
10,038
|
|
||
Less accumulated depreciation
|
|
(2,432
|
)
|
|
(1,847
|
)
|
||
Property, plant and equipment, net
|
|
$
|
8,429
|
|
|
$
|
8,191
|
|
Description
|
|
Interest
rate |
|
June 30,
2015 |
|
December 31, 2014
|
|||||
Senior secured debt – HSBC Bank PLC
|
|
1.10
|
%
|
|
$
|
3,143
|
|
|
$
|
—
|
|
Promissory note—Payable to Former Shareholder of TLC
|
|
2.63
|
%
|
|
3,189
|
|
|
3,373
|
|
||
Promissory note—Lega Enterprises, LLC (formerly Agel Enterprises, LLC)
|
|
5.00
|
%
|
|
1,180
|
|
|
1,375
|
|
||
Other miscellaneous notes
|
|
4.00
|
%
|
|
417
|
|
|
516
|
|
||
Capital lease obligation
|
|
14.00
|
%
|
|
15,800
|
|
|
15,800
|
|
||
Total debt
|
|
|
|
|
23,729
|
|
|
21,064
|
|
||
Less current maturities
|
|
|
|
|
(949
|
)
|
|
(974
|
)
|
||
Long-term debt and other financing arrangements, net of current maturities
|
|
|
|
|
$
|
22,780
|
|
|
$
|
20,090
|
|
|
|
Foreign
Currency
Translation
|
|
Unrealized Gain
(Loss) on
Available-for-
Sale Securities
|
|
Total
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||
Balance at December 31, 2014
|
|
$
|
128
|
|
|
$
|
192
|
|
|
$
|
320
|
|
Other comprehensive income (loss) before reclassifications
|
|
(153
|
)
|
|
7
|
|
|
(146
|
)
|
|||
Amount reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net other comprehensive income (loss) at June 30, 2015
|
|
$
|
(25
|
)
|
|
$
|
199
|
|
|
$
|
174
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
(in thousands)
|
|
Gourmet Food Products
|
|
Home Décor
|
|
Nutritionals and Wellness
|
|
Publishing & Printing
|
|
Other
|
|
Consolidated
|
||||||||||||
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Revenue
|
|
$
|
4,990
|
|
|
$
|
22,372
|
|
|
$
|
7,981
|
|
|
$
|
273
|
|
|
$
|
126
|
|
|
$
|
35,742
|
|
|
Gross profit
|
|
2,025
|
|
|
13,161
|
|
|
6,358
|
|
|
179
|
|
|
66
|
|
|
21,789
|
|
||||||
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
24,271
|
|
|||||||||||
|
Loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||||
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
745
|
|
|||||||||||
|
Loss from operations before income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,227
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Revenue
|
|
$
|
1,644
|
|
|
$
|
12,437
|
|
|
$
|
9,954
|
|
|
$
|
319
|
|
|
$
|
232
|
|
|
$
|
24,586
|
|
|
Gross profit
|
|
889
|
|
|
3,730
|
|
|
8,530
|
|
|
206
|
|
|
148
|
|
|
13,503
|
|
||||||
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
17,610
|
|
|||||||||||
|
Loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|||||||||||
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|||||||||||
|
Loss from operations before income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(4,378
|
)
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
(in thousands)
|
|
Gourmet Food Products
|
|
Home Décor
|
|
Nutritionals and Wellness
|
|
Publishing & Printing
|
|
Other
|
|
Consolidated
|
||||||||||||
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Revenue
|
|
$
|
7,708
|
|
|
$
|
31,713
|
|
|
$
|
14,757
|
|
|
$
|
504
|
|
|
$
|
280
|
|
|
$
|
54,961
|
|
|
Gross profit
|
|
2,727
|
|
|
18,608
|
|
|
11,603
|
|
|
317
|
|
|
181
|
|
|
33,436
|
|
||||||
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
40,166
|
|
|||||||||||
|
Loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|||||||||||
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
1,341
|
|
|||||||||||
|
Loss from operations before income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(8,078
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Revenue
|
|
$
|
2,608
|
|
|
$
|
27,458
|
|
|
$
|
20,156
|
|
|
$
|
613
|
|
|
$
|
422
|
|
|
$
|
51,257
|
|
|
Gross profit
|
|
1,367
|
|
|
8,587
|
|
|
16,595
|
|
|
393
|
|
|
239
|
|
|
27,182
|
|
||||||
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
34,026
|
|
|||||||||||
|
Loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
552
|
|
|||||||||||
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
479
|
|
|||||||||||
|
Loss from operations before income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(7,875
|
)
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Gourmet Food Products
|
|
$
|
1,103
|
|
|
$
|
1,142
|
|
Home Décor
|
|
57,215
|
|
|
28,184
|
|
||
Nutritionals and Wellness
|
|
10,663
|
|
|
11,693
|
|
||
All other segments
|
|
10,811
|
|
|
16,288
|
|
||
Consolidated total assets
|
|
$
|
79,792
|
|
|
$
|
57,307
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount as of June 30, 2015
|
|
Weighted Average Amortization period (in years)
|
||||||
Trade name and trademarks
|
$
|
5,579
|
|
|
$
|
(2,430
|
)
|
|
$
|
3,149
|
|
|
19
|
Other intellectual property
|
363
|
|
|
(54
|
)
|
|
309
|
|
|
9
|
|||
|
$
|
5,942
|
|
|
$
|
(2,484
|
)
|
|
$
|
3,458
|
|
|
17
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount as of December 31, 2014
|
|
Weighted Average Amortization period (in years)
|
||||||
Trade name and trademarks
|
$
|
5,579
|
|
|
$
|
(2,348
|
)
|
|
$
|
3,231
|
|
|
19
|
Other intellectual property
|
363
|
|
|
(36
|
)
|
|
327
|
|
|
9
|
|||
|
$
|
5,942
|
|
|
$
|
(2,384
|
)
|
|
$
|
3,558
|
|
|
17
|
|
Amortization of Intangible Assets
|
||
2015 (remaining six months)
|
$
|
103,000
|
|
2016
|
$
|
206,000
|
|
2017
|
$
|
206,000
|
|
2018
|
$
|
206,000
|
|
2019
|
$
|
206,000
|
|
Thereafter
|
$
|
2,531,000
|
|
Business
|
|
Date of
Acquisition
|
|
Number of
Countries with
Sales Presence
|
|
Product Categories
|
The Longaberger Company
|
|
March 18, 2013
|
|
2
|
|
Home Décor
|
Your Inspiration at Home
|
|
August 22, 2013
|
|
3
|
|
Gourmet Foods and Spices
|
Project Home
|
|
October 1, 2013
|
|
1
|
|
Home Improvement and Home Security
|
Agel
|
|
October 22, 2013
|
|
40
|
|
Nutritional Supplements and Skin Care
|
My Secret Kitchen
|
|
December 20, 2013
|
|
1
|
|
Gourmet Foods and Spices
|
Paperly
|
|
December 31, 2013
|
|
1
|
|
Stationery
|
Uppercase Living
|
|
March 13, 2014
|
|
2
|
|
Home Décor
|
Kleeneze
|
|
March 24, 2015
|
|
2
|
|
Home Décor and Cleaning
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenue
|
|
$
|
35,742
|
|
|
$
|
24,586
|
|
|
$
|
54,961
|
|
|
$
|
51,257
|
|
Program costs and discounts
|
|
(2,998
|
)
|
|
(5,220
|
)
|
|
(5,160
|
)
|
|
(10,196
|
)
|
||||
Net revenue
|
|
32,744
|
|
|
19,366
|
|
|
49,801
|
|
|
41,061
|
|
||||
Costs of sales
|
|
10,955
|
|
|
5,863
|
|
|
16,365
|
|
|
13,879
|
|
||||
Gross profit
|
|
21,789
|
|
|
13,503
|
|
|
33,436
|
|
|
27,182
|
|
||||
Commissions and incentives
|
|
12,612
|
|
|
6,005
|
|
|
18,480
|
|
|
12,978
|
|
||||
Gain on sale of assets
|
|
(40
|
)
|
|
(141
|
)
|
|
(83
|
)
|
|
(407
|
)
|
||||
Selling, general and administrative
|
|
10,829
|
|
|
11,301
|
|
|
20,269
|
|
|
20,389
|
|
||||
Depreciation and amortization
|
|
678
|
|
|
445
|
|
|
1,308
|
|
|
1,066
|
|
||||
Impairment of goodwill
|
|
192
|
|
|
—
|
|
|
192
|
|
|
—
|
|
||||
Operating loss
|
|
$
|
(2,482
|
)
|
|
$
|
(4,107
|
)
|
|
$
|
(6,730
|
)
|
|
$
|
(6,844
|
)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net loss
|
|
$
|
(3,419
|
)
|
|
$
|
(4,591
|
)
|
|
$
|
(8,464
|
)
|
|
$
|
(8,367
|
)
|
Interest, net
|
|
745
|
|
|
213
|
|
|
1,341
|
|
|
479
|
|
||||
Income tax expense
|
|
192
|
|
|
213
|
|
|
386
|
|
|
492
|
|
||||
Depreciation and amortization
|
|
678
|
|
|
445
|
|
|
1,308
|
|
|
1,066
|
|
||||
EBITDA
|
|
$
|
(1,804
|
)
|
|
$
|
(3,720
|
)
|
|
$
|
(5,429
|
)
|
|
$
|
(6,330
|
)
|
Specific capital market event expense
|
|
168
|
|
|
109
|
|
|
542
|
|
|
109
|
|
||||
Specific M&A deal/diligence expense
|
|
97
|
|
|
252
|
|
|
212
|
|
|
284
|
|
||||
Adjusted EBITDA
|
|
$
|
(1,539
|
)
|
|
$
|
(3,359
|
)
|
|
$
|
(4,675
|
)
|
|
$
|
(5,937
|
)
|
M&A infrastructure expense
|
|
791
|
|
|
581
|
|
|
$
|
1,320
|
|
|
$
|
1,764
|
|
||
Adjusted Operating EBITDA
|
|
$
|
(748
|
)
|
|
$
|
(2,778
|
)
|
|
$
|
(3,355
|
)
|
|
$
|
(4,173
|
)
|
•
|
Adjusted EBITDA and Adjusted Operating EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
|
•
|
Adjusted EBITDA and Adjusted Operating EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
Adjusted EBITDA and Adjusted Operating EBITDA do not consider the potentially dilutive impact of share-based compensation;
|
•
|
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA and Adjusted Operating EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
•
|
Adjusted EBITDA and Adjusted Operating EBITDA do not reflect acquisition-related costs; and
|
•
|
Other companies, including companies in our own industry, may calculate Adjusted EBITDA and Adjusted Operating
|
|
2015
|
2016
|
2017
|
2018
|
2019
|
Thereafter
|
Total
|
||||||||||||||
Principal Payments on Debt
|
$
|
453
|
|
$
|
931
|
|
$
|
3,858
|
|
$
|
715
|
|
$
|
412
|
|
$
|
1,417
|
|
$
|
7,786
|
|
Interest Payments on Debt
|
93
|
|
159
|
|
96
|
|
61
|
|
43
|
|
63
|
|
515
|
|
|||||||
Capital Lease Obligations
|
1,137
|
|
2,307
|
|
2,377
|
|
2,448
|
|
2,521
|
|
28,282
|
|
39,072
|
|
|||||||
Operating Lease Obligations
|
763
|
|
611
|
|
493
|
|
361
|
|
349
|
|
2,238
|
|
4,815
|
|
|||||||
|
|
|
|
|
|
|
$
|
52,188
|
|
•
|
A Disclosure Committee was formed and a Committee Charter was adopted with Disclosure Controls and Procedures that were implemented this quarter.
|
•
|
Representatives from all business areas are represented on the committee and the SEC reporting manager presides over the meetings and minutes are kept to evidence the Committee’s effectiveness.
|
•
|
We continue to take strides to identify, attract and retain quality financial executives and staff members to provide improved segregation of duties and to assist in the identification and implementation of mitigating controls when optimal segregation is not be feasible for our newly formed entity.
|
•
|
We have centralized accounting at our headquarters for five of our companies.
|
•
|
We are developing and putting in place plans to critically evaluate our existing accounting processes and control environment to implement controls to enhance our overall control environment.
|
•
|
We developed and executed a new IT project management methodology which includes documented change management and ultimate user acceptance testing.
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We have migrated TLC to our new enterprise resource planning ("ERP") system which includes sophisticated accounting systems and we are migrating our other companies.
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We have aggressively streamlined our financial close process and the related financial reporting process in order to provide management with more timely accurate information and to comply with the filing deadlines for accelerated filers.
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assimilating Kleeneze’s business operations, products and personnel with our existing operations, products and personnel;
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estimating the capital, personnel and equipment required for Kleeneze’s business based on the historical experience of management;
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minimizing potential adverse effects on existing business relationships with other suppliers and customers;
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successfully developing and marketing Kleeneze’s products and services;
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entering a market in which we have limited prior experience; and
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coordinating our efforts throughout various distant localities and time zones, such as the United Kingdom where Kleeneze is based.
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interest costs and debt service requirements for any debt incurred in connection with an acquisition or new business venture; and
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any issuance of securities in connection with an acquisition or other strategic transaction which dilutes the current holders of our common stock.
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assimilating the acquired business’ operations products and personnel with our existing operations, products and personnel;
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estimating the capital, personnel and equipment required for the acquired businesses based on the historical experience of management with the businesses they are familiar with;
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minimizing potential adverse effects on existing business relationships with other suppliers and customers;
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successfully developing and marketing the new products and services;
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entering markets in which we have limited or no prior experience; and
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coordinating our efforts throughout various distant localities and time zones, such as Italy, the United Kingdom and Australia, currently.
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on-going motivation of our independent sales representatives;
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general economic conditions;
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significant changes in the amount of commissions paid;
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public perception and acceptance of the industry, our business and our products;
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our ability to provide proprietary quality-driven products that the market demands; and
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competition in recruiting and retaining independent sales representatives.
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address changing market dynamics;
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provide incentives to independent sales representatives that are intended to help grow our business;
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conform to local regulations; and
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address other business needs.
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the safety and quality of our products, components and ingredients, as applicable;
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the safety and quality of similar products, components and ingredients, as applicable, distributed by other companies’ representatives;
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our marketing program; and
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the business of direct-to-consumer companies generally.
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the possibility that a foreign government might ban or severely restrict our business method of direct selling, or that local civil unrest, political instability or changes in diplomatic or trade relationships might disrupt our operations in an international market;
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the lack of well-established or reliable legal systems in certain areas where we operate;
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the presence of high inflation in the economies of international markets in which we operate;
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the possibility that a government authority might impose legal, tax or other financial burdens on us or our sales force, due, for example, to the structure of our operations in various markets;
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the possibility that a government authority might challenge the status of our sales force as independent contractors or impose employment or social taxes on our sales force; and
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the possibility that governments may impose currency remittance restrictions limiting our ability to repatriate cash.
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A Disclosure Committee was formed and a Committee Charter was adopted with Disclosure Controls and Procedures that were implemented this quarter.
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Representatives from all business areas are represented on the committee and the SEC reporting manager presides over the meetings and minutes are kept to evidence the Committee’s effectiveness.
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We continue to take strides to identify, attract and retain quality staff members to provide improved segregation of duties and to assist in the identification and implementation of mitigating controls when optimal segregation is not be feasible for our newly formed entity.
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We have centralized accounting at our headquarters for five of our companies.
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We developed and executed a new IT project management methodology which includes documented change management and ultimate user acceptance testing.
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•
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We have migrated our largest subsidiary (prior to Kleeneze) to our new enterprise resource planning system which includes sophisticated accounting systems and we are aggressively migrating our other companies.
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•
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We have aggressively streamlined our financial close process and the related financial reporting process in order to provide management with more timely accurate information and to comply with the filing deadlines for accelerated filers.
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•
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the issuance of new equity securities, including issuances of preferred stock;
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the introduction of new products or services by us or our competitors;
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the acquisition of new direct selling businesses;
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changes in interest rates;
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significant dilution caused by the anti-dilutive clauses in our financial agreements;
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competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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variations in quarterly operating results;
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change in financial estimates by securities analysts;
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a limited amount of news and analyst coverage for our company;
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the depth and liquidity of the market for our shares of common stock;
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sales of large blocks of our common stock, including sales by Rochon Capital, any executive officers or directors appointed in the future, or by other significant shareholders;
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investor perceptions of our company and the direct selling segment generally; and
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general economic and other national and international conditions.
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CVSL Inc.
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By:
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/s/ John P. Rochon
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John P. Rochon
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Chief Executive Officer, President and Chairman
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(Principal Executive Officer)
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Date: August 13, 2015
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By:
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/s/ John Rochon, Jr.
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John Rochon , Jr .
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Chief Financial Officer (Principal Financial and Principal Accounting Officer)
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Date: August 13, 2015
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4.
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COVENANTS.
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|
COMPANY:
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CVSL INC.
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By:
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/s/ John P. Rochon
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Name: John P. Rochon
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Title: Chief Executive Officer
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|
SECURITYHOLDER:
|
|||
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Date: August 13, 2015
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By:
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/s/ JOHN ROCHON, JR.
|
|
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Name: John Rochon, Jr.
|
|
|
Title:
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Date: August 13, 2015
|
By:
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/s/ JOHN ROCHON, JR.
|
|
|
Name: John Rochon, Jr.
|
|
|
Title:
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Date: August 13, 2015
|
By:
|
/s/ JOHN ROCHON, JR.
|
|
|
Name: John Rochon, Jr.
|
|
|
Title:
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Date: August 13, 2015
|
By:
|
/s/ JOHN ROCHON, JR.
|
|
|
Name: John Rochon, Jr.
|
|
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Title:
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|