10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2021

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

For the transition period from N/A to N/A

Commission file number: 000-23446

SUGARMADE, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3008888
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
750 Royal Oaks Dr., Suite 108, Monrovia, CA	91016
(Address of principal executive offices)	(Zip Code)

(888) 982-1628

(Registrant’s telephone number, including area code)

N/A

(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 class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

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

Large accelerated filer	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[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 [  ] No [X]

At May 19, 2021, there were 5,444,622,595 shares of common stock issued and outstanding.

SUGARMADE, INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2021

TABLE OF CONTENTS

PART I:	Financial Information
Item 1	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and June 30, 2020 (audited)	1
	Condensed Consolidated Statements of Operations for Three and Nine Months Ended March 31, 2021 and 2020 (unaudited)	2
	Condensed Consolidated Statements of Equity for the Three and Nine Months Ended March 31, 2021 and 2020 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2021 and 2020 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4	Controls and Procedures	39
PART II:	Other Information
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults upon Senior Securities	40
Item 4	Mine Safety Disclosures	40
Item 5	Other Information	40
Item 6	Exhibits	41
Signatures		42

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q includes forward-looking statements. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words. All statements contained or incorporated by reference in this quarterly report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, the future of our industry and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. These factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

PART 1: Financial Information

Item 1 Financial Statements

Sugarmade, Inc. and Subsidiary
Condensed Consolidated Balance Sheets

	For the Period Ended
	March 31, 2021			June 30, 2020
	(Unaudited)
Assets
Current assets:
Cash	$	269,885		$	441,004
Accounts receivable, net		75,040			134,517
Inventory, net		692,460			679,471
Loan receivables, current		-			1,365
Loan receivables - related party, current		208,931			122,535
Other current assets		1,066,597			263,404
Right of use asset, current		237,556			270,363
Total current assets		2,550,469			1,912,659
Noncurrent assets:
Equipment, net		390,189			499,047
Intangible asset, net		14,578			9,800
Other assets		-			54,163
Loan receivable - Investment, noncurrent		196,000			196,000
Right of use asset, noncurrent		549,261			835,393
Investment to Indigo Dye		564,819			-
Total noncurrent assets		1,714,847			1,594,403
Total assets	$	4,265,316		$	3,507,062
Liabilities and Stockholders’ Deficiency
Current liabilities:
Note payable due to bank	$	25,982		$	25,982
Accounts payable and accrued liabilities		1,753,855			1,583,228
Customer deposits		660,268			466,337
Customer overpayment		53,183			47,890
Unearned revenue		9,379			53,248
Other payables		812,069			691,801
Accrued interest		515,767			494,740
Accrued compensation and personnel related payables		-			35,361
Notes payable - Current		20,000			20,000
Notes payable - Related Parties, Current		15,427			15,427
Lease liability - Current		231,305			372,285
Loans payable - Current		350,221			319,314
Loan payable - Related Parties, Current		238,150			35,943
Convertible notes payable, Net, Current		1,982,902			1,740,122
Derivative liabilities, net		2,723,899			5,597,095
Warrants liabilities		24,216			79,910
Shares to be issued		136,577			101,577
Total current liabilities		9,553,200			11,680,260
Non-Current liabilities:
Loans payable		366,495			197,946
Lease liability		591,116			767,729
Total liabilities		10,510,811			12,645,935
Stockholders’ deficiency:
Preferred stock, $0.001 par value, 10,000,000 shares authorized 1,541,500 and 3,541,500 shares issued outstanding at March 31, 2021 and June 30, 2020		1,542			3,542
Common stock, $0.001 par value, 10,000,000,000 shares authorized, 4,718,104,197 and 1,763,277,230 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively		4,718,105			1,763,278
Additional paid-in capital		63,095,927			57,307,767
Share to be issued, Preferred stock		(1	)		-
Common Stock Subscribed		236,008			236,008
Accumulated deficit		(74,350,923	)		(68,438,332	)
Total stockholders’ deficiency		(6,299,342	)		(9,127,737	)
Non-Controlling Interest		53,847			(11,136	)
Total stockholders’ deficiency		(6,245,495	)		(9,138,873	)
Total liabilities and stockholders’ deficiency	$	4,265,316		$	3,507,062

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

-1-

Sugarmade, Inc. and Subsidiary
Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	March 31, 2021			March 31, 2020			March 31, 2021			March 31, 2020
Revenues, net	$	404,843		$	416,356		$	2,851,822		$	1,891,140
Cost of goods sold		229,818			253,223			1,502,247			1,181,081
Gross profit		175,025			163,133			1,349,575			710,059
Selling, general and administrative expenses		300,188			361,986			1,446,038			1,057,706
Advertising and promotion expense		99,481			15,045			378,068			72,528
Marketing and research expense		48,324			70,185			364,580			149,631
Professional expense		137,399			268,530			756,444			1,415,796
Salaries and wages		174,634			109,625			368,616			343,723
Stock compensation expense		16,250			45,250			82,250			6,250,800
Loss from operations		(601,251	)		(707,488	)		(2,046,421	)		(8,580,125	)
Non-operating income (expense):
Other income		1,957			145			5,099			3,243
Gain in loss of control of VIE		-			-			313,928			-
Interest expense		(725,688	)		(173,519	)		(1,920,660	)		(1,493,319	)
Bad debts		(256	)		-			(133,235	)		-
Change in fair value of derivative liabilities		(3,485,549	)		(238,065	)		506,559			2,075,982
Warrant Expense		(14,694	)		(25,369	)		55,695			(80,647	)
Loss on notes conversion		-			-			-			(184,626	)
Loss on settlement		-			-			(80,000	)		(382,635	)
Gain on asset disposal		-			-			-			7,000
Amortization of debt discount		(759,219	)		(961,146	)		(2,605,144	)		(3,079,553	)
Debt forgiveness		-			(25,670	)		-			(197,765	)
Other expenses		(1,459	)		-			(55,054	)		(740	)
Total non-operating expenses, net		(4,984,908	)		(1,423,624	)		(3,912,812	)		(3,333,060	)
Equity Method Investment Loss								(2,114	)
Net loss	$	(5,586,159	)	$	(2,131,112	)	$	(5,961,347	)	$	(11,913,186	)
Less: net loss attributable to the noncontrolling interest	$	(48,756	)	$	-		$	(48,756	)	$	-
Net loss attributable to SugarMade Inc.	$	(5,537,403	)	$	(2,131,112	)	$	(5,912,591	)	$	(11,913,186	)
Basic net loss per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Diluted net loss per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Basic and diluted weighted average common shares outstanding *		4,121,621,837			822,263,706			3,247,070,176			863,368,325

* Shares issuable upon conversion of convertible debts and exercising of warrants were excluded in calculating diluted loss per share.

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

-2-

Sugarmade, Inc. and Subsidiary

Condensed Consolidated Statements of Equity

(Unaudited)

	Preferred Stock						Common Stock						Additional Paid-in			Shares to be Cancelled, Preferred			Shares to be Cancelled, Common			Common Shares			Accumulated			Total Shareholders’
	Shares			Amount			Shares			Amount			Capital			Shares			Shares			Subscribed			Deficit			Equity
Balance at June 30, 2019		2,000,000			2,000			697,608,570			697,610			61,038,875			-			-			29,000			(47,088,950	)		14,678,534
Shares issued for debt settlement		-			-			1,000,000			1,000			28,000			-			-			(29,000	)		-			-
Reclass derivative liability from conversion		-			-			-			-			659,526			-			-			-			-			659,526
Shares issued for conversions		-			-			71,915,557			71,916			475,917			-			-			-			-			547,833
Shares issued for cash		-			-			11,348,591			11,349			88,651			-			-			-			-			100,000
Shares issued for warrant exercise		-			-			28,371,818			28,382			(14,249	)		-			-			-			-			14,133
Net loss		-			-			-			-			-			-			-			-			(2,027,551	)		(2,027,551	)
Balance at September 30, 2019		2,000,000			2,000			810,244,536			810,257			62,276,720			-			-			-			(49,116,501	)		13,972,474
Shares issued for cash		-			-			26,621,610			26,622			213,378			-			-			100,000			-			340,000
Options issued for services		-			-			-			-			73,500			-			-			-			-			73,500
Shares issued as compensation for services		415,000			415			500,000			500			5,941,135			-			-			-			-			5,942,050
Reclass derivative liability from conversion		-			-			-			-			297,962			-			-			-			-			297,962
Shares issued for conversion		-			-			24,994,341			24,994			117,170			-			-			-			-			142,164
Shares issued for debt settlement		-			-			18,181,818			18,182			272,273			-			-			-			-			290,455
Shares issued for award - Bizright		750,001			750			249,373,817			249,374			14,040,936			(10,725,014)			(21,566,046	)		-			-			(18,000,000	)
Initial valuation of BCF		-			-			-			-			239,301			-			-			-			-			239,301
Net loss		-			-			-			-			-			-			-			-			(7,754,524	)		(7,754,524	)
Balance at December 31, 2019		3,165,001			3,165			1,129,916,122			1,129,927			83,472,375			(10,725,014	)		(21,566,046	)		100,000			(56,871,025	)		(4,456,619	)
Shares issued for cash		-			-			33,542,865			33,543			191,457			-			-			(100,000	)		-			125,000
Options issued for services		-			-			-			-			45,250			-			-			-			-			45,250
Reclass derivative liability from conversion		-			-			-			-			302,845			-			-			-			-			302,845
Shares issued for conversions		-			-			128,525,706			128,526			170,230			-			-			-			-			298,756
Shares cancelled for award - Bizright		(750,001	)		(750	)		(448,873,817	)		(448,874	)		(31,827,478	)		10,725,014			21,566,046			-			-			13,958
Initial valuation of BCF		-			-			-			-			210,000			-			-			-			-			210,000
Net loss		-			-			-			-			-			-			-			-			(2,131,111	)		(2,131,111	)
Balance at March 31, 2020		2,415,000			2,415			843,110,876			843,120			52,564,680			-			-			-			(59,002,136	)		(5,591,920	)

	Preferred Stock						Common stock				Additional Paid-in			Shares to be Issued Preferred			Common Shares		Accumulated			Non Controlling			Total Shareholders’
	Shares			Amount			Shares		Amount		Capital			Shares			Subscribed		Deficit			Interest			Equity
Balance at June 30, 2020	3,541,500			3,542			1,763,277,230		1,763,278		57,307,767			-			236,008		(68,438,331)			(11,136)			(9,138,871)
Reclass derivative liability to equity from conversion	-			-			-		-		1,805,188			-			-		-			-			1,805,188
Shares issued for conversion		-			-			1,081,411,606		1,081,412		192,048			-			-		-			-			1,273,459
Repayment of capital to noncontrolling minority		-			-			-		-		-			-			-		-			(24,000	)		(24,000	)
Net loss		-			-			-		-		-			-			-		1,278,812			1,165			1,279,976
Balance at September 30, 2020		3,541,500			3,542			2,844,688,836		2,844,690		59,305,003			-			236,008		(67,159,519	)		(33,971	)		(4,804,248	)
Reclass derivative liability to equity from conversion		-			-			-		-		531,591			-			-		-			-			531,591
Shares issued for conversions		-			-			411,171,815		411,172		(90,293	)		-			-		-			-			320,879
Preferred stock conversions		(2,000,000	)		(2,000	)		360,647,019		360,647		141,353			-			-		-			-			500,000
Loss of control in VIE		-			-			-		-		(169,262	)		-			-		2,396			33,971			(132,895	)
Net loss		-			-			-		-		-			-			-		(1,656,397	)		-			(1,656,398	)
Balance at December 31, 2020		1,541,500			1,542			3,616,507,670		3,616,509		59,718,392			-			236,008		(68,813,520	)		-			(5,241,070	)
Reclass derivative liability to equity from conversion												3,025,875			-			-		-			-			3,025,875
Shares issued for cash		-			-			587,222,222		587,222		424,778			-			-		-			-			1,012,000
Shares issued for conversions		-			-			499,374,305		499,374		(95,619	)		-			-		-			-			403,755
Shares issued for services		-			-			15,000,000		15,000		22,500			-			-		-			-			37,500
Contributions from non-controlling interests in other consolidated subsidiaries		-			-			-		-		-			-			-		-			102,603			102,603
Shares issued to officer		-			-			-		-		1			(1	)		-		-			-			-
Net loss		-			-			-		-		-			-			-		(5,537,403	)		(48,756	)		(5,586,157	)
Balance at March 31, 2021		1,541,500			1,542			4,718,104,197		4,718,105		63,095,927			(1	)		236,008		(74,350,923	)		53,847			(6,245,495	)

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

-3-

Sugarmade, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows For

The Nine Months Ended March 31, 2021 and 2020

(Unaudited)

	For the Nine Months Ended
	March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(5,912,591	)	$	(11,913,186	)
Non-controlling interest		53,847			-
Adjustments to reconcile net loss to cash flows from operating activities:
Initial valuation of debt discount		-			449,300
Loss on settlement		80,000			382,635
Gain on loss of control of VIE		(313,929	)		-
Return on EB5 investment		500,000			-
Amortization of debt discount		2,605,144			756,981
Stock-based compensation		72,500			6,086,800
Change in fair value of derivative liability		(506,559	)		864,878
Change in exercise of warrant		(55,694	)		92,756
Depreciation		70,650			47,526
Amortization of intangible assets		1,022			1,050
Change in financing cost		974,052			-
Changes in assets and liabilities:
Accounts receivable		59,477			178,057
Intangible assets		(5,800	)		-
Inventory		(157,858	)		(165,005	)
Prepayment, deposits and other receivables		(959,214	)		(35,271	)
Other assets		54,163			(20,000	)
Other payables		266,876			(53,609	)
Accounts payable and accrued liabilities		801,973			58,058
Customer deposits		199,224			(47,911	)
Unearned revenue		(43,869	)		(57,415	)
Right of use assets		175,215			67,258
Lease liability		(173,871	)		(64,247	)
Investment to Indigo Dye		(564,819	)		597,830.00
Interest Payable		132,220			264,452
Net cash used in operating activities		(2,647,840	)		(2,509,064	)
Cash flows from investing activities:
Purchase of fixed assets		(55,810	)		-
Investment		-			(700,000	)
Net cash used in investing activities		(55,810	)		(700,000	)
Cash flows from financing activities:
Proceeds from shares issuance		1,012,000			565,000
Bank overdraft		-			20,965
Loan receivable		1,365			271,033
Loan receivable - related parties		(170,887	)		-
Proceeds from note payable		-			-
Proceeds from (repayment of) note payable - related parties		-			(2,573.00	)
Proceeds from advanced shares issuance		-			136,000
Proceeds from loans payable - related parties		202,207			20,000
Proceeds from convertible notes		1,874,200			2,051,887
Repayment of convertible notes		(327,700	)		-
Reduction of cash due to Indigo deconsolidation		(326,811	)		-
Proceeds from loans		268,156			119,890
Net cash provided by financing activities		2,532,530			3,182,202
Net decrease in cash		(171,120	)		(26,861	)
Cash paid during the period for:
Cash, beginning of period		441,004			34,371
Cash, end of period	$	269,885		$	7,510
Supplemental disclosure of non-cash financing activities —
Shares issued for conversion of convertible debt		1,998,095			988,753
Reduction in derivative liability due to conversion		5,362,654			1,260,333
Debt discount related to convertible debt		2,080,016			1,110,311
Debts settled through shares issuance		-			229,000
Shares issued for award to Bizright		-			(32,291,060	)
Shares cancelled for termination of Bizright Acquisition		-			32,283,910
Shares issued for warrant exercise		-			28,381
Reclassification from prepaid deposit to BZRTH investment		-			(883,958	)

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

-4-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

1. Nature of Business

Sugarmade, Inc. (hereinafter referred to as “we,” “us” or “Company”) is a publicly-traded company incorporated in the state of Delaware. Our previous legal name was Diversified Opportunities, Inc. Our Company operates our business activities through multiple subsidiaries, which includes SWC Group, Inc., a California corporation (“SWC”), SugarRush, Inc., a California corporation and NUG Avenue, Inc., a California corporation.

Sugarmade, Inc. was founded in 2010. In 2014, CarryOutSupplies.com was acquired by Sugarmade, Inc., creating the Company as it is today.

Sugar Rush, Inc., our wholly owned subsidiary, seeks to enter the business of operating and investing in specialized licensed and regulated hemp and cannabis operations.

The Company is also a majority owner in Nug Avenue, Inc., a California corporation, which is engaged in the licensed and regulated market for the delivery of cannabis and a part owner in Indigo Dye Group, the operator of a licensed and regulated cannabis delivery service in Northern California.

These operations and investments are outlined in more detail below.

1)	Paper and paper-based products: The supply of consumable products to the quick-service restaurant sub-sector of the restaurant industry, and as an importer and distributor of non-medical personal protection equipment to business and consumers, via our CarryOutSupplies.com subsidiary (“Carryout Supplies”). Carryout Supplies is a producer and wholesaler of custom printed and generic supplies, servicing more than 2,000 quick-service restaurants. The primary products are plastic cold cups, paper coffee cups, yogurt cups, ice cream cups, cup lids, cup sleeves, edible packaging, food containers, soup containers, plastic spoons, and similar products for this market sector. This subsidiary, which was formed in 2009, was recently expanded to also offer non-medical personal protective equipment.
2)	Nug Avenue, Inc. investment into licensed cannabis delivery in Los Angeles area markets. During February 2021, we became a majority owner of Nug Avenue, Inc., a California corporation (“Nug Avenue”), which operates a licensed and regulated cannabis delivery service out of Lynwood, California, serving the greater Los Angeles Metropolitan area (the “Lynwood Operations”). The Company currently owns a majority stake of seventy percent (70%) of Nug Avenue’s Lynwood Operations and holds first rights of refusal on Nug Avenue’s business expansion relative to the cannabis marketplace. By way of our capital injection made into Nug Avenue and by via our 70% ownership position, we consolidate and recognize 100% of the revenues and 70% of profits or loss generated by Nug Ave for its Lynwood Operation. We believe our investment into Nug Avenue will allow us to expand out presence into the licensed and regulated cannabis marketplace. The California cannabis market continues its rapid growth, with the Southern California sub-market representing the world’s largest single cannabis marketplace. According to the California Department of Tax and Fee Administration, the most recently reported quarterly period posted a significant increase in cannabis tax compared to the year-ago period. Much of this growth was driven by increased use of delivery services, as consumers are increasingly relying on home delivery for many goods, including cannabis.
3)	Cannabis products delivery service and sales: As a joint owner in the Budcars licensed cannabis delivery service brand (“Budcars” or the “Budcars Brand”). Budcars operates a licensed cannabis delivery service in the Sacramento, California area. During early 2020, the Company gained a 40% stake in the Budcars Brand and in the Sacramento delivery operations via acquiring a 40% stake in Indigo Dye Group (“Indigo”). Under the terms of the agreement with Indigo, Sugarmade acquired an option to purchase an additional 30% interest in Budcars. Upon exercise of this option, the Company would acquire a controlling interest in Indigo. As of March 31, 2021, the option has not yet been exercised and the Company’s stake in Budcars was at 40%. Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent of Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. As of March 31, 2021, the Company made no additional payments, and still hold approximately 29% of the ownership of Indigo. See Note 4 and Note 5.
4)	Selected cannabis and hemp projects. We are also seeking operating contracts and investments in various legal, licensed and regulated cannabis and hemp projects via our Sugar Rush, Inc. subsidiary and directly from Sugarmade, Inc. We believe our team has strong experience in hemp and cannabis operations and management that can be leveraged to expand our revenue base. On March 28, 2021 we entered into a binding letter of intent for the acquisition of Lemon Glow Company, Inc., a California corporation (“Lemon Glow”), including all of Lemon Glow’s assets, interests, property, and rights, which includes six-hundred-forty (640) acres of real estate in Lake County, California, outside of the local commercial cannabis cultivation exclusion zones. Our intent, via the Sugar Rush subsidiary, is to utilize thirty-two acres of the property to develop licensed cannabis cultivation and manufacturing operations. On April 27, 2021, we entered into an amendment to the March 28, 2021 letter of intent extending the term of the letter of intent to May 12, 2021. On May 14, 2021, the Company issued a press release announcing the Closing of the Merger. The Closing of the Merger occurred in accordance with the terms of the Merger Agreement on May 12, 2021. See subsequent events – Agreement and plan of merger.

-5-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

These interim condensed consolidated financial statements should be read in conjunction with our Company’s Annual Report on Form 10-K for the year ended June 30, 2020, which contains our audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operation, for the fiscal year ended June 30, 2020. The interim results for the period ended March 31, 2021 are not necessarily indicative of the results for the full fiscal year.

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of our Company and SWC, the Company’s wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

Going concern

The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required.

Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management endeavors to increase revenue-generating operations. While the Company’s priority is on generating cash from operations, management also seek to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock.

-6-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies (continued)

Use of estimates

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Revenue recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’’) No. 606, Revenue Recognition. Sugarmade applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Property and equipment

Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment	3-5 years
Furniture and equipment	7 years
Vehicles	5 years
Leasehold improvements	5 years

Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the statements of income.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the nine months ended March 31, 2021 and 2020.

-7-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies (continued)

Impairment of Long-Lived Assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company, as of June 30, 2020, performed an impairment test of all of its intangible assets. Based on the Company’s analysis, the company had an amortization of intangible assets of $4,778 and 1,050 for the nine months ended March 31, 2021 and 2020, respectively.

-8-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies (continued)

Leases

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The new standard became effective April 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on July 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. All existing leases are reported under this rule.

Under ASC 840, leases were classified as either capital or operating, and the classification significantly impacted the effect the contract had on the company’s financial statements. Capital lease classification resulted in a liability that was recorded on a company’s balance sheet, whereas operating leases did not impact the balance sheet. After the new adoption, $1,105,755 of operating lease right-of-use asset and $1,140,041 of operating lease liabilities were reflected on the Company’s June 30, 2020 financial statements and $786,817 of operating lease right-of-use asset and $822,421 of operating lease liabilities were reflected on the Company’s March 31, 2021 financial statements.

-9-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies (continued)

Stock based compensation

Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Binomial Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk-free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Earnings (Loss) per share

We calculate basic earnings (loss) per share (“EPS”) by dividing our net income (loss) by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

Fair value of financial instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The Company used Level 3 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Binomial option-pricing model for the nine months ended March 31, 2021.

-10-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

2. Summary of Significant Accounting Policies (continued)

Derivative instruments

The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense).

Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Segment Reporting

FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

As of March 31, 2021 substantially all of the Company’s operations were conducted in three industry segments – (1) paper and paper-based products such as paper cups, cup lids, food containers, etc., which accounted for approximately 41% of the Company’s revenues as of March 31, 2021; (2) non-medical supplies such as non-medical fascial masks, which accounted for approximately 1% of the Company’s total revenues as of March 31, 2021; (3) cannabis products delivery service and sales, which accounted for approximately 58% of the Company’s total revenues as March 31, 2021.

New accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes an ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company have adopted this ASU on the consolidated financial statements in the quarter ended September 30, 2019.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”. The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, “Income Taxes”. The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for us beginning in the first quarter of fiscal 2021, with early adoption permitted. We are still evaluating the impact this guidance will have on our consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

-11-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

3. Concentration

Customers

For the nine months ended March 31, 2021 and 2020, our Company earned net revenues of $2,851,822 and $1,891,140 respectively. The vast majority of these revenues for the period ended March 31, 2021 were derived from a large number of customers, whereas the vast majority of these revenues for the period ended March 31, 2020 were derived from a limited number of customers. There was one customer that accounted for approximately 11.6% of the Company’s total revenues for the period ended March 31, 2021.

Suppliers

For the period ended March 31, 2021, we purchased products for sale by the Company’s subsidiary from several contract manufacturers located in Asia and the U.S. A substantial portion of the Company’s inventory was purchased from two (2) suppliers. The two suppliers accounted for 33.2% and 19.40%, respectively, of the Company’s total inventory purchase for the period ended March 31, 2021.

For the period ended March 31, 2020, we purchased products for sale by the company’s subsidiaries from several contract manufacturers located in Asia and the U.S. A substantial portion of the Company’s inventory is purchased from two (2) suppliers. The two (2) suppliers accounted as follows: Two suppliers accounted for 31.21% and 17.80% of the Company’s total inventory purchase for the period ended March 31, 2020, respectively.

4. VIE

On February 7, 2020, the Company entered into a share sale and purchase agreement (the “Indigo Agreement”) with Indigo Dye Group Corp. (“Indigo”), a corporation located in Sacramento, California. Indigo carries on business as a cannabis seller and delivery business under the name BudCars. The major Cannabis Products include Flower, Edibles, Vape Cartridges, Pre-Rolls, & Concentrates, etc. All the products are finished goods. In addition, Indigo is operating a non-store front retail delivery business (Type-9 License# C9-0000286) in California.

Pursuant to the terms of the Indigo Agreement, the Company agree to invest $700,000 (the “Investment”) into Indigo for inventory, equipment, and marketing expenses. The Investment shall be made in twelve monthly equal installments of $58,333 with the acceleration of the payment schedule possible depending on business growth, cash flow needs and capital availability.

In exchange, the Company received 40% of Indigo’s issued shares. upon execution of the final agreement. The value used for this transaction is $1,750,000 and each percentage (1%) of the company is worth $17,500. In the event that the Company is not able to make a payment of $58,333 in any month, it will have 90 days to cure the default. On the 91st day the investment plan will cease and the amount of invested capital will be calculated based on an enterprise value of $1,750,000 or $17,500 per 1% of owned equity.

In addition, subject to the terms and conditions of the Indigo Agreement, the Company has the option to acquire an additional 30% interest in Indigo. Upon exercise of the option, the Company would obtain control over Indigo.

-12-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

4. VIE (continued)

From late May 2020 until September 30, 2020, the Company was actively involved in development of Indigo’s operations with power to direct the activities and significantly impact Indigo’s economic performance. The Company also has obligations to absorb losses and right to receive benefits from Indigo. As such, in accordance with ASC 810-10-25-38A through 25-38J, Indigo is consolidated as an VIE of the Company.

Starting on October 1, 2020, the Company plans to open new locations via purchasing equity into other Brand/Franchises to cover delivery for the entire California. Therefore, the Company likely not to proceeds the option to acquire the additional 30% interest in Indigo at the moment. In addition, the Company is no longer involve in day-to-day operations and the Company will be pursuing cannabis delivery moving forward, independently from Indigo Dye Group. As of October 1, 2020, the Company continues to hold approximately 29% of the ownership of Indigo but ceased to have a controlling interest in the partnership and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. See footnote #6 Noncontrolling interest and deconsolidation of VIE for details.

5. Noncontrolling Interest and Deconsolidation of VIE

Starting in fiscal year ended June 30, 2020, the Company had a variable interest entity, Indigo Dye Group, for accounting purposes. The Company owned approximately 29% of Indigo’s outstanding equity and as of September 30, 2020, involved its day-to-day operations, which gave the Company the power to direct the activities of Indigo that most significantly impact its economic performance. Accordingly, the Company recognized the carrying value of the noncontrolling interest as a component of total shareholders’ equity, and the consolidated financial statements included the financial position and results of operations of Indigo as of and for the periods ended June 30, 2020 and September 30, 2020.

Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent from Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. As of and for the quarter ended March 31, 2021, the Company did not make any additional payments, it still holds approximately 29% of the ownership of Indigo. See Note 4 and Note 5.

The net asset value of the Company’s variable interest in Indigo Dye Group was approximately $326,812 as of October 1, 2020, the date of deconsolidation. The value of the Company’s variable interest on the date of deconsolidation was based on management’s estimate of the fair value of Indigo at that time. The Company concluded that the market approach was the most appropriate method to determine the fair value of the entity on the date of deconsolidation, given that Indigo raised equity funding from third-party investors around the same period (i.e., level 2 inputs). The Company recognized a gain on deconsolidation of approximately $313,928 with no related tax impact, which is included in other income, net on the consolidated statement of operations. As the Company is not obligated to fund future losses of Indigo, the carrying amount is the Company’s maximum risk of loss.

-13-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

6. Legal Proceedings

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. Except as set forth below, as of March 31, 2021, there were no legal claims pending or threatened against the Company that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows.

On December 11, 2013, the Company was served with a complaint from two convertible note holders and investors in the Company. On February 21, 2017, the Company signed a settlement agreement with the plaintiffs in the matter of Hannan vs. Sugarmade. Under the terms of the settlement agreement, the company agreed to pay the plaintiffs an aggregate of $227,000 to settle all claims against the Company, which included the payoff of two notes outstanding. The parties had estimated the value of the notes at approximately $80,000. As of June 30, 2020, third parties had purchased two (2) notes of approximately $80,000. As of March 31, 2021, there remains a balance, plus accrued interest on the $227,000 and on the $80,000 due under the notes.

There can be no assurances the ultimate liability relative to these lawsuits will not exceed what is outlined above.

7. Cash

Cash and cash equivalents consist of amounts held as bank deposits and highly liquid debt instruments purchased with an original maturity of three months or less.

From time to time, we may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). We have not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash.

-14-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

8. Accounts Receivable

Accounts receivable are carried at their estimated collectible amounts, net of any estimated allowances for doubtful accounts. We grant unsecured credit to our customer’s deemed credit worthy. Ongoing credit evaluations are performed and potential credit losses estimated by management are charged to operations on a regular basis. At the time any particular account receivable is deemed uncollectible, the balance is charged to the allowance for doubtful accounts. The Company had accounts receivable net of allowances of $75,040 as of March 31, 2021 and of $134,517 as of June 30, 2020.

9. Loans Receivable

Loans receivable amounted $0 and $1,365 as of March 31, 2021 and June 30, 2020, respectively. Loan receivables are mainly advanced payments to the other companies.

10. Loans Receivable – Related Parties

Loan receivables – related parties amounted $404,931 ($208,931 current and $196,000 noncurrent) and $318,535 ($122,535 current and $196,000 noncurrent) as of March 31, 2021 and June 30, 2020, respectively. Loan receivables – related parties are mainly advanced payments to the related party companies for business expense.

11. Inventory

Inventory consists of finished goods paper and paper-based products such as paper cups and food containers ready for sale and is stated at the lower of cost or market. We value our inventory using the weighted average costing method. Our Company’s policy is to include as a part of inventory any freight incurred to ship the product from our contract manufacturers to our warehouses. Outbound freights costs related to shipping costs to our customers are considered period costs and are reflected in selling, general and administrative expenses. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence.

If the estimated realizable value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value. On a consolidated basis, as of March 31, 2021 and June 30, 2020, the balance for the inventory totaled $692,460 and $679,471, respectively. Obsolescence reserve at March 31, 2021 and June 30, 2020 were $183,974 and $15,445, respectively.

-15-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

12. Other Current Assets

As of March 31, 2021 and June 30, 2020, other current assets consisted of the following:

	For the periods ended
	March 31, 2021		June 30, 2020
Prepaid Deposit	$	90,696	$	48,483
Prepaid Inventory		961,975		65,449
Employees Advance		—		324
Prepaid Expenses		9,717		35,157
Undeposited Funds		4,209		71,550
Other		—		42,441
Total:	$	1,066,597	$	263,404

13. Intangible Asset

On August 21, 2017, the Company entered into an intellectual property assignment agreement with Sound Decisions to revamp the Company’s shoplifty website to generate and attract more traffic from potential customers. The Company made a payment of $14,000 for the website (intellectual property). In addition, the Company made a payment of $5,800 for the website (intellectual property) during the three months ended March 31, 2021. The Company amortized this use right as intangible asset over ten years, and recorded amortization expense of $1,022 for the nine months ended March 31, 2021 and 2020, respectively.

-16-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

14. Property and Equipment, net

As of March 31, 2021 and June 30, 2020, property, plant and equipment consisted of the following:

Fixed Assets	March 31, 2021			June 30, 2020
Office and equipment	$	732,062		$	739,447
Motor vehicles		119,764			164,244
Leasehold Improvement		21,970			24,470
Total		873,797			928,161
Less: accumulated depreciation		(483,608	)		(429,116	)
Plant and Equipment, net	$	390,189		$	499,045

For the periods ended March 31, 2021 and June 30, 2020, depreciation expenses amounted to $70,650 and $110,032, respectively.

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the periods ended March 31, 2021 and June 30, 2020.

-17-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

15. Unearned Revenues

Unearned revenue amounted to $9,379 and $53,248 as of March 31, 2021 and June 30, 2020, respectively. Unearned revenues are mainly due to contracts with extended payment terms, acceptance provisions and future delivery obligation.

16. Other Payables

Other payable amounted to $812,069 and $691,801 as of March 31, 2021 and June 30, 2020, respectively. Other payables are mainly credit card payables and taxes payables. As of March 31, 2021, the Company had 8 credit cards, one American Express is a charge card with no limit and zero interest. The remaining 7 cards had total credit limit of $85,000, and APR from 11.24% to 29.99%.

17. Convertible Notes

As of March 31, 2021 and June 30, 2020, the balance owing on convertible notes, net of debt discount, with terms as described below was $1,982,902 and $1,740,122, respectively.

Convertible note 1: On August 24, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

Convertible note 2: On September 18, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

Convertible note 3: On December 21, 2012, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

-18-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

17. Convertible Notes (continued)

Convertible note 4: On November 1, 2018, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 5: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 6: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $40,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 7: On December 3, 2018, the Company entered into a convertible promissory note with an accredited investor for $35,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 8: On September 27, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $165,000 (includes $16,250 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 55% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. During the year ended June 30, 2020, the note holder converted $50,000 principal with $2,992 interest expense into 56,007,062 shares of the Company’s common stock. As of March 31, 2021, the note has been fully converted.

Convertible note 9: On October 28, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $225,500 (includes $23,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 10: On October 28, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $225,500 (includes $23,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 11: On November 29, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,150 (includes $11,150 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 12: On November 29, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,150 (includes $11,150 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

-19-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

17. Convertible Notes (continued)

Convertible note 13: On December 10, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,700 (includes $11,700 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 14: On December 10, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,700 (includes $11,700 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 15: On December 27, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $112,200 (includes $12,200 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 16: On October 31, 2019, the Company issued a convertible promissory note with a former consultant for a total amount of $139,301. The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is $0.008 per share. On October 1, 2020, the Company entered an amendment to settlement note to amend the conversion price at 60% of the lowest trading bid price in the 20 consecutive trading days immediately preceding to the conversion date.

Convertible note 17: On November 1, 2019, the Company issued a convertible promissory note with a former consultant for a total amount of $100,000. The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is $0.008 per share. On October 1, 2020 the Company entered an amendment to settlement note to amend the conversion price at 60% of the lowest trading bid price in the 20 consecutive trading days immediately preceding to the conversion date.

Convertible note 18: On January 3, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $112,200 (includes $12,200 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 19: On January 14, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $150,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest closing prices for the 10 consecutive trading days prior to the conversion date. During the three months ended September 30, 2020, the note holder converted $50,000 principal into 29,868,578 shares of the Company’s common stock. As of March 31, 2021, the remaining principal and unpaid interest has been fully repaid by cash.

Convertible note 20: On January 22, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $128,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 10%. The conversion price for the note is 35% discount to average of two lowest closing prices for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note principal and unpaid interest has been fully repaid by cash.

-20-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

17. Convertible Notes (continued)

Convertible note 21: On February 4, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $110,000 (includes $10,000 OID). The note is due 360 days and bear an interest rate of 12%. The conversion price for the note is $0.001 per share. As of March 31, 2021, the note has been fully converted.

Convertible note 22: On February 18, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $100,000 (includes $10,000 OID). The note is due 360 days and bear an interest rate of 12%. The conversion price for the note is $0.001 per share.

Convertible note 23: On March 5, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $125,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest closing prices for the 10 consecutive trading days prior to the conversion date. As of December 31, 2020, the note has been fully converted.

Convertible note 24: On April 24, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $75,000 (includes $2,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest trading prices for the 10 consecutive trading days prior to the conversion date.

Convertible note 25: On June 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $36,300 (includes $3,300 OID and $3,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 26: On June 18, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $36,300 (includes $3,300 OID and $3,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 27: On July 6, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $77,000 (includes $2,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest trading prices for the 10 consecutive trading days prior to the conversion date.

-21-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

17. Convertible Notes (continued)

Convertible note 28: On July 7, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $153,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 10%. The conversion price for the note is 35% discount to average of two lowest trading prices for the 20 consecutive trading days prior to the conversion date.

Convertible note 29: On July 16, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $260,700 (includes $23,700 OID and $12,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 30: On July 21, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $200,200 (includes $18,200 OID and $7,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 31: On September 8, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $110,000 (includes $10,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 32: On September 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $227,700 (includes $20,700 OID and $7,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 33: On September 24, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $212,300 (includes $19,300 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 34: On October 8, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $231,000 (includes $21,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 35: On October 13, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $275,000 (includes $25,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 36: On November 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $58,300 (includes $5,300 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 37: On February 8, 2021, the Company issued a convertible promissory note with an accredited investor for a total amount of $69,300 (includes $6,300 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

In connection with the convertible debt, debt discount balance as of March 31, 2021 and June 30, 2020 were $355,752 and $880,879, respectively, and were being amortized and recorded as interest expenses over the term of the convertible debt.

-22-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

18. Derivative liabilities

The derivative liability is derived from the conversion features in note 8 and stock warrant in note 10. All were valued using the weighted-average Binomial option pricing model using the assumptions detailed below. As of March 31, 2021 and June 30, 2020, the derivative liability was $2,301,301 and $5,597,095, respectively. The Company recorded $482,232 gain and $1,442,295 loss from changes in derivative liability during the periods ended March 31, 2021 and June 30, 2020, respectively. The Binomial model with the following assumption inputs:

	March 31, 2021
Annual dividend yield	—
Expected life (years)	0.2-1.00
Risk-free interest rate	0.01-0.19	%
Expected volatility	115-209	%

	June 30, 2020
Annual dividend yield	—
Expected life (years)	0.5-1.00
Risk-free interest rate	0.16-2.10	%
Expected volatility	113-175	%

Fair value of the derivative is summarized as below:

Beginning Balance, June 30, 2020	$	5,597,095
Additions		2,996,017
Cancellation of Derivative Liabilities Due to Cash Repayment		(1,300,107	)
Cancellation of Derivative liabilities Due to Share Reservation		(214,757	)
Mark to Market		(278,070	)
Reclassification to APIC due to conversions		(4,076,280	)
Ending Balance, March 31, 2021	$	2,723,899

Beginning Balance, June 30, 2019	$	2,991,953
Additions		3,999,033
Mark to Market		(2,075,982	)
Reclassification to APIC due to conversions		(1,260,333	)
Ending Balance, March 31, 2020	$	3,706,809

-23-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

19. Stock warrants

On September 7, 2018, the Company entered into a settlement agreement with several investors to settle all disputes by issues additional unrestricted shares. In connection with the note each individual investor will also receive warrants equal to the number of the shares the investors own as of the effective date of the settlement agreement. The warrants have a life of five years with an exercise price as of the date of exchange. The fair value of the warrants at the grant date was $56,730. As of March 31, 2021 and June 30, 2020, the fair value of the warrant liability was $1,216 and $1,910, respectively.

On February 4, 2020, the Company entered into a warrant agreement with an accredited investor up to 10,000,000 shares of common stock of the Company at exercise price of $0.008 per share, subject to adjustment. The warrants have a life of five years with an exercise price as of the date of exchange. The fair value of the warrants at the grant date was $80,000. As of March 31, 2021 and June 30, 2020, the fair value of the warrant liability was $23,000 and $78,000, respectively.

As of March 31, 2021 and June 30, 2020, the total fair value of the warrant liability was $24,216 and $79,910, respectively.

20. Note payable

Note Payable Due to Bank –

During October 2011, we entered into a revolving demand note (line of credit) arrangement with HSBC Bank USA, with a revolving borrowing limit of $150,000. The line of credit bears a variable interest rate of 0.25% above the prime rate (5.5% as of December 20, 2018). In the event the deposit account is not established or minimum balance maintained, HSBC can charge a higher rate of interest of up to 4.0% above prime rate. As of March 31, 2021 and June 30, 2020, the loan principal balance was $25,982 and $25,982, respectively.

Notes Payable Due to Non-related Parties

On June 15, 2018, the Company entered into a promissory note with an accredited investor. The original principal amount was $20,000 and the note bears 8% interest per annum. The note was payable upon demand. As of March 31, 2021 and June 30, 2020, this note had a balance of $20,000 and $20,000, respectively.

Notes Payable Due to Related Parties

On January 23, 2013, the Company entered into a promissory note with a former employee of the Company. The original principal amount was $40,000 and the note bears no interest. The note was payable upon demand. As of March 31, 2021 and June 30, 2020, this note had a balance of $15,427 and $15,427, respectively.

-24-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

21. Loans payable

On October 1, 2017, SGMD entered a straight promissory note with Greater Asia Technology Limited (Greater Asia) for borrowing $100,000 with maturity date on June 30, 2018; the note bears an interest rate of 33.33%. As of March 31, 2021 and June 30, 2020, the note was in default and the outstanding balance under this note was $61,919 and $96,401, respectively.

During the year ended June 30, 2019, the Company entered a series of short-term loan agreements with Greater Asia Technology Limited (Greater Asia) for borrowing $375,000, with interest rate at 40% - 50% of the principal balance. As of March 31, 2021 and June 30, 2020, the outstanding balance with Greater Asia loans were $100,000 and $100,000, respectively.

On January 6, 2015, the Company entered into repayment agreement with its former employee for a loan of $9,500 at no interest. As of March 31, 2021 and June 30, 2020, the Company has an outstanding balance of $0 and $3,584, respectively.

On July 1, 2012, CarryOutSupplies entered an equipment loan agreement with a bank with maturity on June 21, 2024. The monthly payment is $648. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $18,735 and $24,524, respectively.

On March 18, 2020, the Company entered into a loan agreement for $150,000 with Celtic Bank with maturity date on March 18, 2020. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $0 and $117,635, respectively.

On June 26, 2020, the Company entered into a government loan agreement for $8,000 with maturity date on December 26, 2020. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $0 and $8,000, respectively.

-25-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

21. Loans payable (Continued)

On April 27, 2020, we entered into a loan borrowed $110,000 from Bank of America (“Lender”), pursuant to a Promissory Note issued by Company to Lender (the “April 2020 PPP Note”). The loan was made pursuant to the Paycheck Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The April 2020 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The April 2020 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the April 2020 PPP Note.

On July 28, 2020, we entered into a loan borrowed $159,900 from the Lender, pursuant to a Promissory Note issued by Company to Lender (the “July 2020 PPP Note”). The loan was made pursuant to the Paycheck Protection Program. The July 2020 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The July 2020 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the July 2020 PPP Note.

On January 25, 2021, we entered into a loan borrowed $96,595 from the Lender, pursuant to a Promissory Note issued by Company to Lender (the “January 2021 PPP Note”). The loan was made pursuant to the Paycheck Protection Program. The January 2021 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The January 2021 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the January 2021 PPP Note.

The Company accounted for the PPP loans under Topic 470: (a). Initially record the cash inflow from the PPP loan as a financial liability and would accrue interest in accordance with the interest method under ASC Subtopic 835-30; (b). Not impute additional interest at a market rate; (c). Continue to record the proceeds from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released or (2) the debtor pays off the loan; (d). Would reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

As of March 31, 2021 and June 30, 2020, the Company had an outstanding loan balance of $716,716 and $517,260, respectively.

22. Loans Payable – Related Parties

On July 7, 2016, SWC received a loan from an employee. The loan bears no interest and amortized on a monthly basis over the life of the loan. As of March 31, 2021 and June 30, 2020, the balance of the loan was $63,778 and $35,943, respectively.

Starting on September 30, 2020, the Company received loans from related parties. The loans bear no interest. As of March 31, 2021 and June 30, 2020, the balance of the loans was $174,372 and $0, respectively.

As of March 31, 2021 and June 30, 2020, the Company had an outstanding loan balance – related parties of $238,150 and $35,943, respectively.

23. Shares to Be Issued

During the year ended June 30, 2020, the Company had entered into one consulting service agreement and one employment agreement, which had potential shares to be issued in total amount of $110,577.

During the six months ended December 31, 2020, the Company had potential shares to be issued to one consulting agreement of $31,000. The shares had been issued during the three months ended March 31, 2021.

As of March 31, 2021 and June 30, 2020, the Company had a balance of $136,577 and $101,577 shares to be issued, respectively.

-26-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

24. Stockholder’s Equity

The Company is authorized to issue 10,000,000,000 shares of $.001 par value common stock and 10,000,000 shares of $.001 par value preferred stock. On April 22, 2020, the Company filed an amendment to increase the total authorized shares to 10,010,000,000 – 10,000,000,000 of which are designated as common stock, par $0.001 per share and 10,000,000 of which are designated as preferred stock, par value $0.001 per share.

Share issuance during the three months ended September 30, 2020 -

During the three months ended September 30, 2020, the Company issued 1,081,411,606 shares of common stock for debt conversions in total amount of $1,273,459.

Share issuance during the three months ended December 31, 2020 -

During the three months ended December 31, 2020, the Company issued 411,171,815 shares of common stock for debt conversions in total amount of $320,879.

During the periods from December 14, 2014 through March 31, 2015, the Company issued 2,000,000 Series A preferred shares from an EB5 Program Investment. Five years from the date of issue (the “Conversion Date”), assuming Investor is approved for l-526, and each Preferred Share will automatically convert into that number of Common Shares having a “fair market value” of the Initial Investment plus a five (5) percent annualized return on Initial Investment, Fair market value will be determined by averaging the closing sale price of a Common Share for the 40 trading days immediately preceding the date of conversion on the U.S. stock exchange on which Common Shares are publicly traded. Should the Investor be unsuccessful in liquidating the Common Shares within 90 days after the Conversion Date, the Company shall buy back total Common Shares owned by Investor at a fixed amount of $500,000.00 plus 5% ROI per annum.

During the three months ended December 31, 2020, those shares were automatically converted into 360,647,019 of common shares with a fair market value of $2,000,000 of initial investment plus a five percent annualized return on initial investment (“ROI”), or total ROI of $500,000.

Share issuances during the three months ended March 31, 2021 -

During the three months ended March 31, 2021, the Company issued 499,374,305 shares of common stock for debt conversions in the total amount of $403,755.

During the three months ended March 31, 2021, the Company issued 587,222,222 shares of common stock in exchange for $1,012,000 in cash.

During the three months ended March 31, 2021, the Company issued 15,000,000 shares of common stock for services with a total fair value of $37,500.

As of March 31, 2021 and June 30, 2020, the Company had 1,541,500 shares of its preferred stock issued and outstanding, and 4,718,104,197 and 1,763,277,230 shares of its common stock, respectively, issued and outstanding.

-27-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

25. Commitments and contingencies

On February 23, 2018, the Company entered into a lease agreement for new office space commencing March 1, 2018. The term of the lease is for five years with one month free in the first year of the term. The monthly rent in the first year was $11,770 with a 3% increase for each subsequent year. Total commitment for the full term of the lease is $737,367.

Our warehouse along with some office space is located at 20529 East Walnut Drive North, Diamond Bar, California, where we lease approximately 11,627 square feet of combined space. The lease term is for five years and two months ending on April 30, 2025. The current monthly rental payment for the facility is $13,022.

Nine Months Ended
March 31, 2021
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	231,694
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended March 31, 2021	$	163,170
Remaining lease term – operating leases (in years)		3.00
Average discount rate – operating leases		10	%
The supplemental balance sheet information related to leases for the periods are as follows:
Operating leases
Short-term right-of-use assets	$	237,555
Long-term right-of-use assets	$	549,262
Total operating lease assets	$	786,817
Short-term operating lease liabilities	$	231,305
Long-term operating lease liabilities	$	591,115
Total operating lease liabilities	$	822,420

Maturities of the Company’s lease liabilities are as follows:

	Operating
Period ending June 30,	Lease
2021	$	78,825
2022		305,040
2023		273,425
2024		172,465
2025		147,446
Total lease payments		977,200
Less: Imputed interest/present value discount		(154,780	)
Present value of lease liabilities	$	822,420

-28-

Sugarmade, Inc. and Subsidiary

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2021

26. Subsequent events

Shares issued for cash

On April 5, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock in exchange for $350,000 in cash.

On April 15, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock in exchange for $350,000 in cash.

On April 26, 2021, the Company entered into a stock subscription agreement to issue 100,000,000 shares of the Company’s common stock in exchange for $180,000 in cash.

On April 27, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock for cash in total amount of $350,000.

Shares issued for debt conversion

Subsequent to May 14, 2021, a note holder converted approximately $52,500 of convertible notes into 40,753,063 shares of the Company’s common stock.

Lemon Glow Merger

On May 12, 2021, entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between Carnaby Spot Bay Corp, a wholly owned subsidiary of the Company (“Merger Sub”), Lemon Glow Company (“Lemon Glow”) and Ryan Santiago (the “Shareholder Representative”).

Pursuant to the Merger Agreement, the parties to the Merger Agreement agreed that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub would merge with and into Lemon Glow (the “Merger”) at which time the separate corporate existence of Merger Sub would cease, with Lemon Glow being the surviving corporation in the Merger.

As consideration for the Merger, Company agreed to provide to the shareholders of Lemon Glow (the “Lemon Glow Shareholders”), at the closing of the Merger (the “Closing”):

(i) cash consideration of $4,256,000, consisting of:

(a)	$280,000 in cash; and
(b)	$3,976,000 via the issuance of promissory notes to Lemon Glow Shareholders, which each bear interest at the rate of 5% per year 36 monthly payments commencing on June 15, 2021 (each, a “Note” and collectively the “Notes”); and

(ii)	660,571,429 shares of common stock of the Company, par value $0.001 (the “Company Common Stock”); and
(iii)	2,000,000 shares of Series B Preferred Stock of the Company (the “Series B Stock”).

The individual items of consideration above are referred to collectively as the “Merger Consideration”.

Lemon Glow is the owner of a 640-acre property located in Lake Country, California. Lemon Glow is in the process of improving 32 acres of the 640 acres for use as a regulated cannabis cultivation site. The Company and Lemon Glow expect that the annual potential cultivation yield at the property is approximately 4,000 pounds per acre of dry trimmed cannabis flower, although there can be no assurance that the property will yield this amount or any at all.

The Merger was consummated on May 14, 2021 (the “Effective Time”).

At the Closing, each outstanding share of common stock of Lemon Glow, of which there were 11,000 shares at the Effective Time of the Merger, were converted into the right to receive the Merger Consideration. The Company paid the Merger Consideration to the Lemon Glow Shareholders, paying the cash consideration, issuing the Notes, and issuing the restricting shares of Company common stock and Series B Stock.

At the Effective Time, all the property, rights, privileges, powers and franchises of Lemon Glow and Merger Sub vested in Lemon Glow as the surviving corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Lemon Glow and Merger Sub became those of Lemon Glow as the surviving corporation. In addition, at the Effective Time, the Articles of Incorporation and Bylaws of Lemon Glow remained in place as the Articles of Incorporation and Bylaws of Lemon Glow as the surviving corporation.

At the Effective Time, each outstanding share of common stock of Merger Sub (100 shares) was converted into one share of common stock of Lemon Glow which became the only outstanding capital stock of the Lemon Glow at the Effective Time. In addition, each share of Lemon Glow common stock of the Company held in the treasury of Lemon Glow immediately prior to the Effective Time was canceled and retired. As a result, the Company became the sole owner of 100% of the issued and outstanding common stock of Lemon Glow.

In addition, at the Effective Time, the Articles of Incorporation and Bylaws of Lemon Glow remained in place as the Articles of Incorporation and Bylaws of Lemon Glow (as the surviving corporation). Also, at the Effective Time, the executive officers and directors of Lemon Glow remained in place as the executive officers and directors of Lemon Glow.

The Merger is intended to be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Merger Agreement is intended to be a “plan of reorganization” within the meaning of the regulations promulgated under Section 368(a) of the Code and for the purpose of qualifying as a tax-free transaction for federal income tax purposes.

-29-

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis may include statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other non-historical statements in the discussion, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, factors listed in other documents we file with the Securities and Exchange Commission (“SEC”). We do not assume an obligation to update any forward- looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Quarterly Report on Form 10-Q. See “SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS” above.

Overview

Sugarmade, Inc. (hereinafter referred to as “we,” “us” or “Company”) is a publicly-traded company incorporated in the state of Delaware. Our previous legal name was Diversified Opportunities, Inc. Our Company operates our business activities through multiple subsidiaries, which includes SWC Group, Inc., a California corporation (“SWC”), SugarRush, Inc., a California corporation and NUG Avenue, Inc., a California corporation.

As of March 31, 2021, we operated our business in the following four segments:

1)	Paper and paper-based products: The supply of consumable products to the quick-service restaurant sub-sector of the restaurant industry, and as an importer and distributor of non-medical personal protection equipment to business and consumers, via our CarryOutSupplies.com subsidiary (“Carryout Supplies”). Carryout Supplies is a producer and wholesaler of custom printed and generic supplies, servicing more than 2,000 quick-service restaurants. The primary products are plastic cold cups, paper coffee cups, yogurt cups, ice cream cups, cup lids, cup sleeves, edible packaging, food containers, soup containers, plastic spoons, and similar products for this market sector. This subsidiary, which was formed in 2009, was recently expanded to also offer non-medical personal protective equipment.
2)	Non-medical supplies: Beginning in 2020, we sell non-medical personal protective equipment through Carryout Supplies.
3)	Cannabis products delivery service and sales: As a joint owner in the Budcars licensed cannabis delivery service brand (“Budcars” or the “Budcars Brand”). Budcars operates a licensed cannabis delivery service in the Sacramento, California area. During early 2020, the Company gained a 40% stake in the Budcars Brand and in the Sacramento delivery operations via acquiring a 40% stake in Indigo Dye Group (“Indigo”). Under the terms of the agreement with Indigo, Sugarmade acquired an option to purchase an additional 30% interest in Budcars. Upon exercise of this option, the Company would acquire a controlling interest in Indigo. As of December 31, 2020, the option has not yet been exercised and the Company’s stake in Budcars was at 40%. Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent of Indigo. Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent of Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. During the quarter ended December 31 ,2020, if the Company makes no additional payments, it will hold approximately 29% of the ownership of Indigo. See Note 4 and Note 5.
4)	Starting on February 8, 2021, Sugarmade became a joint owner of Nug Avenue, Inc., a California corporation (“Nug Avenue”), which operates a licensed and regulated cannabis delivery service out of Lynwood, California, serving the greater Los Angeles Metropolitan area (the “Lynwood Operations”). The Company currently owns a majority stake of seventy percent (70%) of Nug Avenue’s Lynwood Operations and holds first rights of refusal on Nug Avenue’s business expansion relative to the cannabis marketplace.

Our CarryOutSupplies.com Operation

Our legacy business operation, CarryOutSupplies.com, is a producer and wholesaler of custom printed and generic supplies, servicing more than 2,000 businesses in the Quick Service Restaurant Sector. Our products include double poly paper cups for cold beverage; disposable, clear, plastic cold cups, paper coffee cups, yogurt cups, ice cream cups, cup lids, cup sleeves, edible packaging, food containers, soup containers, plastic spoons, and many other similar products for this market sector. CarryOutSupplies.com was founded in 2009. Our products are viewable on our website: www.CarryOutSupplies.com.

We believe we occupy a defensible space within the Quick Service Restaurant Sector by way of our significant experience in serving this customer base, our knowledge of the industry fundamentals, and our significant experience in Asia factory sourcing and importing goods from Asian factories. Our niche within the market pertains to serving the many quick-service restaurants that wish to acquire custom printed products, such as those embossed with logos, but the minimum order size for such customization had been cost-prohibitive. With that in mind, CarryOutSupplies.com was founded to provide products to this underserved section of the market. Since that time, the Company has become a key supplier to more than 2,000 establishments, particularly within the frozen dessert segment.

-30-

The business of supplying such products to the quick-service restaurant sector remains highly competitive. Over the past few years, operating margins have compressed as a result of increased competition, the emergence of relatively inexpensive digital printing processes, and the larger printing and paper product manufacturers lowering minimum order quantities. Sugarmade expects the sector to remain highly competitive and is responding to the industry changes by realigning staff, eliminating less profitable products, and introducing new product areas.

The CarryOutSupplies operation has recently expanded its product offerings to include consumable sanitary supplies, such as non-medical gloves, non-medical facemasks, face shields, and other non-medical protective equipment. We believe our significant experience in sourcing products from Asian factories and the importation of goods from Asia makes us well-equipped to operate within the marketplace for non-medical, consumable, protective equipment.

We plan to continue our business pursuits relative to our CarryOutSuppies.com business, and have significantly restructured the operations over the past year. We plan to continue to modify our strategies and product lines to remain competitive in these niche market sectors.

BudCars Cannabis Delivery Service

In early 2020, our Company entered into an agreement to purchase Bud Cars, Inc., a California corporation, which is engaged in the licensed, and legal under California state law, delivery of cannabis and cannabis-containing products. Under the terms of the acquisition agreement, Sugarmade acquired a 29% stake in the operation and an option to gain a controlling interest in the delivery service.

Cannabis is already one of the fastest-growing markets in the U.S. According to Fortune Business Insights, during 2019, the cannabis market produced approximately $100 billion in U.S. sales. Growth over the next few years is expected to top 32% compounded annually. The U.S. cannabis segment has clearly been one of the fastest-growing markets within the American economy over the past 50 years. The California market clearly leads the U.S. market, with the legal California market worth at least $13 billion annually with strong growth continuing. The illegal market is likely even more extensive.

As the market shifts from the black to white markets, the legal providers are expected to benefit further. We urge investors to consider this trend in their investment decisions. One of the primary reasons many legal providers across several states have developed business issues is flawed state government policies that have allowed illegal operators to continue in business at the expense of the licensed and heavily taxed industry.

According to BDS Analytics and Arcview Market Research, two firms that closely monitor the cannabis marketplace, California’s total cannabis market is expected to produce about $12.8 billion this year, with $8.7 billion going to illicit operators and $3.1 billion to the state-authorized market.

For the first time, the white market/black market balance is beginning to shift as authorities crackdown on unlicensed business. This is starting to benefit legal operators. For example, California regulators and law enforcement agencies have recently announced hundreds of enforcement actions across California seizing millions of dollars of black market cannabis products. We believe this trend toward enforcement against illegal operators will directly benefit companies like the BudCars cannabis delivery service.

The outbreak of COVID-19, new social unrest in the United States, and the general movement toward retail home delivery have resulted in radical shifts in the cannabis marketplace. As a result, the general market for delivery services is proliferating.

Budcars operates its delivery service in strict adherence to all state, local and municipal regulations and is fully licensed for operations by California regulators.

Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent of Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. As of March 31, 2021, the Company still holds approximately 29% of the ownership of Indigo. See Note 4 and Note 5.

-31-

Our Ownership in Nug Avenue, Inc. Relative to Licensed and Permitted Cannabis Delivery in the Los Angeles Metropolitan Area

On February 8, 2020, Sugarmade became a joint owner of Nug Avenue, Inc., a California corporation (“Nug Avenue”), which is party to a management services agreement relating to the licensed and regulated delivery of cannabis out of Lynwood, California, serving primarily the greater Los Angeles Metropolitan area (the “Lynwood Operations”).

As of February 8, 2020, the Company acquired a majority stake of seventy percent (70%), allowing for full financial statement consolidation of the Nug Avenue, Inc. Lynwood Operations. As part of the February 8, 2020, agreement, the Company also gained an option to invest in Nug Avenue’s future business opportunities pertaining to any and all legal and regulated cannabis business operations. Further, under the February 8, 2002 agreement, Nug Avenue agreed to grant the Company unlimited participation rights in future financings.

The Company believes the Los Angeles cannabis delivery market offers substantial opportunities for growth. By all measures, the California cannabis market continues to gain strength, with the Southern California sub-market representing the world’s largest single cannabis marketplace. According to the California Department of Tax and Fee Administration, the most recently reported quarterly period posted an almost 80% increase in cannabis tax compared to the year-ago period. Much of this growth was driven by increased use of delivery services, as consumers are increasingly relying on home delivery for many goods, including cannabis.

Discussions with respect to our Company’s operations included those of, SWC and Indigo Dye Group Corp., a variable interest entity (“VIE”). During the quarter ended December 31, 2020, the Company plans to open new locations via purchasing equity into other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in Indigo’s day-to-day operations and going forward, the Company intends to pursue cannabis delivery, independent of Indigo. As of October 1, 2020, the Company continues to hold approximately 29% of the ownership of Indigo but ceased to have a controlling interest in the partnership and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. During the quarter ended December 31 ,2020, the Company invested additional $61,484 in Indigo, or 3.5% of Indigo’s issued shares. As of March 31, 2021, the Company continues to hold approximately 29% of the ownership of Indigo. As of March 31, 2021, we had no other operations other than CarryOutSupplies.com and NUG Avenue.

Recent Developments

On May 14, 2021, Carnaby Spot Bay Corp, a wholly owned subsidiary of the Company (“Merger Sub”) merged with and into Lemon Glow Company (“Lemon Glow”), at which time the separate corporate existence of Merger Sub would cease (the “Merger”), with Lemon Glow being the surviving corporation in the Merger.

As consideration for the Merger, at the closing of the Merger (the “Closing”) Company provided to the shareholders of Lemon Glow (the “Lemon Glow Shareholders”):

(iv) cash consideration of $4,256,000, consisting of:

(c)	$280,000 in cash; and
(d)	$3,976,000 via the issuance of promissory notes to Lemon Glow Shareholders, which each bear interest at the rate of 5% per year 36 monthly payments commencing on June 15, 2021 (each, a “Note” and collectively the “Notes”); and

(v)	660,571,429 shares of common stock of the Company; and
(vi)	2,000,000 shares of Series B Preferred Stock of the Company (the “Series B Stock”).

Lemon Glow is the owner of a 640-acre property located in Lake Country, California. Lemon Glow is in the process of improving 32 acres of the 640 acres for use as a regulated cannabis cultivation site. The Company and Lemon Glow expect that the annual potential cultivation yield at the property is approximately 4,000 pounds per acre of dry trimmed cannabis flower, although there can be no assurance that the property will yield this amount or any at all.

At the Closing, each outstanding share of common stock of Lemon Glow, of which there were 11,000 shares at the effective time of the Merger, were converted into the right to receive the Merger Consideration. Also at the Closing, each outstanding share of common stock of Merger Sub (100 shares) was converted into one share of common stock of Lemon Glow which became the only outstanding capital stock of the Lemon Glow at the effective time of the Merger. In addition, each share of Lemon Glow common stock of the Company held in the treasury of Lemon Glow immediately prior to the Closing was canceled and retired. As a result, the Company became the sole owner of 100% of the issued and outstanding common stock of Lemon Glow.

The Merger is intended to be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Merger Agreement is intended to be a “plan of reorganization” within the meaning of the regulations promulgated under Section 368(a) of the Code and for the purpose of qualifying as a tax-free transaction for federal income tax purposes.

COVID-19 Impact

Our business and operating results for 2020 was impacted by the COVID-19 pandemic. However, we have seen improvement in our business, which we expect to continue throughout 2021.

Results of Operations

The following table sets forth the results of our operations for the three months ended March 31, 2021 and 2020.

	For the three months ended
	March 31,
	2021			2020
Net Sales	$	404,843		$	416,356
Cost of Goods Sold:		229,818			253,223
Gross profit		175,025			163,133
Operating Expenses		776,276			870,621
Loss from Operations		(601,251	)		(707,488	)
Other non-operating Expense:		(4,984,908	)		(1,423,624	)
Equity Method Investment Loss		—			—
Less: net income attributable to the noncontrolling interest		(48,756	)		—
Net Loss	$	(5,537,403	)	$	(2,131,112	)

Revenues

For the three months ended March 31, 2021 and 2020, revenues were $404,843 and $416,356, respectively. The decrease was primarily due to the COVID-19 pandemic.

Cost of goods sold

For the three months ended March 31, 2021 and 2020, costs of goods sold were $229,818 and $253,223, respectively. The decrease was primarily due to the COVID-19 pandemic.

Gross profit

For the three months ended March 31, 2021 and 2020, gross profit was $175,025 and $163,133, respectively. The increase was primarily due to the higher margin for the cannabis delivery services.

Operating expenses

For the three months ended March 31, 2021 and 2020, operating expenses were $776,276 and $870,621, respectively. The decrease was primarily due to the decrease in stock-based compensation.

Other non-operating expense

The Company had total other non-operating expense of $4,984,908 and $1,423,624 for the three months ended March 31, 2021 and 2020, respectively. The increase in non-operating expense is related to the accounting for the changes in derivative liabilities due to conversions.

Net loss

Net loss totaled $5,537,403 for the three months ended March 31, 2021, compared to a net loss of $2,131,112 for the three-month period ended March 31, 2020. The increase was mainly due to the accounting for the changes in derivative liabilities due to conversions.

-32-

The following table sets forth the results of our operations for the nine months ended March 31, 2021 and 2020.

	For the nine months ended
	March 31,
	2021			2020
Net Sales	$	2,851,822		$	1,891,140
Cost of Goods Sold:		1,502,247			1,181,081
Gross profit		1,349,575			710,059
Operating Expenses		3,395,996			9,290,184
Loss from Operations		(2,046,421	)		(8,580,125	)
Other non-operating Income (Expense):		(3,912,812	)		(3,333,060	)
Equity Method Investment Loss		(2,114	)		—
Less: net income attributable to the noncontrolling interest		(48,756	)		—
Net Loss attributed to Sugarmade, Inc.	$	(5,912,591	)	$	(11,913,186	)

Revenues

For the nine months ended March 31, 2021 and 2020, revenues were $2,851,822 and $1,891,140, respectively. The increase was primarily due to the new cannabis delivery business.

Cost of goods sold

For the nine months ended March 31, 2021 and 2020, costs of goods sold were $1,502,247 and $1,181,081, respectively. The increase was primarily due to the new cannabis delivery business.

Gross profit

For the nine months ended March 31, 2021 and 2020, gross profit was $1,349,575 and $710,059, respectively. The increase was primarily due to the new cannabis delivery business.

Operating expenses

For the nine months ended March 31, 2021 and 2020, operating expenses were $3,395,996 and $9,290,184, respectively. The decrease was due to the decrease in stock-based compensation.

Other non-operating expense

The Company had total other non-operating expense of $3,912,812 and $3,333,060 for the nine months ended March 31, 2021 and 2020, respectively. The increase in non-operating income is related to the accounting for the changes in derivative liabilities due to conversions.

Net loss

Net loss totaled $5,912,591 for the nine months ended March 31, 2021, compared to a net loss of $11,913,186 for the nine-month period ended March 31, 2020. The decrease was mainly due to the decrease in stock-based compensation and the accounting for the changes in derivative liabilities due to conversions.

-33-

Liquidity and Capital Resources

We have primarily financed our operations through the sale of unregistered equity and convertible notes payable. As of March 31, 2021, our Company had cash balance of $269,885, current assets totaling $2,550,469 and total assets of $4,265,316. We had current and total liabilities totaling $9,553,200 and $10,510,811, respectively. Stockholders’ equity reflected a deficiency of $6,245,495.

The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended March 31, 2021 and 2020:

	2021			2020
Cash (used in) provided by:
Operating activities	$	(2,647,840	)	$	(2,509,064	)
Investing activities		(55,810	)		(700,000	)
Financing activities		2,532,530			3,182,202

Net cash used in operating activities was $2,647,840 for the nine months ended March 31, 2021, and $2,509,064 for the nine months ended March 31, 2020.

Net cash used in investing activities was $55,810 for the nine months ended March 31, 2021, and $700,000 for the nine months ended March 31, 2020.

Net cash provided by financing activities was $2,532,530 for the nine months ended March 31, 2021 and $3,182,202 for the nine months ended March 31, 2020.

Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenues and gross margins adequate to equal or exceed our ongoing operating expenses. Other than the notes payable discussed above, borrowings from our bank and the production credit facility with our suppliers, we do not have any credit agreement or source of liquidity immediately available to us.

Given estimates of our Company’s future operating results and our credit arrangements with our suppliers, we are currently forecasting that we will need to secure additional financing to obtain adequate financial resources to reach profitability. As of March 31, 2021, we estimate that the cash necessary to implement our current business plan for the next twelve months is approximately $2,000,000.

Based on our need to raise additional funds to implement our business plans for the next twelve months, we have included a discussion concerning the presentation of our financial statements on a going concern basis in the notes to our unaudited condensed consolidated financial statements and our independent public accountants have included a similar discussion in their opinion on our financial statements through June 30, 2020. We will be required in the near future to issue debt or sell our Company’s equity securities in order to raise additional cash, although there are no firm arrangements in place for any such financing at this time. We cannot provide any assurances as to whether we will be able to secure the necessary financing, or the terms of any such financing transaction if one were to occur. The failure to secure such financing could severely curtail our plans for future growth or in more severe scenarios, the continued operations of our Company.

-34-

Capital Expenditures

Our current plans do not call for our Company to expend significant amounts for capital expenditures for the foreseeable future beyond relatively insignificant expenditures for office furniture and information technology related equipment as we add employees to our Company. We are however continually evaluating the production processes of our third-party contract manufacturers to determine if there are investments we could make in their processes to achieve manufacturing improvements and significant cost savings. Any such desired investments would require additional cash above our current forecast requirements.

Critical Accounting Policies Involving Management Estimates and Assumptions

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

These interim unaudited condensed consolidated financial statements should be read in conjunction with our Company’s Annual Report on Form 10-K for the year ended June 30, 2020, which contains our audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operation, for the fiscal year ended June 30, 2020. The interim results for the period ended March 31, 2021 are not necessarily indicative of the results for the full fiscal year.

Principles of consolidation

The consolidated financial statements include the accounts of our Company, its wholly owned subsidiary, SWC Group Inc., and Indigo Dye Group Corp., an investment in nonconsolidated affiliate (formerly a variable interest entity as of September 30, 2020). All significant intercompany transactions and balances have been eliminated in consolidation.

Going concern

The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management is endeavoring to increase revenue-generating operations. While priority is on generating cash from operations through the sale of the Company’s products, management is also seeking to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock.

-35-

Use of estimates

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Revenue recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’’) No. 606, Revenue Recognition. Sugarmade applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Property and equipment

Property and equipment are stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment	3-5 years
Furniture and equipment	7 years
Vehicles	5 years
Leasehold improvements	5 years

Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the statements of income.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the nine months ended March 31, 2021 and 2020.

Impairment of Long-Lived Assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company, as of June 30, 2020, performed an impairment test of all of its intangible assets. Based on the Company’s analysis, the company had an amortization of intangible assets of $1,022 and $1,050 for the nine months ended March 31, 2021 and 2020, respectively.

-36-

Leases

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The new standard became effective April 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on July 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. All existing leases are reported under this rule.

Under ASC 840, leases were classified as either capital or operating, and the classification significantly impacted the effect the contract had on the company’s financial statements. Capital lease classification resulted in a liability that was recorded on a company’s balance sheet, whereas operating leases did not impact the balance sheet. After the new adoption, $1,105,755 of operating lease right-of-use asset and $1,140,041 of operating lease liabilities were reflected on the Company’s June 30, 2020 financial statements and $786,817 of operating lease right-of-use asset and $822,420 of operating lease liabilities were reflected on the Company’s March 31, 2021 financial statements.

Stock based compensation

Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Binomial Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Earnings (Loss) per share

We calculate basic earnings (loss) per share (“EPS”) by dividing our net income (loss) by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

-37-

Fair value of financial instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The Company used Level 3 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Binomial option-pricing model for the six months ended December 31, 2020.

Derivative instruments

The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense).

Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Segment Reporting

FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

The Company’s financial statements as of December 31, 2020 substantially all of its operations are conducted in three industry segments – (1) paper and paper-based products such as paper cups, cup lids, food containers, etc., which accounts for approximately 24% of the Company’s revenues; (2) non-medical supplies such as non-medical fascial mask, which accounts for approximately 3% of the Company’s total revenues; and cannabis products delivery service and sales.

New accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes an ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company have adopted this ASU on the consolidated financial statements in the quarter ended September 30, 2019.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”. The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, “Income Taxes”. The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for us beginning in the first quarter of fiscal 2021, with early adoption permitted. We are still evaluating the impact this guidance will have on our consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

-38-

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As required by the SEC Rule 13a-15(e) and Rule 15d-15(e), we carried out an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2021, our disclosure controls and procedures were not effective because the Company is relatively inexperienced with certain complexities within U.S. GAAP and SEC reporting.

We have taken, and are continuing to take, certain actions to remediate the material weakness related to our lack of U.S. GAAP experience. We plan to hire additional credentialed professional staff and consulting professionals with greater knowledge and experience of U.S. GAAP and related regulatory requirements to oversee our financial reporting process in order to ensure our compliance with U.S. GAAP and other relevant securities laws. In addition, we plan to provide additional training to our accounting personnel on U.S. GAAP, and other regulatory requirements regarding the preparation of financial statements.

Notwithstanding the above identified material weakness, the Company’s management believes that its unaudited condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Changes in Internal Controls over Financial Reporting

There have not been any changes in our internal controls over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

-39-

PART II: Other Information

ITEM 1 – LEGAL PROCEEDINGS

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. Except as set forth below, as of March 31, 2021, there were no legal claims pending or threatened against the Company that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows.

On December 11, 2013, the Company was served with a complaint from two convertible note holders and investors in the Company. On February 21, 2017, the Company signed a settlement agreement with the plaintiffs in the matter of Hannan vs. Sugarmade. Under the terms of the settlement agreement, the Company agreed to pay the plaintiffs an aggregate of $227,000 to settle all claims against the Company, which included the payoff of two notes outstanding. The parties estimated the value of the notes at approximately $80,000. As of June 30, 2020, third parties had purchased two notes of approximately $80,000. As of March 31, 2021, there remains a balance, plus accrued interest on the $227,000 and on the $80,000 due under the notes.

ITEM 1A – RISK FACTORS

Not required for smaller reporting companies.

ITEM 2 – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

During the nine months ended March 31, 2021, the Company issued the following shares:

● 1,991,957,726 shares of common stock upon conversion of convertible notes of $1,998,093.

● 587,222,222 shares of common stock for cash of $1,012,000.

● 15,000,000 shares of common stock for services of $37,500.

All of the aforementioned securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 thereunder.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

None.

-40-

ITEM 6 – EXHIBITS

Exhibit No.	Description
31.1*	Certification of Chief Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

-41-

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.

	Sugarmade, Inc.
May 19, 2021	By:	/s/ Jimmy Chan
		Jimmy Chan
		Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer)

-42-

EX-31.1

Exhibit 31.1

Certifications

I, Jimmy Chan, certify that:

(1)	I have reviewed this Quarterly Report Form 10-Q for the quarter ended March 31, 2021 of Sugarmade, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 19, 2021	/s/ Jimmy Chan
	Jimmy Chan
	Chief Executive Officer (Principal Executive Officer, and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Form 10-Q report of Sugarmade, Inc. for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jimmy Chan, certify that:

(1)	This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in this period report fairly presents, in all material respects, the financial condition and results of operations of Sugarmade, Inc.

Date: May 19, 2021	/s/ Jimmy Chan
	Jimmy Chan
	Chief Executive Officer (Principal Executive Officer, and Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Mar. 31, 2021	May 19, 2021
Cover [Abstract]
Entity Registrant Name	Sugarmade, Inc.
Entity Central Index Key	0000919175
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		5,444,622,595
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Current assets:
Cash	$ 269,885	$ 441,004
Accounts receivable, net	75,040	134,517
Inventory, net	692,460	679,471
Loan receivables, current		1,365
Loan receivables - related party, current	208,931	122,535
Other current assets	1,066,597	263,404
Right of use asset, current	237,556	270,363
Total current assets	2,550,469	1,912,659
Noncurrent assets:
Equipment, net	390,189	499,047
Intangible asset, net	14,578	9,800
Other assets		54,163
Loan receivable - Investment, noncurrent	196,000	196,000
Right of use asset, noncurrent	549,261	835,393
Investment to Indigo Dye	564,819
Total noncurrent assets	1,714,847	1,594,403
Total assets	4,265,316	3,507,062
Current liabilities:
Note payable due to bank	25,982	25,982
Accounts payable and accrued liabilities	1,753,855	1,583,228
Customer deposits	660,268	466,337
Customer overpayment	53,183	47,890
Unearned revenue	9,379	53,248
Other payables	812,069	691,801
Accrued interest	515,767	494,740
Accrued compensation and personnel related payables		35,361
Notes payable - Current	20,000	20,000
Notes payable - Related Parties, Current	15,427	15,427
Lease liability - Current	231,305	372,285
Loans payable - Current	350,221	319,314
Loan payable - Related Parties, Current	238,150	35,943
Convertible notes payable, Net, Current	1,982,902	1,740,122
Derivative liabilities, net	2,723,899	5,597,095
Warrants liabilities	24,216	79,910
Shares to be issued	136,577	101,577
Total current liabilities	9,553,200	11,680,260
Non-Current liabilities:
Loans payable	366,495	197,946
Lease liability	591,116	767,729
Total liabilities	10,510,811	12,645,935
Stockholders' deficiency:
Preferred stock, $0.001 par value, 10,000,000 shares authorized 1,541,500 and 3,541,500 shares issued outstanding at March 31, 2021 and June 30, 2020	1,542	3,542
Common stock, $0.001 par value, 10,000,000,000 shares authorized, 4,718,104,197 and 1,763,277,230 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively	4,718,105	1,763,278
Additional paid-in capital	63,095,927	57,307,767
Share to be issued, Preferred stock	(1)
Common Stock Subscribed	236,008	236,008
Accumulated deficit	(74,350,923)	(68,438,332)
Total stockholders' deficiency	(6,299,342)	(9,127,737)
Non-Controlling Interest	53,847	(11,136)
Total stockholders' deficiency	(6,245,495)	(9,138,873)
Total liabilities and stockholders' deficiency	$ 4,265,316	$ 3,507,062

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2021	Jun. 30, 2020	Apr. 22, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000	10,000,000
Preferred stock, shares issued	1,541,500	3,541,500
Preferred stock, shares outstanding	1,541,500	3,541,500
Common stock, par value	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	10,000,000,000	10,000,000,000	10,010,000,000
Common stock, shares issued	4,718,104,197	1,763,277,230
Common stock, shares outstanding	4,718,104,197	1,763,277,230

XML

Consolidated Statements of Operations (Unaudited) - USD ($)		3 Months Ended		9 Months Ended
		Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Income Statement [Abstract]
Revenues, net		$ 404,843	$ 416,356	$ 2,851,822	$ 1,891,140
Cost of goods sold		229,818	253,223	1,502,247	1,181,081
Gross profit		175,025	163,133	1,349,575	710,059
Selling, general and administrative expenses		300,188	361,986	1,446,038	1,057,706
Advertising and promotion expense		99,481	15,045	378,068	72,528
Marketing and research expense		48,324	70,185	364,580	149,631
Professional expense		137,399	268,530	756,444	1,415,796
Salaries and wages		174,634	109,625	368,616	343,723
Stock compensation expense		16,250	45,250	82,250	6,250,800
Loss from operations		(601,251)	(707,488)	(2,046,421)	(8,580,125)
Non-operating income (expense):
Other income		1,957	145	5,099	3,243
Gain in loss of control of VIE				313,928
Interest expense		(725,688)	(173,519)	(1,920,660)	(1,493,319)
Bad debts		(256)		(133,235)
Change in fair value of derivative liabilities		(3,485,549)	(238,065)	506,559	2,075,982
Warrant Expense		(14,694)	(25,369)	55,695	(80,647)
Loss on notes conversion					(184,626)
Loss on settlement				(80,000)	(382,635)
Gain on asset disposal					7,000
Amortization of debt discount		(759,219)	(961,146)	(2,605,144)	(3,079,553)
Debt forgiveness			(25,670)		(197,765)
Other expenses		(1,459)		(55,054)	(740)
Total non-operating expenses, net		(4,984,908)	(1,423,624)	(3,912,812)	(3,333,060)
Equity Method Investment Loss				(2,114)
Net loss		(5,586,159)	(2,131,111)	(5,961,347)	(11,913,186)
Less: net loss attributable to the noncontrolling interest		(48,756)		(48,756)
Net loss attributable to SugarMade Inc.		$ (5,537,403)	$ (2,131,112)	$ (5,912,591)	$ (11,913,186)
Basic net loss per share		$ (0.00)	$ (0.00)	$ (0.00)	$ (0.01)
Diluted net loss per share		$ (0.00)	$ (0.00)	$ (0.00)	$ (0.01)
Basic and diluted weighted average common shares outstanding *	[1]	4,121,621,837	822,263,706	3,247,070,176	863,368,325

[1] Shares issuable upon conversion of convertible debts and exercising of warrants were excluded in calculating diluted loss per share

XML

Condensed Consolidated Statements of Equity (Unaudited) - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Shares to be Cancelled, Preferred Shares [Member]	Shares to be Cancelled, Common Shares [Member]	Shares to be Issued Preferred [Member]	Common Stock Subscribed [Member]	Accumulated Deficit [Member]	Noncontrolling Interest [Member]	Total
Beginning Balance at Jun. 30, 2019	$ 2,000	$ 697,610	$ 61,038,875				$ 29,000	$ (47,088,950)		$ 14,678,534
Beginning Balance, Shares at Jun. 30, 2019	2,000,000	697,608,570
Shares issued for debt settlement		$ 1,000	28,000				(29,000)
Shares issued for debt settlement, shares		1,000,000
Reclass derivative liability from conversion			659,526							659,526
Shares issued for conversion		$ 71,916	475,917							547,833
Shares issued for conversion, shares		71,915,557
Shares issued for cash		$ 11,349	88,651							100,000
Shares issued for cash, shares		11,348,591
Shares issued for warrant exercise		$ 28,382	(14,249)							14,133
Shares issued for warrant exercise, shares		28,371,818
Net loss								(2,027,551)		(2,027,551)
Ending Balance at Sep. 30, 2019	$ 2,000	$ 810,257	62,276,720					(49,116,501)		13,972,474
Ending Balance, Shares at Sep. 30, 2019	2,000,000	810,244,536
Beginning Balance at Jun. 30, 2019	$ 2,000	$ 697,610	61,038,875				29,000	(47,088,950)		14,678,534
Beginning Balance, Shares at Jun. 30, 2019	2,000,000	697,608,570
Net loss										(11,913,186)
Ending Balance at Mar. 31, 2020	$ 2,415	$ 843,120	52,564,680					(59,002,136)		(5,591,920)
Ending Balance, Shares at Mar. 31, 2020	2,415,000	843,110,876
Beginning Balance at Sep. 30, 2019	$ 2,000	$ 810,257	62,276,720					(49,116,501)		13,972,474
Beginning Balance, Shares at Sep. 30, 2019	2,000,000	810,244,536
Shares issued for debt settlement		$ 18,182	272,273							290,455
Shares issued for debt settlement, shares		18,181,818
Reclass derivative liability from conversion			297,962							297,962
Shares issued for conversion		$ 24,994	117,170							142,164
Shares issued for conversion, shares		24,994,341
Shares issued for cash		$ 26,622	213,378				100,000			340,000
Shares issued for cash, shares		26,621,610
Options issued for services			73,500							73,500
Shares issued as compensation for services	$ 415	$ 500	5,941,135							5,942,050
Shares issued as compensation for services, shares	415,000	500,000
Shares issued for award - Bizright	$ 750	$ 249,374	14,040,936	(10,725,014)	(21,566,046)					(18,000,000)
Shares issued for award - Bizright, shares	750,001	249,373,817
Initial valuation of BCF			239,301							239,301
Net loss								(7,754,524)		(7,754,524)
Ending Balance at Dec. 31, 2019	$ 3,165	$ 1,129,927	83,472,375	(10,725,014)	(21,566,046)		100,000	(56,871,025)		(4,456,619)
Ending Balance, Shares at Dec. 31, 2019	3,165,001	1,129,916,122
Reclass derivative liability from conversion			302,845							302,845
Shares issued for conversion		$ 128,526	170,230							298,756
Shares issued for conversion, shares		128,525,706
Shares issued for cash		$ 33,543	191,457				(100,000)			125,000
Shares issued for cash, shares		33,542,865
Options issued for services			45,250							45,250
Shares cancelled for award - Bizright	$ (750)	$ (448,874)	(31,827,478)	10,725,014	21,566,046					13,958
Shares cancelled for award - Bizright, shares	(750,001)	(448,873,817)
Initial valuation of BCF			210,000							210,000
Net loss								(2,131,111)		(2,131,111)
Ending Balance at Mar. 31, 2020	$ 2,415	$ 843,120	52,564,680					(59,002,136)		(5,591,920)
Ending Balance, Shares at Mar. 31, 2020	2,415,000	843,110,876
Beginning Balance at Jun. 30, 2020	$ 3,542	$ 1,763,278	57,307,767				236,008	(68,438,331)	$ (11,136)	(9,138,873)
Beginning Balance, Shares at Jun. 30, 2020	3,541,500	1,763,277,230
Reclass derivative liability from conversion			1,805,188							1,805,188
Shares issued for conversion		$ 1,081,412	192,048							$ 1,273,459
Shares issued for conversion, shares		1,081,411,606								1,081,411,606
Repayment of capital to noncontrolling minority									(24,000)	$ (24,000)
Net loss								1,278,812	1,165	1,279,976
Ending Balance at Sep. 30, 2020	$ 3,542	$ 2,844,690	59,305,003				236,008	(67,159,519)	(33,971)	(4,804,248)
Ending Balance, Shares at Sep. 30, 2020	3,541,500	2,844,688,836
Beginning Balance at Jun. 30, 2020	$ 3,542	$ 1,763,278	57,307,767				236,008	(68,438,331)	(11,136)	(9,138,873)
Beginning Balance, Shares at Jun. 30, 2020	3,541,500	1,763,277,230
Net loss										(5,961,347)
Ending Balance at Mar. 31, 2021	$ 1,542	$ 4,718,105	63,095,927			$ (1)	236,008	(74,350,923)	53,847	(6,245,495)
Ending Balance, Shares at Mar. 31, 2021	1,541,500	4,718,104,197
Beginning Balance at Sep. 30, 2020	$ 3,542	$ 2,844,690	59,305,003				236,008	(67,159,519)	(33,971)	(4,804,248)
Beginning Balance, Shares at Sep. 30, 2020	3,541,500	2,844,688,836
Reclass derivative liability from conversion			531,591							531,591
Shares issued for conversion		$ 411,172	(90,293)							$ 320,879
Shares issued for conversion, shares		411,171,815								411,171,815
Preferred stock conversions	$ (2,000)	$ 360,647	141,353							$ 500,000
Preferred stock conversions, shares	(2,000,000)	360,647,019
Reclassification due to deconsolidation of VIE			(169,262)					2,396	33,971	(132,895)
Net loss								(1,656,397)		(1,656,398)
Ending Balance at Dec. 31, 2020	$ 1,542	$ 3,616,509	59,718,392				236,008	(68,813,520)		(5,241,070)
Ending Balance, Shares at Dec. 31, 2020	1,541,500	3,616,507,670
Reclass derivative liability from conversion			3,025,875							3,025,875
Shares issued for conversion		$ 499,374	(95,619)							$ 403,755
Shares issued for conversion, shares		499,374,305								499,374,305
Shares issued for cash		$ 587,222	424,778							$ 1,012,000
Shares issued for cash, shares		587,222,222								587,222,222
Shares issued for services		$ 15,000	22,500							$ 37,500
Shares issued for services, shares		15,000,000								15,000,000
Contributions from non-controlling interests in other consolidated subsidiaries									102,603	$ 102,603
Shares issued to officer			1			(1)
Net loss								(5,537,403)	(48,756)	(5,586,159)
Ending Balance at Mar. 31, 2021	$ 1,542	$ 4,718,105	$ 63,095,927			$ (1)	$ 236,008	$ (74,350,923)	$ 53,847	$ (6,245,495)
Ending Balance, Shares at Mar. 31, 2021	1,541,500	4,718,104,197

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Jun. 30, 2020
Cash flows from operating activities:
Net loss	$ (5,537,403)	$ (2,131,112)	$ (5,912,591)	$ (11,913,186)
Non-controlling interest	(48,756)		(48,756)
Adjustments to reconcile net loss to cash flows from operating activities:
Initial valuation of debt discount				449,300
Loss on settlement			80,000	382,635
Gain on loss of control of VIE			(313,929)
Return on EB5 investment			500,000
Amortization of debt discount			2,605,144	756,981
Stock-based compensation	16,250	45,250	82,250	6,250,800
Change in fair value of derivative liability			(506,559)	864,878
Change in exercise of warrant			(55,694)	92,756
Depreciation			70,650	47,526	$ 110,032
Amortization of intangible assets			1,022	1,050
Change in financing cost			974,052
Changes in assets and liabilities:
Accounts receivable			59,477	178,057
Intangible assets			(5,800)
Inventory			(157,858)	(165,005)
Prepayment, deposits and other receivables			(959,214)	(35,271)
Other assets			54,163	(20,000)
Other payables			266,876	(53,609)
Accounts payable and accrued liabilities			801,973	58,058
Customer deposits			199,224	(47,911)
Unearned revenue			(43,869)	(57,415)
Right of use assets			175,215	67,258
Lease liability			(173,871)	(64,247)
Investment to Indigo Dye			(564,819)	597,830
Interest Payable			132,220	264,452
Net cash used in operating activities			(2,647,840)	(2,509,064)
Cash flows from investing activities:
Purchase of fixed assets			(55,810)
Investment				(700,000)
Net cash used in investing activities			(55,810)	(700,000)
Cash flows from financing activities:
Proceeds from shares issuance			1,012,000	565,000
Bank overdraft				20,965
Loan receivable			1,365	271,033
Loan receivable - related parties			(170,887)
Proceeds from note payable
Proceeds from (repayment of) note payable - related parties				(2,573)
Proceeds from advanced shares issuance				136,000
Proceeds from loans payable - related parties			202,207	20,000
Proceeds from convertible notes			1,874,200	2,051,887
Repayment of convertible notes			(327,700)
Reduction of cash due to Indigo deconsolidation			(326,811)
Proceeds from loans			268,156	119,890
Net cash provided by financing activities			2,532,530	3,182,202
Net decrease in cash			(171,120)	(26,861)
Cash paid during the period for:
Cash, beginning of period			441,004	34,371	34,371
Cash, end of period	$ 269,885	$ 7,510	269,885	7,510	$ 441,004
Supplemental disclosure of non-cash financing activities -
Shares issued for conversion of convertible debt			1,998,095	988,753
Reduction in derivative liability due to conversion			5,362,654	1,260,333
Debt discount related to convertible debt			2,080,016	1,110,311
Debts settled through shares issuance				229,000
Shares issued for award to Bizright				(32,291,060)
Shares cancelled for termination of Bizright Acquisition				32,283,910
Shares issued for warrant exercise				28,381
Reclassification from prepaid deposit to BZRTH investment				$ (883,958)

XML

Nature of Business

9 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

1. Nature of Business

Sugarmade, Inc. (hereinafter referred to as “we,” “us” or “Company”) is a publicly-traded company incorporated in the state of Delaware. Our previous legal name was Diversified Opportunities, Inc. Our Company operates our business activities through multiple subsidiaries, which includes SWC Group, Inc., a California corporation (“SWC”), SugarRush, Inc., a California corporation and NUG Avenue, Inc., a California corporation.

Sugarmade, Inc. was founded in 2010. In 2014, CarryOutSupplies.com was acquired by Sugarmade, Inc., creating the Company as it is today.

Sugar Rush, Inc., our wholly owned subsidiary, seeks to enter the business of operating and investing in specialized licensed and regulated hemp and cannabis operations.

The Company is also a majority owner in Nug Avenue, Inc., a California corporation, which is engaged in the licensed and regulated market for the delivery of cannabis and a part owner in Indigo Dye Group, the operator of a licensed and regulated cannabis delivery service in Northern California.

These operations and investments are outlined in more detail below.

1)	Paper and paper-based products: The supply of consumable products to the quick-service restaurant sub-sector of the restaurant industry, and as an importer and distributor of non-medical personal protection equipment to business and consumers, via our CarryOutSupplies.com subsidiary (“Carryout Supplies”). Carryout Supplies is a producer and wholesaler of custom printed and generic supplies, servicing more than 2,000 quick-service restaurants. The primary products are plastic cold cups, paper coffee cups, yogurt cups, ice cream cups, cup lids, cup sleeves, edible packaging, food containers, soup containers, plastic spoons, and similar products for this market sector. This subsidiary, which was formed in 2009, was recently expanded to also offer non-medical personal protective equipment.
2)	Nug Avenue, Inc. investment into licensed cannabis delivery in Los Angeles area markets. During February 2021, we became a majority owner of Nug Avenue, Inc., a California corporation (“Nug Avenue”), which operates a licensed and regulated cannabis delivery service out of Lynwood, California, serving the greater Los Angeles Metropolitan area (the “Lynwood Operations”). The Company currently owns a majority stake of seventy percent (70%) of Nug Avenue’s Lynwood Operations and holds first rights of refusal on Nug Avenue’s business expansion relative to the cannabis marketplace. By way of our capital injection made into Nug Avenue and by via our 70% ownership position, we consolidate and recognize 100% of the revenues and 70% of profits or loss generated by Nug Ave for its Lynwood Operation. We believe our investment into Nug Avenue will allow us to expand out presence into the licensed and regulated cannabis marketplace. The California cannabis market continues its rapid growth, with the Southern California sub-market representing the world’s largest single cannabis marketplace. According to the California Department of Tax and Fee Administration, the most recently reported quarterly period posted a significant increase in cannabis tax compared to the year-ago period. Much of this growth was driven by increased use of delivery services, as consumers are increasingly relying on home delivery for many goods, including cannabis.
3)	Cannabis products delivery service and sales: As a joint owner in the Budcars licensed cannabis delivery service brand (“Budcars” or the “Budcars Brand”). Budcars operates a licensed cannabis delivery service in the Sacramento, California area. During early 2020, the Company gained a 40% stake in the Budcars Brand and in the Sacramento delivery operations via acquiring a 40% stake in Indigo Dye Group (“Indigo”). Under the terms of the agreement with Indigo, Sugarmade acquired an option to purchase an additional 30% interest in Budcars. Upon exercise of this option, the Company would acquire a controlling interest in Indigo. As of March 31, 2021, the option has not yet been exercised and the Company’s stake in Budcars was at 40%. Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent of Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. As of March 31, 2021, the Company made no additional payments, and still hold approximately 29% of the ownership of Indigo. See Note 4 and Note 5.
4)	Selected cannabis and hemp projects. We are also seeking operating contracts and investments in various legal, licensed and regulated cannabis and hemp projects via our Sugar Rush, Inc. subsidiary and directly from Sugarmade, Inc. We believe our team has strong experience in hemp and cannabis operations and management that can be leveraged to expand our revenue base. On March 28, 2021 we entered into a binding letter of intent for the acquisition of Lemon Glow Company, Inc., a California corporation (“Lemon Glow”), including all of Lemon Glow’s assets, interests, property, and rights, which includes six-hundred-forty (640) acres of real estate in Lake County, California, outside of the local commercial cannabis cultivation exclusion zones. Our intent, via the Sugar Rush subsidiary, is to utilize thirty-two acres of the property to develop licensed cannabis cultivation and manufacturing operations. On April 27, 2021, we entered into an amendment to the March 28, 2021 letter of intent extending the term of the letter of intent to May 12, 2021. On May 14, 2021, the Company issued a press release announcing the Closing of the Merger. The Closing of the Merger occurred in accordance with the terms of the Merger Agreement on May 12, 2021. See subsequent events – Agreement and plan of merger.

XML

Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

These interim condensed consolidated financial statements should be read in conjunction with our Company’s Annual Report on Form 10-K for the year ended June 30, 2020, which contains our audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operation, for the fiscal year ended June 30, 2020. The interim results for the period ended March 31, 2021 are not necessarily indicative of the results for the full fiscal year.

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of our Company and SWC, the Company’s wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

Going concern

The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required.

Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management endeavors to increase revenue-generating operations. While the Company’s priority is on generating cash from operations, management also seek to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock.

Use of estimates

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Revenue recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’’) No. 606, Revenue Recognition. Sugarmade applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Property and equipment

Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment	3-5 years
Furniture and equipment	7 years
Vehicles	5 years
Leasehold improvements	5 years

Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the statements of income.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the nine months ended March 31, 2021 and 2020.

Impairment of Long-Lived Assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company, as of June 30, 2020, performed an impairment test of all of its intangible assets. Based on the Company’s analysis, the company had an amortization of intangible assets of $4,778 and 1,050 for the nine months ended March 31, 2021 and 2020, respectively.

Leases

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The new standard became effective April 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on July 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. All existing leases are reported under this rule.

Under ASC 840, leases were classified as either capital or operating, and the classification significantly impacted the effect the contract had on the company’s financial statements. Capital lease classification resulted in a liability that was recorded on a company’s balance sheet, whereas operating leases did not impact the balance sheet. After the new adoption, $1,105,755 of operating lease right-of-use asset and $1,140,041 of operating lease liabilities were reflected on the Company’s June 30, 2020 financial statements and $786,817 of operating lease right-of-use asset and $822,421 of operating lease liabilities were reflected on the Company’s March 31, 2021 financial statements.

Stock based compensation

Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Binomial Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk-free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Earnings (Loss) per share

We calculate basic earnings (loss) per share (“EPS”) by dividing our net income (loss) by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

Fair value of financial instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The Company used Level 3 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Binomial option-pricing model for the nine months ended March 31, 2021.

Derivative instruments

The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense).

Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Segment Reporting

FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

As of March 31, 2021 substantially all of the Company’s operations were conducted in three industry segments – (1) paper and paper-based products such as paper cups, cup lids, food containers, etc., which accounted for approximately 41% of the Company’s revenues as of March 31, 2021; (2) non-medical supplies such as non-medical fascial masks, which accounted for approximately 1% of the Company’s total revenues as of March 31, 2021; (3) cannabis products delivery service and sales, which accounted for approximately 58% of the Company’s total revenues as March 31, 2021.

New accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes an ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company have adopted this ASU on the consolidated financial statements in the quarter ended September 30, 2019.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”. The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, “Income Taxes”. The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for us beginning in the first quarter of fiscal 2021, with early adoption permitted. We are still evaluating the impact this guidance will have on our consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

XML

Concentration

9 Months Ended

Mar. 31, 2021

Risks and Uncertainties [Abstract]

Concentration

3. Concentration

Customers

For the nine months ended March 31, 2021 and 2020, our Company earned net revenues of $2,851,822 and $1,891,140 respectively. The vast majority of these revenues for the period ended March 31, 2021 were derived from a large number of customers, whereas the vast majority of these revenues for the period ended March 31, 2020 were derived from a limited number of customers. There was one customer that accounted for approximately 11.6% of the Company’s total revenues for the period ended March 31, 2021.

Suppliers

For the period ended March 31, 2021, we purchased products for sale by the Company’s subsidiary from several contract manufacturers located in Asia and the U.S. A substantial portion of the Company’s inventory was purchased from two (2) suppliers. The two suppliers accounted for 33.2% and 19.40%, respectively, of the Company’s total inventory purchase for the period ended March 31, 2021.

For the period ended March 31, 2020, we purchased products for sale by the company’s subsidiaries from several contract manufacturers located in Asia and the U.S. A substantial portion of the Company’s inventory is purchased from two (2) suppliers. The two (2) suppliers accounted as follows: Two suppliers accounted for 31.21% and 17.80% of the Company’s total inventory purchase for the period ended March 31, 2020, respectively.

XML

VIE

9 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

VIE

4. VIE

On February 7, 2020, the Company entered into a share sale and purchase agreement (the “Indigo Agreement”) with Indigo Dye Group Corp. (“Indigo”), a corporation located in Sacramento, California. Indigo carries on business as a cannabis seller and delivery business under the name BudCars. The major Cannabis Products include Flower, Edibles, Vape Cartridges, Pre-Rolls, & Concentrates, etc. All the products are finished goods. In addition, Indigo is operating a non-store front retail delivery business (Type-9 License# C9-0000286) in California.

Pursuant to the terms of the Indigo Agreement, the Company agree to invest $700,000 (the “Investment”) into Indigo for inventory, equipment, and marketing expenses. The Investment shall be made in twelve monthly equal installments of $58,333 with the acceleration of the payment schedule possible depending on business growth, cash flow needs and capital availability.

In exchange, the Company received 40% of Indigo’s issued shares. upon execution of the final agreement. The value used for this transaction is $1,750,000 and each percentage (1%) of the company is worth $17,500. In the event that the Company is not able to make a payment of $58,333 in any month, it will have 90 days to cure the default. On the 91st day the investment plan will cease and the amount of invested capital will be calculated based on an enterprise value of $1,750,000 or $17,500 per 1% of owned equity.

In addition, subject to the terms and conditions of the Indigo Agreement, the Company has the option to acquire an additional 30% interest in Indigo. Upon exercise of the option, the Company would obtain control over Indigo.

From late May 2020 until September 30, 2020, the Company was actively involved in development of Indigo’s operations with power to direct the activities and significantly impact Indigo’s economic performance. The Company also has obligations to absorb losses and right to receive benefits from Indigo. As such, in accordance with ASC 810-10-25-38A through 25-38J, Indigo is consolidated as an VIE of the Company.

Starting on October 1, 2020, the Company plans to open new locations via purchasing equity into other Brand/Franchises to cover delivery for the entire California. Therefore, the Company likely not to proceeds the option to acquire the additional 30% interest in Indigo at the moment. In addition, the Company is no longer involve in day-to-day operations and the Company will be pursuing cannabis delivery moving forward, independently from Indigo Dye Group. As of October 1, 2020, the Company continues to hold approximately 29% of the ownership of Indigo but ceased to have a controlling interest in the partnership and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. See footnote #6 Noncontrolling interest and deconsolidation of VIE for details.

XML

Noncontrolling Interest and Deconsolidation of VIE

9 Months Ended

Mar. 31, 2021

Noncontrolling Interest And Deconsolidation Of Vie

Noncontrolling Interest and Deconsolidation of VIE

5. Noncontrolling Interest and Deconsolidation of VIE

Starting in fiscal year ended June 30, 2020, the Company had a variable interest entity, Indigo Dye Group, for accounting purposes. The Company owned approximately 29% of Indigo’s outstanding equity and as of September 30, 2020, involved its day-to-day operations, which gave the Company the power to direct the activities of Indigo that most significantly impact its economic performance. Accordingly, the Company recognized the carrying value of the noncontrolling interest as a component of total shareholders’ equity, and the consolidated financial statements included the financial position and results of operations of Indigo as of and for the periods ended June 30, 2020 and September 30, 2020.

Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent from Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. As of and for the quarter ended March 31, 2021, the Company did not make any additional payments, it still holds approximately 29% of the ownership of Indigo. See Note 4 and Note 5.

The net asset value of the Company’s variable interest in Indigo Dye Group was approximately $326,812 as of October 1, 2020, the date of deconsolidation. The value of the Company’s variable interest on the date of deconsolidation was based on management’s estimate of the fair value of Indigo at that time. The Company concluded that the market approach was the most appropriate method to determine the fair value of the entity on the date of deconsolidation, given that Indigo raised equity funding from third-party investors around the same period (i.e., level 2 inputs). The Company recognized a gain on deconsolidation of approximately $313,928 with no related tax impact, which is included in other income, net on the consolidated statement of operations. As the Company is not obligated to fund future losses of Indigo, the carrying amount is the Company’s maximum risk of loss.

XML

Legal Proceedings

9 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

6. Legal Proceedings

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. Except as set forth below, as of March 31, 2021, there were no legal claims pending or threatened against the Company that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows.

On December 11, 2013, the Company was served with a complaint from two convertible note holders and investors in the Company. On February 21, 2017, the Company signed a settlement agreement with the plaintiffs in the matter of Hannan vs. Sugarmade. Under the terms of the settlement agreement, the company agreed to pay the plaintiffs an aggregate of $227,000 to settle all claims against the Company, which included the payoff of two notes outstanding. The parties had estimated the value of the notes at approximately $80,000. As of June 30, 2020, third parties had purchased two (2) notes of approximately $80,000. As of March 31, 2021, there remains a balance, plus accrued interest on the $227,000 and on the $80,000 due under the notes.

There can be no assurances the ultimate liability relative to these lawsuits will not exceed what is outlined above.

XML

Cash

9 Months Ended

Mar. 31, 2021

Cash and Cash Equivalents [Abstract]

Cash

7. Cash

Cash and cash equivalents consist of amounts held as bank deposits and highly liquid debt instruments purchased with an original maturity of three months or less.

From time to time, we may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). We have not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash.

XML

Accounts Receivable

9 Months Ended

Mar. 31, 2021

Credit Loss [Abstract]

Accounts Receivable

8. Accounts Receivable

Accounts receivable are carried at their estimated collectible amounts, net of any estimated allowances for doubtful accounts. We grant unsecured credit to our customer’s deemed credit worthy. Ongoing credit evaluations are performed and potential credit losses estimated by management are charged to operations on a regular basis. At the time any particular account receivable is deemed uncollectible, the balance is charged to the allowance for doubtful accounts. The Company had accounts receivable net of allowances of $75,040 as of March 31, 2021 and of $134,517 as of June 30, 2020.

XML

Loans Receivable

9 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Loans Receivable

9. Loans Receivable

Loans receivable amounted $0 and $1,365 as of March 31, 2021 and June 30, 2020, respectively. Loan receivables are mainly advanced payments to the other companies.

XML

Loans Receivable - Related Parties

9 Months Ended

Mar. 31, 2021

Loans Receivable - Related Parties

Loans Receivable - Related Parties

10. Loans Receivable – Related Parties

Loan receivables – related parties amounted $404,931 ($208,931 current and $196,000 noncurrent) and $318,535 ($122,535 current and $196,000 noncurrent) as of March 31, 2021 and June 30, 2020, respectively. Loan receivables – related parties are mainly advanced payments to the related party companies for business expense.

XML

Inventory

9 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Inventory

11. Inventory

Inventory consists of finished goods paper and paper-based products such as paper cups and food containers ready for sale and is stated at the lower of cost or market. We value our inventory using the weighted average costing method. Our Company’s policy is to include as a part of inventory any freight incurred to ship the product from our contract manufacturers to our warehouses. Outbound freights costs related to shipping costs to our customers are considered period costs and are reflected in selling, general and administrative expenses. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence.

If the estimated realizable value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value. On a consolidated basis, as of March 31, 2021 and June 30, 2020, the balance for the inventory totaled $692,460 and $679,471, respectively. Obsolescence reserve at March 31, 2021 and June 30, 2020 were $183,974 and $15,445, respectively.

XML

Other Current Assets

9 Months Ended

Mar. 31, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Current Assets

12. Other Current Assets

As of March 31, 2021 and June 30, 2020, other current assets consisted of the following:

	For the periods ended
	March 31, 2021		June 30, 2020
Prepaid Deposit	$	90,696	$	48,483
Prepaid Inventory		961,975		65,449
Employees Advance		—		324
Prepaid Expenses		9,717		35,157
Undeposited Funds		4,209		71,550
Other		—		42,441
Total:	$	1,066,597	$	263,404

XML

Intangible Asset

9 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Asset

13. Intangible Asset

On August 21, 2017, the Company entered into an intellectual property assignment agreement with Sound Decisions to revamp the Company’s shoplifty website to generate and attract more traffic from potential customers. The Company made a payment of $14,000 for the website (intellectual property). In addition, the Company made a payment of $5,800 for the website (intellectual property) during the three months ended March 31, 2021. The Company amortized this use right as intangible asset over ten years, and recorded amortization expense of $1,022 for the nine months ended March 31, 2021 and 2020, respectively.

XML

Property and Equipment, Net

9 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

14. Property and Equipment, net

As of March 31, 2021 and June 30, 2020, property, plant and equipment consisted of the following:

Fixed Assets	March 31, 2021			June 30, 2020
Office and equipment	$	732,062		$	739,447
Motor vehicles		119,764			164,244
Leasehold Improvement		21,970			24,470
Total		873,797			928,161
Less: accumulated depreciation		(483,608	)		(429,116	)
Plant and Equipment, net	$	390,189		$	499,045

For the periods ended March 31, 2021 and June 30, 2020, depreciation expenses amounted to $70,650 and $110,032, respectively.

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the periods ended March 31, 2021 and June 30, 2020.

XML

Unearned Revenues

9 Months Ended

Mar. 31, 2021

Revenue Recognition and Deferred Revenue [Abstract]

Unearned Revenues

15. Unearned Revenues

Unearned revenue amounted to $9,379 and $53,248 as of March 31, 2021 and June 30, 2020, respectively. Unearned revenues are mainly due to contracts with extended payment terms, acceptance provisions and future delivery obligation.

XML

Other Payables

9 Months Ended

Mar. 31, 2021

Payables and Accruals [Abstract]

Other Payables

16. Other Payables

Other payable amounted to $812,069 and $691,801 as of March 31, 2021 and June 30, 2020, respectively. Other payables are mainly credit card payables and taxes payables. As of March 31, 2021, the Company had 8 credit cards, one American Express is a charge card with no limit and zero interest. The remaining 7 cards had total credit limit of $85,000, and APR from 11.24% to 29.99%.

XML

Convertible Notes

9 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Convertible Notes

17. Convertible Notes

As of March 31, 2021 and June 30, 2020, the balance owing on convertible notes, net of debt discount, with terms as described below was $1,982,902 and $1,740,122, respectively.

Convertible note 1: On August 24, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

Convertible note 2: On September 18, 2012, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

Convertible note 3: On December 21, 2012, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of six (6) months with an interest rate of 10% and is convertible to common shares at a 25% discount of the average of 30 days prior to the conversion date. As of March 31, 2021, the note is in default.

Convertible note 4: On November 1, 2018, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 5: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 6: On November 16, 2018, the Company entered into a convertible promissory note with an accredited investor for $40,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 7: On December 3, 2018, the Company entered into a convertible promissory note with an accredited investor for $35,000. The note has a term of one year with an interest rate of 8% and is convertible to common shares at a fixed conversion price of $0.07. As of March 31, 2021, the note is in default.

Convertible note 8: On September 27, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $165,000 (includes $16,250 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 55% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. During the year ended June 30, 2020, the note holder converted $50,000 principal with $2,992 interest expense into 56,007,062 shares of the Company’s common stock. As of March 31, 2021, the note has been fully converted.

Convertible note 9: On October 28, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $225,500 (includes $23,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 10: On October 28, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $225,500 (includes $23,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 11: On November 29, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,150 (includes $11,150 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 12: On November 29, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,150 (includes $11,150 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 13: On December 10, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,700 (includes $11,700 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 14: On December 10, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $106,700 (includes $11,700 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 15: On December 27, 2019, the Company issued a convertible promissory note with an accredited investor for a total amount of $112,200 (includes $12,200 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 16: On October 31, 2019, the Company issued a convertible promissory note with a former consultant for a total amount of $139,301. The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is $0.008 per share. On October 1, 2020, the Company entered an amendment to settlement note to amend the conversion price at 60% of the lowest trading bid price in the 20 consecutive trading days immediately preceding to the conversion date.

Convertible note 17: On November 1, 2019, the Company issued a convertible promissory note with a former consultant for a total amount of $100,000. The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is $0.008 per share. On October 1, 2020 the Company entered an amendment to settlement note to amend the conversion price at 60% of the lowest trading bid price in the 20 consecutive trading days immediately preceding to the conversion date.

Convertible note 18: On January 3, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $112,200 (includes $12,200 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note has been fully converted.

Convertible note 19: On January 14, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $150,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest closing prices for the 10 consecutive trading days prior to the conversion date. During the three months ended September 30, 2020, the note holder converted $50,000 principal into 29,868,578 shares of the Company’s common stock. As of March 31, 2021, the remaining principal and unpaid interest has been fully repaid by cash.

Convertible note 20: On January 22, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $128,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 10%. The conversion price for the note is 35% discount to average of two lowest closing prices for the 20 consecutive trading days prior to the conversion date. As of March 31, 2021, the note principal and unpaid interest has been fully repaid by cash.

Convertible note 21: On February 4, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $110,000 (includes $10,000 OID). The note is due 360 days and bear an interest rate of 12%. The conversion price for the note is $0.001 per share. As of March 31, 2021, the note has been fully converted.

Convertible note 22: On February 18, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $100,000 (includes $10,000 OID). The note is due 360 days and bear an interest rate of 12%. The conversion price for the note is $0.001 per share.

Convertible note 23: On March 5, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $125,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest closing prices for the 10 consecutive trading days prior to the conversion date. As of December 31, 2020, the note has been fully converted.

Convertible note 24: On April 24, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $75,000 (includes $2,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest trading prices for the 10 consecutive trading days prior to the conversion date.

Convertible note 25: On June 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $36,300 (includes $3,300 OID and $3,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 26: On June 18, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $36,300 (includes $3,300 OID and $3,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 27: On July 6, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $77,000 (includes $2,000 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to average of three lowest trading prices for the 10 consecutive trading days prior to the conversion date.

Convertible note 28: On July 7, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $153,000 (includes $3,000 OID). The note is due 360 days and bear an interest rate of 10%. The conversion price for the note is 35% discount to average of two lowest trading prices for the 20 consecutive trading days prior to the conversion date.

Convertible note 29: On July 16, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $260,700 (includes $23,700 OID and $12,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 30: On July 21, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $200,200 (includes $18,200 OID and $7,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 31: On September 8, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $110,000 (includes $10,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 32: On September 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $227,700 (includes $20,700 OID and $7,000 legal expense). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 33: On September 24, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $212,300 (includes $19,300 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 34: On October 8, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $231,000 (includes $21,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 35: On October 13, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $275,000 (includes $25,000 OID). The note is due 180 days and bear an interest rate of 12%. The conversion price for the note is $0.01 per share. After the six month anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.

Convertible note 36: On November 10, 2020, the Company issued a convertible promissory note with an accredited investor for a total amount of $58,300 (includes $5,300 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

Convertible note 37: On February 8, 2021, the Company issued a convertible promissory note with an accredited investor for a total amount of $69,300 (includes $6,300 OID). The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 60% of the lowest trading bid for the 20 consecutive trading days prior to the conversion date.

In connection with the convertible debt, debt discount balance as of March 31, 2021 and June 30, 2020 were $355,752 and $880,879, respectively, and were being amortized and recorded as interest expenses over the term of the convertible debt.

XML

Derivative Liabilities

9 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative liabilities

18. Derivative liabilities

The derivative liability is derived from the conversion features in note 8 and stock warrant in note 10. All were valued using the weighted-average Binomial option pricing model using the assumptions detailed below. As of March 31, 2021 and June 30, 2020, the derivative liability was $2,301,301 and $5,597,095, respectively. The Company recorded $482,232 gain and $1,442,295 loss from changes in derivative liability during the periods ended March 31, 2021 and June 30, 2020, respectively. The Binomial model with the following assumption inputs:

	March 31, 2021
Annual dividend yield	—
Expected life (years)	0.2-1.00
Risk-free interest rate	0.01-0.19	%
Expected volatility	115-209	%

	June 30, 2020
Annual dividend yield	—
Expected life (years)	0.5-1.00
Risk-free interest rate	0.16-2.10	%
Expected volatility	113-175	%

Fair value of the derivative is summarized as below:

Beginning Balance, June 30, 2020	$	5,597,095
Additions		2,996,017
Cancellation of Derivative Liabilities Due to Cash Repayment		(1,300,107	)
Cancellation of Derivative liabilities Due to Share Reservation		(214,757	)
Mark to Market		(278,070	)
Reclassification to APIC due to conversions		(4,076,280	)
Ending Balance, March 31, 2021	$	2,723,899

Beginning Balance, June 30, 2019	$	2,991,953
Additions		3,999,033
Mark to Market		(2,075,982	)
Reclassification to APIC due to conversions		(1,260,333	)
Ending Balance, March 31, 2020	$	3,706,809

XML

Stock Warrants

9 Months Ended

Mar. 31, 2021

Equity [Abstract]

Stock Warrants

19. Stock warrants

On September 7, 2018, the Company entered into a settlement agreement with several investors to settle all disputes by issues additional unrestricted shares. In connection with the note each individual investor will also receive warrants equal to the number of the shares the investors own as of the effective date of the settlement agreement. The warrants have a life of five years with an exercise price as of the date of exchange. The fair value of the warrants at the grant date was $56,730. As of March 31, 2021 and June 30, 2020, the fair value of the warrant liability was $1,216 and $1,910, respectively.

On February 4, 2020, the Company entered into a warrant agreement with an accredited investor up to 10,000,000 shares of common stock of the Company at exercise price of $0.008 per share, subject to adjustment. The warrants have a life of five years with an exercise price as of the date of exchange. The fair value of the warrants at the grant date was $80,000. As of March 31, 2021 and June 30, 2020, the fair value of the warrant liability was $23,000 and $78,000, respectively.

As of March 31, 2021 and June 30, 2020, the total fair value of the warrant liability was $24,216 and $79,910, respectively.

XML

Note Payable

9 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Note Payable

20. Note payable

Note Payable Due to Bank –

During October 2011, we entered into a revolving demand note (line of credit) arrangement with HSBC Bank USA, with a revolving borrowing limit of $150,000. The line of credit bears a variable interest rate of 0.25% above the prime rate (5.5% as of December 20, 2018). In the event the deposit account is not established or minimum balance maintained, HSBC can charge a higher rate of interest of up to 4.0% above prime rate. As of March 31, 2021 and June 30, 2020, the loan principal balance was $25,982 and $25,982, respectively.

Notes Payable Due to Non-related Parties

On June 15, 2018, the Company entered into a promissory note with an accredited investor. The original principal amount was $20,000 and the note bears 8% interest per annum. The note was payable upon demand. As of March 31, 2021 and June 30, 2020, this note had a balance of $20,000 and $20,000, respectively.

Notes Payable Due to Related Parties

On January 23, 2013, the Company entered into a promissory note with a former employee of the Company. The original principal amount was $40,000 and the note bears no interest. The note was payable upon demand. As of March 31, 2021 and June 30, 2020, this note had a balance of $15,427 and $15,427, respectively.

XML

Loans Payable

9 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Loans Payable

21. Loans payable

On October 1, 2017, SGMD entered a straight promissory note with Greater Asia Technology Limited (Greater Asia) for borrowing $100,000 with maturity date on June 30, 2018; the note bears an interest rate of 33.33%. As of March 31, 2021 and June 30, 2020, the note was in default and the outstanding balance under this note was $61,919 and $96,401, respectively.

During the year ended June 30, 2019, the Company entered a series of short-term loan agreements with Greater Asia Technology Limited (Greater Asia) for borrowing $375,000, with interest rate at 40% - 50% of the principal balance. As of March 31, 2021 and June 30, 2020, the outstanding balance with Greater Asia loans were $100,000 and $100,000, respectively.

On January 6, 2015, the Company entered into repayment agreement with its former employee for a loan of $9,500 at no interest. As of March 31, 2021 and June 30, 2020, the Company has an outstanding balance of $0 and $3,584, respectively.

On July 1, 2012, CarryOutSupplies entered an equipment loan agreement with a bank with maturity on June 21, 2024. The monthly payment is $648. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $18,735 and $24,524, respectively.

On March 18, 2020, the Company entered into a loan agreement for $150,000 with Celtic Bank with maturity date on March 18, 2020. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $0 and $117,635, respectively.

On June 26, 2020, the Company entered into a government loan agreement for $8,000 with maturity date on December 26, 2020. As of March 31, 2021 and June 30, 2020, the outstanding balance under this loan were $0 and $8,000, respectively.

On April 27, 2020, we entered into a loan borrowed $110,000 from Bank of America (“Lender”), pursuant to a Promissory Note issued by Company to Lender (the “April 2020 PPP Note”). The loan was made pursuant to the Paycheck Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The April 2020 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The April 2020 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the April 2020 PPP Note.

On July 28, 2020, we entered into a loan borrowed $159,900 from the Lender, pursuant to a Promissory Note issued by Company to Lender (the “July 2020 PPP Note”). The loan was made pursuant to the Paycheck Protection Program. The July 2020 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The July 2020 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the July 2020 PPP Note.

On January 25, 2021, we entered into a loan borrowed $96,595 from the Lender, pursuant to a Promissory Note issued by Company to Lender (the “January 2021 PPP Note”). The loan was made pursuant to the Paycheck Protection Program. The January 2021 PPP Note bears interest at 1.00% per annum and may be repaid at any time without penalty. The January 2021 PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the January 2021 PPP Note.

The Company accounted for the PPP loans under Topic 470: (a). Initially record the cash inflow from the PPP loan as a financial liability and would accrue interest in accordance with the interest method under ASC Subtopic 835-30; (b). Not impute additional interest at a market rate; (c). Continue to record the proceeds from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released or (2) the debtor pays off the loan; (d). Would reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

As of March 31, 2021 and June 30, 2020, the Company had an outstanding loan balance of $716,716 and $517,260, respectively.

XML

Loans Payable - Related Parties

9 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Loans Payable - Related Parties

22. Loans Payable – Related Parties

On July 7, 2016, SWC received a loan from an employee. The loan bears no interest and amortized on a monthly basis over the life of the loan. As of March 31, 2021 and June 30, 2020, the balance of the loan was $63,778 and $35,943, respectively.

Starting on September 30, 2020, the Company received loans from related parties. The loans bear no interest. As of March 31, 2021 and June 30, 2020, the balance of the loans was $174,372 and $0, respectively.

As of March 31, 2021 and June 30, 2020, the Company had an outstanding loan balance – related parties of $238,150 and $35,943, respectively.

XML

Shares to be Issued

9 Months Ended

Mar. 31, 2021

Equity [Abstract]

Shares to be Issued

23. Shares to Be Issued

During the year ended June 30, 2020, the Company had entered into one consulting service agreement and one employment agreement, which had potential shares to be issued in total amount of $110,577.

During the six months ended December 31, 2020, the Company had potential shares to be issued to one consulting agreement of $31,000. The shares had been issued during the three months ended March 31, 2021.

As of March 31, 2021 and June 30, 2020, the Company had balance of $136,577 and $101,577 share to be issued, respectively.

XML

Stockholder's Equity

9 Months Ended

Mar. 31, 2021

Equity [Abstract]

Stockholder's Equity

24. Stockholder’s Equity

The Company is authorized to issue 10,000,000,000 shares of $.001 par value common stock and 10,000,000 shares of $.001 par value preferred stock. On April 22, 2020, the Company filed an amendment to increase the total authorized shares to 10,010,000,000 – 10,000,000,000 of which are designated as common stock, par $0.001 per share and 10,000,000 of which are designated as preferred stock, par value $0.001 per share.

Share issuance during the three months ended September 30, 2020 -

During the three months ended September 30, 2020, the Company issued 1,081,411,606 shares of common stock for debt conversions in total amount of $1,273,459.

Share issuance during the three months ended December 31, 2020 -

During the three months ended December 31, 2020, the Company issued 411,171,815 shares of common stock for debt conversions in total amount of $320,879.

During the periods from December 14, 2014 through March 31, 2015, the Company issued 2,000,000 Series A preferred shares from an EB5 Program Investment. Five years from the date of issue (the “Conversion Date”), assuming Investor is approved for l-526, and each Preferred Share will automatically convert into that number of Common Shares having a “fair market value” of the Initial Investment plus a five (5) percent annualized return on Initial Investment, Fair market value will be determined by averaging the closing sale price of a Common Share for the 40 trading days immediately preceding the date of conversion on the U.S. stock exchange on which Common Shares are publicly traded. Should the Investor be unsuccessful in liquidating the Common Shares within 90 days after the Conversion Date, the Company shall buy back total Common Shares owned by Investor at a fixed amount of $500,000.00 plus 5% ROI per annum.

During the three months ended December 31, 2020, those shares were automatically converted into 360,647,019 of common shares with a fair market value of $2,000,000 of initial investment plus a five percent annualized return on initial investment (“ROI”), or total ROI of $500,000.

Share issuances during the three months ended March 31, 2021 -

During the three months ended March 31, 2021, the Company issued 499,374,305 shares of common stock for debt conversions in the total amount of $403,755.

During the three months ended March 31, 2021, the Company issued 587,222,222 shares of common stock in exchange for $1,012,000 in cash.

During the three months ended March 31, 2021, the Company issued 15,000,000 shares of common stock for services with a total fair value of $37,500.

As of March 31, 2021 and June 30, 2020, the Company had 1,541,500 shares of its preferred stock issued and outstanding, and 4,718,104,197 and 1,763,277,230 shares of its common stock, respectively, issued and outstanding.

XML

Commitments and Contingencies

9 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

25. Commitments and contingencies

On February 23, 2018, the Company entered into a lease agreement for new office space commencing March 1, 2018. The term of the lease is for five years with one month free in the first year of the term. The monthly rent in the first year was $11,770 with a 3% increase for each subsequent year. Total commitment for the full term of the lease is $737,367.

Our warehouse along with some office space is located at 20529 East Walnut Drive North, Diamond Bar, California, where we lease approximately 11,627 square feet of combined space. The lease term is for five years and two months ending on April 30, 2025. The current monthly rental payment for the facility is $13,022.

Nine Months Ended
March 31, 2021
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	231,694
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended March 31, 2021	$	163,170
Remaining lease term – operating leases (in years)		3.00
Average discount rate – operating leases		10	%
The supplemental balance sheet information related to leases for the periods are as follows:
Operating leases
Short-term right-of-use assets	$	237,555
Long-term right-of-use assets	$	549,262
Total operating lease assets	$	786,817
Short-term operating lease liabilities	$	231,305
Long-term operating lease liabilities	$	591,115
Total operating lease liabilities	$	822,420

Maturities of the Company’s lease liabilities are as follows:

	Operating
Period ending June 30,	Lease
2021	$	78,825
2022		305,040
2023		273,425
2024		172,465
2025		147,446
Total lease payments		977,200
Less: Imputed interest/present value discount		(154,780	)
Present value of lease liabilities	$	822,420

XML

Subsequent Events

9 Months Ended

Mar. 31, 2021

Subsequent Events [Abstract]

Subsequent Events

26. Subsequent events

Shares issued for cash

On April 5, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock in exchange for $350,000 in cash.

On April 15, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock in exchange for $350,000 in cash.

On April 26, 2021, the Company entered into a stock subscription agreement to issue 100,000,000 shares of the Company’s common stock in exchange for $180,000 in cash.

On April 27, 2021, the Company entered into a stock subscription agreement to issue 194,444,445 shares of the Company’s common stock for cash in total amount of $350,000.

Shares issued for debt conversion

Subsequent to May 14, 2021, a note holder converted approximately $52,500 of convertible notes into 40,753,063 shares of the Company’s common stock.

Lemon Glow Merger

On May 12, 2021, entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between Carnaby Spot Bay Corp, a wholly owned subsidiary of the Company (“Merger Sub”), Lemon Glow Company (“Lemon Glow”) and Ryan Santiago (the “Shareholder Representative”).

Pursuant to the Merger Agreement, the parties to the Merger Agreement agreed that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub would merge with and into Lemon Glow (the “Merger”) at which time the separate corporate existence of Merger Sub would cease, with Lemon Glow being the surviving corporation in the Merger.

As consideration for the Merger, Company agreed to provide to the shareholders of Lemon Glow (the “Lemon Glow Shareholders”), at the closing of the Merger (the “Closing”):

(i) cash consideration of $4,256,000, consisting of:

(a)	$280,000 in cash; and
(b)	$3,976,000 via the issuance of promissory notes to Lemon Glow Shareholders, which each bear interest at the rate of 5% per year 36 monthly payments commencing on June 15, 2021 (each, a “Note” and collectively the “Notes”); and

(ii)	660,571,429 shares of common stock of the Company, par value $0.001 (the “Company Common Stock”); and
(iii)	2,000,000 shares of Series B Preferred Stock of the Company (the “Series B Stock”).

The individual items of consideration above are referred to collectively as the “Merger Consideration”.

Lemon Glow is the owner of a 640-acre property located in Lake Country, California. Lemon Glow is in the process of improving 32 acres of the 640 acres for use as a regulated cannabis cultivation site. The Company and Lemon Glow expect that the annual potential cultivation yield at the property is approximately 4,000 pounds per acre of dry trimmed cannabis flower, although there can be no assurance that the property will yield this amount or any at all.

The Merger was consummated on May 14, 2021 (the “Effective Time”).

At the Closing, each outstanding share of common stock of Lemon Glow, of which there were 11,000 shares at the Effective Time of the Merger, were converted into the right to receive the Merger Consideration. The Company paid the Merger Consideration to the Lemon Glow Shareholders, paying the cash consideration, issuing the Notes, and issuing the restricting shares of Company common stock and Series B Stock.

At the Effective Time, all the property, rights, privileges, powers and franchises of Lemon Glow and Merger Sub vested in Lemon Glow as the surviving corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Lemon Glow and Merger Sub became those of Lemon Glow as the surviving corporation. In addition, at the Effective Time, the Articles of Incorporation and Bylaws of Lemon Glow remained in place as the Articles of Incorporation and Bylaws of Lemon Glow as the surviving corporation.

At the Effective Time, each outstanding share of common stock of Merger Sub (100 shares) was converted into one share of common stock of Lemon Glow which became the only outstanding capital stock of the Lemon Glow at the Effective Time. In addition, each share of Lemon Glow common stock of the Company held in the treasury of Lemon Glow immediately prior to the Effective Time was canceled and retired. As a result, the Company became the sole owner of 100% of the issued and outstanding common stock of Lemon Glow.

In addition, at the Effective Time, the Articles of Incorporation and Bylaws of Lemon Glow remained in place as the Articles of Incorporation and Bylaws of Lemon Glow (as the surviving corporation). Also, at the Effective Time, the executive officers and directors of Lemon Glow remained in place as the executive officers and directors of Lemon Glow.

The Merger is intended to be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Merger Agreement is intended to be a “plan of reorganization” within the meaning of the regulations promulgated under Section 368(a) of the Code and for the purpose of qualifying as a tax-free transaction for federal income tax purposes.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

These interim condensed consolidated financial statements should be read in conjunction with our Company’s Annual Report on Form 10-K for the year ended June 30, 2020, which contains our audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operation, for the fiscal year ended June 30, 2020. The interim results for the period ended March 31, 2021 are not necessarily indicative of the results for the full fiscal year.

Principles of Consolidation

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of our Company and SWC, the Company’s wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

Going Concern

Going concern

The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required.

Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Management endeavors to increase revenue-generating operations. While the Company’s priority is on generating cash from operations, management also seek to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock.

Use of Estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Revenue Recognition

Revenue recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’’) No. 606, Revenue Recognition. Sugarmade applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied.

Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Property and Equipment

Property and equipment

Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment	3-5 years
Furniture and equipment	7 years
Vehicles	5 years
Leasehold improvements	5 years

Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from their respective accounts and any gain or loss is recorded in the statements of income.

The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment, no impairment expenses for property, plant, and equipment was recorded in operating expenses during the nine months ended March 31, 2021 and 2020.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company, as of June 30, 2020, performed an impairment test of all of its intangible assets. Based on the Company’s analysis, the company had an amortization of intangible assets of $4,778 and 1,050 for the nine months ended March 31, 2021 and 2020, respectively.

Leases

Leases

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The new standard became effective April 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on July 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. All existing leases are reported under this rule.

Under ASC 840, leases were classified as either capital or operating, and the classification significantly impacted the effect the contract had on the company’s financial statements. Capital lease classification resulted in a liability that was recorded on a company’s balance sheet, whereas operating leases did not impact the balance sheet. After the new adoption, $1,105,755 of operating lease right-of-use asset and $1,140,041 of operating lease liabilities were reflected on the Company’s June 30, 2020 financial statements and $786,817 of operating lease right-of-use asset and $822,421 of operating lease liabilities were reflected on the Company’s March 31, 2021 financial statements.

Stock Based Compensation

Stock based compensation

Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Binomial Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk-free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Earnings (Loss) Per Share

Earnings (Loss) per share

We calculate basic earnings (loss) per share (“EPS”) by dividing our net income (loss) by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

Fair Value of Financial Instruments

Fair value of financial instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - unobservable inputs which are supported by little or no market activity.

The Company used Level 3 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Binomial option-pricing model for the nine months ended March 31, 2021.

Derivative Instruments

Derivative instruments

The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense).

Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Segment Reporting

Segment Reporting

FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

As of March 31, 2021 substantially all of the Company’s operations were conducted in three industry segments – (1) paper and paper-based products such as paper cups, cup lids, food containers, etc., which accounted for approximately 41% of the Company’s revenues as of March 31, 2021; (2) non-medical supplies such as non-medical fascial masks, which accounted for approximately 1% of the Company’s total revenues as of March 31, 2021; (3) cannabis products delivery service and sales, which accounted for approximately 58% of the Company’s total revenues as March 31, 2021.

New Accounting Pronouncements

New accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes an ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company have adopted this ASU on the consolidated financial statements in the quarter ended September 30, 2019.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”. The pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, “Income Taxes”. The pronouncement also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for us beginning in the first quarter of fiscal 2021, with early adoption permitted. We are still evaluating the impact this guidance will have on our consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Schedule of Estimated Useful Lives of Property and Equipment

Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:

Machinery and equipment	3-5 years
Furniture and equipment	7 years
Vehicles	5 years
Leasehold improvements	5 years

XML

Other Current Assets (Tables)

9 Months Ended

Mar. 31, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Current Assets

As of March 31, 2021 and June 30, 2020, other current assets consisted of the following:

	For the periods ended
	March 31, 2021		June 30, 2020
Prepaid Deposit	$	90,696	$	48,483
Prepaid Inventory		961,975		65,449
Employees Advance		—		324
Prepaid Expenses		9,717		35,157
Undeposited Funds		4,209		71,550
Other		—		42,441
Total:	$	1,066,597	$	263,404

XML

Property and Equipment, Net (Tables)

9 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of Property Plant and Equipment

As of March 31, 2021 and June 30, 2020, property, plant and equipment consisted of the following:

Fixed Assets	March 31, 2021			June 30, 2020
Office and equipment	$	732,062		$	739,447
Motor vehicles		119,764			164,244
Leasehold Improvement		21,970			24,470
Total		873,797			928,161
Less: accumulated depreciation		(483,608	)		(429,116	)
Plant and Equipment, net	$	390,189		$	499,045

XML

Derivative Liabilities (Tables)

9 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Binomial Model Assumptions Inputs

The Binomial model with the following assumption inputs:

	March 31, 2021
Annual dividend yield	—
Expected life (years)	0.2-1.00
Risk-free interest rate	0.01-0.19	%
Expected volatility	115-209	%

	June 30, 2020
Annual dividend yield	—
Expected life (years)	0.5-1.00
Risk-free interest rate	0.16-2.10	%
Expected volatility	113-175	%

Schedule of Fair Value of Derivative

Fair value of the derivative is summarized as below:

Beginning Balance, June 30, 2020	$	5,597,095
Additions		2,996,017
Cancellation of Derivative Liabilities Due to Cash Repayment		(1,300,107	)
Cancellation of Derivative liabilities Due to Share Reservation		(214,757	)
Mark to Market		(278,070	)
Reclassification to APIC due to conversions		(4,076,280	)
Ending Balance, March 31, 2021	$	2,723,899

Beginning Balance, June 30, 2019	$	2,991,953
Additions		3,999,033
Mark to Market		(2,075,982	)
Reclassification to APIC due to conversions		(1,260,333	)
Ending Balance, March 31, 2020	$	3,706,809

XML

Commitments and Contingencies (Tables)

9 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule of Supplemental Disclosures Related to Operating Lease

Nine Months Ended
March 31, 2021
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	231,694
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended March 31, 2021	$	163,170
Remaining lease term – operating leases (in years)		3.00
Average discount rate – operating leases		10	%
The supplemental balance sheet information related to leases for the periods are as follows:
Operating leases
Short-term right-of-use assets	$	237,555
Long-term right-of-use assets	$	549,262
Total operating lease assets	$	786,817
Short-term operating lease liabilities	$	231,305
Long-term operating lease liabilities	$	591,115
Total operating lease liabilities	$	822,420

Schedule of Maturities of Lease Liabilities

Maturities of the Company’s lease liabilities are as follows:

	Operating
Period ending June 30,	Lease
2021	$	78,825
2022		305,040
2023		273,425
2024		172,465
2025		147,446
Total lease payments		977,200
Less: Imputed interest/present value discount		(154,780	)
Present value of lease liabilities	$	822,420

XML

Nature of Business (Details Narrative) - USD ($)				1 Months Ended	9 Months Ended
	Mar. 28, 2021	Oct. 02, 2020	Feb. 07, 2020	Feb. 28, 2021	Mar. 31, 2021	Dec. 31, 2020
Lemon Glow Company, Inc [Member]
Business acquisition, description of acquired entity	We entered into into a binding letter of intent for the acquisition of Lemon Glow Company, Inc., a California corporation ("Lemon Glow"), including all of Lemon Glow's assets, interests, property, and rights, which includes six-hundred-forty (640) acres of real estate in Lake County, California, outside of the local commercial cannabis cultivation exclusion zones. Our intent, via the Sugar Rush subsidiary, is to utilize thirty-two acres of the property to develop licensed cannabis cultivation and manufacturing operations.
Nug Avenue, Inc. [Member]
Percentage of VIE				70.00%
Indigo Dye Group [Member]
Proceeds the option to acquire additional interest percentage		30.00%
Percentage of outstanding equity					29.00%	29.00%
Indigo Dye Group [Member] | Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member]
Percentage of VIE		40.00%
Nonconsolidated affiliate - equity method		$ 505,449
Percentage of outstanding equity		40.00%
Nug Avenue, Inc. [Member]
Ownership percentage by parent				70.00%
Percentage of revenues				100.00%
Percentage of profits or loss				70.00%
Sugarmade, Inc. [Member] | Indigo Dye Group Corp. [Member]
Percentage of VIE			40.00%
Option to purchase an additional VIE interest			0.30
Sugarmade, Inc. [Member] | Bud Cars, Inc. [Member]
Percentage of VIE					40.00%

XML

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	9 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Jun. 30, 2020
Amortization of intangible assets	$ 1,022	$ 1,050
Operating lease, right-of-use asset	786,817		$ 1,105,755
Operating lease, liability	$ 822,420		$ 1,140,041
Revenue Benchmark [Member] | Paper and Paper-based Products [Member]
Revenue percentage	41.00%
Revenue Benchmark [Member] | Non-medical Supplies [Member]
Revenue percentage	1.00%
Revenue Benchmark [Member] | Cannabis Products [Member]
Revenue percentage	58.00%

XML

Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment (Details)	9 Months Ended
	Mar. 31, 2021
Machinery and Equipment [Member] | Minimum [Member]
Property and equipment, useful life	3 years
Machinery and Equipment [Member] | Minimum [Member]
Property and equipment, useful life	5 years
Furniture and Equipment [Member]
Property and equipment, useful life	7 years
Vehicles [Member]
Property and equipment, useful life	5 years
Leasehold Improvements [Member]
Property and equipment, useful life	5 years

XML

Concentration (Details Narrative) - USD ($)	9 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net revenue	$ 2,851,822	$ 1,891,140
Revenue Benchmark [Member] | Suppliers One [Member]
Revenue percentage	33.20%	31.21%
Revenue Benchmark [Member] | Suppliers Two [Member]
Revenue percentage	19.40%	17.80%
Revenue Benchmark [Member] | Customer One [Member]
Revenue percentage	11.60%

XML

VIE (Details Narrative) - USD ($)	Oct. 02, 2020	Feb. 07, 2020
Indigo Dye Group Corp. [Member] | Sugarmade, Inc. [Member]
Terms of arrangements	The Company continues to hold approximately 29% of the ownership of Indigo but ceased to have a controlling interest in the partnership and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting.	The value used for this transaction is $1,750,000 and each percentage (1%) of the company is worth $17,500. In the event that the Company is not able to make a payment of $58,333 in any month, it will have 90 days to cure the default.
Percentage of VIE		40.00%
Option to purchase an additional VIE interest		0.30
Indigo Dye Group Corp. [Member] | Indigo Agreement [Member]
Investment		$ 700,000
Terms of arrangements		The Investment shall be made in twelve monthly equal installments of $58,333 with the acceleration of the payment schedule possible depending on business growth, cash flow needs and capital availability.
Monthly installments amount		$ 58,333
Indigo Dye Group [Member]
Proceeds the option to acquire additional interest percentage	30.00%
Indigo Dye Group [Member] | Sugarmade, Inc. and Subsidiary [Member]
Ownership percentage by noncontrolling interest	29.00%

XML

Noncontrolling Interest and Deconsolidation of VIE (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Oct. 02, 2020	Jun. 30, 2020
Net assets value	$ 4,265,316		$ 4,265,316				$ 3,507,062
Gain on deconsolidation			$ 313,928
Indigo Dye Group [Member]
Percentage of outstanding equity	29.00%		29.00%		29.00%
Proceeds the option to acquire additional interest percentage						30.00%
Indigo Dye Group [Member] | Variable Interest Entity, Not Primary Beneficiary [Member]
Net assets value						$ 326,812
Indigo Dye Group [Member] | Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member]
Percentage of outstanding equity						40.00%
Nonconsolidated affiliate - equity method						$ 505,449

XML

Legal Proceedings (Details Narrative) - USD ($)	Feb. 21, 2017	Mar. 31, 2021	Jun. 30, 2020
Litigation settlement, amount	$ 227,000
Convertible notes payable		$ 1,982,902	$ 1,740,122
Third parties [Member] | Two Notes [Member]
Convertible notes payable		80,000	$ 80,000
Debt amount		$ 227,000

XML

Cash (Details Narrative)	Mar. 31, 2021 USD ($)
Cash and Cash Equivalents [Abstract]
Cash, FDIC insured amount	$ 250,000

XML

Accounts Receivable (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Receivables [Abstract]
Accounts receivable, net	$ 75,040	$ 134,517

XML

Loans Receivable (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Receivables [Abstract]
Loans receivable		$ 1,365

XML

Loans Receivable - Related Parties (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Debt Disclosure [Abstract]
Loan receivable related parties	$ 404,931	$ 318,535
Loan receivable related parties current	208,931	122,535
Loan receivable related parties noncurrent	$ 196,000	$ 196,000

XML

Inventory (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Inventory Disclosure [Abstract]
Inventory,net	$ 692,460	$ 679,471
Obsolescence reserve	$ 183,974	$ 15,445

XML

Other Current Assets - Schedule of Other Current Assets (Details) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid deposit	$ 90,696	$ 48,483
Prepaid inventory	961,975	65,449
Employees advance		324
Prepaid expenses	9,717	35,157
Undeposited funds	4,209	71,550
Other		42,441
Total:	$ 1,066,597	$ 263,404

XML

Intangible Asset (Details Narrative) - USD ($)		3 Months Ended	9 Months Ended
	Aug. 21, 2017	Mar. 31, 2021	Mar. 31, 2021	Mar. 31, 2020
Amortization expense			$ 1,022	$ 1,050
Intellectual Property [Member]
Payments to develop software	$ 14,000	$ 5,800

XML

Property and Equipment, net (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Jun. 30, 2020
Property, Plant and Equipment [Abstract]
Depreciation expenses	$ 70,650	$ 47,526	$ 110,032

XML

Property and Equipment, net - Schedule of Property Plant and Equipment (Details) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Property plant and equipment gross	$ 873,797	$ 928,161
Less: accumulated depreciation	(483,608)	(429,116)
Plant and equipment, net	390,189	499,047
Office and Equipment [Member]
Property plant and equipment gross	732,062	739,447
Motor Vehicles [Member]
Property plant and equipment gross	119,764	164,244
Leasehold Improvements [Member]
Property plant and equipment gross	$ 21,970	$ 24,470

XML

Unearned Revenues (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Revenue Recognition and Deferred Revenue [Abstract]
Unearned revenue	$ 9,379	$ 53,248

XML

Other Payables (Details Narrative)	Mar. 31, 2021 USD ($) Integer	Jun. 30, 2020 USD ($)
Other payables	$ 812,069	$ 691,801
Number of credit cards | Integer	8
American Express [Member]
Credit card limit amount	$ 0
Credit Card [Member]
Credit card limit amount	$ 85,000
Credit Card [Member] | Minimum [Member]
Credit cards interest rates percentage	11.24%
Credit Card [Member] | Maximum [Member]
Credit cards interest rates percentage	29.99%

XML

Convertible Notes (Details Narrative)																																			3 Months Ended	12 Months Ended
	Feb. 08, 2021 USD ($) Integer	Nov. 10, 2020 USD ($) Integer	Oct. 13, 2020 USD ($) $ / shares	Oct. 08, 2020 USD ($) $ / shares	Sep. 24, 2020 USD ($) $ / shares	Sep. 10, 2020 USD ($)	Sep. 08, 2020 USD ($) $ / shares	Jul. 21, 2020 USD ($)	Jul. 16, 2020 USD ($)	Jul. 07, 2020 USD ($)	Jul. 06, 2020 USD ($)	Jun. 18, 2020 USD ($)	Jun. 10, 2020 USD ($) Integer	Apr. 24, 2020 USD ($) Integer	Mar. 05, 2020 USD ($) Integer	Feb. 18, 2020 USD ($) $ / shares	Feb. 04, 2020 USD ($) $ / shares	Jan. 22, 2020 USD ($) Integer	Jan. 14, 2020 USD ($) Integer	Jan. 03, 2020 USD ($) Integer	Dec. 27, 2019 USD ($) Integer	Dec. 10, 2019 USD ($) Integer	Nov. 29, 2019 USD ($) Integer	Nov. 01, 2019 USD ($) $ / shares	Oct. 31, 2019 USD ($) $ / shares	Oct. 28, 2019 USD ($) Integer	Oct. 02, 2019 Integer	Sep. 27, 2019 USD ($)	Dec. 03, 2018 USD ($) $ / shares	Nov. 16, 2018 USD ($) $ / shares	Nov. 01, 2018 USD ($) $ / shares	Dec. 21, 2012 USD ($)	Sep. 18, 2012 USD ($)	Aug. 24, 2012 USD ($)	Sep. 30, 2020 USD ($) shares	Jun. 30, 2020 USD ($) Integer shares	Mar. 31, 2021 USD ($)
Convertible notes payable, net, current																																				$ 1,740,122	$ 1,982,902
Debt instrument debt discount																																				$ 880,879	$ 355,752
Convertible Note One [Member] | Accredited Investor [Member]
Debt instrument face amount																																		$ 25,000
Debt instrument term																																		6 months
Debt instrument interest rate																																		10.00%
Debt instrument conversion percentage																																		25.00%
Convertible Note Two [Member] | Accredited Investor [Member]
Debt instrument face amount																																	$ 25,000
Debt instrument term																																	6 months
Debt instrument interest rate																																	10.00%
Debt instrument conversion percentage																																	25.00%
Convertible Note Three [Member] | Accredited Investor [Member]
Debt instrument face amount																																$ 100,000
Debt instrument term																																6 months
Debt instrument interest rate																																10.00%
Debt instrument conversion percentage																																25.00%
Convertible Note Four [Member] | Accredited Investor [Member]
Debt instrument face amount																															$ 100,000
Debt instrument term																															1 year
Debt instrument interest rate																															8.00%
Debt instrument conversion price | $ / shares																															$ 0.07
Convertible Note Five [Member] | Accredited Investor [Member]
Debt instrument face amount																														$ 80,000
Debt instrument term																														1 year
Debt instrument interest rate																														8.00%
Debt instrument conversion price | $ / shares																														$ 0.07
Convertible Note Six [Member] | Accredited Investor [Member]
Debt instrument face amount																														$ 40,000
Debt instrument term																														1 year
Debt instrument interest rate																														8.00%
Debt instrument conversion price | $ / shares																														$ 0.07
Convertible Note Seven [Member] | Accredited Investor [Member]
Debt instrument face amount																													$ 35,000
Debt instrument term																													1 year
Debt instrument interest rate																													8.00%
Debt instrument conversion price | $ / shares																													$ 0.07
Convertible Note Eight [Member] | Accredited Investor [Member]
Debt instrument face amount																												$ 165,000
Debt instrument term																												360 days
Debt instrument interest rate																												8.00%
Debt instrument conversion percentage																												55.00%
Debt instrument original issue discount																												$ 16,250
Debt instrument trading days | Integer																																				20
Debt instrument conversion amount																																				$ 50,000
Debt instrument interest expenses																																				$ 2,992
Debt instrument conversion shares issued | shares																																				56,007,062
Convertible Note Nine [Member] | Accredited Investor [Member]
Debt instrument face amount																										$ 225,500
Debt instrument term																										360 days
Debt instrument interest rate																										8.00%
Debt instrument conversion percentage																										60.00%
Debt instrument original issue discount																										$ 23,000
Debt instrument trading days | Integer																										20
Convertible Note Ten [Member] | Accredited Investor [Member]
Debt instrument face amount																										$ 225,500
Debt instrument term																										360 days
Debt instrument interest rate																										8.00%
Debt instrument conversion percentage																										60.00%
Debt instrument original issue discount																										$ 23,000
Debt instrument trading days | Integer																										20
Convertible Note Eleven [Member] | Accredited Investor [Member]
Debt instrument face amount																							$ 106,150
Debt instrument term																							360 days
Debt instrument interest rate																							8.00%
Debt instrument conversion percentage																							60.00%
Debt instrument original issue discount																							$ 11,150
Debt instrument trading days | Integer																							20
Convertible Note Twelve [Member] | Accredited Investor [Member]
Debt instrument face amount																							$ 106,150
Debt instrument term																							360 days
Debt instrument interest rate																							8.00%
Debt instrument conversion percentage																							60.00%
Debt instrument original issue discount																							$ 11,150
Debt instrument trading days | Integer																							20
Convertible Note Thirteen [Member] | Accredited Investor [Member]
Debt instrument face amount																						$ 106,700
Debt instrument term																						360 days
Debt instrument interest rate																						8.00%
Debt instrument conversion percentage																						60.00%
Debt instrument original issue discount																						$ 11,700
Debt instrument trading days | Integer																						20
Convertible Note Fourteen [Member] | Accredited Investor [Member]
Debt instrument face amount																						$ 106,700
Debt instrument term																						360 days
Debt instrument interest rate																						8.00%
Debt instrument conversion percentage																						60.00%
Debt instrument original issue discount																						$ 11,700
Debt instrument trading days | Integer																						20
Convertible Note Fifteen [Member] | Accredited Investor [Member]
Debt instrument face amount																					$ 112,200
Debt instrument term																					360 days
Debt instrument interest rate																					8.00%
Debt instrument conversion percentage																					60.00%
Debt instrument original issue discount																					$ 12,200
Debt instrument trading days | Integer																					20
Convertible Note Sixteen [Member] | Accredited Investor [Member]
Debt instrument face amount																									$ 139,301
Debt instrument term																									360 days
Debt instrument interest rate																									8.00%
Debt instrument conversion percentage																											60.00%
Debt instrument conversion price | $ / shares																									$ 0.008
Debt instrument trading days | Integer																											20
Convertible Note Seventeen [Member] | Accredited Investor [Member]
Debt instrument face amount																								$ 100,000
Debt instrument term																								360 days
Debt instrument interest rate																								8.00%
Debt instrument conversion percentage																											60.00%
Debt instrument conversion price | $ / shares																								$ 0.008
Debt instrument trading days | Integer																											20
Convertible Note Eighteen [Member] | Accredited Investor [Member]
Debt instrument face amount																				$ 112,200
Debt instrument term																				360 days
Debt instrument interest rate																				8.00%
Debt instrument conversion percentage																				60.00%
Debt instrument original issue discount																				$ 12,200
Debt instrument trading days | Integer																				20
Convertible Note Nineteen [Member] | Accredited Investor [Member]
Debt instrument face amount																			$ 150,000
Debt instrument term																			360 days
Debt instrument interest rate																			8.00%
Debt instrument conversion percentage																			38.00%
Debt instrument original issue discount																			$ 3,000
Debt instrument trading days | Integer																			10
Debt instrument conversion amount																																			$ 50,000
Debt instrument conversion shares issued | shares																																			29,868,578
Convertible Note Twenty [Member] | Accredited Investor [Member]
Debt instrument face amount																		$ 128,000
Debt instrument term																		360 days
Debt instrument interest rate																		10.00%
Debt instrument conversion percentage																		35.00%
Debt instrument original issue discount																		$ 3,000
Debt instrument trading days | Integer																		20
Convertible Note Twenty One [Member] | Accredited Investor [Member]
Debt instrument face amount																	$ 110,000
Debt instrument term																	360 days
Debt instrument interest rate																	12.00%
Debt instrument conversion price | $ / shares																	$ 0.001
Debt instrument original issue discount																	$ 10,000
Convertible Note Twenty Two [Member] | Accredited Investor [Member]
Debt instrument face amount																$ 100,000
Debt instrument term																360 days
Debt instrument interest rate																12.00%
Debt instrument conversion price | $ / shares																$ 0.001
Debt instrument original issue discount																$ 10,000
Convertible Note Twenty Three [Member] | Accredited Investor [Member]
Debt instrument face amount															$ 125,000
Debt instrument term															360 days
Debt instrument interest rate															8.00%
Debt instrument conversion percentage															38.00%
Debt instrument original issue discount															$ 3,000
Debt instrument trading days | Integer															10
Convertible Note Twenty Four [Member] | Accredited Investor [Member]
Debt instrument face amount														$ 75,000
Debt instrument term														360 days
Debt instrument interest rate														8.00%
Debt instrument conversion percentage														38.00%
Debt instrument original issue discount														$ 2,000
Debt instrument trading days | Integer														10
Convertible Note Twenty Five [Member] | Accredited Investor [Member]
Debt instrument face amount													$ 36,300
Debt instrument term													360 days
Debt instrument interest rate													8.00%
Debt instrument conversion percentage													60.00%
Debt instrument original issue discount													$ 3,300
Debt instrument trading days | Integer													20
Legal expense													$ 3,000
Convertible Note Twenty Six [Member] | Accredited Investor [Member]
Debt instrument face amount												$ 36,300
Debt instrument term												360 days
Debt instrument interest rate												8.00%
Debt instrument conversion percentage												60.00%
Debt instrument original issue discount												$ 3,300
Debt instrument trading days												20
Legal expense												$ 3,000
Convertible Note Twenty Seven [Member] | Accredited Investor [Member]
Debt instrument face amount											$ 77,000
Debt instrument term											360 days
Debt instrument interest rate											8.00%
Debt instrument conversion percentage											38.00%
Debt instrument original issue discount											$ 2,000
Debt instrument trading days											10
Convertible Note Twenty Eight [Member] | Accredited Investor [Member]
Debt instrument face amount										$ 153,000
Debt instrument term										360 days
Debt instrument interest rate										10.00%
Debt instrument conversion percentage										35.00%
Debt instrument original issue discount										$ 3,000
Debt instrument trading days										20
Convertible Note Twenty Nine [Member] | Accredited Investor [Member]
Debt instrument face amount									$ 260,700
Debt instrument term									360 days
Debt instrument interest rate									8.00%
Debt instrument conversion percentage									60.00%
Debt instrument original issue discount									$ 23,700
Debt instrument trading days									20
Legal expense									$ 12,000
Convertible Note Thirty [Member] | Accredited Investor [Member]
Debt instrument face amount								$ 200,200
Debt instrument term								360 days
Debt instrument interest rate								8.00%
Debt instrument conversion percentage								60.00%
Debt instrument original issue discount								$ 18,200
Debt instrument trading days								20
Legal expense								$ 7,000
Convertible Note Thirty One [Member] | Accredited Investor [Member]
Debt instrument face amount							$ 110,000
Debt instrument term							180 days
Debt instrument interest rate							12.00%
Debt instrument conversion percentage							65.00%
Debt instrument conversion price | $ / shares							$ 0.01
Debt instrument original issue discount							$ 10,000
Debt instrument trading days							20
Debt instrument conversion description							After the six months anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.
Convertible Note Thirty Two [Member] | Accredited Investor [Member]
Debt instrument face amount						$ 227,700
Debt instrument term						360 days
Debt instrument interest rate						8.00%
Debt instrument conversion percentage						60.00%
Debt instrument original issue discount						$ 20,700
Debt instrument trading days						20
Legal expense						$ 7,000
Convertible Note Thirty Three [Member] | Accredited Investor [Member]
Debt instrument face amount					$ 212,300
Debt instrument term					180 days
Debt instrument interest rate					12.00%
Debt instrument conversion percentage					65.00%
Debt instrument conversion price | $ / shares					$ 0.01
Debt instrument original issue discount					$ 19,300
Debt instrument trading days					20
Debt instrument conversion description					After the six months anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.
Convertible Note Thirty Four [Member] | Accredited Investor [Member]
Debt instrument face amount				$ 231,000
Debt instrument term				180 days
Debt instrument interest rate				12.00%
Debt instrument conversion percentage				65.00%
Debt instrument conversion price | $ / shares				$ 0.01
Debt instrument original issue discount				$ 21,000
Debt instrument trading days				20
Debt instrument conversion description				After the six months anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent
Convertible Note Thirty Five [Member] | Accredited Investor [Member]
Debt instrument face amount			$ 275,000
Debt instrument term			180 days
Debt instrument interest rate			12.00%
Debt instrument conversion percentage			65.00%
Debt instrument conversion price | $ / shares			$ 0.01
Debt instrument original issue discount			$ 25,000
Debt instrument trading days			20
Debt instrument conversion description			After the six months anniversary of this note, the conversion price shall be equal to the lower of the fixed price of $0.01 or 65% of the lowest trading price of the common stock for the 20 prior trading days including the day upon which a conversion notice is received by the Company or its transfer agent.
Convertible Note Thirty Six [Member] | Accredited Investor [Member]
Debt instrument face amount		$ 58,300
Debt instrument term		360 days
Debt instrument interest rate		8.00%
Debt instrument conversion percentage		60.00%
Debt instrument original issue discount		$ 5,300
Debt instrument trading days | Integer		20
Convertible Note Thirty Seven [Member] | Accredited Investor [Member]
Debt instrument face amount	$ 69,300
Debt instrument term	360 days
Debt instrument interest rate	8.00%
Debt instrument conversion percentage	60.00%
Debt instrument original issue discount	$ 6,300
Debt instrument trading days | Integer	20

XML

Derivative Liabilities (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2021	Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative liability	$ 2,301,301	$ 5,597,095
Loss from changes in derivative liability	$ 482,232	$ 1,442,295

XML

Derivative Liabilities - Schedule of Binomial Model Assumptions Inputs (Details)	9 Months Ended	12 Months Ended
	Mar. 31, 2021	Jun. 30, 2020
Annual Dividend Yield [Member]
Fair value measurement input
Expected Life (years) [Member] | Minimum [Member]
Fair value measurement input, term	2 months 12 days	6 months
Expected Life (years) [Member] | Maximum [Member]
Fair value measurement input, term	1 year	1 year
Risk-free Interest Rate [Member] | Minimum [Member]
Fair value measurement input	0.01	0.16
Risk-free Interest Rate [Member] | Maximum [Member]
Fair value measurement input	0.19	2.10
Expected Volatility [Member] | Minimum [Member]
Fair value measurement input	115	113
Expected Volatility [Member] | Maximum [Member]
Fair value measurement input	209	175

XML

Derivative Liabilities - Schedule of Fair Value of Derivative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Beginning Balance			$ 5,597,095	$ 2,991,953
Additions			2,996,017	3,999,033
Cancellation of Derivative Liabilities Due to Cash Repayment			(1,300,107)
Cancellation of Derivative liabilities Due to Share Reservation			(214,757)
Mark to Market	$ 3,485,549	$ 238,065	(506,559)	(2,075,982)
Reclassification to APIC due to conversions			(4,076,280)	(1,260,333)
Ending Balance	$ 2,723,899	$ 3,706,809	$ 2,723,899	$ 3,706,809

XML

Stock Warrants (Details Narrative) - USD ($)			9 Months Ended	12 Months Ended
	Feb. 04, 2020	Sep. 07, 2018	Mar. 31, 2021	Jun. 30, 2020
Fair value of warrant liability			$ 24,216	$ 79,910
Settlement Agreement [Member] | Investors [Member]
Life of warrants		5 years
Fair value of warrant liability		$ 56,730	1,216	1,910
Warrant Agreement [Member] | Accredited Investor [Member]
Life of warrants	5 years
Fair value of warrant liability	$ 80,000		$ 23,000	$ 78,000
Number of common stock called by warrants	10,000,000
Warrants exercise price	$ 0.008

XML

Note Payable (Details Narrative) - USD ($)	1 Months Ended
	Oct. 31, 2011	Mar. 31, 2021	Jun. 30, 2020	Dec. 20, 2018	Jun. 15, 2018	Jan. 23, 2013
Promissory Note [Member] | Former Employee [Member]
Original principal amount						$ 40,000
Interest rate per annum
Notes payable related parties current		$ 15,427	$ 15,427
Promissory Note [Member] | Accredited Investor [Member]
Original principal amount					$ 20,000
Interest rate per annum					8.00%
Outstanding balance		20,000	20,000
Revolving Demand Note [Member] | HSBC [Member] | USA [Member]
Line of credit maximum borrowing capacity	$ 150,000
Debt instrument basis spread on variable rate	0.25%
Interest rate				5.50%
Line of credit covenant terms	In the event the deposit account is not established or minimum balance maintained, HSBC can charge a higher rate of interest of up to 4.0% above prime rate.
Line of credit		$ 25,982	$ 25,982

XML

Loans Payable (Details Narrative) - USD ($)	Oct. 01, 2017	Jul. 02, 2012	Mar. 31, 2021	Jan. 25, 2021	Jul. 28, 2020	Jun. 30, 2020	Jun. 26, 2020	Apr. 27, 2020	Mar. 18, 2020	Jun. 30, 2019	Jan. 06, 2015	Jan. 23, 2013
Outstanding loan balance			$ 716,716			$ 517,260
Repayment Agreement [Member] | Former Employee [Member]
Original principal amount											$ 9,500
Interest rate per annum
Outstanding balance			0			3,584
Equipment Loan Agreement [Member] | CarryOutSupplies [Member]
Maturity date		Jun. 21, 2024
Outstanding balance			18,735			24,524
Monthly payment		$ 648
Government Loan Agreement [Member]
Original principal amount							$ 8,000
Outstanding balance			0			8,000
Celtic Bank [Member] | Loan Agreement [Member]
Original principal amount									$ 150,000
Outstanding balance			0			117,635
Promissory Note [Member] | Former Employee [Member]
Original principal amount												$ 40,000
Interest rate per annum
Promissory Note [Member] | Greater Asia Technology Limited [Member]
Original principal amount	$ 100,000
Maturity date	Jun. 30, 2018
Interest rate per annum	33.33%
Outstanding balance			61,919			96,401
Short Term Loans [Member] | Greater Asia Technology Limited [Member]
Original principal amount										$ 375,000
Outstanding balance			$ 100,000			$ 100,000
Short Term Loans [Member] | Greater Asia Technology Limited [Member] | Minimum [Member]
Interest rate per annum										40.00%
Short Term Loans [Member] | Greater Asia Technology Limited [Member] | Maximum [Member]
Interest rate per annum										50.00%
April 2020 PPP Note [Member] | Bank of America [Member] | CARES Act [Member]
Original principal amount								$ 110,000
Interest rate per annum								1.00%
July 2020 PPP Note [Member] | Bank of America [Member] | CARES Act [Member]
Original principal amount					$ 159,900
Interest rate per annum					1.00%
January 2021 PPP Note [Member] | Bank of America [Member] | CARES Act [Member]
Original principal amount				$ 96,595
Interest rate per annum				1.00%

XML

Loans Payable - Related Parties (Details Narrative) - USD ($)	Mar. 31, 2021	Jun. 30, 2020	Jul. 07, 2016
Loan payable - Related Parties, Current	$ 238,150	$ 35,943
Employee [Member]
Interest rate per annum
Outstanding balance	63,778	35,943
Related Parties [Member]
Outstanding balance	$ 174,372	$ 0

XML

Shares to be Issued (Details Narrative) - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020
Stock to be issued	$ 136,577		$ 101,577
Consulting Service Agreement and Employment Agreement [Member]
Stock to be issued			$ 110,577
Consulting Service Agreement [Member]
Stock to be issued		$ 31,000

XML

Stockholder's Equity (Details Narrative) - USD ($)	3 Months Ended						4 Months Ended	9 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2015	Mar. 31, 2021	Jun. 30, 2020	Apr. 22, 2020
Common stock, par value	$ 0.001							$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	10,000,000,000							10,000,000,000	10,000,000,000	10,010,000,000
Preferred stock, par value	$ 0.001							$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000							10,000,000	10,000,000	10,000,000
Number of shares issued for debt conversion	499,374,305	411,171,815	1,081,411,606
Value of shares issued for debt conversion	$ 403,755	$ 320,879	$ 1,273,459	$ 298,756	$ 142,164	$ 547,833
Shares issued	587,222,222
Number of common stock issued upon conversion		360,647,019
Value of common stock issued upon conversion		$ 2,000,000
Number of shares issued for common stock, value	$ 1,012,000			$ 125,000	$ 340,000	$ 100,000
Number of shares issued for services	15,000,000
Number of shares issued for services, value	$ 37,500
Preferred stock, shares issued	1,541,500							1,541,500	3,541,500
Preferred stock, shares outstanding	1,541,500							1,541,500	3,541,500
Common stock, shares issued	4,718,104,197							4,718,104,197	1,763,277,230
Common stock, shares outstanding	4,718,104,197							4,718,104,197	1,763,277,230
Investors [Member]
Return on investment								5.00%
Fixed buyback amount	$ 500,000							$ 500,000
Series A Preferred Shares [Member] | Investors [Member]
Shares issued							2,000,000
Conversion ratio							526

XML

Commitments and Contingencies (Details Narrative)	Feb. 23, 2018 USD ($) ft²	Mar. 31, 2021 USD ($)
Lease commitment		$ 977,200
Lease Agreement [Member] | Office [Member]
Lease term	5 years 1 month
Monthly rent	$ 11,770
Yearly increase in rent percentage	3.00%
Lease commitment	$ 737,367
Lease Agreement [Member] | Warehouse [Member]
Lease term	5 years 2 months
Monthly rent	$ 13,022
Area under lease | ft²	11,627

XML

Commitments and Contingencies - Schedule of Supplemental Disclosures Related to Operating Lease (Details) - USD ($)	9 Months Ended
	Mar. 31, 2021	Jun. 30, 2020
Cash paid for amounts included in the measurement of lease liabilities	$ 163,170
Remaining lease term - operating leases (in years)	3 years
Average discount rate - operating leases	10.00%
Short-term right-of-use assets	$ 237,556	$ 270,363
Long-term right-of-use assets	549,261	835,393
Total operating lease assets	786,817
Short-term operating lease liabilities	231,305	372,285
Long-term operating lease liabilities	591,116	767,729
Total operating lease liabilities	822,420	$ 1,140,041
General and Administrative [Member]
Operating lease cost	$ 231,694

XML

Commitments and Contingencies - Schedule of Maturities of Lease Liabilities (Details) - USD ($)	Mar. 31, 2021	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
2021	$ 78,825
2022	305,040
2023	273,425
2024	172,465
2025	147,446
Total lease payments	977,200
Less: Imputed interest/present value discount	(154,780)
Present value of lease liabilities	$ 822,420	$ 1,140,041

XML

Subsequent Events (Details Narrative) - USD ($)								3 Months Ended						9 Months Ended
	May 14, 2021	May 12, 2021	Apr. 27, 2021	Apr. 26, 2021	Apr. 15, 2021	Apr. 05, 2021	Mar. 28, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2021	Jun. 30, 2020	Apr. 22, 2020
Share issued for cash								$ 1,012,000			$ 125,000	$ 340,000	$ 100,000
Share issued for cash, shares								587,222,222
Shares issued for debt conversion								$ 403,755	$ 320,879	$ 1,273,459	298,756	142,164	547,833
Shares issued for debt conversion, shares								499,374,305	411,171,815	1,081,411,606
Common stock, par value								$ 0.001						$ 0.001	$ 0.001	$ 0.001
Common Stock [Member]
Share issued for cash								$ 587,222			$ 33,543	$ 26,622	$ 11,349
Share issued for cash, shares								587,222,222			33,542,865	26,621,610	11,348,591
Shares issued for debt conversion								$ 499,374	$ 411,172	$ 1,081,412	$ 128,526	$ 24,994	$ 71,916
Shares issued for debt conversion, shares								499,374,305	411,171,815	1,081,411,606	128,525,706	24,994,341	71,915,557
Lemon Glow Company, Inc [Member]
Business acquisition, description of acquired entity							We entered into into a binding letter of intent for the acquisition of Lemon Glow Company, Inc., a California corporation ("Lemon Glow"), including all of Lemon Glow's assets, interests, property, and rights, which includes six-hundred-forty (640) acres of real estate in Lake County, California, outside of the local commercial cannabis cultivation exclusion zones. Our intent, via the Sugar Rush subsidiary, is to utilize thirty-two acres of the property to develop licensed cannabis cultivation and manufacturing operations.
Ownership percentage description														At the Effective Time, each outstanding share of common stock of Merger Sub (100 shares) was converted into one share of common stock of Lemon Glow which became the only outstanding capital stock of the Lemon Glow at the Effective Time. In addition, each share of Lemon Glow common stock of the Company held in the treasury of Lemon Glow immediately prior to the Effective Time was canceled and retired. As a result, the Company became the sole owner of 100% of the issued and outstanding common stock of Lemon Glow.
Subsequent Event [Member] | Series B Preferred Shares [Member]
Share issued for cash, shares		2,000,000
Subsequent Event [Member] | Common Stock [Member]
Share issued for cash, shares		660,571,429
Common stock, par value		$ 0.001
Subsequent Event [Member] | Lemon Glow Company, Inc [Member]
Cash Consideration		$ 4,256,000
Payments in cash		$ 280,000
Interest rate		5.00%
Business acquisition, description of acquired entity		Lemon Glow is the owner of a 640-acre property located in Lake Country, California. Lemon Glow is in the process of improving 32 acres of the 640 acres for use as a regulated cannabis cultivation site. The Company and Lemon Glow expect that the annual potential cultivation yield at the property is approximately 4,000 pounds per acre of dry trimmed cannabis flower, although there can be no assurance that the property will yield this amount or any at all.
Subsequent Event [Member] | Lemon Glow Company, Inc [Member] | Promissory Notes [Member]
Shares issued for debt conversion		$ 3,976,000
Subsequent Event [Member] | One Note Holder [Member]
Shares issued for debt conversion	$ 52,500
Shares issued for debt conversion, shares	40,753,063
Subsequent Event [Member] | Stock Subscription Agreement [Member]
Share issued for cash			$ 194,444,445	$ 100,000,000	$ 194,444,445	$ 194,444,445
Share issued for cash, shares			350,000	180,000	350,000	350,000