UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
OR
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange in which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of February 6, 2023, there were shares of the issuer’s Class A Common Stock outstanding.
TABLE OF CONTENTS
| 2 |
cautionary notice regarding forward-looking statements
Statements in this Quarterly Report and in any documents incorporated by reference herein which are not purely historical, or which depend upon future events, may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “potential,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “will likely,” “would,” or the negative of such words and/or similar expressions. However, not all forward-looking statements contain these words.
Readers should not place undue reliance upon the Company’s forward-looking statements since such statements speak only as of the date they were made. Such forward-looking statements may refer to events that ultimately do not occur, or may occur to a different extent, or occur at a different time than such forward-looking statements describe. Except to the extent required by federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements contained in this Quarterly Report and in any documents incorporated by reference herein, whether as a result of new information, future events, or otherwise. The Company acknowledges that all forward-looking statements involve risks and uncertainties that could cause actual events and/or results to differ materially from the events and/or results described in the forward-looking statements.
| 3 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited financial statements: condensed consolidated balance sheet as of December 31, 2022, condensed consolidated statements of operations and comprehensive loss for the three and nine months ended December 31, 2022 and 2021, condensed consolidated statements of cash flows, and condensed consolidated statements of changes in stockholders’ equity (deficit) for the nine months ended December 31, 2022 and 2021, are those of Sharing Services Global Corporation and its subsidiaries.
Index to Unaudited Condensed Consolidated Financial Statements
| 4 |
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2022 | March 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade accounts receivable, net | ||||||||
| Income taxes receivable | ||||||||
| Inventory, net | ||||||||
| Notes receivable, net | ||||||||
| Other current assets, net | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Deferred income taxes, net | ||||||||
| Investment in unconsolidated entities, net | ||||||||
| Investment in marketable securities | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | |||||||
| Accrued sales commission payable | ||||||||
| Employee stock warrants liability | ||||||||
| State and local taxes payable | ||||||||
| Note payable, related party, net of unamortized debt discount and unamortized deferred loan cost of $ | ||||||||
| Accrued and other current liabilities | ||||||||
| Convertible notes payable, related parties, net of
unamortized debt discount and unamortized deferred loan cost of $ | ||||||||
| Total Current Liabilities | ||||||||
| Settlement liability, long term portion | ||||||||
| Lease liability, long-term | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ par value, shares authorized: | ||||||||
| Series A convertible preferred stock, $ par value, shares designated, shares issued and outstanding as of December 31, 2022, and March 31, 2022, respectively | ||||||||
| Series B convertible preferred stock, $ par value, shares issued and outstanding at December 31 and March 31, 2022 | ||||||||
| Series C convertible preferred stock, $ par value, shares designated, shares issued and outstanding at December 31 and March 31, 2022, respectively | ||||||||
| Class A common stock, $ par value, shares designated, shares and shares issued and outstanding at December 31 and March 31, 2022, respectively | ||||||||
| Class B common stock, $ par value, shares designated, shares issued and outstanding | ||||||||
| Treasury Stock, shares, at cost | ( | ) | ||||||
| Additional paid in capital | ||||||||
| Shares to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on employee warrants liability | ||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Unrealized gain (loss) on investment | ( | ) | ( | ) | ||||||||||||
| Other non-operating income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision (benefit) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per share: | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation gain | ( | ) | ( | ) | ||||
| Deferred income tax benefit | ( | ) | ||||||
| Amortization of debt discount and other | ||||||||
| Gain on extinguishment of debt | ( | ) | ( | ) | ||||
| Intangible asset impairment | ||||||||
| Bad debt expense | ( | ) | ||||||
| Unrealized loss (gain) on investments | ( | ) | ||||||
| Provision for obsolete inventory | ||||||||
| Changes in operating assets and liabilities: | - | |||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Income taxes payable | ( | ) | ||||||
| Lease liability | ( | ) | ||||||
| Accrued and other liabilities | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Payments for property and equipment and other assets | ( | ) | ( | ) | ||||
| Issuance of notes receivable | ( | ) | ( | ) | ||||
| Purchase of marketable securities | ( | ) | ||||||
| Collection of notes receivable | ||||||||
| Cash paid for asset purchase | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Retirement of loan | ( | ) | ||||||
| Net proceeds from issuance of promissory notes | ||||||||
| Common stock received on litigation settlement | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from convertible notes | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| IMPACT OF CURRENCY RATE CHANGES ON CASH | ( | ) | ( | ) | ||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemented disclosure of non-cash investing and financing activities: | ||||||||
| Stock issued for financing fees and prepaid interest on debt | $ | $ | ||||||
| Investment origination fee collected in shares of investee stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Class A and Class B Common Stock | Additional | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Number | Paid | Shares | Other | ||||||||||||||||||||||||||||||||||||||||||||||||||
| of | Par | of | Par | of | Par | of | Par | in | to be | Treasury | Accumulated | Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Issued | Stock | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||
| Balance – March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||
| Refinancing of debt and detachable warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of shares of Common Stock | - | ( | ) | ( | ) | $ | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Class A and Class B Common Stock | Additional | Cumulative | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares |
Par Value |
Number of Shares |
Par Value |
Number of Shares |
Par Value |
Number of Shares |
Par Value |
Paid in Capital |
Shares to be Issued | Accumulated Deficit |
Translation Adjustments |
Total | ||||||||||||||||||||||||||||||||||||||||
| Balance – March 31, 2021 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | - | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for deferred financing costs and prepaid interest on debt | - | - | - | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||
| Conversions or retirements of preferred stock | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of debt with beneficial conversion feature and in-the-money stock warrant, net of tax | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Expiration of common stock puts | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stock warrants exercised | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS
Description of Operations
Sharing Services Global Corporation and subsidiaries (“Sharing Services” or the “Company”) aim to build shareholder value by developing or acquiring businesses, products and technologies in the direct selling industry and other industries that augment the Company’s product and services portfolio, business competencies, and geographic reach.
The Company was incorporated in the State of Nevada in April 2015.
Health and Wellness Products - The Company’s subsidiaries operating in the health and wellness products industry, which accounted for substantially all the Company’s consolidated net sales during the periods included in this Quarterly Report, market their products primarily through an independent sales force, using a direct selling business model under the proprietary brand “The Happy Co.” Currently, The Happy Co.TM markets and distributes its health and wellness products primarily in the United States, Canada, the Republic of Korea, and other countries in the Asia Pacific region.
Subscription-Based Travel Services - Through its subsidiary, Hapi Travel Destinations (“MyTravelVentures” or “MTV”), the Company delivers subscription-based travel services. MyTravelVentures’ services are designed to offer the deepest discounts for travel relating to airfare, cruises, hotels, resorts, time shares and rental cars for destinations throughout the world for people of all ages, demographics, and economic backgrounds. MTV will also provide entrepreneurial opportunities to its subscribers by capitalizing on both the direct selling model and the retail travel business model.
Company-Owned and Franchised Cafes – Sharing Services has entered into a Master Franchise Agreement (“MFA”) to acquire the exclusive franchise rights in North America to the brand “Hapi Café” from Hapi Café, Inc., a company affiliated with Heng Fai Ambrose Chan, a Director of the Company. Under the MFA, Sharing Services, directly or through its subsidiaries, will operate no less than five corporate-owned stores and can offer to the public sub-franchise rights to own and operate other stores. Each corporate-owned or franchised Hapi CaféTM store will allow customers and Brand Partners seeking a healthier lifestyle access to: (a) functional and healthy food and beverages, (b) a pleasant workspace with free Wi-Fi service, (c) physical fitness, nutrition management and personal workout print and video content, and (d) the Company’s proprietary travel services. In August 2022, the Company executed a non-binding letter of intent with American Wealth Mining Corporation (“AWM”, known previously as American Premium Water Corporation), a related party, allowing AWM to be the exclusive franchisee of Hapi Café in the State of New York.
Targeted Ownership Interests – Directly or through its subsidiaries, the Company from time to time will invest in emerging businesses, using a combination of debt and equity financing, in efforts to leverage the Company’s resources and business competencies and to participate in these businesses’ growth. As part of the Company’s commitment to these emerging businesses’ success, the Company, directly or through its subsidiaries, also offers non-traditional inventory financing, equity or debt financing, order fulfillment and logistic, CRM “Back Office” solutions, and other success-critical services to these businesses.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Unless so stated, the disclosures in the accompanying condensed consolidated financial statements do not repeal the disclosures in our consolidated financial statements for year ended March 31, 2022.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
| 9 |
Use of Estimates and Assumptions
The preparation of financial statements in accordance with GAAP requires the use of judgment and requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures about contingent assets and liabilities, if any. Matters that require the use of estimates and assumptions include: the recoverability of notes and accounts receivable, the valuation of inventory, the useful lives of fixed assets, the assessment of long-lived assets for impairment, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, allocation of the transaction price to multiple performance obligations in a sales transaction, the measurement and recognition of right-of-use assets and related lease liabilities, the valuation of stock-based compensation awards, the measurement and recognition of uncertain tax positions, and the valuation of loss contingencies, if any. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our consolidated financial statements are reasonable.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash
equivalents include recent customer remittances deposited with our merchant processors at the balance sheet date, which generally settle
within 24 to 72 hours. As of December 31, 2022, and March 31, 2022, cash and cash equivalents included cash held by our merchant processors
of approximately $
Notes Receivable
On
August 29, 2022, the Company and 1044Pro LLC (“1044”) entered in an agreement to modify the Revolving Promissory Note dated
January 22, 2022. In accordance with the amendment, the Company agreed to lend $
At
December 31, 2022 and March 31, 2022, notes receivable were $
Investment in Marketable Securities
The
Company has invested in a marketable security that can easily be bought, sold, or traded on public exchanges. The investment is carried
at fair market. Unrealized gains and losses have been recorded in the Company’s consolidated statements of operations. At December
31, 2022, the investment was valued at approximately $
Inventory
Inventory
consists of finished goods and promotional materials and are stated at the lower of cost, determined using the first-in, first-out (“FIFO”)
method, or net realizable value. The Company periodically assesses its inventory levels when compared to current and anticipated sales
levels. As of December 31, 2022, and March 31, 2022, the allowance for obsolete inventory was $
Other Assets
Other
assets include a multi-user license and code of a back-office platform that was acquired for $
| 10 |
Note Payable
In
May 2020, the Company was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $
On
June 15, 2022, Linden Real Estate Holdings, LLC, a wholly owned subsidiary of the Company, American Pacific Bancorp, Inc. (“APB”),
and the Company entered into a Loan Agreement pursuant to which APB loaned the Company approximately $
On
August 11, 2022, the Company executed a revolving credit promissory note with APB (“the APB Revolving Note”) pursuant to
which the Company has access to advances with a maximum principal balance not to exceed the principal sum of $
Foreign Currency Translation
As part of our strategic growth plan initiatives, we have expanded our operations outside the United States. The functional currency of each of our foreign operations is generally the respective local currency. Balance sheet accounts are translated into U.S. dollars (our reporting currency) at the rates of exchange in effect at the balance sheet date, while the results of operations and cash flows are generally translated using average exchange rates for the periods presented. Individual material transactions, if any, are translated using the actual rate of exchange on the transaction date. The resulting translation adjustments are reported in accumulated other comprehensive loss in our condensed consolidated balance sheets.
| South Korean Won per USD | ||||
| Exchange rate as of December 31, 2022 | ||||
South Korean Won per USD | ||||||||
| Three Months Ended December 31, 2022 | Nine Months Ended December 31, 2022 | |||||||
| Average exchange rate as of December 31, 2022 | ||||||||
Comprehensive Loss
For the three and nine months ended December 31, 2022, and 2021, the Company’s comprehensive loss was comprised of currency translation adjustments and net loss.
Revenue Recognition
As
of December 31, 2022, and March 31, 2022, deferred sales associated with product invoiced but not received by customers was $
| 11 |
During
the three and nine months ended December 31, 2022, no individual customer, or affiliated group of customers, represented 10% or more
of the Company’s consolidated net sales, and approximately
During
the nine months ended December 31, 2022, approximately
During
the nine months ended December 31, 2021, approximately
During
the nine months ended December 31, 2022, and December 31, 2021, approximately
During
the three months ended December 31, 2022, substantially all of the Company’s consolidated net sales were from health and wellness
products (including approximately
During
the nine months ended December 31, 2022, substantially all of consolidated net sales were from health and wellness products (including
approximately
During
the nine months ended December 31, 2022, over
Sales Commissions
The
Company recognizes sales commission expense, when incurred, in accordance with GAAP. During the three months ended December 31, 2022,
and 2021, sales commission expense, which is included in selling and marketing expenses in our consolidated statements of operations
and comprehensive loss, was $
Recently Issued Accounting Standards - Recently Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires that an entity recognize a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, and (d) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation for the interim period that includes the enactment date. The Company adopted ASU 2019-12 effective April 1, 2021, and adoption did not have a material impact on its consolidated financial statements.
| 12 |
Recently Issued Accounting Standards - Pending Adoption
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer must be separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal quarter beginning on April 1, 2024. Early adoption is permitted, subject to certain limitations. The Company is evaluating the potential impact of adoption on its consolidated financial statements.
We calculate basic loss per share by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share is calculated similarly but reflects the potential impact of shares issuable upon the conversion or exercise of outstanding convertible preferred stock, convertible notes payable, stock warrants and other commitments to issue common stock, except where the impact would be anti-dilutive.
The calculation of diluted loss per share also reflects an adjustment to net loss for the potential reduction to a reporting period’s interest expense, net of applicable income tax, which would result if the Company’s convertible notes payable were converted at the beginning of such reporting period.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||||||
| Net loss, as reported | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | |||||
| After tax interest adjustment | ||||||||||||||||
| Net loss, if-converted basis | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average basic shares | ||||||||||||||||
| Dilutive securities and instruments: | ||||||||||||||||
| Convertible preferred stock | ||||||||||||||||
| Convertible notes | ||||||||||||||||
| Stock options and warrants | ||||||||||||||||
| Weighted average diluted shares | ||||||||||||||||
| Loss per share: | ||||||||||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| December 31, 2022 | December 31, 2021 | |||||||
| Convertible preferred stock | ||||||||
| Convertible notes payable | ||||||||
| Stock warrants | ||||||||
| Total potential incremental shares | ||||||||
The preceding table does not include for both stock warrants held by employees which are not vested (or exercisable) at December 31, 2022 and at December 31, 2021, respectively.
| 13 |
NOTE 4 – INVENTORY, NET
Inventory consists primarily of finished goods. The Company provides an allowance for slow-moving, damaged, expired or expiring inventory. As of December 31, 2022, and March 31, 2022, inventory consists of the following:
December 31, 2022 | March 31, 2022 | |||||||
| Finished Goods | $ | $ | ||||||
| Allowance for inventory obsolescence | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The
Company allowance for inventory obsolescence for the nine months ended December 31, 2022, and December 31, 2021, was $
On
July 5, 2022, the Company entered into an asset purchase agreement with Hulsa LLC. The Company purchased assets, inclusive of inventory
and intangible assets. The Company paid $
NOTE 5 – OTHER CURRENT ASSETS, NET
Other current assets consist of the following:
| December 31, 2022 | March 31, 2022 | |||||||
| Prepaid consulting fees, related party | $ | $ | ||||||
| Inventory-related deposits | ||||||||
| Prepaid insurance and other operational expenses | ||||||||
| Deposits for sales events | ||||||||
| Right to recover asset | ||||||||
| Subtotal | ||||||||
| Less: allowance for losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Prepaid
consulting fees represent the fair value on the grant date of stock warrants issued to DSS in January 2022 for consulting services to
be rendered over a year from the issue date (see Note 12 – Related Party Transactions). Prepaid insurance and other operational
expenses primarily consist of payments for goods and services (such as freight, trade show expenses and insurance premiums) which are
expected to be realized in the next operating cycle. Right to recover asset is associated with our customers’ right of return and
is expected to be realized in one year or less. As of both December 31, 2022, and March 31, 2022, the provision for losses in connection
with certain inventory-related deposits for which recoverability is less than certain was $
NOTE 6 – INVESTMENT IN UNCONSOLIDATED ENTITIES, NET
In
September 2021, the Company, Stemtech Corporation (“Stemtech”) and Globe Net Wireless Corp. (“GNTW”) entered
into a Securities Purchase Agreement (the “SPA”) pursuant to which the Company invested $
| 14 |
The
Company carries its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock at fair value in accordance
with GAAP. During the three and nine months ended December 31, 2022, the Company recognized losses, before income tax, of $
In
September 2021, the Company entered into a Membership Unit Purchase Agreement pursuant to which the Company acquired a
On a quarterly basis, the Company evaluates the recoverability of its investments and reviews current economic trends to determine the adequacy of its allowance for impairment losses based on each investee financial performance data and other relevant information. An estimate for impairment losses is recognized when recovery in full of the Company’s investment is no longer probable. Investment balances are written off against the allowance after the potential for recovery is considered remote. In March of 2022, the company impaired the MojiLife investment as the evaluation at such time determined the investment was not fully recoverable.
Investment in unconsolidated entities and securities consists of the following:
December 31, 2022 | March 31, 2022 | |||||||
| Investment in detachable GNTW stock warrant | $ | $ | ||||||
| Investment in GNTW common stock | ||||||||
| Investment in Stemtech convertible note | ||||||||
| Investment in MojiLife, LLC | ||||||||
| Subtotal | ||||||||
| Less, allowance for impairment losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The following table reflects the activity in the allowance for impairment losses for the periods presented:
| December 31, 2022 | March 31, 2022 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Provision for estimated impairment losses | ||||||||
| Balance at end of period | $ | $ | ||||||
NOTE 7 – PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
| December 31, 2022 | March 31, 2022 | |||||||
| Building and building improvements | $ | $ | ||||||
| Computer software | ||||||||
| Furniture and fixtures | ||||||||
| Computer equipment | ||||||||
| Vehicles | ||||||||
| Leasehold improvements and other | ||||||||
| Total property and equipment | ||||||||
| Impairment of property and equipment | ( | ) | ||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 15 |
NOTE 8 - OTHER ASSETS
In
July 2022, the Company acquired a multi-user license of a back-office platform for $
NOTE 9 – ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following:
| December 31, 2022 | March 31, 2022 | |||||||
| Deferred sales | $ | $ | ||||||
| Liability associated with uncertain tax positions | ||||||||
| Payroll and employee benefits | ||||||||
| Settlement liability, current portion | ||||||||
| Lease liability, current portion | ||||||||
| Due to related parties | ||||||||
| Other operational accruals | ||||||||
| $ | $ | |||||||
Lease
liability, current portion, represent obligations due within one year under operating leases for office space, automobiles, and office
equipment. See Note14 - LEASES below for more information. Other operational accruals as
of December 31, 2022, include accrued expense of $
NOTE 10 - CONVERTIBLE NOTES PAYABLE, RELATED PARTIES
Convertible notes payable consists of the following:
| Issuance Date | Maturity Date | Interest Rate | Conversion Price (per share) | December 31, 2022 | March 31, 2022 | |||||||||||||
| % | $ | $ | $ | |||||||||||||||
| % | $ | |||||||||||||||||
| % | $ | |||||||||||||||||
| Total convertible notes payable | ||||||||||||||||||
| Less: unamortized debt discount and deferred financing costs | ||||||||||||||||||
| Less: current portion of convertible notes payable | ||||||||||||||||||
| Long-term convertible notes payable | $ | $ | ||||||||||||||||
The Company’s convertible notes are convertible, at the option of the holder, into shares of the Company’s Common Stock at the conversion prices shown above.
In
October 2017, the Company issued a Convertible Promissory Note in the principal amount of $
| 16 |
On
April 5, 2021, the Company and Decentralized Sharing Systems, Inc. (“DSSI”) entered into a Securities Purchase Agreement,
pursuant to which the Company issued: (a) a Convertible Promissory Note in the principal amount of $
In
connection with the issuance of the Note and the detachable Warrant, the Company allocated $
On
June 15, 2022, the Company and DSSI which, together with DSS, is a majority shareholder of the Company, entered into an agreement pursuant
to which the Company issued, to DSSI: (a) a two-year Convertible, Advancing Promissory Note in the principal amount of $
During
the three months ended December 31, 2022, and December 31, 2021, interest expense in connection with the Company’s convertible
notes was $
NOTE 11 – INCOME TAXES
The statutory rates for our domestic and our material foreign operations are as follows for the periods shown:
| Country | 2022 | 2021 | ||||||
| United States | % | % | ||||||
| Republic of Korea | % | % | ||||||
| 17 |
Our consolidated effective income tax rate reconciliation is as follows:
| Nine Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Federal statutory rate | % | % | ||||||
| State and local income taxes | ( | ) | ( | ) | ||||
| Valuation allowance for NOL carry-forwards | ( | ) | ( | ) | ||||
| Stock warrant transactions and other items | ( | ) | ||||||
| Effective income tax rate | ( | )% | ( | )% | ||||
Income taxes applicable to our foreign operations are not material in the periods presented.
NOTE 12 - STOCKHOLDERS’ EQUITY
Common Stock
During
the nine months ended December 31, 2022, the Company issued to DSSI: (a) a two-year Convertible, Promissory Note in the principal
amount of $
In
May 2022, the Company and certain of its subsidiaries, on the one hand, and Alchemist, the former officer and certain entities affiliated
with the former officer, on the other hand, entered into a Confidential Settlement Agreement with Mutual Releases (the “May 2022
Settlement Agreement”) pursuant to which the parties amicably settled all claims and disputes among them; (b) the former officer
sold to the Company shares of the Company’s common stock then under the voting and dispositive control of the former
officer; (c) the Company made a one-time payment of $
At
the Annual Meeting, the Company’s Shareholders ratified the Third Amended and Restated Articles of Incorporation of the Company
and approved the maximum number of shares which the Corporation shall have the authority to issue of Two Billion Two Hundred Million
(
The Company’s Board of Directors has designated shares of Class B Common Stock, par value per share. As of December 31, 2022, and March 31, 2022, there were and shares of the Company’s Class A Common Stock issued. As of December 31, 2022, and March 31, 2022, there were shares and shares, respectively, net of shares held in Treasury Stock at December 31, 2022, of the Company’s Class A Common Stock outstanding. As of December 31, 2022, and March 31, 2022, there were shares of the Company’s Class B Common Stock issued and outstanding.
NOTE 13 - RELATED PARTY TRANSACTIONS
Decentralized Sharing Systems, Inc.
In July 2020, the Company and Heng Fai Ambrose Chan, a Director of the Company, entered into a Stock Purchase and Share Subscription Agreement (the “SPA Agreement”) pursuant to which Mr. Chan invested $ million in the Company and the Company agreed to issue million shares of the Company’s Class A Common Stock and a fully vested Stock Warrant to purchase up to million shares of the Company’s Class A Common Stock at an exercise price of $ per share. Concurrently with the SPA Agreement, Mr. Chan and DSS, then a major shareholder of the Company, entered into an Assignment and Assumption Agreement pursuant to which Mr. Chan assigned to DSS all interests in the SPA Agreement. In July 2020, the Company issued million of its Class A Common Stock pursuant to the SPA Agreement. The Stock Warrant issued pursuant to the SPA Agreement expires on the third anniversary from the issuance date, unless exercised earlier.
| 18 |
In
April 2021, the Company and DSSI entered into a Securities Purchase Agreement, pursuant to which DSSI granted a $
In December 2021, the Company and DSSI entered into a Stock Purchase and Share Subscription Agreement pursuant to which DSSI invested $ in the Company in exchange for million shares of Class A Common Stock (the “Shares”) and stock warrants (the “Stock Warrants”) to purchase up to million shares of the Company’s Class A Common Stock. The Stock Warrants are fully vested, have a term of five () years and are exercisable at any time prior to expiration, at the option of DSSI, at a per share price equal to $. On the effective date of the Stock Purchase and Share Subscription Agreement, the closing price for the Company’s common stock was $ per share and the Company recognized a deemed dividend of $ million in connection with the transaction.
In
January 2022, the Company and DSS who, together with its subsidiaries, is currently a majority shareholder of the Company, entered into
a one-year Business Consulting Agreement (the “Consulting Agreement”) pursuant to which DSS will provide to the Company certain
consulting services, as defined in the Consulting Agreement. The Consulting Agreement may be terminated by either party on a 60-day’s
written notice. In connection with the Consulting Agreement, the Company agreed to pay DSS a flat monthly fee of sixty thousand dollars
($
On
June 15, 2022, the Company and Decentralized Sharing Systems, Inc. (“DSSI”) entered into a Securities Purchase Agreement
(the “SPA”), pursuant to which the Company issued: (a) a Convertible Promissory Note in the principal amount of $
In
connection with the loan, the Company agreed to pay to DSSI a loan Origination Fee of $
As of December 31, 2022, DSS and its affiliates owned, in the aggregate, million shares of the Company’s Class A Common Stock, excluding million shares issuable upon the exercise of warrants held by DSS and million shares issuable upon conversion of the Note discussed in the third preceding paragraph. Heng Fai Ambrose Chan, Frank D. Heuszel, and John (“JT”) Thatch, each a Director of the Company, also serve on the Board of Directors of DSS. Mr. Chan serves as Chairman of the Board of Directors of the Company. Mr. Thatch also serves as President, CEO and Vice Chairman of the Board of Directors of the Company.
HWH International, Inc.
In
October 2017, Sharing Services issued a Convertible Promissory Note in the principal amount of $
| 19 |
HWH World, Inc.
A
subsidiary of the Company operating in the Republic of Korea subleases office space from HWH World, Inc. (“HWH World”), a
subsidiary of DSS and a company affiliated with Heng Fai Ambrose Chan, a Director of the Company. Pursuant to the terms of the sublease
agreement, the Company recognized a right-of-use asset and an operating lease liability of $
In
September 2021, the Company and HWH World entered into an Advisory Agreement pursuant to which the Company provides strategic advisory
services to HWH World in connection with its North America expansion plans in exchange for a monthly fee of $
Impact Biomedical, Inc. and DSS BioHealth Holdings Inc.
In
the fiscal year ended March 31, 2022, a wholly owned subsidiary of the Company purchased health and wellness products from Impact Biomedical,
Inc., a subsidiary of DSS, in the aggregate amount of $
K Beauty Research Lab. Co., Ltd
In
the fiscal year ended March 31, 2022, a wholly owned subsidiary of the Company purchased skin care products manufactured by K Beauty
Research Lab. Co., Ltd (“K Beauty”), a South Korean-based supplier of skin care products that is affiliated with Heng Fai
Ambrose Chan, a Director of the Company, in the aggregate amount of $
Premier Packaging Corporation
Premier
Packaging Corporation is a wholly owned subsidiary of the Company. Purchase orders to Premier Packaging Corporation, a subsidiary of
DSS, to acquire printed packaging materials in the aggregate amount was $
Alchemist Holdings, LLC
In February 2020, the Company, Alchemist Holdings, LLC (“Alchemist”), and a former Company officer entered into a Settlement Accommodation Agreement (the “Accommodation Agreement”) pursuant to which Alchemist and the former Company officer agreed to transfer to the Company million shares of the Company’s Common Stock held by Alchemist, in settlement of certain obligations to the Company. Under the terms of the Accommodation Agreement, Alchemist and the former Company officer also agreed to transfer to the Company million shares of the Company’s Common Stock held by Alchemist, to offset certain legal and other expenses incurred by the Company in connection with various related-party legal claims. Accordingly, in the fiscal year ended March 31, 2021, the Company and Alchemist caused the transfer to the Company, in the aggregate, of million shares of the Company’s Common Stock then held by Alchemist, and the Company retired such redeemed shares.
In
May 2022, the Company and certain of its subsidiaries, on the one hand, and Alchemist, the former officer and certain entities affiliated
with the former officer, on the other hand, entered into a Confidential Settlement Agreement with Mutual Releases (the “May 2022
Settlement Agreement”) pursuant to which the parties amicably settled all claims and disputes among them; (b) the former officer
sold to the Company shares of the Company’s common stock then under the voting and dispositive control of the former
officer; (c) the Company made a one-time payment of $
| 20 |
The
Company subleases warehouse and office space from Alchemist, until May 2022, a
American Wealth Mining Corporation (formerly, American Premium Water Corporation)
In
July 2021, the Company, and American Premium Water Corporation (“American
Premium”) entered into a business consulting agreement pursuant to which the Company provides consulting services to American
Premium in exchange for a monthly fee of $
In August 2022, the Company executed a non-binding letter of intent with American Wealth Mining Corporation (“AWM”), a related party, allowing AWM to be the exclusive franchisee of Hapi Café in the State of New York.
Alset Title Company, Inc.
In
December 2021, Sharing Services, through one of its subsidiaries, purchased an office building in Lindon, Utah for $
Hapi Café, Inc.
In November 2021, Sharing Services and Hapi Café, Inc., a company affiliated with Heng Fai Ambrose Chan, a Director of the Company, entered into a Master Franchise Agreement pursuant to which Sharing Services acquired the exclusive franchise rights in North America to the brand “Hapi Café.” Under the terms, Sharing Services, directly or through its subsidiaries, has the right to operate no less than five (5) corporate-owned stores and can offer to the public sub-franchise rights to own and operate other stores, subject to the terms and conditions contained in the Master Franchise Agreement.
American Pacific Bancorp
On
June 15, 2022, Sharing Services, through one of its subsidiaries, entered into a secured real estate promissory note with American Pacific
Bancorp, Inc. (“APB”), and the Company entered into a Loan Agreement pursuant to which APB loaned the Company approximately
$
On
August 11, 2022, the Company executed a revolving credit promissory note with APB (“the APB Revolving Note”) pursuant to
which the Company has access to advances with a maximum principal balance not to exceed the principal sum of $
Stock Warrants
Stock Warrants Issued to Directors, Officers and Employees
In July 2020, the Company and Heng Fai Ambrose Chan, a Director of the Company, entered into a Stock Purchase and Share Subscription Agreement (the “SPA Agreement”) pursuant to which Mr. Chan invested $ million in the Company in exchange for million shares of the Company’s Class A Common Stock and a fully vested Stock Warrant to purchase up to million shares of the Company’s Class A Common Stock at an exercise price of $ per share. In July 2020, Mr. Chan assigned to DSS all interests in the SPA Agreement and the transactions contemplated in the SPA Agreement were completed. Mr. Chan is also a Director of DSS.
In
October 2017, the Company issued a convertible note in the principal amount of $
| 21 |
During fiscal year 2020, subsidiaries of the Company entered multi-year employment agreements with its key employees. In general, each employment contract contained a fully vested initial grant of warrants exercisable at a fixed exercise price and, provided for subsequent grants that were exercisable at a discounted price based on the 10-day average stock price determined at the time of exercise. The subsequent grants would vest at each anniversary date of the employment agreement effective date. The Company begins recognizing the compensatory nature of the warrants at the service inception date and ceases recognition at the vesting date. Due to the variable nature of the exercise price for some grants, the Company will continue to recognize expense (or benefit) after the end of the service period until the warrants are exercised or expire. As such, the Company disclosures below are based on either (i) the fixed exercise price of the warrant; or (ii) the variable exercise price of the warrant as determined on the last day of the period.
During
the three months ended December 31, 2022, and 2021, the Company recognized a compensatory gain of $
NOTE 15 – LEASES
The Company leases space for its offices and warehouse space, under lease agreements classified as “operating leases’” as defined in ASC Topic 842.
The
Company leases space for its corporate headquarters, warehouse space, automobiles, and office and other equipment, under lease agreements
classified as operating leases. The Company has remaining lease terms of approximately
The following information pertains to the Company’s leases as of the balance sheet dates indicated:
| Assets | Classification | December 31, 2022 | March 31, 2022 | |||||||
| Operating leases | Right-of-use assets, net | $ | $ | |||||||
| Total lease assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Operating leases | Accrued and other current liabilities | $ | $ | |||||||
| Operating leases | Lease liability, long-term | |||||||||
| Total lease liabilities | $ | $ | ||||||||
The following information pertains to the Company’s leases for the periods indicated:
Three Months Ended December 31, | ||||||||||
| Lease cost | Classification | 2022 | 2021 | |||||||
| Operating lease cost | General and administrative expenses | $ | $ | |||||||
| Operating lease cost | Depreciation and amortization | |||||||||
| Operating lease cost | Interest expense, net | |||||||||
| Total lease cost | $ | $ | ||||||||
Nine Months Ended December 31, | ||||||||||
| Lease cost | Classification | 2022 | 2021 | |||||||
| Operating lease cost | General and administrative expenses | $ | $ | |||||||
| Operating lease cost | Depreciation and amortization | |||||||||
| Operating lease cost | Interest expense, net | |||||||||
| Total lease cost | $ | $ | ||||||||
| 22 |
The Company’s lease liabilities are payable as follows:
| Twelve months ending September 30, | Amount | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total remaining payments | ||||
| Less imputed interest | ||||
| Total lease liability | $ | |||
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Legal Matters in General
The Company has incurred several claims in the normal course of business. The Company believes such claims can be resolved without any material adverse effect on our consolidated financial position, results of operations, or cash flows.
The Company maintains certain liability insurance. However, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims, in whole or in part. The Company accrues costs to defend itself from litigation as they are incurred.
The outcome of litigation is uncertain, and despite management’s view of the merits of any litigation, or the reasonableness of the Company’s estimates and reserves, the Company’s financial statements could nonetheless be materially affected by an adverse judgment. The Company believes it has adequately reserved for the contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated. No provision for legal matters was deemed necessary at December 31, 2022.
Legal Proceedings
The Company from time to time is involved in various claims and lawsuits incidental to the conduct of its business in the ordinary course. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, results of operations or cash flows.
| (a) | Case No. 4:20-cv-00946; Dennis Burback, Ken Eddy and Mark Andersen v. Robert Oblon, Jordan Brock, Jeff Bollinger, Four Oceans Global, LLC, Four Oceans Holdings, Inc., Alchemist Holdings, LLC, Elepreneurs U.S., LLC, Elevacity U.S., LLC, Sharing Services Global Corporation, Custom Travel Holdings, Inc., and Does 1-5, pending in the United States District Court for the Eastern District of Texas. On December 11, 2020, three investors in Four Oceans Global, LLC filed a lawsuit against the Company, its affiliated entities, and other persons and entities related to an investment made by the three Plaintiffs in 2015. The Company and its affiliated entities filed an answer denying the three investors’ claims. Plaintiffs filed a First Amended Complaint on October 14, 2021. The Company and its affiliated entities responded in November 2021 by filing a Motion to Dismiss the claims contained in the Amended Complaint. The Motion was granted on July 20, 2022, by Court Order dismissing with prejudice the Company and all affiliated entities from the lawsuit. In early August 2022, Plaintiffs on their own motion moved to dismiss all claims against the remaining parties in the case to enable the Order of Dismissal to become an appealable, final Order. On September 7, 2022, Plaintiffs filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit. As of December 31, 2022, the Fifth Circuit had not yet issued a briefing schedule. |
| (b) | Case No. 4:21-cv-00026; Elepreneurs Holdings, LLC d/b/a Elepreneur, LLC, Elepreneurs U.S., LLC d/b/a Elepreneurs, LLC, and SHRG IP Holdings, LLC v. Lori Ann Benson, Andrea Althaus and Lindsey Buboltz, pending in the United States District Court for the Eastern District of Texas. On December 31, 2020, the Company filed suit against three former distributors and obtained injunctive relief from the 429th Judicial District of Collin County, Texas. The lawsuit was removed by the three former distributors to federal court. The Company subsequently obtained injunctive relief from the federal court. The parties settled their disputes, and a Joint Motion for Final Dismissal was filed with the Court on December 31, 2022, requesting the Court to enter a Final Order of Dismissal with Prejudice and close the case. |
| 23 |
| (c) | Case No. 429-01137-2022; Elevacity U.S., LLC d/b/a The Happy Co. and Elepreneurs U.S., LLC d/b/a Elepreneurs, LLC v. Mark Willodson, Judy Willodson and Valentus, Inc., pending in the 429th Judicial District Court of Collin County, Texas. On March 9, 2022, the Company filed suit against a competitor and former distributors. On March 9, 2022, the Company filed suit against a competitor and former distributors. An Agreed Temporary Injunction was entered by the Court against the Willodsons in April 2022. This matter remains pending as of December 31, 2022. |
| (d) | Case No. 4:22-cv-00042; Elevacity U.S., LLC d/b/a The Happy Co. and Elepreneurs U.S., LLC d/b/a Elepreneurs, LLC v. Brian Christopher Schweda, Jr., pending in the United States District Court for the Eastern District of Texas. On January 20, 2022, the Company filed suit against a former distributor. The Defendant filed two motions to dismiss. The Court entered an Order recently denying Defendant’s motion to dismiss for lack of jurisdiction over the Defendant in Texas. As of December 31, 2022, Defendant’s motion to dismiss Plaintiff’s claim of tortious interference remains pending. Regardless of the outcome of that pending motion, the case will move forward with breach of contract claims against the Defendant. The case is pending as of December 31, 2022. |
| (e) | Case No. 9:22-cv-00146; Travel Gig, LLC and Happitravel, LLC v. Sharing Services Global Corporation, SHRG IP Holdings, LLC; Global Travel Destinations, LLC., and Does 1-25, pending in the United States District Court for the District of Montana. On September 7, 2022, Plaintiffs filed a lawsuit against the Company and two affiliated entities alleging trademark infringement concerning the Company’s affiliated travel entity. Plaintiffs filed a motion seeking a Preliminary Injunction and the Court set a hearing on the motion for November 1, 2022. This case was resolved on December 29, 2022, and the Court entered a Dismissal with Prejudice on February 6, 2023. |
| (f) | Case No. 4:22-cv-00047; Elevacity U.S., LLC d/b/a The Happy Co. and Elepreneurs U.S., LLC d/b/a Elepreneurs, LLC v. Kimberley McLean, pending in the United States District Court for the Eastern District of Texas. On January 20, 2022, the Company filed suit against a former distributor. This matter remains pending as of December 31, 2022. |
NOTE 17 - FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
Our financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, investments in unconsolidated entities, accounts payable and convertible notes payable. The carrying amounts of cash equivalents, if any, trade accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.
Consistent with the valuation hierarchy contained in ASC Topic 820, we categorized certain of our financial assets and liabilities as follows:
| December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in unconsolidated entities, net | $ | $ | ||||||||||||||
| Investment in marketable securities | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| March 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in unconsolidated entities, net | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
NOTE 18 - SUBSEQUENT EVENTS
In preparing these unaudited condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to the balance sheet date of December 31, 2022, for potential recognition or disclosure through the date of this report. Except as disclosed below, no other events require adjustment to or disclosure in the Company’s unaudited condensed consolidated financial statements.
| ● | On February 3, 2023, the Company and DSS entered into a mutual release and termination of the business consulting agreement dated January 24, 2022 (the “Consulting Agreement”) effective December 31, 2022 |