While the world of mergers and acquisitions (M&A) has typically been the realm of the largest of companies backed with Wall Street capital and this has also been true relative to the emerging cannabis sector, one mid-tier market participant is shaking off this dynamic and could be poised to be one of the industry’s most active M&A players. Led by cannabis industry maverick, Jimmy Chan, Los Angeles-based Sugarmade, Inc. (OTCQB:SGMD) is positioned to quickly become one of the cannabis industry’s fastest growing suppliers to the industry.

Growth rates for cannabis companies are being significantly boosted through innovative acquisitions by not only the larger premier industry participants, but also by several mid-tier players. Over the past year, major cannabis companies such as Aurora Cannabis have produced eye-popping prosperity via internal growth, and also through acquiring some of the smaller players in the booming industry. Fellow Canadian company, Canopy Growth, Inc. has also joined the acquisition bandwagon with its own set of roll-up companies and technologies. Aphria, Inc. has entered the cannabis acquisition game with its proposed acquisitions in Latin America and Jamaica worth around $200 million. The number of deals has continued to expand and there seems to be no let up in sight relative to this cannabis mergers and acquisitions boom.

While a lot of the high-profile activities have been with the very large companies, the acquisition angle is not just for the industry behemoths. Several strong mid-tier players have also entered the fray. Sugarmade, Inc., for example, is one of these companies. You can find them on the OTCQB market with the symbol SGMD. They’re another group to keep your eye on, as they’re just now starting to make moves.

Sugarmade (OTCQB:SGMD) recently took the dive toward aggressive mergers and acquisitions with important announcements last week. Per a statement, they’re seeking to acquire at least four companies that supply the picks and shovels to the cannabis industry.  Sugarmade, a supplier of hydroponic growth supplies, has proven to be a fast growing, successful company. As of recently, its revenue growth projections for next year boosted to $30 million, representing a growth rate of over 700%. The two firm proposals Sugarmade recently outlined in a Securities and Exchange Commission filing point to even faster growth for this “non-plant touching” supplier; as the two targets are already producing more than $45 million annually. Additionally, the company indicated it’s in talks with two additional businesses for acquisition, which is expected to produce an additional $50 million in revenue.

The overall revenue boost to Sugarmade could be significant. Revenues from the first two companies could boost the company’s guidance to over $75 million for 2019. And, if Sugarmade is successful in acquiring the additional businesses, revenue guidance could top a staggering $125 million for 2019. This level of growth would likely make Sugarmade one of the cannabis industry’s fastest growing companies and one of the largest publicly traded supply companies.

The first acquisition target is a Southern California-based supplier of hydroponic cultivation supplies. They provide equipment to the wholesale sector and large commercial cultivators. This is a very important market because the trend in cultivation is very much toward the large commercial operations. Sugarmade’s proposal is to acquire all of the outstanding capital stock and business operations for a combination of cash and common shares of Sugarmade. The target company is believed to be one of the larger operators in this sector, with revenues of approximately $40 million per year. To note, this company is also profitable and cash flow positive. Should the company be successful in its acquisition efforts, the operation would be integrated under the Sugarmade corporate umbrella with Sugarmade assuming all operations and recognizing all revenues and profits.

The second acquisition target is a Washington state-based supplier, which is primarily a retailer of hydroponic cultivation supplies. Sugarmade’s proposal is to acquire all of the outstanding capital stock and business operations for a combination of cash and common shares of Sugarmade. The target is producing revenues of approximately $5 million per year. Should the company be successful in its acquisition efforts, the operation would be integrated under the Sugarmade’s corporate umbrella with Sugarmade assuming all operations and recognizing all revenues and profits.

“These acquisitions will not only significantly boost our top line revenue growth, but will also expand our distribution across the most important sectors of the fast-growing cannabis marketplace,” says Jimmy Chan, CEO of Sugarmade. “This includes the wholesale market, which services brick and mortar retailers and to large commercial cultivation operations, which are rapidly expanding their cultivation footprints.”

“In addition to the revenue growth opportunities, we will also be afforded very meaningful cost savings across many operational functions,” Chan says. “In particular, we believe there are strong cost synergies relative to manufacturing, purchasing, international transport, warehousing, and shipment to customers. Perhaps most exciting, however, is that these acquisitions will place us among the largest public companies in the booming cannabis sector.”

While Sugarmade has been a pretty small company that’s enjoyed Wall Street research analyst coverage, an analyst research group recently took notice of the company’s impressive growth trajectory. SeeThruEquity analyst, Ajay Tandon, initiated coverage on Sugarmade last month and has placed a price target on the company’s common shares at $0.30, which represents a potential upside of well over 100% from recent prices. In the report, the firm outlines expectations for the market in the 29 US states where cannabis regulations and laws are relaxed. The research analyst also commented that the outlook for Sugarmade is impressive with its targeted markets expected to grow from $9.2 billion in 2017 to $47.3 billion by 2027.

There seems to be no letup in sight for cannabis-related mergers and acquisitions activity. According to Viridian Capital Advisors, a New York firm that tracks investment activity across the cannabis sector in the United States and Canada, during the first half of 2018, there were 145 mergers and acquisitions, which is up by more than 100% on a year over year basis.

Harrison Phillips, Viridian’s Vice President, seems to be expecting continued growth on activity. “The U.S. is still relatively untapped,” he says.”We’re far from the scale and magnitude that this industry could be operating at. We expect that there’s going to be significantly more capital coming into this space.”

Industry participants and investors will be watching closely for the future actions of companies such as Sugarmade, Inc. (OTCQB:SGMD) as the inevitable industry consolidation continues.

The post Acquisitions in the Cannabis Sector Boosting Revenue Growth appeared first on High Times.

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1. What is CBD? What is CBD Oil?

Cannabidiol (CBD) is a naturally occurring constituent of industrial hemp/cannabis. Its formula is C21H30O2 and it has a molecular mass of 314.4636. It is the most abundant non-psychoactive cannabinoid found in cannabis, and is being scientifically investigated for various reasons.

CBD oil is a cannabis oil (whether derived from marijuana or industrial hemp, as the word cannabis is the latin genus name for both) that has significant amounts of cannabidiol (CBD) contained within it. Our CBD products and extracts are derived from industrial hemp, so they could be considered CBD-rich hemp oil, hemp derived CBD oil, CBD-rich cannabis oil, or plainly “hemp extracts” since they typically contain much more than just CBD. Again, cannabis doesn’t mean marijuana, but is the genus name, and general umbrella term which all forms of marijuana and hemp fall under. The form of cannabis we use for our CBD and hemp extracts is industrial hemp; we do not sell marijuana.

2. If a hemp extract is 40% cannabinoids, what’s the other 60%? What’s in your hemp extracts besides the naturally occurring cannabinoids?

Our Kentucky hemp extracts contain over 80 different phyto-cannabinoids such as cannabidiol (CBD), CBC, CBG, CBN, etc.. In addition to the cannabinoids naturally present in our agricultural hemp extracts, there are also many other types of natural molecules and phyto-chemical compounds such as amino acids, carbohydrates, vitamins (including B1, B2, B6, D), fatty acids (including omega 3 & 6), trace minerals (including iron, zinc, calcium, magnesium, potassium), beta-carotene, chlorophyll, flavanoids, ketones, nitrogenous compounds, alkanes, glycosides, pigments, water, and terpenes. The most common terpenes in our hemp extracts are Myrcene, Beta-caryophyllene, Terpinolene, Linalool, alpha-Pinene, beta-Pinene, Nerolidol og Phytol, trans-alpha-Bergamotene, Limonene/ beta-Phellandrene (Co-elution), and alpha-Humulene.

3. What’s the difference between Hemp and Marijuana?

Scientifically, industrial Hemp and Marijuana are the same plant, with a genus and species name of Cannabis Sativa. They have a drastically different genetic profile though. Industrial Hemp is always a strain of Cannabis sativa, while marijuana can be Cannabis sativa, Cannabis indica, or Cannabis ruderalis. The major difference is how industrial hemp has been bred compared to a marijuana form of Cannabis sativa. organic hemp seedsTypically speaking, industrial hemp is very fibrous, with long strong stalks, and barely has any flowering buds, while a marijuana strain of Cannabis sativa will be smaller, bushier, and full of flowering buds. However, newer industrial hemp varieties in the USA are being bred to have more flowers and higher yields of cannabinoids and terpenes, such as our Kentucky hemp we’re now using!

99% of the time marijuana has a high amount of THC and only a very low amount of CBD. Hemp, on the other hand, naturally has a very high amount of CBD in most instances, and only a trace amount of THC. Fortunately, the cannabinoid profile of hemp is ideal for people looking for benefits from cannabis without the ‘high.’ Hemp is used for making herbal supplements, food, fiber, rope, paper, bricks, oil, natural plastic, and so much more, whereas marijuana is usually used just recreationally, spiritually, and medicinally. The term cannabis oil can refer to either a marijuana or hemp derived oil, since marijuana and hemp are two different forms of cannabis.

In the USA the legal definition of “industrial hemp,” per Section 7606 of the Agricultural Appropriations Act of 2014, is “INDUSTRIAL HEMP — The term ‘‘industrial hemp’’ means the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

4. Are hemp derived cannabinoids such as CBD as good as CBD from marijuana?

The short answer is yes. CBD is CBD, whether from marijuana or hemp. Most marijuana has a very low non-psychoactive cannabinoid profile (like CBD, CBC, CBG), so most of the time hemp would be much more preferable for anything besides THC. Marijuana is usually very high in THC (gives people the high) but usually very low in other non-psychoactive cannabinoids.

Nowadays in the USA, many farmers are growing industrial hemp flowers that are just as beautiful, odor-producing, and terpene rich as the best marijuana strains, such as our partnered farmers in Kentucky.

5. Why don’t you source your Hemp and CBD from within Colorado?

colorado growing operationWe feel that the hemp program in Kentucky is more well suited for our company in regards to growing hemp, and that because it’s 100% compliant with Section 7606 of the 2014 Farm Bill (and the 2016 Agricultural Appropriations Act), procuring it from there is perfectly legal at the federal level. Kentucky’s ecology is perfect for hemp just as it is for tobacco. The growing season is longer than in Colorado, and the soil is richer, so the quality of the hemp and the yields are better.

6. What’s the percentage of cannabinoids and CBD in your product?

Our raw extracts have varying percentages of cannabinoid and cannabidiol (CBD) content, the range being 10%-99%. Each product has a unique formulation and uses varying ratios of our extract types. Our CBD Isolate is over 99% pure CBD.

7. What is the best method of use?

For our dietary supplements we can only recommend them for internal consumption. Our CBD isolate is for research purposes only. If you don’t like the flavor of the oil supplements, you can mix with something sweet like apple sauce or honey to cut through the flavor.

8. What’s the ideal serving size for me, and how often should I take it?

There is no easy answer to this. Our starting recommended serving size is 15 drops but we generally recommend experimenting to see what feels best to you. Some prefer 5 drops, some prefer over 50 drops per day.

9. What is the safety of your hemp extracts? Are there negative side effects?

Hemp is considered by many to be generally safe. We’ve never seen or heard of any significant or negative CBD Oil Extractside effects in our years in the industry. That said, we can’t rule them out. Please consult with your physician before using any dietary supplement including Hemp extract supplements.

10. Which of your CBD and hemp products should I get?

As a company who sells various dietary and food supplements, we can’t suggest any of our products for the prevention, treatment or cure of any disease or ailment.

When considering our different dietary hemp products, know that they all come in two strengths. Our Original Hemp blends (Classic Hemp Blend, Hemp Complete, Brainpower oil, & Signature Blend) all have 250+mg of cannabinoids per fluid ounce, and our concentrated blends have 1,500+mg per fluid ounce, six times the potency of our traditional oils. We’ve found that sometimes less is more, but nevertheless, some people like to take very large serving sizes of our hemp extracts.

The main difference between the four Original Blends is the additional herbal ingredients besides hemp. We suggest you research the separate components of each blend to determine which product may be most appealing to add to your dietary regimen. If you know it’s solely the hemp extract that you are looking for, with no additional ingredients, then Classic Hemp Blend or Classic Hemp 6x is what you’re looking for.

For dabbing and vaporizing or for research you can try our CBD Isolate.

THOSE WHO SUSPECT THEY MAY HAVE A DISEASE OR ARE SEEKING HELP FOR A DISEASE SHOULD CONSULT A QUALIFIED MEDICAL PROFESSIONAL.

11. Why do people use Hemp Extracts and CBD? What are the benefits and uses of CBD?

In accordance with federal regulations we cannot make health claims regarding our dietary supplement products. We can only recommend our products for general wellness.

12. Is a standard hemp seed oil the same as a high-CBD hemp extract?

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Absolutely not. Standard hemp oil, which can be found very cheaply at a grocery store, is a much different product than our CO2 hemp extracts (not from seed). Standard hemp oil is produced by cold pressing the seeds, whereas our hemp extract is a supercritical CO2 extraction of the hemp plant itself, not the seeds. Hemp seed oil is considered to be a great nutritive food, but it doesn’t have the naturally occurring terpenes, cannabinoids and other components that our extracts do have.

13. Do I need to move to Colorado to get your Hemp Extracts and CBD? Where do you ship?

No. We actually source our hemp from Kentucky, as it’s legal to ship across state lines. Many people are under the impression that the only way to acquire hemp extracts and CBD for themselves or a loved one is to move to Colorado or another cannabis-friendly state. Many major news outlets are misinformed and are unfortunately spreading the idea that you can only get CBD oil in the states where medical marijuana has been legalized. This is simply not the case though. Because our extracts comes from hemp instead of marijuana, we can and do ship to all fifty states, and no medical marijuana card is needed. There are some exceptions, like with Indiana, Missouri and South Dakota we can’t sell our concentrated products due to state legislation.

We also ship to Japan, Australia, the EU, Switzerland, and Brazil. For all EU orders contact our exclusive distributor thereCannawell.

14. Is your Hemp Extract Oil similar to Rick Simpson Hemp Oil?

Not quite. Ours are from hemp and RSHO is usually using marijuana, a different form of cannabis than industrial hemp. Our industrial hemp extracts are more standardized and will usually have a much higher content of non-psychoactive cannabinoids like CBD than one produced through the Rick Simpson method. And oils produced through his method will usually have a much higher THC content, as it’s typically marijuana that is used for RSHO.†

Generally speaking, most marijuana producers and sellers (especially on the black market) don’t test for contaminants (metals, pesticides, bacteria, etc.). Rick Simpson Hemp Oil is actually more a method of extraction than it is a specific product. People use the Rick Simpson method with hundreds of different strains of marijuana, so the THC, CBD and other cannabinoid content of the final oil is always varying greatly, depending on the cannabis the consumers are acquiring. Usually what’s used for Rick Simpson oil is a strain with an inferior CBD content (and high THC), because that’s what the vast amount of marijuana is nowadays.

15. Where do you source your hemp and CBD from?

We have partners in Kentucky who grew a dedicated plot for us this year (2016) which is being used in our products now. mjna message boardWe also currently source from Europe but we’ll be changing that soon.

16. What kind of testing/analysis is performed on your products?

We have an industry leading quality control system, and we have third party laboratories analyze all of our hemp extracts and our final products for cannabinoid potency, heavy metals, bacterial and microbial life, mycotoxins (fungus), and pesticides.

17. What is CO2 extraction? What’s the difference between subcritical and supercritical CO2 extractions?

CO2 extraction is an extraction process that uses pressurized carbon dioxide to extract phyto-chemicals (such as CBD, CBG, or terpenes, flavonoids, etc.) from a plant. CO2 at certain temperatures and pressures acts like a solvent, without the dangers of actually being one. It is the most expensive extraction method, and is widely considered the most effective and safest plant extraction method in the world.

Many hemp and CBD companies boast about their supercritical CO2 extractions, but that’s actually only one (and perhaps an inferior) method of using a CO2 extraction machine. There are also subcritical CO2 extractions, and ‘mid-critical’, a general range between subcritical and supercritical. Subcritical (low temp, low pressure) CO2 extractions take more time and produce smaller yields than super-critical, but they retain the essential oils, terpenes, and other sensitive chemicals within the plant. Supercritical, on the other hand, is a high pressure and high temperature process that damages most terpenes and heat sensitive chemicals, but can extract much larger molecules such as lipids (omega 3 and 6), chlorophyll, and waxes. A truly full-spectrum CO2 extract includes first performing a subcritical extraction, separating the extracted oil, and then extracting the same plant material using supercritical pressure, and then homogenizing both oil extracts into one. In the essential oil industry, an extract made using this specific process is referred to as a CO2 Total.

18. What is the endocannabinoid system (ECS)?

“The endocannabinoid system (ECS) is a group of endogenous cannabinoid receptors located in the mammalian brain and throughout the central and peripheral nervous systems, consisting of neuromodulatory lipids and their receptors.” Wikipedia

There are two main types of receptors in the ECS, CB1 and CB2. CB1 receptors are primarily located in the central nervous system and brains of mammals, and CB2 are generally found in the peripheral nervous system. There are two main cannabinoids mammals produce- 2AG and Anandamide (named after the Sanskrit term “ananda” which translates to “peace”).

For hundreds of millions of years every vertebrate on Earth has been equipped with this ECS, a crucial system in the body, and it has been known about in the scientific and medical communities since the 1980’s. However, it’s still not taught about in most medical schools.

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