THE BOARD, INCLUDING THE INDEPENDENT
DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE PROPOSALS.
You have the right
to receive notice of and to vote at the Special Meeting if you were a stockholder of record at the close of business on September
22, 2017. Whether or not you expect to be present in person at the Special Meeting, please sign the proxy and return it promptly.
In the event there are not sufficient votes for a quorum or to approve any of the foregoing proposals at the time of the Special
Meeting, the Special Meeting may be adjourned in order to permit further solicitation of the proxies by the Company.
By Order of the Board,
Jimmy Chan
CEO and Chairman
September 15, 2017
Even if you vote your shares prior to the Special Meeting, you
still may attend the Special Meeting and vote your shares in person.
Table of Contents
GENERAL
|
1
|
SPECIAL MEETING INFORMATION
|
1
|
VOTING INFORMATION
|
2
|
INFORMATION REGARDING THIS SOLICITATION
|
4
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
5
|
PROPOSAL 1: APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE THE BOARD OF DIRECTORS TO INCREASE
THE COMPANY’S AUTHORIZED CAPITAL FROM 300,000,000 TO 1,000,000,000 COMMON SHARES
|
7
|
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE THE BOARD OF DIRECTORS TO AUTHORIZE
AND CREATE TEN MILLION (10,000,000) SHARES OF SERIES C PREFERRED STOCK
|
8
|
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL
MEETING
|
10
|
OTHER BUSINESS
|
10
|
SUBMISSION OF STOCKHOLDER PROPOSALS
|
10
|
PRIVACY PRINCIPLES
|
11
|
167 N. Sunset Avenue
City of Industry, CA 91744
Tel:
(888)
982-1628
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This proxy statement
is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Sugarmade,
Inc. a Delaware corporation (the “Company,” “we,” “us” or “our”), for use at the
Company’s Special Meeting of Stockholders (the “Special Meeting”) to be held on Friday, November 3, 2017, at
8:00 a.m. Pacific Time at 167 N. Sunset Avenue, City of Industry, CA 91744 and at any postponements or adjournments thereof. This
proxy statement and the accompanying proxy card are first being sent to stockholders on or about September 22, 2017.
We encourage you to
vote your shares, either by voting in person at the Special Meeting or by granting a proxy
(i.e.,
authorizing someone to
vote your shares). If you properly sign and date the proxy card, and the Company receives it in time for the Special Meeting, the
persons named as proxies will vote the shares registered directly in your name in the manner that you specified. Please complete
and return the paper proxy card in the pre-addressed, postage-paid envelope provided.
SPECIAL MEETING INFORMATION
Date and Location
We will hold
the Special Meeting on Friday, November 3, 2017, at 8 a.m. Pacific Time at 167 N. Sunset Avenue, City of Industry, CA 91744.
Admission
Only record or beneficial
owners of the Company’s common stock as of the close of business on September 22, 2017 or their proxies may attend
the Special Meeting. Beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank
statement.
Purpose of the Special Meeting
At the Special Meeting, you will be asked
to vote on the following proposals:
|
1.
|
To
approve an amendment to the Articles of Incorporation to increase our authorized capital 300,000,000 common shares to 1,000,000,000
common shares.
|
|
2.
|
To
approve an amendment to the Articles of Incorporation to authorize ten million (10,000,000) shares of newly created Series
C Preferred Stock.
|
|
3.
|
To
approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies; and
|
|
4.
|
To
transact such other business as may properly come before the meeting, or any postponement or adjournment thereof.
|
VOTING INFORMATION
Record Date and Quorum Required
The record date of
the Special Meeting is the close of business on September 22, 2017 (the “Record Date”). You may cast one vote
for each share of our common stock that you own as of the Record Date.
A quorum of stockholders
must be present at the Special Meeting for any business to be conducted. The presence at the Special Meeting, in person or by
proxy, of stockholders entitled to cast a majority of the votes entitled to be cast as of the Record Date will constitute a quorum.
Abstentions will be treated as shares present for quorum purposes. Broker shares for which the nominee has not received voting
instructions from the record holder and does not have discretionary authority to vote the shares on certain proposals (“Broker
Non-Votes”) will be treated as shares present for quorum purposes. On the Record Date, there were
240,340,157
shares of our common stock outstanding and entitled to vote. Thus,
120,170,078
shares of our common stock must be
represented by stockholders’ present at the Special Meeting or by proxy to have a quorum.
If a quorum is not
present at the Special Meeting, the stockholders who are represented may adjourn the Special Meeting until a quorum is present.
The persons named as proxies will vote those proxies for such adjournment, unless marked to be voted against any proposal for which
an adjournment is sought, to permit further solicitation of proxies.
Submitting Voting Instructions for Shares Held Through a Broker
If you hold shares
of common stock through a broker, bank or other nominee, you must follow the voting instructions you receive from your broker,
bank or nominee. If you hold shares of our common stock through a broker, bank or other nominee and you want to vote in person
at the Special Meeting, you must obtain a legal proxy from the record holder of your shares and present it at the meeting. If you
do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted
to vote your shares on any proposal considered at the Special Meeting.
Authorizing a Proxy for Shares Held in Your Name
If you are a record
holder of shares of our common stock, you may authorize a proxy to vote on your behalf by mail, as described on the enclosed proxy
card. Authorizing a proxy will not limit your right to vote in person at the Special Meeting. A properly completed, executed and
submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke the proxy. If you authorize
a proxy without indicating your voting instructions, the proxyholder will vote your shares according to the Board’s recommendations.
Revoking Your Proxy
If
you are a stockholder of record, you can revoke your proxy by (1) delivering a written revocation notice prior to the Special Meeting
to our President, Jimmy Chan at
167 N. Sunset Avenue, City of Industry, CA 91744
;
(2) delivering a later-dated proxy that we receive no later than the opening of the polls at the Special Meeting; or (3) voting
in person at the Special Meeting. If you hold shares of common stock through a broker, bank or other nominee, you must follow the
instructions you receive from your nominee in order to revoke your voting instructions. Attending the Special Meeting does not
revoke your proxy unless you also vote in person at the Special Meeting.
Vote Required
Proposal 1 —
To approve an Amendment to the Articles of Incorporation to increase our authorized capital from 300,000,000 to
1,000,000,000 common shares.
|
|
Affirmative vote of the majority
of the votes entitled to be cast by the holders of the common stock.
|
|
No
|
|
Abstentions and broker non-votes,
if any, will have the same effect of a vote against this proposal.
|
Proposal 2 —
To authorize the creation of ten million (10,000,000) Series C Preferred Shares
|
|
Affirmative vote of the holders
of a majority of the votes cast at the Special Meeting.
|
|
No
|
|
Abstentions and broker non-votes,
if any, will have the same effect of a vote against this proposal.
|
Proposal 3
—
To
approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies.
|
|
Affirmative vote of the holders of a majority of the votes cast at the Special Meeting.
|
|
No
|
|
Abstentions and broker non-votes, if any, will have the same effect of a vote against
this proposal.
|
INFORMATION REGARDING THIS SOLICITATION
Our Board is making
this solicitation and the Company will bear the expense of the solicitation of proxies for the Special Meeting, including the cost
of preparing, printing, and mailing this proxy statement, the accompanying Notice of Special Meeting of Stockholders, and the proxy
card. If brokers, trustees, or fiduciaries and other institutions or nominees holding shares in their names, or in the name of
their nominees, which are beneficially owned by others, forward the proxy materials to, and obtain proxies form, such beneficial
owners, we will reimburse such persons for their reasonable expenses in so doing. In addition, we will indemnify them against any
losses arising out of that firm’s proxy soliciting services on our behalf.
In addition to the
solicitation of proxies by the use of the mail, proxies may be solicited in person and/or by telephone or facsimile transmission
by directors, officers or employees of the Company the Company’s officers are located at 167 N. Sunset Avenue, City of Industry,
CA 91744. No additional compensation will be paid to directors, officers or regular employees of the Company for such services.
Stockholders may also
provide their voting instructions via email through the Internet. This option requires stockholders to input the Control Number
which is located on each proxy card. After inputting this number, stockholders will be prompted to provide their voting instructions.
Stockholders will have an opportunity to review their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their Internet link. Stockholders who vote via the Internet, in addition to confirming their
voting instructions prior to submission, will also receive an e-mail confirming their instructions upon request.
If a stockholder wishes
to participate in the Meeting, but does not wish to give a proxy electronically, the stockholder may still submit the proxy card
originally sent with this Proxy Statement or attend in person.
The SEC has adopted
rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report
addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra
convenience for stockholders and cost savings for companies.
A number of brokerages
and other institutional holders of record have implemented householding. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received from the affected stockholders. If you have received
notice from your broker that it will be householding communications to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement, please notify your broker. Stockholders who currently receive multiple copies of the proxy
statement at their addresses and would like to request information about householding of their communications should contact their
brokers or other intermediary holder of record. You can notify us by sending a written request to: Jimmy Chan, President, 167 N.
Sunset Avenue, City of Industry, CA 91744.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth, as of
September 22, 2017
, the beneficial ownership of each current director, the Company’s executive
officers, each person known to us to beneficially own 5% or more of the outstanding shares of the Company’s common stock,
and the executive officers and directors as a group.
Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and includes voting
or investment power with respect to the securities. Common stock subject to options or warrants that are currently exercisable
or exercisable within 60 days of
September 22, 2017,
are deemed to be outstanding and beneficially owned by the
person holding such options or warrants. Such shares, however, are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. Percentage of ownership is based on 214,826,834 shares of the Company’s common stock outstanding
as of
September 22, 2017
.
Unless otherwise indicated,
to our knowledge, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned
by the stockholder, except to the extent authority is shared by their spouses under applicable law. Unless otherwise indicated,
the address of all executive officers and directors is c/o President, 167 N. Sunset Avenue, City of Industry, CA 91744.
The Company’s
directors are divided into two groups — interested directors and independent directors. Interested directors are “interested
persons” as defined in Section 2(a)(19) of the 1940 Act.
IDENTITY OF PERSON
OR GROUP
|
|
CLASS
|
|
TOTAL
SHARES OWNED
|
|
PERCENT OF
SHARES
OWNED
|
Jimmy Chan
CEO and Chairman
|
|
Common Stock
|
|
|
31,494,733
|
|
|
|
13.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Richard Ko
Director and Treasurer
|
|
Common Stock
|
|
|
2,530,572
|
|
|
|
1
|
%
|
|
(1)
|
Beneficial ownership has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
|
(
|
(2)
|
The persons named above known to be
a beneficial owner of 5% or more of the Company’s stock may be deemed to be a “parent” and “promoter”
of the Company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct holdings
in the Company.
|
The following table sets forth as September
13, 2017, the dollar range of our securities owned by our directors and executive officers.
|
|
|
Name
|
|
Dollar Range of Equity
Securities Beneficially Owned
(1)(2)
|
Interested Director:
Jimmy Chan
|
|
|
|
|
over $100,000
|
|
|
|
Directors:
Richard Ko
|
|
|
|
|
$50,001-$100,000
|
|
(1)
|
The dollar range of the equity securities beneficially owned is based
on the closing price per share of the Company’s common stock of $0.03 on September 14, 2017 on the OTCBB.
|
|
(2)
|
The dollar ranges of equity securities beneficially owned are: none;
$1-$10,000; $10,001-$50,000; $50,001-$100,000; and over $100,000.
|
PROPOSAL 1: APPROVAL OF AN AMENDMENT TO
THE ARTICLES OF INCORPORATION TO AUTHORIZE THE BOARD OF DIRECTORS TO INCREASE THE COMPANY’S AUTHORIZED CAPITAL FROM 300,000,000
TO 1,000,000,000 COMMON SHARES
The Board has adopted,
and recommends that stockholders approve an amendment to the Company’s Articles of Incorporation to increase our authorized
capital from 300,000,000 common shares to 1,000,000,000 common shares. (the “Increase in Authorized Capital Proposal”).
The Increase in Authorized Capital Proposal
The form of the proposed
amendment to the Company’s Articles of Incorporation to affect an increase in Authorized Capital is attached to this Proxy
Statement as Appendix A. Under the terms of the Authorized Capital Proposal, the Board will be given the authority to implement
the proposed amendment.
Reasons for the Proposal
The purpose of the
amendment to our Articles of Incorporation is to reorganize our capital structure, which management believes will better position
us to attract financing. There will be no change to the issued and outstanding common shares as a result of the increase in our
authorized capital.
Effect of the Increase in Authorized Capital on Holders
of Outstanding Common Stock
If implemented, the
Increase in Authorized Capital will affect all holders of common stock uniformly and will not affect any stockholder’s percentage
ownership interest in the Company. In addition, the Increase in Authorized Capital will not affect any stockholder’s proportionate
voting power.
After the effective
date of the Increase in Authorized Capital, we will continue to be subject to the periodic reporting and other requirements of
the Securities Exchange Act of 1934, as amended. The common stock will continue to be listed on the OTCBB under the symbol “SGMD”.
No Going Private Transaction
The Increase in Authorized
Capital, if implemented, is not intended to be the first step in a “going private transaction” within the meaning of
Rule 13e-3 of the Securities Exchange Act of 1934, as amended.
Federal Income Tax Consequences of the Increase in Authorized
Capital
Whereas the Increase
in Authorized Capital has no effect on individual shareholders share positions, there are no material U.S. federal income tax consequences
of the Increase in Authorized Capital to holders of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE THE INCREASE IN AUTHORIZED CAPITAL
.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO
THE ARTICLES OF INCORPORATION TO AUTHORIZE THE BOARD OF DIRECTORS TO AUTHORIZE AND CREATE TEN MILLION (10,000,000) SHARES OF SERIES
C PREFERRED STOCK
The Board has adopted,
and recommends that stockholders approve an amendment to the Company’s Articles of Incorporation to authorize ten million
(10,000,000) shares of Series C Preferred Stock.
Reasons for the Proposal
The purpose of
the amendment to our Articles of Incorporation is to reorganize our capital structure, which management believes will better position
the Company to attract financing. Management believes this is needed to meet future growth goals for the Company. There will be
no change to the issued and outstanding common shares or to other classes of preferred shares as a result of the creation of this
new series of preferred stock.
Proposed Change to Articles of Incorporation
The proposal
is to add the following section to the Company’s Articles of Incorporation:
There is hereby
created a series of preferred stock of 10,000,000 shares, which shall be designated Series C Convertible Preferred Stock, par
value $0.001 per share (the “Series C Preferred Stock”).
The designations,
powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions
of the Series C Preferred Stock, in addition to those set forth in the Certificate of Incorporation, shall be as follows:
(1)
Amount of
Series
. The corporation shall have the authority to issue not more than 10,000,000 shares of Series C Convertible Preferred
Stock at the discretion of the Board of Directors.
(2)
Dividends
.
Series C will not be eligible for dividends.
(3)
Liquidation
Rights
. Any assets distributable to holders of capital stock of the Corporation upon the liquidation, dissolution, or
winding-up of the affairs of the Corporation shall be distributed to holders of Common Stock and Preferred Stock on an “as-converted,”
such that each share of Preferred Stock shall be entitled to receive the amount distributable to each share of Common Stock times
the Conversion Factor on the record date for the distribution.
(4)
Conversion
.
The shares of Series C Preferred Stock shall be convertible at the office of the transfer agent for the Common Stock (the
“Transfer Agent”), and at such other place or places, if any, as the Board of Directors of the Corporation may designate,
into fully paid and non-assessable shares (calculated as to each conversion to the nearest l/100th of a share) of Common Stock
at a rate of one share of common stock for each share of Series C Preferred. No fractional shares of Common Stock will
be issued, and instead the number of shares of Common Stock to be issued on conversion of Preferred Stock will, to the extent
necessary, be rounded up to the nearest whole number of shares.
Before any holder
of shares of the Preferred Stock shall be entitled to convert the same into Common Stock, the holder shall surrender the certificate
or certificates therefore, duly endorsed to the Corporation or in blank, at the office of the Transfer Agent or at such other
place or places, if any, as the Board of Directors of the Corporation has designated, and shall give written notice to the Corporation
at said office or place that it elects to convey the same and shall state in writing therein the name or names (with addresses)
in which it wishes the certificate or certificates for Common Stock to be issued.
The Corporation
will, as soon as practicable thereafter, issue and deliver at said office or place to such holder of shares of the Preferred Stock,
or to its nominee or nominees, certificates for the number of full shares of Common Stock to which it shall be entitled as aforesaid.
Shares of the Preferred Stock shall be deemed to have been converted as of the close of business on the date of the surrender
of such shares for conversion as provided above, and the person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the close of business
on such date.
9) Voting Rights.
Holders of Series C will hold voting rights on all matters put forth to the common shareholders. Each share of Series B held will
receive one hundred (100) votes on a common share basis (100 times voting power).
10) Other Provisions.
The Company reserves the right to accept or reject any subscription in its sole discretion for any reason whatsoever and to withdraw
and Series C offering at any time prior to the acceptance of the subscriptions received. Subscription funds paid by a Subscriber
whose subscription is rejected will be returned promptly without interest or deduction. The Corporation will pay any and all taxes
that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of shares of the Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer
involved in the issue or transfer and delivery of shares of Common Stock in a name other than that in which the shares of the
Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that
such tax has been paid.
Effect of the Increase in Authorized Capital on Holders
of Outstanding Common Stock
If implemented,
newly created Series C Preferred stock will affect all holders of common stock uniformly and will not affect any stockholder’s
percentage ownership interest in the Company. The creation may affect stockholder’s proportionate voting power at future
dates.
No Going Private Transaction
The Increase in
Authorized Capital, if implemented, is not intended to be the first step in a “going private transaction” within the
meaning of Rule 13e-3 of the Securities Exchange Act of 1934, as amended.
Federal Income Tax Consequences of the Increase in Authorized
Capital
Whereas the Increase
in Authorized Capital has no effect on individual shareholders share positions, there are no material U.S. federal income tax
consequences of the Increase in Authorized Capital to holders of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO AUTHORIZE THE SERIES C PREFERRED SHARES
.
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING
The Company’s
stockholders may be asked to consider and act upon one or more adjournments of the Special Meeting, if necessary or appropriate,
to solicit additional proxies in favor of any, or all of the other proposals set forth in this proxy statement.
If a quorum is not
present at the Special Meeting, the Company’s stockholders may be asked to vote on the proposal to adjourn the Special Meeting
to solicit additional proxies. If a quorum is present at the Special Meeting, but there are not sufficient votes at the time of
the Special Meeting to approve one or more of the proposals, the Company’s stockholders may also be asked to vote on the
proposal to approve the adjournment of the Special Meeting to permit further solicitation of proxies in favor of the other proposals.
However, a stockholder vote may be taken on one of the proposals in this proxy statement prior to any such adjournment if there
are sufficient votes for approval on such proposal.
If the adjournment
proposal is submitted for a vote at the Special Meeting, and if the Company’s stockholders vote to approve the adjournment
proposal, the meeting will be adjourned to enable the Board to solicit additional proxies in favor of one or more proposals. If
the adjournment proposal is approved, and the Special Meeting is adjourned, the Board will use the additional time to solicit additional
proxies in favor of any of the proposals to be presented at the Special Meeting, including the solicitation of proxies from stockholders
that have previously voted against the relevant proposal.
The Board believes
that, if the number of shares of the Company’s common stock voting in favor of any of the proposals presented at the Special
Meeting is insufficient to approve the proposal, it is in the best interests of the Company’s stockholders to enable the
Board, for a limited period of time, to continue to seek to obtain a sufficient number of additional votes in favor of the proposal.
Any signed proxies received by the Company in which no voting instructions are provided on such matter will be voted in favor of
an adjournment in these circumstances. The time and place of the adjourned meeting will be announced at the time the adjournment
is taken. Any adjournment of the Special Meeting for the purpose of soliciting additional proxies will allow the Company’s
stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting adjourned
or postponed.
The Board unanimously recommends a vote “for” the
adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies.
OTHER BUSINESS
The Board knows of no other
business to be presented for action at the Special Meeting. If any matters do come before the Special Meeting on which action can
properly be taken, it is intended that the proxies shall vote in accordance with the judgment of the person or persons exercising
the authority conferred by the proxy at the Special Meeting. The submission of a proposal does not guarantee its inclusion in the
Company’s proxy statement or presentation at the Special Meeting unless certain securities law requirements are met.