UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2013
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 000-52818
CVSL Inc.
(Exact name of registrant as specified in its charter)
Florida |
| 98-0534701 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
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2400 North Dallas Parkway, Suite 230, Plano, Texas |
| 75093 |
(Address of principal executive offices) |
| (Zip Code) |
(972) 398-7120
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
| Accelerated filer o |
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Non-accelerated filer o |
| Smaller reporting company x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 11, 2013, 487,712,326 shares of the common stock, $0.0001 par value per share, of the registrant were issued and outstanding.
CVSL Inc.
CVSL Inc.
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| (Unaudited) |
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| September 30, 2013 |
| December 31, 2012 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 1,736,530 |
| $ | 19,032,392 |
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Marketable securities |
| 16,420,483 |
| — |
| ||
Accounts receivable (less allowance for doubtful accounts) |
| 859,738 |
| 100,769 |
| ||
Inventory |
| 17,398,888 |
| — |
| ||
Assets held for sale |
| 3,933,373 |
| — |
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Other current assets |
| 727,836 |
| 20,859 |
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Total current assets |
| 41,076,848 |
| 19,154,020 |
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Property, plant and equipment, net of accumulated depreciation |
| 22,634,371 |
| 1,514 |
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Goodwill |
| 1,475,871 |
| — |
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Other assets |
| 302,552 |
| — |
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Total assets |
| $ | 65,489,642 |
| $ | 19,155,534 |
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Liabilities and stockholders’ equity (deficit) |
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Current liabilities: |
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Accounts payable - trade |
| $ | 8,260,861 |
| $ | 409,643 |
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Accounts payable - related party |
| 80,328 |
| 416,670 |
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Line of credit payable |
| 10,341,257 |
| 22,653 |
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Deferred revenue |
| 3,905,875 |
| 60,548 |
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Current portion of long-term debt |
| 1,498,828 |
| — |
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Other current liabilities |
| 4,014,855 |
| 18,375 |
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Total current liabilities |
| 28,102,004 |
| 927,889 |
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Long-term debt |
| 27,519,875 |
| 20,041,644 |
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Other long-term liabilities |
| 388,350 |
| — |
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Total liabilities |
| 56,010,229 |
| 20,969,533 |
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Stockholders’ equity (deficit): |
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Preferred stock, par value $0.001 per share, 10,000,000 authorized - 0 - issued and outstanding |
| — |
| — |
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Common stock, par value $0.0001 per share, 5,000,000,000 and 490,000,000 shares authorized; 487,712,326 and 487,712,326 shares issued and outstanding, respectively |
| 48,771 |
| 48,771 |
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Additional paid-in capital |
| 10,564,260 |
| 2,691,942 |
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Accumulated other comprehensive income |
| 223,825 |
| — |
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Accumulated deficit |
| (10,218,701 | ) | (4,554,712 | ) | ||
Total stockholders’ equity (deficit) attributable to CVSL |
| 618,155 |
| (1,813,999 | ) | ||
Stockholders’ equity attributable to noncontrolling interest |
| 8,861,258 |
| — |
| ||
Total stockholders’ equity (deficit) |
| 9,479,413 |
| (1,813,999 | ) | ||
Total liabilities and stockholders’ equity |
| $ | 65,489,642 |
| $ | 19,155,534 |
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See notes to unaudited consolidated financial statements.
CVSL Inc.
Consolidated Income Statements (Unaudited)
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| 2013 |
| 2012 |
| 2013 |
| 2012 |
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Gross sales |
| $ | 23,750,749 |
| $ | 265,147 |
| $ | 48,039,951 |
| $ | 714,951 |
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Program costs and discounts |
| (9,410,972 | ) | — |
| (18,589,963 | ) | — |
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Net sales |
| 14,339,777 |
| 265,147 |
| 29,449,988 |
| 714,951 |
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Costs of sales |
| 8,318,669 |
| 87,128 |
| 17,688,709 |
| 233,607 |
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Gross profit |
| 6,021,108 |
| 178,019 |
| 11,761,279 |
| 481,344 |
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Selling, general and administrative |
| 7,290,471 |
| 305,606 |
| 17,357,722 |
| 605,451 |
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Operating loss |
| (1,269,363 | ) | (127,587 | ) | (5,596,443 | ) | (124,107 | ) | ||||
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Impairment of goodwill |
| — |
| 2,488,708 |
| — |
| 2,488,708 |
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Interest expense, net |
| 411,718 |
| 256 |
| 1,015,766 |
| 781 |
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Net loss |
| (1,681,081 | ) | (2,616,551 | ) | (6,612,209 | ) | (2,613,596 | ) | ||||
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Net loss attributable to noncontrolling interest |
| (163,548 | ) | — |
| (948,220 | ) | — |
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Net loss attributed to CVSL |
| $ | (1,517,533 | ) | $ | (2,616,551 | ) | $ | (5,663,989 | ) | $ | (2,613,596 | ) |
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Basic and diluted loss per share: |
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Weighted average common shares outstanding |
| 487,712,326 |
| 441,358,097 |
| 487,712,326 |
| 439,184,771 |
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Net loss per share attributable to CVSL |
| $ | — |
| $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) |
See notes to unaudited consolidated financial statements.
CVSL Inc.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| 2013 |
| 2012 |
| 2013 |
| 2012 |
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Net loss |
| $ | (1,681,081 | ) | $ | (2,616,551 | ) | $ | (6,612,209 | ) | $ | (2,613,596 | ) |
Other comprehensive income, net of tax: |
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Unrealized gain on marketable securities |
| 183,124 |
| — |
| 183,124 |
| — |
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Foreign currency translation adjustment |
| 40,701 |
| — |
| 40,701 |
| — |
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Other comprehensive income |
| 223,825 |
| — |
| 223,825 |
| — |
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Comprehensive loss |
| $ | (1,457,256 | ) | $ | (2,616,551 | ) | $ | (6,388,384 | ) | $ | (2,613,596 | ) |
CVSL Inc.
Statements of Cash Flows (Unaudited)
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| Nine Months Ended September 30, |
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| 2013 |
| 2012 |
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Operating activities: |
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Net loss |
| $ | (6,612,209 | ) | $ | (2,613,596 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Goodwill impairment |
| — |
| 2,488,708 |
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Depreciation and amortization |
| 1,265,049 |
| 1,042 |
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Interest expense |
| 1,015,917 |
| 781 |
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Loss on sales of assets |
| 15,646 |
| — |
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Changes in certain assets and liabilities: |
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Accounts receivable |
| (499,367 | ) | (14,428 | ) | ||
Inventory |
| 2,481,794 |
| — |
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Other current assets |
| (17,545 | ) | (172,110 | ) | ||
Accounts payable and accrued expenses |
| 933,301 |
| 292,188 |
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Accounts payable - related party |
| (428,835 | ) | 33,890 |
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Deferred revenue |
| (259,678 | ) | (8,835 | ) | ||
Other long-term liabilities |
| 388,350 |
| — |
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Net cash (used in) provided by operating activities |
| (1,717,577 | ) | 7,640 |
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Investing activities: |
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Investment in marketable securities |
| (16,237,359 | ) | — |
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Proceeds from the sale of property, plant and equipment |
| 622,465 |
| — |
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Cash acquired in acquisition |
| 103,222 |
| — |
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Net cash (used in) provided by investing activities |
| (15,511,672 | ) | — |
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Financing activities: |
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Line of credit, net change |
| 998,992 |
| — |
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Repayments on long-term debt |
| (1,064,004 | ) | — |
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Net cash used in financing activities |
| (65,012 | ) | — |
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Effect of exchange rate changes on cash |
| (1,601 | ) | — |
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Increase (decrease) in cash |
| (17,295,862 | ) | 7,640 |
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Cash and cash equivalents at beginning of year |
| 19,032,392 |
| 8,608 |
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Cash and cash equivalents at end of period |
| $ | 1,736,530 |
| $ | 16,248 |
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Supplemental disclosure of cash flow information: |
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Non-cash transactions: |
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Convertible note converted to stock |
| 6,563,555 |
| — |
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Convertible note issued related to acquisition |
| 6,500,000 |
| — |
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Promissory note issued related to acquisition |
| 4,000,000 |
| — |
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Stock issued related to acquisition |
| 1,308,763 |
| — |
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See notes to unaudited consolidated financial statements.
CVSL Inc.
Notes to the Consolidated Financial Statements (Unaudited)
(1) General
Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) on a basis consistent with that used in the Annual Report on Form 10-K filed by CVSL Inc. (“CVSL,” and together with its consolidated subsidiaries, the “Company”), formerly Computer Vision Systems Laboratories, Corp. with the Securities and Exchange Commission (“SEC” or “the Commission”) for the year ended December 31, 2012, and include all normal recurring adjustments necessary to present fairly the consolidated balance sheets, statements of income, comprehensive income (loss) and cash flows for the periods indicated. Certain amounts for the prior year have been reclassified to conform to the 2013 presentation. These notes should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2012. The results of operations for the three and nine month periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The financial statements have been prepared on a GAAP basis. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. Actual results could differ from those estimates made by management.
Accounting and Disclosure Changes
The Company has added disclosures related to marketable securities and held for sale assets that are disclosed in footnotes (3), (5) and (8).
Business Overview and Current Plans
CVSL seeks to acquire companies primarily in the direct-selling business and companies potentially engaging in businesses related to direct-selling. The Company owns a controlling interest in The Longaberger Company (“TLC”). TLC is a direct-selling business based in Newark, Ohio that sells premium hand-crafted baskets and a line of products for the home, including pottery, cookware, wrought iron and other home décor products, through a nationwide network of independent sales representatives. TLC also has showrooms in various states, which offer merchandise and serve as sales force support centers. TLC also owns a premier golf course near its corporate headquarters and manufacturing and distribution campus.
The Company owns 100% of Happenings Communications Group, Inc. (“HCG”). HCG publishes a monthly magazine, Happenings Magazine that references events and attractions, entertainment and recreation, and people and community in Northeast Pennsylvania. HCG also provides marketing and creative services to various companies, and can provide such services to direct-selling businesses. Services may include creating brochures, sales materials, websites and other communications for independent sales representatives and ultimate customers. As a result, HCG is available to serve as a valuable “in-house” resource for providing marketing and creative services to the direct-selling companies that we expect to acquire.
The Company owns 100% of Your Inspiration At Home Pty Ltd. (“YIAH”). YIAH is an innovative and award-winning direct seller of hand-crafted spices from around the world. YIAH originated in Australia and has expanded its operations to North America during the third quarter of 2013.
In considering appropriate acquisition targets, we anticipate that we will evaluate companies of varying sizes, generally in the range of $100 million or more in annual revenue. We do not plan to limit our acquisition opportunities to companies of this size, as we will periodically evaluate smaller companies in our targeted space, particularly companies that management believes are accretive or otherwise add value to one or more of our businesses. We generally plan to consider companies that are currently profitable and looking to enhance their growth, as well as companies that have experienced financial and operational difficulties and can, in our opinion, be strengthened by improved strategic and tactical guidance.
(2) Acquisitions, Dispositions and Other Transactions
Your Inspiration At Home Acquisition
On August 22, 2013, the Company completed the asset purchase of award-winning YIAH, a direct seller of hand-crafted spice blends and gourmet foods from around the world in consideration of the issuance by the Company of 4,512,975 shares of its common stock, par value $0.0001 (the “Common Stock”).
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. Rochon Capital Partners, Ltd. has also cancelled 4,512,975 shares subsequent to the YIAH acquisition. 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.
Opening balance sheets
The following summary represents the fair value of TLC’s and YIAH’s balance sheets as of the respective acquisition dates and is subject to change following management’s final evaluation of the fair value assumptions.
Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 103,222 |
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Accounts receivable |
| 259,602 |
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Inventory |
| 19,892,740 |
| |
Other current assets |
| 1,074,420 |
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Total current assets |
| 21,329,984 |
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Property, plant and equipment |
| 28,469,390 |
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Goodwill |
| 1,430,250 |
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Other assets |
| 3,946,570 |
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Total assets |
| $ | 55,176,194 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable - trade |
| $ | 6,391,016 |
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Accounts payable - related party |
| 90,861 |
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Line of credit payable |
| 9,319,612 |
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Customer advanced payments |
| 4,132,386 |
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Current portion of long-term debt |
| 354,390 |
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Other current liabilities |
| 4,003,922 |
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Total current liabilities |
| 24,292,187 |
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Long-term debt |
| 9,265,766 |
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Total liabilities |
| 33,557,953 |
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Stockholders’ equity: |
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Stockholders’ equity attributable to CVSL |
| 11,808,763 |
| |
Stockholders’ equity attributable to noncontrolling interest |
| 9,809,478 |
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Total stockholders’ equity |
| 21,618,241 |
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Total liabilities and stockholders’ equity |
| $ | 55,176,194 |
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(3) Marketable Securities
The Company’s marketable securities as of September 30, 2013 include fixed income and equity investments that are classified as available for sale. Unrealized gains on the investments included in consolidated statements of other comprehensive income were $183,124 for the three and nine months ended September 30, 2013, respectively. The Company realized gains of $348,716 during the three and nine months ended September 30, 2013, respectively. The gains were included as an offset to selling, general and administrative expenses in the consolidated income statements.
(4) Inventory
Inventories are stated at lower of cost or market. Cost is determined using the first-in, first-out method. Inventory consisted of the following:
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| September 30, 2013 |
| December 31, 2012 |
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Raw material and supplies |
| $ | 2,561,092 |
| $ | — |
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Work in process |
| 410,067 |
| — |
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Finished goods |
| 14,427,729 |
| — |
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| $ | 17,398,888 |
| $ | — |
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(5) Assets Held for Sale
During the third quarter of 2013, the Company decided to actively market TLC’s Longaberger Golf Club. As result, we reclassified this asset to other current assets on the Company’s consolidated balance sheet. The operating results were immaterial so no separate presentation is included.
(6) Property, plant and equipment
Property, plant and equipment are stated at fair value as of the date of the acquisition of TLC or cost and are depreciated using a straight-line method over the estimated useful lives of the assets. The Company assigns each fixed asset a useful life ranging from 5 to 31 years for buildings and improvements and 3 to 10 years for equipment. Repair and maintenance costs are expensed as incurred. Depreciation expense was $499,812 and $1,265,049 for three and nine months ended September 30, 2013, respectively, and $0 for the three and nine months ended September 30, 2012.
Property, plant and equipment consisted of the following:
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| September 30, 2013 |
| December 31, 2012 |
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Land and improvements |
| $ | 3,032,773 |
| $ | — |
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Buildings and improvements |
| 19,627,272 |
| — |
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Equipment |
| 1,172,526 |
| 34,562 |
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|
| 23,832,571 |
| 34,562 |
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Less accumulated depreciation |
| 1,198,200 |
| 33,048 |
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| $ | 22,634,371 |
| $ | 1,514 |
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(7) Long-term debt and other financing arrangements
The Company’s long-term borrowing consisted of the following:
Description |
| Interest rate |
| September 30, 2013 |
| December 31, 2012 |
| ||
Convertible Subordinated Unsecured Promissory Note - Richmont Capital Partners V L.P. (including accrued interest) |
| 4.00 | % | $ | 20,638,904 |
| $ | 20,041,644 |
|
Term loan - KeyBank |
| 7.70 | %* | 4,517,660 |
| — |
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Promissory Note - payable to former shareholder of TLC |
| 2.63 | % | 3,823,647 |
| — |
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Other, equipment notes |
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|
| 38,492 |
| — |
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Total debt |
|
|
| 29,018,703 |
| 20,041,644 |
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Less current maturities |
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|
| 1,498,828 |
| — |
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Long-term debt |
|
|
| $ | 27,519,875 |
| $ | 20,041,644 |
|
* Represents the weighted average interest rate at September 30, 2013. The interest rate is variable based on the agreement described below.
Convertible Subordinated Unsecured Promissory Note — Richmont Capital Partners V L.P.
On December 12, 2012 (the “Issuance Date”), the Company signed, closed, and received, as the maker, $20,000,000 in cash proceeds from Richmont Capital Partners V L.P., a Texas limited partnership (“RCP V”), pursuant to a Convertible Subordinated Unsecured Promissory Note, in the original principal amount of $20,000,000 (the “Note”), issued pursuant to a Convertible Subordinated Unsecured Note Purchase Agreement between the Company and RCP V (the “Purchase Agreement”). The Note is (i) an unsecured obligation of the Company and (ii) subordinated to any bank, financial institution, or other lender providing funded debt to the Company or any direct or indirect subsidiary of the Company, including any seller debt financing provided by the owners of any entity(ies) that may be acquired by the Company. Principal payments of $1,333,333 are due and payable on each anniversary of the Issuance Date beginning on the third anniversary of the Issuance Date. A final principal payment, equal to the then unpaid principal balance of the Note, is due and payable on the 10th anniversary of the Issuance Date. The Note bears interest at an annual rate of 4%, which interest is payable on each anniversary of the Issuance Date; provided, however, that interest payable through the third anniversary of the Issuance Date may, at the Company’s option, be paid in kind (“PIK Interest”) and any such PIK Interest will be added to the outstanding principal amount of the Note. Beginning 380 days from the Issuance Date, the Note may be prepaid, in whole or in part, at any time without premium or penalty.
On June 17, 2013, the Note was amended to extend the date of mandatory conversion of the Note to provide that the Note be mandatorily convertible into shares of Common Stock (subject to a maximum of 64,000,000 shares being issued) within ten days of June 17, 2014. The full amount of the Note (including any and all accrued interest thereon, whether previously converted to principal or otherwise) will be converted (the “Conversion”), into no more than 64,000,000 shares of Common Stock, par value $0.0001, of the Company, at a price of $0.33 per share of Common Stock.
John Rochon, Jr. is the 100% owner, and is in control, of Richmont Street LLC, the sole general partner of RCP V. Michael Bishop, a director of the Company, is a limited partner of RCP V. John Rochon, Jr. is a director of the Company and the son of John P. Rochon, the Company’s Chairman and Chief Executive Officer.
Term loan — Key Bank
In conjunction with the Line of Credit described below, on October 23, 2012, TLC obtained a $6,500,000 term loan from Key Bank. The interest rate on the term loan is either Key Bank’s prime rate plus 5.75% or LIBOR plus 7.50%. The term note is due in monthly installments beginning April 1, 2013 and due in full on October 23, 2015. TLC has paid down the outstanding balance of the term note through monthly amortization payments beginning April 1, 2013 and proceeds of the sale of non-core assets, primarily real estate. TLC will continue to use amounts it receives from sales of non-core assets to reduce the balance on this loan. The term loan and line of credit described below are collateralized by substantially all assets of TLC. Under the agreement, TLC is subject to certain financial covenants, including a fixed charge coverage ratio and limitations on capital expenditures, additional indebtedness, and incurrence of liens. TLC was in compliance with the financial covenants at September 30, 2013.
Promissory Note — payable to former shareholder of TLC
On March 14, 2013, the Company issued a $4,000,000 Promissory Note in connection with the Purchase Agreement with TLC. The Promissory Note bears interest at 2.63% per annum, has a ten-year maturity, and is payable in equal monthly installments of outstanding principal and interest.
Line of Credit—Key Bank
TLC has a line of credit agreement which expires on October 23, 2015. Under the agreement, TLC has available borrowings up to $15,000,000, limited to a formula primarily based on accounts receivable and inventory. The agreement provides for interest based on Key Bank’s prime rate plus 1.75% or LIBOR plus 3.50%. Interest at September 30, 2013 was 3.94%. The line of credit balance was $8,712,192 of September 30, 2013.
Line of Credit—UBS Margin Loan
CVSL has a margin loan agreement with UBS that allows the Company to purchase investments. The maximum loan amount is based on a percentage of marketable securities held by the Company. Interest on the outstanding balance of $1,629,065 was 1.68% at September 30, 2013. The loan is included in the line of credit on the Company’s consolidated balance sheets.
Outstanding Warrants
On May 15, 2012, the Company issued 2,666,666 shares of its restricted Common Stock to an investor in satisfaction of $250,000 principal and $16,666 interest due pursuant to a convertible note. In connection with the conversion of that note, the Company granted 1,277,537 warrants to the investor. Each warrant is exercisable into one share of the Company’s Common Stock at the price of $0.50 per share. The warrants are exercisable for a term of two years from the date of grant. Both the restricted common stock and warrants were assumed upon the Share Exchange Agreement dated August 24, 2012 by and among the Company, HCG and Rochon Capital Partners, Ltd. (the “Share Exchange Agreement”).
On May 16, 2012, the Company issued 2,380,000 shares of its restricted Common Stock to an investor in satisfaction of $225,000 principal and $13,000 interest due pursuant to a convertible note. In connection with the conversion of this note, the Company granted 1,010,137 warrants to the investor. Each warrant is exercisable into one share of the Company’s Common Stock at the price of $0.50 per share. The warrants are exercisable for a term of two years from the date of grant. Both the restricted common stock and the warrants were assumed upon the Share Exchange Agreement.
(8) Fair value
The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows:
Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities;
Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The carrying values of cash and cash equivalents, accounts receivable, accounts payable trade and related party and line of credit payable are considered to be representative of their respective fair values. The Company’s available for sale securities (Level 1) was $2,420,250 and (Level 2) $14,000,233. Fair value of property, plant and equipment held for sale (Level 3) was $3,933,373 at September 30, 2013 based on appraised values less costs to sell. The Company does not have other assets or intangible assets measured at fair value on a non-recurring basis at September 30, 2012. The Company did not record any impairment charges for property, plant and equipment for the three and nine months ended September 30, 2013.
(9) Income Taxes
The Company did not record an income tax provision or benefit for the three and nine months ended September 30, 2013 and 2012 as the Company has a deferred tax asset related to its net operating loss carry forwards which are fully reserved with a valuation allowance at September 30, 2013 and December 31, 2012.
Before becoming consolidated subsidiaries of the Company, HCG and TLC reported earnings and losses under the Subchapter S-Corporation election and thereby all taxable income passed through to the shareholders and was taxed at the shareholders’ ordinary tax rates. As a result, there has been no provision for income taxes in the prior years.
The acquisition of TLC resulted in the Company recognizing a deferred tax asset which is fully reserved with a valuation allowance. The purchase accounting adjustment for TLC’s property, plant and equipment resulted in a book value lower than the tax book value.
(10) Earnings per share attributable to CVSL
In calculating earnings per share, there were no adjustments to net earnings to arrive at earnings for any periods presented. The Company did not include the outstanding warrants as the exercise prices were greater than the average market price and their inclusion would be anti-dilutive.
(11) Segment Information
CVSL operates in a single operating segment as a direct selling company that sells products for the home, including hand-woven baskets, pottery, spices and wood craft products. These items are sold together with other home products primarily by independent sales consultants in the United States and Australia through home shows and showrooms.
TLC also owns a golf course and HCG publishes a monthly magazine yet these businesses individually and in aggregate do not meet the quantitative thresholds to report separately as a reportable segment. In addition, management does not separately evaluate the performance of these businesses. As such, management has determined that the Company operates in one reportable business segment.
(12) Related party transactions
During the fourth quarter of 2012, the Company entered into a Reimbursement of Services Agreement for a minimum of one year with Richmont Holdings. The Company has begun to establish an infrastructure of personnel and resources necessary to identify, analyze, negotiate and conduct due diligence on direct-selling acquisition candidates. However, the Company continues to need advice and assistance in areas related to identification, analysis, financing, due diligence, negotiations and other strategic planning, accounting, tax and legal matters associated with such potential acquisitions. Richmont Holdings and its affiliates have experience in the above areas and the Company wishes to draw upon such experience. In addition, Richmont Holdings had already developed a strategy of acquisitions in the direct-selling industry and has assigned and transfered to the Company the opportunities it has previously analyzed and pursued. The Company has agreed to pay Richmont Holdings a reimbursement fee (the “Reimbursement Fee”) each month equal to One Hundred Fifty Thousand dollars ($150,000), which shall increase by $10,000 after six months, and the Company agreed to reimburse or pay the substantial due diligence, financial analysis, legal, travel and other costs Richmont Holdings incurred in identifying, analyzing, performing due diligence, structuring and negotiating potential transactions. During the three and nine months ended September 30, 2013, the Company recorded $480,000 and $1,390,000, respectively in Expense Reimbursement Fees that were included in selling, general and administrative expense.
Other related party transactions include the following discussed at footnote (2) and (7):
· Convertible Subordinated Unsecured Promissory Note — Richmont Capital Partners V L.P.
· Conversion of Convertible Subordinated Unsecured Promissory Note - Tamala L. Longaberger Trust
(13) Subsequent Events
On October 1, 2013, the Company completed the previously announced acquisition of substantially all the assets of Tomboy Tools Inc., a U.S.-based direct seller of a line of tools designed for women as well as home security monitoring services in consideration of the issuance by the Company of 1,766,979 shares of Common Stock.
On October 22, 2013, the Company completed the previously announced acquisition of substantially all the assets of Agel Enterprises, LLC a global direct seller of a line of nutritional products as well as a line of skin care products sold under the brand name AgelessTM. Agel products are sold in 40 countries around the world. Consideration consisted of the issuance by the Company of 7,446,600 shares of Common Stock, delivery of a Purchase Money Note in the principal amount of $1,700,000 and the assumption of certain liabilities.
On October 29, 2013, the Company announced it had proposed a business combination with Blyth, Inc. under which CVSL would acquire all public common shares of Blyth for a per share consideration of $16.75. There can be no assurance if and when the combination will be consummated.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CVSL Inc. (“CVSL” and together with its consolidated subsidiaries, the “Company”) is in the early stages of a long-term strategy to develop a large and diverse global company in direct selling, which spurs micro-enterprise growth.
Management’s goal is to generate positive operating performance. The initial focus is to create building blocks that will be the foundation for long-term growth. The first step was obtaining a base of operations, which has been accomplished through the Share Exchange Agreement and the acquisition of the infrastructure of The Longaberger Company (“TLC”), more fully described below.
During the third quarter, CVSL Inc. continued to successfully execute its strategy of identifying desirable acquisitions in the direct selling channel and moving ahead with the process of bringing companies into the CVSL fold. CVSL completed the acquisition of Your Inspiration at Home, Pty. Ltd. (“YIAH”) and announced definitive agreements to acquire the assets of Tomboy Tools, Inc. (“TBT”) and Agel Enterprises, LLC (“Agel”). Those two transactions closed during October and will be included in the fourth quarter operating results.
As a result of these acquisitions, CVSL is growing at a rapid pace. Historical results presented for the third quarter do not capture the impact of these transactions. Management believes investors should be aware that, on a combined annualized basis, the four acquired companies are expected to generate over $140 million in revenue. In addition CVSL is engaged in an ongoing acquisition strategy, which means that additional revenue should be added as more companies are acquired. Management believes that profitability and cash flow will continue to rapidly increase because fixed costs will not increase at the same rate as the increases in revenues. As described below, the Company will utilize existing infrastructure where possible to lower expenses and increase profits.
CVSL’s team takes a systematic approach to growth: (1) determine which candidate companies among the dozens of companies in its potential acquisition “funnel” are ready for serious consideration; (2) conduct financial analysis and legal due diligence on the companies; (3) hold discussions with owners to determine whether a match is ripe; (4) sign a letter of intent; (5) conduct due diligence; (6) finalize a transaction; (7) begin the integration of the company into CVSL.
Throughout this process and afterward, CVSL gives “brand respect” to each separate company, its product line, its corporate culture, its sales force and its employees.
The objective is to “build out” CVSL across multiple dimensions. In doing so, we attempt to maximize free cash flow for the company and its shareholders through market share growth, aggressively managing costs and finding synergies among the companies’ back offices and operations.
CVSL’s building out process is taking several forms:
Build out categories.
Build out geography.
Build out the “consumer cloud.”
Categories : Each time CVSL acquires another company, it gains a foothold in a fundamental category of products or services that has the potential to be enlarged over time. No matter what the size of the acquired company, the key is to gain entry into the category.
Geography : Each time CVSL acquires a company in a new geographic market anywhere in the world, it gains a foothold in that country which has the potential to be enlarged. Each new market is a pipeline through which all CVSL companies can conduct commerce.
Consumer cloud : Every direct selling company brings with it attributes that include names and contacts that represent personal relationships with current sellers, former sellers, current customers and past customers. Each of these connections has value. Each one holds the potential to help grow sales or recruiting for all of the CVSL companies.
The building out process extends to other categories as well. For example, building out a centralized CVSL supply chain and distribution system, using the large amount of excess manufacturing, warehouse, distribution and office space at CVSL’s facility near Columbus, Ohio has the potential to deliver efficiencies for all member companies. Building out CVSL’s information technology platform could reduce duplication of costs in each company’s IT.
This process of building out a base for expansion is CVSL’s primary objective at this stage of its development.
The Longaberger Company
CVSL 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 51.2% of all stock in TLC. This ownership position gives CVSL operating control of TLC. Under the terms of the transaction, CVSL has the right of first refusal to acquire the remaining 48.8% through an existing buy-sell agreement. CVSL believes the value of that portion is disproportionately less, however, because it is a minority position. CVSL anticipates purchasing the remaining shares at some point.
TLC represents substantially all CVSL’s revenues and gross profits included in the third quarter and year to date financial statements. TLC sells a variety of products for the home. These products include woven wood baskets and other woodcrafts, pottery, cooking items, wrought iron, fabric and other categories. TLC manufactures all wood baskets and other woodcraft items at its manufacturing facility in Frazeysburg, Ohio.
Strategic Initiatives
Assets
One of the many aspects of TLC’s operation that was attractive to CVSL was its abundance of assets. For example, TLC has $17.2 million in inventory as of September 30, 2013, compared to $19.3 million at December 31, 2012, with further reductions planned in future quarters. CVSL has worked with TLC to begin reducing its inventory through selling more items online, through TLC’s showrooms and by opening up new territories. The sale of excess inventory generates cash to reduce debt and fund operations.
Another attractive aspect of acquiring TLC was the variety of fixed assets and real estate that are under-utilized in TLC’s current operations. CVSL intends to utilize certain of these assets with future acquisitions. For example, YIAH has now begun operations in North America, operating out of our Newark, Ohio office building. TBT is in the process of shifting inventory and distribution to TLC’s facilities. While we intend to find new uses for certain under-utilized assets, other assets owned by TLC are non-core assets that can be sold to further reduce debt and generate positive cash.
TLC owns and operates its manufacturing and distribution facilities near Frazeysburg, Ohio at the East Central Ohio (ECO) Business Park. TLC owns and operates ECO Business Park, which has four warehouse buildings ranging from 35,000 square feet to 814,000 square feet, along with other facilities. TLC does not need all the space it currently owns in the Business Park, so CVSL intends to utilize it for other acquisitions and/or sell or structure sale/leaseback transactions to generate additional cash.
Debt Reduction
During 2012, TLC sold, among other assets, a hotel in Newark, Ohio for $1.5 million and a 500,000 square foot warehouse at ECO Business Park for approximately $9.5 million. These sales allowed TLC to reduce debt by approximately $13 million in 2012.
CVSL continues to pursue debt reduction at TLC. The original $6.5 million term loan provided by Key Bank provided in October, 2012, has been paid down to $4.5 million as of September 30, 2013. Debt is expected to continue to be retired through cash generation from operations, inventory reduction and non-core asset sales.
Seasonality
TLC historically experiences seasonality in its revenues. Generally, the best quarter for gross revenues is the fourth quarter, boosted by the traditional holiday shopping season and events such as Halloween and Thanksgiving. The next best quarter is the third quarter, as historically, TLC generates renewed excitement among Home Consultants after the traditional Longaberger Bee sales meeting, held annually in late July, and the subsequent introduction of the Fall WishList catalog.
Recent Developments
Acquisitions
On August 22, 2013, the Company completed the asset purchase of award-winning YIAH, a direct seller of hand-crafted spice blends and gourmet foods from around the world. On October 1, 2013, the Company acquired substantially all the assets of TBT, a U.S.-based direct seller of a line of tools designed for women as well as home security monitoring services. On October 22, 2013, the Company acquired substantially all the assets of Agel, a global direct seller of a line of nutritional products as well as a line of skin care products sold under the brand name Ageless™. Agel products are sold in 40 countries around the world.
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. (“RCP”) entered into an Equity Contribution Agreement with the Company pursuant to which RCP contributed to the Company for no consideration 32,500,000 shares of Common Stock to offset the shares issued to the Trust RCP has also cancelled 4,512,975 shares subsequent to the YIAH acquisition. 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.
Results of Operations
CVSL management believes comparison of the third quarter of 2013 to third quarter of 2012 does not provide investors a meaningful analysis of CVSL’s performance, because CVSL did not own any of its current operating businesses during the third quarter of 2012. Since CVSL’s substantial growth in gross sales and operating results began in the first quarter of 2013 with the acquisition of TLC, management believes comparing sequential quarterly results provides a better evaluation of CVSL’s performance.
During the third quarter of 2013, CVSL’s gross sales increased $3.6 million or 18% to $23.7 million compared to the second quarter of 2013. CVSL’s operating results dramatically improved by $2.1 million during the third quarter of 2013 when compared to an operating loss of $3.3 million recorded during the second quarter of 2013. The substantial improvements are a result of increased revenues at TLC during the quarter coupled with cost containment initiatives undertaken at TLC during the second quarter of 2013 that were more fully realized in the third quarter of 2013.
Selling, General and Administrative
Our selling, general and administrative (“SG&A”) costs decreased by $565 thousand when comparing the third quarter of 2013 to the second quarter 2013. The decrease in quarter over quarter expense is primarily the result of gains realized on marketable securities and cost containment initiatives executed by TLC offset by YIAH expenses incurred after August 22, 2013, the date CVSL acquired YIAH.
Interest expense
Interest expense of $412 thousand has remained relatively consistent comparing the third quarter to second quarter of 2013. CVSL’s interest expense is primarily associated with the $20 million convertible note issued to Richmont Capital Partners V L.P. and debt assumed in the TLC acquisition.
Liquidity and Capital Resources
Our principal uses of cash have included legal and professional fees associated with the acquisitions, legal, due diligence and other fees related to other potential acquisitions and the cost of buying inventory. The Company plans to acquire additional businesses engaged in direct-selling and intends to fund such acquisitions primarily by issuing shares of our Common Stock as consideration for any such acquisition. As of September 30, 2013, the Company had a $16.4 million investment in marketable securities. The investments are readily available to provide liquidity for acquisitions, debt service and operating expenses. The Company also has a line of credit available for its TLC operations.
To the extent that cash will need to be paid as some portion of the acquisition consideration, we expect, to the extent necessary, to use our cash on hand and if necessary to raise cash through debt and/or equity financing. We believe that additional debt or equity financing will be available to us based on the assets and financials of the acquisition candidate and based on management’s experience with respect to debt financing and equity financing. We expect to be able to raise capital from lenders and equity investors who will understand our direct-selling acquisition strategy.
Recently Adopted Accounting and Disclosure Changes
There have been no material changes to our critical accounting policies as set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2012.
Forward-Looking Statements
The discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. This discussion contains forward-looking statements (“forward-looking statements”) that involve risks and uncertainties. For this purpose, any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. When used in this Quarterly Report and in documents incorporated by reference herein, forward-looking statements include, without limitation, statements regarding our expectations, beliefs, or intentions that are signified by terminology such as “subject to,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “can,” the negatives thereof, variations thereon and similar expressions. Such forward-looking statements reflect the Company’s current views with respect to future events, based on what the Company believes are reasonable assumptions; however, such statements are subject to certain risks and uncertainties. Our actual results may differ materially from those anticipated in any forward-looking statements due to known and unknown risks, uncertainties and other factors. The section entitled “Risk Factors” set forth in Item 1A of Part II of this Quarterly Report discusses some of the important risk factors that may affect our business, results of operations and financial condition. Our stockholders are urged to consider such risks and uncertainties carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. The Company disclaims any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events or otherwise. The Company undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Company or its operations and operating results. In addition, the following discussion should be read in conjunction with the information presented in our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2012.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
As a smaller reporting company, we are not required to disclose the information required by this Item.
Item 4. Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods, including controls and disclosures designed to ensure that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and they have concluded that as of that date, our disclosure controls and procedures were effective.
No other changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) occurred during our fiscal quarter ended September 30, 2013 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are not aware of any material, active, pending or threatened proceeding against us, nor are we involved as a plaintiff in any material proceeding or pending litigation.
Except for the risk factors below, there have been no material changes to the risk factors previously disclosed in Item 1A Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
To service our debt obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. Any failure to meet our debt service obligations, or to refinance or repay our outstanding indebtedness as it matures, could materially adversely impact our business, prospects, financial condition, liquidity, results of operations and cash flows.
Our ability to satisfy our debt obligations and repay or refinance our maturing indebtedness will depend principally upon our future operating performance. As a result, prevailing economic conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control, will affect our ability to make payments on and to refinance our debt. If we do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, incurring additional debt, issuing equity or convertible securities, utilizing our revolving credit facility, reducing discretionary expenditures and selling certain assets (or combinations thereof). Our ability to execute such alternative financing plans will depend on the capital markets and our financial condition at such time. In addition, our ability to execute such alternative financing plans may be subject to certain restrictions under our existing indebtedness, including our revolving credit facility and our term loan. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants compared to those associated with any debt that is being refinanced, which could further restrict our business operations. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or our inability to refinance our debt obligations on commercially reasonable terms or at all, would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.
As of September 30, 2013, TLC had outstanding borrowings of $8,712,192 under its line of credit and owed $4,517,660 on a term loan that matures in October 23, 2015. Both loans were provided by Key Bank as part of a credit agreement entered into in October 23, 2012. If TLC were to default in its payment obligations, one of Key Bank’s available remedies would be to seize some or all of TLC’s assets subject to Key Bank’s lien rights, which, depending on the amounts and assets involved, could negatively impact TLC’s operations or ability to operate. TLC is current on its debt obligations.
Risks Associated with the Increase in Authorized Common Stock
On May 30, 2013, an Amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 490,000,000 to 5,000,000,000 shares (the “Increase”) became effective.
The Increase will allow the Board to issue shares without further action or vote by our shareholders, including for acquisitions of other businesses or assets and capital-raising purposes. The issuance in the future of such additional authorized shares may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership and voting rights, of existing holders of our Common Stock. Such dilution may be substantial, depending upon the amount of shares issued. It may also adversely affect the market price of our common stock.
Issuance of additional common stock may also have the effect of deterring or thwarting persons seeking to take control of us through a tender offer, proxy fight or otherwise or to bring about removal of incumbent management or a corporate transaction such as a merger. The Increase permits us to issue additional shares of Common Stock that could dilute the ownership of the holders of our Common Stock by one or more persons seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction for the combination between us and another company. When, in the judgment of the Board, this action will be in the best interests of our shareholders and us, such shares could be used to create voting or other impediments or to discourage persons seeking to gain control of us. Such shares also could be privately placed with purchasers favorable to the Board in opposing such action. The existence of the additional authorized shares of our Common Stock could have the effect of discouraging unsolicited takeover attempts. The issuance of new shares also could be used to entrench current management or deter an attempt to replace the Board by diluting the number or rights of shares held by individuals seeking to control us by obtaining a certain number of seats on the Board. The issuance of shares to certain persons allied with management could have the effect of making it more difficult to remove our current management by diluting the stock ownership or voting rights of those seeking to cause such removal.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 22, 2013, CVSL issued 4,512,975 shares of Common Stock to Inspired Portfolio Pty, Ltd. CVSL relied on an exemption from registration provided under Section 4(a)(2) of the Securities Act of 1933 for the issuance of the securities, which exemption the Company believes is available because the Securities were not offered pursuant to a general solicitation and the status of the purchasers of the Securities as “accredited investors” as defined in Regulation D under the Securities Act of 1933.
On October 1, 2013, CVSL issued 1,766,979 shares of Common Stock to Tomboy Tools Inc. CVSL relied on an exemption from registration provided under Section 4(a)(2) of the Securities Act of 1933 for the issuance of the securities, which exemption the Company believes is available because the Securities were not offered pursuant to a general solicitation and the status of the purchasers of the Securities as “accredited investors” as defined in Regulation D under the Securities Act of 1933.
On October 22, 2013, CVSL issued 3,723,300 shares of Common Stock to Lega Enterprises, LLC. CVSL relied on an exemption from registration provided under Section 4(a)(2) of the Securities Act of 1933 for the issuance of the securities, which exemption CVSL believes is available because the securities were not offered pursuant to a general solicitation and the status of the purchaser of the securities as “accredited investors” under the Securities Act of 1933. An additional 3,723,300 shares of Common Stock are to be issued to Lega Enterprises, LLC upon the completion of certain remaining administrative matters.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Not applicable.
Exhibits required by Item 601 of Regulation S-K:
2.1 |
| Share Exchange Agreement, dated August 24, 2012, by and among Computer Vision Systems Laboratories, Corp., Happenings Communications Group, Inc. and Rochon Capital Partners, Ltd. (incorporated by reference to Exhibit 10.10 of our Current Report on Form 8-K filed with the Commission on August 30, 2012). |
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3.2 |
| Bylaws of Computer Vision Systems Laboratories, Corp. (incorporated by reference to Exhibit 3.4 of our Current Report on Form 8-K filed with the Commission on June 28, 2011). |
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3.3 |
| Amendment to Bylaws of Computer Vision Systems Laboratories, Corp., effective as of September 28, 2012 (incorporated by reference to Exhibit 3.3 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
3.4 |
| Articles of Incorporation of Happenings Communications Group, Inc., filed with the Texas Secretary of State on March 4, 1996, as amended (incorporated by reference to Exhibit 3.4 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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3.5 |
| Amended and Restated Bylaws of Happenings Communications Group, Inc. (incorporated by reference to Exhibit 3.5 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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3.6 |
| Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed with the Commission on May 30, 2013). |
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3.7 |
| Articles of Amendment to the Articles of Incorporation. (incorporated by reference to Exhibit 3.7 of our Current Report on Form 10-Q for the period ended June 30, 2013 and filed with the Commission on August 14, 2013). |
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10.1 |
| Registration Rights Agreement, dated September 25, 2012, by and between Computer Vision Systems Laboratories, Corp. and Rochon Capital Partners, Ltd. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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10.2 |
| Indemnification Agreement entered into between Computer Vision Systems Laboratories, Corp. and John P. Rochon (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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10.3 |
| Purchase Agreement, dated March 15, 2013, by and among Computer Vision Systems Laboratories, Corp., The Longaberger Company, TMRCL Holding Company, TMRCL Holding LLC, and The Longaberger Company Canada (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.4 |
| Convertible Subordinated Unsecured Promissory Note, dated March 15, 2013, in the original principal amount of $6,500,000, issued by Computer Vision Systems Laboratories, Corp. to The Longaberger Company (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.5 |
| Subscription Agreement, dated March 14, 2013, by and between the Company and The Longaberger Company (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.6 |
| Promissory Note, dated March 14, 2013, in the original principal amount of $4,000,000, issued by Computer Vision Systems Laboratories, Corp. to The Longaberger Company (incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.7 |
| Guarantee Agreement, dated March 14, 2013, made by Computer Vision Systems Laboratories, Corp (incorporated by reference to Exhibit 10.5 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.8 |
| Employment Agreement, dated March 18, 2013, by and between Computer Vision Systems Laboratories, Corp. and Tamala L. Longaberger. Canada (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on March 22, 2013).* |
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10.9 |
| Convertible Subordinated Unsecured Promissory Note, dated December 12, 2012, in the original principal amount of $20,000,000, from Computer Vision Systems Laboratories, Corp., a Florida corporation (as Maker), to Richmont Capital Partners V LP, a Texas limited partnership (as Payee) (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on December 18, 2012). |
10.10 |
| Convertible Subordinated Unsecured Note Purchase Agreement, dated December 12, 2012, by and between Computer Vision Systems Laboratories, Corp., a Florida corporation, and Richmont Capital Partners V LP, a Texas limited partnership (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on December 18, 2012). |
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10.11 |
| Reimbursement of Services Agreement between Computer Vision Systems Laboratories Corp., a Florida corporation and Richmont Holdings, Inc., a Texas corporation (incorporated by reference to Exhibit 10.11 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
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10.13 |
| First Amendment to Convertible Subordinated Unsecured Promissory Note, dated as of June 17, 2013, between CVSL Inc. and Richmont Capital Partners V LP. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on June 21, 2013). |
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10.14 |
| Equity Contribution Agreement, dated as of June 18, 2013, between Rochon Capital Partners, Ltd. and CVSL Inc. (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on June 21, 2013). |
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10.15 |
| Asset Purchase Agreement, dated September 25, 2013, between Agel Enterprises, Inc. and Agel Enterprises LLC. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on October 1, 2013). |
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10.16 |
| Purchase Money Note issued by Agel Enterprises, Inc. in the principal amount of $1,700,000. (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on October 1, 2013). |
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14 |
| Code of Business Conduct and Ethics. (incorporated by reference to Exhibit 14 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
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21 |
| List of Subsidiaries. (incorporated by reference to Exhibit 21 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
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31.1 |
| Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.** |
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31.2 |
| Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.** |
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32.1 |
| Certification pursuant to 18 U.S.C. Section 1350.** |
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32.2 |
| Certification pursuant to 18 U.S.C. Section 1350.** |
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101.INS |
| Instance Document.*** |
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101.SCH |
| XBRL Taxonomy Extension Schema Document.*** |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document.*** |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document.*** |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document.*** |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document.*** |
*Management contract
**Filed herewith
***As provided in Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressed set forth by specific reference in such filing.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.
| CVSL Inc. | |
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| By: | /s/ KELLY L. KITTRELL |
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| Kelly L. Kittrell |
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| Chief Financial Officer (Principal Financial and Principal Accounting Officer) |
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| Date: November 14, 2013 |
Exhibit No. |
| Description of Exhibit |
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2.1 |
| Share Exchange Agreement, dated August 24, 2012, by and among Computer Vision Systems Laboratories, Corp., Happenings Communications Group, Inc. and Rochon Capital Partners, Ltd. (incorporated by reference to Exhibit 10.10 of our Current Report on Form 8-K filed with the Commission on August 30, 2012). |
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3.2 |
| Bylaws of Computer Vision Systems Laboratories, Corp. (incorporated by reference to Exhibit 3.4 of our Current Report on Form 8-K filed with the Commission on June 28, 2011). |
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3.3 |
| Amendment to Bylaws of Computer Vision Systems Laboratories, Corp., effective as of September 28, 2012 (incorporated by reference to Exhibit 3.3 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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3.4 |
| Articles of Incorporation of Happenings Communications Group, Inc., filed with the Texas Secretary of State on March 4, 1996, as amended (incorporated by reference to Exhibit 3.4 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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3.5 |
| Amended and Restated Bylaws of Happenings Communications Group, Inc. (incorporated by reference to Exhibit 3.5 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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3.6 |
| Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed with the Commission on May 30, 2013). |
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3.7 |
| Articles of Amendment to the Articles of Incorporation (incorporated by reference to Exhibit 3.7 of our Current Report on Form 10-Q for the period ended June 30, 2013 and filed with the Commission on August 14, 2013). |
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10.1 |
| Registration Rights Agreement, dated September 25, 2012, by and between Computer Vision Systems Laboratories, Corp. and Rochon Capital Partners, Ltd. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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10.2 |
| Indemnification Agreement entered into between Computer Vision Systems Laboratories, Corp. and John P. Rochon (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on October 1, 2012). |
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10.3 |
| Purchase Agreement, dated March 15, 2013, by and among Computer Vision Systems Laboratories, Corp., The Longaberger Company, TMRCL Holding Company, TMRCL Holding LLC, and The Longaberger Company Canada (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.4 |
| Convertible Subordinated Unsecured Promissory Note, dated March 15, 2013, in the original principal amount of $6,500,000, issued by Computer Vision Systems Laboratories, Corp. to The Longaberger Company (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.5 |
| Subscription Agreement, dated March 14, 2013, by and between the Company and The Longaberger Company (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
10.6 |
| Promissory Note, dated March 14, 2013, in the original principal amount of $4,000,000, issued by Computer Vision Systems Laboratories, Corp. to The Longaberger Company (incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.7 |
| Guarantee Agreement, dated March 14, 2013, made by Computer Vision Systems Laboratories, Corp (incorporated by reference to Exhibit 10.5 of our Current Report on Form 8-K filed with the Commission on March 20, 2013). |
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10.8 |
| Employment Agreement, dated March 18, 2013, by and between Computer Vision Systems Laboratories, Corp. and Tamala L. Longaberger. Canada (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on March 22, 2013).* |
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10.9 |
| Convertible Subordinated Unsecured Promissory Note, dated December 12, 2012, in the original principal amount of $20,000,000, from Computer Vision Systems Laboratories, Corp., a Florida corporation (as Maker), to Richmont Capital Partners V LP, a Texas limited partnership (as Payee) (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on December 18, 2012). |
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10.10 |
| Convertible Subordinated Unsecured Note Purchase Agreement, dated December 12, 2012, by and between Computer Vision Systems Laboratories, Corp., a Florida corporation, and Richmont Capital Partners V LP, a Texas limited partnership (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on December 18, 2012). |
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10.11 |
| Reimbursement of Services Agreement between Computer Vision Systems Laboratories Corp., a Florida corporation and Richmont Holdings, Inc., a Texas corporation (incorporated by reference to Exhibit 10.11 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
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10.13 |
| First Amendment to Convertible Subordinated Unsecured Promissory Note, dated as of June 17, 2013, between CVSL Inc. and Richmont Capital Partners V LP. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on June 21, 2013). |
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10.14 |
| Equity Contribution Agreement, dated as of June 18, 2013, between Rochon Capital Partners, Ltd. and CVSL Inc. (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on June 21, 2013). |
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10.15 |
| Asset Purchase Agreement, dated September 25, 2013, between Agel Enterprises, Inc. and Agel Enterprises LLC. (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission on October 1, 2013). |
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10.16 |
| Purchase Money Note issued by Agel Enterprises, Inc. in the principal amount of $1,700,000. (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed with the Commission on October 1, 2013). |
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14 |
| Code of Business Conduct and Ethics. (incorporated by reference to Exhibit 14 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
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21 |
| List of Subsidiaries. (incorporated by reference to Exhibit 21 of our Annual Report on Form 10-K filed with the Commission on March 29, 2013). |
31.1 |
| Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.** |
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31.2 |
| Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.** |
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32.1 |
| Certification pursuant to 18 U.S.C. Section 1350.** |
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32.2 |
| Certification pursuant to 18 U.S.C. Section 1350.** |
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101.INS |
| Instance Document.*** |
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101.SCH |
| XBRL Taxonomy Extension Schema Document.*** |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document.*** |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document.*** |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document.*** |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document.*** |
*Management contract
**Filed herewith
***As provided in Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressed set forth by specific reference in such filing.