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Sugarmade, Inc. (SGMD) Investment in Hemp Set for Payoff with Vote on 2018 Farm Bill

  • 2018 farm bill approved by Congressional vote earlier this week
  • Bill removes industrial hemp from Schedule I under Controlled Substances Act
  • Hemp market expected to hit $1 billion in 2018

With floor votes passing this week in the House of Representatives and the Senate, the chances that the Farm Bill – H.R.2, the Agriculture Improvement Act of 2018 – will be law before Yuletide have improved considerably. Such a development augurs well for Sugarmade, Inc. (OTCQB: SGMD), a company focused on supplying equipment and technologies to support the legal cultivation, processing and storage of cannabis and other agricultural products, which recently made a substantial investment in the hemp space. The 2018 Farm Bill includes provisions to unshackle hemp from restrictions imposed by the Control Substances Act of 1970 and the Marihuana Tax Act of 1937.

Things are looking up for the hemp industry. On Monday, December 10, Senate Majority Leader Mitch McConnell (R-KY) tweeted (http://nnw.fm/pxhU4), “Making it official with my hemp pen! … With today’s signature, my provision to legalize industrial hemp is 1 step closer to reality. Looking forward to voting YES on this bill & sending to POTUS.” If the bill is approved by President Trump, as expected, McConnell, who has been a passionate promoter of reform, would return the hemp industry to its legal status, more or less, from before the 1937 passage of the Marihuana Tax Act.

That infamous statute did not directly criminalize the possession or usage of hemp, marijuana or cannabis. However, it instituted certain regulations, violation of which could result in fines of up to $2,000 and five years’ imprisonment (http://nnw.fm/kL5zJ). For example, one provision required every person who sells, deals in, dispenses or gives away marihuana to register with the Internal Revenue Service and pay a special occupational tax. The Controlled Substances Act of 1970 went further, criminalizing hemp by making only negligible distinction between marijuana and hemp. Consequently, hemp ended up, alongside marijuana, as a Schedule I Controlled Substance, the most restricted category of drugs.

The Farm Bill 2018 attempts to reverse those prohibitions. Importantly, it removes industrial hemp from the CSA’s definition of “marijuana” and from Schedule I. It also repeals section 7606 of the Agricultural Act within the 2014 Farm Bill, which only allowed cultivation of hemp under the auspices of a state agricultural pilot program or institution of higher education. Products made from industrial hemp, including CBD oil, would now be legal under the CSA, provided they contain no more than 0.3 percent THC. Henceforth, regulation of hemp will be like any other agricultural crop (http://nnw.fm/WiEv2).

This sets the stage for rapid expansion – projected at a CAGR of 14 percent – of an industry that is already flourishing. In 2017, the total hemp market reached $820 million, according to the Hemp Business Journal; of that, $190 million came from hemp-derived CBD products. The market is on track to hit $1 billion for 2018.

Sugarmade is expecting substantial payoff for its commitment to the industry. The company intends to invest in Hempistry, Inc. a privately held Nevada corporation, which has begun planting an ultra-high cannabidiol (CBD) industrial hemp strain in the U.S. State of Kentucky (http://nnw.fm/Gy5Yu). In addition, Sugarmade has signaled strong interest in an agreement with Hempistry for hemp cultivation supplies. Hempistry has already begun planting and has signed an agreement reserving up to 23,000 acres of prime Kentucky farmland for its exclusive use for hemp cultivation. This venture will expand the scope of Sugarmade’s operations, which include CarryOutSupplies, a provider of essential supplies to quick-serve restaurants; ZenHydro, an online hydroponics store; and BudLife Cannabis Storage Solutions, which offers a novel way to preserve the quality of cannabis flowers over long periods.

For more information, visit the company’s website at www.Sugarmade.com

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