Schwazze Acquires Six Star Buds Dispensaries in Colorado

Star Buds is one of the Most Recognized and Successful Retail Cannabis Operators in North America

Company Projects Pro Forma Revenue for Schwazze and its Two Acquisitions (Mesa Organics and Star Buds) of $95 Million in 2020

Company Expects to Be Cash Flow Positive Beginning in January 2021

Company Anticipates Acquiring Remaining Seven Star Buds Retail Dispensaries in Colorado during the First Quarter 2021

Schwazze, formerly operating as Medicine Man Technologies Inc. (OTCQX: SHWZ) (“Schwazze ” or “the Company”), announces it has closed on the asset purchase of the first six of 13 Star Buds Colorado retail locations. Total consideration was approximately $37.1 million, consisting of $13.9 million in cash, $13.9 million in a seller’s note, and $9.3 million in Preferred Stock (at a price of $1,000 per share).

Star Buds is one of the most recognized and successful retail cannabis operators in North America and is home to a wide selection of strains, concentrates, edibles, tinctures, and best-in-class customer service. The acquired dispensaries are located in Denver, Commerce City, Longmont, Niwot, Pueblo and Pueblo West and are projected to generate proforma revenue of approximately $24 million and EBITDA in the range of approximately 36% of revenue in 2020.

“Star Buds is a premier cannabis industry brand and we are excited to be bringing the first six of 13 Colorado locations into the Schwazze family. Led by Brian Ruden, TJ Joudeh and their partners, Star Buds has built a respected, innovative and most trusted retail operation. I greatly admire its commitment to high quality products and its budtenders’ commitment to customers and cannabis expertise,” said Justin Dye, Chief Executive Officer of Schwazze.

Dye continued, “The addition of these six Star Buds dispensaries builds on our customer-centric focus, significantly expands our retail operations footprint, and enables us to reach positive cash flow beginning in January. With the projected closing of 13 total Star Buds locations, this expands Schwazze’s retail footprint to 17 total dispensary locations in the Denver metro and southern Colorado region, with aggressive expansion plans underway in other areas of the state, positioning Schwazze to be the premiere cannabis seed to sale company in Colorado.”

“We are excited Colorado Star Buds locations are joining the Schwazze portfolio. This provides exciting opportunities for our employees, customers and the Colorado cannabis industry,” said Brian Ruden, Star Buds owner, operator, and Schwazze Board Member. “Schwazze’s acquisition of Star Buds Colorado locations, which will be completed in several separate transactions, furthers the Company’s vision to create the most admired cannabis company centered around the customer experience, innovation, quality products, and strong profitability. We are proud of what Star Buds has built in Colorado and eagerly look forward to what the future holds with Schwazze.”

Transaction Background

On June 8, 2020, Schwazze announced that it had reached definitive agreements to acquire all 13 Star Buds locations in Colorado, which are represented by 13 different ownership groups and agreements. The Company anticipates acquiring the remaining seven Star Buds retail dispensaries in Colorado during the first quarter of 2021, subject to securing the requisite financing.

Based on the consolidated, unaudited 2019 results the Company received from Star Buds, the 13 Star Buds locations in Colorado collectively earned approximately $50 million in revenue with a strong EBITDA margin. For 2020, these same 13 Star Buds locations are expected to generate revenue of approximately $70 million and EBITDA in the range of approximately 40% of revenue. Together with Schwazze and the proforma revenue for the 2020 Mesa Organics Ltd, acquired by Schwazze in April of 2020, the 2020 proforma revenue for all three companies is estimated to be approximately $95 million.

Schwazze is creating a leading vertically integrated cannabis holding company with a portfolio consisting of top-tier licensed brands, spanning cultivation, extraction, infused-product manufacturing, dispensary operations, consulting, and a nutrient line, all under one entity. In April 2020, Schwazze was the first publicly traded company to complete an acquisition following the new legislation of Colorado House Bill 19-1090 which allowed for public company ownership of cannabis operations. The Company’s inaugural acquisition included the purchase of Mesa Organics, a Southern Colorado dispensary chain with locations in Pueblo, Ordway, Rocky Ford, and Las Animas as well as Purplebee’s, a leading pure CO2 and ethanol extractor and manufacturer.

Dye added, “As we proceed with our acquisition strategy, we’ve also taken definitive steps to reduce corporate overhead which further strengthens our financial projections. Specifically, we recently eliminated 15 positions at our headquarters and significantly reduced other spending that results in an estimated $5 million in annualized G&A savings beginning in 2021. These efforts are in addition to the elimination of one-time expenses as well as other deal-related expenses incurred in 2020. In the best interest of shareholders, the Schwazze team is constantly evaluating opportunities to streamline operations and implement additional efficiency measures as needed.”

Transaction Terms

Total consideration was approximately $37.0 million, consisting of $13.9 million in cash, $13.9 million in a seller’s note, and $9.3 million in Preferred Stock (at a price of $1,000 per share).

The acquisition will be funded by a five-year, $5.0 million convertible promissory note bearing an annual interest rate of 12% payable to Dye Capital & Company, LLC and $9.45 million in proceeds from a securities purchase agreement with a Dye Capital & Company managed fund. The securities purchase agreement consists of a private placement of 9,450 shares of Preferred Stock at a price of $1,000 per share together with an annual interest rate of 8%.

Dye concluded, “As Chairman of Dye Capital and it’s investment funds, which are the single largest investors in the Company, our philosophy is to partner with companies to innovate industries and solve customer problems. Through the acquisition of Star Buds, we firmly believe Schwazze’s strategy is well-aligned with this investment approach.”

To learn more about Schwazze, visit www.Schwazze.com.

About Schwazze

Medicine Man Technologies, Inc. is now operating under its new trade name, Schwazze. Schwazze (OTCQX: SHWZ) is executing its vision to become a leading vertically integrated cannabis holding company with a portfolio consisting of top-tier licensed brands spanning cultivation, extraction, infused-product manufacturing, dispensary operations, consulting, and a nutrient line. Schwazze leadership includes Colorado cannabis leaders with proven expertise in product and business development as well as top-tier executives from Fortune 500 companies. As a leading platform for vertical integration, Schwazze is strengthening the operational efficiency of the cannabis industry in Colorado and beyond, promoting sustainable growth and increased access to capital, while delivering best-quality service and products to the end consumer. The corporate entity continues to be named Medicine Man Technologies, Inc.

Forward-Looking Statements

This press release contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential,” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) our inability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (ii) difficulties in obtaining financing on commercially reasonable terms; (iii) changes in the size and nature of our competition; (iv) loss of one or more key executives or scientists; and (v) difficulties in securing regulatory approval to market our products and product candidates. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

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Contacts

Investor
Raphael Gross
ICR
203-682-8253
[email protected]

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