Sugarmade (SGMD) 10-Q 28 Feb 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	6 Months Ended
	Dec. 31, 2016	Feb. 28, 2017
Document And Entity Information
Entity Registrant Name	Sugarmade, Inc.
Entity Central Index Key	919,175
Document Type	10-Q
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 0
Entity Common Stock, Shares Outstanding		211,272,491
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,017

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Current assets:
Cash	$ 1,709	$ 911
Accounts receivable, net	83,653	117,866
Inventory, net	523,388	468,262
Loan receivables	20,000	20,000
Other current assets	137,566	84,505
Total current assets	766,316	691,543
Equipment, net	57,342	78,453
Other assets	23,281	23,281
Total assets	846,939	793,277
Current liabilities:
Bank overdraft	22,158	28,377
Note payable due to bank	25,982	25,982
Accounts payable and accrued liabilities	1,198,445	1,481,961
Accounts payable - related party	13,586
Customer deposits	190,691	248,299
Other payable	227,857	296,259
Accrued interest	179,867	272,708
Notes payable due to shareholder	80,666	85,666
Accrued compensation and personnel related payables	11,403	11,403
Unearned revenue	64,150	93,522
Loans payable	440,008	427,580
Loans payable - related party	352,267
Convertible notes payable, net	642,500	394,167
Stock to be issued	640,000
Derivative liabilities	813,000	701,000
Total liabilities	4,902,580	4,066,923
Stockholders' deficiency:
Preferred stock ($0.001 par value, 10,000,000 shares authorized, none issued and outstanding)
Common stock ($0.001 par value, 300,000,000 shares authorized 203,227,491 and 178,685,388 shares outstanding & issued at December 31, 2016 and June 30, 2016, respectively	206,033	178,686
Additional paid-in capital	21,521,844	17,151,379
Shares to be issued, preferred stock	2,000,000	2,000,000
Shares to be issued, common stock	230,167	1,246,000
Accumulated deficit	(28,013,684)	(23,849,712)
Total stockholders' deficiency	(4,055,641)	(3,273,647)
Totoal liabilities and stockholder's deficiency	$ 846,939	$ 793,277

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2016	Jun. 30, 2016
Condensed Consolidated Balance Sheets Parenthetical
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	203,227,491	178,685,388
Common stock, shares outstanding	203,227,491	178,685,388

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($)		3 Months Ended		6 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements Of Operations
Revenues, net		$ 728,092	$ 914,429	$ 1,855,646	$ 2,317,340
Cost of goods sold:
Materials and freight costs		525,809	622,403	1,225,460	1,551,062
Total cost of goods sold		525,809	622,403	1,225,460	1,551,062
Gross profit		202,283	292,026	630,186	766,278
Operating expenses:
Selling, general and administrative expenses		1,112,340	503,440	1,601,835	1,205,349
Total operating expenses		1,112,340	503,440	1,601,835	1,205,349
Loss from operations		(910,057)	(211,414)	(971,649)	(439,071)
Non-operating income (expense):
Other income		193	36,261	244	26,761
Interest expense		(61,332)	(3,557)	(73,695)	(18,625)
Change in fair value of derivative liabilities		(355,000)	420,000	(112,000)	(78,000)
Loss on extinguishment of debt		(307,458)	(55,498)	(324,754)	(55,498)
Other expense		(12,252)		(22,856)
Total non-operating income (expense)		(735,849)	397,206	(533,061)	(125,362)
Net loss		$ (1,645,906)	$ 185,793	$ (1,504,710)	$ (564,432)
Basic net loss per share		$ (0.01)	$ 0	$ (0.01)	$ 0
Diluted net loss per share		$ (0.01)	$ 0	$ (0.01)	$ 0
Basic weighted average common shares outstanding		202,875,029	176,447,471	193,657,020	167,096,334
Diluted weighted average common shares outstanding	[1]	202,875,029	176,447,471	193,657,020	167,096,334
[1]	Shares issuable upon conversion of convertible debts and exercising of warrants were excluded in calculating diluted per share due to the fact the issuance of the shares is anti-dilutive.

Consolidated Statements of Cash

Consolidated Statements of Cash Flows Statement - USD ($)	6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net loss	$ (1,504,710)	$ (564,432)
Adjustments to reconcile net loss to cash flows from operating activities:
Loss on extinguishment of liability	324,754	55,498
Stock compensation expense	640,000
Depreciation and amortization	21,111
Change in fair value of derivative liability	112,000	78,000
Decrease in current assets
Accounts receivable	34,213	(147,967)
Inventory	(55,127)	157,391
Other assets	(173,916)	(43,491)
Increase in current liabilities:
Bank overdraft	(6,219)	49,246
Accounts payable and accrued liabilities	9,249	(84,174)
Customer deposits	(57,607)	(89,993)
Unearned revenue	(29,372)
Accrued interest and other payables	(117,994)	56,732
Net cash used in operating activities	(803,617)	(533,190)
Cash flows from investing activities:
Payment for acquisition of property and equipment		(4,177)
Loan receivables		(3,500)
Net cash provided by (used in) investing activities		(7,677)
Cash flows from financing activities:
Proceeds from shares to be issued	125,000
Proceeds from convertible notes	392,500
Proceeds from issuance of common stock		230,000
Proceeds from EB-Five investment		500,000
Repayment of notes payable	(5,000)	(109,500)
Repayment of loans	(148,495)	(136,398)
Proceeds from loans	440,410
Net cash provided by (used in) financing activities	804,415	484,102
Net increase (decrease) in cash	798	(56,765)
Cash, beginning of period	911	58,260
Cash, end of period	1,709	1,496
Cash paid during the period for:
Interest
Income taxes	$ 10,109

Nature of Business

Nature of Business	6 Months Ended
	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of Business	1. Nature of Business Sugarmade, Inc. (hereinafter referred to as “we”, “us” or “the/our Company”) is a publicly traded product and brand marketing company investing in products and brands with disruptive potential. We are incorporated in the state of Delaware. Our previous legal name was Diversified Opportunities, Inc.  Our Company, Sugarmade, Inc. operates through our subsidiary, Sugarmade, Inc., a California corporation (“SWC Group, Inc., - CA”). We are headquartered in City of Industry, California, a suburb of Los Angeles, with two additional warehouse locations in Southern California. As of date of this filing, we employ 21 full and part-time workers and contractors. As of the end of the reporting period, December 31, 2016, we were involved in several businesses including 1) the manufacturer and marketing of packaging for transport of products for the emerging legal cannabis industry, 2) manufacturer and supply of products to the quick service restaurant sub-sector of the restaurant industry 3) distribution of paper products derived from non-wood sources, and 4) as a marketer of a new seasoning food product. The Company has also launched several packaging products serving the developing legal market for cannabis. CannaShroud is a new cannabis transport packaging system specifically designed to allow for discrete and protected transportation of cannabis. DabBox, a cannabis concentrate packaging product with a unique PTFE containment system. Sugarmade is also in the process of developing active packaging for the cannabis industry and is in the advanced development stages for several other cannabis storage/transport and packaging products to serve this growing market sector. Sugarmade’s main business operation, CarryOutSupplies.com, is a producer and wholesaler of custom printed and generic supplies servicing more than 3,000 quick service restaurants. 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, food containers, soup containers, plastic spoons and many other similar products for this market sector. CarryOutSupplies.com was founded in 2009 when the founders gained first-hand experience within the restaurant industry of the difficulty for restaurant owners to acquire custom printed supplies at a reasonable cost. Many quick service restaurants 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 many popular U.S. franchises, particularly in the frozen dessert segments. The Company estimates it holds approximately 40% market share of generic and printed products within the take out frozen yogurt and ice cream industries. We also hold a product supply and licensing agreement FreeHand® ThumbTray™ for the western part of the United States. The Company plans to introduce a new patent protected, culinary seasoning product via a nationwide advertising and social media campaign during the first half of 2017. During September of 2016, the Company completed negotiations for and signed a license agreement with HUY FONG FOODS, INC. (“HFFI”), the maker of Sriracha Hot Chili Sauce. Under the terms of the agreement, the Company is granted license to use the licensed marks of HFFI on and for products the Company is currently in process of designing and testing. Based on this agreement and a separate license agreement signed during 2015 with Seasoning Stixs International, LLC, the Company plans to introduce a new culinary seasoning product named Sriracha Seasoning Stixs. Sriracha Seasoning Stixs are encapsulated Huy Fong Sriracha Sauce and other seasonings in the form of a stick, which are inserted into meat, fish and poultry prior to cooking. Sriracha Seasoning Stixs are a hard solid at room temperature, but as heat is applied the sticks begin to liquefy allowing the meat fibers to act like a sponge absorbing the seasonings and flavors that had previously been encapsulated in the stick. We are also a distributor of paper made from 100% reclaimed sugarcane fiber, enhanced with bamboo. Sugarcane fiber, called bagasse, is a discarded byproduct of sugarcane production. Our primary focus for this business unit as of filing of this report is the organization and administration of fundraisers and paper drives for schools, non-profits and other institutions.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies
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 and the rules and regulations of the United States Securities and Exchange Commission 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, 2016, 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 period ended June 30, 2016, filed on or about November 2016. The interim results for the period ended December 31, 2016 are not necessarily indicative of the results for the full fiscal year. Principles of consolidation The condensed consolidated unaudited financial statements include the accounts of our Company and its wholly-owned subsidiaries, Sugarmade-CA and SWC. All significant intercompany transactions and balances have been eliminated in consolidation. Going concern The Company sustained continued losses from operations during the six months ended December 31, 2016 and for the fiscal year ended June 30, 2016. 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 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 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 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. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 Accounting Standards Codification (“FASB ASC”) No. 605, Revenue Recognition 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. 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 $83,653 as of December 31, 2016 and of $117,866 as of June 30, 2016. 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 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 December 31, 2016 and June 30, 2016, the balance for the inventory totaled $523,388 and $468,262, respectively. No amounts were recognized as an obsolescence reserve at December 31, 2016 and June 30, 2016. Income taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspect of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of October 2, 2008, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as open tax years in these jurisdictions. We have identified the U.S. federal and California as our “major” tax jurisdictions and generally, we remain subject to Internal Revenue Service examination of our 2013 U.S. federal income tax returns. However, we have certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. We have no interest or penalties as of December 31, 2016. 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 Black-Scholes-Merton 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. Loss per share We calculate basic earnings per share (“EPS”) by dividing our net 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. 6,703,559 potential shares issuable upon conversion of convertible debts and 0 potential shares issuable upon exercising of warrants were excluded in calculating diluted loss per share for the three months ended December 31, 2016 due to the fact that issuance of the shares is anti-dilutive as a result of the Company’s net loss. 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 2 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: December 31, 2016 Annual dividend yield — Expected life (years) 0.75 Risk-free interest rate 0.64 % Expected volatility 258 % Carrying Value Fair Value Measurements at As of December 31, 2016 December 31, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 813,000 $ — $ 813,000 $ — Total $ 813,000 $ — $ 813,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 701,000 $ — $ 701,000 $ — Total $ 701,000 $ — $ 701,000 $ — 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 Black-Scholes-Merton 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. Refer to Note 6 for details. Segment Reporting FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – paper and paper-based products such as paper cups, cup lids, food containers, etc. New accounting pronouncements not yet adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-08, Revenue from Contracts with customers In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products In February 2016, the FASB issued ASU 2016-02, Leases In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In September 2015, the FASB issued ASU 2015-06, Simplifying the Accounting for Measurement-period Adjustments In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Concentration

Concentration	6 Months Ended
	Dec. 31, 2016
Risks and Uncertainties [Abstract]
Concentration	3. Concentration Customers For the three months ended December 31, 2016 and December 31, 2015, our Company earned net revenues of $728,092 and $914,429 respectively. The vast majority of these revenues for the period ending December 31, 2016 were derived from one customer of the Company. This customer accounted for 19% of revenue for the three months ended December 31, 2016. No customer accounted for over 10% of the Company’s total revenues for the three months ended December 31, 2015. For the six months ended December 31, 2016 and December 31, 2015, our Company earned net revenues of $1,855,646 and $2,317,340 respectively. The vast majority of these revenues for the periods were derived from a large number of customers, with no customers accounted for over 10% of the Company’s total revenues in either period. Suppliers For the three and six months end December 31, 2016, we purchased products for sale by CarryOutSupplies from several contract manufacturers located in Asia. A substantial portion of the Company’s inventory is purchased from one supplier that functions as an independent foreign procurement agent. Two suppliers accounted for 71% and 64% of the Company’s total inventory purchase for the three and six months ended December 31, 2016 respectively. For the three and six months end December 31, 2015, we purchased products for sale by CarryOutSupplies from several contract manufacturers located in Asia. A substantial portion of the Company’s inventory is purchased from one supplier that functions as an independent foreign procurement agent. Two suppliers accounted for 78% and 72% of the Company’s total inventory purchase for the three and six months ended December 31, 2015 respectively.

Litigation

Litigation	6 Months Ended
	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Litigation	4. Litigation 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. As of December 31, 2016, there were no legal claims currently pending or threatened against us 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. However, as of the date of this filing, we were involved in the following legal proceedings. As of the date of this filing , 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. On October 28, 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. We believe the Hannan case is now in the middle of depositions and it appears a trial is scheduled, tentatively, in the second quarter of 2017. We believe the claims in that case are still primarily of two categories, the first being repayment of the promissory notes and a series of allegations about improper investment solicitations and other misrepresentations. We believe the Company’s exposure to the claim concerning the Notes may be approximately $125,000. We also believe there could be some associated legal fees, but we do not believe this amount will be material. On February 21, 2017, the company signed a settlement agreement regarding a suit that was pending against the Company. 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 parties agreed to a settlement agreement on February 21, 2017. Under the terms of the agreement the Company agrees to pay the plaintiffs $227,000 to settle all claims against the Company, which will include the payoff of the two notes as outstanding within 1 week. The parties had estimated the value of the notes at approximately $80,000. The Company has agreed to pay the plaintive $97,000 within 120 days of the agreement with the remaining balance of $50,000 due within 180 days of the agreement. The parties agreed that all claims against the company shall be satisfied through such payments and that the matter shall therefore be fully resolved. There can be no assurances the ultimate liability relative to these law suits will not exceed what is outlined above.

Convertible Notes

Convertible Notes	6 Months Ended
	Dec. 31, 2016
Convertible Notes
Convertible Notes	5. Convertible Notes As of December 31, 2016 and June 30, 2016 the balance owing on convertible notes with term as describe below was $250,000 and $394,167 respectively. The convertible promissory notes must be repaid by our Company within six months from the date of issuance; accrue interest at the rate of 14%; and are subject to conversion at the election of the investors at such time as our Company has raised a minimum of $500,000 in a subsequent equity financing. The conversion price will be the lower of 80% of the per share purchase price paid for by the new investors in the subsequent financing, or $0.50 per share. Unless these promissory notes are converted or repaid earlier, our Company must pay the note-holders the amount of the then accrued interest on the three, six, and nine month anniversaries of the issue date. As of December 31, 2016, three convertible promissory in the amount of $115,000 with accrued interest of $59,731, were converted to 3,833,358 restricted common shares as follows: On November 3, 2016, the Company issued 982,620 common shares in exchange for the cancellation of $50,000 principal balance and accrued interest of $24,955 on convertible debt. On December 31, 2016, the Company issued 1,761,957 common shares in exchange for the cancellation of $40,000 principal balance and accrued interest of $20,668 on convertible debt. On December 31, 2016, the Company issued 1,088,781 common shares in exchange for the cancellation of $25,000 principal balance and accrued interest of $12,482 on convertible debt. Convertible notes issued during the quarter ended December 31, 2016: On October 18, 2016, the Company entered into a convertible promissory note with an accredited investor for $84,750. The note has a term of twelve (12) months with an interest rate of 10% and is convertible to common shares at a 50% discount. The Company received a net amount of $75,000, after fees. On November 4, 2016, the Company entered into a convertible promissory note with an accredited investor for $84,750. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 50% discount. The Company received a net amount of $75,000, after fees. On November 16, 2016, the Company entered into a convertible promissory note with an accredited investor for $110,000. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount. The Company received a net amount of $107,000, after fees. On December 19, 2016, the Company entered into a convertible promissory note with an accredited investor for $20,000. The note has a term of seven (7) months with an interest rate of 8% and is convertible to common shares at a 40% discount. On December 20, 2016, the Company entered into a convertible promissory note with an accredited investor for $38,000. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount. The Company received a net amount of $30,000, after fees. On December 23, 2016, the Company entered into a convertible promissory note with an accredited investor for $55,000. The note has a term of nine (9) months with an interest rate of 8% and is convertible to common shares at a 42% discount. The Company received a net amount of $52,000, after fees. As of December 31, 2016, the Company’s convertible notes consisted of following: As of December 31, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 10/18/2017 84,750 — 84,750 Convertible Note 8/4/2017 84,750 — 84,750 Convertible Note 8/16/2017 110,000 — 110,000 Convertible Note 9/20/2017 38,000 — 38,000 Convertible Note 7/17/2017 20,000 — 20,000 Convertible Note 9/30/2017 55,000 — 55,000 Total Convertible Promissory Notes $ 642,500 $ 642,500 As of June 30, 2016, the Company’s convertible notes consisted of following: As of June 30, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 40,000 — 40,000 Convertible Note 7/1/2016 50,000 — 50,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 7/1/2016 20,834 — 20,834 Convertible Note 7/1/2016 8,333 — 8,333 Total Convertible Promissory Notes $ 394,167 $ 394,167

Debt settlements

Debt settlements	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Debt settlements	6. Debt settlements On December 31, 2016, the Company issued 1,486,101 common shares in exchange for the cancellation of $51,996 in vendor debt. The fair value of the 1,486,101 common shares was $89,166, which resulted in a loss on settlement of debt of $37,170.

Derivative Liabilities

Derivative Liabilities	6 Months Ended
	Dec. 31, 2016
Derivative Liabilities
Derivative Liabilities	7. Derivative liabilities The derivative liability is derived from the conversion features in note 5 and stock warrant in note 7. All were valued using the weighted-average Black-Scholes-Merton option pricing model using the assumptions detailed below. As of December 31, 2016 and June 30, 2016, the derivative liability was $813,000 and $701,000, respectively. The Company recorded $355,000 loss and $420,000 gain from changes in derivative liability during the three months ended December 31, 2016 and 2015, respectively. The Black-Scholes model with the following assumption inputs: December 31, 2016 Annual dividend yield — Expected life (years) 0.75 Risk-free interest rate 0.64 % Expected volatility 258 % June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 %

Stock warrants

Stock warrants	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Stock warrants	8. Stock warrants In connection with the issuance of the promissory notes, the investors in the aggregate received two-year warrants to purchase up to a total of 50,000 shares of common stock at $0.50 per share, and two-year warrants purchasing up to a total of 81,250 shares of common stock at $0.01 per share. For purposes of accounting for the detachable warrants issued in connection with the convertible notes, the fair value of the warrants was estimated using the Black-Scholes-Merton option pricing formula. The value of all warrants granted at the date of issuance totaled $508,413 and was recorded as a discount to the notes payable. The amount will be amortized over the nine month term of the respective convertible note as additional interest expense. On various dates during June 2014 and December 2014 the Company and holders of certain convertible notes agreed to cancel warrants to purchase common shares in the company and to extend the due dates on the Notes to July 1, 2016. $0.50 warrants and “Bonus Warrants” priced at $0.01, as defined in the original Convertible Note Purchase Agreements we cancelled pertaining to the Note and warrants acquired on the following dates for the following Convertible Notes and amounts. During the six months ended December 31, 2016, all the warrants were expired. There were no warrants outstanding at December 31, 2016. Number of Shares Weighted Average Exercise Price Outstanding at June 30, 2014 $ 180,000 $ 0.20 Granted — — Exercised — — Forfeited September 30, 2014 38,750 0.09 Forfeited December 31, 2014 10,000 0.04 Outstanding at June 30, 2015 131,250 0.20 Outstanding at June 30, 2016 131,250 0.20 Expired 131,250 0.20 Outstanding at December 31, 2016 $ — $ — Following is a summary of the status of warrants outstanding at June 30, 2016: Date Issued Exercise Price Number of Shares Expiration Date 8/17/12 $ 0.01 6,250 7/1/2016 8/20/12 $ 0.01 6,250 7/1/2016 9/10/12 $ 0.01 10,000 7/1/2016 9/13/12 $ 0.01 12,500 7/1/2016 9/18/12 $ 0.01 6,250 7/1/2016 10/5/12 $ 0.01 2,500 7/1/2016 10/25/12 $ 0.01 6,250 7/1/2016 1/31/13 $ 0.01 6,250 7/1/2016 10/22/12 $ 0.01 25,000 7/1/2016 8/24/12 $ 0.50 50,000 8/24/16 Total warrants as of June 30, 2016 131,250

Note payable

Note payable	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Note payable	9. 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 one quarter percent (0.25%) above the prime rate (3.25% as of September 30, 2013). 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 December 31, 2016 and June 30, 2016, the loan principal balance was $25,982. Note payable to shareholders On January 23, 2013, the Company entered into a promissory note with Mira Ablaza (a former employee of the Company who owns less than 5% of the Company’s stock). The original principal amount was $40,000 and the note bore no interest. The note was payable upon demand. As of December 31, 2016, this note had a balance of $18,000. On December 31, 2013, the Company entered into a promissory note with Kalvin Kwong (an employee of the Company, who owns less than 5% of the Company’s stock). The principal amount was $20,000 and the interest rate on the note was 10%. The note had a term of six months. However, this note was now payable upon demand per the oral agreement with the lender. As of December 31, 2016, this note had a balance of $20,000. On January 13, 2014, the Company entered into a promissory note with Tsz Ming Wong (an employee of the Company, who owns less than 5% of the Company’s stock). The principal amount was $25,000 and the note bore no interest. The note had a term of 24 months and was due on January 13, 2016, and became payable upon demand after January 13, 2016. As of December 31, 2016, this note had a balance of $12,666. On January 14, 2015, the Company entered into a promissory note with Richard Ko (an employee of the Company, who owns less than 5% of the Company’s stock). The principle amount was $30,000 and the note bore no interest. The note had a term of one year and was due on January 14, 2016, and became payable upon demand after January 14, 2016. As of December 31, 2016, this note had a balance of $30,000.

Shares issued for services

Shares issued for services	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Shares issued for services	10. Shares issued for services On December 1, 2016, the Company agreed to issued 3,000,000 common shares to Robert McGuire vesting immediately, Mr McGuire will provide strategic marketing consulting services to the Company for period from December 1, 2016 to March 31, 2017, the fair value of the 3,000,000 shares was $240,000. The Company was required to issue the common shares to Mr. McGuire as a sign-on fee. Accordingly, the $240,000 fair value of the common shares was expensed upon issuance of the common shares, on December 1, 2016. As of December 31, 2016, these shares had yet to be issued and were recorded as a liability for stock to be issued – common shares. On December 1, 2016, the Company modified its agreement with Bao Coc International Paper and BAO COC INTERNATIONAL PAPER AND PLASTIC COMPANY LIMITED ("Bao Cao"), of the Socialist Republic of Vietnam. Under the terms of the revised agreement, the Company shall purchase products manufactured by the current contract manufacturers and distribute such products to various quick service restaurant and institutions in the United States. Revenues from such products shall belong to Sugarmade. The price of these products will be determined from time to time in mutual agreement between the Parties. Sugarmade shall be responsible for compensating the contract manufacturer and collection of monies from the end customer with all revenues belonging to the Company. The Company is obligated to issue 5,000,000 restricted common shares, the fair market value of the 5,000,000 shares was $400,000. As of December 31, 2016, these shares had yet to be issued and were recorded as a liability for stock to be issued – common shares.

Common shares issued for equity

Common shares issued for equity financing	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Common shares issued for equity financing	11. Common shares issued for equity financing On October 11, 2016, the Company sold 2,000,000 shares of restricted common stock to a accredited investors for $100,000 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.

Common shares reserved for futu

Common shares reserved for future issuances	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Common shares reserved for future issuances	12. Common shares reserved for future issuances The following table summarizes shares of our common stock reserved for future issuance at December 31, 2016: Common shares to be issued under conversion feature 17,700,225 Common shares to be issued under $0.01 warrants — Common shares to be issued under $0.50 warrants — Total common shares reserved for future issuance 17,700,225 The following table summarizes shares of our common stock reserved for future issuance at June 30, 2016: Common shares to be issued under conversion feature 11,702,118 Common shares to be issued under $0.01 warrants 81,250 Common shares to be issued under $0.50 warrants 50,000 Total common shares reserved for future issuance 11,833,368

Related Party Transactions

Related Party Transactions	6 Months Ended
	Dec. 31, 2016
Related Party Transactions
Related Party Transactions	13. Related party transactions As of December 31, 2016, the Company had outstanding balance of Loans payable of $211,954 borrowed from LMK Capital., LLC a company affiliated with CEO Chan. Additionally the company had outstanding balance of Account Payable of $13,586 to LMK Capital LLC. On December 1, 2016, the Company received a loan from an employee for $12,500 with an interest charge of $12,500. This amount was recorded as interest owed to the loan payable amount and is to be amortized on a monthly basis over the life of the loan. The loan is due on December 1, 2017. As of December 31, 2016, the Company had outstanding loan balance of $140,312 from Shareholders and directors of the company. As of December 31, 2016, the Company had outstanding balance of Notes payable of $60,666 borrowed from employees, these borrowings have no interest, additionally an outstanding Notes payable balance of $20,000 borrowed from one employee, which bear interest rate of 18%. As of December 31, 2016, the Company had outstanding loan balance of $80,666 from employees of the company. On September 7, 2016, our CEO and Chairman, Jimmy Chan, was awarded five (5) million shares of restricted common stock in the Company in lieu of salary. On September 7, 2016, Richard Ko, was awarded three (3) million shares of restricted common stock in the Company for services provided to the Company.

Loans payable

Loans payable	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Loans payable	14. Loans payable On December 22, 2016, SWC entered an agreement with a lending company for its working capital needs. The loan was payable on the 122 nd On July 1, 2012, SWC entered an equipment loan agreement with a bank with maturity on June 1, 2017. The monthly payment is $255. At December 31, 2016, the outstanding balance under this loan was $1,690. On March 1, 2012, SWC entered an equipment loan agreement with a bank with maturity on January 1, 2017. The monthly payment is $435. At December 31, 2016, the outstanding balance under this loan was $488. On March 5, 2013, the company entered an equipment loan agreement with Toyota financial services with maturity date of April 4, 2018. As of December 31, 2016 the balance under this loan is $7,540 On January 5, 2016, the Company received a loan for $100,000 from an investor. The note bears 0% annual interest and is due on December 31, 2017. As of December 31, 2016 the balance under this loan is $60,000 . On July 11, 2016, the Company received a loan from Greater Asia Technology for $150,000. There were loan fees of $8,000 associated with origination of the loan, which bears 40% annual interest and is due on January 15, 2017. As of December 31, 2016, this note had a balance of $80,818. On September 26, 2016, the Company received a loan from Greater Asia Technology for $100,000. It was predetermined interest on the loan would be $40,000. This amount was recorded as a discount to the loan payable amount and is to be amortized on a monthly basis over the life of the loan. The loan is due on November 25, 2017. As of December 31, 2016, this note had a balance of $100,000. On September 26, 2016, the Company received a loan from Greater Asia Technology for $12,500. The loan bears 100% annual interest and is due on November 23, 2017. As of December 31, 2016, this note had a balance of $12,500. On October 28, 2016, the Company received a loan from Autumn Group, LLC for $100,000. It was predetermined interest on the loan would be $100,000. This amount was recorded as a discount to the loan payable amount and is to be amortized on a monthly basis over the life of the loan. The loan is due on September 26, 2017. The loan bears 100% annual interest and is due on November 1, 2017. As of December 31, 2016, this note had a balance of $100,000. As of December 31, 2016, the company had outstanding loan balance of $5,053 from two vendors of the Company. As of December 31, 2016, the total interest balance accrued for loan payable was $125,833.

Shares to be issued

Shares to be issued	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Shares to be issued	15. Shares to be issued Preferred Shares As of December 31, 2016, the Company was obligated to issue 2,000,000 shares of Series B Convertible Preferred Stock for three EB-5 investments with the total amount of $1,500,000. The Company received $2,000,000 proceeds during the year ended June 30, 2016 with fair value of $2,000,000. 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. 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. Common Shares During the six months ended December 31, 2016, the Company issued 22,055,556 common shares, which were obligated to be issued, with a fair value in the amount of $1,230,000, as disclosed in note 13. Related party transactions. As of December 31, 2016, the Company was obligated to issue 2,000,000 restricted common shares for equity financing of $100,000, the fair market value of the 2,000,000 shares was $100,000. As of December 31, 2016, the Company was obligated to issue 2,804,343 restricted common shares for convertible debt conversion in the amount of $65,000 principle and $33,152 as accrued interest. Total amount converted to commons shares were $98,152. As of December 31, 2016, the Company was obligated to issue 1,486,101 restricted common shares for the settlement of outstanding accounts payable in the amount of $51,996. The fair value of the 1,486,101 common shares was $89,166, which resulted in a loss on settlement of debt of $37,170. On December 1, 2016, the Company modified its agreement with Bao Coc International Paper and BAO COC INTERNATIONAL PAPER AND PLASTIC COMPANY LIMITED ("Bao Cao"), of the Socialist Republic of Vietnam. Under the terms of the revised agreement, the Company shall purchase products manufactured by the current contract manufacturers and distribute such products to various quick service restaurant and institutions in the United States. Revenues from such products shall belong to Sugarmade. The price of these products will be determined from time to time in mutual agreement between the Parties. Sugarmade shall be responsible for compensating the contract manufacturer and collection of monies from the end customer with all revenues belonging to the Company. The company is obligated to issue 5,000,000 restricted common shares, the fair market value of the 5,000,000 shares was $400,000. As of December 31, 2016, these shares had yet to be issued and were recorded as a liability for stock to be issued – common shares . As of December 31, 2016, the company was obligated to issue 3,000,000 restricted common shares for consulting services, with a fair market value of $240,000. As of December 31, 2016, these shares had yet to be issued and were recorded as a liability for stock to be issued – common shares.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Dec. 31, 2016
Commitments And Contingencies
Commitments and Contingencies	16. Commitments and contingencies On April 1, 2015, the Company entered into a lease for general office and warehouse in City of Industry, California with a lease term of one year. The Company renewed the lease to March 31, 2017. Monthly rent was $11,884 up to March 31, 2016, and increased to $13,238 from April 1, 2016 to March 31, 2017. Monthly rent increased to $13,238 from April 1, 2016 to March 31, 2017. Future minimum annual rental payments required under operating leases as of December 31, 2016 were as below (by year): 2016 $ 39,714 Total $ 39,714

Subsequent Event

Subsequent Event	6 Months Ended
	Dec. 31, 2016
Subsequent Event
Subsequent Event	17. Subsequent events On February 10, 2017, the Company signed a lease for an approved culinary manufacturing facility, located in Los Angeles, CA, in support of its planned launch on a new culinary product called Sriracha Seasoning Stix. The lease is for a twelve (12) month period at a rate of $1,900 per month. On February 7, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On February 7, 2017, the Company entered into general consulting agreement concerning Cannabis related packaging, 750,000 restricted common shares granted as of the contract date. Shares have not been issued as of the filing date. On February 2, 2017, the Company issued 8,045,000 common shares in exchange for the conversion of $25,000 of convertible debt and accrued interest of $15,225. On January 24, 2017, the Company entered into a convertible promissory note with an accredited investor for $43,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 45% discount. The Company received a net amount of $38,000, after fees. On January 20, 2017, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On January 17, 2017, 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 8% and is convertible into common shares at a 40% discount. On January 1, 2017, the Company entered into settlement agreement with legal counsel David Nemecek, company agreed to issue 300,000 restricted common shares for settlement of $16,074.

Summary of Significant Accoun23

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies Policies
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 and the rules and regulations of the United States Securities and Exchange Commission 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, 2016, 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 period ended June 30, 2016, filed on or about November 2016. The interim results for the period ended December 31, 2016 are not necessarily indicative of the results for the full fiscal year.
Principles of consolidation	Principles of consolidation The condensed consolidated unaudited financial statements include the accounts of our Company and its wholly-owned subsidiaries, Sugarmade-CA and SWC. All significant intercompany transactions and balances have been eliminated in consolidation.
Going concern	Going concern The Company sustained continued losses from operations during the six months ended December 31, 2016 and for the fiscal year ended June 30, 2016. 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 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 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 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.
Use of estimates	Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 Accounting Standards Codification (“FASB ASC”) No. 605, Revenue Recognition
Cash	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.
Accounts receivable	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 $83,653 as of December 31, 2016 and of $117,866 as of June 30, 2016.
Inventory	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 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 December 31, 2016 and June 30, 2016, the balance for the inventory totaled $523,388 and $468,262, respectively. No amounts were recognized as an obsolescence reserve at December 31, 2016 and June 30, 2016.
Income taxes	Income taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspect of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of October 2, 2008, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as open tax years in these jurisdictions. We have identified the U.S. federal and California as our “major” tax jurisdictions and generally, we remain subject to Internal Revenue Service examination of our 2013 U.S. federal income tax returns. However, we have certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. We have no interest or penalties as of December 31, 2016.
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 Black-Scholes-Merton 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.
Loss per share	Loss per share We calculate basic earnings per share (“EPS”) by dividing our net 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. 6,703,559 potential shares issuable upon conversion of convertible debts and 0 potential shares issuable upon exercising of warrants were excluded in calculating diluted loss per share for the three months ended December 31, 2016 due to the fact that issuance of the shares is anti-dilutive as a result of the Company’s net loss.
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 2 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: December 31, 2016 Annual dividend yield — Expected life (years) 0.75 Risk-free interest rate 0.64 % Expected volatility 258 % Carrying Value Fair Value Measurements at As of December 31, 2016 December 31, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 813,000 $ — $ 813,000 $ — Total $ 813,000 $ — $ 813,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 701,000 $ — $ 701,000 $ — Total $ 701,000 $ — $ 701,000 $ —
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 Black-Scholes-Merton 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. Refer to Note 6 for details.
Segment Reporting	Segment Reporting FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – paper and paper-based products such as paper cups, cup lids, food containers, etc.
New Accounting Pronouncements Not Yet Adopted	New accounting pronouncements not yet adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-08, Revenue from Contracts with customers In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products In February 2016, the FASB issued ASU 2016-02, Leases In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In September 2015, the FASB issued ASU 2015-06, Simplifying the Accounting for Measurement-period Adjustments In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Summary of Significant Accoun24

Summary of Significant Accounting Policies (Tables)	6 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies Tables
Schedule of fair value of derivative liabilities	The Company used Level 2 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: December 31, 2016 Annual dividend yield — Expected life (years) 0.75 Risk-free interest rate 0.64 % Expected volatility 258 % Carrying Value Fair Value Measurements at As of December 31, 2016 December 31, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 813,000 $ — $ 813,000 $ — Total $ 813,000 $ — $ 813,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 701,000 $ — $ 701,000 $ — Total $ 701,000 $ — $ 701,000 $ —

Convertible Notes (Tables)

Convertible Notes (Tables)	6 Months Ended
	Dec. 31, 2016
Convertible Notes Tables
Schedule of Promissory Notes	As of December 31, 2016, the Company’s convertible notes consisted of following: As of December 31, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 10/18/2017 84,750 — 84,750 Convertible Note 8/4/2017 84,750 — 84,750 Convertible Note 8/16/2017 110,000 — 110,000 Convertible Note 9/20/2017 38,000 — 38,000 Convertible Note 7/17/2017 20,000 — 20,000 Convertible Note 9/30/2017 55,000 — 55,000 Total Convertible Promissory Notes $ 642,500 $ 642,500 As of June 30, 2016, the Company’s convertible notes consisted of following: As of June 30, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 40,000 — 40,000 Convertible Note 7/1/2016 50,000 — 50,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 7/1/2016 20,834 — 20,834 Convertible Note 7/1/2016 8,333 — 8,333 Total Convertible Promissory Notes $ 394,167 $ 394,167

Stock warrants (Tables)

Stock warrants (Tables)	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Schedule of Convertible Stock Warrants	There were no warrants outstanding at December 31, 2016. Number of Weighted Average Outstanding at June 30, 2014 $ 180,000 $ 0.20 Granted — — Exercised — — Forfeited September 30, 2014 38,750 0.09 Forfeited December 31, 2014 10,000 0.04 Outstanding at June 30, 2015 131,250 0.20 Outstanding at June 30, 2016 131,250 0.20 Expired 131,250 0.20 Outstanding at December 31, 2016 $ — $ —
Schedule of Warrants Outstanding	Following is a summary of the status of warrants outstanding at June 30, 2016: Date Issued Exercise Price Number of Shares Expiration Date 8/17/12 $ 0.01 6,250 7/1/2016 8/20/12 $ 0.01 6,250 7/1/2016 9/10/12 $ 0.01 10,000 7/1/2016 9/13/12 $ 0.01 12,500 7/1/2016 9/18/12 $ 0.01 6,250 7/1/2016 10/5/12 $ 0.01 2,500 7/1/2016 10/25/12 $ 0.01 6,250 7/1/2016 1/31/13 $ 0.01 6,250 7/1/2016 10/22/12 $ 0.01 25,000 7/1/2016 8/24/12 $ 0.50 50,000 8/24/16 Total warrants as of June 30, 2016 131,250

Common shares reserved for fu27

Common shares reserved for future issuances (Tables)	6 Months Ended
	Dec. 31, 2016
Notes to Financial Statements
Schedule of Common Shares Reserved for Furture Issuance	The following table summarizes shares of our common stock reserved for future issuance at December 31, 2016: Common shares to be issued under conversion feature 17,700,225 Common shares to be issued under $0.01 warrants — Common shares to be issued under $0.50 warrants — Total common shares reserved for future issuance 17,700,225 The following table summarizes shares of our common stock reserved for future issuance at June 30, 2016: Common shares to be issued under conversion feature 11,702,118 Common shares to be issued under $0.01 warrants 81,250 Common shares to be issued under $0.50 warrants 50,000 Total common shares reserved for future issuance 11,833,368

Summary of Significant Accoun28

Summary of Significant Accounting Policies (Details)	6 Months Ended	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016
Summary Of Significant Accounting Policies Details
Annual dividend yield
Expected life (years)	9 months	4 days
Risk-free interest rate	0.64%	0.21%
Expected volatility	258.00%	449.00%

Summary of Significant Accoun29

Summary of Significant Accounting Policies (Details 2) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Derivative Liabilities	$ 813,000	$ 701,000
Liabilities [Member]
Derivative Liabilities	813,000	701,000
Liabilities [Member] | Fair Value, Inputs, Level 1 [Member]
Derivative Liabilities
Liabilities [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative Liabilities	813,000	701,000
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]
Derivative Liabilities

Summary of Significant Accoun30

Summary of Significant Accounting Policies (Details Narrative)	6 Months Ended
	Dec. 31, 2016USD ($)
Summary Of Significant Accounting Policies Details Narrative
Cash issued to Federal Deposit Insurance Corporation	$ 250,000

Concentration (Details Narrativ

Concentration (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Risks and Uncertainties [Abstract]
Net Revenue	$ 728,092	$ 914,429	$ 1,855,646	$ 2,317,340

Litigation (Details Narrative)

Litigation (Details Narrative) - USD ($)	Oct. 28, 2014	May 24, 2014
Commitments and Contingencies Disclosure [Abstract]
Litigation Settlement, Amount		$ 56,365
Restricted Shares Issued	502,533
Litigation Cash Paid	$ 30,000

Convertible Notes (Details Narr

Convertible Notes (Details Narrative) - USD ($)	6 Months Ended	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016
Convertible Notes Payable	$ 25,982	$ 25,982
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 25,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 40,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 50,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 25,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 25,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 25,000	$ 25,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 100,000	$ 25,000
Convertible Notes Due Date	Jul. 1, 2016	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 84,750	$ 25,000
Convertible Notes Due Date	Oct. 18, 2017	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 84,750	$ 25,000
Convertible Notes Due Date	Aug. 4, 2017	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 110,000	$ 100,000
Convertible Notes Due Date	Aug. 16, 2017	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 38,000	$ 20,834
Convertible Notes Due Date	Sep. 20, 2017	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 20,000	$ 8,333
Convertible Notes Due Date	Jul. 17, 2017	Jul. 1, 2016
Convertible Notes [Member]
Convertible Notes Payable	$ 55,000
Convertible Notes Due Date	Sep. 30, 2017
Convertible Notes [Member]
Convertible Notes Payable	$ 642,500	$ 394,167
Accured Interest Rate		14.00%

Stock warrants (Details)

Stock warrants (Details) - Stock Warrant [Member] - $ / shares	3 Months Ended	6 Months Ended		12 Months Ended
	Sep. 30, 2014	Dec. 31, 2016	Dec. 31, 2014	Jun. 30, 2016
Number of Shares
Outstanding	180,000	131,250	180,000	131,250
Granted
Exercised		131,250
Forfeited	38,750		10,000
Outstanding				131,250
Weighted Average Exercise Price
Outstanding	$ 0.20	$ 0.20	$ 0.20	$ 0.20
Granted
Exercised		0.20
Forfeited	$ .09		$ .04
Outstanding				$ 0.20

Stock warrants (Details 2)

Stock warrants (Details 2) - $ / shares	6 Months Ended	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2014
8/17/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		6,250
Expiration Date		Jul. 1, 2016
8/20/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		6,250
Expiration Date		Jul. 1, 2016
9/10/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		10,000
Expiration Date		Jul. 1, 2016
9/13/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		12,500
Expiration Date		Jul. 1, 2016
9/18/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		6,250
Expiration Date		Jul. 1, 2016
10/5/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		2,500
Expiration Date		Jul. 1, 2016
10/25/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		6,250
Expiration Date		Jul. 1, 2016
1/31/2013
Exercise Price		$ 0.01
Number of Shares Outstanding		6,250
Expiration Date		Jul. 1, 2016
10/22/2012
Exercise Price		$ 0.01
Number of Shares Outstanding		25,000
Expiration Date		Jul. 1, 2016
8/24/2012
Exercise Price		$ 0.5
Number of Shares Outstanding		50,000
Expiration Date		Aug. 24, 2016
Stock Warrant [Member]
Exercise Price	$ 0.20
Number of Shares Outstanding		131,250	131,250	180,000

Common shares issued for equi36

Common shares issued for equity financing (Details Narrative)	Oct. 11, 2016USD ($)shares
Notes to Financial Statements
Restricted Common Shares Issued | shares	2,000,000
Equity Financing | $	$ 100,000

Common shares reserved for fu37

Common shares reserved for future issuances (Details) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Notes to Financial Statements
Common shares to be issued under conversion feature	$ 17,700,225	$ 11,702,118
Common shares to be issued under $0.01 warrants		81,250
Common shares to be issued under $0.50 warrants		50,000
Total common shares reserved for future issuance	$ 17,700,225	$ 11,833,368

Commitments and Contingencies (

Commitments and Contingencies (Details)	Jun. 30, 2016USD ($)
Commitments And Contingencies Details Narrative
2,016	$ 39,714
Total	$ 39,714

Acquisition of SWC Group, Inc.

Acquisition of SWC Group, Inc. (Details) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Acquisition Of Swc Group Inc. Details
Accounts receivable	$ 83,653	$ 117,866
Inventory	523,388	468,262
Other current assets	137,566	84,505
Customer deposits	$ 190,691	$ 248,299

Acquisition of SWC Group, Inc40

Acquisition of SWC Group, Inc. (Details 2) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Acquisition Of Swc Group Inc. Details 2
Net loss	$ (1,645,906)	$ 185,793	$ (1,504,710)	$ (564,432)