Schwazze, formerly operating as Medicine Man Technologies Inc. (OTCQX: SHWZ) (“Schwazze” or “the Company”), today announced that it has closed its most recent tranche of preferred equity, increasing the total capital raised to date through its private placement offering to $56 million. CRW Capital Cann Holding, LLC (“CRW”) led this investment round of $34 million along with an affiliate of Dye Capital & Company (“Dye Capital”) and other unaffiliated investors.
Over the last three months, the Company raised a total of $71 million in financing split between this private placement offering and debt financing of $15 million. The first $10 million of this debt financing will be funded immediately while the remaining $5 million will be funded as part of the closing of an identified acquisition.
“We think that the combination of Schwazze and Star Buds will provide an outstanding base from which to create a true leader in the Colorado cannabis market, and we are excited to be an active partner to the Company as they pursue their bold vision in the years to come,” said Jeff Cozad, President of CRW.
“This funding enables our team to close on the remaining Star Buds stores in Colorado and provide additional capital for growth. Our team members and investors are focused on taking care of our loyal customers and positioning Schwazze as one of the leading cannabis seed-to-sale companies in Colorado. We look forward to building a purpose-driven, innovative company in Colorado and beyond,” said Justin Dye, Chief Executive Officer of Schwazze.
From mid-December 2020 through this financing closing, the Company raised $21.9 million of preferred equity and convertible debt which has since been converted into preferred equity.
In the private placement, the Company issued and sold an aggregate of approximately 56,000 shares of Series A Cumulative Convertible Preferred Stock at a price of $1,000 per share under a securities purchase agreement with Dye Capital and CRW managed funds as well as subscription agreements with unaffiliated investors. Among other terms, each share of Preferred Stock (i) earns an annual dividend of 8% on the “preference amount,” which initially is equal to the $1,000 per-share purchase price and subject to increase, by having such dividends automatically accrete to, and increase, the outstanding preference amount; (ii) is entitled to a liquidation preference under certain circumstances, (iii) is convertible into shares of the Company’s common stock by dividing the preference amount by $1.20 per share under certain circumstances, and (iv) is subject to a redemption right or obligation under certain circumstances. The material terms of the preferred stock are described in the Company’s Current Report on Form 8-K filed on December 22, 2020.
The securities were offered by the Benchmark Company LLC and DelMorgan Group LLC.
An affiliate of Altmore Capital provided the Company with up to $15.0 million in debt that will mature in four years. The loan will earn 15% annual interest and the Company will begin to amortize the principle in its third year. There are fees, financial covenants, and prepayment fees associated with the note as well as a security agreement. The material terms of the debt will be described in a 8-K to be filed by the Company on or about March 4, 2021.
The securities offered in the private placement described above have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.
Investor Conference Participation
Schwazze will be participating in the Needham 2nd Annual Virtual Cannabis Conference on Wednesday, March 3, 2021. Institutional investors interested in scheduling a meeting with the executive leadership team should contact their Needham representative.
