Sugarmade Signs LOI to Acquire
Major Hydroponic Supplier, Raises FY2019 Sales Outlook to $70M
Monrovia,
CA -- October 17, 2018 --
InvestorsHub NewsWire -- Sugarmade, Inc.
(OTCQB:SGMD),
one
of the
largest publicly traded hydroponics supply
companies, today
announces
the signing of a binding Letter of Intent ("LOI")
to
acquire
Sky Unlimited,
LLC, dba Athena
United (www.AthenaUnited.com),
a
California-based supplier of cannabis cultivation
materials
to
wholesalers and large commercial cannabis
cultivators. Sugarmade
expects this
acquisition to be
highly
accretive
to earnings and shareholder
value and
thus is
revising its guidance for
full-year 2019 revenues to more than
$70
million.
Sugarmade's
revenue within the
cannabis cultivation supply
sector is primarily
derived
from online sales, whereas Sky Unlimited's
revenues are mainly generated via direct sales to wholesalers and
large commercial cultivation
companies. Management
believes that
combining
its focus
on e-commerce
with
Sky
Unlimited's larger commercial
operator-focused
business will result in
strong
marketing, manufacturing and logistical
synergies,
as well as improved margins and other corporate
benefits.
"The
trend in cannabis cultivation is toward the larger commercial
cultivation operations, and Sky Unlimited is
in the thick of that dynamic marketplace," commented Jimmy Chan,
CEO of Sugarmade. "This year, Sky Unlimited and its associated
operations are expected to produce in excess of $40 million in
revenues with profitability and positive cash flow. This new
revenue stream combined with our recently upwardly guided revenue
forecast of $30 million for next year will make Sugarmade one of
the largest publicly
traded
suppliers to the booming cannabis cultivation
marketplace, with a combined
revenue forecast for next year in excess of $70
million."
Sugarmade's market
strategy is to cover three
major areas supplies for cannabis cultivation: 1) online and
e-commerce; 2) the wholesale
market, which services brick and mortar
retailers;
and 3)
large-scale commercial cultivation operations.
"As a result of
successfully acquiring
Sky Unlimited
we
anticipate
revenue
and growth exposure to all three of these sectors, while
gaining
strong
cost and operational synergies. We are currently in
process of additional
discussions to further expand our
growth
goals via other acquisitions in
this fast-growing
market sector," stated
Chan.
The terms
of the LOI call for the payment by the Company of
10
million
common shares of Sugarmade, which will immediately vest as a
non-refundable fee, to the owners of Sky Unlimited.
These shares will be subject to normal sales and registration
restrictions imposed by the financial industry and governmental
agencies. In exchange for this non-refundable compensation,
Sky Unlimited
agrees to
a non-shop and due diligence period not to exceed 180
days.
At
closing and upon the completion of a successful audit of
up to two
years of
financials,
the Company will pay Sky
Unlimited
an
additional 210 million
common
shares. At closing
Sugarmade will
pay the owners a
maximum value of 20% of the transaction value in cash, which is
initially contemplated to be $8 million,
or will
allow Sky Unlimited
to
exercise an option to
convert a portion of the cash payment or the entire
cash
payment into common shares at a
price of
$0.10
per share. The LOI
also
outlines specific incentives that contemplate
allowing Sky
Unlimited
to gain
additional Company shares based on surpassing specific revenue
goals and conversely to
receive a smaller payment in Company shares should the revenue
targets not be reached. It is expected the
specifics of these incentives will be fully outlined in the
definitive agreement.
About
Sugarmade, Inc. (OTCQB:SGMD):
Sugarmade, Inc. is a
product and brand marketing company investing in products and
brands with disruptive potential. Sugarmade's brands
include ZenHydro.com, CarryOutSupplies.com,
and
BudLife
Cannabis Storage Solutions. For more information
on the Company's products, please visit http://www.Sugarmade.com.
For
inquiries please contact Jimmy Chan at (888) 982-1628
or info@Sugarmade.com.
STATEMENTS:
This
release contains "forward-looking statements" within the meaning of
the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements also may
be included in other publicly available documents issued by the
Company and in oral statements made by our officers and
representatives from time to time. These forward-looking statements
are intended to provide management's current expectations or plans
for our future operating and financial performance, based on
assumptions currently believed to be valid. They can be identified
by the use of words such as "anticipate," "intend," "plan," "goal,"
"seek," "believe," "project," "estimate," "expect," "strategy,"
"future," "likely," "may," "should," "would," "could," "will" and
other words of similar meaning in connection with a discussion of
future operating or financial performance. Examples of
forward-looking
statements include,
among others, statements relating to future sales, earnings, cash
flows, results of operations, uses of cash and other measures of
financial performance.
Because
forward-looking statements relate to the future, they are subject
to inherent risks, uncertainties and other factors that may cause
the Company's actual results and financial condition to differ
materially from those expressed or implied in the forward-looking
statements. Such risks, uncertainties and other factors include,
among others such as, but not Unlimited
to
economic conditions, changes in the laws or regulations, demand for
products and services of the company, the effects of competition
and other factors that could cause actual results to differ
materially from those projected or represented in the
forward-looking
statements.
Any
forward-looking information provided in this release should be
considered with these factors in mind. We assume no obligation to
update any forward-looking statements contained in this
report.
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