SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of The Securities Exchange Act
Date of Report (Date of earliest event reported): July 30, 2020
(Exact name of registrant as specified in its charter)
(State or other jurisdiction
750 Royal Oaks Dr., Suite 108
of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act:
of each class
of each exchange on which registered
Common Stock, par value $0.001 per
Indicate by check mark whether the registrant is an emerging growth
company as deﬁned in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised ﬁnancial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Item 8.01 Other Events.
of this year, Sugarmade announced it had accumulated approximately
$10 million in purchase orders for non-medical personal protective
supplies and other sanitary products.
What is the status of those purchase orders?
Sugarmade still has a significant number of purchase orders
pending. As a point of clarification, the actual total value of the
purchase orders received for non-medical personal protective
supplies and other sanitary products exceeds the stated amount of
$10 million. The Company believes its staff resources, importation
capabilities, and financing abilities support a $10 million
purchase order level. Thus, the Company has limited the amount to
purchase orders recognized to the $10 million level. Over the past
weeks, we have filled approximately $886,000 in sales against the
purchase orders. Our staff is working diligently to source products
to fill as many other remaining orders as is possible. Many of the
types of products desired are on backorder and are difficult to
obtain from the mainly Asian manufactures that specialize in these
Sugarmade sees a long term opportunity to remain a valuable source
for non-medical personal protective supplies.
Earlier this year, BudCars, in which Sugarmade has invested,
announced an expansion into the Los Angeles area. What is the
status of the launch of delivery services in the Los Angeles
And, what is the status of the second delivery operation in the Los
One of the Los Angeles sites is behind schedule and the other is
well ahead of schedule. We still expect both to become operational
as soon as final issues are resolved.
We, and the BudCars staff, are very excited about the Los Angeles
expansions. We are actually expanding not into just a single LA
location, but into two. The first of these expansions was expected
to go online during July and significant progress toward opening
has taken place. Unfortunately, we are getting delayed due to
last-minute regulatory issues. For example, we are still working to
get the security plan approved by local authorities and we have a
few minor issues relative to facilities build-out concerning the
Americans with Disabilities Act (ADA). As soon as these final
issues are cleared, we plan to begin operations.
On the positive side, we are ahead of schedule at the other Los
Angeles site. We are happy to report the turn-up of this second
site could occur sooner than was expected. While the California
regulatory environment is difficult to navigate and there could be
further delays. We are now envisioning both sites to be operational
at the end of August. Of course, we see major business
opportunities out of both sites once operations begin. We will be
sure to keep everyone updated. We are working hard daily on both
What is Sugarmade’s ownership percentage of the BudCars operations?
Will this percentage also apply to the new Los Angeles delivery
service to be operated by BudCars?
Sugarmade has acquired a 40% stake in BudCars and has been granted
an option to purchase an additional 30%, which could provide
Sugarmade a controlling interest. Thus, Sugarmade will share at the
rate of 40% on all profits generated, if any, by the operations.
Upon gaining a controlling interest, if such an event ever occur,
Sugarmade would be able to consolidate all the revenues of the
operations and report all such revenues on its financial
The same ownership and option arrangement will also apply to the
new Los Angeles business.
Is the delivery trend still strong in the California
As we have announced on several occasions, the market for cannabis
delivery services is growing substantially. This is resulting in
increases in the number of new customers and in the average sale
size on a per delivery customer basis. We see cannabis delivery
continuing to accelerate. Certainly, the Los Angeles market is
especially robust relative to delivery services.
above estimates may be subject to change upon accounting
adjustments. These estimates may not be reliable. Further, the
Company may not be able to accurately forecast our growth rate
predicated upon these estimates. A significant portion of the
Company’s and BudCars’ expenses is fixed, and we may not be able to
adjust our spending quickly enough if our sales are less than
Our revenue growth may not be sustainable, and our percentage
growth rates may decrease. Our revenue and operating profit growth
depends on the continued growth of demand for the cannabis products
and services offered by BudCars and our other business operations.
In addition, BudCars and our business are affected by general
economic and business conditions. Our sales and operating results
fluctuate for many reasons, including BudCars and our ability to
retain and increase sales to existing customers, attract new
customers, and satisfy our customers’ demands, our ability to offer
products and services on favorable terms, manage inventory, and
fulfill customer orders, the introduction of competitive services,
websites, products, and price decreases and risks described
elsewhere in our filing of reports.
The statements made herein
are subject to change depending on numerous factors, including, but
not limited to the following, 1) the Company’s ability to obtain
necessary final permitting to begin delivery services, 2) changes
in cannabis industry regulations, 3) availability of financing to
fund new operations, 4) consumer purchasing behaviors, and 5) other
factors relating to conducting business in the highly regulated
California cannabis marketplace. Additionally, our business
activities, sales and operating results fluctuate for many reasons,
including BudCars and our ability to retain and increase sales to
existing customers, attract new customers, and satisfy our
customers’ demands, our ability to offer products and services on
favorable terms, manage inventory, and fulfill customer orders, the
introduction of competitive services, websites, products, and price
decreases. There can be no assurance we will be successful in
navigating the complexities discussed herein. Delays in
implementing our business plan, including instituting new delivery
operations at planned sites, and numerous other factors, could
affect our ability to produce revenue and profits. Investors
and other interest parties should reference our other filings with
the U.S. Securities & Exchange Commission, including our annual
report on Form 10-K to review a full list of risk factors relating
to our current business operations and our stated future
This filing contains "forward-looking statements" within the
meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements also may be included in other publicly available
documents issued by the Company and in oral statements made by our
officers and representatives from time to time. These
forward-looking statements are intended to provide management's
current expectations or plans for our future operating and
financial performance, based on assumptions currently believed to
be valid. They can be identified by the use of words such as
"anticipate," "intend," "plan," "goal," "seek," "believe,"
"project," "estimate," "expect," "strategy," "future," "likely,"
"may," "should," "would," "could," "will" and other words of
similar meaning in connection with a discussion of future operating
or financial performance. Examples of forward-looking statements
include, among others, statements relating to future sales,
earnings, cash flows, results of operations, uses of cash and other
measures of financial performance. At this time there are no
assurances the Company’s efforts in begin new business operations
will be successful.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
July 30, 2020
/s/ Jimmy Chan
Chief Executive Officer