UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10
AMENDMENT
# 4
GENERAL
FORM FOR REGISTRATION OF SECURITIES
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Pursuant
to Section 12(b) or (g) of The Securities Exchange Act of 1934
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SHARING
SERVICES GLOBAL CORPORATION
(Exact
name of registrant as specified in its charter)
Nevada
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30-0869786
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or
organization)
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Identification
No.)
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1700
Coit Road, Suite 100, Plano, Texas
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75075
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (469) 304-9400
Securities
to be registered pursuant to Section 12(b) of the Act:
Title
of each class
to
be so registered
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Name
of each exchange on which each class is to be registered
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OTC
Markets QB
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Securities
to be registered pursuant to Section 12(g) of the Act:
Common
Stock, $0.0001 par value per share
(Title
of class)
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an 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 [ ]
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Accelerated
filer [ ]
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Emerging
growth company [X]
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Non-accelerated
filer [ ]
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Smaller
reporting company [X]
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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 Section13(a) of the Exchange Act. [ ]
TABLE
OF CONTENTS
In
this registration statement, references to “the Company,” “Sharing Services,” “our company,”
“we,” “our,” “ours” and “us” refer to Sharing Services, Inc. and its consolidated
subsidiaries unless otherwise indicated or the context otherwise requires.
cautionary
notice regarding forward-looking statements
Statements
in this registration statement 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 such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “project,” “target,”
“can,” “could,” “may,” “should,” “will,” “would” or similar
expressions may also identify such forward-looking statements.
Readers
are cautioned not to place undue reliance on forward-looking statements since such statements speak only as of the date they were
made. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially
from the events or results described in the forward-looking statements, including, but not limited to, risks and uncertainties
related to:
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The
success of our growth initiatives, including our efforts to attract consumers;
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Anticipating
and effectively responding to changes in consumer preferences and buying trends in a timely manner;
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The
timing and acceptance of new products we introduce;
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Our
ability to efficiently manage and control our operating costs;
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If
we continue to incur losses from operations and are unable to generate sufficient cash from operations to fund our working
capital needs, including servicing our debt;
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Our
dependence on and ability to obtain additional financing to implement our business strategies;
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Changes
in interest rates increasing the cost of servicing our debt and obtaining additional debt;
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Our
ability to attract and retain key personalities to promote our products;
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The
inability of a key personality to successfully perform his/her role to promote our products;
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The
existence of negative publicity surrounding a key personality engaged in promoting our products;
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Our
dependence on three suppliers for substantially all the products we sell and the possibility of material interruptions in
the supply of products by those suppliers or increases in the prices of the products we purchase from those suppliers;
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The
highly competitive and dynamic nature of the direct selling industry;
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Our
compliance with current laws and regulations or becoming subject to new or more stringent laws and regulations in the future;
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Products
sold by us being found to be defective in labeling or content;
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Our
success in identifying acquisition candidates, completing desirable acquisitions and integrating acquired businesses;
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The
success of our initiatives to expand into new geographies, including international areas;
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The
challenges of conducting business outside the United States, including foreign currency risks associated with operating in
international areas;
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The
success of our efforts to register our trademarks and protecting our intellectual property rights;
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The
risk that our products may infringe on the intellectual property rights of others; and
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Our
success in developing our information technology systems and our financial controls.
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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.
ITEM
1. BUSINESS.
Introduction
Sharing
Services, Inc. (“SHRV” or “the Company”) is a diversified company specializing in the direct selling industry.
The Company owns, operates, or controls an interest in a variety of companies that either sell products and services to the consumer
directly through independent representatives, that range from health and wellness, energy, technology, insurance services, training,
media and travel benefits. Our website is https://www.shrvinc.com. We believe our management team and affiliated companies and
consultants are industry leaders with extensive experience in all the areas of the direct selling or network marketing industry
as well as familiarity with our product offerings.
The
Company was originally formed to develop and market a taxi-ride sharing website and application (“web app”). Beginning
in February 2017, the Company expanded its business model to also offer a wide range of travel and technology management products
and services that are currently being offered through direct channels.
In
addition, in December 2017, the Company launched a wholly-owned subsidiary operating under the trade name “Elepreneurs.”
Elepreneurs’ meaning is derived from Elevated Entrepreneur. This subsidiary is structured as a sales and marketing company
that currently has approximately 20,000 independent representatives, primarily in the United States, and it markets all the Company’s
products and services. One of the leading product lines of Elepreneurs is called “Elevate.” The Elevate product line
consists of Nutraceutical products that the Company terms “D.O.S.E.” (Dopamine, Oxytocin, Serotonin and Endorphins)
and was developed and is owned by another of the Company’s wholly-owned subsidiaries, “Elevacity Global.” This
product line has accelerated the Company’s growth over the last two quarters enabling the Company to expand its operations
and expand into the direct selling industry at a rapid pace.
The
Company uses a direct-selling model with a subscription-based portal and, as part of its growth strategy, has completed several
acquisitions and purchases of equity interest in businesses it believes have a leading position in the direct selling industry,
technology management sectors and services directly relating to this industry. Subject to approval by its Board of Directors (the
“Board”), the Company intends to continue to grow its business both organically and by making strategic acquisitions
of and purchases of equity interests, from time to time, in businesses and technologies that augment its product portfolio, complement
its business competencies and fit its growth strategy to meet or exceed its objectives and create shareholder value.
The
Company was incorporated in the State of Nevada in April 2015 and has a fiscal year ending April 30.
Our
Acquisition and Growth Strategy
We
believe there are significant opportunities to increase our sales volume and profitability through the further implementation
of our growth strategy, including through strategic acquisitions.
During
the
period from May 5, 2017 to
April 30, 2018, we completed several acquisitions
and purchases of equity interests in business we believe have a leading position in the direct selling industry, technology management
sectors and services directly relating to this industry. See
Significant Recent Acquisitions – Total Travel Media
below
for additional information about the Company’s use of May 5, 2017 as its inception date.
Significant
Recent Acquisitions
Total
Travel Media
On
May 23, 2017, the Company entered into a Share Exchange Agreement with Total Travel Media, Inc. a Nevada corporation (“Total
Travel Media” or “TTM”). Pursuant to the terms of the Agreement, the Company acquired all the outstanding shares
of capital stock of TTM in exchange for (i) 10,000,000 shares of the Company’s Common Stock Class B, par value $0.0001 per
share and (ii) 10,000,000 shares of the Company’s Series B Convertible Preferred Stock, par value $0.0001 per share (the
“Series B Preferred Stock”).
Total Travel Media, Inc. was incorporated on May
5, 2017. On May 5, 2017, Sharing Services and Total Travel Media became entities under common control.
For
financial accounting purposes, the acquisition of Total Travel Media was treated as a reverse acquisition in accordance with accounting
principles generally accepted in the United States. Accordingly, Total Travel Media became the accounting acquirer and Sharing
Services became the acquired company. The consummation of this acquisition resulted in a change of control of Sharing Services.
Accordingly, the historical financial statements prior to the acquisition are those of the accounting acquirer, Total Travel Media,
and have been prepared to give retroactive effect to the acquisition. Thus, the Company’s consolidated financial statements
after the acquisition date include the combined balance sheets of Sharing Services and Total Travel Media, at historical cost,
the historical results of operations and cash flows of Total Travel Media from its inception (May 5, 2017) and the results of
operations and cash flows of Sharing Services from the acquisition date and, accordingly, goodwill was not recognized as a result
of this transaction. All share and per share information in the accompanying consolidated financial statements and notes to consolidated
financial statements have been retroactively restated to reflect the recapitalization. In its consolidated financial statements,
the Company refers to May 5, 2017 as the inception date of the consolidated group.
TTM
is a leading travel and technology management product and services provider. TTM produces videos and interactive tools for hotels,
resorts and other travel-related locations that will show the consumer the benefits of such. In addition, it is designed to attract
visitors and consumers through social media to those specific locations and has uses for personal social media exposure for celebrities
and high-profile individuals.
Four
Oceans
On
September 29, 2017, the Company entered into a Share Exchange Agreement with Four Oceans Holdings, Inc., a Nevada corporation
(“Four Oceans”). Pursuant to the terms of the Agreement, the Company acquired all the outstanding shares of capital
stock of Four Oceans in exchange for the issuance of 75,000,000 shares of the Company’s Series A Convertible Preferred Stock,
par value $0.0001 per share (the “Series A Preferred Stock”). Following the closing, Four Oceans became a wholly-owned
subsidiary of the Company.
Prior
to the Company’s acquisition of Four Oceans, it was controlled by Alchemist Holdings, LLC, a company controlled by the Chairman
of our Board of Directors. Alchemist Holdings received 50,000,000 shares of our Series A Preferred Stock; Bear Bull Market Dividends,
Inc., a Company that is a significant shareholder of Sharing Services, received 20,000,000 shares; and Research and Referral BZ,
a shareholder of the Company, received 5,000,000 shares. Since these transactions are between entities under common control, the
Company treated the acquisition under the pooling-of-interests method and has consolidated financial results since the initial
date in which the above companies were under common control. In accordance with accounting principles generally accepted in the
United States (“GAAP”), assets and liabilities were combined on their carrying values and no recognition of goodwill
was made. The Company’s calculation of earnings per share is based on the new parent-company shares issued to the shareholders
of the Company.
Four
Oceans owns and operates an online travel platform. We believe its online search engine tool, “Four Oceans Explorer,”
provides Elepreneurs-based users the best guaranteed rates, on over 400,000 hotels, cruises, rental cars, extended stays and time-share
properties from around the world. It also provides Lifestyle and Marketplace rewards that can allow discounts on many retail products
and services.
212
Technologies
On
May 21, 2017, 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 shares of its Series
A Convertible Preferred Stock with a deemed value of $0.25 per share, or $1,407,188, and $100,000 in cash. 212 Tech is a developer
of end-to-end online marketing and direct sales software systems. In connection therewith, the Company received a non-exclusive,
non-royalty bearing, perpetual, worldwide license of certain the intellectual property rights of 212 Tech, as further discussed
below.
212
Tech developed and owns an end-to-end online marketing and direct sales software system that is currently used by approximately
20 million users. Certain components of this software leverage state-of-the-art technology that includes customer-facing websites,
“back office” management tools, a unique database schema, client and server scripting technology, intuitive mobile
applications, and a proprietary AI Module (“automated intelligence”) that monitors data and activity and interacts
seamlessly with other system elements. Concurrent with its investment in 212 Tech, the Company acquired a non-exclusive, non-royalty
bearing, worldwide license to market and distribute these online marketing and direct sales software systems and, accordingly,
the Company currently markets and licenses these software systems.
Under
the terms of the Stakeholder and Investment Agreement, 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 shares of the Company’s Series A Convertible Preferred Stock,
when
both 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 stock
equals or exceeds
$10.00
per share, as reported by the OTC stock market
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561
LLC
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant to which it acquired a 25% interest in 561 LLC in exchange for
2,500,000 shares of its Series A Convertible Preferred Stock with a deemed value of $0.25 per share, or $625,000, issued in four
equal instalments over time.
Under the terms of
the
Share 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 A
Convertible
Preferred Stock.
As
of October 29, 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 561 LLC.
Under
the terms of
the
Share 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 Date
and
(b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as
reported by the OTC stock market.
America
Approved Commercial
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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 of
the
Share 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 A
Convertible
Preferred Stock.
As of
October 29, 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 of
the
Share 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 Date
and
(b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as
reported by the OTC stock market.
Medical
Smart Care
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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 pure
share, or $250,000, in four equal installments over time. As of October 29, 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
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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 of
the
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 $500,000. In October 2018, upon LEHIG meeting this condition, the Company issued additional 500,000 shares of its Series
A Preferred Stock to the sellers.
As of October 26, 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 of
the 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.
Legacy
Direct
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, Legacy Direct Global completed the acquisition. The acquisition
involved the purchase of assets with a preliminary value of approximately $83,500.
Key
Industry and Business Trends
We
believe the following key industry and business trends and characteristics will influence our growth and our financial results
in a positive way going forward:
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From
2011 to 2016, the number of people involved in direct selling in the United States grew by 31.4%, outpacing U.S. retail sales
growth according to “Direct Selling in 2016: An Overview” and “Direct Selling Fact Sheet” published
by the Direct Selling Association (DSA) in 2016. By comparison, over the same period, total retail sales in the U.S. grew
from $2.10 trillion to $4.86 trillion, up just 18.4%, according to the US Census Bureau;
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Interest
in direct selling has been on an upward trend in recent years. In 2011, 15.6 million people in the U.S. were involved in direct
selling and, by 2016, that number increased to 20.5 million, up over 31%;
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Classified
by major product category, the most lucrative sectors of the direct selling industry include Wellness products and Value-added
Services. Wellness products alone, such as those marketed through the “Elevacity” brand, accounted for more than
$12 billion in sales in 2016;
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People
involved in direct selling have a higher than average percentage of annual incomes over $50,000, at 58%. They also have a
higher level of average education, with 52% of direct sellers being college graduates compared to 28% of all Americans; and
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Independent
contractors prioritize being one’s own boss, flexibility in schedule and having a better work life balance, according
to Bloomberg. With these factors in mind, more than three-quarters of independent contractor’s report being highly satisfied
with their work.
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Business
Segments, Geographic Area Information and Seasonality
The
information in Note 15 of the Notes to Consolidated Financial Statements in Item 8
—
“Financial Statements
and Supplementary Data” contained in our Annual Report on Form 10-K for the period from May 5, 2017 to April 30, 2018 is
incorporated herein by reference.
The
Company’s travel services business is subject to seasonality inherent to the travel and tourism industries in the United
States and Canada. The travel and tourism industries experience greater passenger activity in the period from March to September
than during the rest of the year. These industries also may be adversely affected by acts of terrorism and natural disasters from
time to time.
We
believe sales of our health and wellness, energy, technology, insurance services, training and media products are not seasonal
in nature.
Competitive
Strengths
We
believe the following competitive strengths differentiate us from our competitors and will help drive our future growth: Three
key differentiators separate the Company from its competitors in the direct sales and traditional consumer spaces. One is our
proprietary Elevacity Global product line nutraceuticals D.O.S.E. component, which is sourced through exclusive strategic partnerships.
The second is our technology-driven marketing initiatives, which emphasize the nutritional value or health benefits of our health
and wellness product offerings. Third is our ability to offer industry exclusive brands.
Recently
Launched Brands
Our
g
oal has been to empower the health-conscious global community with emphasis on Health,
Wealth and Happiness. To achieve this objective, we launched our Elevacity product line, marketed and exclusively distributed
through our subsidiary Elepreneurs, in December 2017. During the five-month period ended April 30, 2018, we had net sales of $8.4
million and, during the three months ended July 31, 2018
,
we had net sales of $12.9
million.
We believe this product line will revolutionize how people take care of their health by facilitating the convergence
of the Company’s nutraceuticals, advanced technologies and most complete entrepreneurial opportunity in the market place.
Key
Products and Services
Sharing
Services’ mission is to produce and deliver products and services that improve Health, Wealth and Happiness by creating
products and services from within the Company’s management team, through strategic partnerships and an independent sales
force with the direct selling model. We take pride in our commitment to offering the finest products and services throughout the
industry, including, but not limited to:
Elevate
Smart Coffee
- A great tasting micro-ground, functional coffee that contains a proprietary blend of Nootropic ingredients
designed to assist with mental clarity, memory and energy.
Elevate
KetoCre
-
A delicious non-dairy Ketogenic creamer designed to support a healthy “Keto” diet.
Elevate
Choclevate
-
A delicious Nootropic Hot Chocolate designed to assist in the elevation of mood, mental focus and
energy
Elevate
Xanthomax
-
An encapsulated dietary supplement designed to deliver xanthohumol, a powerful antioxidant that assists
in elevating mood.
Elevate
Pure 2.0
–
A unique, patent pending, Zeolite dietary supplement designed to assist in the removal of toxins
and heavy metals from the body.
Elevate
Vitamin Patch
–
All natural, time released topical patch delivery system that releases supplements through
the skin unlike pills, powders and liquids.
Elier
Mud Mask
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An organic anti-aging mask designed to infuse the skin with vital nutrients to help purify the skin
while assisting in the reversal of age-related wrinkles and blemishes.
Timeless
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An all-natural skin-tightening product designed for both men and women that results in immediate firming effects
while promoting elasticity over time.
Elier
Serum
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Anti-aging skin care designed to deeply nourish and regenerate at the cellular level resulting in a more
youthful look.
Distribution
Our
main distribution center is operated by a third-party logistics provider located in Addison, Texas. We also operate a smaller
fulfillment center in our corporate headquarters, which capitalizes and improves our product distribution and delivery with cost
savings and efficiencies for our distributors and customers. We purchase our products from independent formulators and manufacturers.
We service individual product orders and ship to individual customers and distributors throughout the United States and Canada
and intend to offer our products to customers in other geographies.
Distributors
and their customers pay for products prior to shipment, resulting in minimal amounts of accounts receivables. Distributors and
customers are provided a web-based platform to place customer service orders online with the Company and are supported by phone
or live chat through our in-house call center.
Competition
The
market for our products and services designed to enhance physical and mental performance is large and growing, and intensely competitive.
Our primary competitors include other network marketing companies that manufacture and market herbal remedies, nutritional products
and personal care products. We also compete with large traditional retail businesses that offer products in similar categories.
To attract positive industry attention and hold sustainable market advantage, we emphasize differentiators such as our company
culture, our exclusive access to unique ingredients, the quality and efficacy of our products and the reliability and convenience
of our distribution system. We emphasize products and services that improve health, wealth and happiness of our distributors and
customers rather than one specific product or service that most companies focus on. We take pride in our commitment to offering
our distributors and our customers the very best tools and support in the industry.
Herbal
remedies, personal care, and nutritional products can be purchased in a wide variety of channels of distribution. While we believe
that consumers appreciate the convenience of ordering products from home through a sales person they know and trust or through
a catalog, the buying habits of many consumers indicate they may not wish to change their preference for purchasing products through
traditional retail channels. We address this challenge directly in our marketing approach.
We
also compete for Elepreneurs (independent distributors) with other direct selling organizations, many of which have a longer operating
history, higher visibility, name recognition, and financial resources. Some of the dominant network marketing companies in our
existing markets are Amway Corporation, Herbalife and NuSkin Enterprises, to name a few. We also compete with many smaller network
marketing companies that also offer personal care products, health and nutrition products. We compete for new Elepreneurs on the
strength of our product line, leadership training, compensation plan, marketing focus, corporate values and management leadership
strengths.
Product
Guarantees
Our
30-day, 100% customer satisfaction policy applies to all our products, sometimes subject to a restocking fee. This policy improves
our customer and Elepreneurs satisfaction and brings us in line with Direct Selling Association recommendations.
Sales
and Marketing
We
rely on a network marketing system for the distribution of our products through our independent representatives (which we refer
to as Elepreneur Affiliates or Elepreneurs) and customer referrals. Our revenue depends directly upon the sales efforts of our
Elepreneurs. We distribute our products exclusively through independent representatives who have contracted directly with the
Company. Elepreneurs are entitled to purchase products from us for personal use or for resale, depending on their market, and
the sales by our Elepreneurs have the potential to earn commissions. Individuals who join as Elepreneurs may enroll and sponsor
other Elepreneurs and may further earn commissions from the resale of products. Our compensation plan provides multiple ways to
earn income for our Elepreneurs.
We
offer our products online and each Elepreneur position that is purchased includes a virtual online website. Known as a replicated
website and “Backoffice,” this is where Elepreneurs can manage, monitor, and operate their businesses 24 hours a day
from any location with internet access. This site is password protected, exclusive to Elepreneurs and provides access to Company
news, order information, commission information, product tracking, product information, and a library of Company documents geared
to help them with their business, such as frequently asked questions and various forms and reference materials. We also offer
additional for-purchase tools like marketing material and educational tools to help enhance their business experience.
In
addition, we offer a replicated website model to our Elepreneurs allowing them to obtain an immediate online presence and personal
URL for their business, which they can use as a place to direct potential new Elepreneurs to learn about the Company and sign
up as Elepreneurs. Features on this website include Company information, video and flash presentations, prospect management and
follow-up, online registration of new Elepreneurs, online product ordering, online customer service and a “contact me”
function that allows anyone visiting the website to contact an Elepreneur directly via email.
Enrollment
and Sponsorship
Any
person may join the Company as an Elepreneur to purchase products for personal use or to build a sales organization. Elepreneurs
are independent contractors and are thus prohibited from representing themselves as our agents or as employees of the Company.
Enrollment and sponsorship activities are encouraged, but not required of our Elepreneurs. Successful Elepreneurs will both enroll
and sponsor new Elepreneurs. The sponsoring of new Elepreneurs creates multiple levels in a network marketing structure. Individuals
that an Elepreneurs sponsors are referred to as “downline,” or “sponsored” Elepreneurs. If downline Elepreneurs
also sponsor new Elepreneurs, they create additional levels in the structure, but their downline Elepreneurs remain in the same
downline network as their original sponsoring Elepreneurs.
Elepreneurs
assist their downline Elepreneurs to successfully sponsor new Elepreneurs. While we provide product and Company brochures, magazines,
websites, videos and other sales and marketing materials, our greatest success and retention comes from Elepreneurs who are accountable
and responsible for educating and training new Elepreneurs with respect to our products and how to build and maintain a successful
business.
Generally,
Elepreneurs who are new to network marketing invite friends, family and acquaintances to attend conference calls, review websites
and marketing materials, or attend personal or company-sponsored meetings. Elepreneurs with a history in direct sales are quick
to invite their contacts within the industry to experience the difference that our Company brings to the network marketing profession.
Some people are attracted to become Elepreneurs after experiencing our products and desiring to enjoy the wholesale pricing that
Elepreneurs receive.
Turnover
is a typical aspect of the direct selling or network marketing industry. Our Elepreneurs understand that to prevent a possible
decline in their organization and sales volume, the enrollment, sponsoring and training of new Elepreneurs is necessary to increase
the overall Elepreneurs force and motivate new and existing Elepreneurs. We may experience seasonal decreases in Elepreneurs sponsoring
and product sales because of holidays and customary vacation periods. We cannot predict the timing or degree of these enrollment
fluctuations because of the number of factors that affect the sponsoring of new Elepreneurs. We cannot assure that the number,
growth or productivity of our Elepreneurs will be sustained at current levels or increase in the future.
Regular
conference calls, the materials available online, training events, corporate events and Elepreneurs Support offerings help to
provide a duplicable business model that help new Elepreneurs successfully begin their independent contractor business.
Elepreneurs
Contract
A
potential Elepreneur must enter into a standard Elepreneurs Agreement which governs the relationship between the Company and the
Elepreneurs in accord with our policies and procedures. Elepreneurs, may purchase a non-commissionable kit which includes all
the business building websites, web back office and online tools. No product purchases are required to become an Elepreneur, and
large inventory product purchases are discouraged. However, in order to receive compensation as an Elepreneurs, personal or customer
monthly purchases and/or personal customer sales of a certain amount of volume are required. Our Elepreneurs Agreement and Policies
and Procedures, which outline the scope of permissible marketing activities, and information on the compensation plan are provided.
Our Elepreneurs rules and guidelines are designed to provide Elepreneurs with maximum flexibility and opportunity within the bounds
of governmental regulations regarding product claims, network marketing and prudent business policies and procedures. Elepreneurs
are obligated to present our products and business opportunity ethically and professionally. Elepreneurs contractually agree to
abide by all local, state and federal laws and regulations pertaining to the advertising, sale and distribution of our products.
All advertising must be factual and not misleading and an Elepreneur’s account may be terminated for making false claims
about the income potential, the compensation plan, or product efficacy.
Elepreneurs
must represent to potential Elepreneurs that the receipt of commissions is based on sales and substantial efforts. Products may
be promoted by personal contact or by literature produced or approved by the Company. In traditional retail environments, our
products generally may not be sold, and the business opportunity may not be promoted.
We
are not in a position to provide the same level of direction, motivation, and oversight to our Elepreneurs as we would our own
employees because the Elepreneurs are independent contractors residing across the United States and in other countries. We review
alleged reports of Elepreneurs misconduct or breach of contract to enforce contract compliance. If we determine that an Elepreneur
has violated any of the Elepreneurs Policies or Procedures, we may elect to educate the Elepreneurs regarding the contract terms
or impose sanctions such as warnings, probation, suspension of privileges of Elepreneurship, withholding commissions until specified
conditions are satisfied, termination of the Elepreneur’s rights completely or other appropriate injunctive relief. An Elepreneur
may voluntarily terminate their position at any time.
Compensation
Plan
We
believe our Compensation Plan brings together the best of uni-level compensation plans. Each personally enrolled Elepreneur is
considered a personally sponsored position. The Enrollment structure addresses the uni-level features of the plan, with no limit
to how many Elepreneurs can be enrolled per level. The Placement structure addresses the features of the plan. Each Elepreneur
can have unlimited individuals in their organization, and everyone contributes building by placing their enrollments.
An
Elepreneur could begin earning commissions when their personally invited Elepreneurs make the first purchase. Our intention is
to ensure that all new Elepreneurs receive the know how to achieve success in this business. We believe we provide a format for
them to succeed. Each person begins in the program by enrolling an Elepreneur. They then work to help mentor and educate the Elepreneurs
they recruited and others in their organization do the same. We believe when everyone is following the same actions the result
can be impressive and it promotes team building. We believe that when people work as a team, they can be rewarded for their team
actions.
The
Company pays weekly and monthly sales commissions and certain matching bonuses. We also offer one-time cash bonuses to people
who reach new ranks for the first time. These cash bonuses vary depending on the level of their success.
Each
of our product carries a specified level of commissionable sales, and commissions or bonuses earned are based on an Elepreneur’s
personal qualifications, organizational skills, and sales volumes.
An
Elepreneur receives commissions based on a percentage of the sales volume of their downline weekly and monthly. Commission qualification
volume points are essentially based upon a percentage of the product’s wholesale cost, net of any sales related taxes. As
an Elepreneur’s retail business expands, and as they successfully sponsor other Elepreneurs into the business, both of which
expand their business, the Elepreneurs can receive more commissions from the expanded sales volume of their downline. An Elepreneur
remains eligible to receive weekly commission bonuses by remaining in good standing with the Company and by generating a minimum
of Personal Volume (PV).
As
with any business, individual results may vary, and will be based on the Elepreneurs’ personal capacity, business experience,
expertise and level of desire. There are no guarantees concerning the level of success Elepreneurs may experience. The examples
used in the Company’s training materials are exceptional results, which may not apply to an average Elepreneur, and are
not intended to represent or guarantee that anyone will achieve the same or similar results. There are several ways for Elepreneurs
to be paid under the Company’s compensation plan, which we refer to as the Super Affiliate Marketing Plan or SAM. For example,
under SAM, Elepreneurs earn sales commissions based on the amount of their personal retail or ecommerce sales, including sales
to repeat customers. Elepreneurs can also earn commissions based on sales made by Elepreneurs that they have recruited into the
Company’s distribution network, which the Company refers to as the Elepreneur’s Downline.
Under
SAM, our top producing Elepreneurs, which we refer to as Super Affiliates, can also earn commission based on the combined commissionable
sales levels achieved (during a relevant measurement period) by such Elepreneur and his/her Downline. In addition, Super Affiliates
can earn bonuses, designed to compensate them for mentoring and developing Elepreneurs in his/her Downline that he/she trains
and sponsors.
A
Super Affiliate also can earn special bonuses based on the commissionable sales levels achieved by Super Affiliates in his/her
Downline. A Super Affiliate’s Downline may contain several levels, or generations, of sponsored Elepreneurs. Under SAM,
an Elepreneur that was directly recruited by a Super Affiliate into the Company’s network would be deemed to belong to that
Super Affiliate’s first-generation Downline. Likewise, an Elepreneur recruited by a person in a Super Affiliate’s
first-generation of recruits, would be deemed to belong to the Super Affiliate’s second-generation Downline. Generally,
the amount of the special bonus that a Super Affiliate can earn under this provision of the compensation plan is graduated depending
on the relative position of the underlying recruit in the Super Affiliate’s Downline. For example, the special bonus a Super
Affiliate can earn on sales made by his/her second-generation recruits is higher than the special bonus he/she can earn on sales
made by his/her first-generation recruits. Likewise, the special bonus a Super Affiliate can earn on sales made by his/her third-generation
recruits is higher than the special bonus he/she can earn on sales made by his/her second-generation recruits. This way, Super
Affiliates are incentivized to build a deep organization of successful recruits (i.e.: a multi-generation sales organization).
Trademarks,
Patents and Intellectual Property
We
have applied for, or are in the process of applying for, trademark protection in the United States and in other countries where
we currently do business or intend to do business in the future. The Company anticipates securing multiple U.S. trademarks and
foreign trademarks. As we continue to expand internationally, trademark protection is increasingly important for brand recognition
as Elepreneurs and consumer loyalty. It is standard Company practice to follow through with ongoing trademark registration in
the United States and other countries where we are experiencing growth.
A
number of our products utilize proprietary formulations and processes. Although we do not directly hold any patents currently,
a number of our key vendors have secured or applied for patents to maintain exclusivity for the ingredients or integrated products
they supply to us. To protect our own intellectual property and proprietary processes that are material to the long-term health
and profitability of the Company, we maintain disciplined business practices to manage trade secrets and use various forms of
confidentiality and non-disclosure agreements.
Our
exclusive product is listed, and we exercise special vigilance in the area of compliance. For this reason, we employ a compliance
team that closely monitors all company and Elepreneurs’ messaging and is empowered to edit or remove all non-compliant language
pertaining to our products.
Strategic
Partnerships
We
maintain good relationships with our key vendors to ensure a continuous supply of our key products. To date, we have relied on
three principal suppliers for our product: Alternative Laboratories, LLC, The Vitamin Patch, LLC and The Ellier Group. Purchases
from these suppliers, in the aggregate, accounted for 99% of total purchases for the fiscal period from May 5, 2017 to April 30,
2018. Although there are other providers in the world who claim to produce similar products our sourcing information indicates
that the products we offer are the best quality.
We
retain the freedom to use any competitive suppliers to garner control over our product costs, quality and lead times for manufacturing
and delivery. Our inventory control system ensures appropriate available volumes of finished product based on the anticipated
movement of each item in our catalog.
Regulatory
Environment
Direct
Selling Activities
Direct
selling activities are regulated by various federal, state and local governmental agencies in the United States and by similar
agencies in foreign countries. We believe the Company’s method of distribution is in compliance in all material respects
with the laws and regulations relating to not-for-resale and direct selling activities in the United States, and other countries
where we operate. These laws and regulations are generally intended to prevent fraudulent or deceptive practices, often referred
to as “pyramids,” “money games,” “business opportunity” or “chain sales” schemes
that promise quick rewards for little or no effort, require high entry costs, use high-pressure recruiting methods, and/or do
not involve legitimate products. These laws and regulations can impose certain cancellation or product return obligations on us,
impose inventory buy-backs obligations on us and provide “cooling-off” rights for consumers. In addition, such laws
and regulations can require us to register with governmental agencies and can otherwise impose limiting regulatory requirements
on us.
The
purpose of these laws and regulations is to ensure that Elepreneurs are compensated for sales of products and not for recruitment
of new Elepreneurs. The extent and provisions of these laws vary from state to state and internationally. International laws may
impose significant restrictions and limitations on our business operations. For example, in foreign countries where we have not
yet established a local office, our Elepreneurs and customers may purchase product through a not-for-resale program enabling them
to receive product for personal consumption, but may not be allowed to retail the product to consumers.
Any
assertion or determination that we do not comply with existing laws or regulations could potentially have a material adverse effect
on our business and results of operations. We cannot assure that regulatory authorities in our existing markets will not impose
new legislation or change existing legislation that might adversely affect our business in those markets. In addition, we cannot
assure that new judicial interpretations of existing law will not be issued that adversely affect our business. Regulatory action,
whether or not it results in a final determination adverse to us, has the potential to create negative publicity, with detrimental
effects on the motivation and recruitment of our Elepreneurs and, consequently, on our revenue and net income.
Regulation
of Personal Care and Nutritional Food Products
Our
products and related marketing and advertising are subject to governmental regulation by various domestic federal, state and local
agencies and authorities, including the U.S. Food and Drug Administration (FDA), which regulates food, medical products and cosmetics,
as further discussed below. The advertising and marketing of our products are regulated by the Federal Trade Commission, which
enforces consumer protection laws regarding truth in advertising. The Consumer Product Safety Commission protects the public from
unreasonable risk of injuries and death associated with consumer products, and the U. S. Department of Agriculture regulates food
safety and quality. Similar types of agencies also exist in our foreign markets. To date, we have not experienced any governmental
actions related to health or safety and food and drug regulations for our products.
The
FDA regulates both finished dietary supplement products and dietary ingredients. Specifically, dietary supplements are regulated
under the Dietary Supplement Health and Education Act of 1994 (the DSHEA). Under the DSHEA, manufacturers and distributors of
dietary supplements are prohibited from marketing products that are adulterated or misbranded. Accordingly, under the DSHEA, manufacturers
and distributors of dietary supplements are responsible for the safety and labeling of their products prior to such products reaching
the market. Once a product reaches the market, the FDA is responsible for taking enforcement action against any product found
to be an adulterated or misbranded dietary supplement. However, dietary supplements and dietary ingredients, such as those sold
by the Company, do not require FDA approval before marketing and selling.
Our
markets have regulations concerning product formulation, labeling and packaging. These laws and regulations often require us to,
among other things, conform product labeling to the language and regulations, and register or qualify products with the applicable
government authority or obtain necessary approvals or file necessary notifications for the marketing of such products. Many of
our existing markets also regulate product claims and advertising. These laws regulate the types of claims and representations
that can be made regarding the capabilities of products. For example, in the United States we are unable to make any claim that
our nutritional products will help diagnose, cure, mitigate, treat, or prevent disease.
Employees
As
of the date of this registration statement, the Company has approximately 50 full-time employees, with a few services, employee
and management functions being performed by consultants. Many of these employees directly support the Elepreneurs network. Our
employees are not presently covered by any collective bargaining agreement. We believe our relationships with our employees are
good.
Access
to Public Filings
Our
Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to such reports
are available to any person, without charge, upon written request to our Investor Relations Department at 1700 Coit Road, Suite
100, Plano, Texas 75075.
In
addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public Reference
Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains our reports, proxy and information statements, and
other information that we file electronically with the SEC at
www.sec.gov
.
ITEM
1A. RISK FACTORS.
You
should carefully review and consider the risks described below, as well as the other information in this report and in other reports
and documents we file with the SEC when evaluating our business and future prospects. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties, not presently known to us, or that we currently see as immaterial,
may also occur. If any of the following risks or any additional risks and uncertainties actually occur, then our business, financial
condition and results of operations could be seriously harmed. In that event, the market price of our common stock could decline
and you could lose all or a portion of the value of your investment in our common stock. You should not draw any inference as
to the magnitude of any particular risk from its position in the following discussion.
Risks
Incidental to our Business:
Our
growth initiatives, including our efforts to attract new consumers, may not be successful.
We
are an emerging growth company with no significant sales history prior to December 2017. We have made significant investments
in our strategic growth initiatives, including our various marketing initiatives designed to attract new customers. We cannot
assure you that these strategic initiatives will result in the increased sales growth that we expect, which could have a material
adverse effect on our financial position and results of operations.
We
may be unable to anticipate and effectively respond to changes in consumer preferences and buying patterns in a timely manner.
Our
success depends in part on our ability to anticipate, assess and react in a timely manner to changes in consumer buying patterns
and preferences, particularly for specific health and wellness and travel products and services. We expect continuously changing
consumer buying patterns and preferences to influence future demand for health, wellness and travel products and services. If
we do not timely identify and properly respond to evolving trends and changing consumer demands for these products and services,
our financial position and results of operations may be adversely affected.
The
timing and acceptance of new products we introduce may not be successful.
Our
success depends in part on our ability to develop or acquire and introduce new products and services that appeal to our targeted
customer base. If we do not timely develop or acquire and successfully introduce new products and services or if such products
and services are not received well by consumers, our financial position and results of operations may be adversely affected.
Our
Ability to Efficiently Manage and Control our Operating Costs.
Our
ability to grow profitably depends in large part on our ability to successfully control our operating expenses. In furtherance
of this strategy, we have engaged in ongoing activities to control costs, including the recent implementation of an operating
budget and management reporting systems. We cannot assure you that our strategic initiatives and cost control efforts will result
in the increased profitability or other benefits that we expect, which could have a material adverse effect on our financial condition
and results of operations.
If
we continue to incur net losses from operations and must rely on additional financing to implement our business strategies.
As
of September 30, 2018, the Company’s working capital (current assets minus current liabilities) was negative, it had a net
accumulated deficit, negative cash flows from operations, and the Company has experienced periodic cash flow difficulties. These
factors combined, raise substantial doubt about the Company’s ability to continue as a going concern. Should we be unable
to raise additional capital or to obtain additional financing, if needed, could inhibit our ability to implement our business
strategies and meet our goals. This, in turn, could slow the financial momentum the Company is currently experiencing.
Because
our direct-to-consumer sales rely on the marketability of key personalities, the inability of a key personality to perform his
or her role, or the existence of negative publicity surrounding a key personality, could adversely affect our revenues.
Direct-to-consumer
products may be marketed with a key personality through our independent Elepreneurs channels. The inability or failure of a key
personality to fulfill his or her role, or the ineffectiveness of a key personality as a spokesperson for a product, a reduction
in the exposure of a key personality due to the discontinuance of a marketing program, or otherwise, or negative publicity about
a key personality may adversely affect the sales of our product associated with that personality and could affect the sale of
other products. A decline in sales would negatively affect our results of operations and financial condition.
We
depend on three suppliers for substantially all the products we sell and the loss, or unexpected interruption, of this source
could materially adversely affect our results of operations and financial condition.
A
shortage of raw materials or an unexpected interruption of product supply from these suppliers could result in higher prices for
these products. In the event of loss of these suppliers, we may no longer be able to continue to offer these products. We may
not be able to raise prices sufficiently or quickly enough to offset the negative effects of the loss of product lines, which
may adversely affect our results of operations or financial condition.
The
failure of our suppliers to supply product of adequate quality, in sufficient quantities, at a favorable price, and in a timely
fashion could adversely affect our results of operations.
We
currently buy our products principally from three suppliers. The loss of any of our principal suppliers or of a supplier that
provides any hard-to-obtain materials could adversely affect our business operations. Although we believe that we could establish
alternate sources for most of our products, any delay in locating and establishing relationships with other sources could result
in product shortages, with a resulting loss of sales and customers. In certain situations, we may be required to alter our products
or to substitute different materials from alternative sources.
Product
liability claims could harm our business. We may be required to pay for losses or injuries purportedly or caused by our products.
Historically,
we have had no product liability claims. We have experienced difficulty in finding insurers that are willing to provide product
liability coverage at reasonable rates due to insurance industry trends and the rising cost of insurance generally. However, we
have elected to purchase product liability insurance, which minimizes the Company’s financial risk. If any of our products
are found to cause any injury or damage, we believe the liability insurance coverage should substantially minimize the adverse
financial impact to the Company. However, there is some risk the Company will be subject an amount of liability associated with
any injuries or damages. This liability could be substantial and may exceed our reserves.
We
may not be able to successfully identify acquisition candidates or successfully finance and complete desirable acquisitions.
In
the past year, we have completed several strategic acquisitions and we intend to pursue additional acquisitions in the future.
We actively review acquisition prospects that we believe would complement our existing product competencies, increase the size
and geographic scope of our operations or otherwise offer profitable growth and operating efficiency opportunities. There can
be no assurance that we will continue to identify suitable acquisition candidates. If suitable candidates are identified, we may
be unable to reach agreeable acquisition terms with such candidates or may not have access to sufficient funds to fund such acquisitions.
We compete against many other companies, some of which are larger and have greater financial and other resources than we do. Increased
competition for acquisition candidates could result in fewer acquisition opportunities and higher acquisition prices. In addition,
our ability to fund future acquisitions is dependent on our ability to obtain sufficient additional financing. We may be unable
to finance acquisitions to grow our business or to improve our financial and competitive position.
Our
planned expansion into foreign markets exposes our business to risks related to those economies that may adversely affect our
results of operations.
We
have entered into agreements with Elepreneurs in the U.S. and we may establish similar arrangements in other countries in the
future. As a result, our future revenues may be affected by the economies of these countries. Our international operations are
subject to a number of risks, such as, unexpected changes in regulatory environments, import and export restrictions and tariffs,
difficulties in staffing and managing international operations, potentially adverse recessionary environments and economies outside
the United States, and possible political and economic instability.
Risk
Incidental to our Preferred Shareholder Rights:
The
Board has authorized the issuance of up to 200,000,000 shares of our Convertible Preferred Stock and, at September 30, 2018, there
were 107,754,540 shares of our Preferred Stock issued and outstanding. The affirmative vote of the holders of 86% of the issued
and outstanding shares of our Convertible Preferred Stock is required for the Board to declare dividends upon our shares of common
stock, unless the shares of our Convertible Preferred Stock are to receive the same dividend as the common shares, on an as converted
basis. In addition, the issued and outstanding shares of our Convertible Preferred Stock are senior with regards to distributions
in the event of the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary. Furthermore, the
issued and outstanding shares of our Convertible Preferred Stock have voting rights that are equal or senior to the voting rights
of our common shares, as described below. These preferred shareholder rights may constitute a material limitation on our ability
to pay dividends, if any, and other distributions, and on the voting rights of our common stockholders.
The
voting rights of each class of the Company’s securities are as follows: (a) each share of Class A Common Stock entitles
the holder to one vote, (b) each share of Class B Common Stock entitles the holder to one vote, (c) each share of Series A Preferred
Stock entitles the holder to one vote, (d) each share of Series B Preferred Stock entitles the holder to 1,000 votes, and (e)
each share of Series C Preferred Stock entitles the holder to one vote. In addition, each share of the Company’s Class B
Common Stock, Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock is convertible into one share of
the Company’s common stock.
ITEM
2. FINANCIAL INFORMATION.
We
are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act. Accordingly, we have omitted certain information
called for by this Item as permitted by applicable scaled disclosure rules.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The
following section discusses management’s view of the financial condition as of July 31, 2018, and the results of operations
and cash flows for the three months ended July 31, 2018, of Sharing Services, Inc. and consolidated subsidiaries. The information
contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our
Annual Report on Form 10-K for the period from May 5, 2017 (inception) to April 30, 2018 is incorporated herein by reference.
This section should be read in conjunction with the audited consolidated financial statements of Sharing Services and the related
notes, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section, included in
such Annual Report, and with the condensed consolidated financial statements included elsewhere in this registration statement.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations section may contain forward-looking
statements. Please see “Cautionary Notice Regarding Forward-Looking Statements” for a discussion of the uncertainties,
risks and assumptions associated with these forward-looking statements that could cause results to differ materially from those
reflected in such forward-looking statements.
For
financial accounting purposes, the acquisition of Total Travel Media was treated as a reverse acquisition in accordance with accounting
principles generally accepted in the United States. Accordingly, for financial accounting purposes, Total Travel Media became
the accounting acquirer and Sharing Services became the acquired company. Accordingly, the historical financial statements prior
to the acquisition are those of the accounting acquirer, Total Travel Media, and have been prepared to give retroactive effect
to the acquisition. Thus, the Company’s consolidated financial statements after the acquisition date include the combined
balance sheets of Sharing Services and Total Travel Media, at historical cost, the historical results of operations and cash flows
of Total Travel Media from its inception (May 5, 2017) and the results of operations and cash flows of Sharing Services from the
acquisition date. In accordance with GAAP, goodwill was not recognized as a result of this transaction. Please see Note 1 of notes
to the consolidated financial statements included in our Annual Report on Form 10-K for the period from May 5, 2017 (inception)
to April 30, 2018 for more information about the acquisition of Total Travel Media.
Highlights
for the Three Months Ended July 31, 2018:
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Our
consolidated net sales for the three months ended July 31, 2018 were $12.9 million. The
Company is an emerging growth company with no significant sales prior to December 2017;
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Our
consolidated gross profit for the three months ended July 31, 2018 was $8.0 million and
our consolidated gross margin was 61.6%;
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For
the three months ended July 31, 2018, our consolidated operating earnings were $337,172
compared to an operating loss of $592,213 for the period from May 5, 2017 (inception)
to July 31, 2017;
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For
the three months ended July 31, 2018, the changes in the fair value of our derivative
liabilities resulted in a net loss of $25,837 compared to $22,004 for the period from
May 5, 2017 (inception) to July 31, 2017;
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Our
consolidated net loss was $91,251 for the three months ended July 31, 2018, compared
to $640,826 for the period from May 5, 2017 (inception) to July 31, 2017. Basic and fully
diluted loss per share was $0.0 for the three months ended July 31, 2018, compared to
$0.01 for the period from May 5, 2017 (inception) to July 31, 2017;
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Our
consolidated cash used by operating activities was $57,257 for the three months ended
July 31, 2018, compared to $323,137 for the period from May 5, 2017 (inception) to July
31, 2017;
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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 and America Approved Commercial LLC;
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During
the three months ended July 31, 2018, the Company acquired certain assets and business
operations, and assumed certain liabilities, subject to certain performance conditions,
of Legacy Direct, LLC;
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In
July 2018, the Company entered into a Binding Letter of Intent (the “Hyten LOI”)
pursuant to which it intends to purchase certain assets and businesses operations of
Hyten Global LLC (“Hyten”), the owner of certain direct selling or multi-level
marketing businesses operating principally in the United States and Asia; and
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During
the three months ended July 31, 2018, the Company issued 600,000 shares of its class
A Common Stock for proceeds in the amount of $150,000 in connection with stock subscription
agreements.
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Overview
Description
of Business
Sharing
Services, Inc. (“SHRV,” “we” or “the Company”) is a diversified company specializing in the
direct selling industry. The Company owns, operates, or controls an interest in a variety of companies that either sell products
and services to the consumer directly through independent representatives, that range from health and wellness, energy, technology,
insurance services, training, media and travel benefits.
The
Company previously developed and marketed a taxi-ride sharing website and application (“web app”). Beginning in February
2017, the Company expanded its business model 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,
the Company launched a wholly-owned subsidiary operating under the trade name “Elepreneurs.” One of Elepreneus’
leading product lines, “Elevate,” consists of Nutraceutical products that the Company terms “D.O.S.E.”
(Dopamine, Oxytocin, Serotonin and Endorphins) and was developed and is owned by another of the Company’s wholly-owned subsidiaries,
“Elevacity Global.” This product line has accelerated the Company’s growth during the last two quarters of the
period from May 5, 2017 (inception) to April 30, 2018.
As
part of its growth strategy, the Company completed a number of significant acquisitions and purchases of equity interest during
the period from May 5, 2017 (inception) to the date of this registration statement. Subject to approval by its Board of Directors,
the Company intends to continue to grow its business both organically and by making strategic acquisitions and purchases of equity
interests, from time to time, in businesses and technologies that augment its product portfolio, complement its business competencies
and fit its growth strategy to meet or exceed its objectives and create shareholder value. Please see “Liquidity and Capital
Resources” below from more information about our recent acquisitions.
Key
Industry and Business Trends
The
information contained under “Key Industry and Business Trends” in ITEM 1 of our Annual Report on Form 10-K for the
period from May 5, 2017 (inception) to April 30, 2018 is incorporated herein by reference.
Debt
The
Company is an emerging growth company with no material sales prior to December 2017 and has not generated cash from operations.
The Company has funded a substantial portion of its liquidity and cash needs through the issuance of debt and equity securities.
Please see “Liquidity and Capital Resources” below for more information about the Company’s debt and issuances
of equity securities.
Results
of Operations
Net
Sales
Our
consolidated net sales for the three months ended July 31, 2018 were $12.9 million and consisted primarily of sales of our Elevacity
health and wellness product line. Our Elevacity product line was introduced during the second half of the period from May 5, 2017
(inception) to April 30, 2018. The Company anticipates its consolidated net sales to grow at a rapid pace during its fiscal year
ending April 30, 2019.
Gross
Profit
Our
consolidated gross profit for the three months ended July 31, 2018 was $8.0 million, and consolidated gross margin was 61.6%.
For the three months ended July 31, 2018, our gross margin benefited from economies of scale (as the volume of product shipped
increased compared to the preceding quarter) and cost reduction efforts in connection with order-fulfilment operations and back
office processes.
Selling
and Marketing Expenses
Our
consolidated selling and marketing expenses were $6.0 million, or 46.7% of consolidated net sales, for the three months ended
July 31, 2018, compared to $288,417 for the period from May 5, 2017 (inception) to July 31, 2017, principally as a result of the
increase in sales compared to the prior year quarter. Our consolidated selling and marketing expenses for the three months ended
July 31, 2018, consisted principally of sales commissions of $5.7 million and advertising expense. During the first half of our
fiscal year ending April 30, 2019, we anticipate selling and marketing expenses to continue to be high as a percentage of net
sales. As our sales volume continues to grow, we expect our consolidated selling and marketing expenses to grow at a slower pace
than our consolidated net sales.
General
and Administrative Expenses
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) were $1.6 million, or 12.3% of consolidated net sales, for the three months ended
July 31, 2018, compared to $303,796 for the period from May 5, 2017 (inception) to July 31, 2017. As our sales volume continues
to grow, we expect our consolidated general and administrative expenses to grow at a slower pace than our consolidated net sales.
Interest
Expense
Consolidated
interest expense, including amortization of debt discount of $335,300 and prepayment penalties of $36,734 associated with a convertible
note, was $402,586 for the three months ended July 31, 2018, compared to $26,609 for the period from May 5, 2017 (inception) to
July 31, 2017 as a result of an increase in convertible notes outstanding. For the three months ended July 31, 2018, interest
expense is net of interest income of $8,318.
Net
Change in Fair Value of Derivative Liabilities
The
net 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 loss of $25,837 for the three months ended July 31, 2018, compared to $22,004 for the
period from May 5, 2017 (inception) to July 31, 2017. The Company accounts for the conversion features of its convertible notes,
stock options and stock warrants under ASC 815. Please see Note 9 of the Condensed Notes to Consolidated Financial Statements
included elsewhere in this registration statement for more information about the net change in the fair value of the derivative
liabilities.
Provision
for Income Taxes
The
Company is an emerging growth company and, prior to its fiscal quarter ended July 31, 2018, had not generated pre-tax earnings
or taxable earnings from its operations. As of the date herein, the ability of the Company to consistently generate 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 registration statement.
Net
Loss and Loss per Share
As
a result of the foregoing, for the three months ended July 31, 2018, our consolidated net loss was $91,251 compared to $640,826
for the period from May 5, 2017 (inception) to July 31, 2017. Basic and fully diluted loss per share was nil for the three months
ended July 31, 2018, compared to a basic and fully diluted loss per share $0.01 for the period from May 5, 2017 (inception) to
July 31, 2017.
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
At
July 31, 2018, cash and cash equivalents were $785,554. Based upon the current level of operations and investments necessary to
grow sales volume to reach a break-even point, we anticipate that existing cash balances and funds expected to be generated by
operations will likely not be sufficient to meet our working capital requirements, and to fund potential acquisitions and anticipated
capital expenditures, including investments in information technology, over the next 12 months. Accordingly, we intend to obtain
additional financing from time to time through the issuance of equity securities from time to time, principally through the issuance
of shares of our Convertible Preferred Stock.
Historical
Cash Flows
Historically,
our primary sources of cash have been capital transactions involving the issuance of equity securities and debt (Please see “Recent
Issuances of Equity Securities” and “Debt” below) and our primary uses of cash were for operating activities,
acquisitions and capital expenditures in the ordinary course of our business.
The
following table shows our sources and uses of cash for the three months ended July 31, 2018, compared to the period from May 5,
2017 (inception) to July 31, 2017:
|
|
Three Months Ended July 31, 2018
|
|
|
Period from May 5, 2017 (inception) to
July 31, 2017
|
|
|
Increase
(Decrease)
|
|
Net cash used by operating activities
|
|
$
|
(57,257
|
)
|
|
$
|
(323,137
|
)
|
|
$
|
(265,880
|
)
|
Net cash provided (used) by investing activities
|
|
|
(118,723
|
)
|
|
|
42,605
|
|
|
|
161,328
|
|
Net cash provided by financing activities
|
|
|
193,266
|
|
|
|
354,349
|
|
|
|
(161,083
|
)
|
Net increase in cash and cash equivalents
|
|
$
|
17,286
|
|
|
$
|
73,817
|
|
|
$
|
(56,531
|
)
|
Net
Cash Used by Operating Activities
Net
cash used by operating activities during the three months ended July 31, 2018 decreased $265,880 to $57,257, compared to the period
from May 5, 2017 (inception) to April 30, 2017, mainly due to a decrease of $549,575 in net loss and incremental amortization
of debt discount of $312,330 (a non-cash expense). This decrease was partially offset by a decrease in stock-based compensation
of $258,448 and net changes in operating assets and liabilities of $349,156.
Net
Cash Used by Investing Activities
Net
cash used by investing activities during the three months ended July 31, 2018 increased $161,328 to $118,723, compared to net
cash provided by investing activities of $42,605 the period from May 5, 2017 (inception) to April 30, 2017. This increase reflects
an increase in capital expenditures of $118,723 and a decrease in net cash acquired in connection with acquisitions.
Net
Cash Used by Financing Activities
Net
cash provided by financing activities during the three months ended July 31, 2018 decreased $161,083 to $193,266, compared to
the period from May 5, 2017 (inception) to April 30, 2017. This decrease was mainly due to lower proceeds of $293,500 from issuances
of equity securities, partially offset by higher net proceeds of $133,266 from issuances of promissory notes.
Significant
Recent 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 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, subject to the achievement by the acquired operating business of certain
specified performance targets over a period of up to three years. 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, Legacy Direct Global completed the acquisition.
The acquisition involved the purchase of assets with a preliminary value of $83,490.
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 26, 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 to grow its business both organically and by making strategic
acquisitions and purchases of equity interests, from time to time, in business and technologies that augment its product portfolio,
complement its business competencies and fit its growth strategy. Such acquisitions and purchases of equity interests are expected
to be funded with cash and cash equivalents, cash from 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
June 2018, the Company issued 600,000 shares of its common stock, par value of $0.0001,
at a price of $0.25 per share , in exchange for cash proceeds of $150,000 pursuant
to stock subscription agreements, including 490,000 shares under subscription agreements
entered into in the three months ended April 30, 2018;
|
|
|
|
|
●
|
In
August 2018, the Company issued 210,000 shares of its common stock, at a price of $0.25
per share , in exchange for cash proceeds of $52,500 pursuant to stock subscription
agreements;
|
|
|
|
|
●
|
In
September 2018, the Company issued 112,000 shares of its Class A common stock in exchange
for professional services valued at $31,000; and
|
|
|
|
|
●
|
At
September 30, 2018, there were 57,092,000 shares of our Common Stock Class A issued and
outstanding.
|
Series
A Convertible Preferred Stock
|
●
|
In
May 2018, the Company issued 5,000,000 shares of its Series A Convertible Preferred Stock,
par value of $0.0001, in the aggregate, in connection with its previously disclosed acquisitions
of equity interests in 561, LLC and America 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 and America Approved Commercial LLC;
|
|
|
|
|
●
|
In
August 2018, the Company also issued 250,000 shares of its Series A Convertible Preferred
Stock in connection with its previously disclosed acquisition of an equity interests
in Medical Smart Care LLC; and
|
|
|
|
|
●
|
At
September 30, 2018, there were 93,194,540 shares of our Series A Convertible Preferred
Stock issued and outstanding.
|
Series
C Convertible Preferred Stock
|
●
|
In
August 2018, the Company issued 80,000 shares of its Series C Convertible Preferred Stock,
par value of $0.0001, at a price of $0.25, in exchange for cash proceeds of $20,000 pursuant
to stock subscription agreements; and
|
|
|
|
|
●
|
In
September 2018, the Company issued 30,000 shares of its Series C Convertible Preferred
Stock, at a price of $0.25, in exchange for cash proceeds of $7,500 pursuant to stock
subscription agreements; and
|
|
|
|
|
●
|
At
September 30, 2018, there were 4,060,000 shares of our Series C Convertible Preferred
Stock issued and outstanding.
|
Debt
Convertible
Notes Payable
Please
see Note 8 of the Condensed Notes to Consolidated Financial Statements contained elsewhere in this registration statement for
more information about our Convertible Notes Payable.
Capital
Requirements
During
the three months ended July 31, 2018, capital expenditures for property and equipment in the ordinary course of our business were
$143,323.
Contractual
Obligations
There
were no material changes to our contractual obligations since April 30, 2018, except for (1) the issuances and repayments of convertible
notes payable disclosed in Note 8 of the Condensed Notes to Consolidated Financial Statements contained elsewhere in this registration
statement 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 registration
statement.
Off-Balance
Sheet Financing Arrangements
At
July 31, 2018 and April 30, 2018, we had no off-balance sheet financing arrangements other than operating leases incurred in the
ordinary course of our business.
Inflation
We
believe inflation did not have a material effect on our results of operations during any of the periods presented in this report.
Critical
Accounting Estimates
There
have been no material changes to our critical accounting estimates or assumptions since April 30, 2018.
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 Consolidated
Financial Statements contained elsewhere in this registration statement.
ITEM
3. PROPERTIES.
The
following table provides the location for our most significant facilities, as of October 26, 2018:
Location
|
|
Type of Facility
|
|
Sq. Feet
|
|
Leased Properties:
|
|
|
|
|
|
|
Plano, Texas
|
|
Corporate Headquarters
|
|
|
18,300
|
|
Plano, Texas
|
|
Office
|
|
|
3,500
|
|
item
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
At
September 30, 2018 the following securities were issued and outstanding: Class A Common Stock: 57,092,000; Class B Common Stock:
10,000,000; Series A Preferred Stock: 93,194,540; Series B Preferred Stock: 10,000,000; and Series C Preferred Stock: 4,060,000.
The respective voting rights of each class, are as follows: (a) Common Stock Class A: each share entitles the holder to one vote,
(b) Common Stock Class B: each share entitles the holder to one vote, (c) Series A Preferred Stock: each share entitles the holder
to one vote, (d) Series B Preferred Stock: each share entitles the holder to 1,000 votes, and (e) Series C Preferred Stock: each
share entitles the holder to one vote.
Each share
of the Company’s Class B Common Stock, Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock
is convertible into one share of the Company’s common stock. The following table reflects the number of shares and percent
of ownership of each voting class held by each listed beneficial owner, after considering the conversion rights for each of the
Company’s convertible equity securities.
Title
of Class
|
|
Name
and Address of
Beneficial
Owner [1]
|
|
Amount
and Nature of Beneficial
Ownership [2]
|
|
|
Percent
of All
Voting Classes [3]
|
|
Common
Stock Class A
|
|
Foshan
City Shunde District
Cheering Garden
Tools Co.,
Ltd., No. 83 Hongqi Mid-Rd.,
Ronggui Town, Shunde District,
Foshan
City, Guangdong
Province, China
|
|
|
30,020,000
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group - 4 persons
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
Class B [4]
|
|
Robert
Oblon
1415
Legacy Drive, Suite 310
Frisco,
TX 75034
|
|
|
7,500,000
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group – 4 persons
|
|
|
7,500,000
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Series
A Preferred Stock [5]
|
|
Robert
Oblon
1415
Legacy Drive, Suite 310
Frisco,
TX 75034
|
|
|
50,000,000
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group - 4 persons
|
|
|
50,000,000
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Series
B Preferred Stock [6]
|
|
Robert
Oblon
1415
Legacy Drive, Suite 310
Frisco,
TX 75034
|
|
|
7,500,000
|
|
|
|
73.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bear
Bull Market Dividends, Inc.
600
Anton Blvd., 17
th
Floor
Costa
Mesa, CA 92626
|
|
|
2,500,000
|
|
|
|
24.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group – 4 persons
|
|
|
7,500,000
|
|
|
|
73.8
|
%
|
|
[1]
|
The
person named above may be deemed to be a “parent” and “promoter” of our company, within the meaning
of such terms under the Securities Act of 1933, as amended, by virtue of their direct and indirect stock holdings. Foshan
City Shunde District Cheering Garden Tools Co., Ltd. is controlled by Natthapong Thipjaroey, a former President and director
of the Company. Alchemist Holdings, LLC is controlled by Robert Oblon, the Chairman of the Company’s Board of Directors
at the time of this report. Bear Bull Market Dividends, Inc. is controlled by Kenyatto M. Jones.
|
|
|
|
|
[2]
|
Beneficial
ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting
or investment power with respect to securities. Pursuant to the rules and regulations of the SEC, shares of common stock that
an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to
be outstanding for the purposes of computing the percentage ownership of such individual or group and includes shares that
could be obtained by the named individual within the next 60 days.
|
|
|
|
|
[3]
|
Calculated
after giving effect to the conversion and voting rights of the various classes of securities issued and outstanding.
|
|
|
|
|
[4]
|
Each
share of Class B Common Stock shall be convertible at any time into one share of Common Stock at the option of the holder.
Mr. Oblon, the Chairman or our Board of Directors at the time of this report, controls Alchemist Holdings, LLC and is deemed
to be the beneficial owner of 7,500,000 shares of our Class B Common Stock owned by Alchemist Holdings, LLC at the time of
this report.
|
|
|
|
|
[5]
|
For
a period of ten (10) years from the date of issuance of shares of Series A Preferred Stock, the holders may elect to convert
each share of Series A Preferred Stock into one share of the Company’s Common Stock. Mr. Oblon, the Chairman or our
Board of Directors at the time of this report, controls Alchemist Holdings, LLC and is deemed to be the beneficial owner of
50,000,000 shares of our Series A Preferred Stock owned by Alchemist Holdings, LLC at the time of this report.
|
|
|
|
|
[6]
|
For
a period of ten (10) years from the date of issuance of shares of Series B Preferred Stock, the holders may elect to convert
each share of Series B Preferred Stock into ten shares of the Company’s Common Stock. Mr. Oblon, the Chairman or our
Board of Directors at the time of this report, controls Alchemist Holdings, LLC and is deemed to be the beneficial owner of
7,500,000 shares of our Series B Preferred Stock owned by Alchemist Holdings, LLC at the time of this report.
|
item
5. directors and executive officers.
Committees
of the Board of Directors
The
registrant’s Board of Directors from time to time may appoint directors to serve in committees. As of the date hereof, the
Board of Directors has not appointed committees due to the limited number of directors currently serving.
The
names, addresses, ages and positions of our executive officers and directors are set forth below:
Name
|
|
Age
|
|
Position(s)
|
Robert
Oblon
|
|
53
|
|
Chairman
of the Board of Directors
|
John
“JT” Thatch
|
|
56
|
|
President,
Chief Executive Officer and Director
|
Frank
A. Walters
|
|
70
|
|
Secretary,
Treasurer, Principal Financial Officer and Director
|
Jordan
Brock
|
|
36
|
|
Vice
President and Director
|
Robert
Oblon has been the visionary architect and Chief Executive Officer of Alchemist Holdings, LLC for over five years, and of Four
Oceans Holdings, Inc. and its predecessor companies, for five years prior to the registrant’s acquisition of Four Oceans
Holdings, Inc. on September 29, 2017. Four Oceans Holdings, Inc. is now a wholly owned subsidiary of the registrant. For more
than 20 years, Mr. Oblon has been at the forefront of some of today’s leading marketing companies, such as WorldVentures,
Your Success Network, and Travopoly Travel. During this time, Mr. Oblon has successfully led both product and business initiatives
that empower entrepreneurs to achieve their business goals.
John
“JT” Thatch is an accomplished, energetic, entrepreneur-minded executive with the vision and knowledge to create growth
and shareholder value for an organization. Mr. Thatch has served as President, Chief Executive Officer and a Director of the registrant
since March 2018. From 2009 to 2016, Mr. Thatch served as Chief Executive Officer for universal education and, from 2016 to present,
as the Managing Member of Superior Wine and Spirits, LLC, a Florida-based wholesale distributor of wine and spirits. From 2000
to 2005, Mr. Thatch served as CEO of CUI Global, Inc., a publicly traded technology company that Mr. Thatch took public in the
year 2000. Prior to that, Mr. Thatch had started, owned and operated several businesses of various size and industries, including
businesses in the service, retail, wholesale, education, finance, real estate management and technology industries. In addition,
Mr. Thatch has served as a consultant and interim CEO of two other public companies, Dtomi and Innova Pure Water, advising their
Board of Directors on growth strategies and organizational structure.
Frank
A. Walters has served for more than 30 years as a CFO and COO in companies in the manufacturing, distribution, direct selling,
management consulting, staffing, and financial services sectors. From 2012 to 2018, Mr. Walters served as Chief Financial Officer
of Columbia Advisory Group, a Dallas, Texas-based Information Technology (IT) consulting firm. From 2006 to 2010, Mr. Walters
served as Chief Financial Officer of WorldVentures, a Plano, Texas-based direct selling travel company. From 1999 to 2012, Mr.
Walters served as President of Kestral Financial, which provided CFO and operational support for startup and emerging growth companies.
Mr. Walters is a graduate of Illinois State University and is a Certified Public Accountant.
Jordan
Brock currently serves as Vice President of Business Development and is a member of the Board of Director of the registrant. From
December 2016 to March 2018, Mr. Brock served as President, Chief Executive Officer and a Director of the registrant. From 2011
to present, Mr. Brock has also served as Vice President of Business Development of GoodThink, Inc., a Dallas, Texas-based leading
Positive Psychology corporate consulting firm where he is responsible for strategic direction and business initiatives. Mr. Brock
is a graduate of Abilene Christian University with a BA degree in Business Management and of Oklahoma Christian University with
an MBA in eCommerce.
Family
Relationships
There
are no family relationships among the Directors and Executive Officers of the registrant.
Involvement
in Legal Proceedings
No
Executive Officer or Director of the registrant has been convicted in any criminal proceeding (excluding traffic violations) or
is the subject of a criminal proceeding that is currently pending. In addition, no Executive Officer of the registrant is the
subject of pending legal proceedings.
As
of the date hereof, no Executive Officer or Director of the registrant is involved in any bankruptcy petition by or against any
business in which they are a general partner or executive officer at this time or within two years of any involvement as a general
partner, executive officer, or director of any business.
ITEM
6. EXECUTIVE COMPENSATON.
We
are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act. Accordingly, we have omitted certain information
called for by this Item as permitted by applicable scaled disclosure rules.
Executive
Compensation
The
table below summarizes all compensation awarded to, earned by, or paid to named executive officers of the registrant for all services
rendered in all capacities to us for the period from inception (May 5, 2017) through April 30, 2018:
SUMMARY COMPENSATION TABLE
|
Name and Principal Position (1)
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Warrant and Option Awards ($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
John “JT” Thatch
President and Chief Executive Officer (2)
|
|
|
2018
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
900,000
|
|
|
|
-
|
|
|
|
3,000
|
|
|
|
948,594
|
|
Frank A. Walters
Secretary, Treasurer, Principal Financial Officer (3)
|
|
|
2018
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
690,000
|
|
|
|
-
|
|
|
|
2,700
|
|
|
|
722,700
|
|
Jordan Brock
Vice President (4)
|
|
|
2018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,351
|
|
|
|
33,351
|
|
|
(1)
|
Table
reflects principal position held by each named officer as of October 26, 2018.
|
|
|
|
|
|
|
(2)
|
Mr.
Thatch was appointed by the Company’s Board of Directors to the position of President, Chief Executive Officer and Director
effective on March 1, 2018. The amounts reported above include salary of $7,500 and other compensation of $4,000 deferred
at the election of Mr. Thatch. All other compensation reported above represents car allowance.
|
|
|
|
|
|
|
(3)
|
Mr.
Walters and the Company entered into an employment agreement effective March 4, 2018. Mr. Walters did not receive remuneration
of any kind from the Company for his services prior to March 4, 2018. The amounts reported above include salary of $7,500
deferred at the election of Mr. Walters. All other compensation reported above represents car allowance.
|
|
|
|
|
|
|
(4)
|
Mr.
Brock served as President, Chief Executive Officer and Director of the Company until March 1, 2018. For the period from inception
(May 5, 2017) through April 30, 2018, Mr. Brock earned $33,351 for consulting services provided to the Company.
|
|
Narrative
Discussion to Summary Compensation Table
The
Company is an emerging growth company with no significant sales activity prior to December 2017 and its executive officers and
directors had agreed to work without remuneration until such time as the Company generated sufficient sales to provide funding
for such remuneration. The Company’s Board of Directors has the ultimate responsibility for authorizing the timing and amount
of compensation programs for the Company’s directors, executive officers and key employees based upon such factors as historical
cash flow from operations, availability of funding from the issuance of equity securities and debt, company product sales revenue,
anticipated cash expenditures, accounts receivable balance, accounts payable, notes payable, and anticipated debt service and
the available cash balance.
Effective
March 1, 2018, the Company’s Board of Directors appointed Mr. John (“JT”) Thatch to the position of President,
Chief Executive Officer and a director of the Company. In connection with such appointment, the Company and Mr. Thatch entered
into an executive employment agreement (the “Executive Agreement”). Pursuant to the terms of the Executive Agreement,
Mr. Thatch is entitled to receive a base salary of $20,000 per month. In addition, effective March 1, 2018, the Company issued
to Mr. Thatch fully-vested warrants to purchase 5,000,000 shares of the Company’s Series A Preferred Stock at a price equal
to par value, $0.0001 per share. Pursuant to the terms of the Executive Agreement, effective as of January 1, 2019, Mr. Thatch
shall be entitled to receive an additional warrant to purchase up to 10% of the then issued and outstanding shares of (a) the
Company’s Common Stock – Class A, (b) the Company’s Series A Preferred Stock, and (c) the Company’s Series
C Preferred Stock, each at a price equal to par value, $0.0001 per share. On March 27, 2018, the Company and Mr. Thatch entered
into an Addendum to Executive Employment Agreement to further clarify the provisions of Section 3.3(a) of the Executive Agreement.
Pursuant to the terms of the Executive Agreement, in the event of termination of employment without cause, any unvested shares
of stock and stock warrants held by Mr. Thatch shall immediately vest in full. In addition, in the event of a change in control
of the Company, as defined in the Executive Agreement, any right to acquire or receive shares shall immediately accelerate.
On
March 4, 2018, the Company and Mr. Frank A. Walters entered into an employment agreement (the “Employment Agreement”).
Pursuant to the Employment Agreement, Mr. Walters is entitled to receive a base salary of $15,000 per month. In addition, effective
March 4, 2018, the Company issued to Mr. Walters fully vested options to purchase up to 3,000,000 shares of the registrant’s
Series A Preferred Stock at a price equal to par value, $0.0001 per share.
On
April 12, 2018, the Company and Mr. Robert Oblon entered into a contractor agreement (the “Agreement”) effective April
1, 2018. Pursuant to the terms of the Agreement, Mr. Oblon is compensated for his services as Chairman of the Board of Director
at the rate of $10,000 per month. In August 2018, Mr. Oblon and the Company entered into an amendment to the Agreement pursuant
to which Mr. Oblon’s compensation rate increased to $25,000 per month, effective August 1, 2018.
For
the period from inception (May 5, 2017) through April 30, 2018, Mr. Jordan Brock received $33,531fom the Company for consulting
services.
Stock
Awards Plan
The
registrant has not adopted a Stock Awards Plan but may do so in the future. The terms of any such plan have not been determined.
Compensation
of Directors
The
table below summarizes all compensation awarded to, earned by, or paid to our directors for all services rendered in all capacities
to us for the period from inception (May 5, 2017) through April 30, 2018:
DIRECTOR COMPENSATION
|
Name
|
|
Fees Earned or
Paid in
Cash
($)(1)
|
|
|
Stock Awards
($)
|
|
|
Option Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Robert Oblon (2)
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,081
|
|
Jordan Brock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
John “JT” Thatch
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Frank A. Walters
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
As
more fully discussed under
Executive Compensation
above, directors of the Company had agreed to work without remuneration
until such time as the Company generated sufficient sales to provide funding for such remuneration. Messrs. Brock, Thatch
and Walters did not receive compensation for their services as directors distinct and separate from any compensation described
under
Executive Compensation
above.
|
|
|
|
|
|
|
(2)
|
Pursuant
to the terms of a contractor agreement entered into with Mr. Oblon on April 12, 2018, Mr. Oblon received compensation for
his services as Chairman of the Board of Director at the rate of $10,000 per month effective April 1, 2018. In August 2018,
Mr. Oblon and the Company entered into an amendment to the contractor agreement pursuant to which Mr. Oblon’s compensation
rate increased to $25,000 per month, effective August 1, 2018.
|
|
Outstanding
Equity Awards at Fiscal Year-End
The
table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive
officer as of April 30, 2018:
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END
|
OPTION or WARRANT AWARDS
|
|
STOCK AWARDS
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options or Warrants
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options or Warrants
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option or Warrant
Exercise
Price
($)
|
|
|
Option or Warrant
Expiration
Date
|
|
|
Number
of
Shares
or Units
of
Stock That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
|
John“JT” Thatch
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Frank A. Walters
|
|
|
3,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Jordan Brock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Alchemist
Holdings, LLC
In
connection with the Company’s acquisition of Total Travel Media, the Company issued 7,500,000 shares of its Series B Preferred
Stock and 7,500,000 shares of its Common Stock Class B to Alchemist Holdings, which is controlled by the Chairman of our Board.
In connection with the Company’s acquisition of Four Oceans, the Company issued 50,000,000 shares of its Series A Preferred
Stock to Alchemist. The information contained in Note 1 of the Notes to Consolidated Financial Statements in Item 8
—
“Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the period from
May 5, 2017 (inception) to April 30, 2018 is incorporated herein by reference.
On
March 15, 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
shall remain in effect until the completion of the services. The Agreement may be terminated by the Company, by giving 14 calendar
days written notice of such termination. For the period from inception (May 5, 2017) to April 30, 2018, consulting expenses incurred
pursuant to this agreement were $836,640. These expenses are included in the research and development expenses in our consolidated
statement of operations.
Bear
Bull Market Dividends, Inc.
In
connection with the Company’s acquisition of Total Travel Media, the Company issued 2,500,000 shares of its Series B Preferred
Stock and 2,500,000 shares of its Common Stock Class B to Bear Bull, a significant shareholder of Sharing Services. In connection
with the Company’s acquisition of Four Oceans, the Company also issued 20,000,000 shares of its Series A Preferred Stock
to Bear Bull.
On
April 7, 2017, the Company issued a promissory note (that carried an annual interest rate of 12%) to Bear Bull for $16,500. The
note principal plus accrued but unpaid interest was repaid in April 2018.
As
part of the acquisition of Four Oceans, the Company recorded a deemed dividend of $18,750,000 to the related parties for value
of the shares issued for this transaction.
Director
Independence
Currently,
each member of the registrant’s Board of Directors, except Mr. Oblon, is an officer or an executive officer on the Company.
Mr. Oblon is the chairman of the registrant’s Board of Director and receives compensation solely for his services in that
capacity.
ITEM
8. LEGAL PROCEEDINGS.
We
may be involved, from time to time, in claims and lawsuits incidental to the conduct of our business in the ordinary course. We
carry insurance coverage in such amounts as we believe to be reasonable under the circumstances and that may or may not cover
any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will
have a material adverse impact on our consolidated financial position, cash flows or results of operations.
We
are subject to a number of U.S. federal, state and local laws and regulations. These laws and regulations govern, among other
things, labor relations, the labeling and safety of the products we sell, and the methods we use to sell these products. We believe
that we are in material compliance with all such laws and regulations, although no assurance can be provided that this will remain
true indefinitely in the future.
ITEM
9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
We
are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act. Accordingly, we have omitted certain information
called for by this Item as permitted by applicable scaled disclosure rules.
Market
Price of the Registrant’s Common Equity
Our
common stock is currently quoted on the OTCQB stock market, under the symbol “SHRV.” Prior to September 5, 2018, our
common stock was quoted on the OTC Pink stock market. Prior to March 7, 2017, there was no established public trading market for
the Company’s common stock. The following table sets forth the high and low sales prices of our common stock during the
period from March 7, 2017 (commencement of trading) to April 30, 2018.
Quarter Ended
|
|
High
|
|
|
Low
|
|
Fiscal year ending April 30, 2019:
|
|
|
|
|
|
|
July 31, 2018
|
|
$
|
0.45
|
|
|
$
|
0.21
|
|
Fiscal year ended April 30, 2018:
|
|
|
|
|
|
|
|
|
April 30, 2018
|
|
$
|
0.59
|
|
|
$
|
0.13
|
|
January 31, 2018
|
|
$
|
0.45
|
|
|
$
|
0.13
|
|
October 31, 2017
|
|
$
|
1.07
|
|
|
$
|
0.16
|
|
July 31, 2017
|
|
$
|
1.15
|
|
|
$
|
0.58
|
|
Period ended April 30, 2017:
|
|
|
|
|
|
|
|
|
April 30, 2017
|
|
$
|
1.01
|
|
|
$
|
0.52
|
|
Holders
As
of October 24, 2018, there were 100 stockholders of record of our common stock.
Dividends
We
have not declared or paid dividends at any time during the period from March 7, 2017 (commencement of trading) to April 30, 2018.
We do not anticipate paying regular cash dividends on our common stock in the foreseeable future. Any payment of future cash dividends
will be at the discretion of our Board of Directors and will depend upon, among other things, future earnings, operations, capital
requirements, our general financial condition, contractual restrictions (including those present in the agreements governing our
Convertible Preferred Stock and our debt) and general business conditions.
We
are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act. Accordingly, we have omitted certain information
called for by this Item as permitted by applicable scaled disclosure rules.
ITEM
10. RECENT SALES OF UNREGISTERED SECURITIES.
(a)
Securities Sold
Series
A Convertible Preferred Stock
In
May 2017, the Registrant issued 5,628,750 shares of its Series A Convertible Preferred Stock, $0.0001 par value, in connection
with its acquisition of an equity interest in 212 Technologies, LLC.
In
September 2017, the Registrant issued 75,000,000 shares of its Series A Convertible Preferred Stock in connection with its acquisition
of Four Oceans Holdings, Inc. Please see Item 7 – “Certain Relationships and Related Transactions, and Director Independence”
above.
In
September 2017, the Registrant also issued 500,000 shares of its Series A Convertible Preferred Stock in connection with its acquisition
of an equity interests in LEH Insurance Group LLC.
During
the period from May 5, 2017 (inception) to April 30, 2018, the Registrant issued, in the aggregate, 750,000 shares of its Series
A Convertible Preferred Stock in connection with its acquisition of an equity interests in Medical Smart Care, LLC.
During
the period from May 5, 2017 (inception) to April 30, 2018, the Registrant also issued, in the aggregate, 1,065,790 shares of its
Series A Convertible Preferred Stock to certain consultants in exchange for services provided.
In
April 2018, the Registrant issued 3,750,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection
with its acquisition of equity interests in 561, LLC and America Approved Commercial, LLC.
In
May 2018, the Registrant 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 and America Approved Commercial, LLC.
In
August 2018, the Registrant 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 and America Approved Commercial, LLC., and 250,000
shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of an equity interests
in Medical Smart Care, LLC.
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 interest in LEH Insurance Group LLC.
For
a period of 10 years from the date of issuance, each share of the Registrant’s Series A Convertible Preferred Stock is convertible
into one share of the Company’s common stock.
Series
B Convertible Preferred Stock
In
September 2017, the Registrant issued 10,000,000 shares of its Series B Convertible Preferred Stock, $0.0001 par value, in connection
with its acquisition of Total Travel Media, Inc. Please see Item 7 – “Certain Relationships and Related Transactions,
and Director Independence” above.
For
a period of 10 years from the date of issuance, each share of the Company’s Series B Convertible Preferred Stock is convertible
into one share of the Company’s common stock.
Series
C Convertible Preferred Stock
During
the period from May 5, 2017 (inception) to April 30, 2018, the Registrant issued, in the aggregate, 3,950,000 shares of its Series
C Convertible Preferred Stock, $0.0001 par value, in connection with stock subscription agreements.
In
August 2018, the Registrant issued 80,000 shares of its Series C Convertible Preferred Stock in connection with stock subscription
agreements.
In
September 2018, the Registrant issued 30,000 shares of its Series C Convertible Preferred Stock in connection with stock subscription
agreements.
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
issuance of Class C Convertible Preferred Stock was implemented pursuant to an exemption to registration under Regulation D. All
purchasers were accredited investors and total purchase did not exceed $1,000,000. All purchasers executed appropriate disclosure
documents prior to purchase, had been provided appropriate current information regarding disclosure of operations and financial
condition of the Company prior to issuance of said shares. The Company has filed Form 10-Q and 10-K for the preceding three years,
or for such shorter period that the Company was required to file such reports. Accordingly, all required information was provided
and available to purchasers.
Common
Stock
In June 2018, the Company issued 600,000
shares of its common stock, at a price of $0.25 per share, in exchange for cash proceeds of $150,000 and, in August 2018, the
Company issued 210,000 shares of its common stock, at a price of $0.25 per share, in exchange for cash proceeds of $52,500 pursuant
to stock subscription agreements. Both issuances were pursuant to a private offering of securities by the Company. The offering
was exempt from registration pursuant to Rule 506 of Regulation D of the Securities Act of 1933. All investors were accredited,
there was no general solicitation or advertising and the investors were provided adequate documentation with appropriate disclosure,
including subscription agreements. These shares were issued as restricted stock and contain the appropriate restrictive legend.
In September 2018, the Company issued,
in the aggregate, 112,000 shares of its common stock in exchange for professional services valued at $31,000. These issuances
were not part of the offering referred to above but were separate transactions involving the issuance of stock, in lieu of cash
payment, for professional services received by the Company. These shares were issued, as exemption to registration, pursuant to
Rule 506 Regulation D of the Securities Act of 1933. These shares were issued as restricted stock and contain the appropriate
restrictive legend.
(b)
Underwriters and Other Purchasers
None
(c)
Consideration and Use of Proceeds
The
Registrant received no cash proceeds from the aforementioned issuances of shares of its Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock.
Cash
proceeds of $1,015,000 were received from the aforementioned issuances of its Series C Convertible Preferred Stock and were used
to fund working capital. There were no underwriting discounts or commissions involved in such issuances.
(d)
Exemption from Registration Claimed
The
aforementioned sales of securities were made in reliance upon the exemption offered under Section 4(a)(2) of the Securities Act
of 1933.
ITEM
11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED.
Common
Stock, $0.0001 par value per share
The
Common Stock of the Registrant is divided into two classes: Class A Common Stock (hereafter referred to as the “Common Stock”)
and Class B Common Stock. There are 500,000,000 shares of Common Stock, $0.0001 par value per share, and 10,000,000 shares of
Class B Common Stock, $0.0001 par value per share, authorized. The shares of each class of common stock are identical except that
the holders of the Class B Common Stock are entitled to elect a majority of the Board of Directors and the holders of the Common
Stock elect the remainder of the directors. Each share of Class B Common Stock is convertible at any time into one share of Common
Stock at the option of the holder.
The
securities to be registered pursuant to this registration statement are the Registrant’s shares of Common Stock currently
quoted in the OTCQB stock market under the symbol SHRV. At September 30, 2018, there were 57,092,000 shares of the Registrant’s
Common Stock issued and outstanding, excluding 10,000,000 shares of Class B Common Stock issued and outstanding.
Each
holder of Common Stock is entitled to one vote for each share of such stock standing in his name on the books of the Corporation.
Dividends on the Common Stock may be declared and paid at the sole discretion of the Board of Directors and after the payment
or declaration and setting aside for payment of the full cumulative dividends for all prior and then current dividend periods
as it relates to all outstanding shares of Preferred Stock and after setting aside all stock purchase funds or sinking funds,
if any, required to be set aside with respect to the Preferred Stock.
Upon
any dissolution, liquidation or winding up of the Corporation, after there have been paid to or set aside for payment for the
holders of all outstanding shares of Preferred Stock the full preferential amount to which they are respectively entitled to receive,
pro-rata in accordance with the number of shares of each class outstanding, all the remaining assets of the Corporation will be
available for distribution to the holder of the Common Stock.
ITEM
12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant
to the Registrant’s Amended and Restated Articles of Incorporation and Bylaws, the Registrant may indemnify any person (including
his estate) made or threatened to be made a party to any suit or proceeding, whether civil or criminal, by reason of the fact
that he was a director or officer of the Registrant or served at the Registrant’s request as a director or officer of a
subsidiary of the Registrant, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorney
fees actually and necessarily incurred as a result of such threat, suit or proceeding, or any appeal therein, to the fullest extent
permitted by the General Corporation Law of the State of Nevada.
ITEM
13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
following condensed consolidated balance sheets as of July 31, 2018 and April 30, 2018, and the condensed consolidated statements
of earnings, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows for
the three months ended July 31, 2018 and for the period from May 5, 2017 (inception) to July 31, 2017 are those of Sharing Services,
Inc. and subsidiaries. The 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) to April 30, 2018 are incorporated herein by reference.
Index
to the Condensed Consolidated Financial Statements
For
the Three Months Ended to July 31, 2018
SHARING
SERVICES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
July 31, 2018
|
|
|
April 30, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
785,554
|
|
|
|
768,268
|
|
Accounts receivable
|
|
|
1,699,505
|
|
|
|
1,556,472
|
|
Notes receivable
|
|
|
275,000
|
|
|
|
275,000
|
|
Inventory
|
|
|
857,859
|
|
|
|
236,335
|
|
Other current assets
|
|
|
437,777
|
|
|
|
145,636
|
|
Total Current Assets
|
|
|
4,055,695
|
|
|
|
2,981,711
|
|
|
|
|
|
|
|
|
|
|
Security deposits
|
|
|
41,920
|
|
|
|
21,055
|
|
Property and equipment, net
|
|
|
253,842
|
|
|
|
118,465
|
|
Investments in unconsolidated entities
|
|
|
4,007,188
|
|
|
|
2,757,188
|
|
TOTAL ASSETS
|
|
$
|
8,358,645
|
|
|
|
5,878,419
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
786,662
|
|
|
|
525,075
|
|
Accrued and other current liabilities
|
|
|
4,045,362
|
|
|
|
3,619,608
|
|
Due to related parties
|
|
|
4,799
|
|
|
|
4,799
|
|
Current portion of convertible notes payable, net of unamortized debt discount
of $770,617 and $772,398
|
|
|
480,383
|
|
|
|
247,602
|
|
Derivative liabilities
|
|
|
31,066,441
|
|
|
|
30,488,655
|
|
Total Current Liabilities
|
|
|
36,383,647
|
|
|
|
34,885,739
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of unamortized debt discount of $41,908
and $44,427
|
|
|
8,092
|
|
|
|
5,573
|
|
TOTAL LIABILITIES
|
|
|
36,391,739
|
|
|
|
34,891,312
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders’ 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; 91,694,540 and 86,694,540 shares issued and outstanding as of July 31, 2018 and April 30, 2018, respectively
|
|
|
9,169
|
|
|
|
8,669
|
|
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
|
|
Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares
designated; 3,950,000 shares issued and outstanding
|
|
|
395
|
|
|
|
395
|
|
Common Stock, $0.0001 par value, 500,000,000 Class A shares authorized, 56,770,000 shares and 56,170,000 shares issued
and outstanding as of July 31, 2018 and April 30, 2018, respectively
|
|
|
5,677
|
|
|
|
5,617
|
|
Common Stock, $0.0001 par value, 10,000,000 Class B shares authorized, 10,000,000 shares issued
and outstanding
|
|
|
1,000
|
|
|
|
1,000
|
|
Additional paid in capital
|
|
|
26,596,079
|
|
|
|
25,423,589
|
|
Shares to be issued
|
|
|
94,500
|
|
|
|
196,500
|
|
Stock subscriptions receivable
|
|
|
(114,405
|
)
|
|
|
(114,405
|
)
|
Accumulated deficit
|
|
|
(54,626,509
|
)
|
|
|
(54,535,258
|
)
|
Total Stockholders’ Deficit
|
|
|
(28,033,094
|
)
|
|
|
(29,012,893
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
$
|
8,358,645
|
|
|
|
5,878,419
|
|
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
|
|
|
Period from May 31,
|
|
|
|
Ended
|
|
|
2017 (Inception) to
|
|
|
|
July 31, 2018
|
|
|
July 31, 2017
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
12,930,726
|
|
|
$
|
-
|
|
Cost of goods sold
|
|
|
4,964,010
|
|
|
|
-
|
|
Gross profit
|
|
|
7,966,716
|
|
|
|
-
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
6,044,357
|
|
|
|
288,417
|
|
General and administrative expenses
|
|
|
1,585,186
|
|
|
|
303,796
|
|
Total operating expenses
|
|
|
7,738,744
|
|
|
|
592,213
|
|
Operating earnings (loss)
|
|
|
337,172
|
|
|
|
(592,213
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(402,586
|
)
|
|
|
(26,609
|
)
|
Change in fair value of derivative liabilities
|
|
|
(25,837
|
)
|
|
|
(22,004
|
)
|
Total other income (expense), net
|
|
|
(428,423
|
)
|
|
|
(48,613
|
)
|
Loss before income taxes
|
|
|
(91,251
|
)
|
|
|
(640,826
|
)
|
Income tax provision (benefit)
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(91,251
|
)
|
|
$
|
(640,826
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
66,561,304
|
|
|
|
52,218,182
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
66,561,304
|
|
|
|
52,218,182
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
SHARING
SERVICES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
Three Months
|
|
|
Period from May 31,
|
|
|
|
Ended
|
|
|
2017 (Inception) to
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
July 31, 2018
|
|
|
July 31, 2017
|
|
Net loss
|
|
$
|
(91,251
|
)
|
|
$
|
(640,826
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,947
|
|
|
|
200
|
|
Stock-based compensation expense
|
|
|
8,000
|
|
|
|
266,448
|
|
Amortization of debt discount
|
|
|
335,300
|
|
|
|
22,970
|
|
Change in fair value of derivative liabilities
|
|
|
25,837
|
|
|
|
22,004
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(143,034
|
)
|
|
|
-
|
|
Inventory
|
|
|
(563,633
|
)
|
|
|
-
|
|
Other current assets
|
|
|
(291,142
|
)
|
|
|
-
|
|
Security deposits
|
|
|
(20,865
|
)
|
|
|
|
|
Accounts payable
|
|
|
261,586
|
|
|
|
5,568
|
|
Accrued and other liabilities
|
|
|
413,998
|
|
|
|
499
|
|
Net Cash Used in Operating Activities
|
|
|
(57,257
|
)
|
|
|
(323,137
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments for property and equipment
|
|
|
(118,723
|
)
|
|
|
-
|
|
Cash from acquisition of subsidiaries
|
|
|
-
|
|
|
|
57,605
|
|
Cash paid for investments
|
|
|
-
|
|
|
|
(15,000
|
)
|
Net Cash Used in Investing Activities
|
|
|
(118,723
|
)
|
|
|
42,605
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes payable
|
|
|
325,000
|
|
|
|
35,000
|
|
Repayment of convertible notes payable
|
|
|
(136,734
|
)
|
|
|
-
|
|
Proceeds from issuance of Series C Convertible preferred stock
|
|
|
-
|
|
|
|
333,500
|
|
Proceeds from issuance of common stock
|
|
|
40,000
|
|
|
|
-
|
|
Repayment of promissory notes payable
|
|
|
(35,000
|
)
|
|
|
(15,000
|
)
|
Proceeds from related parties
|
|
|
-
|
|
|
|
849
|
|
Net Cash Provided by Financing Activities
|
|
|
193,266
|
|
|
|
354,349
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
17,286
|
|
|
|
73,817
|
|
Cash and cash equivalents, beginning of period
|
|
|
768,268
|
|
|
|
-
|
|
Cash and cash equivalents, end of period
|
|
$
|
785,554
|
|
|
$
|
73,817
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
41,972
|
|
|
$
|
-
|
|
Cash paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemented disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock issued for equity
investments
|
|
$
|
1,250,000
|
|
|
$
|
1,407,188
|
|
Derivative liability recognized as debt discount
|
|
$
|
325,000
|
|
|
$
|
61,843
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements
SHARING
SERVICES, INC. AND SUBSIDIARIES
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended JULY 31, 2018
(Unaudited)
NOTE
1 –DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION
The
Company was originally formed to develop and market a taxi-ride sharing website and application (“web app”). Beginning
in February 2017, the Company expanded its business model to also offer a wide range of travel and technology management and other
products and services. In December 2017, the Company launched a wholly-owned subsidiary operating under the trade name “Elepreneurs.”
One of Elepreneus’ leading product lines, “Elevate,” consists of Nutraceutical products that the Company terms
“D.O.S.E.” (Dopamine, Oxytocin, Serotonin and Endorphins) and was developed and is owned by another of the Company’s
wholly-owned subsidiaries, “Elevacity Global.” This product line has accelerated the Company’s growth during
the last two quarters of the period from May 5, 2017 (inception) to April 30, 2018. The Company uses a direct-selling model and
operates a subscription-based vacation portal. 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.
For
financial accounting purposes, the acquisition of Total Travel Media was treated as a reverse acquisition in accordance with accounting
principles generally accepted in the United States. Accordingly, for financial accounting purposes, Total Travel Media became
the accounting acquirer and Sharing Services became the acquired company. Accordingly, the historical financial statements prior
to the acquisition are those of the accounting acquirer, Total Travel Media, and have been prepared to give retroactive effect
to the acquisition. Thus, the Company’s consolidated financial statements after the acquisition date include the combined
balance sheets of Sharing Services and Total Travel Media, at historical cost, the historical results of operations and cash flows
of Total Travel Media from its inception (May 5, 2017) and the results of operations and cash flows of Sharing Services from the
acquisition date. In accordance with GAAP, goodwill was not recognized as a result of this transaction
.
Please see Note 1 of notes to the
consolidated financial statements included in our Annual Report on Form 10-K for the
period from May 5, 2017 (inception) to April 30, 2018 for more information about the acquisition of Total Travel Media
.
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 Annual Report on Form 10-K
of Sharing Services, Inc. and subsidiaries (“Sharing Services”, “we”, “us”, or the “Company”)
for the period from May 5, 2017 (inception) to April 30, 2018.
Going
concern
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 has not generated positive cash flows from operations. In addition, prior to its fiscal quarter
ended January 31, 2018, the Company had not generated sales. Historically, the Company has funded its working capital needs and
acquisitions primarily with capital transactions and with unsecured debt, including the issuance of convertible notes. The Company
intends to continue to raise capital and use unsecured debt, including the issuance of convertible notes, from time to time in
the future as needed to fund its working capital needs and strategic acquisitions.
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 unsecured borrowings, including the issuance of
convertible notes, capital transactions and, ultimately, cash from operations.
These
consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded
assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE
2 – SUMMARY OF 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-year consolidated financial statements. As permitted under GAAP, interim accounting for certain
expenses is based on full-year assumptions.
Revenue
Recognition
The
Company derives revenue from the sale of health and wellness, energy, technology, insurance, training, media and travel products
and services. The Company recognizes revenue upon the transfer of control of the promised goods and services to the customer.
With respect to products and services sold, the transfer of control generally occurs when the customer receives and accepts the
product or service. With respect to subscription-based services, including Elepreneur membership fees, the transfer of control
generally occurs 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 $72,400 at July 31, 2018, net of potential restocking fees of $0. Deferred revenue associated with our performance
obligation for services offered on a subscription basis were $664,700 at July 31, 2018 and are expected to be recognized over
one year.
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
(i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during
the periods presented. 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 of normal
recurring accruals) considered necessary for a fair presentation have been included.
Accounting
Changes
In
May 2014, the FASB issued ASU No. 2014-09,
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 is 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, 2018 and its adoption did not have a material impact on its consolidated
financial statements and business.
The
impact of adopting the new revenue standard on our financial statements was not material and relates primarily to our customers’
right of return and to recognition of revenue from services offered on a subscription basis. We now defer revenue (and the related
cost of goods sold) associated with our customers’ right of return. The impact of adopting the new standard 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.
Historically,
our sales returns have been approximately 2% of our consolidated net sales and our subscription-based revenues have been 1% of
our consolidated net sales. In addition, the Company is an emerging growth company with limited sales history. Going forward,
the Company will continue to monitor its sales returns history and its sales of subscription-based services, and the Company will
continue 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.
In
January 2017, the FASB issued ASU No. 2017-01, “
Business Combinations (Topic 805): Clarifying the Definition 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 is 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 its consolidated financial statements.
In
February 2017, the FASB issued ASU No. 2017-05, “
Other Income - Gains and Losses from the Derecognition of Nonfinancial
Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales 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 is 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.
Recently
Issued Accounting Standards
In
February 2016, the FASB issued ASU No. 2016-02,
Leases
, which will require 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, the lease liability must be measured initially based on the present value of future lease payments,
subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain
initial direct costs. The new guidance further requires that leases be classified at inception 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. For public companies, this amendment is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted.
We have not yet adopted this accounting pronouncement and are currently evaluating the potential impact this standard may have
on our consolidated financial position and consolidated results of operations.
NOTE
3 – FAIR VALUE MEASURENTS OF FINANCIAL INSTRUMENTS
Our
financial instruments consist of cash equivalents, trade accounts receivable, accounts payable, notes payable and derivative liabilities.
The carrying amounts of cash equivalents, accounts 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 described above, we categorized certain of our financial assets and liabilities as follows:
|
|
July 31, 2018
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in unconsolidated entities
|
|
$
|
4,007,188
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,007,188
|
|
Total assets
|
|
$
|
4,007,188
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,007,188
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
31,066,441
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,066,441
|
|
Notes Payable
|
|
|
140,000
|
|
|
|
-
|
|
|
|
140,000
|
|
|
|
-
|
|
Total liabilities
|
|
$
|
31,206,441
|
|
|
$
|
-
|
|
|
$
|
140,000
|
|
|
$
|
31,066,441
|
|
|
|
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
|
|
NOTE
4 – EARNINGS (LOSS) PER SHARE
We
calculate basic earnings (loss) per share by dividing net income (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 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 loss per share:
|
|
Three months ended July 31,
2018
|
|
|
Period from May 5, 2017 (Inception)
to
July 31, 2017
|
|
Net loss
|
|
$
|
(91,251
|
)
|
|
$
|
(640,826
|
)
|
Weighted average basic shares
|
|
|
66,561,304
|
|
|
|
52,218,182
|
|
Dilutive securities and instruments
|
|
|
-
|
|
|
|
-
|
|
Weighted average diluted shares
|
|
|
66,561,304
|
|
|
|
52,218,182
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
-
|
|
|
$
|
(0.01
|
)
|
Diluted loss per share
|
|
$
|
-
|
|
|
$
|
(0.01
|
)
|
The
potentially dilutive instruments outstanding as of July 31, 2018 and 2017, were as follows:
|
|
July 31, 2018
|
|
|
July 31, 2017
|
|
Stock warrants
|
|
|
7,243,333
|
|
|
|
-
|
|
Stock options
|
|
|
3,000,000
|
|
|
|
-
|
|
Convertible notes
|
|
|
98,287,940
|
|
|
|
243,284
|
|
Convertible Preferred Stock
|
|
|
105,644,540
|
|
|
|
17,754,540
|
|
Total potential incremental shares
|
|
|
214,175,813
|
|
|
|
17,997,824
|
|
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following at July 31, 2018 and April 30, 2018:
|
|
July 31, 2018
|
|
|
April 30, 2018
|
|
Furniture and fixtures
|
|
$
|
131,560
|
|
|
$
|
84,289
|
|
Office equipment
|
|
|
55,163
|
|
|
|
18,102
|
|
Computer equipment and software
|
|
|
35,471
|
|
|
|
15,039
|
|
Leasehold improvements
|
|
|
50,448
|
|
|
|
11,888
|
|
Total property and equipment
|
|
|
272,642
|
|
|
|
129,318
|
|
Accumulated depreciation and amortization
|
|
|
(18,800
|
)
|
|
|
(10,853
|
)
|
Property and equipment, net
|
|
$
|
253,842
|
|
|
$
|
118,465
|
|
Depreciation
and amortization expense was $7,947 for the three months ended July 31, 2018, and $200 for the period from May 5, 2017 (inception)
to July 31, 2017.
NOTE
6 – INVESTMENTS IN UNCONSOLIDATED ENTITIES
212
Technologies, LLC
On
May 21, 2017, 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 shares of its Series
A Convertible Preferred Stock with a deemed value of $0.25 per share, or $1,407,188, and $100,000 in cash. 212 Tech is a developer
of end-to-end online marketing and direct sales software systems.
Under
the terms of the Stakeholder and Investment Agreement, 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 shares of the Company’s Series A Convertible Preferred Stock,
when
both 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 stock
equals or exceeds
$10.00
per share, as reported by OTC Markets, Inc
. The Company, in exchange, received a
non-exclusive, non-royalty bearing, perpetual, worldwide license of certain the intellectual property rights of 212 Tech.
561
LLC
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant to which it acquired a 25% interest in 561 LLC 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, to be issued
in four equal instalments over time.
Pursuant to the terms of
the
Share 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 A
Convertible
Preferred
Stock.
As of July 31, 2018, the Company had issued 4,375,000 shares of its Series A Convertible
Preferred Stock (with a deemed value of $1,093,750) in connection with its acquisition of 561 LLC.
Under
the terms of
the
Share 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 Date
and
(b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as
reported by OTC Markets, Inc.
America
Approved Commercial LLC
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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, to be issued in four equal instalments over time.
Pursuant to the terms of
the
Share 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 A
Convertible
Preferred Stock.
As of July 31, 2018, the Company had issued 4,375,000 shares of
its Series A Convertible Preferred Stock (with a deemed value of $1,093,750) in connection with its acquisition of AAC.
Under
the terms of
the
Share 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 Date
and
(b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as
reported by OTC Markets, Inc
Medical
Smart Care LLC
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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 pure
share, or $250,000, in four equal installments as follows: (a) 250,000 shares were issued within 5 days of the Closing Date (b)
250,000 shares were issued on or before December 31, 2017; (c) 250,000 shares were issued on or before April 30, 2018; and 250,000
shares are to be issued on or before August 31, 2018. As of July 31, 2018, the Company had issued 750,000 shares of its Series
A Convertible Preferred Stock (with a deemed value of $187,500) in connection with the acquisition of Smart Care.
LEH
Insurance Group LLC
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant 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 of
the
Share Exchange Agreement
,
the sellers
were entitled to an additional 500,000 shares of the Company’s Series A Preferred Stock if/when the following
condition was been met: prior to December 31, 2018, LEHIG has booked contracts representing insurance premiums of no less than
$500,000. In October 2018, upon LEHIG meeting this condition, the Company issued additional 500,000 shares of its Series A Preferred
Stock to the sellers.
In
addition, under the terms of
the Stakeholder and Investment 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.
As of July 31, 2018, the Company had issued 500,000 shares of its Series A Convertible Preferred
Stock (with a deemed value of $125,000) in connection with the acquisition of LEHIG.
Company
made these investments consistent with its strategy to grow its business organically and by
making
strategic acquisitions of businesses and technologies that augment its products portfolio. Specifically, each of these investees
own and market products that fit the Company’s direct selling model and add to its products portfolio
.
However, the Company does not, directly or indirectly, hold a controlling financial interest in any of these investees (as the
phrase “controlling financial interest” is defined in GAAP). Thus, the Company does not report these investees on
a consolidated basis. In addition, the Company does not exert influence over the operations or policies of the investees. For
example, the members of management of each investee are independent of the Company’s officers and directors. Further, the
Company’s officers, directors, and management are not involved in the operations or policies of the investees. Accordingly,
the Company accounts for its investment in these investees on the cost basis.
NOTE
7 - ACCRUED AND OTHER CURRENT LIABILITIES
Accrued
and other current liabilities consist of the following as of July 31, 2018 and April 30, 2018:
|
|
July 31, 2018
|
|
|
April 30, 2018
|
|
Accrued sales commissions
|
|
$
|
1,850,615
|
|
|
$
|
2,091,081
|
|
Deferred sales revenues
|
|
|
1,356,927
|
|
|
|
1,096,180
|
|
Accrued expenses
|
|
|
187,071
|
|
|
|
252,259
|
|
Accrued investments payable
|
|
|
83,490
|
|
|
|
45,000
|
|
Notes payable
|
|
|
140,000
|
|
|
|
35,000
|
|
Accrued interest payable
|
|
|
62,505
|
|
|
|
34,644
|
|
Other accrued liabilities
|
|
|
364,754
|
|
|
|
65,444
|
|
|
|
$
|
4,045,362
|
|
|
$
|
3,619,608
|
|
Accrued
sales commissions consist of commissions and certain bonuses earned by the Company’s independent sales representatives of
the Company in accordance with the Company’s compensation plan.
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.
In
May 2018, the Company entered into an agreement with Global Payroll Gateway (“GPG”) pursuant to which GPG now 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 to be repaid out of funds due to Sharing Services in
connection with merchant transactions processed by GPG for Sharing Services. As of the date of this Quarterly Report, this loan
has been repaid in full. In addition, in August 2018, GPG granted Sharing Services an interest-free loan in the amount of $500,000
to be repaid, in daily instalments of $5,556, out of funds due to Sharing Services in connection with merchant transactions processed
by GPG for Sharing Services. The unpaid balance on the note ($140,000) is included in accrued and other current liabilities in
our consolidated balance sheet at July 31, 2018.
NOTE
8 - CONVERTIBLE NOTES PAYABLE
Convertible
notes payable consisted of the following as of July 31, 2018 and April 30, 2018:
Issuance
Date
|
|
Maturity
Date
|
|
Conversion
Price
(per share)
|
|
|
July
31, 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
|
|
|
|
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
|
|
May
16, 2018
|
|
May
2019
|
|
|
Variable
|
|
|
|
203,000
|
|
|
|
-
|
|
July
2018
|
|
July
2019
|
|
|
Variable
|
|
|
|
128,000
|
|
|
|
-
|
|
Total
convertible notes payable
|
|
1,301,000
|
|
|
|
1,070,000
|
|
Less:
debt discount and deferred financing fees
|
|
(812,525
|
)
|
|
|
(816,825
|
)
|
|
|
488,475
|
|
|
|
253,175
|
|
Less:
current portion of convertible notes payable
|
|
480,383
|
|
|
|
247,602
|
|
Long-term
convertible notes payable
|
$
|
8,092
|
|
|
$
|
5,573
|
|
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
May 16, 2018, the Company entered into a financing transaction whereby the Company borrowed $203,000 (prior to $3,000 in financing
costs) from Power UP Lending Group Ltd., an accredited investor, in exchange for the issuance by the Company of a promissory note
in favor of the lender. In addition, on July 2, 2018, the Company entered into a financing transaction whereby the Company borrowed
$128,000 (prior to $3,000 in financing costs) from Power UP Lending Group Ltd. in exchange for the issuance by the Company of
a promissory note in favor of the lender. The notes bear interest at 12% and mature one year from each respective issuance date.
Net proceeds from the notes, in the aggregate, were $325,000. Each note is convertible into shares of the Company’s common
stock at any time following 180 days from the issuance date.
On
June 29, 2018 the Company paid $143,211 (including accrued but unpaid interest), to settle in full a convertible note in the principal
amount of $100,000. During the three months ended July 31, 2018, the Company recorded prepayment penalties of $36,734 and accrued
interest payable of $6,477 and recognized a gain of $121,823 resulting from the change in the fair value of this derivative liability,
in connection with this note.
In
the three months ended July 31, 2018 and the period from May 5, 2017 (inception) to July 31, 2017, the Company recognized amortization
expense related to the debt discount and deferred financing fees of $335,300 and $22,970, respectively, which is included in interest
expense in our consolidated statements of operations. The Company also recorded interest of $74,448 (including the prepayment
penalty discussed above) and $2,140 in connection with its convertible notes payables, in the three months ended July 31, 2018
and the period from May 5, 2017 (inception) to July 31,2017, respectively.
NOTE
9 - DERIVATIVE LIABILITIES
The
Company determined that the conversion feature on its convertible notes and stock warrants should be classified as a derivative
liability, under the ASC 815 guidance, since the conversion rate is tied to the market price of the Company’s common stock
and, accordingly, there is no explicit limit to the number of shares issuable upon conversion due to contingencies affecting the
conversion rate.
The
Company determined that its derivative liabilities must be classified in Level 3 of the three-level hierarchy for measuring fair
value (please see Note 3) 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: (1) the exercise, conversion or strike price, (2) the expected life (in years),
(3) the risk-free interest rate, (4) the current stock price, (5) the expected volatility for the Company’s common stock,
and (6) the expected dividend yield. Changes to these inputs could result in a significantly higher or lower fair value measurement.
The
following weighted-average assumptions were used when valuing our derivative liabilities:
|
|
|
Three
months ended
July 31,
2018
|
|
|
Period
from
May
5, 2017 (Inception)
to
July 31, 2017
|
|
Expected
term (in years)
|
|
|
1.0-5.0
|
|
|
0.06
– 5.0
|
|
Expected
average volatility
|
|
|
180%
- 255
|
%
|
|
126%
- 343
|
%
|
Expected
dividend yield
|
|
|
-
|
|
|
-
|
|
Risk-free
interest rate
|
|
|
1.65%
- 2.85
|
%
|
|
1.07%
- 2.52
|
%
|
The
following table summarizes the derivative liabilities included in our consolidated balance sheet at July 31, 2018:
Fair
Value Measurements Using Significant Observable 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
|
|
|
634,536
|
|
Reclassification of derivatives due
to tainted instruments
|
|
|
226,949
|
|
Gain on change in fair value of the
derivative
|
|
|
(608,699
|
)
|
Balance - July 31, 2018
|
|
$
|
31,066,441
|
|
The
following table summarizes the loss (gain) on derivative liability included in our consolidated statement of operation for the
three months ended July 31, 2018 and the period from May 5, 2017 (inception) to July 31, 2017.
|
|
Three
months ended July 31, 2018
|
|
Period
from
May 5, 2017 (Inception) to July 31, 2017
|
Day-one loss due to derivative
liabilities on convertible notes payable and warrants
|
|
$
|
634,536
|
|
|
$
|
28,494
|
|
Gain on change in fair value of the
derivative
|
|
|
(608,699
|
)
|
|
|
(6,490
|
)
|
Loss on change in fair value of derivative
liabilities
|
|
$
|
25,837
|
|
|
$
|
22,004
|
|
NOTE
10 – INCOME TAXES
The
Company is an emerging growth company and, prior to its fiscal quarter ended July 31, 2018, had not generated pre-tax earnings
or taxable earnings from its operations. As of the date herein, the ability of the Company to consistently generate future pre-tax
earnings or taxable earnings remains uncertain. Accordingly, the Company has not recorded a provision for income taxes in its
consolidated financial statements for the periods covered by this quarterly report.
NOTE
11 - RELATED PARTY TRANSACTIONS
Alchemist
Holdings, LLC
In
connection with the Company’s acquisition of Total Travel Media in May 2017, the Company issued 7,500,000 shares of its
Series B Preferred Stock and 7,500,000 shares of its Common Stock Class B to Alchemist Holdings, which is controlled by the Chairman
of our Board. In connection with the Company’s acquisition of Four Oceans, the Company issued 50,000,000 shares of its Series
A Preferred Stock to Alchemist. The information in Note 1 of Notes to the Consolidated Financial Statements located in ITEM 8
– Financial Statements and Supplementary Data in our Annual Report on Form 10-K for the period from May 5, 2017 (inception)
to April 30,2018 is incorporated herein by reference.
On
March 15, 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 terminated by the Company, by giving 14 calendar days written notice of such termination. During the three months ended
July 31, 2018, the Company did not incur consulting fees or expenses pursuant to this agreement.
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 Stock and 2,500,000 shares of its Common Stock Class B to Bear Bull, a significant shareholder of Sharing Services.
In connection with the Company’s acquisition of Four Oceans, the Company also issued of 20,000,000 shares of its Series
A Preferred Stock to Bear Bull and 5,000,000 shares to another shareholder.
NOTE
12 - STOCKHOLDERS’ DEFICIT
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 acquisition of an equity interest in 561, LLC and
America Approved
Commercial LLC.
As
of July 31, 2018, there were 91,694,540 shares of our Series A Convertible Preferred Stock issued and outstanding.
Series
B Convertible Preferred Stock
As
of July 31, 2018, there were 10,000,000 shares of our Series B Preferred Stock issued and outstanding.
Series
C Convertible Preferred Stock
As
of July 31, 2018, there were 3,950,000 shares of our Series C Preferred Stock issued and outstanding.
Common
Stock
In
June 2018, the Company issued 600,000 shares of its Class A Common Stock at $0.25 per share, in exchange for proceeds of $150,000,
in connection with stock subscription agreements. Under the terms of the subscription agreements, the subscribers also acquired
warrants to purchase up to 600,000 additional shares of the Company’s Class A Common Stock. The warrants have a term of
five years and have a conversion rate 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.
As
of July 31, 2018, there were 56,770,000 shares of our Class A common stock and 10,000,000 shares of our Class B common stock issued
and outstanding.
Shares
Subscribed
During
the three months ended of July 31, 2018, the Company received stock subscriptions for its Class A common stock in the total amount
of $40,000.
Stock
Warrants
The
following table summarizes information relating to outstanding and exercisable warrants as of July 31, 2018:
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
Number of
|
|
|
Weighted
Average
Remaining
Contractual
|
|
|
Weighted Average
|
|
|
Number of
|
|
|
Weighted Average
|
|
Shares
|
|
|
life
(in years)
(1)
|
|
|
Exercise
Price
|
|
|
Shares
|
|
|
Exercise
Price
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
5,000,000
|
|
|
$
|
0.0001
|
|
|
1,910,333
|
|
|
|
4.8
|
|
|
$
|
0.31
|
|
|
|
1,910,000
|
|
|
$
|
0.31
|
|
|
333,333
|
|
|
|
4.2
|
|
|
$
|
0.15
|
|
|
|
333,333
|
|
|
$
|
0.15
|
|
|
|
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
|
|
Granted
|
|
|
600,000
|
|
|
|
0.31
|
|
|
|
4.9
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at July 31, 2018
|
|
|
7,243,333
|
|
|
$
|
0.09
|
|
|
|
4.7
|
|
|
(1)
|
In March 2018, the
Company granted warrants to purchase 5,000,000 shares of its Series A Preferred Stock, which have no expiration date. In April
2018 and June 2018, the Company granted warrants to purchase 1,310,000 shares and 600,000 shares, respectively, of its common
stock at a price determined by the average trading price per share of the Company common stock
|
|
NOTE
13 - 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 $83,490.
On
July 6, 2018, Sharing Services issued a Binding Letter of Intent (the “Hyten LOI”) where Sharing Services expressed
its intent to purchase certain operating assets of Hyten Global LLC (“Hyten”), the owner of certain multi-level marketing
(“MLM”) businesses operating principally in the United States and Asia. Under the terms of the Hyten LOI, Sharing
Services agreed to provide Hyten a temporary cash advance in the amount of $50,000 and the parties entered into 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 located in Hong Kong, Taiwan, Thailand, Singapore and South Korea from Hyten. As of August 31, 2018, as provided in the
LOI, Sharing Services provided cash advances to Hyten in the aggregate amount of approximately $540,000. Under the terms of the
Hyten LOI, Hyten has agreed to repay all loans immediately in the event the parties failed to complete the acquisition transaction.
Please see Note 14 below for more information about Hyten.
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.
Other
Contingencies
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant to which it acquired a 25% equity interest in 561 LLC.
Pursuant to the terms of
the
Share 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 A
Convertible
Preferred Stock. Under the terms of
the
Share Exchange Agreement
, the sellers
shall be entitled to an additional 2,500,000
shares of our Series A
Convertible
Preferred Stock when both of the following conditions
have been met: (a)
one year has passed from
the Closing Date
and
(b) the closing
bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by OTC Markets, Inc. In accordance
with GAAP, the Company has not recorded a liability in connection with this contingency.
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant to which it acquired a 25% equity interest in America Approved
Commercial LLC (“AAC”).
Pursuant to the terms of
the
Share 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 A
Convertible
Preferred Stock.
Under the terms of
the
Share Exchange Agreement
,
the sellers
shall be entitled to an additional 2,500,000 shares of the Company’s Series A Preferred Stock when both
of the following conditions have been met: (a)
one year has passed from
the Closing
Date
and
(b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by
OTC Markets, Inc. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.
On
October 4, 2017, the Company entered into a
Share
Exchange Agreement
pursuant to which it acquired a 40% equity interest in LEH Insurance
Group LLC (“LEHIG”) in exchange for 500,000 shares of its Series A Preferred Stock with a deem value of $0.25 per
share, or $125,000.
Under the terms of
the
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 $500,000. In addition, under the terms of
the Stakeholder and Investment 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. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.
NOTE
14 - SUBSEQUENT EVENTS
In
connection with the Asset Purchase Agreement discussed above, on August 17, 2018, Sharing Services and Hyten entered into an addendum
to the Asset Purchase Agreement (together with the Asset Purchase Agreement, the “Amended Asset Purchase Agreement”)
pursuant to which Sharing Services agreed to purchase operating assets of approximately $2.9 million, consisting primarily of
intellectual property (including trade names, website domains and multi-level marketing licenses in several countries), proprietary
software, security deposits, computer and office equipment and inventory from Hyten. Under the terms of the Amended Asset Purchase
Agreement, Sharing Services also agreed to assume up to $570,000 in liabilities of Hyten at the time of the acquisition, subject
to the achievement by the acquired operating assets of certain specified performance targets and to other customary conditions.
In connection with the Amended Asset Purchase Agreement, Sharing Services has agreed to issue 1,000,000 restricted shares of its
common stock and 900,000 stock warrants. The stock warrants enable the holder to acquire up to 900,000 restricted shares of Sharing
Services’ common stock, subject to the achievement by the acquired operating assets 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.
On
August 3, 2018, the Company issued 210,000 shares of its Class A Common Stock, par value of $0.0001, at a price of $0.25 for a
total value of $52,500 in connection with stock subscription agreements entered into prior to April 30, 2018. Under the terms
of the subscription agreements, the subscribers also acquired warrants to purchase up to 210,000 additional shares of the Company’s
Class A Common Stock. The warrants have a term of five years and have a conversion rate 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.
On
August 17, 2018, the Company issued 80,000 shares of its Series C Convertible Preferred Stock, par value of $0.0001, at a price
of $0.25 for a total value of $20,000 in connection with stock subscription agreements entered into prior to April 30, 2018.
On
August 20, 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 and
America Approved
Commercial LLC. In addition,
on August 20, 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 interests in Medical Smart
Care
LLC.
On
August 28, 2018, the Company issued 104,000 shares of its Class A Common Stock, par value of $0.0001, in exchange for professional
services valued at $33,000.
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 the ordinary course of its business.
ITEM
14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
15. FINANCIAL STATEMENTS and exhibits
Documents
filed as part of this registration statement:
(a)
List of Financial Statements
None.
(b)
Exhibits Index
The
following exhibits are filed as part of this registration statement or are incorporated herein by reference:
|
3.1
|
Amended
and Restated Articles of Incorporation of Sharing Service, Inc., which is incorporated herein by reference from Exhibit 3.1.1
to the Company’s Current Report on Form 8-K filed on May 8, 2017
|
|
|
|
|
3.2
|
Bylaws
of Sharing Service, Inc., dated April 25, 2015, which is incorporated herein by reference from Exhibit 3.2.1 to the Company’s
Current Report on Form 8-K filed on May 8, 2017
|
|
|
|
|
4.1
|
Certificate
of Designations 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 Designations 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
|
Certificate
of Designations 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
|
|
|
|
|
4.4
|
Convertible
Promissory Note dated January 22, 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 January 26, 2018
|
|
|
|
|
4.5
|
Convertible
Promissory Note dated February 8, 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 February 13, 2018
|
|
|
|
|
4.6
|
Convertible
Promissory Note dated March 16, 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 March 23, 2018
|
|
|
|
|
4.7
|
Convertible
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
|
|
|
|
|
4.8
|
Convertible
Promissory Note dated May 16, 2018 issued by Sharing Service, Inc. in favor of Power UP Lending Group Ltd., which is incorporated
herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on June 5, 2018
|
|
|
|
|
4.9
|
Convertible
Promissory Note dated July 2, 2018 issued by Sharing Service, Inc. in favor of Power UP Lending Group Ltd., which is incorporated
herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on July 17, 2018
|
|
|
|
|
10.1
|
Stakeholder
and Investment Agreement dated May 21, 2017 by and between Sharing Service, Inc., 212 Technologies and certain individual
selling shareholders, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on
Form 8-K filed on May 25, 2017
|
|
|
|
|
10.2
|
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 filed on May 30, 2017
|
|
10.3
|
Consulting
Agreement dated September 26, 2017 by and between Sharing Service, Inc. and 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 October 2, 2017
|
|
|
|
|
10.4
|
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
|
|
|
|
|
10.5
|
Share
Exchange Agreement dated October 4, 2017 by and between Sharing Service, Inc., 561 LLC, and the Equity Holders of 561 LLC,
which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on October
10, 2017
|
|
|
|
|
10.6
|
Share
Exchange Agreement dated 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
|
|
|
|
|
10.7
|
Share
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
|
|
|
|
|
10.8
|
Share
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
|
|
|
|
|
10.9
|
Securities
Purchase Agreement dated October 10, 2017 by and between Sharing Service, Inc. and UP Lending Group Ltd., which is incorporated
herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on October 13, 2017
|
|
|
|
|
10.10
|
Securities
Purchase Agreement dated December 15, 2017 by and between Sharing Service, Inc. and Power UP Lending Group Ltd., which is
incorporated herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on January 5, 2018
|
|
|
|
|
10.11
|
Employment
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
|
|
|
|
|
10.12
|
Executive
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
|
|
|
|
|
10.13
|
Addendum
to Executive Employment Agreement dated March 27, 2018 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
|
|
|
|
|
10.14
|
Contractor
Agreement dated April 12, 2018 by and between Sharing Service, Inc. and Robert Oblon, which is incorporated herein by reference
from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on April 19, 2018
|
|
|
|
|
10.15
|
Investment
Agreements dated March 15, 2018, March 19, 2018, March 22, 2018 and April 24, 2918 by and between Sharing Service, Inc. and
Direct Cellars, LLC., which are incorporated herein by reference from Exhibit 1.1, Exhibit 1.2, Exhibit 1.3 and Exhibit 1.4
to the Company’s Current Report on Form 8-K filed on May 9, 2018
|
|
|
|
|
10.16
|
Contractor
Agreement dated April 26, 2018 by and between Sharing Service, Inc. and Jordan Brock, which is incorporated herein by reference
from Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on May 23, 2018
|
|
|
|
|
10.17
|
Securities
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
|
|
|
|
|
10.18
|
Asset
Purchase Agreement dated May 15, 2018 by and between Legacy Direct Global, LLC., Sharing Service, Inc. and Legacy Direct,
LLC., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on
June 8, 2018
|
|
|
|
|
10.19
|
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
|
|
|
|
|
10.20
|
Form of Elepreneurs Agreement
|
|
|
|
|
10.21
|
Elepreneurs Super Affiliate Marketing Plan
|
|
|
|
|
21.1
|
List of Subsidiaries of Sharing Services, Inc.
|
|
|
†
Certain schedules and exhibits have been omitted pursuant to Item 601(b) (2) of Regulation S-K. The Registrant agrees
to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request.
|
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of May 2019.
|
SHARING SERVICES, INC.
|
|
(Registrant)
|
|
|
|
|
By:
|
/s/
John Thatch
|
|
|
John Thatch
|
|
|
President, Chief
Executive Officer and Director
|
|
|
|
|
By:
|
/s/
Frank A. Walters
|
|
|
Frank A. Walters
|
|
|
Secretary, Chief
Financial Officer and Director
|
Grafico Azioni Sharing Services Global (PK) (USOTC:SHRG)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni Sharing Services Global (PK) (USOTC:SHRG)
Storico
Da Mag 2023 a Mag 2024