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 | ||
| None | None | None |
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 No
As of August 9, 2024, there were shares of the issuer’s common stock outstanding.
TABLE OF CONTENTS
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In this Quarterly Report, references to “the Company,” “Sharing Services,” “our company,” “we,” “our,” “ours,” and “us” refer to Sharing Services Global Corporation and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.
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.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited financial statements: condensed consolidated balance sheet as of June 30, 2024, condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2024 and 2023, condensed consolidated statements of cash flows, and condensed consolidated statements of changes in stockholders’ deficit for the three months ended June 30, 2024 and 2023, are those of Sharing Services Global Corporation and its subsidiaries.
Index to Unaudited Condensed Consolidated Financial Statements
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SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | March 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Inventory, net | ||||||||
| Other current assets, net | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Intangible assets | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other current liabilities | ||||||||
| Accrued sales commission payable | ||||||||
| State and local taxes payable | ||||||||
| Note payable | ||||||||
| Convertible notes payable, related party | ||||||||
| Total Current Liabilities | ||||||||
| Non-current convertible notes payable, related party | ||||||||
| Lease liability, long-term | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Series A convertible preferred stock, $ par value, shares designated, shares issued and outstanding | ||||||||
| Series B convertible preferred stock, $ par value, shares issued and outstanding | ||||||||
| Series C convertible preferred stock, $ par value, shares designated, shares issued and outstanding | ||||||||
| Series D preferred stock, $ par value, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares designated, shares issued and outstanding | ||||||||
| Treasury Stock | ||||||||
| Additional paid in capital | ||||||||
| Shares to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| 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): | ||||||||
| Change in fair value of embedded derivatives | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Gain on extinguishment of debt | ||||||||
| Unrealized loss on investment | ( | ) | ||||||
| Other non-operating income, net | ||||||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss, net of tax: | ||||||||
| Currency translation adjustments | ( | ) | ||||||
| Total other comprehensive gain (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.
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SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| For the Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 | ||||||||
| Amortization of debt discount and other | ||||||||
| Change in fair value of embedded derivatives | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Bad debt expense | ||||||||
| Provision for obsolete inventory | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Income taxes payable | ||||||||
| Lease liability | ||||||||
| Accrued and other liabilities | ||||||||
| Net Cash Used in Operating Activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of convertible notes, related party | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| IMPACT OF CURRENCY RATE CHANGES ON CASH | ||||||||
| 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: | ||||||||
| Sale of commercial real property in exchange for relief from related party loans and other liabilities | $ | $ | ||||||
| Sale of investments in exchange for relief from related party note and other liabilities | $ | $ | ||||||
| Common stock issued to settle accrued interest payable | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Number | Number | Additional | Shares | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| of | Par | of | Par | of | Par | of | Par | of | Par |
Paid in |
to be | Treasury | Accumulated |
Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Issued | Stock | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - Mar 31, 2024 | $ | $ | $ | $ | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Number | Number | Additional | Shares | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| of | Par | of | Par | of | Par | of | Par | of | Par | Paid in | to be | Treasury | Accumulated | Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Issued | Stock | Deficit | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of treasury stock | - | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued to settle accrued interest payable | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | - | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS
Description of Operations
Sharing Services Global Corporation (“Sharing Services,” “SHRG”) and its subsidiaries (collectively, the “Company”) aim to build shareholder value by developing or investing in innovative emerging businesses and technologies that augment the Company’s products and services portfolio, business competencies, and geographic reach. The Company was incorporated in the State of Nevada in April 2015. The Company’s main business activities include:
| ● | Sale of Health and Wellness Products - The Company markets its health and wellness 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 (the “U.S.”) and Canada. |
| The Company generates substantially all of its revenue from the sale of health and wellness products. | |
| ● | Sale of Member-Based Travel Services - Through its subsidiary, Global Travel Destinations, the Company established a subscription-based travel services business under the proprietary brand MyTravelVentures (“MTV”) in May 2022. MTV provides entrepreneurial opportunities to its subscribers by capitalizing on both the direct selling model and the retail travel business model. The MTV services are designed to offer discount 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. |
| The Company is in the process of revamping its travel services business and has temporarily suspended its MTV business operation to prepare for its re-launch in the first quarter of 2025. |
In August 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 (the “MFA”) pursuant to which Sharing Services acquired the exclusive franchise rights in North America to the brand “Hapi Café.” Under the terms of the MFA, Sharing Services, directly or through its subsidiaries, has the right to operate no less than five 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 MFA. The Company plans to open up Hapi Café in Dallas and the New York City, and is in the process of identifying and evaluating suitable locations.
Directly or through its subsidiaries, the Company from time to time will invest in emerging business in the direct selling industry, using a combination of debt and equity financing, in efforts to leverage the Company’s business competencies and to participate in the growth of these businesses. As part of the Company’s commitment to the success of these emerging businesses, the Company, directly or through its subsidiaries, also plans to offer non-traditional inventory financing, order fulfillment and logistic, CRM “Back Office” solutions, and other success-critical services to these businesses.
NOTE 2 – GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared using generally accepted accounting principles
in the United States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and
the liquidation of liabilities in the ordinary course of business. During the three months ended June 30, 2024 and 2023, the Company
had a net loss was approximately $
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking third party equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated interim financial statements included herein have been prepared in accordance with 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, 2024. 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, 2024.
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. Certain prior period financial information has been reclassified to conform with the current year’s presentation.
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, among others: the recoverability of trade accounts and notes 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 multiple performance obligations resulting from contracts with customers, the 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 share-based compensation awards, the provision for income taxes, the measurement and recognition of uncertain tax positions, the valuation of long-term debt covenants, 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 June 30, 2024, and March 31, 2024, cash and cash equivalents included cash held by our
merchant processors of approximately $
Trade Accounts Receivable and Allowance for Credit Losses
The Company maintains an allowance for credit losses in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) ASC 326 and records the allowance for credit losses as an offset to assets such as accounts receivable. The expected credit losses are classified as general and administrative expenses in the consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on the size and nature of specific receivables. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the receivable balances, credit quality of the counter party, and current and future economic conditions. On a quarterly basis, management determines if the allowance for credit losses is adequate, and adjusts the allowance, when necessary. Delinquent account balances are written-off against the allowance for credit losses after all means of collection have been exhausted and that the likelihood of collection is not probable.
Inventory
Inventory consists of finished goods and promotional materials and is stated at the lower of cost determined using the first-in, first-out (“FIFO”) method, or net realizable value. It includes direct product costs and certain shipping and handling costs, such as in-bound freight. When estimating the net realizable value of inventory, the Company considers several factors including estimates of future demand for the product, historical sales, the age and sales history of the inventory, and historic and anticipated changes in our product offerings.
The
Company periodically assesses the realizability of its inventory based on evaluation of its inventory levels against historical and anticipated
sales. Physical inventory counts are performed at all facilities on a quarterly basis. As of June 30, 2024 and March 31, 2024, the allowance
for slowing moving or obsolete inventory were $
Cost of goods sold includes actual product costs, vendor rebates and allowances, if any, inventory shrinkage and certain shipping and handling costs, such as in-bound freight, associated with product sold. All other shipping and handling costs, including the cost to ship products to customers, are included in selling and marketing expenses in our consolidated statements of operations when incurred.
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Other Receivable and Loan Payable
In
July 2023, the Company, through its out-sourced payroll services provider (“Paychex”), submitted a claim to the Internal
Revenue Services (“IRS”) for the Employee Retention Tax Credit (“ERTC credit”) based on its payroll records and
other pertinent information. Refunds will be distributed based on IRS processing times and the total ERTC credit will be approximately
$
Through
the introduction of Paychex, the Company successfully applied for an ERTC loan (“bridge loan”) in August 2023. The bridge
loan that was approved came to $
Other Assets
Other
assets include a multi-user license and code of a back-office platform that was acquired for $
Foreign Currency Translation
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. In September 2021, the Company, through its wholly owned subsidiary, commenced operations in the Republic of Korea (South Korea).
| South Korean Won per 1 USD | ||||||||
| 2024 | 2023 | |||||||
| Exchange rate as of June 30th | ||||||||
| Average exchange rate for the three months ended | ||||||||
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Comprehensive Loss
For the three months ended June 30, 2024 and 2023, the Company’s comprehensive loss comprised of currency translation adjustments and net loss.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606 when (or as) it transfers control of the promised goods and services to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
Revenue is recognized net of amounts due to taxing authorities (such as local and state sales tax). The Company’s customers place sales orders online and through the Company’s “back-office” operations, which creates a contract and establishes the transaction price. With respect to products sold, the Company’s performance obligation is satisfied upon receipt of the products by the customer. With respect to subscription-based revenue, including independent distributor membership fees, the Company’s performance obligation is satisfied over time (generally, up to one year). With respect to customer loyalty points awarded, the Company’s performance obligation is satisfied at the earliest of (a) the redemption or expiration date, or (b) when it is no longer probable the points will be redeemed. The Company assesses the probability an awards of customer loyalty points will be redeemed, based on its historic breakage rates. The timing of revenue recognition may differ from the time when the Company invoices the customer and/or collects payment. The Company has elected to treat shipping and handling costs as an activity to fulfill its performance obligations, rather than a separate performance obligation.
As of June 30, 2024 and March 31, 2024, deferred revenue associated with
| ● | product
invoiced but not received by customers at the balance sheet date was $ |
| ● | unfulfilled
performance obligations for services offered on a subscription basis was $ |
| ● | unfulfilled
performance obligations for customers’ right of return was $ |
| ● | customer
loyalty points outstanding was $ |
During
the three months ended June 30, 2024 and 2023, approximately
Sales Commissions
The
Company recognizes sales commission expenses, when incurred, in accordance with GAAP. During the three months ended June 30, 2024 and
2023, sales commission expense, which is included in selling and marketing expenses in our condensed consolidated statements of operations
and comprehensive loss, was approximately $
Segment Reporting
The Company follows ASC Topic 280, Segment Reporting. The Company’s management reviews the Company’s consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and has determined that the Company’s reportable segments are: (a) the sale of health and wellness products, and (b) the sale of member-based travel services.
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 year 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.
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The Company calculates basic loss per share by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings 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, if any, stock warrants and other commitments to issue common stock, except where the impact would be anti-dilutive.
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average basic and diluted shares | ||||||||
| Loss per share: | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| As of June 30, | ||||||||
| 2024 | 2023 | |||||||
| Convertible notes payable | ||||||||
| Stock warrants | ||||||||
| Convertible preferred stock | ||||||||
| Total potential incremental shares | ||||||||
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NOTE 5 –
Inventory consists of the following:
| As of | ||||||||
| June 30, 2024 | March 31, 2024 | |||||||
| Finished goods | $ | $ | ||||||
| Promotional items | ||||||||
| Raw materials | ||||||||
| Allowance for obsolescence | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
The following table reflects the activity in the allowance for inventory obsolescence for the periods presented:
| Three months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Provision for estimated obsolescence | ( | ) | ||||||
| Write-offs | ( | ) | ||||||
| Currency translation adjustment | ( | ) | ||||||
| Balance at end of period | $ | $ | ||||||
NOTE 6 – OTHER CURRENT ASSETS, NET
Other current assets consist of the following:
| As of | ||||||||
| June 30, 2024 | March 31, 2024 | |||||||
| Inventory-related deposits | $ | $ | ||||||
| Prepaid insurance and other operational expenses | ||||||||
| Deposits for sales events | ||||||||
| Subtotal | ||||||||
| Allowance for losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As
of June 30, 2024 and March 31, 2024, the allowance for losses in connection with certain inventory-related deposits for which recoverability
is $
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NOTE 7 – PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
| As of | ||||||||
| June 30, 2024 | March 31, 2024 | |||||||
| Computer software | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Computer equipment | ||||||||
| Leasehold improvements and other | ||||||||
| Total property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
and amortization expense in connection with the Company’s property and equipment for the three months ended June 30, 2024 and 2023
was $
NOTE 8 – ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following:
| As of | ||||||||
| June 30, 2024 | March 31, 2024 | |||||||
| Deferred sales revenues | $ | $ | ||||||
| Liability associated with uncertain tax positions | ||||||||
| Accrued interest payable | ||||||||
| Payroll and employee benefits | ||||||||
| Lease liability, current portion | ||||||||
| Other accruals | ||||||||
| $ | $ | |||||||
Lease liability, current portion, represents obligations due within one year under operating leases for office space, automobiles, and office equipment. Other accruals include primarily operational accruals.
| 15 |
NOTE 9 – CONVERTIBLE NOTES PAYABLE, RELATED PARTY
Convertible notes payable consists of the following:
| Conversion | As of | |||||||||||||||||||
| Issuance Date | Maturity Date | Interest Rate | Price | June
30, 2024 | March
31, 2024 | |||||||||||||||
| % | See Note | $ | $ | |||||||||||||||||
| % | $ | |||||||||||||||||||
| % | ||||||||||||||||||||
| % | ||||||||||||||||||||
| Total convertible notes payable | ||||||||||||||||||||
| Change in fair value of embedded derivatives | ||||||||||||||||||||
| Subtotal | ||||||||||||||||||||
| Less: current portion of convertible notes payable | ||||||||||||||||||||
| Long-term convertible notes payable | $ | $ | ||||||||||||||||||
Note: The price for conversion of Principal Amount into shares of Common Stock shall be the average closing market price within last three trading days of the Common Stock form the date of Conversion Notice.
| 16 |
On
January 17, 2024, the Company executed a convertible promissory note for $
On
March 18, 2024, the Company entered into a securities purchase agreement with HWH International Inc., a Delaware corporation
(“HWH”) whereby the Company issued to HWH (i) a convertible promissory note in an aggregate principal amount of $
On
May 9, 2024, the Company entered into a securities purchase agreement (the “May HWH SPA”) with HWH whereby the Company issued
to HWH a convertible promissory note (the “May HWH Note”) in an aggregate principal amount of $
On
June 6, 2024, the Company entered into a securities purchase agreement (the “June HWH SPA”) with HWH whereby the Company
issued to HWH a convertible promissory note (the “June HWH Note”) in an aggregate principal amount of $
On
June 19, 2024, the Company and HWH entered into an addendum to the June HWH SPA and June HWH Note to amend: (i) the number of shares
of Common Stock convertible under the June HWH Note from to ; and (ii) the conversion rate from $
During
the three months ended June 30, 2024 and 2023, interest expense associated with the Company’s convertible notes was approximately
$
| 17 |
NOTE 10 – INCOME TAXES
The statutory rates for our domestic and our material foreign operations are as follows for the periods shown:
| Country | 2024 | 2023 | ||||||
| United States | % | % | ||||||
| Republic of Korea | % | % | ||||||
Our consolidated effective income tax rate reconciliation is as follows:
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Federal statutory rate | % | % | ||||||
| State and local income taxes | ( | ) | ||||||
| Permanent differences | ||||||||
| Change in 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 11 - RELATED PARTY TRANSACTIONS
Alset Inc.
On
January 17, 2024, the Company executed a convertible promissory note for $
HWH International Inc.
On
March 18, 2024, the Company entered into a securities purchase agreement with HWH International Inc., a Delaware corporation
whereby the Company issued to HWH (i) a convertible promissory note in an aggregate principal amount of $
On
May 9, 2024, the Company entered into a securities purchase agreement (the “May HWH SPA”) with HWH whereby the Company issued
to HWH a convertible promissory note (the “May HWH Note”) in an aggregate principal amount of $
On
June 6, 2024, the Company entered into a securities purchase agreement (the “June HWH SPA”) with HWH whereby the Company
issued to HWH a convertible promissory note (the “June HWH Note”) in an aggregate principal amount of $
On
June 19, 2024, the Company and HWH entered into an addendum to the June HWH SPA and June HWH Note to amend: (i) the number of shares
of Common Stock convertible under the June HWH Note from to ; and (ii) the conversion rate from $
Mr. Chan, the Company’s chairman is the executive chairman and a director of HWH; Mr. Thatch, the Company’s chief executive officer (CEO) is the CEO of HWH.
| 18 |
Stock Warrants
In
the fiscal year ended March 31, 2023, the Company issued a fully vested warrant to purchase up to
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 June 30, 2024 and 2023, the Company didn’t recognized a compensatory gain in connection with grants with a variable exercise price after service is completed. As of June 30, 2024, there are no warrants outstanding with a variable exercise price.
| 19 |
NOTE 13 – 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:
| As of | ||||||||||
| Assets | Classification | June 30, 2024 | March 31, 2024 | |||||||
| 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 June 30, | ||||||||||
| Lease cost | Classification | 2024 | 2023 | |||||||
| Operating lease cost | General and administrative expenses | $ | $ | |||||||
| Total lease cost | $ | $ | ||||||||
The Company’s lease liabilities are payable as follows:
| Twelve months ending June 30, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total remaining payments | ||||
| Less imputed interest | ( | ) | ||
| Total lease liability | $ | |||
| 20 |
NOTE 14 – 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 as of June 30, 2024.
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.
| 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. The Plaintiffs filed their Proposed Sufficient Brief of Appellants with the Fifth Circuit on January 2, 2023. The Company filed a Response Brief on February 22, 2023. The appeal is still pending as of June 30, 2024. |
| 21 |
NOTE 15 - FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, accounts payable, and notes payable, including convertible notes. The carrying amounts of cash equivalents, if any, accounts receivable, notes receivable, and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.
The Company measures and discloses the fair value of its financial instruments under the provisions of ASC Topic 820 – Fair Value Measurement, as amended (“ASC 820”). The Company defines “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There were no transfers between the levels of the fair value hierarchy during the periods covered by the accompanying consolidated financial statements.
Consistent with the valuation hierarchy contained in ASC Topic 820, we categorized certain of our financial assets and liabilities as follows:
| As of June 30, 2024 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in unconsolidated entities | $ | $ | $ | |||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| As of March 31, 2024 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets | ||||||||||||||||
| Investment in unconsolidated entities | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | ||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
NOTE 16 – SUBSEQUENT EVENTS
The Company has evaluated all subsequent events and transactions through August 9, 2024, the date that the condensed consolidated financial statements were available to be issued and noted no subsequent events requiring financial statement recognition or disclosure.
| 22 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following section discusses management’s views of the financial condition and the results of operations and cash flows of Sharing Services Global Corporation and consolidated subsidiaries. This section should be read in conjunction with: (a) our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, and (b) our condensed consolidated financial statements included elsewhere in this Quarterly Report. This section may contain forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” above for a discussion of forward-looking statements.
Summary Results of Operations:
| Three Months Ended June 30, | ||||||||||||||||
| 2024 | 2023 | Increase (Decrease) | % Change | |||||||||||||
| Net sales | $ | 2,221,524 | $ | 2,878,121 | $ | (656,597 | ) | -22.8 | % | |||||||
| Gross profit | 1,544,673 | 2,032,292 | (487,619 | ) | -24.0 | % | ||||||||||
| Operating expenses | (2,181,842 | ) | (3,708,562 | ) | 1,526,720 | -41.2 | % | |||||||||
| Operating loss | (637,169 | ) | (1,676,270 | ) | 1,039,101 | -62.0 | % | |||||||||
| Non-Operating expense, net | (331,397 | ) | (735,987 | ) | 533,756 | -72.5 | % | |||||||||
| Loss before income taxes | (968,566 | ) | (2,412,257 | ) | 1,572,857 | -65.2 | % | |||||||||
| Income tax expense | - | 12,102 | (12,102 | ) | -100.0 | % | ||||||||||
| Net loss | $ | (968,566 | ) | $ | (2,424,359 | ) | $ | 1,584,959 | -65.4 | % | ||||||
Highlights for the Three months ended June 30, 2024:
| ● | For the three months ended June 30, 2024, our consolidated net sales decreased $0.7 million, or 22.8%, compared to the three months ended June 30, 2023. | |
| ● | For the three months ended June 30, 2024, our consolidated gross profit decreased $0.5 million, or 24.0%, compared to the three months ended June 30, 2023. Our consolidated gross margin was 69.5% for the three months ended June 30, 2024, compared to 70.6% for the three months ended June 30, 2023. | |
| ● | For the three months ended June 30, 2024, our consolidated operating expenses decreased $1.5 million, or 41.2% to 2.2 million, compared to the three months ended June 30, 2023. | |
| ● | For the three months ended June 30, 2024, our consolidated operating loss was $0.6 million, compared to operating loss of $1.7 million for the three months ended June 30, 2023. | |
| ● | For the three months ended June 30, 2024, our consolidated net non-operating expense was $0.3 million, compared to net non-operating expense of $0.7 million for the three months ended June 30, 2023. | |
| ● | For the three months ended June 30, 2024, our consolidated net loss was approximately $1.0 million, compared to $2.4 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, and 2023, our basic and diluted loss per share was $0.002 and $0.01, respectively. |
| 23 |
Overview
Summary Description of Business
Sharing Services Global Corporation and subsidiaries (“Sharing Services”, “we,” or the “Company”) aim to build shareholder value by developing or acquiring businesses and technologies that increase the Company’s product and services portfolio, business competencies, and geographic reach.
Currently, the Company, through its subsidiaries, markets and distributes its health and wellness and other products primarily in the U.S. and Canada using a direct selling business model. In addition, the Company’s U.S. subsidiaries market our products and services through an independent sales force, using their proprietary websites, including: www.thehappyco.com.
The Company was incorporated in the State of Nevada on April 24, 2015.
As further discussed below, the Company intends to continue to grow its business both organically and by making strategic acquisitions from time to time of businesses and technologies that augment its product portfolio, complement its business competencies, and fit its growth strategy.
Financing Arrangements
Historically, the Company has funded a substantial portion of its liquidity and cash needs through the issuance of notes or convertible notes and borrowings under short-term financing arrangements, and issuance of equity securities. See “Liquidity and Capital Resources” below for additional information about the Company’s convertible notes and borrowings under short-term financing arrangements.
Industry and Business Trends
The information in “Industry and Business Trends” included in ITEM 1 — “Business” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, is incorporated herein by reference.
Strategic Profitable Growth Initiatives
The Company intends to grow its business by pursuing a multipronged growth strategy, that includes: (a) expanding its product offerings, both within the health and wellness category and in new product categories, (b) expanding its direct-to-consumer geographic footprint and (c) re-vamping and re-launching its previously announced membership-based consumer travel products line worldwide. This growth strategy may also include the use of strategic acquisitions of businesses that augment the Company’s product and services portfolio, business competencies and geographic reach.
| 24 |
Results of Operations
Three months ended June 30, 2024, as compared to the Three months ended June 30, 2023
Net Sales
For the three months ended June 30, 2024, our consolidated net sales decreased by $0.7 million, or 22.8%, to $2.2 million, compared to the three months ended June 30, 2023. The decrease in net sales mainly reflects: (a) the decline in orders from independent distributors; (b) the decline in the number of independent distributors, resulting, in part, from recent product reformulations and increased competition for independent distributors, and (c) the generally adverse impact on consumer buying trends resulting from the recent increase in consumer good prices in the U.S.
During the three months ended June 30, 2024, and 2023, the Company derived substantially all its consolidated net sales from the sale of its health and wellness products.
Gross Profit
For the three months ended June 30, 2024, our consolidated gross profit decreased by approximately $0.5 million, to $1.5 million, compared to the three months ended June 30, 2023; and our consolidated gross margin was 69.5% and 70.6%, respectively. The gross margin was about the same compared to the last year’s which is mainly due to efforts to reduce our cost of goods sold and our shipping expenses.
Selling and Marketing Expenses
For the three months ended June 30, 2024, our consolidated selling and marketing expenses decreased by $0.8 million, to $0.6 million, or 28.6% of consolidated net sales, compared to $1.4 million, or 49.4% of consolidated net sales, for the three months ended June 30, 2023. The $0.8 million decrease in consolidated selling and marketing expenses is due to lower sales commissions of $0.5 million (which reflects the decrease in consolidated sales discussed above), lower convention expenses of $0.2 million, and lower marketing expenses of $0.1 million.
General and Administrative Expenses
For the three months ended June 30, 2024, our consolidated general and administrative expenses (which include corporate employee compensation and benefits, stock-based compensation, professional fees, rent and other occupancy costs, certain consulting fees, telephone and information technology expenses, insurance premiums, and other administrative expenses) decreased by approximately $0.7 million, to $1.5 million. The $0.7 million decrease was primarily due to lower consulting expense of approximately $0.3 million, and lower employee compensation and compensation-related benefits of $0.3 million due to less headcount year over year.
Change in Fair Value of Embedded Derivatives
For the three months ended June 30, 2024, we recorded a non-cash charge of approximately $187,000 in connection with the issuance of four convertible promissory notes to our related parties Alset Inc. and HWH International Inc., representing the change in fair value of embedded derivatives.
Interest Expense, Net
For the three months ended June 30, 2024, our consolidated interest expense was $147,664.
For the three months ended June 30, 2023, our consolidated interest expense was $680,082, excluding amortization of debt discount and amortization of deferred financing costs of $515,728, and interest income of $289,999.
| 25 |
Gain on Extinguishment of Debt
For the three months ended June 30, 2024, no gain on extinguishment of debt was recognized.
Effective June 30, 2023, the Company, and DSSI, entered into three transactions whereby such transactions offset certain liabilities through the sale of assets. The Company recognized the transactions as extinguishment of debt of $150,634, before income tax, in connection therewith.
Unrealized Loss on investment
For the three months ended June 30, 2024, no loss on unrealized investment was recognized.
For the three months ended June 30, 2023, the Company recognized an unrealized loss, before income tax, of $78,632 in connection with its investment in Stemtech.
Other Non-operating Income, net
For the three months ended June 30, 2024, there was a gain of foreign currency transactions of 3,664.
For the three months ended June 30, 2023, our net consolidated non-operating income includes recoveries on litigation settlements of $100,000 and other non-operating expense $2,178.
Income Tax Benefit
Income tax (benefit) expenses includes current and deferred income taxes for both our domestic and foreign operations. Income from our international operations is subject to taxation in the countries in which we operate.
For the three months ended June 30, 2024, no income tax benefit/expense was recognized. During the three months ended June 30, 2023, the Company recognized a current federal income tax expense of $3,176, and a state and local tax expense of $8,926.
Net Loss and Loss per Share
As a result of the foregoing, for the three months ended June 30, 2024, our consolidated net loss was $1.0 million, compared to $2.4 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, and June 30, 2023, our basic and diluted loss per share was $0.002 and $0.01, respectively.
Liquidity and Capital Resources
We broadly define liquidity as our ability to generate sufficient cash, from internal and external sources, to meet our obligations and commitments. We believe that, for this purpose, liquidity cannot be considered separately from capital resources.
Working Capital
Working capital (total current assets minus total current liabilities). We had a deficiency in our working capital of approximately $4.4 million as of June 30, 2024, compared to $4.2 million as of March 31, 2024.
As of June 30, 2024, and March 31, 2024, our cash and cash equivalents were $0.6 million and $0.9 million, respectively. Based upon the current level of operations and anticipated investments necessary to grow our business, while we believe that existing cash balances and anticipated funds from operations may be sufficient to meet our working capital requirements over the next 12 months, we will need to obtain additional financing through the issuance of equity securities and convertible promissory notes. Please see NOTE 2 – GOING CONCERN.
| 26 |
Historical Cash Flows
Historically, our primary sources of cash have been capital transactions involving the issuance of equity securities and secured and unsecured debt (See “Short-term Borrowings and Convertible Notes” below) and cash flows from operating activities; and our primary uses of cash have been for operating activities, capital expenditures, acquisitions, net cash advances to related parties, and debt repayments in the ordinary course of our business.
The following table summarizes our cash flow activities for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
| Three Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (821,795 | ) | $ | (1,788,977 | ) | ||
| Net cash provided by financing activities | 500,000 | - | ||||||
| Impact of currency rate changes in cash | 7,936 | 164,237 | ||||||
| Decrease in cash and cash equivalents | $ | (313,859 | ) | $ | (1,624,740 | ) | ||
Net Cash Used in Operating Activities
For the three months ended June 30, 2024, net cash used in operating activities was $0.8 million, compared to $1.8 million for the three months ended June 30, 2023. The $1.0 million decrease was due to a decline in operating losses of $1.0 million (excluding non-cash items, such as depreciation and amortization, stock-based compensation expense, provision for obsolete inventory losses, amortization of debt discount, unrealized gain (loss) on investments, losses on impairment of investments in unconsolidated entities and notes receivable, and gains on extinguishment of debt).
Net Cash Provided by Financing Activities
For the three months ended June 30, 2024, net cash provided by financing activities was $0.5 million, compared to $0 for the three months ended June 30, 2023. The $0.5 million represents convertible promissory notes from HWH.
Impact of currency rate changes in cash
For the three months ended June 30, 2024, the impact of currency rate changes in cash was $7,936, compared to $164,237, for the three months ended June 30, 2023.
| 27 |
Potential Future Acquisitions
The Company, directly and through its subsidiaries, may make strategic acquisitions and purchases of equity interests in businesses that complement its business competencies and growth strategy. Such acquisitions and purchases of equity interests are expected to be funded with cash and cash equivalents, cash provided by operations, if any, and issuance of equity securities and debt.
Capital Requirements
During the quarter ended June 30, 2024, there were no capital expenditures for property and equipment (consisting of furniture and fixtures, computer equipment and software, other office equipment and leasehold improvements) in the ordinary course of our business.
Contractual Obligations
There were no material changes to our contractual cash obligations during the three months ended June 30, 2024.
Off-Balance Sheet Financing Arrangements
As of June 30, 2024, we had no off-balance sheet financing arrangements.
Critical Accounting Estimates
There were no material changes to the Company’s critical accounting estimates or assumptions since March 31, 2024.
Accounting Changes and Recent Accounting Pronouncements
For discussion of accounting changes and recent accounting pronouncements, see Note 3 of the Notes to Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company is a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act, and, accordingly, is not required to provide the information called for by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the fiscal period covered by this Quarterly Report, and concluded that, as of June 30, 2024, due to material weaknesses in our internal control over financial reporting that have yet to be fully remediated, the Company’s disclosure controls and procedures were ineffective in providing reasonable assurance that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management and its Board of Directors, as appropriate to allow timely decisions regarding required disclosure.
| 28 |
Limitations on the Company’s Controls and Procedures. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. Any system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system will be met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud (if any) within the Company have been detected. Furthermore, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements and/or omissions due to error or fraud may occur undetected.
Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The information contained in Note 17, COMMITMENTS AND CONTINGENCIES - Legal Proceedings, of the Notes to Unaudited Condensed Consolidated Financial Statements located elsewhere in this Quarterly Report is incorporated herein by reference.
Item 1A. Risk Factors.
The factors contained in ITEM 1A, — “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, are incorporated herein by reference.
Item 2. Unregistered Sales of Securities and Use of Proceeds.
(a) Unregistered Sales of Securities
None
(b) Not applicable
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
Item 3. Defaults Upon Senior Securities.
(a) Not applicable
(b) Not applicable
Item 4. Mining Safety Disclosures.
Not applicable
Item 5. Other Information.
None
| 29 |
Item 6. Exhibits.
The following exhibits are filed as part of this Quarterly Report unless otherwise indicated:
*Filed herewith
**Furnished herewith.
† Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K, and portions of this exhibit have been redacted in compliance with Item 601(b)(2) of Regulation S-K.
| 30 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SHARING SERVICES GLOBAL CORPORATION | ||
| (Registrant) | ||
| Date: August 9, 2024 | ||
| By: | /s/ John Thatch | |
| John Thatch | ||
| President, Chief Executive Officer and Vice Chairman of the Board of Directors | ||
| (Principal Executive Officer) | ||
| Date August 9, 2024 | ||
| By: | /s/ Anthony S. Chan | |
| Anthony S Chan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
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