SHWZ - Schwazze (SHWZ) - New Mexico Entry Capital Raise

Transformational. Friday, Schwazze announced a $95 million capital raise and entry into the New Mexico market. These transactions are transformational for the Company, in our view. The capital from the raise will support Schwazze in achieving its growth target of doubling pro forma revenue by the end of 1Q22, while, with New Mexico, Schwazze is transforming into a super regional from a single state operator.Capital Raise. Schwazze is raising $95 million ($93 million net) through the sale of convertible notes to institutional investors and individuals. The notes will accrue 13% interest per year (9% payable in cash and 4% accreting to the principal amount) and have a 5-year term. Proceeds from the notes will be used to fund the cash consideration of recently announced acquisitions and other growth and expansion initiatives.New Mexico Entry. Schwazze also is entering the New Mexico market through the acquisition of Reynold Greenleaf & Associates and the equity of Elemental Kitchen. Consideration for the acquisition will be $42 million, consisting of $25 million in cash payable at closing and $17 million in a 3-year seller note at 5% interest. Greenleaf is a licensed medical cannabis provider with ten dispensaries, four cultivation facilities – three operating and one in development - and one manufacturing location.New Mexico Market. A medical cannabis market, the state has approved adult use recreational to begin no later than April 2022. The medical market is about $200 million, with adult use projected to add another $425 million within four years. Notably, there are only 35 vertically integrated businesses licensed in the state, operating about 125 dispensaries. Read More >>