SCHWAZZE ANNOUNCES THIRD QUARTER RESULTS

<br /> SCHWAZZE ANNOUNCES THIRD QUARTER RESULTS<br />

Canada NewsWire

OTCQX: SHWZ

NEO: SHWZ

Record Quarterly Revenue and Adjusted EBITDA

Revenue Increased 36% to

$43.2 Million

Compared to

$31.8 Million

in Q3 2021

Nine Month Revenue Increased 46% to

$119.2 Million

Compared to

$81.9 Million

Adjusted EBITDA of

$15.9 Million

, 36.7% of Revenue

Nine Month Adjusted EBITDA of

$38.7 Million

, 32.5% of Revenue

Conference Call & Webcast Scheduled for Today –

5:00 pm EDT

DENVER

,

Nov. 9, 2022

/CNW/ –

Medicine Man Technologies Inc.

operating as

Schwazze,

(OTCQX: SHWZ) (NEO: SHWZ)

(“Schwazze”

or

the

“Company”)

, today announced financial results for the third quarter ended

September 30, 2022

(“Q3 2022”).

Q3 2022 Financial Summary:

Revenues of

$43.2 million

increased 36% compared to

$31.8 million

in quarter ended

September 30, 2021

(“Q3 2021”)
Retail sales were

$39.8 million

up 92% to

$20.7 million

when compared to Q3 2021
Gross Margin of

$26.0 million

, 60.1% of revenue, compared to

$15.1 million

and 47.3% of revenue in Q3 2021
Net Income was

$1.8 million

compared to a Net Income of

$1.0 million

for the same period last year
Adjusted EBITDA of

$15.9 million

was 36.7% of revenue, compared to

$8.8 million

for the same period last year
Colorado

two year stacked IDs for Q3 2022 compared to Q3 2022 and Q3 2020 for same store sales
⁽¹⁾
were (9.7%) and one year IDs
⁽¹⁾
were (10.6%) comparing Q3 2022 to Q3 2021

Average basket size
⁽¹⁾
for Q3 2022 was

$60.96

up slightly by 0.1% compared to Q3 2021
Recorded customer visits
⁽¹⁾
for Q3 2022 totaled 452,220 down 10.7%, compared to Q3 2021

New Mexico

two year stacked IDs for Q3 2022 compared to Q3 2021 and Q3 2020 for same store sales
⁽¹⁾
were 52.9% and one year IDs
⁽¹⁾
were 48.4% comparing Q3 2022 to Q3 2021

Average basket size
⁽¹⁾
for Q3 2022 was

$52.67

down 12.2% compared to Q3 2021
Recorded customer visits
⁽¹⁾
for Q3 2022 totaled 231,137 up 69.0%, compared to Q3 2021

Corporate Update:

Since

December 2021

, Schwazze has closed acquisitions adding 15 cannabis dispensaries, 10 in

New Mexico

and five in

Colorado

as well as four cultivation facilities in

New Mexico

and one in

Colorado

and one manufacturing asset in

New Mexico

. This year Schwazze has opened two new dispensaries in

New Mexico

. This brings our total dispensary count to 35 between

Colorado

and

New Mexico

.

Justin Dye

, Chairman and CEO of Schwazze stated

, “I am proud of the entire Schwazze team, and I would like to thank them for their hard work this past quarter and year. Despite a challenging economic backdrop, we outperformed our markets in

Colorado

by 12%. We’ve worked hard to continue to grow our market share, increase our profitability rate and generate free cash flow from operations, after paying taxes and CAPEX, placing us in an exclusive club within the cannabis sector. This is a proof point that we are well on our way to building Schwazze into a unique regional powerhouse. I believe our distinctive operating capabilities, applied to attractive growth opportunities within our sector, will reward our shareholders with attractive risk adjusted returns. The potential of favorable regulatory reform in the near-term would obviously accelerate and amplify those returns.”

Q3 2022 Revenue

Revenues for the three months ended September 30, 2022 totaled

$43,190,986

, including (i) retail sales of

$39,759,734

(ii) wholesale sales of

$3,335,252

and (iii) other operating revenues of

$96,000

, compared to revenues of

$31,835,305

, including (i) retail sales of

$20,741,864

, (ii) wholesale sales of

$11,022,519

, and (iii) other operating revenues of

$70,922

during the three months ended September 30, 2021, representing an increase of

$11,355,681

or 36%. The most influential factor driving revenue increases in the third quarter of 2022 as compared to the same period in 2021 is acquisition activity. Revenue for the quarter ended

September 30, 2022

included revenue from four consummated acquisitions in

Colorado

and revenue from the Company’s initial entrance into the

New Mexico

market with the acquisition of R. Greenleaf, which were not in revenue for the same period in 2021. Revenue from wholesale sales decreased, due in large part to continued pricing pressure in the

Colorado

wholesale market as a result of supply saturation in flower and bulk distillate products.

Cost of goods and services for the three months ended

September 30, 2022

, totaled

$17,226,451

compared to cost of goods and services of

$16,779,313

during the three months ended

September 30, 2021

, representing an increase of

$447,138

or 3%. Overall cost of goods and services increased due to the same acquisition activities that generated substantial increases in revenue, but the rate at which cost of goods and services increases from acquisition activity occurs at a lower rate than increases in revenue from acquisition activity due to lower wholesale flower pricing in

Colorado

and substantial vertical integration in

New Mexico

and increased retail revenue, which has better gross margin, as a percentage of the total revenue.

Gross profit was

$25,964,535 million dollars

for the quarter compared to

$15,055,992

during the same period in 2021. Gross profit margin increased as a percentage of revenue from 47.3% to 60.1%. This positive result reflects a higher percentage of retail sales, our consolidated purchasing approach, the implementation of our retail playbook, and vertical product sales in

New Mexico

.

Operating expenses for the quarter, totaled

$14,849,677

, compared to operating expenses of

$11,218,992

during the same quarter 2021, representing an increase of

$3,630,685

or 32%. This increase is due to increased selling, general and administrative expenses, professional service fees, salaries, benefits and related employment costs driven by growth from acquisitions offset by stock-based compensation.

Other expense, net for the three months ended September 30, 2022 totaled

$3,712,108

compared to

$1,555,427

during the three months ended September 30, 2021, representing an increase in other expense of

$2,156,681

or 139%. The increase in other expenses is due to higher interest payments due on the Company’s debt obligations as a result of compounding interest with the passage of time and higher debt balances, which was partially offset this quarter by the revaluation of the derivative liability related to the Investor Notes issued in

December 2021

that was recognized as income in the three months ended

September 30, 2022

.

Adjusted EBITDA for Q3 2022 was

$15,860,466

representing 36.7% of revenue, compared to

$8,797,641

and 27.6% of revenue for the same period last year. This is derived from Operating Income and adjusting one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below adjustment for details.

For nine months ending

September 30, 2022

, the Company used cash for operations of

$3,957,263

compared to generating cash of

$4,814,104

for the same period in 2021. The Company has cash and cash equivalents of

$38.7 million

at the end of Q3 2022.

Nancy Huber

, CFO for Schwazze commented, ”

During the third quarter we continued our focus on reducing operating and SG&A expenses. Our third quarter gross margin and operating expenses improved over the second quarter in both dollars and percent of revenue. Our balance sheet remains strong, with ample liquidity. We continue to be committed to delivering positive cash flow before acquisition costs for the year while driving organic growth with the opening of two stores in

New Mexico

in the third quarter.”

2022 Guidance

The Company is providing guidance for the fiscal year. FY 2022 revenue is projected to be

$155 million

to

$165 million

, and the FY 2022 adjusted EBITDA is projected to be from

$51 million

to

$56 million

. We are on target to deliver the lower end of the range for adjusted EBITDA which was a fourth quarter annualized run-rate of

$60

–

72 million dollars

. We expect to be slightly below the projected revenues which was a fourth quarter annualized run-rate of

$175 million

to

$200 million

. This lower-than-expected revenue in Q4 is due to lower than expected wholesale sales, and construction delays in new store openings in

New Mexico

.

The company generated

$4 million

in cash from operations in the third quarter and expects to generate positive cash flow before acquisitions for the year.

NOTES:
(1)	Schwazze did not own all the assets and entities in part of 2021, 2020 and 2019 and is using unaudited numbers for this comparison.

Adjusted EBITDA represents income (loss) from operations, as reported, before tax, adjusted to exclude non-recurring items, other non-cash items, including stock-based compensation expense, depreciation, and amortization, and further adjusted to remove acquisition and capital raise related costs, and other one-time expenses, such as severance, retention, and employee relocation. The Company uses adjusted EBITDA as it believes it better explains the results of its core business. The Company has not reconciled guidance for adjusted EBITDA to the corresponding GAAP financial measure because it cannot provide guidance for the various reconciling items. The Company is unable to provide guidance for these reconciling items because it cannot determine their probable significance, as certain items are outside of its control and cannot be reasonably predicted. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.

Webcast –

November 9, 2022

–

5:00 PM EDT

Investors and stakeholders may participate in the conference call by dialing 416-764-8650 or by dialing North American toll free 1-888-664-6383 or listen to the webcast from the Company’s website at

https://ir.schwazze.com

The webcast will be available on the Company’s website and on replay until

November 16, 2022

, and may be accessed by dialing 1-888-390-0541 / 997573 #.

Following their prepared remarks, Chief Executive Officer,

Justin Dye

; President,

Nirup Krishnamurthy

; and Chief Financial Officer,

Nancy Huber

will answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink:

https://app.webinar.net/x0q6rpnP84n

.

This weblink has been posted to the Company’s website and will be archived on the website. All Company SEC filings can also be accessed on the Company website at

https://ir.schwazze.com/sec-filings

About Schwazze

Schwazze (OTCQX: SHWZ, NEO: SHWZ) is building a premier vertically integrated regional cannabis company with assets in

Colorado

and

New Mexico

and will continue to take its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company’s leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious practices. Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth.

Forward-Looking Statements

Such forward-looking statements may be preceded by the words “plan,” “will,” “may,” “continue,” “anticipate,” “become,” “build,” “develop,” “expect,” “believe,” “poised,” “project,” “approximate,” “could,” “potential,” or similar expressions as they relate to Schwazze.

Forward-looking statements include the guidance provided regarding the Company’s Q4 2022 performance and annual capital spending. Forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) 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; (v) difficulties in securing regulatory approval to market our products and product candidates; (vi) our ability to successfully execute our growth strategy in

Colorado

and

New Mexico

and outside the states, (vii) our ability to identify and consummate future acquisitions that meet our criteria, (viii) our ability to successfully integrate acquired businesses and realize synergies therefrom, (ix) the ongoing COVID-19 pandemic, * the timing and extent of governmental stimulus programs, (xi) the uncertainty in the application of federal, state and local laws to our business, and any changes in such laws, and (xii) our ability to achieve the target metrics, including our annualized revenue and EBIDTA run rates set out in our Q4 2022 guidance. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at

http://www.sec.gov

. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.

MEDICINE MAN TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

For

September 30,2022

and

Dec 31, 2021

Expressed in U.S. Dollars


	September 30,		December 31,
	2022		2021
	(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	38,725,187	$	106,400,216
Accounts receivable, net of allowance for doubtful accounts		5,176,200		3,866,828
Inventory		21,289,003		11,121,997
Note receivable – current, net		47,778		—
Marketable securities, net of unrealized loss of $42,353 and gain of $216,771, respectively		451,200		493,553
Prepaid expenses and other current assets		5,901,058		2,523,214
Total current assets		71,590,426		124,405,808
Non-current assets
Fixed assets, net accumulated depreciation of $4,011,034 and $1,988,973, respectively		25,592,522		10,253,226
Goodwill		99,592,790		43,316,267
Intangible assets, net accumulated amortization of $13,960,457 and $7,652,750, respectively		111,073,948		97,582,330
Note receivable – noncurrent, net		—		143,333
Accounts receivable – litigation		290,648		303,086
Other noncurrent assets		1,457,646		514,962
Operating lease right of use assets		19,982,940		8,511,780
Total non-current assets		257,990,494		160,624,984
Total assets	$	329,580,920	$	285,030,792

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	5,756,736	$	2,548,885
Accounts payable – related party		53,819		36,820
Accrued expenses		9,332,382		5,592,222
Derivative liabilities		6,818,053		34,923,013
Notes payable – related party		—		134,498
Lease liabilities – current		2,992,540		—
Current portion of long term debt		1,500,000		—
Income taxes payable		3,588,371		2,027,741
Total current liabilities		30,041,901		45,263,179
Long term debt, net of debt discount and issuance costs		122,889,447		97,482,468
Lease liabilities		17,763,177		8,715,480
Total long-term liabilities		140,652,624		106,197,948
Total liabilities		170,694,525		151,461,127

Stockholders’ equity
Preferred stock, $0.001 par value. 10,000,000 shares authorized; 86,994 shares issued as of September 30, 2022 and December 31, 2021, 84,304 outstanding at September 30, 2022 and 82,566 outstanding at December 31, 2021.		87		87
Common stock, $0.001 par value. 250,000,000 shares authorized; 56,069,212 shares issued and 54,741,506 shares outstanding at September 30, 2022 and 45,484,314 shares issued and 44,745,870 shares outstanding as of December 31, 2021.		56,069		45,485
Additional paid-in capital		179,723,367		162,815,097
Accumulated deficit		(18,902,450)		(27,773,968)
Common stock held in treasury, at cost, 886,459 shares held as of September 30, 2022 and 517,044 shares held as of December 31, 2021		(1,990,678)		(1,517,036)
Total stockholders’ equity		158,886,395		133,569,665
Total liabilities and stockholders’ equity	$	329,580,920	$	285,030,792

See accompanying notes to the financial statements

MEDICINE MAN TECHNOLOGIES, INC.

CONSOLDIATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

For the Three Months and Nine Months Periods ended

September 30, 2022

and

September 30, 2021

Expressed in U.S. Dollars


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Operating revenues
Retail	$	39,759,734	$	20,741,864	$	104,386,464	$	54,083,880
Wholesale		3,335,252		11,022,519		14,661,268		27,654,965
Other		96,000		70,922		184,200		165,416
Total revenue		43,190,986		31,835,305		119,231,932		81,904,261
Cost of goods and services
Total cost of goods and services		17,226,451		16,779,313		57,173,192		44,692,765
Gross profit		25,964,535		15,055,992		62,058,740		37,211,496
Operating expenses
Selling, general and administrative expenses		6,725,713		5,593,336		20,245,737		13,580,469
Professional services		1,626,909		752,572		5,729,339		4,466,696
Salaries		6,397,157		3,644,320		18,934,873		8,505,733
Stock based compensation		99,898		1,228,764		1,788,823		3,865,588
Total operating expenses		14,849,677		11,218,992		46,698,772		30,418,486
Income (loss) from operations		11,114,858		3,837,000		15,359,968		6,793,010
Other income (expense)
Interest expense, net		(8,500,235)		(1,851,694)		(23,312,088)		(4,526,746)
Unrealized gain on derivative liabilities		4,816,668		356,824		28,104,960		967,751
Other income		—		—		20,400		—
Gain (loss) on sale of assets		—		(49,985)		—		242,494
Unrealized gain (loss) on investments		(28,541)		(10,572)		(42,353)		210,685
Total other income (expense)		(3,712,108)		(1,555,427)		4,770,919		(3,105,816)
Provision for income taxes		5,593,513		1,312,817		11,259,369		1,997,905
Net income	$	1,809,237	$	968,756	$	8,871,518	$	1,689,289

Less: Accumulated preferred stock dividends for the period		(1,784,113)		—		(5,294,132)		—
Net income attributable to common stockholders	$	25,124	$	968,756	$	3,577,386	$	1,689,289

Earnings (loss) per share attributable to common shareholders
Basic earnings (loss) per share	$	0.00	$	0.02	$	0.07	$	0.04
Diluted earnings (loss) per share	$	0.00	$	0.02	$	0.03	$	0.03

Weighted average number of shares outstanding – basic		51,232,943		44,145,709		50,615,437		42,903,008
Weighted average number of shares outstanding – diluted		137,954,532		44,145,709		137,337,027		56,688,640

See

accompanying notes to the financial statements

MEDICINE MAN TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS (UNAUDITED)

For the Nine Month Periods Ended September 30, 2022 and 2021

Expressed in U.S. Dollars


	For the Nine Months Ended
	September 30,
	2022		2021
Cash flows from operating activities
Net income (loss) for the period	$	8,871,518	$	1,689,289
Adjustments to reconcile net income to cash provided by (used in) operating activities
Depreciation and amortization		8,329,767		7,779,828
Non-cash lease expense		493,782		—
Gain on change in derivative liabilities		(28,104,960)		(967,751)
Loss (gain) on investment, net		42,353		(210,685)
Gain loss on sale of asset		—		(292,479)
Stock based compensation		1,474,380		3,865,588
Changes in operating assets and liabilities (net of acquired amounts):
Accounts receivable		(1,100,055)		(2,179,646)
Inventory		2,829,157		(3,034,246)
Prepaid expenses and other current assets		(2,616,732)		(1,964,835)
Other assets		(940,184)		(396,183)
Operating leases right of use assets and liabilities		75,295		114,129
Accounts payable and other liabilities		5,127,786		(568,387)
Deferred Revenue		—		(50,000)
Income taxes payable		1,560,630		1,029,482
Net cash provided by (used in) operating activities		(3,957,263)		4,814,104

Cash flows from investing activities:
Collection of notes receivable		95,555		181,911
Cash consideration for acquisition of business		(92,701,905)		(71,927,071)
Purchase of fixed assets		(12,511,389)		(3,869,658)
Purchase of intangible assets		—		(29,580)
Net cash used in investing activities		(105,117,739)		(75,644,398)

Cash flows from financing activities:
Proceeds from issuance of debt		22,473,938		45,344,578
Debt issuance and discount costs		4,433,042		—
Repayment of notes payable		—		(4,865,502)
Proceeds from issuance of common stock, net of issuance costs		14,492,993		50,282,797
Net cash provided by financing activities		41,399,973		90,761,874

Net increase (decrease) in cash and cash equivalents		(67,675,029)		19,931,580
Cash and cash equivalents at beginning of period		106,400,216		1,237,236
Cash and cash equivalents at end of period	$	38,725,187	$	21,168,816

Supplemental disclosure of cash flow information:
Cash paid for interest	$	12,797,185	$	3,862,970
Cash paid for income taxes		9,840,000		—

Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock		510,525		—
Return of common stock		565,501		—
Issuance of stock as payment for acquisitions		9,508,872
Issuance of preferred stock in connection with private offerings		—

See

accompanying notes to the financial statements

MEDICINE MAN TECHNOLOGIES, INC.

Adjusted EBITDA Reconciliation

For the Three Months and Nine Months Periods ended

September 30, 2022

and

September 30, 2021

Expressed in U.S. Dollars

Non-GAAP measurement

(UNAUDITED)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2022	2021	2022	2021

Net income (loss)	$ 1,809,237	$ 968,756	$ 8,871,518	$ 1,689,289
Interest expense, net	8,500,235	1,851,694	23,312,087	4,526,746
Provision for income taxes	5,593,513	1,312,817	11,259,369	1,997,905
Other (income) expense	(4,788,127)	(296,267)	(28,083,006)	(1,420,930)
Depreciation and amortization	3,322,150	2,972,681	8,823,549	7,779,828
EBITDA (non-GAAP measure)	$ 14,437,008	$ 6,809,681	$ 24,183,517	$ 14,572,838
Non-cash stock compensation	99,898	1,228,764	1,788,823	3,865,588
Deal related expenses	993,828	404,687	4,907,291	2,067,102
Capital raise related expenses	185,597	74,155	791,229	1,256,244
Inventory adjustment to fair market value for purchase accounting	34,604	–	6,541,651	2,164,686
One-time cultivation asset impairment	–	–	329,210	–
Severance	22,434	19,412	71,536	161,504
Retention program expenses	–	29,687	–	89,062
Employee relocation expenses	–	–	19,110	38,391
Other non-recurring items	87,097	231,255	93,322	448,433
Adjusted EBITDA (non-GAAP measure)	$ 15,860,466	$ 8,797,641	$ 38,725,689	$ 24,663,848

Revenue	43,190,986	31,835,305	119,231,932	81,904,261
aEBITDA Percent	36.7 %	27.6 %	32.5 %	30.1 %