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Subsequent Events
12 Months Ended
Jun. 30, 2022
Subsequent Events [Abstract]  
Subsequent Events

31. Subsequent Events

 

Entry into Letter of Intent

 

On June 29, 2022, the Company entered into a letter of intent (the “LOI”) to acquire the business and associated property known as RMI Ventures, Dba Jerusalem Grade Farm (the “Proposed Acquisition”) located at 22644 Jerusalem Grade Road, Middletown, CA 95461 (“RMI Ventures”).

 

Pursuant to the terms of the LOI, Sugarmade proposes a 40% acquisition of RMI Ventures, including the associated real estate, cannabis-related licenses, and the business operation. The Acquisition will include a 10-year cultivation license relative to the property based on a cultivation canopy size and other information outlined in the license issued by the County of Lake, California. The licensed outdoor canopy area at the property is 43,560 square feet, and the total property acreage is 21.38. In addition, the property will include the currently installed irrigation system, a weather station, a cultivation nursery, and a biomass curing room.

 

All existing equipment at the property shall be included in the Acquisition, such as the cultivation license, clones, and the current 2022 growing season crop.

 

The purchase price would be five hundred and fifty thousand dollars ($550,000).

 

The Parties agree the Definitive Agreement will include a management services agreement (the “MSA”), which will include Ryan Santiago and perhaps other individuals. A five-year term for the MSA is contemplated. The compensation for Mr. Santiago will be $120,000 per annum in salary with bonuses contingent on yield for the season and total gross sales for the seasonal crop. These details will be specifically outlined in the MSA or in other documents suitable to the Parties.

 

Sugarmade will put into place a credit line facility (the “Facility”) in the amount of Six Hundred Fifty Thousand Dollars ($650,000), the funds of which shall be designated for operational costs and working capital. The Facility will hold an annual interest rate of 14% on all outstanding balances. Sugarmade shall commit to maintaining the Facility for three (3) years from the signing of a Definitive Agreement or until the Parties mutually agree the project contemplated by this LOI and implemented by the Definitive Agreement has adequate funds to be self-sustainable.

 

The Parties propose to close the Acquisition by July 31, 2022.

 

Entry into Management Services 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.

 

Common Stock Issuance Subsequent to June 30, 2022

 

Subsequent to June 30, 2022, the Company entered into multiple stock purchase agreements and issued 227,979,125 shares of the Company’s common stock in total cash of $27,630.

 

Entry into Promissory Note and Warrants

 

On September 9, 2022, the Company entered into a loan with Rezyfi Lending Inc. for borrowing $300,000 with maturity date on October 9, 2022; the note bears an interest of 12% per annum. The Company shall pay interest in the amount of $3,000 on a monthly basis with any remaining balance payable on the due date. In connection with the issuance of the note, the property described as 8845 and 8895 High Valley Road, Clearlake Oaks, CA 95423 shall transfer to the possession and ownership of the lender immediately as the “Security”. The Security may not be sold or transferred without the Lender’s consent until the due date. If borrower breaches the provision, Lender may declare all sums due under this note immediately due and payable, unless prohibited by applicable law. The Lender shall have the sole-option to accept the security as full payment for the borrowed money without further liabilities or obligations. If the market value of the security does not exceed the borrowed money, the borrower shall remain liable for the balance due while accruing interest at the maximum rate allowed by law.

 

On November 14, 2022, the Company entered into a loan with Mast Hill Fund L.P. for borrowing $532,000 with maturity date on November 14, 2023; the note bears an interest of 16% per annum. The note shall be convertible into shares of common stock at conversion price of $0.0001, subject to adjustments. In connection with the issuance of the note, the Company granted 1,773,333,333 shares of common stock purchase warrant at an exercise price of $0.0003. The warrant period commencing on the issuance date and ending on the five-year anniversary.

 

On November 14, 2022, the Company granted 95,600,000 shares of common stock purchase warrant to J.H. Darbie & Co., Inc. for service provided according to the fee agreement dated December 28, 2021, at an exercise price of $0.0003. The warrant period commencing on the issuance date and ending on the five-year anniversary.

 

On November 15, 2022, the Company paid off the promissory note of 1800 Diagonal Lending LLC date April 27, 2022 in total cash of $80,765.