SHRG Sharing Services Global Corporation (PK)

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 –DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION

Sharing Services Global Corporation (formerly Sharing Services, Inc.) was originally formed to develop and market a taxi-ride sharing website and application (“web app”). Beginning in February 2017, the Company expanded its business model to also offer a wide range of travel and technology management and other products and services. In addition, in December 2017, the Company launched its Elevate product line. Elevate, are Nutraceutical products developed and owned by Elevacity Global LLC, a wholly-owned subsidiary of the Company. The Company uses a direct-selling model. As part of its growth strategy, the Company has completed several strategic acquisitions and purchases of equity interests in certain companies, as more fully discussed in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) to April 30, 2018.

The condensed consolidated interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Sharing Services, Inc. and subsidiaries for the period from May 5, 2017 (inception) to April 30, 2018.

Corporate Name Change

As the Company announced earlier, on January 14, 2019, Sharing Services, Inc. filed with the Nevada Secretary of State an amendment to its Articles of Incorporation (the “Amendment”), which became effective upon the filing date. The Amendment had the sole effect of changing the Company’s name to Sharing Services Global Corporation. The Company believes the new corporate name more closely reflects the Company’s strategic intent to grow its business both inside and outside the United States. The Amendment was approved by a vote of the Company’s shareholders on January 11, 2019, and by the Company’s Board of Directors.

Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and settle its liabilities in the ordinary course of its business for the foreseeable future. The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated positive cash flows from operations. In addition, prior to its fiscal quarter ended January 31, 2018, the Company had virtually no sales. Historically, the Company has funded its working capital needs (including its inventory needs) and acquisitions primarily with capital transactions and with unsecured debt, including the issuance of convertible notes and short-term borrowings under financing arrangements. The Company intends to continue to raise capital and use secured and unsecured debt, including the issuance of convertible notes and short-term borrowings under financing arrangements, from time to time as needed to fund its working capital needs and its growth.

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Reclassifications

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

Revenue Recognition

As discussed below, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers , using the cumulative effect transition method, effective May 1, 2018. The Company derives revenue from the sale of health and wellness, energy, technology, insurance, training, media and travel products and services. The Company receives sales orders online and through its “back-office” operations, which creates a contract and determines the transaction price. The Company recognizes revenue upon satisfaction of its performance obligation when it transfers control of the promised goods and services to the customer. With respect to products and services sold, the performance obligation is satisfied upon shipment of the product and delivery of the service to the customer. With respect to subscription-based services, including Elepreneur membership fees, the performance obligation is satisfied over time (generally one year or less). The timing of revenue recognition may differ from the time when we invoice and/or collect payment under the contract. Deferred sales revenue associated with our performance obligation for customers’ right of return was $260,490 at January 31, 2019, net of potential restocking fees of $0, and was reported in accrued and other liabilities on our consolidated balance sheets. Deferred revenue associated with our performance obligation for services offered on a subscription basis was $530,538 at January 31, 2019, is expected to be recognized over one year and was reported in accrued and other liabilities on our consolidated balance sheets.

No individual customer, or related group of customers, represents 10% or more of our consolidated net sales and over 96% of our consolidated net sales are from sales to customers located in the United States. For the three months ended January 31, 2019, approximately 97% of our consolidated net sales are from the sale of our Elevate product line (including approximately 28% from the sales of coffee and coffee-related products and approximately 39% from the sale of our Nutraceutical products). In addition, for the nine months ended January 31, 2019, approximately 97% of our consolidated net sales are from the sale of our Elevate product line (including approximately 30% from the sales of coffee and coffee-related products and approximately 35% from the sale of our Nutraceutical products). In addition, for both the three and nine months ended January 31, 2019, product purchases from one supplier accounted for approximately 95% of total purchases.

Sales Commissions

The Company recognizes sales commission expense when incurred. During the three and nine months ended January 31, 2019, sales commission expense, which is included in selling and marketing expenses in our consolidated statements of operations, was $12.7 million and $26.3 million, respectively. During both the three months ended January 31, 2018 and the period from May 5, 2017 (inception) to January 31, 2018, sales commission expense was $387,361.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Actual results may differ from these estimates in amounts that may be material to our consolidated financial statements. We believe that the estimates and assumptions used in the preparation of our financial statements, including our condensed consolidated interim financial statements, are reasonable. In managements’ opinion, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included.

Accounting Changes

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers , which supersedes Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition . A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard required adoption using either the retrospective or cumulative effect transition method. For public companies, this amendment was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. As required, the Company adopted ASU No. 2014-09, using the cumulative effect transition method, effective May 1, 2018 and its adoption did not have a material impact on its consolidated financial statements and business.

The impact of adopting the new revenue standard on our financial statements was not material and is associated with our customers’ right of return and to recognition of revenue from services offered on a subscription basis. We now defer revenue (and the related cost of goods sold) associated with our customers’ right of return. The impact of adopting the new standard on our revenue from subscription-based services was not significant due to the short subscription periods (general one year or less) and to our prior policy of recognizing revenue from subscription-based services ratably over the subscription period.

Historically, our sales returns have been approximately 2-3% of our consolidated net sales and our subscription-based revenues have been 1% of our consolidated net sales. The Company is an emerging growth company with limited sales history. Going forward, the Company will continue to monitor its sales returns history and its sales of subscription-based services, and the Company will continue to recognize revenue in proportion to the documented pattern of satisfaction by the Company of such customer rights. Further, the Company will provide the added disclosures required by ASU No. 2014-09 when material.

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

In February 2017, the FASB issued ASU No. 2017-05, “ Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The amendments clarified that nonfinancial assets that are within the scope of ASC Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. For public companies, this amendment was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. As required, the Company adopted ASU No. 2017-05 effective May 1, 2018 and its adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, Leases , which will require lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. Under the new guidance, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under prior rules) over the life of the lease. The new standard, as amended, must be adopted using a modified retrospective transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted this accounting pronouncement and are currently evaluating the potential impact this standard may have on our consolidated financial position and consolidated results of operations.

NOTE 3 – FAIR VALUE MEASURENTS OF FINANCIAL INSTRUMENTS

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

There were no transfers between the levels of the fair value hierarchy established by ASC Topic 820, Fair Value Measurement , as amended, during the periods covered by the accompanying consolidated financial statements.

Consistent with the valuation hierarchy referred to above, we categorized certain of our financial assets and liabilities as follows:

NOTE 4 – EARNINGS (LOSS) PER SHARE

We calculate basic earnings (loss) per share by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding stock options, stock warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible notes outstanding, except where the impact would be anti-dilutive. Please see Note 15 below for information about changes in the number of common shares our common stock and preferred stock outstanding.

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

The dilutive or potentially dilutive instruments outstanding as of January 31, 2019 and 2018, were as follows:

NOTE 5 – ACCOUNTS RECEIVABLE

At January 31, 2019 and April 30, 2018, accounts receivable includes amounts receivable from credit card processors of $4,669,752 and $1,556,471, respectively.

NOTE 6 – OTHER CURRENT ASSETS

At January 31, 2019 and April 30, 2018, other current assets include deposits under product supply agreements of $746,425 and $210,287, respectively, prepaid expenses of $695,273 and $26,700, respectively, mainly in connection with marketing events and prepayments to vendors for products and services purchased on an annual basis and, at January 31, 2019, amounts receivable from a former employee of $198,824.

Depreciation and amortization expense was $54,760 for the nine months ended January 31, 2019, and $800 for the period from May 5, 2017 (inception) to January 31, 2018.

NOTE 8 – INVESTMENTS IN UNCONSOLIDATED ENTITIES

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

212 Technologies, LLC

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

Under the terms of the Stakeholder and Investment Agreement, the Company has the option to acquire an additional 24% interest in 212 Tech at a future date in exchange for an additional 10,000,000 shares of the Company’s Series A Convertible Preferred Stock, when both of the following conditions have been met: (i) one year has passed from the Closing Date; and (ii) the closing price of the Company’s common stock equals or exceeds $10.00 per share, as reported by OTC Markets.

561 LLC

On October 4, 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 25% interest in 561 LLC in exchange for 2,500,000 shares of its Series A Convertible Preferred Stock with a deemed value of $0.25 per share, or $625,000, issued in four equal instalments over time. Under the terms of the Share Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in 561 LLC to 40% in exchange for 2,500,000 shares of its Series A Convertible Preferred Stock. As of January 31, 2019, the Company had issued 5,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $1,250,000) in connection with its acquisition of 561 LLC.

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

America Approved Commercial LLC

On October 4, 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 25% interest in America Approved Commercial LLC (“AAC”) in exchange for 2,500,000 shares of our Series A Convertible Preferred Stock with a deemed value of $0.25 per share, or $625,000. Under the terms of the Share Exchange Agreement, in May 2018, the Company increased its cumulative equity interest in AAC to 40% in exchange for 2,500,000 shares of its Series A Convertible Preferred Stock. As of January 31, 2019, the Company had issued 5,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $1,250,000) in connection with its acquisition of AAC.

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

Medical Smart Care LLC

On October 4, 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 40% interest in Medical Smart Care LLC (“Smart Care”) in exchange for 1,000,000 shares of its Series A Preferred Stock with a deemed value of $0.25 per share, or $250,000, in four equal installments over time. As of January 31, 2019, the Company had issued 1,000,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $250,000) in connection with the acquisition of Smart Care.

LEH Insurance Group LLC

On October 4, 2017, the Company entered into a Share Exchange Agreement pursuant to which it acquired a 40% interest in LEH Insurance Group LLC (“LEHIG”) in exchange for 500,000 shares of its Series A Preferred Stock with a deemed value of $0.25 per share, or $125,000. Under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 500,000 shares of the Company’s Series A Preferred Stock if/when the following condition had been met: prior to December 31, 2018, if LEHIG had booked contracts representing insurance premiums of no less than $500,000. In October 2018, upon LEHIG meeting this condition, the Company issued an additional 500,000 shares of its Series A Preferred Stock to the sellers. In addition, under the terms of the Share Exchange Agreement, the sellers would be entitled to an additional 500,000 shares of the Company’s Series A Preferred Stock when the following additional condition has been met: prior to December 31, 2018, LEHIG has booked contracts representing insurance premiums of no less than $1,000,000. In December 2018, upon LEHIG meeting this condition, the Company issued an additional 500,000 shares of its Series A Preferred Stock to the sellers. As of January 31, 2019, the Company had issued 1,500,000 shares of its Series A Convertible Preferred Stock (with a deemed value of $375,000) in connection with the acquisition of LEHIG.

NOTE 9 - NOTES PAYABLE

At January 31, 2019 and April 30, 2018, notes payable, consisting of short-term borrowings under financing arrangements with third-party institutions, in the aggregate, were $1,824,597 and $35,000, respectively, net of unamortized debt discount of $274,878 at January 31, 2019. Borrowings under the financing arrangements are generally secured by a lien on the Company’s accounts receivable, inventory and property and equipment to the extent of such borrowings outstanding at any point in time. Generally, a lender’s security interest terminates upon settlement of the Company’s obligation under each respective financing arrangement.

In May 2018, the Company entered into an agreement with Global Payroll Gateway (“GPG”) pursuant to which GPG provides certain wholesale merchant services to the Company and its subsidiaries. In connection with the agreement, in May 2018, GPG granted Sharing Services an interest-free loan in the amount of $500,000 and, in August 2018, GPG granted Sharing Services an interest-free loan in the amount of $500,000. As of January 31, 2019, borrowings under the GPG loans had been paid in full.

On November 2, 2018, the Company entered into a financing agreement with Funders Cloud LLC, d/b/a Syndimate (“Syndimate”), pursuant to which the Company agreed to sell to Syndimate certain future trade receipts in the aggregate amount of $330,000. Net proceeds from this transaction were $239,000 and were net of an initial financing fee of $11,000 and applicable financing costs, calculated at an annual percentage rate (“APR”) of 86%. Under the terms of the agreement, borrowings are payable in equal daily installments of approximately $2,063 over a term of approximately five and one-half months. At January 31, 2019, the unpaid balance remaining under the loan was $178,404, net of unamortized debt discount of $36,096.

On November 27, 2018, the Company entered into a financing agreement with Libertas Funding LLC (“Libertas”) pursuant to which the Company agreed to sell to Libertas certain future trade receipts in the aggregate amount of $635,000. Net proceeds from this transaction were $490,000 and were net of an initial financing fee of $10,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments to Libertas of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months. At January 31, 2019, the unpaid balance remaining under the loan was $381,408, net of unamortized debt discount of $72,164.

On November 30, 2018, the “Company entered into a financing agreement with eMerchant Advance LLC (“eMerchant”) pursuant to which the Company agreed to sell to eMerchant certain future trade receipts in the aggregate amount of $635,000. Net proceeds from this transaction were $485,000 and were net of an initial financing fee of $15,000 and applicable financing costs, calculated at an APR of 76%. Under the terms of the agreement, borrowings are payable in equal daily installments to eMerchant of approximately $4,320, subject to change at the Company’s discretion, over a term of approximately five months. At January 31, 2019, the unpaid balance remaining under the loan was $399,400, net of unamortized debt discount of $80,080.

On December 11, 2018, the Company entered into a Loan Agreement and Promissory Note (“loan agreement”) with GPG pursuant to which the Company borrowed the principal amount of $1,000,000. Borrowings under the loan agreement bear interest at 10% per annum and are payable in 51 equal weekly installments of $21,153.85 and a final installment of $21,153.65, with all amounts due and payable by December 11, 2019. Borrowings are pre-payable without penalty, at the option of the Company. At January 31, 2019, the unpaid balance remaining under the loan was $865,385, net of unamortized debt discount of $86,538.

Accrued sales commissions consist of commissions and certain bonuses earned by the Company’s independent sales representatives of the Company in accordance with the Company’s compensation plan.

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

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

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

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

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

In November 2018, a holder of a convertible note in the principal amount of $15,000 converted $6,000 of outstanding principal into 1,200,000 shares of the Company’s common stock.

At January 31, 2019, convertible notes payable consisted of notes in the aggregate amount of $864,000 held by RB Capital Partners, Inc. and a note of $50,000 held by another lender.

During the three months ended January 31, 2019 and 2018, total interest expense was $213,791 and $118,229, respectively, including amortization of debt discount of $221,599 and $92,791, respectively. During the nine months ended January 31, 2019 and the period from May 5, 2017 (inception) to January 31, 2018, total interest expense was $1,465,770 and $241,424, respectively, including amortization of debt discount of $1,066,611 and $183,300, respectively, as discussed above.

NOTE 12 - DERIVATIVE LIABILITIES

At April 30, 2018, the Company had determined that the conversion feature on its convertible notes and stock warrants should be classified as a derivative liability, under the ASC 815 guidance, since the conversion rate was tied to the market price of the Company’s common stock and, accordingly, there was no explicit limit to the number of shares issuable upon conversion due to contingencies affecting the conversion rate.

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

During the fiscal quarter ended October 31, 2018, the Company repaid the convertible notes with a variable conversion rate, a conversion rate tied to the market price of the Company’s common stock. The convertible notes and warrants outstanding at January 31, 2019 have a fixed conversion rate and, accordingly, the number of shares issuable upon conversion is determinable with certainty. As a result, the Company has recognized a decrease in its derivative liability resulting in the beneficial conversion feature associated with the remaining convertible notes and warrants of $1,187,242 (recognized as an increase to additional paid-in capital) and a gain on fair value of derivatives liabilities of $20,015,840.

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

The following table summarizes the changes in the derivative liabilities included in our consolidated balance sheet for the nine months ended January 31, 2019:

The following table summarizes the (loss) gain on derivative liability included in our consolidated statement of operation for the nine months ended January 31, 2019 and the period from May 5, 2017 (inception) to January 31, 2018:

NOTE 13 – INCOME TAXES

The Company is an emerging growth company and, prior to its fiscal quarter ended October 31, 2018, had not generated pre-tax earnings or taxable earnings from its operations. In addition, during the its fiscal quarter ended January 31, 2019, the Company generated a pre-tax loss of $2.6 million. As of the date herein, the ability of the Company to consistently generate future pre-tax earnings or taxable earnings remains uncertain. Accordingly, the Company has not recorded a provision for income taxes in its consolidated financial statements for the periods covered by this quarterly report.

NOTE 14 - RELATED PARTY TRANSACTIONS

Alchemist Holdings, LLC

In connection with the Company’s acquisition of Total Travel Media in May 2017, the Company issued 7,500,000 shares of its Series B Preferred Stock and 7,500,000 shares of its Common Stock Class B to Alchemist Holdings, LLC (“Alchemist”), the Company’s largest stockholder. In connection with the Company’s acquisition of Four Oceans, the Company issued also 50,000,000 shares of its Series A Preferred Stock to Alchemist. Please see Note 1 of Notes to the Consolidated Financial Statements included in ITEM 8 – “Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the period from May 5, 2017 (inception) to April 30,2018, for more details about the acquisitions of Total Travel Media and Four Oceans; and Note 15 below.

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

As disclosed by the Company earlier, on December 21, 2018, the Company repurchased (and later retired) 30,000,000 shares of its common stock from Foshan City Shunde District Cheering Garden Tools Co., LTD. In connection with the share repurchase, Alchemist assisted the Company in negotiating with the selling stockholder and remitted the purchase price on behalf of the Company. On December 21, 2018, the Company issued a promissory note in favor of Alchemist for $300,000 in connection with the share repurchase. The note is non-interest bearing and is due on demand.

Bear Bull Market Dividends, Inc.

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

NOTE 15 - STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

Series A Convertible Preferred Stock

In May 2018, the Company issued 5,000,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC and America Approved Commercial LLC.

In August 2018, the Company issued an additional 1,250,000 shares of its Series A Convertible Preferred Stock, in the aggregate, in connection with its previously disclosed acquisitions of equity interests in 561, LLC and America Approved Commercial LLC. In addition, in August 2018, the Company issued 250,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of a 40% equity interest in Medical Smart Care LLC.

In October 2018, the Company issued 500,000 shares and, in December 2018, the Company issued 500,000 shares of its Series A Convertible Preferred Stock in connection with its previously disclosed acquisition of a 40% equity interest in LEH Insurance Group LLC.

In December 2018, holders 1,315,790 shares of the Company’s Series A Preferred Stock converted such holdings into shares of the Company’s common stock, and, in January 2019, Alchemist converted 50,000,000 shares of the Company’s Series A Preferred Stock into shares of the Company’s common stock. Please see Note 14 for more information about Alchemist.

As of January 31, 2019, there were 42,878,750 shares of our Series A Convertible Preferred Stock issued and outstanding.

Series B Convertible Preferred Stock

As of January 31, 2019, there were 10,000,000 shares of our Series B Preferred Stock issued and outstanding.

Series C Convertible Preferred Stock

In August 2018, the Company issued 80,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $20,000, in connection with stock subscription agreements entered into prior to April 30, 2018. In addition, in September 2018, the Company issued 30,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $7,500, in connection with stock subscription agreements entered into prior to April 30, 2018. Further, in October 2018, the Company issued 60,000 shares of its Series C Convertible Preferred Stock, at a price of $0.25 per share, for total proceeds of $15,000, in connection with stock subscription agreements entered into prior to April 30, 2018.

As of January 31, 2019, there were 4,120,000 shares of our Series C Preferred Stock issued and outstanding.

Common Stock

In July 2018, the Company issued 600,000 stock subscription units at a price of $0.25 per unit, for total proceeds of $150,000, in connection with stock subscription agreements, including 160,000 shares in connection with subscription agreements entered into after April 30, 2018. Each unit consists of 600,000 shares of its Class A Common Stock and 600,000 warrants to purchase up to an additional 600,000 shares of Class A Common Stock. In August 2018, the Company issued 210,000 stock subscription units at a price of $0.25 per unit, for total proceeds of $52,500, in connection with stock subscription agreements entered into prior to April 30, 2018. Each unit consists of 210,000 shares of its Class A Common Stock and 210,000 warrants to purchase up to an additional 210,000 shares of Class A Common Stock. In addition, in October 2018 and November 2018, in the aggregate, the Company issued 80,000 stock subscription units at a price of $0.25 per unit, for total proceeds of $20,000, in connection with stock subscription agreements entered into prior to April 30, 2018. Each unit consists of a share of the Company’s Class A Common Stock and a warrant to purchase an additional share of its Class A Common Stock (whereas the number of shares issuable upon conversion is fixed).The warrants described in this paragraph are fully exercisable, have a term of five years and an exercise price equal to 50% of the average of the closing bid price for the Company’s common stock for the 20-day trading period prior to conversion of the warrants.

In the nine months ended January 31, 2019, the Company also issued 226,384 shares of its Class A Common Stock, in exchange for professional services valued at $63,000.

In October 2018, an executive officer exercised stock warrants (granted in conjunction with his employment agreement disclosed previously) to purchase 5,000,000 shares of our Series A Convertible Preferred Stock (convertible into 5,000,000 shares of our Class A Common Stock), at an exercise price of $0.0001 per share, and another executive officer exercised stock options (granted in conjunction with his employment agreement disclosed previously) to purchase 3,000,000 shares of our Series A Convertible Preferred Stock (convertible into 3,000,000 shares of our Class A Common Stock), at an exercise price of $0.0001 per share. Upon exercise, all the shares of our Series A Convertible Preferred Stock were converted into shares of our Class A Common Stock.

In November 2018, the holder of a convertible note in the principal amount of $15,000 converted $6,000 of outstanding note principal into 1,200,000 shares of the Company’s common stock, and the holder of 65,790 shares of the Company’s Series A Preferred Stock converted such holding into shares of the Company’s common stock.

As further discussed above, in December 2018, the Company repurchased (and later retired) 30,000,000 shares of its common stock from Foshan City Shunde District Cheering Garden Tools Co., LTD. In connection with the share repurchase, Alchemist assisted the Company in negotiating with the selling stockholder and remitted the purchase price on behalf of the Company. In addition, in December 2018, holders of 1,250,000 shares of the Company’s Series A Convertible Preferred Stock converted such holdings into shares of the Company’s common stock.

In January 2019, Alchemist converted 50,000,000 shares of the Company’s Series A Convertible Preferred Stock into shares of the Company’s common stock. In addition, in January 2019, an executive officer of the Company exercised stock warrants (granted in January 2019 in conjunction with his employment agreement previously disclosed) to purchase 13,470,620 shares of the Company’s Series A Convertible Preferred Stock (convertible into 13,470,620 shares of our Class A Common Stock), at an exercise price of $0.0001 per share. Upon exercise, the newly-issued shares of our Series A Convertible Preferred Stock were converted into shares of our common stock.

As of January 31, 2019, there were 101,272,794 shares of our Class A common stock and 10,000,000 shares of our Class B common stock issued and outstanding.

Shares Subscribed

During the nine months ended January 31, 2019, the Company received stock subscriptions for its Class A common stock in the total amount of $40,000. There were no underwriting discounts or commissions involved in connection with these stock subscriptions.

The following table summarizes the activity relating to the Company’s warrants during the nine months ended January 31, 2019:

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

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

Acquisition-related Commitments

In May 2018, Legacy Direct Global, LLC. (“Legacy Direct Global”), a Texas limited liability company and a wholly-owned subsidiary of Sharing Services, Sharing Services, and Legacy Direct, LLC. (the “Seller”) entered into an agreement pursuant to which Legacy Direct Global agreed to acquire certain assets and operational businesses and to assume certain liabilities of the Seller (the “Agreement”). In December 2018, the Company and Legacy Direct, LLC agreed to terminate the Agreement.

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

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

Contingencies

Legal Proceedings

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

Other Contingencies

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

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