United States securities and exchange commission logo
July 21, 2020
Jimmy Chan
Chief Executive Officer
Sugarmade, Inc.
750 Royal Oaks Drive
Suite 108
Monrovia, CA 91016
Re: Sugarmade, Inc.
Offering Statement
on Form 1-A
Filed June 25, 2020
File No. 024-11246
Dear Mr. Chan:
We have reviewed your offering statement and have the following
comments. In some
of our comments, we may ask you to provide us with information so we may
better understand
your disclosure.
Please respond to this letter by amending your offering statement
and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response. After reviewing any amendment to your offering statement and
the information you
provide in response to these comments, we may have additional comments.
Offering Statement on Form 1-A filed on June 25, 2020
The Offering, page 2
1. You state that you are
offering "6,000,000 to 6,000,000,000" shares. This suggests that
you are conducting an
offering with a minimum and a maximum subscription amount.
Yet elsewhere you state
that there is no minimum offering. Please revise to clarify the
terms of your offering.
Also, tell us how you intend to offer 6,000,000,000 shares of
common stock when your
disclosure and your most recent certificate of amendment to
your articles of
incorporation state that you are authorized to issue 1,990,000,000 shares
of common stock.
Further, ensure that the legal opinion provided by your counsel reflects
the amount you intend
to offer in this offering.
Jimmy Chan
FirstName
Sugarmade,LastNameJimmy Chan
Inc.
Comapany
July NameSugarmade, Inc.
21, 2020
July 21,
Page 2 2020 Page 2
FirstName LastName
We do not have sufficient cash on hand, page 6
2. You state here that you will need at least $5,000,000 within the next
12 months to
continue operations. However, your disclosure on page 20 states that
raising 25% of this
offering, for net proceeds of $1,476,500, will sustain operations for
a twelve-month
period. Please revise for consistency.
Risks of Government Action and Regulatory Uncertainty, page 12
3. The risks you describe here do not appear to address your recent entry
into the cannabis
delivery services, nor do they address your intent to enter into the
cannabis cultivation
business. For example, you state that you "do not cultivate, process,
market or distribute
cannabis...," however, this does not appear to address your current
business operations.
Please substantially revise your risk factors to address your current
business operations.
Use of Proceeds, page 20
4. Elaborate upon the "acquisition of real estate and cannabis licenses"
you refer to here and
your reference to the "purchase of an extraction facility" on page 2.
In this regard, your
recent press releases indicate that you plan to use the proceeds of
this offering to expand
your BudCars delivery service.
Management's Discussion and Analysis, page 22
5. Revise to discuss your financial condition, changes in financial
condition and results of
operations for each year and interim period for which financial
statements are required,
including the audited fiscal year end, and discuss the causes of
material changes from year
to year or period to period in financial statement line items. Refer
to Item 9 of Form 1-A.
BudCars Cannabis Delivery Service, page 28
6. We note that you filed a current report on Form 8-K on February 10,
2020 announcing
your entry into an agreement with Indigo Dye Group Corp., pursuant to
which you
purchased a 40% stake for $700,000, with an option to purchase an
additional 30% stake.
File this agreement as an exhibit to your Form 1-A. Your subsequent
press releases
suggest that this acquisition may be significant to you; if so, please
tell us why you have
not reported this transaction pursuant to Item 2.01 of Form 8-K,
including providing
financial statements of the acquired business.
7. We also note several press releases you have issued recently reporting
the sales
performance of BudCars over various monthly periods and projecting
performance into
the future or against "targets" or "benchmarks." Tell us why you
believe these press
releases are appropriate given the following:
Given your interest in BudCars is a partial ownership interest,
tell us why you believe
it is appropriate to provide historical and future financial
performance in a manner
that suggests these sales will accrue to you.
Jimmy Chan
Sugarmade, Inc.
July 21, 2020
Page 3
You are reporting the performance of BudCars without regard to
other aspects of
your business, such as your product supply business.
You are reporting sales information without regard to other
financial statement line
item information, such as costs or net loss/gain information.
8. Your press release dated June 23, 2020 states that you plan to expand
into cannabis
cultivation and that you have already secured a property containing a
5,000 square-foot
indoor premium cannabis cultivation facility. Please revise to state
as much here and file
the acquisition agreement for the property as an exhibit.
Expansion Into Non-Medical Protective Equipment, page 28
9. You state in a current report on Form 8-K dated May 4, 2020 that you
have begun to
receive a substantial number of large purchase orders in excess of
$10,000,000. Update
your disclosure here to explain whether the purchase orders you have
entered into have
been fulfilled and, if not, the terms under which you are required to
fulfull the purchase
orders. Clarify whether you have secured a supplier and/or airfreight
transportation for
these orders. Finally, clarify the conditions you and the purchasers
will need to satisfy
before purchase orders will result in revenue to you, if at all.
Government Regulations, page 30
10. You acknowledge that the BudCars line of business could be affected by
governmental
regulations of cannabis products. Please revise your disclosure to
describe those state and
federal regulations that are applicable to your business.
We will consider qualifying your offering statement at your request. If
a participant in
your offering is required to clear its compensation arrangements with FINRA,
please have
FINRA advise us that it has no objections to the compensation arrangements
prior to
qualification.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff. We also remind you that, following qualification of your
Form 1-A, Rule 257
of Regulation A requires you to file periodic and current reports, including a
Form 1-K which
will be due within 120 calendar days after the end of the fiscal year covered
by the report.
Please contact Mara Ransom at 202-551-3264 with any questions.
FirstName LastNameJimmy Chan Sincerely,
Comapany NameSugarmade, Inc.
Division of
Corporation Finance
July 21, 2020 Page 3 Office of Trade
& Services
FirstName LastName