Acquisitions, Dispositions and Other Transactions

6 Months Ended

Jun. 30, 2013

Acquisitions, Dispositions and Other Transactions

Acquisitions, Dispositions and Other Transactions

(2) Acquisitions, Dispositions and Other Transactions

Your Inspiration At Home Acquisition

On June 21, 2013, the Company signed a definitive agreement to acquire the assets of award-winning Your Inspiration At Home Ltd., a direct seller of hand-crafted spice blends and gourmet foods from around the world in consideration, upon closing of the acquisition, of the issuance by the Company of 4,512,975 shares of its common stock, par value $0.0001 (the “Common Stock”). The closing is subject to various closing conditions and there can be no assurance given all conditions will be met.  The Company expects to complete the acquisition during the third quarter. The acquisition of Your Inspiration At Home will not meet the quantitative threshold for pro forma disclosure.

Convertible Note Settlement

On June 14, 2013, in accordance with the mandatory conversion provisions of the Convertible Subordinated Unsecured Promissory Note in the principal amount of $6,500,000 (the “Note”) that the Company issued to the Tamala L. Longaberger Trust (the “Trust”) as part of the consideration of the acquisition of TLC, the Company issued the Trust 32,500,000 shares of Common Stock upon conversion of the Note.

Equity Contribution

On June 18, 2013, Rochon Capital Partners, Ltd. entered into an Equity Contribution Agreement with the Company pursuant to which Rochon Capital Partners, Ltd. contributed to the Company for no consideration 32,500,000 shares of Common Stock to offset the shares issued to the Trust.  As a result, the Company’s issued and outstanding shares of Common Stock remained at 487,712,326.  The returned shares were cancelled and are not being held as treasury shares.

The Longaberger Acquisition

On March 18, 2013, the Company acquired a controlling interest in TLC, a direct-selling business based in Newark, Ohio.  The transaction resulted in the Company acquiring 64.6% of the voting stock and 51.7% of all the stock in TLC in return for a $6,500,000 convertible note and a $4,000,000 promissory note.  The Company incurred acquisition related costs of approximately $338 thousand recorded during the fourth quarter of 2012, $138 thousand during the first quarter of 2013 and $165 thousand during the second quarter of 2013. The costs were recorded in selling, general and administrative expenses in the consolidated income statements.  The acquisition is being accounted for under the purchase method of accounting and as of March 18, 2013 TLC is a consolidated subsidiary of the Company.  The following summary represents the fair value of TLC’s balance sheet as of the acquisition date and is subject to change following managements’ final evaluation of the fair value assumptions.

Opening balance sheet:

	March 18, 2013
Assets
Current assets:
Cash and cash equivalents	$	84,062
Accounts receivable	259,602
Inventory	19,892,740
Prepaid expenses and other	1,074,420
Total current assets	21,310,824
Property, plant and equipment	28,469,390
Other assets	3,946,570
Total assets	$	53,726,784
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable - trade	$	6,383,107
Accounts payable - related party	—
Line of credit payable	9,319,612
Customer advanced payments	4,132,386
Current portion of long-term debt	354,390
Other current liabilities	3,962,045
Total current liabilities	24,151,540
Long-term debt	9,265,766
Total liabilities	33,417,306
Stockholders’ equity:
Stockholders’ equity attributable to CVSL	10,500,000
Stockholders’ equity attributable to noncontrolling interest	9,809,478
Total stockholders’ equity	20,309,478
Total liabilities and stockholders’ equity	$	53,726,784

The acquisition did not result in recognition of any intangible assets or goodwill.