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. Kleeneze offers a wide variety of cleaning, health, beauty, home, outdoor and other products to customers across the United Kingdom and Ireland.

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 remaining $2.1 million of consideration consisted of cash. Approximately $1.9 million in cash was acquired by the Company as part of the transaction at closing.

The Kleeneze acquisition was accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed by the Company were recognized at their fair value at the acquisition date. The Company incurred approximately, $113,000 of acquisition-related costs, all of which were expensed and included in general and administrative expenses on the consolidated statements of operations and comprehensive loss.

The following summary represents the preliminary estimate of fair value of Kleeneze as of the acquisition date, March 24, 2015, and is subject to change following management’s final evaluation of the purchase price allocation and fair value assumptions.



	(in thousands)
Consideration	$	5,100
Amounts recognized for assets acquired and liabilities assumed:
Current assets	12,164
Other long-term assets	619
Current liabilities	9,030
Net assets acquired	3,753

Goodwill and intangible assets	$	1,347

Pro-forma Consolidated Statement of Operations

The following unaudited pro-forma financial information presents the Company's consolidated financial results for the three and six months ended June 30, 2015 and 2014 as if the acquisition had occurred as of January 1, 2014 (in thousands, except per share data):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Operations
Revenues	$	36,028		$	40,092		$	68,718		$	83,238
Net loss	(4,038		)	(4,049		)	(8,898		)	(7,366		)
Net loss attributable to JRjr33, Inc.	(3,022		)	(3,003		)	(7,212		)	(5,680		)
Loss per common share attributable to JRjr33, Inc., basic and diluted	$	(0.09	)	$	(0.12	)	$	(0.23	)	$	(0.23	)

Notes to Pro-forma Unaudited Condensed Consolidated Financial Statement

These pro-forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that actually would have resulted had the acquisition been effective at the beginning of the respective periods and are not necessarily representative of future results. The pro-forma results include the following adjustments:


•	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.

The revenues and earnings of Kleeneze since the acquisition date that have been included in our condensed consolidated financial statements for the three and six months ended June 30, 2015 were as follows:

Kleeneze net loss in the table above is presented net of intercompany expenses of $404,000 for the three and six months ended June 30, 2015.

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-to-consumer company that sells 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 $97,000 on the acquisition date. The Company also agreed to deliver 323,897 shares of its common stock at a fair value of $123,000 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 at March 31, 2014 of $220,000. The payable was relieved in April 2014 once the stock was issued to the seller. 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. There have been no payments related to this contingency, to date, and no liability is recorded on our balance sheet related to a contingent payment for UAI due to the Company's belief that it is not probable that UAI will achieve positive EBITDA during the period of the contingent payment. Goodwill arising from the transaction totaled $469,000.

Dispositions

On July 31, 2014, the Company 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. the Company 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 the Company’s underwriters per the terms of the Underwriting Agreement.

The warrants have a per share exercise price of $3.75, are exercisable immediately and will expire five years from the date of issuance. The exercise price of the warrant is subject to anti-dilutive adjustments (such as stock splits, stock dividends, recapitalizations or other similar events). There are no cash settlement alternatives associated with the warrant agreements that would require the Company to pay a holder of such warrant cash at exercise or at any other event. The fair value of the warrants are approximately $9.0 million as calculated using the Black Scholes model. In accordance with US GAAP, the Company has accounted for the warrants as equity instruments.

The Warrants will be exercisable at any time a registration statement registering the issuance of the shares of Common Stock underlying the Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If a registration statement registering the issuance of the shares of Common Stock underlying the warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion, elect to exercise the Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in the Warrant.

A holder of Warrants will not have the right to exercise any portion of the Warrant if such exercise would result in the holder (together with its affiliates) beneficially owning in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon at least 61 days' prior notice from the holder to us.

Possible Issuance of Additional Common Stock under Share Exchange Agreement

Under a certain Share Exchange Agreement with Rochon Capital, which was amended during the fourth quarter of 2014 (the "Amended Share Exchange Agreement") Rochon Capital has rights to be issued the 25,240,676 shares of our common stock (the "Second Tranche Parent Stock") 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.

Three Months Ended June 30, 2015

Six Months Ended June 30, 2015

Net loss, net of intercompany items