SGMD Sugarmade Inc (PK)

Item 1.01. Entry into a Material Definitive Agreement.

On August 12, 2022, SugarRush, Inc. (“SugarRush”), a wholly owned subsidiary of Sugarmade, Inc. (the “Company”), entered into a Management Services Agreement (the “MSA”) by and between SugarRush and Canndis, Inc. (“Canndis”), an unrelated third party,  pursuant to which the parties agreed that SugarRush would manage operations for Canndis, which holds a California regulatory permit issued by the City of Desert Hot Springs authorizing Type 12 adult-use and medicinal-microbusiness at its facility located on Little Morongo Road in Desert Hot Springs, CA (the “Facility”).

Pursuant to the terms of the MSA, SugarRush will be responsible for all business operations, including all commercial cannabis activities, at the Facility. SugarRush agreed to pay Canndis a license fee of (i) 2% of gross retail sales and 1.5 percent of gross wholesale sales during the initial six months following commencement of operations (the “Introductory Period”), and (ii) after the Introductory Period, the greater of (a) $2,500 or (b) 2% of gross retail sales and 1.5% of gross wholesale sales. Canndis agreed to pay to SugarRush 65% of net sales each month.

The MSA has a term of 12 months and can be terminated as follows: (i) SugarRush may terminate for any reason upon 180 days’ written notice to Canndis; and (ii) either party may immediately terminate if the other party has materially breached any representation, warranty or covenant made by the breaching party and the breach has not been cured within 30 days. The MSA contains representations and warranties customary for an agreement of this type.