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Sugarmade Inc. (SGMD) Issues Letter to Shareholders on Upcoming Expansion Steps
November 4, 2020

Sugarmade Inc. (SGMD) Issues Letter to Shareholders on Upcoming Expansion Steps

  • SGMD shareholder letter outlines building blocks of strategic vision
  • Chan talks about two themes: geographic expansion for BudCars and Sugarmade’s move to cultivation operations
  • BudCars is expanding into North San Francisco Bay area and wine country counties, then Los Angeles

In a letter to shareholders thanking them for their support, Sugarmade (OTCQB: SGMD) CEO Jimmy Chan outlined the “building blocks of a coherent and cohesive strategic vision” and noted that the company is putting in motion “key next steps to manifest that vision and drive strong and sustained shareholder value as a key emerging leader in the California cannabis marketplace” (https://ibn.fm/w96hm). 

“I want to highlight two themes that will help to drive our value proposition for shareholders over the intermediate term: geographic expansion for BudCars and our move to vertically integrate through the establishment of cultivation operations,” wrote Chan. “Together, they represent tangible catalysts driving both top and bottom line growth.”

In the letter, Chan noted that Sugarmade is working to “expand the scope, scale and reach of BudCars, a rapidly growing leader in the California cannabis delivery space — where we hold a 40% stake, with an option to take a controlling 70% stake, and where we are actively engaged in strategic and operational execution of the business.”

The letter outlined the dramatic growth BudCars has seen over the past six to eight months, noting that the company has consistently surpassed expectations in several key areas including customer acquisition and per-order volumes. “However, to fuel the next phase of our overarching vision, we must begin to expand our geographic reach,” Chan observed. 

“I have good news: that expansion is officially underway,” Chan continued. “We are expanding BudCars initially into the North San Francisco Bay Area and the Wine Country counties. That will be followed by our grand opening of BudCars Los Angeles, which we anticipate now will take place sometime in November.”

The letter noted that the move into the North Bay Wine Country area, which represents a more than doubling of the company’s total delivery territory, is “ripe with potential.” A recent “North Bay Business Journal” article reported that cannabis-related tax receipts from Sonoma County indicate that the area is seeing growth of 35% in the cannabis space. “As we begin to see tourism return in the wake of the global pandemic health crisis, we anticipate this region to represent one of the strongest bets as well, and we are excited about positioning BudCars to capitalize on that growth trend,” stated Chan.

The expansion into the wine country areas will be followed by the company’s grand opening in Los Angeles, slated for November. “Los Angeles is an enormous market for cannabis sales,” Chan explained. “It stands as perhaps the largest metropolitan cannabis marketplace on the planet. And we will be thrilled to see BudCars lay down roots and start taking market share in the area.”

The shareholder letter also noted that Sugarmade has secured a property zoned for cannabis cultivation and is working with regulators to move forward with plans to start its own cultivation operations. “This move will function to widen our margins on BudCars sales as well as to position Sugarmade to capitalize on growing demand in a chronically undersupplied marketplace,” the letter outlined. “Because of our access to end-market consumers through our BudCars distribution channel, we will also have an advantage over other cultivators in establishing a branded line of cannabis products, further supporting widening margins at each point in the chain.

“These are exciting times for Sugarmade. We have a rapidly growing business, and we are taking concrete steps now to build on that growth,” Chan concluded.

Sugarmade is a product and branding marketing company investing in operations and technologies with disruptive potential. The company’s brand portfolio includes CarryOutsupplies.com, SugarRush(TM) and Budcars.com. Sugarmade is an investor in BudCars and a joint operator of BudCars’ first operating location in Sacramento, California. 

During early 2020, Sugarmade gained a 40% stake in BudCars and in the Sacramento delivery operations via the acquisition of a 40% stake in Indigo Dye Group (Indigo). Under the terms of Sugarmade’s agreement with Indigo, Sugarmade also acquired an option to purchase an additional 30% interest in Indigo, upon the closing of which would provide Sugarmade with a 70% controlling interest. As of the date hereof, this option has not yet been exercised; Sugarmade’s stake in Indigo remains at 40%, and there is no assurance that Sugarmade will exercise the option to acquire an additional 30% interest in Indigo. 

However, since late May 2020, Sugarmade has been actively involved in development of Indigo’s operations with power to direct the activities and significantly impact Indigo’s economic performance. Sugarmade also has obligations to absorb losses and right to receive benefits from Indigo. As such, in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification 810-10-25-38A through 25-38J, Indigo is considered a variable interest entity (“VIE”) of Sugarmade.

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

NOTE TO INVESTORS: The latest news and updates relating to SGMD are available in the company’s newsroom at http://ibn.fm/SUGAR 

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