SHARING SERVICES GLOBAL CORPORATION The following section discusses management's views of the consolidated financial condition and the results of operations and cash flows ofSharing Services Global Corporation and subsidiaries. This section should be read in conjunction with: (a) our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 , and (b) our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. This section may contain forward-looking statements. See "Cautionary Notice Regarding Forward-Looking Statements" above for a discussion of forward-looking statements.
Summary Results of Operations:
Three Months Ended Nine Months Ended
December 31, Increase Increase
December 31, 2022 2021 (Decrease) % Change December 31, 2022 December 30, 2021 (Decrease) % Change
Net sales $ 3,245,903 $ 7,110,532 (3,864,629 ) -54.4 % $ 12,737,673 $ 28,195,359 $ (15,457,686 ) -54.8 %
Gross profit 1,602,792 4,781,949 (3,179,157 ) -66.5 % 7,677,757 19,588,526 (11,910,769 ) -60.8 %
Operating
expenses (5,606,866 ) (7,831,883 ) 2,225,017 -28.4 % (19,511,086 ) (28,273,529 ) 8,762,443 -31.0 %
Operating
loss (4,004,074 ) (3,049,934 ) (954,140 ) 31.3 % (11,833,329 ) (8,685,003 ) (3,148,326 ) 36.3 %
Non-Operating
(expense),
net (6,916,748 ) (2,065,155 ) (4,851,593 ) 234.9 % (19,720,337 ) (3,199,103 ) (16,521,234 ) 516.4 %
Loss before
income taxes (10,920,822 ) (5,115,089 ) (5,805,733 ) 113.5 % (31,553,666 ) (11,884,106 ) (19,669,560 ) 165.5 %
Income tax
(benefit)
expense 104,129 1,825,073 (1,720,944 ) -94.3 % (789,803 ) 1,318,827 (2,108,630 ) -159.9 %
Net loss $ (11,024,951 ) $ (6,940,162 ) $ (4,084,789 ) 58.9 % $ (30,763,863 ) $ (13,202,933 ) $ (17,560,930 ) 133.0 %
Highlights for the Three Months Ended
? For the three months ended
decreased
months ended
? For the three months ended
decreased
months ended
the three months ended
months ended
? For the three months ended
expenses decreased
three months ended
? For the three months ended
was
31, 2021.
? For the three months ended
non-operating expense was
of
? For the three months ended
31, 2021, our diluted losses per share were
? For the nine months ended
operating activities was
months ended
? In
subsidiary of DSS, Inc. ("DSS"), and, together with DSS, a major shareholder
of the Company entered into an agreement pursuant to which the parties to the
agreement replaced the
loan.
? In
Inc. ("APB"), a subsidiary of DSS, entered into a Loan Agreement pursuant to
which APB loaned the Company approximately
? In
("the Note") with APB, pursuant to which the Company has access to advances
with a maximum principal balance, not to exceed the principal sum of
million. In
end any further commitment by APB to fund or to readvance under the terms of
the Note.
25
Overview
Summary Description of Business
Sharing Services Global Corporation and subsidiaries ("Sharing Services", "we," or the "Company") aim to build shareholder value by developing or acquiring businesses and technologies that increase the Company's product and services portfolio, business competencies, and geographic reach. Sharing Services' combined platform leverages the capabilities and expertise of various companies that market and sell products direct to the consumer through independent contractors. The Company's new shared service platform will service this 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 theU.S. Currently, the Company, through its subsidiaries, markets and distributes its health and wellness and other products primarily in theU.S. andCanada using a direct selling business model. The Company'sU.S. subsidiaries market our products and services through an independent sales force, using their proprietary websites, including: www.elevacity.com and www.thehappyco.com. InSeptember 2021 , the Company, through a subsidiary, commenced operations in theRepublic of Korea (South Korea ).
The Company was incorporated in the
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.
Convertible Notes and Borrowing Under Short-term Financing Arrangements
Historically, the Company has funded a substantial portion of its liquidity and cash needs through the intermittent issuance of convertible notes and borrowings under short-term financing arrangements, and through the intermittent issuance of equity securities. See "Liquidity and Capital Resources" below for additional information about the Company's convertible notes and borrowings under short-term financing arrangements. Industry and Business Trends
The information in "Industry and Business Trends" included in ITEM 1 -
"Business" in our Annual Report on Form 10-K for the fiscal year ended
Strategic Profitable Growth Initiatives
The Company intends to continue 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 inAsia ), and (c) expanding its membership-based consumer travel products line in theU.S. and worldwide. This growth strategy may also include the use of strategic acquisitions of businesses that augment the Company's product and services portfolio, business competencies and geographic reach.
Continuing Uncertainty Regarding the Recent COVID-19 Pandemic
In 2020, in response to the COVID-19 pandemic, governments in the countries where our products are sold mandated or recommended various containment measures, including selective business closures, social distancing, quarantine, stay-at-home or shelter-in-place directives, and limitations on, or cancellations of, larger meetings and other public events. We believe that the actual impact of the health crisis, and/or actions taken to contain the spread of the virus, have had and continue to have an adverse impact on the economies in the geographies we serve. Consumer demand for discretionary products such as ours is sensitive to significant downturns in the economy, increases in unemployment or decreases in perceived employment security, and decreases in consumer sentiment in general. In efforts to protect our customers, distributors, employees, and other business partners, in 2020, we instituted several preventive measures, including temporarily transitioning a significant number of our corporate employees to working remotely, increasing efforts to clean and sanitize our business facilities, increasing employee safety communication, and transitioning our sales conventions to a virtual convention platform. While these temporary measures are increasingly being eased or fully reversed at the time of this Quarterly Report, we believe these necessary, temporary measurements are likely to have had an adverse impact on our business. 26 As a result of the foregoing, we cannot predict with certainty the scope, duration, and ultimate impact of this public health emergency in the countries where we operate, including its impact on the economy, but we believe these conditions are likely to have had and continue to have a material adverse impact on our business, financial condition, cash flows, and results of operations (including revenues and profitability), and those of our key suppliers. The COVID-19 pandemic also may have the effect of exacerbating some of the other risk factors described elsewhere in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 , including the success of our growth initiatives, our ability to anticipate and effectively respond to changes in consumer preferences and buying trends in a timely manner, our dependence on one supplier for a substantial portion of the products we sell, potential fluctuations in our quarterly financial performance, our ability to generate sustained, positive cash flows from operations with which to fund our working capital needs, the potential impact on our financial performance from economic slowdowns, our ability to effectively and cost-efficiently respond to any epidemics and other health emergencies, and the potential impact on our business of any disruption in our information technology systems. Results of Operations
Three months ended
Net Sales For the three months endedDecember 31, 2022 , our consolidated net sales decreased by$3.9 million , or 54.4%, to$3.2 million , compared to the three months endedDecember 31, 2021 . The decrease in net sales mainly reflects: (a) continuation of the decline in consumer orders that we experienced since the fourth quarter of 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 and in energy costs in theU.S. and from lingering effects of the COVID global health emergency and actions taken to help mitigate the spread of the virus in the geographies in which we operate. In efforts to restore strong sales growth, in the past several months, we have developed and launched our new business brand, "The Happy CoTM," at our Elevacity division, have accelerated our previously announced initiatives to expand our operations into additional international geographies, and have further intensified our efforts to recruit, develop and reward our distributors and our efforts to reach new consumers, including through the continued introduction of new products. We believe there continues to be significant uncertainty about the potentially adverse impact of the current health crisis on the economies and employment markets of several countries, including theU.S. andCanada . Please see Overview - Significant Uncertainty Regarding the Potential Impact ofOngoing COVID Health Crisis above.
The
During the three months endedDecember 31, 2022 , and 2021, the Company derived substantially all its consolidated net sales from the sale of its Elevate health and wellness product line. During the nine months endedDecember 31, 2022 , approximately 63% of the Company's net sales were to customers (including 39% to recurring customers, refer herein as "SmartShip" sales, and approximately 24% to new customers) and approximately 37% of the Company's net sales were to independent distributors. Gross Profit
For the three months endedDecember 31, 2022 , our consolidated gross profit decreased by$3.2 million , or 66.5%, to$1.6 million , compared to the three months endedDecember 31, 2021 , and our consolidated gross margins were 49.4% and 67.3%, respectively. For the three months endedDecember 31, 2022 , gross margin was affected by an increase in shipping expenses and promotional pricing, as a percentage of sales.
Selling and Marketing Expenses
For the three months endedDecember 31, 2022 , our consolidated selling and marketing expenses decreased by$3.3 million , to$0.9 million , or 28.6% of net sales compared to$4.2 million , or 59.3% of net sales for the three months endedDecember 31, 2021 . The decrease in consolidated selling and marketing expenses is due primarily to lower sales commissions of$2.6 million (which reflects decrease in our consolidated net sales discussed above). 27
General and Administrative Expenses
For the three months endedDecember 31, 2022 , our consolidated general and administrative expenses (which include corporate employee compensation and benefits, stock-based compensation, professional fees, rent and other occupancy costs, certain consulting fees, telephone and information technology expenses, insurance premiums, and other administrative expenses) increased by approximately$1.1 to$4.7 million , or 144.1% of consolidated net sales compared to$3.6 million , or 50.8% of consolidated net sales, for the three months endedDecember 31 , 2021. The increase in consolidated general and administrative expenses was primarily driven by higher consulting expenses offset by a decrease in employee compensation and benefits and legal expenses. Interest Expense, net For the three months endedDecember 31, 2022 , our consolidated interest expense, net was 3.3 million, including amortization of debt discount and deferred financing costs, interest income, and other expenses associated with borrowings from "DSSI" and related parties. For the three months endedDecember 31, 2021 , our consolidated interest expense was$3.1 including amortization of debt discount and deferred financing costs, interest income, and other expenses associated with borrowings from "DSSI"
and related parties.
Net Other Non-Operating Expenses
For the three months endedDecember 31, 2022 , we had net consolidated non-operating expenses of approximately$6.9 million . For the three months endedDecember 31, 2021 , our consolidated non-operating income was approximately
$2.1 million .
Unrealized Gain (Loss) on Investments in
For the three months ended
For the three months ended
Gain on Employee Warrants Liability
For the three months endedDecember 31, 2022 , we recognized a compensatory gain of$39,375 , compared to$154,488 for the three months endedDecember 31, 2021 , in connection with employee warrants with a variable exercise price after service was completed. Income Tax Benefit
Income tax benefit includes current and deferred income taxes for both our domestic and foreign operations. Income from our international operations is subject to taxation in the countries in which we operate.
During the three months endedDecember 31, 2022 , the Company had a state and local tax benefit of$22,849 and a provision for deferred federal income taxes of$348,236 and a benefit for current federal income taxes of$429,516 . Net Loss and Loss per Share
As a result of the foregoing, for the three months endedDecember 31, 2022 , our consolidated net loss was$11.0 million , compared to$6.9 million for the three months endedDecember 31, 2021 . For the three months endedDecember 31, 2022 , andDecember 31, 2021 , our diluted loss per share was$0.04 and$0.04 , respectively. 28
Nine months ended
Net Sales For the nine months endedDecember 31, 2022 , our consolidated net sales decreased by$15.5 million , or 54.8%, to$12.7 million , compared to the nine months endedDecember 31, 2021 . The decrease in net sales mainly reflects: (a) continuation of the decline in consumer orders that we experienced since the fourth quarter of 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 and in energy costs in theU.S. and from lingering effects of the COVID global health emergency and actions taken to help mitigate the spread of the virus in the geographies in which we operate. In efforts to restore strong sales growth, in the past several months, we have developed and launched our new business brand, "The Happy CoTM," at our Elevacity division, have accelerated our previously announced initiatives to expand our operations into additional international geographies, and have further intensified our efforts to recruit, develop and reward our distributors and our efforts to reach new consumers, including through the continued introduction of new products. We believe there continues to be significant uncertainty about the potentially adverse impact of the current health crisis on the economies and employment markets of several countries, including theU.S. andCanada . Please see Overview - Significant Uncertainty Regarding the Potential Impact ofOngoing COVID Health Crisis above.
The
During the nine months endedDecember 31, 2022 , and 2021, the Company derived substantially all its consolidated net sales from the sale of its Elevate health and wellness product line. During the nine months endedDecember 31, 2022 , approximately 63% of the Company's net sales were to customers (including 39% to recurring customers, refer herein as "SmartShip" sales, and approximately 24% to new customers) and approximately 37% of the Company's net sales were to independent distributors. Gross Profit
For the nine months ended
Selling and Marketing Expenses
For the nine months endedDecember 31, 2022 , our consolidated selling and marketing expenses decreased by$8.7 million , to$5.7 million , or 44.9% of net sales compared to$14.4 million , or 51.0% of net sales for the nine months endedDecember 31, 2021 . The decrease in consolidated selling and marketing expenses is due primarily to lower sales commissions of$8.6 million (which reflects decrease in our consolidated net sales discussed above) partially offset by higher sales convention expenses of approximately$454,465 (as we resumed holding some in-person conventions).
General and Administrative Expenses
For the nine months endedDecember 31, 2022 , our consolidated general and administrative expenses (which include corporate employee compensation and benefits, stock-based compensation, professional fees, rent and other occupancy costs, certain consulting fees, telephone and information technology expenses, insurance premiums, and other administrative expenses) decreased by approximately$94,370 to$13.8 million , or 108.2% of consolidated net sales compared to$13.9 million , or 49.2% of consolidated net sales, for the nine months endedDecember 31 , 2021. The decrease in consolidated general and administrative expenses was primarily driven by lower professional fees, employee compensation and benefits and legal expenses. Interest Expense, net For the nine months endedDecember 31, 2022 , our consolidated interest expense was$9.8 million , including amortization of debt discount and deferred financing costs, interest income, and other expenses associated with borrowings from
"DSSI" and related parties. 29
For the nine months endedDecember 31, 2021 , consolidated interest expense was$9.2 million , including amortization of debt discount and deferred financing cost, interest income, and other expenses associated with borrowings from "DSSI" and related parties.
Other Non-operating Income/Expenses
For the nine months ended
Gain on employee warrants liability
For the nine months endedDecember 31, 2022 , we recognized a compensatory gain of$207,210 , compared to$1.9 million for the nine months endedDecember 31, 2021 , in connection with employee warrants with a variable exercise price after service was completed.
Gain on Extinguishment of Debt
For the nine-month endedDecember 31, 2022 , no amounts were incurred related to extinguishment of debt. In June of 2021, the Company's borrowings under the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act") were forgiven pursuant to the CARES Act. The Company recognized a gain on extinguishment of debt of$1.0 million , before income tax, in connection therewith. Income Tax Benefit
During the nine months ended
During the nine months endedDecember 31, 2021 , the Company recognized a consolidated provision for current federal income taxes of$5.2 million , net of a valuation allowance recognized of$4.5 million , and a consolidated provision for state and local taxes of$109,241 and a consolidated deferred income tax benefit of$4.0 million .
Net Loss and Loss per Share
As a result of the foregoing, for the nine months endedDecember 31, 2022 , our consolidated net loss was$30.8 million , compared to$13.2 million for the nine months endedDecember 31, 2021 . For the nine months endedDecember 31, 2022 , andDecember 31, 2021 , our diluted loss per share was$0.12 and$0.07 , 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$23.2 million as ofDecember 31, 2022 , and a working capital of approximately$7.4 million as ofMarch 31, 2022 . As ofDecember 31, 2022 , our cash and cash equivalents were
$3.1 million . We have implemented measures to restructure our business operations and reduce our monthly cash burns and operating loss. Such measures include, and are not limited to, headcount reduction and elimination of certain overhead and consulting fees. Based upon the current level of operations and anticipated investments necessary to sustain/grow our business, we believe that existing cash balances and anticipated funds from operations will likely be sufficient to meet our working capital requirements over the next 12 months. Historical Cash Flows Historically, our primary sources of cash have been capital transactions involving the issuance of equity securities and secured and unsecured debt (See "Recent Issuances ofEquity Securities " and "Short-term Borrowings and Convertible Notes" below) and cash flows from operating activities; and our primary uses of cash have been for operating activities, capital expenditures, acquisitions, net cash advances to related parties, and debt repayments in the ordinary course of our business. 30 The following table summarizes our cash flow activities for the nine months endedDecember 31, 2022 , compared to the nine months endedDecember 31, 2021 : Year Ended December 31, 2022 2021 Change Net cash used in operating activities$ (8,845,938 ) $ (13,178,848 ) $ 4,332,910 Net cash used in investing activities (11,530,898 ) (12,213,306 ) 682,408 Net cash provided by financing activities 6,501,659 33,073,607 (26,571,948 ) Impact of currency rate changes in cash (35,864 ) (45,331 )
9,467
Net (decrease) increase in cash and cash equivalents$ (13,911,041 ) $ 7,636,122 $ (21,547,163 )
For the nine months endedDecember 31, 2022 , net cash used in operating activities was$8.8 million , compared to net cash used in operating activities of$13.7 million for the nine months endedDecember 31, 2021 . The$4.3 million change was due primarily to decline in gross profit, excluding non-cash items, such as depreciation and amortization, stock-based compensation gain, provision for obsolete inventory losses, amortization of debt discount, losses on impairment of investments in unconsolidated entities, a note receivable, and the gain on extinguishment of debt. In addition, the change in net cash used in operating activities reflects a change in operating assets and liabilities of approximately$6.3 million driven by the normal recurring operations of the business.
For the nine months endedDecember 31, 2022 , net cash used in investing activities was$11.5 million , compared to$12.2 million for the nine months endedDecember 31, 2021 . Included in the$11.5 million of net cash outflow was cash paid for marketable securities of approximately$9.5 million during the nine months endedDecember 31, 2022 .
Net Cash Provided by Financing Activities
For the nine months ended
Impact of currency rate changes in cash
For the nine months endedDecember 31, 2022 , the impact of currency rate changes in cash was negative$35,864 compared to negative$45,331 for the nine months endedDecember 31, 2021 . Legal Proceedings
The information contained in Note 16, COMMITMENTS AND CONTINGENCIES - Legal Proceedings, of the Notes to the Unaudited Condensed Consolidated Financial Statements located elsewhere in this Quarterly Report is incorporated herein by reference.
Potential Future Acquisitions The Company, directly and through its subsidiaries, may make strategic acquisitions and purchases of equity interests in businesses that complement its business competencies and growth strategy. Such acquisitions and purchases of equity interests are expected to be funded with cash and cash equivalents, cash provided by operations, if any, and issuance of equity securities and debt.
Short-term Borrowings and Convertible Notes
Borrowing Under Financing Arrangements (Note Payable)
InMay 2020 , the Company was granted a loan (the "PPP Loan") by a commercial bank in the amount of$1.0 million , pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act"). The Company's borrowings under the PPP Loan were eligible for loan forgiveness under the provisions of the CARES Act. In June of 2021, the Company was formally notified by the lender that the Company's obligations under the loan had been forgiven effectiveMay 25, 2021 . The loan forgiveness applies to all principal and interest accrued through the loan forgiveness effective date. 31
Convertible Notes from Related Parties
OnApril 5, 2021 , the Company andDecentralized Sharing Systems, Inc. ("DSSI") which, together with DSS, Inc., is a majority shareholder of the Company, 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 . Under the terms of the loan, 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 bears interest at the annual rate of 8% and matures onApril 5, 2024 , subject to certain acceleration provisions upon the occurrence of an Event of Default, as defined in the Note. At any time during the term of the Note, all or part of the Note, including principal, less unamortized prepaid interest, if any, plus any accrued interest and other fees was convertible into shares of the Company's Class A Common Stock at the rate of$0.20 per share, at the option of the holder. OnJune 15, 2022 , the Company and DSSI 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 bears interest at the annual rate of 8% and is due and payable on demand or, if no demand, onMay 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 paid to DSSI a loan origination fee of$270,000 , and DSSI surrendered to the Company all DSSI's rights pursuant to the Convertible Promissory Note in the principal amount of$30.0 million issued by the Company inApril 2021 and the 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, as discussed in the preceding paragraph.
OnJune 15, 2022 ,Linden Real Estate Holdings, LLC , a wholly owned subsidiary of the Company,American Pacific Bancorp, Inc. ("APB"), a subsidiary of DSS, and the Company entered a Loan Agreement pursuant to which APB loaned the Company approximately$5.7 million . The loan bears interest at the annual rate of 8%, matures onDecember 1, 2024 , and is secured by a first mortgage interest on the Company'sLindon, Utah office building. In connection with this loan, the Company received net proceeds of$5,522,829 from APB.Heng Fai Ambrose Chan andFrank D. Heuszel , each a Director of the Company, also serve on the Board of Directors of APB.
OnAugust 11, 2022 , the Company executed a revolving credit promissory note with APB ("the APB Revolving Note") pursuant to which the Company has access to advances with a maximum principal balance not to exceed the principal sum of$10 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. Interest payments on the loan are due and payable on the last day of each consecutive third calendar month until the maturity date ofAugust 12, 2024 . OnDecember 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. As ofDecember 31, 2022 , the Company had$6.0 million outstanding under the APB Revolving Note.HWH International, Inc. InOctober 2017 , the Company issued a Convertible Promissory Note in the principal amount of$50,000 (the "Note") toHWH International, Inc. ("HWH" or the "Holder"). HWH is affiliated withHeng Fai Ambrose Chan , who inApril 2020 became a Director of the Company. The Note is convertible into 333,333 shares of the Company's Common Stock. Concurrent with issuance of the Note, the Company issued to HWH a detachable stock warrant to purchase up to an additional 333,333 shares of the Company's Common Stock, at an exercise price of$0.15 per share. Under the terms of the Note and the detachable stock warrant, the Holder is entitled to certain financing rights. If the Company enters into more favorable transactions with a third-party investor, it must notify the Holder and may have to amend and restate the Note and the detachable stock warrant to be identical. OnAugust 9, 2022 , HWH and the Company executed an agreement to settle the Note and cancel the related stock warrant for$78,636 , which amount represents the principal plus accrued interest. The Company made the payment to HWH onAugust 9, 2022 . Capital Requirements During the nine months endedDecember 31, 2022 , capital expenditures for property and equipment (consisting of furniture and fixtures, computer equipment and software, other office equipment and leasehold improvements) in the ordinary course of our business were$1.4 million which primarily relates to the purchase of the multi-user license and code for development of a new sales commissions' platform. 32 Contractual Obligations There were no material changes to our contractual cash obligations during the nine months endedDecember 31, 2022 , except for (a) theJune 2022 refinancing of our loan from DSSI (b) theJune 2022 financing of ourLindon, Utah office building, and (c) the August 2022 revolving line of credit with APB, as all described above.
Off-Balance Sheet Financing Arrangements
As of
Inflation Prior to the COVID-19 pandemic, inflation was generally been low in the geographies where we operate. However, at the time of this Quarterly Report, the increase in price of consumer goods inthe United States has reached a 40-year high, primarily as a result of higher energy costs, higher housing costs, and the impact global supply chain disruptions. Please see "Our business and financial performance could be adversely affected by inflation" contained in ITEM 1A, - "Risk Factors" in our Annual Report on Form 10-K for the fiscal
year endedMarch 31, 2022 .
Critical Accounting Estimates
While the Company is not aware of material changes to its critical accounting estimates or assumptions sinceMarch 31, 2022 , it is reasonably possible that estimates made in the Company's unaudited condensed consolidated financial statements have been, or will be, materially impacted as a result of the ultimate resolution of the uncertainties associated with the COVID health crisis. This may include estimates regarding allowance for slow-moving or obsolete inventory, impairment losses related to long-lived assets, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, and the valuation of loss contingencies. Please see Overview - Continuing Uncertainty Regarding the Recent COVID Pandemic above.
Accounting Changes and Recent Accounting Pronouncements
For discussion of accounting changes and recent accounting pronouncements, see Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report.
© Edgar Online, source
