UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


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


For the quarterly period endedended: January 31, 2018June 30, 2021


or

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

Commission File Number 333-205310000-55997

SHARING SERVICES INC.GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)


Nevada

Nevada

30-0869786

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1700 Coit Road, Suite 100, Plano, Texas75075
 (Address of principal executive offices)(Zip Code)

1700 Coit Rd., Suite 100, Plano, Texas 75075(469) 304-9400

(Address of principal executive offices)(Zip Code)

(714) 203-6717

(Registrant’s telephone number, including area code)

                                                           N/A                                                          None  

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



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

Title of each classTrading Symbol(s)Name of each exchange in which registered
N/AN/AN/A

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 ☒ No ☐

(X) Yes  (_) No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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)Yes ☒ No ☐


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


Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☒

[  ] Large accelerated filer  [  ] Accelerated filer

[  ] Non-accelerated filer (Do not check if a smaller reporting company)

[X] Smaller reporting company  [X] Emerging Growth Company


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   (X) Yes☐ No ☒




APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)As of August 6, 2021, there were 187,610,769 shares of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a courtissuer’s Class A Common Stock outstanding.

(_)Yes (_) No


APPLICABLE ONLY TO CORPORATE ISSUERS:


TABLE OF CONTENTS

As of March 23, 2018, there were 54,860,000 shares of class A common stock issued and outstanding and 10,000,000 shares of class B common stock issued and outstanding.




2



TABLE of CONTENTS


28

PART I—FINANCIAL INFORMATION

3

Item 1. Condensed Financial Statements

3

4

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

26

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Risk

31

26

Item 4. Controls and Procedures

31

26

PART II—OTHER INFORMATION

33

Item 1. Legal Proceedings

33

27

Item 1A. Risk Factors

33

27

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

33

27

Item 3. Defaults Upon Senior Securities

33

27

Item 4. Mine Safety Disclosures

33

27

Item 5. Other Information

33

27

Item 6. Exhibits

33


2



In its fiscal year 2021, the Company changed its fiscal year-end from a fiscal year ending on April 30 to a fiscal year ending on March 31. 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.

3


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.

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.



The following condensed consolidated balance sheets as of June 30, 2021, and March 31, 2021, and the condensed consolidated statements of operations, condensed consolidated statements of cash flows, and condensed consolidated statements of stockholders’ equity for the three months ended June 30, 2021, and July 31, 2020, are those of Sharing Services Global Corporation and its subsidiaries.


SHARING SERVICES, INC.


Index to the Unaudited InterimCondensed Consolidated Financial Statements


For the Period from May 5, 2017 (Inception) to January 31, 2018



Page

Balance sheetCondensed consolidated balance sheets as of JanuaryJune 30, 2021, and March 31, 2018

2021

5

StatementCondensed consolidated statements of operationsearnings (loss) and comprehensive income (loss) for the three months ended JanuaryJune 30, 2021, and July 31, 2018 and for the period from May 5, 2017 to January 31, 2018

2020

6

StatementCondensed consolidated statements of cash flows for the period from May 5, 2017 to Januarythree months ended June 30, 2021, and July 31, 2018

2020

7

Condensed consolidated statements of stockholders’ equity for the three months ended June 30, 2021, and July 31, 2020

8
Notes to the unauditedcondensed consolidated financial statements

 9

8




4

4



SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETSHEETS

(Unaudited)

  June 30, 2021  March 31, 2021 
ASSETS        
Current Assets        
Cash and cash equivalents $35,918,667  $12,144,409 
Trade accounts receivable, net  1,510,153   1,514,359 
Income taxes receivable  1,011,797   1,011,740 
Notes receivable, net  84,529   94,600 
Inventory, net  5,825,361   2,471,310 
Other current assets  3,573,308   2,403,634 
Total Current Assets  47,923,815   19,640,052 
Property and equipment, net  1,060,468   887,950 
Right-of-use assets, net  288,268   428,075 
Deferred income taxes, net  -   1,873,170 
Intangible assets  796,182   188,567 
Other assets  188,883   219,142 
TOTAL ASSETS $50,257,616  $23,236,956 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable $2,263,780  $1,295,174 
Accrued sales commission payable  3,856,998   4,713,777 
Employee stock warrants liability  1,920,629   3,132,161 
Note payable  -   1,040,400 
Accrued and other current liabilities  4,785,225   5,876,131 
Current portion of convertible notes payable, net of unamortized debt discount of $0 at June 30 and $369 at March 31  100,000   99,631 
Total Current Liabilities  12,926,632   16,157,274 
Deferred income taxes, net  4,517,050   - 
Convertible notes payable, net of unamortized debt discount of $27,659,101 and deferred financing costs of $2,764,599 at June 30 and unamortized debt discount of $15,238 at March 31  2,390,899   34,762 
Settlement liability, long term portion  539,522   808,071 
Lease liability, long-term  52,399   77,810 
TOTAL LIABILITIES  20,426,502   17,077,917 
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, 5,100,000 shares issued and outstanding at both June 30 and March 31  510   510 
Series B convertible preferred stock, $0.0001 par value, 10,000,000 shares designated, 0 shares issued and outstanding at June 30 and March 31  -   - 
Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares designated, 3,220,000 shares and 3,230,000 shares issued and outstanding at June 30 and March 31, respectively  322   323 
Preferred stock value        
Common Stock, $0.0001 par value, 500,000,000 Class A shares authorized, 187,110,769 and 160,100,769 shares issued and outstanding at June 30 and March 31, respectively  18,711   16,010 
Common Stock, $0.0001 par value, 10,000,000 Class B shares authorized, 0 shares issued and outstanding at June 30 and March 31  -   - 
Common stock value        
Additional paid in capital  71,845,068   43,757,768 
Shares to be issued  12,146   12,146 
Accumulated deficit  (42,077,846)  (37,627,718)
Cumulative translation adjustments  32,203   - 
Total Stockholders’ Equity  29,831,114   6,159,039 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $50,257,616  $23,236,956 


January 31,

ASSETS

2018

Current Assets

Cash and cash equivalents

$

175,451 

Accounts receivable

366,269 

Inventory

91,755 

Prepaid expenses and deposits

297,358 

Total Current Assets

930,833 

Property and equipment, net  

46,173 

Investments  

2,382,188 

TOTAL ASSETS

$

3,359,194 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts payable and accrued expenses

$

377,807 

Accrued interest - related parties

2,942 

Advance from customers

128,851 

Due to related parties

5,648 

Investment payable

75,000 

Convertible notes payable, net of unamortized debt discount of $443,522

71,478 

Convertible notes payable - related party, net of unamortized debt discount of $39,178

10,822 

Notes payable

35,000 

Notes payable - related parties

16,500 

Derivative liabilities

5,265,314 

Total Current Liabilities

5,989,362 

TOTAL LIABILITIES

5,989,362 

Stockholders' Deficit

Preferred stock, $0.0001 par value, 200,000,000 shares authorized:

Series A convertible preferred stock, $0.0001 par value, 100,000,000 shares designated; 85,194,540 shares issued and outstanding

8,519 

Series B convertible preferred stock, $0.0001 par value, 10,000,000 shares designated; 10,000,000 shares issued and outstanding

1,000 

Series C convertible preferred stock, $0.0001 par value, 10,000,000 shares designated; 3,680,000shares issued and outstanding

368 

Common Stock, $0.0001 par value, 500,000,000 million Class A shares authorized, 54,860,000 shares issued and outstanding as of January 31, 2018; 10,000,000 Class B authorized, 10,000,000 shares issued and outstanding as of January 31,2018

6,486 

Additional paid in capital

4,313,897 

Accumulated deficit

(6,976,438)

Stock subscription

16,000 

Total Stockholders' Deficit

(2,630,168)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

3,359,194 


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



5

5


SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONSEARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)


 

 

 

Three Months

 

Date of Inception

 

 

 

Ended

 

(May 5, 2017) to

 

 

 

January 31,

 

January 31,

  

  

 

2018

 

2018

 

 

 

 

 

 

Revenues

$

960,182 

$

960,182 

Cost of sales

 

673,551 

 

673,551 

Gross profit

 

286,631 

 

286,631 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

General and administration

 

194,201 

 

288,971 

  

Marketing expenses

 

- 

 

694,207 

 

Stock based compensation

 

- 

 

1,308,948 

 

Professional

 

117,882 

 

151,554 

 

   Total operating expenses

 

312,083 

 

2,443,680 

 

 

 

 

 

 

Operating loss

 

(25,452)

 

(2,157,049)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

Interest expense

 

(118,229)

 

(241,424)

 

Change in fair value of derivative liability

 

(3,455,374)

 

(4,577,965)

 

   Total other expense

 

(3,573,603)

 

(4,819,389)

 

 

 

 

 

 

Net loss

$

(3,599,055)

$

(6,976,438)

 

 

 

 

 

 

Basic and dilutive loss per common share

$

(0.06)

$

(0.12)

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

64,860,000 

 

60,461,176 

         
  Three Months Ended 
  June 30, 2021  July 31, 2020 
Net sales $11,211,526  $21,889,160 
Cost of goods sold  3,353,810   5,889,026 
Gross profit  7,857,716   16,000,134 
Operating expenses        
Selling and marketing expenses  5,150,475   9,601,832 
General and administrative expenses  4,728,310   6,369,270 
Total operating expenses  9,878,785   15,971,102 
Operating earnings (loss)  (2,021,069)  29,032 
Other income (expense)        
Interest expense, net  (2,930,014)  (9,127)
Litigation settlements and other non-operating  (23,605)  (78,822)
Gain (loss) on employee warrants liability  1,134,170   (1,123,500)
Gain on extinguishment of debt  1,040,400   - 
Total other income (expense), net  (779,049)  (1,211,449)
Loss before income taxes  (2,800,118)  (1,182,417)
Income tax (benefit) provision  747,889   (133,717)
Net loss $(3,548,007) $(1,048,700)
Other Comprehensive Income/Loss (net of tax):        
Currency translation adjustments  32,203   - 
Total other comprehensive income  32,203   - 
Comprehensive loss $(3,515,804) $(1,048,700)
Earnings (loss) per share:        
Basic $(0.02) $(0.01)
Diluted $(0.02) $(0.01)
Weighted average shares:        
Basic  184,435,274   140,202,821 
Diluted  184,435,274   140,202,821 

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



6

6


SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


         
  Three Months Ended 
 June 30, 2021  July 31, 2020 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(3,548,007) $(1,048,700)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  87,114   42,217 
Stock-based compensation expense (gain)  (931,533)  2,650,467 
Deferred income tax benefit  (717,960)  (567,777)
Amortization of debt discount and other  2,356,507   25,121 
Gain on extinguishment of debt  (1,040,400)  - 
Provision for obsolete inventory  116,334   - 
Changes in operating assets and liabilities:        
Accounts receivable  4,755   43,588 
Inventory  (3,450,228)  (185,639)
Other current assets  730,387   (714,713)
Other assets  (89,935)  - 
Accounts payable  959,990   51,281 
Income taxes payable  1,446,896   316,074 
Lease liability  1,621   1,638 
Accrued and other liabilities  (1,942,929)  (4,318,040)
Net Cash Used in Operating Activities  (6,017,388)  (3,704,483)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Payments for property and equipment  (244,728)  (61,046)
Collection of notes receivable  10,070   48,698 
Due to related parties and other  -   (8,400)
Net Cash Used in Investing Activities  (234,658)  (20,748)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of common stock  -   3,000,000 
Proceeds from issuance of promissory notes  30,000,000   1,040,400 
Repayment of promissory notes payable  -   - 
Net Cash Provided by Financing Activities  30,000,000   4,040,400 
IMPACT OF CURRENCY RATE CHANGES ON CASH  26,304   - 
Increase in cash and cash equivalents  23,774,258   315,169 
Cash and cash equivalents, beginning of period  12,144,409   11,742,728 
Cash and cash equivalents, end of period $35,918,667  $12,057,897 
         
Supplemental cash flow information        
Cash paid for interest $14,442  $3,687 
Cash paid for income taxes $-  $4,398 
Supplemented disclosure of non-cash investing and financing activities:        
Stock issued for financing fees and prepaid interest on debt $5,400,000  $- 
Settlement obligation satisfied with shares of common stock $-  $400,000 

Date of Inception

(May 5, 2017) to

January 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

2018

    Net loss

 $

(6,976,438)

 Adjustments to reconcile net loss to net cash used in operating activities:

    Depreciation

800 

    Stock-based compensation

1,308,948 

    Amortization of debt discount and debt issue cost

183,300 

    Change in fair value of derivative

4,577,965 

 Changes in operating assets and liabilities:

    Accounts receivable

(366,269)

     Inventory

(91,755)

    Prepaid expenses  

(296,233)

    Accounts payable and accrued expenses

371,627 

    Accrued interest, related parties

2,812 

    Deferred revenue

128,851 

Net Cash Used in Operating Activities

(1,156,392)

 CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property and equipment

(43,111)

  Cash from acquisition of subsidiaries

57,605 

  Equity Investment

(15,000)

 Net Cash Used in Investing Activities

(506)

 CASH FLOWS FROM FINANCING ACTIVITIES:

   Proceeds from issuance of convertible notes payable

544,000 

   Proceeds from issuance of convertible note payable - related party

50,000 

   Repayments of convertible notes payable

(101,000)

   Proceeds from issuance of Series C Convertible preferred stock

853,500 

   Repayment of promissory notes payable

(15,000)

   Proceeds from related parties

849 

 Net Cash Provided by Financing Activities

1,332,349 

 Increase in cash and cash equivalents

175,451 

 Cash and cash equivalents, beginning of period

- 

 Cash and cash equivalents, end of period

 $

175,451 

 Supplemental cash flow information

 Cash paid for interest

$

43,475 

 Cash paid for taxes

$

- 

 Supplemented disclosure of non-cash investing and financing activities

Series A Convertible Preferred Stock issued for equity investments

 $

2,282,188 

Derivative liability recognized as debt discount

 $

594,000 

Investment payable for equity investments

 $

75,000 

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



 

7


SHARING SERVICES INC.GLOBAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED 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 IssuedTreasury Stock Accumulated Deficit  Cumulative Translation Adjustments  Total 
Balance – March 31, 2021  5,100,000  $510   -  $-   3,230,000  $323   160,100,769  $16,010  $43,757,768 $                  - $12,146 $               - $(37,627,718) $-  $6,159,039 
Common stock issued for deferred financing costs and prepaid interest on debt  -   -   -   -   -   -   27,000,000   2,700   6,477,300     -  -  (1,080,000)  -   5,400,000 
Conversions of preferred stock          -   -   (10,000)  (1)  10,000   1   -     -     -   -   - 
Issuance of debt with beneficial conversion feature and in-the-money stock warrant, net of tax  -   -   -   -   -   -   -   -   21,330,000     -     -   -   21,330,000 
Expiration of common stock puts  -   -   -   -   -   -   -   -   -     -     177,879   -   177,879 
Stock-based compensation expense  -   -   -   -   -   -   -   -   280,000     -     -   -   280,000 
Currency translation adjustments  -   -   -   -   -   -   -   -   -     -     -   32,203   32,203 
Common stock issued for cash                                                        
Common stock issued for cash, shares                                                        
Common stock issued upon settlement of litigation                                                        
Common stock issued upon settlement of litigation, shares                                                        
Preferred stock retired                                                        
Preferred stock retired, shares                                                        
Stock warrants exercised                                                        
Net earnings (loss)  -   -   -   -   -   -   -   -   -  -  -  -  (3,548,007)  -   (3,548,007)
Balance – June 30, 2021  5,100,000  $510   -  $-   3,220,000  $322   187,110,769  $18,711  $71,845,068 $- $12,146 $- $(42,077,846) $32,203  $29,831,114 

                                             
  

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

  Cumulative Translation Adjustments  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   2,997,000   -   -   -    -       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   -   -       -       - 
Stock warrants exercised  -   -   -   -   -   -   -   -   -   -   -   -   -       - 
Net earnings  -   -   -   -   -   -   -   -   -   -   -       (1,048,700)  -   (1,048,700)
Balance – July 31, 2020  26,850,000  $2,685   10,000,000  $1,000   3,490,000  $349   176,072,386  $17,607  $42,267,620  $(114,405) $11,785  $(1,532,355) $(35,041,397) $-  $5,612,889 

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

8

SHARING SERVICES GLOBAL CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2018(Unaudited)


NOTE 1 – NATUREDESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION


Description of Operations

Sharing Services Inc.Global Corporation and subsidiaries (“Sharing Services”, “we”, “us”,“we,” or the “Company”) is a publicly traded company that aims to build shareholder value by developing or acquiring businesses that augment the Company’s product and services portfolio, business competencies, and geographic reach.

The Company is an emerging growth company and was incorporated on April 24, 2014 in the State of Nevada. The Company’s wholly owned subsidiary, Total Travel Media, Inc. (“Total Travel Media”, or “TTM”), was incorporated on May 5, 2017Nevada in the State of Nevada. The Company’s wholly-owned subsidiary, Four Oceans Holdings, Inc. (“Four Oceans”), was incorporated on September 22, 2017 in the State of Nevada. TheApril 2015. In its fiscal year end is April 30.  The Company acquired Total Travel Media on May 23, 2017.  While Total Travel Media is a wholly owned subsidiary of the Company, for financial accounting purposes the transaction has been treated as a reverse acquisition (reference is made to the paragraph below entitled “Recapitalization”). The Company acquired Four Oceans from related parties and was treated as an acquisition under common control.  See Note 11 - Related Party Considerations.


The Company was originally formed to launch a taxi sharing website and application. Beginning on February 1, 20172021, the Company changed its fiscal year-end from a fiscal year ending on April 30 to a fiscal year ending on March 31. The Company has decided not to restate the information reported for prior accounting periods, because: (a) the Company’s business model and is now a travel and technology management company. Sharing Services is a direct-selling model with a subscription-based vacation portal.


Share Exchange and Acquisition – Four Oceans Holdings, Inc.


On September 29, 2017, Sharing Services, Inc., entered into a Share Exchange Agreement with Four Oceans Holdings, Inc., a Nevada corporation. Pursuant tonot inherently seasonal, (b) the terms of the Agreement, the Company acquired all of the shares of capital stock of Four Oceans from the holders of such stock (the “Equity-Holders”),change in exchange for the issuance of Seventy-five Million (75,000,000) newly-issued restricted sharesfiscal years did not materially distort comparability of the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”).  Followingresults of operations and cash flows, and (c) the closing, Four Oceans operated as a wholly-owned subsidiarycost to restate the data reported for prior periods outweighs the usefulness of such restated data. Accordingly, the Company.


Four Oceans was controlled by Alchemist Holdings, LLC, a Company controlled by our Chairman, who received 50,000,000 Series A Preferred stock; Bear Bull Market Dividends, Inc., a Company that is a significant shareholder of Sharing Services, who received 20,000,000 Series A Preferred stock; and Research and Referral BZ received 5,000,000 shares. As a result of these share exchanges, Four Oceans became a 100% owned subsidiary of the Company. As these transactions are between entities under common control, the Company has reportedcondensed consolidated financial statements included herein reflect the results of operations and cash flows for the periodthree months ended June 30, 2021 (91 days) compared to the three months ended July 31, 2020 (92 days).

Currently, the Company markets and distributes its health and wellness and other products primarily in a manner similar to a poolingthe United States, Canada, the Republic of interestsKorea, and has consolidated financial results sinceother countries in the initial date in which the above companies were under common control. Assets and liabilities were combined on their carrying values and no recognition of goodwill was made.Asia Pacific region. The Company has presented earnings per share based on the new parent company shares issued to the former shareholders of the Company.


Share Exchange and Reorganization – Total Travel Media, Inc.


On May 23, 2017, Sharing Services, Inc., entered into a Share Exchange Agreement (the “Agreement”) with Total Travel Media, Inc. On May 23, 2017, there was a Closing of the transaction (the “Closing Date”).  Pursuant to the terms of the Agreement,does not currently operate retail stores. Through its subsidiaries, the Company acquired allcurrently markets its products and services through an independent sales force, using a direct selling business model.

Basis of the shares of capital stock of TTM from the holders of such stock (the “Equity-Holders”), in exchange for the issuance of Ten Million (10,000,000) newly-issued shares of the Company’s Common Class B Stock, par value $0.0001 per share and (ii) Ten Million (10,000,000) newly-issued shares of the Company’s Series B Preferred Stock, par value $0.0001 per share.  Following the Closing Date, TTM will operate as a wholly-owned subsidiary of the Company.Presentation


Recapitalization


For financial accounting purposes, this transaction was treated as a reverse acquisition by Total Travel Media, and resulted in a recapitalization with Total Travel Media being the accounting acquirer and Sharing Services as the acquired company. The consummation of this reverse acquisition resulted in a change of control. Accordingly, the historicalcondensed consolidated interim financial statements prior to the acquisition are those of the accounting acquirer, Total Travel Media, andincluded herein have been prepared to give retroactive effect to the reverse acquisition completed on May 23, 2017, and represent the operations of Total Travel Media. The consolidated financial statements after the acquisition date, May 23, 2017,



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include the balance sheets of both companies at historical cost, the historical results of Total Travel Media and the results of the Company from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization.


Going concern


These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. To date the Company has generated $960,182 in revenues from its business operations and has an accumulated deficit of $6,976,438. As of January 31, 2018, the Company had a working capital deficit of $5,058,529. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company has initiated extensive direct sales and social media marketing which it expects to drive significant sales volume of the Company’s products, and services over the next several months. The Company expects to become profitable and not need additional outside funding once working capital needs have been met.  The acceptance of the Company’s marketing efforts are uncertain and therefore, the Company has plans to continue to fund its business by way of private placements, promissory notes, convertible promissory notes and advances from related parties as may be required.


These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation


The preparation of financial statements in conformityaccordance with accounting principles generally accepted in the United States (“GAAP”) requires managementand pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain 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 estimatesthe information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and assumptions that affectnotes thereto included in the Company’s Transition Report on Form 10-K for the transition period ended March 31, 2021. Unless so stated, the disclosures in the accompanying condensed consolidated financial statements do not repeal the disclosures in our consolidated financial statements for the transition period ended March 31, 2021.

During the 11-month transition period ended March 31, 2021, and the three months ended June 30, 2021, the Company’s net loss was $1,235,021 and $3,548,007, respectively. During the 11-month transition period ended March 31, 2021, and the three months ended June 30, 2021, the Company’s cash used in operating activities was $1,566,970 and $6,017,388, respectively. As of June 30, 2021, cash and cash equivalents are $35,918,667. The Company anticipates continuing to use operating cash due to: (i) a sustained reduction in sales; (ii) investments in new markets, new lines of business, and new products, and (iii) costs associated with the reported amountsdue diligence of purchasing strategic assets and liabilities, (ii)companies. The Company believes that funds from the disclosure$30 million convertible loan received from Decentralized Sharing Systems, Inc. on April 5, 2021 (see Note 4), provides the Company with sufficient liquidity to sustain the Company’s plans and operations at current levels over the next twelve months.

The accompanying condensed consolidated financial statements include the accounts of contingent assetsthe Company and liabilities knownits wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to existthe prior year data to conform to the current period’s presentation, primarily consisting, as of March 31, 2021, reclassification of the dateliability associated with uncertain tax positions of $904,643 and, for the financial statements are published,three months ended July 31, 2020, reclassification of the gain on employee warrants liability of $1,123,500.

Correction of Errors

In the three months ended January 31, 2021, the Company identified two errors in amounts previously reported in its Quarterly Report on Form 10-Q for the interim periods ended July 31, 2020, concerning the method used to capitalize work-in-progress for projects and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respecterrors in its stock-based compensation expense related to the use of estimates often relate to improved information not previously available.employment contracts.


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Uncertainties with respect to such estimates and assumptions are inherentAccordingly, in the preparationthree months ended January 31, 2021, the Company made the following corrections to previously reported amounts:

Capitalization of financial statements; accordingly, actual results could differ from these estimates.


Costs for Ongoing Projects and Development of a New Business Brand. - In managements’ opinion, all adjustments (consistingthe three months ended January 31, 2021, the Company capitalized costs incurred in connection with ongoing upgrades to its information technology systems, the development of normal recurring accruals) considered necessary for a fair presentationthe new business brand “The Happy Co” and office renovations, in the aggregate, of $816,116. Of the amount capitalized, $58,038 (before tax) should have been included.capitalized in the quarter ended July 31, 2020.


Stock-based Compensation Expense - In the three months ended January 31, 2021, the Company conducted a detailed review of the terms and conditions of stock warrants awarded to its employees in connection with employment agreements. As a result of this review, the Company concluded that stock-based compensation expense reported in the quarter ended July 31, 2020, was understated, before income taxes, by $5,587.

The impact on our previously reported Net Earnings for the affected period indicated is:

Schedule of Previously Reported Net Earnings

  

Three Months Ended

July 31, 2020

 
Net Earnings/(Loss) – As Reported $(1,093,377)
Adjustments (net of tax):    
Capitalized Projects  50,264 
Warrant Benefit / (Expense)  (5,587)
Total Adjustments (net of tax)  44,677 
Net Earnings/(Loss) – As Corrected $(1,048,700)

The Company has identified the impacted internal controls for both errors and has implemented additional internal controls in order to identify and mitigate in the future.

Use of Estimates and Assumptions


The preparation of financial statements in accordance with accounting principles generally accepted inGAAP requires the United Statesuse of judgment and requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and liabilitiesexpenses, and disclosures ofabout contingent assets and liabilities, atif any. Matters that require the dateuse of estimates and assumptions include: the recoverability of notes and 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 performance obligations resulting from contracts with customers, allocation of the financial statements, andtransaction price to multiple performance obligations in a sales transaction, the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions about the valuationmeasurement and recognition of right-of-use assets and related lease liabilities, the valuation of stock-based compensation expense,awards, the valuationmeasurement and recognition of derivative liability,uncertain tax positions, and the valuation allowance for deferred tax assetsof 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 useful lifeassumptions used in the preparation of fixed assets.


Principles of Consolidation

For January 31, 2018, the unauditedour consolidated financial statements of theare reasonable.

Cash, Cash Equivalents, and Restricted Cash

The Company include the accounts of the Company and its wholly owned subsidiaries, Total Travel Media, Inc. and Four Oceans Holding, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.




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Cash and cash equivalents


Cash and cash equivalents include cash on hand and on deposit at banking institutions as well asconsiders all highly liquid short-term investments with original maturities of 90 daysthree months or less.  As of January 31, 2018 theless to be cash equivalents. The Company hadincludes in its cash and cash equivalents of $175,451.


Fair value measurements

Fair value is defined as the price that the Company would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent counter-party in the principal market or in the absence of a principal market, the most advantageous market for the investment or liability. A three-tier hierarchy is established to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs); and establishes a classification of fair value measurements for disclosure purposes.

The hierarchy is summarized in the three broad levels listed below:

Level 1

-

quoted prices in active markets for identical assets and liabilities

Level 2

-

other significant observable inputs (including quoted prices for similar assets and liabilities, interest rates, credit risk, etc.)

Level 3

-

significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).

In accordance with Accounting Standards Codification (“ASC”) 815, the Company’s debt derivative liabilities are measured at fair value on a recurring basis, and are level 3 measurements in the three-tier fair value hierarchy.

There were no transfers between the levels of the fair value hierarchy during the period of inception (May 5, 2017) to January 31, 2018.


Fair value of financial instruments

The Company’s financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.


The following table summarizes fair value measurements by level at January 31, 2018 measured at fair value on a recurring basis:


January 31, 2018

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Derivative liabilities

 

$

                               -   

 $

             -   

 $

       5,265,314

 $

       5,265,314



Related Parties


The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions (see Note 11).

Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value.




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Property and Equipment

Furniture and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives of the equipment are as follows:


Office equipment - 5 years

Furniture and fixtures - 3 years


Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.


Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable that the receivable will not be recovered. As of January 31, 2018, the Company determined no valuation allowance for doubtful accounts was required, for the Company’s accounts receivable.


Revenue Recognition


In accordance with ASC 605, “Revenue Recognition”, revenue is recognized when, specifically when all the following conditions are met:


·

There is clear evidence that an arrangement exists;

·

Services are provided or products are delivered to customers;

·

Amounts are fixed or can be determined;

·

The ability to collect is reasonably assured;

·

There is no significant obligation for future performance; and

·

The amount of future returns can be reasonably estimated.


The Company generally recognizes revenue upon delivery and when both the title and risk and rewards pass to the Independent Representative or Customer. Product sales are recognized net of product returns and discounts referred to as “returns and allowances.” Net sales include product sales net of processing fees The Company generally receives the net sales price through credit card payments on the Company Website or at the point of sale.  Products sold on an annual basis are recognized as revenue over the following twelve months. Allowances for product returns have not been providedreceivables due to the short period that the products have been sold.  As historical data is collected a reserve will be provided at the time the sale is recorded.


The Company recognizes revenue when the products are shipped and services are complete.


Deferred Revenue


At January 31, 2018, the Company had advances from customers of $128,851.  Advances from customers are a component of deferred revenue in the consolidated balance sheets and includes billings to customers where the



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product has not shipped, for services that were in process but not completed and for annual memberships and other productsits merchant processors, which are recognized over the succeeding twelve months.


Cost of Sales


The Cost of merchandise sold is recognized at the time of revenue recognition, as the product is shipped and services are complete.


Share-Based Expense


ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.


Share-based expense totaled $1,308,948 for the period from inception (May 5, 2017) to January 31, 2018.


Advertising Costs

The Company follows ASC 720, “Advertising Costs,” and expenses costs as incurred.  Advertising and marketing expense totaled $694,207 for the period from inception (May 5, 2017) to January 31, 2018.  


Income Taxes

The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recoveredsettled within 24 to 72 hours. At June 30, 2021, and March 31, 2021, credit card receivables were $4,260,380 and $6,225,139, respectively. In addition, as of June 30, 2021, and March 31, 2021, cash and cash equivalents held in bank accounts in foreign countries in the ordinary course of our business were $4,416,179 and $1,612,026, respectively. Amounts held by merchant processors or settled.held in bank accounts located in foreign countries are generally not insured by any federal agency.

Inventory

Inventory consists of finished goods and promotional materials and are stated at the lower of cost, determined using the first-in, first-out (“FIFO”) method, or net realizable value. The Company periodically assesses its inventory levels when compared to current and anticipated sales levels. During the three months ended June 30, 2021, and July 31, 2020, the Company recognized a provision for excess (slow-moving) or obsolete inventory of $116,334and nil, respectively, in connection with health and wellness product that is damaged, expired or otherwise in excess of forecasted outputs, based on our current and anticipated sales levels. The Company reports its provisions for inventory losses in cost of goods sold in its consolidated statements of operations.

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Other Current Assets

As of June 30, 2021, and March 31, 2021, other current assets were $3,573,308 and $2,403,634, respectively. These amounts primarily consisted of inventory-related deposits of $971,619 and $1,845,722, employee advances of $233,155 and $320,631, and prepaid freight and other expenses of $534,013 and $210,665, as of June 30, 2021, and March 31, 2021, respectively. In addition, as of June 30, 2021, these amounts included prepaid interest related to the DSSI loan of $1,834,521 (see Note 7 below).

Accrued and Other Current Liabilities

As of June 30, 2021, and March 31, 2021, accrued and other current liabilities were $4,785,225 and $5,876,131, respectively. These amounts consisted of deferred sales revenues of $971,917 and $1,449,359, state and local taxes payable of $927,178 and $1,048,717, liability associated with uncertain tax positions of $921,977 and $904,643, accrued severance expense of $25,000 and $700,000, payroll and employee benefits of $722,904 and $523,454, current portion of settlement liability of $363,008 and $376,921, current portion of lease liability of $260,623 and $373,398 and other operational accruals of $592,618 and $499,639, respectively.

Note Payable

In May 2020, the Company was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $1.0 million, pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”).

At March 31, 2021, loan principal in the amount of $1.0 million was outstanding. The Company’s borrowings under the PPP Loan were eligible for loan forgiveness under the provisions of the CARES Act. In June 2021, the Company was formally notified by the lender that the Company’s obligations under the loan have been forgiven effective May 25, 2021. The loan forgiveness applies to all principal and interest accrued through the loan forgiveness effective date. The Company recognized a gain on extinguishment of debt of $1.0 million in connection with such loan forgiveness.

Foreign Currency Translation

Prior to April 1, 2021, substantially all our consolidated net sales were denominated in U.S. dollars. As part of our growth initiatives, we are in the process of expanding operations outside the United States. The functional currency of each of our foreign operations is generally the respective local currency. Balance sheet accounts are translated into U.S. dollars (our reporting currency) at the rates of exchange in effect on deferred tax assets and liabilities of a change in tax rates is recognized inat the balance sheet date, while the results of operations and cash flows are generally translated using average exchange rates for the periods presented. Individually material transactions, if any, are translated using the actual rate of exchange on the transaction date. The resulting translation adjustments are reported in cumulative translation adjustments in our consolidated balance sheets.

Comprehensive Income

For the three months ended June 30, 2021, the Company’s comprehensive income was comprised of currency translation adjustments and net earnings (loss). Prior to April 1, 2021, the only component of the Company’s comprehensive income was its net earnings (loss).

Revenue Recognition

As of June 30, 2021, and March 31, 2021, deferred sales revenue associated with product invoiced but not received by customers at the balance sheet date was $779,844 and $1.2 million, respectively. In addition, as of June 30, 2021, and March 31, 2021, deferred sales revenue associated with our unfulfilled performance obligations for services offered on a subscription basis was $121,798 and $153,216, and deferred sales revenue associated with our performance obligations for customers’ right of return was $70,275 and $95,780, respectively. Deferred sales revenue is expected to be recognized over one year.

During the three months ended June 30, 2021, no individual customer, or affiliated group of customers, represents 10% or more of our consolidated net sales, and approximately 70% of our net sales were to customers (including 31% to recurring customers, which we refer to as “SmartShip” sales, and approximately 39% to new customers) and approximately 30% of our net sales were to our independent distributors. During the three months ended June 30, 2021, and July 31, 2020, approximately 89% and 93%, respectively, of our consolidated net sales were to our customers and/or independent distributors located in the United States. No other country accounted for 10% or more of our consolidated net sales.

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During the three months ended June 30, 2021, substantially all our consolidated net sales are from our health and wellness products (including approximately 42% from the sale of Nutraceutical products, 27% from the sale of coffee and other functional beverages, 12% from the sale of weight management products, and approximately 19% from the sale of all other health and wellness products). During the three months ended July 31, 2020, approximately 98% of our consolidated net sales are from the sale of our health and wellness products (including 60% from the sale of Nutraceutical products, 27% from the sales of coffee and other functional beverages, and 11% from the sale of all other health and wellness products).

During the three months ended June 30, 2021, approximately 49% of our consolidated product purchases were from a third-party manufacturer based in the U.S., while 51% of our product purchases were from a related-party supplier located in the Republic of Korea. During the three months ended July 31, 2020, product purchases from one third-party manufacturer (the same U.S.-based supplier discussed in the preceding sentence) accounted for approximately 98% of our total product purchases.

Sales Commissions

The Company recognizes sales commission expense, when incurred, in accordance with GAAP. During the three months ended June 30, 2021, and July 31, 2020, sales commission expense, which is included in selling and marketing expenses in our consolidated statements of earnings and comprehensive income, was $5.0 million and $9.4 million, respectively.

Recently Issued Accounting Standards - Recently Adopted

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. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

The Company usesadopted ASU 2019-12 effective April 1, 2021, and adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards - Pending Adoption

In August 2020, the two-step approachFASB issued 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 must be separated from the host contract for convertible instruments with conversion features not required to recognizing and measuring uncertain tax positions. The first stepbe 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 April 1, 2024. Early adoption is permitted, subject to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.certain limitations. The Company considers many factors whenis evaluating the potential impact of adoption on its consolidated financial statements.

NOTE 2 – INVENTORY

Inventories consist of finished goods and estimatingpromotional materials. The Company provides an allowance for any slow-moving or obsolete inventory. As of June 30, 2021, and March 31, 2021, inventory consists of the Company's tax positions and tax benefits,following:

SCHEDULE OF INVENTORY

  June 30, 2021  March 31, 2021 
Finished Goods $6,026,753  $2,556,368 
Allowance for inventory obsolescence  (201,392)  (85,058)
 Inventory, net $5,825,361  $2,471,310 

The increase in finished goods for the quarter, compared to as of March 31, 2021, is primarily due to the acquisition of product related to our South Korean operations, which may require periodic adjustments. At January 31, 2018, the Company did not record any liabilities for uncertain tax positions.stated selling product in June 2021.

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Basic and Diluted Net Loss per Common ShareNOTE 3 – EARNINGS (LOSS) PER SHARE

Basic incomeWe calculate basic earnings (loss) per share is computed by dividing net incomeearnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted earnings per share is calculated similarly but reflects the potential dilution that could occur ifimpact of shares issuable upon the conversion or exercise of outstanding convertible preferred stock, options,convertible notes payable, stock warrants and other commitments to issue common stock, were exercised or equity awards vest resulting inexcept where the impact would be anti-dilutive.



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issuanceThe calculation of common stock that coulddiluted earnings per share inalso reflects an adjustment to net earnings for the earningspotential reduction to a reporting period’s interest expense, net of applicable income tax, which would result if the Company. There wereCompany’s convertible notes payable were converted at the beginning of such reporting period.

The following table sets forth the computations of basic and accrued interest for approximately $575,034diluted earnings (loss) per share:

SCHEDULE OF COMPUTATIONS OF BASIC AND DILUTED EARNINGS PER SHARE

  June 30, 2021  July 31, 2020 
  Three Months Ended July 31, 
  June 30, 2021  July 31, 2020 
Net loss $(3,548,007) $(1,048,700)
Weighted average basic shares  184,435,274   140,202,821 
Weighted average diluted shares  184,435,274   140,202,821 
Loss per share:        
Basic $(0.02) $(0.01)
Diluted $(0.02) $(0.01)

The following potentially dilutive securities and 101,874,540 convertible preferred shares issued byinstruments were outstanding as of June 30, 2021, and July 31, 2020, but excluded from the Company during the period ended January 31, 2018. Potential dilutive instruments as at January 31, 2018, consisted of the following common share equivalents:


January 31, 2018

Warrants

333,333

Convertible notes

31,089,702

Convertible preferred shares

101,874,540

133,279,575



Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalentstable above because their impact would be anti-dilutive as a result of the net loss.anti-dilutive:


SCHEDULE OF POTENTIALLY DILUTIVE INSTRUMENTS OUTSTANDING

  June 30, 2021  July 31, 2020 
Convertible preferred stock  8,325,165   44,133,288 
Convertible notes payable  152,231,082   10,406,100 
Stock warrants  168,295,815   27,695,037 
Total potential incremental shares  328,852,062   82,234,425 

Recently Issued Accounting Standards


In November 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-14, “Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606).” ASU 2017-14 includes amendments to certain SEC paragraphs within the FASB Accounting Standards Codification (Codification). ASU 2017-14 amends the Codification to incorporate the following previously issued guidance from the SEC. ‘The amendments in ASU No. 2017-14 amends the Codification to incorporate SEC Staff Accounting Bulletin (SAB) No. 116 and SEC Interpretive Release on Vaccines for Federal Government Stockpiles (SEC Release No. 33-10403) that bring existing SEC staff guidance into conformity with the FASB’s adoption of and amendments to ASC Topic 606, Revenue from Contracts with Customers.


In September 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.”The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adopt using the public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.


In February 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The amendments clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset. The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets. The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. Effective at the same time as the amendments in Update 2014-09, Revenue from Contracts with Customers (Topic 606). Therefore, public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the amendments in this Update to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the amendments in this Update to annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. All other entities may apply the guidance earlier as of annual reporting periods beginning



13


after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance earlier as of annual reporting periods beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance. An entity is required to apply the amendments in this Update at the same time that it applies the amendments in Update 2014-09. The Company is currently evaluating the potential impact this standard may have on its consolidated financial position and results of operations.

In January 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Effective for public business entities that are a SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. The Companypreceding table does not anticipate the adoption of ASU 2017-04 will have a material impact on its consolidated financial statements.


In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This new standard clarifies the definition of a businessinclude 8,750,000 and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018, however, early adoption is permitted with prospective application to any business development transaction.

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.


NOTE 3 – ACCOUNTS RECEIVABLE


As at January 31, 2018, accounts receivable of $366,269 represents the billed revenue due from merchant processor net of deferred revenue and merchant processing fees. The full amount was received in subsequent payments, thus no allowance for doubtful accounts was required at January 31, 2018  


NOTE 4 – PREPAID EXPENSES AND DEPOSITS


Prepaid expenses and deposits consisted of the following at January 31, 2018:


 

January 31,

2018

Prepaid expenses

$

57,910

Vendor deposits

 

210,287

Security deposit

 

29,161

 

$

297,358



Prepaid expenses consist of payments for goods and services which will be consumed in the Company’s operations in the next operating cycle.



14


Vendor deposits represent 50% of open purchase orders to the Company’s primary supplier, per the vendor agreement.


Security deposits are for the new corporate offices per the lease agreement.  See subsequent events (Note 14) regarding the new Corporate offices.


NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at January 31, 2018:


 

January 31,

 

2018

Furniture and fixtures

$

18,928

Office and computer equipment

 

28,178

Accumulated depreciation

 

(933)

Property and equipment, net

$

46,173 



The depreciation expense for the period from inception to January 31,2018 was $800.


NOTE 6 – EQUITY INVESTMENTS


212 Technologies, LLC


On May 21, 2017, the Company entered into a transaction whereby the Company will acquire a Forty-eight percent (48%) interest in 212 Technologies, LLC, a Montana limited liability company (“212 Tech”), in exchange for 15,628,750 shares of the Company’s Series A Convertible Preferred Stock and cash in the amount of $100,000.  212 Technologies, LLC is a developer of end-to-end online marketing and direct sales software systems. Initially, the Company will acquire a Twenty-four percent (24%) interest in exchange for 5,628,750 shares of the Company’s Series A Convertible Preferred Stock and cash. The Stakeholder and Investment Agreement dated May 21, 2017 also provides for the acquisition by the Company of the remaining twenty-four percent (24%) interest in 212 Tech at a future date in exchange for an additional 10,000,000 shares of the Company’s Series A Preferred Stock, when the following milestones have been reached: (i) One year has passed from the original MOU; and (ii) the price per share of the Company’s common11,625,000 stock is quoted at $10.00 or more. The Company, in exchange, received a non-exclusive, non-royalty bearing, perpetual, worldwide license of all of the Intellectual Property Rights developed andwarrants held by 212 Tech.


The Company acquired a 24% interest in 212 Tech by paying $25,000 in cash, leaving a payable of $75,000,employees which are not vested (or exercisable) at June 30, 2021, and issuing 5,628,750 shares of Series A Convertible Preferred Stock, with a deemed value of $0.25 per share or $1,407,188.  As of JanuaryJuly 31, 2018, we recorded $1,507,188 as an investment at cost.2020, respectively.


561 LLC


The Company acquired a 25% interest in 561 LLC by agreeing to issue 2,500,000 shares of Series A Convertible Preferred Stock, with a deemed value of $0.25 per share or $625,000.    The shares are to be issued to the 561 Equity-holders as follows: 625,000 shares issued within 5 days of the closing date and 625,000 shares issued on or before December 31, 2017.  These shares are issued and outstanding at January 31, 2018. 625,000 Shares are to be issued on or before April 30, 2018 and 625,000 Shares are to be issued on or before August 31, 2018. As of January 31, 2018, we recorded $312,500 as an investment at cost for the 1,250,000 shares issued.


The 561 Equity-Holders shall be entitled to an additional Two Million Five Hundred Thousand (2,500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when both of the following conditions have been met: (a) Following the first year’s anniversary of the Closing Date and (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by OTC Markets, Inc. If these conditions are met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.



15



The 561 Equity-Holders shall be entitled to an additional Two Million Five Hundred Thousand (2,500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when the following conditions have been met: The Company shall be the owner of record of no less than Forty percent (40%) of the member interests in each of (i) 561 and (ii) its affiliated company, America Approved Commercial, LLC. If these conditions are met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.


America Approved Commercial LLC


The Company acquired a 25% interest in America Approved Commercial LLC by issuing 2,500,000 shares of Series A Convertible Preferred Stock, with a deemed value of $0.25 pure share or $625,000. The Company issued 625,000 shares during the period ended January 31, 2018. As of January 31, 2018, we recorded $ 312,500 as an investment at cost for the first installment of 625,000 shares issued.


The AAC Equity-Holders shall be entitled to an additional Two Million Five Hundred Thousand (2,500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when both of the following conditions have been met: (a) Following the first year’s anniversary of the Closing Date and (b) the closing bid price of the Company’s common stock equals or exceeds $5.00 per share, as reported by OTC Markets, Inc.  If these conditions are met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.


The AAC Equity-Holders shall be entitled to another additional Two Million Five Hundred Thousand (2,500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when the following conditions have been met: The Company shall be the owner of record of no less than Forty percent (40%) of the member interests in each of (i) AAC and (ii) its affiliated company, 561, LLC.  If these conditions are met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.


Medical Smart Care LLC


The Company acquired a 40% interest in Medical Smart Care LLC for 1,000,000 shares of Series A Convertible Preferred Stock, with a deem value of $0.25 pure share or $250,000.  The shares are to be issued to the Medical Smart Care Equity-holder as follows: 250,000 shares issued within 5 days of the closing date and 250,000 shares issued on or before December 31, 2017.  These shares were issued in November and December 2017 with the mutual consent of the parties. 250,000 Shares are to be issued on or before April 30, 2018; and 250,000 Shares are to be issued on or before August 31, 2018. As of January 31, 2018, we recorded $125,000 as an investment at cost for the installments of 500,000 shares issued.


LEH Insurance Group LLC


The Company acquired a 40% interest in LEH Insurance Group LLC (“LEHIG”) by issuing 500,000 shares of Series A Convertible Preferred Stock, with a deem value of $0.25 pure share or $125,000.  As of January 31, 2018, we recorded $125,000 as an investment at cost.  The 500,000 shares were issued to the LEHIG Equity-holder in November 2017.


The LEHIG Equity-Holder shall be entitled to an additional Five Hundred Thousand (500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when the following condition has been met:  Prior to December 31, 2018, LEHIG has booked premiums of at least Five Hundred Thousand dollars ($500,000). If this condition is met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.


The LEHIG Equity-Holder shall be entitled to a second additional Five Hundred Thousand (500,000) of shares of the Company’s restricted Series A Preferred Stock, $0.0001 par value per share, when the following condition has been met: Prior to December 31, 2018, LEHIG has booked premiums of at least One Million dollars ($1,000,000).  If this condition is met, the Company shall cause the issuance of such shares within ten (10) calendar days of the satisfaction of such conditions.




16


NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES


Accounts payable and accrued expenses consisted of the following at January 31, 2018:


 

January 31,

2018

Accounts payable

$

68,738

Accrued commissions

 

240,884

Accrued expenses

 

56,211

Accrued interest

 

11,974

 

$

377,807



Accrued commissions consisted of commissions earned on sales of products and services by independent representatives and paid in the following month.


NOTE 8 - NOTES PAYABLE

Notes payable consisted of the following at January 31, 2018:


 

 

January 31, 2018

 

 

Interest Rate

 

 

Maturity

 

Dated – March 20, 2017

 

$

10,000

 

 

12%

 

 

March 18, 2018

 

Dated – May 4, 2017

 

 

10,000

 

 

12%

 

 

May 3, 2018

 

Dated – May 11, 2017

 

 

15,000

 

 

12%

 

 

May 10, 2018

 

Total notes payable

 

 

35,000

 

 

 

 

 

 

 

Less: current portion of notes payable

 

 

35,000

 

 

 

 

 

 

 

Long-term notes payable

 

$

-

 

 

 

 

 

 

 



As of January 31, 2018, the Company accrued interest on these notes of $3,255 and recorded interest expense of $3,117 in interest expense for the period from inception (May 5, 2017) to January 31, 2018.


NOTE 94 - CONVERTIBLE NOTES PAYABLE

Convertible notes payable consistedconsists of the following as of January 31, 2018:following:


SCHEDULE OF CONVERTIBLE NOTES PAYABLE

Issuance Date Maturity Date 

Interest Rate

  

Conversion Price (per share)

  June 30, 2021  March 31, 2021 
April 2021 April 2024  8% $0.20  $30,000,000  $- 
October 2017 October 2022  12% $0.15   50,000   50,000 
April 2018 April 2021  0% $0.01   100,000   100,000 
Total convertible notes payable     30,150,000   150,000 
Less: unamortized debt discount and deferred financing costs     27,659,101   15,607 
      2,490,899   134,393 
Less: current portion of convertible notes payable     100,000   99,631 
Long-term convertible notes payable    $2,390,899  $34,762 

January 31, 2018

Dated – September 26, 2017

$

15,000 

Dated – October 6, 2017

50,000 

Dated - October 10, 2017

100,000 

Dated - December 15, 2017

100,000 

Dated - January 22, 2018

250,000 

Total convertible notes payable

515,000 

Less: debt discount and deferred financing fees

(443,522)

71,478 

Less: current portion of convertible notes payable

71,478 

Long-term convertible notes payable

$

- 



The Company recognized amortization expense related to the debt discount and deferred financing fees of $71,478 for the period of inception (May 5, 2017) to January 31, 2018, which are included in interest expense in the



17


consolidated statements of operations.  The Company also recorded an interest of $25,139 on theCompany’s convertible notes payables, duringare convertible, at the period from inception (May 5, 2017) to January 31, 2018.


On November 14, 2017, the Company paid $90,055, for settlementoption of the note dated May 15, 2017, with a principal balance of $63,000.  For the period ended January 31, 2018, the Company recorded $23,534 in prepayment penalties and accrued interest payable and recognized a gain of $93,285 from the change in derivative liability.


On December 28, 2017, the Company paid $54,420, for settlementholder, into shares of the note dated June 20,Company’s Common Stock at the conversion prices shown above.

In October 2017, with a principal balance of $38,000.  As of January 31, 2018, the Company recorded $14,321 in prepayment penalties and accrued interest payable and recognized a gain of $57,439 from the change in derivative liability.


Promissory Notes – Issued in Fiscal year 2018


During the period of inception (May 5, 2017) to January 31, 2018, the Company issued a totalConvertible Promissory Note in the principal amount of $616,000 notes$50,000 (the “Note”) to HWH International, Inc (“HWH” or the “Holder”). HWH is affiliated with Heng Fai Ambrose Chan, who in April 2020 became a Director of the following terms:Company. The Note is convertible into 333,333 shares of the Company’s Common Stock. Concurrent with issuance of the Note, the Company issued to HWH a detachable warrant to purchase up to an additional 333,333 shares of the Company’s Common Stock, at an exercise price of $0.15 per share. Under the terms of the Note and the detachable stock warrant, the Holder is entitled to certain financing rights. If the Company enters into more favorable transactions with a third-party investor, it must notify the Holder and may have to amend and restate the Note and the detachable stock warrant to be identical. See Note 7 below.


13

·

Terms of zero to 5 years

·

Annual interest rates of 12%

·

Convertible at the option of the holders at issuance to 180 days after issuance date. 

·

Conversion prices are typically based on the discounted (39% discount) lowest two (2) trading prices of the Company’s common shares during the fifteen (15) trading day period prior to conversion. Three notes have a fixed conversion price of $0.005, $0.01 and $0.15 per share respectively.

·

Warrants to purchase up to 333,333 shares of common stock at an exercise price of $0.15 per share.

The notes allow

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 amendment to the underlying promissory note. Pursuant to the amendment, the parties extended the maturity date of the note to April 2021. In addition, after giving effect to the amendment, the April 2018 Note is non-interest bearing. All other terms of the April 2018 Note remain unchanged. As of the date of this Quarterly Report, the Company and the holder of the note are discussing options for the note holder to convert a portion of the note and for the Company to redeemsettle the notes at rates ranging from 110% to 135% depending onremainder of the redemption date provided that no redemption is allowed after the 180th day.note. The Company received net cashintends to conclude these discussions and to settle the April 2018 Note in the foreseeable future.

On April 5, 2021, the Company and Decentralized Sharing Systems, Inc. (“DSSI”) entered into a Securities Purchase Agreement, pursuant to which the Company issued: (a) a Convertible Promissory Note in the principal amount of $509,000$30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, and DSSI loaned to the Company $30.0 million. DSSI, is a subsidiary of Document Security Systems, Inc. (“DSS”), and, together with DSS, is a major shareholder of the Company. Under the terms of the loan, the Company agreed to pay to DSSI a loan Origination Fee of $3.0 million, payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share. The Note bears interest at the annual rate of 8% and matures on April 5, 2024, subject to certain acceleration provisions upon the convertible notes and recognized $6,000occurrence of an Event of Default, as deferred financing fee, which is being amortized overdefined in the Note. At any time during the term of the convertible notes.Note, all or part of the Note, including the principal amount less unamortized prepaid interest, if any, plus any accrued interest can be converted into shares of the Company’s Class A Common Stock at the rate of $0.20 per share, at the option of the holder. Interest on the Note is pre-payable annually in cash or in shares of the Company’s Class A Common Stock, at the option of the Company, except that interest for the first year is pre-payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share.


TheIn connection with the issuance of the Note and the detachable Warrant, the Company determined thatallocated $15.0 million of the net proceeds from the loan to the detachable Warrant, allocated $12.0 million of the net proceeds to the beneficial conversion feature metembedded in the definitionNote and recognized deferred financing costs of a liability in accordance with ASC Topic No. 815 - 40, “Derivatives and Hedging - Contracts in Entity's Own Stock,” and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability.$3.0 million. The fair value of the conversion feature was recorded as aresulting debt discount and the deferred financing costs are being amortized tointo interest expense over the term of the note.

Thenote (three years). During the three months ended June 30, 2021, the Company valuedissued to DSSI 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the conversion feature usingloan Origination Fee and 12,000,000 shares in prepayment of interest for the Binomial option pricing valuation model.  Thefirst year. In connection therewith, the Company recognized a deemed dividend of $1,080,000 for the excess of the fair value of the derivative liabilityshares issued over the amounts settled.

During the three months ended June 30, 2021, and July 31, 2020, interest expense in connection with the Company’s convertible notes was $566,975 and $1,512, respectively, excluding amortization of debt discount of $2,356,507 and $2,519, respectively, and, in the three months ended June 30, 2021, amortization of deferred financing costs of $235,401. These amounts are included in interest expense in our consolidated statements of operations.

NOTE 5 – INCOME TAXES

The statutory rates for allour domestic and our material foreign operations are as follows for the notes amountedperiods shown:

SCHEDULE OF STATUTORY RATES FOR OUR DOMESTIC AND FOREIGN OPERATION

Country 2021  2020 
United States  21%  21%
Republic of Korea  22%  22%

For the three months ended June 30, 2021, and July 31, 2020, the Company’s consolidated effective tax rate was -26.7% and 11.3%, respectively. Our consolidated effective tax rate for the three months ended June 30, 2021, was different from the federal statutory rate primarily due to $7,376,788. $544,000the valuation allowance of $1,429,620 placed on certain deferred tax assets being carried forward or projected to reverse in future years due to the uncertainty of the value assignedCompany generating taxable income in the foreseeable future. Income taxes applicable to our foreign operations are not material in the derivative liabilityperiods presented.

The effective tax rate for the three months ended July 31, 2020, was recognized as a debt discountdifferent from the federal statutory rate primarily due to state income and franchise tax liabilities.

14

NOTE 6 - STOCKHOLDERS’ EQUITY

Common Stock

During the notes whilethree months ended June 30, 2021, the balanceCompany issued to DSSI 27,000,000 shares of $6,832,788 was recognized as a “day 1” derivative loss.


NOTE 10 - DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, “Derivatives and Hedging,” and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resultingits Class A Common Stock, including 15,000,000 shares in there being no explicit limit to the number of shares to be delivered upon settlementpayment of the above conversion options.


The Company determined our derivative liabilities to be a Level 3 fair value measurementloan Origination Fee and used a multi-nominal lattice model to calculate the fair value as12,000,000 shares in prepayment of January 31, 2018. The multi-nominal lattice model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the



18


multi-nominal lattice valuation model. The following weighted-average assumptions were used for the periodfirst year, as more fully discussed in Note 4. In addition, during the three months ended January 31, 2018:


Date of Inception

(May 5, 2017) to

January 31, 2018

Expected term

 0.22 – 4.93 year

Expected average volatility

 102% - 343%

Expected dividend yield

                       -   

Risk-free interest rate

 1.31% - 2,52%



The following table summarizesJune 30, 2021, the derivative liabilities included in the balance sheet at January 31, 2018:


Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance - May 5, 2017

 $ 

- 

Acquisition of derivative liability on reverse acquisition

93,349 

Addition of new derivatives recognized as debt discounts

594,000 

Addition of new derivatives recognized as warrant

242,969 

Addition of new derivatives recognized as loss on derivatives

6,597,095 

Gain on change in fair value of the derivative

(2,262,099)

Balance - January 31, 2018

 $ 

5,265,314 



ASC 815 requires we assess the fair market valueholders of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item. The following table summarizes the loss (gain) on derivative liability included in the income statement for the period of inception (May 5, 2017) to January 31, 2018.


Day one loss due to derivative liabilities on convertible notes payable and warrants

$

6,840,064 

Gain on change in fair value of the derivative

(2,262,099)

Loss on change in fair value of derivative liabilities

$

4,577,965 



NOTE 11 -  RELATED PARTY CONSIDERATIONS


Alchemist Holdings, LLC


As part of the acquisition of Total Travel Media (see Note 1), Alchemist Holdings, LLC (“Alchemist”), which is controlled by our Chairman, Robert Oblon, received 7,500,00010,000 shares of the Company’s Series B Convertible Preferred Stock (75% of the issued shares) and 7,500,000C preferred stock converted such holdings into 10,000 shares of the Company’s Class A Common Class B Stock (75%Stock.

As of the issued shares), respectively.


As part of the acquisition of Four Oceans Holdings, Inc. (see Note 1), Alchemist received 50,000,000June 30, 2021, 187,110,769 shares of our Class A Common Stock remained issued and outstanding.

NOTE 7 - RELATED PARTY TRANSACTIONS

Decentralized Sharing Systems, Inc.

In July 2020, the Series A Convertible Preferred Stock (66.7%Company and Heng Fai Ambrose Chan, a Director of the issued shares).


On March 15, 2017, the Company, entered into a ConsultancyStock Purchase and MarketingShare Subscription Agreement with Alchemist(the “SPA Agreement”) pursuant to provide marketing and consulting services, tools, websites, video production and event management services.  The Agreement shall remainwhich Mr. Chan invested $3.0 million in effect until the completion of the services. The Agreement may be terminated by the Company without cause and without liability by giving 14 calendar days written notice of such termination to Alchemist.  Total costin exchange for these services were estimated to be $840,000 for twelve months from agreement date. The Company has paid $862,361 to the related party, pursuant to this agreement, during the period ended January 31, 2018. Of this amount, $ 694,207 was paid post reverse acquisition (May 23, 2017) and is included in the marketing



19


expense in the accompanying financial statements.  For the period ended January 31, 2018 there was $69,000 paid to related parties for other services.


The Company purchased property, plant and equipment of $18,928 and inventory amounting to $42,890 from Alchemist, during the period from May 23, 2017 (inception) to January 31, 2018.

Subsequent to January 31, 2018, approximately $35,500 was paid to related parties.

Promissory Note - Bear Bull Market Dividends, Inc.


As part of the acquisition of Total Travel Media (see Note 1), Bear Bull Market Dividends, Inc. (“Bear Bull”), received 2,500,00030.0 million shares of the Series B Convertible PreferredCompany’s Class A Common Stock (25% of the issued shares) and 2,500,000a fully vested Stock Warrant to purchase up to 10.0 million shares of the Company’s Class A Common Class B Stock (25%at an exercise price of $0.20 per share. On the stock warrant issuance date, the closing price for the Company’s common stock was $0.177 per share and the Company recognized a deemed dividend of $2.4 million. Simultaneously with the SPA Agreement, Mr. Chan and Decentralized Sharing Systems, Inc. (“DSSI”), a subsidiary of Document Security Systems, Inc.(“DSS”), and, together with DSS, 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. In July 2020, the Company issued shares), respectively.


As part30.0 million shares 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 acquisitionSPA Agreement, the shares of Four Oceans Holdings, Inc. (seeClass A Common Stock issued to DSS are subject to a one (1) year restriction. The Stock Warrant issued pursuant to the SPA Agreement expires on the third anniversary from the issuance date, unless exercised earlier.

On April 5, 2021, the Company and DSSI entered into a Securities Purchase Agreement, pursuant to which the Company issued: (a) a Convertible Promissory Note 1), Bear Bull received 20,000,000in the principal amount of $30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Warrant to purchase up to 150,000,000 shares of the SeriesCompany’s Class A Convertible PreferredCommon Stock, (26.7%at $0.22 per share, and DSSI loaned to the Company $30.0 million. Under the terms of the issued shares).loan, the Company agreed to pay to DSSI a loan Origination Fee of $3.0 million, payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share. See Note 4 for more information.


On April 7,As of June 30, 2021, DSS and its affiliates owned 91.2 million shares of the Company’s Class A Common Stock, excluding 160.0 million shares issuable upon the exercise of warrants held by DSS and 150.0 million shares issuable upon conversion of the Note discussed in the preceding paragraph. Heng Fai Ambrose Chan, Frank D. Heuszel, and John (“JT”) Thatch, each a Director of the Company, also serve on the Board of Directors of DSS. Mr. Thatch also serves as President, CEO and Interim Chairman of the Board of Directors of the Company.

HWH International, Inc.

In October 2017, the Company issued a Promissory Note to Bear Bull, for $16,500, due April 6, 2018. The Note carries an annual interest rate of 12%. As of January 31, 2018, the accrued interest on the note amounted to $1,627.


Convertible Promissory Note – Caye Island Ventures LLC


On November 13, 2017, the Company received financing in the amount of $50,000 from Cay Island Ventures LLC, a Company owned by a shareholder of Sharing Services. The $50,000 convertible promissory note bears 12% interest and matures on November 13, 2018. The holder shall be entitled, commencing 180 days from November 13, 2017, to convert any portion of the outstanding and unpaid conversion amount into fully paid and non-assessable shares of Common Stock. Conversion price which is 80% of the average of the lowest two traded prices, determined on the then current trading market for the Company’s common stock, for the 15 trading days prior to conversion. The Company may prepay any portion of the principal amount at 115% of such amount along$50,000 (the “Note”) to HWH International, Inc (“HWH” or the “Holder”). HWH is affiliated with any accrued interest of this note at any time upon three days written notice to the holder. The Company valued the conversion feature using the Binomial option pricing valuation model (see Note 10).  The fair valueHeng Fai Ambrose Chan, who in April 2020 became a Director of the derivative liability for the note amounted to $57,276. $50,000 of the value assigned to the derivative liability was recognized as a debt discount to the note while the balance of $7,276 was recognized as a “day 1” derivative loss.Company. The discountNote is being amortized over the life of the note using the effective interest method resulting in $10,822 of interest expense and $39,178 as unamortized discount, for the period ended January 31, 2018. As of January 31, 2018, the Company accrued interest on this note of $1,315 and recorded $1,315 in interest expense for the period from inception (May 5, 2017) to January 31, 2018.


Other


During the period from May 5, 2017 to January 31, 2018, the Company paid no management fees to our CEO and CFO.


NOTE 12 - STOCKHOLDERS’ DEFICIT


Preferred Stock


The Company has authorized 200,000,000 preferredconvertible into 333,333 shares with a par value of $0.0001 per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.


Series A Convertible Preferred Stock


The Company has authorized the issuance of one hundred million (100,000,000) shares of Series A Preferred Stock.  The Series A Preferred shares are senior in ranking to the Series C Preferred shares, but junior to the Series B Preferred shares.  The affirmative vote of the holders of Eighty-six percent (86%) of the issued and outstanding shares of Series A Preferred Stock shall be required for the Board of Directors to: (i) declare dividends upon shares of common stock unless the Series A Preferred shares are to receive the same dividend as the common shares, on an



20


as converted basis; (ii) redeem the shares of Series A Preferred Stock at a price of $0.001 per share; (iii) authorize or issue additional or other capital stock that is junior or equal rank to the Series A Preferred shares with respect to the preferences as to distributions and payments upon the liquidation or dissolution and winding up of the Company; and (iv) amend, alter, change, or repeal any of the powers, designations, preferences, and rights of the Series A Preferred Stock.  Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall receive out of the assets of the Company the sum of $0.001 per shares before any payment or distribution shall be made on the Common Stock, or any other class of capital stock of the Company ranking junior to the Series A Preferred Stock.  For a period of ten (10) years from the date of issuance of shares of Series A Preferred Stock, the holders may elect to convert each share of Series A Preferred Stock into one share of the Company’s Common Stock. Each shareConcurrent with issuance of Series A Preferred Stock is entitled to one vote when voting as a class or together with shares of Common Stock.


From May 5, 2017 to January 31, 2018,the Note, the Company issued the followingto HWH a detachable stock warrant to purchase up to an additional 333,333 shares of Series A Convertible Preferred Stock:


·

On January 10, 2018 we issued 625,000 shares of Series A Convertible preferred stock to 561 LLC, as part of an equity investment for 25% of 561 LLC. The shares were issued for a deemed value of $0.25 per share or $156,250 (see Note 4).


·

On January 10, 2018 we issued 625,000 shares of Series A Convertible preferred stock to America Approved Commercial LLC, as part of an equity investment for 25% of America Approved Commercial LLC. The shares were issued for a deemed value of $0.25 per share or $156,250 (see Note 4).


·

On January 10, 2018, we issued 250,000 shares of Series A Convertible preferred stock to Medical Smart Care LLC, as part of an equity investment for 40% of Medical Smart Carer LLC. The shares were issued for a deemed value of $0.25 per share or $62,500 (see Note 4).


·

On October 4, 2017, we issued 500,000 shares of Series A Convertible preferred stock to LEH Insurance Group LLC, as part of an equity investment for 40% of to LEH Insurance Group LLC. The shares were issued for a deemed value of $0.25 per share or $125,000 (see Note 4).


·

On October 4, 2017, we issued 250,000 shares of Series A Convertible preferred stock to Medical Smart Care LLC, as part of an equity investment for 40% of Medical Smart Care LLC. The shares were issued for a deemed value of $0.25 per share or $62,500 (see Note 4).


·

On October 4, 2017, we issued 625,000 shares of Series A Convertible preferred stock to America Approved Commercial LLC, as part of an equity investment for 25% of America Approved Commercial LLC. The shares were issued for a deemed value of $0.25 per share or $156,250 (see Note 4).


·

On October 4, 2017, we issued 625,000 shares of Series A Convertible preferred stock to 561 LLC, as part of an equity investment for 25% of 561 LLC. The shares were issued for a deemed value of $0.25 per share or $156,250 (see Note 4).


·

On September 29, 2017, we issued 75,000,000 shares of Series A Convertible preferred stock, 50,000,000 shares to Alchemist Holdings, 20,000,000 shares to Bear Bull Market Dividends, Inc., and 5,000,000 shares  to Research and Referral, BZ; as an acquisition for 100% of Four Oceans Holdings, Inc. The acquisition was under common control and the deemed value was the historical cost of Four Oceans Holdings, Inc. (see Note 1).


·

From June to July, 2017, we issued 1,065,790 shares of Series A Convertible preferred stock to consultants for a deemed value of $0.25 per share or $266,448.


·

On May 31, 2017, we issued 5,628,750 shares of Series A Convertible preferred stock to 212 Technologies, LLC, as part of an equity investment for 24% of 212 technologies, LLC. The shares were issued for a deemed value of $0.25 per share or $1,407,188 (see Note 4).


As of January 31, 2018, 85,194,540 shares of series A Convertible Preferred Stock were issued and outstanding.  




21


Series B Convertible Preferred Stock


The Company has authorized the issuance of ten million (10,000,000) series of Series B Preferred Stock.  The Series B Preferred shares are senior in ranking to the Series A and Series C Preferred shares.  The affirmative vote of the holders of Eighty-six percent (86%) of the issued and outstanding shares of Series B Preferred Stock shall be required for the Board of Directors to: (i) declare dividends upon shares of common stock unless the Series B Preferred shares are to receive the same dividend as the common shares, on an as converted basis; (ii) redeem the shares of Series B Preferred Stock at a price of $0.001 per share; (iii) authorize or issue additional or other capital stock that is senior, junior or equal rank to the Series B Preferred shares with respect to the preferences as to distributions and payments upon the liquidation or dissolution and winding up of the Company; and (iv) amend, alter, change, or repeal any of the powers, designations, preferences, and rights of the Series B Preferred Stock.  Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series B Preferred Stock shall receive out of the assets of the Company the sum of $0.001 per shares before any payment or distribution shall be made on the Common Stock, or any other class of capital stock of the Company ranking junior to the Series B Preferred Stock.  For a period of ten (10) years from the date of issuance of shares of Series B Preferred Stock, the holders may elect to convert each share of Series B Preferred Stock into one share of the Company’s Common Stock.  Each shareStock, at an exercise price of Series B Preferred Stock$0.15 per share. Under the terms of the Note and the detachable stock warrant, the Holder is entitled to one vote when voting ascertain financing rights. If the Company enters into more favorable transactions with a classthird-party investor, it must notify the Holder and one thousand votes when voting togethermay have to amend and restate the Note and the detachable stock warrant to be identical. As of the date of this Quarterly Report, the Company and HWH are jointly reviewing the Note and the detachable stock warrant. The number of shares that HWH may acquire upon conversion of the HWH Note and exercise of the detachable warrant may be greater than the amounts described in this paragraph, depending on the results of such review.

HWH World, Inc.

A subsidiary of the Company operating in the Republic of Korea subleases office space from HWH World, Inc., a subsidiary of DSS and a company affiliated with sharesHeng Fai Ambrose Chan, a Director of Common Stock.the Company. Under the terms of the sublease agreement, the Company’s subsidiary occupies the space free of rent.


OnK Beauty Research Lab. Co., Ltd

In January 2021 and May 23, 2017, pursuant to the Share Exchange Agreement (See Note 1),2021, the Company issued 10,000,000 sharespurchase orders to acquire skin care products manufactured by K Beauty Research Lab. Co., Ltd (“K Beauty”), a South Korean-based supplier of Series B convertible preferred stockskin care products that is affiliated with Heng Fai Ambrose Chan, a Director of the Company, in the amount of $0.4 million and $2.2 million, respectively. The Company’s affiliates operating in Asia intend to distribute skin care and other products in South Korea and other countries, including skin care products procured from K Beauty, as part of the stockholdersCompany’s previously announced strategic growth plans.

15

Premier Packaging Corporation

In the three months ended June 30, 2021, the Company issued purchase orders to Premier Packaging Corporation, a subsidiary of Total Travel MediaDSS, to acquire printed packaging materials in the aggregate amount of $151,509.

NOTE 8 – STOCK-BASED COMPENSATION

Stock Warrants

Stock Warrants Issued to Directors, Officers and Employees

In July 2020, the Company and Heng Fai Ambrose Chan, a Director of the Company, entered into a Stock Purchase and Share Subscription Agreement (the “SPA Agreement”) pursuant to which Mr. Chan invested $3.0 million in the Company in exchange for 10,000,00030.0 million shares of Total Travel Media’s common stock, representing 100% of its issuedthe Company’s Class A Common Stock and outstanding common stock. As a resultfully vested Stock Warrant to purchase up to 10.0 million shares of the reverse acquisition accounting, these shares issued to the former Total Travel Media stockholders are treated as being outstanding from the date of issuance of the Total Travel Media shares.


As of January 31, 2018, 10,000,000 shares of series B Preferred Stock were issued and outstanding.


Series C Convertible Preferred Stock


The Company has authorized the issuance of ten million (10,000,000) series of Series C Preferred Stock.  The Series C Preferred shares are junior in ranking to the SeriesCompany’s Class A and Series B Preferred shares.  The affirmative vote of the holders of Eighty-six percent (86%) of the issued and outstanding shares of Series C Preferred Stock shall be required for the Board of Directors to: (i) declare dividends upon shares of common stock unless the Series C Preferred shares are to receive the same dividend as the common shares, on an as converted basis; (ii) redeem the shares of Series C PreferredCommon Stock at aan exercise price of $0.001$0.20 per share; (iii) authorize or issue additional or other capital stock thatshare. In July 2020, Mr. Chan assigned to DSS all interests in the SPA Agreement and the transactions contemplated in the SPA Agreement were completed. Mr. Chan is junior or equal rank to the Series C Preferred shares with respect to the preferences as to distributions and payments upon the liquidation or dissolution and winding upalso a Director of the Company; and (iv) amend, alter, change, or repeal any of the powers, designations, preferences, and rights of the Series C Preferred Stock.  Upon the dissolution, liquidation, or winding up ofDSS.

In October 2017, the Company whether voluntary or involuntary,issued a convertible note in the holdersprincipal amount of the Series C Preferred Stock shall receive out of the assets of the Company the sum of $0.001 per$50,000 to HWH International, Inc (“HWH”) and a detachable stock warrant to purchase up to 333,333 shares before any payment or distribution shall be made on the Common Stock, or any other class of capital stock of the Company ranking junior to the Series C Preferred Stock.  For a period of ten (10) years from the date of issuance of shares of Series C Preferred Stock, the holders may elect to convert each share of Series C Preferred Stock into one share of the Company’s Common Stock.  Each shareStock, at an exercise price of Series C Preferred Stock$0.15 per share. The Note is entitled to one vote when voting as a class or together withconvertible into 333,333 shares of the Company’s Common Stock.Stock and expires in October 2022. HWH is affiliated with Heng Fai Ambrose Chan, who in April 2020 became a Director of the Company.


During fiscal year 2020; subsidiaries of the Company entered multi-year employment agreements with its key employees. In general, each employment contract contained a fully vested initial grant of warrants exercisable at a fixed exercise price and, provided for subsequent grants that were exercisable at a discounted price based on the 10-day average stock price determined at the time of exercise. The subsequent grants would vest at each anniversary date of the employment agreement effective date. The Company begins recognizing the compensatory nature of the warrants at the service inception date and ceases recognition at the vesting date. Due to the variable nature of the exercise price for some grants, the Company will continue to recognize expense (or benefit) after the end of the service period until the warrants are exercised or expire. As such, the Company disclosures below are based on either (i) the fixed exercise price of the warrant; or (ii) the variable exercise price of the warrant as determined on the last day of the period.

During the periodthree months ended JanuaryJune 30, 2021, we recognized a compensatory gain of $1,134,170, in connection with grants with a variable exercise price after service is completed. During the three months ended July 31, 20182020, we issued 3,680,000 sharesrecognized a compensatory loss of Series C Convertible Preferred Stock$1,123,500 in connection with such grants.

NOTE 9 – LEASES

The Company leases space for $0.25 per share, for proceeds of $920,000.


its offices and warehouse space, under lease agreements classified as “operating leases’” as defined in ASC Topic 842. As of January 31, 2018, 3,680,000 sharesJune 30, 2021, the Company had net operating lease right-of-use (“ROU”) assets of series C Preferred Stock$288,268 and net finance lease right-of-use assets of $0. As of June 30, 2021, our operating lease liabilities were issued$313,022 and outstanding.our finance lease liabilities were $0.


Common Stock


The Company has authorized the issuance of Class A common stockweighted-average remaining lease term and Class B common stock. We are authorized to issue 500,000,000 shares of Class A common stock and 10,000,000 shares of Class B common stock, each with a par value of $0.0001 per share. Holders of our Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by our board of directors, subjectdiscount rate related to the rightsCompany’s lease liabilities as of June 30, 2021, were 1.5 years and 12% respectively. The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as discount rates implicit in the Company’s leases cannot be readily determined.

16

The following information pertains to the Company’s leases as of the holders of all classes ofbalance sheet dates indicated:



SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES

Assets Classification June 30, 2021  March 31, 2021 
Operating leases Right-of-use assets, net $288,268  $428,075 
Operating leases, Right-of-use assets, net Right-of-use assets, net $288,268  $428,075 
Total lease assets   $288,268  $428,075 
           
Liabilities          
Operating leases Accrued and other current liabilities $260,623  $373,398 
Operating leases, Accrued and other current liabilities Accrued and other current liabilities $260,623  $373,398 
Operating leases Lease liability, long-term  52,399   77,810 
Operating leases, Lease liability, long-term Lease liability, long-term  52,399   77,810 
Total lease liabilities   $313,022  $451,208 

22


stock outstanding having priority rights to dividends.  The shares of each class of Common Stock shall be identical except that the holders of the Class B Common Stock shall be entitled to elect a majority of the Board of Directors and the holders of the Class A Common Stock shall elect the remainder of the directors.  Each share of Class B Common Stock shall be convertible at any time into one share of Common Stock at the option of the holder.  Class A common stock and Class B common stock are referred to as common stock throughout the notes to these financial statements, unless otherwise noted.


On September 26, 2017, the Company issued 1,500,000 shares of Class A common stock for consulting services, valued at $1,042,500.


On May 23, 2017, pursuantfollowing information pertains to the Share Exchange Agreement (See Note 1), the Company issued 10,000,000 shares of Class B common stock to the stockholders of Total Travel Media in exchange for 10,000,000 shares of Total Travel Media’s common stock, representing 100% of its issued and outstanding common stock. As a result of the reverse acquisition accounting, these shares issued to the former Total Travel Media stockholders are treated as being outstanding from the date of issuance of the Total Travel Media shares.

As of January 31, 2018, there were 54,860,000 shares of Class A common stock and 10,000,000 shares of Class B common stock issued and outstanding, respectively.


Shares Subscribed


As of January 31, 2018, the Company has received subscriptions for Series C Convertible Preferred Stock totaling $16,000.


Warrants


On October 6, 2018, we issued 333,333 warrants to purchase up to 333,333 shares of our common stock. The warrants are exercisable into 333,333 shares of common stock, for a period of five years from issuance, at a price of $0.15 per share subject to default provisions. As of January 31, 2018, there were 333,333 warrants outstanding. We accountedCompany’s leases for the issuance of Warrants in accordance with ASC 815 (see Note 10).periods indicated:


SCHEDULE OF OPERATING LEASE COSTS

    Three Months Ended 
Lease cost Classification June 30, 2021  July 31, 2020 
Operating lease cost General and administrative expenses $159,820  $140,223 
Operating lease cost Depreciation and amortization  -   - 
Operating lease cost Interest expense, net  -   - 
Total lease cost   $159,820  $140,223 

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

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

 

 

333,333

 

 

 

4.25

 

 

$

0.15

 

 

 

333,333

 

 

$

0.15

 



A summary of activity during the period from inception to January 31, 2018Company’s lease liability is payable as follows:


SCHEDULE OF OPERATING LEASE LIABILITY PAYABLE

 

 

Warrants Outstanding

 

 

 

 

 

 

Weighted

Average

 

 

 

Shares

 

 

Exercise

Price

 

Balance as of May 5, 2017

 

 

-

 

 

$

-

 

Granted

 

 

333,333

 

 

 

0.15

 

Exercised

 

 

-

 

 

 

-

 

Forfeited/canceled

 

 

-

 

 

 

-

 

Balance as of January 31, 2018

 

 

333,333

 

 

$

0.15

 




23


Twelve months ending June 30,   
2022 $260,623 
2023  52,399 
2024-2026  - 
Thereafter  - 
Total lease liability $313,022 


NOTE 13 -  10 – COMMITMENTS AND CONTINGENCIES


PursuantRegulatory Matters

In May 2021, the Company announced that it has received a notice from the pertinent licensing authority in the Republic of Korea, (“KOSSA”) that the multi-level license previously issued to the Company’s subsidiary organized in South Korea has been cancelled by KOSSA. The Company is actively reviewing all correspondence with KOSSA and investigating the facts surrounding the cancellation and reviewing its available options. As the Company announced earlier, the Company still intends to launch operations in South Korea in the foreseeable future and is working to resolve all outstanding issued raised by KOSSA.

Legal Matters in General

The Company has incurred several claims in the normal course of business. The Company believes such claims can be resolved without any material adverse effect on our 40% equity investmentconsolidated financial position, results of operations, or cash flows.

The Company maintains certain liability insurance. However, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims, in LEH Insurance Group LLC (“LEHIG”), on October 4, 2017, LEHIG based upon attaining certain benchmarks for booked insurance premiums through December 31, 2018, the sellerwhole or in part. The Company accrues costs to defend itself from litigation as they are incurred.

The outcome of litigation is uncertain, and despite management’s view of the LEHIG ownership may be entitled to an additional 1,000,000 sharesmerits of any litigation, or the reasonableness of the Company’s Series A Preferred Stock.  As of January 31, 2018,estimates and reserves, the Company’s financial statements could nonetheless be materially affected by an adverse judgment. The Company believes it has not recorded a contingency for this event.


Pursuant to our 25% equity investment in 561 LLC ("561"), on October 4, 2017, if, on October 4, 2018, the Company's common stock has a closing bid price in excess of $5.00 per share, the sellers of 561 ownership shall be entitled to an additional 2,500,000 shares of the Company's Series A Preferred Stock.  Additionally, at such time as the Company shall be the owner of record of no less than 40% of the member interests in each of 561 and it's affiliated Company, America Approved Commercial, LLC ("AAC"), the Sellers of 561 ownership shall be entitled to another 2,500,000 shares of the Company's Series A Preferred Stock.  As of January 31, 2018, the Company has not made a contingency for these events


Pursuant to our 25% equity investment in AAC, on October 4, 2017, if, on October 4, 2018, the Company's common stock has a closing bid price in excess of $5.00 per share, the sellers of the AAC ownership shall be entitled to an additional 2,500,000 shares of the Company's Series A Preferred Stock. Additionally, at such time as the Company shall be the owner of record of no less than 40% of the member interests in each of AAC and its affiliated company, 561, the sellers of AAC shall be entitled to another 2,500,000 shares of the Company's Series A Preferred Stock. As of January 31, 2018, the Company has not made a contingency for these events.


On January 3, 2018 the Company entered into a 36 month leaseadequately reserved for the new corporate offices (See subsequent events  Note 14).  contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated. No provision for legal matters was deemed necessary at June 30, 2021.

17

Legal Proceedings

The total lease commitmentCompany from time to time is $656,940.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)Case No. 4:20-cv-00946; Dennis Burback, Ken Eddy and Mark Andersen v. Robert Oblon, Jordan Brock, Jeff Bollinger, John Thatch, Four Oceans Global, LLC, Four Oceans Holdings, Inc., Alchemist Holdings, LLC, Elepreneurs U.S., LLC, Elevacity U.S., LLC, Sharing Services Global Corporation, Custom Travel Holdings, Inc., and Does 1-5, pending in the United States District Court for the Eastern District of Texas. On December 11, 2020, three investors in Four Oceans Global, LLC filed a lawsuit against the Company, its affiliated entities, and other persons and entities related to an investment made by the three investors in 2015. The Company and its affiliated entities have filed an answer denying the three investors’ claims. This matter remains pending as of June 30, 2021.
(b)AAA Ref. No. 01-20-0019-3907; Sharing Services Global Corporation, Elevacity Holdings, LLC, Elevacity U.S., LLC, Elepreneurs Holdings, LLC and Elepreneurs U.S., LLC v. Robert Oblon, pending before the American Arbitration Association. On December 30, 2020, the Company and its affiliated companies filed an arbitration complaint against Robert Oblon for breach of contract and a declaratory judgment relating to the Multi-Party Settlement Agreement with Robert Oblon. This matter remains pending as of June 30, 2021.
(c)Case No. 4:20-cv-00989; Sharing Services Global Corporation, Elevacity Holdings, LLC, Elevacity U.S., LLC, Elepreneurs Holdings, LLC and Elepreneurs U.S., LLC v. Robert Oblon, pending in the in the United States District Court for the Eastern District of Texas. On December 30, 2020, the Company and its affiliated companies filed a lawsuit against Robert Oblon seeking injunctive relief relating to the Multi-Party Settlement Agreement with Robert Oblon. This matter is a companion case to the AAA arbitration proceeding described in paragraph (b) above and, while it remains pending as of June 30, 2021, further action in this case has been stayed by court order, pending final adjudication of the referenced AAA arbitration proceeding.
(d)Case No. 4:21-cv-00026; Elepreneurs Holdings, LLC d/b/a Elepreneur, LLC, Elepreneurs U.S., LLC d/b/a Elepreneurs, LLC, and SHRG IP Holdings, LLC v. Lori Ann Benson, Andrea Althaus and Lindsey Buboltz, pending in the United States District Court for the Eastern District of Texas. On December 31, 2020, the Company filed suit against three former distributors and obtained injunctive relief from the 429th Judicial District of Collin County, Texas. The lawsuit was removed by the three former distributors to federal court. The Company subsequently obtained injunctive relief from the federal court. The matter remains pending as of June 30, 2021.
(e)Case No. 4:21-cv-00183; Sharing Services Global Corporation f/k/a Sharing Services, Inc., Elepreneurs Holdings, LLC n/k/a Elevacity Holdings, LLC, Elepreneurs U.S., LLC n/k/a Elevacity U.S., LLC and SHRG IP Holdings, LLC v. AmplifeiIntl, LLC d/b/a HAPInss and HAPInssBrands, LLC pending in the United States District Court for the Eastern District of Texas. On March 5, 2021, the Company and its affiliated entities filed suit against a newly formed competitor for various claims including trademark infringement, trade secret violations, unfair competition under state and federal law as well as tortious interference with contracts and business relationships. The matter remains pending as of June 30, 2021.
(f)On December 4, 2019, Entrepreneur Media, Inc. 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 pending before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office. On April 13, 2020, SHRG IP Holdings, LLC filed an answer to the Notice of Opposition. A scheduling order has been entered and the parties have exchanged initial disclosures. This matter remains pending as of June 30, 2021.

18

NOTE 11 - FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Our financial instruments consist of cash equivalents, if any, accounts receivable, notes receivable, investments in unconsolidated entities, accounts payable and convertible notes payable. The monthly lease expense is $17,336 forcarrying amounts of cash equivalents, if any, trade accounts receivable and accounts payable approximate their respective fair values due to the first 12 months.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:

SUMMARY OF FINANCIAL ASSETS AND LIABILITIES

  June 30, 2021 
  Total  Level 1  Level 2  Level 3 
Assets                
                 
Notes receivable $84,529  $-  $-  $84,529 
Total assets $84,529  $-  $-  $84,529 
Liabilities                
Notes Payable $-  $-  $-  $- 
Convertible notes payable  36,092,254   -   -   36,092,254 
Total liabilities $36,092,254  $-  $-  $36,092,254 

  March 31, 2021 
  Total  Level 1  Level 2  Level 3 
Assets            
             
Notes receivable $94,600  $-  $-  $94,600 
Total assets $94,600  $-  $-  $94,600 
Liabilities                
Notes Payable $1,040,400  $-  $-  $1,040,400 
Convertible notes payable  134,393   -   -   134,393 
Total liabilities $1,174,793  $-  $-  $1,174,793 


NOTE 1412 - SUBSEQUENT EVENTS


Subsequent to January 31, 2018, and through to March 21, 2018, the date these financials were approved to be issued, we had the following subsequent events:


On February 8, 2018,July 28, 2021, the Company closed a lineheld its Annual Meeting of credit financing transaction whereby the Company borrowed the sum of Two Hundred Fifty Thousand dollars ($250,000.00) from an accredited investor, RB Capital Partners, Inc. (the “ Lender ” ). The transaction involved the issuance by the Company in favor of the Lender of a Convertible Promissory Note (the “ Note ” ) in the principal amount of $250,000.00. The Note accrues interest at the rate of Twelve percent (12%) per annum with the principal amount and all accrued interest being due and payable on demand y the Lender.Stockholders. At the optionmeeting, the Company’s Shareholders: (i) ratified the Second Amended and Restated Articles of the Lender, the Note is convertible into sharesIncorporation of the Company, ’ s common stock at any time following 180 days from its issuance.


On March 1, 2018, Jordan Brock, Robert Oblon, and Frank A. Walters were elected as directors to for a one (1) year term or until their successors are elected and qualified.  On March 1, 2018, Jordan Brock, President and Chief Executive Officer of the Company, resigned as President and Chief Executive Officer.  On the same date, Mr. Brockwhich was appointed to the position of Vice President of the Company.  He remains a director of the Company.


On March 1, 2018,previously approved by the Board of Directors, appointed John (“JT”) Thatch toand (ii) ratified the positionappointment by the Board of President, Chief Executive Officer, and a directorDirectors of Ankit Consulting Services, Inc., Certified Public Accountants as the Company.


OnCompany’s independent registered public accounting firm for the fiscal year ending March 7th 2018, the Company moved into its new corporate offices.  The Company and its wholly owned subsidiaries will now operate31, 2022. No other matters were proposed or voted on at the new addressmeeting. The Second Amended and Restated Articles of 1700 Coit Rd. Suite 100, Plano, Texas 75075. This new location is slightly less than 10,000 Sq. Ft. allowing for expansion forIncorporation ratified at the customer service department, product fulfillment, opportunity and training rooms as well as a video production suite.





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On March 16, 2018, the Company closed a line of credit financing transaction whereby the Company borrowed the sum of Two Hundred Fifty Thousand dollars ($250,000.00) frommeeting, among other things, resulted in an accredited investor, RB Capital Partners, Inc. (the “ Lender ” ). The transaction involved the issuance by the Company in favor of the Lender of a Convertible Promissory Note (the “ Note ” )increase in the principal amountnumber of $250,000.00. The Note accrues interest at the rate of Twelve percent (12%) per annum with the principal amount and all accrued interest being due and payable on demand by the Lender. At the option of the Lender, the Note is convertible into shares of the Company ’ s commonCompany’s stock at any time following 180 days from its issuance.to 1,000,000,000 shares, including: (a) 800,000,000 shares of Common Stock having a par value of $0.0001 per share, and (b) 200,000,000 shares of Preferred Stock having a par value of $0.0001 per share and comprised of the Company’s Convertible Series A Preferred Stock and Convertible Series C Preferred Stock.




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19

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


In its fiscal year 2021, the Company changed its fiscal year-end from a fiscal year ending on April 30 to a fiscal year ending on March 31. The following discussionsection discusses management’s views of ourthe financial condition and the results of operations and cash flows of Sharing Services Global Corporation and consolidated subsidiaries. This section should be read in conjunction withwith: (a) our unauditedaudited consolidated financial statements and related notes included in our Transition Report on Form 10-K for the transition period ended March 31, 2021, and (b) our condensed consolidated financial statements and associated notes appearingincluded elsewhere in this Report on Form 10-Q.Quarterly Report. This discussion containssection may contain forward-looking statements based upon current expectations that involve risks and uncertainties.statements. See “Cautionary NoteNotice Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by anyStatements” above for a discussion of forward-looking statements as a resultstatements.

Highlights for the Three months ended June 30, 2021:

●For the three months ended June 30, 2021, our consolidated net sales decreased $10.7 million, or 48.8%, to $11.2 million, compared to the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated gross profit decreased $8.1 million, or 50.9%, to $7.9 million, compared to the three months ended July 31, 2020. Our consolidated gross margin was 70.1% for the three months ended June 30, 2021, compared to 73.1% for the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated operating expenses decreased $6.1 million, or 38.1%, to $9.9 million, compared to the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated operating loss was $2.0 million compared to operating earnings of $29,032 for the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated net non-operating expenses were $779,049 compared to $1.2 million for the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated net loss was $3.5 million compared to $1.0 million for the three months ended July 31, 2020. For the three months ended June 30, 2021, our diluted loss per share was $0.02, compared to $0.01 for the three months ended July 31, 2020.
●For the three months ended June 30, 2021, our consolidated net cash used by operating activities was $6.0 million compared to $3.7 million for the three months ended July 31, 2020.
●In April 2021, the Company borrowed $30.0 million from Decentralized Sharing Systems, Inc. (“DSSI”), a subsidiary of Document Security Systems, Inc.(“DSS”), and, together with DSS, a major shareholder of the Company.
●In April 2021, the Company issued to DSSI 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of a loan Origination Fee of $3.0 million and 12,000,000 shares in prepayment of $2.4 million in interest in connection with the DSSI loan discussed above.

Overview

Summary Description of various factors, includingBusiness

Currently, the risksCompany markets and uncertainties described under “Risk Factors.”, as set forth in our Annual Report on Form 10-K filed with the SEC on September 11, 2017.


Recapitalization.


Our acquisition of Total Travel Media, Inc., a Nevada corporation (“Total Travel”) discussed below was accounted for as a recapitalization of Total Travel since the shareholders of Total Travel obtained votingdistributes its health and managing control of our Company. Total Travel was the acquirer for financial reporting purposeswellness and Sharing Services, Inc. was the acquired company. Consequently, the consolidated financial statements after completion of the acquisition include the assets and liabilities of both Sharing Services and Total Travel, the historical operations of Total Travel and their consolidated operations from the May 23, 2017 closing date of the acquisition. Total Travel retroactively applied its recapitalization for all periods presentedother products primarily in the accompanying consolidated financial statements.United States, Canada, the Republic of Korea, and other countries in the Asia Pacific region. Through its subsidiaries, the Company currently markets its products and services primarily through an independent sales force, using a direct selling business model. The Company does not currently operate retail stores. It markets its products and services through its independent sales force, using its proprietary websites, including: www.thehappyco.com and using social media.


Total TravelThe Company is an emerging growth company and was incorporated in the State of Nevada on May 5, 2017. Total Travel wasin April 2015.

Convertible Notes and Borrowing Under Short-term Financing Arrangements

Historically, the surviving companyCompany has funded a substantial portion of its liquidity and became a wholly owned subsidiarycash needs through the intermittent issuance of Sharing Services. 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.

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Industry and Business Trends

The financial statements reflectedinformation in this 10-Q as of January 31, 2018 represents the period May 5, 2017 (date of inception) to January 31, 2018.


The financial statements“Industry and Business Trends” included in this report reflect all adjustments, consistingITEM 1 — “Business” in our Transition Report on Form 10-K for the fiscal year ended March 31, 2021, is incorporated herein by reference.

Change of normal recurring adjustments, whichFiscal Year

In March 2021, the Company adopted a change in the opinion of management are necessary for fair presentation of the information contained therein.


Our History.


We were incorporated in Nevadaits fiscal year end, from a fiscal year ending on April 24, 2015 under the name Sharing Services, Inc. and were engaged in the development of a taxi sharing web application.  In early 2017, we proposed expanding our business model into that of a diversified travel holdings company specializing in ride sharing, mobile applications, Social Travel Alchemy, relationship marketing, group travel programs, brick-and-mortar travel agencies, and vacation funding.  The adoption of the new business model was completed when, on May 23, 2017, we completed a reverse merger with Total Travel Media, pursuant to which the Company acquired all of the shares of capital stock of Total Travel Media from the holders of such stock, in exchange for the issuance of Ten Million (10,000,000) newly-issued shares of the Company’s Common Class B Stock, par value $0.0001 per share and (ii) Ten Million (10,000,000) newly-issued shares of the Company’s Series B Preferred Stock, par value $0.0001 per share. After the reverse merger, we continued Total Travel’s historical and proposed business.


Business Description


Sharing Services, Inc. is a diversified holding company specializing in the direct selling industry. The Company owns, operates, or controls an interest in a variety of companies that either sell products to the consumer directly through independent representatives or offers services that range from manufacturing, processing, training, and travel benefits.


With the acquisition of Total Travel Media, Inc. on May 23, 2017, Sharing Services, Inc. (“Sharing Services”) completed the transition of its principal business operations from that of a taxi sharing web application30 to a travelfiscal year ending on March 31. Accordingly, this discussion and technology management Company utilizing a direct-selling model with a subscription-based vacation portal.


Sharing Services is a diversified travel holdings company specializing in ride sharing, mobile applications, 4.0 meta-search technologies, relationship marketing, group travel programs, and brick-and-mortar travel agencies. The Company’s direct-to-consumer online travel agent (OTA) platform delivers unprecedented accessanalysis relates to many of today’s most popular travel destinations, and all with savings of up to 30% and 80% off published rates.




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The objective of the Company is to scale revenues based on relationship marketing that are proven with the right travel related products and services. Sharing Services will launch a direct selling model with a subscription-based vacation portal accessing the new meta-search 4.0 technology.  Included in the subscription will be Vacation Financing options, Seminars on Vacation (called Vacationars) and below published fares with guaranteed lower rates than Expedia.


Metro-search is defined by a “search within a search”. Examples would be Kayak and Trivago, where consumers can search one time and access hundreds of websites. Sharing Services new meta-search 4.0 goes beyond Kayak and Trivago in two important ways: the fares searched (hotels) garner below published pricing and Sharing Services agents fulfill on the travel booked, rather that redirect the chosen result at Kayak for example, to the website the offer was made on. These two differentiators will help Sharing Services travel companies gain market share of travelers from around the world.  On February 1, 2017, the Company launched its (BETA) website.


Results of Operations for the Period of Inception (May 5, 2017) to January 31, 2018


As the Company was incorporated on May 5, 2017, we do not have historical operations to base current results on. The results related to the current operations do not include historical results of operations for Sharing Services prior to May 23, 2017 when we acquired Total Travel Media as noted above.


Overview


For quarterly period ended January 31, 2018, we had revenues of $960,182, cost of sales of $673,551, gross profits of $286,631, and operating expenses of $312,083, for an operating loss of $25,452. Our other expenses totaled  $3,573,603, giving us a total net loss of $3,599,055.


Since May 5, 2017 (inception) through January 31, 2018, the Company has had revenues of $960,182, costs of sales of $673,551, gross profits of $286,631, and operating expenses of $2,433,680, for an operating loss of $2,157,049.  Our other expenses totaled $4,819,389, giving us a total net loss and accumulated losses since inception of $6,976,438.  


January 31,

2018

Cash and cash equivalents

$

175,451 

Total Assets

3,359,194 

Total Liabilities

5,989,362 

Stockholders’ Equity/Deficit

$

(2,630,168)



Operating Expenses and Loss from Operations


 

 

Date of Inception

 

 

(May 5, 2017) to

 

For the Quarter Ended

January 31,

 

January 31, 2018

2018

General and administration

$

194,201

 

288,971

Marketing expenses

-

 

694,207

Stock based compensation

-

 

1,308,948

Professional fees

117,882

 

151,554

Total Operating Expenses       

$

312,083

 

2,443,680



During the Quarter ended January 31, 2018 our loss from operations and operating expenses was $25,452.


Since inception (Mar 5, 2017) through January 31, 2018, our loss from operations and operating expenses were $2,157,049, primarily from marketing expenses of $694,207 and share based compensation of $1,308,948 incurred



27


prior to the most recent quarter. The marketing expenses were for payments made to a related party, who was a significant shareholder and now Chairman of the Board of the Company, pursuant to a consulting and marketing agreement dated March 15, 2017, to provide marketing and consulting services, tools, websites, video production and event management services.  Stock based compensation is related to the issuance of 1,500,000 shares of common stock, to consultant, at a deemed value of $0.695 per share and the issuance of 1,065,790 shares of Series A Convertible Preferred Stock, to consultants, at a deemed value of $0.25 share.


Other Expenses


 

 

Date of Inception

 

For the Quarter Ended

(May 5, 2017) to

 

January 31, 2018

January 31, 2018

 

 

 

Interest expense

$

118,229

$

241,424

Change in fair value of derivative liability

3,455,374

 

4,577,965

Total Other Expenses              

$

3,573,603

$

4,819,389



For the Quarter ended January 31, 2018, interest expenses consisted of $92,790 for the amortization of the debt discount on convertible notes and $25,439 for interest expenses on notes payable. The change in fair value of derivative liability represents the day one derivate expense on inception of the convertible notes and warrants of $4,595,778 less a derivative revaluation gain at January 31, 2018 of $1,140,404.


Since inception (Mar 5, 2017) through January 31, 2018, interest expenses consisted of $183,300 for the amortization of the debt discount on convertible notes, prepayment penalties of $43,476 and $14,648 for interest expenses on notes payable.  The change in fair value of derivative liability represents the day one derivative expense on inception of the convertible notes and warrants of $6,840,064 less a derivative revaluation gain at January 31, 2018 of $2,262,099.


Liquidity and Capital Resources


The following tables present selected financial information on our capital and cash flows as of and for the periodthree months ended JanuaryJune 30, 2021 (91 days) compared to the three months ended July 31, 2018:2020 (92 days).


 

January 31,

 

2018

Current Assets

$

930,833

Current Liabilities

 

5,989,362

Working Capital Deficiency

$

5,058,529



Date of Inception

(May 5, 2017) to

January 31,

2018

Cash Flows used in Operating Activities

$

(1,156,392)

Cash Flows used in Investing Activities

(506) 

Cash Flows provided by Financing Activities

1,332,349 

Net Increase in Cash During Period

$

175,451 


Strategic Profitable Growth Initiatives




The Company intends to grow its business by pursuing a multipronged growth strategy, which includes increasing the number of product offerings in the U.S. and Canada expanding US sales directly to foreign consumers, opening offices and sales activities in the Asia Pacific region, and developing and launching a travel membership program. This growth strategy may also include the use of strategic acquisitions of businesses that augment the Company’s product and services portfolio, business competencies and geographic reach.

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AsSignificant Uncertainty Regarding the Potential Impact of January 31, 2018,Ongoing COVID Health Crisis

In efforts to protect our customers, distributors, employees, and other business partners, in 2020, we instituted several preventive measures, including temporarily transitioning a significant number of our corporate employees to working capital deficiencyremotely, increasing efforts to clean and sanitize our business facilities, increasing employee safety communication, and transitioning our sales conventions to a virtual convention platform. Some of these temporary measures have increased our already significant reliance on telephone and computer systems and on the availability of continued and impeded access to the Internet by our business. The timing when these temporary measures will be eased or reversed altogether is primarilycontingent on the success of current efforts, by governmental policy makers, health service providers, and others, to contain the pandemic. At the time of this Quarterly Report, we cannot project with certainty the timing and extend of any potential easing or reversal of our temporary preventive measures.

There continues to be significant uncertainty in the countries where we operate about (a) the timing and availability of sufficient vaccines, (b) the timing and speed of any economic recovery, and (c) the impact in consumer demand, if any, resulting from past and future economic stimulus and relief programs. As a result of currently liabilitiesthe foregoing, we cannot predict the ultimate scope, duration, and ultimate impact of the COVID public health emergency, but we believe it may have a material adverse impact on our business, financial condition, cash flows, and results of operations (including revenues and profitability), and those of our key suppliers.

Results of Operations

The Three months ended June 30, 2021, Compared to the Three months ended July 31, 2020

Net Sales

The Company recently changed its fiscal year, from a derivative liabilityfiscal year ending on April 30 to a fiscal year ending on March 31. For the three months ended June 30, 2021 (91-days), our consolidated net sales decreased by $10.7 million, or 48.8%, to $11.2 million, compared to the three months ended July 31, 2020 (92 days). The decrease in net sales mainly reflects: (a) one less day of $5,265,314, convertible notes payable of $82,300 (net of unamortized discount) and notes payable totaling $51,500.  Our current assets consisted primarily of cashsales in the amount of $175,451, accounts receivableapproximately $238,000 (b) continuation of $366,269,the decline in consumer orders that we experienced since the fourth quarter of the fiscal year 2020, (c) a decline in independent distributor orders, in the number of new independent distributors and prepaidin the number of continuing active distributors, resulting, in part, from recent product reformulations and increased competition for independent distributors, and (d) the generally adverse impact on consumer buying trends resulting from the COVID global health emergency and actions taken to help mitigate the spread of the virus in the geographies in which we operate. In efforts to restore strong sales growth, in the past several months, we have developed and launched our new business brand, “The Happy Co TM,” at our Elevacity division, have accelerated our previously announced initiatives to expand our operations into additional international geographies, and have further intensified our efforts to recruit, develop and reward our distributors and our efforts reach new consumers, including through the continued introduction of new products.

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

The $10.7 million decrease in consolidated net sales primarily reflects a decrease in number of comparable product units sold, partially offset by sales of products introduced since July 31, 2020, of approximately $3.4 million.

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During the three months ended June 30, 2021, the Company derived substantially all its consolidated net sales from the sale of its Elevate health and wellness product line. During the three months ended July 31, 2020, the Company derived approximately 98% of its consolidated net sales from the sale of its Elevate health and wellness product line.

During the three months ended June 30, 2021, approximately 70% of our net sales were to customers (including approximately 31% to recurring customers, which we refer to as “SmartShip” sales, and approximately 39% were to new customers) and approximately 30% of our net sales were to our independent distributors.

Gross Profit

For the three months ended June 30, 2021, our consolidated gross profit decreased by $8.1 million, or 50.9%, to $7.9 million, compared to the three months ended July 31, 2020, and our consolidated gross margins were 70.1% and 73.1%, respectively. For the three months ended June 30, 2021, gross margin was affected by a provision for excess (slow-moving) inventory $116,334 and a shift in product sales mix (to lower margin products) in the normal course of business.

Selling and Marketing Expenses

For the three months ended June 30, 2021, our consolidated selling and marketing expenses decreased by $4.5 million, to $5.2 million, or 45.9% of consolidated net sales, compared to $9.6 million, or 43.9% of consolidated net sales, for the three months ended July 31, 2020. The decrease in consolidated selling and marketing expenses is due primarily to lower sales commissions of $4.4 million (which reflects decrease in our consolidated net sales discussed above) and lower general marketing expenses.

General and Administrative Expenses

For the three months ended June 30, 2021, our consolidated general and administrative expenses (which include corporate employee compensation and benefits, stock-based compensation, professional fees, rent and other occupancy costs, certain consulting fees, telephone and information technology expenses, insurance premiums, and other administrative expenses) decreased by $1.6 million, to $4.7 million, or 42.2% of consolidated net sales compared to $6.4 million, or 29.1% of consolidated net sales, for the three months ended July 31, 2020. The $1.6 million decrease in consolidated general and administrative expenses was due to lower stock-based compensation expense of $1.3 million, lower employee compensation and compensation-related benefits of $0.7 million and lower other general corporate administrative expenses of $0.1 million, partially offset by higher consulting and professional fees of $0.5 million.

Interest Expense, Net

For the three months ended June 30, 2021, our consolidated interest expense was $579,182, excluding amortization of debt discount of $2,356,507, amortization of deferred financing costs of $235,401, and interest income of $5,674. Consolidated interest expense of $579,183 reflects $565,479 associated with borrowings under the $30.0 million from “DSSI”.

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.

Litigation Settlements and Other Non-operating Expenses

For the three months ended June 30, 2021, our consolidated non-operating expenses include litigation settlements and other non-operating expenses of $23,605. 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 depositsloss on impairment of $297,358.  investments of $20,000.

Gain (loss) on employee warrants liability

For the three months ended June 30, 2021, we recognized a compensatory gain of $1,134,170, compared to a compensatory loss of $1,123,500 for the three months ended July 31, 2020, in connection with employee warrants with a variable exercise price after service was completed.

Gain on Extinguishment of Debt

In June 2021, the Company’s borrowings under the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) were forgiven pursuant to the CARES Act. The Company recognized a gain on extinguishment of debt of $1.0 million, before income tax, in connection therewith.

22

Provision for (Benefit from) Income Taxes

Income tax (benefit) provision include current and deferred income taxes for both our domestic and foreign operations. Income from our international operations is subject to taxation in the countries in which we operate.

We also had inventoryuse the recognition and measurement provisions of $91,755 at Januarythe FASB ASC Topic 740, Income Taxes (“Topic 740”) to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. As a result, we reviewed the operating results, as well as all positive and negative evidence related to realization of such deferred tax assets to evaluate the need for a valuation allowance in each tax jurisdiction. In evaluating the US and South Korea markets, it was determined a valuation allowance should be placed on each market as of June 30, 2021.

During the three months ended June 30, 2021, the Company recognized a provision for current federal income taxes of $1,445,951, net of a valuation allowance recognized of $1,428,620, a provision for state and local taxes of $19,898, and a deferred income tax benefit of $717,960. During the three months ended July 31, 2018.2020, 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.


Net Earnings (Loss) and Earnings (Loss) per Share

As a result of the foregoing, for the three months ended June 30, 2021, our consolidated net loss was $3.5 million, compared to $1.0 million for the three months ended July 31, 2020. For the three months ended June 30, 2021, our diluted loss per share was $0.02, compared to $0.01 for the three months ended July 31, 2020.

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

Working capital (total current assets minus total current liabilities) was $35.0 million and $3.5 million as of June 30, 2021, and March 31, 2021, respectively,

As of June 30, 2021, our cash and cash equivalents were $35.9 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 over the next 12 months.

Historical Cash Flows

Historically, our primary sources of cash have been capital transactions involving the issuance of equity securities and secured and unsecured debt (See “Recent Issuances 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 June 30, 2021, compared to the three months ended July 31, 2020:

  Three Months Ended 
  June 30, 2021  July 31, 2020  Increase (Decrease) 
Net cash used in operating activities $(6,017,388) $(3,704,483) $2,312,905 
Net cash used in investing activities  (234,658)  (20,748)  213,910 
Net cash provided by financing activities  30,000,000   4,040,400   25,959,600 
Impact of currency rate changes in cash  26,304   -   26,304 
Net increase in cash and cash equivalents $23,774,258  $315,169  $23,459,089 

23

Net Cash Used in Operating Activities

For the three months ended June 30, 2021, net cash used in operating activities duringwas $6.0 million, compared to $3.7 million for the periodthree months ended JanuaryJuly 31, 20182020. The $2.3 million change was $1,156,392, which consisteddue to a decrease in profitability of $4.8 million, excluding non-cash items, such as depreciation and amortization, stock-based compensation expense, provision for obsolete inventory losses, amortization of debt discount, losses on impairment of investments in unconsolidated entities and a net loss of $6,976,438, reducednote receivable, and estimated settlement liability. This change was partially offset by net non-cash expenses of $6,070213, and net changechanges in operating assets and liabilities of $250.967.$2.5 million.


Net Cash Used in Investing Activities

For the three months ended June 30, 2021, net cash used in investing activities was $234,658, compared to $20,748 for the resultthree months ended January 31, 2020. The $213,910 was due to higher capital expenditures and capitalizable costs related to ongoing upgrades to our information technology systems of net cash retained in$183,682 and lower collection of notes receivable of $38,628, partially offset by lower payments for intangible assets of $8,400.

Net Cash Provided by Financing Activities

For the merger with Total Travel Media of $57,605 and less $15,000 paid for an equity investment and investment in Property and Equipment of $43,111


Netthree months ended June 30, 2021, net cash provided by financing activities increased by $26.0 million, to $30.0 million, compared to $4.0 million for the three months ended July 31, 2020. The $26.0 million increase was mainly due to higher net proceeds ($29.0 million) of borrowings under short-term financing arrangements and/or convertible promissory notes (including borrowings from proceeds on issuance of a convertible notes for $544,000,DSSI in the three months ended June 30 2021), partially offset by proceeds from a promissory note from a related partyissuances of $50,000, proceeds from stock subscriptionof $3.0 million in 2020.

Impact of currency rate changes in cash

Prior to April 1, 2021, substantially all our consolidated net sales were denominated in U.S. dollars. Effective April 1, 2021, the Company’s consolidated financial statements reflect the operation of our wholly owned subsidiaries operating in the Asia Pacific region. See Note 1 of the Notes to Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report for information about our translation of foreign currency financial statements.

Legal Proceedings

The information contained in Note 10, Legal Matters, of the Notes to Condensed Consolidated Financial Statements located elsewhere in this Quarterly Report is incorporated herein by reference.

Potential Future Acquisitions

The Company, directly and through its subsidiaries, may make strategic acquisitions and purchases of equity interests in businesses that complement its business competencies and growth strategy. Such acquisitions and purchases of equity interests are expected to be funded with cash and cash equivalents, cash provided by operations, if any, and issuance of Series C Preferredequity securities and debt.

Recent Issuances of Equity Securities

Common Stock

During the three months ended January 31, 2021:

●the Company issued to DSSI 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the loan Origination Fee discussed above and 12,000,000 shares in prepayment of interest for the first year in connection with the related party loan discussed below, and
●the Company issued: (i) 10,000 shares of its Class A Common Stock upon the conversion of 10,000 shares of the its Series C preferred stock.

Short-term Borrowings and Convertible Notes

Borrowing Under Financing Arrangements (Note Payable)

In May 2020, the Company was granted a loan (the “PPP Loan”) by a commercial bank in the amount of $1.0 million, pursuant to the Paycheck Protection Program features of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”). The Company’s borrowings under the PPP Loan were eligible for $853,500, $849 proceedsloan forgiveness under the provisions of the CARES Act. In June 2021, the Company was formally notified by the lender that the Company’s obligations under the loan have been forgiven effective May 25, 2021. The loan forgiveness applies to all principal and interest accrued through the loan forgiveness effective date. See Note 1, Description of Operations and Basis of Presentation – Note Payable, of the Notes to Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report for more information about the PPP Loan.

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Convertible Notes from Related Parties

Decentralized Sharing Systems, Inc.

On April 5, 2021, the Company and Decentralized Sharing Systems, Inc. (“DSSI”) entered into a related party,Securities Purchase Agreement, pursuant to which the Company issued: (a) a Convertible Promissory Note in the principal amount of $30.0 million (the “Note”) in favor of DSSI, and (b) a detachable Warrant to purchase up to 150,000,000 shares of the Company’s Class A Common Stock, at $0.22 per share, and DSSI loaned to the Company $30.0 million. Under the terms of the loan, the Company agreed to pay to DSSI a loan Origination Fee of $3.0 million, payable in shares of the Company’s Class A Common Stock, at the rate of $0.20 per share. The Note bears interest at the annual rate of 8% and matures on April 5, 2024, subject to certain acceleration provisions upon the occurrence of an Event of Default, as defined in the Note. At any time during the term of the Note, all or part of the Note, including principal, less unamortized prepaid interest, if any, plus any accrued interest and other fees can be converted into shares of the Company’s Class A Common Stock at the rate of $0.20 per share, at the option of the holder.

HWH International, Inc.

In October 2017, the Company issued a repaymentConvertible Promissory Note in the principal amount of $15,000$50,000 (the “Note”) to HWH International, Inc (“HWH” or the “Holder”). HWH is affiliated with Heng Fai Ambrose Chan, who in April 2020 became a Director of the Company. The Note is convertible into 333,333 shares of the Company’s Common Stock. Concurrent with issuance of the Note, the Company issued to HWH a detachable stock warrant to purchase up to an additional 333,333 shares of the Company’s Common Stock, at an exercise price of $0.15 per share. Under the terms of the Note and the detachable stock warrant, the Holder is entitled to certain financing rights. If the Company enters into more favorable transactions with a third-party investor, it must notify the Holder and may have to amend and restate the Note and the detachable stock warrant to be identical. As of the date of this Quarterly Report, the Company and HWH are jointly reviewing the Note and the detachable stock warrant. The number of shares that HWH may acquire upon conversion of the HWH Note and exercise of the detachable warrant may be greater than the amounts described in this paragraph, depending on a promissory note and repaymentsthe results of such review.

Convertible Note Payable, Other

As of June 30, 2021, convertible notes payable also include a note in the amount of $101,000.


Capital Resources


We currently have limited cash resources on hand$100,000 held by an unaffiliated lender. As of the date of this Quarterly Report, the Company and our projected operating expenses and working capital needs exceed our income and cash resources. We do not have sufficient cash to carry out our operations over the next 12 months. As a result, capital raising has been and continues to be essential for our continued operations, ongoing sales and marketing efforts and further developmentholder of our business. 


Off Balance Sheet Arrangements


We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been establishedthe note are discussing options for the purposenote holder to convert a portion of facilitating off-balance sheet arrangements orthe note and for the Company to settle the remainder of the note. The Company intends to conclude these discussions and to settle the April 2018 Note in the foreseeable future. See Note 4 of the Notes to Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report for more information.

Capital Requirements

During the three months ended June 30, 2021, capital expenditures for property and equipment (consisting of furniture and fixtures, computer equipment and software, other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt,office equipment and we have not entered into any synthetic leases. We are, therefore, not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engagedleasehold improvements) in such relationships.


Application of Critical Accounting Policies


We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact on our business operations and any associated risks related to these policies are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported or expected financial results.


In the ordinary course of our business were $33,393.

Contractual Obligations

There were no material changes to our contractual cash obligations during the three months ended June 30, 2021, except for our repayment of borrowings under short-term financing arrangements and convertible notes described above.

Off-Balance Sheet Financing Arrangements

As of June 30, 2021, we had no off-balance sheet financing arrangements.

Inflation

We believe inflation did not have made a number of estimates and assumptions relating to the reporting ofmaterial effect on our results of operations and financial conditionduring 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 March 31, 2021, it is reasonably possible that estimates made in the preparation of ourCompany’s consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, oftenhave been, or will be, materially impacted as a result of the need to make estimates about the effect of matters that are inherently uncertain.


The material estimates for our company are thatultimate resolution of the stock-based compensation recorded for preferred stock issued,uncertainties associated with the COVID 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 fair valuevaluation of embedded conversion options that are convertible into a variable amountloss contingencies. Please see Overview - Significant Uncertainty Regarding the Potential Impact of shares,Ongoing COVID Health Crisis above.

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Accounting Changes and the income tax valuation allowance recorded for deferred tax assets. The fair values of embedded conversion options are determined using the Black-Scholes option pricing model. We have no historical data on the accuracy of these estimates. The estimated sensitivity to change is related to the various variables of the Black-Scholes option pricing model stated below. The specific quantitative variables are included in the notes to the consolidated financialRecent Accounting Pronouncements



29


statements. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the expected life, dividend yield, expected volatility, and risk-free interest rate weighted-average assumptions used for conversion options. Expected volatility for 2017 was estimated using the average historical volatility of our common stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. The expected life of options is based on the life of the instrument on grant date.


Going Concern


These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. To date the Company has generated $960,182 in revenues from its business operations and has an accumulated deficit of $6,976,438. As of January 31, 2018, the Company had a working capital deficit of $5,058,529. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company has initiated extensive direct sales and social media marketing which it expects to drive significant sales volume of the Company’s products, and services over the next several months. The Company expects to become profitable and not need additional outside funding once working capital needs have been met.  The acceptance of the Company’s marketing efforts is uncertain and therefore, the Company has plans to continue to fund its business by way of private placements, promissory notes, convertible promissory notes and advances from related parties as may be required.


These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


Stock-Based Compensation


ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).


The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity - Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.


Share-based expense totaled $1,308,948 for the period of inception (May 5, 2017) to January 31, 2018.


Convertible Notes


Convertible notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest method.




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Derivative Financial Instruments


The fair value of an embedded conversion option that is convertible into a variable amount of shares and warrants that include price protection reset provision features are deemed to be “down-round protection” and, therefore, do not meet the scope exception for treatment as a derivative under ASC 815 “Derivatives and Hedging”, since “down-round protection” is not an input into the calculation of the fair value of the conversion option and warrants and cannot be considered “indexed to the Company’s own stock” which is a requirement for the scope exception as outlined under ASC 815.


The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.


The Black-Scholes option valuation model was used to estimate the fair value of the conversion options. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time, of other comparative securities, equal to the weighted average life of the options.


Conversion options are recorded as debt discount and are amortized as interest expense over the life of the underlying debt instrument.


Also, refer to Note 2 - Significant Accounting Policies and Note 7 - Derivative Liabilities in the unaudited condensed consolidated financial statements that are included in this Report.


Recent accounting pronouncements


For discussion of recently issuedaccounting changes and recent accounting pronouncements, please see Note 21 of the Notes to the unaudited condensed consolidated financial statements includedCondensed Consolidated Financial Statements contained elsewhere in this report.Quarterly Report.


Item 3. Quantitative and Qualitative Disclosures about Market Risk.


We areThe Company is a smaller reporting companySmaller Reporting Company, as defined byin Rule 12b-2 of the Exchange Act, and, areaccordingly, is not required to provide the information required undercalled for by this item.Item.


Item 4. Controls and Procedures.


Disclosure Controls Evaluation and Procedures


Disclosure controlsRelated CEO and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted underCFO Certifications. Our management, with the Securities Exchange Actparticipation of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer (“CEO”) and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.


In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out(“CFO”), conducted an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. The material weaknesses in our disclosure control procedures are as follows:of June 30, 2021.


1.Lack of formal policies and procedures necessary to adequately review significant accounting transactions.We utilize a third party independent contractor for the preparationCertifications of our financial statements. AlthoughCEO and our CFO, which are required in accordance with Rule 13a-14 of the financial statementsExchange Act, are attached as exhibits to this Quarterly Report. This “Controls and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactionsProcedures” section discusses the above-described Certifications and the accounting treatmentevaluation of “disclosure controls” referred to therein. Accordingly, this section should be read in conjunction with such transactions. The third partyCertifications.



31


independent contractor is not involved in our day to day operations and may not be provided information from our managementLimitations on a timely basis to allow for adequate reporting/considerationthe Effectiveness of certain transactions.


2Controls. .Audit Committee and Financial Expert. We do not have an audit committee with a financial expertexpect that our disclosure controls and thus, we lackprocedures 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 appropriate oversightobjectives 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 financial reporting process.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 intendperform this type of evaluation on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can accompany our Quarterly Reports 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 June 30, 2021, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to initiate measuresbe 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 remediate the identified material weaknesses,our management, including but not necessarily limitedour CEO and CFO, as appropriate to the following:allow timely decisions regarding required disclosure.


•

 Establishing a formal review process of significant accounting transactions that includes participation of our principal executive officer, principal financial officer and corporate legal counsel.

•

 Form an audit committee that will establish policies and procedures that will provide our Board of Directors with a formal review process that will among other things, assure that management controls and procedures are in place and being maintained consistently.


Changes in Internal Control Overover Financial ReportingReporting.


There wereDuring our most recent fiscal quarter, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended January 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.



32

26


PART II—OTHER INFORMATION


Item 1. Legal Proceedings.


Currently we are not involvedThe information contained in any pending litigation or legal proceeding.Note 10, Legal Matters, of the Notes to Condensed Consolidated Financial Statements located elsewhere in this Quarterly Report is incorporated herein by reference.


Item 1A. Risk Factors.


WeThe factors contained in ITEM 1A, — “Risk Factors” in our Transition Report on Form 10-K for the fiscal year ended March 31, 2021, are a smaller reporting company as definedincorporated herein by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.reference.


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


(a) Unregistered Sales of unregistered securities bySecurities

In the three months ended June 30, 2021, Company duringissued to Decentralized Sharing Systems, Inc. 27,000,000 shares of its Class A Common Stock, including 15,000,000 shares in payment of the period covered by this report were disclosedloan Origination Fee discussed above and 12,000,000 shares in our Current Reports on Form 8-K filed January 5, 2018 and January 26, 2018, respectively, and as such, are not required to be furnishedprepayment of interest for the first year in connection with the related party loan discussed elsewhere in this report.  Quarterly Report.

In addition, in the Company sold additional unregistered securities during the period covered by this report as follows: during the Quarterthree months ended January 31, 2018,June 30, 2021, the Company issued 3,680,000 restricted10,000 shares of its Class A Common Stock upon the conversion of 10,000 shares of the Company’s Series C Preferred Stockpreferred stock.

In connection with the transactions described in the preceding two paragraphs, no underwriters were involved, there were no proceeds generated, and received subscriptions for an additional 64,000 shares of Series C Preferred Stock, all pursuant to an offering by means of a private placement memorandum.  Each of the aforementioned sales of securitiesissuances were made in reliance uponon the exemption offered under Section 4(2)from the registration requirements of the Securities Act of 1933.1933 provided under Section 4(a)(2) thereof.

(b) Not applicable

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None


Item 3. Defaults Upon Senior Securities.


None(a) Not applicable

(b) Not applicable


Item 4. Mining Safety Disclosures.


NoneNot applicable


Item 5. Other Information.


None

27


Item 6. Exhibits.


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


3.1

Second Amended and Restated Articles of Incorporation of Sharing Services Global Corporation, which is incorporated herein by reference from Exhibit No.

Description

A to the Company’s 2021 Proxy Statement on Schedule 14A filed on July 14, 2021

31.1

3.2Bylaws 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
4.1Certificate of Designation 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
4.2Certificate of Designation 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
4.3Convertible Promissory Note dated April 13, 2018, issued by Sharing Service, Inc. in favor of RB Capital Partners, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on April 19, 2018
4.4Convertible Promissory Note dated April 5, 2021, issued by Sharing Service Global Corporation in favor of Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on April 9, 2021
4.5Warrant to Purchase Shares of Sharing Services Global Corporation’s Class A Common Stock issued to Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 1.3 to the Company’s Current Report on Form 8-K filed on April 9, 2021
10.1Amended 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
10.2Multi-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
10.3U. 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
10.4Stock Purchase and Share Subscription Agreement dated as of July 22, 2020, by and between Sharing Services Global Corporation and Heng Fai Ambrose Chan, 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
10.5Settlement 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
10.6Executive Employment Agreement by and between S. Mark Nicholls and Sharing Services Global Corporation Effective as of February 1, 2021, which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on January 21, 2021
10.7Securities Purchase Agreement dates as of April 5, 2021, by and among Sharing Service Global Corporation and Decentralized Sharing Systems, Inc., which is incorporated herein by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on April 9, 2021
10.8Form of Distributor Agreement of The Happy Co., which is incorporated herein by reference from Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed on June 10, 2021
10.92021 The Happy Co. Brand Partner Compensation Plan, which is incorporated herein by reference from Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed on June 10, 2021
31.1Certification of Chief Executive Officer Pursuantpursuant to Rule 13a–14(a) or 15d-14(a)Section 302 of the Securities ExchangeSarbanes-Oxley Act of 1934 [1]

2002 *

31.2

31.2Certification of Interim Chief Financial Officer Pursuantpursuant to Rule 13a-14(a) or 15d-14(a)Section 302 of the Securities ExchangeSarbanes-Oxley Act of 1934 [1]

2002 *

32.1

32.1Certification of Chief Executive Officer under Section 1350 as Adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 [1]

*

32.2

32.2Certification of Interim Chief Financial Officer under Section 1350 as Adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 [1]

*


[1] Included herewith.

101The following financial information from our Quarterly Report on Form 10-Q for the three months ended June 30, 2021, and July 31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings and Comprehensive Income; (iii) the Condensed Consolidated Statements of Cash Flows and (iv) Condensed Consolidated Statements of Stockholders’ Equity *




*Included herewith

33

28


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.


Officer)

SHARING SERVICES INC.

GLOBAL CORPORATION

(Registrant)



Date: March 26, 2018

August 16, 2021

By:/s/ John Thatch

John Thatch

President, and Director

      Principal andChief Executive Officer



and Vice Chairman of the Board of Directors

(Principal Executive Officer)
Date: March 26, 2018


August 16, 2021

By:/s/ Frank A. Walters

      Frank A. Walters

      Secretary Treasurer and Director

John Thatch

John Thatch
Interim Chief Financial Officer
(Principal Financial Officer

      Principal Accounting Officer


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34