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Subsequent Event

12 Months Ended

Jun. 30, 2014

10. Subsequent Events

On various dates during June 2014 and July 2014 the Company and holders of certain convertible notes, the dates for which are outlined below, agreed to 1) cancel $0.50 warrants and retained the $0.01 warrant, as defined in the original Convertible Note Purchase Agreements warrants to purchase common shares in the Company, 2) extend the due dates on the Notes to July 1, 2016, and 3) reduce the interest on the notes to 10% from 14%. In total, 300,000 warrants at $0.50 were cancelled. The original dates for the notes and the amounts of the notes affected by these agreements are listed below. Notes dated otherwise retained the original terms.


	•	Note dated August 16, 2012 for $25,000 Note dated August 24, 2012 for $25,000
	•	Note dated September 8, 2012 for $40,000
	•	Note dated September 12, 2012 for $50,000 Note dated September 18, 2012 for $25,000
	•	Note dated October 5, 2012 for $10,000
	•	Note dated October 24, 2012 for $25,000
	•	Note dated December 21, 2012 for $100,000
	•	Note dated July 31, 2012 for $25,000

On July 16, 2014 the Company entered into an agreement to acquire City of Industry, California based SWC Group, Inc., a California Corporation, which does business as CarryOutSupplies.com pending, but not limited to, the Company performing due diligence and executing a final Acquisition and Share Exchange Agreement.

On July 17, 2014, the Company sold 4,500,000 shares of restricted common stock to an accredited investor for $50,000 pursuant to an exemption from registration relying on Section 4(2) and Rule 506 of Regulation D, under the Securities Act of 1933, as amended. The purchasing entity was LMK CAPITAL LLC, DBA PREMIER PAPER & PLASTIC INTERNATIONAL (“LMK”), a Company in which our CEO, Jimmy Chan, is currently employed by LMK CAPITAL LLC, DBA PREMIER PAPER & PLASTIC INTERNATIONAL as an independent consultant.

On July 17, 2014, the Company sold 1,250,000 shares of restricted common stock to an accredited investor for $25,000 pursuant to an exemption from registration relying on Section 4(2) and Rule 506 of Regulation D, under the Securities Act of 1933, as amended.

On July 18, 2014, the Company sold 1,250,000 shares of restricted common stock to an accredited investor for $25,000 pursuant to an exemption from registration relying on Section 4(2) and Rule 506 of Regulation D, under the Securities Act of 1933, as amended.

On July 23, 2014, the Company entered to an agreement with a debtor settling a debt of $65,000 in exchange for 520,000 restricted common shares and a cash payment of $39,000.

August 7, 2014, the Company sold 5,000,000 shares of restricted common stock to an accredited investor for $135,000 pursuant to an exemption from registration relying on Section 4(2) and Rule 506 of Regulation D, under the Securities Act of 1933, as amended.

August 7, 2014, the Company sold 900,000 shares of restricted common stock to an accredited investor for $10,000 pursuant to an exemption from registration relying on Section 4(2) and Rule 506 of Regulation D, under the Securities Act of 1933, as amended.

On August 12, 2014, the Company approved the conversion of $200,000 of short-term debt into 10,000,000 common shares. The shares were issued to Weihao LLC on December 19, 2014.

On August 12, 2014, the Company approved the conversion of $275,000 of short-term debt into 15,277,778 common shares. The holder of the debt was LMK CAPITAL LLC, DBA PREMIER PAPER & PLASTIC INTERNATIONAL (“LMK”), a Company in which our CEO, Jimmy Chan, is currently employedas an independent consultant.

On September 12, 2014, the Company approved the conversion of $75,000 of short-term debt into 4,166,666 common shares. The holder of the debt was LMK CAPITAL LLC, DBA PREMIER PAPER & PLASTIC INTERNATIONAL (“LMK”), a Company in which our CEO, Jimmy Chan, is currently employed as an independent consultant.

On October 6, 2014, the Company accepted the resignation of Dennis Mandell, a director of the Company. Mr. Mandell also served as Chairman of the Board and as the sole member of the Company’s Audit Committee.

As of October 8, 2014, the Company accepted the resignation of Jonathan Leong. The sole remaining director, Clifton Leung, then appointed two individuals to occupy the open seats on the board of directors, Jimmy Chan, as Chairman, and Waylon Huang. These two individuals will serve until their successors are duly elected and qualified. Mr. Jonathan Leong will be issued Four Million (4,000,000) shares of common stock of the Company for his services to the Company and the board.

On October 28, 2014, the Board of Directors of the Company executed the final Acquisition and Share Exchange Agreement (the “Share Exchange Agreement”) ratifying the Pending Acquisition.

On October 28, 2014, the Company resolved debts related to former employees and/or contractors through the issuance of 4,239,368 restricted common shares. Shares were issued December, 19, 2014

On November 11, 2014, Registrant dismissed its independent registered public accounting firm, Anton & Chia, LLC. The Registrant's Board of Directors made the decision to dismiss Anton & Chia, LLC and engage MJF & Associates, APC as Registrant's independent registered public accounting firm, as described below. During Registrant's two most recent fiscal years and any subsequent interim period before such dismissal, there were no substantial disagreements with Anton & Chia, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which remain unresolved.

On November 11, 2014 the Registrant engaged MJF & Associates, APC as Registrant's independent registered public accounting firm.

On November 11, 2014, the Company accepted the resignation of CEO and Director Clifton Leung from the position of CEO, a director, and from all other titles at the Company. Jimmy Chan who, is also a director and serves as chairman and secretary, has assumed the position of CEO.

On November 11, 2014, the Board approved the appointment of Er Wang to the Board of Directors. He comes to the Company with a diverse background across management consulting at a Big 4 accounting and audit firm, corporate finance at a major movie studio, and as a co-founder at a loyalty rewards startup. Mr. Wang graduated from the University of California Irvine with a Bachelor of Arts in Business Economics.

On December 14, 2014, the Company resolved a debt of $30,000 to the issuance of 1,000,000 restricted common shares.

On December 23, 2014, the Board approved the issuance of 2,674,718 shares with option price @ $0.001 with an expiration date of December, 31, 2016, to non-executive employees, as part of the plan of employee retention.

On December 23, 2014, the Board approved the issuance of 5,500,000 shares with option price @ $0.001 with an expiration date of December, 31, 2016, to executives as part of the plan of retaining experienced talents.

On December 31, 2014, Sugarmadeelected Mr. Er Wang as Audit Committee Chair, to serve until his successor is duly elected and qualified. Mr. Wang will serve as the sole member of the Audit Committee until additional qualified Directors can be nominated and ratified for service on the Board and/or Audit Committee.

On December 31, 2014 the Company resolved a debt of $41,629 Pursuant to the terms of a promissory note dated July 11, 2012 where the creditor provided $36,000 of financing to the Company.

On February 20, 2015, the Company sold 1,000,000 shares of restricted common stock to an accredited investor for $20,000 pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b of Regulation D, under the Securities Act of 1933, as amended.

On April 1, 2015, the Company completed a series of transactions and amended its Articles of Incorporation creating a series of preferred stock of 10,000,000 shares, which shall be designated Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). Series B will not be eligible for dividends. Five years from the date of issue (the "Conversion Date"), assuming the Series B investor is approved for l-526 under the U.S Government’s EB-5 Investment Program, 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.

On April 9, 2015, the Company completed a series of transactions receiving proceeds of $1,500,000 for sales of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). The offering was made pursuant to SEC Rule 506 Section 4(2), which provides exemption from registration for transactions, which are not public offerings. The funds received were used for general working capital purposes and to accelerate order deliveries to customers.

On April 14, 2016 the Company notified its transfer agents that 6,446,000 shares had been repurchased and will be retired to treasury. The transactions, which were effective January 11, 2015, called for the Company to repurchase the 6,446,000 shares for a price of $20,000, which was paid to the holder.

On April 23, 2015, The Board received notification that the majority stockholders approved the appointing of Directors by written consent in lieu of the meeting of shareholders. The following table sets forth the name, age, and current position of the directors elected by the Written Consent:

Name Age Position

Jimmy Chan 35 Chairman, CEO, CFO and Secretary

Waylon Huang 32 Director

Er Wang 28 Director

The appointments will become effective when the company files the required documents with the Secretary of State of the State of Delaware twenty (20) days after the Preliminary Definitive Information Statement is filed on Form 14-C with the U.S. Securities & Exchange Commission and mailed to Stockholders of Record. The Company is in process of preparing and filing Form 14-C.

On April 23, 2015, The Board approved a resolution reappointing directors to the Company’s Board and ratified the approval by the majority stockholders pointing directors by written consent in lieu of the meeting of shareholders.

Acquisition of CarryOutSupplies.com

On July 16, 2014 the Company entered into an agreement to acquire City of Industry, California based SWC Group, Inc (‘SWC”), a California Corporation, which does business as CarryOutSupplies.com (“CarryOut”).

Effective October 28, 2014, the Board of Directors of the Company executed the final Acquisition and Share Exchange Agreement (the “Share Exchange Agreement”) ratifying the Pending Acquisition. Under the terms of the Share Exchange Agreement the Company will issue Thirty Five Million (35,000,000) common shares of the Company to the holders of CarryOutSupplies.com in exchange for all of the outstanding shares in CarryOutSupplies.com. The number of Company shares exchanged shall be modified to Forty Million (40,000,000) shares Thirty (30) days after the effective date of this Share Exchange Agreement should CarryOutSupplies.com demonstrate revenues for the three (3) month period ending June 30, 2014 did not fall below a level equal to 70% of the revenues for the three (3) month period ending June 30, 2013. The number of shares exchanged shall be modified to Seventy One Million (71,000,000) Seventy Five (75) days after the effective date of this Share Exchange Agreement should CarryOutSupplies.com demonstrate revenues for the three (3) month period ending September 30, 2014 did not fall below a level equal to 70% of the revenues for the three (3) month period ending September 30, 2013. As of the date of this filing all of the 71,000,000 shares had been issued to the owners of CarryOutSupplies.com. The fair value of 71,000,000 shares was $7,810,000 on October 28, 2014.

CarryOutSupplies.com is a producer and wholesaler of custom printed and generic takeout supplies. CarryOutSupplies.com, which services more than 3,000 takeout establishments, restaurants and other food service operators, is headquartered at 167 N Sunset Ave, City of Industry, CA 91744, with two additional warehouse locations in Southern California. With the this merger behind the Company now, we are in the process of rolling out three new verticals under the corporate umbrella; state side manufacturing and printing, ad support products, and online restaurant supplies catalogue. All of which is leveraging the strength of Sugarmade’s core business.

The Company is contemplating additional revenue growth via acquisitions. During the most recently completed fiscal years (June 2014) Carryout produced revenues of approximately $8,490,959, gross profits of $2,836,797 and a loss from operations of $888,087.

The acquisition was accounted as a business combination in accordance with ASC Topic 805 “Business Combination.” The fair values of the assets acquired and liabilities assumed at acquisition closing date were used for the purpose of purchase price allocation. The acquisition closing date was October 28, 2014, since there were no material transactions from October 28, 2014 to October 31, 2014, and for convenience of reporting the acquisition for accounting purposes, October 31, 2014 has been designated as the acquisition date. Under the acquisition method of accounting, the total purchase price is allocated to tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition with the excess recorded as goodwill. Goodwill represents the synergies expected from SWC Group’s business with the Company’s existing operations. Goodwill is expected to be deductible for tax purposes over a period of 15 years. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition, and is a preliminary purchase price allocation based on unaudited financial statements of CarryOut:

Cash	$	39,925
Accounts receivable		452,112
Inventory		1,008,252
Other current assets		44,052
Loan receivables		302,521
Fixed assets		211,694
Security deposit		33,281
Goodwill		8,912,679
Accounts payable		(1,489,757	)
Credit card payable		(438,972	)
Loans payable		(443,584	)
Other payables		(362,203	)
Long term notes payables		(460,000	)
Purchase price	$	7,810,000

The following unaudited pro forma consolidated results of operations of the Company and SWC Group for the years ended June 30, 2014 and 2013, presents the operations of the Company and SWC Group as if the acquisition of SWC Group occurred on July 1, 2013 and 2014, respectively. The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.

Pro forma Consolidated Income Statements

June 30, 2013

Sugarmade, Inc. and Subsidiary and SWC Group, Inc., a California

Corporation, which does business as CarryOutSupplies.com

(unaudited)

		June 30, 2013
		SGMD	SWC Group	Pro Forma Adjustments	Pro Forma Consolidated
Revenues, net		241,398	11,061,316	-	11,302,714
Cost of goods sold:
	Materials and freight costs	188,109	7,070,823	-	7,258,932
	Provision for inventory obsolescence	69,451		-	69,451
Total cost of goods sold		257,560	7,070,823		7,328,383
Gross margin (loss)		(16,162)	3,990,493		3,974,331

Operating expenses:
	Loss on write-off of license and supply agreement
	Selling, general and administrative expenses	1,784,490	3,606,413	-	5,390,903
	Amortization of license and supply agreement
Total operating expenses		1,784,490	3,606,413		5,390,903

Loss from operations		(1,800,652)	384,080		(1,416,572)

Non-operating income (expense):
	Interest expense	(646,566)		-	(646,566)
	Interest income	487	10,062	-	10,549
	Change in fair value of derivative liabilities	181,961		-	181,961
	Other Income (Expense)		(62,125)	-

Total non-operating income (expense)		(464,118)	(52,063)		(516,181)

Net loss		(2,264,770)	332,017		(1,932,753)

Basic and diluted net loss per share		(0.22)	(0.01)		(0.02)

Basic and diluted weighted average common shares outstanding used in computing net loss per share		10,504,279	71,000,000		81,504,279

Pro forma Consolidated Income Statements

June 30, 2014

Sugarmade, Inc. and Subsidiary and SWC Group, Inc., a California

Corporation, which does business as CarryOutSupplies.com

(unaudited)

		June 30, 2014
		SGMD	SWC Group	Pro Forma Adjustments	Pro Forma Consolidated
Revenues, net		70,751	8,490,958		8,561,709
Cost of goods sold:
	Materials and freight costs	52,046	5,654,847		5,706,893
	Provision for inventory obsolescence	39,306			39,306
Total cost of goods sold		91,352	5,654,847		5,746,199
Gross margin (loss)		(20,601)	2,836,111		2,815,510

Operating expenses:
	Loss on write-off of license and supply agreement
	Selling, general and administrative expenses	705,428	3,677,733		4,383,161
	Amortization of license and supply agreement
Total operating expenses		705,428	3,677,733		4,383,161

Loss from operations		(726,029)	(841,622)		(1,567,651)

Non-operating income (expense):
	Interest expense	(120,292)			(120,292)
	Interest income	50			50
	Change in fair value of derivative liabilities	90,662			90,662
	Other Income (Expense)		(79,155)		(79,155)

Total non-operating income (expense)		(29,581)	(79,155)		(108,736)

Net loss		(755,610)	(920,777)		(1,676,387)

Basic and diluted net loss per share		(0)	(0.01)		(0.02)

Basic and diluted weighted average common shares outstanding used in computing net loss per share		10,538,526	71,000,000		81,538,526

Outstanding Litigations

As of the date of this filing, the Company is a plaintiff, in Contra Costa County, California, in a suit alleging breach of fiduciary duty, conspiracy to commit breach of fiduciary duty, fraud, conspiracy to commit fraud, conversion, breach of contract, and interference with contractual relations against, Diversified Products Group Inc. (DPG), Stephen Pinto, Lewis Cohen and Heidi Estiva, who were former sales agents for the Company. Pinto is the Company’s former Chairman of the board of directors. The Company plans to actively pursue this case. During November of 2014, the Company received notice that the defendants had filed a cross complaint against the Company. The cross complaint alleges the parties were induced to make a series of investments in the Company by the material misrepresentations and omissions made by the Company. The Company believes the allegations are without merit. The Company plans to vigorously defend against such claims.

On May 24, 2014, the Labor Commissioner, State of California issued an Order, Decision or Award of the Labor Commissioner against the Company in the amount of $56,365 the Company is in the process of settling this claim and believes any amount of settlement paid would not be likely to have a material adverse effect on our financial position, results of operations or cash flows.

On June 30, 2014 the Company entered into a settlement agreement, which was effective October 28, 2014, to resolve a judgment against the Company via the issuance of 502,533 restricted shares and a $30,000 cash payment.

On December 11, 2013, the Company was served with a complaint from two Convertible Note Holders and investors in the Company, Lovitt&Hannan, Inc. Salary Deferral Plan FBO J. Thomas Hannan, Attorney at Law 401K Plan and Trust, and Kevin M. Kearney. The Company’s former CEO, Scott Lantz, was also named in the suit. The complaint alleges Hannan was induced to make a series of investments in the Company by the material misrepresentations and omissions made by the Company. The Company believes the allegations are without merit.The Company plans to vigorously defend against such claims.

Sales of Unregistered Securities

There were no sales of unregistered securities during the reporting period.

Issuance of Other Unregistered Securities

There were no other unregistered securities issued during the reporting period.

Convertible Notes Payable


	•	Note dated August 16, 2012 for $25,000 Note dated August 24, 2012 for $25,000
	•	Note dated September 8, 2012 for $40,000
	•	Note dated September 12, 2012 for $50,000 Note dated September 18, 2012 for $25,000
	•	Note dated October 5, 2012 for $10,000
	•	Note dated October 24, 2012 for $25,000
	•	Note dated December 21, 2012 for $100,000
	•	Note dated July 31, 2012 for $25,000

Note Payable Due to Bank

The note payable due to Bank at June 30, 2014 was $25,982.

Production Line of Credit

This line of credit was converted to equity in our 2014 fiscal year - See financial note number 3.

Director Related Activities

Name Age Position

Jimmy Chan 35 Chairman, CEO, CFO and Secretary

Waylon Huang 32 Director

Er Wang 28 Director

On December 31, 2014, The Board of Directors elected Mr. Er Wang as Audit Committee Chair, to serve until his successor is duly elected and qualified. Mr. Wang will serve as the sole member of the Audit Committee until additional qualified Directors can be nominated and ratified for service on the Board and/or Audit Committee.

Effective October 6, 2014, our Chairman and Independent Director, Dennis Mandell, resigned from the Board. Mr. Mandell was also the sole member of the Company’s audit committee.

Effective October 6, 2014, -, Jonathan Leong, a Director, resigned from the Board.

On August 12, 2014, the Company approved the conversion of $350,000 of short-term debt into 15,277,778 common shares. The holder of the debt was LMK CAPITAL LLC, DBA PREMIER PAPER & PLASTIC INTERNATIONAL (“LMK”), a Company in which our CEO, Jimmy Chan, is currently employed as an independent consultant.

On October 22, 2013, Henry Michon resigned as a director and committee member of the Board of our Company. At the time of Michon’s resignation, he was a board member and a committee member of the Compensation Committee of our Board. We believe that Michon’s resignation was a result of a disagreement with some members of the Board regarding certain board resolutions that were passed at the September 18, 2013 board meeting, which Michon believes were self-interested transactions. We explained to Michon that each of the resolutions was unanimously approved by the disinterested directors of our Company who were present at the board meeting on September 18, 2013, and that the approved transactions remove approximately $591,071 of debt from our balance sheet. Additionally, we believe that Michon’s resignation was also caused by differences of opinion between Michon and other Board members regarding the conduct of the Board, our minimal operations and other transactions not in the ordinary course of our business.

On October 10, 2013, Pinto resigned as the Chairman, Director of our Board and a committee member. At the time of Pinto’s resignation, he was a member of the Spending Committee and the Finance Committee of the Board. Our Board believes that Pinto’s resignation was a result of perceived differences of philosophical opinion between Pinto and some other members of the Board regarding the conduct of the Board, our Company’s minimal operations and other transactions not in the ordinary course of its business. Pinto resigned because these differences could result in a conflict of his interest as a stockholder and his position as a Board member representing our Company.

On September 18, 2013, Leung who is our CEO and a Director, agreed to a compensation package for CEO services for 2,500,000 common shares. Sugarcane Paper Company, for which Leung is a major shareholder, agreed on September 18, 2013 to convert $284,000 of outstanding debt and then outstanding interest to 2,840,000 common shares. On this same date, Sugarcane Paper Company also agreed to cancel the Company’s production credit line resulting in a zero balance on this credit line in exchange for the issuance of 2,840,000 common shares to Sugarcane Paper Company. On this date, Sugarcane Paper Company also agreed to accept 1,057,534 common shares for the conversion of a promissory note with an outstanding balance of $105,753.

On September 18, 2013, Leong, Director, converted a convertible note for $100,000 into 1,113,918 common shares.

Per board resolution September 18, 2013, our Board approved the appointment of Leung as of July 19, 2013, as CEO. Leung is also a Director of our Company. The services contract, which has a term of six months and is renewable at the discretion of our Board, calls for no monthly or annual salary and compensation in the form of 2,500,000 restricted common shares for the contract period. Leung is also CEO of Sugarcane Paper Company, which is the sole supplier of paper to the Company. He also holds a controlling interest in Sugarcane Paper Company.

On September 18, 2013, our Board approved the appointment of Leong as Corporate Secretary of our Company. Leong is also a Director of our Company;

On September 18, 2013, our Board approved the modification of the Convertible Promissory Note dated November 27, 2012 held in the name of Leong to allow for conversion of the outstanding principal and interest due at a rate of Ten US Cents ($0.10) per share. Leong is a Director and Secretary of the Company. Leong subsequently exercised the conversion option on the Convertible Promissory Note and will be issued common shares pursuant to the Notice of Conversion, dated September 18, 2013; and

On September 18, 2013, our Board approved the issuance of 1,057,534 common shares to our CEO, Leung, pursuant to a settlement agreement dated September 20, 2013, allowing for the conversion of the $100,000 promissory note balance and $5,753.43 interest due at a rate of $0.10 per share. Leung is also a Director of the Company.

On September 10, 2013, Kevin Kearney resigned from the Board. The resignation was not the result of any disagreements with the Company.

On September 10, 2013 Sandy Salzberg resigned from the Board of our Company. The resignations were not the result of any disagreements with the Company.