0001493152-20-017648.txt : 20200911 0001493152-20-017648.hdr.sgml : 20200911 20200911164200 ACCESSION NUMBER: 0001493152-20-017648 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20200731 FILED AS OF DATE: 20200911 DATE AS OF CHANGE: 20200911 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARING SERVICES GLOBAL Corp CENTRAL INDEX KEY: 0001644488 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 300869786 STATE OF INCORPORATION: NV FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55997 FILM NUMBER: 201171406 BUSINESS ADDRESS: STREET 1: 1700 COIT RD. STREET 2: SUITE 100 CITY: PLANO STATE: TX ZIP: 75075 BUSINESS PHONE: 714-203-6717 MAIL ADDRESS: STREET 1: 1700 COIT RD. STREET 2: SUITE 100 CITY: PLANO STATE: TX ZIP: 75075 FORMER COMPANY: FORMER CONFORMED NAME: Sharing Services, Inc. DATE OF NAME CHANGE: 20190124 FORMER COMPANY: FORMER CONFORMED NAME: Sharing Services Global Corporation. DATE OF NAME CHANGE: 20190124 FORMER COMPANY: FORMER CONFORMED NAME: Sharing Services, Inc. DATE OF NAME CHANGE: 20150609 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended: July 31, 2020

 

or

 

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

 

Commission File Number 000-55997

 

SHARING SERVICES GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   30-0869786

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

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

 

(469) 304-9400

(Registrant’s telephone number, including area code)

 

None

 

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

 

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

 

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

 

Title of each class

Common Stock, $0.0001 par value per share

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

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

 

Large accelerated filer [  ]     Accelerated filer [  ]
Non-accelerated filer [  ]     Smaller reporting company [X]
        Emerging growth company [X]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of September 9, 2020, there were 179,080,633 shares of the issuer’s class A common stock and 7,500,000 shares of the issuer’s class B common stock outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION  
Item 1. Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4. Controls and Procedures 26
   
PART II—OTHER INFORMATION  
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29
Item 3. Defaults Upon Senior Securities 29
Item 4. Mine Safety Disclosures 29
Item 5. Other Information 29
Item 6. Exhibits 30

 

2

 

 

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

 

cautionary notice regarding forward-looking statements

 

Statements in this Quarterly Report and in any documents incorporated by reference herein which are not purely historical, 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 (the “Exchange Act”). Forward-looking statements generally contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “potential,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “will likely,” “would,” or the negative of such words and/or similar expressions. However, not all forward-looking statements contain these words.

 

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

 

  Our dependence upon a direct selling system to sell our products, and the highly competitive and dynamic nature of the direct selling industry.
     
  Our ability to attract and retain key personalities and independent distributors to promote our products; the ability of a key personality or distributor to successfully perform his or her role; and the potential adverse effect of the loss of a high-level distributor or a significant number of distributors for causes out of our control.
     
  Changes to our sales compensation plan could be negatively received by members of our sales force, could fail to achieve the desired long-term goals, and could adversely impact future sales.
     
  The success of our growth initiatives, including our efforts to attract and retain new customers, build brand awareness, and our efforts to generate recurring customer orders, which we call “SmartShip” orders.
     
  Our ability to anticipate and effectively respond to changes in consumer preferences and buying trends in a timely manner.
     
  Our dependence on one supplier for a substantial portion of the products we sell and the potential for material disruptions in our supply chain or potential increases in the prices of the products we purchase beyond what we can pass along to our customers.
     
  Potential disruptions in the supply of raw materials used to manufacture our products or potential increases in the prices of such raw materials resulting in increased costs to us beyond what we can pass along to our customers.
     
  Our dependence on one merchant processor for a material portion of our sales proceeds.
     
  Our financial performance could be adversely affected by economic slowdowns, particularly over extended periods.
     
  The potential impact of the COVID-19 virus outbreak and its impact on the United States economy.
     
  Our ability to effectively manage and control our operating expenses.
     
  Our quarterly financial performance and potential fluctuations therein.
     
  Our ability to generate sustained, positive cash flows from operations or to obtain additional financing, if needed, with which to fund our working capital needs now and in the future.
     
  Our ability to attract and retain talented employees and management.
     
  Our ability to maintain a positive image and brand acceptance in the dynamic and sometimes unpredictable social media environment.
     
  Our ability to comply with current laws and regulations or our becoming subject to new or more stringent laws and regulations in the future, including applicable laws and regulations in jurisdictions outside the United States.
     
  Potential product liability claims could harm our business.
     
  The success of our efforts to register our trademarks and protect our intellectual property rights.
     
  Our potential unintended infringement on the intellectual property rights of others.
     
  The potential impact if products sold by us were found to be defective in labeling or content.

 

3

 

 

  The costs and effects of litigation and other claims.
     
  Past or future reformulations of our products, including as a result of potential governmental enforcement action, could be negatively received by our sales force and customers and adversely impact future sales.
     
  Our stated intension to expand into foreign markets may expose us to foreign currency exchange rate fluctuations and other risks inherent to foreign operations.
     
  Our ability to effectively and cost-efficiently respond to any natural disasters, epidemics and other health emergencies, or acts of violence or terrorism that may affect our customers and/or our business.
     
  Our dependence on the use of information technology and our ability to effectively and cost-efficiently respond to any disruption in our information technology systems and/or any acts of cyberterrorism.
     
  If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our securities.
     
  Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
     
  If securities or industry analysts do not publish research or reports about our business, if our operating results do not meet their expectations, or if they adversely change their recommendations regarding our common stock, our stock price and trading volume could decline.
     
  Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, likely will be your sole source of gain.
     
  Future sales and issuances of our common stock and/or rights to purchase our common stock, including pursuant to our equity incentive plans, will result in additional dilution of the percentage ownership of our stockholders and could cause our trading price to decline.
     
  We will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance requirements as a result of our disclosed efforts to uplist our stock in the NASDAQ Capital Market.

 

4

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

The following condensed consolidated balance sheets as of July 31, 2020 and April 30, 2020, the condensed consolidated statements of operations, the condensed consolidated statements of cash flows and condensed consolidated statements of stockholders’ equity for the three months ended July 31, 2020 and 2019 are those of Sharing Services Global Corporation and subsidiaries.

 

Index to Unaudited Condensed Consolidated Financial Statements

 

  Page
   
Condensed consolidated balance sheets as of July 31, 2020 and April 30, 2020 6
   
Condensed consolidated statements of operations for the three months ended July 31, 2020 and 2019 7
   
Condensed consolidated statements of cash flows for the three months ended July 31, 2020 and 2019 8
   
Condensed consolidated statements of stockholders’ equity for the three months ended July 31, 2020 and 2019 9
   
Notes to the condensed consolidated financial statements 10

 

5

 

 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   July 31, 2020   April 30, 2020 
ASSETS        
Current Assets          
Cash and cash equivalents  $12,057,897   $11,742,728 
Trade accounts receivable, net   4,033,263    4,076,851 
Notes receivable, net   69,349    118,047 
Inventory   4,987,540    4,801,901 
Other current assets   1,749,691    1,034,979 
Total Current Assets   22,897,740    21,774,506 
Property and equipment, net   259,175    298,383 
Right-of-use assets, net   591,197    800,381 
Deferred tax assets   1,970,000    1,649,018 
Other assets   43,470    55,070 
TOTAL ASSETS  $25,761,582   $24,577,358 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities          
Accounts payable  $822,331   $771,050 
Accrued sales commission payable   6,786,001    7,983,536 
Deferred sales revenues   1,737,087    3,495,571 
Employee stock warrants liability   3,306,564    661,684 
Settlement liability   1,445,714    2,620,931 
State and local taxes payable   1,776,115    2,285,514 
Accrued and other current liabilities   2,044,871    2,117,485 
Income taxes payable   981,810    920,305 
Current portion of convertible notes payable, net of unamortized debt discount of $7,241 in July and $9,843 in April   92,759    90,157 
Total Current Liabilities   18,993,252    20,946,233 
Lease liability, long-term   131,610    343,948 
Note payable   1,040,400    - 
Convertible notes payable, net of unamortized debt discount of $21,892 in July and $24,412 in April   28,108    25,588 
TOTAL LIABILITIES   20,193,370    21,315,769 
Commitments and contingencies          
Stockholders’ Equity          
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, 26,850,000 and 32,478,750 shares issued and outstanding in July and April, respectively   2,685    3,248 
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, 3,490,000 shares issued and outstanding in July and April   349    349 
Common Stock, $0.0001 par value, 500,000,000 Class A shares authorized, 166,072,386 shares and 126,072,386 shares issued and outstanding in July and April, respectively   16,607    12,607 
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   44,667,620    38,871,057 
Shares to be issued   11,785    11,785 
Stock subscriptions receivable   (114,405)   (114,405)
Treasury Stock   (1,532,355)   (1,532,355)
Accumulated deficit   (37,486,074)   (33,992,697)
Total Stockholders’ Equity   5,568,212    3,261,589 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $25, 761,582   $24,577,358 

 

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

 

6

 

 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

   Three Months Ended July 31, 
   2020   2019 
Net sales  $21,899,160   $35,481,917 
Cost of goods sold   5,889,026    10,051,457 
Gross profit   16,000,134    25,430,460 
Operating expenses          
Selling and marketing expenses   9,601,832    15,828,098 
General and administrative expenses   7,545,221    9,626,202 
Total operating expenses   17,147,053    25,454,300 
Operating loss   (1,146,919)   (23,840)
Other income (expense)          
Interest expense, net   (9,127)   (325,949)
Litigation settlements and other non-operating expenses   (78,822)   (204,717)
Total other income (expense), net   (87,949)   (530,666)
Loss before income taxes   (1,234,868)   (554,506)
Income tax (benefit) provision   (141,491)   300,000 
Net loss  $(1,093,377)  $(854,506)
Loss per share:          
Basic  $(0.01)  $(0.01)
Diluted  $(0.01)  $(0.01)
Weighted average shares:          
Basic   140,202,821    123,869,895 
Diluted   140,202,821    123,869,895 

 

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

 

7

 

 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

   Three Months Ended July 31, 
  2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(1,093,377)  $(854,506)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:          
Depreciation and amortization   42,217    30,281 
Stock-based compensation expense   2,644,880    5,595,267 
Deferred income tax benefit   (567,777)   - 

Amortization of debt discount and other

   6,759    312,237 
Loss on impairment or disposal of assets   20,000    14,153 
Changes in operating assets and liabilities:          
Accounts receivable   43,588    192,784 
Inventory   (185,639)   (580,499)
Other current assets   (714,713)   101,219 
Accounts payable   51,281    254,502 
Income taxes payable   308,300    300,000 
Accrued and other liabilities   (4,318,040)   1,697,631 
Net Cash (Used in) Provided by Operating Activities   (3,762,521)   7,063,069 
CASH FLOWS FROM INVESTING ACTIVITIES:          
Payments for property and equipment   (3,008)   (51,116)
Collection of notes receivable   48,698    - 
Due to related parties and other   (8,400)   (30,924)
Net Cash Provided by (Used in) Investing Activities   37,290    (82,040)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from issuance of common stock   3,000,000    6,300 
Repayment of convertible notes payable   -    (255,000)
Repurchase of common stock   -    (500)
Proceeds from issuance of promissory notes   1,040,400    - 
Repayment of promissory notes payable   -    (1,688,292)
Net Cash Provided by (Used in) Financing Activities   4,040,400    (1,937,492)
           
Increase in cash and cash equivalents   315,169    5,043,537 
Cash and cash equivalents, beginning of period   11,742,728    3,912,135 
Cash and cash equivalents, end of period  $12,057,897   $8,955,672 
           
Supplemental cash flow information          
Cash paid for interest  $1,706   $321,826 
Cash paid for income taxes  $4,398   $- 
Supplemented disclosure of non-cash investing and financing activities:          
Settlement obligation satisfied with shares of common stock  $400,000   $- 
Right-of-use assets recognized as lease liability  $-   $1,299,385 

 

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

 

8

 

 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

   Series A Preferred Stock   Series B Preferred Stock   Series C Preferred Stock   Class A and Class B Common Stock                         
   Number of Shares   Par Value   Number of Shares   Par Value   Number of Shares   Par Value   Number of Shares   Par Value   Additional Paid in Capital   Subscription Receivable   Shares to be Issued   Treasury Stock   Accumulated Deficit   Total 
Balance – April 30, 2020   32,478,750   $3,248    10,000,000   $1,000    3,490,000   $349    136,072,386   $13,607   $38,871,057   $(114,405)  $11,785   $(1,532,355)  $(33,992,697)  $3,261,589 
Common stock issued for cash   -    -    -    -    -    -    30,000,000    3,000    5,397,000    -    -         

(2,400,000)

    3,000,000 
Common stock issued upon settlement of litigation   -    -    -    -    -    -    10,000,000    1,000    399,000    -    -         -    400,000 
Preferred stock retired   (5,628,750)   (563)   -    -    -    -    -    -    563    -    -         -    - 
Conversions of preferred stock   -    -    -    -    -    -    -    -    -    -    -         -    - 
Stock-based compensation expense   -    -    -    -    -    -    -    -    -    -    -         -     - 
Stock warrants exercised   -    -    -    -    -    -    -    -    -    -    -         -     - 
Net earnings   -    -    -    -    -    -    -    -    -    -    -         (1,093,377)   (1,093,377)
Balance – July 31, 2020   26,850,000   $2,685    10,000,000   $1,000    3,490,000   $349    176,072,386   $17,607   $44,667,620   $(114,405)  $11,785   $(1,532,355)  $(37,486,074)  $5,568,212 

 

   Series A Preferred Stock   Series B Preferred Stock   Series C Preferred Stock   Class A and Class B Common Stock                         
   Number of Shares   Par Value   Number of Shares   Par Value   Number of Shares   Par Value   Number of Shares   Par Value   Additional Paid in Capital   Subscription Receivable   Shares to be Issued   Treasury Stock   Accumulated Deficit   Total 
Balance – April 30, 2019   42,878,750   $4,288    10,000,000   $1,000    3,520,000   $352    114,077,061   $11,408   $31,870,020   $(114,405)  $21,000    -   $(33,111,921)  $(1,318,258)
Common stock issued for professional services   -    -    -    -    -    -    29,558    3    5,997    -    300    -    -    6,300 
Conversions of preferred stock   (10,250,000)   (1,025)   -    -    (40,000)   (4)   10,290,000    1,029    -    -    -    -    -    - 
Repurchase of common stock   -    -    -    -    -    -    (1,500,000)   (150)   (350)   -    -    -    -    (500)
Stock-based compensation expense   -    -    -    -    -    -    -    -    5,595,267    -    -    -    -    5,595,267 
Net loss   -    -    -    -    -    -    -    -    -    -    -    -    (854,506)   (854,506)
Balance – July 31, 2019   32,628,750   $3,263    10,000,000   $1,000    3,480,000   $348    122,896,619   $12,290   $37,470,934   $(114,405)  $21,300    -   $(33,966,427)  $3,428,303 

 

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

 

9

 

 

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 –DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION

 

Sharing Services Global Corporation (“Sharing Services”, “we,” or the “Company”), formerly Sharing Services, Inc., markets and distributes its health and wellness products primarily in the United States and Canada. The Company is an emerging growth company and was incorporated in the State of Nevada in April 2015. It markets and distributes its products and services primarily through an independent sales force, which it refers to as “Elepreneurs,” using a marketing strategy which is a form of direct selling.

 

The Company does not operate retail stores. It markets its products and services through its independent sales force and using its proprietary websites, including: www.elevacity.com. The Company’s fiscal year ends on April 30.

 

In 2019, Sharing Services, Inc. changed its corporate name to Sharing Services Global Corporation to better reflect the Company’s strategic intent to grow its business globally. In connection with the name change, the Company adopted the over-the-counter trading symbol “SHRG.”

 

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 as permitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

NOTE 2 –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, including our provision for income taxes, is based on full-year assumptions.

 

Reclassifications

 

Certain reclassifications have been made to the prior year data to conform with the current period’s presentation.

 

Comprehensive Income

 

For the fiscal periods included in this Quarterly Report, the only component of the Company’s comprehensive income is the Company’s net earnings. Accordingly, the Company does not present a consolidated statement of comprehensive income.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in accordance with GAAP requires the use of judgment and requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures about contingent assets and liabilities, if any. Matters that require the use of estimates and assumptions include: the recoverability of accounts receivable, the valuation of inventory, the useful lives of fixed assets, the assessment of long-lived assets for impairment, the nature and timing of satisfaction of multiple performance obligations resulting from contracts with customers, allocation of the transaction price to multiple performance obligations in a sales transaction, the measurement and recognition of right-of-use assets and related lease liabilities, the valuation of share-based compensation awards, the measurement and recognition of uncertain tax positions, and the valuation of loss contingencies, if any. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our consolidated financial statements are reasonable.

 

However, we believe that the public’s fear of exposure to and/or the actual impact of the COVID-19 virus, as well as actions taken to mitigate the spread of the virus, have had and continue to have a materially adverse impact on the economy of the U. S. and Canada, and has resulted in a significant number of workers becoming unemployed in both countries. Consumer demand for discretionary products such as ours is sensitive to downturns in the economy, increases in unemployment or decreases in perceived employment security. The full impact on our business of changes in consumer demand resulting from the current economic downturn, widespread unemployment, reduced consumer confidence, and public fear of exposure to the virus cannot reasonably be determined, but the impact may be significant and protracted. Accordingly, it is possible that estimates made in the Company’s consolidated financial statements have been, or will be, materially impacted as a result of these uncertainties. This may include estimates regarding losses on inventory, impairment losses related to long-lived assets, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, and the valuation of loss contingencies.

 

10

 

 

Revenue Recognition

 

The Company derives revenue only from the sale of its products and services and recognizes revenue net of amounts due to taxing authorities (such as local and state sales tax). Our customers place sales orders online and through our “back-office” operations, which creates a contract and establishes the transaction price. The Company recognizes revenue when (or as) it transfers control of the promised goods and services to the customer. With respect to products sold, our performance obligation is satisfied upon receipt of the products by the customer. With respect to subscription-based revenue, including Elepreneurs membership fees, our performance obligation is satisfied over time (up to one year). The timing of our revenue recognition may differ from the time when we invoice and/or collect payment. The Company has elected to treat shipping and handling costs as an activity to fulfill its performance obligations, rather than a separate performance obligation.

 

Deferred sales revenue associated with product invoiced but not received by customers at the balance sheet date was $1.1 million and $2.7 million as of July 31, 2020 and April 30, 2020, respectively. In addition, as of July 31, 2020 and April 30, 2020, deferred sales revenue associated with our performance obligations for services offered on a subscription basis was $341,102 and $433,386, and deferred sales revenue associated with our performance obligations for customers’ right of return was $200,588 and $263,117, respectively. Deferred sales revenue is expected to be recognized over one year.

 

During the fiscal quarter ended July 31, 2020, no individual customer, or related group of customers, represents 10% or more of our consolidated net sales, and approximately 46% of our consolidated net sales were to recurring customers (which we refer to as “SmartShip” sales), approximately 27% were to new customers and approximately 27% were to our independent distributors. During the fiscal quarter ended July 31, 2020 and 2019, approximately 93% and 96%, respectively, of our consolidated net sales are to our customers and/or independent distributors located in the United States.

 

During the fiscal quarter ended July 31, 2020, approximately 98% of our consolidated net sales are from our health and wellness products (including approximately 6% from the sale of coffee and coffee-related products, 57% from the sale of other Nutraceutical products, and approximately 35% from the sale of all other health and wellness products). During the three months ended July 31, 2019, approximately 97% of our consolidated net sales are from the sale of our Elevate product line (including 21% from the sales of coffee and coffee-related products, 50% from the sale of other Nutraceutical products, and approximately 26% from the sale of all other health and wellness products).

 

During the fiscal quarter ended July 31, 2020 and 2019, product purchases from one supplier accounted for approximately 98% and 96%, respectively, of our total product purchases.

 

Sales Commission

 

The Company recognizes sales commission expense, when incurred, in accordance with GAAP. During the three months ended July 31, 2020 and 2019, sales commission expense was $9.4 million and $15.4 million, respectively.

 

At July 31, 2020 and April 30, 2020, accrued sales commission payable was $6,786,001 and $7,983,536, respectively, and included $1,290,477, at both dates, in estimated sales commission payable with stock warrants in connection with the 2019 Sales-related Warrants.

 

Recently Issued Accounting Standards - Not Yet Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives., or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal quarter beginning on May 1, 2024. Early adoption is permitted, subject to certain limitations.

 

11

 

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires than an entity recognize a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, and (d) requires than an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation for the interim period that includes the enactment date. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted but must involve the adoption of all amendments contained in ASU 2019-12 concurrently. The Company has not adopted ASU 2019-12 and is evaluating the potential impact of adoption on its consolidated financial statements.

 

In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-based Consideration Payable to a Customer (“ASU 2019-08”). ASU 2019-08 requires that an entity apply the guidance in ASC 718 to measure and classify share-based payment awards granted to a customer. Under ASC 718, among other things, share-based awards to non-employees must generally be measured at the grant-date fair value of the equity instrument. For entities that have adopted the provisions of ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-based Payment Accounting, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As discussed above, the Company has adopted the provisions of ASU 2018-07. The Company has not adopted ASU 2019-08 but, based on its preliminary assessment, does not believe the impact of adoption will be material on its consolidated financial statements.

 

NOTE 3 – FAIR VALUE MEASURENTS OF FINANCIAL INSTRUMENTS

 

Our financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, investments in unconsolidated entities, accounts payable, notes payable and derivative liabilities. The carrying amounts of cash equivalents, if any, trade accounts receivable, notes receivable, and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.

 

12

 

 

Consistent with the valuation hierarchy contained in ASC Topic 820, we categorized certain of our financial assets and liabilities as follows:

 

   July 31, 2020 
   Total   Level 1   Level 2   Level 3 
Assets                    
Notes receivable  $69,349   $-   $-   $69,349 
Total assets  $69,349   $-   $-   $69,349 
Liabilities                    
Note Payable  $1,040,400   $-   $-   $1,040,400 
Convertible notes payable   120,867    -    -    120,867 
Total liabilities  $1,161,267   $-   $-   $1,161,267 

 

   April 30, 2020 
   Total   Level 1   Level 2   Level 3 
                 
Assets                    
Notes receivable  $118,047   $-   $-   $118,047 
Investments in unconsolidated entities   20,000    -    -    20,000 
Total assets  $138,047   $-   $-   $138,047 
Liabilities                    
Convertible notes payable  $115,745   $-   $-   $115,745 
Total liabilities  $115,745   $-   $-   $115,745 

 

NOTE 4 – EARNINGS (LOSS) PER SHARE

 

We calculate basic earnings (loss) per share by dividing net earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding convertible preferred stock, stock warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible notes, except where the impact would be anti-dilutive.

 

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

 

   Three Months Ended July 31, 
   2020   2019 
Net loss  $(1,093,377)  $(854,506)
Weighted average basic shares   140,202,821    123,869,895 
Weighted average diluted shares   140,202,821    123,869,895 
Loss per share:          
Basic  $(0.01)  $(0.01)
Diluted  $(0.01)  $(0.01)

 

13

 

 

The following potentially dilutive securities and instruments were outstanding during the three months ended July 31, 2020 and 2019 but excluded from the calculation of loss per share because their impact would be anti-dilutive:

 

   2020   2019 
Convertible notes   10,406,100    60,231,439 
Convertible preferred stock   44,133,288    32,628,750 
Stock warrants   27,695,037    31,899,133 
Total incremental shares   82,234,425    124,759,322 

 

NOTE 5 – NOTES RECEIVABLE

 

In the fiscal year 2020, the Company received a promissory note for $58,047 from a prior merchant processor in connection with amounts owed to the Company. At July 31, 2020 and April 30, 2020, the principal balance of $19,349 and $58,047, respectively, remains outstanding.

 

In the fiscal year 2019, the Company received a promissory note for $106,404 from a prior merchant processor in connection with amounts owed to the Company. The Company and the issuer of one of the promissory notes engaged in negotiations aimed at settling this balance. In January 2020, the Company recognized an impairment loss of $46,404 in connection therewith. At July 31, 2020 and April 30, 2020, the principal balance of $50,000 and $60,000, respectively, remains outstanding.

 

NOTE 6 – OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

   July 31, 2020   April 30, 2020 
Prepaid expenses, including $1,077,040 for inventory purchases in July  $1,342,552   $404,089 
Right to recover asset   57,523    76,103 
Employee advances and other   349,616    554,787 
   $1,749,691   $1,034,979 

 

NOTE 7 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

   July 31, 2020   April 30, 2020 
Furniture and fixtures  $224,239   $224,239 
Computer equipment and software   158,501    155,493 
Leasehold improvements   106,877    106,877 
Office equipment   31,652    31,652 
Total property and equipment   521,269    518,261 
Accumulated depreciation and amortization   (262,094)   (219,878)
Property and equipment, net  $259,175   $298,383 

 

Depreciation and amortization expense were $42,217 and $30,280 for the three months ended July 31, 2020 and 2019, respectively.

 

NOTE 8 - NOTE PAYABLE

 

In May 2020, the Company applied for and was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $1,040,400, pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). The PPP Loan is evidenced by a promissory note, matures on May 13, 2022 and bears interest at an annual rate of 1.0%. The PPP Loan may be prepaid without penalty, at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (“qualifying expenses”). The Company used the loan proceeds for qualifying expenses.

 

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The Company’s borrowings under the PPP Loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,” as defined in the CARES Act, except that the amount of loan forgiveness is limited to the qualifying expenses incurred during the 8-week period commencing on the loan effective date. In addition, the amount of any loan forgiveness may be reduced if there is a decrease in the average number of full-time equivalent employees of the Company during the covered period as compared to the comparable period in the prior calendar year. The Company anticipates that some or all of its obligation under the PPP Loan will qualify for loan forgiveness. The Company’s indebtedness, after any such loan forgiveness, is payable in 18 equal monthly installments commencing on December 13, 2020, with all amounts due and payable by the maturity date.

 

At July 31, 2020, note principal in the amount of $1,040,400, excluding accrued but unpaid interest of $2,223, remains outstanding.

 

NOTE 9 - ACCRUED AND OTHER CURRENT LIABILITIES

 

Accrued and other current liabilities consist of the following:

 

   July 31, 2020   April 30, 2020 
Payroll and employee benefits  $1,275,458   $1,199,950 
Lease liability, current portion   481,741    476,950 
Accrued interest payable   19,155    15,419 
Other operational accruals   268,517    425,166 
   $2,044,871   $2,117,485 

 

Lease liability, current portion, represent obligations due withing one year under operating leases for office space, automobiles, and office equipment.

 

NOTE 10 - CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consists of the following:

 

      Conversion Price     
Issuance Date  Maturity Date  (per share)   July 31, 2020   April 30, 2020 
October 2017  October 2022  $0.15   $50,000   $50,000 
April 2018  April 2021  $0.01    100,000    100,000 
Total convertible notes payable    150,000    150,000 
Less: unamortized debt discount and deferred financing fees    (29,133)   (34,255)
     120,867    115,745 
Less: current portion of convertible notes payable    92,759    90,157 
Long-term convertible notes payable   $28,108   $25,588 

 

The Company’s convertible notes are convertible, at the option of the holder, into shares of the Company’s common stock at the conversion prices shown above. Borrowings on the Company’s convertible notes bear interest at the annual rate of 12%, except as otherwise indicated below.

 

Pursuant to the terms of the Company’s convertible note dated October 6, 2017, the Company is currently reviewing the conversion terms of the note. Accordingly, the conversion price that shows on the table above is subject to change as a result of such review. This is a related party note. Please see note 13 for more details.

 

In December 2019, the Company and the holder of the Company’s convertible note dated April 13, 2018 (the “April 2018 Note”) entered into an addendum to the underlying promissory note. Pursuant to the addendum, the parties extended the maturity date of the April 2018 Note to April 2021. In addition, after giving effect to the addendum, the April 2018 Note is non-interest bearing. All other terms of the April 2018 Note remain unchanged.

 

During the three months ended July 31, 2020 and 2019, interest expense in connection with the Company’s convertible notes was $1,512 and $27,567, respectively, excluding amortization of debt discount of $2,519 and $2,519, respectively. These amounts are included in interest expense in our consolidated statements of operations.

 

15

 

 

NOTE 11 – LEASES

 

The Company leases space for its corporate headquarters, and additional office and warehouse space, under lease agreements classified as “operating leases’” as defined in ASC Topic 842. The Company’s real estate lease agreements have remaining terms varying from one to two years, offer the Company customary renewal options, and contain provisions for customary common area maintenance (CAM) assessments by the lessor.

 

The following information pertains to the Company’s leases as of the balance sheet dates indicated:

 

Assets  Classification  July 31, 2020   April 30, 2020 
Operating leases  Right-of-use assets, net  $591,197   $800,381 
Total leased assets     $591,197   $800,381 
              
Liabilities             
Operating leases  Accrued and other current liabilities  $481,741   $476,950 
Operating leases  Lease liability, long-term   131,610    343,948 
Total lease liability     $613,351   $820,898 

 

The following information pertains to the Company’s leases for the periods indicated:

 

      Three Months Ended July 31, 
Lease cost  Classification  2020   2019 
Operating lease cost  General and administrative expenses  $140,223   $178,035 
Operating lease cost  Depreciation and amortization   -    - 
Operating lease cost  Interest expense, net   -    - 
Total lease cost     $140,223   $178,035 

 

The Company’s lease liability is payable as follows:

 

Twelve months ending July 31,    
2021  $481,741 
2022   127,789 
2023   3,821 
2024-2025   - 
Thereafter   - 
Total lease liability  $613,351 

 

NOTE 12 – INCOME TAXES

 

The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated earnings from its operations or pre-tax earnings. During its fiscal year ended April 30, 2020, the Company’s consolidated operating earnings were $9.7 million and, during its fiscal year ended April 30, 2019, the Company had a consolidated operating loss of $1.0 million. The Company believes that it is probable it will utilize its available net operating losses entirely in the foreseeable future.

 

During the three months ended July 31, 2020, the Company recognized a current provision for federal income taxes of $308,300, a provision for state and local income taxes of $117,986 and a deferred income tax benefit of $567,777 million. In addition, during the fiscal year ended April 30, 2020, the Company recognized a current provision for income taxes of $2.1 million and deferred income tax benefits of $1.6 million.

 

16

 

 

For the three months ended July 31, 2020, our income tax rate reconciliation is as follows:

 

Federal statutory rate   21.0%
State income taxes and franchise tax   (9.6)%
Stock-based compensation and other   0.1%
Effective tax rate   11.5%

 

For the three months ended July 31, 2020, our consolidated provision for (benefit from) income taxes is as follows:

 

Current:     
Federal  $308,300 
State and local   117,986 
Total current   426,286 
Deferred:     
Federal   (567,777)
State and local   - 
Total deferred   (567,777)
Total consolidated income tax benefit  $(141,491)

 

As of July 31, 2020, our deferred tax asset (liability) is as follows:

 

Gross deferred tax asset:     
Share-based compensation  $1,654,047 
Accruals and reserves not currently deductible   315,953 
Total deferred tax assets   1,970,000 
Total deferred tax liability   - 
Total consolidated deferred tax assets, net  $1,970,000 

 

NOTE 13 - RELATED PARTY TRANSACTIONS

 

Decentralized Sharing Systems, Inc.

 

On July 22, 2020, the Company and Chan Heng Fai Ambrose, an independent director of the Company, entered into a Stock Purchase and Share Subscription Agreement (the “SPA Agreement”) pursuant to which Mr. Chan agreed to invest $3.0 million in the Company in exchange for 30.0 million shares of the Company’s Class A Common Stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s Class A Common Stock at an exercise price of $0.20 per share. Simultaneously with the SPA Agreement, Mr. Chan and Decentralized Sharing Systems, Inc. (“DSS”) , a subsidiary of Document Security Systems, Inc., a major shareholder of the Company, entered into an Assignment and Assumption Agreement pursuant to which Mr. Chan assigned to DSS all interests in the SPA Agreement. On July 23, 2020, the Company issued 30.0 million of its Class A Common Stock to DSS, an “accredited investor” as defined in the Securities Act, pursuant to the SPA Agreement. Under the terms of the SPA Agreement, the shares of Class A Common Stock issued to DSS are subject to a one (1) year restriction. In addition, the Stock Warrant issued pursuant to the SPA Agreement expires on the third anniversary from the issuance date, unless exercised earlier.

 

As of July 30, 2020, DSS and its affiliates owned 62.4 million shares of the Company’s Class A Common Stock, excluding 10.0 million shares issuable upon the exercise of warrants held by DSS. Mr. Chan, an independent director of the Company, also serves on the Board of Directors of DSS and its parent, Document Security Systems, Inc. In addition, John (JT) Thatch, the Company’s President, CEO and Director, also serves on the Board of Directors of Document Security Systems, Inc. The Company recognized a deemed dividend of $2.4 million in connection with its sale of 30.0 million shares of its Class A Common Stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of its class A common stock to DSS.

 

In October 2017, the Company issued a convertible note in the principal amount of $50,000 to HWH International, Inc (“HWH”). HWH is affiliated with Chan Heng Fai Ambrose, an independent director of the Company. The note matures in October 2022. Please see Note 10 above for more details.

 

17

 

 

Bear Bull Market Dividends, Inc.

 

On July 22, 2020, the Company, Bear Bull Market Dividends, Inc. (“BBMD”), a purported shareholder of the Company, Kenyatto Montez Jones (“Jones”), and MLM Mafia, Inc. (“MLM”) entered into a Settlement Accommodation Agreement [Including Stock Disposition And Release Provisions] (the “SAA”) pursuant to which the relevant parties agreed to settle all prior disputes between the Company, on the one part, and BBMD and Jones, on the other, concerning the status of BBMD as a valid shareholder of the Company, and the ownership, operation, management and control of the Company, all of which has been the subject of various pending lawsuits. In addition to other provisions discussed herein, the parties agreed to dismiss such pending lawsuits and exchanged customary mutual releases.

 

Under the terms of the SAA, the Disputed Stock in its entirety will be converted into 25.0 million shares of the Company’s Class A Common Stock (the “Converted Stock”). In addition, under the terms of the SAA, all 25.0 million shares of the Converted Stock will be placed in escrow with the Company’s stock transfer agent, VStock Transfer, LLC, and to be governed by a Securities Escrow And Disposition Agreement dated as of July 29, 2020.

 

Upon completion of the foregoing actions, MLM will purchase from BBMD 20.0 million shares of the Converted Stock at the purchase price of $0.0525 per share, and BBMD will remain the holder of 5.0 million shares of the Converted Stock.

 

Upon completion of the actions discussed in the preceding paragraph, the Company will buy-back from MLM 17.5 million shares of the Converted Stock at the purchase price of $0.0514 per share, and MLM will remain the holder of 2.5 million shares of the Converted Stock. Upon completion of this buy-back transaction, the Company presently intends to retire the 17.5 million shares repurchased.

 

NOTE 14 - STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock

 

During the three months ended July 31, 2020, the Company issued 30,000,000 shares of its class A common stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s class A common stock, at the exercise price of $0.20 per share, to DSS in exchange for $3.0 million in cash (please see Note 12 above). In addition, the Company issued 10,000,000 shares of its class A common stock to Robert Oblon, a co-founder of the Company, pursuant to the Multi-Party Settlement Agreement discussed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

As of July 31, 2020, 166,072,386 shares of our class A common stock and 10,000,000 shares of our Class B common stock remained issued and outstanding.

 

Stock Warrants

 

The following table summarizes the activity relating to the Company’s warrants during the three months ended July 31, 2020:

 

   Number of Warrants   Weighted Average Exercise Price   Weighted Average Remaining Term 
Outstanding at April 30, 2020   26,883,933   $0.04    4.2 
Granted   10,000,000   $0.20    3.0 
Exercised   -           
Outstanding at July 31, 2020   36,883,933   $0.08    3.7 

 

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

 

Warrants Outstanding at July 31, 2020 
Warrants Outstanding   Warrants Exercisable 
    Weighted
Average Remaining
   Weighted
Average
       Weighted
Average
 
Number of
Shares
   Contractual
life (in years)
   Exercise
Price
   Number of
Shares
   Exercise
Price
 
 22,000,000    4.5   $0.0001    22,000,000   $0.0001 
 10,000,000    3.0   $0.20    10,000,000   $0.20 
 2,270,600    1.1   $0.25    2,270,600   $0.25 
 2,180,000    3.3   $0.10    2,180,000   $0.10 
 333,333    2.7   $0.15    333,333   $0.15 
 100,000    1.7   $3.00    100,000   $3.00 

 

During the three months ended July 31, 2020, the Company issued a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s Class A Common Stock at an exercise price of $0.20 per share to DSS. Please see Note 13 above for more details.

 

NOTE 15 - COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

The Company from time to time is involved in various claims and lawsuits incidental to the conduct of its business in the ordinary course. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

 

Acquisition-Related Contingencies

 

In October 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 Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 2,500,000 shares of our Series A Preferred Stock if/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. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

In October 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 Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 2,500,000 shares of the Company’s Series A Preferred Stock in/when both of the following conditions have been met: (a) one year has passed from the Closing 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. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

Legal Proceedings – Other Matters

 

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.

 

(a) Cause No. 416-02428-2019; Sharing Services Global Corporation, f/k/a Sharing Services, Inc. v. XIP Technologies, LLC, pending in the 416th Judicial District of Collin County, Texas. On May 6, 2019, the Company filed a lawsuit against XIP Technologies, LLC to recover money held by XIP Technologies, LLC that was owed to the Company. The Company obtained a writ of garnishment against a third-party holding funds for XIP Technologies, LLC. XIP Technologies, LLC has filed an answer denying the claims asserted against it. On March 2, 2020, a settlement was reached in this matter and XIP Technologies, LLC is to make twelve (12) monthly installment payments to the Company. Upon receipt of final payment of the amounts due to the Company under the Settlement Agreement, the lawsuit will be dismissed.

 

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(b) Cause No. 296-03589-2019; Pruvit Ventures, Inc. v. Elevacity, LLC, pending in the 296th Judicial District of Collin County, Texas. On July 3, 2019, Pruvit Ventures, Inc. filed a lawsuit against Elevacity, alleging a breach of contract claim. Elevacity has denied the claim of breach contract.

 

(c) Case No. A-19-802861-B; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Alchemist Holdings, LLC and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On October 1, 2019, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Alchemist Holdings, LLC, and the key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning an amended certificate of designation filed by the Company, and for allegations of self-dealing by the two shareholders. An entry of default was made against two of the defendant shareholders as well as Mr. Jones, as a key principal. This matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claim.

 

(d) Case No. A-20-811265-C; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Research and Referral, BZ and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On February 27, 2020, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Research and Referral BZ, as well as a key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning breach of contract, fraud, violations of state securities laws and alter ego relating to a stock exchange/transfer transaction, involving the Company’s stock. An entry of default was made against the two shareholders and key principal Jones and the matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claims against Jones.

 

(e) Cause No. 366-04941-2019; Sharing Services Global Corporation, Elepreneurs U.S., LLC and Elevacity, LLC v. Robert Oblon, filed in the 366th Judicial District of Collin County, Texas. On August 30, 2019, the Company and its affiliated entities filed a lawsuit against Robert Oblon for breach of contract, tortious interference with business relationships, and misappropriation of trade secrets, and sought injunctive relief. A settlement was reached in this matter and the lawsuit was dismissed on March 2, 2020. As part of the settlement, the Company agreed to pay amounts that were due to Oblon under a prior settlement agreement in the approximate amount of $2,000,000, to be paid in installments through June 1, 2020. The Company completed its final payment obligation in accordance with the settlement agreement.

 

(f) Cause No. DC-19-20587; Sharing Services Global Corporation f/k/a Sharing Services, Inc. v. Amber-Lynn Beers-Hutchinson, n/k/a Amber-Lynn Cantrell, pending in the 192nd Judicial District of Dallas County, Texas. On December 30, 2019, the Company filed a lawsuit against a former contractor for breach of contract. The defendant in this matter filed a counterclaim, asserting defamatory conduct engaged in by the Company. This matter remains pending.

 

(g) On December 4, 2019, Entrepreneur Media, Inc. (“EMI”) filed a Notice of Opposition in response to the “Elepreneurs” trademark application filed by SHRG IP Holdings, LLC, a wholly owned subsidiary of the Company. This opposition proceeding is now before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office (“TTAB”). On April 13, 2020, SHRG IP Holdings, LLC filed an answer to the Notice of Opposition. Legal counsel for the parties held a mandatary discovery conference on May 12, 2020. This matter remains pending.

 

(h) On May 20, 2020, the Company (through its legal counsel, Jones, Davis & Jackson, PC) received a demand letter from legal counsel representing a former employee of the Company. The Company has denied the claim of this at-will employee and this matter remains pending.

 

(i) Company subsidiaries Elevacity Holdings, LLC, Elevacity U.S., LLC, Elepreneurs Holdings, LLC and Elepreneurs U.S., LLC (collectively, the “Subsidiaries”) received notice of a dispute with a former officer of such Subsidiaries regarding severance payments allegedly due under an executive employment agreement. The Company and its Subsidiaries have disputed this matter, and the issues between the parties remain outstanding.

 

(j) In March 2019, the Company engaged in preliminary discussions with various independent contractor distributors of the Subsidiaries regarding a previously reported dispute concerning the issuance of stock warrants based on the satisfaction of certain individual sales production metrics. The Company previously recorded a liability of approximately $1.3 million for the projected resolution of this matter, which remains pending.

 

NOTE 16 - SUBSEQUENT EVENTS

 

Pursuant to the Settlement Accommodation Agreement [Including Stock Disposition And Release Provisions] between the Company, Bear Bull Market Dividends, Inc. (“BBMD”), a purported shareholder of the Company, Kenyatto Montez Jones, and MLM Mafia, Inc. (“MLM”) discussed in Note 13 above, the Company repurchased 17,500,000 shares of its Class A Common Stock in exchange for $899,500 in cash. After completion of this transaction, BBMD remains the holder of 5,000,000 shares of Company’s Class A Common Stock and MLM remains the holder of 2,500,000 shares of Company’s Class A Common Stock. The Company recognized the repurchased shares as treasury stock in accordance with GAAP.

 

On September 11, 2020, the Company and Alchemist Holdings, LLC (“Alchemist”), a major shareholder of the Company, entered into an agreement pursuant to which Alchemist will convert 7,500,000 shares of the Company’s Series B preferred stock and 7,500,000 shares of the Company’s Class B common stock into 15,000,000 shares of the Company’s Class A common stock. After giving effect to this stock conversion, Alchemist will hold 65,000,000 shares of the Company’s Class A common stock. All the shares held by Alchemist continue to be subject to a series of agreements favorable to the Company regarding the voting of those shares of stock and the prohibition of such shareholder of taking actions which are adverse to the Company.

 

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

 

The following section discusses management’s views of the financial condition and the results of operations and cash flows of Sharing Services Global Corporation (formerly Sharing Services, Inc.) and consolidated subsidiaries. This section should be read in conjunction with (a) our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020, and (b) our condensed consolidated financial statements included elsewhere in this Quarterly Report. This section may contain forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” above for a discussion of forward-looking statements and the inherent uncertainties, risks and assumptions associated therewith, which could cause actual results to differ materially from the projections contained in such forward-looking statements.

 

Highlights for the Three Months Ended July 31, 2020:

 

  For the three months ended July 31, 2020, our consolidated net sales decreased by $13.6 million, or 38.3%, to $21.9 million, compared to the three months ended July 31, 2019.
     
  For the three months ended July 31, 2020, our consolidated gross profit decreased by $9.5 million, or 37.3%,to $16.0 million, compared to the three months ended July 31, 2019. Our consolidated gross margin was 73.1% for the three months ended July 31, 2020, compared to 71.7% for the three months ended July 31, 2019.
     
  For the three months ended July 31, 2020, our consolidated operating expenses decreased by $8.3 million, or 32.6%,to $17.1 million, compared to the three months ended July 31, 2019.
     
  For the three months ended July 31, 2020, our consolidated operating loss was $1.1 million compared to $23,840 for the three months ended July 31, 2019.
     
  For the three months ended July 31, 2020, our consolidated net non-operating expenses were $87,949 compared to $530,666 for the three months ended July 31, 2019.
     
  For the three months ended July 31, 2020, our consolidated net loss was $1.1 million compared to $854,506 for the three months ended July 31, 2019. For both the three months ended July 31, 2020 and 2019, diluted loss per share was $0.01.
     
  For the three months ended July 31, 2020, our consolidated net cash used in operating activities was $3.8 million compared to cash provided of $7.1 million for the three months ended July 31, 2019.
     
  During the three months ended July 31, 2020, we obtained a loan in the amount of $1,040,400 pursuant to the Paycheck Protection Program of the CARES Act.
     
  During the three months ended July 31, 2020, we issued 30.0 million shares of our common stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of our common stock, at an exercise price of $0.20 per share, to Decentralized Sharing Systems, Inc. (“DSS”) in exchange for $3.0 million in cash. See Note 13 of Notes to Condensed Consolidated Financial Statements.
     
  In July 2020, the Company and a purported shareholder of the Company entered into a Settlement Accommodation Agreement pursuant to which the parties agreed to settle all prior disputes between the Company and the purported shareholder, which disputes are the subject of various pending lawsuits. See Note 13 of Notes to Condensed Consolidated Financial Statements.

 

Overview

 

Summary Description of Business

 

The Company, through its subsidiaries, markets and distributes health and wellness products under the “Elevate” brand, primarily in the United States and Canada. The Company is an emerging growth company and was incorporated in the State of Nevada in April 2015. It markets and distributes its products and services primarily through an independent sales force, which it refers to as “Elepreneurs,” using a marketing strategy which is a form of direct selling. The Company does not operate retail stores. It markets its products and services through its independent sales force and using its proprietary website: www.elevacity.com. The Company’s fiscal year ends on April 30.

 

The Company had no significant sales history prior to December 2017, when the Company launched its current Elevate health and wellness product line. The launch of this product line accelerated the Company’s growth and enabled the Company to expand its consolidated sales volume and operations at a rapid pace.

 

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In January 2019, Sharing Services, Inc. changed its corporate name to Sharing Services Global Corporation to better reflect the Company’s strategic intent to grow its business globally. In connection with the name change, the Company adopted the OTC trading symbol SHRG effective April 4, 2019. Prior to this the Company’s common stock traded under the symbol SHRV.

 

Convertible Notes and Borrowing Under Short-term Financing Arrangements

 

Historically, the Company has funded a substantial portion of its liquidity and cash needs through the issuance of convertible notes and borrowings under short-term financing arrangements, and through the intermittent issuance of equity securities. See “Liquidity and Capital Resources” below for additional information about the Company’s convertible notes and borrowings under short-term financing arrangements.

 

Industry and Business Trends

 

The information in “Industry and Business Trends” included in ITEM 1 “Business” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020 is incorporated herein by reference.

 

Significant Uncertainty Regarding the Potential Impact of Ongoing COVID-19 Virus Outbreak

 

In early 2020, in response to the growing COVID-19 public health emergency, the U.S. and several Canadian provinces declared states of emergency. In an effort to help control the spread of COVID-19, state, provincial and local governments in the U.S. and Canada mandated or recommended various containment measures, including social distancing, quarantine and stay-at-home or shelter-in-place directives, limitations on the size of gatherings, the forced closure of schools, public buildings and businesses not deemed “essential”, and the cancellation of gatherings and events, including sporting events, concerts, conferences and meetings. At the time of this Quarterly Report, some of these mandated or recommended safety measures remain in place.

 

We believe that the public’s fear of exposure to and/or the actual impact of the COVID-19 virus, as well as actions taken to mitigate the spread of the virus, have had and continue to have a materially adverse impact on the economy of the U. S. and Canada, and has resulted in a significant number of workers becoming unemployed in both countries. Consumer demand for discretionary products such as ours is sensitive to significant downturns in the economy, increases in unemployment or decreases in perceived employment security. The full impact on our business of changes in customer demand resulting from the current economic downturn, widespread unemployment, reduced consumer confidence, and consumer fear of exposure to the virus cannot reasonably be determined at this point, but the impact may be significant and protracted.

 

In response to these conditions, the Company has instituted a number of preventive measures, including temporarily transitioning a significant number of our corporate headquarter employees to working remotely, and transitioning our sales conventions to a virtual convention platform, which has increased our already significant reliance on telephone and computer systems and on the availability continued and impeded access to the internet to operate these systems. At the time of this Quarterly Report, we are unable to determine with certainty when these temporary measures can be eased or reversed altogether.

 

As a result of the foregoing, we cannot predict the ultimate scope, duration and impact of the COVID-19 public health emergency, but we believe it may have a material adverse impact on our business, financial condition, cash flows and liquidity, and results of operations (including revenues and profitability), and those of our key suppliers. The impact of the COVID-19 public health emergency may also have the effect of exacerbating some of the other risks described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

Results of Operations

 

The Three Months Ended July 31, 2020 Compared to the Three Months Ended July 31, 2019

 

Net Sales

 

For the three months ended July 31, 2020, our consolidated net sales decreased by $13.6 million, or 38.3%, to $21.9 million, compared to the three months ended July 31, 2019. The decrease in net sales mainly reflects (a) continuation of the decline in consumer orders that we experienced in the fourth quarter of the fiscal year 2020, (b) a decline in independent distributor orders and in the number of new independent distributors, (c) a decline in the number of continuingly active distributors, including as a result of recent product reformulations and increased competition for independent distributors, and (d) the generally adverse impact on consumer buying trends resulting from the COVID-19 virus and actions taken to help mitigate the spread of the outbreak in the U.S. and Canada. In efforts to restore strong sales growth, in the fiscal year 2021, we have further intensified our efforts to recruit, develop and reward our distributors and our efforts reach new consumers through the continued launch of new products and the introduction of new-generation back-office technologies.

 

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We believe there continues to be significant uncertainty about the potentially adverse impact of this health crisis on the economies and employment markets of several countries, including the U.S. and Canada. Please see Significant Uncertainty Regarding the Potential Impact of Ongoing COVID-19 Virus Outbreak above.

 

The $13.6 million decrease in consolidated net sales reflects a decrease in number of comparable product units sold ($23.4 million) and the impact of products discontinued since July 31, 2019 ($0.6 million), partially offset by sales of products introduced since July 31, 2019 of $10.5 million.

 

During the three months ended July 31, 2020 and 2019, the Company derived approximately 98% and 97%, respectively, of its consolidated net sales from the sale of its Elevate health and wellness product line, launched in December 2017.

 

During the three months ended July 31, 2020, approximately 46% of our consolidated net sales were to recurring customers (which we refer to as “SmartShip” sales), approximately 27% were to new customers and approximately 27% were to our independent distributors.

 

Gross Profit

 

For the three months ended July 31, 2020, our consolidated gross profit decreased by $9.5 million, or 37.3%, to $16.0 million, compared to the three months ended July 31, 2019, and our consolidated gross margin was 73.1% and 71.7%, respectively. During the three months ended July 31, 2020, our consolidated gross margin benefited from selective price increases implemented in the fiscal year ended April 30, 2020 and a favorable shift in product mix (towards the sale of products with a relatively higher average gross margin) resulting from changes in customer preferences in the ordinary course of business.

 

Selling and Marketing Expenses

 

For the three months ended July 31, 2020, our consolidated selling and marketing expenses decreased by $6.2 million, to $9.6 million, or 43.9% of consolidated net sales, compared to $15.8 million, or 44.6% of consolidated net sales, for the three months ended July 31, 2019. The decrease in consolidated selling and marketing expenses is due primarily to lower sales commissions of $6.0 million (which reflects decrease in our consolidated net sales discussed above) and lower promotional trade show and sales convention expenses of $0.3 million, mainly as a result of the adoption of a virtual convention platform in response to the COVID-19 health emergency.

 

General and Administrative Expenses

 

For the three months ended July 31, 2020, 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) decreased to $7.5 million, or 34.5% of consolidated net sales compared to $9.6 million, or 26.7% of consolidated net sales, for the three months ended July 31, 2019. The $2.1 million decrease in consolidated general and administrative expenses was due primarily to lower share-based compensation expense of $2.9 million and lower consulting and professional fees of $0.3 million, partially offset by higher estimated severance and severance-related expenses of $1.1 million.

 

Interest Expense, Net

 

For the three months ended July 31, 2020, our consolidated interest expense was $5,441, excluding amortization of debt discount of $5,121 and interest income of $1,435. Consolidated interest expense of $5,441 primarily consists of $3,929 associated with borrowings under short-term financing arrangements and $1,512 associated with our convertible notes.

 

For the three months ended July 31, 2019, our consolidated interest expense was $300,969, excluding amortization of debt discount of $32,998. Consolidated interest expense of $300,969 consisted of interest of $273,402 associated with short-term borrowings under financing arrangements with third-party lenders and interest of $27,567 associated with our convertible notes. In the fiscal year ended April 30, 2020, the Company paid in full all borrowings under prior financing arrangements with third-party lenders.

 

Litigation Settlements and Other Non-operating Expenses

 

For the three months ended July 31, 2020, our consolidated non-operating expenses include litigation settlements and other non-operating expenses of $78,822, including a loss of $58,822 from the settlement of legal claims and related legal expenses, and loss on impairment of investments of $20,000.

 

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For the three months ended July 31, 2019, our consolidated non-operating expenses include litigation settlements and other non-operating expenses of $204,717.

 

Provision for (Benefit from) Income Taxes

 

During the three months ended July 31, 2020, the Company’s recognized a current provision for federal income taxes of $308,300, a provision for state and local taxes of $117,986 and a deferred income tax benefit of $567,777. See Note 2 of the Notes to Consolidated Financial Statements in ITEM 8 “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2020 for information about the Company’s accounting policies regarding accounting for income taxes.

 

Net Loss and Loss per Share

 

As a result of the foregoing, for the three months ended July 31, 2020, our consolidated net loss was $1.1 million compared to $854,506 for the three months ended July 31, 2019. For both the three months ended July 31, 2020 and 2019, fully diluted loss per share was $0.01.

 

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

 

As of July 31, 2020, cash and cash equivalents were $12.1 million. Based upon the current level of operations and anticipated investments necessary to grow our business, we believe that existing cash balances and anticipated funds from operations will likely be sufficient to meet our working capital requirements, and to fund potential acquisitions and capital expenditures, including potential investments in information technology, over the next 12 months. However, when needed to compensate for any temporary fluctuations in our working capital needs, compared to our operating cash flows, we may obtain occasional additional financing through the issuance of equity securities and secured and unsecured debt, including borrowings under convertible notes and short-term financing arrangements.

 

Historical Cash Flows

 

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

 

The following table summarizes our cash flow activities for the three months ended July 31, 2020, compared to the three months ended July 31, 2019:

 

   Three Months Ended July 31, 
   2020   2019   Increase (Decrease) 
Net cash provided by (used in) operating activities  $(3,762,521)  $7,063,069   $(10,825,590)
Net cash provided by (used in) investing activities   37,290    (82,040)   119,330 
Net cash provided by (used in) financing activities   4,040,400    (1,937,492)   5,977,892 
Net increase in cash and cash equivalents  $315,169   $5,043,537   $(4,728,368)

 

Net Cash Provided by (Used in) Operating Activities

 

Net cash provided by (used in) operating activities changed by $10.8 million, to a net use of cash of $3.8 million, for the three months ended July 31, 2020, compared to cash provided of $7.1 million for the three months ended July 31, 2019. The $10.8 million change was due to net changes in operating assets and liabilities of $7.0 million, and to a decrease in profitability of $3.8 million, excluding non-cash items, such as depreciation and amortization, change in fair value of derivative liabilities, stock-based compensation expense, amortization of debt discount, losses on impairment of investments in unconsolidated entities and a note receivable, and estimated settlement liability.

 

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Net Cash Provided by (Used in) Investing Activities

 

Net cash provided by (used in) investing activities changed by $119,330, to cash provided of $37,290, for the three months ended July 31, 2020, compared to a net use of cash of $82,040 for the three months ended July 31, 2019. The $119,330 change was due to collection of a note receivable of $48,698, lower capital expenditures of $48,285 and lower changes in due to related party of $30,924. The change was partially offset by payments for intangible assets of $8,400 in the current interim period.

 

Net Cash Provided by (Used in) Financing Activities

 

Net cash provided by (used in) financing activities changed by $6.0 million, to cash provided of $4.0 million, for the three months ended July 31, 2020, compared to a net use of cash of $1.9 million for the three months ended July 31, 2019. The $6.0 million change was mainly due to higher net proceeds ($3.0 million) of borrowings under short-term financing arrangements and/or convertible promissory notes, and due to higher proceeds from issuances of stock of $3.0 million.

 

Legal Proceedings

 

The information contained in Part II, Item 1. Legal Proceedings, of this Quarterly Report is incorporated herein by reference.

 

Potential Future Acquisitions

 

Subject to approval by its Board of Directors, the Company may make strategic acquisitions and purchases of equity interests in businesses that complement its business competencies and growth strategy. Such acquisitions and purchases of equity interests are expected to be funded with cash and cash equivalents, cash provided by operations, and issuance of equity securities and debt.

 

Recent Issuances of Equity Securities

 

Common Stock

 

During the three months ended July 31, 2020:

 

  the Company issued 30,000,000 shares of its class A common stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s class A common stock, at the exercise price of $0.20 per share, to DSS in exchange for $3.0 million in cash; and
     
  the Company issued 10,000,000 shares of its class A common stock to Robert Oblon, a co-founder of the Company, pursuant to the Multi-Party Settlement Agreement discussed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

The Company recognized a deemed dividend of $2.4 million in connection with its sale of 30.0 million shares of its Class A Common Stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of its class A common stock to DSS.

 

Short-term Borrowings and Convertible Notes

 

Borrowing Under Financing Arrangements (Note Payable)

 

In May 2020, the Company applied for and was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $1,040,400, pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). The PPP Loan is evidenced by a promissory note, matures on May 13, 2022 and bears interest at an annual rate of 1.0%. The PPP Loan may be prepaid without penalty, at the option of the Company, at any time prior to maturity.

 

The Company’s borrowings under the PPP Loan may be eligible for partial or total loan forgiveness, subject to certain limiting conditions. The Company’s indebtedness, after any such loan forgiveness, is payable in 18 equal monthly installments commencing on December 13, 2020, with all amounts due and payable by the maturity date. See Note 8 of the Condensed Notes to Consolidated Financial Statements in ITEM 1 “Financial Statements” contained elsewhere in this Quarterly Report for more information about the PPP Loan.

 

Convertible Notes Payable

 

As of July 31, 2020, convertible notes payable consists of a note in the amount of $100,000 held by an unaffiliated lender and a note in the amount of $50,000 held by an affiliate of DSS, excluding unamortized debt discount of $29,133. See Notes 10 and 13 of the Condensed Notes to Consolidated Financial Statements in ITEM 1 “Financial Statements” contained elsewhere in this Quarterly Report for more information about our Convertible Notes Payable and about DSS.

 

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Capital Requirements

 

During the three months ended July 31, 2020, capital expenditures for property and equipment (consisting of furniture and fixtures, computer equipment and software, other office equipment and leasehold improvements) in the ordinary course of our business were $3,008.

 

Contractual Obligations

 

There were no material changes to our contractual cash obligations during the three months ended July 31, 2020, except for our repayment of borrowings under under short-term financing arrangements and convertible notes described above.

 

Off-Balance Sheet Financing Arrangements

 

As of July 31, 2020, we had no off-balance sheet financing arrangements.

 

Inflation

 

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

 

Critical Accounting Estimates

 

While the Company is not aware of material changes to its critical accounting estimates or assumptions since April 30, 2020, it is reasonably possible that estimates made in the Company’s consolidated financial statements have been, or will be, materially impacted as a result of the ultimate resolution of the uncertainties associated with the COVID-19 health crisis. This may include estimates regarding losses on inventory, impairment losses related to long-lived assets, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, and the valuation of loss contingencies. Please see Significant Uncertainty Regarding the Potential Impact of Ongoing COVID-19 Virus Outbreak above.

 

Accounting Changes and Recent Accounting Pronouncements

 

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

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2020.

 

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section discusses the above-described Certifications and the evaluation of “disclosure controls” referred to therein. Accordingly, this section should be read in conjunction with such Certifications.

 

Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. Any system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system will be met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud (if any) within the Company will be detected. Furthermore, because the design of any system of controls and procedures is based in part upon assumptions about the likelihood of future events, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements and/or omissions due to error or fraud may occur undetected.

 

Scope of the Controls Evaluation. The above-described evaluation of our disclosure controls and procedures included a review of (a) their objectives and design, (b) our implementation of the controls and procedures and (c) the effect of the controls and procedures upon the information generated for this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and sought to confirm that necessary corrective action, including process improvement, followed. We perform this type of evaluation on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can accompany our Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

 

Conclusions regarding Disclosure Controls. Based upon the aforementioned evaluation of our disclosure controls and procedures, our CEO and CFO concluded that, as of July 31, 2020, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We may be involved, from time to time, in claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.

 

We are subject to several U.S. federal, state and local laws and regulations. These laws and regulations govern, among other things, labor relations, the labeling and safety of the products we sell, and the methods we use to sell these products. We believe that we are in material compliance with all such laws and regulations, although no assurance can be provided that this will remain true indefinitely in the future.

 

(a) Cause No. 416-02428-2019; Sharing Services Global Corporation, f/k/a Sharing Services, Inc. v. XIP Technologies, LLC, pending in the 416th Judicial District of Collin County, Texas. On May 6, 2019, the Company filed a lawsuit against XIP Technologies, LLC to recover money held by XIP Technologies, LLC that was owed to the Company. The Company obtained a writ of garnishment against a third-party holding funds for XIP Technologies, LLC. XIP Technologies, LLC has filed an answer denying the claims asserted against it. On March 2, 2020 a settlement was reached in this matter and XIP Technologies, LLC is to make twelve (12) monthly installment payments to the Company. Upon receipt of final payment of the amounts due to the Company under the Settlement Agreement, the lawsuit will be dismissed.

 

(b) Cause No. 296-03589-2019; Pruvit Ventures, Inc. v. Elevacity, LLC, pending in the 296th Judicial District of Collin County, Texas. On July 3, 2019, Pruvit Ventures, Inc. filed a lawsuit against Elevacity, alleging a breach of contract claim. Elevacity has denied the claim of breach contract.

 

(c) Case No. A-19-802861-B; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Alchemist Holdings, LLC and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On October 1, 2019, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Alchemist Holdings, LLC, and the key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning an amended certificate of designation filed by the Company, and for allegations of self-dealing by the two shareholders. An entry of default was made against two of the defendant shareholders as well as Mr. Jones, as a key principal. This matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claim.

 

(d) Case No. A-20-811265-C; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Research and Referral, BZ and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On February 27, 2020, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Research and Referral BZ, as well as a key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning breach of contract, fraud, violations of state securities laws and alter ego relating to a stock exchange/transfer transaction, involving the Company’s stock. An entry of default was made against the two shareholders and key principal Jones and the matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claims against Jones.

 

(e) Cause No. 366-04941-2019; Sharing Services Global Corporation, Elepreneurs U.S., LLC and Elevacity, LLC v. Robert Oblon, filed in the 366th Judicial District of Collin County, Texas. On August 30, 2019, the Company and its affiliated entities filed a lawsuit against Robert Oblon for breach of contract, tortious interference with business relationships, and misappropriation of trade secrets, and sought injunctive relief. A settlement was reached in this matter and the lawsuit was dismissed on March 2, 2020. As part of the settlement, the Company agreed to pay amounts that were due to Oblon under a prior settlement agreement in the approximate amount of $2,000,000, to be paid in installments through June 1, 2020. The Company completed its final payment obligation in accordance with the settlement agreement.

 

(f) Cause No. DC-19-20587; Sharing Services Global Corporation f/k/a Sharing Services, Inc. v. Amber-Lynn Beers-Hutchinson, n/k/a Amber-Lynn Cantrell, pending in the 192nd Judicial District of Dallas County, Texas. On December 30, 2019, the Company filed a lawsuit against a former contractor for breach of contract. The defendant in this matter filed a counterclaim, asserting defamatory conduct engaged in by the Company. This matter remains pending.

 

27

 

 

(g) On December 4, 2019, Entrepreneur Media, Inc. (“EMI”) filed a Notice of Opposition in response to the “Elepreneurs” trademark application filed by SHRG IP Holdings, LLC, a wholly owned subsidiary of the Company. This opposition proceeding is now before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office (“TTAB”). On April 13, 2020, SHRG IP Holdings, LLC filed an answer to the Notice of Opposition. Legal counsel for the parties held a mandatary discovery conference on May 12, 2020. This matter remains pending.

 

(h) On May 20, 2020, the Company (through its legal counsel, Jones, Davis & Jackson, PC) received a demand letter from legal counsel representing a former employee of the Company. The Company has denied the claim of this at-will employee and this matter remains pending.

 

(i) Company subsidiaries Elevacity Holdings, LLC, Elevacity U.S., LLC, Elepreneurs Holdings, LLC and Elepreneurs U.S., LLC (collectively, the “Subsidiaries”) received notice of a dispute with a former officer of such Subsidiaries regarding severance payments allegedly due under an executive employment agreement. The Company and its Subsidiaries have disputed this matter, and the issues between the parties remain outstanding.

 

(j) In March 2019, the Company engaged in preliminary discussions with various independent contractor distributors of the Subsidiaries regarding a previously reported dispute concerning the issuance of stock warrants based on the satisfaction of certain individual sales production metrics. The Company previously recorded a liability of $1.3 million for the projected resolution of this matter, which remains pending.

 

Item 1A. Risk Factors.

 

In addition to the factors contained in ITEM 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2010, you should consider the following risk factor:

 

The dynamic nature of the COVID-19 pandemic and actions to mitigate the spread of the virus have caused an economic downturn, widespread unemployment, and an adverse impact on consumer sentiment. Such negative factors could continue for an extended period and may more adversely impact our business.

 

In early 2020, in response to the growing COVID-19 public health emergency, the U.S. and several Canadian provinces declared states of emergency. In an effort to help control the spread of COVID-19, state, provincial and local governments in the U.S. and Canada mandated or recommended various containment measures, including social distancing, quarantine and stay-at-home or shelter-in-place directives, limitations on the size of gatherings, the forced closure of schools, public buildings and businesses not deemed “essential”, and the cancellation of meetings and events, including sporting events, concerts, conferences and meetings. At the time of this Quarterly Report, some of these mandated or recommended safety measures remain in place.

 

We believe that the public’s fear of exposure to and/or the actual impact of the COVID-19 virus, as well as actions taken to mitigate the spread of the virus, have had and continue to have a materially adverse impact on the economy of the U. S. and Canada, and has resulted in a significant number of workers becoming unemployed in both countries. Consumer demand for discretionary products such as ours is sensitive to significant downturns in the economy, increases in unemployment or decreases in perceived employment security. The full impact on our business of changes in customer demand resulting from the current economic downturn, widespread unemployment, reduced consumer confidence, and consumer fear of exposure to the virus cannot reasonably be determined at this point, but the impact may be significant and protracted.

 

In response to these conditions, the Company has instituted a number of preventive measures, including temporarily transitioning a significant number of our corporate headquarter employees to working remotely, and transitioning our sales conventions to a virtual convention platform, which has increased our already significant reliance on telephone and computer systems and on the availability of continued and impeded access to the Internet to operate these systems. At the time of this Quarterly Report, we are unable to determine with certainty when these temporary measures can be eased or reversed altogether.

 

As a result of the foregoing, we cannot predict the ultimate scope, duration and impact of the COVID-19 public health emergency, but we believe it may have a material adverse impact on our business, financial condition, cash flows and liquidity, and results of operations (including revenues and profitability), and those of our key suppliers. The impact of the COVID-19 public health emergency may also have the effect of exacerbating some of the other risks described in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

28

 

 

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

 

(a) Unregistered Sales of Securities

 

On July 17, 2020, the Company issued 10,000,000 shares of its class A common stock to Robert Oblon, a co-founder of the Company, pursuant to the Multi-Party Settlement Agreement previously disclosed.

 

On July 23, 2020, the Company issued 30,000,000 shares of its class A common stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s class A common stock, at the exercise price of $0.20 per share, to Decentralized Sharing Systems, Inc. in exchange for $3.0 million in cash. Proceeds from this stock sale will be used for general corporate purposes.

 

In both cases above, no underwriters were involved, and the issuances were made in reliance on the exemption from the registration requirements of the Securities Act of 1933 provided under Section 4(a)(2) thereof.

 

(b) Not applicable

 

(c) Not applicable

 

Item 3. Defaults Upon Senior Securities.

 

(a) Not applicable

 

(b) Not applicable

 

Item 4. Mining Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

(a) Not applicable

 

(b) Not applicable

 

29

 

 

Item 6. Exhibits.

 

The following exhibits are filed as part of this Quarterly Report unless otherwise indicated:

 

3.1   Amended and Restated Articles of Incorporation of Sharing Services Global Corporation, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 24, 2019
     
3.2   Bylaws of Sharing Services Global Corporation, which is incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on January 24, 2019
     
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   Amendment to Certificate of Designations of Series B Preferred Stock, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on August 29, 2019
     
4.4   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
     
4.5   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
     
10.1   Share Exchange Agreement dated May 23, 2017 by and between Sharing Service, Inc., Total Travel Media, Inc., and the Equity Holders of Total Travel Media, Inc., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed on September 21, 2017
     
10.2   Share Exchange Agreement dated September 29, 2017 by and between Sharing Service, Inc., Four Oceans Holdings, Inc., and the Equity Holders of Four Oceans Holdings, Inc., which is incorporated herein by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 5, 2017
     
10.3   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
     
10.4   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
     
10.5   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
     
10.6   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
     
10.7   Amended and Restated Executive Employment Agreement effective as of May 16, 2019 between Frank A. Walters and Sharing Service Global Corporation, which is incorporated herein by reference from Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed on March 12, 2020
     
10.8   Amended and Restated Executive Employment Agreement effective as of May 16, 2019 between John “JT” Thatch and Sharing Service Global Corporation, which is incorporated herein by reference from Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed on March 12, 2020

 

30

 

 

10.9   Form of Elepreneur Agreement, which is incorporated herein by reference from Exhibit 10.20 to the Company’s Registration Statement on Form 10-12G/A filed on December 13, 2018
     
10.10   Sharing Services Global Corporation Elepreneurs Compensation Plan of 2019, which is incorporated herein by reference from Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q filed on December 16, 2019
     
10.11   U. S. Small Business Administration Note dated May 13, 2020 issued by Sharing Services Global Corporation in favor of Prosperity Bank, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on May 18, 2020
     
10.12   Multi-Party Settlement Agreement, effective as of February 28, 2020, by and between Sharing Services Global Corporation and relevant subsidiaries, Robert Oblon, Jordan Brock, certain officers and directors of Sharing Services Global Corporation, and certain other corporate parties, which is incorporated herein by reference from Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on July 8, 2020
     
10.13   Stock Purchase and Share Subscription Agreement dated as of July 22, 2020 by and between Sharing Services Global Corporation and Chan Heng Fai Ambrose, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on July 24, 2020
     
10.14   Settlement Accommodation Agreement [Including Stock Disposition and Release Provisions] dated July 22, 2020 by and between Sharing Services Global Corporation, Bear Bull Market Dividends, Inc., Kenyatto Montez Jones, and MLM Mafia, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on July 30, 2020
     
31.1   Certification of John Thatch pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
     
31.2   Certification of Frank A. Walters pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
     
32.1   Certification of John Thatch pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
     
32.2   Certification of Frank A. Walters pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
     
101   The following financial information from our Quarterly Report on Form 10-Q for the three months ended July 31, 2020 and 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Cash Flows; (iv) Condensed Consolidated Statements of Stockholders’ Equity and (v) Notes to Condensed Consolidated Financial Statements *

 

* Included herewith

 

31

 

 

SIGNATURES

 

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

 

  SHARING SERVICES GLOBAL CORPORATION
  (Registrant)
Date: September 11, 2020    
  By: /s/ John Thatch
    John Thatch
    President, Chief Executive Officer and Director
    (Principal Executive Officer)

 

Date: September 11, 2020    
     
  By: /s/ Frank A. Walters
    Frank A. Walters
    Secretary and Chief Financial Officer
    (Principal Financial Officer)

 

32

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, John Thatch, certify that:

 

(1) I have reviewed this Quarterly Report on Form 10-Q of Sharing Services Global Corporation;

 

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 11, 2020    
       
    By: /s/ John Thatch
      John Thatch
      Chief Executive Officer

 

 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Frank A. Walters, certify that:

 

(1) I have reviewed this Quarterly Report on Form 10-Q of Sharing Services Global Corporation;

 

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 11, 2020    
       
    By: /s/ Frank A. Walters
      Frank A. Walters
      Chief Financial Officer

 

 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Sharing Services Global Corporation (the “Company”) on Form 10-Q for the three months ended July 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Thatch, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

    By: /s/ John Thatch
      John Thatch
      Chief Executive Officer
       
Date: September 11, 2020    

 

 

 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Sharing Services Global Corporation (the “Company”) on Form 10-Q for the three months ended July 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank A. Walters, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

    By: /s/ Frank A. Walters
      Frank A. Walters
      Chief Financial Officer
       
Date: September 11, 2020    

 

 

 

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Document and Entity Information - shares
3 Months Ended
Jul. 31, 2020
Sep. 09, 2020
Entity Registrant Name SHARING SERVICES GLOBAL Corp  
Entity Central Index Key 0001644488  
Document Type 10-Q  
Document Period End Date Jul. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --04-30  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2021  
Class A Common Stock [Member]    
Entity Common Stock, Shares Outstanding   179,080,633
Class B Common Stock [Member]    
Entity Common Stock, Shares Outstanding   7,500,000
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Condensed Consolidated Balance Sheets - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Current Assets    
Cash and cash equivalents $ 12,057,897 $ 11,742,728
Trade accounts receivable, net 4,033,263 4,076,851
Notes receivable, net 69,349 118,047
Inventory 4,987,540 4,801,901
Other current assets 1,749,691 1,034,979
Total Current Assets 22,897,740 21,774,506
Property and equipment, net 259,175 298,383
Right-of-use assets, net 591,197 800,381
Deferred tax assets 1,970,000 1,649,018
Other assets 43,470 55,070
TOTAL ASSETS 25,761,582 24,577,358
Current Liabilities    
Accounts payable 822,331 771,050
Accrued sales commission payable 6,786,001 7,983,536
Deferred sales revenues 1,737,087 3,495,571
Employee stock warrants liability 3,306,564 661,684
Settlement liability 1,445,714 2,620,931
State and local taxes payable 1,776,115 2,285,514
Accrued and other current liabilities 2,044,871 2,117,485
Income taxes payable 981,810 920,305
Current portion of convertible notes payable, net of unamortized debt discount of $7,241 in July and $9,843 in April 92,759 90,157
Total Current Liabilities 18,993,252 20,946,233
Lease liability, long-term 131,610 343,948
Note payable 1,040,400
Convertible notes payable, net of unamortized debt discount of $21,892 in July and $24,412 in April 28,108 25,588
TOTAL LIABILITIES 20,193,370 21,315,769
Commitments and contingencies
Stockholders' Equity    
Additional paid in capital 44,667,620 38,871,057
Shares to be issued 11,785 11,785
Stock subscriptions receivable (114,405) (114,405)
Treasury Stock (1,532,355) (1,532,355)
Accumulated deficit (37,486,074) (33,992,697)
Total Stockholders' Equity 5,568,212 3,261,589
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 25,761,582 24,577,358
Series A Convertible Preferred Stock [Member]    
Stockholders' Equity    
Preferred stock, $0.0001 par value, 200,000,000 shares authorized: 2,685 3,248
Series B Convertible Preferred Stock [Member]    
Stockholders' Equity    
Preferred stock, $0.0001 par value, 200,000,000 shares authorized: 1,000 1,000
Series C Convertible Preferred Stock [Member]    
Stockholders' Equity    
Preferred stock, $0.0001 par value, 200,000,000 shares authorized: 349 349
Class A Common Stock [Member]    
Stockholders' Equity    
Common stock, Value 16,607 12,607
Class B Common Stock [Member]    
Stockholders' Equity    
Common stock, Value $ 1,000 $ 1,000
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Unamortized debt discount, current $ 7,241 $ 9,843
Unamortized debt discount, non-current $ 21,892 $ 24,412
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 200,000,000 200,000,000
Series A Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares issued 26,850,000 32,478,750
Preferred stock, shares outstanding 26,850,000 32,478,750
Series B Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 10,000,000 10,000,000
Preferred stock, shares outstanding 10,000,000 10,000,000
Series C Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 3,490,000 3,490,000
Preferred stock, shares outstanding 3,490,000 3,490,000
Class A Common Stock [Member]    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 500,000,000 500,000,000
Common stock, shares issued 166,072,386 126,072,386
Common stock, shares outstanding 166,072,386 126,072,386
Class B Common Stock [Member]    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 10,000,000 10,000,000
Common stock, shares outstanding 10,000,000 10,000,000
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Statement of Operations (Unaudited) - USD ($)
3 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Income Statement [Abstract]    
Net sales $ 21,899,160 $ 35,481,917
Cost of goods sold 5,889,026 10,051,457
Gross profit 16,000,134 25,430,460
Operating expenses    
Selling and marketing expenses 9,601,832 15,828,098
General and administrative expenses 7,545,221 9,626,202
Total operating expenses 17,147,053 25,454,300
Operating loss (1,146,919) (23,840)
Other income (expense)    
Interest expense, net (9,127) (325,949)
Litigation settlements and other non-operating expenses (78,822) (204,717)
Total other income (expense), net (87,949) (530,666)
Loss before income taxes (1,234,868) (554,506)
Income tax (benefit) provision (141,491) 300,000
Net loss $ (1,093,377) $ (854,506)
Loss per share:    
Basic $ (0.01) $ (0.01)
Diluted $ (0.01) $ (0.01)
Weighted average shares:    
Basic 140,202,821 123,869,895
Diluted 140,202,821 123,869,895
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)
3 Months Ended 12 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Apr. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $ (1,093,377) $ (854,506)  
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:      
Depreciation and amortization 42,217 30,281  
Stock-based compensation expense 2,644,880 5,595,267  
Deferred income tax benefit (567,777) $ 1,600,000
Amortization of debt discount and other 6,759 312,237  
Loss on impairment or disposal of assets 20,000 14,153  
Changes in operating assets and liabilities:      
Accounts receivable 43,588 192,784  
Inventory (185,639) (580,499)  
Other current assets (714,713) 101,219  
Accounts payable 51,281 254,502  
Income taxes payable 308,300 300,000  
Accrued and other liabilities (4,318,040) 1,697,631  
Net Cash (Used in) Provided by Operating Activities (3,762,521) 7,063,069  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Payments for property and equipment (3,008) (51,116)  
Collection of notes receivable 48,698  
Due to related parties and other (8,400) (30,924)  
Net Cash Provided by (Used in) Investing Activities 37,290 (82,040)  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from issuance of common stock 3,000,000 6,300  
Repayment of convertible notes payable (255,000)  
Repurchase of common stock (500)  
Proceeds from issuance of promissory notes 1,040,400  
Repayment of promissory notes payable (1,688,292)  
Net Cash Provided by (Used in) Financing Activities 4,040,400 (1,937,492)  
Increase in cash and cash equivalents 315,169 5,043,537  
Cash and cash equivalents, beginning of period 11,742,728 3,912,135 3,912,135
Cash and cash equivalents, end of period 12,057,897 8,955,672 $ 11,742,728
Supplemental cash flow information      
Cash paid for interest 1,706 321,826  
Cash paid for income taxes 4,398  
Supplemented disclosure of non-cash investing and financing activities:      
Settlement obligation satisfied with shares of common stock 400,000  
Right-of-use assets recognized as lease liability $ 1,299,385  
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.20.2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
Series A Preferred Stock [Member]
Series B Preferred Stock [Member]
Series C Preferred Stock [Member]
Class A and Class B Common Stock [Member]
Additional Paid in Capital [Member]
Subscription Receivable [Member]
Shares to be Issued [Member]
Treasury Stock [Member]
Accumulated Deficit [Member]
Total
Balance at Apr. 30, 2019 $ 4,288 $ 1,000 $ 352 $ 11,408 $ 31,870,020 $ (114,405) $ 21,000 $ (33,111,921) $ (1,318,258)
Balance, shares at Apr. 30, 2019 42,878,750 10,000,000 3,520,000 114,077,061            
Common stock issued for professional services $ 3 5,997 300 6,300
Common stock issued for professional services, shares 29,558            
Conversions of preferred stock $ (1,025) $ (4) $ 1,029
Conversions of preferred stock, shares (10,250,000) (40,000) 10,290,000            
Repurchase of common stock $ (150) (350) (500)
Repurchase of common stock, shares (1,500,000)            
Stock-based compensation expense 5,595,267 5,595,267
Net earnings (loss) (854,506) (854,506)
Balance at Jul. 31, 2019 $ 3,263 $ 1,000 $ 348 $ 12,290 37,470,934 (114,405) 21,300 (33,966,427) 3,428,303
Balance, shares at Jul. 31, 2019 32,628,750 10,000,000 3,480,000 122,896,619            
Balance at Apr. 30, 2020 $ 3,248 $ 1,000 $ 349 $ 13,607 38,871,057 (114,405) 11,785 (1,532,355) (33,992,697) 3,261,589
Balance, shares at Apr. 30, 2020 32,478,750 10,000,000 3,490,000 136,072,386            
Conversions of preferred stock  
Conversions of preferred stock, shares            
Common stock issued for cash $ 3,000 5,397,000   (2,400,000) 3,000,000
Common stock issued for cash, shares 30,000,000            
Common stock issued upon settlement of litigation $ 1,000 399,000   400,000
Common stock issued upon settlement of litigation, shares 10,000,000            
Preferred stock retired $ (563) 563  
Preferred stock retired, shares (5,628,750)            
Stock-based compensation expense  
Stock warrants exercised  
Stock warrants exercised, shares            
Net earnings (loss)   (1,093,377) (1,093,377)
Balance at Jul. 31, 2020 $ 2,685 $ 1,000 $ 349 $ 17,607 $ 44,667,620 $ (114,405) $ 11,785 $ (1,532,355) $ (37,486,074) $ 5,568,212
Balance, shares at Jul. 31, 2020 26,850,000 10,000,000 3,490,000 176,072,386            
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.20.2
Description of Operations and Basis of Presentation
3 Months Ended
Jul. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Operations and Basis of Presentation

NOTE 1 –DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION

 

Sharing Services Global Corporation (“Sharing Services”, “we,” or the “Company”), formerly Sharing Services, Inc., markets and distributes its health and wellness products primarily in the United States and Canada. The Company is an emerging growth company and was incorporated in the State of Nevada in April 2015. It markets and distributes its products and services primarily through an independent sales force, which it refers to as “Elepreneurs,” using a marketing strategy which is a form of direct selling.

 

The Company does not operate retail stores. It markets its products and services through its independent sales force and using its proprietary websites, including: www.elevacity.com. The Company’s fiscal year ends on April 30.

 

In 2019, Sharing Services, Inc. changed its corporate name to Sharing Services Global Corporation to better reflect the Company’s strategic intent to grow its business globally. In connection with the name change, the Company adopted the over-the-counter trading symbol “SHRG.”

 

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 as permitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.20.2
Significant Accounting Policies
3 Months Ended
Jul. 31, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies

NOTE 2 –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, including our provision for income taxes, is based on full-year assumptions.

 

Reclassifications

 

Certain reclassifications have been made to the prior year data to conform with the current period’s presentation.

 

Comprehensive Income

 

For the fiscal periods included in this Quarterly Report, the only component of the Company’s comprehensive income is the Company’s net earnings. Accordingly, the Company does not present a consolidated statement of comprehensive income.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in accordance with GAAP requires the use of judgment and requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures about contingent assets and liabilities, if any. Matters that require the use of estimates and assumptions include: the recoverability of accounts receivable, the valuation of inventory, the useful lives of fixed assets, the assessment of long-lived assets for impairment, the nature and timing of satisfaction of multiple performance obligations resulting from contracts with customers, allocation of the transaction price to multiple performance obligations in a sales transaction, the measurement and recognition of right-of-use assets and related lease liabilities, the valuation of share-based compensation awards, the measurement and recognition of uncertain tax positions, and the valuation of loss contingencies, if any. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our consolidated financial statements are reasonable.

 

However, we believe that the public’s fear of exposure to and/or the actual impact of the COVID-19 virus, as well as actions taken to mitigate the spread of the virus, have had and continue to have a materially adverse impact on the economy of the U. S. and Canada, and has resulted in a significant number of workers becoming unemployed in both countries. Consumer demand for discretionary products such as ours is sensitive to downturns in the economy, increases in unemployment or decreases in perceived employment security. The full impact on our business of changes in consumer demand resulting from the current economic downturn, widespread unemployment, reduced consumer confidence, and public fear of exposure to the virus cannot reasonably be determined, but the impact may be significant and protracted. Accordingly, it is possible that estimates made in the Company’s consolidated financial statements have been, or will be, materially impacted as a result of these uncertainties. This may include estimates regarding losses on inventory, impairment losses related to long-lived assets, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, and the valuation of loss contingencies.

 

Revenue Recognition

 

The Company derives revenue only from the sale of its products and services and recognizes revenue net of amounts due to taxing authorities (such as local and state sales tax). Our customers place sales orders online and through our “back-office” operations, which creates a contract and establishes the transaction price. The Company recognizes revenue when (or as) it transfers control of the promised goods and services to the customer. With respect to products sold, our performance obligation is satisfied upon receipt of the products by the customer. With respect to subscription-based revenue, including Elepreneurs membership fees, our performance obligation is satisfied over time (up to one year). The timing of our revenue recognition may differ from the time when we invoice and/or collect payment. The Company has elected to treat shipping and handling costs as an activity to fulfill its performance obligations, rather than a separate performance obligation.

 

Deferred sales revenue associated with product invoiced but not received by customers at the balance sheet date was $1.1 million and $2.7 million as of July 31, 2020 and April 30, 2020, respectively. In addition, as of July 31, 2020 and April 30, 2020, deferred sales revenue associated with our performance obligations for services offered on a subscription basis was $341,102 and $433,386, and deferred sales revenue associated with our performance obligations for customers’ right of return was $200,588 and $263,117, respectively. Deferred sales revenue is expected to be recognized over one year.

 

During the fiscal quarter ended July 31, 2020, no individual customer, or related group of customers, represents 10% or more of our consolidated net sales, and approximately 46% of our consolidated net sales were to recurring customers (which we refer to as “SmartShip” sales), approximately 27% were to new customers and approximately 27% were to our independent distributors. During the fiscal quarter ended July 31, 2020 and 2019, approximately 93% and 96%, respectively, of our consolidated net sales are to our customers and/or independent distributors located in the United States.

 

During the fiscal quarter ended July 31, 2020, approximately 98% of our consolidated net sales are from our health and wellness products (including approximately 6% from the sale of coffee and coffee-related products, 57% from the sale of other Nutraceutical products, and approximately 35% from the sale of all other health and wellness products). During the three months ended July 31, 2019, approximately 97% of our consolidated net sales are from the sale of our Elevate product line (including 21% from the sales of coffee and coffee-related products, 50% from the sale of other Nutraceutical products, and approximately 26% from the sale of all other health and wellness products).

 

During the fiscal quarter ended July 31, 2020 and 2019, product purchases from one supplier accounted for approximately 98% and 96%, respectively, of our total product purchases.

 

Sales Commission

 

The Company recognizes sales commission expense, when incurred, in accordance with GAAP. During the three months ended July 31, 2020 and 2019, sales commission expense was $9.4 million and $15.4 million, respectively.

 

At July 31, 2020 and April 30, 2020, accrued sales commission payable was $6,786,001 and $7,983,536, respectively, and included $1,290,477, at both dates, in estimated sales commission payable with stock warrants in connection with the 2019 Sales-related Warrants.

 

Recently Issued Accounting Standards - Not Yet Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives., or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal quarter beginning on May 1, 2024. Early adoption is permitted, subject to certain limitations.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires than an entity recognize a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, and (d) requires than an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation for the interim period that includes the enactment date. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted but must involve the adoption of all amendments contained in ASU 2019-12 concurrently. The Company has not adopted ASU 2019-12 and is evaluating the potential impact of adoption on its consolidated financial statements.

 

In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-based Consideration Payable to a Customer (“ASU 2019-08”). ASU 2019-08 requires that an entity apply the guidance in ASC 718 to measure and classify share-based payment awards granted to a customer. Under ASC 718, among other things, share-based awards to non-employees must generally be measured at the grant-date fair value of the equity instrument. For entities that have adopted the provisions of ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-based Payment Accounting, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As discussed above, the Company has adopted the provisions of ASU 2018-07. The Company has not adopted ASU 2019-08 but, based on its preliminary assessment, does not believe the impact of adoption will be material on its consolidated financial statements.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.20.2
Fair Value Measurements of Financial Instruments
3 Months Ended
Jul. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Financial Instruments

NOTE 3 – FAIR VALUE MEASURENTS OF FINANCIAL INSTRUMENTS

 

Our financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, investments in unconsolidated entities, accounts payable, notes payable and derivative liabilities. The carrying amounts of cash equivalents, if any, trade accounts receivable, notes receivable, and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.

 

Consistent with the valuation hierarchy contained in ASC Topic 820, we categorized certain of our financial assets and liabilities as follows:

 

    July 31, 2020  
    Total     Level 1     Level 2     Level 3  
Assets                                
Notes receivable   $ 69,349     $ -     $ -     $ 69,349  
Total assets   $ 69,349     $ -     $ -     $ 69,349  
Liabilities                                
Note Payable   $ 1,040,400     $ -     $ -     $ 1,040,400  
Convertible notes payable     120,867       -       -       120,867  
Total liabilities   $ 1,161,267     $ -     $ -     $ 1,161,267  

 

    April 30, 2020  
    Total     Level 1     Level 2     Level 3  
                         
Assets                                
Notes receivable   $ 118,047     $ -     $ -     $ 118,047  
Investments in unconsolidated entities     20,000       -       -       20,000  
Total assets   $ 138,047     $ -     $ -     $ 138,047  
Liabilities                                
Convertible notes payable   $ 115,745     $ -     $ -     $ 115,745  
Total liabilities   $ 115,745     $ -     $ -     $ 115,745
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Earnings (Loss) Per Share
3 Months Ended
Jul. 31, 2020
Loss per share:  
Earnings (Loss) Per Share

NOTE 4 – EARNINGS (LOSS) PER SHARE

 

We calculate basic earnings (loss) per share by dividing net earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding convertible preferred stock, stock warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible notes, except where the impact would be anti-dilutive.

 

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

 

    Three Months Ended July 31,  
    2020     2019  
Net loss   $ (1,093,377 )   $ (854,506 )
Weighted average basic shares     140,202,821       123,869,895  
Weighted average diluted shares     140,202,821       123,869,895  
Loss per share:                
Basic   $ (0.01 )   $ (0.01 )
Diluted   $ (0.01 )   $ (0.01 )

 

The following potentially dilutive securities and instruments were outstanding during the three months ended July 31, 2020 and 2019 but excluded from the calculation of loss per share because their impact would be anti-dilutive:

 

    2020     2019  
Convertible notes     10,406,100       60,231,439  
Convertible preferred stock     44,133,288       32,628,750  
Stock warrants     27,695,037       31,899,133  
Total incremental shares     82,234,425       124,759,322
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Notes Receivable
3 Months Ended
Jul. 31, 2020
Receivables [Abstract]  
Notes Receivable

NOTE 5 – NOTES RECEIVABLE

 

In the fiscal year 2020, the Company received a promissory note for $58,047 from a prior merchant processor in connection with amounts owed to the Company. At July 31, 2020 and April 30, 2020, the principal balance of $19,349 and $58,047, respectively, remains outstanding.

 

In the fiscal year 2019, the Company received a promissory note for $106,404 from a prior merchant processor in connection with amounts owed to the Company. The Company and the issuer of one of the promissory notes engaged in negotiations aimed at settling this balance. In January 2020, the Company recognized an impairment loss of $46,404 in connection therewith. At July 31, 2020 and April 30, 2020, the principal balance of $50,000 and $60,000, respectively, remains outstanding.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Other Current Assets
3 Months Ended
Jul. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Current Assets

NOTE 6 – OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

    July 31, 2020     April 30, 2020  
Prepaid expenses, including $1,077,040 for inventory purchases in July   $ 1,342,552     $ 404,089  
Right to recover asset     57,523       76,103  
Employee advances and other     349,616       554,787  
    $ 1,749,691     $ 1,034,979
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.20.2
Property and Equipment
3 Months Ended
Jul. 31, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment

NOTE 7 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

    July 31, 2020     April 30, 2020  
Furniture and fixtures   $ 224,239     $ 224,239  
Computer equipment and software     158,501       155,493  
Leasehold improvements     106,877       106,877  
Office equipment     31,652       31,652  
Total property and equipment     521,269       518,261  
Accumulated depreciation and amortization     (262,094 )     (219,878 )
Property and equipment, net   $ 259,175     $ 298,383  

 

Depreciation and amortization expense were $42,217 and $30,280 for the three months ended July 31, 2020 and 2019, respectively.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.20.2
Note Payable
3 Months Ended
Jul. 31, 2020
Debt Disclosure [Abstract]  
Note Payable

NOTE 8 - NOTE PAYABLE

 

In May 2020, the Company applied for and was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $1,040,400, pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). The PPP Loan is evidenced by a promissory note, matures on May 13, 2022 and bears interest at an annual rate of 1.0%. The PPP Loan may be prepaid without penalty, at the option of the Company, at any time prior to maturity. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (“qualifying expenses”). The Company used the loan proceeds for qualifying expenses.

 

The Company’s borrowings under the PPP Loan may be eligible for loan forgiveness if used for qualifying expenses incurred during the “covered period,” as defined in the CARES Act, except that the amount of loan forgiveness is limited to the qualifying expenses incurred during the 8-week period commencing on the loan effective date. In addition, the amount of any loan forgiveness may be reduced if there is a decrease in the average number of full-time equivalent employees of the Company during the covered period as compared to the comparable period in the prior calendar year. The Company anticipates that some or all of its obligation under the PPP Loan will qualify for loan forgiveness. The Company’s indebtedness, after any such loan forgiveness, is payable in 18 equal monthly installments commencing on December 13, 2020, with all amounts due and payable by the maturity date.

 

At July 31, 2020, note principal in the amount of $1,040,400, excluding accrued but unpaid interest of $2,223, remains outstanding.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Accrued and Other Current Liabilities
3 Months Ended
Jul. 31, 2020
Payables and Accruals [Abstract]  
Accrued and Other Current Liabilities

NOTE 9 - ACCRUED AND OTHER CURRENT LIABILITIES

 

Accrued and other current liabilities consist of the following:

 

    July 31, 2020     April 30, 2020  
Payroll and employee benefits   $ 1,275,458     $ 1,199,950  
Lease liability, current portion     481,741       476,950  
Accrued interest payable     19,155       15,419  
Other operational accruals     268,517       425,166  
    $ 2,044,871     $ 2,117,485  

 

Lease liability, current portion, represent obligations due withing one year under operating leases for office space, automobiles, and office equipment.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes Payable
3 Months Ended
Jul. 31, 2020
Debt Disclosure [Abstract]  
Convertible Notes Payable

NOTE 10 - CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consists of the following:

 

        Conversion Price        
Issuance Date   Maturity Date   (per share)     July 31, 2020     April 30, 2020  
October 2017   October 2022   $ 0.15     $ 50,000     $ 50,000  
April 2018   April 2021   $ 0.01       100,000       100,000  
Total convertible notes payable       150,000       150,000  
Less: unamortized debt discount and deferred financing fees       (29,133 )     (34,255 )
        120,867       115,745  
Less: current portion of convertible notes payable       92,759       90,157  
Long-term convertible notes payable     $ 28,108     $ 25,588  

 

The Company’s convertible notes are convertible, at the option of the holder, into shares of the Company’s common stock at the conversion prices shown above. Borrowings on the Company’s convertible notes bear interest at the annual rate of 12%, except as otherwise indicated below.

 

Pursuant to the terms of the Company’s convertible note dated October 6, 2017, the Company is currently reviewing the conversion terms of the note. Accordingly, the conversion price that shows on the table above is subject to change as a result of such review. This is a related party note. Please see note 13 for more details.

 

In December 2019, the Company and the holder of the Company’s convertible note dated April 13, 2018 (the “April 2018 Note”) entered into an addendum to the underlying promissory note. Pursuant to the addendum, the parties extended the maturity date of the April 2018 Note to April 2021. In addition, after giving effect to the addendum, the April 2018 Note is non-interest bearing. All other terms of the April 2018 Note remain unchanged.

 

During the three months ended July 31, 2020 and 2019, interest expense in connection with the Company’s convertible notes was $1,512 and $27,567, respectively, excluding amortization of debt discount of $2,519 and $2,519, respectively. These amounts are included in interest expense in our consolidated statements of operations.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Leases
3 Months Ended
Jul. 31, 2020
Leases [Abstract]  
Leases

NOTE 11 – LEASES

 

The Company leases space for its corporate headquarters, and additional office and warehouse space, under lease agreements classified as “operating leases’” as defined in ASC Topic 842. The Company’s real estate lease agreements have remaining terms varying from one to two years, offer the Company customary renewal options, and contain provisions for customary common area maintenance (CAM) assessments by the lessor.

 

The following information pertains to the Company’s leases as of the balance sheet dates indicated:

 

Assets   Classification   July 31, 2020     April 30, 2020  
Operating leases   Right-of-use assets, net   $ 591,197     $ 800,381  
Total leased assets       $ 591,197     $ 800,381  
                     
Liabilities                    
Operating leases   Accrued and other current liabilities   $ 481,741     $ 476,950  
Operating leases   Lease liability, long-term     131,610       343,948  
Total lease liability       $ 613,351     $ 820,898  

 

The following information pertains to the Company’s leases for the periods indicated:

 

        Three Months Ended July 31,  
Lease cost   Classification   2020     2019  
Operating lease cost   General and administrative expenses   $ 140,223     $ 178,035  
Operating lease cost   Depreciation and amortization     -       -  
Operating lease cost   Interest expense, net     -       -  
Total lease cost       $ 140,223     $ 178,035  

 

The Company’s lease liability is payable as follows:

 

Twelve months ending July 31,      
2021   $ 481,741  
2022     127,789  
2023     3,821  
2024-2025     -  
Thereafter     -  
Total lease liability   $ 613,351
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes
3 Months Ended
Jul. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 12 – INCOME TAXES

 

The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated earnings from its operations or pre-tax earnings. During its fiscal year ended April 30, 2020, the Company’s consolidated operating earnings were $9.7 million and, during its fiscal year ended April 30, 2019, the Company had a consolidated operating loss of $1.0 million. The Company believes that it is probable it will utilize its available net operating losses entirely in the foreseeable future.

 

During the three months ended July 31, 2020, the Company recognized a current provision for federal income taxes of $308,300, a provision for state and local income taxes of $117,986 and a deferred income tax benefit of $567,777 million. In addition, during the fiscal year ended April 30, 2020, the Company recognized a current provision for income taxes of $2.1 million and deferred income tax benefits of $1.6 million.

 

For the three months ended July 31, 2020, our income tax rate reconciliation is as follows:

 

Federal statutory rate     21.0 %
State income taxes and franchise tax     (9.6 )%
Stock-based compensation and other     0.1 %
Effective tax rate     11.5 %

 

For the three months ended July 31, 2020, our consolidated provision for (benefit from) income taxes is as follows:

 

Current:        
Federal   $ 308,300  
State and local     117,986  
Total current     426,286  
Deferred:        
Federal     (567,777 )
State and local     -  
Total deferred     (567,777 )
Total consolidated income tax benefit   $ (141,491 )

 

As of July 31, 2020, our deferred tax asset (liability) is as follows:

 

Gross deferred tax asset:        
Share-based compensation   $ 1,654,047  
Accruals and reserves not currently deductible     315,953  
Total deferred tax assets     1,970,000  
Total deferred tax liability     -  
Total consolidated deferred tax assets, net   $ 1,970,000
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Related Party Transactions
3 Months Ended
Jul. 31, 2020
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 13 - RELATED PARTY TRANSACTIONS

 

Decentralized Sharing Systems, Inc.

 

On July 22, 2020, the Company and Chan Heng Fai Ambrose, an independent director of the Company, entered into a Stock Purchase and Share Subscription Agreement (the “SPA Agreement”) pursuant to which Mr. Chan agreed to invest $3.0 million in the Company in exchange for 30.0 million shares of the Company’s Class A Common Stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s Class A Common Stock at an exercise price of $0.20 per share. Simultaneously with the SPA Agreement, Mr. Chan and Decentralized Sharing Systems, Inc. (“DSS”) , a subsidiary of Document Security Systems, Inc., a major shareholder of the Company, entered into an Assignment and Assumption Agreement pursuant to which Mr. Chan assigned to DSS all interests in the SPA Agreement. On July 23, 2020, the Company issued 30.0 million of its Class A Common Stock to DSS, an “accredited investor” as defined in the Securities Act, pursuant to the SPA Agreement. Under the terms of the SPA Agreement, the shares of Class A Common Stock issued to DSS are subject to a one (1) year restriction. In addition, the Stock Warrant issued pursuant to the SPA Agreement expires on the third anniversary from the issuance date, unless exercised earlier.

 

As of July 30, 2020, DSS and its affiliates owned 62.4 million shares of the Company’s Class A Common Stock, excluding 10.0 million shares issuable upon the exercise of warrants held by DSS. Mr. Chan, an independent director of the Company, also serves on the Board of Directors of DSS and its parent, Document Security Systems, Inc. In addition, John (JT) Thatch, the Company’s President, CEO and Director, also serves on the Board of Directors of Document Security Systems, Inc. The Company recognized a deemed dividend of $2.4 million in connection with its sale of 30.0 million shares of its Class A Common Stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of its class A common stock to DSS.

 

In October 2017, the Company issued a convertible note in the principal amount of $50,000 to HWH International, Inc (“HWH”). HWH is affiliated with Chan Heng Fai Ambrose, an independent director of the Company. The note matures in October 2022. Please see Note 10 above for more details.

 

Bear Bull Market Dividends, Inc.

 

On July 22, 2020, the Company, Bear Bull Market Dividends, Inc. (“BBMD”), a purported shareholder of the Company, Kenyatto Montez Jones (“Jones”), and MLM Mafia, Inc. (“MLM”) entered into a Settlement Accommodation Agreement [Including Stock Disposition And Release Provisions] (the “SAA”) pursuant to which the relevant parties agreed to settle all prior disputes between the Company, on the one part, and BBMD and Jones, on the other, concerning the status of BBMD as a valid shareholder of the Company, and the ownership, operation, management and control of the Company, all of which has been the subject of various pending lawsuits. In addition to other provisions discussed herein, the parties agreed to dismiss such pending lawsuits and exchanged customary mutual releases.

 

Under the terms of the SAA, the Disputed Stock in its entirety will be converted into 25.0 million shares of the Company’s Class A Common Stock (the “Converted Stock”). In addition, under the terms of the SAA, all 25.0 million shares of the Converted Stock will be placed in escrow with the Company’s stock transfer agent, VStock Transfer, LLC, and to be governed by a Securities Escrow And Disposition Agreement dated as of July 29, 2020.

 

Upon completion of the foregoing actions, MLM will purchase from BBMD 20.0 million shares of the Converted Stock at the purchase price of $0.0525 per share, and BBMD will remain the holder of 5.0 million shares of the Converted Stock.

 

Upon completion of the actions discussed in the preceding paragraph, the Company will buy-back from MLM 17.5 million shares of the Converted Stock at the purchase price of $0.0514 per share, and MLM will remain the holder of 2.5 million shares of the Converted Stock. Upon completion of this buy-back transaction, the Company presently intends to retire the 17.5 million shares repurchased.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.20.2
Stockholders' Equity (Deficit)
3 Months Ended
Jul. 31, 2020
Equity [Abstract]  
Stockholders' Equity (Deficit)

NOTE 14 - STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock

 

During the three months ended July 31, 2020, the Company issued 30,000,000 shares of its class A common stock and a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s class A common stock, at the exercise price of $0.20 per share, to DSS in exchange for $3.0 million in cash (please see Note 12 above). In addition, the Company issued 10,000,000 shares of its class A common stock to Robert Oblon, a co-founder of the Company, pursuant to the Multi-Party Settlement Agreement discussed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

 

As of July 31, 2020, 166,072,386 shares of our class A common stock and 10,000,000 shares of our Class B common stock remained issued and outstanding.

 

Stock Warrants

 

The following table summarizes the activity relating to the Company’s warrants during the three months ended July 31, 2020:

 

    Number of Warrants     Weighted Average Exercise Price     Weighted Average Remaining Term  
Outstanding at April 30, 2020     26,883,933     $ 0.04       4.2  
Granted     10,000,000     $ 0.20       3.0  
Exercised     -                  
Outstanding at July 31, 2020     36,883,933     $ 0.08       3.7  

 

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

 

Warrants Outstanding at July 31, 2020  
Warrants Outstanding     Warrants Exercisable  
      Weighted
Average Remaining
    Weighted
Average
          Weighted
Average
 
Number of
Shares
    Contractual
life (in years)
    Exercise
Price
    Number of
Shares
    Exercise
Price
 
  22,000,000       4.5     $ 0.0001       22,000,000     $ 0.0001  
  10,000,000       3.0     $ 0.20       10,000,000     $ 0.20  
  2,270,600       1.1     $ 0.25       2,270,600     $ 0.25  
  2,180,000       3.3     $ 0.10       2,180,000     $ 0.10  
  333,333       2.7     $ 0.15       333,333     $ 0.15  
  100,000       1.7     $ 3.00       100,000     $ 3.00  

 

During the three months ended July 31, 2020, the Company issued a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s Class A Common Stock at an exercise price of $0.20 per share to DSS. Please see Note 13 above for more details.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies
3 Months Ended
Jul. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 15 - COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

The Company from time to time is involved in various claims and lawsuits incidental to the conduct of its business in the ordinary course. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

 

Acquisition-Related Contingencies

 

In October 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 Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 2,500,000 shares of our Series A Preferred Stock if/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. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

In October 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 Preferred Stock. Under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 2,500,000 shares of the Company’s Series A Preferred Stock in/when both of the following conditions have been met: (a) one year has passed from the Closing 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. In accordance with GAAP, the Company has not recorded a liability in connection with this contingency.

 

Legal Proceedings – Other Matters

 

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.

 

(a) Cause No. 416-02428-2019; Sharing Services Global Corporation, f/k/a Sharing Services, Inc. v. XIP Technologies, LLC, pending in the 416th Judicial District of Collin County, Texas. On May 6, 2019, the Company filed a lawsuit against XIP Technologies, LLC to recover money held by XIP Technologies, LLC that was owed to the Company. The Company obtained a writ of garnishment against a third-party holding funds for XIP Technologies, LLC. XIP Technologies, LLC has filed an answer denying the claims asserted against it. On March 2, 2020, a settlement was reached in this matter and XIP Technologies, LLC is to make twelve (12) monthly installment payments to the Company. Upon receipt of final payment of the amounts due to the Company under the Settlement Agreement, the lawsuit will be dismissed.

 

(b) Cause No. 296-03589-2019; Pruvit Ventures, Inc. v. Elevacity, LLC, pending in the 296th Judicial District of Collin County, Texas. On July 3, 2019, Pruvit Ventures, Inc. filed a lawsuit against Elevacity, alleging a breach of contract claim. Elevacity has denied the claim of breach contract.

 

(c) Case No. A-19-802861-B; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Alchemist Holdings, LLC and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On October 1, 2019, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Alchemist Holdings, LLC, and the key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning an amended certificate of designation filed by the Company, and for allegations of self-dealing by the two shareholders. An entry of default was made against two of the defendant shareholders as well as Mr. Jones, as a key principal. This matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claim.

 

(d) Case No. A-20-811265-C; Sharing Services Global Corporation v. Bear Bull Market Dividends, Inc., Research and Referral, BZ and Kenyatto M. Jones, pending in the District Court of Clark County, Nevada. On February 27, 2020, the Company filed suit against two shareholders, Bear Bull Market Dividends, Inc. and Research and Referral BZ, as well as a key principal of Bear Bull Market Dividends, Inc., Kenyatto M. Jones, concerning breach of contract, fraud, violations of state securities laws and alter ego relating to a stock exchange/transfer transaction, involving the Company’s stock. An entry of default was made against the two shareholders and key principal Jones and the matter remains pending, but upon the fulfillment of all requirements of the settlement agreement described in Note 13 the Company plans to dismiss its claims against Jones.

 

(e) Cause No. 366-04941-2019; Sharing Services Global Corporation, Elepreneurs U.S., LLC and Elevacity, LLC v. Robert Oblon, filed in the 366th Judicial District of Collin County, Texas. On August 30, 2019, the Company and its affiliated entities filed a lawsuit against Robert Oblon for breach of contract, tortious interference with business relationships, and misappropriation of trade secrets, and sought injunctive relief. A settlement was reached in this matter and the lawsuit was dismissed on March 2, 2020. As part of the settlement, the Company agreed to pay amounts that were due to Oblon under a prior settlement agreement in the approximate amount of $2,000,000, to be paid in installments through June 1, 2020. The Company completed its final payment obligation in accordance with the settlement agreement.

 

(f) Cause No. DC-19-20587; Sharing Services Global Corporation f/k/a Sharing Services, Inc. v. Amber-Lynn Beers-Hutchinson, n/k/a Amber-Lynn Cantrell, pending in the 192nd Judicial District of Dallas County, Texas. On December 30, 2019, the Company filed a lawsuit against a former contractor for breach of contract. The defendant in this matter filed a counterclaim, asserting defamatory conduct engaged in by the Company. This matter remains pending.

 

(g) On December 4, 2019, Entrepreneur Media, Inc. (“EMI”) filed a Notice of Opposition in response to the “Elepreneurs” trademark application filed by SHRG IP Holdings, LLC, a wholly owned subsidiary of the Company. This opposition proceeding is now before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office (“TTAB”). On April 13, 2020, SHRG IP Holdings, LLC filed an answer to the Notice of Opposition. Legal counsel for the parties held a mandatary discovery conference on May 12, 2020. This matter remains pending.

 

(h) On May 20, 2020, the Company (through its legal counsel, Jones, Davis & Jackson, PC) received a demand letter from legal counsel representing a former employee of the Company. The Company has denied the claim of this at-will employee and this matter remains pending.

 

(i) Company subsidiaries Elevacity Holdings, LLC, Elevacity U.S., LLC, Elepreneurs Holdings, LLC and Elepreneurs U.S., LLC (collectively, the “Subsidiaries”) received notice of a dispute with a former officer of such Subsidiaries regarding severance payments allegedly due under an executive employment agreement. The Company and its Subsidiaries have disputed this matter, and the issues between the parties remain outstanding.

 

(j) In March 2019, the Company engaged in preliminary discussions with various independent contractor distributors of the Subsidiaries regarding a previously reported dispute concerning the issuance of stock warrants based on the satisfaction of certain individual sales production metrics. The Company previously recorded a liability of approximately $1.3 million for the projected resolution of this matter, which remains pending.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events
3 Months Ended
Jul. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

NOTE 16 - SUBSEQUENT EVENTS

 

Pursuant to the Settlement Accommodation Agreement [Including Stock Disposition And Release Provisions] between the Company, Bear Bull Market Dividends, Inc. (“BBMD”), a purported shareholder of the Company, Kenyatto Montez Jones, and MLM Mafia, Inc. (“MLM”) discussed in Note 13 above, the Company repurchased 17,500,000 shares of its Class A Common Stock in exchange for $899,500 in cash. After completion of this transaction, BBMD remains the holder of 5,000,000 shares of Company’s Class A Common Stock and MLM remains the holder of 2,500,000 shares of Company’s Class A Common Stock. The Company recognized the repurchased shares as treasury stock in accordance with GAAP.

 

On September 11, 2020, the Company and Alchemist Holdings, LLC (“Alchemist”), a major shareholder of the Company, entered into an agreement pursuant to which Alchemist will convert 7,500,000 shares of the Company’s Series B preferred stock and 7,500,000 shares of the Company’s Class B common stock into 15,000,000 shares of the Company’s Class A common stock. After giving effect to this stock conversion, Alchemist will hold 65,000,000 shares of the Company’s Class A common stock. All the shares held by Alchemist continue to be subject to a series of agreements favorable to the Company regarding the voting of those shares of stock and the prohibition of such shareholder of taking actions which are adverse to the Company.

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.20.2
Significant Accounting Policies (Policies)
3 Months Ended
Jul. 31, 2020
Accounting Policies [Abstract]  
Reclassifications

Reclassifications

 

Certain reclassifications have been made to the prior year data to conform with the current period’s presentation.

Comprehensive Income

Comprehensive Income

 

For the fiscal periods included in this Quarterly Report, the only component of the Company’s comprehensive income is the Company’s net earnings. Accordingly, the Company does not present a consolidated statement of comprehensive income.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

 

The preparation of financial statements in accordance with GAAP requires the use of judgment and requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures about contingent assets and liabilities, if any. Matters that require the use of estimates and assumptions include: the recoverability of accounts receivable, the valuation of inventory, the useful lives of fixed assets, the assessment of long-lived assets for impairment, the nature and timing of satisfaction of multiple performance obligations resulting from contracts with customers, allocation of the transaction price to multiple performance obligations in a sales transaction, the measurement and recognition of right-of-use assets and related lease liabilities, the valuation of share-based compensation awards, the measurement and recognition of uncertain tax positions, and the valuation of loss contingencies, if any. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our consolidated financial statements are reasonable.

 

However, we believe that the public’s fear of exposure to and/or the actual impact of the COVID-19 virus, as well as actions taken to mitigate the spread of the virus, have had and continue to have a materially adverse impact on the economy of the U. S. and Canada, and has resulted in a significant number of workers becoming unemployed in both countries. Consumer demand for discretionary products such as ours is sensitive to downturns in the economy, increases in unemployment or decreases in perceived employment security. The full impact on our business of changes in consumer demand resulting from the current economic downturn, widespread unemployment, reduced consumer confidence, and public fear of exposure to the virus cannot reasonably be determined, but the impact may be significant and protracted. Accordingly, it is possible that estimates made in the Company’s consolidated financial statements have been, or will be, materially impacted as a result of these uncertainties. This may include estimates regarding losses on inventory, impairment losses related to long-lived assets, the nature and timing of satisfaction of performance obligations resulting from contracts with customers, and the valuation of loss contingencies.

Revenue Recognition

Revenue Recognition

 

The Company derives revenue only from the sale of its products and services and recognizes revenue net of amounts due to taxing authorities (such as local and state sales tax). Our customers place sales orders online and through our “back-office” operations, which creates a contract and establishes the transaction price. The Company recognizes revenue when (or as) it transfers control of the promised goods and services to the customer. With respect to products sold, our performance obligation is satisfied upon receipt of the products by the customer. With respect to subscription-based revenue, including Elepreneurs membership fees, our performance obligation is satisfied over time (up to one year). The timing of our revenue recognition may differ from the time when we invoice and/or collect payment. The Company has elected to treat shipping and handling costs as an activity to fulfill its performance obligations, rather than a separate performance obligation.

 

Deferred sales revenue associated with product invoiced but not received by customers at the balance sheet date was $1.1 million and $2.7 million as of July 31, 2020 and April 30, 2020, respectively. In addition, as of July 31, 2020 and April 30, 2020, deferred sales revenue associated with our performance obligations for services offered on a subscription basis was $341,102 and $433,386, and deferred sales revenue associated with our performance obligations for customers’ right of return was $200,588 and $263,117, respectively. Deferred sales revenue is expected to be recognized over one year.

 

During the fiscal quarter ended July 31, 2020, no individual customer, or related group of customers, represents 10% or more of our consolidated net sales, and approximately 46% of our consolidated net sales were to recurring customers (which we refer to as “SmartShip” sales), approximately 27% were to new customers and approximately 27% were to our independent distributors. During the fiscal quarter ended July 31, 2020 and 2019, approximately 93% and 96%, respectively, of our consolidated net sales are to our customers and/or independent distributors located in the United States.

 

During the fiscal quarter ended July 31, 2020, approximately 98% of our consolidated net sales are from our health and wellness products (including approximately 6% from the sale of coffee and coffee-related products, 57% from the sale of other Nutraceutical products, and approximately 35% from the sale of all other health and wellness products). During the three months ended July 31, 2019, approximately 97% of our consolidated net sales are from the sale of our Elevate product line (including 21% from the sales of coffee and coffee-related products, 50% from the sale of other Nutraceutical products, and approximately 26% from the sale of all other health and wellness products).

 

During the fiscal quarter ended July 31, 2020 and 2019, product purchases from one supplier accounted for approximately 98% and 96%, respectively, of our total product purchases.

Sales Commission

Sales Commission

 

The Company recognizes sales commission expense, when incurred, in accordance with GAAP. During the three months ended July 31, 2020 and 2019, sales commission expense was $9.4 million and $15.4 million, respectively.

 

At July 31, 2020 and April 30, 2020, accrued sales commission payable was $6,786,001 and $7,983,536, respectively, and included $1,290,477, at both dates, in estimated sales commission payable with stock warrants in connection with the 2019 Sales-related Warrants.

Recently Issued Accounting Standards - Not Yet Adopted

Recently Issued Accounting Standards - Not Yet Adopted

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments. Among other things, under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion features not required to be accounted for as derivatives., or that do not result in substantial premiums accounted for as paid-in capital. ASU 2020-06 also eliminates the use of the treasury stock method when calculating the impact of convertible instruments on diluted Earnings per Share. For the Company, the provisions of ASU 2020-06 are effective for its fiscal quarter beginning on May 1, 2024. Early adoption is permitted, subject to certain limitations.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12, among other things, (a) eliminates the exception to the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income (or a gain) from other items, (b) eliminates the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the year, (c) requires than an entity recognize a franchise tax (or a similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, and (d) requires than an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation for the interim period that includes the enactment date. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted but must involve the adoption of all amendments contained in ASU 2019-12 concurrently. The Company has not adopted ASU 2019-12 and is evaluating the potential impact of adoption on its consolidated financial statements.

 

In November 2019, the FASB issued ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-based Consideration Payable to a Customer (“ASU 2019-08”). ASU 2019-08 requires that an entity apply the guidance in ASC 718 to measure and classify share-based payment awards granted to a customer. Under ASC 718, among other things, share-based awards to non-employees must generally be measured at the grant-date fair value of the equity instrument. For entities that have adopted the provisions of ASU 2018-07, Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-based Payment Accounting, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As discussed above, the Company has adopted the provisions of ASU 2018-07. The Company has not adopted ASU 2019-08 but, based on its preliminary assessment, does not believe the impact of adoption will be material on its consolidated financial statements.

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.20.2
Fair Value Measurements of Financial Instruments (Tables)
3 Months Ended
Jul. 31, 2020
Fair Value Disclosures [Abstract]  
Summary of Financial Assets and Liabilities

Consistent with the valuation hierarchy contained in ASC Topic 820, we categorized certain of our financial assets and liabilities as follows:

 

    July 31, 2020  
    Total     Level 1     Level 2     Level 3  
Assets                                
Notes receivable   $ 69,349     $ -     $ -     $ 69,349  
Total assets   $ 69,349     $ -     $ -     $ 69,349  
Liabilities                                
Note Payable   $ 1,040,400     $ -     $ -     $ 1,040,400  
Convertible notes payable     120,867       -       -       120,867  
Total liabilities   $ 1,161,267     $ -     $ -     $ 1,161,267  

 

    April 30, 2020  
    Total     Level 1     Level 2     Level 3  
                         
Assets                                
Notes receivable   $ 118,047     $ -     $ -     $ 118,047  
Investments in unconsolidated entities     20,000       -       -       20,000  
Total assets   $ 138,047     $ -     $ -     $ 138,047  
Liabilities                                
Convertible notes payable   $ 115,745     $ -     $ -     $ 115,745  
Total liabilities   $ 115,745     $ -     $ -     $ 115,745
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.20.2
Earnings (Loss) Per Share (Tables)
3 Months Ended
Jul. 31, 2020
Loss per share:  
Schedule of Computations of Basic and Diluted Earnings Per Share

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

 

    Three Months Ended July 31,  
    2020     2019  
Net loss   $ (1,093,377 )   $ (854,506 )
Weighted average basic shares     140,202,821       123,869,895  
Weighted average diluted shares     140,202,821       123,869,895  
Loss per share:                
Basic   $ (0.01 )   $ (0.01 )
Diluted   $ (0.01 )   $ (0.01 )
Summary of Dilutive or Potentially Dilutive Instruments Outstanding

The following potentially dilutive securities and instruments were outstanding during the three months ended July 31, 2020 and 2019 but excluded from the calculation of loss per share because their impact would be anti-dilutive:

 

    2020     2019  
Convertible notes     10,406,100       60,231,439  
Convertible preferred stock     44,133,288       32,628,750  
Stock warrants     27,695,037       31,899,133  
Total incremental shares     82,234,425       124,759,322
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.20.2
Other Current Assets (Tables)
3 Months Ended
Jul. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of Other Current Assets

Other current assets consist of the following:

 

    July 31, 2020     April 30, 2020  
Prepaid expenses, including $1,077,040 for inventory purchases in July   $ 1,342,552     $ 404,089  
Right to recover asset     57,523       76,103  
Employee advances and other     349,616       554,787  
    $ 1,749,691     $ 1,034,979
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.20.2
Property and Equipment (Tables)
3 Months Ended
Jul. 31, 2020
Property, Plant and Equipment [Abstract]  
Summary of Property and Equipment

Property and equipment consist of the following:

 

    July 31, 2020     April 30, 2020  
Furniture and fixtures   $ 224,239     $ 224,239  
Computer equipment and software     158,501       155,493  
Leasehold improvements     106,877       106,877  
Office equipment     31,652       31,652  
Total property and equipment     521,269       518,261  
Accumulated depreciation and amortization     (262,094 )     (219,878 )
Property and equipment, net   $ 259,175     $ 298,383
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.20.2
Accrued and Other Current Liabilities (Tables)
3 Months Ended
Jul. 31, 2020
Payables and Accruals [Abstract]  
Summary of Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following:

 

    July 31, 2020     April 30, 2020  
Payroll and employee benefits   $ 1,275,458     $ 1,199,950  
Lease liability, current portion     481,741       476,950  
Accrued interest payable     19,155       15,419  
Other operational accruals     268,517       425,166  
    $ 2,044,871     $ 2,117,485
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes Payable (Tables)
3 Months Ended
Jul. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Convertible Notes Payable

Convertible notes payable consists of the following:

 

        Conversion Price        
Issuance Date   Maturity Date   (per share)     July 31, 2020     April 30, 2020  
October 2017   October 2022   $ 0.15     $ 50,000     $ 50,000  
April 2018   April 2021   $ 0.01       100,000       100,000  
Total convertible notes payable       150,000       150,000  
Less: unamortized debt discount and deferred financing fees       (29,133 )     (34,255 )
        120,867       115,745  
Less: current portion of convertible notes payable       92,759       90,157  
Long-term convertible notes payable     $ 28,108     $ 25,588
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.20.2
Leases (Tables)
3 Months Ended
Jul. 31, 2020
Leases [Abstract]  
Schedule of Operating Lease Assets and Liabilities

The following information pertains to the Company’s leases as of the balance sheet dates indicated:

 

Assets   Classification   July 31, 2020     April 30, 2020  
Operating leases   Right-of-use assets, net   $ 591,197     $ 800,381  
Total leased assets       $ 591,197     $ 800,381  
                     
Liabilities                    
Operating leases   Accrued and other current liabilities   $ 481,741     $ 476,950  
Operating leases   Lease liability, long-term     131,610       343,948  
Total lease liability       $ 613,351     $ 820,898
Schedule of Operating Lease Costs

The following information pertains to the Company’s leases for the periods indicated:

 

        Three Months Ended July 31,  
Lease cost   Classification   2020     2019  
Operating lease cost   General and administrative expenses   $ 140,223     $ 178,035  
Operating lease cost   Depreciation and amortization     -       -  
Operating lease cost   Interest expense, net     -       -  
Total lease cost       $ 140,223     $ 178,035
Schedule of Operating Lease Liability Payable

The Company’s lease liability is payable as follows:

 

Twelve months ending July 31,      
2021   $ 481,741  
2022     127,789  
2023     3,821  
2024-2025     -  
Thereafter     -  
Total lease liability   $ 613,351
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes (Tables)
3 Months Ended
Jul. 31, 2020
Income Tax Disclosure [Abstract]  
Schedule of Income Tax Rate Reconciliation Rate

For the three months ended July 31, 2020, our income tax rate reconciliation is as follows:

 

Federal statutory rate     21.0 %
State income taxes and franchise tax     (9.6 )%
Stock-based compensation and other     0.1 %
Effective tax rate     11.5 %
Schedule of Provision for Income Taxes

For the three months ended July 31, 2020, our consolidated provision for (benefit from) income taxes is as follows:

 

Current:        
Federal   $ 308,300  
State and local     117,986  
Total current     426,286  
Deferred:        
Federal     (567,777 )
State and local     -  
Total deferred     (567,777 )
Total consolidated income tax benefit   $ (141,491 )
Schedule of Deferred Tax Asset Liability

As of July 31, 2020, our deferred tax asset (liability) is as follows:

 

Gross deferred tax asset:        
Share-based compensation   $ 1,654,047  
Accruals and reserves not currently deductible     315,953  
Total deferred tax assets     1,970,000  
Total deferred tax liability     -  
Total consolidated deferred tax assets, net   $ 1,970,000
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.20.2
Stockholders' Equity (Deficit) (Tables)
3 Months Ended
Jul. 31, 2020
Equity [Abstract]  
Schedule of Warrant Activity

The following table summarizes the activity relating to the Company’s warrants during the three months ended July 31, 2020:

 

    Number of Warrants     Weighted Average Exercise Price     Weighted Average Remaining Term  
Outstanding at April 30, 2020     26,883,933     $ 0.04       4.2  
Granted     10,000,000     $ 0.20       3.0  
Exercised     -                  
Outstanding at July 31, 2020     36,883,933     $ 0.08       3.7
Summary of Warrant Outstanding and Exercisable Warrants

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

 

Warrants Outstanding at July 31, 2020  
Warrants Outstanding     Warrants Exercisable  
      Weighted
Average Remaining
    Weighted
Average
          Weighted
Average
 
Number of
Shares
    Contractual
life (in years)
    Exercise
Price
    Number of
Shares
    Exercise
Price
 
  22,000,000       4.5     $ 0.0001       22,000,000     $ 0.0001  
  10,000,000       3.0     $ 0.20       10,000,000     $ 0.20  
  2,270,600       1.1     $ 0.25       2,270,600     $ 0.25  
  2,180,000       3.3     $ 0.10       2,180,000     $ 0.10  
  333,333       2.7     $ 0.15       333,333     $ 0.15  
  100,000       1.7     $ 3.00       100,000     $ 3.00  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.20.2
Significant Accounting Policies (Details Narrative)
3 Months Ended
Jul. 31, 2020
USD ($)
Supplier
Jul. 31, 2019
USD ($)
Supplier
Apr. 30, 2020
USD ($)
Deferred sales revenue $ 1,100,000   $ 2,700,000
Sales commission expense 9,400,000 $ 15,400,000  
Sales commission payable 6,786,001   7,983,536
Estimated Sales Commission Payable [Member]      
Sales commission payable $ 1,290,477   1,290,477
Sales Revenue, Net [Member] | Coffee and Coffee Related Products [Member]      
Concentration risk, percentage 6.00% 21.00%  
Sales Revenue, Net [Member] | Other Nutraceutical Products [Member]      
Concentration risk, percentage 57.00% 50.00%  
Sales Revenue, Net [Member] | Other Health and Wellness Products [Member]      
Concentration risk, percentage 35.00% 26.00%  
Sales Revenue, Net [Member] | No Individual Customer [Member]      
Concentration risk, percentage 10.00%    
Sales Revenue, Net [Member] | Recurring Customers [Member]      
Concentration risk, percentage 46.00%    
Sales Revenue, Net [Member] | New Customer [Member]      
Concentration risk, percentage 27.00%    
Sales Revenue, Net [Member] | Independent Distributors [Member]      
Concentration risk, percentage 27.00%    
Sales Revenue, Net [Member] | Elevate Product Line [Member]      
Concentration risk, percentage 98.00% 97.00%  
Purchases [Member] | One Supplier [Member]      
Concentration risk, percentage 98.00% 96.00%  
Number of suppliers | Supplier 1 1  
Services Offered on Subscription Basis [Member]      
Deferred sales revenue $ 341,102   433,386
Customers Right of Return [Member]      
Deferred sales revenue $ 200,588   $ 263,117
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.20.2
Fair Value Measurements of Financial Instruments - Summary of Financial Assets and Liabilities (Details) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Notes receivable $ 69,349 $ 118,047
Investments in unconsolidated entities   20,000
Total assets 69,349 138,047
Note payable 1,040,400  
Convertible notes payable 120,867 115,745
Total liabilities 1,161,267 115,745
Level 1 [Member]    
Notes receivable
Investments in unconsolidated entities  
Total assets
Note payable  
Convertible notes payable
Total liabilities
Level 2 [Member]    
Notes receivable
Investments in unconsolidated entities  
Total assets
Note payable  
Convertible notes payable
Total liabilities
Level 3 [Member]    
Notes receivable 69,349 118,047
Investments in unconsolidated entities   20,000
Total assets 69,349 138,047
Note payable 1,040,400
Convertible notes payable 120,867 115,745
Total liabilities $ 1,161,267 $ 115,745
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.20.2
Earnings (Loss) Per Share - Schedule of Computations of Basic and Diluted Earnings Per Share (Details) - USD ($)
3 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Loss per share:    
Net loss $ (1,093,377) $ (854,506)
Weighted average basic shares 140,202,821 123,869,895
Weighted average diluted shares 140,202,821 123,869,895
Loss per share: Basic $ (0.01) $ (0.01)
Loss per share: Diluted $ (0.01) $ (0.01)
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.20.2
Earnings (Loss) Per Share - Summary of Dilutive or Potentially Dilutive Instruments Outstanding (Details) - shares
3 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Total incremental shares 82,234,425 124,759,322
Convertible Notes [Member]    
Total incremental shares 10,406,100 60,231,439
Convertible Preferred Stock [Member]    
Total incremental shares 44,133,288 32,628,750
Stock Warrants [Member]    
Total incremental shares 27,695,037 31,899,133
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.20.2
Notes Receivable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Jan. 31, 2020
Jul. 31, 2020
Jul. 31, 2019
Apr. 30, 2020
Apr. 30, 2019
Proceeds from notes receivable   $ 48,698    
Impairment loss $ 46,404        
Promissory Note One [Member]          
Principal of notes receivable   19,349   $ 58,047  
Promissory Note Two [Member]          
Principal of notes receivable   $ 50,000   60,000  
Merchant Processors [Member]          
Proceeds from notes receivable       $ 58,047 $ 106,404
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.20.2
Other Current Assets - Schedule of Other Current Assets (Details) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Prepaid expenses, including $1,077,040 for inventory purchases in July $ 1,342,552 $ 404,089
Right to recover asset 57,523 76,103
Employee advances and other 349,616 554,787
Other current assets $ 1,749,691 $ 1,034,979
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.20.2
Other Current Assets - Schedule of Other Current Assets (Details) (Parenthetical)
1 Months Ended
Jul. 31, 2020
USD ($)
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Prepaid inventory purchases $ 1,077,040
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.20.2
Property and Equipment (Details Narrative) - USD ($)
3 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Property, Plant and Equipment [Abstract]    
Depreciation and amortization expense $ 42,217 $ 30,281
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.20.2
Property and Equipment - Summary of Property and Equipment (Details) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Property, Plant and Equipment [Abstract]    
Furniture and fixtures $ 224,239 $ 224,239
Computer equipment and software 158,501 155,493
Leasehold improvements 106,877 106,877
Office equipment 31,652 31,652
Total property and equipment 521,269 518,261
Accumulated depreciation and amortization (262,094) (219,878)
Property and equipment, net $ 259,175 $ 298,383
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.20.2
Note Payable (Details Narrative) - USD ($)
1 Months Ended
May 31, 2020
Jul. 31, 2020
Apr. 30, 2020
Note payable principal amount   $ 1,040,400
Accrued unpaid interest   $ 2,223  
Commercial Bank [Member] | PPP Loan [Member]      
Proceeds from loan $ 1,040,400    
Debt instrument, maturity date May 13, 2022    
Debt instrument, interest rate 1.00%    
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.20.2
Accrued and Other Current Liabilities - Summary of Accrued and Other Current Liabilities (Details) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Payables and Accruals [Abstract]    
Payroll and employee benefits $ 1,275,458 $ 1,199,950
Lease liability, current portion 481,741 476,950
Accrued interest payable 19,155 15,419
Other operational accruals 268,517 425,166
Accrued and other current liabilities $ 2,044,871 $ 2,117,485
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes Payable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Dec. 31, 2019
Jul. 31, 2020
Jul. 31, 2019
Interest expense   $ 9,127 $ 325,949
Convertible Notes [Member]      
Convertible notes, annual interest rate   12.00%  
Interest expense   $ 1,512 27,567
Amortization expense related to debt   $ 2,519 $ 2,519
April 2018 [Member]      
Maturity date description Extended the maturity date of the April 2018 Note to April 2021.    
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.20.2
Convertible Notes Payable - Schedule of Convertible Notes Payable (Details) - USD ($)
3 Months Ended 12 Months Ended
Jul. 31, 2020
Apr. 30, 2020
Total convertible notes payable $ 150,000 $ 150,000
Less: unamortized debt discount and deferred financing fees (29,133) (34,255)
Convertible notes payable, net 120,867 115,745
Less: current portion of convertible notes payable 92,759 90,157
Long-term convertible notes payable $ 28,108 $ 25,588
Maturity One [Member]    
Issuance Date October 2017 October 2017
Maturity Date October 2022 October 2022
Conversion Price (per share) $ 0.15 $ 0.15
Total convertible notes payable $ 50,000 $ 50,000
Maturity Two [Member]    
Issuance Date April 2018 April 2018
Maturity Date April 2021 April 2021
Conversion Price (per share) $ 0.01 $ 0.01
Total convertible notes payable $ 100,000 $ 100,000
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.20.2
Leases - Schedule of Operating Lease Assets and Liabilities (Details) - USD ($)
Jul. 31, 2020
Apr. 30, 2020
Operating leases, Right-of-use assets, net $ 591,197 $ 800,381
Operating leases, Accrued and other current liabilities 481,741 476,950
Operating leases, Lease liability, long-term 131,610 343,948
Lease Liability [Member]    
Operating leases, Right-of-use assets, net 591,197 800,381
Total leased assets 591,197 800,381
Operating leases, Accrued and other current liabilities 481,741 476,950
Operating leases, Lease liability, long-term 131,610 343,948
Total lease liability $ 613,351 $ 820,898
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.20.2
Leases - Schedule of Operating Lease Costs (Details) - USD ($)
3 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Total lease cost $ 140,223 $ 178,035
General and Administrative Expenses [Member]    
Total lease cost 140,223 178,035
Depreciation and Amortization [Member]    
Total lease cost
Interest Expense, Net [Member]    
Total lease cost
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.20.2
Leases - Schedule of Operating Lease Liability Payable (Details)
Jul. 31, 2020
USD ($)
Leases [Abstract]  
2021 $ 481,741
2022 127,789
2023 3,821
2024-2025
Thereafter
Total lease liability $ 613,351
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Apr. 30, 2020
Apr. 30, 2019
Income Tax Disclosure [Abstract]        
Operating earnings     $ 9,700,000 $ 1,000,000
Current provision for federal income taxes $ 308,300      
Provision for state and local income taxes 117,986      
Deferred income tax benefits (567,777) 1,600,000  
Current provision for income taxes $ 426,286   $ 2,100,000  
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes - Schedule of Income tax Rate Reconciliation Rate (Details)
3 Months Ended
Jul. 31, 2020
Income Tax Disclosure [Abstract]  
Federal statutory rate 21.00%
State income taxes and franchise tax (9.60%)
Stock-based compensation and other 0.10%
Effective tax rate 11.50%
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($)
3 Months Ended 12 Months Ended
Jul. 31, 2020
Jul. 31, 2019
Apr. 30, 2020
Income Tax Disclosure [Abstract]      
Current, Federal $ 308,300    
Current, State and local 117,986    
Total current 426,286   $ 2,100,000
Deferred, Federal (567,777)    
Deferred, State and local    
Total deferred (567,777) $ 1,600,000
Total consolidated income tax benefit $ (141,491) $ 300,000  
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.20.2
Income Taxes - Schedule of Deferred Tax Asset Liability (Details)
Jul. 31, 2020
USD ($)
Income Tax Disclosure [Abstract]  
Share-based compensation $ 1,654,047
Accruals and reserves not currently deductible 315,953
Total deferred tax assets 1,970,000
Total deferred tax liability
Total consolidated deferred tax assets, net $ 1,970,000
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.20.2
Related Party Transactions (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jul. 30, 2020
Jul. 23, 2020
Jul. 22, 2020
Oct. 31, 2017
Jul. 31, 2020
Stock Disposition and Release Provisions [Member]          
Conversion of common stock shares converted     25,000,000    
HWH International, Inc [Member]          
Debt instrument, face amount       $ 50,000  
Maturity date       October 2022  
Bear Bull Market Dividends, Inc. [Member]          
Conversion of common stock shares converted     20,000,000    
Conversion purchase price per share     $ 0.0525    
Remaining shares of converted shares     5,000,000    
MLM Mafia, Inc [Member]          
Conversion purchase price per share     $ 0.0514    
Remaining shares of converted shares     2,500,000    
Number of shares purchased     17,500,000    
Number of intends to retire of shares repurchased     17,500,000    
Class A Common Stock [Member]          
Number of shares issued         30,000,000
Class A Common Stock [Member] | Stock Disposition and Release Provisions [Member]          
Conversion of common stock shares converted     25,000,000    
Decentralized Sharing Systems, Inc [Member] | Class A Common Stock [Member]          
Warrants to purchase common stock 10,000,000        
Number of shares issued 30,000,000        
Number of common stock were owned 62,400,000        
Number of shares issuable upon exercise of warrants 10,000,000        
Deemed dividend $ 2,400,000        
Stock Purchase and Share Subscription Agreement [Member] | Class A Common Stock [Member]          
Number of shares issued   30,000,000      
Stock Purchase and Share Subscription Agreement [Member] | Mr. Chan [Member]          
Investment amount     $ 3,000,000    
Stock Purchase and Share Subscription Agreement [Member] | Mr. Chan [Member] | Class A Common Stock [Member]          
Number of common stock exchanged     30,000,000    
Warrants to purchase common stock     10,000,000    
Exercise price of warrants     $ 0.20    
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.20.2
Stockholders' Equity (Deficit) (Details Narrative) - USD ($)
3 Months Ended
Jul. 31, 2020
Apr. 30, 2020
Value of shares issued during period $ 3,000,000  
Decentralized Sharing Systems, Inc [Member]    
Value of shares issued during period $ 3,000,000  
Warrant [Member] | Decentralized Sharing Systems, Inc [Member]    
Warrants to purchase common stock 10,000,000  
Warrants exercise price $ 0.20  
Class A Common Stock [Member]    
Number of shares issued during period, shares 30,000,000  
Common stock, shares issued 166,072,386 126,072,386
Common stock, shares outstanding 166,072,386 126,072,386
Class A Common Stock [Member] | Robert Oblon [Member]    
Number of shares issued during period, shares 10,000,000  
Class A Common Stock [Member] | Warrant [Member]    
Warrants to purchase common stock 10,000,000  
Warrants exercise price $ 0.20  
Class B Common Stock [Member]    
Common stock, shares issued 10,000,000 10,000,000
Common stock, shares outstanding 10,000,000 10,000,000
XML 66 R55.htm IDEA: XBRL DOCUMENT v3.20.2
Stockholders' Equity (Deficit) - Schedule of Warrant Activity (Details) - Warrant [Member]
3 Months Ended
Jul. 31, 2020
$ / shares
shares
Number of Warrants Outstanding, Beginning of Period | shares 26,883,933
Number of Warrants, Granted | shares 10,000,000
Number of Warrants, Exercised | shares
Number of Warrants Outstanding, End of Period | shares 36,883,933
Weighted Average Exercise Price of Warrants Outstanding, Beginning of Period | $ / shares $ 0.04
Weighted Average Exercise Price, Granted | $ / shares 0.20
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price of Warrants Outstanding, End of Period | $ / shares $ 0.08
Weighted Average Remaining Term, Beginning of Period 4 years 2 months 12 days
Weighted Average Remaining Term, Granted 3 years
Weighted Average Remaining Term, End of Period 3 years 8 months 12 days
XML 67 R56.htm IDEA: XBRL DOCUMENT v3.20.2
Stockholders' Equity (Deficit) - Summary of Warrant Outstanding and Exercisable Warrants (Details)
3 Months Ended
Jul. 31, 2020
$ / shares
shares
Warrant One [Member]  
Number of Warrants Outstanding | shares 22,000,000
Weighted Average Remaining Contractual life (in years) 4 years 6 months
Weighted Average Exercise Price, Outstanding | $ / shares $ 0.0001
Number of Warrants Exercisable | shares 22,000,000
Weighted Average Exercise Price, Exercisable | $ / shares $ 0.0001
Warrant Two [Member]  
Number of Warrants Outstanding | shares 10,000,000
Weighted Average Remaining Contractual life (in years) 3 years
Weighted Average Exercise Price, Outstanding | $ / shares $ 0.20
Number of Warrants Exercisable | shares 10,000,000
Weighted Average Exercise Price, Exercisable | $ / shares $ 0.20
Warrant Three [Member]  
Number of Warrants Outstanding | shares 2,270,600
Weighted Average Remaining Contractual life (in years) 1 year 1 month 6 days
Weighted Average Exercise Price, Outstanding | $ / shares $ 0.25
Number of Warrants Exercisable | shares 2,270,600
Weighted Average Exercise Price, Exercisable | $ / shares $ 0.25
Warrant Four [Member]  
Number of Warrants Outstanding | shares 2,180,000
Weighted Average Remaining Contractual life (in years) 3 years 3 months 19 days
Weighted Average Exercise Price, Outstanding | $ / shares $ 0.10
Number of Warrants Exercisable | shares 2,180,000
Weighted Average Exercise Price, Exercisable | $ / shares $ 0.10
Warrant Five [Member]  
Number of Warrants Outstanding | shares 333,333
Weighted Average Remaining Contractual life (in years) 2 years 8 months 12 days
Weighted Average Exercise Price, Outstanding | $ / shares $ 0.15
Number of Warrants Exercisable | shares 333,333
Weighted Average Exercise Price, Exercisable | $ / shares $ 0.15
Warrant Six [Member]  
Number of Warrants Outstanding | shares 100,000
Weighted Average Remaining Contractual life (in years) 1 year 8 months 12 days
Weighted Average Exercise Price, Outstanding | $ / shares $ 3.00
Number of Warrants Exercisable | shares 100,000
Weighted Average Exercise Price, Exercisable | $ / shares $ 3.00
XML 68 R57.htm IDEA: XBRL DOCUMENT v3.20.2
Commitments and Contingencies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Aug. 30, 2019
May 31, 2018
Oct. 31, 2017
Jul. 31, 2020
Jul. 31, 2019
Apr. 30, 2020
Mar. 31, 2019
Settlement liability       $ 1,445,714   $ 2,620,931 $ 1,300,000
Robert Oblon [Member]              
Settlement agreement, description As part of the settlement, the Company agreed to pay amounts that were due to Oblon under a prior settlement agreement in the approximate amount of $2,000,000, to be paid in installments through June 1, 2020. The Company completed its final payment obligation in accordance with the settlement agreement.            
Series A Preferred Stock [Member]              
Number of shares converted into preferred stock       (10,250,000)    
Share Exchange Agreement [Member] | 561 LLC [Member]              
Increased percentage of cumulative equity interest   40.00%          
Stock closing bid price per share   $ 5.00          
Share Exchange Agreement [Member] | 561 LLC [Member] | Series A Preferred Stock [Member]              
Equity interest rate percentage     25.00%        
Number of shares converted into preferred stock   2,500,000 2,500,000        
Share Exchange Agreement [Member] | America Approved Commercial LLC [Member]              
Equity interest rate percentage     25.00%        
Increased percentage of cumulative equity interest   40.00%          
Number of shares converted into preferred stock     2,500,000        
Stock closing bid price per share   $ 5.00          
XML 69 R58.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events (Details Narrative) - USD ($)
Sep. 11, 2020
Jul. 22, 2020
Jul. 31, 2020
Apr. 30, 2020
Bear Bull Market Dividends, Inc. [Member]        
Conversion of stock shares converted   20,000,000    
MLM Mafia, Inc [Member]        
Number of shares repurchased during period, shares   17,500,000    
Class A Common Stock [Member]        
Common stock, shares outstanding     166,072,386 126,072,386
Class A Common Stock [Member] | Alchemist Holdings, LLC [Member] | Subsequent Event [Member]        
Common stock, shares outstanding 65,000,000      
Conversion of stock shares converted 15,000,000      
Class A Common Stock [Member] | Settlement Accomodation Agreement [Member]        
Number of shares repurchased during period, shares   17,500,000    
Value of shares repurchased during period   $ 899,500    
Class A Common Stock [Member] | Settlement Accomodation Agreement [Member] | Bear Bull Market Dividends, Inc. [Member]        
Common stock, shares outstanding   5,000,000    
Class A Common Stock [Member] | Settlement Accomodation Agreement [Member] | MLM Mafia, Inc [Member]        
Common stock, shares outstanding   2,500,000    
Series B Preferred Stock [Member] | Alchemist Holdings, LLC [Member] | Subsequent Event [Member]        
Conversion of stock shares converted 7,500,000      
Class B Common Stock [Member]        
Common stock, shares outstanding     10,000,000 10,000,000
Class B Common Stock [Member] | Alchemist Holdings, LLC [Member] | Subsequent Event [Member]        
Conversion of stock shares converted 7,500,000      
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