0001683168-17-001290.txt : 20170516 0001683168-17-001290.hdr.sgml : 20170516 20170516151105 ACCESSION NUMBER: 0001683168-17-001290 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170516 DATE AS OF CHANGE: 20170516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Medicine Man Technologies, Inc. CENTRAL INDEX KEY: 0001622879 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 465289499 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55450 FILM NUMBER: 17848375 BUSINESS ADDRESS: STREET 1: 4880 HAVANA STREET STREET 2: SUITE 102 SOUTH CITY: DENVER STATE: CO ZIP: 80239 BUSINESS PHONE: 303-371-0387 MAIL ADDRESS: STREET 1: 4880 HAVANA STREET STREET 2: SUITE 102 SOUTH CITY: DENVER STATE: CO ZIP: 80239 10-Q 1 medman_10q-033117.htm FORM 10-Q

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2017

 

  [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________.

 

Commission File Number: 000-55450

 

Medicine Man Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   46-5289499

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification Number)

     
4880 Havana Street    
Suite 201 South    
Denver, Colorado   80239
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (303) 371-0387


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

  Large accelerated filer  o Accelerated filer  o
  Non-accelerated filer  o Smaller reporting company  x
  Emerging growth company  o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No x

 

As of May 15, 2017, there were 10,548,087 shares of common stock, par value $0.001 issued and outstanding.

 

 

 

 
 

 

MEDICINE MAN TECHNOLOGIES, INC.

Table of Contents

 

 

  Page
Part I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 15
Item 4. Controls and Procedures 15
     
Part II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Mine safety disclosure  
Item 5. Other Information 16
Item 6. Exhibits 16

 

 

 

 

 

 

 

 2 

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.

 

Factors that may cause or contribute actual results to differ from these forward-looking statements include, but are not limited to, for example:

 

  · adverse economic conditions;

 

  · the inability to attract and retain qualified senior management and technical personnel;

 

  · other risks and uncertainties related to the cannabis market and our business strategy.

 

All forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from expectations under “Risk Factors” in our Form 10-K. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether because of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 

 

 3 

 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

MEDICINE MAN TECHNOLOGIES, INC.

BALANCE SHEETS

Expressed in U.S. Dollars

     

 

   March 31, 2017   December 31, 2016 
         
Assets 
Current assets          
Cash and cash equivalents  $161,258   $351,524 
Accounts receivable   358,094    25,000 
Available for sale securities   26,948    13,998 
Short-term note receivable   271,413    264,016 
Other assets   69,894    27,479 
Total current assets   887,607    682,017 
           
Non-current assets          
Property and equipment, net   101,739    42,126 
Intangible assets: license agreement, net   3,575    3,708 
Total non-current assets   105,314    45,834 
           
Total assets  $992,921   $727,851 
           
Liabilities and Stockholders’ Equity 
           
Current liabilities          
Accounts payable  $   $ 
Other liabilities   24,616    175 
Derivative liability   244,993    294,002 
Total current liabilities   269,609    294,177 
           
Long-term liabilities          
Convertible loan   735,000    810,000 
Total long-term liabilities   735,000    810,000 
           
Total liabilities   1,004,609    1,104,177 
           
Commitments and contingencies, note 5          
Shareholders’ equity          
Preferred stock $0.001 par value, 10,000,000 authorized, none issued and outstanding at March 31, 2017 or 2016                
Common stock $0.001 par value, 90,000,000 authorized, 10,548,087 and 10,402,500 were issued and outstanding December 31, 2017 and December 31, 2016, respectively     10,549       10,403    
Additional paid-in capital   1,280,683    1,026,052 
Accumulated other comprehensive (loss)   (5,607)   (4,303)
Accumulated equity   (1,297,313)   (1,408,478)
Total shareholders' equity   (11,688)   (376,326)
           
Total liabilities and stockholders’ equity  $992,921   $727,851 

 

See accompanying notes to the financial statements

 

 

 

 4 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

STATEMENT OF COMPREHENSIVE (LOSS) AND INCOME

(UNAUDITED)

For the Three Months Ended March 31, 2017 and 2016

Expressed in U.S. Dollars

 

 

  Three Months Ended March 31, 
   2017   2016 
Operating revenues          
Licensing fees  $531,030   $194,235 
Other revenues   10,106    5,380 
Total revenue   541,136    199,615 
           
Cost of services   165,159    137,441 
           
Gross profit   375,977    62,174 
           
Operating expenses          
General and administrative   195,401    114,338 
Stock based compensation expense       49,200 
Advertising   33,484    12,492 
Total operating expenses   228,885    176,030 
           
Income from operations   147,092    (113,856)
           
Other income/expense          
Interest income   (7,397)    
Net gain on derivative liability   (49,009)    
Net gain on available for sale securities   (262)    
Interest expense related to convertible notes   22,340     
(Gain)/Loss on management fee contracts   70,257     
Total other expense   35,929     
           
Net income (loss) before income taxes   111,163    (113,856)
           
Income tax expense        
           
Net income (loss)  $111,163   $(113,856)
           
Earnings per share attributable to common shareholders:          
Basic and diluted earnings per share  $0.01   $0.01 
Weighted average number of shares outstanding - basic and diluted   10,226,086    9,906,250 
           
Other comprehensive income (loss), net of tax          
Net unrealized (loss) on available for sale securities  $   $10,400 
Total other comprehensive income (loss), net of tax          
Comprehensive income (loss)  $111,163   $(103,456)

 

See accompanying notes to the financial statements

 

 

 

 5 

 

 

MEDICINE MAN TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS

(UNAUDITED)

For the Three Months Ended March 31, 2017 and 2016

Expressed in U.S. Dollars

 

 

   2017   2016 
Cash flows from operating activities          
Net income for the period  $111,163   $(113,856)
Adjustments to reconcile net income to net cash provided by operating activities          
Initial fair value of derivative convertible note liability included as interest expense        
Loss on derivative liability, net   (49,009)    
Stock based compensation   254,777    49,200 
Depreciation and amortization   10,306    4,265 
Changes in operating assets and liabilities          
Accounts Receivable   (333,094)   68,270 
Prepaid Expenses   (49,228)   (30,289)
Prepaid Rent   6,813    5,750 
Proceeds from note receivable   (7,397)    
Accounts payable       25,237 
Other liabilities   24,441     
Net cash (used)/earned from operating activities   (31,228)   8,577 
           
Cash flows from investing activities          
Purchase of fixed assets   (14,254)    
AFS Securities Investment, net   (69,784)    
Net cash used in investing activities   (84,038)    
           
Cash flows from financing activities          
Long-term convertible debt   (75,000)    
Common stock        
Net cash used in financing activities   (75,000)    
           
Net decrease in cash and cash equivalents   (190,266)   8,577 
Cash and cash equivalents - beginning of period   351,524    262,146 
Cash and cash equivalents - end of period  $161,258   $270,723 
           
Supplemental disclosures          
Interest paid  $   $ 
Income taxes paid  $   $ 
           
Non-Cash Transactions          
Derivative convertible liability recorded  $   $ 

 

See accompanying notes to the financial statements

 

 

 

 6 

 

 

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

 

Organization and Nature of Operations:

 

Business DescriptionBusiness Activity: Medicine Man Technologies Inc. (the "Company") is a Colorado corporation incorporated on March 20, 2014. The Company is a cannabis consulting company providing services related to cost efficient cannabis cultivation technologies focusing on quality as well as safety, retail operations related to the delivery of cannabis related products, and other related business lines as described in our operating strategic vision outlines below.

 

Brand Warehouse Development – With recent 8K filings, the Company has signaled that it intends to aggregate new business opportunities into its corporate fabric in a manner that does not diminish the various companies or brands it is partnering with, but rather enhances it. Suitable candidates for consideration will have ongoing operations within various industry segments, such as the Pono Publications and Success Nutrient acquisitions as already noted in the Company’s 8K filings on or about August 12th and October 20th of 2016. Over time, the Company expects to expand its presence within the industry through the development of an ‘intelligent acquisition’ process.

 

Intelligent AcquisitionThis term is meant to define a selection and due diligence process that will enable both the Company as well as the acquisition to benefit mutually in that each may better 1) establish a more stable method of continual valuation through direct contact with the public marketplace wherein with the related growth of the enterprise as a whole it will eventually be able to achieve a higher listing status within the NYSE as a capital markets member based upon prevailing regulations, 2) market themselves collectively thus taking advantage of certain cost savings strategies through shared participation in various events and advertising opportunities, 3) take advantage of other operating and reporting cost efficiencies available to the Company through aggregation of such acquisitions, 4) continue to work develop a full spectrum of products and services deliverable to the general cannabusiness marketplace through careful segmentation of the marketplace as a whole, and 5) continue to work collaboratively within the industry to achieve both transparency as well as a strong positive reputation for ethical behavior when working both internally within its collective as well as externally with others in the industry.

 

1. Liquidity and Capital Resources:

 

Cash Flows – During the quarters ending March 31, 2017 and 2016, the Company primarily utilized cash and cash equivalents and profits from operations to fund its operations.

 

Cash and cash equivalents are carried at cost and represent cash on hand, deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date. The Company had $161,258 and $351,524 classified as cash and cash equivalents as of March 31, 2017 and December 31, 2016, respectively.

 

2. Critical Accounting Policies and Estimates:

 

Basis of Presentation: These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for annual financial statements.

 

Fair Value Measurements: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments include cash, accounts receivable, note receivable, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. Our derivative liability was adjusted to fair market value at the end of each reporting period, using Level 3 inputs.

 

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

 

 

 

 7 

 

 

Accounts receivable: The Company extends unsecured credit to its customers in the ordinary course of business. Accounts receivable related to licensing revenues are recorded at the time the milestone result in the funds being due being achieved, services are delivered and payment is reasonably assured. Licensing revenues are generally collected from 30 to 60 days after the invoice is sent. As of March 31, 2017, and 2016, the Company had accounts receivable of $358,094 and $25,000, respectively. The company wrote off $0 of its accounts receivable in the current quarter. Allowance for doubtful accounts is currently zero as all receivables are less than 60 days old. The company will continue to evaluate the need for recognizing an additional allowance in the future.

 

AFS Securities: Investments available for sale is comprised of publicly traded stock purchased as an investment. The Company considers the securities to be liquid and convertible to cash in under a year. The Company has the ability and intent to liquidate any security that the Company holds to fund operations over the next twelve months, if necessary, and as such has classified all its marketable securities as short-term. Our investment securities at March 31, 2017 consist of available-for-sale instruments which include $26,948 of equity in publicly traded companies. All our available-for-sale securities are Level 2 due to limited trading volume. Realized gains and losses on these securities will be included in “other income (expense)” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCT).

 

Short term note receivable: Note receivable were comprised of a $250,000 loan with $21,413 of accrued interest for a total loan value of $271,413 issued to the organization that owns Funk Sack, Inc. This loan was extended with the option of negotiating an agreement to acquire the entirety of the company through a stock swap. However, in the fourth quarter of 2016 the Company determined that it would not complete the acquisition of the company and instead will hold the investment and it will be repaid. The loan was issued May 6, 2016 and was is due to be repaid November 1, 2017. As the note is still current and the Funk Sacks organization is continuing to operate and grow this note is considered to be fully collectable.

 

Other assets: Other assets at March 31, 2017 and December 31, 2016 were $69,894 and $27,479, respectively and as of March 31, 2017 included $4,542 in prepaid rent, $50,852 in prepaid registrations fees for major cannabis events the Company is sponsoring and advertising costs and $14,500 in a security deposit.

 

Accounts payable: Accounts payable at March 31, 2017 and December 31, 2016 was $0 and $0, respectively.

 

Accrued tax and other liabilities: Accrued tax and other liabilities at March 31, 2017 and December 2016 were $24,616 and $175. At March 31, 2017 this was comprised of accrued interest expense of $22,339 and $2,276 in accrued expense.

  

Fair Value of Financial Instruments: The carrying amounts of cash and current assets and liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. Available for sale securities are recorded at current market value as of the date of this report.

 

Revenue recognition and related allowances: Revenue from licensing services is recognized when the obligations to the client are fulfilled which is determined when milestones in the contract are achieved. Revenue from seminar fees is related to one day seminars and is recognized as earned at the completion of the seminar. All revenue is measured at fair value.

 

Costs of Services Sold – Costs of services sold are comprised of direct salaries and related expenses incurred while supporting the implementation of licensing agreements and related services.

 

General & Administrative Expenses – General and administrative expense are comprised of all expenses not linked to the production or advertising of the Company’s services.

 

Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred and were $33,484 and $12,492 during the three months ended March 31, 2017 and 2016, respectively.

 

Stock based compensation: The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock and restricted stock awards using the Black-Scholes option pricing model.

 

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse.

 

Share based expense paid to through direct stock grants is expensed as occurred. Since the Company’s stock has become publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. Prior to the company’s stock being traded the Company used the most recent valuation. The company recognized $0 in expenses for stock based compensation to employees during the three months ended March 31, 2017.

 

Income taxes: The Company has adopted SFAS No. 109 – “Accounting for Income Taxes”. ASC Topic 740 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

 8 

 

 

Management fee contracts: In February 2017, the Company entered into a Merger Agreement with Pono Publications Ltd. (“Pono”), as well as a Share Exchange Agreement with Success Nutrients, Inc. (“SN”), each a Colorado corporation, in order to facilitate our acquisition of both of these entities. The ratification of the acquisition of these companies requires the approval of the holders of a majority of the Company’s shareholders, which will be submitted for such approval at the Company’s annual shareholder meeting to be held in May 2017. If approved the relevant agreements provide that the effective date for accounting purposes will be March 1, 2016. Success Nutrients will become a wholly owned subsidiary of Medicine Man Technologies, Inc. and the business conducted by Pono will be incorporated into a newly formed wholly owned subsidiary, Medicine Man Consulting, Inc., which is also where we will continue to conduct the Company’s consulting service business. In March 2017, the Company integrated Pono Publications and Success Nutrients into its operations including a lease for approximately 10,000 square feet of space located at 6660 East 47th Street, Denver, CO 80216. This integration also included four (4) full time team members as well as several independent contractors. From March 1, 2017 until such time as the acquisition can be complete the Company has agreed to manage the acquirees through a management fee agreement whereby all cash collected will is recognized as revenue and all cash expenses are direct cost of the project. As of March 31, 2017, the management contract resulted in cash collections of approximately $100,000 and cash expenditures of approximately $170,000 resulting in a net loss of $70,257 which was presented on a net basis as a loss in the other income portion of our income statement.

 

3. Recent Accounting Pronouncements

 

During May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides new guidance on the recognition of revenue and states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standard update on the financial position and the results of operations.

 

On September 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10,Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2016. Early adoption is permitted. The Company has adopted this amendment effective this current fiscal year.

  

4. Stockholders’ Equity:

 

The Company’s initial authorized stock at inception was 1,000,000 common shares, par value $0.001 per share. In 2016 the company subsequently amended its Articles of Incorporation to increase its authorized shares to 90,000,000 Common Shares, par value $0.001 per share and 10,000,000 preferred shares, par value $0.001 per share.

 

During the time in which the Company was establishing its operations it issued 4,199,000 shares of Common Stock to various individuals as founders for prior services completed which was valued at par value, resulting in the Company booking stock based expense of $4,199.

 

During the time in which the Company was establishing it operations it issued 5,331,000 shares of Common Stock to various individuals for a license agreement valued at par value resulting in the Company recognizing a purchased asset of $5,331.

 

Commencing in November 2014, the Company commenced a private offering of its Common Stock at an offering price of $1.00 per share. At December 31, 2014, it had accepted subscription from 26 investors and received net proceeds of $260,000 therefrom.

 

In December 2014, the Company issued 50,000 shares of its Common Stock for legal fees and recognized an expense for this issuance of $50,000 based upon the prior sale in November 2014 of its Common Stock. 

 

At December 31, 2014, the Company had 9,840,000 shares outstanding.

 

On March 17, 2015, 10,000 shares of Common Stock were sold to one investor as part of the private offering commencing in November 2014 in exchange for $10,000 cash.

 

During the second quarter of 2015, the Company issued 50,000 shares of Common Stock to an individual in consideration for their services rendered in support of the Company resulting in the Company recognizing compensation expense of $50,000 based upon a per share price of $1.00 per share realized in the most recent private offering.

 

 

 

 9 

 

 

On July 1, 2015, the Company issued 72,500 shares of Common Stock to four different individuals in consideration for their services rendered in support of the Company, resulting in recognizing compensation expense of $29,725 based upon an independent valuation determining the value of shares at $0.41 per share.

 

At December 31, 2015, the Company had 9,972,500 shares outstanding.

 

On January 4, 2016, the Company issued 120,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $49,200 based upon an independent valuation determining the value of shares at $0.41 per share.

 

During the three months ended March 31, 2017, the Company issued 145,587 shares of Common Stock upon conversion of convertible notes in the aggregate amount of $254,777.

 

At March 31, 2017, the Company had 10,548,087 common shares outstanding.

  

5. Property and Equipment:

 

Property and equipment are recorded at cost, net of accumulated depreciation and are comprised of the following:

  

   March 31,
2017
   December 31,
2016
 
Furniture & Fixtures  $56,527   $11,526 
Marketing Display   36,900    42,681 
Office Equipment   41,409    10,838 
   $134,836   $65,045 
Less:  Accumulated Depreciation   (33,098)   (22,919)
   $101,738   $42,126 

 

Depreciation on equipment is provided on a straight-line basis over its expected useful lives at the following annual rates.

  

Furniture & Fixtures 3 years  
Marketing Display 3 years  
Leasehold Improvements Term of the lease

 

Depreciation expense for the three month periods ending March 31, 2017 and 2016 was $10,177 and $4,133 respectively.

  

6. Intangible Asset

 

On May 1, 2014, the Company entered into a non-exclusive Technology License Agreement with Futurevision, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation, dba Medicine Man Denver (“Medicine Man Denver”), a company owned and controlled by affiliates of the Company, whereby Medicine Man Denver granted a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future). As payment for the license rights the Company issued Medicine Man Denver (or its designees) 5,331,000 shares of the Company’s common stock. The Company accounted for this license in accordance with ASC 350-30-30 “Intangibles – Goodwill and Other by recognizing the fair value of the amount paid by the company for the asset at the time of purchase. Since the Company has a limited operating history, management determined to use par value as the value recognized for the transaction. Since the term of the initial license agreement is ten (10) years, the cost of the asset will be recognized on a straight-line basis over the life of the agreement. In addition, each period the Company will evaluate the intangible asset for impairment. As of December 31, 2014, no impairment was deemed necessary.

 

Amortization expense for the periods ending March 31, 2017 and 2016 was $133 and $133, respectively.

 

   March 31,
2017
   December 31,
2016
 
License Agreement  $5,300   $5,300 
Less: accumulated amortization   (1,725)   (1,592)
   $3,575   $3,708 

 

 

 

 10 

 

 

7. Convertible Notes and Derivative Liability:

 

At December 31, 2016 the Company had raised $810,000 through a private placement of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019. During the quarter ended March 31, 2017 the Company raised an additional $179,777 with the same terms for a total of $989,777. In the period ended March 31, 2017 the Company converted $254,777 of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019, into 145,587 shares of common stock.

 

Upon issuance, each of the notes is immediately convertible at the noteholders election into the company’s common stock at $1.75 per share or 90% of the VWAP of the five days following the notice of conversion, whichever is lower. Since the conversion rate can be tied to an underlying item, the warrants are considered to be a derivative that is recorded as a liability at fair value and adjusted to fair value at the conclusion of each reporting period. The underlying assumptions used in the Black Scholes model to determine the fair value of the derivative liability were based on the individual date the notes were closed and were the following:

 

 

   Upon issuance   March 31, 2017 
Current stock price   $     1.66 to $4.35   $1.88 
Risk-free interest rate   67%    67% 
Expected dividend yield   0    0 
Expected term (in years)   2.39 to 2.09    2.00 
Expected volatility   85% to 114%    122% 
           
Changes in the derivative liability were as follows:          
           
January 1, 2017  $294,002      
Gain on derivative liability   (49,009)     
March 31, 2017  $244,993      

 

 

8. Related Party Transactions:

 

During 2015 and 2016 through September 30, 2016, the Company had a verbal agreement with Chineseinvestors.com Inc. and Futurevistion to share employees time while the majority of their salary was covered by these related companies. Medicine Man Technologies also paid the individuals a modest stipend for their time. While this agreement was in place through the balance of this, the 3rd quarter of operations the Company will be adding new employees as well as converting such other employees from these two common contributors directly to its own payroll as described in the subsequent event notes as needed to further its operating as well as growth requirements. It should also be noted that in August of the third quarter one of the ChineseInvestors.COM team members converted to full time employment with the Company increasing the number of full time paid team members to three.

 

During 2016, the Company received two short term loans bearing 12% annual interest from related parties, which were repaid in full along with interest. The Company borrowed $25,000 from Chineseinvestors.com, Inc. in July, which was repaid along with $250 interest in August. In that same period the Company borrowed $50,000 from Brett Roper, the COO and director, which was repaid along with $1,299 in interest in October.

 

9. Net Income (Loss) per Share

 

In accordance with ASC Topic 280 – “Earnings Per Share”, the basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's quarterly earnings for the period ended March 31, 2017 and 2016 basic and diluted earnings/(loss) per share $0.01 and $0.01, respectively.

 

 

 

 11 

 

 

10. Commitments and Concentrations:

 

Office Lease – Denver, Colorado – The Company entered into a lease for office space at 4880 Havana Street, Suite 200, Denver, Colorado 80239. The lease period started March 1, 2017 and will terminate February 29, 2020, resulting in the following future commitments:

 

2017 fiscal year  $95,947 
2018 fiscal year   154,174 
2019 fiscal year   171,000 
2020 fiscal year   29,000 

 

11. Tax Provision:

 

The Company had no tax provisions as of March 31, 2017 and December 31, 2016. The company had net income in the quarter ending March 31, 2017, however currently has an adequate net loss carryforward to cover any liability generated in the current quarter.

  

12. Subsequent event:

 

Subsequent to quarter end the Company executed a Term Sheet whereby we have reached an agreement to acquire Denver Consulting Group LLC, (“DCG”), a Colorado limited liability company that is engaged in cannabis consulting throughout the United States. The consideration for this acquisition will be the issuance of 2,258,065 shares of our Common Stock valued at $3.5 million based upon the closing price of our Common Stock on the date the Term Sheet was executed.

 

The agreement is subject to our due diligence as well as execution of definitive agreements, which shall contain customary representations. Due diligence is expected to be completed within 60 days from the date of the Term Sheet. It is also anticipated that we will retain the services of several of the principals of DCG, as well as its current employees.

 

 

 

 

 

 

 

 12 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

 

Overview

 

We were incorporated on March 20, 2014, in the State of Nevada. On May 1, 2014, we entered into an exclusive Technology License Agreement with Medicine Man Denver, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation (“Medicine Man Denver”) whereby Medicine Man Denver granted us a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future) (the “Medicine Man Denver License Agreement”).

 

We commenced our business on May 1, 2014 and currently generate revenues derived from licensing agreements with cannabis related entities, as well as sponsoring seminars offered to the cannabis industry and other business endeavors related to our core competencies. As of the date of this report we have or have had 45 fee generating clients in 14 different states.

 

Medicine Man Technologies Inc. (the "Company") is a Colorado corporation incorporated on March 20, 2014. The Company is a cannabis consulting company providing services related to cost efficient cannabis cultivation technologies focusing on quality as well as safety, retail operations related to the delivery of cannabis related products, and other related business lines as described in our operating strategic vision outlines below.

 

Brand Warehouse Development –We intend to aggregate new business opportunities into our corporate fabric in a manner that does not diminish the various companies or brands we are or intend to partnerwith, but rather enhance it. Suitable candidates for consideration will have ongoing operations within various industry segments, such as the Pono Publications and Success Nutrient acquisitions we have already announced in our Form 8-K filings with the US Securities and Exchange Commission dated February 27, 2017 and August 10, 2016. Over time, it is our intention to expand our presence within the cannabis industry through the development of an ‘intelligent acquisition’ process. There are no assurances our efforts will be successful.

 

Intelligent AcquisitionThis term is meant to define a selection and due diligence process that will enable us and an acquisition candidate to benefit mutually in that each may better: 1) establish a more stable method of continual valuation through direct contact with the public marketplace wherein the consolidated enterprise will eventually be able to meet the listing criteria of the NYSE; 2) market themselves collectively to take advantage of certain cost savings strategies through shared participation in various events and advertising opportunities; 3) take advantage of other operating and reporting cost efficiencies available to us through aggregation of such acquisitions; 4) continue to work to develop a full spectrum of products and services deliverable to the general cannabis marketplace through careful segmentation of the marketplace as a whole; and 5) continue to work within the industry to achieve both transparency as well as a strong positive reputation for ethical behavior.

 

Recent examples of our acquisition initiatives include Pono Publications and Success Nutrients, both Colorado Corporations that are heavily involved in cultivation activities. More specifically, these two acquisitions (once completed noting we have recently entered into a temporary operating agreement that should allow us to effectively bridge the time required to successfully completed these acquisitions while all parties are able to take advantage of common operating element advantages as well as enjoy compensation opportunities driven by this new relationship) will also allow us to offer enhanced cultivation consulting as well as an extraordinary nutrient line that has been developed specifically for cannabis cultivation use.

 

As a result of these pending acquisitions, Mr. Joshua Haupt (recently referred to as the ‘Steve Jobs of Cannabis Cultivation’ will also be joining our company as our new Chief Cultivation Officer upon successful completion of the acquisition. Josh’s extraordinary cultivation skills are outlined in his Three-A-Light ® publication (www.threealight.com) wherein he fully describes his three pounds a light performance metrics for growers in a non-industrial setting.

 

 

 

 13 

 

 

The combination of both these new acquisitions is already achieving profitability year to date on revenues (through October of 2016) of just over $1.267M noting both businesses were launched late in FY 2015.

 

One of the new products developed in cooperation with this new partner is referred to as Cultivation MAX, a service we will be launching shortly designed to increase the efficiency as well as yields of an existing cultivation operation in states where such operations are allowed by law wherein we will be able to achieve a revenue outcome for our client based upon the improvement of those related metrics; in other words our clients will not have any obligation to compensate us for ongoing operations unless they achieve improved cultivation outcomes. In addition to design and deployment revenue (nutrients included) we will receive for these services fees based upon the margin of improvement metrics typical to our industry on a pre-agreed to performance metric reflected in grams per watt, pounds per light, or grams per square foot of flower canopy. While we are optimistic there are no assurances we will increase production. Failure to increase production will result in our inability to generate revenues from these operations.

 

We believe our new cultivation performance metrics as achieved through this new partnership will provide extraordinary value to the industry as a whole for those able to recognize that cost of operations and quality will eventually define who thrives or just survives in this industry.

 

It is the Company’s belief that over time and in taking careful measured growth steps, our business will become both an admired as well as emulated model for the cannabusiness industry.

 

We have never been subject to any bankruptcy proceeding. Our executive offices are located at 4880 Havana Street, Suite 201 South, Denver, Colorado 80239, telephone (303) 371-0387. Our website address is www.medicinemantechnologies.com.

 

Results of Operations

 

Results of Operations for the three months ended March 31, 2017 and 2016

 

During the three months ended March 31, 2017, we generated revenues of $541,136, including consulting/licensing fees of $531,030, with the balance of fees arising from our participation in cannabis seminars. In the three months ended March 31, 2016 revenue generated was $199,615 with $194,235 generated through consulting/licensing fees. In addition, the Company entered into a management fee agreement with Pono and Success Nutrients until such time as the acquisition of these entities is approved by our shareholders. This agreement provides that the net of the cash income and expenses related to their business divisions are recognized as a gain or loss in the other income section of our financial statements. This agreement resulted in our generating approximately an additional $100,000 in revenue and approximately $40,000 in revenue invoiced but not collected in the period. If these additional revenues were included in our March 2017 Statement of Income, our total revenues would have been approximately $680,000 in the first quarter. Shareholder ratification of these two acquisitions is expected to occur at our annual meeting of shareholders scheduled for June 3, 2017.

 

It is anticipated that our efforts to develop our seminar business will be limited in the future as we intend to devote our resources and efforts into the development of our consulting business.

 

Cost of services, consisting of expense related to delivery of services, was $165,159 during the three months ended March 31, 2017, compared to $137,441 during the comparable period in 2016, this increase was largely driven by an increase in wages for the period. Operating expenses during the three months ended March 31, 2017, were $228,885, including general and administrative expense of $195,401, compared to general and administrative expenses of $114,338 incurred during the three months ended March 31, 2016, an increase of $81,063. Increased operating expenses included additional cost incurred related to professional fees incurred during the period, as well as $33,484 in advertising expense incurred during the three months ended March 31, 2017, compared to advertising expenses of $12,492 during the corresponding period in 2016. Advertising expense increased because of there being more states who had approved or had pending legislation authorizing legalization of cannabis, either medical, recreational or both.

 

Thus, we generated net income of $111,162 during the three months ended March 31, 2017 (approximately ($0.01) per share), compared to net loss of $113,857 during the three months ended March 31, 2016.

  

Liquidity and Capital Resources

 

At March 31, 2017, we had $161,258 in cash on hand.

 

Net cash used by operating activities was $(31,228) during the three-month period ended March 31, 2017, compared to cash earned from operating activities of $8,577 for the similar period in 2016, a decrease of $39,805. We anticipate we will continue to generate negative cash flow from operations until we complete at least one of several potential acquisitions.

 

Between November 2014 and March 2016, we undertook a private offering of our Common Stock wherein we sold 270,000 shares of our Common Stock for gross proceeds of $270,000 ($1.00 per share) to 4 non-accredited and 23 “accredited” investors, as that term is defined under the Securities Act of 1933.

 

 

 

 14 

 

 

As the Company continues to focus on expanding its branding warehouse concept, it will begin to require capital beyond its ability to support through normal cash flow sources. Over time these investments will begin to require less capital and be spread out over an ever-increasing corporate structure integrating various acquisitions as wholly owned subsidiary operations, all supporting a common brand and marketing strategy. Additionally, our ability to evolve into a low cost public company entity will generate even better value to our shareholders as we are eliminating duplication of all the various related costs and services.

  

From October 2016 through February 2017, we engaged in a private offering of convertible notes to 11 accredited investors (as that term is defined under Rule 501, Regulation D of the Securities Act of 1933, as amended). These loans provide for a fixed or VW AP conversion option, bear an annual interest rate of 12% (simple), with interest paid quarterly and mature on December 31, 2018. We issued notes totaling $989,777. As of the date of this Report, Convertible Notes aggregating $254,777 were converted to 145,587 shares of our Common Stock. These conversions were computed at both the floor value of $1.75 as well as at a VW AP value as allowable under the terms of the conversion rights. See "Notes to Financial Statements."

 

The company is currently in process of securing additional capital in return for issuing equity in the company’s common stock. It is expected, though not assured, that this additional cash infusion will provide meet the cash requirements of the company until it will again start generating positive cash flow for its operations. However, if we are unable to secure this financing or generate profits from our operations or elect to expand our operations or otherwise require additional capital, we have no agreement with any third party to provide us the same and there can be no assurances that we will be able to raise any capital, either debt or equity on commercially reasonable terms, or at all. If we require additional capital and are unable to raise the same, it could have a material negative impact on our results of operations.

 

Inflation

 

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period ended March 31, 2017.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements as of March 31, 2017 and December 31, 2016.

 

Critical Accounting Estimates

 

Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2016 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2017.   This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2017.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

  

 

 

 15 

 

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are not a party to any legal proceeding that we believe will have a material adverse effect upon its business or financial position, nor has any such action been threatened against us.

 

Item 1A. Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended March 31, 2017, we issued 145,587 shares of Common Stock upon conversion of convertible notes in the aggregate amount of $254,777. We used the funds received from the issuance of these convertible notes for working capital.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

31.1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32   Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance Document*
101.SCH   XBRL Schema Document*
101.CAL   XBRL Calculation Linkbase Document*
101.DEF   XBRL Definition Linkbase Document*
101.LAB   XBRL Label Linkbase Document*
101.PRE   XBRL Presentation Linkbase Document*
     

______________________ 

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.

 

 

 

 16 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    MEDICINE MAN TECHNOLOGIES, INC.
     
     
Dated: May 16, 2017 By: /s/ Andrew Williams
    Andrew Williams
    Chief Executive Officer
     

 

Dated: May 16, 2017 By: /s/ Paul Dickman
    Paul Dickman
    Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 17 

 

EX-31.1 2 medman_10q-ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Andrew Williams, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Medicine Man Technologies, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Dated: May 16, 2017 /s/ Andrew Williams
  Andrew Williams, Chief Executive Officer

 

EX-31.2 3 medman_10q-ex3102.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Paul Dickman, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Medicine Man Technologies, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Dated: May 16, 2017 /s/ Paul Dickman
  Paul Dickman, Chief Financial Officer

 

EX-32 4 medman_10q-ex032.htm CERTIFICATION

Exhibit 32

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this quarterly report of Medicine Man Technologies, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission on May 16, 2017 (the “Report”), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

 

  1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Dated:  May 16, 2017 /s/ Andrew Williams
  Andrew Williams, Chief Executive Officer
   
   
Dated:  May 16, 2017 /s/ Paul Dickman
  Paul Dickman, Chief Financial Officer

 

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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
May 15, 2017
Document And Entity Information    
Entity Registrant Name Medicine Man Technologies, Inc.  
Entity Central Index Key 0001622879  
Document Type 10-Q  
Document Period End Date Mar. 31, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   10,548,087
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
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Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
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Cash and cash equivalents $ 161,258 $ 351,524
Accounts receivable 358,094 25,000
Available for sale securities 26,948 13,998
Short term note receivable 271,413 264,016
Other assets 69,894 27,479
Total current assets 887,607 682,017
Non-current assets    
Property and equipment, net 101,738 42,126
Intangible Assets: License Agreement, net 3,575 3,708
Total non-current assets 105,314 45,834
Total assets 992,921 727,851
Current liabilities    
Accounts payable 0 0
Other liabilities 24,616 175
Derivative liability 244,993 294,002
Total current liabilities 269,609 294,177
Long-term liabilities    
Convertible loan 735,000 810,000
Total long-term liabilities 735,000 810,000
Total liabilities 1,004,609 1,104,177
Commitments and Contingencies, note 5
Shareholders' equity    
Preferred stock $0.001 par value, 10,000,000 authorized, none issued and outstanding at March 31, 2017 or 2016 0 0
Common stock $0.001 par value, 90,000,000 authorized, 10,548,087 and 10,402,500 were issued and outstanding December 31, 2017 and December 31, 2016, respectively 10,549 10,403
Additional paid-in capital 1,280,683 1,026,052
Accumulated other comprehensive (loss) (5,607) (4,303)
Accumulated equity (1,297,313) (1,408,478)
Total Shareholders' equity (11,688) (376,326)
Total liabilities and stockholders' equity $ 992,921 $ 727,851
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Mar. 31, 2017
Dec. 31, 2016
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Preferred stock par value $ 0.001 $ .001
Preferred stock issued 0 0
Preferred stock outstanding 0 0
Common stock authorized 90,000,000 90,000,000
Common stock par value $ 0.001 $ .001
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Statement of Comprehensive (Loss) and Income (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating revenues    
Licensing Fees $ 531,030 $ 194,235
Other revenues 10,106 5,380
Total revenue 541,136 199,615
Cost of services 165,159 137,441
Gross profit 375,977 62,174
Operating expenses    
General and administrative 195,401 114,338
Stock based compensation expense 0 49,200
Advertising 33,484 12,492
Total operating expenses 228,885 176,030
Income from operations 147,092 (113,856)
Other income/expense    
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Net gain on derivative liability (49,009) 0
Net gain on available for sale securities (262) 0
Interest expense related to convertible notes 22,340 0
(Gain)/Loss on management fee contracts 70,257 0
Total other expense 35,929 0
Net income (loss) before taxes 111,163 (113,856)
Income tax expense 0 0
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Earnings per share attributable to common shareholders:    
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Weighted average number of shares outstanding - basic and diluted 10,226,086 9,906,250
Other comprehensive income (loss), net of tax    
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Mar. 31, 2016
Cash flows from operating activities    
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Accounts payable 0 25,237
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Net cash (used) generated from operating activities (31,228) 8,577
Cash flows from investing activities    
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AFS Securities Investment, net (69,784) 0
Net cash used in investing activities (84,038) 0
Cash flows from financing activities    
Long-term convertible debt (75,000) 0
Common stock 0 0
Net cash used in financing activities (75,000) 0
Net decrease in cash and cash equivalents (190,266) 8,577
Cash and cash equivalents - beginning of period 351,524 262,146
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Supplemental disclosures    
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Income taxes paid 0 0
Non-Cash Transactions    
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Organization and Nature of Operations
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Nature of Operations

Business DescriptionBusiness Activity: Medicine Man Technologies Inc. (the "Company") is a Colorado corporation incorporated on March 20, 2014. The Company is a cannabis consulting company providing services related to cost efficient cannabis cultivation technologies focusing on quality as well as safety, retail operations related to the delivery of cannabis related products, and other related business lines as described in our operating strategic vision outlines below.

 

Brand Warehouse Development – With recent 8K filings, the Company has signaled that it intends to aggregate new business opportunities into its corporate fabric in a manner that does not diminish the various companies or brands it is partnering with, but rather enhances it. Suitable candidates for consideration will have ongoing operations within various industry segments, such as the Pono Publications and Success Nutrient acquisitions as already noted in the Company’s 8K filings on or about August 12th and October 20th of 2016. Over time, the Company expects to expand its presence within the industry through the development of an ‘intelligent acquisition’ process.

 

Intelligent AcquisitionThis term is meant to define a selection and due diligence process that will enable both the Company as well as the acquisition to benefit mutually in that each may better 1) establish a more stable method of continual valuation through direct contact with the public marketplace wherein with the related growth of the enterprise as a whole it will eventually be able to achieve a higher listing status within the NYSE as a capital markets member based upon prevailing regulations, 2) market themselves collectively thus taking advantage of certain cost savings strategies through shared participation in various events and advertising opportunities, 3) take advantage of other operating and reporting cost efficiencies available to the Company through aggregation of such acquisitions, 4) continue to work develop a full spectrum of products and services deliverable to the general cannabusiness marketplace through careful segmentation of the marketplace as a whole, and 5) continue to work collaboratively within the industry to achieve both transparency as well as a strong positive reputation for ethical behavior when working both internally within its collective as well as externally with others in the industry.

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1. Liquidity and Capital Resources
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Liquidity and Capital Resources

Cash Flows – During the quarters ending March 31, 2017 and 2016, the Company primarily utilized cash and cash equivalents and profits from operations to fund its operations.

 

Cash and cash equivalents are carried at cost and represent cash on hand, deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date. The Company had $161,258 and $351,524 classified as cash and cash equivalents as of March 31, 2017 and December 31, 2016, respectively.

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2. Critical Accounting Policies and Estimates
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Critical Accounting Policies and Estimates

Basis of Presentation: These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for annual financial statements.

 

Fair Value Measurements: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments include cash, accounts receivable, note receivable, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. Our derivative liability was adjusted to fair market value at the end of each reporting period, using Level 3 inputs.

 

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

  

Accounts receivable: The Company extends unsecured credit to its customers in the ordinary course of business. Accounts receivable related to licensing revenues are recorded at the time the milestone result in the funds being due being achieved, services are delivered and payment is reasonably assured. Licensing revenues are generally collected from 30 to 60 days after the invoice is sent. As of March 31, 2017, and 2016, the Company had accounts receivable of $358,094 and $25,000, respectively. The company wrote off $0 of its accounts receivable in the current quarter. Allowance for doubtful accounts is currently zero as all receivables are less than 60 days old. The company will continue to evaluate the need for recognizing an additional allowance in the future.

 

AFS Securities: Investments available for sale is comprised of publicly traded stock purchased as an investment. The Company considers the securities to be liquid and convertible to cash in under a year. The Company has the ability and intent to liquidate any security that the Company holds to fund operations over the next twelve months, if necessary, and as such has classified all its marketable securities as short-term. Our investment securities at March 31, 2017 consist of available-for-sale instruments which include $26,948 of equity in publicly traded companies. All our available-for-sale securities are Level 2 due to limited trading volume. Realized gains and losses on these securities will be included in “other income (expense)” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCT).

 

Short term note receivable: Note receivable were comprised of a $250,000 loan with $21,413 of accrued interest for a total loan value of $271,413 issued to the organization that owns Funk Sack, Inc. This loan was extended with the option of negotiating an agreement to acquire the entirety of the company through a stock swap. However, in the fourth quarter of 2016 the Company determined that it would not complete the acquisition of the company and instead will hold the investment and it will be repaid. The loan was issued May 6, 2016 and was is due to be repaid November 1, 2017. As the note is still current and the Funk Sacks organization is continuing to operate and grow this note is considered to be fully collectable.

 

Other assets: Other assets at March 31, 2017 and December 31, 2016 were $69,894 and $27,479, respectively and as of March 31, 2017 included $4,542 in prepaid rent, $50,852 in prepaid registrations fees for major cannabis events the Company is sponsoring and advertising costs and $14,500 in a security deposit.

 

Accounts payable: Accounts payable at March 31, 2017 and December 31, 2016 was $0 and $0, respectively.

 

Accrued tax and other liabilities: Accrued tax and other liabilities at March 31, 2017 and December 2016 were $24,616 and $175. At March 31, 2017 this was comprised of accrued interest expense of $22,339 and $2,276 in accrued expense.

  

Fair Value of Financial Instruments: The carrying amounts of cash and current assets and liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. Available for sale securities are recorded at current market value as of the date of this report.

 

Revenue recognition and related allowances: Revenue from licensing services is recognized when the obligations to the client are fulfilled which is determined when milestones in the contract are achieved. Revenue from seminar fees is related to one day seminars and is recognized as earned at the completion of the seminar. All revenue is measured at fair value.

 

Costs of Services Sold – Costs of services sold are comprised of direct salaries and related expenses incurred while supporting the implementation of licensing agreements and related services.

 

General & Administrative Expenses – General and administrative expense are comprised of all expenses not linked to the production or advertising of the Company’s services.

 

Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred and were $33,484 and $12,492 during the three months ended March 31, 2017 and 2016, respectively.

 

Stock based compensation: The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock and restricted stock awards using the Black-Scholes option pricing model.

 

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse.

 

Share based expense paid to through direct stock grants is expensed as occurred. Since the Company’s stock has become publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. Prior to the company’s stock being traded the Company used the most recent valuation. The company recognized $0 in expenses for stock based compensation to employees during the three months ended March 31, 2017.

 

Income taxes: The Company has adopted SFAS No. 109 – “Accounting for Income Taxes”. ASC Topic 740 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

  

Management fee contracts: In February 2017, the Company entered into a Merger Agreement with Pono Publications Ltd. (“Pono”), as well as a Share Exchange Agreement with Success Nutrients, Inc. (“SN”), each a Colorado corporation, in order to facilitate our acquisition of both of these entities. The ratification of the acquisition of these companies requires the approval of the holders of a majority of the Company’s shareholders, which will be submitted for such approval at the Company’s annual shareholder meeting to be held in May 2017. If approved the relevant agreements provide that the effective date for accounting purposes will be March 1, 2016. Success Nutrients will become a wholly owned subsidiary of Medicine Man Technologies, Inc. and the business conducted by Pono will be incorporated into a newly formed wholly owned subsidiary, Medicine Man Consulting, Inc., which is also where we will continue to conduct the Company’s consulting service business. In March 2017, the Company integrated Pono Publications and Success Nutrients into its operations including a lease for approximately 10,000 square feet of space located at 6660 East 47th Street, Denver, CO 80216. This integration also included four (4) full time team members as well as several independent contractors. From March 1, 2017 until such time as the acquisition can be complete the Company has agreed to manage the acquirees through a management fee agreement whereby all cash collected will is recognized as revenue and all cash expenses are direct cost of the project. As of March 31, 2017, the management contract resulted in cash collections of approximately $100,000 and cash expenditures of approximately $170,000 resulting in a net loss of $70,257 which was presented on a net basis as a loss in the other income portion of our income statement.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
3. Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2017
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
Recent Accounting Pronouncements

During May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides new guidance on the recognition of revenue and states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating the impact of the adoption of this accounting standard update on the financial position and the results of operations.

 

On September 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10,Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2016. Early adoption is permitted. The Company has adopted this amendment effective this current fiscal year.

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4. Stockholders' Equity
3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Stockholders' Equity

The Company’s initial authorized stock at inception was 1,000,000 common shares, par value $0.001 per share. In 2016 the company subsequently amended its Articles of Incorporation to increase its authorized shares to 90,000,000 Common Shares, par value $0.001 per share and 10,000,000 preferred shares, par value $0.001 per share.

 

During the time in which the Company was establishing its operations it issued 4,199,000 shares of Common Stock to various individuals as founders for prior services completed which was valued at par value, resulting in the Company booking stock based expense of $4,199.

 

During the time in which the Company was establishing it operations it issued 5,331,000 shares of Common Stock to various individuals for a license agreement valued at par value resulting in the Company recognizing a purchased asset of $5,331.

 

Commencing in November 2014, the Company commenced a private offering of its Common Stock at an offering price of $1.00 per share. At December 31, 2014, it had accepted subscription from 26 investors and received net proceeds of $260,000 therefrom.

 

In December 2014, the Company issued 50,000 shares of its Common Stock for legal fees and recognized an expense for this issuance of $50,000 based upon the prior sale in November 2014 of its Common Stock. 

 

At December 31, 2014, the Company had 9,840,000 shares outstanding.

 

On March 17, 2015, 10,000 shares of Common Stock were sold to one investor as part of the private offering commencing in November 2014 in exchange for $10,000 cash.

 

During the second quarter of 2015, the Company issued 50,000 shares of Common Stock to an individual in consideration for their services rendered in support of the Company resulting in the Company recognizing compensation expense of $50,000 based upon a per share price of $1.00 per share realized in the most recent private offering.

 

On July 1, 2015, the Company issued 72,500 shares of Common Stock to four different individuals in consideration for their services rendered in support of the Company, resulting in recognizing compensation expense of $29,725 based upon an independent valuation determining the value of shares at $0.41 per share.

 

At December 31, 2015, the Company had 9,972,500 shares outstanding.

 

On January 4, 2016, the Company issued 120,000 shares of Common Stock to various individuals in consideration of their services rendered in support of the Company resulting in recognizing compensation expense of $49,200 based upon an independent valuation determining the value of shares at $0.41 per share.

 

During the three months ended March 31, 2017, the Company issued 145,587 shares of Common Stock upon conversion of convertible notes in the aggregate amount of $254,777.

 

At March 31, 2017, the Company had 10,548,087 common shares outstanding.

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Property and Equipment
3 Months Ended
Mar. 31, 2017
Property, Plant and Equipment [Abstract]  
Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation and are comprised of the following:

  

   March 31,
2017
   December 31,
2016
 
Furniture & Fixtures  $56,527   $11,526 
Marketing Display   36,900    42,681 
Office Equipment   41,409    10,838 
   $134,836   $65,045 
Less:  Accumulated Depreciation   (33,098)   (22,919)
   $101,738   $42,126 

 

Depreciation on equipment is provided on a straight-line basis over its expected useful lives at the following annual rates.

  

Furniture & Fixtures 3 years  
Marketing Display 3 years  
Leasehold Improvements Term of the lease

 

Depreciation expense for the three month periods ending March 31, 2017 and 2016 was $10,177 and $4,133 respectively.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Intangible Asset
3 Months Ended
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Asset

On May 1, 2014, the Company entered into a non-exclusive Technology License Agreement with Futurevision, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation, dba Medicine Man Denver (“Medicine Man Denver”), a company owned and controlled by affiliates of the Company, whereby Medicine Man Denver granted a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future). As payment for the license rights the Company issued Medicine Man Denver (or its designees) 5,331,000 shares of the Company’s common stock. The Company accounted for this license in accordance with ASC 350-30-30 “Intangibles – Goodwill and Other by recognizing the fair value of the amount paid by the company for the asset at the time of purchase. Since the Company has a limited operating history, management determined to use par value as the value recognized for the transaction. Since the term of the initial license agreement is ten (10) years, the cost of the asset will be recognized on a straight-line basis over the life of the agreement. In addition, each period the Company will evaluate the intangible asset for impairment. As of December 31, 2014, no impairment was deemed necessary.

 

 

Amortization expense for the periods ending March 31, 2017 and 2016 was $133 and $133, respectively.

 

   March 31,
2017
   December 31,
2016
 
License Agreement  $5,300   $5,300 
Less: accumulated amortization   (1,725)   (1,592)
   $3,575   $3,708 
XML 23 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Convertible Notes and Derivative Liability
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Convertible Notes and Derivative Liability

At December 31, 2016 the Company had raised $810,000 through a private placement of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019. During the quarter ended March 31, 2017 the Company raised an additional $179,777 with the same terms for a total of $989,777. In the period ended March 31, 2017 the Company converted $254,777 of promissory convertible notes with certain accredited investors, bearing interest at 12%, with interest and principal due January 1, 2019, into 145,587 shares of common stock.

 

Upon issuance, each of the notes is immediately convertible at the noteholders election into the company’s common stock at $1.75 per share or 90% of the VWAP of the five days following the notice of conversion, whichever is lower. Since the conversion rate can be tied to an underlying item, the warrants are considered to be a derivative that is recorded as a liability at fair value and adjusted to fair value at the conclusion of each reporting period. The underlying assumptions used in the Black Scholes model to determine the fair value of the derivative liability were based on the individual date the notes were closed and were the following:

 

 

   Upon issuance   March 31, 2017 
Current stock price   $     1.66 to $4.35   $1.88 
Risk-free interest rate   67%    67% 
Expected dividend yield   0    0 
Expected term (in years)   2.39 to 2.09    2.00 
Expected volatility   85% to 114%    122% 
           
Changes in the derivative liability were as follows:          
           
January 1, 2017  $294,002      
Gain on derivative liability   (49,009)     
March 31, 2017  $244,993      
XML 24 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
8. Related Party Transactions
3 Months Ended
Mar. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

During 2015 and 2016 through September 30, 2016, the Company had a verbal agreement with Chineseinvestors.com Inc. and Futurevistion to share employees time while the majority of their salary was covered by these related companies. Medicine Man Technologies also paid the individuals a modest stipend for their time. While this agreement was in place through the balance of this, the 3rd quarter of operations the Company will be adding new employees as well as converting such other employees from these two common contributors directly to its own payroll as described in the subsequent event notes as needed to further its operating as well as growth requirements. It should also be noted that in August of the third quarter one of the ChineseInvestors.COM team members converted to full time employment with the Company increasing the number of full time paid team members to three.

 

During 2016, the Company received two short term loans bearing 12% annual interest from related parties, which were repaid in full along with interest. The Company borrowed $25,000 from Chineseinvestors.com, Inc. in July, which was repaid along with $250 interest in August. In that same period the Company borrowed $50,000 from Brett Roper, the COO and director, which was repaid along with $1,299 in interest in October.

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9. Net Income (Loss) per Share
3 Months Ended
Mar. 31, 2017
Earnings per share attributable to common shareholders:  
Net Income (Loss) per Share

In accordance with ASC Topic 280 – “Earnings Per Share”, the basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's quarterly earnings for the period ended March 31, 2017 and 2016 basic and diluted earnings/(loss) per share $0.01 and $0.01, respectively.

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10. Commitments and Concentrations
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Concentrations

Office Lease – Denver, Colorado – The Company entered into a lease for office space at 4880 Havana Street, Suite 200, Denver, Colorado 80239. The lease period started March 1, 2017 and will terminate February 29, 2020, resulting in the following future commitments:

 

2017 fiscal year  $95,947 
2018 fiscal year   154,174 
2019 fiscal year   171,000 
2020 fiscal year   29,000 

 

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
11. Tax Provision
3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Tax Provision

The Company had no tax provisions as of March 31, 2017 and December 31, 2016. The company had net income in the quarter ending March 31, 2017, however currently has an adequate net loss carryforward to cover any liability generated in the current quarter.

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12. Subsequent Event
3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
Subsequent Event

Subsequent to quarter end the Company executed a Term Sheet whereby we have reached an agreement to acquire Denver Consulting Group LLC, (“DCG”), a Colorado limited liability company that is engaged in cannabis consulting throughout the United States. The consideration for this acquisition will be the issuance of 2,258,065 shares of our Common Stock valued at $3.5 million based upon the closing price of our Common Stock on the date the Term Sheet was executed.

 

The agreement is subject to our due diligence as well as execution of definitive agreements, which shall contain customary representations. Due diligence is expected to be completed within 60 days from the date of the Term Sheet. It is also anticipated that we will retain the services of several of the principals of DCG, as well as its current employees.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
2. Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation: These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for annual financial statements.

Fair Value Measuerments

Fair Value Measurements: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments include cash, accounts receivable, note receivable, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. Our derivative liability was adjusted to fair market value at the end of each reporting period, using Level 3 inputs.

Use of Estimates

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

Accounts receivable

Accounts receivable: The Company extends unsecured credit to its customers in the ordinary course of business. Accounts receivable related to licensing revenues are recorded at the time the milestone result in the funds being due being achieved, services are delivered and payment is reasonably assured. Licensing revenues are generally collected from 30 to 60 days after the invoice is sent. As of March 31, 2017, and 2016, the Company had accounts receivable of $358,094 and $25,000, respectively. The company wrote off $0 of its accounts receivable in the current quarter. Allowance for doubtful accounts is currently zero as all receivables are less than 60 days old. The company will continue to evaluate the need for recognizing an additional allowance in the future.

AFS Securities

AFS Securities: Investments available for sale is comprised of publicly traded stock purchased as an investment. The Company considers the securities to be liquid and convertible to cash in under a year. The Company has the ability and intent to liquidate any security that the Company holds to fund operations over the next twelve months, if necessary, and as such has classified all its marketable securities as short-term. Our investment securities at March 31, 2017 consist of available-for-sale instruments which include $26,948 of equity in publicly traded companies. All our available-for-sale securities are Level 2 due to limited trading volume. Realized gains and losses on these securities will be included in “other income (expense)” in the consolidated statements of income using the specific identification method. Unrealized gains and losses, net of tax, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCT).

Short term note receivable

Short term note receivable: Note receivable were comprised of a $250,000 loan with $21,413 of accrued interest for a total loan value of $271,413 issued to the organization that owns Funk Sack, Inc. This loan was extended with the option of negotiating an agreement to acquire the entirety of the company through a stock swap. However, in the fourth quarter of 2016 the Company determined that it would not complete the acquisition of the company and instead will hold the investment and it will be repaid. The loan was issued May 6, 2016 and was is due to be repaid November 1, 2017. As the note is still current and the Funk Sacks organization is continuing to operate and grow this note is considered to be fully collectable.

Other assets

Other assets: Other assets at March 31, 2017 and December 31, 2016 were $69,894 and $27,479, respectively and as of March 31, 2017 included $4,542 in prepaid rent, $50,852 in prepaid registrations fees for major cannabis events the Company is sponsoring and advertising costs and $14,500 in a security deposit.

Accounts payable

Accounts payable: Accounts payable at March 31, 2017 and December 31, 2016 was $0 and $0, respectively.

Accrued tax and other liabilities

Accrued tax and other liabilities: Accrued tax and other liabilities at March 31, 2017 and December 2016 were $24,616 and $175. At March 31, 2017 this was comprised of accrued interest expense of $22,339 and $2,276 in accrued expense.

Fair Value of Financial Instruments

Fair Value of Financial Instruments: The carrying amounts of cash and current assets and liabilities approximate fair value because of the short-term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. Available for sale securities are recorded at current market value as of the date of this report.

Revenue recognition and related allowances

Revenue recognition and related allowances: Revenue from licensing services is recognized when the obligations to the client are fulfilled which is determined when milestones in the contract are achieved. Revenue from seminar fees is related to one day seminars and is recognized as earned at the completion of the seminar. All revenue is measured at fair value.

Cost of Services Sold

Costs of Services Sold – Costs of services sold are comprised of direct salaries and related expenses incurred while supporting the implementation of licensing agreements and related services.

General and Administrative Expenses

General & Administrative Expenses – General and administrative expense are comprised of all expenses not linked to the production or advertising of the Company’s services.

Advertising and Marketing Costs

Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred and were $33,484 and $12,492 during the three months ended March 31, 2017 and 2016, respectively.

Stock-based compensation

Stock based compensation: The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock and restricted stock awards using the Black-Scholes option pricing model.

 

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse.

 

Share based expense paid to through direct stock grants is expensed as occurred. Since the Company’s stock has become publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. Prior to the company’s stock being traded the Company used the most recent valuation. The company recognized $0 in expenses for stock based compensation to employees during the three months ended March 31, 2017.

Income taxes

Income taxes: The Company has adopted SFAS No. 109 – “Accounting for Income Taxes”. ASC Topic 740 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Management for contracts

Management fee contracts: In February 2017, the Company entered into a Merger Agreement with Pono Publications Ltd. (“Pono”), as well as a Share Exchange Agreement with Success Nutrients, Inc. (“SN”), each a Colorado corporation, in order to facilitate our acquisition of both of these entities. The ratification of the acquisition of these companies requires the approval of the holders of a majority of the Company’s shareholders, which will be submitted for such approval at the Company’s annual shareholder meeting to be held in May 2017. If approved the relevant agreements provide that the effective date for accounting purposes will be March 1, 2016. Success Nutrients will become a wholly owned subsidiary of Medicine Man Technologies, Inc. and the business conducted by Pono will be incorporated into a newly formed wholly owned subsidiary, Medicine Man Consulting, Inc., which is also where we will continue to conduct the Company’s consulting service business. In March 2017, the Company integrated Pono Publications and Success Nutrients into its operations including a lease for approximately 10,000 square feet of space located at 6660 East 47th Street, Denver, CO 80216. This integration also included four (4) full time team members as well as several independent contractors. From March 1, 2017 until such time as the acquisition can be complete the Company has agreed to manage the acquirees through a management fee agreement whereby all cash collected will is recognized as revenue and all cash expenses are direct cost of the project. As of March 31, 2017, the management contract resulted in cash collections of approximately $100,000 and cash expenditures of approximately $170,000 resulting in a net loss of $70,257 which was presented on a net basis as a loss in the other income portion of our income statement.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Property and Equipment (Tables)
3 Months Ended
Mar. 31, 2017
Property, Plant and Equipment [Abstract]  
Property and equipment table
   March 31,
2017
   December 31,
2016
 
Furniture & Fixtures  $56,527   $11,526 
Marketing Display   36,900    42,681 
Office Equipment   41,409    10,838 
   $134,836   $65,045 
Less:  Accumulated Depreciation   (33,098)   (22,919)
   $101,738   $42,126 
Schedule of property and equipment useful lives
Furniture & Fixtures 3 years  
Marketing Display 3 years  
Leasehold Improvements Term of the lease
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Intangible Asset (Tables)
3 Months Ended
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
License Agreement
   March 31,
2017
   December 31,
2016
 
License Agreement  $5,300   $5,300 
Less: accumulated amortization   (1,725)   (1,592)
   $3,575   $3,708 
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Convertible Notes and Derivative Liability (Tables)
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Assumptions used
   Upon issuance   March 31, 2017 
Current stock price   $     1.66 to $4.35   $1.88 
Risk-free interest rate   67%    67% 
Expected dividend yield   0    0 
Expected term (in years)   2.39 to 2.09    2.00 
Expected volatility   85% to 114%    122% 

 

Schedule of derivative liability
           
Changes in the derivative liability were as follows:          
           
January 1, 2017  $294,002      
Gain on derivative liability   (49,009)     
March 31, 2017  $244,993      
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
10. Commitments and Concentrations (Tables)
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Future minimum lease
2017 fiscal year  $95,947 
2018 fiscal year   154,174 
2019 fiscal year   171,000 
2020 fiscal year   29,000 
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
1. Liquidity and Capital Resources (Details Narrative) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Cash and cash equivalents $ 161,258 $ 351,524 $ 270,723 $ 262,146
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Accounts receivable $ 358,094   $ 25,000
Available for sale instruments 26,948   13,998
Note receivable 271,413   264,016
Other assets 69,894   27,479
Accounts payable 0   0
Accrued liabilities 24,616   $ 175
Accounts receivable write-off 0    
Advertising and marketing 33,484 $ 12,492  
Management contract net loss 70,257 $ 0  
Prepaid Rent [Member]      
Other assets 4,542    
Prepaid Registration Fees [Member]      
Other assets 50,852    
Security Deposit [Member]      
Other assets 14,500    
Accrued Interest [Member]      
Accrued liabilities 22,339    
Accrued Expense [Member]      
Accrued liabilities $ 2,276    
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
4. Stockholders' Equity (Details Narrative) - Various Individuals [Member]
3 Months Ended
Mar. 31, 2017
USD ($)
shares
Stock issued for services, shares issued | shares 145,587
Stock issued for services, value | $ $ 254,777
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Property and Equipment (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment [Abstract]    
Furniture & fixtures $ 56,527 $ 11,526
Marketing Display 36,900 42,681
Office Equipment 41,409 10,838
Property and Equipment, gross 134,836 65,045
Less: Accumulated Depreciation (33,098) (22,919)
Property and equipment, net $ 101,738 $ 42,126
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Property and Equpment (Details - Useful life)
3 Months Ended
Mar. 31, 2017
Furniture and Fixtures  
Useful lives of property and equipment 3 years
Marketing Display  
Useful lives of property and equipment 3 years
Leasehold Improvements  
Useful lives of property and equipment Term of the lease
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Property and Equipment (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 10,177 $ 4,133
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Intangible Asset (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
License agreement costs $ 5,300 $ 5,300
Less: accumulated amortization (1,725) (1,592)
License agreement costs, net $ 3,575 $ 3,708
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Intangible Asset (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization expense $ 133 $ 133
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Convertible Notes and Derivative Liability (Details - Assumptions)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Current stock price 1.88  
Risk-free interest rate 67.00%  
Expected dividend yield 0.00%  
Expected term (in years) 2.00 years  
Expected volatility 122%  
Upon Issuance [Member]    
Current stock price   1.66 to $4.35
Risk-free interest rate   67.00%
Expected dividend yield   0.00%
Expected term (in years)   2.39 to 2.09 years
Expected volatility   85% to 114%
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Convertible Notes and Derivative Liability (Details - Derivative liability)
3 Months Ended
Mar. 31, 2017
USD ($)
Debt Disclosure [Abstract]  
Derivative liability, beginning balance $ 294,002
Increase in fair value (49,009)
Derivative liability, ending balance $ 244,993
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
9. Net Income (Loss) per Share (Details Narrative) - $ / shares
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Earnings per share attributable to common shareholders:    
Earnings per share - basic and diluted $ .01 $ .01
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
10. Commitments and Concentrations (Details)
Mar. 31, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2017 fiscal year $ 95,947
2018 fiscal year 154,174
2019 fiscal year 171,000
2020 fiscal year $ 29,000
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
11. Tax Provision (Details Narrative) - USD ($)
May 15, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]    
Income tax liability $ 0 $ 0
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