Subsequent Event

9 Months Ended

Mar. 31, 2020

Subsequent Event

Subsequent Event

23. Subsequent events

On April 8, 2020, the Company issued 11,609,907 shares of the Company’s common stock for cash in total amount of $25,000.

On April 13, 2020, the Company issued 41,846,732 shares of the Company’s common stock for a debt conversion in total principal amount of $55,000 with accrued interest of $2,748.49.

On April 14, 2020, the Company issued 22,206,951 shares of the Company’s common stock for a debt conversion in total principal amount of $30,000 with accrued interest of $1,703.01.

On April 15, 2020, the Company issued 2,126,500 shares of the Company’s series B preferred stock subject to a waiver agreement, described in below.

On April 17, 2020, the Company entered into a Series B Waiver Agreement (the “Waiver Agreement”) with its chief executive officer and corporate chairman of its board of directors, Jimmy Chan (“Chan”) relating to Chan’s ownership of One Million Five Hundred Thousand (1,500,000) of Series B Convertible Preferred Stock. Under the terms of the Waiver Agreement, Chan waives his rights (a) to the conversion rights granted to him in the Series B Convertible Preferred Stock and (b) the rights to proceeds in the event of any liquidation, dissolution or winding up as may be provided in the Certificate of Incorporation pertaining to said Series B Preferred Stock, if any. In the event that there is a merger or consolidation (other than one in which stockholder of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company, this event will be treated as a liquidation event. The Series B Convertible Preferred Stock continues to vote or have the right to vote, together with the Common Stock as if it were on an as-converted basis, and not as a separate class, subject to any adjustments for stock dividends, splits, combinations and similar events.

On April 17, 2020, the Company issued 45,689,101 shares of the Company’s common stock for a debt conversion in total principal amount of $60,000.

On April 20, 2020, the Company issued 14,285,714 shares of the Company’s common stock for cash in total amount of $30,000.

On April 24, 2020, the Company entered a convertible promissory note with an accredited investor for a total amount of $75,000. The note is due 360 days and bear an interest rate of 8%. The conversion price for the note is 38% discount to the average of the three lowest trading prices during the previous 10 trading days to the conversion date.

On April 29, 2020, the Company issued 47,875,470 shares of the Company’s common stock for a debt conversion in total principal amount of $60,000 with $3,196 accrued interest.

On April 29, 2020, the Company issued 24,373,340 shares of the Company’s common stock for a debt conversion in total principal amount of $ 31,598.

On May 4, 2020, the Company informs its shareholders and other interested parties relative to new purchase orders received for consumable sanitary supplies and non-medical grade protective gear. Sugarmade, via its CarryOutSupplies.com operation, has begun to receive a substantial number of large purchase orders from both private and public institutions and businesses and in many cases, has begun to deliver products to the ordering customers.

As of the close of business on May 1, 2020, these purchase orders totaled in excess of ten million US dollars ($10,000,000).  Considering the Company’s revenue of $4,367,644 and $4,439,324 for the recently completed fiscal years ending June 30, 2019, and June 30, 2018, respectively, the Company believes the receipt of these purchase orders is potentially a material event and thus, puts forth these disclosures pursuant to Regulation FD.

Executives at the Company have identified numerous sources to supply the products with several factories having available capacity to meet a substantial portion, if not all, of these orders.  These supply sources include factories in both Vietnam and Southern China. In many cases, executives at Sugarmade have long standing relationship with these factories and the principal operators. While the Company will work toward delivering on as many of these purchase orders as is possible, airfreight transportation resources between Asia and Los Angeles, and relative to other routes, is at a premium with demand generally exceeding supply.  As a result of the current transportation constraints, the Company may be limited in its ability to fully deliver on orders being received.

There are numerous others risks to fulfilling the orders received. These include, but are not limited to availability of financing, ability for contracted factory operations to produce the products, access to adequate logistical resource, customs clearance, ability for the ordering party to pay and risks related to transportation of finished goods to end customers.