Sugarmade has signed a Letter of Intent (LOI) toward the acquisition of 40% of the business and associated property known as RMI Ventures (d/b/a Jerusalem Grade Farm) located in Lake County, California.
Sugarmade said it plans to pursue the acquisition of additional equity in RMI Ventures next year as market conditions improve.
The RMI acquisition follows the company’s recently announced collaborative cannabis cultivation contract with Cannabis Global to produce approximately 25,000 pounds of “fresh frozen” cannabis, which Cannabis Global will use in its product lines for distribution throughout the California cannabis marketplace.
“We plan to leverage this turnkey operation to fulfill some of the 25,000 pounds of fresh frozen flower stipulated in our purchase agreement with Cannabis Global,” noted Jimmy Chan, CEO of Sugarmade. “At the same time, this deal will allow us to seek more buyers and build our sales channel to support the eventual activation of our large production site at our nearby 640-acre project.”
Fresh frozen cannabis is cultivated to be immediately flash frozen upon harvest (instead of the traditional post-harvest drying and curing process). Sugarmade and Cannabis Global signed a pre-booked, fixed-price contract in the amount of $700,000.
The LOI with RMI Ventures covers a minority stake acquisition that includes the associated real estate, cannabis-related licenses and the business operation. The acquisition will include minority ownership of a 10-year cultivation license at the property based on a cultivation canopy size and other information outlined in the license issued by the County of Lake, California. The licensed outdoor canopy area at the property covers 43,560 square feet, or 21.38 acres.
Th property also includes an installed irrigation system, weather station, cultivation nursery and biomass curing room.
Sugarmade said it hopes the deal will help it avoid supply and demand issues due to the perishable nature of cannabis flowers' short shelf life and save on costs related to licensing and cultivation taxes by reducing the canopy square-footage basis from the first 8 acres to be activated to 1 acre.
“This acquisition will allow us to be more efficient on every level,” said Chan. “It gives us much more optionality in scaling our vertically integrated model while avoiding unnecessary costs and wasteful spending as we prepare to hit the gas pedal when market conditions are more advantageous. The RMI business is an excellent property, and we look forward to updating current and prospective shareholders as we move toward a definitive agreement and an expanded equity position.”