Acquisitions, Dispositions and Other Transactions

Kleeneze

On March 24, 2015, we completed the acquisition of Kleeneze Limited (“Kleeneze”), a direct-to-consumer business based in the United Kingdom. Pursuant to the terms of a Share Purchase Agreement with Findel plc (“Findel”), the Company purchased 100% of the shares of Kleeneze from Findel for total consideration of $5.1 million. The consideration included $3.0 million of senior secured debt provided by HSBC Bank PLC, which has a term of two years and an interest rate per annum of 0.60% over the Bank of England Base Rate as published from time to time (an interest rate of approximately 1.1% at the time of the purchase). The remainder was funded by a net cash contribution by the Company of approximately $100,000 after deducting $2.0 million in cash that remained on the books of Kleeneze at closing.

Opening balance sheet for Kleeneze acquisition on March 24, 2015

The following summary represents the fair value of Kleeneze as of the acquisition date and is subject to change following management’s final evaluation of the fair value assumptions.



(in thousand)	Kleeneze
Assets
Current assets:
Cash and cash equivalents	$	1,964
Accounts receivable	2,986
Inventory	6,283
Other current assets	931
Total current assets	12,164
Property, plant and equipment	619
Goodwill	1,347
Total assets	$	14,130

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade	$	3,635
Other current liabilities	5,395
Total current liabilities	9,030
Other long-term liabilities	—
Total liabilities	9,030
Stockholders’ equity	5,100
Total liabilities and stockholders’ equity	$	14,130

Pro forma Consolidated Statement of Operations for the quarter ended March 31, 2015.

The following summary presents the pro forma results of operations for the current year up to the date of March 31, 2015 as though the companies had combined at the beginning of the reported period.



							Pro Forma				Pro Forma
	JRJR			Kleeneze			Adjustments			Note	JRJR
Revenue	$	19,878		$	12,812		$	—			$	32,690
Program costs and discounts	(3,251		)	(2,971		)	—				(6,222		)
Net revenue	16,627			9,841			—				26,468
Costs of sales	5,230			5,054			—				10,284
Gross profit	11,397			4,787			—				16,184
Commissions and incentives	5,820			1,941			—				7,761
Gain on sale of assets	(43		)	—			—				(43		)
Selling, general and administrative	10,703			3,132			(113		)	A	13,722
Depreciation and amortization	279			—			—				279
Share based compensation expense	(1,167		)	—			—				(1,167		)
Operating loss	(4,195		)	(286		)	113				(4,368		)
Loss (gain) on marketable securities	(192		)	—			—				(192		)
Interest expense, net	599			(106		)	—				493
Loss from operations before income tax provision	(4,602		)	(180		)	113				(4,669		)
Income tax provision	191			—			—				191
Loss before extraordinary item	(4,793		)	(180		)	113				(4,860		)
Extraordinary item, net of tax	—			33,638			(33,638		)	B	—
Net income (loss)	(4,793		)	(33,818		)	33,751				(4,860		)
Net loss attributable to non-controlling interest	670			—			—				670
Net income (loss) attributable to JRjr33, Inc.	$	(4,123	)	$	(33,818	)	$	33,751			$	(4,190	)

Basic and diluted loss per share:
Weighted average common shares outstanding	29,668,069			29,668,069			29,668,069				29,668,069
Gain (loss) per common share attributable to common stockholders, basic and diluted	$	(0.14	)	$	(1.14	)	$	1.14			$	(0.14	)

Notes to Pro Forma Unaudited Condensed Consolidated Financial Statement


A.	Transaction fees related to the acquisition of Kleeneze were removed in the pro forma adjustments.


B.	Losses were incurred as a result of the write down of intercompany receivables 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 income statement shown below.

Uppercase Living

On March 14, 2014, Uppercase Acquisition Inc. (“UAI”), a wholly-owned subsidiary of the Company, acquired substantially all the assets of Uppercase Living, LLC, a direct seller of an extensive line of customizable vinyl expressions for display on walls. UAI assumed certain liabilities and agreed to issue 254,490 shares of our common stock, par value $0.0001 ("Common Stock") to the seller at a fair value of $96,706 on the acquisition date. The Company also agreed to deliver 323,897 shares of its common stock at a fair value of $123,081 to an escrow account for up to 24 months that will be issued to the seller upon remediation of certain close conditions. Since the Company did not deliver the shares of our Common Stock until April 2014, we recorded a payable as of the acquisition date totaling $219,787. The Company also agreed to pay the seller three subsequent contingent payments equal to 10% of Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") for each of the years ending 2014 to 2016 which is recorded in other long-term liabilities in the opening balance sheet. Goodwill arising from the transaction totaled $469,065.

Possible Issuance of Additional Common Stock under Share Exchange Agreement

Under the Share Exchange Agreement, Rochon Capital purchased and has the right to an additional 25,240,676 shares of common stock (the “Additional Shares”). The second closing of the transactions and the issuance of the Additional Shares contemplated by the Share Exchange Agreement (the “Second Tranche Closing”) was to occur on the date that was the later of: (i) the 20^th calendar day following the date on which we first mailed an Information Statement to our shareholders; (ii) the date the Financial Industry Regulatory Authority (“FINRA”) approved the Amendment; or (iii) the first business day following the satisfaction or waiver of all other conditions and obligations of the parties to consummate the transactions contemplated by the Share Exchange Agreement, or on such other date and at such other time as the parties may mutually determine.

On October 10, 2014, the Company entered into a second amendment to that certain Share Exchange Agreement, as amended, with Rochon Capital (as further amended, the "Amended Share Exchange Agreement"), which became effective on December 1, 2014, which limits Rochon Capital's right or the right of a Permitted Transferee (as defined below) to be issued the 25,240,676 shares of our common stock which it is currently entitled to receive under the Share Exchange Agreement, as amended (the "Second Tranche Parent Stock") based solely upon the public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as defined below), or upon the commencement or announcement of a tender or exchange offer which would result in any person or group becoming an Acquiring Person. In such event, the Second Tranche Parent Stock will be issued to Rochon Capital, or a Permitted Transferee to whom the right has been transferred, within ten (10) days of its written request, which request shall be in its sole discretion. A person or group of affiliated or associated persons becomes an "Acquiring Person," thus triggering the issuance of the Second Tranche Parent Stock to Rochon Capital, or a Permitted Transferee to whom the right has been transferred, upon acquiring, subsequent to the date of the Amended Share Exchange Agreement, beneficial ownership of 15% or more of the shares of our common stock then outstanding. The term "Acquiring Person" shall not include (1) any person who acquires 15% or more of our shares of common stock in a transaction approved by John P. Rochon, (2) any affiliates of John P. Rochon or (3) any family members of John P. Rochon.

In addition, Rochon Capital has agreed to irrevocably waive its right to, and has agreed that it will not (i) sell, pledge, convey or otherwise transfer all or any part of the Second Tranche Parent Stock or the right to receive the Second Tranche Parent Stock to any person or entity other than to (x) John P. Rochon or his wife, or both, or John Rochon, Jr. (each a "Permitted Transferee") or (y) the Company, as set forth below, and (ii) be entitled to receive any cash dividends or cash distributions of any kind with respect to the Second Tranche Parent Stock, except as specifically provided below. Rochon Capital further agreed that the Second Tranche Parent Stock shall be redeemed by the Company upon receipt of a cash payment by Rochon Capital from the Company of One Million Dollars ($1,000,000) if any of the following events occur: (i) our liquidation or dissolution; (ii) our merger with or into another entity where the holders of its common stock prior to the merger do not own a majority of its common stock immediately after the merger (while specifically excluding the Second Tranche Parent Stock from such calculation); (iii) the sale of all or substantially all of our assets; (iv) the death of John P. Rochon, in which case the redemption shall be limited to Second Tranche Parent Stock that has not been transferred by Rochon Capital; (v) a change of control of Rochon Capital such that a majority of the equity of Rochon Capital is not owned by John P. Rochon or immediate family members of John P. Rochon; and (vi) John P. Rochon having been found guilty or having pled guilty or nolo contendere to any act of embezzlement, fraud, larceny or theft on or from the Company. Rochon Capital has also agreed that the Second Tranche Parent Stock will be automatically redeemed by the Company for nominal consideration if any of the following events should occur: (i) the Company commences a voluntary case under Title 11 of the United States Code or the corresponding provisions of any successor laws; (ii) an involuntary case against the Company is commenced under Title 11 of the United States Code or the corresponding provisions of any successor laws and either (A) the case is not dismissed by midnight at the end of the 90th day after commencement or (B) the court before which the case is pending issues an order for relief or similar order approving the case; or (iii) a court of competent jurisdiction appoints, or the Company makes an assignment of all or substantially all of its assets to, a custodian (as that term is defined in Title 11 of the United States Code or the corresponding provisions of any successor laws) for the Company or all or substantially all of its assets.

Rochon Capital has agreed to irrevocably authorize and direct our transfer agent to place a permanent stop order on the Second Tranche Parent Stock and to add a corresponding restrictive legend on the certificate or certificates representing the Second Tranche Parent Stock.

Dispositions

On July 31, 2014, JRjr and our subsidiary TLC and CFI NNN Raiders, LLC. ("CFI"), entered into a Sale Leaseback Agreement (the "Sale Leaseback Agreement") pursuant to which TLC agreed to sell to CFI certain real estate owned by TLC and used by TLC in its manufacturing, distribution and showroom activities. The real estate described in the Sale Leaseback Agreement was purchased by CFI, for an aggregate purchase price of $15.8 million. A gain on sale of approximately $2.5 million was recorded associated with the sale. Because the transaction was part of a Sale Leaseback agreement that is being accounted for as a capital lease, the gain has been deferred and will be recognized over the fifteen (15) year life of the Sale Leaseback Agreement.

Public Offering

On March 4, 2015 the Company closed an underwritten public offering of 6,667,000 shares of common stock and warrants to purchase up to an aggregate of 6,667,000 shares of common stock at a combined offering price of $3.00. JRjr granted the underwriters a 45-day option to purchase up to an additional 1,000,050 shares of common stock and/or warrants to purchase up to an aggregate of 1,000,050 shares of common stock to cover additional over-allotments and the underwriters. On March 4, 2015, the underwriters exercised a portion of the over-allotment option with respect to 113,200 warrants. No options were exercised as it relates to shares of common stock. The over-allotment option has expired and no additional shares of common stock or warrants were exercised. In addition, warrants for an additional 166,675 shares with the same terms mentioned previously were issued to JRjr’s underwriters per the terms of the Underwriting Agreement.