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Restatement of previously issued financial statements

9 Months Ended

Sep. 30, 2024

Accounting Changes and Error Corrections [Abstract]

Restatement of previously issued financial statements

2. Restatement of previously issued financial statements

The Company has restated the financial statements for the year ended December 31, 2023 along with certain notes to such restated financial statements. The adjustments recorded were related to the correction of an error identified by management. The nature and impact of this adjustment on the Company’s previously issued financial statements is summarized as follows and the effects by impacted line items are detailed in the tables below. Impacted amounts and associated disclosures are restated within the accompanying notes to the financial statements.

On May 4, 2023, the Company distributed approximately 280 million shares of Sharing Service Global Corporation (“SHRG”), beneficially held by the Company, in the form of a dividend to the shareholders of the Company’s common stock. Upon completion of this distribution, the Company retained an ownership interest in SHRG of approximately 7%. Effective May 1, 2023, SHRG was deconsolidated from the consolidated financial statements (the “Deconsolidation”). The consolidated statement of operations does not include SHRG activity after April 30, 2023 and the assets and liabilities of SHRG are no longer included within the Company’s consolidated balance sheet. In the 10-Q for the second quarter of 2023, the Company recorded an approximate $29.9 million loss on deconsolidation. The Company also recorded an decrease in accumulated deficit of $18.7 million to reflect the reversal of balances as of deconsolidation. In preparation of the Form S-3 as well as the September 30, 2024 10-Q filing this transaction was revisited and it was determined that loss was unintentionally overstated by approximately $23.5 million driven primarily by the increases in accumulated deficit that should have been recorded as an offset to the initial income statement loss. In addition, the Company has determined that Deconsolidation also requires the recognition of discontinued operations. Management and the Audit Committee of the Company has concluded that restatement of its December 31, 2023 financial statements, filed on March 27, 2024, was required.

The following tables summarize the effect of the restatement on each financial statement line items as of the September 30, 2023:

	As Previously Reported			Adjustments			As Restated
Consolidated Statements of Operations Income (Loss) for the nine months ended September 30, 2023
Direct marketing revenue	$	6,088,000			(4,325,000	)	$	1,763,000
Total revenue	$	23,245,000			(4,325,000	)	$	18,920,000
Cost of revenue	$	19,437,000			(1,258,000	)	$	18,179,000
Selling, general and administrative (including stock based compensation)	$	21,036,000			(4,728,000	)	$	16,308,000
Total costs and expenses	$	40,473,000			(5,986,000	)	$	34,487,000
Operating loss	$	(17,228,000	)		(1,661,000	)	$	(15,567,000	)
Other income (expense)	$	139,000			(1,000	)	$	138,000
Loss on investment	$	(30,490,000	)		(28,019,000	)	$	(2,471,000	)
Impairment of assets due to deconsolidation	$	-			6,220,000		$	(6,220,000	)
Loss from continuing operations before income taxes	$	(53,030,000	)		(23,459,000	)	$	(29,571,000	)
Loss from continuing operations	$	(53,030,000	)		(23,450,000	)	$	(29,580,000	)
(Loss) from discontinued operations, net of tax	$	-			3,481,000		$	(3,481,000	)
Net loss	$	(53,039,000	)		(19,978,000	)	$	(33,061,000	)
Net loss attributable to common stockholders	$	(50,303,000	)		(19,978,000	)	$	(30,325,000	)
Loss per common share - basic earnings per share	$	(7.20	)		(3.33	)	$	(3.87	)
Loss per common share - diluted earnings per share	$	(7.20	)		(3.33	)	$	(3.87	)
Loss per common share - discontinued operations basic	$	-			(0.47	)	$	(0.47	)
Loss per common share - discontinued operations diluted	$	-			(0.47	)	$	(0.47	)
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023
Net loss	$	(53,039,000	)		(19,978,000	)	$	(33,061,000	)
Loss from discontinued operations	$	-			(3,481,000	)	$	(3,481,000	)
Loss from continuing operations	$	-			(29,580,000	)	$	(29,580,000	)
Loss (gain) on investments	$	30,490,000			(26,198,000	)	$	4,292,000
Impairment of assets	$	-			6,220,000		$	6,220,000
Net cash used by operating activities - continuing operations	$	-			(17,554,000	)	$	(17,554,000	)
Net cash used by operating activities - discontinued operations	$	-			(3,481,000	)	$	(3,481,000	)
Net increase (decrease) in cash - continuing operations	$	-			(8,912,000	)	$	(8,912,000	)
Net increase (decrease) in cash - discontinued operations	$	-			(3,481,000	)	$	(3,481,000	)
Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2023
Dividend in kind - Deconsolidation of Sharing Services Global Corporation	$	-			(1,206,000	)	$	(1,206,000	)
Deconsolidation of Sharing Services Global Corp	$	18,773,000			(18,773,000	)	$	-
Net loss	$	(50,303,000	)		(19,978,000	)	$	(30,325,000	)
Accumulated deficit	$	(225,873,000	)		(1,000	)	$	(225,874,000	)
Total stockholders’ equity	$	127,747,000			(1,000	)	$	127,746,000