Schwazze (SHWZ) - Meticulous, Efficient & Visionary Cannabis Investing

Schwazze (formerly Medicine Man Technologies Inc.) is a data-driven cannabis growth operator leveraging best practices to intentionally grow by design and outpace the market. The company's mission is to provide the most trusted products and experiences with a focus on the health, well-being, and happiness of its people, customers, and the planet. The company has a high-performance culture and is focused on growth by purposeful design, combining customer-centric thinking and data science to test, measure, and drive desired outcomes.

Matt Gordon caught up with Justin Dye, CEO, and Chairman, Schwazze. Justin has over 25 years of experience in high-level strategic management, mergers and acquisitions, operations, private equity, and corporate finance. He played an integral role in the private equity consortium that acquired national grocery chain Albertsons, Inc, where he led company expansion with over $40Bn in acquisitions, divestitures, and real estate transactions. During his time at Albertsons, sales grew from $10Bn to over $60Bn. He previously held senior management and corporate development roles at Cerberus Capital Management, General Electric, and Arthur Andersen LLP. His educational credentials include a Bachelor's degree in Political Science from DePauw University, where he graduated with academic honors. 

Company Overview

Schwazze is the parent company of a portfolio of vertically-integrated cannabis brands spanning seed to sale. The company's intent is to apply its operational playbook by expanding into markets where it can entrench itself in a leadership position. The company is listed on the OTC Markets (OTCQX: SHWZ). Schwazze was founded in 2014 and is headquartered in Denver, Colorado. SBUD LLC, Mesa Organics IV Ltd, Mesa Organics II Ltd, Two JS LLC, Denver Consulting Group LLC, SCG Holding LLC, Mesa Organics+, Double Brow LLC, Mesa Organics III Ltd, Pono Publications Ltd, and Success Nutrients Inc. are the company's subsidiaries. 

Schwazze is a leading vertically integrated cannabis company with a new named acquisition to move into New Mexico as it continues to grow into a regional operating company. The company's leadership team has expertise in CPG (Consumer Packaged Goods), retail, building consumer brands at Fortune 500 companies, and the cannabis sector. 

Cash Position

In 2021, Schwazze raised $95M in capital. The company continues to operate in Colorado and has seen significant growth opportunities. It recently made both inorganic and organic acquisitions including 2 Emerald Field stores. It is currently looking to purchase the Smoking Gun asset, one of the best locations in the State of Colorado. This asset is planned for remodeling. The company has also announced the purchase of R. Greenleaf Organics. 

R. Greenleaf has multiple companies under its structure which provides Schwazze an opportunity to grow its business operations in New Mexico. R. Greenleaf is one of the leading vertically-operated cannabis operations in New Mexico. The capital raised by Schwazze will be utilized towards the funding of acquisitions. The company plans to deploy two-thirds of the capital towards ongoing acquisitions. The acquisitions are expected to close by early 2022. 

The remaining capital will be used by the company for future acquisitions. The funds will also be utilized towards store remodeling to develop great assets at the store level as a way to attract customers. The capital will also be used to fund the company's internal growth. Schwazze currently has $21M in cash flow, which provides a lot of flexibility in business operations for the company. 

Business Strategy

Schwazze intends to become the number 1 cannabis retail company in Colorado and New Mexico. It has an efficient supply chain that produces consumer products along with a portfolio of strong brands. The company also intends to partner with third parties. The company is focused on its capital, strategy, and customers. It continues to grow its market share by instilling trust in customers through multiple brands. 

Schwazze has had several large institutional investors that have supported its growth strategy. The investors enabled the company to enter the convertible debt deal, leading to the $95M capital raise. It is important to note that the funds raised are equivalent to the company's current market cap. This has enabled the company to expand its debt holder base, which can be converted to equity in the future. It is focused on generating good returns for investors through smart deals and value creation. 

The company plans to continue its focus on Colorado and New Mexico, improving the business efficiency of its assets. It intends to broaden its base with retail assets, products, efficient supply chains, and new cannabis cultivation locations. 

Schwazze has a talented management team that helps in providing comfort and reassurance for investors. It is closely working with highly-qualified advisors including Perella Weinberg and the Benchmark Company. These institutions have helped the company to gain exposure to the market, leading to the recent capital raise. 

The company plans to continue a disciplined approach towards the cash paid for acquisitions. It seeks to deploy additional people to attain more growth and improve existing assets. This strategy has enabled the company to bring down its EBITDA (Earnings before interest, taxes, depreciation, and amortization), leading to the creation of additional shareholder value. 

The company plans to continue acquiring smaller assets such as retail stores by way of excess capital. It is looking to invest in brands and also expand the cultivation arm of its business. 

The Political Landscape

Schwazze's representatives have spent several weeks in Washington DC, entering discussions with  Dan Pabon, General Council Head of Government Affairs along with various senators and congress members. These meetings highlight the benefits cannabis provides for people suffering from PTSD (Post-Traumatic Stress Disorders) and sleep-related ailments. Cannabis serves as an invaluable substitute for the rampant opioid addiction problems in the United States. 

The company is also awaiting safe banking services for the cannabis industry. This change would enable Schwazze's employees to get mortgages and become eligible for 401K. The company places a strong emphasis on the well-being of its employees. 

The cannabis industry employs a large number of people and a safe banking arrangement would enable stores and businesses within the sector to operate safely. The current enforcement of cash-only payments has made the cannabis industry prone to security risks. Additionally, the tax revenue generated by cannabis businesses can assist in the development of education, governance, and enforcement required to shield minors from alcohol, drugs, and cannabis. A recent survey shows that 70% of US citizens are in favor of legalized cannabis.

To find out more, go to the Schwazze website