Medicine Man Technologies Provides Company Update and Announces Fourth Quarter and Full Year 2019 Financial Results

Company to Host Conference Call and Webcast Today at 4:30 p.m. ET

Company Remains On Schedule with Acquisition Strategy to Roll-up Colorado Cannabis Operators

Company Revenue Increases 31% in 2019 Year Over Year

DENVER–(BUSINESS WIRE)–Medicine Man Technologies, Inc. (OTCQX: MDCL) (“Medicine Man Technologies” or “the Company”) today provided a company update and announced financial results for its fourth quarter and full year 2019.

“As we respond to these complex, unprecedented times, our thoughts and prayers go out to those affected by the coronavirus pandemic. On behalf of Medicine Man Technologies, we thank the frontline workers for their heroic courage and are heartened by our country’s spirit and our community’s togetherness. We are grateful for our healthcare providers, government officials, essential businesses and a number of private companies for their tireless work,” said Justin Dye, Chief Executive Officer. “In addition, I would like to recognize our employees and our executive team for their steady leadership and amazing efforts. During this pandemic, we have led with the health of our employees and communities as our top priority and have enacted measures to do our part to slow down the spread of the virus. Finally, we are collaborating with state and local governments to develop and implement rules and regulations for the cannabis industry throughout Colorado. This is an ever-changing situation, but our goal is to protect our patients, recreational consumers, employees and the public.”

Dye continued, “Despite these unique challenges, we continue to be optimistic and confident that 2020 is poised to be a historic year for our Company, employees, shareholders, communities, and above all, customers. We remain on schedule to close the 11 pending acquisitions which will enable us to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry based on revenue. Collectively, these premier operators generated 2019 pro-forma revenue of $144 million and healthy EBITDA margins. Our team is focused and in a great position to execute our strategy.”

Dye concluded, “We are building a unique, differentiated business with leading brands, talented cannabis pioneers, and an exceptional management team to seize the growth opportunity ahead of us. We believe that the Company is uniquely positioned to be a winner as the cannabis industry experiences consolidation. By combining to create a single publicly traded organization, we can increase the collective efficiencies and profit margin over time. We are eager to realize the full potential of the numerous opportunities ahead of us and excited by the overall growth of our industry.”

Fourth Quarter 2019 Financial Results

Total revenue was $3.3 million during the three months ended December 31, 2019, an increase of approximately 54% as compared to $2.1 million in the same period in 2018. All areas of the business rose quarter over quarter, except for litigation revenue.

Cost of goods and services were $2.1 million during the three months ended December 31, 2019 as compared to 1.4 million during the same period in 2018. This increase was due primarily to increased costs related to the sale of products.

Gross profit was $1.2 million during the three months ended December 31, 2019 as compared to $0.8 million during the same period in 2018. Gross profit was relatively unchanged as a percentage of revenue.

Operating expenses were $6.7 million during the three months ended December 31, 2019 as compared to $1.1 million during the same period in 2018. The increase was primarily attributable to $4.1 million in non-cash, stock-based compensation and costs associated with activities related to building an infrastructure to ensure a seamless integration of our numerous pending acquisitions and to help build the proper platform for sustainable growth.

Net loss was $3.4 million for the quarter-ended December 31, 2019, or a loss of approximately $0.10 per share on a basic weighted average, as compared to a net loss of $4.2 million, or a loss of approximately $0.17 per share on a basic weighted average, for the quarter-ended December 31, 2018.

Full Year 2019 Financial Results

Total revenue was $12.4 million during the twelve months ended December 31, 2019, an increase of approximately 31% as compared to $9.4 million in the same period in 2018. All areas of the business rose year over year, except for the one-time sale of the Canadian master license last year for $3.5 million.

Cost of goods and services were $7.6 million during the twelve months ended December 31, 2019 as compared to $2.6 million during the same period in 2018. This increase was due primarily to increased costs related to the sale of products.

Gross profit was $4.8 million during the twelve months ended December 31, 2019 as compared to $6.9 million during the same period in 2018. Gross profit declined as percentage of revenue due to the product mix increase in 2019, and the one-time licensing sale in 2018.

Operating expenses were $21.9 million during the twelve months ended December 31, 2019 as compared to $4.7 million during the same time period in 2018. The increase was primarily attributable to non-cash, stock-based and derivative compensation of $12.7 million and costs associated with activities related to building an infrastructure of $6.8 million to ensure a seamless integration of our numerous pending acquisitions and to help build the proper platform for sustainable growth.

Net loss was $17.0 million for the year-ended December 31, 2019, or a loss of approximately $0.50 per share on a basic weighted average, as compared to net income of $0.9 million, or $0.04 per share on a basic weighted average, for the year ended December 31, 2018.

The Company’s had $11.9 million classified as cash and cash equivalents at December 31, 2019 as compared to $0.3 million at December 31, 2018, an improvement of $11.6 million.

Conference Call and Webcast Today

Medicine Man Technologies will host a conference call and webcast today at 4:30 p.m. ET. Investors interested in participating can dial 201-389-0879 or listen to the webcast from the Company’s “Investors” website at https://ir.medicinemantechnologies.com. The webcast will later be archived on the Company’s “Investors” website.

Following their prepared remarks, Chief Executive Officer Justin Dye and Chief Financial Officer Nancy Huber will answer investor questions. Investors may submit questions through the weblink: http://public.viavid.com/index.php?id=138461 which has also been posted to the Company’s “Investors” website.

For more information about Medicine Man Technologies, please visit www.MedicineManTechnologies.com.

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About Medicine Man Technologies

Denver, Colorado-based Medicine Man Technologies (OTCQX: MDCL) is a rapidly growing provider of cannabis consulting services, nutrients, and supplies. The Company’s client portfolio includes active and past clients throughout the cannabis industry in 20 states and seven countries. The Company has entered into agreements to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry. Current agreements will enable Medicine Man Technologies to offer cultivation, extraction, distribution and retail pharma-grade products. Management includes decades of cannabis experience, a unique combination of first movers in industrial cannabis and proven Fortune 500 corporate executives.

Forward-Looking Statements

This press release contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential,” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) our inability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (ii) difficulties in obtaining financing on commercially reasonable terms; (iii) changes in the size and nature of our competition; (iv) loss of one or more key executives or scientists; and (v) difficulties in securing regulatory approval to market our products and product candidates. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

MEDICINE MAN TECHNOLOGIES, INC.

BALANCE SHEETS

As of December 31, 2019 and 2018

Expressed in U.S. Dollars

December 31,

 

 

December 31,

2019

 

 

2018

 
Assets
Current assets:
Cash and cash equivalents

$

11,853,627

 

$

321,788

 

Accounts receivable, net of allowance for doubtful accounts

 

313,317

 

 

1,180,757

 

Accounts receivable — related party

 

72,658

 

 

125,112

 

Inventory

 

684,940

 

 

489,239

 

Notes receivable — related party

 

767,695

 

 

 

Other current assets

 

529,416

 

 

50,824

 

Prepaid acquisition costs

 

1,347,462

 

 

 

Total current assets

 

15,569,115

 

 

2,167,720

 

 
Noncurrent assets:
Fixed assets, net of accumulated depreciation of $159,354 and $149,015, respectively

 

239,078

 

 

94,640

 

Goodwill

 

12,304,306

 

 

12,304,306

 

Intangible assets, net of accumulated amortization of $19,811 and $13,903, respectively

 

75,289

 

 

81,197

 

Marketable securities, net of unrealized loss of $1,792,569 and $463,386, respectively

 

406,774

 

 

2,199,344

 

Accounts receivable — litigation

 

3,063,968

 

 

1,281,511

 

Notes receivable — noncurrent

 

241,711

 

 

92,888

 

Net deferred tax assets

 

268,423

 

 

 

Operating lease right of use assets

 

59,943

 

 

 

Total noncurrent assets

 

16,659,492

 

 

16,053,886

 

Total assets

$

32,228,607

 

$

18,221,606

 

 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable

$

699,961

 

$

202,515

 

Accounts payable — related party

 

15,372

 

 

71,312

 

Accrued liabilities

 

1,091,204

 

 

291,084

 

Derivative liabilities

 

3,773,382

 

 

 

Income taxes payable

 

1,940

 

 

582,931

 

Total current liabilities

 

5,581,859

 

 

1,147,842

 

 
Noncurrent liabilities:
Lease liabilities

 

66,803

 

 

 

Total noncurrent liabilities

 

66,803

 

 

 

Total liabilities

 

5,648,662

 

 

1,147,842

 

 
Shareholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 authorized, zero shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

 

 

 

Common stock, $0.001 par value; 250,000,000 shares authorized; 39,952,626 and 27,753,310 shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

39,953

 

 

27,875

 

Additional paid-in capital

 

50,356,469

 

 

22,886,624

 

Accumulated deficit

 

(22,816,477

)

 

(5,840,735

)

Less: Treasury stock

 

(1,000,000

)

 

 

Total shareholders’ equity

 

26,579,945

 

 

17,073,764

 

Total liabilities and shareholders’ equity

$

32,228,607

 

$

18,221,606

 

MEDICINE MAN TECHNOLOGIES, INC.
STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
For the Three Months and Years Ended December 31, 2019 and 2018
Expressed in U.S. Dollars
 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Operating revenues:
Product sales, net

$

1,890,456

 

$

678,788

 

$

6,633,847

 

$

1,476,169

 

Product sales — related party, net

 

292,877

 

 

129,935

 

 

1,185,961

 

 

555,434

 

Litigation revenue

 

 

 

502,945

 

 

1,782,457

 

 

1,518,099

 

Consulting, licensing and Cultivation Max fees

 

1,110,363

 

 

838,242

 

 

2,767,649

 

 

5,810,815

 

Other operating revenues

 

7,095

 

 

(8,598

)

 

31,041

 

 

82,038

 

Total operating revenues

 

3,300,791

 

 

2,141,312

 

 

12,400,955

 

 

9,442,555

 

Cost of goods and services:
Cost of goods and services

 

2,144,852

 

 

1,364,316

 

 

7,616,221

 

 

2,577,510

 

Total cost of goods and services

 

2,144,852

 

 

1,364,316

 

 

7,616,221

 

 

2,577,510

 

Gross profit

 

1,155,939

 

 

776,996

 

 

4,784,734

 

 

6,865,045

 

 
Operating expenses:
Selling, general and administrative expenses

 

1,168,615

 

 

391,109

 

 

2,261,317

 

 

1,101,756

 

Professional services

 

(244,895

)

 

227,455

 

 

3,357,877

 

 

885,149

 

Salaries, benefits and related expenses

 

1,704,545

 

 

(90,175

)

 

3,567,535

 

 

1,250,549

 

Stock-based compensation

 

4,113,087

 

 

619,750

 

 

7,279,363

 

 

1,457,250

 

Derivative expense — contingent compensation

 

 

 

 

 

5,400,559

 

 

 

Total operating expenses

 

6,741,352

 

 

1,148,139

 

 

21,866,651

 

 

4,694,704

 

Income (loss) from operations

 

(5,585,413

)

 

(371,143

)

 

(17,081,917

)

 

2,170,341

 

 
Other income (expense):
Bad debt expense

 

(151,169

)

 

(196,112

)

 

(151,169

)

 

(196,112

)

Loss on sale of assets

 

 

 

(4,682

)

 

 

 

(8,998

)

Unrealized gain on derivative liabilities

 

2,079,267

 

 

 

 

1,627,177

 

 

 

Unrealized loss on marketable securities

 

(334,532

)

 

(3,061,496

)

 

(1,792,569

)

 

(463,386

)

Interest (expense) income, net

 

(4,380

)

 

7,562

 

 

(160,195

)

 

30,001

 

Total other income (expense)

 

1,589,186

 

 

(3,254,728

)

 

(476,756

)

 

(638,495

)

Income (loss) from operations before income taxes

 

(3,996,227

)

 

(3,625,871

)

 

(17,558,673

)

 

1,531,846

 

 
Provision for income tax (benefit) expense

 

(582,931

)

 

582,931

 

 

(582,931

)

 

582,931

 

Net (loss) income

$

(3,413,296

)

$

(4,208,802

)

$

(16,975,742

)

$

948,915

 

 
(Loss) earnings per share attributable to common shareholders:
 
Basic earnings (loss) per common share

$

(0.10

)

$

(0.17

)

$

(0.50

)

$

0.04

 

Diluted earnings (loss) per common share

$

(0.10

)

$

(0.15

)

$

(0.50

)

$

0.03

 

 
Weighted-average number of common shares outstanding:
Basic

 

33,740,557

 

 

25,121,896

 

 

33,740,557

 

 

25,121,896

 

Diluted

 

33,740,557

 

 

27,769,357

 

 

33,740,557

 

 

27,769,357

 

 
Comprehensive (loss) income

$

(3,413,296

)

$

(4,208,802

)

$

(16,975,742

)

$

948,915

 

MEDICINE MAN TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019 and 2018
Expressed in U.S. Dollars
 

2019

2018

Cash flows from operating activities of continuing operations:
Net (loss) income

$ (16,975,742)

$ 948,915

Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization

61,708

81,960

Bad debt expense

151,169

196,112

Deferred taxes

(268,423)

Derivative expense

5,400,559

Unrealized gain on derivative liabilities

(1,627,176)

Equity investment received in exchange for fees and services

(2,662,730)

Realized loss on disposal of fixed assets

8,998

Unrealized loss on marketable securities

1,792,569

463,386

Stock-based compensation

7,184,363

1,457,250

Changes in operating assets and liabilities:
Accounts receivable

(3,361,194)

(2,100,318)

Inventory

(195,701)

(383,147)

Prepaid expenses and other current assets

(383,592)

Other assets

6,495

Operating leases right of use assets and liabilities

6,860

Accounts payable and accrued liabilities

1,241,626

812,919

Income taxes payable

(580,991)

Net cash used in operating activities

(7,553,965)

(1,170,160)

 
Cash flows from investing activities:
Adjustment for acquisition payment

(71,561)

Issuance of notes receviable

(916,518)

(97,889)

Repayment of Short-term debt

(58,280)

Proceeds from sale of fixed assets

14,000

Purchase of fixed assets

(200,238)

(43,037)

Net cash used in investing activities

(1,116,756)

(256,767)

 
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs

19,600,000

1,000,000

Proceeds from exercise of common stock purchase warrants, net of issuance costs

602,560

Net cash provided by financing activities

20,202,560

1,000,000

 
Net increase (decrease) in cash and cash equivalents

11,531,839

(426,927)

Cash and cash equivalents at beginning of period

321,788

748,715

Cash and cash equivalents at end of period

$ 11,853,627

$ 321,788

 

Contacts

Raquel Fuentes

Senior Director, Corporate Communications

303-371-0387

raquel@medicinemantechnologies.com

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