Restatement of Condensed Consolidated Financial Statements

Correction of Accounting Errors

Subsequent to the filing of our Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, management identified certain year end accounting adjustments. Management evaluated these adjustments and their effects on the Company's 2015 previously-filed quarterly financial statements and determined restated consolidated financial statements should be filed to correct errors within our originally reported financial statements as of and for the three months ended March 31, 2015.

The most significant errors found in the annual that affected the three month period ended March 31, 2015 include the following:


•	The correction of errors related to the recognition of revenue, accounts receivable and deferred revenue. The Company did not have the adequate accounting procedures to appropriately recognize and record revenues, accounts receivable and deferred revenue appropriately during Fiscal 2015.


•	The correction of errors related to the appropriate recognition of share-based compensation expense. The Company did not appropriately account for certain share-based compensation plans, which required adjustments to the quarterly financial statements.


•	The correction of errors related to the appropriate recognition of commissions expense on a quarterly basis. The Company did not appropriately calculate commissions expense related to the sales on a quarterly basis, which required an adjustment to the quarterly financial statements.


•	The Company did not appropriately account for certain expenses attributable to acquisitions costs, but were incorrectly recorded as related party accounts receivable, which required an adjustment to the quarterly financial statements.

Other Restatement and Reclassification Adjustments

In addition to correcting the accounting errors discussed above, the restated condensed consolidated financial statements for the three months ended March 31, 2015 include adjustments for certain other accounting errors and reclassifications that were discovered subsequent to the issuance of the originally reported financial statements for the three months ended March 31, 2015. This adjustments include the following:


•	Correcting the classification of revenues, program costs and discounts and commissions expense for certain of the subsidiaries.


•	Other adjustments to correct for differences related to the recording accounts payable, interest expense, accrued commissions and accounts receivable write-offs.

JRjr33, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



	March 31, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	5,633		$	(501	)	$	—		$	5,132
Marketable securities, at fair value	9,682			—			—			9,682
Accounts receivable, net	3,488			368			46			3,902
Inventory, net	20,331			(93		)	1			20,239
Other current assets	3,420			(112		)	72			3,380
Total current assets	42,554			(338		)	119			42,335
Restricted cash	3,000			—			—			3,000
Sale leaseback security deposit	4,414			—			—			4,414
Property, plant and equipment, net	8,775			—			(1		)	8,774
Leased property, net	15,098			—			—			15,098
Goodwill	5,367			(4		)	1			5,364
Intangibles, net	3,510			213			(1		)	3,722
Other assets	543			(85		)	(116		)	342
Total assets	$	83,261		$	(214	)	$	2		$	83,049

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	13,924		$	(655	)	$	1,086		$	14,355
Related party payables	531			761			25			1,317
Line of credit	112						(112		)	—
Accrued commissions	3,907			(457		)	600			4,050
Accrued liabilities	—			213			5,763			5,976
Deferred revenue	3,582			(2,322		)	46			1,306
Current portion of long-term debt	905			—			—			905
Accrued taxes payable	—			576			3,974			4,550
Other current liabilities	12,889			816			(10,818		)	2,887
Total current liabilities	35,850			(1,068		)	564			35,346
Deferred tax liability	—			—			—			—
Long-term debt, net of current portion	7,081			—			—			7,081
Lease liability, net of current portion	15,800			(26		)	—			15,774
Other long-term liabilities	1,905			977			(562		)	2,320
Total liabilities	60,636			(117		)	2			60,521
Commitments & contingencies (Note 9)
Stockholders' equity:
Preferred stock, par value $0.001 per share, 500,000 authorized	—			—			—			—
Common stock, par value $0.0001 per share, 250,000,000 shares authorized; 34,367,095 outstanding as of March 31, 2015	4			—			—			4
Additional paid-in capital	55,452			—			—			55,452
Accumulated other comprehensive income	637			(336		)	—			301
Accumulated deficit	(37,024		)	742			—			(36,282		)
Total stockholders' equity attributable to JRjr33, Inc.	19,069			406			—			19,475
Stockholders' equity attributable to non-controlling interest	3,556			(503		)	—			3,053
Total stockholders' equity	22,625			(97		)	—			22,528
Total liabilities and stockholders' equity	$	83,261		$	(214	)	$	2		$	83,049

JRjr33, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended March 31, 2015
(in thousands, except share and per share data)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments			As Restated
Revenue	$	19,219		$	511		$	148		$	19,878
Program costs and discounts	(2,161		)	(864		)	(226		)	(3,251		)
Net revenue	17,058			(353		)	(78		)	16,627
Costs of sales	5,411			(68		)	(113		)	5,230
Gross profit	11,647			(285		)	35			11,397
Commissions and incentives	5,865			32			(77		)	5,820
Gain on sale of assets	(43		)	—			—			(43		)
Selling, general and administrative	9,440			1,151			112			10,703
Depreciation and amortization	618			(339		)	—			279
Share based compensation expense	—			(1,167		)	—			(1,167		)
Impairment of goodwill	—			—			—			—
Operating loss	(4,233		)	38			—			(4,195		)
Loss (gain) on sale of marketable securities	7			(199		)	—			(192		)
Interest expense, net	597			2			—			599
Loss from operations before income tax provision	(4,837		)	235			—			(4,602		)
Income tax provision	195			(4		)	—			191
Net income (loss)	(5,032		)	239			—			(4,793		)
Net loss attributable to non-controlling interest	166			504			—			670
Net income (loss) attributable to JRjr33, Inc.	$	(4,866	)	$	743		$	—		$	(4,123	)
Basic and diluted loss per share:
Weighted average common shares outstanding	29,668,069			—			—			29,668,069
Income (loss) per common share attributable to common stockholders, basic and diluted	$	(0.16	)	$	0.02		$	—		$	(0.14	)

JRjr33, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)



	Three Months Ended March 31, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments		As Restated
Net loss	$	(5,032	)	$	239		$	—	$	(4,793	)
Other comprehensive gain (loss), net of tax:
Unrealized gain (loss) on marketable securities
Unrealized holding gain arising during the period	17			(10		)	—		7
Reclassification of other comprehensive income included in net loss	—			(199		)	—		(199		)
Foreign currency translation adjustment gain (loss)	310			(136		)	—		174
Other comprehensive gain (loss)	327			(345		)	—		(18		)
Comprehensive loss	(4,705		)	(106		)	—		(4,811		)
Comprehensive loss attributable to non-controlling interests	166			504			—		670
Comprehensive gain (loss) attributable to JRjr33, Inc.	$	(4,539	)	$	398		$	—	$	(4,141	)

JRjr33, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended March 31, 2015
(in thousands)	As Previously Reported			Prior Period Cash Flow Errors ⁽¹⁾			Restatement Adjustments			Reclassification Adjustments		As Restated
Operating activities:
Net income (loss)	$	(5,032	)	$	—		$	239		$	—	$	(4,793	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities net of effect of acquisitions
Depreciation and amortization	629			3			(212		)	—		420
Loss (gain) on sale of marketable securities	7			—			(199		)	—		(192		)
Share-based compensation	—			—			(1,167		)			(1,167		)
Provision for doubtful accounts	(7		)	3			15			—		11
Provision for obsolete inventory	—			—			—			—		—
Gain on sales of assets	(43		)	—			—			—		(43		)
Deferred income tax	—			—			34			—		34
Non-cash compensation	—			—			101			—		101
Changes in certain assets and liabilities:
Accounts receivable	(21		)	94			(540		)	—		(467		)
Inventory	858			(363		)	93			—		588
Other current assets	210			80			13			—		303
Accounts payable	1,864			(1,646		)	507			—		725
Related party payables, net	404			(25		)	785			—		1,164
Accrued commissions	588			3			143			—		734
Accrued liabilities	—			—			129			—		129
Deferred revenue	600			(1,346		)	(130		)	—		(876		)
Taxes payable	—			—			150			—		150
Other liabilities	(1,670		)	1,648			(478		)	—		(500		)
Net cash used in operating activities	(1,613		)	(1,549		)	(517		)	—		(3,679		)
Investing activities:
Capital expenditures	(347		)	31			—			—		(316		)
Proceeds from the sale of property, plant and equipment	113			(85		)	—			—		28
Purchase of investments available for sale	(18,876		)	—			—			—		(18,876		)
Sale of marketable securities	8,901			1,284			—			—		10,185
Cash held as collateral	(3,000		)	—			—			—		(3,000		)
Acquisitions, net of cash purchased	(3,567		)	432			—			—		(3,135		)
Net cash provided by (used in) investing activities	(16,776		)	1,662			—			—		(15,114		)
Financing activities:
Net borrowings (payments) on long-term debt and revolving credit facility	2,984			(6		)	—			—		2,978
Payments on debt	(247		)	—			—			—		(247		)
Stock issuances	18,369			(9		)	—			—		18,360
Net cash provided by (used in) financing activities	21,106			(15		)	—			—		21,091
Effect of exchange rate changes on cash	310			(98		)	16			—		228
Increase in cash and cash equivalents	3,027			—			(501		)	—		2,526
Cash and cash equivalents at beginning of period	2,606			—			—			—		2,606
Cash and cash equivalents at end of period	$	5,633		$	—		$	(501	)	$	—	$	5,132
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	595		$	—		$	—		$	—	$	595
Income taxes	—			—			—			—		—

⁽¹⁾The cash flow in the previously issued March 31, 2015 Form 10-Q contains calculation errors which are presented in the 'prior period cash flow errors' column.