EX-99.1 2 tm2330575d1_ex99-1.htm EXHIBIT 99.1

 

 Exhibit 99.1

 

 

 

Schwazze Announces Third Quarter 2023 Financial Results

 

Q3 Revenue of $46.7 Million; Income from Operations of $8.9 Million; Adjusted EBITDA of $14.1 Million or 30% of Revenue

 

Generated $6.9 Million of Operating Cash Flow

 

DENVER, CO, November 14, 2023 – Medicine Man Technologies, Inc., operating as Schwazze, (OTCQX: SHWZ) (NEO: SHWZ) ("Schwazze" or the "Company"), today announced financial and operational results for the third quarter ended September 30, 2023.

 

Third Quarter 2023 Summary

 

   For the Three Months Ended 
$ in Thousands USD  September 30,
2023		   June 30,
2023		   September 30,
2022		 
Total Revenue  $46,747   $42,375   $43,191 
Gross Profit  $21,438   $24,519   $22,476 
Operating Expenses  $12,514   $19,562   $11,361 
Income from Operations  $8,924   $4,957   $11,115 
Adjusted EBITDA1  $14,119   $13,814   $15,860 
Operating Cash Flow  $6,946   $2,683   $10,298 

 

Management Commentary

 

“We continued to increase our retail footprint during the quarter to a total of 63 stores in Colorado and New Mexico, while further integrating our recently-acquired assets in both states,” said Nirup Krishnamurthy, CEO of Schwazze. “We also generated a 41% increase in our wholesale business year-over-year as we are gaining momentum in New Mexico and improved penetration in Colorado. When looking at wholesale penetration, Schwazze now sells into 7 of the 10 largest operators in Colorado and New Mexico with its expanding product portfolio.

 

 

1 Adjusted EBITDA is a non-GAAP measure as defined by the SEC, and represents earnings before interest, taxes, depreciation, and amortization, adjusted for other income, non-cash share-based compensation, one-time transaction related expenses, or other non-operating costs. The Company uses Adjusted EBITDA as it believes it better explains the results of its core business. See “ADJUSTED EBITDA RECONCILIATION (NON-GAAP)” section herein for an explanation and reconciliations of non-GAAP measure used throughout this release.

 

 

 

 

“In Colorado, we have increased efforts to expand our reach to medical patients through the Standing Akimbo banner with new presence in Colorado Springs and Fort Collins. We also opened a new Starbuds store in Lakewood in August and are seeing promising early results. Alongside new store openings, we are currently remodeling and/or relocating certain stores to further enhance the customer experience.

 

“In New Mexico, cannabis operators are navigating increased competition as a result of new licenses. While legal cannabis sales in the state were up 19% year-over-year in Q3, total store count was up 76%, leading to lower revenue on a per store basis. In response to these market dynamics, we are strategically investing in the retail experience and remain committed to attracting and retaining our customers and patients there. Our strategy is to first, further integrate the Everest assets while refining assortment, in-stock position and standard costs from a combined integrated supply chain. Second, invest in our leading retail position by bringing new products to our shelves while sharpening pricing and promotional efforts. Third, support the state as it implements cannabis regulation and enforcement to heighten testing and safety standard. And finally, continue to expand our wholesale business in the state.

 

“As we look to 2024, our strategy remains unchanged: leverage our operating playbook and further integrate our acquired assets to drive customer acquisition and sales across our expanded footprint. We will continue to evaluate opportunities that can enhance our geographic footprint and brand portfolio.”

 

Recent Highlights

 

·Launched Colorado’s first “store-within-a-store” concept, combining a Star Buds recreational dispensary with the Standing Akimbo medical banner.

 

·Announced the grand opening of a medical and recreational dispensary under the R. Greenleaf banner in Hobbs, NM, increasing the Company’s New Mexico retail footprint to 33 stores.

 

·Third quarter ecommerce transactions in New Mexico and Colorado increased a collective 28% compared to the second quarter of 2023.

 

·Third quarter customer loyalty members increased 16% compared to the second quarter of 2023 with New Mexico loyalty member penetration growing to 78% of total customers.

 

·Lowell Farms premium pre-roll brand, licensed by the Company, is now in over 130 doors and the #2 pre-roll in Colorado.

 

 

 

 

Third Quarter 2023 Financial Results

 

Total revenue in the third quarter of 2023 increased 8% to $46.7 million compared to $43.2 million for the same quarter last year. The increase was primarily due to growth from new stores compared to the prior year period and increased wholesale revenue, partially offset by pricing pressure from the proliferation of new licenses in New Mexico.

 

Gross profit for the third quarter of 2023 was $21.4 million or 45.9% of total revenue, compared to $22.5 million or 52.0% of total revenue for the same quarter last year. The decrease in gross margin was primarily driven by a year-to-date true-up expense reclassification from SG&A into cost of goods sold, as well as increased lower margin medical sales mix in Colorado and lower initial gross margin from the Company’s acquisition of Everest Apothecary’s inventory. This was partially offset by improvements to product mix across the Company’s retail footprint.

 

Operating expenses for the third quarter of 2023 were $12.5 million compared to $11.4 million for the same quarter last year. The increase was primarily due to four-wall SG&A increases associated with 28 additional stores in Colorado and New Mexico that are still ramping.

 

Income from operations for the third quarter of 2023 was $8.9 million compared to $11.1 million in the same quarter last year. Net loss was $0.3 million compared to net income of $1.8 million for the third quarter of 2022.

 

Adjusted EBITDA for the third quarter of 2023 was $14.1 million or 30.2% of revenue, compared to $15.9 million or 36.7% of revenue for the same quarter last year. The decrease in Adjusted EBITDA margin was primarily driven by lower gross margin and the higher four-wall SG&A associated with new stores that are still ramping.

 

As of September 30, 2023, cash and cash equivalents were $19.6 million compared to $38.9 million on December 31, 2022, while operating working capital decreased by $3.5 million to $0.6 million during this period. Total debt as of September 30, 2023, was $155.1 million compared to $127.8 million on December 31, 2022.

 

Schwazze CFO Forrest Hoffmaster added, “As we focus on revenue growth, customer acquisition and generating positive cash flow, we are also making steady progress on integrating our recent acquisitions to drive operational efficiencies and cost synergies at scale. In addition, we are in the process of optimizing our inventory through an ERP implementation across our cultivation and manufacturing facilities, which we expect will lead to one-time inventory valuation adjustments as we close out the year. These initiatives will enable us to recognize further improvements across our business as we continue to deepen our presence in the markets we serve.”

 

 

 

 

Conference Call

 

The Company will conduct a conference call today, November 14, 2023, at 5:00 p.m. Eastern time to discuss its results for the third quarter ended September 30, 2023.

 

Schwazze management will host the conference call, followed by a question-and-answer period. Interested parties may submit questions to the Company prior to the call by emailing ir@schwazze.com.

 

Date: Tuesday, November 14, 2023
Time: 5:00 p.m. Eastern time
Toll-free dial-in: (888) 664-6383

International dial-in: (416) 764-8650

Conference ID: 64450430

Webcast: SHWZ Q3 2023 Earnings Call

 

The conference call will also be broadcast live and available for replay on the investor relations section of the Company’s website at https://ir.schwazze.com.

 

Toll-free replay number: (888) 390-0541

International replay number: (416) 764-8677

Replay ID: 450430

 

If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.

 

About Schwazze

 

Schwazze (OTCQX: SHWZ) (NEO: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to take its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale.

 

Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company's leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector.

 

Medicine Man Technologies, Inc. was Schwazze's former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth. To learn more about Schwazze, visit https://schwazze.com/.

 

 

 

 

Forward-Looking Statements

 

This press release contains "forward-looking statements." Such statements may be preceded by the words "may," "will," "could," "would," "should," "expect," "intends," "plans," "strategy," "prospects," "anticipate," "believe," "approximately," "estimate," "predict," "project," "potential," "continue," "ongoing," or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements are not guarantees of future events or 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 events and 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) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. 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 except as required by law.

 

Investor Relations Contact

 

Sean Mansouri, CFA or Aaron D’Souza

Elevate IR

(720) 330-2829

ir@schwazze.com

 

 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

For the Periods Ended September 30, 2023 and December 31, 2022

Expressed in U.S. Dollars

 

   September 30,   December 31, 
   2023   2022 
   (Unaudited)   (Audited) 
ASSETS          
Current Assets          
Cash & Cash Equivalents  $19,624,615   $38,949,253 
Accounts Receivable, net of Allowance for Doubtful Accounts   5,049,869    4,471,978 
Inventory   32,767,841    22,554,182 
Notes Receivable - Current, net   -    11,944 
Marketable Securities, net of Unrealized Loss of $1,816 and Loss of $39,270, respectively   456,099    454,283 
Prepaid Expenses & Other Current Assets   6,485,896    5,293,393 
Total Current Assets   64,384,320    71,735,033 
Non-Current Assets          
Fixed Assets, net Accumulated Depreciation of $8,065,794 and $4,899,977, respectively   32,139,192    27,089,026 
Investments   2,000,000    2,000,000 
Goodwill   76,578,654    94,605,301 
Intangible Assets, net Accumulated Amortization of $28,828,713 and $16,290,862, respectively   168,822,669    107,726,718 
Note Receivable - Non-Current, net   1,313    - 
Deferred Tax Assets, net   50,467    - 
Other Non-Current Assets   1,298,950    1,527,256 
Operating Lease Right of Use Assets   25,315,122    18,199,399 
Total Non-Current Assets   306,206,367    251,147,700 
Total Assets  $370,590,687   $322,882,733 
           
LIABILITIES & STOCKHOLDERS' EQUITY          
Current Liabilities          
Accounts Payable  $11,665,499   $10,701,281 
Accounts Payable - Related Party   22,073    22,380 
Accrued Expenses   9,430,875    7,462,290 
Derivative Liabilities   2,022,248    16,508,253 
Lease Liabilities - Current   4,721,713    3,139,289 
Current Portion of Long Term Debt   4,250,000    2,250,000 
Income Taxes Payable   18,283,784    7,297,815 
Total Current Liabilities   50,396,192    47,381,308 
Non-Current Liabilities          
Long Term Debt, net of Debt Discount & Issuance Costs   150,878,200    125,521,520 
Lease Liabilities - Non-Current   23,525,633    17,314,464 
Deferred Income Taxes, net   -    502,070 
Total Non-Current Liabilities   174,403,833    143,338,054 
Total Liabilities  $224,800,025   $190,719,362 
           
Stockholders' Equity          
Preferred Stock, $0.001 Par Value. 10,000,000 Shares Authorized; 86,494 Shares Issued and 86,994 Shares Outstanding as of September 30, 2023 and 86,994 Shares Issued and 86,994 Shares Outstanding as of December 31, 2022.   87    87 
Common Stock, $0.001 Par Value. 250,000,000 Shares Authorized; 72,607,621 Shares Issued and 72,591,605 Shares Outstanding as of September 30, 2023 and 56,352,545 Shares Issued and 55,212,547 Shares Outstanding as of December 31, 2022.   72,607    56,353 
Additional Paid-In Capital   199,177,342    180,381,641 
Accumulated Deficit   (51,426,247)   (46,241,583)
Common Stock Held in Treasury, at Cost, 920,150 Shares Held as of September 30, 2023 and 920,150 Shares Held as of December 31, 2022.   (2,033,127)   (2,033,127)
Total Stockholders' Equity   145,790,662    132,163,371 
Total Liabilities & Stockholders' Equity  $370,590,687   $322,882,733 

  

 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND (LOSS)

For the Periods Ended September 30, 2023 and 2022

Expressed in U.S. Dollars

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
Operating Revenues                    
Retail  $41,951,969   $39,759,734   $115,871,037   $104,386,464 
Wholesale   4,701,268    3,335,252    13,034,676    14,661,268 
Other   93,698    96,000    217,258    184,200 
Total Revenue   46,746,935    43,190,986    129,122,971    119,231,932 
Total Cost of Goods & Services   25,308,972    20,715,192    60,133,091    60,661,933 
Gross Profit   21,437,963    22,475,794    68,989,880    58,569,999 
Operating Expenses                    
Selling, General and Administrative Expenses   9,639,268    6,594,311    28,693,517    20,114,335 
Professional Services   767,822    1,507,149    2,443,046    5,609,579 
Salaries   4,545,439    3,159,578    17,700,403    15,697,294 
Stock Based Compensation   (2,438,073)   99,898    622,162    1,788,823 
Total Operating Expenses   12,514,456    11,360,936    49,459,128    43,210,031 
Income from Operations   8,923,507    11,114,858    19,530,752    15,359,968 
Other Income (Expense)                    
Interest Expense, net   (8,320,397)   (8,500,235)   (23,956,691)   (23,312,088)
Unrealized Gain (Loss) on Derivative Liabilities   4,516,237    4,816,668    14,486,005    28,104,960 
Other Loss   -    -    -    20,400 
Unrealized Gain (Loss) on Investments   -    (28,541)   1,816    (42,353)
Total Other Income (Expense)   (3,804,160)   (3,712,108)   (9,468,870)   4,770,919 
Pre-Tax Net Income (Loss)   5,119,347    7,402,750    10,061,882    20,130,887 
Provision for Income Taxes   5,441,809    5,593,513    15,246,546    11,259,369 
Net Income (Loss)  $(322,462)  $1,809,237   $(5,184,664)  $8,871,518 
                     
Less: Accumulated Preferred Stock Dividends for the Period   (1,547,369)   (1,784,113)   (5,930,646)   (5,294,132)
Net Income (Loss) Attributable to Common Stockholders  $(1,869,831)  $25,124   $(11,115,310)  $3,577,386 
                     
Earnings (Loss) per Share Attributable to Common Stockholders                    
Basic Earnings (Loss) per Share  $(0.02)  $-   $(0.14)  $0.07 
Diluted Earnings (Loss) per Share  $(0.03)  $-   $(0.14)  $0.03 
                     
Weighted Average Number of Shares Outstanding - Basic   87,202,537    51,232,943    78,635,841    50,615,437 
Weighted Average Number of Shares Outstanding - Diluted   87,202,537    137,954,532    78,635,841    137,337,027 
Comprehensive Income (Loss)  $(322,462)  $1,809,237   $(5,184,664)  $8,871,518 

 

 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Periods Ended September 30, 2023 and 2022

Expressed in U.S. Dollars

 

   For the Nine Months Ended 
   September 30, 
   2023   2022 
   (Unaudited)   (Unaudited) 
Cash Flows from Operating Activities:          
Net Income (Loss) for the Period  $(5,184,664)  $8,871,518 
Adjustments to Reconcile Net Income (Loss) to Cash for Operating Activities          
Depreciation & Amortization   15,703,668    8,329,767 
Non-Cash Interest Expense   3,003,386    3,137,021 
Non-Cash Lease Expense   5,756,492    3,910,679 
Deferred Taxes   (552,537)   - 
Change in Derivative Liabilities   (14,486,005)   (28,104,960)
Amortization of Debt Issuance Costs   1,264,537    1,264,538 
Amortization of Debt Discount   6,269,584    5,505,420 
(Gain) Loss on Investments, net   (1,816)   42,353 
Stock Based Compensation   835,347    811,897 
Changes in Operating Assets & Liabilities (net of Acquired Amounts):          
Accounts Receivable   206,179    (1,100,055)
Inventory   (4,883,659)   2,898,959 
Prepaid Expenses & Other Current Assets   (1,192,503)   (3,377,844)
Other Assets   228,306    (179,072)
Change in Operating Lease Liabilities   (5,078,622)   (11,938,634)
Accounts Payable & Other Liabilities   (4,124,458)   8,802,231 
Income Taxes Payable   10,985,969    1,560,630 
Net Cash Provided by (Used in) Operating Activities   8,749,202    434,448 
           
Cash Flows from Investing Activities:          
Collection of Notes Receivable   10,631    - 
Cash Consideration for Acquisition of Business, net of Cash Acquired   (15,813,028)   (56,875,923)
Purchase of Fixed Assets   (6,766,759)   (12,511,389)
Purchase of Intangible Assets   (2,700,000)   (2,825)
Net Cash Provided by (Used in) Investing Activities   (25,269,156)   (69,390,137)
           
Cash Flows from Financing Activities:          
Payment on Notes Payable   (3,488,302)   - 
Proceeds from Issuance of Common Stock, net of Issuance Costs   683,618    1,280,660 
Net Cash Provided by (Used in) Financing Activities   (2,804,684)   1,280,660 
           
Net (Decrease) in Cash & Cash Equivalents   (19,324,638)   (67,675,029)
Cash & Cash Equivalents at Beginning of Period   38,949,253    106,400,216 
Cash & Cash Equivalents at End of Period  $19,624,615   $38,725,187 
           
Supplemental Disclosure of Cash Flow Information:          
Cash Paid for Interest  $13,271,618   $13,239,685 
Cash Paid for Income Taxes   5,000,000    9,840,000 

 

 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

ADJUSTED EBITDA RECONCILIATION (NON-GAAP)

For the Periods Ended September 30, 2023 and 2022

Expressed in U.S. Dollars

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Net Income (Loss)  $(322,462)  $1,809,237   $(5,184,664)  $8,871,518 
Interest Expense, net   8,320,397    8,500,235    23,956,691    23,312,088 
Provision for Income Taxes   5,441,809    5,593,513    15,246,546    11,259,369 
Other (Income) Expense, net of Interest Expense   (4,516,237)   (4,788,127)   (14,487,821)   (28,083,007)
Depreciation & Amortization   5,330,529    3,322,150    15,808,535    8,823,549 
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (non-GAAP)  $14,254,036   $14,437,008   $35,339,287   $24,183,517 
Non-Cash Stock Compensation   (2,438,073)   99,898    622,162    1,788,823 
Deal Related Expenses   1,401,795    993,828    3,331,315    4,907,291 
Capital Raise Related Expenses   1,712    185,597    36,780    791,229 
Inventory Adjustment to Fair Market Value for                    
Purchase Accounting   -    34,604    -    6,541,651 
Severance   121,715    22,434    425,832    71,536 
Retention Program Expenses   110,023    -    505,655    - 
Employee Relocation Expenses   12,867    -    65,042    19,110 
Other Non-Recurring Items   655,244    87,097    2,132,272    422,532 
Adjusted EBITDA (non-GAAP)  $14,119,319   $15,860,466   $42,458,345   $38,725,689 
Revenue   46,746,935    43,190,986    129,122,971    119,231,932 
Adjusted EBITDA Percent   30.2%   36.7%   32.9%   32.5%

 

MEDICINE MAN TECHNOLOGIES, INC.

OPERATING WORKING CAPITAL RECONCILIATION (NON-GAAP)

For the Periods Ended September 30, 2023 and December 31, 2022

Expressed in U.S. Dollars

 

   September 30,   December 31, 
   2023   2022 
Current Assets  $64,384,320   $71,735,033 
Less: Cash & Cash Equivalents   (19,624,615)   (38,949,253)
Adjusted Current Assets (non-GAAP)   44,759,705    32,785,780 
           
Current Liabilities  $50,396,192   $47,381,308 
Less: Derivative Liabilities   (2,022,248)   (16,508,253)
Less: Current Portion of Long Term Debt   (4,250,000)   (2,250,000)
Adjusted Current Liabilities (non-GAAP)   44,123,944    28,623,055 
           
Operating Working Capital (non-GAAP)  $635,761   $4,162,725