Sugarmade Inc (OTCMKTS:SGMD) Is A Cannabis Runner

Sugarmade Inc (OTCMKTS:SGMD) is up a little over 30% this week, on the company's announcement that it has acquired the manufacturing rights for a cannabis transportation product. This is one that we have covered on a couple of occasions in the past, and one that – as with the majority of companies in the cannabis space – ran up on the back of the early November ballots in the US. Just as with the majority of companies in the space, however, Sugarmade has since given back a large portion of its post-recreational-legalization run, and currently trades at around $0.07 a share.While the highs seemed a little overenthusiastic given the scope of this company's operational activity right now, current prices look as though they may represent something of a discount to inherent value, especially with the latest announcement taken into consideration. As such, there may be some value in a near-term exposure.Here is why.By way of a brief introduction, Sugarmade is a packaging company that – across the last few months – has sort of pivoted towards the cannabis space. Its goal, and the niche in which it is trying to establish itself, is designing and commercializing safe, secure and odorless packaging solutions for the recreational and medical side of the cannabis space. For us, this is a decent market opportunity. Cannabis is going to have to be transported, and not only that, but transported safely and securely. A key part of this is ensuring handlers are unable to smell the contents, and it is this specific element of the packaging that Sugarmade is focusing on right now. Last time we looked at the company, we highlighted its CannaShroud product, which is a sort of plastic, envelope-style packaging designed to stop the smell of cannabis from escaping when transported, mailed etc.The just announced manufacturing rights acquisition involves a similar product (at least in concept) but with the concept expanded to a backpack. It's called SmelPro, and according to the marketing material, the bag utilizes the proprietary polyamide sandwiched tri-liners developed for Sugarmade's CannaShroud product, combined with active carbon filtration to virtually eliminate all odors. The units are designed to be easy to carry, or to be worn as a backpack, and will initially be available in a choice of three colors, plus camouflage.Right now, there is not much information available on the product, apart from that which the press release detailed. A quick Google search reveals a couple of non-reported bits of info, including a competition run at this site (48HoursLogo.com) that seemingly seeks to find a logo for the new product (see image below for the winner) and – as per the business brief listed on this site – the finished product will be a 50 gallon bag. In the brief, the listing states that the bag is for sporting, hunting, dirty laundry, storage, etc., but we suspect this is just an attempt to hide accurate use-case by the company for competition purposes.Secondary to the manufacturing rights acquisition, Sugarmade has also picked up an option to acquire the entire company that develops the product if and when it chooses to do so. This suggests to us that SmelPro is going to be a core feature of the company's retail operations going forward.Bottom line, this one is a pretty tough one to figure out. When all is said and done, it is a retail entity with a focus on odor proof packaging, and there is nothing particularly inspirational or enthusing about that. However, with the recreational marijuana industry set to expand dramatically over the next five years, there is no denying that products such as those that Sugarmade is bringing to market right now will be in demand. As such, with quarterly revenues of circa $1.2 million (last two reported quarters) and a market capitalization of just $13 million, there looks to be some run room for the stock this year.Cash is not great, and if the company is to continue acquiring assets at its current rate, it's going to be diluting shareholders, but so long as these assets can induce value-add, this dilution should be offset.We will be updating our subscribers as soon as we know more. For the latest updates on SGMD, sign up below!Disclosure: We have no position in SGMD and have not been compensated for this article.