UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period endedended:October 31, 20182019

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number333-205310000-55997

 

SHARING SERVICES INC.GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada 30-0869786

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1700 Coit Road, Suite 100, Plano, Texas 75075
(Address of principal executive offices) (Zip Code)

 

(469) 304-9400

(Registrant’s telephone number, including area code)

 

N/ANone

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class
Common Stock, $0.0001 par value per share

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer[  ] Accelerated filer[  ]
Non-accelerated filer[  ] Smaller reporting company[X][X]
(Do not check if a smaller reporting company)  Emerging growth company[X][X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ]

No [X]

 

As of December 10, 2018,2019, there were 66,457,444123,272,386 shares of the issuer’s class A common stock and 10,000,000 shares of the issuer’s class B common stock outstanding.

 

 

 

 
 

 

TABLE ofOF CONTENTS

 

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements45
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations2221
Item 3. Quantitative and Qualitative Disclosures About Market Risk3027
Item 4. Controls and Procedures3027
  
PART II—OTHER INFORMATION31
Item 1. Legal Proceedings3128
Item 1A. Risk Factors3129
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds3130
Item 3. Defaults Upon Senior Securities3130
Item 4. Mine Safety Disclosures3130
Item 5. Other Information3130
Item 6. Exhibits3231

In this Quarterly Report, references to “the Company,” “Sharing Services,” “our company,” “we,” “our,” “ours” and “us” refer to Sharing Services Inc.Global Corporation and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

 

cautionary notice regarding forward-looking statements

 

Statements in this Quarterly Report and in any documents incorporated by reference herein which are not purely historical facts, or which depend upon future events may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended which we refer to as the Exchange Act. Words(the “Exchange Act”). Forward-looking statements generally contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “will likely,” “would” and/or similar expressions may also identify such forward-looking statements.expressions.

 

Readers are cautionedshould not to place undue reliance onupon the Company’s forward-looking statements, since such statements speak only as of the date they were made. AnySuch forward-looking statements may refer to events that ultimately do not occur, or may occur to a different extent, or occur at a different time than such forward-looking statements describe. Except to the extent required by federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of new information, future events, or otherwise. The Company acknowledges that all forward-looking statements involve risks and uncertainties that could cause actual events and/or results to differ materially from the events and/or results described in the forward-looking statements, including,statements. Such risks and uncertainties include, but are not limited to, risks and uncertainties related to:concerning:

 

●Our dependence upon a direct selling system to distribute our products, and the highly competitive and dynamic nature of the direct selling industry;
●The potential adverse effect of the loss of a high-level distributor or a significant number of distributors for causes out of our control;
●The potential adverse effect upon our sales resulting from recent changes to our sales commission program and potential changes to our sales commission program in the future;
 ●The success of our growth initiatives, including our efforts to attract consumers;and retain new customers and our efforts to generate recurring customer orders, which we call “SmartShip” orders;
   
 ●AnticipatingThe success of our initiatives to build brand awareness;
●Our ability to anticipate and effectively respondingrespond to changes in consumer preferences and buying trends in a timely manner;trends;
   
 ●The timing and customer acceptance of new products we introduce;
   
 ●Our ability to efficiently manageattract and control our operating costs;retain talented employees and management;
   
 ●Potential fluctuation inOur ability to effectively manage and control our quarterly financial performance;operating expenses;
   
 ●If we incur losses and/or are unableOur quarterly financial performance and potential fluctuations therein;
●Our ability to generate sufficientsustained, positive cash flows from operations with which to fund our working capital needs, including servicing our debt;
   
 ●Our dependence on and ability to obtain additional financing with which to implement our business strategies;
●Changes in interest rates increasing the cost of servicing our debt and obtaining additional debt;
   
 ●Our ability to attract and retain reliable key personalities to successfully promote our products;products, image and brands, and the potential for negative publicity to affect a key personality engaged in promoting our products, image and brands;
   
 ●The inability ofOur ability to maintain a key personality to successfully perform his/her role to promote our products;
●The existence of negative publicity surrounding a key personality engagedpositive image and brand acceptance in promoting our products;the often changing and unpredictable social media environment;
   
 ●Our dependence on three suppliersone supplier for substantially alla substantial amount of the products we sell and the possibility ofpotential for material interruptionsdisruptions in theour supply of products by those supplierschain or potential increases in the prices of the products we purchase from those suppliers;
●The highly competitive and dynamic nature of the direct selling industry;beyond what we can pass along to our customers;
   
 ●Our complianceability to comply with current laws and regulations or our becoming subject to new or more stringent laws and regulations in the future;future, including applicable laws and regulations in jurisdictions outside the United States;
   
 ●ProductsOur ability to register our trademarks and successfully protect our intellectual property rights;
●Our potential unintended infringement on the intellectual property rights of others;
●The potential impact if products sold by us beingwere found to be defective in labeling or content;
   
 ●Recent product reformulations and/or potential product reformulations in the future could adversely affect demand for our products and our sales in the future;
●Potential product liability claims in the future could harm our business;
●Our success in identifyingability to successfully identify acquisition candidates completingor to successfully finance, complete and integrate desirable acquisitionsacquisitions;
●Our ability to expand into foreign markets and integrating acquired businesses;to successfully address any resulting exposure to foreign exchange rate fluctuations and other risks inherent to foreign operations;
●Our high reliance on the use of information technology and our ability to effectively and cost-efficiently respond to any disruption in our information technology systems and/or any acts of cyberterrorism;
●Our ability to effectively and cost-efficiently respond to any natural disasters and/or acts of violence or terrorism that may affect our business;
●Our ability to comply with the financial reporting requirements contained in U.S. securities laws and regulations and, as such, maintain investor confidence in our financial reporting;
●If securities or industry analysts do not publish research or reports about our business, if our operating results do not meet their expectations, or if they adversely change their recommendations regarding our common stock, our stock price and trading volume could remain stagnant or decline;
●If we do not maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our securities;
●Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud;
●Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gain;
   
 ●The successpotential for future sales and issuances of our initiativescommon stock and/or rights to expand into new geographies,purchase our common stock, including international areas;
●The challenges of conducting business outside the United States, including foreign currency risks associated with operatingpursuant to our equity incentive plans, to result in international areas;
●The successa material dilution of our efforts to registerstockholders’ percentage ownership and, in turn, a trading price decline for our trademarks and protecting our intellectual property rights;
●The risk that our products may infringe on the intellectual property rights of others;stock; and
   
 ●Our success in developing our information technology systemsability to successfully absorb the increased financial, operational and our financial controls.compliance costs of operating as a public company.

 

4

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements. We assume no obligation to publicly update or revise any forward-looking statements.

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

The following condensed consolidated balance sheets as of October 31, 20182019 and April 30, 2018,2019, the condensed consolidated statements of operations for the three months ended October 31, 2018 and 2017 and for the six months ended October 31, 2019 and 2018, and the period from May 5, 2017 (inception) to October 31, 2017, the condensed consolidated statements of cash flows for the six months ended October 31, 2018 and the period from May 5, 2017 (inception) to October 31, 2017 and the condensed consolidated statementstatements of stockholders’ equity (deficit) for the six months ended October 31, 2019 and 2018 are those of Sharing Services Inc.Global Corporation and subsidiaries.

 

Index to Unaudited Condensed Consolidated Financial Statements

 

 Page
  
Condensed consolidated balance sheets as of October 31, 20182019 and April 30, 2018201956
  
Condensed consolidated statements of operations for the three months ended October 31, 2018 and 2017 and for the six months ended October 31, 20182019 and the period from May 5, 2017 (inception) to October 31, 2017201867
  
Condensed consolidated statements of cash flows for the six months ended October 31, 20182019 and the period from May 5, 2017 (inception) to October 31, 2017201878
  
Condensed consolidated statementstatements of stockholders’ equity (deficit) for the six months ended October 31, 2019 and 201889
  
Condensed notesNotes to the condensed consolidated financial statements910

 

45
 

 

SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

October 31, 2018

  April 30, 2018  October 31, 2019 April 30, 2019 
 (Unaudited)     (Unaudited)   
ASSETS             
Current Assets             
Cash and cash equivalents $1,099,249  $768,268  $12,789,974  $3,912,135 
Accounts receivable  2,901,452   1,556,472 
Notes receivable  275,000   275,000 
Trade accounts receivable, net 4,387,652 4,406,704 
Accounts receivable, related party 3,456,751 3,446,114 
Notes receivable, net 106,404 425,197 
Inventory  1,077,650   236,335  4,413,243 2,882,869 
Other current assets  1,519,084   145,636   347,129  373,310 
Total Current Assets  6,872,435   2,981,711  25,501,153 15,446,329 
             
Security deposits  42,670   21,055  35,070 42,670 
Property and equipment, net  241,412   118,465  335,511 307,524 
Right-of-use assets, net 1,087,192 - 
Investments in unconsolidated entities  4,527,188   2,757,188   20,000  207,500 
TOTAL ASSETS $11,683,705  $5,878,419  $26,978,926 $16,004,023 
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)     
Current Liabilities             
Accounts payable $493,801  $525,075  $1,633,937 $1,107,786 
Notes payable 115,385 2,123,208 
Accrued sales commissions payable, including, $1,290,599 at October 31, 2019 and $1,365,705 at April 30, 2019, payable with stock warrants 10,649,233 7,402,659 
Deferred sales revenues 4,095,987 3,209,288 
Settlement liability 2,903,956 - 
Accrued and other current liabilities  6,661,358   3,619,608  4,282,345 2,608,773 
Due to related parties  57,849   4,799 
Current portion of convertible notes payable, net of unamortized debt discount of $263,425 and $772,398  606,575   247,602 
Derivative liabilities  -   30,488,655 
Income taxes payable 275,000 - 
Current portion of convertible notes payable  100,000  855,000 
Total Current Liabilities  7,819,583   34,885,739  24,055,843 17,306,714 
        
Convertible notes payable, net of unamortized debt discount of $39,389 and $44,427  10,611   5,573 
Lease liability, long-term 655,412 - 
Convertible notes payable, net of unamortized debt discount of $29,395 at October 31, 2019 and $34,433 at April 30, 2019  20,605  15,567 
TOTAL LIABILITIES  7,830,194   34,891,312   24,731,860  17,322,281 
Commitments and contingencies             
Stockholders’ Equity (Deficit)             
Preferred stock, $0.0001 par value, 200,000,000 shares authorized:             
Series A convertible preferred stock, $0.0001 par value, 100,000,000 shares designated; 93,694,540 and 86,694,540 shares issued and outstanding as of October 31, 2018 and April 30, 2018, respectively  9,369   8,669 
Series A convertible preferred stock, $0.0001 par value, 100,000,000 shares designated; 32,478,750 and 42,878,750 shares issued and outstanding at October 31, 2019 and April 30, 2019, respectively 3,248 4,288 
Series B convertible preferred stock, $0.0001 par value, 10,000,000 shares designated; 10,000,000 shares issued and outstanding  1,000   1,000  1,000 1,000 
Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares designated; 4,120,000 and 3,950,000 shares issued and outstanding as of October 31, 2018 and April 30, 2018, respectively  412   395 
Common Stock, $0.0001 par value, 500,000,000 Class A shares authorized, 65,151,654 shares and 56,170,000 shares issued and outstanding as of October 31, 2018 and April 30, 2018, respectively  6,515   5,617 
Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares designated; 3,470,000 and 3,520,000 shares issued and outstanding at October 31, 2019 and April 30, 2019, respectively 347 352 
Common Stock, $0.0001 par value, 500,000,000 Class A shares authorized, 123,272,386 shares and 104,077,061 shares issued and outstanding at October 31, 2019 and April 30, 2019, respectively 12,328 10,408 
Common Stock, $0.0001 par value, 10,000,000 Class B shares authorized, 10,000,000 shares issued and outstanding  1,000   1,000  1,000 1,000 
Additional paid in capital  28,398,883   25,423,589  37,529,412 31,870,020 
Shares to be issued  26,000   196,500  11,785 21,000 
Stock subscriptions receivable  (114,405)  (114,405) (114,405) (114,405)
Accumulated deficit  (24,475,263)  (54,535,258)  (35,197,649)  (33,111,921)
Total Stockholders’ Equity (Deficit)  3,853,511   (29,012,893)  2,247,066  (1,318,258)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $11,683,705  $5,878,419  $26,978,926 $16,004,023 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHARING SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

  Three Months Ended October 31,  Six Months Ended October 31, 
  2018  2017  2018  2017(1) 
Net sales $17,973,379  $-  $30,904,105  $- 
Cost of goods sold  6,800,413   -   11,764,423   - 
Gross profit  11,172,966   -   19,139,682   - 
Operating expenses                
Selling and marketing expenses  8,169,895   405,790   14,214,252   694,207 
General and administrative expenses  2,136,269   1,133,594   3,721,456   1,437,390 
Total operating expenses  10,306,164   1,539,384   17,935,708   2,131,597 
Operating earnings (loss)  866,802   (1,539,384)  1,203,974   (2,131,597)
Other income (expense)                
Interest expense  (626,028)  (96,586)  (1,028,615)  (123,195)
Change in fair value of derivative liabilities  29,910,472   (1,100,587)  29,884,636   (1,122,591)
Total other income (expense), net  29,284,444   (1,197,173)  28,856,021   (1,245,786)
Earnings (loss) before income taxes  30,151,246   (2,736,557)  30,059,995   (3,377,383)
Income tax provision (benefit)  -   -   -   - 
Net earnings (loss) $30,151,246  $(2,736,557) $30,059,995  $(3,377,383)
Earnings per share:                
Basic $0.45  $(0.05) $0.45  $(0.07)
Diluted $0.08  $(0.05) $0.10  $(0.07)
Weighted average shares:                
Basic  67,146,971   58,212,889   66,854,138   48,324,000 
Diluted  392,505,479   58,212,889   291,913,008   48,324,000 

(1) Represents results of operations for the period from May 5, 2017 (inception) to October 31, 2017.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

SHARING SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 Six Months Ended October 31, 2018  Period from May 5, 2017 (Inception) to October 31, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net earnings (loss) $30,059,995  $(3,377,383)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  31,910   800 
Stock-based payments  44,000   1.308,948 
Amortization of debt discount  845,011   90,509 
Loss on prepayment of convertible notes  123,435   - 
Change in fair value of derivative liabilities  (29,884,636)  1,122,591 
Changes in operating assets and liabilities:        
Accounts receivable  (1,344,981)  - 
Inventory  (783,425)  - 
Other current assets  (1,372,448)  (7,750)
Security deposits  (21,615)  - 
Accounts payable  (31,275)  40,015 
Accrued and other liabilities  2,958,351   24,298 
Net Cash Provided by (Used in) Operating Activities  624,322   (797,972)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Payments for property and equipment  (130,256)  - 
Cash from acquisition of subsidiaries  -   57,605 
Cash paid for investments  (20,000)  (15,000)
Net Cash Used in Investing Activities  (150,256)  42,605 
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of convertible notes payable  325,000   147,000 
Repayment of convertible notes payable  (604,435)  - 
Proceeds from issuance of Series C Convertible preferred stock  40,000   692,001 
Proceeds from issuance of common stock  43,300   - 
Repayment of promissory notes payable  -   (15,000)
Due to related parties  53,050   849 
Net Cash Provided by Financing Activities  (143,085)  824,850 
         
Increase in cash and cash equivalents  330,981   69,483 
Cash and cash equivalents, beginning of period  768,268   - 
Cash and cash equivalents, end of period $1,099,249  $69,483 
         
Supplemental cash flow information        
Cash paid for interest $155,243  $23,830 
Cash paid for taxes $-  $- 
Supplemented disclosure of non-cash investing and financing activities:        
Series A Convertible Preferred Stock issued for acquisitions $1,750,000  $1,907,188 
Derivative liability recognized as debt discount  325,000  $147,000 
Payable for equity investments $24,907  $75,000 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)OPERATIONS

(Unaudited)

 

  Series A Preferred Stock  Series B Preferred Stock  Series C Preferred Stock  Class A and Class B Common Stock  Additional             
  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Paid in Capital  Subscription Receivable  Shares to be Issued  Accumulated Deficit  Total 
                                        
Balance – April 30, 2018  86,694,540   8,669   10,000,000   1,000   3,950,000   395   66,170,000   6,617   25,423,589   (114,405)  196,500   (54.535.258)  (29,012,893)
Preferred shares issued for equity investments  7,000,000   700   -   -   -   -   -   -   1,749,300   -   -   -   1,750,000 
Common stock issued for cash  -   -   -   -   -   -   850,000   85   212,415   -   (210,000)  -   2,500 
Preferred stock issued for cash  -   -   -   -   170,000   17   -   -   42,483   -   (2,500)  -   40,000 
Common stock issued for professional services  -   -   -   -   -   -   131,654   13   41,987   -   2,000   -   44,000 
Common share subscriptions received in advance  -   -   -   -   -   -   -   -   -   -   40,000   -   40,000 
Warrants for common stock issued  -   -   -   -   -   -   -   -   (258,132)  -   -   -   (258,132)
Reclassification of derivative  -   -   -   -   -   -   -   -   1,187,241   -   -   -   1,187,241 
Stock warrants exercised  -   -   -   -   -   -   5,000,000   500   -   -   -   -   500 
Stock options exercised  -   -   -   -   -   -   3,000,000   300   -   -   -   -   300 
Net earnings  -   -   -   -   -   -   -   -   -   -   -   30,059,995   30,059,995 
Balance – October 31, 2018  93,694,540   9,369   10,000,000   1,000   4,120,000   412   75,151,654   7,515   28,398,883   (114,405)  26,000   (24,475,263)  3,853,511 
  Three Months Ended October 31,  Six Months Ended October 31, 
  2019  2018  2019  2018 
Net sales $38,850,453  $17,973,379  $74,332,371  $30,904,105 
Cost of goods sold  11,436,308   6,800,413   21,487,765   11,764,423 
Gross profit  27,414,145   11,172,966   52,844,606   19,139,682 
Operating expenses                
Selling and marketing expenses  19,015,783   8,169,895   34,843,882   14,214,252 
General and administrative expenses  4,517,530   2,136,269   14,143,732   3,721,456 
Total operating expenses  23,533,313   10,306,164   48,987,614   17,935,708 
Operating earnings  3,880,832   866,802   3,856,992   1,203,974 
Other income (expense)                
Interest expense, net  (145,787)  (626,028)  (471,737)  (1,028,615)
Interest income, related party  138,546   -   138,546   - 
Litigation settlements and other non-operating expenses  (4,029,813)  -   (4,234,529)  - 
Change in fair value of derivative liabilities  -   29,910,472   -   29,884,636 
Total other income (expense), net  (4,037,054)  29,284,444   (4,567,720)  28,856,021 
Earnings (loss) before income taxes  (156,222)  30,151,246   (710,728)  30,059,995 
Income tax provision  1,075,000   -   1,375,000   - 
Net earnings (loss) $(1,231,222) $30,151,246  $(2,085,728) $30,059,995 
Earnings (loss) per share:                
Basic $(0.01) $0.45  $(0.02) $0.45 
Diluted $(0.01) $0.08  $(0.02) $0.10 
Weighted average shares:                
Basic  132,500,548   67,146,971   128,185,221   66,854,138 
Diluted  132,500,548   392,505,479   128,185,221   291,913,008 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

  Six Months Ended October 31, 
  2019  2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net earnings (loss) $(2,085,728) $30,059,995 
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:        
Depreciation and amortization  111,550   31,910 
Stock-based compensation expense  5,640,252   44,000 
Amortization of debt discount  373,276   845,011 
Loss on prepayment of convertible notes  -   123,435 
Loss on impairment of notes receivable  313,794   - 
Loss on impairment of investments and other  226,234   - 
Change in fair value of derivative liabilities  -   (29,884,636)
Changes in operating assets and liabilities:        
Accounts receivable  19,052   (1,344,981)
Inventory  (1,530,375)  (783,425)
Other current assets  26,182   (1,372,448)
Security deposits  7,600   (21,615)
Accounts payable  526,152   (31,275)
Income taxes payable  275,000   - 
Accrued and other liabilities  8,224,787   2,958,351 
Net Cash Provided by Operating Activities  12,127,776   624,322 
CASH FLOWS FROM INVESTING ACTIVITIES:        
Payments for property and equipment  (114,038)  (130,256)
Due to related parties  (5,637)  53,050 
Cash paid for investments  -   (20,000)
Net Cash Used in Investing Activities  (119,675)  (97,206)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of convertible notes payable  -   325,000 
Repayment of convertible notes payable  (755,000)  (604,435)
Repurchase of common stock  (500)  - 
Repayment of promissory notes payable  (2,376,062)  - 
Proceeds from issuance of common stock  1,300   83,300 
Net Cash Used in Financing Activities  (3,130,262)  (196,135)
         
Increase in cash and cash equivalents  8,877,839   330,981 
Cash and cash equivalents, beginning of period  3,912,135   768,268 
Cash and cash equivalents, end of period $12,789,974  $1,099,249 
         
Supplemental cash flow information        
Cash paid for interest $493,708  $155,243 
Cash paid for income taxes $1,147,620  $- 
Supplemented disclosure of non-cash investing and financing activities:        
Preferred Stock issued for acquisitions $-  $1,750,000 
Derivative liability recognized as debt discount  -   325,000 
Right-of-use assets recognized as lease liability  1,385,871  $- 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

8
 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

  Series A Preferred Stock  Series B Preferred Stock  Series C Preferred Stock  Class A and Class B
Common Stock		  Additional      Shares       
  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Paid in Capital  Subscription Receivable  

to be

Issued

  Accumulated Deficit  Total 
Balance – April 30, 2019  42,878,750  $4,288   10,000,000  $1,000   3,520,000  $352   114,077,061  $11,408  $31,870,020  $(114,405) $21,000  $(33,111,921) $(1,318,258)
Common stock issued for cash  -   -   -   -   -   -   30,000   3   7,497   -   (7,500)  -   - 
Common stock issued for professional or consulting services  -   -   -   -   -   -   215,325   22   11,993   -   (1,715)  -   10,300 
Conversions of preferred stock  (10,400,000)  (1,040)  -   -   (50,000)  (5)  10,450,000   1,045   -   -   -   -   - 
Repurchase of common stock  -   -   -   -   -   -   (1,500,000)  (150)  (350)  -   -   -   (500)
Stock-based compensation expense  -   -   -   -   -   -   -   -   5,640,252   -   -   -   5,640,252 
Stock warrants exercised  -   -   -   -   -   -   10,000,000   1,000   -   -   -   -   1,000 
Net earnings (loss)  -   -   -   -   -   -   -   -   -   -   -   (2,085,728)  (2,085,728)
Balance – October 31, 2019  32,478,750  $3,248   10,000,000  $1,000   3,470,000  $347   133,272,386  $13,328  $37,529,412  $(114,405) $11,785  $(35,197,649) $2,247,066 

  Series A Preferred Stock  Series B Preferred Stock  Series C Preferred Stock  Class A and Class B
Common Stock		  Additional             
  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Number of Shares  Par Value  Paid in Capital  Subscription Receivable  Shares to be Issued  Accumulated Deficit  Total 
                                        
Balance – April 30, 2018  86,694,540  $8,669   10,000,000  $1,000   3,950,000  $395   66,170,000  $6,617  $25,423,589  $(114,405) $196,500  $(54.535.258) $(29,012,893)
Preferred shares issued for equity investments  7,000,000   700   -   -   -   -   -   -   1,749,300   -   -   -   1,750,000 
Common stock issued for cash  -   -   -   -   -   -   850,000   85   212,415   -   (210,000)  -   2,500 
Preferred stock issued for cash  -   -   -   -   170,000   17   -   -   42,483   -   (2,500)  -   40,000 
Common stock issued for professional services  -   -   -   -   -   -   131,654   13   41,987   -   2,000   -   44,000 
Common share subscriptions received in advance  -   -   -   -   -   -   -   -   -   -   40,000   -   40,000 
Warrants for common stock issued  -   -   -   -   -   -   -   -   (258,132)  -   -   -   (258,132)
Reclassification of derivative  -   -   -   -   -   -   -   -   1,187,241   -   -   -   1,187,241 
Stock warrants/options exercised  -   -   -   -   -   -   8,000,000   800   -   -   -   -   800 
Net earnings  -   -   -   -   -   -   -   -   -   -   -   30,059,995   30,059,995 
Balance – October 31, 2018  93,694,540  $9,369   10,000,000  $1,000   4,120,000  $412   75,151,654  $7,515  $28,398,883  $(114,405) $26,000  $(24,475,263) $3,853,511 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9

SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 –DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION

 

Sharing Services Global Corporation (“Sharing Services” or “the Company”) is a diversified company, with Elepreneurs Holdings and Elevacity Holdings being its primary operating subsidiaries.The Company was originally formed to developmarkets and marketdistributes health and wellness products that are sold under the Elevate brand through an independent sales force of distributors, or Elepreneurs, using a taxi-ride sharing websitemarketing strategy which is a form of direct selling. The Company’s current product offerings include its Elevate health and application (“web app”). Beginningwellness product line, launched in February 2017,December 2017. The Company’s Elevate product line consists of Nutraceutical products that the Company expanded its business modelrefers to also offer a wide range of travelas “D.O.S.E.” (which stands for: Dopamine, Oxytocin, Serotonin and technology management and other products and services. In addition, in December 2017, the Company launched its Elevate product line. Elevate, are Nutraceutical products developed and owned by Elevacity Global, a wholly-owned subsidiary of the Company. The Company uses a direct-selling model. As part of its growth strategy, the Company has completed several strategic acquisitions and purchases of equity interests in certain companies, as more fully discussed in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) to April 30, 2018.Endorphins).

 

The condensed consolidated interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K offor the fiscal year ended April 30, 2019.

Recent Corporate Name Change

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. The corporate name change was approved by the Company’s stockholders and subsidiaries forby its Board of Directors. In connection with the period from May 5, 2017 (inception) to April 30, 2018.name change, the Company adopted the over-the-counter trading symbol SHRG.

 

Going concernConcern

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and settle its liabilities in the ordinary course of its business for the foreseeable future. The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated positive cash flows from operations. In addition, prior to its fiscal quarter ended January 31, 2018, the Company had virtually no sales. Historically,However, the CompanyCompany’s quarterly net sales have increased, and gross margin has fundedexpanded, each quarter since the December 2017 launch of its working capital needs (including its inventory needs)Elevate health and acquisitions primarily with capital transactionswellness product line. For the full fiscal year ended April 30, 2019, cash provided by operations was $6.0 million on annual sales of $85.9 million. In addition, for the six months ended October 31, 2019, cash provided by operations was $12.1 million on sales of $74.3 million, while operating earnings were $3.9 million. As of October 31, 2019, cash and with unsecured debt, including the issuance of convertible notes. The Company intends to continue to raise capital and use secured and unsecured debt, including the issuance of convertible notes, and other financing products from time to time as needed to fund its working capital needs and its growth.cash equivalents were $12.8 million.

 

The Company recently initiated comprehensive direct sales and social media marketing initiatives intended to promote its products and services and to drive long-term sales growth. There can be no assurance about the success of the Company’s growth initiatives and, accordingly, this raises reasonable doubt as to the Company’s ability to continue as a going concern. The Company believes it will be able to fund its working capital needs for the next 12 months with existing cash and cash equivalents, cash to be provided by operations, secured and unsecured borrowings,debt, including through the issuance of convertible notes and short-term borrowings under financing arrangements, and capital transactions and, ultimately, cash from operations.

These consolidated financial statements do not include any adjustments relatedtime to time. Accordingly, the Company believes there is no longer reasonable doubt as to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unableCompany’s ability to continue as a going concern.concern in the foreseeable future.

 

NOTE 2 – SUMMARY OF SIGNIFICANT–SIGNIFICANT ACCOUNTING POLICIES

 

We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full-yearfull year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses is based on full-year assumptions.

 

Revenue Recognition

As discussed below, the Company adopted ASU No. 2014-09,Revenue from Contracts with Customers, using the cumulative effect transition method, effective May 1, 2018. The Company derives revenue from the sale of health and wellness, energy, technology, insurance, training, media and travel products and services. The Company receives sales orders online and through its “back-office” operations, which creates a contract and determines the transaction price. The Company recognizes revenue upon satisfaction of its performance obligation when it transfers control of the promised goods and services to the customer. With respect to products and services sold, the performance obligation is satisfied upon receipt and acceptance of the product and services by the customer. With respect to subscription-based services, including Elepreneur membership fees, the performance obligation is satisfied over time (generally one year or less). The timing of revenue recognition may differ from the time when we invoice and/or collect payment under the contract. Deferred sales revenue associated with our performance obligation for customers’ right of return were $120,400 at October 31, 2018, net of potential restocking fees of $0, and were reported in accrued and other liabilities on our consolidated balance sheets. Deferred revenue associated with our performance obligation for services offered on a subscription basis were $646,500 at October 31, 2018 and are expected to be recognized over one year and were reported in accrued and other liabilities on our consolidated balance sheets.

No individual customer, or group of customers, represents 10% or more of our consolidated net sales and over 95% of our consolidated net sales are from sales to customers located in the United States. For the three and six months ended October 31, 2018, over 95% of our consolidated net sales are from the sale of ourElevateproduct line (including approximately 33% from the sales of coffee and coffee-related products and approximately 28% from the sale of our Nutraceutical products). In addition, for the three and six months ended October 31, 2018, product purchases from one supplier accounted for approximately 92% of total purchases.

Sales Commissions

The Company recognizes sales commission expense when incurred. During the three and six months ended October 31, 2018, sales commission expense, which is included in selling and marketing expenses in our consolidated statements of operations, was $7.9 million and $13.6 million, respectively.

Use of Estimates and Assumptions

 

The preparation of financial statements in conformityaccordance with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets, liabilities, revenues and liabilities, (ii) the disclosure ofexpenses, and disclosures about contingent assets and liabilities, known to exist asif any. Examples of estimates and assumptions include: the daterecoverability of accounts receivable, the financial statements are published,valuation of inventory, the useful lives of fixed assets, the assessment of long-lived assets for impairment, the measurement and (iii)recognition of right-of-use assets and related lease liabilities, the reported amountvaluation and recognition of netderivative liabilities, the measurement and recognition of stock-based compensation expense, the measurement and recognition of revenues, the nature and expenses recognized duringtiming of satisfaction of performance obligations resulting from contracts with customers, the periods presented.measurement and recognition of uncertain tax positions, and the valuation of loss contingencies, if any. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our financial statements, including our condensed consolidated interim financial statements are reasonable. In managements’ opinion, all adjustments (consisting

10

Comprehensive Income

For the fiscal periods included in this Quarterly Report, the only component of normal, recurring accruals) considered necessary forthe Company’s comprehensive income is its net earnings. Accordingly, the Company does not present a fair presentation have been included.consolidated statement of comprehensive income.

 

Accounting ChangesRevenue Recognition

 

In May 2014,As disclosed earlier, the FASB issued ASU No. 2014-09,Company adopted Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers, which supersedes Accounting Standards Codification (“ASC”) Topic 605,Revenue Recognition. A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard must be adopted using either the retrospective or cumulative effect transition method. For public companies, this amendment was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. As required, the Company adopted ASU No. 2014-09, using the cumulative effect transition method, effective May 1, 20182018. The Company derives revenue only from the sale of its products and services and recognizes revenue net of amounts due to taxing authorities (such as local and state sales tax). Our customers place sales orders online and through our “back-office” operations, which creates a contract and establishes the transaction price. The Company recognizes revenue when (or as) it transfers control of the promised goods and services to the customer. With respect to products sold, our performance obligation is satisfied upon receipt of the products by the customer. With respect to subscription-based services, including Elepreneur membership fees, our performance obligation is satisfied over time (up to one year). The timing of our revenue recognition may differ from the time when we invoice and/or collect payment. The Company has elected to treat shipping and handling costs as an activity to fulfill its adoption did not haveperformance obligations, rather than a material impact on its consolidated financial statements and business.

The impact of adopting the newseparate performance obligation. Deferred sales revenue standard on our financial statements was not material and is associated with our performance obligation for customers’ right of return was $201,386 and to recognition$194,042 as of October 31, 2019 and April 30, 2019, respectively, and was reported in accrued and other current liabilities on our condensed consolidated balance sheets. Deferred revenue fromassociated with product invoiced but not received by customers at the balance sheet date was $3.3 million and $2.5 million and with our performance obligation for services offered on a subscription basis. We now defer revenue (and the related costbasis was $546,004 and $515,087 as of goods sold) associated with our customers’ right of return. The impact of adopting the new standardOctober 31, 2019 and April 30, 2019, respectively. These amounts are expected to be recognized over one year and were reported in accrued and other current liabilities on our revenue from subscription-based services was not significant due to the short subscription periods (general one year or less) and to our prior policy of recognizing revenue from subscription-based services ratably over the subscription period.consolidated balance sheets.

 

Historically, our sales returns have been approximately 2%No individual customer, or related group of customers, represents 10% or more of our consolidated net sales and our subscription-based revenues have been 1%over 95% of our consolidated net sales. The Company is an emerging growth company with limited sales history. Going forward,are from sales to our customers and/or independent distributors located in the Company will continueUnited States. During the six months ended October 31, 2019, approximately 50% of our consolidated net sales were to monitor itsrecurring customers and approximately 25% of our consolidated net sales returns history and its sales of subscription-based services, and the Company will continuewere to recognize revenue in proportion to the documented pattern of satisfaction by the Company of such customer rights. Further, the Company will provide the added disclosures required by ASU No. 2014-09 when material.our independent distributors.

 

In January 2017,For the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definitionsix months ended October 31, 2019, approximately 98% of a Business”(“ASU 2017-01”). ASU 2017-01 must be applied prospectively and provides a narrower framework to be used to determine if a set of assets and activities constitutes a business compared to the framework under the prior guidance and is generally expected to result in greater consistency in the application of ASC Topic No. 805, “Business Combinations.” For public companies, this amendment was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. As required, the Company adopted ASU No. 2017-01 effective May 1, 2018 and its adoption did not have a material impact on itsour consolidated financial statements.net sales are from ourElevate

In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Lossesproduct line (including approximately 25% from the Derecognitionsales of Nonfinancial Assets (Subtopic 610-20): Clarifyingcoffee and coffee-related products and approximately 52% from the Scopesale of Asset Derecognition Guidanceother D.O.S.E. Nutraceutical products). For the six months ended October 31, 2019 and Accounting2018, product purchases from a single supplier accounted for Partial Salesapproximately 98% and 92%, respectively, of Nonfinancial Assets.” The amendments clarified that nonfinancial assets that are within the scope of ASC Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. For public companies, this amendment was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. As required, the Company adopted ASU No. 2017-05 effective May 1, 2018 and its adoption did not have a material impact on its consolidated financial statements.our total purchases.

 

Recently Issued Sales Commission

The Company recognizes sales commission expense, when incurred, in accordance with GAAP. For the three months ended October 31, 2019 and 2018, sales commission expense was $18.2 million and $7.9 million, respectively. For the six months ended October 31, 2019 and 2018, sales commission expense was $33.6 million and $13.6 million, respectively. Sales commission expense is included in selling and marketing expenses in our consolidated statements of operations.

Accounting StandardsChanges

 

In February 2016, the FASB issued ASUAccounting Standards Update (“ASU”) No. 2016-02,Leases, which will requirerequires lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. Under the new guidance, codified as ASC Topic 842,Leases, the lease liability must be measured initiallyupon adoption of the new standard based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initiallyupon adoption of the new standard based on the amount of the liability, plus certain initial direct costs. As permitted, the Company adopted ASC Topic 842 effective May 1, 2019 using the optional cumulative-effect transition method, and adoption resulted in an initial lease liability in the aggregate amount of $1.3 million and right-of-use assets in the same aggregate amount. The new guidance further requires thatCompany’s right-of-use assets relate to leases be classified at inceptioninvolving office space, automobiles and office equipment, and are amortized over periods ranging from one to three years. The adoption of ASC Topic 842 did not otherwise have a material impact on the Company’s consolidated financial statements.

11

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-13,Fair Value Measurement (Topic 820) which modifies the disclosure requirements on fair value measurements under ASC Topic No. 820,Fair Value Measurement, as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under prior rules) over the life of the lease. The new standard must be adopted using a modified retrospective transition method.amended (“ASC 820”). For public companies, thisASU 2018-13 removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC Topic 820, (b) the policy for timing of transfers between levels, and (c) the valuation processes used for level 3 fair value measurements. For public companies, ASU 2018-13 also adds, among other things, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.2019. Early adoption is permitted. We havewas permitted upon issuance of ASU 2018-13. The Company has not yet adopted this accounting pronouncementASU 2018-13 and, are currently evaluatingbased on its preliminary assessment, does not believe the potential impact this standard may haveof adoption would be material on ourits consolidated financial position and consolidated results of operations.statements.

 

NOTE 3 – FAIR VALUE MEASURENTS OF FINANCIAL INSTRUMENTS

 

Our financial instruments consist of cash equivalents, tradeif any, accounts receivable, notes receivable, investments in unconsolidated entities, accounts payable, notes payable and derivative liabilities. 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.

 

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 describedreferred to above, we categorized certain of our financial assets and liabilities as follows:

 

 October 31, 2018  October 31, 2019 
 Total  Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3 
Assets                                
Investment in unconsolidated entities $4,527,188  $-  $-  $4,527,188 
Accounts receivable, related party $3,456,751  $-  $-  $3,456,751 
Investments in unconsolidated entities  20,000   -   -   20,000 
Total assets $4,527,188  $-  $-  $4,527,188  $3,476,751  $-  $-  $3,476,751 
Liabilities $-  $-  $-  $-                 
Convertible notes payable $120,605  $-  $-  $120,605 
Notes payable  115,385   -   -   115,385 
Total liabilities $235,990  $-  $-  $235,990 

 

  April 30, 2018 
  Total  Level 1  Level 2  Level 3 
Assets                
Investment in unconsolidated entities $2,757,188  $-  $-  $2,757,188 
Total assets $2,757,188  $-  $-  $2,757,188 
Liabilities                
Derivative liabilities  30,172,153   -   35,000   30,137,153 
Total liabilities $30,172,153  $-  $35,000  $30,137,153 

11
  April 30, 2019 
  Total  Level 1  Level 2  Level 3 
Assets                
Accounts receivable, related party $3,446,114  $-  $-  $3,446,114 
Investments in unconsolidated entities  207,500   -   -   207,500 
Total assets $3,653,614  $-  $-  $3,653,614 
Liabilities                
Convertible notes payable $870,567  $-  $-  $870,567 
Notes payable  2,123,208   -   -   2,123,208 
Total liabilities $2,993,775  $-  $-  $2,993,775 

 

NOTE 4 – EARNINGS (LOSS) PER SHARE

 

We calculate basic earnings (loss) per share by dividing net incomeearnings (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 outstanding convertible preferred stock, options, stock warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible notes, outstanding, except where the impact would be anti-dilutive.

The following table sets forth the computations of basic and diluted earnings (loss)loss per share:

 

  Three Months Ended October 31,  Six Months Ended October 31, 
  2018  2017  2018  2017(1) 
Net earnings (loss) $30,151,246  $(2,736,557) $30,059,995  $(3,377,383)
Weighted average basic shares  67,146,971   58,212,889   66,854,138   48,324,000 
Dilutive securities:                
Convertible preferred stock  106,997,040   -   105,641,442   - 
Convertible notes  210,959,331   -   112,199,041   - 
Stock options and warrants  7,402,137   -   7,218,387   - 
Weighted average diluted shares  392,505,479   58,212,889   291,913,008   48,324,000 
Earnings (loss) per share:                
Basic $0.45  $(0.05) $0.45  $(0.07)
Diluted $0.08  $(0.05) $0.10  $(0.07)

(1)Represents data for the period from May 5, 2017 (inception) to October 31, 2017.
  Three Months Ended October 31,  Six Months Ended October 31, 
  2019  2018  2019  2018 
Net earnings (loss), as reported $(1,231,222) $30,151,246  $(2,085,728) $30,059,995 
After tax interest adjustment  -   98,462   -   158,189 
Net earnings (loss), if-converted basis $(1,231,222) $30,249,708  $(2,085,728) $30,218,184 
Weighted average basic shares  132,500,548   67,146,971   128,185,221   66,854,138 
Dilutive securities and instruments:                
Convertible preferred stock  -   106,997,040   -   105,641,442 
Convertible notes  -   210,959,331   -   112,199,041 
Stock options and warrants  -   7,402,137   -   7,218,387 
Weighted average diluted shares  132,500,548   392,505,479   128,185,221   291,913,008 
Earnings per share:                
Basic $(0.01) $0.45  $(0.02) $0.45 
Diluted $(0.01) $0.08  $(0.02) $0.10 

 

The dilutive orfollowing potentially dilutive securities and instruments were outstanding as of October 31, 2018 and 2017, were as follows:2019 but excluded from the table above because their impact would be anti-dilutive:

 

  As of October 31, 
  2018  2017 
Stock warrants  2,493,333   333,333 
Convertible notes  240,356,018   243,284 
Convertible Preferred Stock  107,814,540   17,754,540 
Total potential incremental shares  350,663,891   18,331,157 

Convertible preferred stock46,285,924
Convertible notes69,259,756
Stock options and warrants21,585,167
Total incremental shares137,130,847

 

NOTE 5 – ACCOUNTSNOTES RECEIVABLE

 

AtIn March and April 2018, the Company entered into certain investment agreements with a third party pursuant to which the Company loaned an aggregate of $275,000 to the third party. The related promissory notes accrued interest at the rate of 12% per annum. In June 2019, the Company and the third party entered into a loan exchange agreement pursuant to which the Company received a promissory note for $309,309 in settlement of all amounts owed to the Company under the March and April 2018 loans, including loan principal of $275,000 and accrued interest of $34,309. Loans under the June 2019 promissory note bear interest at the rate of 8% per annum. In October 2019, after exhausting all efforts to collect the amounts due pursuant to the June 2019 promissory note, the Company recognized an impairment loss of $317,105 in connection therewith. For the six months ended October 31, 2019 and 2018, interest income earned in connection with our promissory notes, excluding promissory notes from a related party, was $15,357 and April 30, 2018, accounts receivable includes amounts receivable from credit card processors of $2,897,492 and $1,556,472,$16,636, respectively.

 

NOTE 6 – OTHER CURRENT ASSETS

 

At October 31, 2018 and April 30, 2018, otherOther current assets include deposits with suppliersconsist of $703,675 under product supply agreement and prepaid expenses of $794,474, mainly in connection with marketing events and prepayments to vendors for products and services purchased on an annual basis. At April 30, 2018, there were no comparable amounts outstanding.the following:

  October 31, 2019  April 30, 2019 
Prepaid expenses $145,124  $270,625 
Right to recover asset  58,452   65,257 
Interest receivable  138,546   36,678 
Other  5,007   750 
  $347,129  $373,310 

13

 

NOTE 7 – PROPERTY AND EQUIPMENT

 

Property and equipment consistedconsist of the following at October 31, 2018 and April 30, 2018:following:

 

 October 31, 2018 April 30, 2018  October 31, 2019  April 30, 2019 
Furniture and fixtures $138,737  $84,289  $224,239  $193,737 
Office equipment  43,847   18,102 
Computer equipment and software  38,187   15,039   119,989   91,223 
Leasehold improvements  63,404   11,888   97,890   82,981 
Office equipment  31,652   30,601 
Total property and equipment  284,175   129,318   473,770   398,542 
Accumulated depreciation and amortization  (42,763)  (10,853)  (138,259)  (91,018)
Property and equipment, net $241,412  $118,465  $335,511  $307,524 

 

Depreciation and amortization expense was $31,910$16,961 and $23,963 for the three months ended October 31, 2019 and 2018 and, for the six months ended October 31, 2019 and 2018, $47,242 and $800 for the period from May 5, 2017 (inception) to October 31, 2017.$31,910, respectively.

 

NOTE 8 – INVESTMENTS IN UNCONSOLIDATED ENTITIES

 

The Company made these investments consistent with its strategy to grow its business organically and bymaking strategic acquisitions of businesses and technologiesin certain unconsolidated entities that augment its products portfolio. Specifically, each of these investees own and market products that fit the Company’s direct selling model and could add to its products portfolio.portfolio. However, the Company doesdid not, directly or indirectly, hold a controlling“controlling financial interest,” as defined in GAAP, in any of these investees, as the phrase “controlling financial interest” is defined in GAAP.investees. Thus, the Company doesdid not report these investees on a consolidated basis. In addition, the Company doesdid not exert influence over the operations or policies of the investees. TheFor example, the Company’s officers, directors, and management are not involved in the operations or policies of the investees. Accordingly, the Company accountsaccounted for its investment in these investeesinvestments on the cost basis.

In the fiscal year ended April 30, 2019, the Company recognized an impairment loss in the aggregate amount of $4.4 million in connection with its investments in unconsolidated entities as a result of a less than temporary decline in the value of the Company’s investment. In addition, in the six months ended October 31, 2019, the Company recognized an impairment loss in the amount of $187,500 in connection with its investments in an unconsolidated entity as a result of a less than temporary decline in the value of the Company’s investment. The information contained in Note 8 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2019 is incorporated herein by reference. See Note 16 below for contingencies and other matters associated with the Company’s prior investments.

 

212 Technologies, LLC

On May 21, 2017,The Company periodically assesses the Company entered into a Stakeholder and Investment Agreement pursuant to which it acquired a 24% interest in 212 Technologies, LLC (“212 Tech”), a Montana limited liability company, in exchange for 5,628,750 sharesvalue of its Series A Convertible Preferred Stock with a deemed value of $0.25 per share, or $1,407,188, and $100,000investments in cash. 212 Tech is a developer of end-to-end online marketing and direct sales software systems. In connection therewith,unconsolidated entities by considering several factors, including the Company received a non-exclusive, non-royalty bearing, perpetual, worldwide license of certain intellectual property rights of 212 Tech.

Under the termsprospect of the Stakeholderinvestee achieving commercial viability, the ability of the investee to generate sustainable earnings and Investment Agreement,cash flows, and the Company has the option to acquire an additional 24% interest in 212 Tech at a future date in exchange for an additional 10,000,000 sharesprobability of recovery of the Company’s Series A Convertible Preferred Stock, whenboth of the following conditions have been met: (i) one year has passed from the Closing Date;and (ii) the closing price of the Company’s common stockequals or exceeds$10.00per share, as reported by the NASDAQ stock marketinvestment.

 

561 LLCNOTE 9 - NOTES PAYABLE

 

OnIn the six months ended October 4, 2017,31, 2019, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 25% interest in 561 LLC in exchange for 2,500,000 sharesrepaid an aggregate of $2.4 million of its Series A Convertible Preferred Stockshort-term borrowings under financing arrangements with a deemed value of $0.25 per share, or $625,000, issued in four equal instalments over time.Under the terms oftheShare Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in 561 LLC to 40%in exchange for 2,500,000 shares of its Series AConvertible Preferred Stock.As ofthird-party lenders. At October 31, 2018,2019 and April 30, 2019, notes payable, consisting of short-term borrowings under financing arrangements, in the Company had issued 5,000,000 sharesaggregate, were $115,385 and $2,123,208, respectively. These balances are net of its Series A Convertible Preferred Stock (withunamortized debt discount of $11,538 and $379,777, respectively. Borrowings under these financing arrangements are secured by a deemed value of $1,250,000) in connection with its acquisition of 561 LLC.lien on the Company’s accounts receivable, inventory and property and equipment.

 

Under the terms oftheShare Exchange Agreement, the sellers shall be entitled to an additional 2,500,000 shares of the Company’s Series A Convertible Preferred Stock when both of the following conditions have been met: (a)one year has passed from the Closing Dateand (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by the NASDAQ stock market.

America Approved Commercial LLC

On October 4, 2017, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 25% interest in America Approved Commercial LLC (“AAC”) in exchange for 2,500,000 shares of our Series A Convertible Preferred Stock with a deemed value of $0.25 per share, or $625,000.Under the terms oftheShare Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in AAC to 40%in exchange for 2,500,000 shares of its Series AConvertible Preferred Stock.As of October 31, 2018, the Company had issued 5,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $1,250,000) in connection with its acquisition of AAC.

Under the terms oftheShare Exchange Agreement, the sellers shall be entitled to an additional 2,500,000 shares of the Company’s Series A Convertible Preferred Stock when both of the following conditions have been met: (a)one year has passed from the Closing Dateand (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by the NASDAQ stock market.

Medical Smart Care LLC

On October 4, 2017, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 40% interest in Medical Smart Care LLC (“Smart Care”) in exchange for 1,000,000 shares of its Series A Preferred Stock with a deemed value of $0.25 per share, or $250,000, in four equal installments over time. As of October 31, 2018, the Company had issued 1,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $250,000) in connection with the acquisition of Smart Care.

LEH Insurance Group LLC

On October 4, 2017, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 40% interest in LEH Insurance Group LLC (“LEHIG”) in exchange for 500,000 shares of its Series A Preferred Stock with a deemed value of $0.25 per share, or $125,000.Under the terms oftheShare Exchange Agreement, the sellers would be entitled to an additional 500,000 shares of the Company’s Series A Preferred Stock if/when the following condition had been met: prior to December 31, 2018, if LEHIG had booked contracts representing insurance premiums of no less than $500,000. In October 2018, upon LEHIG meeting this condition, the Company issued an additional 500,000 shares of its Series A Preferred Stock to the sellers.As of October 31, 2018, the Company had issued 1,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $250,000) in connection with the acquisition of LEHIG.

In addition, under the terms ofthe Share Exchange Agreement, the sellers shall be entitled to an additional 500,000 shares of the Company’s Series A Preferred Stock when the following condition has been met: prior to December 31, 2018, LEHIG has booked contracts representing insurance premiums of no less than $1,000,000.

14

 

NOTE 910 - ACCRUED AND OTHER CURRENT LIABILITIES

 

Accrued and other current liabilities consist of the following as of October 31, 2018 and April 30, 2018:following:

 

  October 31, 2018  April 30, 2018 
Accrued sales commissions $3,452,615  $2,091,081 
Deferred sales revenues  2,116,474   1,096,180 
Accrued expenses  275,703   252,259 
Accrued interest payable  79,640   34,644 
Notes payable  71,000   35,000 
Accrued investments payable  69,907   45,000 
Other accrued liabilities  596,019   65,444 
  $6,661,358  $3,619,608 
  October 31, 2019  April 30, 2019 
State and local taxes payable $2,007,997  $1,913,638 
Payroll  859,621   37,807 
Lease liability, current portion  496,013   - 
Accrued shipping and freight  375,443   226,695 
Accrued interest payable  41,212   139,746 
Other operational accruals  502,059   290,877 
  $4,282,345  $2,608,773 

 

Accrued sales commissions consistLease liability, current portion, represent obligations under leases that are payable within one year for office space, automobiles and office equipment. See Note 2 of commissions and certain bonuses earned bythe Condensed Notes to the Consolidated Financial Statements above for information about the Company’s independent sales representativesadoption of the Company in accordance with the Company’s compensation plan.ASC Topic 842,Leases.

Deferred sales revenues are comprised of product sales billed but not shipped the balance sheet date, the unearned portion of various annual memberships and other products sold on an annual basis, and amount associated with unsettled performance obligations arising from contracts with customers.

In May 2018, the Company entered into an agreement with Global Payroll Gateway (“GPG”) pursuant to which GPG provides certain wholesale merchant services to Sharing Services and its subsidiaries. In connection with the agreement, in May 2018, GPG granted Sharing Services an interest-free loan in the amount of $500,000 and, in August 2018, GPG granted Sharing Services an interest-free loan in the amount of $500,000. As of October 31, 2018, the aggregate remaining unpaid balance on the loans is $71,000.

14

 

NOTE 1011 - CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consistedconsists of the following as of October 31, 2018 and April 30, 2018:following:

 

Issuance Date Maturity Date Conversion
Price (per
share)		  October31, 2018  April 30, 2018 
September 2017 March 2018 $0.005  $15,000  $15,000 
October 2017 October 2022 $0.15   50,000   50,000 
November 2017 November 2018  Variable   -   50,000 
November 2017 May 2018 $0.0025   5,000   5,000 
December 2017 September 2018  Variable   -   100,000 
January 2018 January 2019 $0.0025   250,000   250,000 
February 2018 February 2019 $0.0025   250,000   250,000 
March 2018 March 2019 $0.01   250,000   250,000 
April 2018 April 2019 $0.01   100,000   100,000 
Total convertible notes payable   920,000   1,070,000 
Less: debt discount and deferred financing fees   (302,814)  (816,825)
    617,186   253,175 
Less: current portion of convertible notes payable   606,575   247,602 
Long-term convertible notes payable  $10,611  $5,573 

    Conversion Price    
Issuance Date Maturity Date (per share)  October 31, 2019  April 30, 2019 
October 2017 October 2022 $0.15  $50,000  $50,000 
November 2017 On Demand $0.0025   -   5,000 
January 2018 On Demand $0.0025   -   250,000 
February 2018 On Demand $0.0025   -   250,000 
March 2018 On Demand $0.01   -   250,000 
April 2018 On Demand $0.01   100,000   100,000 
Total convertible notes payable      150,000   905,000 
Less: debt discount and deferred financing fees      (29,395)  (34,433)
         120,605   870,567 
Less: current portion of convertible notes payable      100,000   855,000 
Long-term convertible notes payable     $20,605  $15,567 

 

All the Company’s convertible notes are convertible, at the option of the holder, into shares of the Company’s common stock. As indicated above, certain of the Company’s convertible notes are convertible at a variable conversion price, a conversion price based on the market price for Company’s common stock. Borrowings on all the Company’s convertible notes bear interest at the annual rate of 12%.

 

On June 29, 2018 the Company paid $143,211 (including accrued but unpaid interest of $6,477) to settle in full a convertible note in the principal amount of $100,000. In connection therewith, the Company recorded prepayment penalties of $36,734 and recognized a gain of $121,823 resulting from the change in the fair value of this derivative liability, in connection with this transaction.

On September 12, 2018, the Company paid $54,997 (including accrued but unpaid interest of $4,997) to settle in full a convertible note in the principal amount of $50,000. In connection therewith, the Company recognized a gain of $34,771 resulting from the change in the fair value of this derivative liability, in connection with this transaction.

On October 31, 2018 the Company paid $433,503 (including accrued but unpaid interest of $15,802) to settle in full two convertible notes in the aggregate principal amount of $331,000. In connection therewith, the Company recorded prepayment penalties of $86,701 and recognized a gain of $681,909 resulting from the change in the fair value of the related derivative liabilities, in connection with our prepayment.

At October 31, 2018, convertible notes payable consisted of notes in the aggregate amount of $870,000 held by RB Capital Partners, Inc. and a note of $50,000 held by another lender. In the six months ended October 31, 2018 and the period from May 5, 2017 (inception) to October 31, 2017, the Company recognized amortization expense related to the debt discount and deferred financing fees of $845,011 and $90,509, respectively, which is included in interest expense in our consolidated statements of operations.

During the three months ended October 31, 2018 and 2017, total interest expense was $634,346 and $96,586, respectively, including amortization of debt discount of $509,711 and $67,539, respectively. During the six months ended October 31, 2018 and2019, the period from May 5, 2017 (inception) toCompany settled in full convertible notes with an aggregate principal balance of $755,000, excluding accrued but unpaid interest of $136,315.

For the three months ended October 31, 2017, total2019 and 2018, interest expense in connection with the Company’s convertible notes was $1,045,251$16,802 and $123,195,$124,635, respectively, includingexcluding amortization of debt discount of $845,011$2,519 and $90,509,$509,711, respectively. For the six months ended October 31, 2019 and 2018, interest expense in connection with the Company’s convertible notes was $43,711 and $200,240, respectively, excluding amortization of debt discount of $5,040 and $514,011, respectively.

 

15
 

 

NOTE 1112 - DERIVATIVE LIABILITIES

 

At April 30, 2018,The Company analyzed the Company hadconversion option for derivative accounting consideration under ASC 815 and determined that the conversion feature on itsCompany’s convertible notes and stock warrants outstanding at April 30, 2018 should be classified as a derivative liability, under the ASC 815 guidance, since the conversion rate was tied to the market price of the Company’s common stockoptions become effective at issuance and accordingly, there wasis no explicit limit to the number of shares issuable upon conversion due to contingencies affecting the conversion rate.

 

The Company determined thatclassifies its derivative liabilities must be classified inunder Level 3 of the three-level hierarchy for measuring fair value (please see(see Note 3)3 above) and uses a multi-nominal lattice model to calculate the fair value of these liabilities. The multi-nominal lattice model requires six basic data inputs:inputs including: (1) the exercise conversion or strikeconversion price, (2) the expected lifeterm (in years), (3) the risk-free interest rate,expected volatility for the Company’s common stock, (4) the current stock price, (5) the expected volatility for the Company’s common stock,risk-free interest rate, and (6) the expected dividend yield. Changes to these inputs could result in a significantly higher or lower fair value measurement.

 

During the three months ended October 31, 2018, the Company repaid the convertible notes with a variable conversion rate, a conversion rate tied to the market price of the Company’s common stock. The remaining convertible notes and warrants outstanding at October 31, 2018 have a fixed conversion rate and, accordingly, the number of shares issuable upon conversion is determinable with certainty. As a result, the Company recognized a decrease in its derivative liability resulting in the beneficial conversion feature associated with the remaining convertible notes and warrants of $1,187,242 (recognized as an increase to additional paid-in capital) and a gain on fair value of derivatives liabilities of $20,015,840. The Company has no similar derivative liabilities at October 31, 2019.

 

The following weighted-average assumptions were used when valuing our derivative liabilities:

 

  

Six months endedMonths Ended

October 31, 2018

Period from

May 5, 2017
(Inception) to
October 31, 2017

 
Expected term (in years)  1.0-5.0 0.31 – 1.0
Expected average volatility  107% - 237237%%126% - 330%
Expected dividend yield-  - 
Risk-free interest rate  1.65% - 2.962.96%%0.99% - 1.34%

 

The following table summarizes the changes inactivity for the derivative liabilities included in our consolidated balance sheet for the six months ended October 31, 2018:

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance – April 30, 2018 $30,488,655 
Addition of new derivatives recognized as debt discounts  325,000 
Other addition of new derivatives  679,032 
Reclassification of derivatives due to tainted instruments  258,132 
Change in fair value of the derivative  (10,547,737)
Reclassification of derivative to additional paid-in capital  (1,187,242)
Change in derivative liabilities recognized as gain on derivative  (20,015,840)
Balance - October 31, 2018 $- 

The following table summarizes the (loss) gain on derivative liability included in our consolidated statement of operation for the six months ended October 31, 2018 and the period from May 5, 2017 (inception) to October 31, 2017:operations:

 

 Six months ended
October 31, 2018		 Period from
May 5, 2017
(Inception) to
October 31, 2017		  Six months ended October 31, 2018 
Day-one loss due to derivative liabilities on convertible notes payable and warrants $(678,941) $(2,099,349) $(678,941)
Change in derivative liabilities  20,015,840   -   20,015,840 
Gain from marked-to-market adjustments  10,547,737   976,758   10,547,737 
Net gain (loss) on change in fair value of derivative liabilities $29,884,636  $(1,122,591)
Net gain on change in fair value of derivative liabilities $29,884,636 

16

 

NOTE 1213 – INCOME TAXES

 

The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated pre-tax earnings or taxable earnings from its operations. As ofoperations or pre-tax earnings. During its fiscal year ended April 30, 2019 and 2018, the date herein,Company’s consolidated operating loss was $1.1 million and $6.0 million, respectively, and, during the ability ofsix months ended October 31, 2019, the Company’s consolidated operating earnings were $3.9 million. The Company believes that it is probable it will utilize its available net operating losses entirely in the foreseeable future. During the six months ended October 31, 2019, the Company to consistently generate future pre-tax earnings or taxable earnings remains uncertain. Accordingly, the Company has not recordedrecognized a provision for income taxes in its consolidated financial statements for the periods covered by this quarterly report.of $1.4 million.

 

NOTE 1314 - RELATED PARTY TRANSACTIONS

 

Alchemist Holdings, LLC

 

In connection with the Company’s acquisition of Total Travel Media, Inc. in May 2017, the Company issued 7,500,000 shares of its Series B Preferred Stockpreferred stock and 7,500,000 shares of its Common Stock Class Bcommon stock (Class B) to Alchemist Holdings, an entity which iswas then controlled by the then Chairman of our Board.Board of Directors. In connection with the Company’s acquisition of Four Oceans, the Company issued also 50,000,000 shares of its Series A Preferred Stockpreferred stock to Alchemist. Please seeThe information contained in Note 1 of Notes to the Consolidated Financial Statements includedlocated in ITEM 8 – “FinancialFinancial Statements and Supplementary Data”Data in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) tofiscal year ended April 30,2018, for more details about the acquisitions of Total Travel Media and Four Oceans.

In March 2017, the Company entered into a Consultancy and Marketing Agreement with Alchemist pursuant to which Alchemist provides marketing and consulting services, tools, websites, video production, and event management services to the Company. The Agreement may be terminated30, 2019 is incorporated herein by the Company, by giving 14 calendar days written notice of such termination. During the six months ended October 31, 2018, the Company did not incur consulting fees or expenses pursuant to this agreement.reference.

 

Bear Bull Market Dividends, Inc.

 

In connection with the Company’s acquisition of Total Travel Media, in May 2017, the Company issued 2,500,000 shares of its Series B Preferred Stockpreferred stock and 2,500,000 shares of its Common Stock Class Bcommon stock (Class B) to Bear Bull a significant shareholder of Sharing Services.Market Dividends, Inc. In connection with the Company’s acquisition of Four Oceans Holdings, Inc. in September 2017, the Company also issued of 20,000,000 shares of its Series A Preferred Stockpreferred stock to Bear Bull and 5,000,000 shares to another shareholder.Market Dividends, Inc.

See Note 16 below for more information about our related parties.

 

NOTE 1415 - STOCKHOLDERS’ DEFICITEQUITY (DEFICIT)

 

Preferred Stock

 

Series A Convertible Preferred Stock

 

In May 2018,During the Company issued 5,000,000six months ended October 31, 2019, holders of 10,400,000 shares of its the Company’sSeries A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andconvertibleAmerica Approved Commercial LLC.

In August 2018, the Company issued an additional 1,250,000preferred stock converted their holdings into 10,400,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andAmerica Approved Commercial LLC. In addition, inCompany’s common stockAugust 2018, the Company issued 250,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of a 40% equity interest in Medical SmartCare LLC..

 

InOctober 2018, the Company issued 500,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of a 40% equity interest in LEH Insurance GroupLLC.

As of October 31, 2018, there were 93,694,5402019, 32,478,750 shares of our Series A Convertible Preferred Stock convertiblepreferred stockremainedissued and outstanding.

 

Series B Convertible Preferred Stock

 

As of October 31, 2018, there were2019, 10,000,000 shares of our Series B Preferred Stock convertiblepreferred stock remainedissued and outstanding.

 

Series C Convertible Preferred Stock

 

In August 2018,During the Company issued 80,000six months ended October 31, 2019, holders of 50,000 shares of its the Company’sSeries C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $20,000, in connection withconvertiblepreferred stock subscription agreements enteredconverted their holdings into prior to April 30, 2018. In addition, in September 2018, the Company issued 30,00050,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $7,500, in connection withthe Company’s common stock subscription agreements entered into prior to April 30, 2018. Further, in October 2018, the Company issued 60,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $15,000, in connection with stock subscription agreements entered into prior to April 30, 2018..

 

As of October 31, 2018, there were 4,120,0002019, 3,470,000 shares of our Series C Preferred Stock convertiblepreferred stockremainedissued and outstanding.

 

Common Stock

 

In July 2018,As described above, during the six months endedOctober 31, 2019, holders of 10,400,000 shares of the Company’sSeries Aconvertiblepreferred stockand holders of 50,000 shares of the Company’sSeries Cconvertiblepreferred stock converted their holdings into a respectively equal number of shares of the Company’s common stock.

During the six months endedOctober 31, 2019, the Company issued 600,00010,000,000 shares of its class A common stock subscription units atto a price of $0.25 per unit, for total proceeds of $150,000,director in connection with stock subscription agreements, including 160,000 shares in connection with subscription agreements entered into after April 30, 2018. Each unit consists of 600,000 shares of its Class A Common Stock and 600,000 warrants to purchase up to an additional 600,000 shares of Class A Common Stock. In addition, in August 2018, the Company issued 210,000 stock subscription units at a price of $0.25 per unit, for total proceeds of $52,500, in connection with stock subscription agreements entered into prior to April 30, 2018. Each unit consists of 210,000 shares of its Class A Common Stock and 210,000 warrants to purchase up to an additional 210,000 shares of Class A Common Stock. Further, in October 2018, the Company issued 40,000 stock subscription units at a price of $0.25 per unit, for total proceeds of $10,000, in connection with stock subscription agreements entered into prior to April 30, 2018. Each unit consists of 40,000 shares of its Class A Common Stock and 40,000 warrants to purchase up to an additional 40,000 shares of Class A Common Stock.The warrants are fully exercisable, have a term of five years and anhis exercise price equal to 50% of the average of the closing bid price for the Company’s common stock for the 20-day trading period prior to conversion of the warrants.

In the six months ended October 31, 2018, the Company also issued 131,654 shares of its Class A Common Stock, in exchange for professional services valued at $37,000.

On October 30, 2018, an executive officer exercised stock warrants (granted in conjunction with his employment agreement disclosed previously) to purchase 5,000,000 shares of our Series A Convertible Preferred Stock (convertible into 5,000,000 shares of our Class A Common Stock), at(at an exercise price of $0.0001 per share, and another executive officer exercisedshare) of stock options (granted in conjunction withwarrants granted under his employment agreement disclosed previously) to purchase 3,000,000agreement. In addition, the Company issued 215,325 shares of its class A common stock in exchange for professional or consulting services valued at $36,000 and 30,000 shares of its class A common stock in connection with stock subscription agreements.

During the six months endedOctober 31, 2019, the Company repurchased from a third-party, in exchange for $500 in cash, 1,500,000 shares of its class A common stock and retired the shares.

As of October31, 2019, 123,272,386 shares of our Series A Convertible Preferred Stock (convertible into 3,000,000 shares of our Class A Common Stock), at an exercise price of $0.0001 per share. Upon exercise, all the shares of our Series A Convertible Preferred Stock were converted into shares of our Class A Common Stock.

As of October 31, 2018, there were 65,151,654 shares of our Classclass A common stock and 10,000,000 shares of our Class B common stock remained issued and outstanding.

18

Shares Subscribed

During the six months ended of October 31, 2018, the Company received stock subscriptions for its Class A common stock in the total amount of $40,000.There were no underwriting discounts or commissions involved in connection with these stock subscriptions.

 

Stock Warrants

The following table summarizes certain information relating to outstanding and exercisable warrants as of October 31, 2018:

Warrants Outstanding  Warrants Exercisable 
Number of
Shares		  Weighted
Average Remaining
Contractual
life (in years)(1)		  Weighted
Average
Exercise
Price(1)		  Number of
Shares		  

Weighted

Average
Exercise
Price(1)

 
 2,160,000   4.6  $0.22   2,160,000  $0.22 
 333,333   3.9  $0.15   333,333  $0.15 

(1)Between April 2018 and October 2018, in conjunction with the sale, in the aggregate, of 2,160,000 shares of its common stock pursuant to stock subscription agreements, the Company granted warrants to purchase up to 2,160,000 shares of its common stock at a price determined by the average trading price per share of the Company common stock.

 

The following table summarizes the activity relating to the Company’s warrants during the six months ended October 31, 2018:2019:

 

 Number of
Warrants		 

Weighted

Average Exercise
Price(1)

 Weighted Average
Remaining Term(1)		  Number of Warrants Weighted Average Exercise Price(1) Weighted Average Remaining Term(1) 
Outstanding at April 30, 2018  6,643,333  $0.08   4.7 
Outstanding at April 30, 2019  4,255,133  $0.24   3.1 
Granted  850,000   0.22   4.9   27,644,000  $0.0001   9.6 
Exercised  (5,000,000)  0.0001   -   10,000,000  $0.0001   - 
Expired  -   -   -   -   -   - 
Outstanding at October 31, 2018  2,493,333  $0.21   4.5 
Outstanding at October 31, 2019  21,899,133  $0.05   8.2 

 

(1)In October 2018, an executive officer of the Company exercised warrants (granted in connection with his employment agreement disclosed previously) to purchase 5,000,000 shares of the Company’s Series A Convertible Preferred Stock at the exercise price of $0.0001. Between April 2018 and October 2018, in conjunction with the sale, in the aggregate, of 2,160,000 shares of its common stock pursuant to stock subscription agreements, the Company granted warrants to purchase up to 2,160,000 shares of its common stock at a price determined by the average trading price per share of the Company common stock.

The following table summarizes certain information relating to outstanding and exercisable warrants:

Warrants Outstanding at October 31, 2019 
Warrants Outstanding  Warrants Exercisable 
   Weighted
Average Remaining		  Weighted
Average		     Weighted
Average		 
Number of
Shares		  Contractual
life (in years)		  Exercise
Price		  Number of
Shares		  Exercise
Price		 
              
 17,500,000   9.8  $0.0001   17,500,000  $0.0001 
 2,180,000   4.0  $0.09   2,180,000  $0.09 
 1,785,800   1.6  $0.25   1,785,800  $0.25 
 100,000   2.7  $3.00   100,000  $3.00 
 333,333   3.2  $0.15   333,333  $0.15 

During the six months ended October 31, 2019, the Company issued warrants to purchase up to 144,000 shares of the Company’s common stock to its independent sales force (with an aggregate fair value of $95,267). In addition, the Company issued warrants to purchase, in the aggregate, up to 27,500,000 shares of the its common stock to two new directors and an employee, with an aggregate fair value of $5,500,000. The exercise price of these stock warrants was $0.0001 per share.

 

NOTE 1516 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

In May 2018, Sharing Services entered into an amendment to the lease agreement covering its corporate headquarters in Plano, Texas. Under the terms of the amendment, Sharing Services leased additional office space adjacent to its current corporate offices. The incremental rent expense resulting from this amendment is approximately $10,159 per month, subject to customary rent increases in future years.

Acquisition-related Commitments

On May 15, 2018, Legacy Direct Global, LLC. (“Legacy Direct Global”), a Texas limited liability company and a wholly-owned subsidiary of Sharing Services, Sharing Services, and Legacy Direct, LLC. (the “Seller”) entered into an agreement pursuant to which Legacy Direct Global acquired certain assets and operational businesses and assumed certain liabilities of the Seller (the “Agreement”). In connection with the Agreement, Sharing Services has agreed to issue 100,000 restricted shares of its common stock and 900,000 stock warrants. The stock warrants enable the holders to acquire up to 900,000 restricted shares of Sharing Services’ common stock, subject to the achievement by the acquired business of certain specified performance targets over a period of up to three years. The stock warrants have an exercise price per share equal to 50% of the average 10-day trading price of Sharing Services’ common stock. In June 2018, the Company completed the acquisition. The acquisition involved the purchase of assets with a preliminary value of approximately $83,500.

On July 6, 2018, Sharing Services issued a Binding Letter of Intent (the “Hyten LOI”) expressing its intent to purchase certain operating assets of Hyten Global LLC (“Hyten”), the owner of certain multi-level marketing businesses operating principally in the United States and Asia. Under the terms of the Hyten LOI, Sharing Services agreed to provide Hyten with temporary loans and/or cash advances necessary to satisfy certain of Hyten’s financial obligations and the parties engaged in due diligence and negotiations aimed at completing the asset acquisition transaction within 120 days from the effective date of the Hyten LOI. On July 25, 2018, Sharing Services and Hyten entered into an Asset Purchase Agreement pursuant to which Sharing Services agreed to purchase certain operating assets from Hyten. As of October 31, 2018, Sharing Services had provided secured loans in the aggregate amount of $655,789 and unsecured cash advances of $12,097 to Hyten under the Hyten LOI.

On September 28, 2018, Sharing Services and Hyten entered into a Rescission and Mutual Release agreement pursuant to which the parties agreed to terminate the transaction contemplated in the Asset Purchase Agreement and exchanged customary mutual releases. In addition, on September 28, 2018, Hyten executed a promissory note in favor of Sharing Services for $655,789 relating to cash advances received from Sharing Services prior to that date under the terms of the Hyten LOI. The note bears interest at 5% and is secured by substantially all of Hyten’s assets. On October 3, 2018, Sharing Services and Hyten entered into a Sublicense Agreement pursuant to which Hyten granted to Sharing Services a non-exclusive sublicense to a Travel Application software (the “Travel App”) and any enhancements thereof. The Travel App sublicense was a part of the transaction contemplated in the Asset Purchase Agreement.

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.

 

OtherAcquisition-Related Contingencies

 

In October 2017, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 25% equity interest in 561 LLC. Pursuant to the terms oftheShare Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in 561 LLC to 40%in exchange for 2,500,000 shares of its Series AConvertible Preferred Stock. Under the terms oftheShare Exchange Agreement, the sellers shallwould be entitled to an additional 2,500,000 shares of our Series AConvertible Preferred Stock if/when both of the following conditions have been met: (a)one year has passed from the Closing Dateand (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by the NASDAQ stock market.OTC Markets. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

In October 2017, the Company entered into aShare Exchange Agreementpursuant to which it acquired a 25% equity interest in America Approved Commercial LLC (“AAC”).Pursuant to the terms oftheShare Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in AAC to 40%in exchange for 2,500,000 shares of its Series AConvertible Preferred Stock. Under the terms oftheShare Exchange Agreement, the sellers shallwould be entitled to an additional 2,500,000 shares of the Company’s Series A Preferred Stock in/when both of the following conditions have been met: (a)one year has passed from the Closing Dateand (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by the NASDAQ stock market.OTC Markets. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

In October 2017,As of September 16, 2019, the Company and 212 Technologies, LLC (“212 Technologies”) entered into aShare Exchange Release and Settlement Agreementpursuant (the “Settlement Agreement”). Pursuant to which it acquiredthe Settlement Agreement, the parties: (i) rescinded a 40% equity interestcertain “Stakeholder & Investment Agreement” dated May 21, 2017 (resulting in LEH Insurance Group LLC (“LEHIG”) in exchange for 500,000 sharesthe return of its Series A Preferred Stock with a deem value of $0.25 per share, or $125,000.Under the terms oftheShare Exchange Agreement, the sellers would be entitled to an additional 500,0005,628,750 shares of the Company’s Series A Preferred Stock if/whenby 212 Technologies and the following condition were met: prior to December 31,return of a 24% ownership stake in 212 Technologies by the Company) and (ii) terminated a certain “Software License Agreement” dated June 12, 2018 if LEHIG had booked contracts representing insurance premiums(the “SLA”) by and between 212 Technologies and Elepreneurs, LLC, a wholly owned subsidiary of no less than $500,000. In October 2018, upon LEHIG meeting this condition, the Company issued(“Elepreneurs”). In connection with the Settlement Agreement, Elepreneurs agreed to pay 212 Technologies the amount of $425,000 and to dismiss, with prejudice, a lawsuit it had previously filed concerning the functionality of the mobile application produced by 212 Technologies under the SLA, and the parties reached mutually accommodating terms and resolved all issues between their respective companies. As of the date hereof, the shares returned by 212 Technologies remain outstanding and are held by a custodian for the benefit of the Company.

Other Matters

In January 2019, the Company became aware of an additional 500,000 sharesunliquidated amount of potential liability arising from a series of cash advance loan transactions (“Transactions”) entered into by eight different lending sources and a Related Party entity (“debtor entity”) owned and/or controlled by a former Company officer. Without the knowledge of the Company and in contravention of the express provisions of both the Company’s Bylaws and the controlling Nevada Revised Statutes, this former officer also purported to obligate the Company (and two of the Company’s affiliates) to repay the amounts owed by the debtor entities under the Transactions. At this time, the Company has resolved all of the debt associated with the Transactions at a substantial discount from the amounts alleged by the holders of such debt. Additionally, the Company has entered into a comprehensive agreement, secured by substantial assets, with the former officer and the entity owned and/or controlled by the former officer. Pursuant to such agreement, the former officer and the entity owned and controlled by such former officer are obligated jointly and severally to repay the Company all sums expended by the Company in the resolution of the Transactions. The amount expended by the Company, in connection with such resolution, is the sum of $3.4 million. At April 30, 2019, the Company has recorded an accounts receivable of $3.4 million from the former officer and the entity owned and/or controlled by the former officer. This amount is reported in accounts receivable, related party in our consolidated balance sheet.

In June 2019, the Company became aware of a potential liability arising out of certain previous transactions involving the formation and capitalization of two legal entities affiliated with a Company consultant who was, at the time, considered the Company spokesperson. Without the knowledge of the Company and in contravention of the express provisions of both the Company’s Bylaws and the controlling Nevada Revised Statutes, this Company consultant purportedly solicited investment funds from various persons, who at the time, were independent contractors of the Company. While this matter is still currently under investigation, the Company has reason to believe that this Company consultant, possibly acting in concert with others, sought to leverage the assets and resources of the Company in furtherance of these ventures, to their personal pecuniary benefit. Upon learning of these allegations from various of these investors, the Company launched an immediate internal investigation into these transactions. In addition, the Company secured the services of a Dallas-based law firm with experience in financial impropriety and forensic investigations to assist in that process. The Company believes that it is probable that these actions have resulted in a material loss to the investing parties and is evaluating the potential exposure of these events to the Company. The Company is continuing to finalize its evaluation and to pursue settlements with the impacted investing parties.

On July 26, 2019, the Company and certain of its Series A Preferred Stocksubsidiaries entered into a Settlement Agreement (the “Agreement”) with Company co-founder and former consultant Robert Oblon. Pursuant to the sellers.

In addition, underAgreement and in compromise of a dispute concerning a prior contractual obligation and various competing claims, the termsCompany agreed to pay Mr. Oblon the aggregate amount ofthe Stakeholder $2.2 million, payable in 96 equal semi-monthly installments, and Investment Agreement, the sellers shall be entitledstock warrants to an additional 500,000purchase up to 7.0 million restricted shares of the Company’s Series A Preferred Stock when the following condition has been met: priorcommon stock, subject to December 31, 2018, LEHIG has booked contracts representing insurance premiums of no less than $1,000,000. In accordance with GAAP,limiting conditions. On August 30, 2019, the Company has not recordedceased making the installment payments and filed a lawsuit against Mr. Oblon claiming, among other things, Mr. Oblon’s breach of contract related to this Agreement, as further discussed below. During the three and six months ended October 31, 2019, the Company made payments under the Agreement of $120,000 and $235,000, respectively. At October 31, 2019, the Company recognized an estimated settlement liability of $2.9 million in connection with the Agreement.

On March 28, 2019 Elepreneur, LLC, a wholly owned subsidiary of the Company, and Jordan Brock, a co-founder and former officer of the Company, entered into a Founder Consulting Agreement pursuant to which Mr. Brock agreed to provide certain business consulting services to the Company. Under the terms of the Founder Consulting Agreement, the Company agreed to pay Mr. Brock a consultancy fee at the rate of $15,000 per month. Effective as of July 15, 2019, the Company and Mr. Brock amended the Founder Consulting Agreement which resulted in the increase of the consultancy fee to $37,000 per month in exchange for Mr. Brock’s willingness to forgo significant previously negotiated income-earning opportunities with the Company. During the three and six months ended October 31, 2019, the Company made payments under the Founder Consulting Agreement of $45,000 and $137,500, respectively.

In July 2019, Pruvit Ventures, Inc. filed a lawsuit against Elevacity U.S., LLC, a wholly owned subsidiary of the Company, alleging breach of contract by Elevacity. Elevacity has denied the Plaintiff’s claim. Discovery was propounded on the Plaintiff specifically related to the alleged act of wrong-doing, responses were received by the Company on December 6, 2019 and the Company is currently evaluating the responses.

In August 2019, Entrepreneur Media, Inc. (“EMI”) notified the Company that EMI believes that the Company’s pending trademark application for “Elepreneurs” would confuse consumers due to the purported similarity to EMI’s existing trademark for the word “Entrepreneur.” The Company believes that this contingency.claim is without merit and intends to vigorously defend its trademark application. EMI has reached out to the Company and the parties are now engaged in dialogue intended to achieve a possible amicable resolution.

In August 2019, the Company filed a lawsuit against Kenyatto M. Jones, Bear Bull Market Dividends, Inc. and Research and Referral, BZ for breach of contract, statutory fraud in a stock transaction, and violations of the Texas Securities Act. The three defendants purport to be beneficial owners of shares of the Company’s equity securities, which purported ownership is the subject of the referenced lawsuit. The relief sought in the lawsuit includes both recovery of damages and rescission of the underlying shares of the Company’s equity securities.

On August 30, 2019, the Company and certain of its affiliated entities filed a lawsuit against Company founder and former consultant, Robert Oblon. The lawsuit claims breach of contract related to the Settlement Agreement dated July 26, 2019, tortious interference with business relationships, and misappropriation of trade secrets, and sought injunctive relief. The Company and such affiliated entities filed an amended petition in September 2019 and were awarded temporary injunctive relief protecting their intellectual property.

In September 2019, the Company and a former consultant to the Company agreed to settle a legal dispute between the Company and the consultant. As of the date herein the parties are in the process of formalizing the settlement. The Company has accrued all costs and expenses associated with the settlement in the three months ended July 31, 2019.

On October 1, 2019, the Company filed a complaint in the District Court of Clark County, Nevada entitled Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Alchemist Holdings, LLC, Kenyatto M. Jones, et al.,Case No. A-19-802861-B. The lawsuit asserts that a Certificate of Designation for its Series B Preferred Stock filed on or about April 24, 2017 (the “Defective Certificate”) was in contravention of both the Company’s Articles of Incorporation and Nevada law. Additionally, the lawsuit alleges that the Defective Certificate was improperly approved through the self-dealing actions of certain former Company executives, working in collusion with outside shareholders. The lawsuit seeks relief in the form of an injunction enjoining the defendants from attempting to enforce the provisions of the Defective Certificate and a declaratory judgment that will invalidate the improper portions of the Defective Certificate. The lawsuit also requests declaratory judgment relief regarding the terms of the Amended and Restated Certificate of Designation filed by the Company on or about September 26, 2019 (the “Amended Certificate”) which seeks to correct the improper provisions of the Defective Certificate and to properly realign the rights of the shareholders which were improperly diminished by the terms of the Defective Certificate. The District Court of Clark County issued a default judgment against Defendant Bear Bull Market Dividends, Inc. on November 14, 2019 and against Defendant Kenyatto M Jones on November 15, 2019. The Company is in negotiations with Defendant Alchemist Holdings, LLC and anticipates that a favorable outcome will be reached in connection with those negotiations.

The Company does not believe that the ultimate resolution of these matters will have a material future effect on its financial statements.

 

NOTE 1617 - SUBSEQUENT EVENTS

 

On November 2,December 11, 2018, the Company entered into a financing agreementLoan Agreement and Promissory Note (“loan agreement”) with Syndimate LLC (“Syndimate”)Global Payroll Gateway pursuant to which the Company agreed to sell to Syndimate certain future trade receipts inborrowed the aggregateprincipal amount of $330,000. Net proceeds from this transaction$1,000,000. Borrowings under the loan agreement were $239,000 and were net of an initial financing fee of $11,000 and applicable financing costs, calculated at an annual percentage rate (“APR”) of 86%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $2,063 over a term of approximately five and one-half months.

52 weekly installments. On November 27, 2018,December 11, 2019 the Company entered into a financing agreement with Libertas Funding LLC (“Libertas”) pursuant to which the Company agreed to sell to Libertas certain future trade receiptspaid in the aggregate amount of $635,000. Net proceeds from this transaction were $490,000full all principal and were net of an initial financing fee of $10,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months.

On November 30, 2018, the Company entered into a financing agreement with eMerchant Advance LLC (“eMerchant”) pursuant to which the Company agreed to sell to eMerchant certain future trade receipts in the aggregate amount of $635,000. Net proceeds from this transaction were $485,000 and were net of an initial financing fee of $15,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months.interest then outstanding.

 

2120
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following section discusses management’s viewviews of the financial condition as of October 31, 2018, and the results of operations and cash flows for the three months ended October 31, 2018, of Sharing Services Global Corporation (formerly Sharing Services, Inc.) and consolidated subsidiaries. This section should be read in conjunction with the(a) our audited consolidated financial statements of Sharing Services and the related notes included in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) tofiscal year ended April 30, 2018,2019, and with the(b) our condensed consolidated financial statements included elsewhere in this Quarterly Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations section may contain forward-looking statements. Please seeSee “Cautionary Notice Regarding Forward-Looking Statements” above for a discussion of forward-looking statements and the inherent uncertainties, risks and assumptions associated with these forward-looking statements thattherewith, which could cause actual results to differ materially from those reflectedthe projections contained in such forward-looking statements.

 

Executive SummaryHighlights for the Three Months Ended October 31, 2018:2019:

 

 ●For the three months ended October 31, 2018,2019, our consolidated net sales were $18.0increased by $20.9 million, to $38.9 million, compared to $12.9 million for the preceding fiscal quarter. The Company is an emerging growth company with no significant sales prior to December 2017;three months ended October 31, 2018;
   
 ●For the three months ended October 31, 2018,2019, our consolidated gross profit was $11.2increased by $16.2 million, and ourto $27.4 million, compared to the three months ended October 31, 2018. Our consolidated gross margin was 62.2%,70.9% for the three months ended October 31, 2019, compared to 61.6%62.2% for the preceding fiscal quarter;three months ended October 31, 2018;
   
 ●For the three months ended October 31, 2018,2019, our consolidated operating earnings were $866,802$3.9 million compared to an operating loss of $1,539,384$866,802 for the three months ended October 31, 2017;2018;
   
 ●For the three months ended October 31, 2018, the changes in the fair value of2019, our derivative liabilitiesconsolidated net non-operating expenses were net earnings of $29,910,472$4.0 million compared to aconsolidated net lossnon-operating income of $1,100,587$29.3 million for the three months ended October 31, 2017;2018;
   
 ●OurFor the three months ended October 31, 2019, our consolidated net loss was $1.2 million compared to consolidated net earnings were $30,151,246of $30.2 million for the three months ended October 31, 2018, compared to a net2018. Diluted loss of $2,736,557per share was $0.01 for the three months ended October 31, 2017. Fully2019, compared to diluted earnings per share wereof $0.08 for the three months ended October 31, 2018, compared to a fully diluted loss per share of $0.05 for the three months ended October 31, 2017;2018;
   
 ●OurFor the six months ended October 31, 2019, our consolidated net cash provided by operating activities was $12.1 million compared to $624,322 for the six months ended October 31, 2018, compared to cash used of $797,972 for the period from May 5, 2017 (inception) to October 31, 2017;
●In August 2018, the Company issued, in the aggregate, 1,250,000 shares of its Series A Convertible Preferred Stock, for a total value of $312,500, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andAmerica Approved Commercial LLC;
●In September, the Company Hyten entered into a Rescission and Mutual Release agreement pursuant to which the parties agreed to terminate the transaction contemplated in the previously disclosed Asset Purchase Agreement between the parties;
●In October 2018, the Company issued 500,000 shares of its Series A Preferred Stock, for a total value of $125,000, in connection with its previously disclosed acquisition of an equity interest in LEH Insurance Group LLC;
●In October 2018, the Company issued, in the aggregate, 8,000,000 shares of its Class A Common Stock to two executive officers, at an exercise price of $0.0001 per share, in connection with their exercise of derivative instruments granted to them in conjunction with their previously disclosed employment agreements;2018;
   
 ●During the threesix months ended October 31, 2018 the Company prepaid in full three convertible notes2019, we conducted a comprehensive assessment of our information technology systems. Based on this assessment, we intend to implement a system upgrade in the second half of the fiscal year 2020, at a projected cost of approximately $200,000;
●During the six months ended October 31, 2019, we awarded to certain directors and employees warrants, with an aggregate principal amountfair value of $381,000, plus accrued and unpaid interest, and applicable prepayment penalties;$5.5 million, to purchase up to 27,500,000 shares of our common stock at an exercise price of $0.0001 per share;
●During the six months ended October 31, 2019, we repurchased from a third-party (and retired) 1,500,000 shares of our class A common stock in exchange for $500 in cash; and
   
 ●During the threesix months ended October 31, 2018, the Company issued 250,000 shares2019, we repaid borrowings under financing arrangements aggregating $2.4 million and borrowings under convertible notes with an aggregate principal amount of its Class A Common Stock, at a price of $0.25, for a total value of $62,500, and 170,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25, for a total value of $42,500, in connection with stock subscription agreements.$755,000, not including accrued interest.

22

 

Overview

 

Summary Description of Business

 

Sharing Services Inc.Global Corporation (“SHRV,” “we”Sharing Services” or “the Company”) is a diversified company, specializing in the direct selling industry. with Elepreneurs Holdings and Elevacity Holdings as its primary operating subsidiaries.The Company owns, operates, or controls an interest in a variety of companies that either sell productsmarkets and services to the consumer directly through independent representatives, that range fromdistributes health and wellness energy, technology, insurance services, training, media and travel benefits.

products that are sold under the Elevate brand through a sales force of independent distributors, or Elepreneurs, using a marketing strategy which is a form of direct selling. The Company previously developedoperates several websites, includingwww.shrginc.com,www.elepreneur.com and marketed a taxi-ride sharing website and application (“web app”)www.elevacity.com. Beginning in February 2017, the

The Company expanded its business modelhad no significant sales history prior to also offer a wide range of travel and technology management and other products and services, which are currently in varying planning stages and are expected to be marketed in the future. In December 2017, when the Company launched a wholly-owned subsidiary operating under the trade name “Elepreneurs.” One of Elepreneus’ leadingits current Elevate health and wellness product lines, “Elevate,”line. The Company’s Elevate product line consists of Nutraceutical products whichthat the Company termsrefers to as “D.O.S.E.” (Dopamine,(an acronym for the four mood-enhancing hormones contained therein: Dopamine, Oxytocin, Serotonin and Endorphins) and was developed and is owned by Elevacity Global, a wholly-owned subsidiary of the Company.. The introductionlaunch of this product line has accelerated the Company’s growth in recent months. For example,and enabled the Company to expand its consolidated sales volume and operations at a rapid pace.

Recent Corporate Name Change

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. The corporate name change was approved by the Company’s stockholders and its Board.

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 issuance of convertible notes and borrowings under short-term financing arrangements, and through the intermittent issuance of equity securities from time to time. See “Liquidity and Capital Resources” below for additional information about the Company’s convertible notes and borrowings under short-term financing arrangements.

Information Technology System Upgrade

During the six months ended October 31, 2018, consolidated net sales were $30.9 million and consisted primarily of sales of ourElevatehealth and wellness products.

As part2019, the Company conducted a comprehensive assessment of its growth strategy,information technology systems, with a view of implementing a system upgrade that can accommodate the Company has completedCompany’s current and anticipated growth. We expect to implement a number of significant acquisitions and purchases of equity interests in certain businessessystem upgrade in the past year. Subject to approval by its Boardsecond half of Directors, the Company intends to continue to make strategic acquisitionsour fiscal year 2020, at a projected cost of businesses that it believes complement its business competencies and growth strategy and create shareholder value. Please see “Liquidity and Capital Resources” below from more information about our recent acquisitions.approximately $200,000.

 

Key Industry and Business Trends

The information in “Key Industry“Industry and Business Trends” included in ITEM 1— “Business” in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) tofiscal year ended April 30, 20182019 is incorporated herein by reference.

Debt

The Company is an emerging growth company with no significant sales prior to December 2017 and, prior to its fiscal quarter ended October 31, 2018, had not generated cash from operations. Historically, the Company has funded a substantial portion of its liquidity and cash needs through the issuance of convertible and non-convertible debt and equity securities.

On June 29, 2018 the Company paid $143,211 (including accrued but unpaid interest of $6,477) to settle in full a convertible note in the principal amount of $100,000. In connection therewith, the Company recognized prepayment penalties of $36,734 and a gain of $121,823 resulting from the change in the fair value of this derivative liability, in connection with this transaction.

On September 12, 2018, the Company paid $54,997 (including accrued but unpaid interest) to settle in full a convertible note in the principal amount of $50,000. In connection therewith, the Company recognized a gain of $34,771 resulting from the change in the fair value of this derivative liability, in connection with this transaction.

On October 31, 2018 the Company paid $433,503 (including accrued but unpaid interest of $15,802) to settle in full two convertible notes in the aggregate principal amount of $331,000. In connection therewith, the Company recorded prepayment penalties of $86,701 and recognized a gain of $681,909 resulting from the change in the fair value of this derivative liability, in connection with these transactions.

At October 31, 2018, convertible notes payable consists of notes in the aggregate amount of $870,000 held by RB Capital Partners, Inc. and a note of $50,000 held by another lender. Please see “Liquidity and Capital Resources” below for more information about the Company’s debt and issuances of equity securities.

23

 

Results of Operations

 

The Three Months Ended October 31, 20182019 compared to the Three Months Ended October 31, 20172018

 

Net Sales

For the three months ended October 31, 2018,2019, our consolidated net sales were $38.9 million, compared to $18.0 million for the three months ended October 31, 2018. During both the three months ended October 31, 2019 and consisted primarily2018,the Company derived approximately 98% of sales of ourElevacity health and wellness product line, which was introduced in December 2017. The Company anticipates its consolidated net sales from its Elevate health and wellness products launched in December 2017. During the three months ended October 31, 2019, approximately 50% of our consolidated net sales were to continuerecurring customers and approximately 25% of our consolidated net sales were to grow at a rapid pace during its fiscal year ending April 30, 2019.our independent distributors.

 

Gross Profit

 

For the three months ended October 31, 2018,2019, our consolidated gross profit was $27.4 million, compared to $11.2 million and our consolidated gross profit as a percentage of consolidated net sales, or consolidated gross margin, was 62.2%. Forfor the three months ended October 31, 2018, and our consolidated gross margins were 70.6% and 62.2%, respectively. During the three months ended October 31, 2019, our consolidated gross margin benefited from economies of scale, (asdue to an increase in the volume of product shipped increased, for example, compared to the six-month periodvolume of product shipped during the three months ended April 30, 2018)October 31, 2018, and ongoing cost reduction efforts in connection with our order-fulfilment operationsfrom selective price increases implemented during the second half of the fiscal year 2019 and back-office processes.during the six months ended October 31, 2019.

 

Selling and Marketing Expenses

 

For the three months ended October 31, 2018,2019, our consolidated selling and marketing expenses increased by $7.8to $19.0 million, to $8.2 million, compared to the three months ended October 31, 2017, principally as a result of sales commission expense of $7.9 million associated with the increase in sales.

As a percentageor 48.9% of consolidated net sales, compared to $8.2 million, or 45.5% of consolidated selling and marketing expenses were 45.5%net sales, for the three months ended October 31, 2018. As our sales volume continue to grow, we expect ourThe increase in consolidated selling and marketing expenses is mainly due to grow at a slower pace thanhigher sales commissions of $10.3 million (which reflects an increase in our consolidated net sales.sales commission payout rate implemented since November 1, 2018 as well as in August 2019) and incremental promotional trade show and sales convention expenses.

General and Administrative Expenses

 

For the three months ended October 31, 2018,2019, our consolidated 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) increased by $1.0to $4.5 million, or 11.5% of consolidated net sales, compared to $2.1 million, compared toor 11.9% of consolidated net sales, for the three months ended October 31, 2017.2018. The increase in consolidated general and administrative expenses consisted principally ofprimarily was due to higher employee compensation and benefits of $826,195, incremental consulting and contract labor expenses of $366,024,$1.7 million, higher legal and other professional fees of $285,988,$426,937, and higher rent and other occupancy costs of $124,677, and higher insurance and other administrativeoccupancy-related expenses. This increase was partially offset by lower share-based compensation of $1,042,500.

22

Interest Expense, Net

 

As a percentage of consolidated net sales, consolidated general and administrative expenses were 11.8% forFor the three months ended October 31, 2018. As our sales volume continue to grow, we expect2019, our consolidated general and administrative expenses to grow at a slower pace than our consolidated net sales.

Interest Expense

Consolidated interest expense includingwas $66,204, excluding interest of $37,799 associated with Type B lease obligations, amortization of debt discount of $509,711$12,168 and prepayment penaltiesinterest income of $86,701$7,340. Interest expense consisted of $51,529 associated with short-term borrowings under financing arrangements and $16,802 associated with our convertible notes paid, increased to $626,028 for the three months ended October 31, 2018, compared to $96,586 for the three months ended October 31, 2017 as a result of an increase in convertible notes outstanding. notes.

For the three months ended October 31, 2018, our consolidated interest expense is netwas $116,317, excluding amortization of debt discount of $509,711 and primarily was associated with our convertible notes.

Interest Income, Related Party

For the three months ended October 31, 2019, interest income on accounts receivable, related party, were $138,546. For the three months ended October 31, 2018, there was no comparable amount.

Litigation Settlements and Other Non-Operating Expenses

For the three months ended October 31, 2019, our consolidated non-operating expenses include litigation settlements and other non-operating expenses of $8,318.$4.0 million, including an estimated loss of $2.9 million from the settlement of certain legal claims and counterclaims between the Company and certain of its affiliated entities, and Company founder and former consultant, Robert Oblon, a loss of $425,000 in connection with the Release and Settlement Agreement by and between the Company and 212 Technologies and a loss of $317,105 on impairment of a promissory note receivable. For the three months ended October 31, 2018, there was no comparable amount.

 

Net Change in Fair Value of Derivative Liabilities

 

The change in the fair value of the derivative liabilities associated with the Company’s convertible notes, stock options and stock warrants outstanding, was a net gain of $29,910,472 for the three months ended October 31, 2018, compared to a net loss of $1,100,587 for the three months ended October 31, 2017. DuringFor the three months ended October 31, 2018, the Company repaidchange in the convertible notes withfair value of our derivative liabilities resulted in a variable conversion rate, a conversion rate tied to the market pricenet gain of the Company’s common stock.$29.9 million. The Company accounts for the conversion features of its convertible notes, stock options and stock warrants under ASC 815. Please see Note 11 ofAccounting Standards Codification (“ASC”) Topic No. 815,Derivatives and Hedging. During the Notes tothree months ended October 31, 2019, the condensed consolidated financial statements included elsewhere in this Quarterly Report for more information about the net change in the fair value of theCompany had no derivative liabilities.

 

Provision for Income Taxes

 

The Company is an emerging growth company and, prior toDuring its fiscal quarteryear ended April 30, 2019, the Company’s consolidated operating loss was $1.1 million. During the six months ended October 31, 2018, had not generated pre-tax2019, the Company’s consolidated operating earnings or taxable earnings fromwere $3.9 million. The Company believes it is probable it will utilize its operations. As ofavailable net operating losses in the date herein, the ability of the Company to consistently generateforeseeable future pre-tax earnings or taxable earnings remains uncertain. Accordingly, the Company has not recorded an income tax benefit in its consolidated financial statements for the periods covered in this Quarterly Report.

Net Loss and, Loss per Share

As a result of the foregoing, for the three months ended October 31, 2018,2019, recognized a provision for income taxes of $1.1 million. See Note 2 of the Notes to Consolidated Financial Statements in ITEM 8— “Financial Statements and Supplementary Data” contained in our Annual Report for the fiscal year ended April 30, 2019 for more information.

Net Earnings and Earnings per Share

For the three months ended October 31, 2019, our consolidated net earnings were $30,151,246loss was $1.2 million compared to aconsolidated net lossearnings of $2,736,557$30.2 million for the three months ended October 31, 2017. Fully2018. For the three months ended October 31, 2019, diluted loss per share was $0.01, compared to diluted earnings per share wereof $0.08, for the three months ended October 31, 2018, compared to a fully diluted loss per share $0.05 for the three months ended October 31 2017.2018.

 

The Six Months Ended October 31, 20182019 compared to the Period from May 5, 2017 (Inception) toSix Months Ended October 31, 20172018

Net Sales

TheFor the six months ended October 31, 2019, our consolidated net sales were $74.3 million, compared to $30.9 million for the six months ended October 31, 2018. During both the six months ended October 31, 2019 and 2018,the Company isderived approximately 98% of its consolidated net sales from its Elevate health and wellness product line launched in December 2017. During the six months ended October 31, 2019, approximately 50% of our consolidated net sales were to recurring customers and approximately 25% of our consolidated net sales were to our independent distributors.

Gross Profit

For the six months ended October 31, 2019, our consolidated gross profit was $52.8 million, compared to $19.1 million for the six months ended October 31, 2018, and our consolidated gross margin was 71.1% and 61.9%, respectively. During the six months ended October 31, 2019, our consolidated gross margin benefited from economies of scale, due to an emerging growth company with no significantincrease in the volume of product shipped compared to the volume of product shipped during the six months ended October 31, 2018, and selective price increases implemented during the second half of the fiscal year 2019 and during the six months ended October 31, 2019.

23

Selling and Marketing Expenses

For the six months ended October 31, 2019, our consolidated selling and marketing expenses increased to $34.8 million, or 46.9% of consolidated net sales, priorcompared to December 2017. Our$14.2 million, or 46.0% of consolidated net sales, for the six months ended October 31, 2018 were $30.9 million and consisted primarily of sales of ourElevacityhealth and wellness products. Our Elevacity product line was introduced2018. The increase in December 2017. The Company anticipates its consolidated net sales to continue to grow at a rapid pace during its fiscal year ending April 30, 2019, compared to the fiscal period from May 5, 2017 to April 30, 2018.

Gross Profit

Our consolidated gross profit for the six months ended October 31, 2018 was $19.1 million and our consolidated gross profit as a percentage of consolidated net sales, or consolidated gross margin, was 61.9%. For the six months ended October 31, 2018, our consolidated gross margin benefited from economies of scale (as the volume of product shipped increased, for example, compared to the six-month period ended April 30, 2018) and ongoing cost reduction efforts in connection with our order-fulfilment operations and back-office processes.

Selling and Marketing Expenses

Our consolidated selling and marketing expenses increased $13.5 million,is mainly due to $14.2 million, for the six months ended October 31, 2018, compared to the period from May 5, 2017 (inception) to October 31, 2017, principally as a result ofhigher sales commissions of $13.6$20.0 million associated with the(which reflects an increase in sales.

As a percentage of consolidated net sales, consolidated selling and marketing expenses were 46.0% for the six months ended October 31, 2018. As our sales volume continue to grow, we expect our consolidated sellingcommission payout rate implemented since November 1, 2018 as well as in August 2019) and marketing expenses to grow at a slower pace than our consolidated net sales.incremental promotional trade show and sales convention expenses.

General and Administrative Expenses

 

OurFor the six months ended October 31, 2019, our consolidated 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) increased $2.3to $14.1 million, or 19.0% of consolidated net sales, compared to $3.7 million, or 12.0% of consolidated net sales, for the six months ended October 31, 2018, compared to the period from May 5, 2017 (inception) to October 31, 2017.2018. The increase in consolidated general and administrative expenses consisted principallyprimarily was due to higher stock-based compensation expense of $5.5 million, employee compensation and benefits of $1.3$3.5 million, incremental consulting and contract labor expenses of $684,171, higher legal and other professional fees of $442,323,$1.0, and higher rent and other occupancy costs of $251,195, and higher insurance and other administrativeoccupancy-related expenses. This increase was partially offset by lower share-based compensation of $1,308,948.

 

As a percentage of consolidated net sales, consolidated general and administrative expenses were 12.0% forInterest Expense, Net

For the six months ended October 31, 2018. As our sales volume continue to grow, we expect2019, our consolidated general and administrative expenses to grow at a slower pace than our consolidated net sales.

Interest Expense

Consolidated interest expense includingwas $367,174, excluding interest of $74,755 associated with Type B lease obligations, amortization of debt discount of $845,011$45,166 and prepayment penaltiesinterest income of $123,435$15,358. Interest expense consisted of $324,932 associated with short-term borrowings under financing arrangements and $44,369 associated with our convertible notes paid, increased to $1,028,615 for the six months ended October 31, 2018, compared to $123,195 for the period from May 5, 2017 (inception) to October 31, 2017 as a result of an increase in convertible notes outstanding. notes.

For the six months ended October 31, 2018, our consolidated interest expense is netwas $183,604, excluding amortization of debt discount of $845,011, and primarily was associated with our convertible notes.

Interest Income, Related Party

For the six months ended October 31, 2019, interest income of $16,636.on accounts receivable, related party, were $138,546. For the six months ended October 31, 2018, there was no comparable amount.

 

Litigation Settlements and Other Non-operating Expenses

For the six months ended October 31, 2019, our consolidated non-operating expenses include litigation settlements and other non-operating expenses of $4.6 million, including an estimated loss of $2.9 million from the settlement of certain legal claims and counterclaims between the Company and certain of its affiliated entities, and Company founder and former consultant, Robert Oblon; a loss of $425,000 in connection with the Release and Settlement Agreement by and between the Company and 212 Technologies; and a loss of $317,105 on impairment of a promissory note receivable. For the six months ended October 31, 2018, there was no comparable amount.

Net Change in Fair Value of Derivative Liabilities

 

The change in the fair value of the derivative liabilities associated with the Company’s convertible notes, stock options and stock warrants outstanding, was a net gain of $29,884,636 forFor the six months ended October 31, 2018, compared tothe change in the fair value of our derivative liabilities resulted in a net lossgain of $1,122,591 for the period from May 5, 2017 (inception) to October 31, 2017. During the three months ended October 31, 2018, the Company repaid the convertible notes with a variable conversion rate, a conversion rate tied to the market price of the Company’s common stock.$29.9 million. The Company accounts for the conversion features of its convertible notes, stock options and stock warrants under ASC 815. Please see Note 11 ofAccounting Standards Codification (“ASC”) Topic No. 815,Derivatives and Hedging. During the Notes tothree months ended October 31, 2019, the condensed consolidated financial statements included elsewhere in this Quarterly Report for more information about the net change in the fair value of theCompany had no derivative liabilities.

 

Provision for Income Taxes

 

The Company is an emerging growth company and, prior toDuring its fiscal quarteryear ended April 30, 2019, the Company’s consolidated operating loss was $1.1 million. During the six months ended October 31, 2018, had not generated pre-tax2019, the Company’s consolidated operating earnings or taxable earnings fromwere $3.9 million. The Company believes it is probable it will utilize its operations. As ofavailable net operating losses in the date herein, the ability of the Company to consistently generateforeseeable future pre-tax earnings or taxable earnings remains uncertain. Accordingly, the Company has not recorded an income tax benefit in its consolidated financial statements for the periods covered in this Quarterly Report.

Net Loss and, Loss per Share

As a result of the foregoing, for the six months ended October 31, 2018,2019, recognized a provision for income taxes of $1.4 million. See Note 2 of the Notes to Consolidated Financial Statements in ITEM 8—“Financial Statements and Supplementary Data” contained in our Annual Report for the fiscal year ended April 30, 2019 for more information.

24

Net Earnings and Earnings per Share

For the six months ended October 31, 2019, our consolidated net earnings were $30,059,995loss was $2.1 million compared to a net lossearnings of $3,377,383$30.1 million for the period from May 5, 2017 (inception) tosix months ended October 31, 2017. Fully2018. For the six months ended October 31, 2019, diluted loss per share was $0.2, compared to diluted earnings per share wereof $0.10 for the six months ended October 31, 2018, compared to a fully diluted loss per share $0.07 for the period from May 5, 2017 (inception) to October 31, 2017.2018.

 

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

AtAs of October 31, 2018,2019, cash and cash equivalents were $1,099,249.$12.8 million. Based upon the current level of operations and anticipated investments necessary to grow our business, we anticipatebelieve that existing cash balances and anticipated funds expected to be generated byfrom operations will likely not be sufficient to meet our working capital requirements, and to fund potential acquisitions and anticipated capital expenditures, including potential investments in information technology, over the next 12 months. Accordingly,However, when needed to compensate for any temporary fluctuations in our working capital needs, compared to our operating cash flows, we intend tomay obtain occasional additional financing through the issuance of equity securities and secured and unsecured debt, including the issuance ofborrowings under convertible notes and othershort-term financing products from time to time as needed to fund our working capital needs and our growth.arrangements.

Historical Cash Flows

Historically, our primary sources of cash have been capital transactions involving the issuance of equity securities and secured and unsecured debt (Please see(See “Recent Issuances of Equity Securities” and “Debt”“Short-term Borrowings and Convertible Notes” below) and our primary uses of cash have been for operating activities, capital expenditures, acquisitions and acquisitionsdebt repayments in the ordinary course of our business.

 

The following table showssummarizes our sources and uses of cash flow activities for the six months ended October 31, 2018,2019, compared to the period from May 5, 2017 (inception) tosix months ended October 31, 2017:2018:

 

  Six Months Ended
October 31, 2018		  Period from May 5,
2017 (Inception) to
October 31, 2017		  Increase
(Decrease)		 
Net cash provided by (used in) operating activities $624,322  $(797,972) $ 
Net cash (used in) provided by investing activities  (150,256)  42,605     
Net cash (used in) provided by financing activities  (143,085)  824,850             
Net increase in cash and cash equivalents $330,981  $69,483  $

 
  Six Months Ended October 31, 
  2019  2018  Increase (Decrease) 
Net cash provided by operating activities $12,127,776  $624,322  $11,503,454 
Net cash used in investing activities  (119,675)  (97,206)  22,469 
Net cash used in financing activities  (3,130,262)  (196,135)  2,934,127 
Net increase in cash and cash equivalents $8,877,839  $330,981  $8,546,858 

 

Net Cash UsedProvided by Operating Activities

 

Net cash provided by operating activities increased by $1,422,294 to $624,322$11.5 million for the six months ended October 31, 2018,2019, compared to net cash used in operating activities of $797,972 for the period from May 5, 2017 (inception) tosix months ended October 31, 2017.2018. This changeincrease was mainly due to an increase in operating earningsstock-based compensation (a non-cash expense) of $3,335,571, partially offset$5.6 million and by a decrease in stock-based payments of $1,264,948 and net changes in operating assets and liabilities of $651,956.$8.1 million. This increase was partially offset by an increase in cash payments for income taxes and interest, in the aggregate, of $1.5 million.

 

Net Cash Used byin Investing Activities

 

Net cash used in investing activities increased by $192,861 to $150,256$22,454 for the six months ended October 31, 2018,2019, compared to net cash provided by investing activities of $42,605 for the period from May 5, 2017 (inception) tosix months ended October 31, 2017.2018. This changeincrease was mainly due to an increasechange in accounts receivable from related parties of $58,687, partially offset by lower capital expenditures of $130,256$16,218 and a $20,000 decrease in net cash acquired in connection with acquisitions of $57,605.paid for acquisitions.

 

Net Cash Used byin Financing Activities

 

Net cash used in financing activities increased by $967,935 to $143,085$2.9 million for the six months ended October 31, 2018,2019, compared to net cash provided by financing activities of $824,850 for the period from May 5, 2017 (inception) tosix months ended October 31, 2017.2018. This changeincrease was mainly due to higher net repayments ($2.9 million) of borrowings under short-term financing arrangements and convertible promissory notes, and lower proceeds of $608,701 from issuances of equity securities and higher net repayments of promissory notes of $411,435, partially offset by higher net proceeds from related-party loans and cash advances of $52,201.

stock.

Significant RecentFuture Acquisitions

On May 15, 2018, Legacy Direct Global, LLC. (“Legacy Direct Global”), a Texas limited liability company and a wholly-owned subsidiary of Sharing Services, Sharing Services, and Legacy Direct, LLC. (the “Seller”) entered into an agreement pursuant to which Legacy Direct Global acquired certain assets and operational business and assumed certain liabilities of the Seller (the “Agreement”). In connection with the Agreement, Sharing Services has agreed to issue 100,000 restricted shares of its common stock and 900,000 stock warrants. The stock warrants enable the holders to acquire up to 900,000 restricted shares of Sharing Services’ common stock, subject to the achievement by the acquired business of certain specified performance targets over a period of up to three years. The stock warrants have an exercise price per share equal to 50% of the average 10-day trading price of Sharing Services’ common stock. In June 2018, the Company completed the acquisition. The acquisition involved the purchase of assets with a preliminary value of $83,500.

On July 6, 2018, Sharing Services issued a Binding Letter of Intent (the “Hyten LOI”) expressing its intent to purchase certain operating assets of Hyten Global LLC (“Hyten”), the owner of certain multi-level marketing businesses operating principally in the United States and Asia. Under the terms of the Hyten LOI, Sharing Services agreed to provide Hyten with temporary loans and/or cash advances necessary to satisfy certain of Hyten’s financial obligations and the parties engaged in due diligence and negotiations aimed at completing the asset acquisition transaction within 120 days from the effective date of the Hyten LOI. On July 25, 2018, Sharing Services and Hyten entered into an Asset Purchase Agreement pursuant to which Sharing Services agreed to purchase certain operating assets from Hyten. As of October 31, 2018, Sharing Services had provided secured loans in the aggregate amount of $655,789 and unsecured cash advances of $12,097 to Hyten under the Hyten LOI.

On September 28, 2018, Sharing Services and Hyten entered into a Rescission and Mutual Release agreement pursuant to which the parties agreed to terminate the transaction contemplated in the Asset Purchase Agreement and exchanged customary mutual releases. In addition, on September 28, 2018, Hyten executed a promissory note in favor of Sharing Services for $655,789 relating to cash advances received from Sharing Services prior to that date under the terms of the Hyten LOI. The note bears interest at 5% and is secured by substantially all of Hyten’s assets. On October 3, 2018, Sharing Services and Hyten entered into a Sublicense Agreement pursuant to which Hyten granted to Sharing Services a non-exclusive sublicense to a Travel Application software (the “Travel App”) and any enhancements thereof. The Travel App sublicense was a part of the transaction contemplated in the Asset Purchase Agreement.

 

Subject to approval by its Board of Directors, the Company intends to continue tomay make strategic acquisitions and purchases of equity interests in businessbusinesses 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, and the issuance of equity securities and debt. There is no assurance the Company will be able to obtain adequate financing or otherwise complete desirable acquisitions and purchases of equity interests.

 

Recent Issuances of Equity Securities

 

Common Stock

 

 ●In Duringthe six months ended October 31, 2018, the Company issued 850,0002019, holders of 10,400,000 shares of its Classthe Company’sSeries A Common Stock at $0.25 per share, in exchange for proceedsconvertiblepreferred stockand holders of $212,500, in connection with stock subscription agreements;
●In the six months ended October 31, 2018, the Company also issued 131,65450,000 shares of its Class A Common Stock, par valuethe Company’s convertibleSeries C preferred stock converted their holdings into an equal number of $0.0001, in exchange for professional services with a deemed value of $37,000;
●On October 30, 2017, the Company issued, in the aggregate, 8,000,000 shares of its Class A Common Stock to two executive officers, at an exercise price of $0.0001 per share, in connection with the exercise of derivative instruments granted in conjunction with employment agreements disclosed previously;
●At October 31, 2018, there were 65,151,654 shares of our Common Stock Class A and 10,000,000 shares of our Common Stock Class B issued and outstanding; and
●In November 2018, the Company issued 20,000 shares of its Class ACompany’s common stock, at a price of $0.25, for a total value of $5,000, in connection with stock subscription agreements and 20,000 shares of its Class A common stock, in exchange for professional services with a deemed value of $5,000.

Convertible Preferred Stock

Series A Convertible Preferred Stock

●In May 2018, the Company issued 5,000,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andAmerica Approved Commercial LLC;
●In August 2018, the Company issued 1,250,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andAmerica Approved Commercial LLC, and 250,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of a 40% equity interests in Medical SmartCare LLCstock;
   
 ●InDuringthe six months ended October 2018,31, 2019, the Company issued 500,00010,000,000 shares of its Seriesclass A Preferred Stock, forcommon stock to a total valuedirector upon the exercise of $125,000,stock warrants previously awarded in connection with its previously disclosed acquisition of a 40% equity interest in LEH Insurance Group LLC; andthe director’s employment agreement.
   
 ●At October 31, 2018, there were 93,694,540 shares of our Series A Convertible Preferred Stock issued and outstanding.

Series C Convertible Preferred Stock

●InDuringthe six months ended October 31, 2018,2019, the Company issued 170,000repurchased from a third-party (and retired) 1,500,000 shares of its Series C Convertible Preferred Stock at $0.25 per share,class A common stock in exchange for proceeds of $42,500,$500 in connection with stock subscription agreements; andcash.
   
 ●AtDuringthe six months ended October 31, 2018, there were 4,120,0002019, the Company issued 215,325 shares of our Series C Convertible Preferred Stock issuedits class A common stock in exchange for services and outstanding.30,000 shares for cash, under prior subscription agreements.

Short-term Borrowings and Convertible Notes

 

Long-term Debt and Short-term BorrowingsBorrowing Under Financing Arrangements (Notes Payable)

 

As of October 31, 2019, notes payable, consisting of short-term borrowings under financing arrangements with third-party institutions, were $115,385, net of unamortized debt discount of $11,538. See Note 9 of the Condensed Notes to Consolidated Financial Statements in ITEM 1— “Financial Statements” contained elsewhere in this Quarterly Report for more information about the Company’s’ short-term borrowings under financing arrangements.

Convertible Notes Payable

 

Please seeAs of October 31, 2019, convertible notes payable consists of a note in the amount of $100,000 held by RB Capital Partners, Inc. and a note in the amount of $50,000 held by another lender, excluding unamortized debt discount of $29,395. See Note 1011 of the Condensed Notes to Consolidated Financial Statements in ITEM 1— “Financial Statements” contained elsewhere in this Quarterly Report for more information about our Convertible Notes Payable.

 

Cash-Flow Financing

On November 2, 2018, the Company entered into a financing agreement with Syndimate LLC (“Syndimate”) pursuant to which the Company agreed to sell to Syndimate certain future trade receipts in the aggregate amount of $330,000. Net proceeds from this transaction were $239,000 and were net of an initial financing fee of $11,000 and applicable financing costs, calculated at an annual percentage rate (“APR”) of 86%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $2,063 over a term of approximately five and one-half months.

On November 27, 2018, the Company entered into a financing agreement with Libertas Funding LLC (“Libertas”) pursuant to which the Company agreed to sell to Libertas certain future trade receipts in the aggregate amount of $635,000. Net proceeds from this transaction were $490,000 and were net of an initial financing fee of $10,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months.

On November 30, 2018, the Company entered into a financing agreement with eMerchant Advance LLC (“eMerchant”) pursuant to which the Company agreed to sell to eMerchant certain future trade receipts in the aggregate amount of $635,000. Net proceeds from this transaction were $485,000 and were net of an initial financing fee of $15,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months.

Capital Requirements

 

During the six months ended October 31, 2018,2019, 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 $130,256.$114,038.

 

Contractual Obligations

 

During the six months ended October 31, 2018, thereThere were no material changes to our contractual cash obligations during the six months ended October 31, 2019, except for: (1) the issuancesfor our repayment of borrowings under under short-term financing arrangements and repayments of convertible notes payable disclosed in Note 8 of the Condensed Notes to Consolidated Financial Statements contained elsewhere in this Quarterly Report and (2) the incremental obligation resulting from the August 2018 amendment to the lease agreement covering our corporate headquarters discussed in Note 13 of the Condensed Notes to Consolidated Financial Statements contained elsewhere in this Quarterly Report.described above.

 

Off-Balance Sheet Financing Arrangements

 

AtAs of October 31, 20182019, and April 30, 2018, we had no off-balance sheet financing arrangements other than operating leases incurred inarrangements. See Note 2 of the ordinary courseCondensed Notes to the Consolidated Financial Statements above for information about the Company’s adoption of our business.Accounting Standards Codification Topic 842,Leases.

 

Inflation

 

We believe inflation did not have a material effect on our results of operations during any of the periods presented in this report.Quarterly Report.

 

Critical Accounting Estimates

 

There have been no material changes to our critical accounting estimates or assumptions since April 30, 2018.during the six months ended October 31, 2019.

Accounting Changes and Recent Accounting Pronouncements

 

For discussion of accounting changes and recent accounting pronouncements, please see Note 2 to the of the Condensed Notes to the Consolidated Financial Statements contained elsewhere in Item 1 of this Quarterly Report.

26

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

We areThe Company is a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act, and, accordingly, areis not required to provide the information called for by this Item.

 

Item 4. Controls and Procedures.

 

Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2018.2019.

 

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includesdiscusses the information concerningabove-described Certifications and the controls evaluation of “disclosure controls” referred to in the certifications and ittherein. Accordingly, this section should be read in conjunction with the certifications for a more complete understanding of the topics presented.such Certifications.

 

Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. AAny system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system arewill be met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud if any,(if any) within the Company have beenwill be detected. Furthermore, because the design of any system of 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.conditions. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements and/or omissions due to error or fraud may occur and not be detected.undetected.

 

Scope of the Controls Evaluation. The above-described evaluation of our disclosure controls and procedures included a review of (a) their objectives and design, (b) our implementation of the controls and procedures and (c) the effect of the controls and procedures onupon the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and sought to confirm that appropriatenecessary corrective action, including process improvements, was being undertaken if needed. Thisimprovement, followed. We perform this type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported inaccompany our Quarterly ReportsReport on Form 10-Q and our Annual ReportsReport on Form 10-K.

 

Conclusions regarding Disclosure Controls. Based onupon the requiredaforementioned evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of October 31, 2018,2019, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

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.

 

We implemented internal controls to ensure we adequately evaluated our lease agreements and properly implemented the new lease accounting standard effective May 1, 2019. There were no significant changes in our internal control over financial reporting as a result of implementation of this new standard.

27

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

The Company from time to time is involved in various claims and lawsuitsand/or negotiations incidental to the conductordinary course of its business in the ordinary course.business. 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.

In January 2019, the Company became aware of an unliquidated amount of potential liability arising from a series of cash advance loan transactions (“Transactions”) entered into by eight different lending sources and a Related Party entity (“debtor entity”) owned and/or controlled by a former Company officer. Without the knowledge of the Company and in contravention of the express provisions of both the Company’s Bylaws and the controlling Nevada Revised Statutes, this former officer also purported to obligate the Company (and two of the Company’s affiliates) to repay the amounts owed by the debtor entities under the Transactions. At this time, the Company has resolved all of the debt associated with the Transactions at a substantial discount from the amounts alleged by the holders of such debt. Additionally, the Company has entered into a comprehensive agreement, secured by substantial assets, with the former officer and the entity owned and/or controlled by the former officer. Pursuant to such agreement, the former officer and the entity owned and controlled by such former officer are obligated jointly and severally to repay the Company all sums expended by the Company in the resolution of the Transactions. The amount expended by the Company, in connection with such resolution, is the sum of $3.4 million. At April 30, 2019, the Company has recorded an accounts receivable of $3.4 million from the former officer and the entity owned and/or controlled by the former officer. This amount is reported in accounts receivable, related party in our consolidated balance sheet.

In June 2019, the Company became aware of a potential liability arising out of certain previous transactions involving the formation and capitalization of two legal entities affiliated with a Company consultant who was, at the time, considered the Company spokesperson. Without the knowledge of the Company and in contravention of the express provisions of both the Company’s Bylaws and the controlling Nevada Revised Statutes, this Company consultant purportedly solicited investment funds from various persons, who at the time, were independent contractors of the Company. While this matter is still currently under investigation, the Company has reason to believe that this Company consultant, possibly acting in concert with others, sought to leverage the assets and resources of the Company in furtherance of these ventures, to their personal pecuniary benefit. Upon learning of these allegations from various of these investors, the Company launched an immediate internal investigation into these transactions. In addition, the Company secured the services of a Dallas-based law firm with experience in financial impropriety and forensic investigations to assist in that process. The Company believes that it is probable that these actions have resulted in a material loss to the investing parties and is evaluating the potential exposure of these events to the Company. The Company is continuing to finalize its evaluation and to pursue settlements with the impacted investing parties.

On July 26, 2019, the Company and certain of its subsidiaries entered into a Settlement Agreement (the “Agreement”) with Company co-founder and former consultant Robert Oblon. Pursuant to the Agreement and in compromise of a dispute concerning a prior contractual obligation and various competing claims, the Company agreed to pay Mr. Oblon the aggregate amount of $2.2 million, payable in 96 equal semi-monthly installments, and stock warrants to purchase up to 7.0 million restricted shares of the Company’s common stock, subject to limiting conditions. On August 30, 2019, the Company ceased making the installment payments and filed a lawsuit against Mr. Oblon claiming, among other things, Mr. Oblon’s breach of contract related to this Agreement, as further discussed below. During the three and six months ended October 31, 2019, the Company made payments under the Agreement of $120,000 and $235,000, respectively. At October 31, 2019, the Company recognized an estimated settlement liability of $2.9 million in connection with the Agreement.

In July 2019, Pruvit Ventures, Inc. filed a lawsuit against Elevacity U.S., LLC, a wholly owned subsidiary of the Company, alleging breach of contract by Elevacity. Elevacity has denied the Plaintiff’s claim. Discovery was propounded on the Plaintiff specifically related to the alleged act of wrong-doing, responses were received by the Company on December 6, 2019 and the Company is currently evaluating the responses.

In August 2019, Entrepreneur Media, Inc. (“EMI”) notified the Company that EMI believes that the Company’s pending trademark application for “Elepreneurs” would confuse consumers due to the purported similarity to EMI’s existing trademark for the word “Entrepreneur.” The Company believes that this claim is without merit and intends to vigorously defend its trademark application. EMI has reached out to the Company and the parties are now engaged in dialogue intended to achieve a possible amicable resolution.

On August 30, 2019, the Company and certain of its affiliated entities filed a lawsuit against Company founder and former consultant, Robert Oblon. The lawsuit claims breach of contract related to the Settlement Agreement dated July 26, 2019, tortious interference with business relationships, and misappropriation of trade secrets, and sought injunctive relief. The Company and such affiliated entities filed an amended petition in September 2019 and were awarded temporary injunctive relief protecting their intellectual property.

On August 31, 2019, the Company filed a lawsuit against Kenyatto M. Jones, Bear Bull Market Dividends, Inc. and Research and Referral, BZ for breach of contract, statutory fraud in a stock transaction, and violations of the Texas Securities Act. The three defendants purport to be beneficial owners of shares of the Company’s equity securities, which purported ownership is the subject of the referenced lawsuit. The relief sought in the lawsuit includes both recovery of damages and rescission of the underlying shares of the Company’s equity securities.

In September 2019, the Company and a former consultant to the Company agreed to settle a legal dispute between the Company and the consultant. As of the date herein the parties are in the process of formalizing the settlement. The Company has accrued all costs and expenses associated with the settlement in the three months ended July 31, 2019.

As of September 16, 2019, the Company and 212 Technologies, LLC (“212 Technologies”) entered into a Release and Settlement Agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the parties: (i) rescinded a certain “Stakeholder & Investment Agreement” dated May 21, 2017 (resulting in the return of 5,628,750 shares of the Company’s Series A Preferred Stock by 212 Technologies and the return of a 24% ownership stake in 212 Technologies by the Company) and (ii) terminated a certain “Software License Agreement” dated June 12, 2018 (the “SLA”) by and between 212 Technologies and Elepreneurs, LLC, a wholly owned subsidiary of the Company (“Elepreneurs”). In connection with the Settlement Agreement, Elepreneurs agreed to pay 212 Technologies the amount of $425,000 and to dismiss, with prejudice, a certain lawsuit it had previously filed concerning the functionality of the mobile application produced by 212 Technologies under the SLA, and the parties reached mutually accommodating terms and resolved all issues between their respective companies. As of the date hereof, the shares returned by 212 Technologies remain outstanding and are held by a custodian for the benefit of the Company.

On October 1, 2019, the Company filed a complaint in the District Court of Clark County, Nevada entitled Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Alchemist Holdings, LLC, Kenyatto M. Jones, et al.,Case No. A-19-802861-B. The lawsuit asserts that a Certificate of Designation for its Series B Preferred Stock filed on or about April 24, 2017 (the “Defective Certificate”) was in contravention of both the Company’s Articles of Incorporation and Nevada law. Additionally, the lawsuit alleges that the Defective Certificate was improperly approved through the self-dealing actions of certain former Company executives, working in collusion with outside shareholders. The lawsuit seeks relief in the form of an injunction enjoining the defendants from attempting to enforce the provisions of the Defective Certificate and a declaratory judgment that will invalidate the improper portions of the Defective Certificate. The lawsuit also requests declaratory judgment relief regarding the terms of the Amended and Restated Certificate of Designation filed by the Company on or about September 26, 2019 (the “Amended Certificate”) which seeks to correct the improper provisions of the Defective Certificate and to properly realign the rights of the shareholders which were improperly diminished by the terms of the Defective Certificate. The District Court of Clark County issued a default judgment against Defendant Bear Bull Market Dividends, Inc. on November 14, 2019 and against Defendant Kenyatto M Jones on November 15, 2019. The Company is in negotiations with Defendant Alchemist Holdings, LLC and anticipates that a favorable outcome will be reached in connection with those negotiations.

The Company does not believe that the ultimate resolution of these matters will have a material future effect on its financial statements.

 

Item 1A. Risk Factors.

 

Please referIn addition to informationthe factors contained in ITEM 1A,— “Risk Factors” in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) tofiscal year ended April 30, 2018.2019, you should consider the following risk factors:

Changes to our sales compensation plan could be negatively received by members of our sales force, could fail to achieve the desired long-term goals and could adversely impact future sales.

We modify aspects of our sales compensation plan from time to time to keep our sales compensation plan competitive and attractive to our existing and future sales force, to address changing market conditions, to provide incentives that we believe will help grow our business and to conform to changing government regulations, among other reasons. For example, we modified our compensation plan in November 2018 and in August 2019. In addition, we may be required to modify our sales compensation plan from time to time to comply with additional regulations in the future. Changes to our sales compensation plan, including changes perceived to reduce sales commissions earned by our sales force, could be negatively received by our sales force, could fail to achieve the desired long-term goals, and could adversely impact our financial condition, results of operations and cash flows.

Past or future reformulations of our products, including as a result of potential governmental enforcement action, could be negatively received by our 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 additional regulations in the future or potential governmental enforcement action. Changes to our product formulations, including as a result of potential governmental enforcement action, could be negatively received by our sales force and customers, and could adversely impact our financial condition, results of operations and cash flows.

Item 2. Unregistered Sales of Securities and Use of Proceeds.

 

(a) Recent Sales of Unregistered Securities

In May 2018, the Company issued 5,000,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC andAmerica Approved Commercial LLC.In August 2018, the Company issued 1,500,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in three unconsolidated entities.In October 2018, the Company issued 500,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of an equity interests in LEH Insurance Group,LLC.For a period of 10 years from the date of issuance, each share of the Company’s Series A Convertible Preferred Stock is convertible into one share of the Company’s common stock. The Company received no proceeds from the issuances of securities discussed in this paragraph.

In addition, in August 2018, September 2018 and October 2018, the Company issued 80,000 shares, 30,000 shares and 60,000 shares, respectively, of its Series C Convertible Preferred Stock in connection with stock subscription agreements.Cash proceeds from the issuances of securities discussed in this paragraph were used for general corporate purposes.For a period of 10 years from the date of issuance, each share of the Company’s Series C Convertible Preferred Stock is convertible into one share of the Company’s common stock.

The aforementioned sales of securities were made in reliance upon the exemption offered under Section 4(a)(2) of the Securities Act of 1933.Not applicable

 

(b) Not applicable

 

(c) Not applicable

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable

 

Item 4. Mining Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

(a) Not applicable

 

(b) Not applicable

30

 

Item 6. Exhibits.

 

The following exhibits are incorporated intofiled as part of this Form 10-Q Quarterly Report:Report unless otherwise indicated:

 

3.1 Amended and Restated Articles of Incorporation of Sharing Service, Inc.,Services Global Corporation, which is incorporated herein by reference from Exhibit 3.1.13.1 to the Company’s Current Report on Form 8-K filed on May 8, 2017January 24, 2019
   
3.2 Bylaws of Sharing Service, Inc., dated April 25, 2015,Services Global Corporation, which is incorporated herein by reference from Exhibit 3.2.13.2 to the Company’s Current Report on Form 8-K filed on May 8, 2017January 24, 2019
   
4.1 Certificate of DesignationDesignations 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
   
4.2 Certificate of DesignationDesignations of Series B Preferred Stock, which is incorporated herein by reference from Exhibit 3.1.3 to the Company’s Current Report on Form 8-K filed on May 8, 2017
   
4.3 Amendment to Certificate of Designations of Series B Preferred Stock, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on August 29, 2019
4.4Certificate of DesignationDesignations 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
   
4.44.5 Convertible Promissory Note dated May 16,February 8, 2018 issued by Sharing Service, Inc. in favor of Power UP Lending Group Ltd.RB Capital Partners, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on June 5,February 13, 2018
   
4.54.6 Convertible Promissory Note dated July 2,March 16, 2018 issued by Sharing Service, Inc. in favor of Power UP Lending Group Ltd.RB Capital Partners, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on July 17,March 23, 2018
4.7Convertible Promissory Note dated April 13, 2018 issued by Sharing Service, Inc. in favor of RB Capital Partners, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on April 19, 2018
   
10.1 Share Exchange Agreement dated May 23, 2017 by and between Sharing Service, Inc., Total Travel Media, Inc., and the Equity Holders of Total Travel Media, Inc., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed on September 21, 2017
   
10.2 Share Exchange Agreement dated September 29, 2017 by and between Sharing Service, Inc., Four Oceans Holdings, Inc., and the Equity Holders of Four Oceans Holdings, Inc., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 5, 2017
   
10.3 Asset PurchaseShare Exchange Agreement dated May 15, 2018October 4, 2017 by and between Legacy Direct Global, LLC., Sharing Service, Inc., 561 LLC, and Legacy Direct, LLC.,the Equity Holders of 561 LLC, which is incorporated herein by reference from Exhibit 2.11.1 to the Company’s Current Report on Form 8-K filed on June 8, 2018October 10, 2017
10.4Securities Purchase Agreement dated May 16, 2018 by and between Sharing Service, Inc. and Power UP Lending Group Ltd., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 5, 2018
10.5

Securities Purchase Agreement dated July 2, 2018 by and between Sharing Service, Inc. and Power UP Lending Group Ltd., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 17, 2018

   
10.6 Receipts Purchase and SaleShare Exchange Agreement dated November 2,October 4, 2017 by and between Sharing Service, Inc., America Approves Commercial LLC and the Equity Holders of America Approves Commercial LLC, which is incorporated herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on October 10, 2017
10.7Share Exchange Agreement dated October 4, 2017 by and between Sharing Service, Inc., Medical Smart Care LLC and the Equity Holder of Medical Smart Care LLC, which is incorporated herein by reference from Exhibit 1.3 to the Company’s Current Report on Form 8-K filed on October 10, 2017
10.8Share Exchange Agreement dated October 4, 2017 by and between Sharing Service, Inc., LEH Insurance Group LLC and the Equity Holder of LEH Insurance Group LLC, which is incorporated herein by reference from Exhibit 1.4 to the Company’s Current Report on Form 8-K filed on October 10, 2017
10.9Employment Agreement dated March 4, 2018 by and between Sharing Service, Inc. and Frank A. Walters, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on March 8, 2018
10.10Executive Employment Agreement dated February 28, 2018 by and between Sharing Service, Inc. and John Thatch, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K/A filed on March 28, 2018
10.11Addendum to Executive Employment Agreement by and between Sharing Service, Inc. and John Thatch, which is incorporated herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K/A filed on March 28, 2018
10.12Form of Elepreneur Agreement, which is incorporated herein by reference from Exhibit 10.20 to the Company’s registration Statement on Form 10-12G/A filed on December 13, 2018
10.13Sharing Services Global Corporation Elepreneurs Compensation Plan of 2019 *
10.14Loan Agreement and Promissory Note by and Between Sharing Services, Inc. and Syndimate LLC.Global Payroll Gateway, Inc., which is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 13,17, 2018
   
10.710.15 AgreementLetter of Saleresignation of Future Receipts dated November 2, 2018 by and between Sharing Services, Inc. and Libertas Funding LLC.,Robert Oblon, which is incorporated herein by reference from Exhibit 10.21.1 to the Company’s Current Report on Form 8-K filed on December 13, 2018February 7, 2019
   
10.810.16 Agreement forLetter of resignation from the Purchase and SaleBoard of Future Receipts dated November 2, 2018 between Sharing Services, Inc. and eMerchant Advance LLC.,Directors of Frank A. Walters, which is incorporated herein by reference from Exhibit 10.31.1 to the Company’s Current Report on Form 8-K filed on December 13, 2018May 23, 2019
10.17Settlement Agreement between Sharing Service Global Corporation, Elevacity U.S., LLC, Elepreneurs U.S., LLC and Robert Oblon dated as of July 26, 2019, which is incorporated herein by reference from Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q filed on September 16, 2019
   
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of John Thatch pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
   
31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of Frank A. Walters pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
   
32.1 Section 1350 Certification of John Thatch pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
   
32.2 Section 1350 Certification of Frank A. Walters pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
   
101 The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarterthree months ended October 31, 2019 and 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Cash FlowsFlows; (iv) Condensed Consolidated Statements of Stockholders’ Equity (Deficit) and (v) the Condensed Consolidated Notes to Consolidated Financial Statements*Statements *
   
* Included herewith

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 SHARING SERVICES INC.GLOBAL CORPORATION
 (Registrant)
  
Date:December 13, 201816, 2019
By:/s/ John Thatch
  John Thatch
  President, Chief Executive Officer and Director
  (Principal and Executive OfficerOfficer)
   
Date:December 13, 201816, 2019
By:/s/ Frank A. Walters
  Frank A. Walters
  Secretary Treasurer and Director
PrincipalChief Financial Officer
  (Principal Accounting OfficerFinancial Officer)