Schwazze To Close Star Buds Transaction, Expects $7.4M In Revenue For The Quarter

Back in June, cannabis company Schwazze signed a definitive agreement to acquire 14 Start Buds Colorado locations — 13 dispensaries and one cultivation.

“Star Buds is a cornerstone acquisition for us as we build our vertically integrated platform. Star Buds has built a respected, innovative, and trusted business and as one of the most recognized and successful retail cannabis operators in North America, we are excited to add the Colorado locations of Star Buds to the Schwazze family,” Schwazze CEO Justin Dye told Benzinga.

According to unaudited 2019 financial results, Schwaze — previously operating as Medicine Man Technologies Inc. SHWZ — the Star Buds locations jointly accumulated $50 million in revenue with a powerful EBITDA margin. Furthermore, it is projected that the pro-forma revenue for the combined companies in 2020 will be around $90 million, and after the completion of purchase, combined companies can be labeled as cash flow positive.

Schwazze provided a transaction update Thursday noting that Star Buds has authorized the company’s proof of funds, allowing companies to prepare for the closing of the acquisitions.

“Star Buds could not be more thrilled to have received satisfactory proof of funds from Schwazze,” Brian Ruden, Owner of Star Buds stated. “We look forward to not only closing our pending transactions but working together to build a great cannabis company.”

Dye says the Star Buds deal allows Schwazze to create "the next era of cannabis with a true focus on cannabis consumers."

"With Star Buds’ industry expertise and Schwazze’s best-in-class playbook, we will establish one of the best vertically integrated platforms in the industry. The Star Buds acquisitions position us to become a cannabis leader in Colorado,” he added.

The company also released its preliminary unaudited financial results, revealing projected revenue of $7.4 million for the three months ended Sept. 30, up by 140% quarter over quarter.

Schwazze noted that the higher revenue could be connected to the moderate development of Success Nutrients business and the Mesa Organic acquisition.

“We are very pleased with our preliminary results for the third quarter,” added Dye. “Our ability to substantially grow our top-line and meaningfully narrow our net loss reflects both the efficacy of our business model and ability to successfully integrate strategically attractive and accretive acquisitions such as Mesa Organics and Purplebee’s into our operations. We are also encouraged by contributions made by Big Tomato and Success Nutrients to our quarterly performance.”