Restatement of Condensed Consolidated Financial Statements

Correction of Accounting Errors

During the course of 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, as amended, and determined restated condensed consolidated financial statements should be filed to correct errors within our originally reported financial statements as of and for the three and six months ended June 30, 2015.

The most significant errors identified during the preparation of the Company's December 31, 2015 consolidated financial statements that affected the three and six month period ended June 30, 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, which were incorrectly recorded a related party accounts receivable, which required an adjustment to the quarterly financial statements.


•	The correction of errors related to the identification of assets included in cash and cash equivalents. The Company did not appropriately classify in transit receivables as accounts receivables during the year ended December 31, 2015.

Other Restatement and Reclassification Adjustments

In addition to correcting the accounting errors discussed above, the restated condensed consolidated financial statements for the three and six months ended June 30, 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 and six months ended June 30, 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)



	June 30, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	6,436		$	(723	)	$	—		$	5,713
Marketable securities	5,967			—			—			5,967
Accounts receivable, net	3,966			300			50			4,316
Inventory, net	20,289			(97		)	(1		)	20,191
Other current assets	3,373			(117		)	(152		)	3,104
Total current assets	40,031			(637		)	(103		)	39,291
Restricted cash	3,027			(1		)	—			3,026
Sale leaseback security deposit	4,414			—			—			4,414
Property, plant and equipment, net	8,429			—			—			8,429
Leased property, net	14,834			—			—			14,834
Goodwill	5,246			(4		)	—			5,242
Intangibles, net	3,458			255			—			3,713
Other assets	353			—			—			353
Total assets	$	79,792		$	(387	)	$	(103	)	$	79,302

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	12,515		$	3		$	196		$	12,714
Related party payables	635			761			25			1,421
Line of credit	99			—			(99		)	—
Accrued commissions	4,056			—			123			4,179
Accrued liabilities	8,316			(79		)	(143		)	8,094
Deferred revenue	2,490			(727		)	—			1,763
Current portion of long-term debt	949			(92		)	57			914
Taxes payable	3,842			219			(154		)	3,907
Other current liabilities	3,027			33			(108		)	2,952
Total current liabilities	35,929			118			(103		)	35,944
Long-term debt	7,015			—			—			7,015
Lease liability	15,765			—			—			15,765
Other long-term liabilities	2,353			—			—			2,353
Total liabilities	61,062			118			(103		)	61,077
Commitments & contingencies
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 and 27,599,012 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	4			—			—			4
Additional paid-in capital	55,468			—			—			55,468
Accumulated other comprehensive (loss) income	174			(137		)	—			37
Accumulated deficit	(38,730		)	(574		)	—			(39,304		)
Total stockholders' equity attributable to JRJR33, Inc.	16,916			(711		)	—			16,205
Stockholders' equity attributable to non-controlling interest	1,814			206			—			2,020
Total stockholders' equity	18,730			(505		)	—			18,225
Total liabilities and stockholders' equity	$	79,792		$	(387	)	$	(103	)	$	79,302

JRjr33, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended June 30, 2015
(in thousands, except share and per share data)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments			As Restated
Revenue	$	35,742		$	77		$	209		$	36,028
Program costs and discounts	(2,998		)	(602		)	(2,774		)	(6,374		)
Net revenue	32,744			(525		)	(2,565		)	29,654
Costs of sales	10,955			466			(311		)	11,110
Gross profit	21,789			(991		)	(2,254		)	18,544
Commissions and incentives	12,612			(1,601		)	(2,564		)	8,447
Gain on sale of assets	(40		)	—			—			(40		)
Selling, general and administrative	12,026			425			310			12,761
Depreciation and amortization	678			(186		)	—			492
Share based compensation expense	(1,197		)	1,167			—			(30		)
Impairment of goodwill	192			—			—			192
Operating loss	(2,482		)	(796		)	—			(3,278		)
Interest expense, net	745			(180		)	—			565
Loss from operations before income tax provision	(3,227		)	(616		)	—			(3,843		)
Income tax provision	192			3			—			195
Net loss	(3,419		)	(619		)	—			(4,038		)
Net loss attributable to non-controlling interest	1,726			(710		)	—			1,016
Net loss attributable to JRjr33, Inc.	$	(1,693	)	$	(1,329	)	$	—		$	(3,022	)
Basic and diluted loss per share:
Weighted average common shares outstanding	34,367,095			—			—			34,367,095
Loss per common share attributable to JRjr33, Inc., basic and diluted	$	(0.05	)	$	(0.04	)	$	—		$	(0.09	)



	Six Months Ended June 30, 2015
(in thousands, except share and per share data)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments			As Restated
Revenue	$	54,961		$	588		$	357		$	55,906
Program costs and discounts	(5,160		)	(1,466		)	(3,000		)	(9,626		)
Net revenue	49,801			(878		)	(2,643		)	46,280
Costs of sales	16,365			398			(423		)	16,340
Gross profit	33,436			(1,276		)	(2,220		)	29,940
Commissions and incentives	18,480			(1,569		)	(2,643		)	14,268
Gain on sale of assets	(83		)	—			—			(83		)
Selling, general and administrative	21,466			1,573			423			23,462
Depreciation and amortization	1,308			(537		)	—			771
Share based compensation expense	(1,197		)	—			—			(1,197		)
Impairment of goodwill	192			—			—			192
Operating loss	(6,730		)	(743		)	—			(7,473		)
Loss (gain) on sale of marketable securities	7			(199		)	—			(192		)
Interest expense, net	1,341			(177		)	—			1,164
Loss from operations before income tax provision	(8,078		)	(367		)	—			(8,445		)
Income tax provision	386			—			—			386
Net loss	(8,464		)	(367		)	—			(8,831		)
Net loss attributable to non-controlling interest	1,892			(206		)	—			1,686
Net loss attributable to JRjr33, Inc.	$	(6,572	)	$	(573	)	$	—		$	(7,145	)
Basic and diluted loss per share:
Weighted average common shares outstanding	32,017,582			—			—			32,017,582
Loss per common share attributable to JRjr33, Inc., basic and diluted	$	(0.21	)	$	(0.01	)	$	—		$	(0.22	)

JRjr33, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)



	Three Months Ended June 30, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments		As Restated
Net loss	$	(3,419	)	$	(619	)	$	—	$	(4,038	)
Other comprehensive gain, net of tax:
Unrealized gain (loss) on marketable securities
Unrealized holding gain arising during the period	—			—			—		—
Reclassification of other comprehensive loss included in net loss	—			—			—		—
Foreign currency translation adjustment gain (loss)	(463		)	197			—		(266		)
Other comprehensive gain (loss)	(463		)	197			—		(266		)
Comprehensive loss	(3,882		)	(422		)	—		(4,304		)
Comprehensive loss (income) attributable to non-controlling interests	1,726			(710		)	—		1,016
Comprehensive loss attributable to JRjr33, Inc.	$	(2,156	)	$	(1,132	)	$	—	$	(3,288	)



	Six Months Ended June 30, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments		As Restated
Net loss	$	(8,464	)	$	(367	)	$	—	$	(8,831	)
Other comprehensive gain, net of tax:
Unrealized gain (loss) on marketable securities
Unrealized holding gain arising during the period	7			—			—		7
Reclassification of other comprehensive loss included in net loss	—			(199		)	—		(199		)
Foreign currency translation adjustment gain (loss)	(153		)	61			—		(92		)
Other comprehensive loss	(146		)	(138		)	—		(284		)
Comprehensive loss	(8,610		)	(505		)	—		(9,115		)
Comprehensive loss (income) attributable to non-controlling interests	1,892			(206		)	—		1,686
Comprehensive loss attributable to JRjr33, Inc.	$	(6,718	)	$	(711	)	$	—	$	(7,429	)

JRjr33, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended June 30, 2015
(in thousands)	As Previously Reported			Restatement Adjustments			Reclassification Adjustments		As Restated
Operating activities:
Net loss	$	(8,464	)	$	(367	)	$	—	$	(8,831	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities net of effect of acquisitions
Depreciation and amortization	1,308			(255		)	—		1,053
Loss (gain) on sale of marketable securities	7			(199		)	—		(192		)
Share-based compensation	(1,197		)	—			—		(1,197		)
Provision for doubtful accounts	220			111			—		331
Gain on sales of assets	(83		)	—			—		(83		)
Deferred income tax	73			—			—		73
Goodwill impairment	192			—			—		192
Non-cash compensation	—			201			—		201
Changes in certain assets and liabilities:
Accounts receivable	(748		)	(286		)	—		(1,034		)
Inventory	754			246			—		1,000
Other current assets	5			623			—		628
Accounts payable	522			(1,661		)	—		(1,139		)
Related party payables	507			761			—		1,268
Accrued commissions	737			126			—		863
Accrued liabilities	3,704			(1,702		)	—		2,002
Deferred revenue	(491		)	23			—		(468		)
Taxes payable	1,077			(1,695		)	—		(618		)
Other liabilities	(3,798		)	3,348			—		(450		)
Net cash used in operating activities	(5,675		)	(726		)	—		(6,401		)
Investing activities:
Capital expenditures	(407		)	75			—		(332		)
Proceeds from the sale of property, plant and equipment	187			(127		)	—		60
Purchase of marketable securities	(18,876		)	—			—		(18,876		)
Sale of marketable securities	13,900			1			—		13,901
Proceeds from note receivable	1			1			—		2
Deposit of restricted cash collateral	(3,027		)	96			—		(2,931		)
Acquisitions, net of cash purchased	(3,137		)	2			—		(3,135		)
Net cash provided by (used in) investing activities	(11,359		)	48			—		(11,311		)
Financing activities:
Net borrowings on long-term debt and revolving credit facility	3,137			(86		)	—		3,051
Payments on debt	(477		)	6			—		(471		)
Stock issuances	18,357			77			—		18,434
Net cash provided by financing activities	21,017			(3		)	—		21,014
Effect of exchange rate changes on cash and cash equivalents	(153		)	(42		)	—		(195		)
Increase in cash and cash equivalents	3,830			(723		)	—		3,107
Cash and cash equivalents at beginning of period	2,606			—			—		2,606
Cash and cash equivalents at end of period	$	6,436		$	(723	)	$	—	$	5,713
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	595		$	569		$	—	$	1,164

⁽¹⁾The cash flow in the previously issued June 30, 2015 Form 10-Q contains calculation errors which are presented in the 'prior period cash flow errors' column.