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Sugarmade, Inc. (SGMD) Turns Sights toward Supplying Burgeoning Cannabis Industries

  • Global hydroponics industry expected to enjoy 6.5 percent CAGR through 2025 amid competitive growth
  • Sugarmade building hydroponics holdings with proposed acquisitions, foray into U.S. hemp market
  • Company’s reach extending to European markets with recent targeting of global leader in hydroponic consumption

The growing popularity of cannabis both as a medicinal plant extract and a relaxing recreational drug during recent years has created a bellwether effect for a number of industries that see potential in catering to the companies that in turn cater to cannabidiol (CBD) and marijuana clients. Among them, hydroponics suppliers are seeing tremendous year-over-year growth lately, and Sugarmade, Inc. (OTC: SGMD) hopes to build on its product and brand marketing experience to take advantage of the trend.

Sugarmade is a Southern California company invested in the development of products and brands with disruptive potential. Recently, the company expanded into Europe’s hydroponics supply market and saw its revenue growth patterns expand geographically from California-centric last year to an increasing number of U.S. states where legalization has eased restriction and on into the United Kingdom.

On August 28, Sugarmade announced that it had filed a disclosure statement with the Securities and Exchange Commission about its formal acquisition negotiations with two companies that provide online and retail hydroponic and other agricultural cultivation supplies, which Sugarmade believes may enhance its portfolio.

“The hydroponic supply sector is still highly fragmented with many of the larger players not likely to reach public company liquidity events for the original entrepreneurial teams. We have entered into talks with at least two of these companies for acquisition, which we believe will be highly accretive for common Sugarmade shareholders and additive to our already robust top line growth rate,” CEO Jimmy Chan stated in a news release about the filing (http://nnw.fm/0OBf5). “We wanted to publicly disclose these discussions to ensure that all shareholders have equal access to our direction, thus our recent public filing.”

Sugarmade plans a special shareholder meeting October 10 to conduct business related to the negotiations, including a vote on whether to increase the company’s authorized common shares from 300 million to two billion, which Sugarmade’s management considers necessary to facilitate the possible acquisitions.

The global hydroponics market is expected to see a high level of competition during the next few years, and analysts at Transparency Market Research predict that the market will reach a value of $12.1 billion by the end of 2025 — a 6.5 percent CAGR during the coming years and near doubling of its $6.9 billion value last year (http://nnw.fm/T7TUs).

Europe is the leading geographical consumer of hydroponic supplies and is expected to maintain a leading position throughout the coming years with a share of about 41 percent of the global market, according to the analysts, but helping to drive the market is cannabis extracts’ growing favor not only with the public, but with governmental agencies as well. Canada’s government will legalize recreational marijuana use nationwide next month, lifting the final usage restrictions. Nine U.S. states have legalized marijuana use despite federal drug enforcement restrictions, and at least 30 states have legalized some form of medicinal cannabis use or research (http://nnw.fm/W3teq). The U.S. Food and Drug Administration’s approval of CBD-bearing Epidiolex as an anti-seizure medication portends a reclassifying of CBD’s drug status before the end of this month.

In August, Sugarmade committed to an investment of $1 million in capital over the coming 12 months into Hempistry, Inc.’s ultra-high CBD industrial hemp cultivation project in Kentucky, with an expected additional agreement regarding hemp cultivation supplies, according to a news release announcing the project (http://nnw.fm/qf0Z4).

“Demand for industrial hemp and products derived from hemp is soaring, with no let up in sight. We expect our direct investment into Hempistry to be accretive to common shareholders and our supply agreement to be lucrative. All of us at Sugarmade see a tremendous opportunity to become a supplier to this fast growing sector,” Chan stated in the news release.

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

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