Summary of Significant Accounting Policies

Consolidation

The Company consolidates all entities in which it owns or controls more than 50% of the voting shares, including any investments where the Company has determined to have control. The portion of the entity not owned by us is reflected as a non-controlling interest within the equity section of the consolidated balance sheets. As of December 31, 2016, the non-controlling interest consisted of minority shareholder interests in TLC, MSK, and certain international subsidiaries of Agel. All inter-company accounts and transactions have been eliminated in the consolidated financial statements. Business combinations accounted for as purchases are included in the consolidated financial statements from their respective dates of acquisition.

Reclassifications

Certain amounts in the consolidated financial statements included for the fiscal year ended December 31, 2015 have been reclassified to conform to current year's presentation. The Company has reclassified select expenses to show a consistent presentation as well as changing the presentation on the consolidated statement of operations to show selling expense separate from general and administrative expense. In addition, reclassifications between program costs and discounts, cost of sales, distributor expenses, selling expenses, and general and administrative expenses were made to improve the comparability of the statements. None of the adjustments had any effect on the prior period net loss. The Company also reclassified the current portion of the lease liability previously reported as an "Other current liabilities" to "Current portion of lease obligation" to provide additional transparency. In addition, a related party trade payable was reclassified from "Accounts payable" to "Related party payables." More details on this reclassification are discussed in Note (9), Related Party Transactions, to the consolidated financial statements included in this report.

Significant Accounting Policies, Estimates and Judgments

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions in these consolidated financial statements require the exercise of judgment and are used for, but not limited to, the allowance for doubtful accounts, inventory valuation and obsolescence, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, allocation of purchase price to the fair value of net assets acquired, useful lives for depreciation and amortization, revenue recognition, income taxes and deferred tax valuation allowances, lease classification, and contingencies. These estimates are based on information available as of the date of the preparation of the consolidated financial statements. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

Cash equivalents are short-term, highly-liquid instruments with original maturities of ninety days or less. The Company maintains cash primarily with multinational banks. The amounts held in interest bearing accounts periodically exceed the Federal Deposit Insurance Corporation insured limit of $250,000. At the end of December 31, 2016, the Company held a zero-cash position in FDIC insured banks and at the end of December 31, 2015, the Company held an amount of $340,000 in FDIC insured banks. The insured limit of $250,000 was not exceeded by any individual FDIC insured account in either period. The Company has not incurred any losses related to these deposits.

Marketable Securities

Investments in marketable securities may include equity securities, debt instruments, and mutual funds. Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Management determines the appropriate classification at the time of purchase and re-evaluates such designation as of each balance sheet date. The investments are recorded at fair value with unrealized gains and losses included in "Accumulated other comprehensive loss", on the consolidated balance sheets, and the realized gains and losses are included in "Gain on marketable securities," reported separately on the consolidated statement of operations.

Accounts Receivable

The carrying value of the Company's accounts receivable, net of allowance for doubtful accounts, represents the estimated net realizable value. The Company determines the allowance for doubtful accounts based on the type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the ability to collect the outstanding balances, and the allowance is adjusted accordingly. Receivable balances deemed not collectible are written off against the allowance. The Company has recorded an allowance for doubtful accounts of approximately $1.8 million and $1.0 million as of December 31, 2016 and December 31, 2015, respectively. A reconciliation of the allowance for doubtful accounts for the fiscal year ended December 31, 2016 is included below:



	December 31, 2016
Balance as of beginning of period	$	1,028
Provisions to allowance for doubtful accounts	1,068
Write-offs	(290		)
Balance as of end of period	$	1,806

Inventory

All inventories are stated at the lower of cost or net realizable values. Cost of inventories are determined on a first-in, first-out (FIFO) basis. The Company records provisions for obsolete, excess, and unmarketable inventory in cost of goods sold.

Assets Held for Sale

The Company classifies assets as "held for sale" when management approves and commits to a formal plan of sale with the expectation that the sale will be completed within one year. The net assets of the business held for sale are then recorded at the lower of their current carrying value or the fair market value, less costs to sell. See additional discussion regarding the Company’s assets held for sale in Note (6), Assets Held for Sale, to the consolidated financial statements included in this report.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the depreciable assets. Provisions for amortization of leasehold improvements are made at annual rates based upon the lesser of the estimated useful lives of the assets or terms of the leases. Expenditures for maintenance and repairs are expensed as incurred.

The estimated useful life used for depreciation and amortization are generally as follows:



Buildings	7 to 40 years
Land improvements	3 to 25 years
Leasehold improvements	3 to 15 years
Equipment	3 to 25 years

Leases

Leases are contractual agreements between lessees and lessors in which lessees get the right to use leased assets for a specified period in exchange for regular payments. Capital leases resemble asset purchases because there is an implied transfer of the benefits and risks of ownership from lessor to lessee, and the lessee is responsible for repairs and maintenance. The Company treats asset leases as capital leases if the life of the lease exceeds 75 percent of the asset's useful life, there is an ownership transfer to the lessee at the end of the lease, there is a "bargain" purchase option at the end of the lease, or the discounted present value of the lease payments exceeds 90 percent of the fair-market value of the asset at the beginning of the lease term. Capital lease obligations, and the related assets, are recorded at the commencement of the lease based on the present value of the minimum lease payments. Property under capital leases is amortized on a straight-line basis over the useful life.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting as of the acquisition date - the date on which control of the acquired company is transferred to the Company. Control is assessed by considering the legal transfer of voting rights that are currently exercisable and managerial control of the entity. Goodwill is measured at the acquisition date by taking the fair value of the consideration transferred and subtracting the net fair value of identifiable assets acquired and liabilities assumed. Any contingent consideration is measured at fair value at the acquisition date. Transaction costs - other than those associated with the issuance of debt or equity securities - related to a business combination are expensed as incurred.

Goodwill and Other Intangibles

Goodwill arising from business combinations, if applicable, represents the excess of the purchase prices over the value assigned to the net acquired assets and other specifically identified intangibles. Specifically identified intangibles generally include trade names, trademarks, and other intellectual property.

The Company's management performs its goodwill and other indefinite-lived intangible impairment test annually or when changes in circumstances indicate an impairment event may have occurred by estimating the fair value of each reporting unit compared to its carrying value. The last annual impairment analysis was performed as of December 31, 2016.

Goodwill is measured for impairment by comparing the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is less than the carrying value, a second step is performed to determine the implied fair value of goodwill. If the implied fair value of goodwill is lower than its carrying value, an impairment charge equal to the difference is recorded.

Indefinite-lived assets are measured for impairment by comparing the fair value of the indefinite-lived intangible asset to its carrying value. If the fair value of the indefinite-lived intangible asset is lower than its carrying value, an impairment charge equal to the difference is recorded.

The reporting units are aggregated based on similar economic characteristics, nature of products and services, nature of production processes, type of customers and distribution methods. The Company uses a discounted cash flow model and a market approach to calculate the fair value of intangible assets. The model includes a number of significant assumptions and estimates regarding future cash flows and these estimates could be materially impacted by adverse changes in market conditions.

Impairment of Long-Lived Assets

The Company's management reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives for impairment in accordance with accounting guidance. Management determines whether there has been an impairment of long-lived assets held for use in the business by comparing anticipated undiscounted future cash flow from the use and eventual disposition of the asset or asset group to the carrying value of the asset. The amount of any resulting impairment is calculated by comparing the carrying value to the fair value. Long-lived assets that meet the definition of held for sale, when present, are valued at the lower of carrying amount or fair value, less costs to sell. Assets or asset groups are determined at the lowest level possible for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Fair Value

The Company established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. The levels are determined based on the lowest level input that is significant to the fair value measurement. Level 1 represents unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 represents quoted prices for similar assets and liabilities in active markets - other than those included in Level 1- which are observable, either directly or indirectly. Level 3 represents valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Income Taxes

The Company is subject to tax in many jurisdictions, and significant judgment is required in determining the Company's provision for income taxes. Likewise, the Company is subject to a potential audit by tax authorities in many jurisdictions. In such audits, the Company's interpretation of tax legislation may be challenged and tax authorities in various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions under the Company's inter-company agreements.

Deferred income taxes are provided for temporary differences between financial statement and tax bases of asset and liabilities. The Company maintains a full valuation allowance for domestic and foreign deferred tax assets, including net operating loss carry-forwards and tax credits. The Company records income tax positions, including those that are uncertain, based on a more likely than not threshold that the tax positions will be sustained on examination by the taxing authorities having full knowledge of all relevant information.

Translation of Foreign Currencies

The functional currency of the Company's foreign subsidiaries is the local currency of their country of domicile. Assets and liabilities of the foreign subsidiaries are translated into U.S. dollar amounts at period-end exchange rates. Revenue and expenditures are translated at the weighted-average rates for the quarterly accounting period to which they relate. Equity accounts are translated at historical rates. Foreign currency translation adjustments are accumulated as a component of other comprehensive income (loss).

Management has determined the functional currency of each primary operating subsidiary by evaluating indicators such as cash flows, sales prices, sales markets, expenses, financing, and intra-entity transactions and arrangements. The Company has listed below the functional and reporting currencies for each subsidiary.



Subsidiary	Functional Currency	Reporting Currency
The Longaberger Company	USD	USD
Uppercase Acquisition, Inc.	USD	USD
CVSL TBT LLC	USD	USD
My Secret Kitchen, Ltd.	GBP	USD
Your Inspiration At Home Pty Ltd.	AUD	USD
Paperly, Inc.	USD	USD
Happenings Communications Group, Inc.	USD	USD
Agel Enterprises Inc.	USD	USD
Kleeneze Ltd.	GBP	USD
Betterware Ltd.	GBP	USD

Revenue Recognition and Deferred Revenue

In the ordinary course of business, the Company receives payments - primarily via credit card - for the sale of products at the time customers place orders. Sales and related fees such as shipping and handling, net of applicable sales discounts, are recorded as revenue when the product is shipped and when title and the risk of ownership passes to the customer. The Company presents revenue net of any taxes collected from customers. Such taxes collected that have not been remitted by the Company are included in "Taxes payable" on the consolidated balance sheets. Payments received for undelivered products are recorded as "Deferred revenue" which is included in current liabilities on the consolidated balance sheets. Certain incentives offered on the sale of products, including sale discounts, described in the paragraph below, are classified as "Program costs and discounts" on the consolidated statements of operations. A provision for product returns and allowances is recorded and is founded on historical experience and is classified as a reduction of revenues. As of December 31, 2016 and December 31, 2015, the provision for sales returns totaled approximately $921,000 and $808,000, respectively, which are recorded as "Accrued liabilities" included in current liabilities on the consolidated balance sheets.

Program Costs and Discounts

Program costs and discounts represent the various methods of promoting products. The Company offers benefits such as discounts on starter kits for new consultants, promotional pricing for the host of a home show, which vary depending on the value of the orders placed, and general discounts on the products.

Cost of Sales

Cost of sales includes the cost of raw materials, finished goods, inbound shipping expenses, customs, insurance, and the direct and indirect costs associated with the personnel, resources and property, plant and equipment related to the manufacturing and inventory management functions.

Distributor Expense

Distributor expenses include all forms of commissions, overrides and incentives related to the sales force. The Company accrues expenses for incentive trips over qualification periods as they are earned. The Company analyzes incentive trip accruals based on historical and current sales trends as well as contractual obligations when evaluating the adequacy of the incentive trip accruals. Actual results could result in liabilities being more or less than the amounts recorded.

Selling Expense

Selling expenses include merchant fees, freight-out shipping expenses, distribution supplies, distribution labor, and any other distribution related expenses that may arise during the ordinary course of business. The shipping and handling expense during the fiscal year ended December 31, 2016 and December 31, 2015, was $12.5 million and $15.9 million, respectively.

General and Administrative Expense

General and administrative expenses include wages and related benefits associated with various administrative departments, including human resources, legal, information technology, finance and executive, as well as professional fees and administrative facility costs associated with leased buildings.

Depreciation and Amortization

Depreciation and amortization includes depreciation related to owned buildings, office equipment and supplies, warehousing, and order fulfillment. In addition, it also includes the amortization of leasehold improvements and intangibles. The depreciation of manufacturing facilities and equipment as well as depreciation associated to inventory management are included in cost of sales.

Share-based Compensation

The Company's share-based compensation plans include cash-settled plans, stock options, and warrants. Cash settled plans are treated as liability awards, with payments determined based on changes in the trading prices of the Company's common stock. Stock options and warrants are generally evaluated using a Black-Scholes model, with expenses recorded on a straight-line basis over the required period of service.

Loss on Extinguishment of Debt

The Company recognized a loss on extinguishment of debt, in accordance with ASC 470-50, Debt Modifications and Extinguishments, during the fiscal year 2016, in connection to the Dominion Capital monthly principle payment adjustment discussed in Note (11), Long-term Debt and Other Financing Arrangements, to the consolidated financial statements included in this report.

Operating Expenses

The Company evaluates operating expenses to view holistically the expenditures that the Company incurs to engage in any activities not directly associated with the production of goods or services. Operating expenses include commissions and incentives; selling expenses; general and administrative expenses; share-based compensation; depreciation and amortization; gain or loss on sale of assets; impairment of intangibles and goodwill; loss on extinguishment of debt; and any additional impairments of assets.

Interest Expense

Interest on outstanding borrowings and other finance costs directly related to borrowings are expensed as incurred. Interest expense includes interest on debt, discounts on loans, penalties on loans, amortization of finance charges, and interest income which is shown net of the expense.

Basic and Diluted Loss Per Share

The computation of basic earnings (loss) per common share is based upon the weighted average number of shares outstanding in accordance with current accounting guidance.

Outstanding stock options, warrants, and convertible notes are not included in the computation of dilutive loss per common share because the Company has experienced operating losses in all periods presented and therefore, the effect would be anti-dilutive.

Comprehensive Income (Loss)

The Company reports comprehensive income (loss) in the consolidated statements of comprehensive income (loss). Comprehensive income (loss) consists of net income (loss) plus gains and losses affecting stockholders’ equity that are excluded from net income (loss), such as gains and losses related to available for sale marketable securities and the translation effect of foreign currency assets and liabilities.

Recent Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606).This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Subsequently, FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which contains certain practical expedients in response to identified implementation issues. These new standards are effective for interim and annual periods beginning after December 15, 2017, and may be adopted using either a full retrospective or a modified retrospective approach. These standards may be adopted earlier. Management is currently evaluating these ASUs, including which transition approach to use, if needed. The Company is still evaluating whether these ASUs may materially impact the Company's consolidated net income, financial position, or cash flows.

On August 27, 2014, the FASB issued Accounting Standards Update 2014-15 (ASU 2014-15), Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and to provide related footnote disclosures. The ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The Company adopted the ASU effective December 31, 2016.

On February 25, 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases. This new standard is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard is effective for interim and annual periods beginning after December 15, 2018, and may be adopted using either a full retrospective or a modified retrospective approach. The standard may be adopted earlier. The Company is in the process of assessing the effects of the application of the new guidance on the Company's financial statements.

On November 17, 2016, the FASB issued Accounting Standards Update 2016-18 (ASU 2016-18), Statement of Cash Flows: Restricted Cash. This ASU provides guidance on the classification of restricted cash in the statement of cash flows. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2017, and may be adopted using either a full retrospective or a modified retrospective approach. The standard may be adopted earlier. The Company is in the process of assessing the impact on its financial statements from the adoption of the new guidance.

On January 5, 2017, the FASB issued a Accounting Standards Update 2017-01 (ASU 2017-01), Business Combinations (Topic 805) Clarifying the Definition of a Business, that changes the definition of a business to assist entities with evaluating when a set of assets acquired or disposed of should be considered a business. The new standard requires an entity to evaluate if substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set would not be considered a business. The new standard also requires a business to include at least one substantive process and narrows the definition of outputs. The Company expects that these provisions will reduce the number of transactions that will be considered a business. The new standard is effective for interim and annual periods beginning on January 1, 2018, and may be adopted earlier. The standard would be applied prospectively to any transaction occurring on or after the adoption date. The Company is currently evaluating the impact that this new standard will have on the Company's consolidated financial statements.

On January 26, 2017, the FASB issued a Accounting Standards Update 2017-04 (ASU 2017-04), Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, that eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The new standard is effective for interim and annual periods beginning on January 1, 2017, with early adoption permitted. The standard would be applied prospectively to any transaction occurring on or after the adoption date. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

On February 22, 2017, the FASB issued a Accounting Standards Update 2017-05 (ASU 2017-05), Other Income – Gains and Losses from the Derecognition of Non-financial Assets, that clarifies the scope of the derecognition of non-financial assets, defines in substance financial assets, adds guidance for partial sales of non-financial assets and clarifies the recognition of gains and losses from the transfer of non-financial assets in contracts with non-customers. The new standard is effective for interim and annual periods beginning after December 15, 2017, and may be adopted using either a full retrospective or a modified retrospective approach. The Company is required to adopt the amendments in this standard at the same time that the amendments in ASU 2014-09 are adopted. The Company is evaluating the impact of the adoption of this standard on the Company’s consolidated financial statements.

On March 30, 2016, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606).This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Subsequently, FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which contains certain practical expedients in response to identified implementation issues. This guidance will become effective for the Company in the first quarter of 2018. Companies may use either a full retrospective or a modified retrospective approach to adopt these ASUs. Management is currently evaluating these ASUs, including which transition approach to use, if needed. The Company does not expect these ASUs to materially impact the Company's consolidated net income, financial position or cash flows.

On May 10, 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting.” ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. ASU 2017-09 is effective for the Company beginning in fiscal 2019. The Company is evaluating the impact of the adoption of this guidance on its financial statements but does not expect it to have a material impact.

On July 13, 2017, the FASB issued ASU 2017-09, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815),” which outlines the change of the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part I of this ASU are effective for the Company as of January 1, 2019. The Company is evaluating the impact of the adoption of this standard on the Company’s consolidated financial statements.