Sugarmade CEO Issues Shareholder Letter on M&A Strategy Following Landmark Deal in $24B Hydroponics Space
NEW YORK, Nov. 04, 2019 (GLOBE NEWSWIRE) -- via NetworkWire -- Sugarmade, Inc. (OTCQB:SGMD) ("Sugarmade", "SGMD", or the "Company"), a major supplier to the hydroponic cultivation and hemp sectors, issues the following Letter to Shareholders from the Company's CEO:
Dear Valued Shareholder,
As announced in recent days, we have completed a landmark deal to acquire BZRTH, LLC ("BZRTH"), one of the true market leaders on the ecommerce side of the explosive hydroponic agricultural space. This acquisition alone should position Sugarmade as one of the largest publicly traded companies in the overall hydroponics space, driving EBITDA profitability, net-positive cash flows, and top-line sales of $37 million on a forward basis.
Sugarmade has acquired BZRTH in a manner that is particularly friendly to Company common shareholders. The transaction was for 650 million shares of common stock, of which 30% have already been issued, cash, preferred shares, and a long-term note, where Sugarmade has two years to pay the remaining cash component. Most of the common and preferred shares will be subject to significant selling restrictions, which will limit the number of shares insiders can liquidate, aligning their interests with those of common shareholders. In addition to the common stock, the transaction included 3.5 million shares of Series B convertible preferred stock, $870K in cash (already paid as part of prior marketing agreement), and 5% promissory notes in the sum of $7.13 million that will come due in two years. We have designed the terms of this acquisition to benefit both current shareholders and the previous owners of BZRTH who have built such a strong business operation.
We believe this is a tremendous deal for our shareholders given the enormous top and bottom-line growth that is already implicit in the deal and the projections we have on hand for growth in this opportunity in the quarters and years ahead.
While that acquisition was a major step, we feel it is really just the beginning. We are already in talks pursuing other deals in what we would consider to be a comprehensive multi-step roll-up strategy designed to create a truly market-dominant positioning for the Company based on our driving strategic thesis: hydroponics is set to become the difference-maker that separates successful producers of hemp and hemp-related crops from the rest of the herd.
That thesis is predicated on research and analysis demonstrating that the investment boom in the production of raw hemp and hemp-related crops has tightened margins for growers through a massive expansion in the sheer number of producers. In other words, while demand for these crops is skyrocketing -- and will continue to skyrocket for years to come -- the number of producers competing in this niche is also ramping sharply.
The upshot is narrowing profit margins among competing producers, which is translating into a boom for producers and distributors of what we call "margin amplifiers". Hydroponics equipment is a prime example of capital expenditures that can work to widen margins for producers of hemp and hemp-related crops. In other words, the boom in demand for these crops should show up most powerfully in the pick-and-shovel industries, like hydroponics, that enable more efficient production.
We are absolutely committed to dominating the hydroponics supply niche, and BZRTH is the first of a string of planned acquisitions set to demonstrate that dominant positioning.
We will have more details on the path forward in the days and weeks that follow.
Warm Regards,
Jimmy Chan, Sugarmade CEO
About Sugarmade, Inc.
Sugarmade, Inc. (OTCQB: SGMD) is a product and branding marketing company investing in operations and technologies with disruptive potential. The Company is becoming a leading supplier to the growing hemp industry and is benefitting from the growth of the hydroponic marketplace. The Company is in the process of acquiring several leading hydroponic and agricultural supply companies that are currently producing in excess of $70 million in annual revenues. Sugarmade is also an investor in fast growing Hempistry, Inc., a Kentucky-based cultivator and operates Carryoutsupplies.com a leader provider to the quick service restaurant industry.
FORWARD-LOOKING 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 limited 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.
Corporate Contact:
Jimmy Chan
+1-(888)-982-1628
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