1.Organization and Description of Business

Organization

Jones Energy, Inc. (the “Company”) was formed in March 2013 as a Delaware corporation to become a publicly-traded entity and the holding company of Jones Energy Holdings, LLC (“JEH”). As the sole managing member of JEH, the Company is responsible for all operational, management and administrative decisions relating to JEH’s business and consolidates the financial results of JEH and its subsidiaries.

JEH was formed as a Delaware limited liability company on December 16, 2009 through investments made by the Jones family and through private equity funds managed by Metalmark Capital and Wells Fargo Energy Capital (collectively, the “Pre-IPO owners”). JEH acts as a holding company of operating subsidiaries that own and operate assets that are used in the exploration, development, production and acquisition of oil and natural gas properties.

The Company’s certificate of incorporation authorizes two classes of common stock, Class A common stock and Class B common stock. The Class B common stock is held by the owners of JEH prior to the Company’s initial public offering (“IPO”) and can be exchanged (together with a corresponding number of units representing membership interests in JEH (“JEH Units”)) for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. The Class B common stock has no economic rights but entitles its holders to one vote on all matters to be voted on by the Company’s stockholders generally. As a result of the IPO and as of October 30, 2015, the Pre-IPO owners had 74.7% and 50.6%, respectively, of the total economic interest in JEH, but with no voting rights or management power over JEH, resulting in the Company reporting this ownership interest as a non-controlling interest.

Description of Business

The Company is engaged in the exploration, development, production and acquisition of oil and natural gas properties in the mid-continent United States. The Company’s assets are located within the Anadarko and Arkoma basins of Texas and Oklahoma, and are owned by JEH and its operating subsidiaries. The Company is headquartered in Austin, Texas.

Restatement of Previously Issued Financial Statements

In conjunction with our 2014 year-end audit and the preparation of our annual Form 10-K, we identified an error in our previously issued 2014 quarterly financial statements which would have been material to such statements if not restated. We recorded the adjustments on a quarterly basis in the prior periods. The Consolidated Statement of Operations for the three and nine months ended September 30, 2014 were restated to record $2.6 million and $7.0 million, respectively, of additional depletion, depreciation and amortization expense and net income was reduced by $2.2 million and $6.2 million accordingly. The impact of the restatement to the three and nine month periods ended September 30, 2014 are summarized in the table below:

	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
(in thousands)	As Reported		As Restated		As Reported		As Restated
Oil and gas properties	$	1,533,704	$	1,526,735	$	1,533,704	$	1,526,735
Depletion, depreciation and amortization	$	47,965	$	50,491	$	130,521	$	137,490
Operating income	$	28,757	$	26,231	$	103,331	$	96,362
Net income (loss)	$	52,230	$	50,025	$	52,434	$	46,279
Net income (loss) attributable to non-controlling interests	$	42,701	$	40,893	$	42,879	$	37,835
Net income (loss) attributable to controlling interests	$	9,529	$	9,132	$	9,555	$	8,444
Basic earnings (loss) per share	$	0.76	$	0.73	$	0.76	$	0.68
Diluted earnings (loss) per share	$	0.76	$	0.73	$	0.76	$	0.68

Revision of Previously Issued Financial Statements

During the first quarter of 2015, we identified an error in our previously issued Form 10-K for the year ended December 31, 2014 related to the over accrual for production taxes which would have been material to the first quarter and could be material to projected 2015 annual results if recorded as an out of period adjustment in such period. Therefore we will revise our Consolidated Statement of Operations for the year and quarter ended December 31, 2014 in the December 31, 2015 Form 10-K to reduce Production Taxes by $1.6 million and increase Income Tax Provision by $0.1 million related to an accrual for production taxes that was not properly reversed at December 31, 2014. As a result, net income will be increased for the year and quarter ended December 31, 2014 by $1.5 million, resulting in an increase in earnings per share of $0.02. The balance sheet impacts of the revision, which are reflected in this Form 10-Q, are included in the table below. This revision had no impact on our net cash provided by operations in our Consolidated Statement of Cash Flows for the nine months ended September 30, 2014. We have determined that this error is not material to the consolidated financial statements of any prior period presented.

In addition, we identified an error in our previously issued Form 10-K for the year ended December 31, 2014 related to the exchange of Class B shares for Class A shares. Therefore we revised our Consolidated Balance Sheet and Statement of Changes in Stockholders’ Equity for the year ended December 31, 2014 as noted in the table below. This revision had no impact on Class A or Class B shares outstanding at December 31, 2014. We have determined that this error is not material to the consolidated financial statements of any prior period presented.

	December 31, 2014				Exchange of Class B			December 31, 2014
	As Reported		Production tax		shares			As Revised
Accounts Receivable, Oil and gas sales	$	49,861	$	1,621				$	51,482
Deferred tax liabilities	$	26,612	$	144				$	26,756
Additional paid in capital	$	177,133			$	1,630		$	178,763
Retained earnings	$	38,682	$	268				$	38,950
Non-controlling interest	$	636,366	$	1,209	$	(1,630	)	$	635,945