Does anyone know if they filed to push JRJR into bankruptcy or if they are going to this week? I haven't seen any mention of it over the weekend but I am guessing it would not be possible to file on a weekend anyway. But I did do some homework on this company over the weekend and found that it is quite a circus. Here are some things going on,
- this company will get pushed off the exchange and on to the pink sheets if they do not file the last two quarters financial statements by Monday Oct. 17.
- the chairman of the board's son runs the company. He was promoted after a one year stint as CFO during which the company fell behind in its filings by over six months and later had to restate all periods for which he served as CFO
- the company changed its name to JRJR Networks to name it after the chairman's son.
- the chairmans son and leader of the company posts to facebook saying that the company is breaking new sales records every month but the company does not file anything with the SEC that would back this up or disclose to investors that he is doing that.
- Recently filed lawsuit alleging fraud and that portfolio company owner (her family still owns 49%) Tammy Longaberger did not disclose the TIF arrangement or property tax situation. this seems like a stretch due to subject matter being public record. The lawsuit seems more appropriate as a shareholder derivative suit against Richmont or whomever was charged with completing the due diligence process on this acquisition.
- JRJR will eventually have to repay the $1 million loan to the Longabergers. They can file suit against Tammy for all of the things they allege and possibly recover damages if the court finds she breached her employment agreement, but that is an issue that is completely distinct from the $1 million loan. It appears that the company is trying to combine the two to avoid paying back the loan as long as possible.
- JRJR will have to pay the property taxes on the basket or it will be taken. They may prefer to give it back since they probably lack the cash necessary to maintain it.
- JRJR has numerous payables outstanding that they are continuing to dispute - so many that you has to wonder if the cost of legal representation necessary in multiple jurisdictions is going to start taking a toll on the balance sheet and/or lead to additional litigation as the law firms go unpaid.
- JRJR has significant payments coming due to the owners/operators of recently acquired businesses. These payments must be made or they will find themselves in situations similar to the recent kerfuffle with Rob Way - where the company contractually must give low priced stock when they are unable to make the cash payments due and/or find themselves at odds with the people who will make or break this business. You can't help but think these entrepreneurs are looking at what JRJR has done to Tami Longaberger and Rob Way and wonder how much leeway they should grant JRJR when they are unable to make these payments.
- It has been over a year since the company has acquired a company and you have to think that the pool of attractive options gets smaller when potential sellers see the company doing the dance they have done with Longaberger and Betterware the two where public filings made it evident that the company was trying to delay or avoid payments. It seems probable that there have been others that did not get to the point where an SEC filing revealed what was happening.
- JRJR continues to pay huge sums to Richmont Capital each quarter, despite the fact that they have only acquired two companies over the last two and a half years. While they continue to stall and dispute payments to what appear to be legitimate payees, they make timely payments to Richmont, whose due diligence failed to turn up property taxes owed on the Longaberger Basket HQ.
- The recent investor presentation was likely a precursor to another stock or debt offering through Aegis. The trading volume since that presentation should tell you all that you need to know about how much interest there was in buying JRJR stock at current prices. Any capital raise will almost certainly be convertible debt and the strike will necessarily be low enough to cause massive dilution of current shareholders in light of the anti-dilutive provisions of the two offerings they did last year. As long as there are people who will pay $1 for its stock, JRJR can be a $1 billion company by just issuing a billion shares. It looks like the company is well down that path already. I think we may see a many millions of new shares issued or effectively issued as options over the next few months.
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