PROSPECTUS SUMMARY

The following summary highlights material contained in this prospectus. This summary does not contain all the information you should consider before investing in our securities. Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements that appear elsewhere in this prospectus.

Business Overview

Our Company, Sugarmade, Inc., a Delaware Corporation, operates through our subsidiary, Sugarmade, Inc., a California corporation (“Sugarmade-CA”).  We are a distributor of paper products that are derived from non-wood sources.  We are parties to an Exclusive License and Supply Agreement (“LSA”) with Sugar Cane Paper Company (“SCPC”), a company located in the People’s Republic of China.  SCPC and their contract suppliers produce our products and is a manufacturer and a holder of intellectual property rights and patents in the area of developing and manufacturing paper from non-wood sources.  Under the LSA, we hold the exclusive right to market, distribute and manufacture SCPC’s proprietary products in Europe, North, Central and South America, Australia and in other designated territories in the world.  We also obtained the rights (within the designated territories) to the Sugarmade brand name and trademarks.

Our principal executive offices are located at 2280 Lincoln Avenue, Suite 200, San Jose, California, 95125. Our telephone number is (888)-747-6233.  We maintain a corporate website at www.sugarmade.com.  Information found on our website is not part of this prospectus.

Shares included in this Prospectus

This prospectus is part of a registration statement of Sugarmade, Inc. filed with the Securities and Exchange Commission.  This prospectus relates solely to the offer and sale by the selling stockholders identified in this prospectus of up to 6,081,200shares.6,068,700shares.  The shares offered in this prospectus include:

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2,185,600 shares of common stock sold between January 15, 2011 and June 3, 2011;

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2,185,600 shares of common stock subject to the exercise of two-year warrants with an exercise price of $1.50 per share issued in connection with the same number of shares of our unregistered common stock sold between January 15, 2011 and June 3, 2011;

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500,000 shares of common stock issued to two individuals in connection with consulting services performed for our Company and granted on November 22, 2010;

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600,000 shares of common stock subject to the exercise of two-year warrants with an exercise price of $1.25 per share issued to three individuals in connection with consulting services performed for our Company and granted on April 27, 2011;

·140,000 shares of common stock issued to three individuals in connection with consulting services performed for our company and granted on April 22, 2011.

237,500 shares of our common stock of three individuals who were the controlling shareholders of our Company prior to its purchase of Sugarmade-CA; and

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200,000 shares of common stock subject to the exercise of three-year warrants with an exercise price of $1.25 per share issued to three individuals on May 9, 2011 as consideration for the cancellation of 8,500,000 shares of our common stock previously held by them.

20,000 shares of common stock subject to the exercise of two-year warrants with an exercise price of $1.50 per share issued to one individual on May 27, 2011 as consideration for consulting services performed for our company.

The shares and shares underlying the outstanding warrants being registered were issued to the selling stockholders in connection with a private placement transaction that was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Act”) and/or Rule 506 of Regulation D under the Securities Act.  We will not receive any of the proceeds from the sale of the shares of our common stock by the selling stockholders. We would receive proceeds from the exercise of the warrants and issuance of the underlying shares of our common stock totaling $4,325,510$4,308,400 upon their exercise of all warrants for cash payment, however there can be no assurance that the holders of the warrants will exercise their option to purchase the shares, whether some of the warrants may be exercised (as allowed) employing a cashless exercise option or what quantity of shares they will purchase in connection with the outstanding warrants.

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Recent Transactions

Reference is made to the disclosure set forth under Company History of this Registration Statement, which disclosure is incorporated by reference into this section.  In addition, Sugarmade-CA has sold the following securities in transactions that were not registered with the SEC or a state securities commission:

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From April 11, 2011 to April 22, 2011, Sugarmade-CA issued 252,070 shares of Sugarmade-CA common stock upon the conversion by existing Sugarmade-CA note holders of notes payable with a principal balance outstanding totaling $693,900.

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The Offering

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RISK FACTORS

Investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this herein before making an investment decision.  If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.  You should also read the section entitled "Special Notes Regarding Forward-Looking Statements" below for a discussion of what types of statements are forward-looking statements as well as the significance of such statements in the context of this report.

RISKS RELATED TO OUR BUSINESS

We have a very limited operating history.Prior to the Sugarmade Acquisition, our Company was a “shell” company with no or nominal operations. Sugarmade-CA recently completed its funding and the related acquisition with our Company. Sugarmade-CA was formed in 2009 to market paper products manufactured from tree-free materials. Sugarmade-CA does not currently have significant operating revenues and has a very limited operating history. Because Sugarmade-CA has a limited operating history, we do not have any historical financial data upon which to base planned operations. Our historical financial information is not a reliable indicator of future performance or prospects.

The segments of the paper industry in which we operate are highly competitive and increased competition could affect our sales and profitability.We compete in different markets within the paper industry on the basis of the uniqueness of our products, the quality of our products, customer service, price and distribution. All of our markets are highly competitive. Our competitors vary in size and many have greater financial and marketing resources than we do. While we believe that our products offer unique advantages because of their tree-free composition, if we cannot maintain quality and pricing that are comparable to traditional products we may not be able to develop, or may lose, market share. In some of our markets, the industry’s capacity to make products exceeds current demand levels. Competitive conditions in some of our segments may cause us to incur lower net selling prices, reduced gross margins and net earnings.

Our tree-free products could encounter low consumer acceptance in our primary target markets, including our initial target market of North America.  The tree-free paper market in North America is relatively young with little publically available data on the size of the market in relation to the overall paper industry. There is only anecdotal data referencing the growing demand in the United States and abroad for paper products from tree-free sources. Our product is relatively new to consumers and does not have a significant sales history in many of our target markets.  Should our tree-free products not be accepted by consumers in these markets, particularly in the markets of our initial focus in North America, we could experience sales and operating results substantially less than we expect to achieve.  Such results could jeopardize our Company’s financial well-being and subject an investor to the loss of all or a portion of his investment in our Company.  

Our business and financial performance may be adversely affected by downturns in the target markets that we serve or reduced demand for the types of products we sell.Demand for our products is often affected by general economic conditions as well as product-use trends in our target markets. These changes may result in decreased demand for our products. The occurrence of these conditions is beyond our ability to control and, when they occur, they may have a significant impact on our sales and results of operations.Our products are comparably priced with paper products comprised of 30% recycled materials. Both our products and paper products comprised of 30% recycled materials are typically higher in cost than paper products made from virgin pulp wood. The inability or unwillingness of our customers to pay a premium for our products due to general economic conditions or a downturn in the economy may have a significant adverse impact on our sales and results of operations.

Changes within the paper industry may adversely affect our financial performance.Changes in the identity, ownership structure and strategic goals of our competitors and the emergence of new competitors in our target markets may harm our financial performance. New competitors may include foreign-based companies and commodity-based domestic producers who could enter our specialty markets if they are unable to compete in their traditional markets. The paper industry has also experienced consolidation of producers and distribution channels. Further consolidation could unite other producers with distribution channels through which we intend to sell our products, thereby limiting access to our target markets.

Any interruption in delivery from our only suppliersuppliers will impair our ability to distribute our products and generate revenues.We are dependent on a sole supplier—SCPC—third party contract manufacturers for the production of our products. We have no manufacturing facilities and we rely on SCPCthird party contract manufacturers to provide us with an adequate and reliable supply of products on a timely basis. Any interruption in the distribution from our sole supplierthese suppliers could affect our ability to distribute our products. Additionally, our sole supplier issuppliers are located outside of the United States in the PRC.People’s Republic of China (“PRC”). Any legislation or consumer preferences in the United States or other countries

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requiring products which are made in the United States or such other countries may have a material adverse impact on our sales and results of operations.

Uncertainties with respect to the PRC legal system could limit the legal protections available for us to pursue any claim against SCPC,our third party contract manufacturers, and therefore our ability to protect our contract rights.We rely on SCPCthird party contract manufacturers for our supply of products. SCPC operatesThese third party suppliers operate entirely within the PRC. The PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to us in the event that we needed to bring a claim against SCPC.our suppliers. Courts in the PRC may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. The PRC does not have any treaties or other arrangements that provide for

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make such a request to SCPC, any patent applications may not be issued as patents, or may not be issued in a form that will be advantageous to us, or we may not be able to obtain copyright protection for the name “Sugarmade”.  Additionally, our Company is in the process of applying for a provisional patent in the US to protect its new formulation and process for its most recent tree free pulp and paper product. Any patents obtained in the future may be challenged by re-examination or otherwise invalidated or eventually be found unenforceable.  Both the patent application process and the process of managing patent disputes can be time consuming and expensive.  Even if any patents were to be granted, competitors may attempt to challenge or invalidate the patents, or may be able to design alternative techniques or devices that avoid infringement of the patents, or develop products with functionalities that are comparable to the tree-free products which we sell. In the event a competitor infringes upon our intellectual property rights, litigation to enforce such rights or to defend patents granted (or to be granted) against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights.

We may become involved in claims concerning intellectual property rights, and we could suffer significant litigation or related expenses in defending our or SCPC’s intellectual property rights or defending claims that we infringed the rights of others.We consider our licensed intellectual property to be a material asset. We may lose market share and suffer a decline in our revenue and net earnings if we cannot successfully defend one or more trademarks or patents we have secured or licensed. We do not believe that any of our products infringe the valid intellectual property rights of third parties. However, we may be unaware of intellectual property rights of others that may cover some of our products or services. In that event, we may be subject to significant future claims for damages. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert our management and key personnel from our business operations. Claims of intellectual property infringement might also require us to enter into licensing agreements which would reduce our operating margins, or in some cases, we may not be able to obtain license agreements on terms acceptable to us.

FINANCIAL RISKS

Our current business plan requires that our Company raise additional equity by the end of fiscal year 2012. We do not currently have sufficient revenues to cover our operating expenses and have never been profitable. We cannot be certain that our Company will ever generate sufficient revenues and gross margin to achieve profitability in the future.  Our business plan requires that our Company needs to raise additional equity by the end of our 2012 fiscal year end.  However, there are no arrangements in place for any such financing at this time.  We cannot provide any assurances as to whether we will be able to secure any necessary financing, or the terms of any such financing transaction if one were to occur.  Our failure to raise additional capital would seriously harm our business and operating results.  If we fail to raise additional capital by the end of 2012, our business will be materially and adversely affected and an investor could suffer the loss of a significant portion or all of his investment in our Company.

If we cannot establish profitable operations, we will need to raise additional capital to continue our operations, which may not be available on commercially reasonable terms, or at all, and which may dilute your investment.We incurred a net loss for the yearthree months ended December 31, 2010September 30, 2012 of $598,481.nearly $629,000 and had negative cash flows from operations in excess of $245,000. For the three months ended September 30, 2011 we incurred a net loss of nearly $791,000 and had negative cash flows from operations of nearly $660,000.  Achieving and sustaining profitability will require us to increase our revenues and manage our product, operating and administrative expenses. We cannot guarantee that we will be successful in achieving profitability. If we are unable to generate sufficient revenues to pay our expenses and our existing sources of cash and cash flows are otherwise insufficient to fund our activities, we will need to raise additional funds to continue our operations. We do not have any arrangements in place for additional funds. If needed, those funds may not be available on favorable terms, or at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have

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We may not have the ability to pay our convertible notes when due.Between August and January15, 2013, our Company has issued convertible promissory notes totaling $500,000 which must be repaid by our Company within 9 months after their date of issuance.  Our Company does not have sufficient capital to repay the notes as of the date of this report, and may not have sufficient capital to repay the notes when due. Our Company’s inability to repay the notes when due would permit the note holders to exercise their default remedies against our Company which could have a material adverse effect on our Company.

Conversion of our convertible notes into common stock could result in additional dilution to our stockholders.Upon satisfaction of certain conversion conditions (including conditions outside of our control, such as the closing of a financing), the notes may be converted into shares of Company common stock by the note holders.  If shares of our common stock are issued due to conversion of some or all of the convertible notes, the ownership interests of existing stockholders would be diluted.

Our financial statements have been prepared assuming that theour Company will continue as a going concern. We have generated losses to date and have limited working capital. These factors raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent registered public accounting firm included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern in their recent audit report included herein.for the fiscal year ended June 30, 2012.  If we cannot generate the required revenues and gross margin to achieve profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.

Fluctuations in exchange rates could adversely affect our cost of goods sold and consequently our profit margins.The price we pay for product from SCPCour third party suppliers in China will be directly affected by the foreign exchange rate between U.S. dollars and the Chinese Renminbi ("RMB") and between those currencies and other currencies in which our sales may be denominated. Because substantially all of our product purchases will be from SCPCour suppliers in China, fluctuations in the exchange rate between the U.S. dollar and the RMB will affect the prices that we effectively pay for product.Sinceproduct. Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all.

As we transition from a Company with insignificant revenues to what we hope will be a Company generating substantial revenues, we may not be able to manage our growth effectively, which could adversely affect our operations and financial performance.The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.

We do not expect to pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit.We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.

Our net operating loss (“NOL”) carry-forward is limited. We have recorded a valuation allowance amounting to our entire net deferred tax asset balance due to our lack of a history of earnings, possible statutory limitations on the use of tax loss carry-forwards generated in the past and the future expiration of our NOL. This gives rise to uncertainty as to whether the net deferred tax asset is realizable. Internal Revenue Code Section 382, and similar California rules, place a limitation on the amount of taxable income that can be offset by carry-forwards after a change in control (generally greater than a 50% change in ownership). As a result of these

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provisions, it is likely that given our acquisition of Sugarmade-CA, future utilization of the NOL will be severely limited. Our inability to use our Company’s historical NOL, or the full amount of the NOL, would limit our ability to offset any future tax liabilities with its NOL.

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CAPITAL MARKET RISKS

Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.There is limited market activity in our stock and we are too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading

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Future sales of our equity securities could put downward selling pressure on our securities, and adversely affect the stock price.There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.

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forth the high and low bid prices per share of our common stock by both the OTC Bulletin Board and OTCQB for the periods indicated. These prices reflect prices paid for our common stock prior to the Sugarmade Acquisition.  Prior to July 15, 2011, our common stock traded under the symbol “DVOP.”

The quotes represent inter-dealer prices, without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.  The trading volume of our securities fluctuates and may be limited during certain periods.  As a result of these volume fluctuations, the liquidity of an investment in our securities may be adversely affected.

Holders

As of August 1, 2011, January 29, 2013, we estimate that there were approximately 900 stockholders of record of our common stock.      

Dividends

We have never declared or paid a cash dividend.  Any future decisions regarding dividends will be made by our Board of Directors.  We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.  Our Board of Directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders.  Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.  

Equity Compensation Plans

On May 5, 2011, our Board of Directors adopted the Diversified Opportunities, Inc. 2011 Stock Option/Stock Issuance Plan (the “Plan”).    On May 20^th, the plan was approved by a vote of the majority of our shareholders. The Plan is intended to promote the interests of our Company by “providing eligible person with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation.”  The Plan is divided into two separate equity programs: 1) a stock option grant program; and 2) a stock issuance program.  The maximum number of shares available to be issued under the Plan is currently 1,500,000 shares, subject to adjustments for any stock splits, stock dividends or other specified adjustments which may take place in the future.  

The Plan is administered by our Company’s Board of Directors.  Persons eligible to participate in the Plan are: 1) employees; 2) non-employee members of our Company’s Board of Directors; and 3) consultants and other independent advisors who provide services to our Company or its subsidiary Sugarmade – CA.  All grants under the Plan are intended to comply with the requirements under Internal Revenue Code Section 409A and activities under the Plan will be administered accordingly.  Options granted under the Plan are evidenced by agreement between the recipient and our Company, subject to the following general provisions: 1) the exercise price shall not be less than 100% of the fair market value per share of our Company’s common stock on the date of grant (110% in the case of 10% or greater shareholders); and 2) the term of stock options shall be limited to a maximum of ten years.  A complete description of the Plan is included as an exhibit to this Current Report.  

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BUSINESS

We are a distributor of paper products that are derived from non-wood sources.  We are parties to an Exclusive License and Supply Agreement (“LSA”) with Sugar Cane Paper Company (“SCPC”), a company located in the People’s Republic of China.  SCPC is a contract manufacturer and a holder of intellectual property rights and patents in the area of developing and manufacturing paper from non-wood sources.  Under the LSA, we hold the exclusive right to market, distribute and manufacture SCPC’s proprietary products in Europe, North, Central and South America, Australia and in other designated territories in the world.  We also obtained the rights (within the designated territories) to the SugarmadeSugarmade™ brand name and trademarks.    Historically, Sugarmade has leveraged this relationship and corresponding agreement to initially insure production and management of its products. Presently, Sugarmade has been able to diversify its manufacturing and process management options to include other third party contract manufacturers.  As of June 30, 2012, our Company wrote off the value of the LSA which was reported as an intangible asset in our prior annual and quarterly reports.

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History

Our Company was originally incorporated on June 5, 1986 in California as Lab, Inc. and later the same month, on June 24, 1986, changed its name to Software Professionals, Inc. On April 20, 1994, following the filing of a registration statement on Form S-1, our Company began quoting its stock on the NASDAQ National Market under the symbol “SFTW”.  During this time our Company was in the software solutions business, developing, marketing, and supporting software products designed to automate the management of computer systems for commercial concerns.  On May 21, 1996, our Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation changing its name to Enlighten Software Solutions, Inc.  On October 23, 1998, our Company's common stock began trading on the NASDAQ Small Cap Market.  

During August 2001, our Company filed a Form 15 for the purpose of deregistering its securities.  On September 13, 2001, our Company filed a voluntary petition under Chapter 7, in the U.S. Bankruptcy Court, Northern District of California.  On November 2, 2004, the Trustee filed its Report of Distribution and on January 4, 2005 a final decree was entered and the case was closed.  On or near July 10, 2007, we filed the requisite documents with the State of California for the purpose of reinstating our corporate charter.  In October 2007, Corporate Services International Profit Sharing Plan (“CSIPSP”) agreed to contribute $30,000 as paid-in capital to our Company, the entire amount of which was contributed in January 2008.  In consideration for the capital contribution, in October 2007 our Company issued to CSIPSP 225,000,000 shares of its common stock (pre-split, 9,000,000 post-split) representing approximately 97.83% of its common stock outstanding on that date.  On July 30, 2007, our Company through a series of transactions effectively reincorporated in the state of Delaware, while retaining the capital structure and number of shares outstanding of the previous California corporation.  On January 14, 2008, our Company officially changed its name to Diversified Opportunities, Inc.  On February 11, 2008, our Company enacted a reverse split of its common stock on a 1:25 basis and concurrently increased its authorized capital stock to 310,000,000 shares comprised of 300,000,000 shares of common stock, $.001 par value and 10,000,000 shares of blank check preferred stock, $.001 par value.

Effective May 30, 2008, pursuant to the terms of a Stock Purchase Agreement dated May 16, 2008 (the “Purchase Agreement”) by and between QRSciences Holdings Limited (“QRSciences”), an Australian corporation (“QRSciences”) and CSIPSP, QRSciences purchased all of CSIPSP’s 9,000,000 shares of DVOP common stock (“Common Stock”) in exchange for the payment of $650,000 by QRSciences to CSIPSP. The 9,000,000 shares of DVOP common stock constituted 97.83% of the 9,199,192 shares of Company common stock outstanding at that time.  This purchase of CSIPSP’s shares by QRSciences resulted in a change of control. On April 13, 2010, QRSciences completed the sale of the 9,000,000 shares of our Company’s common stock which they owned to CT Partners, a California general partnership.

From the legal incorporation of Sugarmade-CA in March 2009 through October 2009, activities were primarily limited to exploring strategic alternatives and related negotiations in connection with what was to become its future operating business. On October 26, 2009, weSugarmade-CA (operating at the time as Simple Earth, Inc.) acquired all of the outstanding common stock of Sugarmade, Inc. (“SMI”), a California corporation incorporated to import, sell and distribute sustainable and environmentally friendly non-tree-based paper products. During 2010,SMI primarily sold its 100% tree free copy paper, as well as other 100% tree free paper products such as plates, bowls, napkins and toilet tissue.  SMI did not have a long history having been founded in May 2009, nor did it have significant sales of its products and was therefore in search of a sales outlet for its products when acquired by Sugarmade-CA.  

Sugarmade-CA acquired all of the outstanding common stock of SMI in exchange for: 1) cash totaling $340,000; 2) a note payable totaling $60,000 (subsequently forgiven in February 2011); and 3) 10% of the then outstanding common stock of our Company or 72,973 shares (with a nominal value at the date of acquisition of $.001 per share).  Additionally, we began doing business asare required to pay up to two additional earn-out payments of $200,000 to the seller of SMI: 1) if net income equals or exceeds $10 million in 2011; and/or 2) if net income exceeds $11 million in 2012.

In addition to minimal amounts of saleable inventory, SMI also had an exclusive license and supply agreement (“LSA”) with Sugar Cane Paper Company (“SCPC”) located in the People’s Republic of China.  SCPC is a contract manufacturer and a holder of intellectual property in the area of paper from non-wood sources.  Under the LSA (as subsequently amended), we obtained the exclusive right (as defined) to market, distribute and manufacture SCPC’s proprietary products in Europe, North and South America and in other designated territories in the world.  We also obtained the rights to the Sugarmade Inc. (“Sugarmade-CA”).brand name and trademarks and other provisions of the agreement with SCPC also inure to the benefit of our Company.  On February 1,17, 2011, Sugarmade-CA changed its legal nameSCPC forgave all amounts including accrued interest outstanding under the note payable due to Sugarmade, Inc. and dissolvedthem totaling $62,800.  We accounted for the SMI legal entity.  forgiveness as a capital contribution.  

On May 9,April 23, 2011, we entered into an exchange agreement (the “Exchange Agreement”) with Sugarmade-CA. Under the Companyterms of the Exchange Agreement, we acquired all of the outstanding stock of Sugarmade-CA through a share exchange agreement.(the "Exchange").  On May 9, 2011, our Company completed the Exchange.  Our Company then changed its name from “Diversified Opportunities, Inc.” to “Sugarmade, Inc.”

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on June 24, 2011. Our Company operates under Sugarmade-CA, which is a wholly owned subsidiary of the Company.  ReferencesCompany (references in this registration statement and prospectusfiling to the Company include the operations of Sugarmade-CA.  Sugarmade-CA).

Under the terms of the Exchange Agreement, Sugarmade-CA’s shareholders exchanged all of their shares of stock on a one-for-one basis for an aggregate of 8,864,108 shares of our common stock.  In connection with the Exchange Agreement and effective at the closing of the Exchange transaction, our previous three principal shareholders agreed to enter into a Share Cancellation Agreement pursuant to which 8,762,500 shares held by them were canceled or redeemed in exchange for the Company’s payment of $210,000, the issuance of 200,000 warrants to purchase our common stock at $1.25 per share, and certain registration rights.  

The Industry and the Overall Market

Currently, the U.S. paperPulp and Paper industry is a $230estimated to be an almost $200 billion industry. The U.S. alone consumesis estimated to consume over 110100 million tons of paper products each year.year (Source: Martin, “Paper Chase”). Our areaareas of focus includesare (but SCPC’s manufacturing capabilities are not limited to):

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Printing and writing paper (27% of total production);

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Containerboard or corrugated boxes (29% of total production); and

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Tissue (8% of total production).

Within each of these sectors, there are varying amounts of recycled materials that can be used in production. Tissue has an industry average of 45% recycled fibers. Containerboard averages 24% recycled fibers.  Printing and writing paper uses a scant 6% recycled fibers.fibers (Source: S. Kinsella et al, “The State of the Paper Industry”, 2007, Pg. 17.).  We see a significant market opportunity to leverage our capabilities to eliminate tree materials included in these products.

The advent of the Internet and email would at first sight seem to argue for decreased paper consumption.  Many (including industry experts) forecasted that these technologies would lead to substantial reductions in the level of paper consumption.  The reality has been the opposite. Paper sales have increased roughly four percent annually since the onset of the Internet age.  Worldwide, paper constitutes approximately 42% of the wood harvested in the world.world (Source: “Paper Listening Study – Question 64” (http://www.conservatree.org/paperlisteningstudy/Forests/question64.html)).  The U.S. alone consumes nearly 30% of the world’s paper

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impacts of each category of paper production. The table gives data for the production of one ton of copy paper and the environmental impact each category has on our environment.

Table : Environmental Impacts

*Data from EDF Paper Calculator (Environmental Paper Network Paper Calculator. (http://www.papercalculator.org)) **Internal Sugarmade Statistics

We believe that trends in government, corporate and consumer awareness of the environmental impacts of paper production will increase demand for alternative paper supplies which are more environmentally friendly.  Within the market for environmentally friendly paper, we believe that our tree-free products are unique in their low carbon footprint.  In addition, our relationship with SCPC gives us access to experience in manufacturing tree-free paper and the ability to reach commercial scale quickly.  It is important to note that the tree-free paper market in North America is relatively young with little publically available data on the size of the market in relation to the overall paper industry. At this time, there is only anecdotal data referencing the growing demand in the United States and abroad for paper products from tree-free sources.

Our Partner SCPC: Capacity, License and Territory

SCPC is a 56 year-old paper products company and is among the largest bagasse and bamboo pulping companies in the world.  With over a half-century of experience, research, and business development effort, SCPC contends that it is the largest producer of 100% tree-free paper products in the Asian markets.  SCPCThrough our third party contract manufacturers, our Company converts plant material from the waste residuals of sugar cane (bagasse) and bamboo to commercial grade tree-free fibers.  SCPC’sOur Company’s processes are proprietary and patented and previously virtually all of its paper products were marketed and consumed in the Asian markets.  SCPC has been selling tree-free paper products into the Asian markets for over fifty years.proprietary.  

Under the LSA, we are the exclusive distributor for all of SCPC’s tree-free and bagasse-based products in the Americas, Europe, Australia and New Zealand (the “Territories”).  As its exclusive licensee, SCPC has also assigned us their relevant production

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Over time, we plan to market,have a complete suite of tree-less paper products in order to concurrently capitalize on multiple commercial market verticals.available for sale.  More specifically, our company willCompany expects to have 32 separate SKU's (stock keeping units) of tree-free paper products in order to take advantage of all the products being produced by SCPCSCPC’s subcontractors  in commercially scalable quantities.  These 32 SKU's are expected to break down into four (4) product categories:

1

Printing, Writing, and Copy Paper (4 SKU’s)

a.

Letter size – 8.5” x 11”

b.

Legal size – 8.5” x 14”

2

Industrial/Commercial Packaging (2 SKU’s)

a.

Corrugated box

b.

Industrial paper

3

Tissue (Bath/Kitchen) (7 SKU’s)Roll Stock

a.

Paper towels – multi-fold and rollWeb Roll Printing

b.

Toilet paper – regular roll and jumbo (janitorial) rollConverting

c.

Napkins – beverage, lunch, dinnerHigh Speed Printing Applications

d.

4

Tableware/Foodservice items (Plates, Cups, etc.) (18 SKU’s)

a.

Plates – 10.25”, 10”, 9” and 8.75” rounds with or without compartments

b.

Bowls – 24 oz., 20 oz., 16 oz., 12 oz. with lids

c.

Away from home – 9”, 6” clamshells with or without compartments

d.

Trays – assorted sizes and shapes based on requirements

We intend to primarily focus our sales and marketing efforts on the printing, writing and copy paper and industrial/commercial packaging categories.

Production and Logistics

SCPC’sOur Company’s main third party contract manufacturing facility isfacilities are located in the city of Jiangmen and Goaming, in the province of Guangdong in the Peoples’ Republic of China.  ItsThese operations include pulping (from locally available bagasse and bamboo) and conversion (from pulp to finished product).  Based on discussions with SCPC management,assessment of our third party contract manufacturers’ capacities, we believe that SCPCSugarmade’s tree-free paper production, through current subcontractors is currently operating at roughly 28% capacity. Further, Sugarmade and SCPC are evaluating other pulping and conversion facilities to augment or replace the current subcontractors.

After transport from SCPC’sthe factory to the nearby port of Yan Tian, product is shipped to a warehouse located in Oakland, CA.CA or shipped directly to the customer.  We have contracted for a warehousing facility that we use as a staging area for shipments throughout the U.S. as well as storage for inventory sold regionally. The third party warehouse can inventoryhold up to 2,000 shipping containers or 1.44 million cases of copy paper.  

We have access toBetween June 30, 2009 and June 30, 2011, the Company has purchased, sold or otherwise used approximately 49.85 metric tons of tree-free paper.  For the year ended June 30, 2012, our Company purchased an extensive networkadditional 347 metric tons of third-party logistics companies.  If required, we are prepared to handle the moving and transporting of our products to customers anywhere in the U.S.tree-free paper.

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Our products are priced competitively with products from recycled sources.  We believe this is a compelling price point, since ‘green’ products are often priced at a significant premium compared to the ‘non-green’ offerings.  

Corporate Social Responsibility

Corporate Social Responsibility ("CSR") is the practice of corporate self-regulation integrated into an organization’s business model.  CSR takes into account the impact of business decisions on the environment, society, consumers, employees, stakeholders and other members of public sphere. The Company proactively promotes the public’s interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere.  Through the deliberate inclusion of public interest into corporate decision-making, and honoring the triple bottom line, People, Planet, and Profitability, we hope to better our communities for generations to come.

B-Corporation Status

Our Company has been certified as a “B Corp” by B Lab.The B Corporation certification is a validation process that requires companies to report and verify that they meet the sustainable and stewardship goals that B Lab sets forth to become a B Corporation. The certification process includes requirements that we have certain internal policies and procedures, such as allowing employees to donate up to 45 hours per year of their time for community service, and other reporting, governance and management practices intended to promote social and environmental responsibility. The certification process does not require that we change our bylaws, articles or the legal rights or remedies of our shareholders.  Our Company B Corp status has been fully recertified effective August 2012.  We are one of only two publically held companies to earn this certification.  B Corporation certification lasts for a period of two years.

Intellectual Property

In conjunction with SCPC, we rely on a combination of trademark, patent laws, trade secrecy laws and contractual provisions to protect ours and SCPC’s intellectual property rights.  SCPC holds several patents in the People’s Republic of China related to the production of tree-free paper. Sugarmade has the right to request SCPC to file for counterpart patent protection in Sugarmade’s territories and for copyright protection for the name “Sugarmade,” but we have not yet made such requests. We anticipate making such requests in the future. There can be no assurance that the steps taken by us to protect these proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, trade secrets or similar proprietary rights.  In addition, there can be no assurance that other parties will not assert infringement claims against us, noror that we may have to pursue litigation against other parties to assert our rights.  Any such claim or litigation could be costly and we may lack the resources required to defend against such claims.  In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse affecteffect on our ability to market or sell our brands, and profitably exploit our products.

Competition

We face competition from traditional paper manufacturers as well as other manufacturers that claim to produce environmentally friendly products.  Paper is a mature industry with a number of manufacturers with significant capital resources, distribution channels and entrenched customer accounts.  We compete against traditional paper manufacturers primarily based on our environmental benefits.  As discussed above, our products compete well in terms of reduced environmental impact.  Our products are generally more expensive than paper manufactured from virgin wood.  Some customers will pay a premium for "green" or environmentally friendly paper, provided that the price is a reasonable premium, and the products are of comparable quality.  We also believe that we provide comparable quality as compared to virgin wood products in our product applications.  Currently, we are priced competitively with recycled paper products.  If there were a significant reduction in the cost of virgin wood based products, or if our costs of products were to rise significantly, it would reduce our ability to compete.

There are a number of manufacturers deploying different techniques to develop environmentally sensitive paper products.  WeBased on feedback from customers and potential customers of environmentally sensitive paper products, we classify these manufacturers into the following four distinct categories:

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2.

Companies that in addition to employing bagasse or bamboo in their products, also include wood fillers, post-consumer waste and wood pulp or fiber whose products are not truly tree-free (e.g. Canefields, Terradigm, New Leaf Paper Company and Quena Paper Company).

3.

Companies producing a tree-free paper product employing wheat, corn, bananas or kenaf fiber.  These materials have not proven to yield a commercially successful product for scalable quantities.quantities (e.g. Echo Paper Store, Natures Paper Company, Banana Paper Company, and Vision Paper Company).

4.

Companies employing tree-free competitive products that are unable to meet standard quality requirements (e.g. “jam-free" copy paper) (e.g. Shangi Hongtuo,ShangiHongtuo, Ltd.).

We believe the products we acquire from SCPC and their contract manufacturers are the only commercially scalable tree-free paper products able to meet U.S. customer product quality specifications (moisture content, multi-sheet feeding, etc.).In.In addition, we believe that our competitors lack economical access to the hundreds of thousands of metric tons of bagasse and bamboo available to SCPC.  Through SCPC, we believe we can supply commercial quantities of our products.

Regulation

SCPC isSCPC’s contract manufacturers are subject to extensive regulation by various Chinese national and local agencies concerning compliance with environmental control statutes and regulations.  The major environmental regulations applicable to SCPCSCPC’s contract manufacturers include:

•

The Environmental Protection Law of the PRC

•

The Law of PRC on the Prevention and Control of Water Pollution

•

Implementation Rules of the Law of PRC on the Prevention and Control of Water Pollution

•

The Law of PRC on the Prevention and Control of Air Pollution

•

Implementation Rules of the Law of PRC on the Prevention and Control of Air Pollution

•

The Law of PRC on the Prevention and Control of Solid Waste Pollution

•

The Law of PRC on the Prevention and Control of Noise Pollution  

SCPC isSCPC’s contract manufacturers are also subject to periodic inspections by local environmental protection authorities.  SCPC hasSCPC’s contract manufacturers have received certifications from the relevant PRC government agencies in charge of environmental protection indicating that their business operations are in material compliance with the relevant PRC environmental laws and regulations.  To our knowledge, SCPC isSCPC’s contract manufacturers are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.

These regulations impose limitations (including but not limited to effluent and emission limitations) on the discharge of materials into the environment as well as require SCPCSCPC’s contract manufacturers to obtain and operate in compliance with conditions of permits and other governmental authorizations.  Future regulations could materially increase SCPC’s contract manufacturers’ capital requirements and certain of their operating expenses in future years. Such increases in SCPC’s contract manufacturers’ required outlays to comply with such regulation could result in higher costs being passed to our Company and could have a negative effect on the competitiveness of our product offerings.  

Our Employees

We have approximately sevensix full-time employees as of June 30, 2011 and two contracted positions.January 15, 2013.  None of our employees are subject to collective bargaining agreements.  

Backlog

We do not have any material order backlog as of the date of this Current Report.registration statement.   

Seasonality

We do not expect that our business will experience significant seasonality.

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DESCRIPTION OF PROPERTY

Our corporate offices are located at 2280 Lincoln Avenue, San Jose, California 95125, where we lease approximately 1,560 square feet of office space. This lease is for a term of 38 months and commenced in February 2011. The current monthly rental payment including utilities and operating expenses for the facility is approximately $3,700.$4,700. We believe this facility is in good condition and adequate to meet our current and anticipated requirements.

Our company utilizes third party warehousing providers in California, Washington, Texas, and Massachusetts to store its products.

LEGAL PROCEEDINGS

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.  However, there are 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.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated.  The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein.  In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.

Overview and Financial Condition

Discussions with respect to our Company’s operations included herein refer to our operating subsidiary, Sugarmade-CA.  Our Company purchased Sugarmade-CA on May 9, 2011.  We have no operations other operations than those of Sugarmade-CA.  Information with respect to our Company’s nominal operations prior to the Sugarmade Acquisition is not included herein.  

Results of Operations for the yearyears ended December 31, 2010June 30, 2012 and the period March 2, 2009 (inception) to December 31, 20092011.

Revenues

Our Company had insignificantnet revenues totaling $40,792$141,750 and $37,629 for the years ended June 30, 2012 and 2011, respectively, an increase of $104,121 (276.7%).  Our net revenues for the year ended December 31, 2010 (we had no revenues in 2009).June 30, 2012 consist of gross sales totaling $237,156 and returns and allowances of $95,405.  During the fourth quarter of 2012, we became aware of quality issues surrounding our copy paper products.  We were able to trace the reported problems with paper quality back to manufacturing issues with our third party contract manufacturer.  Our Company had its first sale in January 2010.  Our activities to datehas since implemented additional quality assurance procedures both during and at the completion of the production processes and believes that all known issues have been primarily centered on establishing relationships withaddressed.  As a result of the production difficulties, we issued full refunds to our suppliercustomers for the poor quality paper, and potential customers, recruiting an executive management team and instituting systems to control and grow our future operations.  Going forward, we plan to heavily market our tree-free paper products and educate potential customers concerning their quality, suitability and environmental advantages over traditional tree-based paper products.  Whileas of the date of this report, we are optimistic about the prospects forworking to deliver fully tested, quality paper to our Company, since this is a relatively new product offering with significantly different characteristics compared with existing paper products on the market (and we have not recognized significant revenuescustomers to date), there can be no assurance about whether or when our products will generate sufficient revenues with adequate margins in order for our Company to be profitable.meet continuing demand.

Cost of goods sold

Total cost of goods sold increased by $248,588 from $59,083 for the year ended June 30, 2011 to $307,671 for the year ended June 30 2012.  Cost of goods sold totaled $53,483 in 2010 (there were no corresponding amounts in 2009).  Included in costsfiscal 2012 includes a provision for inventory obsolescence totaling $195,880 resulting from inventory quality issues we discovered during the three months ended June 30, 2012.  It was our management’s assessment that based on a thorough review of the inventory and the extent of the quality issues discovered, our Company’s inventory was materially impaired. Upon further analysis and estimations of our inventory’s future marketability, we recorded a charge for inventory obsolescence.   For the year ended June 30, 2011, the cost of goods sold were materials and freight costs totaling $35,944 as well asalso reflected a charge for inventory obsolescence totaling $17,539.  $32,634 resulting from a package redesign impacting the entire on hand inventory at that time.

Gross margin

Gross margin was a negative $12,691 in 2010 with no corresponding amounts in 2009.$165,921 for the year ended June 30, 2012 compared to a negative margin of $21,454 for the year ended June 30, 2011.  The overall negative gross margin for both years resulted from the provision for inventory obsolescence discussed above.  We had a slightly positive gross margin from sales before our provision for inventory obsolescence.  The gross margin percentage realizedobsolescence in 2010 is not indicative of anticipated future results due to the lack of product sales volume to date.both fiscal 2012 and 2011.     

Selling, general and administrative expenses

Selling, general and administrative expenses totaled $480,156$3,817,320 and $130,042 in 2010$3,072,306 for the years ended June 30, 2012 and 2009,2011, respectively.  Included in these expenses were payroll and related expenses of $183,591$1,255,462 and $22,860$1,148,252 during the years ended June 30, 2012 and 2011, respectively.  Included in 2010our payroll and 2009, respectively.related expenses are charges for share based compensation totaling $204,404 for the year ended June 30, 2012 and 99,737 for the year ended June 30, 2011.  Consulting expenses totaled $170,892 in 2010$1,880,747 and $10,030 in 2009,1,545,912 during the years ended June 30, 2012 and 2011, respectively, while legal and auditing expenses totaled $45,964$104,783 and $86,691$141,056 during the years ended June 30, 2012 and 2011, respectively.  Included in 2010consulting expenses are noncash charges for the issuance of common stock for services totaling $1,633,900 for the year ended June 30, 2012 and 2009, respectively.  Warehousing$2,027,938 for the year ended June 30, 2011.  

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Freight and storageshipping costs totaled $25,511 and $3,156$77,183 for the year ended June 30, 2012 compared to $8,980 for the year ended June 30, 2011.  The increased freight charges during 2012 reflected both increased customer sales compared to 2011 as well as the additional charges incurred in 2010 and 2009, respectively.shipping additional product to our customers to replace their inventory of paper with reported quality issues.  Travel expenses were $11,474totaled $156,149 and 38,986 during the years ended June 30, 2012 and 2011, respectively.  The increased travel related expenditures in 20102012 resulted from additional travel and $2,181 in 2009.lodging for both the operations and sales teams.  Advertising and promotion totaled $4,165 in 2010 with no corresponding amounts in 2009.$61,281 and $23,975 during the years ended June 30, 2012 and 2011, respectively.  

Amortization of license and supply agreement

We recognized amortization of our license and supply agreement with SCPC totaling $18,400$18,403 and $3,067 in 2010$18,402 during the years ended June 30, 2012 and 2009,2011, respectively.  The amortization represented the recognition of the cost of the SCPC agreement over its initial twenty year term on a straight-linestraight line basis.  During the three months ended June 30, 2012, our management determined the value of the license and supply agreement with SCPC had been impaired as a result of changes in our manufacturing processes, enhancements to our product formulation and the limitations on our production credit facility.  During the year ended June 30, 2012, our company diversified our manufacturing and process management options to include other third party contract manufacturers.  Additionally, we developed a new formulation for the tree-free pulp, which has improved our overall paper quality.  Finally, we have been working to secure additional credit options to allow us to produce paper for inventory purposes and for sale to distribution partners.  Based on this assessment, the fair value of the remaining intangible asset was deemed negligible and as such the entire intangible asset totaling $318,983 was charged to operations during the three months ended June 30, 2012.

Interest expense and interest income

Interest expense totaled $105,766 and $9,879$2,156 for the year ended June 30, 2012 as compared to $93,584 for the year ended June 30, 2011.  Interest expense in 2010 and 2009, respectively.fiscal 2012 resulted from expenses incurred in connection with a note payable to a bank with an outstanding balance totaling $150,000 from December 2011 through June 20, 2012. Interest expense in 2011 was primarily the result of amounts dueaccrued and paid in cash under notes payable outstanding through December 31, 2010.April 2011.  Interest income totaled $18,532$1,376 and $20,275 during the years ended June 30, 2012 and 2011, respectively.  During the year ended June 30, 2011, a total of $693,900 in 2010 andprincipal under outstanding promissory notes was converted to equity while principal outstanding totaling $162,000 was repaid in cash.  Interest income for the year ended June 30, 2011 was derived

16

attempt mitigate some of these costs by using pre-purchased freight, alternative routes and /or longer lead times.  We are expecting our freight costs to return to more normal levels in the coming months.  For the three months ended September 30, 2011, we recorded no cost of goods sold is a provision for inventory obsolescence totaling $15,195 in 2011 (no comparable amounts in 2010).  The provision representsas the reservingcost of inventory partsliquidated during the quarter was previously written off in the prior year as a result of a different grade,product packaging or composition from our current customer product offerings.    changes.

Gross margin

Gross margin totaled a negative $15,001was minimal for the first fiscal quarter of 2013 compared to margins totaling $26,546 for the same period in fiscal 2012.  The unusually high margins for the three months ended March 31,September 30, 2011 ($6,138related to the sales of previously written off inventory.  As noted above, the focus on replacing our customers’ product coupled with higher than normal product costs let to a very small margin for the comparable period in 2010).  The gross margin percentage realized in both periods do not represent what we are currently estimating will be typical margin percentages going forward when we have more substantial levels of sales revenues.three months ended September 30, 2012.      

Selling, general and administrative expenses

Selling, general and administrative expenses totaled $238,155$621,117 and $813,463 for the three months ended March 31,September 30, 2012 and 2011, ($155,044 for the comparable period in 2010).respectively.  Included in these expenses for the first fiscal quarter of 2011 were $360,600 of non-cash related charges for stock compensation and 2010 respectively were payrollconsulting expenses, compared to $149,053 of non-cash related costs for stock compensation and related expenses of $68,347 and $75,109.  Consulting expenses totaled $83,373 in 2011 and $31,402 in 2010, while legal and auditing expenses totaled $36,027 and $23,416 in 2011 and 2010, respectively.  Warehousing and storage costs totaled $2,806 and $8,705 in 2011 and 2010, respectively.  Travel, meals and entertainment expenses were $14,924 in 2011 and $6,670 in 2010.  Advertising and promotion totaled $10,839 in 2011 and $3,269 in 2010.  

Amortization of license and supply agreement

We recognized amortization of our license and supply agreement with SCPC totaling $4,601 and $4,176consulting services for the three months ended March 31,September 30, 2012.    Payroll and related expenses including noncash items totaled $330,718 and $289,702 during the three months ended September 30, 2012 and 2011, respectively.  Consulting expenses totaled $141,173 and 2010,$386,288 during the three months ended September 30, 2012 and 2011, respectively, while legal and accounting expenses totaled $34,694 and $43,728 during the three months ended September 30, 2012 and 2011, respectively.   The amortization representedIncluded in consulting expenses are noncash charges for the recognitionissuance of common stock for services totaling $93,745 for the cost ofthree months ended September 30, 2012 and $301,000 for the SCPC agreement over its initial twenty year term.three months ended September 30, 2011.  

Interest expense and interest income

Interest expense totaled $27,202 and $23,682$7,870 for the three months ended March 31, 2011 and 2010, respectively.September 30, 2012 compared to none for the same period in 2011.    Interest expense was primarilyin the resultfirst quarter of amounts due underfiscal 2013 resulted from our note payable with our bank totaling $150,000, as well as interest from the convertible notes payable outstanding through March 31, 2011.  Interest incomeand the related amortization of the discount on the convertible notes.  Net convertible notes payable including accrued interest totaled $6,350 in 2011$205,797, consisting of gross notes payable of $241,803, and $2,543 in 2010 and was derived almost exclusively from a note receivable due from a stockholder and former

17

Our capital requirements going forward will consist of financing our operations until we are able to reach a level of revenues and gross margins adequate to equal or exceed our ongoing operating expenses.  Other than the operatingnotes payable discussed above, borrowings from our bank and the production credit facility with SCPC,our suppliers, we do not have any credit agreement or source of liquidity immediately available to us.

Given estimates of our Company’s future operating results and our credit arrangements with SCPC,our suppliers, we are currently forecasting that we havewill need to secure additional financing to obtain adequate financial resources to reach profitability.  As of the date of this report, we estimate that the cash necessary to implement our current business plan for the next twelve months is approximately $2,500,000.  As of September 30, 2012, we had a cash balance of approximately $188,697.  However, we cannot provide any assurances that we will be able to raise additional funds to meet our cash needs; that the cash required to implement our current plan will not exceed our estimated amount of $2,500,000; or that we can achieve cash flow break-even.  Weprofitability with the estimated amounts we determined above, or that we will ever achieve profitability.

Based on our need to raise additional funds to implement our business plans for the next twelve months, we have nevertheless included a discussion concerning the presentation of our financial statements on a going concern basis in the notes to our financial statements and our independent public accountants have included a similar discussion in their opinion on our financial statements through December 31, 2010.  

Should we not achieve our forecasted operating results or should strategic opportunities present themselves such that additional financial resources would present attractive investing opportunities for our Company, we may decideJune 30, 2012.  We will be required in the near future to issue debt or sell our Company’s equity securities in order to raise additional cash.  Therecash, although there are no firm arrangements in place for any such financing at this time.  We cannot provide any assurances as to whether we will be able to secure anythe necessary financing, or the terms of any such financing transaction if one were to occur.  The failure to secure such financing could severely curtail our plans for future growth or in more severe scenarios, the continued operations of our Company.  

Capital Expenditures

Our current plans do not call for our Company to expend significant amounts for capital expenditures for the foreseeable future beyond relatively insignificant expenditures for office furniture and information technology related equipment as we add employees to our Company.  SCPC producesWe are however continually evaluating the production processes of our products thatthird party contract manufacturers to determine if there are investments we marketcould make in their processes to achieve manufacturing improvements and significant cost savings.  Any such desired investments would require additional cash above our warehousing facilities are contracted for with third parties (and therefore do not require us to make capital purchases in this area).current forecast requirements.  

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Cash

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 customers 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.  Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our allowance for doubtful accounts will be adequate.

From time to time, we may have a limited number of customers with individually large amounts due.  Any unanticipated change in a customer’s creditworthiness could have a material effect on our results of operations in the period in which such changes or events occurred.  Accounts receivable at September 30, 2012 was $2,145, which we expect to be collectible.

Inventory

Inventory consists of finished goods paper and paper-based products ready for sale and is stated at the lower of cost or market.  We value inventories 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 manufactures to our warehouses.  Outbound freights costs related to shipping costs to our customers are considered period costs and reflected in selling, general and administrative costs.  Outbound freight costs to customers were minimal for the three months ended September 30, 2012 and 2011. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value orof our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value.  During the fourth quarter of fiscal 2012, our Company became aware of quality issues surrounding its copy paper products.  As a result of these quality issues, we determined that the historical inventory values were not realizable and we recorded a reserve for inventory obsolescence.  The balance for this reserve totaled $195,880 at September 30, 2012.

Other current assets

Other current assets consist mainly of prepaid insurance, deposits and other related expenses.

Equipment

Equipment is stated at cost, less accumulated depreciation.  Expenditures for maintenance and repairs are charged to expense as incurred.  Items of equipment with costs greater than $1,500 are capitalized and depreciated on a straight-line basis over their estimated useful lives ranging from 3-7 years.

Intangible assets

We had valuation reserves against inventoryintangible assets related to the exclusive license and supply agreement (“LSA”) with Sugar Cane Paper Company.    During the year ended June 30, 2012, we performed a review of $17,539 at December 31, 2010 (none at December 31, 2009).the LSA including estimations of the likely future cash flows to be derived from the LSA.  Upon completing the review, it was management’s assessment that due to changes in our Company’s manufacturing process, enhancements to the product formulation and the limitations on the credit facility, the fair value of the intangible asset had been impaired to the level that the asset has negligible remaining value. As such, our Company recorded an impairment charge totaling $318,983 for the remaining value of the license and supply agreement as of June 30, 2012.  

Valuation of long-lived assets

We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate their net book value may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.  Our management currently believes there is no impairmentAs noted above, for the year ended June 30, 2012, it

24

was determined that the carrying value of our long-lived assets. There canintangible assets should be no assurance, however,zero and we recorded an impairment charge for the full carrying value.

Income taxes

We provide for federal and state income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that market conditionsincludes the enactment date.

The accounting guidance for uncertainties in income tax prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company recognizes a tax benefit from an uncertain tax position in the financial statements only when it is more likely than not that the position will not changebe sustained upon examination, including resolution of any related appeals or demand for our products under development will continue. Eitherlitigation processes, based on the technical merits and a consideration of these could result in future impairment of long-lived assets.  the relevant taxing authority's widely understood administrative practices and precedents.

Stock based compensation

Future stockStock based compensation cost will beis 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 will estimate the fair value of employee stock options granted using the Black-ScholesBlack-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 will use comparable public company data among other information to estimate the expected price volatility and the expected forfeiture rate.  There were no options or warrants issued or outstanding from our Company’s inception through December 31, 2010.Non-employee stock grant costs are measured and recognized upon completion of performance and tied to the contractual obligations of the parties we transact with.

Net lossLoss 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.  

Recent accounting pronouncements

For discussion of recently issued and adopted accounting pronouncements, please see Note 1 to the Sugarmade financial statements included herein.  

1925

MANAGEMENT

Prior to the date of the Exchange Agreement, our Board of Directors consisted of one sole director, Kevin Russeth, who was elected to serve until his successor is duly elected and qualified or until the next annual meeting of our stockholders. Mr. Russeth resigned from our Board of Directors on June 14, 2011.  Scott Lantz was appointed to our Board of Directors effective on the date of the Exchange Agreement.  CliftonAgreement.Clifton Kuok Wai Leung, Sandy Salzberg, C. James Jensen and Ed Roffman were appointed to our Board of Directors on June 14, 2011. In addition, effective on the date of the Exchange Agreement Mr.Russeth resigned each of his officer positions with our company and we appointed Mr. Lantz our Chief Executive Officer and Chief Financial Officer.  

Effective November 27, 2012, Ed Roffman and C. James Jensen resigned from the Board of Directors of the Company.  The resignations were not the result of any disagreements with the Company.  Also effective November 27, 2012, the Board of Directors of the Company appointed Stephan P. Pinto and Jonathan Leong to the Board of Directors to fill the vacancies created by the resignations of Mr. Roffman and Mr. Jensen.  Effective December 6, 2012, the Board of Directors of the Company voted to increase the number of directors to 7, and appointed Kevin Kearney and Henry Michon to the Board of Directors to fill the vacancies created by the increase in the number of directors.  The Board of Directors also appointed Mr. Stephan Pinto to serve as Chairman of the Board of Directors.

The names of our current officers and directors and the incoming directors, as well as certain information about them, are set forth below:

Name

Age

Position

Scott Lantz

3637

Chief Executive Officer, Chief Financial Officer and Director

Stephan P. Pinto

58

Chairman and Director

Clifton Kuok Wai Leung

31

Director

Sandy Salzberg

51

Director

C. James JensenJonathan R. Leong

7060

Director

Ed RoffmanHenry Michon

6162

Director

Kevin M. Kearney

59

Director

Scott Lantz. Mr. Lantz was appointed as our Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors and a Director of our Company on May 9, 2011.  Effective December 6, 2012, Mr. Pinto was appointed as Chairman of the Board.  Mr. Lantz has served ashas the Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors and a Director  of our Companysubsidiary since December 2009 and was a co-founder of our Companysubsidiary in 2009.  From November 2002 to February 2009, Mr. Lantz was employed by The Margarita King, a privately held consumer packaged goods company, during which time he served as its Chief Operating Officer and its Vice President of Sales.

Stephan P. Pinto.  Mr. Pinto was appointed to our Board of Directors on November 27, 2012.  Mr. Pinto has served for the past 14 years as President and Chief Executive Officer of Allied Financial Services, Inc., which is an investment and advisory company making investments on behalf of itself and others in emerging companies and real estate syndications. Between October 2009 and July 2010, Mr. Pinto also held the position of Chairman of the Board of directors of our then private subsidiary, Sugarmade, Inc., a California corporation, prior to our acquisition of the subsidiary on May 9, 2011.

Clifton Kuok Wai Leung.Mr. Leung was appointed to our Board of Directors on June 14, 2011. Mr. Leung has served as a member of ourthe Board of Directors of our subsidiary since October 2009, and is also the Chief Executive Officer and 100% owner of SCPC.  SCPC since early 2006.

Sandy Salzberg.Mr. Salzberg was appointed to our Board of Directors on June 14, 2011.   Mr. Salzberg has served as a member of ourthe Board of Directors of our subsidiary since August 2010.   Since April 2003, Mr. Salzberg is the President of Shasta Inc.  Prior to that, from May 1988 to June 1991 Mr. Salzberg served as Area Vice President with PepsiCo’s Frito-Lay Snack division.  From March 1986 to April 2001, Mr. Salzberg was a Regional Vice President at the Frito-Lay Snack Division of PepsiCo.  Mr. Salzberg has a Bachelor’s Degree in Marketing from the University of Washington.  

C. James Jensen.Jonathan R. Leong.Mr. JensenLeong was appointed to our Board of Directors on April 2011.November 27, 2012.  Mr. JensenLeong is the co-founderowner of JLA Risk Services and managing partnerInsurance Agency, an insurance agency and safety engineering company.  He is also the founder of Mara Gateway Associates, L.P,Legends Bar and Jalapeno Mex Grill which are both located at the San Francisco International Airport.  From 1988 to 1994, Mr. Leong was also the founder and director or Isys Inc., a privately owned real estate investment company.  Additionally,high speed vision inspection system for paper, steel, aluminum and manufacturing.  Mr. JensenLeong is the co-managing partner of Stronghurst, LLC., an advisory and financial services firm.  Mr. Jensen has previously served as the Chairman and Chief Executive Officer of Thousand Trails, Inc., an industry leader of private campground resorts; President of Grantree Furniture Rental Corporation, a privately held furniture rental company, and Senior Vice President and Chief Operating Officer of Great BooksFounder of the Western World. During the past 5 years, Mr. Jensen has served on theAsian American Donor Program, which is an out-reach program for donors to support bone marrow

26

transplants.  He serves as a governor-appointed board of Health Benefits Inc. and as Chairmanmember of the Board for Thousand Trails,California Earthquake Authority, a public-private earthquake insurance agency.  Mr. Leong is a board member of Asian Inc., which focuses on low income housing and small businesses.  He is also a board member of I Hear Inc., a company developing a new kind of hearing aid.

Ed Roffman.Henry Michon.  Mr. RoffmanMichon was appointed to our Board of Directors on December 6, 2012.  Mr. Michon is currently the Senior Vice President of Regional Sales and Merchandising for Safeway, Inc.  Safeway is a Fortune 500 company and the second largest supermarket chain in April 2011.North America with over 1600 stores and estimated annual revenues of over $40 billion.  Mr. Roffman,Michon has beenworked with Safeway since 1990 and has held numerous management positions of increasing responsibility throughout his career with Safeway.  For the Chief Financial Officer for Public Media Works, Inc. since October 2010.last 13 years, Mr. RoffmanMichon has also been an independent business consultant since April 2006.the Board President of the Northern California Food Industries Circle which raises funds for the City of Hope, California.  Mr. Roffman currentlyMichon has served for the last 10 years as the Board President of the Northern California Food and Drug Industry Alliance which raises funds for Easter Seals.  He has been involved with Easter Seals for the last 20 years and presently serves as a Director on the Board of Directors for Easter Seals of Northern California.  Over the last 25 years, Mr. Michon has been instrumental in raising over $50 million for both of these charitable organizations. Mr. Michon serves on the boardNational Hispanic University Board of Directors located in San Jose, California, and has received numerous awards and national recognition for his humanitarianism, community service and charitable works. Mr. Michon has a Bachelor of Arts Degree in Business and Marketing from Saint Mary’s College.

Kevin M. Kearney.  Mr. Kearney was appointed to our Board of Directors on December 6, 2012.  Mr. Kearney is chairmanthe President of Kearney & O’Banion, Inc., which he founded in 1980.  Kearney & O’Banion specializes in commercial properties in San Francisco and the surrounding Bay area and has generated revenues in excess of $180 million.  Mr. Kearney is responsible for marketing and sales efforts, developing and presenting proposals with cost estimates, contract negotiations, pre-construction consulting, and design and project management services.  Since 2001, Mr. Kearney has also been a member of the audit committeeBoard of Westinghouse Solar (formerly Akeena Solar)Directors of Promia, Inc., an established development firm and software provider for cyber security. Promia specializes in providing solutions designed to support highly secure, reliable, scalable and interoperable business applications for large corporations, and its customers include the U.S. Navy, National Security Agency as well as a designer and distributornumber of solar modules. DuringFortune 500 companies. Mr. Kearney received his MFA, Magna Cum Laude, from the past five years Mr. Roffman has also served on the Boards and audit committeesUniversity of Silverstar Holdings and Adex Media.California, Davis.

In evaluating director nominees, our Company considers the following factors:

·

The appropriate size of the Board;

·

Our needs with respect to the particular talents and experience of our directors;

·

The knowledge, skills and experience of nominees;

·

Experience with accounting rules and practices; and

·

The nominees’ other commitments.

Our Company’s goal is to assemble a Board of Directors that brings our Company a variety of perspectives and skills derived from high quality business, professional and personal experience.  Other than the foregoing, there are no stated minimum criteria for director nominees.

20

·

Mr. Michon’s extensive knowledge and experience in the areas of retail and consumer products are expected to be very beneficial to the Company.   In his current position as Senior Vice President of Regional Sales and with over 35 years at Safeway, Inc., the second largest supermarket chain in North America, Mr. Michon brings invaluable insight in the areas of retail sales, marketing and distribution models.consumer products.

·

Mr. Roffman’s extensive financialKearney founded Kearney & O’Banion, Inc. and accounting experienceis currently its president, focusing on the sales and his training as a certified public accountant brings a valuable assetmarketing efforts of the company.  His general business knowledge and many years of presenting proposals, contract negotiations and project management will be of benefit to our Board.  Mr. Roffman's experience on public company boards has provided extensive audit committee experienceCompany and the board as well as additional insight into the practices of other Boards and their committees.  He has also been designated to head the audit committee and serve as the financial expert forwe continue our Company’s Board of Directors.  planned growth.

There are no family relationships among any of our officers or directors.  

Corporate Governance

Leadership Structure

Prior to the consummation of the Exchange Agreement we had only one director who also served as our Chief Executive Officer. Following the Exchange Agreement, Scott Lantz will actacted as our Chairman and Chief Executive Officer.  OurFollowing the expansion of our Board to seven board members, and the appointment of Stephan Pinto as Chairman, our Board of Directors does not havenow has a lead independent director. Our Board of Directors has determined that its leadership structure was appropriate and effective for the Company given its stage of operations.  In connection with the Exchange Agreement, we intend to establish a full Board of Directors, including a majority of independent directors.  We will re-evaluateMr. Lantz is currently our leadership structure once we have added additional members to our Board of Directors.President and Chief Executive Officer.

Board Committees

We presently do not have an audit committee and a compensation committee or nominating committee or committee performing similar functions, as our management believes that until this point it has been premature at the early stage of our management and business development to form an audit, compensation or nominating committee.  However, our new Board plans to form an audit, compensation and nominating committee in the near future. We envision that theThe audit committee will beis primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and system of internal controls. We envision that theThe compensation committee will beis primarily responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of our executive officers.  We presently do not have a nominating committee and do not foresee the need for such a committee at this time.  The responsibilities of the nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. Until these committees are established,there is a need for a nominating committee, these decisions will continue to be made by our Board of Directors.

Director Independence

The Board has determined that Messrs. Leung, Salzberg, JensenLeong, Michon and RoffmanKearney are independent as the term "independent" is defined by the rules of NASDAQ Rule 5605.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to,

21

SELLING STOCKHOLDERS

We are registering 6,048,7006,068,700 shares of our common stock pursuant to this prospectus (3,063,100 shares of outstanding common stock and 2,985,6003,005,600 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock).  See also “PROSPECTUS SUMMARY—Recent Transactions,” above.  This prospectus is a part of that registration statement.  

The following includes a summary of any transaction occurring since January 1, 2010, or any proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds $120,000, and in which any related person had or will have a direct or indirect material interest (other than compensation described under "Executive Compensation" above).  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.    

·

Effective May 11, 2012, our Company entered into a Share Cancellation Agreement with Clifton Leung, a director and shareholder of our Company, pursuant to which Mr. Leung agreed to the cancellation of 500,000 shares of Company common stock held by him.  In consideration for the cancellation, our Company agreed to pay Mr. Leung $5,000 representing a price of $0.01 per share of common stock.  Our Company accounted for this transaction as a purchase and immediate retirement of treasury shares.  Effective June 30, 2012, Mr. Leung forgave the amount owed to him from the share cancellation agreement.

·

On October 1, 2012, our Company obtained a $3 million dollar production line of credit line from Norco Sourcing (Hong Kong) Company Ltd (“Norco”).  One of our directors, Clifton Leung, has an ownership interest in Norco.  The line of credit will allow our Company to produce product for inventory purposes without the need for customer purchase orders as a requirement to order product from its contract manufacturer.  The line of credit will bear interest at 9% per annum and require payment 60 days after shipment of the product.  For the initial three to four months, the line will fund the full cost of the production, after which our Company will pay a 40% deposit for subsequent productions.  Additionally, once our Company utilizes the line of credit, we will grant Norco 100,000 shares of Common stock and warrants to purchase 100,000 shares of the  Company’s common stock at an exercise price of $0.01 per share.   Similarly, once our Company outstanding balance on the line exceeds $1,000,000 dollars, our Company will issue an additional 100,000 shares of stock and warrants to purchase 100,000 shares of stock at an exercise price of $0.01 per share. Finally, if our Company exceeds $2,000,000 balance on the line, our Company will again issue 100,000 shares of stock and warrants to purchase 100,000 shares of stock at an exercise price of $0.01 per share.  As of January 15, 2013, the company has not utilized the Norco production credit line.

·

On April 27, 2011, we issued a total of 2,484,299 and 800,000 shares of common stock to Scott Lantz our Chief Executive Officer and Clifton Leung, a member of its Board of Directors, respectively, in exchange for nominal cash consideration.  

·

On May 9, 2011 we completed the Cancellation Agreement with Kevin Russeth, Steven Davis and Jonathan Shultz.  At the time of the Cancellation Agreement, Mr. Russeth was our sole director and was our Chief Executive Officer and Chief Financial Officer.  In addition, each of Messrs. Russeth, Davis and Shultz were stockholders of our Company holding in excess of 10% of our outstanding common stock.  Under the terms of the Cancellation Agreement, Messrs. Russeth, Davis and Shultz cancelled 8,500,000 shares of our common stock held by them in exchange for Sugarmade-CA's agreement to consummate the transactions contemplated by the Exchange Agreement and 200,000 warrants to purchase shares of our common stock.  The warrants are three year warrants to purchase common stock at a price of $1.25 per share.  Also under the terms of the Cancellation Agreement, Messrs Russeth and Shultz agreed to redeem an aggregate of 262,500 shares of our outstanding common stock in exchange for cash payments aggregating to $210,000.

·

Effective, May 2011,  we entered into a twenty-five month consulting agreement with Mr. Joseph Abrams for him to provide assistance in a variety of areas including defining and communicating the Company message, identifying strategic growth areas, identifying potential merger or acquisition candidates, introductions to potential business development partners, introductions to potential capital partners and defining marketing and sales opportunities. In connection with this Agreement, the company issued Mr. Abrams 500,000 shares of common stock.  In December 2011, our Company vested all of the remaining unvested shares.  For the year ended June 30, 2012, we recorded noncash charges totaling $1,547,000 in connection with this stock issuance.

·

In 2010, Sugarmade-CA loaned money to Ethan Farid Jinian in exchange for a note payable secured by shares of stock in our Company.  At the time of the loan, Mr. Jinian was a former director and executive officer of Sugarmade-CA and was a 5% stockholder.  The loans bore interest at a rate of 14 percent per annum.  The largest amount outstanding under the

29

loan was $163,000.  Mr. Jinian repaid the loan in its entirety through the tender to Sugarmade-CA of 59,962 shares of common stock for cancellation.  

·

Effective January 1, 2011, we entered into the LSA with SCPC.  We are dependent on SCPC to supply us with paper products and our costs of goods sold, exclusive of freight and transportation costs and inventory obsolescence are generally comprised of payments to SCPC for our products.  Clifton Leung, a director and 10% stockholder in our Company is the Chief Executive Officer and 100% owner of SCPC.  

·

On April 27, 2011, we issued two-year warrants to purchase up to 600,000 shares of our common stock with an exercise price of $1.25 per share to George Mainas, Kevin Kearney and Garrett Cecchini in exchange for consulting services performed on our behalf.  

·

On November 22, 2010, we issued 500,000 shares of common stock to George Mainas and Garrett Cecchini in exchange for consulting services performed on our behalf.

The price at which we issued common stock and the exercise price of the accompanying warrants were negotiated with the purchasers and reflected our progress at the time of the issuance, our cash position and the amount of funds being invested.  Our progress and the relative strength of our cash position favorably impacted (i.e. increased the price per share and exercise price per share) while the size of the cash contributed tended to result in more favorable terms for the investor (i.e. lowered the price per share and exercise price per share).  

The following table provides information regarding the beneficial ownership of the outstanding shares of our common stock by the selling stockholders.  In computing the number of shares beneficially owned by a selling stockholder and the percentage of ownership of that selling stockholder, we have included all shares of common stock owned or beneficially owned by that selling stockholder. Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Securities and Exchange Act of 1934, as amended (“Exchange Act”) and includes shares which can be acquired within 60 days through exercise or conversion of a security. Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to the shares, subject to community property laws where applicable.  Each selling stockholder's percentage of ownership in the following table is based on the 10,256,00010,538,526 shares of our common stock outstanding as of August 1, 2011January 15, 2013 and options and warrants expected to be exercisable as of (or withinMarch 16, 2013 (within sixty days of) August 1, 2011of January 15, 2013) totaling 3,509,392.4,230,427.  In determining the percentage of shares

23

31

(4) The natural person(s) or public company that has the ultimate voting or investment control over the shares held by the named selling stockholders is as follows:

Sandor Capital Master Fund, L.P. – John S. Lemak, Manager

2030 Investors 401K Plan Ellison Morgan – Ellison Morgan

Equity Trust Company dba Sterling Trust Custodian fbo Mark Geist -Mark Geist

Lovitt and Hannan, Inc. – J. Thomas Hannan

Marger Investments, LLC – Jerome Marger, Member

Iroquois Capital - Iroquois Capital Management L.L.C. (“Iroquois Capital”) is the investment manager of Iroquois Master Fund, Ltd (“IMF”). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As Joshua Silverman and Richard Abbe make voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF, they may be deemed to have voting control and investment discretion over securities held by each of the Iroquois Funds.

Pax Beal and Sophie Taggart Trust – Pax Beal

The Mark and Susan Sandson Revocable Living Trust UA February 18, 1997—Mark Sandson, Trustee

The Daniel David Tompkins Separate Property Trust Under Trust Dated August 8, 2006—Daniel Tompkins, Trustee

(5) The totals for the following listed shares of common stock and warrants to purchase common stock include the following:

Karim Merzian – 1) Karim Merzian & Sylvie Merzian Trust – 8,000 shares and a warrant to purchase 8,000 shares; 2) Ameriprise Trust Company, FBO Karim Merzian – 20,000 shares and a warrant to purchase up to 20,000 shares;

Garrett Cecchini – Garrett and Sheri Cecchini – 37,000 shares and a warrant to purchase up to 37,000 shares;

To our knowledge, based on information obtained from the selling stockholders, none of the selling stockholders currently have short positions in our common stock, nor is any of the selling stockholders a registered broker-dealer or an affiliate of a broker-dealer.

Relationships with the Selling Stockholders

With the exception of Sanford Salzberg (current Board members), Stephen P. Pinto (current Chairman and Board member), C. James Jensen Sanford Salzberg and Ed Roffman (current(former Board members), Kevin Russeth (former officer, director and 10% or greater shareholder), Jonathan Shultz (former 10% or greater shareholder), and Steve Davis (former 10% or greater shareholder)shareholder and Stephen P. Pinto (former director)legal counsel), none of the selling stockholders has had any position, office or other material relationship with us within the past three years.  

2532

PLAN OF DISTRIBUTION

Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTC MarketsBulletin Board or any other stock exchange, market or trading facility on which the shares are traded or in private transactions.  These salesThe selling stockholders may besell these shares of common stock from time to time in one or more transactions, in negotiated transactions or otherwise, at fixedprevailing market prices or negotiated prices.at prices otherwise negotiated.  A Selling Stockholder may use any one or more of the following methods when selling shares:

·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

·

broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

a combination of any such methods of sale; or

·

any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.  

In connection with the sale of the common stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The Selling Stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares.  The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.  

Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder.  In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus.  There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.

2633

We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the Selling Stockholders or any other person.  We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

2734

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods.  No other executive officers received total annual compensation in excess of $100,000.

Sugarmade, Inc. (Sugarmade-CA)

Change in

Pension

Value and

Non-Qual.

Deferred

Stock

Option

Non-equity

Compens.

All Other

Salary

Bonus

Awards

Awards

Incentive

Earnings

 Comp.

Total

Position

Year⁽²⁾

($)

($)

($)

($)⁽³⁾

Comp ($)

($)

($)⁽¹⁾

($)

Scott Lantz (3)

20102012

120,000216,000

-

-

-

-

14,568

230,568

2011

132,500

-

3,519

123,519

2009

10,000742,785

-

-

-

-5,004

-

-

10,000880,289

President/Chief Executive Officer/Director since DecemberMay 9, 2009.2011.

Ethan Farid JinianHarold Jackson

20102012

37,500150,000

-

-

-7,312

-

-

-16,380

37,500173,692

20092011

12,50018,750

-

-

-8,592

-

-

1,356

28.698

Vice President, Sales since May 1, 2011

Fred Ruffin

2012

150,000

-

12,500-

President/Chief Executive Officer/Director from October6,500

-

-

9,456

165,956

2011

15,000

-

-

7,637

-

-

788

23,425

Vice President, Operations since May 1, 2009 through December 9, 2009.2011

(1)

-– All other compensation consists of health insurance reimbursedpremiums paid by our Company on behalf of the individual.  

(2)

Sugarmade, Inc. (formerly Diversified Opportunities, Inc.)– Fiscal year ended June 30^th.

(3)

Change– Option award vested in

Pension

Value and

Non-Qual.

Deferred

Stock

Option

Non-equity

Compens.

All Other

Salary

Bonus

Awards

Awards

Incentive

Earnings

 Comp.

Total

Position

Year

($)

($)

($)

($)

Comp ($)

($)

($)

($) the current fiscal year.

Kevin Russeth

2010

-

-

-

-

-

-

-

-

2009

-

-

-

-

-

-

-

-

President/Chief Executive Officer/Director since May 2008.

Employment Agreements

None.We have no employment agreements in effect for any named executive officers as of the date of this report.  Mr. Lantz’s annual salary at the time of this filing is $216,000.  His compensation is determined by the Board of Directors of our Company on a periodic basis.  

Grants of Stock and Other Equity Awards

During 2010 and 2009,the fiscal year ended June 30, 2012, there were no grants of plan-basedoption or equity awards to our named executive officers.  Inofficers.

Outstanding Equity Awards

The following table sets forth information concerning outstanding equity awards for each named executive officer as of June 30, 2012:

Option Exercises

During the fiscal year ended June 30, 2012, there were no option exercises by our named executive officers.

Compensation of Directors

On April 27, 2011, our Company issuedthe Board of Directors of Sugarmade-CA approved compensation for outside directors in the amount of 100,000 stock option grants to purchase up to 920,000 shares of our common stockoptions vesting over 3 years at an exercise price of $1.25 per share, vesting over periods up to three years.

Option Exercises and Stock Vested

Duringshare.  Additionally, the 2010 and 2009, there were no option exercises or vestingBoard of Directors of Sugarmade-CA also approved a stock awards to our named executive officers.

Outstanding Equity Awards at Fiscal Year End

Nonegrant of 100,000 shares of our executive officers receivedCompany’s common stock (subject to a 3 year repurchase option by our Company) to a director for services rendered as the Head of the Audit committee and financial expert.  Our Company also issued 100,000 shares of its common stock (subject to a 2 year repurchase option) to a director for sales and advisory services.  

Other than the reimbursement of actual and ordinary out-of-pocket expenditures, we did not compensate any equity awards, including, options, restricted stock or other equity incentivesof our directors for their services as directors during 2010 and 2009.  the fiscal year ended June 30, 2012.

2836

Compensation of Directors

Our former Chairman of

Stock Option Plan

On April 27, 2011, the Sugarmade, Inc.Company’s Board of Directors received compensationapproved the adoption of the 2011 Stock Option/Stock Issuance Plan (the “2011 Plan”) and reserved 1,500,000 shares of common stock for his service asissuance under the 2011 Plan.  The 2011 Plan provides for the issuance of both non-qualified stock options and incentive stock options (“ISOs”), and permitted grants to employees, non-employee directors and consultants of the Company.   Generally, stock option grants under this plan will vest over a director totaling $18,000.  During 2010period of three years and 2009, no other member of our Boards of Directors received any compensation for his services ashave a director.term not to exceed 10 years, although the Plan Administrator has the discretion to issue option grants with varying terms and vesting periods.   

2937

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Related Persons, Promoters and Certain Control Persons

The following includes a summary of any transaction occurring since JanuaryJuly 1, 2010,2011, or any proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of our average total assets at year end for the two most recently completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under "Executive Compensation" above).  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.    

·

On April 27, 2011, weNovember 30, 2012, our Company issued a totalconvertible promissory note in the amount of 2,484,299$100,000 to Jonathan Leong, one of our directors, as part of a financing involving eleven accredited investors. The convertible promissory note must be repaid by our Company within 9 months from the date of issuance; accrues interest at the rate of 14%; and 800,000is convertible at the election of the note holder at such time as our Company has raised a minimum of $500,000 in equity in a subsequent equity financing, at the conversion price which is the lower of 80% of the per share purchase price paid for the securities by the investors in the subsequent financing, or $.50 per share.  Unless this promissory note is converted or repaid earlier, our Company must pay the note holder the amount of the then accrued interest on the three month anniversary, six month anniversary, and nine month anniversary of the issue date. In connection with the issuance of the promissory notes, Mr. Leong received two-year warrants to purchase 15,000 shares of common stock to Scott Lantz our Chief Executive Officerat $.50 per share, and Clifton Leung, a member of its Board of Directors, respectively, in exchange for nominal cash consideration.  

·

On May 9, 2011 we completed the Cancellation Agreement with Kevin Russeth, Steven Davis and Jonathan Shultz.  At the time of the Cancellation Agreement, Mr. Russeth was our sole director and was our Chief Executive Officer and Chief Financial Officer.  In addition, each of Messrs. Russeth, Davis and Shultz were stockholders of our Company holding in excess of 10% of our outstanding common stock.  Under the terms of the Cancellation Agreement, Messrs. Russeth, Davis and Shultz cancelled 8,500,000 shares of our common stock held by them in exchange for Sugarmade-CA's agreement to consummate the transactions contemplated by the Exchange Agreement and 200,000two-year warrants to purchase shares of our common stock.  The warrants are three year warrants to purchase common stock at a price of $1.25 per share.  Also under the terms of the Cancellation Agreement, Messrs. Russeth and Shultz agreed to redeem an aggregate of 262,500 shares of our outstanding common stock in exchange for cash payments aggregating to $210,000.

·

In 2010, Sugarmade-CA loaned money to Ethan Farid Jinian in exchange for a note payable secured by shares of stock in our Company.  At the time of the loan, Mr. Jinian was a former director and executive officer of Sugarmade-CA and was a 5% stockholder.  The loans bore interest at a rate of 14 percent per annum.  The largest amount outstanding under the loan was $163,000.  Mr. Jinian repaid the loan in its entirety through the tender to Sugarmade-CA of 59,96225,000 shares of common stock at $.01 per share.   

·

On April 27, 2011, we issued two-year warrants to purchase up to 600,000January 19, 2012, our Board of Directors approved a grant of 36,000 shares of our Company’s common stock with(subject to a 1 year repurchase option by our Company) to Ed Roffman, a former director, for the provision of services to our Company in the areas of finance and public reporting.  The shares were issued in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act as transactions by an exercise price of $1.25 per share to George Mainas, Kevin Kearney and Garrett Cecchini in exchange for investor relations services performed on our behalf.  issuer not involving any public offering.

·

On November 22, 2010, we issued 500,000 shares of common stock to George Mainas and Garrett Cecchini in exchange for consulting services performed on our behalf.

Review, approval or ratification of transactions with related persons

We do not have any other special committee, policy or procedure related to the review, approval or ratification of related party transactions.  

Promoters and Control Persons

We didThe Company does not have any promoters at any time during the past five fiscal years.  a parent company.  

3039

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of August 1 2011,January 15, 2013, information with respect to the securities holdings of (i) our officers and directors, and (ii) all persons (currently none) which, pursuant to filings with the SEC and our stock transfer records, we have reason to believe may be deemed the beneficial owner of more than five percent (5%) of the Common Stock.  The securities "beneficially owned" by an individual are determined in accordance with the definition of "beneficial ownership" set forth in the regulations promulgated under the Exchange Act and, accordingly, may include securities owned by or for, among others, the spouse and/or minor children of an individual and any other relative who resides in the same home as such individual, as well as other securities as to which the individual has or shares voting or investment power or which each person has the right to acquire within 60 days through the exercise of options or otherwise.  Beneficial ownership may be disclaimed as to certain of the securities.  This table has been prepared based on the number of shares outstanding totaling 10,256,000,totaling10,538,526, adjusted individually as shown below.

(1)

Unless otherwise noted, the address is c/o Sugarmade, Inc., 2280 Lincoln Avenue, Suite 200, San Jose CA 95125.

(2)

Effective November 29, 2012, the Company entered into a Share Cancellation Agreement with Scott Lantz pursuant to which Mr. Lantz agreed to the cancellation of 354,722 of his shares of Company common stock. Mr. Lantz is the Chief Executive Officer, Chief Financial Officer and a Director of the Company.

(3)

Effective May 11, 2012, the Company entered into a Share Cancellation Agreement with Clifton Leung, a director and shareholder of the Company, pursuant to which Mr. Leung agreed to the cancellation of 500,000 shares of Company common stock held by him.

(4)

Mr. Salzberg’s beneficial ownership is calculated as 100,000 shares of common stock owned outright; vested warrants to purchase up to 100,000 shares of common stock and options to purchase up to 45,254 share of common stock that will be vested prior to September 30, 2011.  Options and warrants vesting prior to September 30, 2011 totaling 145,254 were added to the denominator in the calculation of the percentage of class beneficially owned.

(3)

Mr. Jensen’s beneficial ownership is calculated as 100,000 shares of common stock owned outright; vested warrants to purchase up to 100,000 shares of common stock, 100,000 shares granted to him under a consulting agreement (subject to repurchase on a diminishing basis over two years) and options to purchase up to 24,59486,111 shares of common stock that will be vested prior to September 30, 2011.March 16, 2013.  Options and warrants vesting prior to September 30, 2011March 16, 2013 totaling 224,594 were added to the denominator in the calculation of the percentage of class beneficially owned.

(4)

Mr. Roffman’s beneficial ownership is calculated as 100,000 shares granted to him under a consulting agreement (subject to repurchase on a diminishing basis over three years) and options to purchase up to 24,594 shares of common stock that will be vested prior to September 30, 2011.  Options and warrants vesting prior to September 30, 2011 totaling 24,594186,111 were added to the denominator in the calculation of the percentage of class beneficially owned.

(5)

Percentage of class beneficially ownedMr. Pinto’s beneficial ownership is calculated by dividing the amount and nature of beneficial ownership by the totalas 284,404 shares of common stock outstanding plus theowned outright and vested warrants to purchase up to 49,000 shares subject to warrants and options through September 30, 2011 held by the individual.of common stock.  Options and warrants vesting prior to September 30, 2011March 16, 2013 totaling 394,44249,000 were added to the denominator in the calculation of the percentage of class beneficially owned.  No amounts have been subtracted for

(6)

Mr. Leong’s beneficial ownership is calculated as vested warrants to purchase up to 40,000 shares of common stock granted that are subject to repurchase.  him as in conjunction with a convertible note issued to the company totaling $100,000.  Options and warrants vesting prior to March 16, 2013 totaling 40,000 were added to the denominator in the calculation of the percentage of class beneficially owned.

(7)

Mr. Kearney’s beneficial ownership is calculated as 160,000 shares of common stock owned outright and vested warrants to purchase up to 160,000 shares of common stock.  Options and warrants vesting prior to March 16, 2013 totaling 160,000 were added to the denominator in the calculation of the percentage of class beneficially owned.

(8)

Mr. Michon beneficial ownership is calculated as 46,956 shares of common stock owned outright

3140

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 300,000,000 shares of $.001 par value common stock and 10,000,000 shares of $.001 par value preferred stock.  We are incorporated in the United States of America in the state of Delaware.  

Common Stock

We are authorized to issue up to 300,000,000 shares of common stock, $.001 par value.  Each share of common stock entitles a stockholder to one vote on all matters upon which stockholders are permitted to vote.  Common stock does not confer on the holder any preemptive right or other similar right to purchase or subscribe for any additional securities issued by us and is not convertible into other securities.  No shares of common stock are subject to redemption or any sinking fund provisions.  All the outstanding shares of our common stock are fully paid and non-assessable.  Subject to the rights of the holders of the preferred stock, the holders of shares of our common stock are entitled to dividends out of funds legally available when and as declared by our Board of Directors.  In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to receive, ratably, the net assets available to stockholders after payment of all creditors and any liquidation preference on outstanding preferred stock.

Preferred Stock

We may issue up to 10,000,000 shares of preferred stock, $.001 par value in one or more classes or series within a class as may be determined by our Board of Directors, who may establish, from time to time, the number of shares to be included in each class or series, may fix the designation, powers, preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof.  Any preferred stock so issued by the Board of Directors may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of us, or both.  

No shares of preferred stock are currently outstanding.  The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding voting stock.  

41

Options and Warrants

As of June 30, 2012 we have outstanding options and warrants to purchase up to 4,328,562 shares of common stock.  Included in this amount are two-year warrants to purchase up to 2,185,600 shares of our common stock issued in connection with sales of our common stock during the year ended June 30, 2011 and 40,000 outstanding warrants issued in connection with the sale of our common stock during the year ended June 30, 2012, as well as warrants to purchase 632,500 shares of common stock issued for consulting and advisory services, almost all at an exercise price of $1.50.  The number of shares and exercise price are subject to adjustment in the case where the Company declares a stock dividend or split.  We also issued warrants to purchase up to 200,000 shares of our common stock to three selling shareholders of our Company in connection with our reverse merger.  These warrants have a three year life and are exercisable at $1.25 per share, subject to adjustment in the case where the Company declares a stock dividend or split.  Additionally, warrants to purchase 189,000 shares of common stock were issued to non-executive employees.

As of June 30, 2012, we have a total of 1,081,462 incentive and nonqualified stock options granted and outstanding under the Plan.   All of the options have terms of five to 10 years with expiration dates between April 27, 2016 and January 13,, 2022.  The options vest at various schedules with the latest vesting over four years.  

The number of shares of common stock subject to exercise and the exercise price of all options and warrants outstanding at June 30, 2012 is as follows:  

Transfer Agent and Registrar

Our transfer agent and registrar is Island Stock Transfer, 100 Second Avenue South,15500 Roosevelt Boulevard, Suite 705S, St. Petersburg, FL 33701.301, Clearwater, Florida 33760

42

DISCLOSURE OF COMMISSION POSITION
OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Pursuant to our Amended and Restated Articles of Incorporation, our Board of Directors may issue additional shares of common or preferred stock. Any additional issuance of common stock or the issuance of preferred stock could have the effect of impeding or discouraging the acquisition of control of us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for their shares, and thereby protects the continuity of our management.  Specifically, if in the due exercise of its fiduciary obligations, the Board of Directors was to determine that a takeover proposal was not in our best interest, shares could be issued by the Board of Directors without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover by:

·

diluting the voting or other rights of the proposed acquirer or insurgent stockholder group;

·

putting a substantial voting block in institutional or other hands that might undertake to support the incumbent board of directors; or

·

effecting an acquisition that might complicate or preclude the takeover.

The Delaware Corporations and Associations Act (“Delaware Corporate Law”), with certain exceptions, permits a Delaware corporation to indemnify a present or former director or officer of the corporation (and certain other persons serving at the request of the corporation in related capacities) for liabilities, including legal expenses, arising by reason of service in such capacity if such person shall have acted in good faith and in a manner he reasonably believed to be in, or not opposed, to the best interests of the corporation, and in any criminal proceeding if such person had no reasonable cause to believe his conduct was unlawful. However, in the case of actions brought by or in the right of the corporation, no indemnification may be made with respect to any matter as to which such director or officer shall have been adjudged liable, except in certain limited circumstances.

Our Amended and Restated Articles of Incorporation provide that we shall indemnify our directors and executive officers to the fullest extent now or hereafter permitted by Delaware Corporate Law. The indemnification provided by Delaware Corporate Law and our Amended and Restated Certificate of Incorporation is not exclusive of any other rights to which a director or officer may be

32

common stock was hiredemployed on a contingentcontingency basis, and no expert or counsel willhad, or is to receive, in connection with the offering, a substantial interest, direct or indirect, interest in the Companyregistrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee of the Company.employee.

WHERE YOU CAN FIND MORE INFORMATION

We filed a registration statement on Form S-1, and amendments thereto, under the Securities Act relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement, as amended. This prospectus constitutes the prospectus of the Company, filed as part of the registration statement, as amended, and it does not contain all information in the registration statement, as amended, as certain portions have been omitted in accordance with the rules and regulations of the SEC.

We are subject to the informational requirements of the Exchange Act, which requires us to file reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be inspected at public reference room of the SEC at 100 F. Street, N.E., Washington D.C. 20549. Copies of such material can be obtained from the facility at prescribed rates. Please call the SEC toll free at 1-800-SEC-0330 for information about its public reference room. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC's website at http://www.sec.gov.

Our statements in this prospectus about the contents of any contract or other document are not necessarily complete.  You should refer to the copy of such contract or other document that we have filed as an exhibit to the registration statement, as amended, of which this prospectus is a part, for complete information.

You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with different information. The selling stockholders are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of the document. We furnish our stockholders with annual reports containing audited financial statements.

3344

INDEX TO FINANCIAL STATEMENTS

Sugarmade, Inc. Annual Audited Financial Statements

Report of Independent Registered Public Accounting FirmAccountants

Consolidated Balance Sheets at December 31, 2010June 30, 2012 and 20092011

Consolidated Statements of Operations for the yearyears ended December 31, 2010June 30, 2012 and the period from March 2, 2009 (inception) to December 31, 20092011

Consolidated Statements of Changes in Stockholders’ DeficitShareholders' Equity (Deficiency) for the yearyears ended December 31, 2010June 30, 2012 and the period from March 2, 2009 (inception) to December 31, 20092011

Consolidated Statements of Cash Flows for the yearyears ended December 31, 2010June 30, 2012 and the period from March 2, 2009 (inception) to December 31, 2009

2011

Notes to Consolidated Financial Statements

Sugarmade, Inc. Interim Unaudited Financial Statements

Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2011 (unaudited)September 30, 2012 and December 31, 2010June 30, 2012

Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31,September 30, 2012 and 2011 and 2010

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31,September 30, 2012 and 2011 and 2010

Notes to Condensed Consolidated Financial Statements

(unaudited)

34F-1

Anton & Chia, LLP

Certified Public Accountants

To the Board of Directors and Stockholders:

Sugarmade, Inc. and Subsidiary

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMACCOUNTANTS

We have audited the accompanying consolidated balance sheets of Sugarmade, Inc. and Subsidiary (“the Company”) as of December 31, 2010June 30, 2012 and 20092011 and the related consolidated statements of operations, changes in stockholders’ deficitequity (deficiency) and cash flows for the year ended December 31, 2010 and the period from March 2, 2009 (inception) to December 31, 2009.years then ended.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sugarmade, Inc. and Subsidiary,Subsidiaries, at December 31, 2010June 30, 2012 and 2009,2011, and the results of its operations and its cash flows for the yearyears then ended, December 31, 2010 and the period from March 2, 2009 (inception) to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.  As described in Note 1 to the consolidated financial statements, the Company has incurred net losses since inception and has a deficiency in stockholders’ equityan accumulated deficit at December 31, 2010.June 30, 2012.  These and other factors discussed therein raise a substantial doubt about the ability of the Company to continue as a going concern.  Management’s plans in regard to those matters are also described in Note 1.  The Company’s ability to achieve its plans with regard to those matters, which may be necessary to permit the realization of assets and satisfaction of liabilities in the ordinary course of business, is uncertain.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Anton & Chia, LLP

Newport Beach, California

May 9, 2011October 11, 2012

35F-2