EDGAR 10-K Filing

Company CIK: 1644488
Filing Year: 2024
Filename: 1644488_10-K_2024_0001493152-24-025787.json

---

ITEM 1. BUSINESS
ITEM 1. BUSINESS.
Sharing Services Global Corporation (“Sharing Services”) 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.
Our combined platform leverages the capabilities and expertise of various companies that market and sell products and services direct to the consumer through independent contractors. The Company’s new shared service platform is intended to service the direct selling “gig economy” sector by providing needed services (such as equity and inventory financing, advisory services, mobile application tools, merchant processing services, commercial insurance, and event planning) to smaller direct sales companies initially in the United States (“U.S.”).
Currently, the Company markets and distributes its health and wellness products primarily in the U.S. and Canada using a direct selling business model through its proprietary websites: www.thehappyco.com. In addition, the Company is in the process of revamping its subscription-based travel services, MyTravelVentures, that used to conduct its business via direct selling business model through its proprietary website: www.mytravelventures.com.
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.
Our History
Sharing Services was originally incorporated under the name Sharing Services, Inc. on April 24, 2015. In December 2017, the Company, through its U.S.-based subsidiaries, launched its Elevate brand of health and wellness products.
In January 2019, Sharing Services, Inc. changed its corporate name to Sharing Services Global Corporation to better reflect the Company’s strategic intent to grow its business globally. In connection with the name change, the Company adopted the trading symbol SHRG effective April 4, 2019. Prior to this, the Company’s Common Stock traded under the trading symbol SHRV.
In February 2021, the Company rebranded its product offerings under the new marketing banner, “The Happy Co TM,” to capitalize on its vision that Everyone Deserves to be Happy. As part of this business initiative, the Company updated its customer messaging to re-emphasize the Company’s core values, including, among others: “harnessing the power of happiness;” “offering products you love;” “achieving more together;” and “offering products by people, for people.”
In June 2021, the Company expanded its geographical footprint, and through its wholly-owned subsidiary, commenced operations in the Republic of Korea (South Korea).
In late 2022, through its subsidiary, Global Travel Destinations (“MyTravelVentures” or “MTV”), the Company launched a subscription-based travel service. MyTravelVentures’ services are designed to offer discounts in connection with travel, including on airfare, cruises, hotels, resorts, time shares and rental cars for destinations throughout the world for people of all ages, demographics, and economic backgrounds. MTV also provides entrepreneurial opportunities to its subscribers by capitalizing on both the direct selling model and the retail travel business model. 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 November 2024.
Strategic Growth Initiatives
The Company intends to grow its business by pursuing a multipronged growth strategy, that includes expanding: (a) its product offerings, both within the health and wellness category and in new product categories, (b) its direct-to consumer geographic footprint, and (c) re-vamping and re-launching its previously announced membership-based consumer travel products line. 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.
Key Global Industry and Business Trends
We believe the following industry and business trends will provide opportunities for the Company to grow its business in a sustained manner in the future:
● The Global direct selling industry remains strong. According to the World Federation of Direct Selling Associations (the “WFDSA”), worldwide industry sales were $173 billion in 2022 a decrease of $2.7 billion from prior year of $176 billion in 2021, with the Americas and Asia accounting for more than $137 billion in sales.
● Global interest in direct selling is strong. According to the WFDSA, the worldwide direct selling industry salesforce has grown from 168 million in 2019 to 173 million in 2021, an increase of over 3%.
● The U.S. direct selling industry continues to grow. For example, total industry sales in the U.S. grew from $37.7 billion in 2019 to $43.1 billion in 2022, an increase 14%, according to the U.S.-based Direct Selling Association (the “DSA”).
● Interest in direct selling in the U.S. has grown in recent years. The number of direct sellers in the U.S. grew from 6.2 million in 2018 to 6.7 million in 2022, an increase of over 8%, according to the DSA.
● Consumer attitudes to direct selling continue to be favorable. The results of a consumer attitude survey released by the DSA show that 79% of consumers consistently gave the direct selling industry a positive rating during the past 10 years.
● The level of interest in the direct selling industry is high among younger sectors of the population. Over 70% of the people involved in direct selling, in the U.S. and worldwide, were between the ages of 20 and 54, according to the WFDSA and the DSA.
● Participation in the industry by women is high. For example, women made up approximately 75% of the people involved in direct selling in 2022, in the U.S., according to the DSA. By comparison, the U.S. Census Bureau estimates that women make up about 51% of the overall 2020 U.S. population.
● Wellness products are the largest sector in the industry. Wellness products (such as our Elevate product line), accounted for over 35% of the industry’s sales in 2022, in the U.S., according to the DSA.
● The initial costs and business risks in direct selling are relatively lower. According to “2020 Consumer Attitudes & Entrepreneurship Study,” published by the DSA, the required start-up costs and business risks associated with direct selling in the U.S. are lower than those for most competing entrepreneurial business opportunities.
Travel Services
Travel is essential to driving economic growth and job creation in states, destinations, and communities across the U.S., and it is indispensable to our nation’s global competitiveness. Travel accounted for $1.3 trillion in direct spending in 2023 - which produced an economic footprint of $2.8 trillion. In 2023, travel supported nearly 15 million American workers and directly employed 8 million. This economic and job growth was largely due to the robust return of domestic leisure travel, which far outpaced the recovery of the business travel and international travel segments.
International travel plays a critical role in the US economy. Prior to the COVID-19 pandemic, in 2019, international visitors spent $233.5 billion experiencing the U.S.; injecting nearly $640 million a day into the U.S. economy. The U.S. travel and tourism industry generated $1.9 trillion in economic output, supporting 9.5 million American jobs, and accounted for 2.9% of U.S. Gross Domestic Product. At 14.5% of international travel spending globally, international travelers spend more in the U. S. than any other country.
Global Travel
The travel industry accounted for approximately $5.8 trillion dollars globally in 2021 - a large portion of which came from the largest travel companies in the world. These outfits cater to both businesses and individuals and make the process of transit and accommodation a streamlined affair, with most transactions booked online.
Business Segments, Geographic Area Information and Seasonality
The Company operates primarily in two business segments: sale of health and wellness products, and sale of member-based travel services through an independent sales force. During the fiscal years ended March 31, 2024 and 2023, approximately 100% and 99%, respectively, of the Company’s consolidated sales were derived from sales of health and wellness products.
During the fiscal years ended March 31, 2024 and 2023, 95% and 91%, respectively, of the Company’s consolidated sales were made to customers and independent contractor distributors located in the United States (the “U.S.”). See Note 20 - “BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION” of the Notes to Consolidated Financial Statements contained in Item 8 - “Financial Statements and Supplementary Data” of this Annual Report for more details.
While the Company’s business generally is not highly seasonal in nature, sales activity is normally slower during November and December, when many customers and independent contractor distributors in the U.S. traditionally take a holiday break.
Competition
The health and wellness direct selling industry is highly fragmented and competitive, and there are few barriers to entering the industry. We compete with other direct selling businesses, including many that have a longer operating history, higher visibility and name recognition, and more financial resources than we do. Among others, these network marketing companies include Amway Corporation, Avon Products, Herbalife Nutrition, Mary Kay, Nature’s Sunshine Products, The Body Shop, Nu Skin Enterprises and Youngevity International. Our competitors also include a wide range of retailers, including traditional retail stores that offer their products in “brick and mortar” outlets and/or online, and e-commerce-based retailers. These retailers include, among other: CVS Health Corporation (Pharmacies), GNC Holdings (a specialty retailer), Target Corporation, The Vitamin Shoppe, Walgreens Boots Alliance (Pharmacies) and Walmart.
The marketplace for subscription-based travel and leisure services is currently very dynamic and competitive, and highly fragmented. The barriers to entry are low and new competitors continuously emerge. We compete with many well-known companies, including some with greater resources, such as: Costco, Inspirato, Travel & Leisure Club, TripAdvisor, and Virgin Hotels, just to name a few. Our competitors may adopt aspects of our business model or may introduce new business models or services that we may need to adopt or otherwise adapt to in order to compete effectively, which could reduce our ability to differentiate our travel services from those of our competitors. Increased competition could result in a reduction in revenue, higher cost or reduced market share. We compete with many well-known companies, including some with greater resources, such as: Costco Travel (a division of Costco Wholesale), Inspirato Inc., Travel & Leisure Co., TripAdvisor, Inc., and Virgin Hotels (a division of Virgin Group), just to name a few.
We compete in these marketplaces by emphasizing differentiators such as our access to exclusive products and services, the quality and efficacy of our product and service offerings, the reliability and convenience of our distribution system, and a personalized customer service experience. We offer products and services that aim to improve the health and happiness of our customers and distributors. In addition, our direct selling business model, provides our independent contractor distributors the opportunity to build wealth by growing and operating of their own distribution business.
We also compete with other direct selling organizations in our efforts to attract and retain our independent contractor distributors by emphasizing the strengths of our product line, entrepreneurship and leadership training, a comprehensive sales compensation plan, a strong marketing focus, positive corporate values, and strong management leadership.
Travel
Thanks to the 10 largest travel companies in the world, consumers are able to book a plane, hotel, cruise, rental car, and more, often through one single web page. These companies can be dedicated to both businesses and consumers (oftentimes both) and are the biggest contributors to the travel industry’s nearly $5.8 trillion global economic contribution in 2021.
Beginning with the widespread adoption of the internet, the travel industry has split into two different sectors. The more traditional travel agency is one where most customers interact on a personal one-to-one basis with a travel agent, and these have existed for many decades. Today, the largest travel companies are all online and skip personal interaction to instead opt for integrated systems that work for every method of travel.
Currently, the largest travel online companies in the world include: Booking.com; Priceline.com; Trivago; Expedia.com; Hotels.com; Hotwire.com; Orbitz. Com; and Kayak.com.
Unlike the other online travel companies that sell to the public and spend millions of dollars each month on radio, television and billboards, MTV sells direct to consumers by way of independent sales representatives who promote and sell direct to consumers for a commission base payout. We only sell to consumers that join their membership-based subscription, which then offer the lowest rates available and do not mark up the travel unlike their competitors. Similar to large wholesale buying clubs like Costco and Sam’s club, where the consumer pays for a membership to offset the retail prices of consumer goods. Travel is sold at up to 65% off any companies, because we collect a monthly membership fee which offsets the expenses.
Competitive Strengths
We believe the following competitive strengths differentiate us from our competitors and will help drive our future growth:
● A strong management team consisting of senior and middle management professionals with significant direct selling industry and global business experience.
● An exclusive line of Nootropic products sourced through one or more exclusive strategic partnerships and not available through traditional sales channels.
● Best in class marketing process that focuses on the nutritional value and/or other health benefits of our health and wellness products.
● Our ability to offer our industry-exclusive brands directly to consumers using a friendly, highly trained entrepreneurial sales force.
● Our 30-day, “full customer satisfaction or your money back” product return policy.
Our Health and Wellness Product Line
The Company launched its current health and wellness product line, under the name Elevate, in 2017. In 2021, we rebranded our products under The Happy Co trademark. The Company’s health and wellness product line consists of Nootropics, natural products aimed at improving the health and happiness of its customers and distributors. We aim to grow health and wellness product offerings by developing, acquiring, and introducing new products and services. In fiscal years ended March 31, 2024 and 2023, approximately 100% and 99%, respectively, of the Company’s consolidated sales were from sale of its health and wellness products.
Key Products and Services
We purchase our proprietary and non-proprietary products from independent formulators and manufacturers who specialize in wellness and skincare products. We take pride in our commitment to offer the finest products in the industry, including, but not limited to:
Health & Wellness Products
Elevate MAX® Happy Coffee - A delicious 100% Arabica coffee drink with a combination of at least five powerful mood-enhancing ingredients and a non-stimulant thermogenic agent, p-synephrine, known to increase the breakdown of fats. When combined with XanthoMax®, Elevate MAX® coffee completes the set of four hormones that are associated with happiness.
XanthoMax® Happy Caps - An encapsulated wellness supplement designed to deliver Xanthohumol, a powerful antioxidant, and Turmeric. Xanthohumol is a natural ingredient that helps the body release elevated amounts of Oxytocin, commonly referred to as the “hormone of happiness.” When combined with any of the Company’s functional beverages XanthoMax® completes the set of four hormones that are associated with happiness.
KetoCre® Keto Creamer- A delicious Ketogenic creamer designed to support a healthy Keto diet, and a great addition to any weight management program.
Elevate ZEST® Happy + Lemonade - A refreshing, potent Nootropic blend with a smooth lemonade twist and a proprietary blend of natural Nootropic ingredients designed to assist with mental clarity, memory, and energy. When combined with XanthoMax®, Elevate ZEST® completes the set of four hormones that are associated with happiness.
ElevaciTea® Georgia Peach - A flavorful, Southern-style tea that delivers natural Georgia Peach flavor in every sip. ElevaciTea® Georgia Peach is a perfect afternoon pick-me-up with a proprietary blend of Nootropic ingredients designed to assist with mental clarity, memory, and energy.
ElevaciTea® Vanilla Chai - A flavorful afternoon pick-me-up, ElevaciTea® Vanilla Chai is a creamy, spiced black tea with a proprietary blend of Nootropic ingredients designed to assist with mental clarity, memory, and energy.
Skincare Products
Age-Defying Intensive Repair Serum™ - An age-defying serum that can help you restore the appearance of healthy and glowing skin. Our proprietary Synchronized Peptide ComplexTM has been stabilized through a patented process to deliver outstanding results. This potent serum locks in moisture to help restore the skin’s youthful look.
Ultimate Revitalizing Cream™ - A rich, anti-aging cream that helps illuminate and firm up the skin. Our proprietary Synchronized Peptide ComplexTM has been stabilized through a patented process to deliver outstanding results. This luxurious cream helps the skin retain moisture and improve skin texture, for a firm and radiant looking skin.
Fragrance Devices and Pods
AirMoji, CarMoji and MojiPop - These innovative fragrance devices offer a unique and efficient way to diffuse delightful scents throughout any space. With no heat, fire or wax, these fragrance devices are the safest way to fill any space with amazing fragrance. Every device uses versatile pods, allowing users to refresh their surroundings with over 50 different fragrance or essential oil pods.
Fragrance Pod - Each pod features a 100% natural wood fiber core, infused with premium fragrance, encased in a recyclable plastic cup, and sealed for optimal preservation. With over 50 unique scents, including special seasonal options, there’s a fragrance for everyone to enjoy. The Company’s fragrance pods are free from harmful chemicals such as SLS, parabens, dyes, and phthalates; and they are intended for use in any of the Company’s fragrance device.
Essential Oil Pod - Every essential oil pod combines a wood fiber core with expertly curated blends of premium essential oils, encased in a recyclable plastic cup and sealed for maximum preservation. Our selection includes a variety of pure essential oils and essential oil blends designed to suit every mood and need. These pods are intended for use in any of the Company’s fragrance device.
Member-Based Travel Services
In late 2022, through its subsidiary, Global Travel Destinations (doing business as “MyTravelVentures” or “MTV”), the Company launched a subscription-based travel service. MyTravelVentures’ services are designed to offer discounts in connection with travel, including on airfare, cruises, hotels, resorts, time shares and rental cars for destinations throughout the world for people of all ages, demographics, and economic backgrounds. This program is being revised and is currently projected to re-launch in November of 2024. The website is active, but we are not enrolling any new customers at this time.
Sales and Marketing
We rely on a direct selling model consisting of independent contractor distributors and on customer referrals to promote and sell a majority of our products. We believe this is an effective selling model since our independent contractor distributors can educate consumers about our products in person, provide testimonials, and provide higher levels of customer support, compared to more traditional selling models. The Company markets and sells its health and wellness products using its proprietary website: www.thehappyco.com. We plan to revise and enhance our subscription-based travel services in November 2024 which is be sold through www.mytravelventures.com.
We provide support to our independent contractor distributors with marketing content, websites, events, and technology. We offer our products and services online and provide our independent distributors with a virtual online Back Office website. This website is where independent distributors can manage, monitor, and operate their businesses 24 hours a day from any location. In addition, we actively communicate with our independent distributors about new products, price changes, policy changes, recruiting opportunities, sales promotions, and other important matters via electronic mail, by phone and during our sales conventions. As deemed appropriate, sales conventions are generally held once or twice a year and are attended or viewed digitally by our independent distributors. Each sales convention includes the participation of one or more key personalities, including social media influencers, engaged in promoting our products and services. In addition, each sales convention is attended by members of our executive team, providing an opportunity for our sales force to learn about latest corporate and business initiatives, new products, and other matters relevant to their businesses.
Distribution of Products and Services
Distribution and delivery of our health and wellness products in the North America is handled primarily by our distribution center in Addison, Texas. On the other hand, sales, distribution, and delivery of our products in Asia is handled by our South Korean subsidiary.
Retail Customers and Independent Contractor Distributors
The Company distributes its health and wellness products and its subscription-based travel services through two distribution channels: (1) sales to our retail customers - consumers that buy our products from a distributor or through one of our websites, for personal use and (2) sales to our independent contractor distributors that buy product for resale or for personal use. The Company’s goal is to monitor and grow both sales channels using different strategies. To grow our retail customer base, we offer high-quality, unique products and travel services. Our strategy for growing our sales force of independent distributors includes providing a meaningful business opportunity to them, a competitive sales compensation plan, sales incentives, and volume-based bonuses, as further discussed below.
Any person may join the Company as a distributor, or Brand Partner, by purchasing a Virtual Business System (“VBS”) for $29.00. This kit includes the training and basic marketing materials which better enables our sales force to sell our products and build their organization. Independent distributors may then purchase products for personal use or to build their sales organization. No product purchases are required upon enrollment.
Distributor Agreement and Compensation
Our distributors are independent contractors, and the Company does not direct or control their efforts. However, the Company requires its distributors to abide by its policies and procedures, and to comply with all applicable laws and regulations. To become a distributor an individual must affirmatively accept our standard Distributor Agreement as well as our Distributor Policies and Procedures. These documents govern the relationship between the Company and each independent distributor. The Distributor Policies and Procedures outline the scope of permissible marketing activities, and the Distributor Agreement defines the relationship between the distributor and the Company. Our policies and procedures require that our distributors present our products, as well as the business opportunity, both ethically and professionally.
We believe that our compensation plan offers our independent distributors an exciting and effective way to earn commissions. All our distributors can earn commissions when they sell our products to their retail customers or their downline independent distributors. Additionally, they can earn commissions when their own personally sponsored distributors (or downline) sell products to end users. There is no limit as to the number of personally enrolled distributors or retail customers that an independent distributor may have.
Each distributor begins by purchasing a VBS. The VBS includes the training and basic marketing materials which better enables our sales force to sell our products and build their organization. No commissions or bonuses are paid for enrolling other distributors.
Additionally, each month, our top producing distributors may also earn commission based on the sales levels achieved by such distributor and his/her downline. This bonus commission is designed to compensate them for mentoring, training, and developing the distributors in their downline.
The Company’s compensation plan is designed to promote customer acquisition and retention. The Company provides a back-office website for our independent distributors to use in their ecommerce sales, but an affiliate may also sell directly to their customers.
We rely upon our independent distributors to create customer demand and sales. We believe our plan is successful in helping to attract and motivate our sales force and key industry leaders. Please see ITEM 1A. - “RISK FACTORS” - “Our subsidiaries’ ability to attract and retain independent distributors; our subsidiaries’ ability to develop and maintain positive relationships with our independent distributors; the ability of a distributor to successfully perform his or her role; and the potential adverse impact of the loss of a high-level distributor or a significant number of distributors for causes out of our subsidiaries’ control” below for more information.
Full Customer Satisfaction Product Return Policy
If a consumer is not completely satisfied with the products they purchased, we offer a full refund, or exchange of the product, for items returned within 30 days from the date of purchase. For products purchased by our independent distributors, we also offer a generous product return policy that allows our distributors to get full credit for unopened and resalable items returned for up to 30 days from the date of purchase, generally subject to a customary restocking fee.
Trademarks and Other Intellectual Property
We have obtained more than 40 trademark registrations issued by the United States Patent and Trademark Office (the “USPTO”). We anticipate obtaining additional U.S. trademark registrations in the future and currently have over 25 applications in process with the USPTO.
In addition, we intend to file for trademark protection in jurisdictions outside the U.S. where we market and distribute or intend to market and distribute our products, including, among others, in Canada, Mexico, South Korea, Singapore, Malaysia, Japan, Thailand, and the Philippines. Trademark protection is increasingly important to our growing business.
Several of our products are manufactured under formulations and processes owned by some of our key vendors. Some of our key vendors have registered or applied for patent registrations to maintain exclusivity over the ingredients, formulation and processes, and the integrated products they supply to us. Such potential patents, the underlying ingredients, formulation and processes, and integrated products are material to the Company’s business. The Company reserves the right to join in any future actions to defend against any infringement on such patents that could adversely affect the products the Company sells. If our vendors and us were unsuccessful in protecting such intellectual property rights, this could have a material adverse effect on our business. Please see - “RISK FACTORS” - “Our dependence on one supplier for a significant portion of the products we sell and the potential for material disruptions in our supply chain or potential increases in the prices of the products we purchase beyond what we can pass along to our customers” below for more information.
To protect our own intellectual property and proprietary processes that are material to the long-term health and profitability of the Company, we maintain disciplined business practices to manage trade secrets and use various forms of confidentiality and non-disclosure agreements. We consider trademark protection to be very important to our business and utilize an internal compliance team to closely monitor the usage of our intellectual property. Please see ITEM 1A. - “RISK FACTORS” - “The success of our efforts to register our trademarks and to protect certain intellectual property rights” below for more information.
Strategic Supply Chain Partnerships
We strive to maintain positive relationships with key business partners to ensure the continuous manufacturing, supply, and quality of our products. In the fiscal year ended March 31, 2024 and 2023, product purchases from one supplier accounted for approximately 84% and 92%, respectively, of our product purchases. Please see ITEM 1A. - “RISK FACTORS” - “Our dependence on one supplier for a significant portion of the products we sell and the potential for material disruptions in our supply chain or potential increases in the prices of the products we purchase beyond what we can pass along to our customers.”
Regulatory Environment
Our business is regulated by various federal, state, and local governmental agencies in the U.S. and by similar agencies in Canada and other jurisdictions in which we market and sell our products. These laws and regulations are related to: (a) the manufacturing, labeling, distribution, and sale of our products; (b) product claims and advertising; and (c) our network marketing program.
Regulation of Direct Selling Activities
In the United States, direct selling programs are subject to a variety of federal and state regulations governed by the United States Federal Trade Commission (the “FTC”) or a similar state agency. These regulations are generally intended to protect consumers from fraudulent or deceptive sales practices. They also ensure that product sales are made to the ultimate consumers and that compensation within the organization is made based upon actual sales transactions, rather than upon recruitment into the organization.
The Company monitors and, if necessary, responds to regulatory developments that may adversely affect its network marketing program. We believe the Company is in material compliance with all applicable laws and regulations relating to direct selling activities in the United States and other countries where we operate.
Regulation of Personal Care and Nutritional Food Products
Personal care and nutritional food products (including the products we sell) and certain related marketing and advertising practices are subject to governmental regulation by various federal, state, and local government agencies and other authorities in the U.S., Canada, and other jurisdictions where we market and distribute or intend to market and distribute our products in the future. These agencies and authorities include the U.S. Food and Drug Administration (the “FDA”), the FTC, the Consumer Product Safety Commission, the U.S. Department of Agriculture, and various similar state and Canadian regulatory agencies. To date, we have not experienced any governmental actions related to health or safety, or food and drug regulations regarding our products.
The FDA regulates both finished dietary supplement products (including health and wellness products such as ours) and dietary ingredients. Dietary supplements are specifically regulated under the Dietary Supplement Health and Education Act of 1994 (the DSHEA). Under the DSHEA, manufacturers and distributors of dietary supplements are prohibited from marketing products that are adulterated or misbranded. Generally, such regulations apply prior to a product reaching the market. Once a product reaches the market, the FDA is responsible for taking enforcement action against any product found to be an adulterated or misbranded dietary supplement. Unlike medications, dietary supplements and dietary ingredients, such as those sold by the Company, do not require FDA approval before such products can be marketed and sold.
The FTC, which enforces consumer protection laws regarding truth in advertising, and similar state and foreign agencies regulate how we advertise and market our products. The U.S. Consumer Product Safety Commission, and similar state and foreign agencies, seek to protect the public from unreasonable risks of injuries or death associated with consumer products. In the U.S., Canada and other jurisdictions where we operate, our products are also subject to laws and regulations concerning product formulation, labeling and packaging. These laws and regulations often require us to, among other things, conform product labeling to local language and content description requirements, register or qualify the products with the applicable government authorities, or obtain approvals or file required notifications prior to marketing such products within certain jurisdictions. Many of the jurisdictions where we operate also regulate product capability claims and advertising content. These regulations control the type of claims and representations that can be made regarding the capabilities of products. For example, in the United States, it is unlawful to make claims that nutritional supplements will help diagnose, cure, mitigate, treat, or prevent disease. Please see ITEM 1A. - “RISK FACTORS” - “Our ability to comply with current consumer product laws and regulations or our becoming subject to new or more stringent consumer product laws and regulations in the future” below for more information.
Employees
As of March 31, 2024 and 2023, the Company employed 32 and 43 persons, respectively, as follows:
Location
United States
Asia
Total
The amounts above do not include the Company’s independent distributors, which are independent contractors. Our employees are not represented by labor unions. We believe that our relationship with our employees is positive, and we do not expect a shortage in qualified personnel to continue our business growth.
Access to Public Filings
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to such reports, are available to any person, without charge, upon written request to our Investor Relations Department at 5200 Tennyson Parkway, Suite 400, Plano, Texas. You may also access copies of such reports, and other information about the Company, by visiting our corporate website: www.shrginc.com.
In addition, the SEC maintains a website that contains any reports and other information that we file with the SEC: www.sec.gov.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, and cash flows. If any of these events occurs, the market price of our Common Stock could decline, and you could experience the loss of all or a portion of the value of your investment in our Common Stock. You should not draw any inference about the relative magnitude or relevance of any particular risk from its position in the following discussion.
Risks Associated with the Direct Selling Business Model:
The dependence of some of our subsidiaries upon a direct selling business model to sell our products, and the highly competitive and dynamic nature of the direct selling industry.
Some of our subsidiaries operate in the direct selling industry market and distribute our products and services through a sales force of independent contractor distributors. The distribution of our products and services depends upon their continued efforts to recruit, train, and retain qualified and effective independent distributors. The success of their efforts to recruit and retain distributors may be affected by the competitive environment among direct-to-consumer companies, the conditions of the general labor market, including levels of employment, the occurrence of demographic and cultural changes in the workforce, and the extent to which their brand is recognized in the geographies in which they operate. There can be no assurance that our subsidiaries will be successful in recruiting and retaining enough independent distributors to grow their business worldwide.
The direct selling industry worldwide is highly competitive and dynamic, and generally there are few barriers to entering the industry. In addition, the sale of health and wellness products by direct selling industry participants, online resellers, and others is highly competitive. There are several companies, including many with more resources than the Company that offer competing health and wellness products. The primary competitive factors for health and wellness products are (a) price; (b) the quality, perceived value, brand recognition and package appeal of the product; (c) the skills and effectiveness of the independent distributor and customer service staff interacting with the customer or potential customer; and (d) the continuous availability of enough product to fulfill orders promptly. There can be no assurance that our subsidiaries will remain competitive or that competition in the industry will not intensify.
If our subsidiaries do not remain competitive and promptly and effectively respond to increased competition, including competition for independent distributors, and to marketplace changes in the future, future sales of our products and services could decline. This could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.
Our subsidiaries’ ability to attract and retain independent distributors; our subsidiaries’ ability to develop and maintain positive relationships with our independent distributors; the ability of a distributor to successfully perform his or her role; and the potential adverse impact of the loss of a high-level distributor or a significant number of distributors for causes out of our subsidiaries’ control.
Our subsidiaries operating in the direct selling industry depend on the skills and marketability of their independent distributors to promote their brand and to market and distribute our products and services. The direct selling industry generally experiences a relatively high rate of salesforce turnover and is very competitive. The success of our subsidiaries’ efforts to recruit and retain distributors, or to develop and maintain positive relationships with our independent distributors, may be affected by the competitive environment among direct-to-consumer companies, the conditions of the general labor market, including levels of employment, the occurrence of demographic and cultural changes in the workforce, and the extent to which our subsidiaries’ brand is recognized in the geographies in which they operate. Our subsidiaries’ inability to attract and retain qualified distributors in the future, our subsidiaries’ inability to develop and maintain positive relationships with our independent distributors in the future, the inability or failure of a distributor to fulfill his or her role, including his or her role to comply with all laws and regulations applicable to direct-to-consumer sales activities, the ineffectiveness of a distributor as a spokesperson for our subsidiaries’ brand and products, or the loss of a high-level distributor or a significant number of distributors for causes out of their control may adversely affect future sales of our products and services. This could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.
Changes to our subsidiaries’ sales compensation plan could be negatively perceived by members of their independent sales force, could fail to achieve the desired long-term goals, and could adversely impact future sales.
Some of our subsidiaries operating in the direct selling industry modify aspects of their sales compensation plan from time to time in efforts to keep their sales compensation plan competitive and attractive to their existing and future sales force, to address changing market conditions, to provide incentives that they believe will help grow their business, and to ensure conformance with evolving government regulations, among other reasons. In addition, our subsidiaries may be required to modify their sales compensation plan from time to time to comply with existing or new regulations in the future, including in response to potential governmental enforcement action. Changes to our subsidiaries’ sales compensation plan, including changes perceived to reduce sales commissions earned by their independent sales force, could be negatively received by their sales force, could fail to achieve the desired long-term goals, and could adversely impact future sales. This, in turn, could adversely affect our consolidated business, financial condition, results of operations and cash flows.
Certain of our subsidiaries may be held responsible for certain taxes or assessments relating to the activities of their independent distributors.
The success of our subsidiaries operating in the direct selling industry depends on the effective use of an independent sales force to market and distribute our products and services. Our subsidiaries’ business activities and the activities of their independent distributors are subject to various local, state, and national laws and regulations and, in some instances, governmental agencies may seek to impose on our subsidiaries an obligation to collect taxes, such as sales or value-added tax, to maintain appropriate tax records, or to otherwise ensure compliance with local, state, or national laws and regulations by their distributors. In addition, some jurisdictions may challenge a company’s classification of its distributors as independent contractors and seek to make the company pay additional compensation to its distributors or seek to make the company responsible to withhold and remit payroll and similar taxes with respect to compensation paid to its distributors or with respect to the activities of its distributors. For example, in 2020, the State of California passed legislation which seeks to expand the classification of employees. Other states and other jurisdictions where we operate, now or in the future, may pass similar laws or interpret existing laws, rules, and regulations to expand the classification of employees. Although the California legislation provides an exemption for direct sellers, such as the Company’s subsidiaries operating in the direct selling industry, there can be no assurance that other jurisdictions where we operate now or in the future will provide a similar exemption or that judicial or regulatory authorities will not assert interpretations of law that would mandate that we change our classification. In the event that any governmental agency challenges the classification of our subsidiaries’ distributors as independent contractors or otherwise seeks to make our subsidiaries responsible to withhold and remit payroll or other taxes in connection with the activities of their independent distributors, we may incur significant costs and expenses to defend us and our subsidiaries from such actions, with no assurance that we will prevail, and our subsidiaries may ultimately be held responsible for such taxes in those jurisdictions in the future. The occurrence of any of these conditions could have a material adverse effect on our consolidated business, financial condition, results of operations and cash flows.
Civil or governmental challenges to our subsidiaries’ direct selling system or independent distributor policies could harm our business.
The direct-to-consumer industry is subject to extensive governmental scrutiny, including as a result of various national, state, and local laws and regulations. For example, in the U.S., the FTC has actively warned several direct selling companies, and the industry as a whole, about certain business practices associated with direct selling and has entered into settlements with several direct selling companies that required those companies to modify their compensation plans and business models. Those settlements resulted from FTC enforcement actions involving a variety of alleged violations of consumer protection laws, including allegations of earnings potential misrepresentations and challenges about the legal validity of the distributor compensation plans and business models. Elements of the network marketing system or distributor policies of some of our subsidiaries may also be challenged by third parties, including their independent distributors, by competing direct-to-consumer companies, and by others.
In the countries where we operate, including the United States, the direct selling industry relies on the implementation of distributor rules and policies designed to protect consumers, prevent inappropriate sales activities and marketing practices, and distinguish between legitimate direct selling distribution systems and unlawful pyramid schemes. We and our subsidiaries have adopted formal rules and policies that we believe are consistent with best domestic and global direct-to-consumer industry standards. The laws and regulations covering the direct selling industry, however, often involve a high level of subjectivity and are subject to judicial interpretation. Because of this, there can be no assurance that elements of our subsidiaries’ network marketing system, including representations made by their independent distributors, or elements of their distributor policies will not be challenged in civil or governmental actions, or that the application and interpretation of laws or regulations governing the direct-to-consumer industry in the future would not be harmful to our subsidiaries’ business. The occurrence of any of these conditions could have a material adverse effect on our consolidated business, financial condition, results of operations and cash flows.
Risks Associated with our Growing Business:
The success of our growth initiatives, including our efforts to attract new customers, build brand awareness, and expand into international areas, and our efforts to generate recurring customer orders, which we call “SmartShip” orders.
Our long-term success is dependent on our ability to achieve sustained growth. We are a developing company and had no significant sales history prior to December 2017, when our U.S.-based subsidiaries launched their Elevate health and wellness product line. During the period from December 2017 through October 2019, our consolidated sales increased at a fast pace. During the following three years, however, we have experienced sales declines or stagnation. In efforts to restore growth, in the fourth quarter of our fiscal year ended March 31, 2021, we launched a multipronged growth strategy intended to accelerate sales growth, including by: (a) expanding our product offerings in the U.S., (b) initiating operations in countries like South Korea, Singapore, Malaysia, Japan, Thailand, and the Philippines, among others, and (c) launching our previously announced membership-based consumer travel products line worldwide. In addition, we have made significant investments in developing and launching a new business brand, “The Happy Co.,” in February 2021, commonly referred to as HCo, in the U.S. There can be no assurance that these strategic initiatives will result in the consolidated sales growth we anticipate, or any sales growth at all, which could have a material adverse effect on our consolidated business, financial condition, results of operations and cash flows.
Our ability to anticipate and effectively respond to changes in consumer preferences and buying trends in several countries in a timely manner.
Our success depends in part on our ability to anticipate, evaluate, and respond in a timely manner to changes in consumer preferences and buying trends, particularly for health and wellness products, in the countries we operate. We anticipate that continuously changing consumer preferences and buying trends will affect future worldwide demand for health and wellness products, and other consumer products and services. If we do not effectively identify and respond in a timely manner to evolving consumer preferences and buying trends, including consumer demands for health and wellness products and services, our consolidated business, financial condition, results of operations and cash flows may be adversely affected.
Our ability to maintain a positive image and brand acceptance in the dynamic, highly competitive, and sometimes unpredictable marketplace, including the impact of social media.
In recent years, there has been a significant increase in the use by businesses of social media platforms, including informal blogs, social media websites, and other forms of internet-based communications. Social media can enable a business to reach a wide selection of consumers and other targeted audiences, generally in a more cost-effective way than more traditional forms of marketing and advertising. However, negative, inaccurate, or false information about a company or the products it sells may be circulated through social media quickly and may damage a company’s reputation and business. In addition, negative, inaccurate, or false information about a company or the products it sells may be circulated through more traditional communication means. Many consumers and independent distributors of direct-to-consumer companies value readily available information and often act on such information without further investigation. The harm caused by the circulation of negative, inaccurate, or false information about a company or its products may be immediate, and opportunities to redress and correct the information may be slow and costly. If we were the victim of allegations, or the dissemination of negative, inaccurate, or false information, circulated through social media or otherwise, this could adversely impact our reputation and business and could result in the loss of independent distributors and in a decline in our future sales.
The Company also uses social media platforms, including Facebook and Instagram, to communicate with existing and prospective customers, independent distributors, vendors, and employees, and to otherwise promote its products and services. Laws and regulations intended to govern the use of the Internet and social media platforms are complex and evolving. If we, our employees, our subsidiaries’ independent distributors, or other third parties acting on our behalf were found to be in violation of any of these laws and regulations, this could result in fines and enforcement actions and adversely impact our reputation and business.
The occurrence of any of these conditions could have a material adverse effect on our consolidated business, financial condition, results of operations and cash flows.
Our dependence on one merchant processor for a material portion of our sales proceeds.
The availability of merchant processing providers willing to serve smaller companies is limited. Substantially all our credit card sales in the U.S. are processed by one merchant processor. Any disruption in the operations of this merchant processor, as a result of organized labor disputes, natural disasters, acts of cyberterrorism or otherwise, could disrupt or substantially decrease our cash flows from operation. If this occurred, particularly for an extended period, we may not be able to meet our obligations, including servicing our debt now or in the future. The occurrence of any of these conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our long-term success depends on our ability to attract and retain talented employees and management, and to develop effective management succession plans.
As a growing business, our long-term success depends in large part on our ability to attract and retain talented employees and senior executives who have strong knowledge, experience, and managerial skills, including in the direct selling industry. From time to time, key employees may retire or otherwise leave our business, and we may experience delays or be unsuccessful in attracting and integrating the new staff required to grow and operate our business profitably. In addition, as a growing company with a relatively limited number of executives currently on staff, our ability to develop effective management succession plans is limited. Effective management succession planning is important to our long-term success because failure to effectively transfer knowledge and to complete a smooth management transition could hinder or disrupt our strategic planning initiatives and/or adversely affect future execution of those initiatives and our performance. The occurrence of any of these conditions could have a material adverse effect on our consolidated business, financial condition, results of operations and cash flows.
Our ability to effectively manage and control our operating expenses.
We are a growing company and have not achieved sustained growth and profitability. Our ability to consistently generate earnings from operations depends in large part on our ability to successfully control our operating costs and expenses, while we continue to invest in strategic initiatives intended to grow our sales volume and business infrastructure, including our international footprint. In furtherance of this goal, we have intensified our ongoing activities to control operating costs and expenses, including by strengthening our financial management processes. There can be no assurance that our strategic initiatives and cost control efforts will result in the levels of profitability and positive cash flows that we expect, if at all, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our quarterly and annual financial performance and potential fluctuations therein.
Our quarterly and annual financial performance may fluctuate and adversely affect the price of our Common Stock, often for causes outside of our control. For example, consumer demand for our products and services and, as a result, our quarterly and annual consolidated sales levels, may increase or decrease materially, among other things, because of changes in actual or anticipated levels of employment, changes in the interest rates applicable to consumer credit cards, inflation, national or local political uncertainty, increased competition, and changes in consumer sentiment in general in the countries where we operate. In addition, our results of operations and cash flows may decrease because of, among other things, potential increases in our product costs beyond that which we can pass along to our customers, changes in the willingness or ability of our suppliers to provide product to us in a timely manner, increases in labor costs and in payroll tax rates, and changes in the regulatory environment in the countries where we operate. The occurrence of any of these conditions could have a material adverse effect on our quarterly financial performance and adversely affect the price of our Common Stock.
Our ability to generate sustained positive cash flows from operations or to obtain additional financing, if needed, with which to fund our working capital needs, including servicing or refinancing our debt, now and in the future.
We are a developing company and have not consistently generated sustained positive cash flows from operations. We have experienced significant fluctuations in our operating cash flows, or have otherwise depended on the issuance of equity securities and debt, including convertible notes and short-term borrowings under financing arrangements, in order to meet our working capital needs. For example, during the fiscal year ended March 31, 2024 and 2023, our net cash used in operating activities was approximately $3.8 and $9.0 million, respectively. If the Company is unable to generate sustained positive cash flows from operations or to obtain additional equity or debt financing, if needed, this could inhibit the Company’s ability to implement its business strategies and to grow its business, service its debt, now or in the future, and otherwise meet its business goals. This could, in turn, have a material adverse effect on its financial condition, results of operations and cash flows.
Our financial performance could be adversely affected by economic downturns, particularly over an extended period.
Our results of operations may be materially impacted by changes in general economic conditions in the countries where our products are sold. The economies in such countries may be adversely affected by changes in government policy and/or by, among other things, changes in levels of employment, changes in tax laws, increases in energy costs, geopolitical conflict, natural disasters or acts of terrorism, widespread health crises, changes in consumer credit card interest rates, inflation, and changes in consumer sentiment in general. For example, business activity in several sectors of the global economy were severely reduced because of the recent COVID pandemic. These conditions, in turn, resulted in significant economic contraction in the countries where we operate. In the event of a significant economic downturn, particularly over an extended period of time, whether as a result of a similar health crisis or otherwise, consumer spending habits could be adversely affected over a longer term, and we could experience lower than expected sales. Any economic downturn could also adversely affect one or more of our key suppliers. The occurrence of any of these events could have a material adverse effect on our business, financial condition, and results of operations.
Our business and financial performance could be adversely affected by inflation.
In recent history, inflation has generally been low in the geographies where we operate. However, at the time of this Annual Report, the inflation rate in the United States remains around 3%, primarily as a result of higher energy, housing, and food costs. In the event of a significant increase in consumer prices, particularly over an extended period of time, consumer demand for discretionary products, such as our health and wellness products, could be adversely affected, and we could experience lower than expected sales. In addition, if any of our suppliers implemented price increases, in response to higher raw material, labor, and energy costs or otherwise, we may not be able to pass along such price increases to our customers and our profitability may be reduced. The occurrence of any of these events could have a material adverse effect on our business, financial condition, and results of operations.
The success of our efforts to register our trademarks and to protect certain intellectual property rights.
We have applied for, or are in the process of applying for, trademark protection in the U.S. and in other jurisdictions where we market and distribute or intend to market and distribute our products. We have obtained 40 trademarks and have over 25 pending trademark applications in the U.S. We anticipate securing additional U.S. trademarks and foreign trademarks. Trademark protection is increasingly important to our business. If we fail to register or enforce our intellectual property rights or if our intellectual property rights are successfully challenged, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Several of our products are manufactured under formulations and processes owned by some of our key vendors. Some of our key vendors have registered or applied for patent registrations to maintain exclusivity over the ingredients, formulation and processes, and the integrated products they supply to us. Such existing or potential patents, the underlying ingredients, formulation and processes, and integrated products could be material to our business. The Company reserves the right to join in any actions to defend against any infringement on such vendor-owned patents that could adversely affect the products the Company sells. If we, and our vendors, were unsuccessful in protecting such intellectual property rights, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our potential unintended infringement on the intellectual property rights of others.
The health and wellness industry is competitive and characterized by the need for trademarks to protect intellectual property rights, and by claims of infringement or other violation of intellectual property rights. A third party may assert that one or more of our products violates that party’s intellectual property rights. Any successful intellectual property claim against us in the future could result in significant financial liability and/or prevent us from selling the affected product afterwards. In addition, the resolution of infringement claims may require that we redesign our products, obtain licenses to use intellectual property belonging to a third party, or cease using the intellectual property altogether. Moreover, any intellectual property claim, regardless of its merits, could be expensive and time-consuming to defend against. As a result, claims based on allegations of infringement or other violations of intellectual property rights, regardless of the outcome, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
From time to time, we are a party to lawsuits and other claims that may result in adverse outcomes.
In recent years, we have been a party to several claims and lawsuits arising from a wide variety of business activities, including acquisition-related contingencies, disputes between the Company and certain former officers, disputes between the Company and certain shareholders, and disputes between the Company and former independent distributors. Litigation and other claims are subject to inherent uncertainties and management’s assessment of these uncertainties may change in the future, including as a result of new information. A material adverse impact to our consolidated financial position and results of operations could occur in a period in which an unfavorable outcome becomes probable and reasonably estimable, and a material adverse cash flow could occur in the period when these lawsuits or claims are settled.
Our efforts to expand into foreign markets will increasingly expose us to foreign currency exchange rate fluctuations, and other risks inherent to foreign operations.
During the fiscal years ended March 31, 2024 and 2023, approximately 95% and 91%, respectively, of our sales have been to customers and independent distributors located in the United States. However, as part of our strategic growth initiatives, in recent years we initiated efforts to expand our operations in other countries, mainly in Korea. As a result, the amount of our reported consolidated sales, expenses, and cash flows may be significantly affected by fluctuations in the relevant foreign currency exchange rates, as we translate the financial statements of our foreign operations from their functional currency into our reporting currency, the U.S. Dollar. In addition, as a multinational consolidated group, we and some of our domestic or foreign affiliates may obtain and hold assets and liabilities denominated in a currency different from our or their functional currency, in the normal course of business. As a result, we and some of our affiliates may incur foreign currency transaction gains and losses in connection with such assets and liabilities.
Our business may also become exposed to more adverse economic, regulatory, and other conditions in the international areas to which we market and distribute our products now or in the future, compared to those in the U.S. For example, our future international operations may result in exposure to more restrictive consumer safety, product labeling and other consumer product regulations; more restrictive labor laws and regulations; more frequent or unexpected changes in the regulatory environments; more economic volatility; higher rates of inflation; or higher political instability, compared to the U.S. Furthermore, our international operations may expose us to higher consolidated income tax rates, import and export restrictions and tariffs, restrictions on the expatriation of cash to the U.S., and potentially adverse changes in trade agreements between the U.S. and a particular foreign country where we market and distribute our products now or in the future.
The occurrence of any of these conditions could have a material adverse effect on our future business, financial condition, results of operations and cash flows.
Our ability to respond to any natural disasters, epidemics, and other health emergencies, or acts of violence or terrorism that may affect our customers and/or our business effectively and cost-efficiently.
The occurrence of natural disasters, epidemics or other health emergencies, or acts of violence or terrorism in the geographies we market and distribute our products now and in the future, could result in physical damage to our property, the temporary or long-term closure of a facility, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) to us, the temporary or long-term reduction in our ability to sell products and grow our business, and/or the temporary reduction in consumer demand for our products and services. In addition, if one or more natural disasters, epidemics, or other health emergencies, or acts of violence or terrorism were to impact our global business, our insurance costs may rise significantly afterwards. The occurrence of any of these conditions could have a material adverse effect on our financial condition, results of operations and cash flows.
Risks Associated with our Products, and with Product and Consumer Laws and Regulations:
Our dependence on one supplier for a significant portion of the products we sell and the potential for material disruptions in our supply chain or potential increases in the prices of the products we purchase beyond what we can pass along to our customers.
We depend on one supplier for a significant portion of the products we sell. Any disruption or substantial decrease in the supply of product by this supplier, as a result of a shortage of raw materials, organized labor disputes, natural disasters, acts of cyberterrorism, or otherwise, could disrupt or substantially decrease our ability to fulfill customer orders. If this occurred, particularly for an extended period, we may not be able to continue to offer these or similar products and our future sales may decline. In such event, we may not be able to offset the decline in sales through substitution of product, price increases, or otherwise. In addition, if this supplier or any of our suppliers implemented unilateral price increases, we may not be able to pass along such price increases to our customers and our profitability may be reduced. Further, if this supplier or any of our suppliers fails to continue to supply product of adequate quality and in a timely fashion to us, this could adversely affect our future sales. The occurrence of any of these conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Past or future reformulations of our products, including in response to potential governmental enforcement action, could be negatively received by our independent sales force and customers, and adversely impact future sales.
As part of our commitment to continuously improve our products, we introduce product reformulations and other product enhancements from time to time. In addition, we may be required to modify our product formulations from time to time to comply with existing or new regulations in the future, including in response to potential governmental enforcement action. Changes to our product formulations, whether as a result of potential governmental enforcement action or not, could be negatively received by our independent sales force and customers, and could adversely impact future sales, and our business, financial condition, results of operations and cash flows.
Potential product liability claims could harm our business.
Historically, product liability claims have not been material to our business. However, given the increase in product liability claim activity in recent years and the increased application of a “strict liability” legal standard to those claims particularly in the U.S., we purchase product liability insurance to minimize the financial risks associated with such claims or potential claims. The sources of product liability insurance coverage in the countries where we market and distribute our products are limited, product liability coverage is increasingly expensive, and product liability insurance policies contain many exclusions. We believe our product liability insurance policies significantly mitigate the potentially adverse financial impact to us resulting from most potential product liability claims. However, there can be no assurance that our product liability coverages are adequate to protect us sufficiently and against all potential claims. For example, if any of our products is found to have caused personal injury to a consumer, we might be subjected to liability substantially in excess of our insurance coverages. Any of these conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Nutritional supplements are often supported only by limited available clinical studies.
Nutritional supplements, such as many of the Company’s health and wellness products, have a long history of human consumption. Some of our products may contain innovative ingredients or contain combinations of ingredients. Although we believe that all our products are safe when taken as directed, there is only limited data available about human consumption of certain of these product ingredients or combinations of ingredients in concentrated form. We and our key suppliers conduct research and test the formulation and production of our products, however, there are only limited, if any, conclusive clinical studies available about our products and similar product in the marketplace. Furthermore, because we are highly dependent on consumer perception of the efficacy, safety, and quality of our products, we could be adversely affected in the event that our products, or similar product in the marketplace, are proven or asserted to be ineffective or harmful to consumers or in the event of publicity associated with any adverse effects resulting from the use or misuse of our products, or similar products in the marketplace. Any of these conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we fail to maintain satisfactory compliance with the regulations of the United States Food and Drug Administration and other governmental agencies in the United States and abroad, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil, criminal or monetary penalties.
Our operations are subject to regulation by different state and federal government agencies in the United States and other countries, as well as to the standards established by international standards bodies. If we fail to comply with those regulations or standards, we could be subject to fines, penalties, criminal prosecution or other sanctions. Some of our products are subject to regulation by the United States Food and Drug Administration and similar foreign and domestic agencies. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales and distribution. If we fail to comply with those regulations or standards, we may have to recall products, cease their manufacture and distribution, and may be subject to fines or criminal prosecution.
We are also subject to a variety of laws, regulations and standards that govern, among other things, the importation and exportation of products, the handling, transportation and manufacture of toxic or hazardous substances, the collection, storage, transfer, use, disclosure, retention and other processing of personal data, and our business practices in the United States and abroad such as anti-bribery, anti-corruption and competition laws. This requires that we devote substantial resources to maintaining our compliance with those laws, regulations and standards. A failure to do so could result in the imposition of civil, criminal or monetary penalties having a material adverse effect on our operations.
Our ability to comply with current consumer product laws and regulations or our becoming subject to new or more stringent consumer product laws and regulations in the future.
Our business and the products we sell are subject to several national, state, and local laws and regulations in the countries where we currently market and distribute or intend to market and distribute our products. These laws and regulations generally govern the composition, packaging, labeling and consumer safety of the products we sell, as well as the information we use to market these products. In addition, the laws and regulations applicable to us and our products may become more stringent in the future. For example, the State of California enforces recent legislation that requires that “clear and reasonable” warnings be given to consumers who are exposed to chemicals known to the State of California to cause cancer or reproductive toxicity. Although we actively seek to comply with the requirements of this and all other laws and regulations applicable to our business and products, there can be no assurance our products would not be found to be defective in labeling or content, or that the labeling and content of our products will not be challenged in civil or enforcement actions in the future. Our continued compliance with existing or new consumer product laws and regulations could also require the review and possible reformulation or relabeling of our products, as well as the potential removal of some products from the marketplace. In addition, the existence of more stringent consumer product laws and regulation in countries where we intend to market and distribute our products, could hinder our ability to grow our business into such countries. If we were found to be in violation of existing or new consumer product laws or regulations in the future, this could result in significant fines or damages and other enforcement actions, in addition to significant costs and expenses to defend the resulting claims. The occurrence of any of these conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Associated with our System of Internal Controls, and with our Disclosure Controls:
We have identified material weaknesses in our internal control over financial reporting, and our management has concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report. If we fail to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our Class A common stock may decline.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to determine the adequacy of our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation if a deficiency is identified. Annually, we perform activities that include reviewing, documenting, and testing our internal control over financial reporting. If we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to achieve and maintain an effective internal control environment could result in materially misstated consolidated financial statements and a failure to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiency and lead to a decline in our stock price.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management, with the participation of our CEO and our CFO, assessed the effectiveness of our internal control over financial reporting as of March 31, 2024, and concluded that our internal control over financial reporting was ineffective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States due to material weaknesses identified below.
1. As of March 31, 2024, our management has identified material weaknesses in our internal controls to review and reconcile account balances on a monthly basis and has concluded that, due to such material weakness, our disclosure controls and procedures were not effective.
2. As of March 31, 2024, our management has identified material weaknesses in our internal controls to complete document procedures that timely completes monthly reconciliations and closing procedures. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Our conclusion is based on the fact that we do not have sufficient number of qualified accounting personnel to ensure proper segregation of incompatible duties, perform timely account analyses, and timely preparation and review of our financial statements. To remediate these material weaknesses, our management is in the process of (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience; (ii) enhancing our accounting and financial reporting process, and (iii) strengthening our account reconciliation and documentation procedures.
While we believe these efforts will improve our internal controls and address the root cause of the material weaknesses, such material weaknesses will not be remediated until our remediation plan has been fully implemented and we have concluded, through testing, that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting. For more information related to our material weaknesses and their remediation, see ITEM 9A. CONTROLS AND PROCEDURES.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Securities Act, or the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and executed, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple human error or mistake. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in any control system, misstatements, or insufficient disclosures due to error or fraud may occur and not be detected.
Risks Associated with our Information Technology Systems and with Cybersecurity:
We may be adversely affected by any disruption in our information technology systems.
We depend on our information technology systems to manage most of our major business functions, including sales order processing, independent sales force service and support, billings and collection, human resources and recordkeeping, and accounting and reporting. More specifically, we rely upon our information technology systems to procure and replenish inventory, to fulfill and ship customer orders, to coordinate our sales activities across several functional areas, to carry out our administrative activities, and to protect personal or sensitive information about our customers, independent distributors, employees, vendors, and other business partners that we received in the ordinary course of our business. A substantial disruption in our information technology systems could result in delays in receiving product and in filling customer orders, and adversely affect our relationships with our customers, independent distributors, employees, vendors, and other business partners, and damage our reputation and business.
As our operations rapidly grow in both size and scope, we continuously need to scale and upgrade our systems and infrastructure to meet increased demand, while preserving their reliability and integrity. For example, we recently implemented an information system upgrade in the U.S. to better accommodate our current and anticipated growth. Any expansion or upgrade to our systems and infrastructure in the future will require us to commit substantial financial, operational, technical, and human resources before the volume of our business increases, with no assurance that the volume of business will increase to the extent we expect or at all. Also, there can be no assurance that any system expansion or upgrade will result in the anticipated benefits and efficiencies, or that the costs of such system expansion or upgrade will not outweigh the benefits and efficiencies derived.
Any of these conditions could have a material adverse effect on our financial condition, results of operations and cash flows.
We may be adversely affected by potential acts of cyberterrorism.
The normal course of our business requires the collection, transmission, and retention of large volumes of confidential and proprietary information, including personal or confidential information of our customers, independent distributors, suppliers, and employees in the information technology systems that we maintain and in those maintained by certain third parties with which we do business. We operate in a global environment characterized by increasing threats of cyberterrorism. Information technology system threats can take a variety of forms. Individual hackers, groups of hackers, and sophisticated organizations, including state-sponsored organizations or nation-states, often commit cyberattacks that pose threats to government, military, educational, and business institutions, among others. These actors could use a wide variety of methods, which could include the development and deployment of malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to gain access to networks and data, potentially compromising sensitive customer, independent distributor, supplier, employee, or other information.
Cyber-threats are constantly evolving, making it increasingly difficult to prevent, detect and successfully defend against. A potential breach of our facilities, data systems or data security could disrupt the operations of our information technology systems and business, impair our ability to ship product or provide services to our customers, and potentially compromise the privacy of our data, including our confidential or technical business information. In addition, the risk of one or more cybersecurity incidents may be heightened as many of our employees work remotely, any of these things could harm our reputation or competitive position, require us to allocate more resources to improve our systems, technologies, and infrastructure, or otherwise adversely affect our business, financial condition, results of operations and cash flows.
Risks Related to Our Securities:
Future sales and issuances of our Common Stock or rights to purchase our Common Stock, including issuances pursuant to stock warrants currently outstanding, could result in additional dilution of the percentage ownership by our existing stockholders and could cause our trading price to decline.
We expect that significant additional capital will be needed in the future to fund our planned growth, including our ongoing efforts to expand our footprint outside the U.S. To raise capital, we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. Future issuances of equity or equity-linked securities, together with future conversions of our preferred stock and exercises of stock warrants currently outstanding or granted in the future, and shares issued in connection with future acquisitions, if any, may result in material dilution to the equity interests of our existing investors. In addition, as a result of such future issuances, new investors could gain rights, preferences and privileges senior to those of the current holders of our common stock.
Our Board of Directors may adopt an equity compensation plan in the future to enhance our efforts to attract and reward employees, executives, and consultants with grants of equity-based awards. Future issuances of equity-based awards, including issuances under any such future equity compensation plan, may result in material dilution to the equity interests of our existing investors and have an adverse effect on the market price of our securities.
Our Common Stock has historically had a limited market and high stock price volatility. If an active trading market for our Common Stock develops, trading prices for our stock may be more volatile.
The principal U.S. market for our Common Stock is the OTC Pink Market, an over-the-counter trading platforms market operated by OTC Markets Group Inc. Our common stock has historically had limited daily trading activity. In addition, the price of our stock has historically been volatile. For example, as of March 31, 2024, the 52-week trading price for our Common Stock has ranged from $0.0010 to $0.0210 per share. Many factors, some of which are beyond our control, may cause the price of our Common Stock to decline over the short-term or over a long-term, regardless of our operating results. These factors include, among others, fluctuations in our operating results; trends or adverse publicity related to our business, products, competitors or industry; the unwillingness of some stockbrokers to place trading orders in our stock and the resulting limitations in the number of stockbrokers willing to trade our stock; the concentration of a large number of shares of our Common Stock in one or a few stockholders, the sale of our Common Stock by one or more significant stockholders, changes in the economic conditions in the geographies where we operate, and a decline in the stock market in general. If an active market for our Common Stock develops, trading prices for our stock may be more volatile and expose our stockholders to a higher risk of loss of principal over the short-term or over a long-term.
Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.
As of March 31, 2024, our directors, executive officers and their affiliates as a group beneficially own approximately 52.3% of the outstanding Common Stock. As a result, these stockholders able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of the articles of incorporation, as amended and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
Certain rights of our Preferred Stockholders may limit your rights as a Common Stockholder.
The Company’s authorized capital stock structure is comprised of multiple classes of Common Stock (Class A and Class B) as well as Preferred Stock (Series A, B, C and D). As of March 31, 2024, there were 347,451,880 shares of its Class A Common Stock, 3,100,000 shares of its Series A Preferred Stock; and 3,220,000 shares of its Series C Preferred Stock issued and outstanding. Effective August 31, 2023, we established the Series D Preferred Stock, which consists of 26,000 shares issued and outstanding. There are no shares of the Company’s Class B Common Stock or Series B Preferred Stock currently issued and outstanding.
The rights of the holders of Series A and C Preferred Stock are set out in a Certificate of Designation (for each such series) filed in the State of Nevada. Pursuant to such Certificates of Designation, each share of Series A and Series C Preferred Stock entitles the holder to one vote and is convertible into one share of our Class A Common Stock, at the option of the holder, subject to certain regulatory restrictions. In addition, pursuant to such Certificates of Designation, the affirmative vote of the holders of at least 86% of the shares of the Series A and the Series C Preferred Stock outstanding is required for the Board to declare and pay dividends and other distributions upon the shares of the Company’s Common Stock, unless, with respect to a cash dividend, the holders of the Company’s Preferred Stock (including the Series A and the Series C Preferred Stock) are to receive the same cash dividend as the Common Stock, on an if converted basis. Further, the shares of our Preferred Stock are senior to the shares of our Common Stock with regards to distributions in the event of dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary.
The rights of the holders of the Series D Preferred Stock are set out in the Certificate of Designation filed in the state of Nevada. Pursuant to such Certificate of Designation, from the first date of issuance of any Series D Preferred Stock, each Holder of the Series D Preferred Stock (each a “Holder”) shall be entitled to receive cumulative dividends be paid by the Company in cash at the rate of twenty-five percent (25%) per annum of the net operating income of the Company for its calendar year. Accrued and unpaid dividends are cumulative and shall continue to accrue whether or not declared and whether or not in any fiscal year there shall be operating income or surplus available for the payment of dividends in such fiscal year. Accrued and unpaid dividends shall be payable in cash commencing June 1, 2024 and continuing each annual anniversary of such date, until such Series D Preferred Stock is called by the Company. So long as the Series D Preferred Stock is outstanding, a majority of Holders (owning fifty percent (50%) or more) of Preferred D Stock will be entitled to designate individuals to the board of directors of the Company as necessary to maintain a ratio of at least 28.5% of the filled Board seats, subject to confirmation by the Board, to fill any vacancy in such Board seats and to remove and replace any individuals designated to fill such Board seats. Without the prior written consent of the holders of fifty percent (50%) or more of the outstanding shares of the Series D Preferred Stock, the Company shall not (i) authorize or issue additional or other capital stock that is of junior, equal or greater rank to the shares of the Series D Preferred Stock in respect of the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company, (ii) amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series D Preferred Stock, and (iii) directly or indirectly declare, pay or make any dividends or other distributions upon any of the common stock, if any shares of the Series D Preferred Stock are outstanding.
The preferred shareholder rights discussed above may constitute a material limitation on the rights of our Common Stockholders, including the right to receive dividends and other to distributions, if any. The reduced disclosure requirements applicable to us as a “smaller reporting company” may make our common stock less attractive to investors.
We are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act. As permitted by scaled disclosure requirements applicable to smaller reporting companies under the Exchange Act, the information we disclose may differ or be less comprehensive, when compared to that of larger filers. If some investors find our common stock less attractive as a result of less comprehensive information we may disclose pursuant to the exemptions available to us as a smaller reporting company, there may be a less active trading market for our common stock and our stock price may be more volatile than that of an otherwise comparable company that does not avail itself of the same or similar exemptions.
The conversion or exercise, as applicable, of the outstanding Series A Preferred Stock and Series C Preferred Stock could substantially dilute your investment and adversely affect the market price of our common stock.
As of March 31, 2024, the Series A Preferred Stock are convertible into an aggregate of 3,100,000 shares of common stock. The Series C Preferred Stock are convertible into an aggregate of 3,220,000 shares of common stock.
In addition, sales of a substantial number of shares of common stock issued upon the conversion or exercise, as applicable, of the outstanding Series A Preferred Stock, Series C Preferred Stock, or even the perception that such sales could occur, could adversely affect the market price of our common stock. The conversion or exercise of such securities could result in dilution in the interests of our other stockholders and adversely affect the market price of our common stock.
Sales of a substantial amount of common stock in the public market or the perception that these sales could occur, could cause the market price of common stock to decline.
Sales of a substantial number of shares of common stock in the public market or the perception that these sales might occur could cause the market price of common stock to decline. In addition, we may file a registration statement to register shares reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable vesting requirements and expiration of the lock-up provisions referred to above, the shares issued upon exercise of outstanding stock options would be available for immediate resale in the open market.
A decline in the price of common stock could affect our ability to raise working capital and adversely impact our ability to continue operations.
A prolonged decline in the price of common stock could result in a reduction in the liquidity of the common stock and a reduction in our ability to raise capital. A decline in the price of common stock could be especially detrimental to our liquidity, operations and strategic plans. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new products and services and continue current operations. If our common stock’s price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
We will be required to raise additional capital in order to develop our technology and scale our operations. However, we may be unable to raise additional capital needed to fund and grow our business.
We will need additional capital to scale our operations. We will not be able to continue product development and our commercial deliveries if we cannot raise additional debt and/or equity financing.
We may not be able to increase our capital resources by engaging in additional debt or equity financings. Even if we complete such financings, they may result in dilution to our existing investors and include additional rights or terms that may be unfavorable to our existing investor base. These circumstances could materially and adversely affect our financial results and impair our ability to achieve our business objectives. Additionally, we may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions (including terms that require us to maintain specified liquidity or other ratios) that would otherwise be in the best interests of our stockholders.
Even if the Board approves a reverse stock split of our common stock at the currently approved ratio, we cannot assure you that the market price of our common stock will remain high enough for such reverse split to have the intended effect of complying with the minimum bid price requirement of The Nasdaq Stock Market LLC (“Nasdaq”).
In connection with this offering and the potential uplist of our common stock to Nasdaq, we intend to effect a reverse stock split of our common stock, subject to approval by the Financial Industry Regulatory Authority (“FINRA”) at the currently approved ratio to allow us to obtain Nasdaq approval of our initial listing application to list our common stock on Nasdaq. Even if the Board approves a reverse stock split of our common stock at the currently approved ratio, there can be no assurance that the market price of our common stock following the reverse stock split will remain at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. If the market price of our common stock declines following the effectuation of the reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and thus jeopardize our ability to meet or maintain the Nasdaq’s minimum bid price requirement or other listing requirements of Nasdaq.
Risks Related to Current World Events
An escalation of the current war in Ukraine, generalized geopolitical conflict in Europe, or the emergence of conflict elsewhere, may adversely affect our business.
An escalation of the current war in Ukraine, generalized conflict in Europe, or the emergence of conflict elsewhere may adversely affect our business if the U.S. capital markets become risk averse for a prolonged period of time, and/or there is a general slowdown in the global economy.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The following table provides information about our material facilities:
Location Type of Facility Leased/Owned Sq. Feet
Plano, Texas Corporate Headquarters Leased 5,560
Addison, Texas Distribution Center Leased 11,100
Seoul, South Korea Asian Office Leased 2,612
In March 2022, the Company entered into a 7-year lease for its current Corporate Headquarters in Plano, Texas. The Company relocated to its current headquarters during the second quarter of its fiscal year 2023.
In June 2021, the Company commenced operations in Seoul, South Korea in a facility subleased from HWH World, Inc. (“HWH World”), a subsidiary of DSS and a company affiliated with Heng Fai Ambrose Chan, a Director of the Company. In May 2022, the Company and HWH World amended the related sublease agreement to reduce the space subleased by the Company and to reduce the related rent obligation. As of March 31, 2024 and 2023, the agreement constitutes a month-to-month arrangement.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We may be involved, from time to time, in claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.
We are subject to several U.S. federal, state and local laws and regulations. These laws and regulations govern, among other things, labor relations, the labeling and safety of the products we sell, and the methods we use to sell these products. We believe that we are in material compliance with all such laws and regulations, although no assurance can be provided that this will remain true indefinitely in the future.
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 March 31, 2024.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Stock is not listed on any securities exchange and is quoted on the OTC Pink Market under the symbol “SHRG” because our Common Stock is not listed on a securities exchange and its quotations on OTC Pink are limited and sporadic, there is currently no established public trading market for our Common Stock.
The following table reflects the high and low closing sales information for our Common Stock for each fiscal quarter during the fiscal years ended March 31, 2024 and 2023. This information was obtained from OTC Pink Market and reflects inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
HIGH LOW
Fiscal Year Ended March 31, 2024:
First Quarter $ 0.0205 $ 0.0012
Second Quarter $ 0.0076 $ 0.004
Third Quarter $ 0.0046 $ 0.002
Fourth Quarter $ 0.004 $ 0.0012
HIGH LOW
Fiscal Year Ended March 31, 2023:
First Quarter $ 0.038 $ 0.024
Second Quarter $ 0.037 $ 0.022
Third Quarter $ 0.0355 $ 0.015
Fourth Quarter $ 0.0251 $ 0.013
Holders
As of June 24, 2024, there were 476 stockholders of record of our Common Stock.
Dividends
We have not declared or paid dividends at any time during our past two fiscal years. We currently anticipate that we will retain future earnings to support reinvestments in our business and our growth plans. Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon, among other things, future operating earnings and cash flows, future capital requirements, contractual restrictions (including those contained in the agreements and instruments governing our debt and the Certificates of Designation of our convertible Preferred Stock) and general business conditions.
Securities Authorized for Issuance Under Equity Compensation Plans
The information contained under the caption “Equity Compensation Plans” in ITEM 12 - “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” is incorporated herein by reference.
Penny Stock Regulations
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).
For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the investors’ ability to buy and sell our stock.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
In the month ended February 28, 2022, the Company issued 50,000,000 shares of its Class A Common Stock in connection with the exercise of warrants by DSS, Inc., a majority shareholder of the Company. The proceeds from these stock issuances were used for general corporate purposes.
On June 15, 2022, the Company together with DSS, Inc. and Decentralized Sharing Systems, Inc. (“DSSI”), entered into an agreement pursuant to which the Company issued: (a) a two-year convertible, advancing promissory note in the principal amount of $27.0 million in favor of DSSI and (b) a detachable warrant to purchase up to 818,181,819 shares of the Company’s common stock at the exercise price of $0.033 per share.
Effective August 31, 2024, the Company issued 26,000 shares of the Company’s Series D Preferred Stock to DSSI in reliance upon the exemption from the registration requirements of the under the U.S. Securities Act of 1933, as amended (the “Act”), pursuant to Section 3(a)(9).
On February 3, 2023, the Company agreed with DSS to enter into a Letter Agreement (the “DSS Letter Agreement”), pursuant to which the Company and DSS have agreed to terminate and release all obligations of a certain Consulting Agreement among the parties effective as of December 31, 2022. In accordance with the DSS Letter Agreement, the Company also agreed to issue 33,333,333 shares of the Company’s Common Stock in lieu of cash payment to satisfy the accrued and unpaid consulting service fees equal to $700,000 owed to DSS under the Consulting Agreement. See Note 16 - Related Party Transactions in ITEM 8 of this Annual Report for further details.
On February 28, 2023, the Company and DSSI mutually agreed in a Letter Agreement (the “First DSSI Letter Agreement”) to a mutual settlement of the interest accrued on the 2022 Note issued by the Company to DSSI. In accordance with the DSSI Letter Agreement, the Company agreed to issue 26,285,714 shares of the Company’s Common Stock, at a price per share of $0.021 in lieu of cash payment to satisfy the accrued and unpaid interest through and including December 31, 2022, in the amount of $552,000 owed to DSS. See Note 16 - Related Party Transactions in ITEM 8 of this Annual Report for further details.
On March 24, 2023, the Company, DSS and DSSI, entered into a Securities Exchange and Amendment Agreement (the “Agreement”) pursuant to which the parties agreed to: (1) exchange and surrender the Assigned Warrants; (2) exchange and surrender the Service Warrants; (3) exchange and surrender the DSSI Warrants; and (4) amend the 2022 Note by removing all conversion rights granted by the 2022 Note. Accordingly, the Company issued 25,000,000 shares of the Company’s Class A Common Stock in full satisfaction, exchange and payment for the exchanges and amendments set forth in the Agreement. See Note 13 - Convertible Notes Payable in ITEM 8 of this Annual Report for further details.
In connection with the transactions described in the preceding three paragraphs, no underwriters were involved, there were no proceeds generated (except as indicated in the preceding paragraphs), and the issuances were made in reliance on the exemption from the registration requirements of the Securities Act of 1933 provided under Section 4(a)(2) thereof (except as indicated otherwise).
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and the related notes. This management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause our actual results or events to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in section Item 1A. “Risk Factors” in this Annual Report. Except as required by applicable law we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
Overview
Summary Description of Business
Sharing Services Global Corporation and subsidiaries 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 markets and distributes its health and wellness products primarily in the U.S and Canada, and delivers its member-based travel services, primarily in the U.S., using a direct selling business model. The Company markets its health and wellness products through its proprietary website: www.thehappyco.com; and its member-based travel services using www.mytravelventures.com. Currently, the Company is in the process of revamping its subscription-based travel services and plans to relaunch it in November 2024.
Sharing Services was originally incorporated in the State of Nevada under the name Sharing Services, Inc. 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.
Strategic 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 (primarily in Asia), and (c) expanding its previously launched membership-based consumer travel products line. 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.
Summary Results of Operations:
Fiscal Years Ended March 31,
Increase (Decrease) % Change
Net sales $ 10,878,242 $ 16,102,136 $ (5,223,894 ) -32.4 %
Gross profit 7,045,265 9,256,670 (2,211,405 ) -23.9 %
Operating expenses (11,944,630 ) (24,071,575 ) 12,126,945 -50.4 %
Operating loss (4,899,365 ) (14,814,905 ) 9,915,540 -66.9 %
Non-Operating loss, net (1,812,172 ) (22,870,258 ) 21,058,086 -92.1 %
Loss before income taxes (6,711,537 ) (37,685,163 ) 30,973,626 -82.2 %
Income tax (benefit) expense - - - 0.0 %
Net loss $ (6,711,537 ) $ (37,685,163 ) $ 30,973,626 -82.2 %
Highlights for the Fiscal Year Ended March 31, 2024:
● For the fiscal year ended March 31, 2024, our consolidated net sales decreased by approximately $5.2 million, to approximately $10.9 million, compared to approximately $16.1 million for the fiscal year ended March 31, 2023, primarily as a result of a decline in consumer orders, a decline in the number of new and continuing active distributors, and the generally adverse impact on consumer buying trends resulting from the recent increase in consumer good prices in the U.S..
● For the fiscal year ended March 31, 2024, our consolidated gross profit decreased by $2.2 million, to $7.0 million, compared to $9.3 million for the fiscal year ended March 31, 2023. However, as a result of our cost reduction initiatives to control our production costs and shipping expenses, we were able to improve our gross margin from approximately 57.5% for the fiscal year ended March 31, 2023 to approximately 64.8% for the year ended March 31, 2024.
● For the fiscal year ended March 31, 2024, our consolidated operating loss was approximately $4.9 million compared to approximately $14.8 million for the fiscal year ended March 31, 2023.
● For the fiscal year ended March 31, 2024, our consolidated net non-operating expenses were approximately $1.8 million compared to approximately $22.9 million for the fiscal year ended March 31, 2023, primarily as a result of lower interest expenses and amortization of debt discount associated with borrowings from related party in fiscal 2024.
● For the fiscal year ended March 31, 2024, our consolidated net loss was approximately $6.7 million, compared to approximately $37.7 million for the fiscal year ended March 31, 2023. Our basic and diluted loss per share was $0.02 for the fiscal year ended March 31, 2024, compared $0.14 for the fiscal year ended March 31, 2023.
● For the fiscal year ended March 31, 2024, our consolidated net cash used in operating activities was $3.8 million compared to $9.0 million for the fiscal year ended March 31, 2023.
● In April 2023, Sharing Services issued 28,877,005 shares of the Company’s Common Stock to DSSI in lieu of cash payment to satisfy the accrued and unpaid interest from January 1, 2023, through and including March 31, 2023, in the amount of $540,000, owed to DSSI in connection with the 2022 Note.
● In May 2023, DSS and DSSI distributed, in the aggregate, 280,528,500 shares of SHRG they then held to the shareholders of DSS, Inc. and DSS ceased to be a majority shareholder of the Company.
● In January 2024, Sharing Services issued a Convertible Promissory Note in the principal amount of $250,000 to Alset Inc. bears a 10% interest per annum and had an origination fee of $25,000 which is payable in cash or convertible into common shares of the Company at the option of Alset Inc.
● In March 2024, Sharing Services entered into a securities purchase agreement with HWH International Inc., whereby the Company issued to HWH a convertible promissory note in $250,000.00 which shall be convertible into 208,333,333 shares of the Company’s common stock at the option of HWH and a common stock purchase warrant agreement which shall be exercisable into up to 208,333,333 shares of the Company’s common stock.
The Fiscal Year Ended March 31, 2024, Compared to the Fiscal Year Ended March 31, 2023
Results of Operations
Net Sales
For the fiscal year ended March 31, 2024, our consolidated net sales decreased by $5.2 million, to $10.9 million, compared to the fiscal year ended March 31, 2023. The decrease in net sales mainly reflects: (a) continuation of the decline in consumer orders that we experienced since the fiscal year 2020, (b) a decline in independent distributor orders, in the number of new independent distributors and in the number of continuing active 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. In efforts to restore sales growth, we have developed and launched our new business brand, the “ HCo”, and have further intensified our efforts to recruit, develop and reward our distributors and our efforts reach new consumers, including through the continued introduction of new products such as Moji fragrance devices and pods.
The decrease of $5.2 million in consolidated net sales is primarily as a result of a decrease in the number of comparable product units sold.
During the fiscal years ended March 31, 2024 and 2023, the Company derived approximately 100% and 99%, respectively, of its consolidated net sales from the sale of its health and wellness product line.
Gross Profit
For the fiscal year ended March 31, 2024, our consolidated gross profit decreased by $2.2 million, to $7.0 million, compared to the fiscal year ended March 31, 2023, and our consolidated gross margin was 64.8% and 57.5%, respectively. The improvement in our gross margin was attributed mainly to efforts to reduce our production cost and shipping expenses.
Selling and Marketing Expenses
For the fiscal year ended March 31, 2024, our consolidated selling and marketing expenses decreased to $4.1 million, or 37.7% of consolidated net sales, compared to $7.0 million, or 43.4% of consolidated net sales for the fiscal year ended March 31, 2023. The decrease of $2.9 million in consolidated selling and marketing expenses is due to lower sales commissions of $2.1 million (which reflects the decrease in consolidated net sales discussed above), and lower convention expenses of $0.7 million.
General and Administrative Expenses
For the fiscal year ended March 31, 2024, our general and administrative expenses (which include corporate employee compensation and benefits, share-based compensation, professional fees, rent and other occupancy costs, certain consulting fees, telephone and information technology expenses, insurance premiums, and other administrative expenses) decreased to $7.8 million, or 72.1% of consolidated net sales, compared to $17.1 million, or 106.1% of consolidated net sales for the fiscal year ended March 31, 2023. The decrease of $9.3 million in general and administrative expenses was primarily due to our efforts to reduce our overhead and discretionary/non-essential expenses. Compared to fiscal 2023, we have reduced our consulting and professional fees by approximately$4.0 million majority, our compensation and compensation-related expenses by approximately $2.6 million, legal and other professional fees of approximately $1.5 million, and our rent and other corporate expenses by approximately $0.9 million.
Other Expense
For the fiscal year ended March 31, 2024, we recorded a non-cash charge of approximately $87,300 in connection with the issuance of two convertible promissory notes to our related party Alset Inc. and HWH International Inc., representing the change in fair value of embedded derivatives.
Interest Expense, Net
For the fiscal year ended March 31, 2024, interest expense was $1.2 million, excluding amortization of debt discount and deferred financing costs, in the aggregate, of $2.0 million, and interest income of $290,439. Interest expense of $1.2 million represents primarily interest associated with borrowings under the $27.0 million loan from DSSI. See Note 16 of the Notes to Consolidated Financial Statements for more details.
For the fiscal year ended March 31, 2023, interest expense was $2.9 million, excluding amortization of debt discount and deferred financing costs, in the aggregate, of $10.3 million, and interest income of $178,072. Interest expense of $2.9 million represents primarily interest associated with borrowings under the $27.0 million loan from DSSI. See Note 16 of the Notes to Consolidated Financial Statements for more details.
Other Income
For the fiscal year ended March 31, 2024, we recorded other income of $1.8 million in connection with our application for the U.S. government ERTC (employee retention tax credit) program.
Loss on Investment and Extinguishment of Debt
For the fiscal year ended March 31, 2024, we recognized a loss, before income tax, of $78,632 in connections with our investment in Stemtech and a loss on extinguishment of debt of $29,752 due mainly to the cancellation of the DSS promissory note in exchange of Series D Preferred Stock with DSSI.
Realized and Unrealized Gains/ Losses on Investment in Unconsolidated Entities and Marketable Securities
For the fiscal years ended March 31, 2024 and 2023, net realized and unrealized gains/losses in connection with our investment in equity instruments (including investments in unconsolidated entities) were losses of approximately $0.0 and $5.0 million, respectively. See Note 10 of the Notes to Consolidated Financial Statements for more details.
Realized Loss on Investment in Marketable Securities
For the fiscal years ended March 31, 2024 and 2023, realized loss on investments in marketable securities were $0.0 and $4.9, respectively.
Other Non-operating Income/Expense, net
For the fiscal year ended March 31, 2024, other non-operating expense, net, was approximately $268,500. These amounts consisted primarily of miscellaneous account true-up amounting to $367,300 partially offset by net litigation settlement recoveries of $100,000 and foreign currency transaction gains of approximately $1,300.
For the fiscal year ended March 31, 2023, other non-operating income, net, was approximately $108,200. These amounts consisted primarily of foreign currency transaction gains of approximately $39,000 and net litigation settlement recoveries of approximately $69,200.
Income Tax Benefit
During the fiscal years ended March 31, 2024 and 2023, the Company did not recognize any income tax benefit as a result of its decision to recognize a 100% allowance against the deferred tax asset related to its net operating loss. See Note
Net Loss and Loss per Share
As a result of the foregoing, for the fiscal years ended March 31, 2024 and 2023, our consolidated net loss was approximately $6.7 million and $37.7 million, respectively. For the fiscal years ended March 31, 2024 and 2023, our diluted loss per share was $0.02 and $0.14, 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
We had a deficiency in our working capital of approximately $4.2 million as of March 31, 2024, and working capital of approximately $33.9 million as of March 31, 2023.
As of March 31, 2024, and 2023, cash and cash equivalents were $0.9 million and $3.0 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 ITEM 1A - “RISK FACTORS” - “Our ability to generate sustained positive cash flows from operations or to obtain additional financing, if needed, with which to fund our working capital needs, including servicing or refinancing our debt, now and in the future.”
Historical Cash Flows
Historically, our primary sources of cash have been capital transactions involving the issuance of equity securities and secured and unsecured debt 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 shows our cash flow activities for the fiscal year ended March 31, 2024, compared to the fiscal year ended March 31, 2023:
Fiscal Years Ended March 31,
Increase (Decrease)
Net cash used in operating activities $ (3,729,443 ) $ (9,025,388 ) $ (5,295,945 )
Net cash used in investing activities - (6,830,094 ) (6,830,094 )
Net cash provided by financing activities 1,675,251 1,918,706 (243,455 )
Impact of currency rate changes in cash (46,487 ) (91,605 ) (45,118 )
Net decrease in cash and cash equivalents $ (2,100,679 ) $ (14,028,381 ) $ (11,927,702 )
Net Cash Used in Operating Activities
Net cash used in operating activities decreased by $5.3 million, to $3.7 million, for the fiscal year ended March 31, 2024, compared to the fiscal year ended March 31, 2023. The $5.3 million decrease was due to net changes in operating assets and liabilities of $8.9 million, partially offset by an increase in our operating loss of $3.6 million, excluding non-cash items, such as depreciation and amortization, stock-based compensation expense, provision for obsolete inventory losses, amortization of debt discount, gains (losses) on investments in unconsolidated entities and losses on impairment of notes receivable and other assets, and deferred income taxes.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased by $6.8 million, to $0.0, for the fiscal year ended March 31, 2024, compared to the fiscal year ended March 31, 2023.
Net Cash Provided by Financing Activities
Net cash provided by financing activities decreased by $0.2 million, to $1.7 million for the fiscal year ended March 31, 2024, compared to the fiscal year ended March 31, 2023. The $1.7 million represents proceeds from note payable of $1.2 million in connection with ERTC and $0.5 million of convertible promissory notes from Alset and HWH.
Recent Issuances of Equity Securities
● In April 2023, Sharing Services issued 28,877,005 shares of the Company’s Common Stock to DSSI in lieu of cash payment to satisfy the accrued and unpaid interest from January 1, 2023 through and including March 31, 2023, in the amount of $540,000, owed to DSSI in connection with the 2022 Note.
Borrowings via Convertible Notes
Convertible Notes Payable
On January 17, 2024, the Company executed a convertible promissory note for $250,000 with Alset Inc, a Texas corporation (“Alset”) and a shareholder of the Company in an aggregate principal amount of $250,000, for a purchase price of $250,000 (the “Alset Note”). The Alset Note bears interest at 10% per annum, paid quarterly in cash or at the option of the holder, shares of common stock of the Company (the “Common Stock”). The Alset Note contains an origination fee of $25,000 payable in cash or at the option of the holder may be convertible into shares of Common Stock upon the maturity date. The maturity date and related accrued interest is the earliest of (i) six months from the date of issuance; (ii) the acceleration of the Alset Note upon an occurrence of an event of default (as defined in the Alset Note); (iii) the third business day after the holder has delivered the Company a written demand for payment of the Alset Note; or (iv) upon the Company’s successful listing on The Nasdaq Stock Market LLC. Alset may, at its option, at any time during the term of the Alset Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
On March 18, 2024, the Company entered into a securities purchase agreement (the “March HWH SPA”) with HWH International Inc., a Delaware corporation (“HWH”), pursuant to which the Company issued and sold to HWH (i) a convertible promissory note (the “March HWH Note”) in an aggregate principal amount of $250,000, convertible into 208,333,333 shares of Common Stock and (ii) a warrant (the “March HWH Warrant”) exercisable into up to 208,333,333 shares of Common Stock for an aggregate purchase price of $250,000. The exercise price of the March HWH Warrant is $0.0012 and expires five years from the date of issuance. The March HWH Note bears interest at 6% per annum and has a commitment fee of $15,000. The March HWH Note, together with any accrued interest reduced by any unamortized prepaid interest shall, at the discretion of HWH, shall either be repaid in cash and/or converted into shares of Common Stock at a conversion rate of $0.0012 per share; due and payable in full on the earliest of: (i) the third anniversary of the March HWH Note; (ii) the acceleration of the March HWH Note upon the occurrence of an event of default (as defined in the March HWH Note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of the March HWH Note. HWH may, at its option, at any time during the term of the March HWH Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 $250,000, for a purchase price of $250,000. The May HWH Note bears interest at 8% per annum, contains a commitment fee of $20,000, and at the option of HWH, convertible into 208,333,333 shares of Common Stock. The May HWH Note, together with any accrued interest, reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or convert into shares of Common Stock of the Company at a conversion rate of $0.002 per share; due and payable in full on the earliest of: (i) the third anniversary of the May HWH Note; (ii) the acceleration of the May HWH Note upon the occurrence of an event of default (as defined in the May HWH Note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of the May HWH Note. The Company may, at its option, at any time during the term of the May HWH Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 $250,000, for a purchase price of $250,000. The June HWH Note bears interest at 8% per annum and contains a commitment fee of $20,000. The June HWH Note, together with any accrued interest, reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or converted into 2,500,000,000 shares of Common Stock at a conversion rate of $0.0001 per share; due and payable in full on the earliest of: (i) the third anniversary of the June HWH Note; (ii) the acceleration of the June HWH Note upon the occurrence of an event of default (as defined in the June HWH Note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of the June HWH Note. The Company may, at its option, at any time during the term of the June HWH Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 2,500,000 to 125,000,000; and (ii) the conversion rate from $0.0001 to $0.002.
Capital Resources
During the two fiscal years in the period ended March 31, 2024, the Company did not have material commitments for capital expenditures. During the fiscal year ended March 31, 2024, and 2023, our consolidated capital expenditures were approximately $0.9 million and $1.2 million, respectively, primarily consisting of the purchase of furniture and fixtures, computer equipment and software, and leasehold improvements in the ordinary course of our business.
Critical Accounting Estimates
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at each balance sheet date, reported amount of revenues and expenses for each reporting period presented, and related disclosures of contingent liabilities. Actual results may differ from these estimates. We believe the Company’s estimates and assumptions are reasonable.
Our critical accounting estimates relate to the valuation of inventory, the assessment of long-lived assets for impairment, the assessment of loss contingencies, and income taxes.
Valuation of Inventory - Our inventory is stated at the lower of cost, determined using the first-in, first-out (“FIFO”) method, or net realizable value. Determining the net realizable value of inventory involves the use of judgment. In assessing the net realizable value of inventory, we consider factors including estimates of the future demand for our products, historical turnover rates, and the age and sales history of the inventory. When necessary, we adjust the carrying value of inventory for estimated inventory shrinkage and damage. We estimate inventory shrinkage between physical counts and product damage based upon our historical experience. Actual results differing from these estimates could significantly affect our inventory and cost of products sold. We take physical counts of inventory on hand, at least annually, and adjust our financial statements to match actual quantities counted.
Assessment of Long-Lived Assets for Impairment - Long-lived assets, such as office furniture, fixtures, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The recoverability of long-lived assets is assessed by comparing the net carrying amount of each asset to its total estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds the sum of its undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
Loss Contingencies - From time to time, we are involved in legal proceedings. We record a contingent liability when it is probable that a loss has been incurred and the amount is reasonably estimable. We also perform an assessment of the materiality of loss contingencies where a loss is either not probable or it is reasonably possible that a loss could be incurred in excess of amounts accrued. If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the financial statements would be material, we provide disclosure of the loss contingency in the notes to our consolidated financial statements. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or the range of the loss can be made. An adverse judgment or negotiated resolution in any of these matters could have a material adverse effect on our business, financial position, results of operations or cash flows.
Income Taxes - Income taxes have a significant effect on our net earnings. As of March 31, 2024, we are subject to income taxes primarily in the U.S. The determination of our provision for income taxes requires judgment, the use of estimates in certain cases and the interpretation and application of complex tax laws and regulations. Our effective income tax rate is affected by many factors, including changes in our assessment of certain tax contingencies, increases and decreases in valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items, and may fluctuate as a result.
The benefits of uncertain tax positions are recorded in our financial statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. We account for uncertain tax positions by determining the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. This determination requires the use of judgment in evaluating our tax positions and assessing the timing and amounts of deductible and taxable items.
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent that a portion is not more likely than not to be realized. Many factors are considered when assessing whether it is more likely than not that the deferred tax assets will be realized, including recent cumulative earnings, expectations of future taxable income, carryforward periods and other relevant quantitative and qualitative factors. The recoverability of the deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. This evaluation relies on estimates.
Recent Accounting Pronouncements and Accounting Changes
The information contained in Note 3 of the Notes to Consolidated Financial Statements, under the sub-headings: “Recently Issued Accounting Standards - Pending Adoption” and “Recently Issued Accounting Standards - Recently Adopted,” in ITEM 8 - “Financial Statements and Supplementary Data” below, is incorporated herein by reference.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act, and, accordingly, are not required to provide the information required by Item 7A of this Annual Report.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SHARING SERVICES GLOBAL CORPORATION
Page
Report of Independent Registered Public Accounting Firm (PCAOB No. 606)
Report of Independent Registered Public Accounting Firm (PCAOB No. 6121)
Consolidated Balance Sheets as of March 31, 2024 and 2023
Consolidated Statements of Operations and Comprehensive Loss for the Fiscal Years ended March 31, 2024 and 2023
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2024 and 2023
Consolidated Statements of Changes in Stockholders’ Deficit for the Fiscal Years ended March 31, 2024 and 2023
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Sharing Services Global Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Sharing Services Global Corporation and its subsidiaries (the “Company”) as of March 31, 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company (i) has incurred losses and negative cash flows from operations for consecutive years, (ii) has an accumulated deficit and negative equity, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Convertible Notes- Related Party
As described in Note 13, the Company executed a convertible promissory note for $250,000 with Alset Inc, a Texas corporation (“Alset”) and a shareholder of the Company. The convertible promissory note bears a 10% interest per annum and had an origination fee.
The Company also entered into a securities purchase agreement with HWH International Inc., a Delaware corporation (“HWH”) whereby the Company issued to HWH a convertible promissory note in $250,000 which shall be convertible into 208,333,333 shares of the Company’s common stock at the option of HWH and a common stock purchase warrant agreement which shall be exercisable into up to 208,333,333 shares of the Company’s common stock. The convertible promissory note bears a 6% interest per annum and had a commitment fee of $15,000.
The principal consideration for our determination of management’s assessment of the valuation of the convertible notes- related party as a critical audit matter, which is primarily due to the complexity of the valuation used and the sensitivity of the underlying significant assumptions. The calculated fair values are sensitive to changes in these key assumptions.
How the Critical Audit Matter was addressed in the Audit
Our audit procedures related to the determination of the fair value of the Convertible Debt included the following, among others:
a) We obtained the agreements between the related parties and the Company.
b) We obtained third party valuations that assess the fair value of the convertible notes-related party from management.
c) We reviewed the valuation reports provided by management to determine if the reports were reasonable and acceptable based on the methodologies used by management’s third-party valuation firm. We also assessed the qualifications and competence of the valuation firm.
d) We audited the critical inputs used in the valuation calculations.
e) We assessed the sufficiency of the Company’s disclosure of its accounting for convertible notes- related party included in Note 13.
GRASSI & CO., CPAs, P.C.
We have served as the Company’s auditor since 2023.
Jericho, New York
July 1, 2024
Ankit Consulting Services, Inc.
Avenida de Las Banderas, Suite # 200, Rancho Santa Margarita, CA 92688
Phone: 949-683-3034, Facsimile: 949-271-4737
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Sharing Services Global Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Sharing Services Global Corporation, formerly Sharing Services, Inc. (the “Company”) as of March 31, 2023, and the related consolidated statements of operations, cash flows and stockholders’ equity, for the year ended March 31, 2023 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023, and the results of its operations and its cash flows for the year ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a net loss and net cash used in operating activities of $37,685,163 and $9,025,388, respectively, for the fiscal year ended March 31, 2023. The Company has an accumulated deficit of $106,456,378 at March 31, 2023. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan regarding these matters is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Related Party Convertible Note Payable
As described in Note 13 to the financial statements, the Company had a convertible note payable with detached warrants to a related party. The note payable was modified twice during the year which was treated as extinguishment of debt and replacement with a new note payable.
The principal considerations for our determination that performing procedures relating to the accounting treatment of the transaction is a critical audit matter were (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of the transaction due to the significant amount of judgment by management when developing the estimate; (ii) significant audit effort was required in evaluating the terms of note payable assumptions relating to the estimates.
Our audit of the valuation of the convertible notes payable and attached warrants included, but was not limited to, the following procedures:
● understanding of controls relating to the loan raised;
● examining original convertible note and warrants agreements;
● reviewing management’s assumptions used in the valuation of the note, warrants and related interest and fee;
● reviewing management’s reasoning for treating the debt modification as extinguishment of a note payable;
● obtaining technical guidance from third party experts on the accounting treatment;
● reviewing management’s assumptions for accounting treatment of the whole transaction;
● evaluating the adequacy of the Company’s disclosures relating to the loan raised from related party;
/s/ Ankit Consulting Services, Inc.
We have served as the Company’s auditor since September 2017.
Rancho Santa Margarita, California
June 23, 2023
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of As of
March 31, 2024 March 31, 2023
ASSETS
Current Assets
Cash and cash equivalents $ 894,206 $ 2,994,885
Trade accounts receivable, net 280,793 273,674
Other receivable 1,800,000 -
Inventory, net 1,318,662 1,636,120
Other current assets, net 132,674 527,827
Total Current Assets 4,426,335 5,432,506
Property and equipment, net 239,943 9,270,193
Right-of-use assets, net 403,107 448,240
Investment in unconsolidated entities, net - 206,231
Intangible assets 402,144 545,372
Other assets 1,163,385 1,177,173
TOTAL ASSETS $ 6,634,914 $ 17,079,715
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable $ 1,304,046 $ 1,028,510
Accrued and other current liabilities 2,611,951 2,632,770
Accrued sales commission payable 1,742,309 2,357,643
Employee stock warrants liability - 148,267
State and local taxes payable 1,545,463 1,446,503
Notes payable, related party, net of unamortized debt discount and unamortized deferred loan cost - 6,922,043
Note payable 1,200,000 -
Convertible notes payable 262,782 24,827,086
Total Current Liabilities 8,666,551 39,362,822
Non-current convertible notes payable, related party 324,521 -
Lease liability, long-term 416,277 440,478
TOTAL LIABILITIES 9,407,349 39,803,300
Commitments and Contingencies - -
STOCKHOLDERS’ DEFICIT
Series A convertible preferred stock, $0.0001 par value, 100,000,000 shares designated, 3,100,000 shares issued and outstanding
Series B convertible preferred stock, $0.0001 par value, no shares issued and outstanding - -
Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares designated, 3,220,000 shares issued and outstanding
Series D preferred stock, $0.0001 par value, 26,000 shares and no shares issued and outstanding as of March 31, 2024, and March 31, 2023, respectively -
Preferred stock value
Class A common stock, $0.0001 par value, 1,990,000,000 shares designated, 376,328,885 shares and 347,451,880 shares issued and outstanding as of March 31, 2024 and March 31, 2023, respectively 37,633 34,745
Class B common stock, $0.0001 par value, 10,000,000 shares designated, no shares issued and outstanding - -
Common stock value - -
Treasury Stock - (626,187 )
Additional paid in capital 110,699,858 84,619,762
Shares to be issued 12,146 12,146
Accumulated deficit (113,167,915 ) (106,456,378 )
Accumulated other comprehensive loss (354,792 ) (308,305 )
TOTAL STOCKHOLDERS’ DEFICIT (2,772,435 ) (22,723,585 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 6,634,914 $ 17,079,715
The accompanying notes are an integral part of these consolidated financial statements.
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
March 31, 2024 March 31, 2023
For the Fiscal Years Ended
March 31, 2024 March 31, 2023
Net sales $ 10,878,242 $ 16,102,136
Cost of goods sold 3,832,977 6,845,466
Gross profit 7,045,265 9,256,670
Operating expenses
Selling and marketing 4,104,991 6,989,660
General and administrative 7,839,639 17,081,915
Total operating expenses 11,944,630 24,071,575
Operating loss (4,899,365 ) (14,814,905 )
Other income (expense):
Interest expense, net (3,148,032 ) (13,212,583 )
Change in fair value of embedded derivatives (87,303
) -
Other income 1,800,000 -
Gain on employee warrants liability - 173,432
Loss on investment and extinguishment of debt (108,384 ) -
Unrealized loss on investment - (5,018,735 )
Realized loss on investment in marketable securities - (4,920,556 )
Other non-operating income (expense), net (268,453 ) 108,184
Total other expense, net (1,812,172 ) (22,870,258 )
Loss before income taxes (6,711,537 ) (37,685,163 )
Income tax expense - -
Net loss $ (6,711,537 ) $ (37,685,163 )
Other comprehensive loss, net of tax:
Currency translation adjustments (46,487 ) (243,196 )
Total other comprehensive loss (46,487 ) (243,196 )
Comprehensive loss $ (6,758,024 ) $ (37,928,359 )
Loss per share:
Basic and diluted $ (0.02 ) $ (0.14 )
Weighted average shares:
Basic and diluted 374,987,603 274,108,025
The accompanying notes are an integral part of these consolidated financial statements.
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 2024 March 31, 2023
For the Fiscal Years Ended
March 31, 2024 March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,711,537 ) $ (37,685,163 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 570,595 726,666
Stock-based compensation (148,267 ) (194,004 )
Loss on disposal of property - 25,053
Amortization of debt discount and other 2,040,291 10,877,730
Change in fair value of embedded derivatives 87,303 -
Amortization prepaid consulting Services - 2,867,123
Loss (gain) on extinguishment of debt 38,215 (324,229 )
Bad debt expense 413,551 162,392
Loss on investment and other assets - 9,939,290
Provision for obsolete inventory 777,443 1,788,999
Changes in operating assets and liabilities:
Accounts receivable (420,669 ) 1,560,481
Other receivable (1,800,000 ) -
Inventory (459,984 ) 1,152,522
Other current assets 763,417 (97,073 )
Property and equipment (60,806 ) -
Other assets 99,843 -
Accounts payable 275,537 808,008
Income taxes payable 98,960 385,013
Lease liability 20,932 25,224
Accrued and other liabilities 685,733 (1,043,420 )
Net Cash Used in Operating Activities $ (3,729,443 ) $ (9,025,388 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment and other assets - (1,196,406 )
Payments upon issuance of notes receivable - (313,592 )
Purchase of marketable securities, net - (4,920,096 )
Cash paid for acquisition of non-consolidated interests - (400,000 )
Net Cash Used in Investing Activities - (6,830,094 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 1,175,251 -
Proceeds from issuance of convertible notes, related party 500,000 -
Net proceeds from issuance of promissory notes - 10,922,329
Repayments of borrowings under promissory notes - (4,611,342 )
Refinance of notes payable - (3,270,000 )
Payment in connection with litigation settlement - (1,043,645 )
Repayment of convertible note payable - (78,636 )
Net Cash Provided by Financing Activities 1,675,251 1,918,706
IMPACT OF CURRENCY RATE CHANGES ON CASH (46,487 ) (91,605 )
Decrease in cash and cash equivalents (2,100,679 ) (14,028,381 )
Cash and cash equivalents, beginning of period 2,994,885 17,023,266
Cash and cash equivalents, end of period $ 894,206 $ 2,994,885
Supplemental cash flow information
Cash paid for interest $ 168,279 $ 1,708,409
Cash paid for income taxes $ 1,111 $ 9,525
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 $ 7,438,692
$ -
Sale of investments in exchange for relief from related party note and other liabilities $ 1,500,000
$ -
Debt modification $ - $ 10,363,126
Common stock issued to settle accrued interest payable $ 539,806 $ 552,000
Common stock issued to settle management fees payable $ - $ 700,000
The accompanying notes are an integral part of these consolidated financial statements.
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Fiscal Years Ended March 31, 2024 and 2023
of Par of Par of Par of Par of Par Paid in to be
Treasury Accumulated Comprehensive
Series B
Series D
Series A
Preferred Stock
Preferred Stock
Series C
Preferred Stock
Preferred Stock Class A and Class B
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, 2022 3,100,000 $ 310 - $ - 3,220,000 $ 322 - $ - 288,923,969 $ 28,892 $ 80,738,719 $ 12,146
- $ (57,886,336 ) $ (65,109 ) $ 22,828,944
Refinancing of debt and detachable warrants - - - - - - - - - - 2,029,454 -
- - - 2,029,454
Repurchase of shares of Common Stock - - - - - - - - (26,091,136 ) (2,609 ) (23,482 ) -
(626,187 ) - - (652,278 )
Common Stock issued for debt modification - - - - - - - - 14,854,159 1,485 307,206 -
- (10,671,817 ) - (10,363,126 )
Common stock issued to settle management fees payable - - - - - - - - 33,333,333 3,333 696,667 -
- - - 700,000
Common stock issued to settle accrued interest payable - - - - - - - - 26,285,714 2,629 549,371 -
- - - 552,000
Common stock issued upon cancellation of stock warrants - - - - - - - - 10,145,841 1,015 212,047 -
- (213,062 ) - -
Stock based compensation award (stock warrants) - - - - - - - - - - 109,780 -
- - - 109,780
Currency translation adjustments - - - - - - - - - - - -
- - (243,196 ) (243,196 )
Net loss - - - - - - - - - - - -
- (37,685,163 ) - (37,685,163 )
Balance - March 31, 2023 3,100,000 $ 310 - $ - 3,220,000 $ 322 - $ - 347,451,880 $ 34,745 $ 84,619,762 $ 12,146
(626,187 ) $ (106,456,378 ) $ (308,305 ) $ (22,723,585 )
Series B
Series D
Series A
Preferred Stock
Preferred Stock Series C
Preferred Stock
Preferred Stock Class A and Class B
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 3,100,000 $ 310 - $ - 3,220,000 $ 322 - $ - 347,451,880 $ 34,745 $ 84,619,762 $ 12,146 (626,187 ) $ (106,456,378 ) $ (308,305 ) $ (22,723,585 )
Balance 3,100,000 $ 310 - $ - 3,220,000 $ 322 - $ - 347,451,880 $ 34,745 $ 84,619,762 $ 12,146 (626,187 ) $ (106,456,378 ) $ (308,305 ) $ (22,723,585 )
Cancellation of treasury stock - - - - - - - - - - (626,187 ) - 626,187 - - -
Preferred stock issued for debt modification - - - - - - 26,000 - - 26,169,365 - - - - 26,169,368
Common stock issued to settle accrued interest payable - - - - - - - - 28,877,005 2,888 536,918 - - - - 539,806
Currency translation adjustments - - - - - - - - - - - - - - (46,487 ) (46,487 )
Net loss - - - - - - - - - - - - - (6,711,537 ) - (6,711,537 )
Balance - March 31, 2024 3,100,000 $ 310 - $ - 3,220,000 $ 322 26,000 $ 3 376,328,885 $ 37,633 $ 110,699,858 $ 12,146 - $ (113,167,915 ) $ (354,792 ) $ (2,772,435 )
Balance 3,100,000 $ 310 - $ - 3,220,000 $ 322 26,000 $ 3 376,328,885 $ 37,633 $ 110,699,858 $ 12,146 - $ (113,167,915 ) $ (354,792 ) $ (2,772,435 )
The accompanying notes are an integral part of these consolidated financial statements.
SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BUSINESS
Sharing Services Global Corporation (“Sharing Services”) 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. Sharing Services was incorporated in the State of Nevada in April 2015; its 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 (“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 November 2024.
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 (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 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 businesses, using a combination of debt and equity financing, in efforts to leverage the Company’s resources and 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 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 years ended March 31, 2024 and 2023, the Company had a net loss of approximately $6.7 million and $37.7 million, respectively. In addition, the Company had reported consecutive years of declining net sales. These factors among other raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.
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.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
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 other 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 March 31, 2024 and 2023, cash and cash equivalents included cash held by our merchant processors of approximately $0.05 million and $0.5 million, respectively. In addition, as of March 31, 2024 and 2023, cash and cash equivalents held in bank accounts in foreign countries in the ordinary course of business were approximately $0.4 million and $1.3 million, respectively. Amounts held by our merchant processor or held in bank accounts located in foreign countries are generally not insured by any federal agency.
Trade Accounts Receivable and Allowance for Credit Losses
In May 2019, the Financial Accounting Standards Board (FASB) issued the Accounting Standards Update (ASU) 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The Company adopted this standard on April 1, 2023 using a modified retrospective approach and did not restate the comparable prior periods. The adoption did not have a material impact on the Company’s consolidated financial statements.
The Company maintains an allowance for credit losses in accordance with 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 and Cost of Goods Sold
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. During the fiscal year ended March 31, 2024, and 2023, the allowance for slowing moving or obsolete inventory of $1.6 million and $1.8 million, respectively, in connection with health and wellness products that were either damaged, expired, or slow-moving, based on the Company’s historical and anticipated sales. The Company reports its allowance for obsolete or slow-moving inventory in cost of goods sold in its consolidated statements of operations.
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.
Other Receivable and Note 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 $1.8 million. Since the likelihood of receiving the ERTC credit is probable and the amount is estimable, the Company has recorded its ERTC credit in Other Receivable.
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 $1.2 million, and it was recorded as a Loan Payable. The loan is for a 12-month period and carries a 2% monthly interest rate. The loan proceeds must be used solely and exclusively for working capital and other business purposes and it had an origination fee of $24,000. The Company received net proceeds of approximately $1.18 million in September 2023.
Other Assets
Other assets include a multi-user license and code of a back-office platform that was acquired for $1 million in 2022. This back-office platform is designed to facilitate the computation and processing of commission payments to distributors, and it requires customization in order for it to be operational. Costs associated with the customization and build out of the platform has been capitalized in accordance with ASC 350 - Capitalization on Internal-Use Software Costs.
Property and Equipment
Property and equipment are recorded at cost and reported net of accumulated depreciation. Depreciation expense is recognized over an asset’s estimated useful life using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the term of the related lease, including lease renewals considered reasonably assured. The estimated useful lives of our property and equipment are as follows:
● Buildings and building improvements- shorter of 39 years or remaining useful life of the asset
● Furniture and fixtures - 3 years
● Office equipment - 5 years
● Computer Equipment - 3 years
● Computer software - 3 years
● Leasehold improvements - shorter of the remaining lease term or estimated useful live of the asset
The estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. The recoverability of long-lived assets is assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable, by comparing the net carrying amount of each asset to the total estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (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.
During the fiscal year ended March 31, 2022, a subsidiary of the Company introduced a Customer Loyalty Program which enables customers to earn points in a purchase transaction or through other means. The points are not redeemable for cash or product. Upon reaching 1,500 points, a customer may redeem the points and receive a $10 loyalty rewards card or certificate, that may be used when purchasing a product. Points and loyalty rewards cards or certificates expire one year for the issuance date. However, points, loyalty rewards cards, and certificates are forfeited if the customer fails to remain active for a period of 90-days. The Company allocates a portion of the sales transaction price to each of its performance obligations therein, including points earned, and deferred revenue recognition until the earlier of (a) redemption or expiration of the rights conferred by the points or (b) the date when it is not probable the points will be redeemed (for example, because the holder is no longer an active customer).
As of March 31, 2024 and 2023, deferred revenue associated with
● product invoiced but not received by customers at the balance sheet date was $80,404 and $113,896, respectively;
● unfulfilled performance obligations for services offered on a subscription basis was $37,774 and $80,528, respectively;
● unfulfilled performance obligations for customers’ right of return was $24,703 and $26,894, respectively; and
● customer loyalty points outstanding was $19,326 and $25,493, respectively.
As of March 31, 2022, deferred revenue associated with product invoiced but not received by customers at the balance sheet date was $344,071; deferred sales revenue associated with unfulfilled performance obligations for services offered on a subscription basis was $70,968; deferred sales revenue associated with unfulfilled performance obligations for customers’ right of return was $63,890; and deferred sales revenue associated with customer loyalty points outstanding was $68,287.
During the fiscal years ended March 31, 2024 and 2023, no individual customer, or related group of customers, represents 10% or more of the Company’s net sales.
During the fiscal year ended March 31, 2024, and 2023,
● approximately 100% and 99%, respectively, of the Company’s net sales were from sale of health and wellness products.
● the Company’s ten top selling products represent approximately 53% and 49%, respectively, of its net sales.
● approximately 95% and 91%, respectively, of the Company’s net sales are to customers and independent distributors located in the U.S. (based on the customer’s shipping address). No other country represented more than 10% of total sales.
● product purchases from one U.S.-based supplier accounted for approximately 84% and 92%, respectively, of total product purchases.
Sales Commissions
The Company recognizes sales commission expense when incurred at the time when the revenue is recognized. In the fiscal year ended March 31, 2024, and 2023, sales commission expense was approximately $3.7 million and $5.8 million, respectively, and is included in selling and marketing expenses in the Company’s consolidated statements of operations. The Company measures and recognizes sales commission expense based on the Company’s Distributor Compensation Plan. The Company’s independent distributors earn commissions when they sell Company products to retail customers or to their downline independent distributors. Additionally, they can earn commissions when their personally sponsored distributors (or downline) sell products to end users. There is no limit as to the number of personally enrolled distributors or retail customers that an independent distributor may have and earned compensation for.
Share-Based Payments
The Company accounts for stock-based compensation awards to its directors, officers, and employees in accordance with ASC Topic 718, Compensation - Stock Compensation (“ASC 718”). Previously, the Company, through a subsidiary, entered into multi-year employment agreements with certain employees. Such agreements generally contain (a) an Initial Warrant that vested immediately and is exercisable at a fixed exercise price and (b) Subsequent Warrants that vest over time and are exercisable at an exercise price calculated by multiplying a specified discount rate by the 10-day average stock price determined at the time of exercise. Generally, a Subsequent Warrants tranche vests in full at each anniversary of the employment agreement effective date, during the contractual term of employment.
As stated above, some stock warrants issued in connection with these multi-year employment agreements are exercisable at a variable exercise price, a price equal to the discounted 10-day average stock price determined at the time of exercise. In general, 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, however, the Company remeasures compensation expense associated with these awards after the service period ends and until the warrant is exercised or expires. As such, the Company’s stock-based compensation expense contains components associated with (i) awards that have a fixed exercise price whose fair value is measured at the grant date and (ii) awards with a variable exercise price whose value is measured at the balance sheet date, including fully vested awards. The Company recognizes the income/expense component associated with the subsequent measure of fully vested awards as non-operating income/expense.
In the fiscal year ended March 31, 2024, income recognized in connection with stock-based compensation awards was $148,267, primarily associated with the subsequent measure of fully vested awards. In the fiscal year ended March 31, 2023, expense recognized in connection with stock-based compensation awards was $160,225, primarily consisting of: (a) compensatory expense of $13,207 and (b) income associated with the subsequent measure of fully vested awards of $194,004.
Lease Accounting
The Company determines if an arrangement is a lease at inception. Determining whether a contract contains a lease includes judgment regarding whether the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. The Company accounts for its lease obligations in accordance with ASC Topic 842, Leases, which requires lessees to, among other things, report on their balance sheets a right-of-use asset and a lease liability measured based on the present value of future lease payments over the term of the lease agreements for agreements classified as operating leases.
For all arrangements as a lessee, the Company has elected an accounting policy to combine non-lease components with the related-lease components and treat the combined items as a lease for accounting purposes. The Company measures lease related assets and liabilities based on the present value of lease payments, including in-substance fixed payments, variable payments that depend on an index or rate measured at the commencement date, and the amount the Company believes is probable the Company will pay the lessor under residual value guarantees when applicable. The Company discounts lease payments based on the Company’s estimated incremental borrowing rate at lease commencement (or modification), which is primarily based on the Company’s estimated credit rating, the lease term at commencement, and the contract currency of the lease arrangement. The Company has elected to exclude short term leases (leases with an original lease term one year or less) from the measurement of lease-related assets and liabilities.
The Company tests right-of-use assets in an operating or finance lease at the asset group level (because these assets are long-lived nonfinancial assets and should be accounted for the same way as other long-lived nonfinancial assets) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company leases space for its corporate headquarters, warehouse space, automobiles, and office and other equipment, under lease agreements classified as operating leases.
Foreign Currency Translation
The Company maintains a legal entity structure that would allow management to expand its U.S.-based operation into certain key direct sales market in Asia, such as Korea. In 2021, through its wholly owned subsidiary, the Company commenced operations in the Republic of Korea (South Korea). The functional currency of the Korean subsidiary is the South Koran Won. Balance sheet accounts are translated into U.S. dollars (USD, the Company’s reporting currency) at the rates of exchange in effect at the balance sheet date, while the results of operations and cash flows are translated using average exchange rates for the periods presented. The resulting translation adjustments are recorded as a component of accumulated other comprehensive gain/loss in the Company’s consolidated balance sheets. The following exchange rates between the South Korean Won and the USD are used to translate the Company’s Korean operation’s financial statements:
SCHEDULE OF FOREIGN EXCHANGE CURRENCY TRANSLATION
South Korean Won per 1 USD
Exchange rate as of March 31st 1,346.42 1,302.31
Average exchange rate for the fiscal year then ended 1,319.86 1,309.20
During the fiscal year ended March 31, 2024 and 2023, approximately 95% and 93%, respectively, of the Company’s net sales are denominated in U.S. Dollars. During the fiscal year ended March 31, 2024, and 2023, sales denominated in no other currency accounted for 10% or more of net sales.
Income Taxes
The Company uses the asset and liability method and follows ASC Topic 740 - Income Taxes (“ASC 740”) in accounting for its income taxes. The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (“temporary differences”). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are anticipated to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in measuring results of operations in the period that includes the enactment date. Deferred tax assets are evaluated periodically, and a valuation allowance is recorded to reduce the carrying amounts of deferred tax assets to the amount expected to be realized unless it is more-likely-than-not that the assets will be realized in full. When assessing whether it is more-likely-than-not that the deferred tax assets will be realized, management considers multiple factors, including recent earnings history, expectations of future earnings, available carryforward periods, the availability of tax planning strategies, and other relevant quantitative and qualitative factors.
In determining the provision for income taxes, an annual effective income tax rate is used based on annual income, permanent differences between book and tax income, and statutory income tax rates. Accounting for income taxes involves judgment and the use of estimates.
The Company recognizes a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax returns, unless the weight of available evidence indicates it is more-likely-than-not that the tax position will be sustained on audit, including resolution through available appeals processes. We measure the tax position as the largest amount which is more-likely-than-not of being realized. The Company considers many factors when evaluating and estimating the Company’s tax positions, which may require periodic adjustments when new facts and circumstances become known.
Related Parties
A party is considered to be related to the Company if it, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its separate interests.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the increase or decrease in stockholders’ equity during a period as a result of transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. For each of the fiscal years presented herein, the Company’s components of comprehensive loss included net loss and foreign currency translation adjustments, as reported in the consolidated statements of operations and comprehensive loss.
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 Standard - 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.
NOTE 4 - FAIR VALUE MEASUREMENTS
The Company’s financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, investments in unconsolidated entities, 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 820, we categorized certain of our financial assets and liabilities as follows:
SCHEDULE OF VALUATION HIERARCHY FINANCIAL ASSETS AND LIABILITIES
Total Level 1 Level 2 Level 3
As of March 31, 2024
Total Level 1 Level 2 Level 3
Assets
Investment in unconsolidated entities $ - $ - $ - $ -
Total assets $ - $ - $ - $ -
Liabilities
Convertible notes payable $ 587,303 $ - $ 587,303 $ -
Notes payable
Total liabilities $ 587,303 $ - $ 587,303 $ -
Total Level 1 Level 2 Level 3
As of March 31, 2023
Total Level 1 Level 2 Level 3
Assets
Investment in unconsolidated entities $ 206,231 $ - $ - $ 206,231
Total assets $ 206,231 $ - $ - $ 206,231
Liabilities
Notes payable $ 24,827,086 $ - $ 24,827,086 -
Total liabilities $ 24,827,086 $ - $ 24,827,086 $ -
Certain of the Company’s investments in unconsolidated entities are valued for purposes of this disclosure using unobservable inputs, since there are no observable market transactions for such investments. The fair value of notes receivable approximates the carrying value due to the short-term nature of the note.
As of March 31, 2024, convertible notes payable (including current maturities) are reported in our consolidated financial statements at fair value of approximately $0.5 million.
As of March 31, 2023, notes payable (including current maturities) are reported in our consolidated financial statements at amortized cost of $27.0 million, less unamortized debt discount and deferred financing costs, in the aggregate, of approximately $2.2 million.
NOTE 5 - LOSS PER SHARE
The Company calculates 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 earnings per share is calculated similarly but reflects the potential impact of shares issuable upon the conversion or exercise of our outstanding convertible Preferred Stock, convertible notes payable, stock warrants and other commitments to issue Common Stock, except where the impact would be anti-dilutive, as defined in GAAP.
The following table sets forth the computations of basic and diluted earnings (loss) per share for the periods indicated:
SCHEDULE OF COMPUTATIONS OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Fiscal Year Ended March 31,
Net loss $ (6,711,537 ) $ (37,685,163 )
Weighted average basic and diluted shares 374,987,603 274,108,025
Loss per share:
Basic and diluted $ (0.02 ) $ (0.14 )
The following potentially dilutive securities and instruments were outstanding on the dates indicated, but excluded from the table above because their impact would be anti-dilutive:
SCHEDULE OF POTENTIALLY DILUTIVE INSTRUMENTS OUTSTANDING
As of March 31,
Convertible notes payable 333,333,333 663,546,451
Stock warrants 200,933,515
669,010,148
Convertible Preferred Stock 6,320,000 6,320,000
Total potential incremental shares 540,586,848
1,338,876,599
NOTE 6 - TRADE ACCOUNTS RECEIVABLE, NET
SCHEDULE OF TRADE ACCOUNTS RECEIVABLE, NET
As of March 31,
Trade accounts receivable $ 420,135 $ 344,841
Allowance for credit losses (139,342 ) (71,167 )
Trade accounts receivable, net $ 280,793 $ 273,674
Trade accounts receivable as of March 31, 2024 and 2023 includes amount due from a merchant processor of approximately $280,793 and $10,348, respectively. The following table reflects the activity in the allowance for credit losses for the periods presented:
SCHEDULE OF ALLOWANCE FOR CREDIT LOSSES
Fiscal Year Ended March 31,
Balance at beginning of fiscal year $ 71,167 $ -
Provision for credit losses 68,175 71,167
Balance at end of fiscal year $ 139,342 $ 71,167
NOTE 7 - INVENTORY, NET
Inventory consists of the following:
SCHEDULE OF INVENTORY
As of March 31,
Finished goods $ 2,878,569 $ 2,517,046
Promotional items 5,940 -
Raw materials 77,902 -
Allowance for obsolescence (1,643,749 ) (880,926 )
Inventory, net $ 1,318,662 $ 1,636,120
The following table reflects the activity in the allowance for inventory obsolescence for the periods presented:
SCHEDULE OF ALLOWANCE FOR INVENTORY OBSOLESCENCE
Fiscal Year Ended March 31,
Balance at beginning of fiscal year $ 880,926 $ 108,055
Provision for estimated obsolescence 778,445 1,788,999
Write-offs (15,622 ) (1,016,128 )
Balance at end of fiscal year $ 1,643,749 $ 880,926
NOTE 8 - OTHER CURRENT ASSETS, NET
Other current assets consist of the following:
SCHEDULE OF OTHER CURRENT ASSETS
As of March 31,
Inventory-related deposits $ 252,867 $ 288,649
Accounts receivable, related parties - 167,578
Prepaid insurance and other operational expenses 31,598 105,652
Deposits for sales events 23,850 120,614
Right to recover asset - 20,975
Subtotal 308,315 703,468
Allowance for losses (175,641 ) (175,641 )
Other current assets $ 132,674 $ 527,827
Prepaid insurance and other operational expenses 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 March 31, 2024 and 2023, the allowance for losses in connection with certain inventory-related deposits for which recoverability is less than certain was approximately $176,000.
NOTE 9 - PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
As of March 31,
Building and building improvements $ - $ 8,952,555
Computer software 1,024,274 1,024,274
Furniture and fixtures 285,732 237,042
Computer equipment 220,264 220,264
Leasehold improvements and other 399,306 394,306
Total property and equipment 1,929,576 10,828,441
Accumulated depreciation and amortization (1,689,633 ) (1,558,248 )
Property and equipment, net $ 239,943 $ 9,270,193
Depreciation and amortization expense in connection with the Company’s property and equipment for the fiscal year ended March 31, 2024 and 2023 was $427,422 and $583,369, respectively.
In December 2021, the Company, through its subsidiary, Linden Real Estate Holdings LLC, purchased a commercial building in Lindon, Utah for $8,942,640, including $3,675,000 allocated to land. The capitalized costs include legal and other professional fees incurred directly in connection with the purchase of the property. On June 15, 2022, the Company and American Pacific Bancorp, Inc. (“APB”) entered a Loan Agreement pursuant to which APB loaned to the Company approximately $5.7 million. The loan was secured by a first mortgage interest on the Lindon, Utah building. Effective June 30, 2023, the Company and DSSI entered into an Assignment of Limited Liability Company Interests agreement pursuant to which: (a) DSSI assumed approximately $7.24 million in SHRG liabilities secured by certain Commercial Real Estate, (b) DSSI credited SHRG approximately $240,000 towards amounts owed under the 2022 Note (the “$27.0 million loan”), and (c) DSSI acquired ownership of Linden Real Estate Holdings LLC, with its sole asset being a commercial building located in Lindon, Utah, subject to the assumed indebtedness.
NOTE 10 - 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 $1.4 million in Stemtech in exchange for: (a) a Convertible Promissory Note in the amount of $1.4 million in favor of the Company (the “Convertible Note”) and (b) a detachable Warrant to purchase shares of GNTW common stock (the “GNTW Warrant”). Stemtech is a subsidiary of GNTW. As an inducement to enter into the SPA, GNTW agreed to pay to the Company an origination fee of $500,000, payable in shares of GNTW’s common stock. The Convertible Note matures on September 9, 2024, bears interest at the annual rate of 10%, and is convertible, at the option of the holder, into shares of GNTW’s common stock at a conversion rate calculated based on the closing price per share of GNTW’s common stock during the 30-day period ended September 19, 2021. The GNTW Warrant expires on September 13, 2024 and conveys the right to purchase up to 1.4 million shares of GNTW’s common stock at a purchase price calculated based on the closing price per share of GTNW’s common stock during the 10-day period ended September 13, 2021. In September 2021, GNTW issued to the Company 154,173 shares of its common stock, or less than 1% of the shares of GNTW then issued and outstanding, in payment of the origination fee. In November 2021, Globe Net Wireless Corp. changed its corporate name to Stemtech Corporation. In connection therewith, the investee’s common stock is now traded under the symbol “STEK”.
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 U.S. GAAP. During the fiscal year end March 31, 2023, the Company recognized unrealized losses, before income tax, of approximately $4.9 million in connection with its investment in the Convertible Note, the GNTW Warrant and the shares of GNTW common stock.
Effective June 30, 2023, subject to the terms of a certain Loan Purchase Contract, Assignment of Note and Liens and Other Loan Documents, and Note Allonge document, DSSI purchased from SHRG the Stemtech promissory note in the amount of $1.4 million, along with all SHRG’s rights in any Stemtech warrants, for a purchase price of $1.1 million, with the financial terms generally summarized as follows: (a) DSSI paid the $1.1 million purchase price by crediting the $27.0 million loan, first to interest and then to principal, and (b) DSSI acquired ownership of the $1.4 million promissory note payable by Stemtech, free and clear of any liens, and any equity or warrant interest in the Stemtech that SHRG may have held. As of September 30, 2023, as a result of the transaction, the Company no longer has an investment in Stemtech.
In September 2021, the Company entered into a Membership Unit Purchase Agreement pursuant to which the Company acquired a 30.75% equity interest in MojiLife, a limited liability company organized in the State of Utah, in exchange for $1,537,000. MojiLife is a distributor of technology-based consumer products, such as cordless scent diffusers, for the home and the car, as well as proprietary home cleaning products and accessories. On October 1, 2023, MojiLife and its principals Darin Davis and Kimberlee Davis (collectively the “Seller”) and Moji Life International, Inc., a Nevada corporation (the “Purchaser”), a wholly-owned subsidiary of the Company (collectively the “Parties”) entered into an Asset Purchase Agreement (the “MojiLife Asset Purchase Agreement”). Pursuant to the MojiLife Asset Purchase Agreement, the Purchaser purchased the Seller’s real and personal property including, machinery and equipment, intellectual property, trade names, patents, marketing strategies and materials, all product formulas, all saleable inventory, the Seller’s organization database of distributors and customers, and assumed certain liabilities of the Seller.
In connection with the MojiLife Asset Purchase Agreement, on October 1, 2023, the Purchaser and SHRG Development Ventures, LLC (“SHRGDV”), an affiliate of the Purchaser and subsidiary of the Company also entered into an Exchange Agreement whereby SHRDV relinquished and surrendered its 30.75% LLC unit ownership interest in Seller.
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.
Investment in unconsolidated entities consists of the following:
SCHEDULE OF INVESTMENT IN UNCONSOLIDATED ENTITIES
As of March 31,
Investment in detachable GNTW stock warrant $ - $ 143,641
Investment in GNTW common stock - 18,300
Investment in Stemtech convertible note - 44,290
Investment in MojiLife - 1,537,000
Subtotal - 1,743,231
Allowance for impairment losses - (1,537,000 )
Investments $ - $ 206,231
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 fill 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.
The following table reflects the activity in the allowance for impairment losses for the periods presented:
SCHEDULE OF NOTES PAYABLE
Fiscal Year Ended March 31,
Balance at beginning of fiscal year $ 1,537,000 $ 1,537,000
Write-off (1,537,000 ) -
Balance at end of fiscal year $ - $ 1,537,000
NOTE 11 - NOTES PAYABLE, RELATED PARTY
Notes payables consist of the following:
SCHEDULE OF NOTE PAYABLE RELATED PARTY
As of March 31,
APB Loan $ - $ 5,594,253
APB Revolving Note - 1,530,569
Unamortized discount and deferred financing costs - (202,779 )
Note payable to related party, net $ - $ 6,922,043
On June 15, 2022, the Company, through one of its subsidiaries, Linden Real Estate Holdings LLC (“SHRG Subsidiary”), entered into a secured real estate promissory note with American Pacific Bancorp, Inc. (“APB”), pursuant to which APB loaned the Company approximately $5.7 million (the “APB Loan”). The APB Loan would mature on June 1, 2024, bore interest at the annual rate of 8%, with interest payable in equal monthly installments of $43,897 commencing on July 1, 2022 (with the remainder due on June 1, 2024). The loan was secured by a first mortgage interest on the Company’s Lindon, Utah office building. In connection with this loan, the Company received net proceeds of $5,522,829 from APB on June 17, 2022. APB is a subsidiary of DSS. The Company paid $418,323 in principal and interest related to the loan for the twelve months ended March 31, 2023.
On August 11, 2022, the Company executed a revolving credit promissory note with APB (“the APB Revolving Note”) pursuant to which the Company had access to advances with a maximum principal balance not to exceed the principal sum of $10 million. The APB Revolving Note included origination fees of $600,000. The APB Revolving Note was collateralized by the assets of the Company, and it bore interest at the annual rate of 8%. On December 9, 2022, APB and the Company mutually agreed to limit and/or end any further commitment by APB to fund or to readvance under the terms of the APB Revolving Note to $6.0 million. As of March 31, 2023, the Company had $1.5 million outstanding under the APB Revolving Note and accrued interest of $54,384.
Effective June 30, 2023 subject to the terms of an Assignment of Limited Liability Company Interests agreement, Decentralized Sharing Systems, Inc. (“DSSI”) purchased the SHRG Subsidiary with the financial terms generally summarized as follows: (a) DSSI assumed approximately $7.24 million in SHRG liabilities (namely, all amounts due under the APB Loan and the APB Revolving Note), (b) DSSI credited SHRG approximately $240,000 towards amounts owned under the 2022 Note (the “$27.0 million loan”), and (c) DSSI acquired ownership of Linden Real Estate Holdings LLC, with its sole asset being a commercial lot and commercial building located in Lindon, Utah, subject to the assumed indebtedness.
NOTE 12 - ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following:
SCHEDULE OF ACCRUED AND OTHER CURRENT LIABILITIES
As of March 31,
Deferred sales revenues $ 162,207 $ 246,811
Liability associated with uncertain tax positions 925,786 925,795
Accrued interest payable 5,833 536,123
Payroll and employee benefits 206,426 329,762
Lease liability, current portion 21,909 41,385
Other accruals 1,289,790 552,894
Accrued and other current liabilities $ 2,611,951 $ 2,632,770
Lease liability, current portion, represents obligations due withing one year under operating leases for office space, automobiles, and office equipment. Other accruals include primarily operational accruals.
NOTE 13 - CONVERTIBLE NOTES PAYABLE - RELATED PARTY
Convertible notes payable consists of the following:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
Issuance Date Date Rate (per share)
Maturity Interest Conversion Price As of March 31,
Issuance Date Date Rate (per share)
June 2022 June 2024 8 % N/A $ - $ 27,000,000
January 2024 July 2024 10 % See Note 250,000 -
March 2024 March 2027 6 % $ 0.0012 250,000 -
Total convertible notes payable
500,000 27,000,000
Unamortized debt discount and deferred financing costs
- (2,172,914 )
Change in fair value of embedded derivatives
87,303
-
Subtotal
587,303 24,827,086
Less: current portion of convertible notes payable
262,782 24,827,086
Long-term convertible notes payable
$ 324,521 $ -
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.
On April 5, 2021, the Company and DSSI entered into a Securities Purchase Agreement, pursuant to which the Company issued: (a) a Convertible Promissory Note in the principal amount of $30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, and DSSI loaned to the Company $30.0 million. DSSI, is a subsidiary of DSS, Inc. (“DSS”), and, together with DSS, is a shareholder of the Company. Under the terms of the Note, the Company agreed to pay to DSSI a loan Origination Fee of $3.0 million, payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share. The Note bore interest at the annual rate of 8%, with a maturity date of April 5, 2024, subject to certain accelerated provisions upon the occurrence of an Event of Default, as was defined in the Note. At any time during the term of the Note, all or part of the Note, including the principal amount less unamortized prepaid interest, if any, plus any accrued interest could have been converted into shares of the Company’s Class A Common Stock at the rate of $0.20 per share, at the option of the holder. Interest on the Note was pre-payable annually in cash or in shares of the Company’s Class A Common Stock, at the option of the Company, except that interest for the first year was pre-payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share. As further discussed below, the Note and the detachable Warrant were redeemed in June 2022.
On June 15, 2022, the Company and DSSI which, together with DSS, a major 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 $27.0 million (the “2022 Note”) in favor of DSSI and (b) a detachable Warrant to purchase up to 818,181,819 shares of the Company’s Class A Common Stock at the exercise price of $0.033 per share. The 2022 Note bore interest at the annual rate of 8%, was due and payable on demand or, if no demand, on May 1, 2024. At any time during the term of the 2022 Note, all or part of the Note may be converted into up to 818,181,819 shares of the Company’s Class A Common Stock, at the option of the holder. Under the terms of the agreement, the Company agreed to pay to DSSI a loan origination fee of $270,000. In addition, DSSI agreed to surrender to the Company all DSSI’s rights pursuant to: (a) a certain Convertible Promissory Note in the principal amount of $30.0 million issued by the Company in April 2021 in favor of DSSI, and (b) a certain detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, issued concurrently with such $30.0 million note. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized in additional paid in capital on the Company’s consolidated balance sheet. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a capital contribution of $2.0 million within additional paid-in capital in the Company’s consolidated financial statements.
In March 2023, the Company and DSSI entered into a Securities Exchange and Amendment Agreement pursuant to which the parties agreed to amend the 2022 Note by removing the conversion rights granted by the 2022 Note. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a deemed dividend of approximately $10.7 million on the Company’s consolidated financial statements.
Effective June 30, 2023, the Company and DSSI entered into two transactions, involving the sale of certain assets of the Company to DSSI, pursuant to which DSSI credited, in the aggregate, $641,790 to principal outstanding on the 2022 Note. In addition, effective June 30, 2023, DSSI also credited, in the aggregate, $546,000 in accrued interest due on the 2022 Note in connection with transactions involving the sale of certain assets to DSSI.
On August 31, 2023, the Company and DSSI executed a debt exchange agreement whereby DSSI cancelled the $27 million loan and accepted 26,000 shares of the Company’s Series D Preferred Stock, $0.0001 par value per share (“Preferred D Stock”) in exchange for the cancellation of the $27.0 million loan. Pursuant to the debt exchange agreement, the principal amount together with all unpaid interest, totaling $26,169,367 was deemed to be repaid. The holder of Preferred D Stock is entitled to receive dividends in cash valued at a rate of 25% per annum of the operating income of the Company. Any accrued and unpaid dividends shall be payable in cash commencing on August 31, 2024 and continuing each annual anniversary of such date on a perpetual basis.
On January 17, 2024, the Company executed a convertible promissory note for $250,000 with Alset Inc, a Texas corporation (“Alset”) and a shareholder of the Company. The convertible promissory note (“Alset Note”) bears a 10% interest per annum and had an origination fee of $25,000 which is payable in cash or convertible into common shares of the Company at the option of Alset. The note and related accrued interest shall be due and payable in full on the earliest of (i) six months from the date of issuance; (ii) the acceleration of the Alset Note upon an occurrence of an event of default (as defined in the Alset Note); (iii) the third business day after the holder has delivered the Company a written demand for payment of the Alset Note; or (iv) upon the Company’s successful listing on The Nasdaq Stock Market LLC. Alset may, at its option, at any time during the term of the Alset Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 $250,000.00 which shall be convertible into 208,333,333 shares of the Company’s common stock at the option of HWH and (ii) a common stock purchase warrant agreement which shall be exercisable into up to 208,333,333 shares of the Company’s common stock for an aggregate purchase price of $250,000. The convertible promissory note (the “HWH Note”) bears a 6% interest per annum and had a commitment fee of $15,000. The note, together with any accrued interest reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or convert into shares of common stock of the Company at a conversion rate of $0.0012 per share; and it shall be due and payable in full on the earliest of: (i) the third anniversary of the note; (ii) the acceleration of the note upon the occurrence of an event of default (as defined in the note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of this Note. The Company may, at its option, at any time during the term of the HWH Note, redeem a portion or all amounts of outstanding Principal Amount, without incurring penalties, additional interest, or other fees or charges. The purchase price of one share of common stock of the Company under this warrant shall be equal to $0.0012. The exercise period for each warrant will be five years from the date of this warrant.
During the fiscal year ended March 31, 2024, and 2023, interest expense associated with the Company’s convertible notes was approximately $0.2 million and $2.2 million, excluding amortization of debt discounts and deferred financing fees of approximately $2.0 million and $10.0 million, respectively. These amounts are included in interest expense, net, in our consolidated statements of operations.
NOTE 14 - LEASES
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 1 to 10 years on the remaining Leases. Leases with an initial term in excess of 12 months are recognized on the consolidated balance sheet based on the present value of future lease payments over the defined lease term at the lease commencement date. Future lease payments were discounted using an implicit rate of 10% to 12% in connection with most leases.
The following information pertains to the Company’s leases as of the balance sheet dates indicated:
SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES
Assets Classification
As of March 31,
Assets Classification
Operating leases Right-of-use assets, net $ 403,107 $ 448,240
Total lease assets
$ 403,107 $ 448,240
Liabilities
Operating leases Accrued and other current liabilities $ 21,909 $ 41,385
Operating leases Lease liability, long-term 416,277 440,478
Total lease liabilities
$ 438,186 $ 481,863
Expense pertaining to the Company’s leases for the periods indicated is as follows:
SCHEDULE OF OPERATING LEASE COSTS
Lease cost Classification
Fiscal Year Ended March 31,
Lease cost Classification
Operating lease cost General and administrative expenses $ 112,413 $ 303,157
Operating lease cost Depreciation and amortization - -
Operating lease cost Interest expense, net - -
Total lease cost
$ 112,413 $ 303,157
The Company’s lease liabilities are payable as follows:
SCHEDULE OF OPERATING LEASE LIABILITY PAYABLE
Twelve months ending March 31, Amount
$ 21,909
50,726
103,536
106,316
109,095
Thereafter 197,345
Total remaining payments 588,927
Less imputed interest (150,741
)
Total lease liability $ 438,186
NOTE 15 - INCOME TAXES
The Company’s provision for (benefit from) income taxes is as follows:
SCHEDULE OF PROVISION FOR INCOME TAXES
Fiscal Year Ended March 31,
Current:
Federal $ - $ -
State and local - -
Foreign - -
Total current - -
Deferred:
Federal - -
State and local - -
Foreign - -
Total deferred - -
Total consolidated income tax benefit $ - $ -
Our consolidated effective income tax rate reconciliation is as follows:
SCHEDULE OF INCOME TAX RATE RECONCILIATION RATE
Fiscal Year Ended March 31,
Federal statutory rate 21.0 % 21.0 %
State and local income taxes - -
Change in valuation allowance for NOL carry-forwards (21.0 ) (21.0 )
Stock warrant transactions and other items - -
Effective income tax rate - % - %
Our deferred tax asset (liability) is as follows:
SCHEDULE OF DEFERRED TAX ASSET LIABILITY
Deferred tax assets:
As of March 31,
Deferred tax assets:
Share-based compensation $ -
$ 928,525
Accruals and reserves not currently deductible
Impairment of investments and inventory 707,699
661,050
Other 99,294 215,542
Total deferred tax assets 806,995 1,805,119
Less: valuation allowance (806,995 ) (1,805,119 )
Total deferred tax assets, net $ - $ -
During the fiscal year ended March 31, 2024 and 2023, the Company recognized a valuation allowance of approximately $.8 million and $1.8 million, respectively, connection with certain deferred tax assets because of significant uncertainty about the Company’s ability to generate sufficient earnings in the foreseeable future to realize such assets. During the fiscal year ended March 31, 2024 and 2023, the Company recognized, in the aggregate, $0 and $163,192, respectively, in deferred income tax benefits in connection with certain foreign start-up operations. In addition, during the fiscal year ended March 31, 2024, and 2023, the Company recognized a valuation allowance of $0 and $163,192, respectively, in connection with the associated deferred tax assets because these start-up operations do not yet have a history of profits.
The Company has adopted the comprehensive model for how an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return, consistent with ASC 740. Accordingly, the Company recognizes the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. For the fiscal year ended March 31, 2024 and 2023, the Company had recognized a liability of $0 and $3,809, respectively, related to uncertain income tax positions, which is reported in other current liabilities. As of March 31, 2024 and 2023, the Company had unrecognized tax benefits of $925,786 and $925,786, respectively, that, if recognized, would impact the Company’s effective tax rate.
A reconciliation of the Company’s unrecognized tax benefits for the years indicated is as follows:
SCHEDULE OF UNRECOGNIZED TAX BENEFITS
Fiscal Year Ended March 31,
Balance at beginning of fiscal year $ 925,786 $ 921,977
Additions for tax positions related to the current year
3,809
Balance at end of fiscal year $ 925,786 $ 925,786
The company recognizes interest and/or penalties related to uncertain tax positions in current income tax provision. For the year ended March 31, 2024, and 2023, the Company did not recognize and interest and penalties. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase or decrease in the next twelve months due to uncertainties regarding timing and outcome of any examinations, the Company is evaluating alternatives that may impact the recognition of uncertain tax positions in the next twelve months.
The Company files consolidated federal income tax returns in the United States and files income tax returns in various state and foreign jurisdictions. As of March 31, 2024, the Company’s income tax returns for the following tax years remained subject to examination:
SCHEDULE OF INCOME TAX RETURNS SUBJECT TO EXAMINATION
Tax Jurisdiction Open Years
United States 2018 - 2023
Republic of Korea
Other Countries N/A
NOTE 16 - RELATED PARTY TRANSACTIONS
Alset Inc.
On January 17, 2024, the Company executed a convertible promissory note for $250,000 with Alset Inc, a Texas corporation (“Alset”) and a shareholder of the Company. The convertible promissory note (“Alset Note”) bears a 10% interest per annum and had an origination fee of $25,000 which is payable in cash or convertible into common shares of the Company at the option of Alset. The note and related accrued interest shall be due and payable in full on the earliest of (i) six months from the date of issuance; (ii) the acceleration of the Alset Note upon an occurrence of an event of default (as defined in the Alset Note); (iii) the third business day after the holder has delivered the Company a written demand for payment of the Alset Note; or (iv) upon the Company’s successful listing on The Nasdaq Stock Market LLC. Alset may, at its option, at any time during the term of the Alset Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
HWH International Inc.
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 $250,000.00 which shall be convertible into 208,333,333 shares of the Company’s common stock at the option of HWH and (ii) a common stock purchase warrant agreement which shall be exercisable into up to 208,333,333 shares of the Company’s common stock for an aggregate purchase price of $250,000. The convertible promissory note (the “HWH Note”) bears a 6% interest per annum and had a commitment fee of $15,000. The note, together with any accrued interest reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or convert into shares of common stock of the Company at a conversion rate of $0.0012 per share; and it shall be due and payable in full on the earliest of: (i) the third anniversary of the note; (ii) the acceleration of the note upon the occurrence of an event of default (as defined in the note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of this Note. The Company may, at its option, at any time during the term of the HWH Note, redeem a portion or all amounts of outstanding Principal Amount, without incurring penalties, additional interest, or other fees or charges. The purchase price of one share of common stock of the Company under this warrant shall be equal to $0.0012. The exercise period for each warrant will be five years from the date of this warrant. On June 19, 2024, the Company and HWH executed an amended to revise the conversion rate from $0.0001 to $0.002.
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.
Decentralized Sharing Systems, Inc.
In April 2021, the Company and DSSI entered into a Securities Purchase Agreement, pursuant to which DSSI granted a $30.0 million loan to the Company in exchange for: (a) a Convertible Promissory Note in the principal amount of $30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Stock Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share. At any time during the term of the Note, all or part of the Note, including the principal amount less unamortized prepaid interest, if any, plus any accrued interest can be converted into shares of the Company’s Class A Common Stock at the rate of $0.20 per share, at the option of the holder. Under the terms of the loan agreement, the Company agreed to pay to DSSI a loan origination fee of $3.0 million, payable in shares of the Company’s Class A Common Stock, with the number of shares to be calculated at the rate of $0.20 per share. In April 2021, Sharing Services issued 27.0 million shares of its Class A Common Stock to DSSI, including 15.0 million shares in payment of the loan origination fee and 12.0 million shares in prepayment of interest on a loan for the first year.
In January 2022, the Company and DSS who, together with its subsidiaries, entered into a one-year Business Consulting Agreement (the “Consulting Agreement”) pursuant to which the 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 and flat monthly fee of sixty thousand dollars ($60,000) and DSS received a fully vested detachable Stock Warrant to purchase up to 50.0 million shares of the Company’s Class A Common Stock, at the exercise price of $0.0001 per share. On the effective date of the Consulting Agreement, the closing price of the Company’s common stock was $0.07 per share and the fair value of the Stock Warrant was $3.5 million. The fair value of the Stock Warrant is being recognized as consulting expense over the term of one year. During the fiscal year ended March 31, 2023 and 2022, the Company recognized consulting expense of approximately $3.5 million and $0.8 million, respectively, in connection with the Consulting Agreement. No service was recognized during the fiscal year ended March 31, 2024. In February 2022, the Company issued 50.0 million shares of its Common Stock Class A to DSS in connection with exercise of the Stock Warrant. As of March 31, 2023, the prepaid consulting expense of $2.9 million was fully amortized on the Company’s consolidated financial statements.
On June 15, 2022, the Company and 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 $27.0 million (the “2022 Note”) in favor of DSSI and (b) a detachable Warrant to purchase up to 818,181,819 shares of the Company’s Class A Common Stock (the “Warrant”), at $0.033 per share, in exchange for the $27.0 million. The 2022 Note bears interest at the annual rate of 8% and is due and payable on demand or, if no demand, on May 1, 2024. At any time during the term of the 2022 Note, all or part of the Note may be converted into up to 818,181,819 shares of the Company’s Class A Common Stock, at the option of the holder. In connection with the loan, the Company agreed to pay to DSSI a loan Origination Fee of $270,000. In addition, DSSI agreed to surrender to the Company all DSSI’s rights pursuant to: (a) a certain Convertible Promissory Note in the principal amount of $30.0 million issued by the Company in April 2021 in favor of DSSI, and (b) a certain detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, issued concurrently with such $30.0 million note. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a capital contribution within additional paid-in capital in the Company’s consolidated financial statements.
On February 3, 2023, the Company mutually agreed with DSS to enter into a Letter Agreement (the “DSS Letter Agreement”), pursuant to which the Company and DSS have agreed to terminate and release all obligations of the Consulting Agreement effective as of December 31, 2022. In accordance with the DSS Letter Agreement, the Company also agreed to issue 33,333,333 shares of the Company’s Common Stock in lieu of cash payment to satisfy the accrued and unpaid service fees equal to $700,000 owed to DSS under the Consulting Agreement.
On February 28, 2023, the Company and DSSI mutually agreed in a Letter Agreement (the “First DSSI Letter Agreement”) to a mutual settlement of the interest accrued on the 2022 Note issued by the Company to DSSI. In accordance with the DSSI Letter Agreement, the Company agreed to issue 26,285,714 shares of the Company’s Common Stock, at a price per share of $0.021 in lieu of cash payment to satisfy the accrued and unpaid interest through and including December 31, 2022, in the amount of $552,000 owed to DSS.
On March 24, 2023, the Company, DSS and DSSI, entered into a Securities Exchange and Amendment Agreement (the “Agreement”) pursuant to which the parties agreed to: (1) exchange and surrender of the Assigned 60 million Warrants in exchange for 693,194 shares of the Company’s Class A common stock; (2) exchange and surrender the Service Warrants of 818,181,819 warrants for 9,452,647 shares of the Company’s Class A common stock; (3) exchange and surrender the DSSI Warrants; and (4) amend the 2022 Note by removing all conversion rights granted by the 2022 Note in exchange for 14,854,159 shares of the Company’s Class A common stock. The Company issued 25,000,000 shares of the Company’s Class A Common Stock in full satisfaction, exchange and payment for the exchanges and amendments set forth in the Agreement. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a deemed dividend on the Company’s consolidated financial statements.
On April 17, 2023, the Company and DSSI mutually agreed in a subsequent Letter Agreement (the “Second DSSI Letter Agreement”) to a mutual settlement of the interest accrued on the 2022 Note between January 1, 2023, through and including March 31, 2023. In accordance with the Second DSSI Letter Agreement, the Company agreed to issue 28,877,005 shares of the Company’s Common Stock, at a price per share of $0.0187 in lieu of cash payment to satisfy the accrued and unpaid interest between January 1, 2023, through and including March 31, 2023, in the amount of $540,000 owed to DSSI.
On May 4, 2023, DSS and DSSI distributed, in the aggregate, 280,528,500 shares of SHRG they then held to DSS, Inc. shareholders in connection with the Form S-1 (file no. 333-271184) initially filed with the Securities and Exchange Commission on April 7, 2023, and declared effective on April 25, 2023. Accordingly, after the distribution, DSS ceased to be a majority shareholder of the Company.
Effective June 30, 2023, subject to the terms of a certain Loan Purchase Contract, Assignment of Note and Liens and Other Loan Documents, and Note Allonge document, DSSI purchased from SHRG a Stemtech promissory note in the amount of $1.4 million, along with all SHRG’s rights in any Stemtech warrants, for a purchase price of $1.1 million, with the financial terms generally summarized as follows: (a) DSSI pays the $1.1 million purchase price by crediting the $27.0 million loan, first to interest and then to principal, and (b) DSSI acquired ownership of certain $1.4 million promissory note payable by Stemtech, free and clear of any liens, and any equity or warrant interest in the Stemtech that SHRG may have held. As of June 30, 2023, as a result of the transaction, the Company no longer has an investment in Stemtech.
On July 1, 2023, the Company and DSSI, entered into a Securities Purchase Agreement, pursuant to which the Company purchased 1,000 shares of common stock, par value $0.001 per share, (the “Shares”) representing all of the issued and outstanding shares of common stock of HWH World, Inc., a Texas corporation (“HWHW”). The Company purchased the Shares for a consideration of (i) $10 paid immediately in cash, and (ii) up to $711,300 payable from the gross proceeds generated from the sale of HWHW’s inventory, payable quarterly, and as described in detail in the Securities Purchase Agreement.
Effective July 1, 2023, the Company and DSSI cancelled the previously executed Securities Purchase Agreement related to HWHW and replaced it with an Asset Purchase Agreement whereby the Company agreed to purchase the inventory of HWHW as of June 30, 2023 and assumed certain account payable of HWHW as of June 30, 2023. Pursuant to the Asset Purchase Agreement, the Company agreed to pay DSSI a maximum of $757,641.98 from gross proceeds generated from the sale of HWHW inventory.
Effective July 31, 2023, the Company and HWHW also entered into an Exclusive Intellectual Property License Agreement (the “IP Agreement”). Pursuant to the IP Agreement, HWHW granted the Company an exclusive, non-transferable worldwide license to use HWHW’s intellectual property (the “IP”) as set forth in the IP Agreement. The purchase price from the Company to HWHW for the IP was (i) $10.00 paid in cash and (ii) 1% of the gross sales price of all new products made and sold, outside of the existing inventory conveyed under the terms of the Asset Purchase Agreement, which commenced on November 1, 2023. The IP Agreement terminates on November 1, 2033.
On July 1, 2023, the Company and DSSI, entered into a Securities Purchase Agreement (“HWHH SPA”), pursuant to which the Company purchased 1,000 shares of common stock, par value $0.001 per share, (the “HWHH Shares”) representing all of the issued and outstanding shares of common stock of HWH Holdings, Inc., a Texas corporation (“HWHH”). The Company purchased the HWHH Shares for a consideration of (i) $10.00 paid immediately in cash, and (ii) up to $1,210,224 payable from the gross proceeds generated from the sale of HWHH’s inventory, payable quarterly, and as described in detail in the Securities Purchase Agreement.
Effective July 1, 2023, the Company, DSSI and Ascend Management Pte, a Singaporean private limited company (“Ascend Management”) executed an Assignment and Assumption Agreement whereby Ascend Management purchased 1,000 shares of common stock, par value $0.01 per share, of HWHH, representing all of the issued and outstanding shares of capital stock of HWHH, pursuant to that certain Securities Purchase Agreement made as of July 1, 2023 by and between DSSI and the Company. In connection with the Assignment and Assumption Agreement, the Company and HWHH entered into a business consulting agreement to assist in the management of the business of HWHH.
On January 31, 2024, DSSI and Ascend Management executed an agreement whereby the obligations under the HWHH SPA were deemed fully complied with and that Ascend Management has been fully released and discharged from all liabilities, obligations, claims and demands whatsoever arising out of or in connection with the HWHH SPA and in respect of anything done or omitted to be done under or in connection with the HWHH SPA.
On August 31, 2023, the Company and DSSI executed a debt exchange agreement whereby DSSI cancelled the $27 million loan and accepted 26,000 shares of the Company’s Series D Preferred Stock, $0.0001 par value per share (“Preferred D Stock”) in exchange for the cancellation of the $27.0 million loan. Pursuant to the debt exchange agreement, the principal amount together with all unpaid interest, totaling $26,169,367 was deemed to be repaid. The holder of Preferred D Stock is entitled to receive dividends in cash valued at a rate of 25% per annum of the operating income of the Company. Any accrued and unpaid dividends shall be payable in cash commencing on August 31, 2024 and continuing each annual anniversary of such date on a perpetual basis.
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, Inc., currently known as American Pacific Financial, Inc.
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 $5.7 million. The loan bore interest at the annual rate of 8%, would mature on September 1, 2024, was payable in equal monthly instalments of $43,897 commencing on July 1, 2022 (with the remainder due on September 1, 2024). The loan was secured by a first mortgage interest on the Company’s Lindon, Utah office building. In connection with this loan, the Company received net proceeds of $5,522,829 from APB on June 17, 2022. APB is a subsidiary of DSS.
On August 11, 2022, the Company executed a revolving credit promissory note with APB pursuant to which the Company has access to advances with a maximum principal balance not to exceed the principal sum of $10.0 million. The APB Revolving Note is collateralized by the assets of the Company, and it bears interest at the annual rate of 8% and such interest shall be due and payable quarterly as it accrues on the outstanding balance. On December 9, 2022, APB and the Company mutually agreed to limit and/or end any further commitment by APB to fund or to readvance under the terms of the APB Revolving Note to $6.0 million.
As discussed above, effective June 30, 2023 subject to the terms of an Assignment of Limited Liability Company Interests agreement, DSSI purchased the SHRG subsidiary, Linden Real Estate Holdings LLC, with the financial terms generally summarized as follows: (a) DSSI assumed approximately $7.24 million in SHRG liabilities (namely, all amounts due under the APB Loan and the APB Revolving Note), (b) DSSI credited SHRG $239,790 towards accrued interest payable under the 2022 Note (the “$27.0 million loan”), and (c) DSSI acquired ownership of Linden Real Estate Holdings LLC, with its sole asset being a commercial lot and commercial building located in Lindon, Utah, subject to the assumed indebtedness.
HWH World, Inc.
A subsidiary of the Company operating in the Republic of Korea subleases office space, on a month-to-month basis, from HWH World, Inc. (“HWH World”), until September 30, 2023, 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 in connection therewith. In May 2022, the Company and HWH World amended the related sublease agreement to significantly reduce the space subleased by the Company and the related rent obligation. On June 30, 2022, the right-of-use asset and liability were written off and a new month-to-month rental agreement was entered into for the reduced space subleased by the Company. The company recognized approximately $630 in monthly rent expense in connection with the new lease.
Premier Packaging Corporation
In the fiscal years ended March 31, 2024 and 2023, a wholly owned subsidiary of the Company issued purchase orders to Premier Packaging Corporation, a subsidiary of DSS, to acquire printed packaging materials for approximately $0 and $108,000, respectively.
New Electric CV Corp. (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 $4,166. Mr. John “JT” Thatch, a director of the Company, also serves on the Board of Directors of American Premium. During the fiscal year ended March 31, 2023, the Company recognized consulting fee income of approximately $50,000. No consulting fee income was recognized in the fiscal year ended March 31, 2024.
NOTE 17 - STOCKHOLDERS’ DEFICIT
The Company’s shareholders had ratified the Third Amended and Restated Articles of Incorporation of the Company and approved the maximum number of shares which the Corporation now has the authority to issue Two Billion Two Hundred Million (2,200,000,000) shares, $0.0001 par value per share, of which: (a) Two Billion (2,000,000,000) Shares of Common Stock having a par value of $0.0001 per share (“Common Stock”) and (b) Two Hundred Million (200,000,000) Shares of Preferred Stock comprised of Series A, Series C, and Series D having a par value of $0.0001 per share or as authorized (“Preferred Stock”). The Board may divide the authorization into one or more series, each with distinct powers, designations, preferences, and rights.
Preferred Stock
Series A Convertible Preferred Stock
The Board has authorized the issuance of up to 100,000,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”). Shares of our Series A Preferred Stock are senior in rank to shares of our Series C Preferred Stock. The affirmative vote of the holders of 86% of the issued and outstanding shares of our Series A Preferred Stock is required for the Board: (i) to declare dividends upon shares of our Common Stock unless, with respect to cash dividends, the shares of our Series A Preferred Stock are to receive the same dividend as the common shares, on an as converted basis; (ii) to redeem the shares of our Series A Preferred Stock at a redemption price of $0.001 per share; (iii) to authorize or issue additional or other capital stock that is junior or equal in rank to shares of our Series A Preferred Stock with respect to the preferences as to distributions and payments upon the liquidation, dissolution, or winding up of the Company; and (iv) to amend, alter, change, or repeal any of the powers, designations, preferences, and rights of our Series A Preferred Stock. Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive out of the assets of the Company the sum of $0.001 per share before any payment or distribution shall be made on our shares of Common Stock, or any other class of capital stock ranking junior to the Series A Preferred Stock. For a period of 10 years from the date of issuance, the holders of the Series A Preferred Stock may elect to convert each share of the Series A Preferred Stock into one share of the Company’s Common Stock. Each share of our Series A Preferred Stock is entitled to one vote when voting as a class or together with the shares of our Common Stock.
During the fiscal year ended March 31, 2021, stockholders converted an aggregate of 21,750,000 shares of the Company’s Series A Preferred Stock into an equal number of shares of the Company’s Common Stock. There were no similar conversions in the fiscal year ended March 31, 2024 and 2023, respectively.
As of March 31, 2024 and 2023, 3,100,000 shares, respectively, of the Company’s Series A Preferred Stock remain outstanding. The shares of the Company’s Series A Preferred Stock reported in the Company’s financial statements as of March 31, 2024 and 2023, include 2,900,000 shares purportedly held by Research & Referral BZ, pending cancellation of the stock certificate when presented by Research & Referral BZ in the future.
Series B Convertible Preferred Stock
The Board has authorized the issuance of up to 10,000,000 shares of Series B Convertible Preferred Stock (the Series B Preferred Stock”). Issued and outstanding shares of our Series B Preferred Stock, if any, are senior in rank to shares of our Series A and Series C Preferred Stock. During the fiscal year ended March 31, 2021, all shares of the Company’s Series B Preferred Stock previously issued were converted into shares of the Company’s Class A Common Stock. As of March 31, 2024, and 2023, no shares of the Company’s Series B Preferred Stock remain outstanding.
Series C Convertible Preferred Stock
The Board has authorized the issuance of up to 10,000,000 shares of Series C Convertible Preferred Stock (the Series C Preferred Stock”). Shares of our Series C Preferred Stock are junior in rank to the Series A and Series B Preferred Stock. The affirmative vote of the holders of 86% of the issued and outstanding shares of our Series C Preferred Stock is required for the Board: (i) to declare dividends upon shares of our Common Stock unless, with respect to cash dividends, the shares of our Series C Preferred Stock are to receive the same dividend as the common shares, on an as converted basis; (ii) to redeem the shares of Series C Preferred Stock at a redemption price of $0.001 per share; (iii) to authorize or issue additional or other capital stock that is junior or equal in rank to our Series C Preferred Stock with respect to the preferences as to distributions and payments upon the liquidation, dissolution, or winding up of the Company; and (iv) to amend, alter, change, or repeal any of the powers, designations, preferences, and rights of the Series C Preferred Stock. Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series C Preferred Stock are entitled to receive out of the assets of the Company the sum of $0.001 per share before any payment or distribution shall be made on our shares of Common Stock, or any other class of capital stock of the Company ranking junior to the Series C Preferred Stock. For a period of 10 years from the date of issuance, the holders of the Series C Preferred Stock may elect to convert each share of Series C Preferred Stock into one share of the Company’s Common Stock. Each share of our Series C Preferred Stock is entitled to one vote when voting as a class or together with shares of our Common Stock.
During the fiscal year ended March 31, 2022, holders of 10,000 shares of the Company’s Series C Preferred Stock converted their holdings into an equal number of shares of the Company’s Common Stock. As of March 31, 2024, and 2023, respectively 3,220,000 shares of the Company’s Series C Preferred Stock remain outstanding.
Series D Preferred Stock
On August 31, 2023, the Company and DSSI executed a debt exchange agreement whereby DSSI cancelled the $27 million loan and accepted 26,000 shares of the Company’s Series D Preferred Stock, $0.0001 par value per share (“Preferred D Stock”) in exchange for the cancellation of the $27.0 million loan. Pursuant to the debt exchange agreement, the principal amount together with all unpaid interest, totaling $26,169,367 was deemed to be repaid. The holder of Preferred D Stock is entitled to receive dividends in cash valued at a rate of 25% per annum of the operating income of the Company. Any accrued and unpaid dividends shall be payable in cash commencing on August 31, 2024 and continuing each annual anniversary of such date on a perpetual basis.
Common Stock
The Board has authorized the issuance of up to 1,990,000,000 shares of Class A Common Stock and up to 10,000,000 shares of Class B Common Stock, each with a par value of $0.0001 per share. Holders of our Common Stock are entitled to dividends, subject to the rights of the holders of other classes of capital stock outstanding having priority rights with respect to dividends. At the time of this Annual Report, no shares of the Company’s Class B Common Stock remain outstanding. References to the “Common Stock” throughout this report include the Company’s Class A Common Stock and Class B Common Stock, unless otherwise indicated or the context otherwise requires.
On June 15, 2022, the Company and DSSI which, together with DSS, a 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 $27.0 million (the “2022 Note”) in favor of DSSI and (b) a detachable Warrant to purchase up to 818,181,819 shares of the Company’s Class A Common Stock at the exercise price of $0.033 per share. The 2022 Note bore interest at the annual rate of 8% and was due and payable on demand or, if no demand, on May 1, 2024. At any time during the term of the 2022 Note, all or part of the Note may be converted into up to 818,181,819 shares of the Company’s Class A Common Stock, at the option of the holder. Under the terms of the agreement, the Company agreed to pay to DSSI a loan origination fee of $270,000. In addition, DSSI agreed to surrender to the Company all DSSI’s rights pursuant to: (a) a certain Convertible Promissory Note in the principal amount of $30.0 million issued by the Company in April 2021 in favor of DSSI, and (b) a certain detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, issued concurrently with such $30.0 million note. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a capital contribution of $2.0 million in additional paid in capital on the Company’s consolidated balance sheet.
On February 3, 2023, the Company mutually agreed with DSS to enter into a Letter Agreement (the “DSS Letter Agreement”), pursuant to which the Company and DSS have agreed to terminate and release all obligations of the Consulting Agreement effective as of December 31, 2022. In accordance with the DSS Letter Agreement, the Company also agreed to issue 33,333,333 shares of the Company’s Common Stock in lieu of cash payment to satisfy the accrued and unpaid service fees equal to $700,000 owed to DSS under the Consulting Agreement.
On February 28, 2023, the Company and DSSI mutually agreed in a Letter Agreement (the “First DSSI Letter Agreement”) to a mutual settlement of the interest accrued on the 2022 Note issued by the Company to DSSI. In accordance with the DSSI Letter Agreement, the Company agreed to issue 26,285,714 shares of the Company’s Common Stock, at a price per share of $0.021 in lieu of cash payment to satisfy the accrued and unpaid interest through and including December 31, 2022, in the amount of $552,000 owed to DSSI.
On March 24, 2023, the Company, DSS and DSSI, entered into a Securities Exchange and Amendment Agreement (the “Agreement”). Pursuant to the Agreement, the parties decided to: 1) exchange and surrender the Assigned Warrants, 2) exchange and surrender the Service Warrants, 3) exchange and surrender the DSSI Warrants, and 4) amend the 2022 Note by removing all conversion rights granted by the 2022 Note. Under the terms of the Agreement, the Company issued 10,145,841 shares of its Class A Common Stock in connection with the exchange and surrender of the Assigned Warrants and the Service Warrants. In accordance with GAAP, the Company recognized a deemed dividend of $213,062 on the Company’s consolidated financial statements. In addition, the Company issued 14,854,159 shares of its Class A Common Stock in connection with removal of all conversion rights granted by the 2022 Note. The Company recognized the debt modification transaction as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new debt instrument and the carrying value of the retired debt instrument was recognized as a deemed dividend of $10.7 million on the Company’s consolidated financial statements.
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 26,091,136 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 $1,043,645; and (d) the Company and its relevant subsidiaries, on the one hand, and the former officer and relevant entities affiliated with the former officer, on the other hand, exchanged customary mutual releases of any prior obligations among them. On May 19, 2022, the closing price for the Company’s common stock was $0.25 per share. In the fiscal quarter ending June 30, 2022, the Company measured and recognized the repurchase of its common stock at its fair value of $652,278, derecognized its remaining liability under the Co-Founder’s Agreement, and recognized a recovery of $324,230 in connection with the previously recognized loss related to the Co-Founder’s Agreement. The Company reported the 26,091,136 shares of the Company’s common stock in Treasury Stock until the interim period ended June 30, 2023, when it cancelled the stock certificate.
On April 17, 2023, the Company and DSSI, mutually agreed in a subsequent Letter Agreement (the “Second DSSI Letter Agreement”) to a mutual settlement of the interest accrued on the 2022 Note between January 1, 2023, through and including March 31, 2023. In accordance with the Second DSSI Letter Agreement, the Company issued 28,877,005 shares of the Company’s Common Stock, at a price per share of $0.0187 in lieu of cash payment to satisfy the accrued and unpaid interest between January 1, 2023, through and including March 31, 2023, equal to $539,806 owed to DSSI under the Second DSSI Letter Agreement. The Company’s shares were trading at $0.0180 on April 17, 2023.
On October 30, 2023, the Company filed a Definitive Information Statement on Schedule 14C with the Securities and Exchange Commission and disclosed that a majority of the Company’s stockholders had approved by majority written consent an amendment to the Company’s articles of incorporation with the Secretary of State of Nevada to effect a Reverse Split (the “Reverse Split”) of the Company’s Class A Common Stock, par value $0.0001 per share (the “Common Stock”) by a ratio of not less than 700-for-1 and not more than 1,800-for-1, with the Board of Directors (the “Board”) of the Company having the discretion as to the exact date and ratio of any Reverse Split to be set at a whole number within the above range.
On December 15, 2023, the Board approved the exact ratio of the Reverse Split at 1,400-for-1. The Company intends on effecting the Reverse Split for the purpose of enabling a future uplisting of the Company’s Common Stock to a national securities exchange. The Reverse Split remains subject to approval by the Financial Industry Regulatory Authority (“FINRA”). There is no guarantee that the Company will be successful in achieving FINRA’s approval or uplisting to a national exchange.
As of March 31, 2024 and 2023, and 347,451,880 shares, respectively, of our Class A Common Stock remained issued and outstanding. As of March 31, 2024 and 2023, there were no shares of the Company’s Class B Common Stock outstanding.
NOTE 18 - STOCK-BASED COMPENSATION
Stock Warrants
Stock Warrants Issued to Related Parties, Directors, Officers, and Employees
In January 2022, the Company and DSS who, together with its subsidiaries, was then a majority shareholder of the Company, entered into a one-year Business Consulting Agreement (the “Consulting Agreement”) pursuant to which the DSS would provide to the Company certain consulting services, as defined in the Consulting Agreement. In connection with the Consulting Agreement, the Company agreed to pay DSS and flat monthly fee of sixty thousand dollars ($60,000) and DSS received a fully vested detachable Stock Warrant to purchase up to 50.0 million shares of the Company’s Class A Common Stock, at the exercise price of $0.0001 per share. On the effective date of the Consulting Agreement, the closing price of the Company’s common stock was $0.07 per share and the fair value of the Stock Warrant was $3.5 million. The fair value of the Stock Warrant is being recognized as consulting expense over the term of one year. During the fiscal year ended March 31, 2023, and 2022, the Company recognized consulting expense of approximately $3.5 million and $0.8 million, respectively, in connection with the Consulting Agreement. In February 2023, the Company issued 50.0 million shares of its Common Stock Class A to DSS in connection with exercise of the Stock Warrant.
In June 2022, the Company and 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 $27.0 million (the “2022 Note”) in favor of DSSI and (b) a detachable Warrant to purchase up to 818,181,819 shares of the Company’s Class A Common Stock (the “Warrant”), at $0.033 per share. At any time during the term of the 2022 Note, all or part of the Note was convertible into up to 818,181,819 shares of the Company’s Class A Common Stock, at the option of the holder. In connection with the SPA, DSSI surrendered to the Company all DSSI’s rights pursuant to: (a) the Convertible Promissory Note in the principal amount of $30.0 million discussed in the preceding paragraph, and (b) the detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock discussed in the preceding paragraph. In March 2023, the parties entered into a Securities Exchange and Amendment Agreement pursuant to which the parties agreed to amend the 2022 Note by removing the conversion rights granted by the 2022 Note. The Company recognized the transaction with DSSI as a debt extinguishment in accordance with GAAP. Since DSSI is a related party, the difference between the fair value of the new equity instruments and the carrying value of the retired equity instruments was recognized as a deemed dividend in the Company’s financial statements in the fiscal year ended March 31, 2023.
In the fiscal year ended March 31, 2023, the Company issued a fully vested warrant to purchase up to 8,444,663 shares of the Company’s Common Stock, at the exercise price of $0.0001 per share, to the Company’s CEO John “JT” Thatch. The fair value of the warrant on the grant date was $109,780.
The following table summarizes the activity relating to the Company’s stock warrants held by Related Parties (all of which are fully vested):
SCHEDULE OF WARRANT ACTIVITY
Number of
Warrants Weighted Average
Exercise Price
Weighted Average
Remaining Term
Outstanding at March 31, 2022 210,333,333 $ 0.18 4.1
Granted 818,181,819 0.033
Exercised - - -
Expired, terminated, or forfeited (1,028,515,152 ) 0.06 -
Outstanding at March 31, 2023 - $ - -
Granted - - -
Exercised - - -
Expired, terminated, or forfeited - - -
Outstanding at March 31, 2024 - $ - -
In February 2023, the Company issued a fully vested warrant to purchase up to 8,444,663 shares of the Company’s Common Stock, at an exercise price of $0.0001 per share (the “Warrant”), to its Chief Executive Officer in connection with the executive existing employment agreement. The Warrant expires in February 2028. The fair value of the warrant on the grant date was $109,780.
The following table summarizes the activity relating to the Company’s vested and unvested stock warrants held by Directors, Officers, and Employees:
SCHEDULE OF WARRANT ACTIVITY
Number of
Warrants Weighted Average
Exercise Price
Weighted Average
Remaining Term
Outstanding at March 31, 2022 19,700,000 $ 0.03 2.6
Granted 8,444,663 0.0001 5.0
Exercised - - -
Expired or forfeited (4,700,000 )
Outstanding at March 31, 2023 23,444,663 $ 0.02 2.9
Less: unvested at March 31, 2023 1,875,000 $ 0.01 1.1
Vested at March 31, 2023 21,569,663 $ 0.02 3.1
Granted - - -
Exercised - - -
Expired or forfeited - - -
Vested at March 31, 2024 21,569,663 $ 0.02 3.1
Stock Warrants Issued to Our Independent Sales Force
In the fiscal year ended March 31, 2021, the Company issued fully vested warrants to purchase up to 4,013,000 shares of its Common Stock to members of its independent sales force, with a fair value of $1.5 million. The warrants are exercisable for a period ranging from one to two years from the issuance date, at the exercise price ranging from $0.01 per share to $0.25 per share. In the fiscal year ended March 31,2022 warrants held by independent distributors to purchase up to 1,507,200 shares and 2,066,600 shares, respectively, of the Company’s Common Stock expired or were otherwise terminated or forfeited. As of March 31, 2024 and 2023, the warrants held by independent distributors had all expired and no additional shares were granted.
The following table summarizes the activity relating to the Company’s stock warrants held by members of the Company’s independent sales force (all of which are fully vested):
SCHEDULE OF WARRANT ACTIVITY
Number of Warrants Weighted Average
Exercise Price
Weighted Average
Remaining Term
Outstanding at March 31, 2022 2,180,000 $ 0.02 1.2
Granted -
Exercised -
Expired or forfeited -
Outstanding at March 31,2023 2,180,000 $ 0.01 0.2
Granted -
Exercised -
Expired or forfeited -
Outstanding at March 31,2024 2,180,000 $ 0.01 0.2
The following table summarizes additional information relating to all stock warrants outstanding and warrants exercisable as of March 31, 2024: -
SUMMARY OF WARRANT OUTSTANDING AND EXERCISABLE WARRANTS
All Warrants Outstanding All Warrants Exercisable
Weighted
Average
Remaining
Contractual Weighted
Average
Weighted
Average
Number of Shares life (in years) Exercise Price Number of Shares Exercise Price
208,333,333 3.0 $ 0.0012 208,333,333 $ 0.0012
208,333,333
208,333,333
NOTE 19 - COMMITMENTS AND CONTINGENCIES
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 e a Response Brief on February 22, 2023. The appeal is still pending as of March 31, 2024.
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 March 31, 2024.
NOTE 20 - BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
Business Segments
As of March 31, 2024, and 2023, the Company, through its subsidiaries, markets and sells its products and services to consumers, through its independent sales force and proprietary websites, and to its independent distributors. The Company has determined its reportable segments are: (a) the sale of health and wellness products, and (b) the sale of member-based travel services. The Company’s determination of its reportable segments is based on how its chief operating decision maker manages the business.
The Company’s segment information is as follows:
SCHEDULE OF SEGMENT INFORMATION
Fiscal Year Ended March 31,
Net sales
Health and wellness products $ 10,671,528 $ 15,990,756
Other 206,714 111,380
Total net sales $ 10,878,242 $ 16,102,136
Operating earnings (loss):
Segment gross profit:
Health and wellness products $ 7,013,426 $ 9,192,641
Other 31,839 64,029
Total segment gross profit 7,045,265 9,256,670
Selling and marketing expenses 4,104,991 6,989,660
General and administrative expenses 7,839,639 17,081,915
Consolidated operating loss $ (4,899,365 ) $ (14,814,905 )
Total Assets:
Health and wellness $ 1,927,213
$ 4,961,068
Corporate 4,707,701
12,118,647
Consolidated total assets $ 6,634,914 $ 17,079,715
Payments for property and equipment:
Health and wellness $ - $ -
Corporate - 1,196,406
Consolidated payments for property and equipment $ - $ 1,196,406
Depreciation and amortization expense:
Health and wellness $ 79,883 $ 101,733
Corporate 490,712 624,933
Consolidated depreciation and amortization $ 570,595 $ 726,666
Geographic Area Information
Our consolidated net sales, by geographic area, were as follows:
SCHEDULE OF CONSOLIDATED NET SALES
Country
Fiscal Year Ended March 31,
Country
United States $ 10,306,213 $ 14,699,480
Canada 556,639 769,229
Republic of Korea 15,390 441,666
Other - 191,761
Total $ 10,878,242 $ 16,102,136
Our consolidated total assets, by geographic area, were as follows:
SCHEDULE CONSOLIDATED TOTAL ASSETS
Country
Fiscal Year Ended March 31,
Country
United States $ 6,219,767 $ 15,827,730
Republic of Korea 115,333 1,053,773
Other 299,814 198,212
Total $ 6,634,914 $ 17,079,715
NOTE 21 - SUBSEQUENT EVENTS
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 $250,000, for a purchase price of $250,000. The May HWH Note bears interest at 8% per annum, contains a commitment fee of $20,000, and at the option of HWH, convertible into 208,333,333 shares of Common Stock. The May HWH Note, together with any accrued interest, reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or convert into shares of Common Stock of the Company at a conversion rate of $0.002 per share; due and payable in full on the earliest of: (i) the third anniversary of the May HWH Note; (ii) the acceleration of the May HWH Note upon the occurrence of an event of default (as defined in the May HWH Note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of the May HWH Note. The Company may, at its option, at any time during the term of the May HWH Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 $250,000, for a purchase price of $250,000. The June HWH Note bears interest at 8% per annum and contains a commitment fee of $20,000. The June HWH Note, together with any accrued interest, reduced by any unamortized prepaid interest shall, at the discretion of HWH, either be repaid in cash and/or converted into 2,500,000,000 shares of Common Stock at a conversion rate of $0.0001 per share; due and payable in full on the earliest of: (i) the third anniversary of the June HWH Note; (ii) the acceleration of the June HWH Note upon the occurrence of an event of default (as defined in the June HWH Note); or (iii) on the fifth business day after HWH has delivered to the Company a written demand for payment of the June HWH Note. The Company may, at its option, at any time during the term of the June HWH Note, redeem a portion or all amounts of outstanding principal amount, without incurring penalties, additional interest, or other fees or charges.
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 2,500,000 to 125,000,000; and (ii) the conversion rate from $0.0001 to $0.002.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The disclosure with respect to the change in our independent registered accountants required under this section was previously reported as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, on a Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2023. As previously reported, there were no disagreements or any reportable events to disclose.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. 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 Annual Report, and concluded that, as of March 31, 2024, due to significant deficiencies described below, the Company’s disclosure controls and procedures are 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.
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. A system of internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are 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 certain 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 or omissions due to error or fraud may occur and not be detected.
Management’s Annual Report on Internal Control over Financial Reporting.
Management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management, with the participation of our CEO and our CFO, assessed the effectiveness of our internal control over financial reporting as of March 31, 2024, and concluded that our internal control over financial reporting was ineffective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States due to material weaknesses identified below.
1. As of March 31, 2024, our management has identified material weaknesses in our internal controls to review and reconcile account balances on a monthly basis and has concluded that, due to such material weakness, our disclosure controls and procedures were not effective.
2. As of March 31, 2024, our management has identified material weaknesses in our internal controls to complete document procedures that timely completes monthly reconciliations and closing procedures. Accordingly, management has determined that this control deficiency constitutes a material weakness.
Our conclusion is based on the fact that we do not have sufficient number of qualified accounting personnel to ensure proper segregation of incompatible duties, perform timely account analyses, and timely preparation and review of our financial statements. To remediate these material weaknesses, our management is in the process of (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience; (ii) enhancing our accounting and financial reporting process, and (iii) strengthening our account reconciliation and documentation procedures.
All internal control systems, no matter how well designed, have inherent limitations. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
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.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as stated below, the information required by Item 10 of this Annual Report is incorporated herein by reference to the definitive proxy statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after March 31, 2024.
Directors and Executive Officers
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, Inc. (formerly Document Security Systems, Inc.) (“DSS”). Mr. Chan also serves as Executive Chairman of the Company’s Board of Directors of the Company. Mr. Thatch also serves as President, CEO and Vice Chairman of the Company’s Board of Directors of the Company. Until May 4, 2023, DSS, together with its subsidiary, Decentralized Sharing Systems, Inc., was a majority shareholder of the Company. On May 4, 2023, DSS and/or DSSI distributed 280,528,500 shares they held of SHRG to DSS, Inc.’s shareholders in connection with the Form S-1 (file no. 333-271184) initially filed with the Securities and Exchange Commission on April 7, 2023, and declared effective on April 25, 2023. As a result of the distribution, DSS and affiliates ceased being a majority shareholder of the Company.
Code of Business Conduct and Ethics
The Company’s Board of Directors has adopted a Code of Business Conduct and Ethics that applies to the Company’s directors, officers and employees. Copies of this document are available in print to any person, free of charge, upon written request to our Investor Relations Department at 5200 Tennyson Pkwy, Suite 400, Plano, Texas 75024.
Involvement in Legal Proceedings
No Executive Officer or Director of the registrant has been convicted in a criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding that is currently pending. In addition, no Executive Officer of the registrant is the subject of any other type of legal proceedings pending.
As of the date hereof, no Executive Officer or Director of the registrant is involved in any bankruptcy petition by or against any business in which they are a general partner, an executive officer or a director at this time or within two years of any involvement as a general partner, executive officer, or director of any business.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the definitive proxy statement for the 2024 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after March 31, 2024.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Except as stated below, the information required by Item 12 of this Annual Report, including information about securities granted under individual compensation arrangements with executives of the registrant, is incorporated herein by reference to the definitive proxy statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after March 31, 2024.
Equity Compensation Plans
In the fiscal year ended March 31, 2022, the Company did not issue securities to its directors, officers, employees, independent sales distributors, and consultants. In the fiscal year ended March 31, 2023, the Company issued a fully vested warrant to purchase up to 8,444,663 shares of the Company Common Stock, at the exercise price of $0.0001 per share, to the Company’s CEO John “JT” Thatch. The fair value of the warrant on the grant date was $109,780.
In the fiscal years ended March 31, 2021, and April 30, 2020, the Board authorized the issuance of fully vested stock warrants to purchase an aggregate of up to 29,200,000 shares and 32,000,000 shares, respectively, of the Company’s Common Stock to its employees, including 24,700,000 shares and 32,000,000 shares, respectively, exercisable at a price linked to the price of a share of the Company’s stock multiplied by a discount rate. As of March 31, 2022, stock warrants to purchase up to 19,700,000 shares under these authorizations remain outstanding.
In addition, in the fiscal years 2018 and 2019, the Company issued fully vested stock warrants in connection with certain stock subscription agreements. These warrants convey the right to purchase up to 2,180,000 shares of the Company’s Common Stock, at an exercise price determined by the average trading price per share of the Company’s Common Stock and expired in the fiscal year 2023.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to the definitive proxy statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after March 31, 2024.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to the definitive proxy statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after March 31, 2024.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Annual Report or are incorporated herein by reference:
3.1
Third Amended and Restated Articles of Incorporation of Sharing Services Global Corporation, which is incorporated herein by reference from Exhibit A to the Company’s Proxy Statement on Schedule 14A filed on July 14, 2022
3.2
Bylaws of Sharing Services Global Corporation, which is incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 24, 2019
3.3
Certificate of Designation of Series A Preferred Stock, which is incorporated herein by reference from Exhibit 3.1.2 to the Company’s Current Report on Form 8-K filed on May 8, 2017
3.4
Certificate of Designation of Series C Preferred Stock, which is incorporated herein by reference from Exhibit 3.1.4 to the Company’s Current Report on Form 8-K filed on May 8, 2017
3.5
Certificate of Designation of Series D Preferred Stock, dated August 31, 2023, which is incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 5, 2023
3.6
Amended and Restated Certificate of Designation of Series D Preferred Stock, which is incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2023
4.1
Convertible Promissory Note dated April 5, 2021, issued by Sharing Service Global Corporation in favor of Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on April 9, 2021
4.2
Warrant to Purchase Shares of Sharing Services Global Corporation’s Class A Common Stock, which is incorporated herein by reference from Exhibit 1.3 to the Company’s Current Report on Form 8-K filed on April 9, 2021
4.3
Warrant to Purchase Shares of Sharing Services Global Corporation’s Class A Common Stock, which is incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 29, 2021
4.4
Form of Warrant to Purchase Shares of Sharing Services Global Corporation’s Class A Common Stock, which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 27, 2022
4.5
Form of Secured Advancing Convertible Promissory Note issued, in June 2022, by Sharing Service Global Corporation in favor of Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 4.8 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
4.6
Form of Warrant to Purchase Shares of Sharing Services Global Corporation’s Class A Common Stock issued, in June 2022, by Sharing Service Global Corporation to Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 4.9 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
4.7
Convertible Promissory Note issued by Sharing Services Global Corporation to Alset, Inc., dated January 17, 2024, which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 27, 2024
4.8
Convertible Promissory Note issued by Sharing Services Global Corporation to HWH International Inc., dated March 18, 2024, which is incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 27, 2024
4.9
Common Stock Purchase Warrant issued by Sharing Services Global Corporation to HWH International Inc., dated March 18, 2024, which is incorporated herein by reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 27, 2024
4.10
Convertible Promissory Note issued by Sharing Services Global Corporation to HWH International Inc., dated May 9, 2024, which is incorporated herein by reference from Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on June 27, 2024
4.11
Convertible Promissory Note issued by Sharing Services Global Corporation to HWH International Inc., dated June 6, 2024, which is incorporated herein by reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on June 27, 2024
10.1
Securities Purchase Agreement dated as of April 5, 2021. by and among Sharing Service Global Corporation and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on April 9, 2021
10.2
Stock Purchase and Share Subscription Agreement dated as of December 23, 2021, by and among Sharing Service Global Corporation and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 29, 2021
10.3
Business Consulting Agreement dated January 24, 2022, by and between Sharing Service Global Corporation and DSS, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on January 27, 2022
10.4
Form of Distributor Agreement of The Happy Co., which is incorporated herein by reference from Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed on June 10, 2021
10.5
2021 The Happy Co. Brand Partner Compensation Plan, which is incorporated herein by reference from Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed on June 10, 2021
10.6
Form of Securities Purchase Agreement entered into, in June 2022, by and among Sharing Services Global Corporation, and the Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
10.7
Form of Security Agreement made, in June 2022, by Sharing Service Global Corporation in favor of Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
10.8
Form of Loan Agreement entered into, in June 2022, by and between LINDEN REAL ESTATE HOLDINGS, LLC and AMERICAN PACIFIC BANCORP, INC., which is incorporated herein by reference from Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
10.9
Form of DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT made, in June 2022, by LINDEN REAL ESTATE HOLDINGS, LLC in favor of Cottonwood Title Insurance Agency, Inc., for the benefit of American Pacific Bancorp, Inc., which is incorporated herein by reference from Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
10.10
Form of Demand Promissory Note issued, in June 2022, by LINDEN REAL ESTATE HOLDINGS, LLC in favor of AMERICAN PACIFIC BANCORP, INC., which is incorporated herein by reference from Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed on June 21, 2022
10.11
Letter Agreement dated February 3, 2023, by and between Sharing Service Global Corporation and DSS, Inc., which is incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 29, 2023
10.12
Letter Agreement dated February 28, 2023, by and between Sharing Service Global Corporation and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 29, 2023
10.13
Securities Exchange and Amendment Agreement dated March 24, 2023, by and between Sharing Service Global Corporation, DSS, Inc., and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on March 30, 2023
10.14
Letter Agreement dated April 17, 2023, by and between Sharing Service Global Corporation and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2023
10.15
Exchange Agreement between Sharing Services Global Corporation and Decentralized Sharing System, Inc., dated August 31, 2023, which is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 5, 2023
10.16†
Asset Purchase Agreement between Sharing Services Global Corporation and HWH World, Inc., dated November 3, 2023, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 21, 2023
10.17
Bill of Sale and Assumption Agreement between Sharing Services Global Corporation and HWH World, Inc., dated November 3, 2023, which is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 21, 2023
10.18
Exclusive Intellectual Property License Agreement between Sharing Services Global Corporation and HWH World, Inc., dated November 3, 2023, which is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 21, 2023
10.19
Assignment and Assumption Agreement between Sharing Services Global Corporation, Decentralized Sharing Systems, Inc., and Ascend Management Pte. Ltd., dated November 3, 2023, which is incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 21, 2023
10.20
Securities Purchase Agreement between Sharing Services Global Corporation and HWH International Inc., dated March 18, 2024, which is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 27, 2024
10.21
Securities Purchase Agreement between Sharing Services Global Corporation and HWH International Inc., dated May 9, 2024, which is incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 27, 2024
10.22
Securities Purchase Agreement between Sharing Services Global Corporation and HWH International Inc., dated June 6, 2024, which is incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 27, 2024
10.23
Addendum between Sharing Services Global Corporation and HWH International Inc., dated June 19, 2024, which is incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on June 27, 2024
21.1
List of Subsidiaries of Sharing Services Global Corporation *
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS101
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) *
101.SCH
Inline XBRL Taxonomy Extension Schema Document *
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document *
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101) *
*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.