NEW YORK, Jan. 17, 2020 (GLOBE NEWSWIRE) — via NetworkWire – Sugarmade, Inc. (OTCQB:SGMD) (“Sugarmade”, “SGMD”, or the “Company”), today announces the rescission of an agreement to acquire a hydroponic equipment supplier. In a filing with the U.S. Securities & Exchange Commission, Sugarmade outlines that approximately 1.2 billion common share equivalents will be returned to the Company’s treasury. Sugarmade’s board of directors has determined the business combination is no longer viewed as the best shareholder maximization strategy as industry upheaval accelerates. Sugarmade has been presented with numerous other business combination opportunities that its board of directors now believes are superior and are under consideration.
The rescission will:
- Reduce the outstanding shares to approximately 706 million via the return of approximately 1.2 billion shares to SGMD’s treasury.
- Result in a cash flow savings of $1 million quarter for seven quarters due to the elimination of the cash portion of the transaction due.
- Eliminate shareholder dilution due to the acquisition’s insufficient cash flow to meet debt service.
- Allow Sugarmade to immediately enter the significantly higher margin regulated sectors of the cannabis marketplace where acquisition targets are plentiful and are priced at meaningful discounts.
“The hydroponic transaction was proposed more than two years ago and since that time the industry has changed significantly. Simply Put – We have looked long and hard at the industry situation and we have determined there are numerous other potentially larger opportunities at this time for Sugarmade and its shareholders,” commented CEO Jimmy Chan. “The previous transaction is not the best way for us to maximize shareholder value. We are very pleased to be returning all of the issued shares to the treasury, which significantly lowers our outstanding shares, placing us in a prime spot as an industry consolidator of the many troubled assets in the sector. Thus, as a board of directors, we are taking the bold step to rescind the Past of the industry in favor of the Future of the industry and the more lucrative opportunities that are currently under consideration.”
The shareholders of the acquired company have agreed to surrender 448,873,817 common shares and 750,000 Series B Convertible Preferred shares. On an as-converted to common basis the returns to Sugarmade’s treasury equal 448,873,817 relating to the common shares to be surrendered and 750,000,000 million common shares equivalents due to each Series B Convertible Preferred share converting to common shares on a 1 for 1,000 basis. Thus, on a common share equivalent basis, the surrender equals 1,198,873,817 common shares, if all Preferred Series B were converted.
Additionally, as part of the Agreement, the Company will retain or will receive 102,248 shares in the acquired company.
A major factor in the decision to rescind the transaction is the significant upheaval currently being seen within the marketplace as many cultivators, distributors, vendors and other market participants struggle to maintain viability. This industry turmoil has caused many struggling companies to seek publicly traded partners that can assist in their return to viability. Sugarmade has entered into discussions with representatives of several of these companies operating in the regulated portion of the cannabis sector.
The Company’s board of directors believes entry into the regulated portion of the cannabis business sector, which includes hemp and legal THC cannabis cultivation, processing and marketing, is particularly appealing due to the large number of assets within that sub-sector that are currently available for purchase or acquisition.
About Sugarmade, Inc.
Sugarmade, Inc. (OTCQB: SGMD) is a product and branding marketing company investing in operations and technologies with disruptive potential. For more information please reference www.sugarmade.com
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.
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