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ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
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For the fiscal period ended June 30, 2016
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or
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from to
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Florida
(State or other jurisdiction of
incorporation or organization)
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98-0534701
(I.R.S Employer
Identification No.)
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2950 North Harwood Street, 22nd Floor, Dallas, Texas
(Address of principal executive offices)
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75201
(Zip Code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a
smaller reporting company)
|
Smaller reporting company
x
|
|
|
|
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Item 1.
|
|
|
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||
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Item 2.
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Item 3.
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Item 4.
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||
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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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||
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Index to Exhibits
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(in thousands, except share and per share data)
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June 30, 2016
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December 31, 2015
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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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2,196
|
|
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$
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6,482
|
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Marketable securities
|
|
1,247
|
|
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5,306
|
|
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Accounts receivable, net
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5,036
|
|
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4,828
|
|
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Inventory, net
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19,310
|
|
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20,799
|
|
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Other current assets
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4,235
|
|
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2,303
|
|
||
Total current assets
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32,024
|
|
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39,718
|
|
||
Assets held for sale
|
|
998
|
|
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1,111
|
|
||
Restricted cash
|
|
—
|
|
|
2,857
|
|
||
Sale leaseback security deposit
|
|
4,414
|
|
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4,414
|
|
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Property, plant and equipment, net
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|
4,687
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|
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5,387
|
|
||
Property under capital leases, net
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|
14,053
|
|
|
14,654
|
|
||
Goodwill
|
|
5,146
|
|
|
5,427
|
|
||
Intangibles, net
|
|
8,088
|
|
|
8,801
|
|
||
Other assets
|
|
37
|
|
|
135
|
|
||
Total assets
|
|
$
|
69,447
|
|
|
$
|
82,504
|
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Liabilities and stockholders’ equity
|
|
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
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$
|
15,144
|
|
|
$
|
15,937
|
|
Related party payables
|
|
1,799
|
|
|
1,605
|
|
||
Accrued commissions
|
|
4,314
|
|
|
3,033
|
|
||
Accrued liabilities
|
|
8,397
|
|
|
7,303
|
|
||
Deferred revenue
|
|
2,879
|
|
|
2,307
|
|
||
Taxes payable
|
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5,444
|
|
|
4,830
|
|
||
Current portion of long-term debt
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8,627
|
|
|
3,048
|
|
||
Other current liabilities
|
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857
|
|
|
777
|
|
||
Total current liabilities
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47,461
|
|
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38,840
|
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Deferred tax liability
|
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780
|
|
|
744
|
|
||
Long-term debt, less current portion
|
|
6,077
|
|
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12,784
|
|
||
Capital lease obligation, less current portion
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16,057
|
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16,332
|
|
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Other long-term liabilities
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2,870
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|
|
2,864
|
|
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Total liabilities
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73,245
|
|
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71,564
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|
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Commitments and contingencies (Note 12)
|
|
|
|
|
|
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Stockholders’ equity:
|
|
|
|
|
|
|
||
Preferred stock, par value $0.001 per share, 500,000 authorized; -0-issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, par value $0.0001 per share, 250,000,000 shares authorized; 35,993,324 and 35,718,279 shares issued and outstanding, at June 30, 2016 and at December 31, 2015 respectively
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4
|
|
|
4
|
|
||
Additional paid-in capital
|
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59,166
|
|
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58,837
|
|
||
Accumulated other comprehensive loss
|
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(2,056
|
)
|
|
(586
|
)
|
||
Accumulated deficit
|
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(56,642
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)
|
|
(45,255
|
)
|
||
Total stockholders’ equity attributable to JRjr33, Inc.
|
|
472
|
|
|
13,000
|
|
||
Stockholders’ equity attributable to noncontrolling interest
|
|
(4,270
|
)
|
|
(2,060
|
)
|
||
Total stockholders’ equity
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(3,798
|
)
|
|
10,940
|
|
||
Total liabilities and stockholders’ equity
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|
$
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69,447
|
|
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$
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82,504
|
|
|
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in thousands, except share and per common share data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenue
|
|
$
|
36,414
|
|
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$
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36,028
|
|
|
$
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72,489
|
|
|
$
|
55,906
|
|
Program costs and discounts
|
|
(6,292
|
)
|
|
(5,553
|
)
|
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(12,194
|
)
|
|
(8,124
|
)
|
||||
Net revenues
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|
30,122
|
|
|
30,475
|
|
|
60,295
|
|
|
47,782
|
|
||||
Costs of sales
|
|
9,274
|
|
|
9,468
|
|
|
19,726
|
|
|
14,658
|
|
||||
Gross profit
|
|
20,848
|
|
|
21,007
|
|
|
40,569
|
|
|
33,124
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|
||||
Distributor expense
|
|
9,224
|
|
|
9,269
|
|
|
18,656
|
|
|
15,769
|
|
||||
Selling expense
|
|
4,729
|
|
|
4,299
|
|
|
9,251
|
|
|
6,609
|
|
||||
General and administrative expense
|
|
10,726
|
|
|
10,103
|
|
|
22,499
|
|
|
18,536
|
|
||||
Share based compensation expense
|
|
49
|
|
|
(30
|
)
|
|
50
|
|
|
(1,197
|
)
|
||||
Depreciation and amortization
|
|
696
|
|
|
492
|
|
|
1,368
|
|
|
771
|
|
||||
Gain on sale of assets
|
|
(70
|
)
|
|
(40
|
)
|
|
(112
|
)
|
|
(83
|
)
|
||||
Impairment of goodwill
|
|
—
|
|
|
192
|
|
|
191
|
|
|
192
|
|
||||
Operating loss
|
|
(4,506
|
)
|
|
(3,278
|
)
|
|
(11,334
|
)
|
|
(7,473
|
)
|
||||
Gain on sale of marketable securities
|
|
(7
|
)
|
|
—
|
|
|
(9
|
)
|
|
(192
|
)
|
||||
Interest expense, net
|
|
1,037
|
|
|
565
|
|
|
1,868
|
|
|
1,164
|
|
||||
Loss before income tax provision
|
|
(5,536
|
)
|
|
(3,843
|
)
|
|
(13,193
|
)
|
|
(8,445
|
)
|
||||
Income tax provision
|
|
334
|
|
|
195
|
|
|
410
|
|
|
386
|
|
||||
Net loss
|
|
(5,870
|
)
|
|
(4,038
|
)
|
|
(13,603
|
)
|
|
(8,831
|
)
|
||||
Net loss attributable to non-controlling interest
|
|
1,253
|
|
|
1,016
|
|
|
2,216
|
|
|
1,686
|
|
||||
Net loss attributable to JRjr33, Inc.
|
|
$
|
(4,617
|
)
|
|
$
|
(3,022
|
)
|
|
$
|
(11,387
|
)
|
|
$
|
(7,145
|
)
|
Basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
35,892,137
|
|
|
34,367,095
|
|
|
35,912,156
|
|
|
32,017,582
|
|
||||
Loss per common share attributable to JRjr33, Inc., basic and diluted
|
|
$
|
(0.13
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.22
|
)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss before allocation to non-controlling interests
|
|
$
|
(5,870
|
)
|
|
$
|
(4,038
|
)
|
|
$
|
(13,603
|
)
|
|
$
|
(8,831
|
)
|
Other comprehensive gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustment gain
|
|
(1,515
|
)
|
|
(266
|
)
|
|
(1,469
|
)
|
|
(92
|
)
|
||||
Unrealized gain (loss) on marketable securities
|
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gain arising during the period
|
|
2
|
|
|
—
|
|
|
5
|
|
|
7
|
|
||||
Reclassification of other comprehensive income included in net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(199
|
)
|
||||
Other comprehensive gain (loss) before allocation to non-controlling interests
|
|
(1,513
|
)
|
|
(266
|
)
|
|
(1,464
|
)
|
|
(284
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive loss before allocation to non-controlling interests
|
|
$
|
(7,383
|
)
|
|
$
|
(4,304
|
)
|
|
$
|
(15,067
|
)
|
|
$
|
(9,115
|
)
|
Less: Comprehensive loss attributable to non-controlling interests
|
|
1,253
|
|
|
1,016
|
|
|
2,216
|
|
|
1,686
|
|
||||
Comprehensive loss attributable to JRjr33, Inc.
|
|
$
|
(6,130
|
)
|
|
$
|
(3,288
|
)
|
|
$
|
(12,851
|
)
|
|
$
|
(7,429
|
)
|
|
|
Six Months Ended
June 30, |
||||||
(in thousands)
|
|
2016
|
|
2015
|
||||
Operating activities:
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(13,603
|
)
|
|
$
|
(8,831
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities, net of effect of business acquisitions:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
1,650
|
|
|
1,053
|
|
||
Gain on sale of marketable securities
|
|
(9
|
)
|
|
(192
|
)
|
||
Share based compensation expense
|
|
50
|
|
|
(1,197
|
)
|
||
Non-cash compensation
|
|
782
|
|
|
201
|
|
||
Provision for doubtful accounts
|
|
551
|
|
|
331
|
|
||
Gain on sale of assets
|
|
(112
|
)
|
|
(83
|
)
|
||
Deferred income tax
|
|
69
|
|
|
73
|
|
||
Impairment of goodwill
|
|
191
|
|
|
192
|
|
||
Amortization of debt discount
|
|
383
|
|
|
—
|
|
||
Deferred rent amortization
|
|
104
|
|
|
—
|
|
||
Forgiveness of receivable
|
|
174
|
|
|
—
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
(533
|
)
|
|
(1,034
|
)
|
||
Inventory
|
|
823
|
|
|
1,000
|
|
||
Other current assets
|
|
587
|
|
|
628
|
|
||
Accounts payable
|
|
(389
|
)
|
|
(1,139
|
)
|
||
Related party payables
|
|
194
|
|
|
1,268
|
|
||
Accrued commissions
|
|
1,364
|
|
|
863
|
|
||
Accrued liabilities
|
|
538
|
|
|
2,002
|
|
||
Deferred revenue
|
|
574
|
|
|
(468
|
)
|
||
Taxes payable
|
|
764
|
|
|
(618
|
)
|
||
Other liabilities
|
|
(6
|
)
|
|
(450
|
)
|
||
Net cash used in operating activities
|
|
(5,854
|
)
|
|
(6,401
|
)
|
||
Investing activities:
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(61
|
)
|
|
(332
|
)
|
||
Proceeds from the sale of property, plant and equipment
|
|
141
|
|
|
60
|
|
||
Purchases of marketable securities
|
|
—
|
|
|
(18,876
|
)
|
||
Proceeds from sales of marketable securities
|
|
4,073
|
|
|
13,901
|
|
||
Proceeds from note receivable
|
|
—
|
|
|
2
|
|
||
Deposit of restricted cash collateral
|
|
—
|
|
|
(2,931
|
)
|
||
Acquisitions, net of cash purchased
|
|
—
|
|
|
(3,135
|
)
|
||
Net cash (used in) provided by investing activities
|
|
4,153
|
|
|
(11,311
|
)
|
||
Financing activities:
|
|
|
|
|
|
|
||
Borrowings on long-term debt
|
|
—
|
|
|
3,051
|
|
||
Payments on long-term debt
|
|
(941
|
)
|
|
(471
|
)
|
||
Stock issuances
|
|
274
|
|
|
18,434
|
|
||
Net cash (used in) provided by financing activities
|
|
(667
|
)
|
|
21,014
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(1,918
|
)
|
|
(195
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
|
(4,286
|
)
|
|
3,107
|
|
||
Cash and cash equivalents at beginning of period
|
|
6,482
|
|
|
2,606
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
2,196
|
|
|
$
|
5,713
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||
Cash paid during the period for:
|
|
|
|
|
|
|
||
Interest
|
|
$
|
1,858
|
|
|
$
|
1,164
|
|
Income taxes
|
|
342
|
|
|
313
|
|
||
Non-cash transactions:
|
|
|
|
|
|
|
||
Stock issued related to expenses
|
|
274
|
|
|
—
|
|
•
|
The Company is seeking to renegotiate and potentially refinance existing debt.
|
•
|
The Company is seeking investment capital.
|
•
|
The Company is aggressively targeting new distributors and looking to expand into new markets with our more successful companies.
|
•
|
The Company is seeking to reduce excess inventory to improve working capital.
|
Buildings
|
7 to 40 years
|
Land improvements
|
3 to 25 years
|
Leasehold improvements
|
3 to 15 years
|
Equipment
|
3 to 25 years
|
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
|
Betterware Ltd.
|
|
GBP
|
|
USD
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
June 30, 2015
|
|
June 30, 2015
|
||||
Revenue
|
$
|
46,062
|
|
|
$
|
90,479
|
|
Net loss
|
(4,209
|
)
|
|
(9,042
|
)
|
||
Net loss attributable to JRjr33, Inc.
|
(3,193
|
)
|
|
(7,356
|
)
|
||
Loss per common share attributable to JRjr33, Inc., basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.23
|
)
|
•
|
Losses were incurred by Kleeneze as a result of the write down of inter-company 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, the Company has excluded these items from the pro-forma results above; and
|
•
|
The pro-forma results above exclude transaction costs related to the
two
acquisitions that were expensed in
2015
.
|
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Balance at December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Mutual Funds
|
$
|
5,312
|
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
5,306
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at June 30, 2016
|
|
|
|
|
|
|
|
||||||||
Mutual Funds
|
$
|
1,248
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
1,247
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Raw material and supplies
|
$
|
2,496
|
|
|
$
|
3,165
|
|
Work in process
|
376
|
|
|
221
|
|
||
Finished goods
|
18,770
|
|
|
20,164
|
|
||
Inventory, gross
|
21,642
|
|
|
23,550
|
|
||
Inventory reserve
|
(2,332
|
)
|
|
(2,751
|
)
|
||
Inventory, net
|
$
|
19,310
|
|
|
$
|
20,799
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Balance as of beginning of period
|
$
|
1,111
|
|
|
$
|
—
|
|
Additions to held for sale
|
—
|
|
|
4,440
|
|
||
Realized gains (losses)
|
—
|
|
|
—
|
|
||
Impairment charge
|
—
|
|
|
(3,329
|
)
|
||
Sales and settlements, net
|
(113
|
)
|
|
—
|
|
||
Balance as of end of period
|
$
|
998
|
|
|
$
|
1,111
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Land and improvements
|
$
|
109
|
|
|
$
|
109
|
|
Buildings and improvements
|
2,473
|
|
|
2,472
|
|
||
Equipment
|
4,944
|
|
|
5,070
|
|
||
Construction in progress
|
10
|
|
|
—
|
|
||
Property, plant and equipment, gross
|
7,536
|
|
|
7,651
|
|
||
Less accumulated depreciation
|
(2,849
|
)
|
|
(2,264
|
)
|
||
Property, plant and equipment, net
|
$
|
4,687
|
|
|
$
|
5,387
|
|
Identifiable Intangible Assets
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount as of
June 30, 2016
|
|
Weighted Average Amortization Period (in Years)
|
|||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|||||||
Trade name and trademarks
|
$
|
5,447
|
|
|
$
|
—
|
|
|
$
|
5,447
|
|
|
—
|
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|||||||
Trade name and trademarks
|
3
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|||
Intellectual property
|
3,326
|
|
|
(685
|
)
|
|
2,641
|
|
|
4
|
|
|||
|
$
|
8,776
|
|
|
$
|
(688
|
)
|
|
$
|
8,088
|
|
|
4
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount as of
December 31, 2015
|
|
Weighted Average Amortization Period (in Years)
|
|||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|||||||
Trade name and trademarks
|
$
|
5,614
|
|
|
$
|
—
|
|
|
$
|
5,614
|
|
|
—
|
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Trade name and trademarks
|
3
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|||
Intellectual property
|
3,534
|
|
|
(347
|
)
|
|
3,187
|
|
|
4
|
|
|||
|
$
|
9,151
|
|
|
$
|
(350
|
)
|
|
$
|
8,801
|
|
|
4
|
|
2016 (remaining portion)
|
$
|
357
|
|
2017
|
714
|
|
|
2018
|
714
|
|
|
2019
|
642
|
|
|
2020
|
97
|
|
|
Thereafter
|
117
|
|
|
Total amortization of intangible assets
|
$
|
2,641
|
|
Description
|
|
Interest rate
|
|
June 30, 2016
|
|
December 31, 2015
|
|||||
Convertible note—Dominion Capital
|
|
9.75
|
%
|
|
$
|
3,800
|
|
|
$
|
4,000
|
|
Unamortized debt discount, costs and fees of issuance—Dominion Capital
|
|
|
|
(633
|
)
|
|
(1,016
|
)
|
|||
Convertible notes—payable to former shareholders of Stanley House
|
|
2.00
|
%
|
|
4,856
|
|
|
5,502
|
|
||
Senior secured debt—HSBC Bank PLC
|
|
1.10
|
%
|
|
2,781
|
|
|
2,984
|
|
||
Promissory note—payable to former shareholder of TLC
|
|
2.63
|
%
|
|
2,813
|
|
|
3,003
|
|
||
Promissory note—Lega Enterprises, LLC (formerly Agel Enterprises, LLC)
|
|
5.00
|
%
|
|
874
|
|
|
1,043
|
|
||
Other miscellaneous notes
|
|
4.00
|
%
|
|
213
|
|
|
316
|
|
||
Total debt
|
|
|
|
|
14,704
|
|
|
15,832
|
|
||
Less current maturities
|
|
|
|
|
(8,627
|
)
|
|
(3,048
|
)
|
||
Long-term debt
|
|
|
|
|
$
|
6,077
|
|
|
$
|
12,784
|
|
2016 (remaining portion)
|
$
|
1,923
|
|
2017
|
8,619
|
|
|
2018
|
2,333
|
|
|
2019
|
412
|
|
|
2020
|
423
|
|
|
Thereafter
|
994
|
|
|
Total long-term debt including current maturities
|
$
|
14,704
|
|
2016 (remaining portion)
|
$
|
733
|
|
2017
|
1,523
|
|
|
2018
|
1,524
|
|
|
2019
|
1,520
|
|
|
2020
|
1,191
|
|
|
Thereafter
|
8,487
|
|
|
Total non-cancelable leases
|
$
|
14,978
|
|
2016, remaining portion
|
$
|
1,299
|
|
2017
|
2,566
|
|
|
2018
|
2,617
|
|
|
2019
|
2,651
|
|
|
2020
|
2,633
|
|
|
Thereafter
|
25,700
|
|
|
Total minimum lease payments
|
37,466
|
|
|
Less amount representing interest
|
(21,125
|
)
|
|
Present value of minimum lease payments
|
$
|
16,341
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Recorded Amount
|
|
|
|
||||
Long-term debt, including current portion
|
$
|
14,704
|
|
|
$
|
15,832
|
|
Capital leases, including current portion
|
16,341
|
|
|
16,529
|
|
||
Total debt and capital lease commitments
|
$
|
31,045
|
|
|
32,361
|
|
|
|
|
|
|
||||
Fair Value
|
|
|
|
||||
Long-term debt, including current portion
|
$
|
13,676
|
|
|
$
|
14,024
|
|
Capital leases, including current portion
|
$
|
10,385
|
|
|
$
|
10,040
|
|
Total debt and capital lease commitments
|
$
|
24,061
|
|
|
$
|
24,064
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Stock Options
|
|
|
|
||||
Weighted average expected volatility
|
103
|
%
|
|
92
|
%
|
||
Weighted Average Term (in years)
|
10
|
|
|
10
|
|
||
Risk-free interest rate
|
2
|
%
|
|
2
|
%
|
||
Weighted average forfeiture rate
|
41
|
%
|
|
—
|
%
|
||
Weighted average fair value at date of grant
|
$
|
0.63
|
|
|
$
|
1.08
|
|
|
|
|
|
||||
Warrants
|
|
|
|
||||
Weighted average expected volatility
|
|
|
|
69
|
%
|
||
Weighted Average Term (in years)
|
|
|
|
2
|
|
||
Risk-free interest rate
|
|
|
|
2
|
%
|
||
Weighted average fair value at date of grant
|
|
|
|
$
|
1.24
|
|
|
|
|
Weighted Average
|
|||
|
Number
|
|
Exercise Price Per Share
|
|||
Outstanding as of December 31, 2015
|
1,100,000
|
|
|
$
|
1.27
|
|
Granted
|
1,160,000
|
|
|
1.11
|
|
|
Expired, forfeited, and revoked
|
(1,060,000
|
)
|
|
1.27
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
Outstanding as of June 30, 2016
|
1,200,000
|
|
|
1.12
|
|
|
Options exercisable as of June 30, 2016
|
17,000
|
|
|
1.23
|
|
|
Remaining unvested options outstanding and expected to vest
|
1,183,000
|
|
|
$
|
1.11
|
|
|
|
Foreign
Currency
Translation
|
|
Unrealized Gain
(Loss) on
Available-for-
Sale Securities
|
|
Total
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||
Balance at December 31, 2014
|
|
$
|
128
|
|
|
$
|
193
|
|
|
$
|
321
|
|
Other comprehensive loss before reclassifications
|
|
(706
|
)
|
|
—
|
|
|
(706
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(199
|
)
|
|
(199
|
)
|
|||
Transactions with non-controlling interests
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Balance at December 31, 2015
|
|
(580
|
)
|
|
(6
|
)
|
|
(586
|
)
|
|||
Other comprehensive income (loss) before reclassifications
|
|
(1,469
|
)
|
|
5
|
|
|
(1,464
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Transactions with non-controlling interests
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
|||
Net other comprehensive loss at June 30, 2016
|
|
$
|
(2,055
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2,056
|
)
|
|
June 30, 2016
|
|
December 31, 2015
|
||
Stock options
|
1,200,000
|
|
|
1,100,000
|
|
Warrants
|
50,000
|
|
|
50,000
|
|
Warrants issued in public offering
|
6,946,875
|
|
|
6,946,875
|
|
Convertible notes
|
375,000
|
|
|
375,000
|
|
Shares potentially issuable to Rochon Capital
|
25,240,676
|
|
|
25,240,676
|
|
Total excluded securities
|
33,812,551
|
|
|
33,712,551
|
|
|
Gourmet Food
|
|
Home Décor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
3,587
|
|
|
$
|
25,311
|
|
|
$
|
7,250
|
|
|
$
|
266
|
|
|
$
|
36,414
|
|
Gross profit
|
1,862
|
|
|
12,699
|
|
|
6,125
|
|
|
162
|
|
|
20,848
|
|
|||||
Operating expenses
|
2,133
|
|
|
16,372
|
|
|
5,248
|
|
|
1,601
|
|
|
25,354
|
|
|||||
Gain on sale of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
|||||
Interest expense
|
—
|
|
|
546
|
|
|
12
|
|
|
479
|
|
|
1,037
|
|
|||||
Income (loss) before income tax provision
|
$
|
(271
|
)
|
|
$
|
(4,219
|
)
|
|
$
|
865
|
|
|
$
|
(1,911
|
)
|
|
$
|
(5,536
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
5,190
|
|
|
$
|
22,459
|
|
|
$
|
7,981
|
|
|
$
|
398
|
|
|
$
|
36,028
|
|
Gross profit
|
3,132
|
|
|
11,232
|
|
|
6,397
|
|
|
246
|
|
|
21,007
|
|
|||||
Operating expenses
|
2,889
|
|
|
14,149
|
|
|
6,449
|
|
|
798
|
|
|
24,285
|
|
|||||
Gain on sale of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense
|
(3
|
)
|
|
(22
|
)
|
|
15
|
|
|
575
|
|
|
565
|
|
|||||
Income (loss) before income tax provision
|
$
|
246
|
|
|
$
|
(2,895
|
)
|
|
$
|
(67
|
)
|
|
$
|
(1,127
|
)
|
|
$
|
(3,843
|
)
|
|
Gourmet Food
|
|
Home Décor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
6,514
|
|
|
$
|
51,964
|
|
|
$
|
13,516
|
|
|
$
|
495
|
|
|
$
|
72,489
|
|
Gross profit
|
3,359
|
|
|
25,813
|
|
|
11,095
|
|
|
302
|
|
|
40,569
|
|
|||||
Operating expenses
|
4,259
|
|
|
32,919
|
|
|
11,309
|
|
|
3,416
|
|
|
51,903
|
|
|||||
Gain on sale of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
(9
|
)
|
|||||
Interest expense
|
1
|
|
|
1,112
|
|
|
28
|
|
|
727
|
|
|
1,868
|
|
|||||
Loss before income tax provision
|
$
|
(901
|
)
|
|
$
|
(8,218
|
)
|
|
$
|
(242
|
)
|
|
$
|
(3,832
|
)
|
|
$
|
(13,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenue
|
$
|
7,735
|
|
|
$
|
32,630
|
|
|
$
|
14,757
|
|
|
$
|
784
|
|
|
$
|
55,906
|
|
Gross profit
|
4,388
|
|
|
16,536
|
|
|
11,702
|
|
|
498
|
|
|
33,124
|
|
|||||
Operating expenses
|
4,715
|
|
|
20,658
|
|
|
12,284
|
|
|
2,940
|
|
|
40,597
|
|
|||||
Gain on sale of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(192
|
)
|
|
(192
|
)
|
|||||
Interest expense
|
18
|
|
|
168
|
|
|
32
|
|
|
946
|
|
|
1,164
|
|
|||||
Loss before income tax provision
|
$
|
(345
|
)
|
|
$
|
(4,290
|
)
|
|
$
|
(614
|
)
|
|
$
|
(3,196
|
)
|
|
$
|
(8,445
|
)
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Gourmet food
|
|
$
|
1,728
|
|
|
$
|
2,324
|
|
Home décor
|
|
47,621
|
|
|
53,887
|
|
||
Nutritional and wellness
|
|
8,884
|
|
|
9,686
|
|
||
Other
|
|
11,214
|
|
|
16,607
|
|
||
Consolidated total assets
|
|
$
|
69,447
|
|
|
$
|
82,504
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Gourmet food
|
|
$
|
1,184
|
|
|
$
|
1,161
|
|
Home décor
|
|
2,024
|
|
|
2,137
|
|
||
Nutritional and wellness
|
|
1,938
|
|
|
1,938
|
|
||
Other
|
|
—
|
|
|
191
|
|
||
Consolidated goodwill
|
|
$
|
5,146
|
|
|
$
|
5,427
|
|
|
|
Three Months Ended
June 30, 2016 |
|
Three Months Ended
June 30, 2015 |
|
Six Months Ended
June 30, 2016 |
|
Six Months Ended
June 30, 2015 |
||||||||||||||||||||
|
|
Revenue
|
|
Percent of Total
|
|
Revenue
|
|
Percent of Total
|
|
Revenue
|
|
Percent of Total
|
|
Revenue
|
|
Percent of Total
|
||||||||||||
Gourmet food
|
|
$
|
3,587
|
|
|
9.9
|
%
|
|
$
|
5,190
|
|
|
14.4
|
%
|
|
$
|
6,514
|
|
|
9.0
|
%
|
|
$
|
7,735
|
|
|
13.8
|
%
|
Home décor
|
|
25,311
|
|
|
69.5
|
%
|
|
22,459
|
|
|
62.3
|
%
|
|
51,964
|
|
|
71.7
|
%
|
|
32,630
|
|
|
58.4
|
%
|
||||
Nutritional and wellness
|
|
7,250
|
|
|
19.9
|
%
|
|
7,981
|
|
|
22.2
|
%
|
|
13,516
|
|
|
18.6
|
%
|
|
14,757
|
|
|
26.4
|
%
|
||||
Other
|
|
266
|
|
|
0.7
|
%
|
|
398
|
|
|
1.1
|
%
|
|
495
|
|
|
0.7
|
%
|
|
784
|
|
|
1.4
|
%
|
||||
Revenue
|
|
$
|
36,414
|
|
|
100.0
|
%
|
|
$
|
36,028
|
|
|
100.0
|
%
|
|
$
|
72,489
|
|
|
100.0
|
%
|
|
$
|
55,906
|
|
|
100.0
|
%
|
•
|
The gourmet food segment's revenue decreased by
$1.6 million
, or
31.0%
, for the
three months ended June 30, 2016
compared to the
three months ended June 30, 2015
.
|
•
|
The gourmet food segment's revenue decreased by
$1.2 million
, or
16.0%
, for the
six months ended June 30, 2016
compared to the
six months ended June 30, 2015
.
|
•
|
The decrease in revenue during the
three and six
months ended
June 30, 2016
, compared to the prior year, was a result of supply chain issues arising in the Australian market which resulted in lower availability of products.
|
•
|
The home décor segment's revenue increased by
$2.9 million
, or
13.0%
, for the
three months ended June 30, 2016
compared to the prior year. Betterware, acquired on October 15, 2015, attributed to a revenue increase of $8.1 million compared to the prior year. The remainder of the segment attributed to a revenue decrease of $5.2 million.
|
•
|
The home décor segment's revenue increased by
$19.3 million
, or
59.0%
, for the
six months ended June 30, 2016
compared to the prior year. Kleeneze and Betterware, both acquired in 2015, attributed to a revenue increase of $25.9 million compared to the prior year. The revenue at Longaberger declined $6.3 million, or 36% compared to the prior year. Longaberger's revenue has been declining since 2000 when it recorded revenue of over $1.0 billion. Over the years, Longaberger has tried to change its compensation plan and product categories to no avail. The Company believes that an aging sales force and a saturated market are currently the primary reasons for the decline.
|
•
|
The nutritional and wellness segment's revenue decreased by
$731,000
, or
9.0%
, compared to the
three months ended June 30, 2015
. The decline is primarily driven by the revenue declines in Russia, Thailand, and many of the secondary markets. The Europe market performed similar to the prior year. In the second quarter, the Company faced supply chain issues which decreased the availability of products.
|
•
|
The nutritional and wellness segment's revenue decreased by
$1.2 million
, or
8.0%
, during the
six months ended June 30, 2016
compared to the
six months ended June 30, 2015
. The decline is primarily driven by the negative impacts of foreign exchange in many of Agel's markets including Russia as well as revenue declines in some key markets such as Europe and Russia. The Company has made many changes to the leadership structure in Agel over the course of the year which resulted in a new CEO and a change to many of the sales development leaders in the Company. In addition, the Company had supply chain issues that decreased the availability of products. These changes may have negatively impacted our revenue during the
six months ended June 30, 2016
.
|
•
|
For the quarter ended
June 30, 2016
and
June 30, 2015
, respectively, approximately
$30.6 million
, or
84.0%
of revenue, and
$25.7 million
, or
71.4%
of revenue, was generated in international markets.
|
•
|
For the
six
months ended
June 30, 2016
and
June 30, 2015
, respectively, approximately
$58.8 million
, or
81.1%
of revenue, and
$34.8 million
, or
62.3%
of revenue, was generated in international markets.
|
•
|
The home décor segment contributed the most to the increase of revenue generated in international markets for the
three and six
months ended
June 30, 2016
, compared to the prior year.
|
|
|
Three Months Ended
June 30, 2016 |
|
Three Months Ended
June 30, 2015 |
|
Six Months Ended
June 30, 2016 |
|
Six Months Ended
June 30, 2015 |
||||||||||||||||||||
|
|
Gross Profit
|
|
Percent of Revenue
|
|
Gross Profit
|
|
Percent of Revenue
|
|
Gross Profit
|
|
Percent of Revenue
|
|
Gross Profit
|
|
Percent of Revenue
|
||||||||||||
Gourmet food
|
|
$
|
1,862
|
|
|
51.9
|
%
|
|
$
|
3,132
|
|
|
60.3
|
%
|
|
$
|
3,359
|
|
|
51.6
|
%
|
|
$
|
4,388
|
|
|
56.7
|
%
|
Home décor
|
|
12,699
|
|
|
50.2
|
%
|
|
11,232
|
|
|
50.0
|
%
|
|
25,813
|
|
|
49.7
|
%
|
|
16,536
|
|
|
50.7
|
%
|
||||
Nutritional and wellness
|
|
6,125
|
|
|
84.5
|
%
|
|
6,397
|
|
|
80.2
|
%
|
|
11,095
|
|
|
82.1
|
%
|
|
11,702
|
|
|
79.3
|
%
|
||||
Other
|
|
162
|
|
|
60.9
|
%
|
|
246
|
|
|
61.8
|
%
|
|
302
|
|
|
61.0
|
%
|
|
498
|
|
|
63.5
|
%
|
||||
Gross profit
|
|
$
|
20,848
|
|
|
57.3
|
%
|
|
$
|
21,007
|
|
|
58.3
|
%
|
|
$
|
40,569
|
|
|
56.0
|
%
|
|
$
|
33,124
|
|
|
59.2
|
%
|
•
|
During the
three months ended June 30, 2016
, the gourmet food segment's gross profit decreased by
$1.3 million
, or
41.0%
, compared to the same period the prior year. The gross profit margin decreased from
60.3%
in
2015
to
51.9%
in
2016
. The program costs and discounts increased significantly in Australia as the Company was trying to spur revenue in the market which resulted in a decreased gross profit margin.
|
•
|
During the
six months ended June 30, 2016
, the gourmet food segment's gross profit decreased by
$1.0 million
, or
23.0%
, compared to the same period the prior year. The gross profit margin decreased from
56.7%
in
2015
to
51.6%
in
2016
. The decrease in the gross profit margin is a result of cost of sales increasing from
21.4%
to
25.6%
as a result of the material cost increasing.
|
•
|
The home décor segment's gross profit improved by
$1.5 million
, or
13.0%
, for
three months ended June 30, 2016
compared to the prior year mostly due to the acquisition of Betterware. The gross profit margin for the home décor segment stayed consistent with last year.
|
•
|
The home décor segment's gross profit improved by
$9.3 million
, or
56.1%
, for the quarter ended
June 30, 2016
compared to the prior year mostly due to the acquisition of Kleeneze and Betterware. Due to the new acquisitions having lower gross profit margins, the gross profit margin for the home décor segment fell to
49.7%
compared to
50.7%
the prior year.
|
•
|
The nutritional and wellness segment's gross profit decreased by
$272,000
, or
4.0%
, compared to the
three months ended June 30, 2015
. The gross profit margin improved to
84.5%
compared to
80.2%
for the
three months ended June 30, 2015
.
|
•
|
The nutritional and wellness segment's gross profit decreased by
$607,000
, or
5.0%
, compared to the
six months ended June 30, 2015
. The gross profit margin improved to
82.1%
compared to
79.3%
for the
six months ended June 30, 2015
.
|
•
|
The gross profit margin improved over the prior year due to lower freight costs experienced by the company in 2016.
|
|
|
Three Months Ended
June 30, 2016 |
|
Three Months Ended
June 30, 2015 |
|
Six Months Ended
June 30, 2016 |
|
Six Months Ended
June 30, 2015 |
||||||||||||||||||||
|
|
Operating Expenses
|
|
Percent of Total
|
|
Operating Expenses
|
|
Percent of Total
|
|
Operating Expenses
|
|
Percent of Total
|
|
Operating Expenses
|
|
Percent of Total
|
||||||||||||
Gourmet food
|
|
$
|
2,133
|
|
|
8.4
|
%
|
|
$
|
2,889
|
|
|
11.9
|
%
|
|
$
|
4,259
|
|
|
8.2
|
%
|
|
$
|
4,715
|
|
|
11.6
|
%
|
Home décor
|
|
16,372
|
|
|
64.6
|
%
|
|
14,149
|
|
|
58.2
|
%
|
|
32,919
|
|
|
63.4
|
%
|
|
20,658
|
|
|
50.9
|
%
|
||||
Nutritional and wellness
|
|
5,248
|
|
|
20.7
|
%
|
|
6,449
|
|
|
26.6
|
%
|
|
11,309
|
|
|
21.8
|
%
|
|
12,284
|
|
|
30.3
|
%
|
||||
Other
|
|
1,601
|
|
|
6.3
|
%
|
|
798
|
|
|
3.3
|
%
|
|
3,416
|
|
|
6.6
|
%
|
|
2,940
|
|
|
7.2
|
%
|
||||
Operating Expenses
|
|
$
|
25,354
|
|
|
100.0
|
%
|
|
$
|
24,285
|
|
|
100.0
|
%
|
|
$
|
51,903
|
|
|
100.0
|
%
|
|
$
|
40,597
|
|
|
100.0
|
%
|
•
|
The gourmet food segment's operating expenses decreased by
$756,000
, or
26.0%
, for the
three months ended June 30, 2016
compared to the prior year.
|
•
|
During the
six months ended June 30, 2016
, the gourmet food segment's operating expenses decreased by
$457,000
, or
10.0%
, compared to the prior year.
|
•
|
Over the last year, the business had to be scaled with the revenue resulting in higher operating expenses. Due to an unexpected revenue downturn during the second quarter, the Company was not able to scale the operating expenses to revenue which resulted in operating expenses as a percent of revenue increasing significantly over the prior year.
|
•
|
During the
three months ended June 30, 2016
, the home décor segment's operating expenses increased by
$2.2 million
, or
16.0%
, compared to the prior year. The addition of Betterware increased the operating expenses by $4.2 million during the quarter ended
June 30, 2016
. The increase in operating expenses is partially offset by the decrease of expenses at Longaberger of approximately $1.8 million related to cost reduction initiatives such as reducing payroll and general operating expenses.
|
•
|
During the
six months ended June 30, 2016
, the home décor segment's operating expenses increased by
$12.3 million
, or
59.4%
, compared to the prior year in large part due to the acquisitions of Kleeneze and Betterware. $15.0 million of the increase is attributable to the acquisitions. The increase in operating expenses is partially offset by the decrease of expenditures at Longaberger of approximately $2.6 million related to cost reduction initiatives such as reducing payroll and general operating expenses.
|
•
|
During the
three months ended June 30, 2016
, the nutritional and wellness segment's operating expenses decreased by
$1,201,000
, or
19.0%
compared to the prior year.
|
•
|
During the
six months ended June 30, 2016
, the nutritional and wellness segment's operating expenses decreased by
$975,000
, or
8.0%
compared to the prior year.
|
•
|
Similar to Longaberger, the Company has initiated cost reduction initiatives to reduce payroll and general operating expenses.
|
•
|
EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments such as debt or capital lease payments.
|
•
|
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
EBITDA and Adjusted 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 EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
•
|
Adjusted EBITDA does not reflect acquisition-related costs; and
|
•
|
Other companies, including companies in our own industry, may calculate EBITDA and Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
$
|
(5,870
|
)
|
|
$
|
(4,038
|
)
|
|
$
|
(13,603
|
)
|
|
$
|
(8,831
|
)
|
Interest, net
|
1,037
|
|
|
565
|
|
|
1,868
|
|
|
1,164
|
|
||||
Income tax expense
|
334
|
|
|
195
|
|
|
410
|
|
|
386
|
|
||||
Depreciation and amortization
|
837
|
|
|
633
|
|
|
1,649
|
|
|
1,053
|
|
||||
EBITDA (losses)
|
(3,662
|
)
|
|
(2,645
|
)
|
|
(9,676
|
)
|
|
(6,228
|
)
|
||||
Capital market expenses
|
107
|
|
|
361
|
|
|
243
|
|
|
835
|
|
||||
M&A expenses
|
432
|
|
|
312
|
|
|
825
|
|
|
642
|
|
||||
M&A infrastructure expense
|
614
|
|
|
778
|
|
|
1,289
|
|
|
1,497
|
|
||||
Other EBITDA Adjustments
|
134
|
|
|
223
|
|
|
1,013
|
|
|
(887
|
)
|
||||
Adjusted EBITDA (losses)
|
$
|
(2,375
|
)
|
|
$
|
(971
|
)
|
|
$
|
(6,306
|
)
|
|
$
|
(4,141
|
)
|
|
Gourmet Food Products
|
|
Home Decor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
Earnings (loss) before income tax provision
|
$
|
(271
|
)
|
|
$
|
(4,219
|
)
|
|
$
|
865
|
|
|
$
|
(1,911
|
)
|
|
$
|
(5,536
|
)
|
Interest, net
|
—
|
|
|
546
|
|
|
12
|
|
|
479
|
|
|
1,037
|
|
|||||
Depreciation and amortization
|
3
|
|
|
644
|
|
|
25
|
|
|
165
|
|
|
837
|
|
|||||
EBITDA (losses)
|
(268
|
)
|
|
(3,029
|
)
|
|
902
|
|
|
(1,267
|
)
|
|
(3,662
|
)
|
|||||
Capital market expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
107
|
|
|||||
M&A expenses
|
91
|
|
|
300
|
|
|
—
|
|
|
41
|
|
|
432
|
|
|||||
M&A infrastructure expense
|
—
|
|
|
—
|
|
|
—
|
|
|
614
|
|
|
614
|
|
|||||
Other EBITDA Adjustments
|
—
|
|
|
(70
|
)
|
|
(1
|
)
|
|
205
|
|
|
134
|
|
|||||
Adjusted EBITDA (losses)
|
$
|
(177
|
)
|
|
$
|
(2,799
|
)
|
|
$
|
901
|
|
|
$
|
(300
|
)
|
|
$
|
(2,375
|
)
|
|
Gourmet Food Products
|
|
Home Decor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
Loss before income tax provision
|
$
|
246
|
|
|
$
|
(2,895
|
)
|
|
$
|
(67
|
)
|
|
$
|
(1,127
|
)
|
|
$
|
(3,843
|
)
|
Interest, net
|
(3
|
)
|
|
(22
|
)
|
|
15
|
|
|
575
|
|
|
565
|
|
|||||
Depreciation and amortization
|
—
|
|
|
506
|
|
|
31
|
|
|
96
|
|
|
633
|
|
|||||
EBITDA (losses)
|
243
|
|
|
(2,411
|
)
|
|
(21
|
)
|
|
(456
|
)
|
|
(2,645
|
)
|
|||||
Capital market expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
361
|
|
|
361
|
|
|||||
M&A expenses
|
124
|
|
|
170
|
|
|
—
|
|
|
18
|
|
|
312
|
|
|||||
M&A infrastructure expense
|
—
|
|
|
—
|
|
|
—
|
|
|
778
|
|
|
778
|
|
|||||
Other EBITDA Adjustments
|
—
|
|
|
(52
|
)
|
|
(7
|
)
|
|
282
|
|
|
223
|
|
|||||
Adjusted EBITDA (losses)
|
$
|
367
|
|
|
$
|
(2,293
|
)
|
|
$
|
(28
|
)
|
|
$
|
983
|
|
|
$
|
(971
|
)
|
|
Gourmet Food Products
|
|
Home Decor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
Earnings (loss) before income tax provision
|
$
|
(901
|
)
|
|
$
|
(8,218
|
)
|
|
$
|
(242
|
)
|
|
$
|
(3,832
|
)
|
|
$
|
(13,193
|
)
|
Interest, net
|
1
|
|
|
1,112
|
|
|
28
|
|
|
727
|
|
|
1,868
|
|
|||||
Depreciation and amortization
|
6
|
|
|
1,283
|
|
|
57
|
|
|
303
|
|
|
1,649
|
|
|||||
EBITDA (losses)
|
(894
|
)
|
|
(5,823
|
)
|
|
(157
|
)
|
|
(2,802
|
)
|
|
(9,676
|
)
|
|||||
Capital market expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
243
|
|
|
243
|
|
|||||
M&A expenses
|
176
|
|
|
566
|
|
|
—
|
|
|
83
|
|
|
825
|
|
|||||
M&A infrastructure expense
|
—
|
|
|
—
|
|
|
—
|
|
|
1,289
|
|
|
1,289
|
|
|||||
Other EBITDA Adjustments
|
—
|
|
|
(117
|
)
|
|
(3
|
)
|
|
1,133
|
|
|
1,013
|
|
|||||
Adjusted EBITDA (losses)
|
$
|
(718
|
)
|
|
$
|
(5,374
|
)
|
|
$
|
(160
|
)
|
|
$
|
(54
|
)
|
|
$
|
(6,306
|
)
|
|
Gourmet Food Products
|
|
Home Decor
|
|
Nutritional and Wellness
|
|
Other
|
|
Consolidated
|
||||||||||
Loss before income tax provision
|
$
|
(345
|
)
|
|
$
|
(4,290
|
)
|
|
$
|
(614
|
)
|
|
$
|
(3,196
|
)
|
|
$
|
(8,445
|
)
|
Interest, net
|
18
|
|
|
168
|
|
|
32
|
|
|
946
|
|
|
1,164
|
|
|||||
Depreciation and amortization
|
—
|
|
|
1,401
|
|
|
(103
|
)
|
|
(245
|
)
|
|
1,053
|
|
|||||
EBITDA (losses)
|
(327
|
)
|
|
(2,721
|
)
|
|
(685
|
)
|
|
(2,495
|
)
|
|
(6,228
|
)
|
|||||
Capital market expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
835
|
|
|
835
|
|
|||||
M&A expenses
|
217
|
|
|
169
|
|
|
—
|
|
|
256
|
|
|
642
|
|
|||||
M&A infrastructure expense
|
—
|
|
|
—
|
|
|
—
|
|
|
1,497
|
|
|
1,497
|
|
|||||
Other EBITDA Adjustments
|
—
|
|
|
(372
|
)
|
|
(272
|
)
|
|
(243
|
)
|
|
(887
|
)
|
|||||
Adjusted EBITDA (losses)
|
$
|
(110
|
)
|
|
$
|
(2,924
|
)
|
|
$
|
(957
|
)
|
|
$
|
(150
|
)
|
|
$
|
(4,141
|
)
|
•
|
For the quarter ended
June 30, 2016
, the gourmet food segment's EBITDA
decreased
$511,000
from the prior year, or
210.0%
, to
$(268,000)
and the Adjusted EBITDA
decreased
to
$(177,000)
, a change of
$544,000
, or
148.0%
. The decrease to EBITDA and Adjusted EBITDA was a result of the change in losses mentioned above as well as a increase in interest and depreciation of
$6,000
from prior year and a decrease of
$33,000
in M&A related expenses during the same time period for a total impact of
$(27,000)
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
For the
six months ended June 30, 2016
, the gourmet food segment's EBITDA (losses)
increased
$567,000
from the prior year, or
173.0%
, to
$(894,000)
and the Adjusted EBITDA (losses)
increased
to
$(718,000)
, a change of
$608,000
, or
553.0%
. The increase to EBITDA (losses) and Adjusted EBITDA (losses) was a result of the change in losses mentioned above as well as a decrease in interest and depreciation of
$11,000
from prior year and a decrease of
$41,000
in M&A related expenses during the same time period for a total impact of
$(52,000)
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
For the quarter ended
June 30, 2016
, the home décor segment's EBITDA (losses)
increased
$618,000
from the prior year, or
26%
, to
$(3.0) million
and the Adjusted EBITDA (losses)
increased
to
$(2.8) million
, a change of
$506,000
, or
22.0%
. The increase to EBITDA (losses) and Adjusted EBITDA (losses) was a result of the change in losses mentioned above as well as a increase in interest and depreciation of
$706,000
from prior year, a decrease of
$130,000
in M&A related expenses that - incurred as a result of a service level agreement with the prior owners of Kleeneze - during the same time period, and a decrease of
$18,000
in other EBITDA adjustments as a result of more gains from asset sales compared to last year for a total impact of
$818,000
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
For the
six months ended June 30, 2016
, the home décor segment's EBITDA (losses)
increased
$3.1 million
from the prior year, or
114.0%
, to
$(5.8) million
and the Adjusted EBITDA (losses)
increased
to
$(5.4) million
, a change of
$2.5 million
, or
84.0%
. The increase to EBITDA (losses) and Adjusted EBITDA (losses) was a result of the change in losses mentioned above as well as a decrease in interest and depreciation of
$826,000
from prior year and a decrease of
$397,000
in M&A related expenses that - incurred as a result of a service level agreement with the prior owners of Kleeneze - during the same time period, and a decrease of
$255,000
in other EBITDA adjustments as primarily as a result of more share based compensation compared to last year for a total impact of
$1.5 million
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
For the quarter ended
June 30, 2016
, the nutritional and wellness segment's EBITDA (losses)
improved
from
$(21,000)
in the prior year to
$902,000
. The Adjusted EBITDA (losses)
improved
to
$901,000
from a
$(28,000)
loss in the prior year. The increase to EBITDA (losses) and Adjusted EBITDA (losses) was a result of the change in losses mentioned above as well as a decrease in interest and depreciation of
$9,000
from prior year and an increase of
$6,000
in other EBITDA adjustments mostly as a result of the asset impairment for a total impact of
$(3,000)
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
For the
six months ended June 30, 2016
, the nutritional and wellness segment's EBITDA (losses)
improved
$528,000
from the prior year, or
77%
, to
$(157,000)
and the Adjusted EBITDA (losses)
improved
to
$(160,000)
, a change of
$797,000
, or
83%
. The increase to EBITDA (losses) and Adjusted EBITDA (losses) was a result of the change in losses mentioned above as well as a increase in interest and depreciation of
$156,000
from prior year and an increase of
$0.3 million
in other EBITDA adjustments mostly as a result of the asset impairment for a total impact of
$0.4 million
on Adjusted EBITDA (losses) in the
three months ended June 30, 2016
.
|
•
|
The Company is seeking to renegotiate and potentially refinance existing debt.
|
•
|
The Company is seeking investment capital.
|
•
|
The Company is aggressively targeting new distributors and looking to expand into new markets with our more successful companies.
|
•
|
The Company is seeking to reduce excess inventory to improve working capital.
|
•
|
Overall Control Environment
|
•
|
Sufficient Accounting Personnel
|
◦
|
Management estimates were not performed with the structure and rigor necessary to result in quality estimate that need for fairly presented financial information.
|
◦
|
Management missed a required Form 8-K/A filing requirement related to the acquisition of Kleeneze. Subsequently, the filing was made 8 months later.
|
◦
|
Management has made significant adjustments for material errors resulting from the review of the quarterly financial statements.
|
◦
|
Management has made significant adjustments for material errors resulting from the audit of the annual financial statements.
|
◦
|
Management has made significant disclosure remediation and adjustments to the financial statements resulting from the quarterly review and annual audits.
|
◦
|
The Company has incurred substantial delays in completing its audit and filing with the SEC of its 2015 Form 10-K, its March Quarterly Report, this Form 10-Q, and its September Form 10-Q.
|
◦
|
The Company has incurred breaches to covenants to its debt agreements due to the delays in missing its filing requirements.
|
•
|
Consolidation Process
|
•
|
Account Reconciliation
|
•
|
Deferred Revenue and Revenue
|
•
|
Inventory Management
|
•
|
Journal Entry Support
|
•
|
Complex Accounting Issues
|
•
|
Segregation of Duties
|
•
|
IT System Conversion Controls
|
•
|
IT Control Environment
|
•
|
continued concern on the part of customers, partners, investors, and employees about our financial condition and extended filing delay status, including potential loss of business opportunities;
|
•
|
additional significant time and expense required to complete our remaining filings and the process of maintaining the listing of our common stock on NYSE MKT beyond the significant time and expense the Company has already incurred in connection with our accounting review to date;
|
•
|
continued distraction of our senior management team and our board of directors as the Company works to complete our remaining filings;
|
•
|
limitations on our ability to raise capital and make acquisitions; and
|
•
|
general harm to reputation as a result of the foregoing.
|
Exhibit No.
|
|
Description
|
|
31.1
|
|
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**
|
31.2
|
|
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**
|
32.1
|
|
|
Certification pursuant to 18 U.S.C. Section 1350.**
|
32.2
|
|
|
Certification pursuant to 18 U.S.C. Section 1350.**
|
101.INS
|
|
|
Instance Document.**
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document.**
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.**
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.**
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.**
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.**
|
|
|
|
|
|
**
|
Filed herewith
|
|
|
JRjr33, Inc.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
December 6, 2016
|
By:
|
/s/ John P. Rochon
|
|
|
|
|
|
|
|
John P. Rochon
|
|
|
|
Chief Executive Officer, President and Chairman
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date:
|
December 6, 2016
|
By:
|
/s/ John P. Walker
|
|
|
|
|
|
|
|
John P. Walker
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer and
|
|
|
|
Principal Accounting Officer)
|