Replies to post #51258 on Sugarmade Inc (SGMD)

[Three Cents]

It seems the language was confusing.I thought it meant that he was no longer partner in BC. That if he missed payments, SGMD will own less each month. And perhaps the money he paid at the start will vanish..Very confusing. Probably not by accident.

[Not2Wise]

Missed payments more than likely?

[remember my name]

Front. Sgmd had more payments left to complete the 40 percent and has remained
At 29 for a few months as I recalled . Know way a deal can go to zero
After you made the payment . Why would Jim even Consider not paying
500 k to get the rest of the 40 percent . What I think is the deal went wrong
And budcars wanted bigger players and left Jimmy behind or vice versa .
From the phone call I made , jimmy is not in the day to day operations and wanted bigger players .
Jimmy will also have to disclose anything related to resending on the deal .

We still have 29 percent . I believe this is how jimmy had some leverage to pull off lemon grow .
Remember this industry is so corrupted , that deals go bad fast . The whole industry been running from the feds for years . ....
Jimmy should not
Pay budcars shit . Jimmy paid for all of the Operations and growth and learned sgmd will not be able to
Show a dime on revenues until budcars is profitable . Could take years . That's not good for a stock at all .
I think jimmy got screwed . Better off jimmy goes on his own anyway . Now we can go in with a
Hostile takeover or budcars buys out jimmy .

I don't see it going to zero.

[CanItBThisEZ2Make]

Not sure if this info helps

4. VIE



On February 7, 2020, the Company entered into a share sale and purchase agreement (the “Indigo Agreement”) with Indigo Dye Group Corp. (“Indigo”), a corporation located in Sacramento, California. Indigo carries on business as a cannabis seller and delivery business under the name BudCars. The major Cannabis Products include Flower, Edibles, Vape Cartridges, Pre-Rolls, & Concentrates, etc. All the products are finished goods. In addition, Indigo is operating a non-store front retail delivery business (Type-9 License# C9-0000286) in California.



Pursuant to the terms of the Indigo Agreement, the Company agree to invest $700,000 (the “Investment”) into Indigo for inventory, equipment, and marketing expenses. The Investment shall be made in twelve monthly equal installments of $58,333 with the acceleration of the payment schedule possible depending on business growth, cash flow needs and capital availability.



In exchange, the Company received 40% of Indigo’s issued shares. upon execution of the final agreement. The value used for this transaction is $1,750,000 and each percentage (1%) of the company is worth $17,500. In the event that the Company is not able to make a payment of $58,333 in any month, it will have 90 days to cure the default. On the 91st day the investment plan will cease and the amount of invested capital will be calculated based on an enterprise value of $1,750,000 or $17,500 per 1% of owned equity.



In addition, subject to the terms and conditions of the Indigo Agreement, the Company has the option to acquire an additional 30% interest in Indigo. Upon exercise of the option, the Company would obtain control over Indigo.


From late May 2020 until September 30, 2020, the Company was actively involved in development of Indigo’s operations with power to direct the activities and significantly impact Indigo’s economic performance. The Company also has obligations to absorb losses and right to receive benefits from Indigo. As such, in accordance with ASC 810-10-25-38A through 25-38J, Indigo is consolidated as an VIE of the Company.


Starting on October 1, 2020, the Company plans to open new locations via purchasing equity into other Brand/Franchises to cover delivery for the entire California. Therefore, the Company likely not to proceeds the option to acquire the additional 30% interest in Indigo at the moment. In addition, the Company is no longer involve in day-to-day operations and the Company will be pursuing cannabis delivery moving forward, independently from Indigo Dye Group. As of October 1, 2020, the Company continues to hold approximately 29% of the ownership of Indigo but ceased to have a controlling interest in the partnership and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. See footnote #6 Noncontrolling interest and deconsolidation of VIE for details.


5. Noncontrolling Interest and Deconsolidation of VIE



Starting in fiscal year ended June 30, 2020, the Company had a variable interest entity, Indigo Dye Group, for accounting purposes. The Company owned approximately 29% of Indigo’s outstanding equity and as of September 30, 2020, involved its day-to-day operations, which gave the Company the power to direct the activities of Indigo that most significantly impact its economic performance. Accordingly, the Company recognized the carrying value of the noncontrolling interest as a component of total shareholders’ equity, and the consolidated financial statements included the financial position and results of operations of Indigo as of and for the periods ended June 30, 2020 and September 30, 2020.



Starting on October 1, 2020, the Company plans to open new locations via purchasing equity in other Brand/Franchises to cover delivery for the entire California. Therefore, the Company is not likely at this time to exercise its option to acquire the additional 30% interest in Indigo. In addition, the Company is no longer involved in day-to-day operations of Indigo and going forward, the Company intends to pursue cannabis delivery independent from Indigo. As of October 1, 2020, the Company ceased to have control over the day-to-day business of Indigo and it was deconsolidated and recorded as an investment in nonconsolidated affiliate at its $505,449 estimated fair value and changed to equity method of accounting. Pursuant to the terms of the Indigo agreement, if the Company determines, in its discretion not to continue to make monthly payments, its 40% ownership interest in Indigo will be decreased according to the payment then made. As of and for the quarter ended March 31, 2021, the Company did not make any additional payments, it still holds approximately 29% of the ownership of Indigo. See Note 4 and Note 5.



The net asset value of the Company’s variable interest in Indigo Dye Group was approximately $326,812 as of October 1, 2020, the date of deconsolidation. The value of the Company’s variable interest on the date of deconsolidation was based on management’s estimate of the fair value of Indigo at that time. The Company concluded that the market approach was the most appropriate method to determine the fair value of the entity on the date of deconsolidation, given that Indigo raised equity funding from third-party investors around the same period (i.e., level 2 inputs). The Company recognized a gain on deconsolidation of approximately $313,928 with no related tax impact, which is included in other income, net on the consolidated statement of operations. As the Company is not obligated to fund future losses of Indigo, the carrying amount is the Company’s maximum risk of loss.

I never really did all the math on this and probably won't get around to it anytime soon.

GO SGMD$

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