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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2021
☐ 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)
|
(I.R.S. Employer
Identification No.) |
4880 Havana Street
Suite 201
Denver,
Colorado
|
80239 |
(Address of principal
executive offices) |
(Zip Code) |
(303)
371-0387
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading
Symbol(s) |
|
Name of
each exchange on which registered |
None |
|
None |
|
None |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
Large accelerated
Filer ☐ |
Accelerated Filer
☐ |
|
Non-accelerated Filer ☒ |
Smaller reporting
company
☒ |
|
|
Emerging growth
company
☒ |
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.
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
As of
August 16, 2021, the Registrant had
45,139,297 shares of Common Stock
outstanding.
TABLE OF
CONTENTS
CAUTIONARY NOTE ABOUT FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements
contained in this Quarterly Report on Form 10-Q other than
statements of historical fact, including statements regarding our
future results of operations and financial position, business
strategy and plans, and objectives for future operations, are
forward-looking statements. 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 words of similar meaning in connection with a
discussion of future events or future operating or financial
performance, although the absence of these words does not
necessarily mean that a statement is not forward-looking.
Forward-looking statements are based upon our current assumptions,
expectations and beliefs concerning future developments and their
potential effect on our business. Forward-looking statements are
subject to known and unknown risks, uncertainties and other factors
which may cause actual events or our actual results, performance or
achievements to be materially different from the future events,
results, performance or achievements expressed or implied by any
forward-looking statements. There can be no assurance that future
events, results, performance or achievements will be in accordance
with our expectations or that the effect of future events, results,
performance or achievements will be those anticipated by us.
Factors and risks that may cause or contribute to actual events,
results, performance or achievements differing from these
forward-looking statements include, but are not limited to, for
example:
|
· |
regulatory limitations
on our products and services; |
|
· |
our
ability to complete and integrate announced
acquisitions; |
|
· |
general
industry and economic conditions; |
|
· |
our
ability to access adequate capital upon terms and conditions that
are acceptable to us; |
|
· |
volatility in credit and
market conditions; |
|
· |
other
risks and uncertainties related to the cannabis market and our
business strategy. |
We operate in very competitive and rapidly changing markets. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed
in this Quarterly Report on Form 10-Q may not occur and actual
results could differ materially and adversely from those
anticipated or implied in the forward-looking statements.
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 Quarterly
Report on Form 10-Q are reasonable, we cannot assure stockholders
and potential investors that these plans, intentions or
expectations will be achieved.
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. 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.
All forward-looking statements speak only as of the date of this
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.
Part I. FINANCIAL INFORMATION
Item 1. Financial
Statements
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED BALANCE
SHEETS
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
June 30,
2021 |
|
|
December 31,
2020 |
|
|
|
(Unaudited) |
|
|
(Audited) |
|
Assets |
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
21,130,769 |
|
|
$ |
1,231,235 |
|
Accounts
receivable, net of allowance for doubtful accounts |
|
|
3,204,941 |
|
|
|
1,270,380 |
|
Accounts
receivable – related party |
|
|
– |
|
|
|
80,494 |
|
Inventory |
|
|
9,182,942 |
|
|
|
2,619,145 |
|
Note receivable –
current, net |
|
|
144,223 |
|
|
|
– |
|
Notes receivable –
related party |
|
|
– |
|
|
|
181,911 |
|
Prepaid
expenses |
|
|
1,865,138 |
|
|
|
614,200 |
|
Total current
assets |
|
|
35,528,013 |
|
|
|
5,997,365 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Fixed
assets, net accumulated depreciation of $1,291,349 and $872,579, respectively |
|
|
3,476,546 |
|
|
|
2,584,798 |
|
Goodwill |
|
|
41,505,944 |
|
|
|
53,046,729 |
|
Intangible assets, net accumulated amortization of $4,553,827 and $200,456, respectively |
|
|
94,861,253 |
|
|
|
3,082,044 |
|
Marketable securities, net of unrealized gain (loss) of $221,257
and $(129,992),
respectively |
|
|
498,039 |
|
|
|
276,782 |
|
Note receivable –
noncurrent, net |
|
|
71,667 |
|
|
|
– |
|
Accounts
receivable – litigation |
|
|
3,063,968 |
|
|
|
3,063,968 |
|
Other noncurrent
assets |
|
|
419,472 |
|
|
|
51,879 |
|
Operating lease right of use assets |
|
|
3,934,370 |
|
|
|
2,579,036 |
|
Total
non-current assets |
|
|
147,831,259 |
|
|
|
64,685,236 |
|
Total
assets |
|
$ |
183,359,272 |
|
|
$ |
70,682,601 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity |
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
2,335,217 |
|
|
$ |
3,508,478 |
|
Accounts payable –
related party |
|
|
40,323 |
|
|
|
48,982 |
|
Accrued
expenses |
|
|
10,279,124 |
|
|
|
2,705,445 |
|
Derivative
liabilities |
|
|
436,554 |
|
|
|
1,047,481 |
|
Deferred
revenue |
|
|
– |
|
|
|
50,000 |
|
Notes
payable – related party |
|
|
– |
|
|
|
5,000,000 |
|
Total current
liabilities |
|
|
13,091,218 |
|
|
|
12,360,386 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Long term
debt |
|
|
54,250,000 |
|
|
|
13,901,759 |
|
Lease
liabilities |
|
|
4,078,375 |
|
|
|
2,645,597 |
|
Total
long-term liabilities |
|
|
58,328,375 |
|
|
|
16,547,356 |
|
Total
liabilities |
|
|
71,419,593 |
|
|
|
28,907,742 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
Common stock
$0.001 par value.
250,000,000
authorized, 42,925,303 shares issued and
42,408,259 outstanding as
of June 30, 2021 and 42,601,773 shares issued and
42,169,041 outstanding as
of December 31, 2020, respectively. |
|
|
42,925 |
|
|
|
42,602 |
|
Preferred stock
$0.001 par value.
10,000,000
authorized. 87,266 shares
issued and outstanding as of June 30, 2021 and 19,716 shares
issued and outstanding as of December 31, 2020, respectively. |
|
|
87 |
|
|
|
20 |
|
Additional paid-in
capital |
|
|
158,787,183 |
|
|
|
85,357,835 |
|
Accumulated
deficit |
|
|
(45,373,480 |
) |
|
|
(42,293,098 |
) |
Common stock held in treasury, at cost, 517,044 shares held
as of June 30, 2021 and 432,732 shares held
as of December 31, 2020. |
|
|
(1,517,036 |
) |
|
|
(1,332,500 |
) |
Total
shareholders' equity |
|
|
111,939,679 |
|
|
|
41,774,859 |
|
Total
liabilities and stockholders’ equity |
|
$ |
183,359,272 |
|
|
$ |
70,682,601 |
|
See accompanying notes to the financial statements
MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED STATEMENT OF COMPREHENSIVE (LOSS) AND INCOME
For the Three and Six Months Ended June 30, 2021 and
2020
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
21,525,816 |
|
|
$ |
732,457 |
|
|
$ |
33,342,016 |
|
|
$ |
732,457 |
|
Wholesale |
|
|
9,186,181 |
|
|
|
4,106,197 |
|
|
|
16,632,445 |
|
|
|
6,635,128 |
|
Other |
|
|
16,844 |
|
|
|
585,675 |
|
|
|
94,494 |
|
|
|
1,259,878 |
|
Total revenue |
|
|
30,728,841 |
|
|
|
5,424,329 |
|
|
|
50,068,955 |
|
|
|
8,627,463 |
|
Cost of goods and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
goods and services |
|
|
15,826,341 |
|
|
|
3,106,686 |
|
|
|
27,913,451 |
|
|
|
5,255,221 |
|
Total cost of
goods and services |
|
|
15,826,341 |
|
|
|
3,106,686 |
|
|
|
27,913,451 |
|
|
|
5,255,221 |
|
Gross
profit |
|
|
14,902,500 |
|
|
|
2,317,643 |
|
|
|
22,155,504 |
|
|
|
3,372,242 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
|
4,797,495 |
|
|
|
1,088,479 |
|
|
|
7,987,134 |
|
|
|
1,755,398 |
|
Professional
services |
|
|
1,519,016 |
|
|
|
2,371,743 |
|
|
|
3,714,124 |
|
|
|
3,620,731 |
|
Salaries |
|
|
2,992,055 |
|
|
|
2,098,291 |
|
|
|
4,861,413 |
|
|
|
4,095,327 |
|
Stock
based compensation |
|
|
1,153,018 |
|
|
|
3,109,091 |
|
|
|
2,636,824 |
|
|
|
4,361,822 |
|
Total
operating expenses |
|
|
10,461,584 |
|
|
|
8,667,604 |
|
|
|
19,199,494 |
|
|
|
13,833,278 |
|
Income
(loss) from operations |
|
|
4,440,916 |
|
|
|
(6,349,961 |
) |
|
|
2,956,010 |
|
|
|
(10,461,036 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense), net |
|
|
(1,713,770 |
) |
|
|
(11,447 |
) |
|
|
(2,675,053 |
) |
|
|
36,595 |
|
Gain on
forfeiture of contingent consideration |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,462,636 |
|
Unrealized gain
(loss) on derivative liabilities |
|
|
1,864,741 |
|
|
|
(348,535 |
) |
|
|
610,927 |
|
|
|
843,428 |
|
Other income
(expense) |
|
|
– |
|
|
|
32,621 |
|
|
|
– |
|
|
|
32,621 |
|
Gain (loss) on
sale of assets |
|
|
– |
|
|
|
– |
|
|
|
292,479 |
|
|
|
– |
|
Unrealized gain (loss) on investments |
|
|
6,627 |
|
|
|
81,615 |
|
|
|
221,257 |
|
|
|
110,739 |
|
Total
other income (expense) |
|
|
157,598 |
|
|
|
(245,746 |
) |
|
|
(1,550,390 |
) |
|
|
2,486,019 |
|
Provision for income tax (benefit) expense |
|
|
228,474 |
|
|
|
– |
|
|
|
685,088 |
|
|
|
– |
|
Net
income (loss) |
|
$ |
4,370,040 |
|
|
$ |
(6,595,707 |
) |
|
$ |
720,532 |
|
|
$ |
(7,975,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share |
|
$ |
0.10 |
|
|
$ |
(0.16 |
) |
|
$ |
0.02 |
|
|
$ |
(0.20 |
) |
Diluted earnings (loss) per share |
|
$ |
0.08 |
|
|
$ |
(0.16 |
) |
|
$ |
0.01 |
|
|
$ |
(0.20 |
) |
Weighted average
number of shares outstanding - basic |
|
|
42,332,144 |
|
|
|
41,568,147 |
|
|
|
42,286,168 |
|
|
|
40,742,462 |
|
Weighted average
number of shares outstanding - diluted |
|
|
53,975,521 |
|
|
|
41,568,147 |
|
|
|
53,886,727 |
|
|
|
40,742,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss) |
|
$ |
4,370,040 |
|
|
$ |
(6,595,707 |
) |
|
$ |
720,532 |
|
|
$ |
(7,975,017 |
) |
See accompanying notes to the financial statements
MEDICINE MAN TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Six months Ended June 30, 2021 and 2020
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock |
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Treasury
Stock |
|
|
Total Stock-
holders’
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Shares |
|
|
Cost |
|
|
Equity |
|
Balance at, December 31, 2019 |
|
|
– |
|
|
$ |
– |
|
|
|
39,952,628 |
|
|
$ |
39,953 |
|
|
$ |
50,356,469 |
|
|
$ |
(22,816,477 |
) |
|
|
257,732 |
|
|
$ |
(1,000,000 |
) |
|
$ |
26,579,945 |
|
Net
income (loss) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(7,975,017 |
) |
|
|
– |
|
|
|
– |
|
|
|
(7,975,017 |
) |
Issuance
of common stock as payment for Mesa |
|
|
– |
|
|
|
– |
|
|
|
2,554,750 |
|
|
|
2,555 |
|
|
|
4,167,253 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,169,808 |
|
Return
of common stock as compensation to employees, officers and/or
directors |
|
|
– |
|
|
|
– |
|
|
|
(500,000 |
) |
|
|
(500 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(500 |
) |
Issuance
of common stock in connection with sales made under private or
public offerings |
|
|
– |
|
|
|
– |
|
|
|
187,500 |
|
|
|
187 |
|
|
|
374,813 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
375,000 |
|
Stock based compensation expense related to common stock
options |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,361,822 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,361,822 |
|
Balance, June 30, 2020 |
|
|
– |
|
|
$ |
– |
|
|
|
42,194,878 |
|
|
$ |
42,195 |
|
|
$ |
59,260,357 |
|
|
$ |
(30,791,494 |
) |
|
|
257,732 |
|
|
$ |
(1,000,000 |
) |
|
$ |
27,511,058 |
|
|
|
Preferred
Stock |
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Treasury
Stock |
|
|
Total Stock-
holders’
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Shares |
|
|
Cost |
|
|
Equity |
|
Balance at, December 31, 2020 |
|
|
19,716 |
|
|
$ |
20 |
|
|
|
42,601,773 |
|
|
$ |
42,602 |
|
|
$ |
85,357,835 |
|
|
$ |
(42,293,098 |
) |
|
|
432,732 |
|
|
$ |
(1,332,500 |
) |
|
$ |
41,774,859 |
|
Net
income (loss) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
720,532 |
|
|
|
– |
|
|
|
– |
|
|
|
720,532 |
|
Issuance
of stock as payment for acquisitions |
|
|
20,240 |
|
|
|
20 |
|
|
|
– |
|
|
|
– |
|
|
|
20,239,980 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
20,240,000 |
|
Issuance
of common stock as compensation to employees, officers, and/or
directors |
|
|
– |
|
|
|
– |
|
|
|
323,530 |
|
|
|
323 |
|
|
|
680,538 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
680,861 |
|
Issuance
of stock in connection with sales made under private or public
offerings |
|
|
47,310 |
|
|
|
47 |
|
|
|
– |
|
|
|
– |
|
|
|
50,449,159 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
50,449,206 |
|
Dividends declared |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,800,914 |
) |
|
|
– |
|
|
|
– |
|
|
|
(3,800,914 |
) |
Return
of common stock |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
84,312 |
|
|
|
(184,536 |
) |
|
|
(184,536 |
) |
Stock based compensation expense related to common stock
options |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,059,671 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,059,671 |
|
Balance, June 30, 2021 |
|
|
87,266 |
|
|
$ |
87 |
|
|
|
42,925,303 |
|
|
$ |
42,925 |
|
|
$ |
158,787,183 |
|
|
$ |
(45,373,480 |
) |
|
|
517,044 |
|
|
$ |
(1,517,036 |
) |
|
$ |
111,939,679 |
|
See accompanying notes to the financial statements
MEDICINE MAN TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Three months Ended June 30, 2021 and 2020
Expressed in U.S. Dollars
|
|
Preferred
Stock |
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Treasury
Stock |
|
|
Total Stock-
holders’
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Shares |
|
|
Cost |
|
|
Equity |
|
Balance at, March 31, 2020 |
|
|
– |
|
|
$ |
– |
|
|
|
39,952,628 |
|
|
$ |
39,953 |
|
|
$ |
51,609,200 |
|
|
$ |
(24,195,787 |
) |
|
|
257,732 |
|
|
$ |
(1,000,000 |
) |
|
$ |
26,453,366 |
|
Net
income (loss) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(6,595,707 |
) |
|
|
– |
|
|
|
– |
|
|
|
(6,595,707 |
) |
Issuance
of common stock as payment for Mesa |
|
|
– |
|
|
|
– |
|
|
|
2,554,750 |
|
|
|
2,555 |
|
|
|
4,167,253 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,169,808 |
|
Return
of common stock as compensation to employees, officers and/or
directors |
|
|
– |
|
|
|
– |
|
|
|
(500,000 |
) |
|
|
(500 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(500 |
) |
Issuance
of common stock in connection with sales made under private or
public offerings |
|
|
– |
|
|
|
– |
|
|
|
187,500 |
|
|
|
187 |
|
|
|
374,813 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
375,000 |
|
Stock based compensation expense related to common stock
options |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
3,109,091 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
3,109,091 |
|
Balance, June 30, 2020 |
|
|
– |
|
|
$ |
– |
|
|
|
42,194,878 |
|
|
$ |
42,195 |
|
|
$ |
59,260,357 |
|
|
$ |
(30,791,494 |
) |
|
|
257,732 |
|
|
$ |
(1,000,000 |
) |
|
$ |
27,511,058 |
|
|
|
Preferred
Stock |
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Treasury
Stock |
|
|
Total Stock-
holders’
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Shares |
|
|
Cost |
|
|
Equity |
|
Balance, March 31, 2021 |
|
|
87,266 |
|
|
$ |
87 |
|
|
|
42,819,815 |
|
|
$ |
42,820 |
|
|
$ |
157,530,563 |
|
|
$ |
(46,823,076 |
) |
|
|
488,220 |
|
|
$ |
(1,445,696 |
) |
|
$ |
109,304,698 |
|
Net
income (loss) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,370,040 |
|
|
|
– |
|
|
|
– |
|
|
|
4,370,040 |
|
Issuance
of stock as payment for acquisitions |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Issuance
of common stock as compensation to employees, officers, and/or
directors |
|
|
– |
|
|
|
– |
|
|
|
105,488 |
|
|
|
105 |
|
|
|
235,950 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
236,056 |
|
Issuance
of stock in connection with sales made under private or public
offerings |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Dividends declared |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(2,920,446 |
) |
|
|
– |
|
|
|
– |
|
|
|
(2,920,446 |
) |
Return
of common stock |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
28,824 |
|
|
|
(71,340 |
) |
|
|
(71,340 |
) |
Stock based compensation expense related to common stock
options |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,020,671 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,020,671 |
|
Balance, June 30, 2021 |
|
|
87,266 |
|
|
$ |
87 |
|
|
|
42,925,303 |
|
|
$ |
42,925 |
|
|
$ |
158,787,183 |
|
|
$ |
(45,373,480 |
) |
|
|
517,044 |
|
|
$ |
(1,517,036 |
) |
|
$ |
111,939,679 |
|
See accompanying notes to the financial statements
MEDICINE MAN TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
For the Six months Ended June 30, 2021 and 2020
Expressed in U.S. Dollars
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
2021 |
|
|
2020 |
|
Cash flows from operating
activities |
|
|
|
|
|
|
|
|
Net
income (loss) for the period |
|
$ |
720,532 |
|
|
$ |
(7,975,017 |
) |
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
4,807,147 |
|
|
|
94,269 |
|
Gain on forfeiture
of contingent consideration |
|
|
– |
|
|
|
– |
|
(Gain) loss on
change in derivative liabilities |
|
|
(610,927 |
) |
|
|
(2,306,064 |
) |
(Gain) loss on
investment, net |
|
|
(221,257 |
) |
|
|
(110,739 |
) |
(Gain) loss on
sale of asset |
|
|
(292,479 |
) |
|
|
– |
|
Stock based
compensation |
|
|
2,636,824 |
|
|
|
4,361,822 |
|
Changes in
operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(1,854,067 |
) |
|
|
780,772 |
|
Inventory |
|
|
(3,368,807 |
) |
|
|
445,345 |
|
Prepaid expenses
and other current assets |
|
|
(1,250,938 |
) |
|
|
107,417 |
|
Other assets |
|
|
(367,593 |
) |
|
|
(41,879 |
) |
Operating lease
right of use assets and liabilities |
|
|
77,444 |
|
|
|
16,773 |
|
Accounts payable
and other liabilities |
|
|
1,169,537 |
|
|
|
575,153 |
|
Deferred
Revenue |
|
|
(50,000 |
) |
|
|
– |
|
Income
taxes payables |
|
|
– |
|
|
|
(1,940 |
) |
Net
cash provided by (used in) operating activities |
|
|
1,395,416 |
|
|
|
(4,054,088 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
|
|
|
|
Purchase of fixed
assets - net |
|
|
(1,203,180 |
) |
|
|
(593,785 |
) |
Cash consideration
for acquisition of business |
|
|
(66,082,072 |
) |
|
|
(2,609,500 |
) |
Collection
(issuance) of notes receivable |
|
|
181,911 |
|
|
|
(50,390 |
) |
Purchase of intangible assets |
|
|
(29,580 |
) |
|
|
– |
|
Net
cash (used in) investing activities |
|
|
(67,132,921 |
) |
|
|
(3,253,675 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt, net |
|
|
40,348,241 |
|
|
|
374,500 |
|
Repayment of notes
payable |
|
|
(5,000,000 |
) |
|
|
– |
|
Proceeds from issuance of stock, net of issuance costs |
|
|
50,282,798 |
|
|
|
– |
|
Net
cash provided by financing activities |
|
|
85,631,039 |
|
|
|
374,500 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and
cash equivalents |
|
|
19,893,534 |
|
|
|
(6,933,263 |
) |
Cash
and cash equivalents at beginning of period |
|
|
1,237,235 |
|
|
|
12,351,580 |
|
Cash and cash equivalents at end of period |
|
$ |
21,130,769 |
|
|
$ |
5,418,317 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
2,131,495 |
|
|
$ |
– |
|
See accompanying notes to the financial statements
MEDICINE MAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
Organization and
Nature of Operations
Medicine Man Technologies, Inc. (“we,” “us,” “our” or the
“Company”) was incorporated in Nevada on March 20, 2014. On May 1,
2014, we entered into a non-exclusive Technology License Agreement
with Futurevision, Inc., f/k/a Medicine Man Production Corp., dba
Medicine Man Denver (“Medicine Man Denver”) pursuant to which
Medicine Man Denver granted us a license to use all of the
proprietary processes that they had developed, implemented and
practiced at their cannabis facilities relating to the commercial
growth, cultivation, marketing and distribution of medical 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 “License
Agreement”) for 10 years.
In 2017, the Company acquired additional cultivation intellectual
property through the acquisition of Success Nutrients™ and Pono
Publications, including the rights to the book titled “Three A
Light” and its associated cultivation techniques, which have been
part of the Company’s products and services offerings since the
acquisition. The Company acquired Two J’s LLC d/b/a The Big Tomato
(“The Big Tomato”) in 2018, which operates a retail location in
Aurora, Colorado. It has been a leading supplier of hydroponics and
indoor gardening supplies in the metro Denver area since May 2001.
The Company was focused on cannabis dispensary and cultivation
consulting and providing equipment and nutrients to cannabis
cultivators until its first plant touching acquisition in April of
2020. In 2019, due to the changes in Colorado law permitting
non-Colorado resident and publicly traded investment into
“plant-touching” cannabis companies, the Company made a strategic
decision to move toward direct plant-touching operations. The
Company developed a plan to roll up a number of direct
plant-touching dispensaries, manufacturing facilities, and cannabis
cultivations with a target to be one of the largest seed to sale
cannabis businesses in Colorado. In April 2020, the Company
acquired its first plant-touching business, Mesa Organics Ltd.
(“Mesa Organics”), which consists of four dispensaries and one
manufacturing infused products facility (“MIP”), d/b/a
Purplebee’s.
On April 20, 2020, the Company rebranded and conducts its business
under the trade name, Schwazze. The corporate name of the Company
continues to be Medicine Man Technologies, Inc. Effective April 21,
2020, the Company commenced trading under the OTC ticker symbol
SHWZ.
On December 17, 2020, the Company acquired the assets of (i)
Starbuds Pueblo LLC; and (ii) Starbuds Alameda LLC under the
applicable Asset Purchase Agreements (“APAs”). On December 18,
2020, the Company acquired the assets of (i) Starbuds Commerce City
LLC; (ii) Lucky Ticket LLC; (iii) Starbuds Niwot LLC; and (iv) LM
MJC LLC under the applicable APAs.
On February 4, 2021, the Company acquired the assets of Colorado
Health Consultants LLC and Mountain View 44th LLC under the
applicable APAs.
On March 2, 2021, the Company acquired the assets of (i) Starbuds
Aurora LLC, (ii) SB Arapahoe LLC; (iii) Citi-Med LLC; (iv) Starbuds
Louisville LLC; and (v) KEW LLC under the applicable APAs.
From December 2020 through March 2021 the Company completed a
private placement of Series A Cumulative Convertible Preferred
Stock (“Series A Preferred Stock”) for aggregate gross proceeds of
$57.7 million
dollars. In the private placement, the Company issued and sold an
aggregate of 57,700 shares of Series A
Preferred Stock at a price of $1,000 per share under securities
purchase agreement with Dye Capital Cann Holdings II, LLC (“Dye
Cann II”) and CRW Cann Holdings, LLC (“CRW”) as well as
subscription agreements with unaffiliated investors. Among other
terms, each share of Series A Preferred Stock (i) earns an annual
dividend of
8% on the “preference amount,” which initially is equal to
the $1,000 per-share purchase price and subject to increase, by
having such dividends automatically accrete to, and increase, the
outstanding preference amount; (ii) is entitled to a liquidation
preference under certain circumstances, (iii) is convertible into
shares of the Company’s common stock by dividing the preference
amount by $1.20 per share under certain circumstances, and (iv) is
subject to a redemption right or obligation under certain
circumstances.
In addition, on December 16, 2020, the Company issued and sold a
Convertible Promissory Note and Security Agreement in the original
principal amount of $5,000,000
to Dye Capital & Company, LLC (“Dye Capital”). On February 26,
2021, Dye Capital converted all outstanding amounts under the note
into 5,060 shares of Series
A Preferred Stock.
The Company is focused on growing through internal growth,
acquisition, and new licenses in the Colorado cannabis market. The
Company is focused on building the premier vertically integrated
cannabis company in Colorado. The company's leadership team has
deep expertise in mainstream consumer packaged goods, retail, and
product development at Fortune 500 companies as well as in the
cannabis sector. The Company has a high-performance culture and a
focus on analytical decision making, supported by data.
Customer-centric thinking inspires the Company’s strategy and
provides the foundation for the Company’s operational
playbooks.
The Company’s operations are organized into three different
segments as follows: (i) retail, consisting of retail locations for
sale of cannabis products, (ii) wholesale, consisting of
manufacturing and sale of wholesale cannabis products, nutrients
for cannabis, and hydroponics and indoor gardening supplies, and
(iii) other, consisting of all other income and expenses, including
those related to licensing and consulting services, facility design
services, facility management services, and corporate
operations.
1. |
Liquidity and Capital
Resources |
During the quarters ended June 30, 2021 and 2020, the Company
primarily used revenues from its 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
$21,130,769 and $1,231,235 classified as
cash and cash equivalents as of June 30, 2021, and December 31,
2020, respectively.
The Company maintains its cash balances with a high-credit-quality
financial institution. At times, such cash may be more than the
insured limit of $250,000. The Company has not experienced any
losses in such accounts, and management believes the Company is not
exposed to any significant credit risk on its cash and cash
equivalents.
2. |
Critical Accounting
Policies and Estimates |
Management’s
Representation of Interim Financial
Statements
The
accompanying unaudited consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”).
Certain information and disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP”) have been
condensed or omitted as allowed by such rules and regulations, and
management believes that the disclosures are adequate to make the
information presented not misleading. These unaudited consolidated
financial statements include all of the adjustments, which in the
opinion of management are necessary to a fair presentation of the
Company’s financial position and results of operations. All such
adjustments are of a normal and recurring nature. Interim results
are not necessarily indicative of results for a full year. These
unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements as
of December 31, 2020 and 2019, as presented in the Company’s Annual
Report on Form 10-K filed on March 31, 2021 with the SEC.
Basis of
Presentation
These
accompanying financial statements have been prepared in accordance
with U.S. GAAP and pursuant to the rules and regulations of the SEC
for interim financial statements. All intercompany accounts and
transactions are eliminated in consolidation.
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.
Reclassifications
Certain prior period amounts have been reclassified to conform to
the current period presentation. These reclassifications had no
impact on net earnings and financial position.
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.
The Company’s financial instruments include cash, accounts
receivable, notes receivable, accounts payable and tenant deposits.
The carrying values of these financial instruments approximate
their fair value due to their short maturities. The carrying amount
of the Company’s debt approximates fair value because the interest
rates on these instruments approximate the interest rate on debt
with similar terms available to us. The Company’s derivative
liability was adjusted to fair market value at the end of each
reporting period, using Level 3 inputs.
The following is the Company’s assets and liabilities measured at
fair value on a recurring and nonrecurring basis at June 30, 2021
and December 31, 2020, using quoted prices in active markets for
identical assets (Level 1), significant other observable inputs
(Level 2), and significant unobservable inputs (Level 3):
Schedule of fair value measurement |
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Level 1 – Marketable
Securities Available-for-Sale – Recurring |
|
|
498,039 |
|
|
|
276,782 |
|
Marketable Securities
at Fair Value on a Recurring Basis
Certain assets are measured at fair value on a recurring basis. The
Level 1 position consists of an investment in equity securities
held in Canada House Wellness Group, Inc., a publicly-traded
company whose securities are actively quoted on the Toronto Stock
Exchange.
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.
Accounts
Receivable
The Company extends unsecured credit to its customers in the
ordinary course of business. These accounts receivable relates to
the Company’s wholesale and other revenue segments. Accounts
receivable are recorded when a milestone is reached at a point in
time resulting in funds being due for delivered goods or services,
and where payment is reasonably assured. Wholesale revenues are
generally collected within 14 to 30 days after invoice is sent.
Consulting revenues are generally collected from 30 to 60 days
after the invoice is sent.
The following table depicts the composition of our accounts
receivable as of June 30, 2021, and December 31, 2020:
Schedule of Accounts Receivable |
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Accounts receivable –
trade |
|
$ |
3,377,879 |
|
|
$ |
1,315,188 |
|
Accounts receivable – related
party |
|
|
– |
|
|
|
80,494 |
|
Accounts receivable – litigation,
non-current |
|
|
3,063,968 |
|
|
|
3,063,968 |
|
Allowance for
doubtful accounts |
|
|
(172,938 |
) |
|
|
(44,808 |
) |
Total
accounts receivable |
|
$ |
6,268,909 |
|
|
$ |
4,414,842 |
|
The Company establishes an allowance for doubtful accounts based on
management’s assessment of the collectability of trade receivables.
A considerable amount of judgment is required in assessing the
amount of the allowance. The Company makes judgments about the
creditworthiness of each customer based on ongoing credit
evaluations and monitors current economic trends that might impact
the level of credit losses in the future. If the financial
condition of the customers were to deteriorate, resulting in their
inability to make payments, a specific allowance will be
required.
Notes
Receivable
On July 17, 2018, the Company entered into an intellectual property
license agreement with Abba Medix Corp. (“AMC”), a wholly owned
subsidiary of publicly traded Canada House Wellness Group, Inc..
The Company agreed to provide a lending facility to AMC in
CAD$125,000 increments of up to CAD$500,000. The lending facility
is for a term of 60 months and bears interest at a rate of 2%. On
April 30, 2019, the terms of the loan were amended to reduce the
term from 60 months to 36 months. As of June 30, 2021 and December
31, 2020, the outstanding balance, including accrued interest, on
the notes receivable with AMC totaled $246,765 and $246,765,
respectively. As of June 30, 2021 and December 31, 2020, the
Company has recorded a full allowance on the note receivable
balance.
On March 12, 2021, the Company sold equipment to Colorado Cannabis.
The terms of sale included a zero interest note receivable, payable
$11,944 on the first of each month for 24 months. As of June 30,
2021, the outstanding balance, including penalties for late
payments, on the notes receivable with Colorado Cannabis totaled
$215,890.
Other Assets (Current
and Non-Current)
Other assets as of June 30, 2021 and December 31, 2020 were
$2,284,610 and $666,079, respectively. As of June 30,
2021, this balance included $1,865,138 in prepaid expenses and
$419,472 in security deposits. As of December 31,
2020, other assets included $345,777 in prepaid expenses, $268,423 in tax receivable, and
$51,879 in security deposits. Prepaid
expenses were primarily comprised of insurance premiums, membership
dues, conferences and seminars, and other general and
administrative costs.
Goodwill and
Intangible Assets
Goodwill represents the future economic benefit arising from other
assets acquired that could not be individually identified and
separately recognized. The goodwill arising from the Company’s
acquisitions is attributable to the value of the potential expanded
market opportunity with new customers. Intangible assets have
either an identifiable or indefinite useful life. Intangible assets
with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The
Company’s amortizable intangible assets consist of licensing
agreements, product licenses and registrations, and intellectual
property or trade secrets. Their estimated useful lives range from
10 to 15 years.
Goodwill and indefinite-lived assets are not amortized but are
subject to annual impairment testing unless circumstances dictate
more frequent assessments. The Company performs an annual
impairment assessment for goodwill during the fourth quarter of
each year and more frequently whenever events or changes in
circumstances indicate that the fair value of the asset may be less
than the carrying amount. Goodwill impairment testing is a two-step
process performed at the reporting unit level. Step one compares
the fair value of the reporting unit to its carrying amount. The
fair value of the reporting unit is determined by considering both
the income approach and market approaches. The fair values
calculated under the income approach and market approaches are
weighted based on circumstances surrounding the reporting unit.
Under the income approach, the Company determines fair value based
on estimated future cash flows of the reporting unit, which are
discounted to the present value using discount factors that
consider the timing and risk of cash flows. For the discount rate,
the Company relies on the capital asset pricing model approach,
which includes an assessment of the risk-free interest rate, the
rate of return from publicly traded stocks, the Company’s risk
relative to the overall market, the Company’s size and industry and
other Company-specific risks. Other significant assumptions used in
the income approach include the terminal value, growth rates,
future capital expenditures and changes in future working capital
requirements. The market approaches use key multiples from
guideline businesses that are comparable and are traded on a public
market. If the fair value of the reporting unit is greater than its
carrying amount, there is no impairment. If the reporting unit’s
carrying amount exceeds its fair value, then the second step must
be completed to measure the amount of impairment, if any. Step two
calculates the implied fair value of goodwill by deducting the fair
value of all tangible and intangible net assets of the reporting
unit from the fair value of the reporting unit as calculated in
step one. In this step, the fair value of the reporting unit is
allocated to all of the reporting unit’s assets and liabilities in
a hypothetical purchase price allocation as if the reporting unit
had been acquired on that date. If the carrying amount of goodwill
exceeds the implied fair value of goodwill, an impairment loss is
recognized in an amount equal to the excess.
Determining the fair value of a reporting unit is judgmental in
nature and requires the use of significant estimates and
assumptions, including revenue growth rates, strategic plans, and
future market conditions, among others. There can be no assurance
that the Company’s estimates and assumptions made for purposes of
the goodwill impairment testing will prove to be accurate
predictions of the future. Changes in assumptions and estimates
could cause the Company to perform an impairment test prior to
scheduled annual impairment tests.
The Company performed its annual fair value assessment as of
December 31, 2020, on its subsidiaries with material goodwill and
intangible asset amounts on their respective balance sheets and
determined that no impairment exists. No additional factors or
circumstances existed as of June 30, 2021 that would indicate
impairment.
Long-Lived
Assets
The Company evaluates the recoverability of its long-lived assets
whenever events or changes in circumstances have indicated that an
asset may not be recoverable. The long-lived asset is grouped with
other assets at the lowest level for which identifiable cash flows
are largely independent of the cash flows of other groups of assets
and liabilities. If the sum of the projected undiscounted cash
flows is less than the carrying value of the assets, the assets are
written down to the estimated fair value.
The Company evaluated the recoverability of its long-lived assets
on December 31, 2020 on its subsidiaries with material amounts on
their respective balance sheets and determined that no impairment
exists.
Accounts
Payable
Accounts payable as of June 30, 2021 and December 31, 2020 were
$2,375,540 and $3,557,461, respectively and were
comprised of trade payables for various purchases and services
rendered during the ordinary course of business.
Accrued Expenses and
Other Liabilities
Accrued expenses and other liabilities as of June 30, 2021 and
December 31, 2020 were $10,279,124
and $2,705,445,
respectively. As of June 30, 2021, this was comprised of customer
deposits of $17,169,
accrued payroll of $741,299,
operating expenses of $5,719,742,
and accrued dividends on preferred stock of $3,800,914. As of
December 31, 2020, accrued expenses and other liabilities was
comprised of customer deposits of $26,826,
accrued payroll of $1,154,887,
and operating expenses of $1,523,732.
Revenue Recognition
and Related Allowances
The Company’s revenue recognition policy is significant because the
amount and timing of revenue is a key component of our results of
operations. Certain criteria are required to be met in order to
recognize revenue. If these criteria are not met, then the
associated revenue is deferred until is the criteria are met. When
consideration is received in advance of the delivery of goods or
services, a contract liability is recorded. Revenue contracts are
identified when accepted from customers and represent a single
performance obligation to sell the Company’s products to a
customer.
The Company has three main revenue streams: retail; wholesale; and
other.
Retail and wholesale sales are recorded at the time that control of
the products is transferred to customers. In evaluating the timing
of the transfer of control of products to customers, the Company
considers several indicators, including significant risks and
rewards of products, its right to payment, and the legal title of
the products. Based on the assessment of control indicators, sales
are generally recognized when products are delivered to
customers.
Other revenue consists of other income and expenses, including
related to, licensing and consulting services, facility design
services, facility management services, the Company’s Three A
Light™ publication, and corporate operations. Revenue is recognized
when the obligations to the client are fulfilled which is
determined when milestones in the contract are achieved and target
harvest yields are exceeded or earned upon the completion of the
seminar. The Company also recognizes expense reimbursement from
clients as revenue for expenses incurred during certain jobs.
Costs of Goods and
Services Sold
Costs of goods and services sold are comprised of related expenses
incurred while supporting the implementation and sales of the
Company’s products and services.
General and
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
totaled $196,908 and
$308,593 for the
three and six months ended June 30, 2021, respectively, as compared
to $336,529 and
$465,796,
respectively, for the three and six months ended June 30, 2020.
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 options 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 Emerging Issues Task Force (“EITF”) 96-18 when stock or options
are awarded for previous or current service without further
recourse.
Share-based expense paid through direct stock grants is expensed as
occurred. Since the Company’s common stock is publicly traded, the
value is determined based on the number of shares of common stock
issued and the trading value of the common stock on the date of the
transaction.
On June 20, 2018, the Financial Accounting Standards Board (“FASB”)
issued ASU 2018-07 which simplifies the accounting for share-based
payments granted to nonemployees for goods and services. Under the
ASU, most of the guidance on such payments to nonemployees would be
aligned with the requirements for share-based payments granted to
employees. Previously, share-based payment arrangements to
nonemployees were accounted for under ASC 718, while nonemployee
share-based payments issued for goods and services were accounted
for under ASC 505-50. Before the amendment, the major difference
for the Company (but not limited to) was the determination of
measurement date, which generally is the date on which the
measurement of equity classified share-based payments becomes
fixed. Equity classified share-based payments for employees was
fixed at the time of grant. Equity-classified nonemployee
share-based payment awards are no longer measured at the earlier of
the date which a commitment for performance by the counterparty is
reached or the date at which the counterparty’s performance is
complete. They are now measured at the grant date of the award,
which is the same as share-based payments for employees. The
Company adopted the requirements of the new rule as of January 1,
2019, the effective date of the new guidance.
The Company recognized $1,153,018 and
$2,636,824 in
expense for stock-based compensation from common stock options and
common stock issued to employees, officers, and directors during
the three and six months ended June 30, 2021, respectively, and
$3,109,091 and $4,361,822 in
expenses for stock-based compensation from the issuance of common
stock to employees, officers, directors and/or contractors during
the three and six months ended June 30, 2020, respectively.
Income
Taxes
ASC 740, Income Taxes requires the use of the asset and liability
method of accounting for income taxes. Under the asset and
liability method of ASC 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 are regularly assessed to determine the
likelihood they will be recovered from future taxable income. A
valuation allowance is established when we believe it is more
likely than not the future realization of all or some of a deferred
tax asset will not be achieved. In evaluating our ability to
recover deferred tax assets within the jurisdiction which they
arise, we consider all available positive and negative evidence.
Factors reviewed include the cumulative pre-tax book income for the
past three years, scheduled reversals of deferred tax liabilities,
our history of earnings and reliability of our forecasts,
projections of pre-tax book income over the foreseeable future, and
the impact of any feasible and prudent tax planning strategies.
The Company assesses all material positions taken in any income tax
return, including all significant uncertain positions, in all tax
years that are still subject to assessment or challenge by relevant
taxing authorities. Assessing an uncertain tax position begins with
the initial determination of the position’s sustainability, and the
tax benefit to be recognized is measured at the largest amount of
benefit that is greater than 50 percent likely of being realized
upon ultimate settlement. We recognize the impact of a tax position
in our financial statements only if that position is more likely
than not of being sustained upon examination by taxing authorities,
based on the technical merits of the position. Tax authorities
regularly examine our returns in the jurisdictions in which we do
business and we regularly assess the tax risk of our return filing
positions. Due to the complexity of some of the uncertainties, the
ultimate resolution may result in payments that are materially
different from our current estimate of the tax liability. These
differences, as well as any interest and penalties, will be
reflected in the provision for income taxes in the period in which
they are determined.
As the Company operates in the cannabis industry, it is subject to
the limits of the Internal Revenue Code (IRC) Section 280E under
which the Company is only allowed to deduct expenses directly
related to sales of product. This results in permanent differences
between ordinary and necessary business expenses deemed
non-allowable under IRC Section 280E.
Right of Use Assets
and Lease Liabilities
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic
842). The standard requires lessees to recognize almost all
leases on the balance sheet as a Right-of-Use (“ROU”) asset and a
lease liability and requires leases to be classified as either an
operating or a finance type lease. The standard excludes leases of
intangible assets or inventory. The standard became effective for
the Company beginning January 1, 2019. The Company adopted ASC 842
using the modified retrospective approach, by applying the new
standard to all leases existing at the date of initial application.
Results and disclosure requirements for reporting periods beginning
after January 1, 2019 are presented under ASC 842, while prior
period amounts have not been adjusted and continue to be reported
in accordance with our historical accounting under ASC 840. The
Company elected the package of practical expedients permitted under
the standard, which also allowed the Company to carry forward
historical lease classifications. The Company also elected the
practical expedient related to treating lease and non-lease
components as a single lease component for all equipment leases as
well as electing a policy exclusion permitting leases with an
original lease term of less than one year to be excluded from the
ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease
at inception. ROU assets and liabilities are recognized at
commencement date based on the present value of remaining lease
payments over the lease term. For this purpose, the Company
considers only payments that are fixed and determinable at the time
of commencement. As most of the Company's leases do not provide an
implicit rate, the Company estimated the incremental borrowing rate
in determining the present value of lease payments. The ROU asset
also includes any lease payments made prior to commencement and is
recorded net of any lease incentives received. The Company’s lease
terms may include options to extend or terminate the lease when it
is reasonably certain that the Company will exercise such
options.
Operating leases are included in operating lease ROU assets and
operating lease liabilities, current and non-current, on the
Company's consolidated balance sheets.
3. |
Recent Accounting
Pronouncements |
The Company has implemented all new accounting pronouncements that
are in effect and that may impact its financial statements and does
not believe that there are any other new pronouncements that have
been issued that might have a material impact on its financial
position or results of operations except as noted below:
In January 2017, the FASB issued ASU 2017-01, Clarifying the
Definition of a Business (Topic 805), which changes the
definition of a business to assist entities with evaluating when a
set of transferred assets and activities is a business. The
guidance requires an entity to evaluate if substantially all of the
fair value of the gross assets acquired is concentrated in a single
identifiable asset or a group of similar identifiable assets; if
so, the set of transferred assets and activities is not a business.
The guidance also requires a business to include at least one
substantive process and narrows the definition of outputs by more
closely aligning it with how outputs are described in ASC 606. The
ASU is effective for annual reporting periods beginning after
December 15, 2017, and for interim periods within those years.
Adoption of this ASU did not have a significant impact on the
Company’s consolidated results of operations, cash flows and
financial position.
In December 2019, the FASB issued ASU 2019-12, Income Taxes
(Topic 740), which enhances and simplifies various aspects of
the income tax accounting guidance, including requirements such as
tax basis step-up in goodwill obtained in a transaction that is not
a business combination, ownership changes in investments, and
interim-period accounting for enacted changes in tax law. The
amendment became effective for public companies with fiscal years
beginning after December 15, 2020. The Company is evaluating the
impact of this amendment on its consolidated financial
statements.
In February 2020, the FASB issued ASU 2020-02, Financial
Instruments-Credit Losses (Topic 326) and Leases (Topic 842) -
Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting
Bulletin No. 119 and Update to SEC Section on Effective Date
Related to Accounting Standards Update No. 2016-02, Leases (Topic
842), which amends the effective date of the original
pronouncement for smaller reporting companies. ASU 2016-13 and its
amendments will be effective for the Company for interim and annual
periods in fiscal years beginning after December 15, 2022. The
Company believes the adoption will modify the way the Company
analyzes financial instruments, but it does not anticipate a
material impact on results of operations. The Company is in the
process of determining the effects adoption will have on its
consolidated financial statements.
4. |
Property and
Equipment |
Property and equipment are recorded at cost, net of accumulated
depreciation and are comprised of the following:
Property and equipment table |
|
|
|
|
|
|
|
|
June 30,
2021 |
|
|
December 31,
2020 |
|
Furniture and
fixtures |
|
$ |
294,204 |
|
|
$ |
228,451 |
|
Leasehold improvements |
|
|
656,314 |
|
|
|
90,314 |
|
Machinery and tools |
|
|
1,502,417 |
|
|
|
1,456,752 |
|
Office equipment |
|
|
238,837 |
|
|
|
104,059 |
|
Software |
|
|
1,308,387 |
|
|
|
1,308,387 |
|
Work in
process |
|
|
767,736 |
|
|
|
269,414 |
|
|
|
$ |
4,767,895 |
|
|
$ |
3,457,377 |
|
Less: Accumulated depreciation |
|
|
(1,291,349 |
) |
|
|
(872,579 |
) |
Total property
and equipment, net of depreciation |
|
$ |
3,476,546 |
|
|
$ |
2,584,798 |
|
Depreciation on equipment is provided on a straight-line basis over
its expected useful lives at the following annual
rates.
Schedule of property and equipment useful
lives |
|
Furniture and
fixtures |
3 years |
Leasehold
improvements |
Lesser of the lease term or estimated
useful life |
Machinery and
tools |
3 years |
Office
equipment |
3 years |
Software |
3-5 years |
Depreciation expense for the three and six months ended June 30,
2021 was $260,843 and $455,480, respectively.
Intangible assets as of June 30, 2021 and December 31, 2020 were
comprised of the following:
Intangible assets |
|
|
|
|
|
|
|
|
June 30,
2021 |
|
|
December 31,
2020 |
|
|
|
|
|
|
|
|
License agreements |
|
$ |
88,775,280 |
|
|
$ |
1,667,000 |
|
Tradenames |
|
|
4,270,000 |
|
|
|
350,000 |
|
Customer relationships |
|
|
5,150,000 |
|
|
|
1,055,000 |
|
Non-compete |
|
|
1,130,000 |
|
|
|
120,000 |
|
Product license and registration |
|
|
57,300 |
|
|
|
57,300 |
|
Trade secret –
intellectual property |
|
|
32,500 |
|
|
|
32,500 |
|
|
|
|
99,415,080 |
|
|
|
3,282,500 |
|
Less: accumulated
amortization |
|
|
(4,553,827 |
) |
|
|
(200,456 |
) |
Total
intangible assets, net of amortization |
|
$ |
94,861,253 |
|
|
$ |
3,082,044 |
|
Amortization expense for the three and six months ended June 30,
2021 was $2,755,736 and $4,351,667, respectively.
In 2019, the Company entered into certain employment agreements
with key officers that contained contingent consideration
provisions based upon the achievement of certain market condition
milestones. The Company determined that each of these vesting
conditions represented derivative instruments.
On January 8, 2019, the Company granted the right to receive
500,000 shares of
restricted common stock to an officer and director, which will vest
at such time that the Company’s stock price appreciates to $8.00
per share with defined minimum average daily trading volume
thresholds.
On April 23, 2019, the Company granted the right to receive
1,000,000 shares of
restricted common stock to an officer and director, which will vest
at such time that the Company’s stock price appreciates to $8.00
per share with defined minimum average daily trading volume
thresholds. On February 25, 2020, the director resigned from his
remaining positions with the Company and forfeited his right to the
contingent consideration. As a result, the Company recorded a gain
of $1,462,636
as a component of other income (expense), net on its financial
statements.
On June 11, 2019, the Company granted the right to receive
1,000,000 shares of
restricted common stock to an officer, which will vest at such time
that the Company’s stock price appreciates to $8.00 per share with
defined minimum average daily trading volume thresholds. On May 3,
2021, the Company executed an agreement whereby the officer
relinquished the 1,000,000 shares of restricted common stock.
The Company accounts for derivative instruments in accordance with
the US GAAP accounting guidance under ASC 815, Derivatives and
Hedging Activities. The Company estimated the fair value of
these derivatives at the respective balance sheet dates using the
Black-Scholes option pricing model based upon the following inputs:
(i) stock price on the date of grant ranging between $1.32 - $3.75,
(ii) a risk-free interest rate ranging between 1.45% - 2.57% and
(iii) an expected volatility of the price of the underlying common
stock ranging between 145% - 158%.
As of June 30, 2021, the fair value of these derivative liabilities
is $436,554. The
change in the fair value of derivative liabilities for the three
months ended June 30, 2021 was $1,864,741,
resulting in an aggregate unrealized gain on derivative
liabilities. The change in the fair value of the derivative
liabilities for the six months ended June 30, 2021 was $610,927,
resulting in an aggregated unrealized gain on derivative
liabilities.
7. |
Related Party
Transactions |
Transactions Involving Former Directors, Executive Officers or
Their Affiliated Entities
During the year ended December 31, 2020, the Company recorded sales
to Medicine Man Denver, totaling $997,262. The Company
had an accounts receivable balance with Medicine Man Denver
totaling $72,109 as
of December 31, 2020. The Company’s former Chief Executive Officer,
Andy Williams, maintains an ownership interest in Medicine Man
Denver. Effective February 25, 2020 he was no longer an officer of
the Company and therefore no longer a related party. As such, he is
not included as a related party with respect to sales and accounts
receivable from Medicine Man Denver during the period ended June
30, 2021.
During the year ended December 31, 2020, the Company recorded sales
to MedPharm Holdings LLC (“MedPharm”) totaling $73,557. The Company had
a net accounts receivable balance with MedPharm totaling $5,885 as of
December 31, 2020. The Company’s former Chief Executive Officer,
Andy Williams, maintains an ownership interest in MedPharm.
Effective February 25, 2020 he was no longer an officer of the
Company and therefore no longer a related party. As such, he is not
included as a related party with respect to sales and accounts
receivable from MedPharm during the period ended June 30, 2021.
Also, during the year ended December 31, 2019, the Company issued
various notes receivable to MedPharm totaling $767,695 with original
maturity dates ranging from September 21, 2019 through January 19,
2020 and all bearing interest at 8% per annum. The maturity date of
all notes were extended to May 2020 by mutual agreement between the
Company and the noteholder. On August 1, 2020, the Company entered
into a Settlement Agreement and Mutual Release (the “Settlement
Agreement”) with MedPharm. Pursuant to the terms of the Settlement
Agreement, the Company and MedPharm agreed that the amount of the
settlement to be furnished to the Company by MedPharm was
$767,695 in principal and
$47,161 in accrued
interest. The Company received a $100,000 cash payment
from MedPharm on August 1, 2020. On September 4, 2020, Andrew
Williams, a member of the MedPharm Board of Directors and the
Company’s former Chief Executive Officer, returned 175,000
shares of the Company’s common stock to the Company, as equity
consideration at a price of $1.90 per share, a mutually agreed upon
price per share. These shares are held in treasury. The remaining
outstanding principal and interest of $181,911 due and payable by
MedPharm under the Settlement Agreement was to be paid out in
bi-weekly installments of product by scheduled deliveries through
June 30, 2021. This 0 amount was paid off on April 19,
2021.
During the year ended December 31, 2020, the Company recorded sales
to Baseball 18, LLC (“Baseball”) totaling $14,605, to Farm Boy,
LLC (“Farm Boy”) totaling $16,125, to Emerald
Fields LLC (“Emerald Fields”) totaling $16,605, and to Los
Sueños Farms (“Los Sueños”) totaling $52,244. As of December
31, 2020 the Company had net accounts payable balances with
Baseball of $31,250, and with
Farm Boy of $93,944. One of
the Company’s former directors, Robert DeGabrielle, owns the
Colorado retail marijuana cultivation licenses for Farm Boy,
Baseball, Emerald Fields, and Los Sueños. Effective June 19, 2020
he was no longer an officer of the Company and therefore no longer
a related party. As such, he is not included as a related party
with respect to sales and accounts receivable from Baseball, Farm
Boy, Emerald Fields, or Los Sueños during the period ended June 30,
2021.
Transactions with Entities Affiliated with Justin Dye
The Company has participated in several transaction involving Dye
Capital, Dye Capital Cann Holdings, LLC (“Dye Cann I”) and Dye Cann
II. Justin Dye, the Company’s Chief Executive Officer, one of its
directors, and the largest beneficial owner of the Company’s common
stock and Series A Preferred Stock, controls Dye Capital and Dye
Capital controls Dye Cann I and Dye Cann II. Dye Cann I is the
largest holder of the Company’s outstanding common stock. Dye Cann
II is a significant holder of the Series A Preferred Stock. Mr. Dye
has sole voting and dispositive power over the securities held by
Dye Capital, Dye Cann I, and Dye Cann II.
The Company entered into a Securities Purchase Agreement with Dye
Cann I on June 5, 2019, (as amended, the “Dye Cann I SPA”) pursuant
to which the Company agreed to sell to Dye Cann I up to between
8,187,500 and 10,687,500 shares of the Company’s common stock in
several tranches at $2.00 per share and warrants to purchase 100%
of the number of shares of common stock sold at a purchase price of
$3.50 per share. At the initial closing on June 5, 2019, the
Company sold to Dye Cann I 1,500,000 shares of common
stock and warrants to purchase 1,500,000 shares of common stock for
gross proceeds of $3,000,000, and the
Company has consummated subsequent closings for an aggregate of
9,287,500 shares of common
stock and warrants to purchase 9,287,500 shares of common stock for
aggregate gross proceeds of $18,575,000 to the
Company. The terms of the Dye Cann I SPA are disclosed in the
Company’s Current Report on Form 8-K filed on June 6, 2019. The
Company and Dye Cann I entered into a first amendment to the Dye
Cann I SPA on July 15, 2019, as described in the Company’s Current
Report on Form 8-K filed on July 17, 2019, a second amendment to
the Dye Cann I SPA on May 20, 2020, as described in the Company’s
Current Report on Form 8-K filed on May 22, 2020, and a Consent,
Waiver and Amendment on December 16, 2020, as described in the
Company’s Current Report on Form 8-K filed on December 23, 2020. At
the time of the initial closing under the Dye Cann I SPA, Justin
Dye became a director and the Company’s Chief Executive
Officer.
The Company granted Dye Cann I certain demand and piggyback
registration rights with respect to the shares of common stock sold
under the Dye Cann I SPA and issuable upon exercise of the warrants
sold under the Dye Cann I SPA. The Company also granted Dye Cann I
the right to designate one or more individuals for election or
appointment to the Company’s board of directors (the “Board”) and
Board observer rights. Further, under the Dye Cann I SPA, until
June 5, 2022, if the Company desires to pursue debt or equity
financing, the Company must first give Dye Cann I an opportunity to
provide a proposal to the Company with the terms upon which Dye
Cann I would be willing to provide or secure such financing. If the
Company does not accept Dye Cann I’s proposal, the Company may
pursue such debt or equity financing from other sources but Dye
Cann I has a right to participate in such financing to the extent
required to enable Dye Cann I to maintain the percentage of the
Company’s common stock (on a fully-diluted basis) that it then
owns, in the case of equity securities, or, in the case of debt, a
pro rata portion of such debt based on the percentage of the
Company’s common stock (on a fully-diluted basis) that it then
owns.
The Company entered into a Securities Purchase Agreement (as
amended, the “Dye Cann II SPA”) with Dye Cann II on November 16,
2020 pursuant to which the Company agreed to sell to Dye Cann II
shares of Series A Preferred Stock in one or more tranches at a
price of $1,000 per share. The terms of the Dye Cann II SPA are
disclosed in the Company’s Current Report on Form 8-K filed on
December 23, 2020. The Company and Dye Cann II entered into an
amendment to the Dye Cann II SPA on December 16, 2020, as described
in the Company’s Current Report on Form 8-K filed on December 23,
2020, a second amendment to the Dye Cann II SPA on February 3,
2021, as described in the Company’s Form 8-K filed on February 9,
2021, and a third amendment to the Dye Cann II SPA on March 30,
2021, as described under Item 9B of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2021. The Company issued
and sold to Dye Cann II 7,700 shares of Series A
Preferred Stock on December 16, 2020, 1,450 shares of Series A
Preferred Stock on December 18, 2020, 1,300 shares of Series
Preferred Stock on December 22, 2020, 3,100 shares of Series A
Preferred Stock on February 3, 2021, 3,800 shares of Series A
Preferred Stock on March 2, 2021 and 4,000 shares of Series A
Preferred Stock on March 30, 2021. As a result, the Company issued
and sold an aggregate of 21,350 shares of Series A
Preferred Stock to Dye Cann II for aggregate gross proceeds of
$21,350,000.
The Company granted Dye Cann II certain demand and piggyback
registration rights with respect to the shares of common stock
issuable upon conversion of the Series A Preferred Stock under the
Dye Cann II SPA. Further, the Company granted Dye Can II the right
to designate one or more individuals for election or appointment to
the Board and Board observer rights.
On December 16, 2020, the Company entered into a Secured
Convertible Note Purchase Agreement with Dye Capital and issued and
sold to Dye Capital a Convertible Note and Security Agreement in
the principal amount of $5,000,000 as described in the
Company’s Current Report on Form 8-K filed on December 23, 2020. On
February 26, 2021, Dye Capital elected to convert the $5,000,000 principal
amount and the $60,250 of accrued
but unpaid interest under the Convertible Promissory Note and
Security Agreement under its terms and Dye Capital and the Company
entered into a Conversion Notice and Agreement pursuant to which
the Company issued 5,060 shares of Series
A Preferred Stock to Dye Capital and also paid Dye Capital
$230.97 in cash in
lieu of issuing any fractional shares of Series Preferred Stock
upon conversion, as described in the Company’s Current Report on
Form 8-K filed on March 4, 2021.
The Company previously reported the terms of the Series A Preferred
Stock in the Company’s Current Report on Form 8-K filed on December
23, 2020 and under Item 1 of this Report, which disclosure is
incorporated herein by reference.
During the year ended December 31, 2020, the Company recorded
expenses of $66,264 with
Tella Digital. During the quarter ended June 30, 2021, the Company
recorded expenses of $193,120 with
Tella Digital. Tella Digital provides on-premise digital experience
solutions for our retail dispensary locations. Mr. Dye serves as
Chairman of Tella Digital and has super majority rights.
Transactions with CRW and Affiliated Entities
On February 26, 2021, the Company entered into a Securities
Purchase Agreement (the “CRW SPA”) with CRW pursuant to which the
Company issued and sold 25,350 shares of Series A
Preferred Stock to CRW at a price of $1,000 per share for aggregate
gross proceeds of $25,350,000. The
transaction made CRW a beneficial owner of more than 5% of the
Company’s common stock. The Company granted CRW certain demand and
piggyback registration rights with respect to the shares of common
stock issuable upon conversion of the Series A Preferred Stock
under the CRW SPA. On the same date, the Company entered into a
letter agreement with CRW, granting CRW the right to designate one
individual for election or appointment to the Board and Board
observer rights. Under the letter agreement, for as long as CRW has
the right to designate a Board member, if the Company, directly or
indirectly, plans to issue, sell or grant any securities or options
to purchase any of its securities, CRW has a right to purchase its
pro rata portion of such securities, based on the number of shares
of Series A Preferred Stock beneficially held by CRW on the
applicable date on an as-converted to common stock basis divided by
the total number of shares of common stock outstanding on such date
on an as-converted, fully-diluted basis (taking into account all
outstanding securities of the Company regardless of whether the
holders of such securities have the right to convert or exercise
such securities for common stock at the time of determination).
Further, under the letter agreement, the Company will pay CRW
Capital, LLC, the sole manager of CRW and a holder of a carried
interest in CRW, a monitoring fee equal to $150,000 in monthly
installments of $10,000. On March 14, 2021, the Board appointed
Jeffrey A. Cozad as a director to fill a vacancy on the Board. Mr.
Cozad is a manager and owns 50% of CRW Capital, LLC, and he shares
voting and disposition power over the shares of Series A Preferred
Stock held by CRW. Mr. Cozad and his family members indirectly own
membership interests in CRW. The Company previously reported the
terms of the CRW SPA and the CRW letter agreement in the Company’s
Current Report on Form 8-K filed March 4, 2021.
Transactions with Entities Affiliated with Brian Ruden
The Company has participated in several transactions involving
entities owned or affiliated with Brian Ruden, one of its directors
and a beneficial owner of more than 5% of the Company’s common
stock and a beneficial owner of more than 5% of the Series A
Preferred Stock.
Between December 17, 2020 and March 2, 2021, the Company’s
wholly-owned subsidiary SBUD, LLC acquired the Star Buds assets.
The Company previously reported the terms of the applicable
purchase agreements and related amendments in the Company’s Current
Reports on Form 8-K filed June 8, 2020, September 21, 2020,
December 22, 2020, and March 8, 2021.
The aggregate purchase price for the Star Buds assets was
$118,000,000, paid as
follows: (i) $44,250,000 in cash at the
applicable closings, (ii) $44,250,000 in deferred cash, also
referred to in this report as “seller note(s),” (iii) 29,500 shares of Series A Preferred
Stock, of which 25,075 shares were issued at the applicable
closings and 4,425 shares are held in held in escrow and will be
released post-closing to either Star Buds or the Company depending
on post-closing adjustments to the purchase price. In addition, the
Company issued warrants to purchase an aggregate of 5,531,250 shares of the Company’s
common stock to the sellers. As of June 30, 2021, the Company owed
an aggregate principal amount of $44,250,000 under the seller
notes. The Company has not paid any principal and has paid an
aggregate of $1,752,662 of interest on the seller
notes as of June 30, 2021. Mr. Ruden’s interest in the aggregate
purchase price for the Star Buds assets is as follows: (i)
$13,727,490 in cash at the
applicable closings, (ii) $13,727,490 in seller notes, (iii)
9,152 shares of Series A Preferred
Stock, of which 7,779 shares were issued at the applicable closings
and 1,373 shares are held in held in escrow and will be released
post-closing to either Mr. Ruden or the Company depending on
post-closing adjustments to the purchase price. In addition, the
Company issued warrants to purchase an aggregate of 1,715,936 shares of the Company’s
common stock to Mr. Ruden. The Company has paid Mr. Ruden an
aggregate of $544,889 in interest on his seller
notes as of June 30, 2021.
Mr. Ruden was a part-owner of each of the Star Buds companies that
sold assets to SBUD, LLC. Mr. Ruden owned 50% of Colorado Health
Consultants LLC, 50% of Starbuds Aurora LLC, 50% of Starbuds Pueblo
LLC, 50% of Starbuds Alameda LLC, 48% of SB Arapahoe LLC, 36% of
Starbuds Commerce City LLC, 30% of Starbuds Louisville LLC, 25% of
Starbuds Niwot LLC, 16.66% of Lucky Ticket LLC, 15% of KEW LLC, and
10% of LM MJC LLC.
In connection with acquiring the Star Buds assets for our Pueblo
West and Commerce City locations, SBUD LLC entered into a lease
with each of 428 S. McCulloch LLC and 5844 Ventures LLC on
substantially the same terms. Each of the leases is for an initial
three-year term. The lease with 428 S. McCulloch LLC is for the
Company’s Pueblo West Star Buds location and was effective on
December 17, 2020. The lease with 45844 Ventures LLC is for the
Company’s Commerce City Star Buds location and was effective on
December 18, 2020. Each lease provides for a monthly rent payment
of $5,000. SBUD LLC expect to pay each landlord an aggregate of
$180,000 during the initial term of the leases. During 2020, SBUD
LLC made aggregate rent payments of $10,000. Between January 1,
2021 and June 30, 2021, SBUD LLC made aggregate rent payments of
$60,000. In addition, SBUD LLC must pay each landlord’s expenses
and disbursements incurred in connection with the ownership,
operation, maintenance, repair and replacement of the premises.
SBUD LLC has the option to renew each lease for two additional
three-year terms. The rent increase to $5,500 per month during the
first three-year renewal period, and to $6,050 during the second
three-year renewal period. The Company has an option to purchase
the premises at fair market value at any time during the lease term
and also has a right of first refusal if the landlords desire to
sell the premises to a third party.
On December 17, 2020, SBUD, LLC entered into a Trademark License
Agreement with Star Brands LLC under which Star Brands LLC licenses
certain trademarks to SBUD, LLC effective as of the closing of the
acquisitions of all of the Star Buds assets. SBUD LLC has no
payment obligation under this agreement. Mr. Ruden is a part-owner
of Star Brands LLC.
In connection with the Star Buds acquisitions, the Company granted
Mr. Ruden and Naser Joudeh the right designate individuals for
election or appointment to the Board.
As of June 30, 2021, and December 31, 2020, respectively, the
Company had $5,948,853 and $2,090,887 of finished goods
inventory. As of June 30, 2021, the Company had $858,628 of work in process
and $2,375,461 of raw
materials. As of December 31, 2020, the Company had $500,917 of work in process
and $27,342 of raw materials.
The Company uses the FIFO inventory valuation method. As of June
30, 2021 and December 31, 2020, the Company did not recognize any
impairment for obsolescence within its inventory.
On June 3, 2017, the Company issued an aggregate of 7,000,000
shares of its common stock for 100% ownership of both Success
Nutrients and Pono Publications. The Company utilized purchase
price accounting stating that net book value approximates fair
market value of the assets acquired. The purchase price accounting
resulted in $6,301,080 of goodwill.
On July 21, 2017, the Company issued 2,258,065
shares of its common stock for 100% ownership of Denver Consulting
Group (“DCG”). The Company utilized purchase price accounting
stating that net book value approximates fair market value of the
assets acquired. The purchase price accounting resulted in
$3,003,226 of goodwill.
On September 17, 2018, we closed the acquisition of The Big Tomato.
The Company issued an aggregate of 1,933,329
shares of its common stock for 100% ownership of The Big Tomato.
The Company utilized purchase price accounting stating that net
book value approximates fair market value of the assets acquired.
The purchase price accounting resulted in the Company valuing the
investment as $3,000,000 of goodwill.
On April 20, 2020, the Company closed the acquisition of Mesa
Organics. The aggregate purchase price after working capital
adjustments was $2,609,500 of cash and
2,554,750
shares of the Company’s Common Stock. The Company accounted for the
transaction utilizing purchase price accounting stating that the
book value approximates the fair market value of the assets
acquired. The purchase price accounting resulted in the Company
valuing the investment as $2,147,613 of goodwill.
From December 2020 through March 2021, the Company closed the
acquisition of thirteen Star Buds dispensaries and one cultivation
facility. The aggregate purchase price was $118,000,000. The
Company accounted for the transaction utilizing purchase price
accounting stating that the book value approximates the fair market
value of the assets acquired. The purchase price accounting
resulted in the Company valuing the investment as $27,054,025 of goodwill.
As of June 30, 2021, the Company had $41,505,944 of goodwill which
consisted of $6,301,080 from Success Nutrients and Pono
Publications, $3,003,226 from DCG, $3,000,000 from The Big Tomato, $2,147,613 from Mesa Organics, and
$27,054,025
from Star Buds.
Term Loan — On February 26, 2021, the Company entered into a
Loan Agreement with SHWZ Altmore, LLC and GGG Partners LLC, as
collateral agent. Upon execution of the Loan Agreement, the Company
received $10,000,000.
The term loan incurs 15%
interest per annum, due quarterly on March 1, June 1, September 1,
and December 1 of each year. Principal payments begin on June 1,
2023 in the amount of $500,000, with the
remainder of the principal due upon maturity on February 26,
2025.
Under the terms of the loan, the
Company must comply with certain restrictions. These include
customary events of default and specified representations as well
as various financial ratio requirements including, (i) a
consolidated fixed charge coverage ratio of at least 1.3 at the end
of each fiscal quarter beginning in the first quarter of 2022, and
(ii) a minimum of $3,000,000 in a deposit account in which the
lender has a security interest. As of June 30, 2021, the Company
was in compliance with the requirements described above.
Seller Notes — As part of the acquisition of the Star Buds
assets, the Company entered into a deferred payment arrangement
with the sellers for $44,250,000. The deferred
payment arrangement incurs 12%
interest per annum, payable on the 1st of every month
through November 2025. Principal payments are due as follows:
$13,901,759
on December 17, 2025, $3,474,519
on February 3, 2026, and $26,873,722
on March 2, 2026.
Leases with an initial term of 12 months or less are not recorded
on the balance sheet; we recognize lease expense for these leases
on a straight-line basis over the lease term. Leases with a term
greater than one year are recognized on the balance sheet at the
time of lease commencement or modification of an ROU operating
lease asset and a lease liability, initially measured at the
present value of the lease payments. Lease costs are recognized in
the income statement over the lease term on a straight-line basis.
ROU assets represent our right to use an underlying asset for the
lease term and lease liabilities represent our obligation to make
lease payments arising from the lease.
The Company's leases consist of real estate leases for office
spaces. The Company elected to combine the lease and related
non-lease components for its operating leases.
The Company’s operating leases include options to extend or
terminate the lease, which are not included in the determination of
the ROU asset or lease liability unless reasonably certain to be
exercised. The Company's operating leases have remaining lease
terms of less than two years. The Company’s lease agreements do not
contain any material residual value guarantees or material
restrictive covenants.
As the Company's leases do not provide an implicit rate, we used an
incremental borrowing rate based on the information available at
the lease commencement date in determining the present value of
lease payments. The discount rate used in the computations ranged
between 6% and
12%.
Balance Sheet
Classification of Operating Lease Assets and
Liabilities
Balance Sheet Classification Table |
|
|
|
|
|
|
|
Balance Sheet Line |
|
June 30, 2021 |
|
Asset |
|
|
|
|
|
|
Operating lease right of use assets |
|
Noncurrent assets |
|
$ |
3,934,370 |
|
Liabilities |
|
|
|
|
|
|
Lease
liabilities |
|
Noncurrent liabilities |
|
$ |
4,078,375 |
|
Lease
Costs
The table below summarizes the components of lease costs for the
six months ended June 30, 2021.
Operating Lease Costs |
|
|
|
|
|
Six Months Ended
June 30, 2021 |
|
|
|
|
|
|
Operating lease costs |
|
$ |
650,692 |
|
Maturities of Lease
Liabilities
Maturities of lease liabilities as of June 30, 2021 are as
follows:
Maturities of Lease Liabilities |
|
|
|
|
2021 fiscal year |
|
$ |
4,809,658 |
|
Less:
Interest |
|
|
182,344 |
|
Present value of lease
liabilities |
|
$ |
4,627,314 |
|
The following table presents the Company’s future minimum lease
obligation under ASC 840 as of June 30, 2021:
Future minimum lease obligations |
|
|
|
|
2021 fiscal year |
|
$ |
740,076 |
|
2022 fiscal year |
|
|
1,479,393 |
|
2023 fiscal year |
|
|
1,354,595 |
|
2024 fiscal year |
|
|
723,590 |
|
2025 fiscal
year |
|
|
333,356 |
|
Total |
|
$ |
4,631,010 |
|
The Company is authorized to issue two classes of stock, designated
preferred stock and common stock.
Preferred
Stock
The number of shares of preferred stock authorized is 10,000,000, par
value $0.001 per share.
The preferred stock may be divided into such number of series as
the Board may determine. The Board is authorized to determine and
alter the rights, preferences, privileges and restrictions granted
and imposed upon any wholly unissued series of preferred stock, and
to fix the number and designation of shares of any series of
preferred stock. The Board, within limits and restrictions stated
in any resolution of the Board, originally fixing the number of
shares constituting any series may increase or decrease, but not
below the number of such series then outstanding, the shares of any
subsequent series.
The Company had 87,266 shares of
Series A Preferred Stock issued and outstanding as of June 30, 2021
and 19,716 shares of
Series A Preferred Stock issued and outstanding as of December 31,
2020. Among other terms, each share of Series A Preferred Stock (i)
earns an annual dividend of 8% on the “preference amount,” which
initially is equal to the $1,000 per-share purchase price and
subject to increase, by having such dividends automatically accrete
to, and increase, the outstanding preference amount; (ii) is
entitled to a liquidation preference under certain circumstances,
(iii) is convertible into shares of the Company’s common stock by
dividing the preference amount by $1.20 per share under certain
circumstances, and (iv) is subject to a redemption right or
obligation under certain circumstances.
Common
Stock
The Company is authorized to issue 250,000,000 shares of
common stock at a par value of $0.001. The Company had
42,925,303 shares of common
stock issued and 42,408,259 shares of common
stock outstanding as of June 30, 2021, and 42,601,773 shares of common
stock issued and 42,169,041 shares of common
stock outstanding as of December 31, 2020.
Common Stock Issued in
Private Placements
During the year ended December 31, 2020, the Company issued
187,500 shares of common
stock and warrants to purchase 187,500 shares of common stock, for
gross proceeds of $375,000.
Common Stock Issued as
Compensation to Employees, Officers, and Directors
On April 3, 2020, the Company cancelled 500,000 shares of common stock,
with vesting conditions represented as derivative instruments.
These shares were incorrectly issued as restricted shares instead
of restricted stock units to an officer of the Company, Paul
Dickman, on January 8, 2019.
During the six months ended December 31, 2020, the Company issued
406,895 shares
of common stock valued at $497,301 to
employees, officers, and directors as compensation.
During the period ended June 30, 2021, the Company issued
323,530 shares of common stock valued at $557,998
to employees, and directors as compensation.
Common and Preferred
Stock Issued as Payment for Acquisitions
On April 20, 2020, the Company issued 2,554,750
shares of common stock valued at $4,167,253 for
the acquisition of Mesa Organics, Ltd.
On December 17, 2020, the Company issued 2,862 shares of
Series A Preferred Stock valued at $2,861,994 and
on December 18, 2020, the Company issued 6,404 shares of
Series A Preferred Stock valued at $6,403,987 for
the acquisition of Star Buds assets.
On February 3, 2021, the Company issued 2,319 shares of
Series A Preferred Stock valued at $2,318,998 and
on March 3, 2021, the Company issued 17,921 shares
of Series A Preferred Stock valued at $17,920,982 for
the acquisition of Star Buds assets.
Warrants
The Company accounts for common stock purchase warrants in
accordance with ASC 480, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock, Distinguishing Liabilities from Equity. The Company
estimates the fair value of warrants at date of grant using the
Black-Scholes option pricing model. There is a moderate degree of
subjectivity involved when using option pricing models to estimate
the warrants, and the assumptions used in the Black Scholes
option-pricing model are moderately judgmental.
During the period ended June 30, 2021, the Company issued warrants
to purchase an aggregate of 3,793,530
shares of common stock as purchase consideration for the
acquisition of certain Star Buds assets. These warrants have an
exercise price of $1.20 per share and expiration dates five years
from the date of issuance. In addition, the Company issued a
warrant to purchase an aggregate 1,500,000 shares of common stock
to an accredited investor in connection with entering into a loan
agreement. This warrant has an exercise price of $2.50 per share
and expires five years from the date of issuance. The Company
estimated the fair value of these warrants at date of grant using
the Black-Scholes option pricing model using the following inputs:
(i) stock price on the date of grant of $1.20 of $2.50, respectively, (ii) the contractual
term of the warrant of 5 years, (iii) a risk-free interest
rate ranging between 0.46% - 0.75% and (iv) an expected
volatility of the price of the underlying common stock ranging
between 192.71% - 195.00%.
The following table reflects the change in common stock purchase
warrants for the six months ended June 30, 2021.
Schedule of warrant activity |
|
|
|
|
|
Number of shares |
|
Balance as of January 1, 2021 |
|
|
11,725,220 |
|
Warrants exercised |
|
|
– |
|
Warrants forfeited |
|
|
– |
|
Warrants
issued |
|
|
5,293,530 |
|
Balance as of June 30, 2021 |
|
|
17,018,750 |
|
Option
Repricing
On December 15, 2020, the Board repriced certain outstanding stock
options issued to the Company’s current employees. The repriced
stock options had original exercise prices ranging from $1.52 per
share to $3.83 per share. All of these stock options to current
employees were repriced to have an exercise price of $1.26 per
share, which was the closing price of the Company’s common stock on
December 15, 2020. Each of the options has a new 10-year term from
the repricing date.
The Company has three identifiable segments as of June 30, 2021;
(i) retail, (ii) wholesale and (iii) and other. The retail segment
represents our dispensaries which sell merchandise directly to
customers via retail locations and e-commerce portals. The
wholesale segment represents our manufacturing and wholesale
business which sell merchandise to customers via e-commerce
portals, a retail location, and manufacturing facility. The other
segment derives its revenue from licensing and consulting
agreements with cannabis related entities, in addition to fees from
seminars and expense reimbursements included in other revenue on
the Company’s financial statements.
The following information represents segment activity for the
three-month periods ended June 30, 2021 and June 30,
2020:
Schedule of Segment Reporting
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
Three Months Ended |
|
|
For the
Three Months Ended |
|
|
|
30-June-2021 |
|
|
30-June-2020 |
|
|
|
Retail |
|
|
Wholesale |
|
|
Other |
|
|
Total |
|
|
Retail |
|
|
Wholesale |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
21,525,816 |
|
|
$ |
9,186,180 |
|
|
$ |
16,844 |
|
|
$ |
30,728,841 |
|
|
$ |
732,459 |
|
|
$ |
4,106,195 |
|
|
$ |
586,675 |
|
|
$ |
5,424,329 |
|
Cost of
goods and services |
|
$ |
(9,562,361 |
) |
|
$ |
(6,208,416 |
) |
|
$ |
(55,564 |
) |
|
$ |
(15,826,341 |
) |
|
$ |
(477,085 |
) |
|
$ |
(2,356,159 |
) |
|
$ |
(273,442 |
) |
|
$ |
(3,106,686 |
) |
Gross
profit |
|
$ |
11,963,455 |
|
|
$ |
2,977,764 |
|
|
$ |
(38,720 |
) |
|
$ |
14,902,500 |
|
|
$ |
255,374 |
|
|
$ |
2,382,741 |
|
|
$ |
734,127 |
|
|
$ |
2,317,643 |
|
Intangible assets amortization |
|
$ |
2,755,794 |
|
|
$ |
(191 |
) |
|
$ |
134 |
|
|
$ |
2,755,736 |
|
|
$ |
– |
|
|
$ |
3,027 |
|
|
$ |
268 |
|
|
$ |
1,647 |
|
Depreciation |
|
$ |
136,500 |
|
|
$ |
5,385 |
|
|
$ |
118,957 |
|
|
$ |
260,843 |
|
|
$ |
76,448 |
|
|
$ |
4,593 |
|
|
$ |
9,933 |
|
|
$ |
86,510 |
|
Income
(loss) from operations |
|
$ |
6,643,360 |
|
|
$ |
2,519,461 |
|
|
$ |
(4,792,780 |
) |
|
$ |
4,370,040 |
|
|
$ |
(76,789 |
) |
|
$ |
1,448,547 |
|
|
$ |
(9,346,774 |
) |
|
$ |
(6,595,707 |
) |
Segment
assets |
|
$ |
133,063,287 |
|
|
$ |
24,484,790 |
|
|
$ |
25,811,195 |
|
|
$ |
183,359,272 |
|
|
$ |
1,730,156 |
|
|
$ |
20,783,819 |
|
|
$ |
12,498,980 |
|
|
$ |
36,012,965 |
|
The following information represents segment activity for the
six-month periods ended June 30, 2021 and June 30, 2020:
|
|
For the Six
Months Ended |
|
|
For the Six
Months Ended |
|
|
|
30-June-2021 |
|
|
30-June-2020 |
|
|
|
Retail |
|
|
Wholesale |
|
|
Other |
|
|
Total |
|
|
Retail |
|
|
Wholesale |
|
|
Other |
|
|
Total |
|
Revenues |
|
$ |
33,342,016 |
|
|
$ |
16,632,445 |
|
|
$ |
94,494 |
|
|
$ |
50,068,955 |
|
|
$ |
732,459 |
|
|
$ |
6,635,126 |
|
|
$ |
1,259,878 |
|
|
$ |
8,627,463 |
|
COGS |
|
$ |
(17,063,118 |
) |
|
$ |
(10,692,109 |
) |
|
$ |
(158,224 |
) |
|
$ |
(27,913,451 |
) |
|
$ |
(477,085 |
) |
|
$ |
(4,252,385 |
) |
|
$ |
(525,751 |
) |
|
$ |
(5,255,221 |
) |
Gross
profit |
|
$ |
16,278,898 |
|
|
$ |
5,940,336 |
|
|
$ |
(63,730 |
) |
|
$ |
22,155,504 |
|
|
$ |
255,374 |
|
|
$ |
2,382,741 |
|
|
$ |
734,127 |
|
|
$ |
3,372,242 |
|
Intangible assets amortization |
|
$ |
4,350,095 |
|
|
$ |
1,305 |
|
|
$ |
266 |
|
|
$ |
4,351,667 |
|
|
$ |
– |
|
|
$ |
3,027 |
|
|
$ |
268 |
|
|
$ |
3,295 |
|
Depreciation |
|
$ |
220,798 |
|
|
$ |
9,026 |
|
|
$ |
225,656 |
|
|
$ |
455,480 |
|
|
$ |
76,448 |
|
|
$ |
4,593 |
|
|
$ |
9,933 |
|
|
$ |
90,974 |
|
Income
(loss) from operations |
|
$ |
8,042,011 |
|
|
$ |
5,333,475 |
|
|
$ |
(12,654,954 |
) |
|
$ |
720,532 |
|
|
$ |
(76,789 |
) |
|
$ |
1,448,547 |
|
|
$ |
(9,346,774 |
) |
|
$ |
(7,975,017 |
) |
Segment
assets |
|
$ |
133,063,287 |
|
|
$ |
24,484,790 |
|
|
$ |
25,811,195 |
|
|
$ |
183,359,272 |
|
|
$ |
1,730,156 |
|
|
$ |
20,783,819 |
|
|
$ |
12,498,980 |
|
|
$ |
36,012,965 |
|
The following table summarizes the Company’s income tax expense and
effective tax rates for the three and six months ended June 30,
2021 and June 30, 2020:
Components of income tax expense |
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
2021 |
|
|
2020 |
|
Income (Loss) before
Income Taxes |
|
|
4,598,515 |
|
|
|
(6,595,707 |
) |
Income Tax Expense |
|
|
228,474 |
|
|
|
– |
|
Effective Tax Rate |
|
|
4.97% |
|
|
|
0% |
|
|
|
Six Months Ended June 30, |
|
|
|
2021 |
|
|
2020 |
|
Income (Loss) before
Income Taxes |
|
|
1,405,620 |
|
|
|
(7,975,017 |
) |
Income Tax Expense |
|
|
685,088 |
|
|
|
– |
|
Effective Tax Rate |
|
|
48.74% |
|
|
|
0% |
|
The Company has computed its provision for income taxes under the
discrete method which treats the year-to-date period as if it were
the annual period and determines the income tax expense or benefit
on that basis. The discrete method is applied when application of
the estimated annual effective tax rate is impractical because it
is not possible to reliably estimate the annual effective tax rate.
We believe that, at this time, the use of this discrete method is
more appropriate than the annual effective tax rate method as the
estimated annual effective tax rate method is not reliable due to
the high degree of uncertainty in estimating annual pre-tax income
due to the early growth stage of the business.
Due to its cannabis operations, the Company is subject to the
limitations of Internal Revenue Code (“IRC”) Section 280E under
which the Company is only allowed to deduct expenses directly
related to sales of product. This results in permanent differences
between ordinary and necessary business expenses deemed
non-allowable under IRC Section 280E.
The effective tax rate for the three months and six months ended
June 30, 2021 varies from the three months and six months ended
June 30, 2020 primarily due to IRC Section 280E. The Company
acquired plant-touching cannabis operations during 2020 and 2021
and these plant-touching operations are subject to the limitations
of IRC Section 280E. In April 2020, the Company acquired its first
plant-touching business, Mesa Organics. Prior to this acquisition,
the Company was not subject to IRC Section 280E.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The Company's
valuation allowance represents the amount of tax benefits that are
likely to not be realized. Management assesses the need for a
valuation allowance each period and continues to have a full
valuation allowance on its deferred tax assets as of June 30,
2021.
The Federal statute of limitation remains open for the 2017 tax
year to present. The state statute of limitation remains open for
the 2016 tax year to present.
In accordance with FASB ASC 855-10, Subsequent Events, the
Company has analyzed its operations subsequent to June 30, 2021 to
the date these consolidated financial statements were issued, and
has determined that it does not have any material subsequent events
to disclose in these consolidated financial statements, except as
follows:
On July 21, 2021, the Company, completed its previously announced
asset purchase from SCG Services, LLC (the “APA Seller”), pursuant
to the terms of an asset purchase agreement, dated May 27, 2021,
among the Company, SCG Holding, LLC, a wholly-owned subsidiary of
the Company (the “Purchaser”), the APA Seller, and John Sakun and
Vladimir Sakun (together, the “APA Members”).
At the closing, the Purchaser purchased all of the assets of the
APA Seller that are used in or held for use in or are related to
the operation of the APA Seller’s business of growing, distributing
and marketing recreational cannabis products, on the terms and
subject to the conditions set forth in the asset purchase
agreement, and assumed obligations under contracts acquired as part
of the purchase.
The aggregate purchase price for the assets of the APA Seller was
$6.725 million, approximately $1.2 million of which was paid in
cash and the remainder of which was paid in shares of the Company’s
common stock based on the volume weighted average price per share
of the Company’s common stock for the prior 30 consecutive trading
days, as determined in reasonable good faith by the Purchaser on
the date that was three business days prior to the closing, or
1,992,593 shares. The Company held back 10% of each of the cash
portion, approximately $0.1 million, and the stock portion, 221,400
shares, of the purchase price as collateral for potential claims
for indemnification from the APA Seller and the APA Members under
the asset purchase agreement. Any portion of the held-back cash
portion and stock portion not used to satisfy indemnification
claims will be released to the APA Members on the first anniversary
of the closing.
Also, at the closing, the Purchaser acquired certain real estate
from BWR L.L.C.(the “Real Estate Seller”), pursuant to the terms of
an agreement of purchase and sale, dated May 27, 2021, between the
Purchaser and the Real Estate Seller.
At closing, the Purchaser purchased and acquired from the Real
Estate Seller certain real property consisting of approximately 36
acres located in Huerfano County, Colorado, together with, among
other things, all structures and improvements thereon, all fixtures
therein or thereto and all privileges, easements and appurtenances
pertaining thereto, including all of the Real Estate Seller’s
right, title and interest in and to any adjacent or adjoining
streets, alleys, or rights-of-ways and any strips or gores. The
aggregate purchase price for the property of the Real Estate Seller
was $4.499 million, which was paid in cash.
On July 28, 2021, Mesa Organics Ltd, a wholly-owned subsidiary of
the Company, in its capacity as the administrative borrower,
entered into a First Amendment to Loan Agreement with SHWZ Altmore,
LLC, as lender, and GGG Partners LLC, as collateral agent,
effective as of June 25, 2021. The amendment amended two
definitions in the Loan Agreement, dated February 26, 2021, among
Mesa Organics Ltd., Mesa Organics II Ltd., Mesa Organics III Ltd.,
Mesa Organics IV Ltd., SCG Holding, LLC and PBS Holdco LLC, SHWZ
Altmore LLC and GGG Partners LLC, to extend the time period during
which the borrowers are eligible to request the final $5,000,000
advance under the Loan Agreement by 60 days, or until August 25,
2021. On July 28, 2021, SHWZ Altmore LLC made the final advance of
$5,000,000 to the borrowers under the Loan Agreement. As previously
reported, the final advance was conditioned on, among other things,
the Company’s completing its asset purchase from SCG Services, LLC,
which occurred on July 21, 2021.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with our
unaudited consolidated financial statements and notes thereto
included herein and with our audited consolidated financial
statements included in our Annual Report on Form 10-K for the year
ended December 31, 2020, as filed with the SEC. In addition to our
historical unaudited condensed consolidated financial information,
the following discussion contains forward-looking statements that
reflect our plans, estimates, and beliefs. Our actual results could
differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this
Quarterly Report on Form 10-Q and our most recent Annual Report on
Form 10-K, particularly in Part I, Item 1A “Risk Factors.” See
also, “CAUTIONARY NOTE ABOUT FORWARD-LOOKING INFORMATION.”
Overview
We were incorporated in Nevada on March 20, 2014. On May 1, 2014,
we entered into an exclusive Technology License Agreement with
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 their 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).
In 2017, the Company acquired additional cultivation intellectual
property through the acquisition of Success Nutrients™ and Pono
Publications, including the rights to the book titled “Three A
Light” and its associated cultivation techniques, which have been
part of the Company’s products and services offerings since the
acquisition. The Company acquired Two J’s LLC d/b/a The Big Tomato
(“Big T or The Big Tomato”) in 2018, which operates a retail
location in Aurora, Colorado. It has been a leading supplier of
hydroponics and indoor gardening supplies in the metro Denver area
since May 2001. The Company was focused on cannabis dispensary and
cultivation consulting and providing equipment and nutrients to
cannabis cultivators until its first plant touching acquisition in
April of 2020. In 2019, due to the changes in Colorado law
permitting non-Colorado resident and publicly traded investment
into “plant-touching” cannabis companies, the Company made a
strategic decision to move toward direct plant-touching operations.
The Company developed a plan to roll up a number of direct
plant-touching dispensaries, manufacturing facilities, and cannabis
cultivations with a target to be one of the largest seed to sale
cannabis businesses in Colorado. In April 2020 the Company acquired
its first plant-touching business, Mesa Organics, which consists of
four dispensaries and one MIP, d/b/a Purplebee’s.
On April 20, 2020, the Company rebranded and conducts its business
under the trade name, Schwazze. The corporate name of the Company
continues to be Medicine Man Technologies, Inc. Effective April 21,
2020, the Company commenced trading under the OTC ticker symbol
SHWZ.
On December 17, 2020, the Company acquired the assets of (i)
Starbuds Pueblo LLC; and (ii) Starbuds Alameda LLC under the
applicable APAs. On December 18, 2020, the Company acquired the
assets of (i) Starbuds Commerce City LLC; (ii) Lucky Ticket LLC;
(iii) Starbuds Niwot LLC; and (iv) LM MJC LLC under the applicable
APAs.
On February 4, 2021, the Company acquired the assets of Colorado
Health Consultants LLC and Mountain View 44th LLC under the
applicable APAs.
On March 2, 2021, the Company acquired the assets of (i) Starbuds
Aurora LLC, (ii) SB Arapahoe LLC, (iii) Citi-Med LLC, (iv) Starbuds
Louisville LLC and (v) KEW LLC under the applicable APAs.
From December 2020 through March 2021 the Company completed a
private placement of Series A Preferred Stock for aggregate gross
proceeds of $57.7 million dollars. In the private placement, the
Company issued and sold an aggregate of 57,700 shares of Series A
Preferred Stock at a price of $1,000 per share under securities
purchase agreement with Dye Capital and CRW as well as subscription
agreements with unaffiliated investors. Among other terms, each
share of Series A Preferred Stock (i) earns an annual dividend of
8% on the “preference amount,” which initially is equal to the
$1,000 per-share purchase price and subject to increase, by having
such dividends automatically accrete to, and increase, the
outstanding preference amount; (ii) is entitled to a liquidation
preference under certain circumstances, (iii) is convertible into
shares of the Company’s common stock by dividing the preference
amount by $1.20 per share under certain circumstances, and (iv) is
subject to a redemption right or obligation under certain
circumstances.
In addition, on December 16, 2020, the Company issued and sold a
Convertible Promissory Note and Security Agreement in the original
principal amount of $5,000,000 to Dye Capital. On February 26,
2021, Dye Capital converted all outstanding amounts under the note
into 5,060 shares of Series A Preferred Stock.
The Company is focused on growing through internal growth,
acquisition, and new licenses in the Colorado cannabis market. The
Company is focused on building the premier vertically integrated
cannabis company in Colorado. The company's leadership team has
deep expertise in mainstream consumer packaged goods, retail, and
product development at Fortune 500 companies as well as in the
cannabis sector. The Company has a high-performance culture and a
focus on analytical decision making, supported by data.
Customer-centric thinking inspires the Company’s strategy and
provides the foundation for the Company’s operational
playbooks.
The Company’s operations are organized into three different
segments as follows: (i) retail, consisting of retail locations for
sale of cannabis products, (ii) wholesale, consisting of
manufacturing and sale of wholesale cannabis products, nutrients
for cannabis, and hydroponics and indoor gardening supplies, and
(iii) other, consisting of all other income and expenses, including
those related to licensing and consulting services, facility design
services, facility management services, and corporate
operations.
Results of
Operations
Comparison of Results of Operations for the three months ended
June 30, 2021 and 2020
Revenues
Revenue for the three months ended June 30, 2021 totaled
$30,728,841 and consisted of (i) retail revenue of $21,525,816,
(ii) wholesale revenue of $9,186,180, and (iii) other operating
revenue of $16,844, compared to $5,424,329 for the three months
ended June 30, 2020, consisting of(i) retail revenue of $732,459,
(ii) wholesale revenue of $4,106,195, and (iii) other operating
revenue of $585,675, representing an increase of $25,304,512, or
466.5%. This increase was due to increased sale of our products as
well as growth through acquisition.
Cost of Goods and Services
Cost of goods and services for the three months ended June 30, 2021
totaled $15,826,341, compared to cost of goods and services of
$3,106,686 during the three months ended June 30, 2020 representing
an increase of $12,719,655 or 409.4%. This increase was due to
increased sale of our products as well as growth through
acquisition.
Operating Expenses
Operating expenses for the three months ended June 30, 2021 totaled
$10,461,584, compared to operating expenses of $8,667,604 during
the three months ended June 30, 2020 representing an increase of
$1,793,980 or 20.7%. This increase was due to increased selling,
general and administrative expenses, and salaries, benefits and
related employment costs, offset by decreases in professional
service fees, and non-cash, stock-based compensation.
Other Income (Expense), Net
Net other income for the three months ended June 30, 2021 totaled
$157,598, compared to net other expense of $245,746 during the
three months ended June 30, 2020. The increase in other income was
primarily due to an unrealized gain recognized on the change in
fair value of certain derivative liabilities and an unrealized gain
on investments, offset by interest expense.
Net Income (Loss)
As a result, we generated net income of $4,370,041 during the three
months ended June 30, 2021 or approximately $0.10 per share,
compared to net loss of $6,595,707 or approximately $0.16 per share
during the three months ended June 30, 2020.
Comparison of Results of Operations for the six months ended
June 30, 2021 and 2020
Revenues
Revenue for the six months ended June 30, 2021 totaled $50,068,955
and consisted of (i) retail revenue of $33,342,016, (ii) wholesale
revenue of $16,632,445, and (iii) other operating revenue of
$94,494, compared to $8,627,463 for the six months ended June 30,
2020, consisting of (i) retail of $732,459, (ii) wholesale of
$6,635,126, and (iii) other operating revenues of $1,259,878,
representing an increase of $41,441,493, or 480.3%. This increase
was due to increased sale of our products as well as growth through
acquisition.
Cost of Goods and Services
Cost of goods and services for the six months ended June 30, 2021
totaled $27,913,451, compared to cost of goods and services of
$5,255,221 during the six months ended June 30, 2020 representing
an increase of $22,658,231 or 431.2%. This increase was due to
increased sale of our products as well as growth through
acquisition.
Operating Expenses
Operating expenses for the six months ended June 30, 2021 totaled
$19,199,494, compared to operating expenses of $13,833,278 during
the six months ended June 30, 2020 representing an increase of
$5,366,216 or 38.8%. This increase was due to increased selling,
general and administrative expenses, professional service fees, and
salaries, benefits and related employment costs, offset by a
decrease in stock-based compensation.
Other
Income (Expense), Net
Net other
expense for the six months ended June 30, 2021 totaled $1,550,390,
compared to net other income of $2,486,019 during the six months
ended June 30, 2020. The decrease in other expenses was primarily
due to an unrealized gain recognized on the change in fair value of
certain derivative liabilities, unrealized gain on investments, and
a gain on sale of assets, offset by interest expense. In addition,
there was a gain on forfeiture of contingent consideration during
the six months ended June 30, 2020 that was not present during the
six months ended June 30, 2021.
Net Income (Loss)
As a result, we generated net income of $720,532 during the six
months ended June 30, 2021 or approximately $0.02 per share,
compared to net loss of $6,595,707 or approximately $0.16 per share
during the six months ended June 30, 2020.
Liquidity and Capital
Resources
As
of June 30, 2021, we had $21,130,769 in cash and cash
equivalents. Net cash provided by operating activities was
$1,395,416 during the six months ended June 30, 2021, compared to
cash used in operating activities of $4,054,088 for the six months
ended June 30, 2020, representing an increase in cash provided of
$5,449,504. Cash flows used for investing activities was
$67,132,921 during the six months ended June 30, 2021, compared to
cash used of $3,253,675 for the six months ended June 30, 2020,
representing an increase of $63,879,246. Cash flows provided by
financing activities was $85,631,039 during the six months ended
June 30, 2021, compared to $374,500 for the six months ended June
30, 2020, representing an increase of $85,256,539. This increase
was due to securities issued related to the acquisition of the Star
Buds assets.
The Company’s debt obligations are discussed in Note 10, Debt, in
the Notes to Unaudited Condensed Interim Financial Statements
contained in this Quarterly Report on Form 10-Q and such discussion
is incorporated herein by this reference.
We will likely need to raise additional capital to fund our growth
acquisition strategy. We may explore capital raising transactions
in the form of debt, equity or both. At this time, we are unable to
state how much additional capital we may need. No assurance can be
given that any future financing will be available or, if available,
that it will be on terms that are satisfactory to the Company. Even
if the Company can obtain additional financing, it may contain
undue restrictions on our operations, in the case of debt financing
or cause substantial dilution for our stockholders, in case of
equity financing. Failure to obtain this additional financing may
have a material negative impact on our ability growth the company
at the pace we anticipate.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of June 30, 2021 and
December 31, 2020.
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,
2020 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 of the end of the period covered by this Quarterly Report on
Form 10-Q, we conducted an evaluation, under the supervision and
with the participation of our Chief Executive Officer and Chief
Financial Officer of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act).
Based upon this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the
Exchange Act is: (i) recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms, and
(ii) accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, or person
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial
reporting during the period covered by this Quarterly Report on
Form 10-Q that have materially affected, or are reasonably likely
to affect, our internal control over financial reporting.
PART II — OTHER
INFORMATION
Item 1. Legal
Proceedings.
On June 7, 2019, the Company filed a complaint against ACC
Industries Inc. (“ACC”) and Building Management Company B, L.L.C.,
in state district court located in Clark County, Nevada, alleging,
amongst other causes of action, breach of contract, conversion, and
unjust enrichment and seeking general, special and punitive damages
in the amount of $3,876,850. On July 17, 2019, the parties
stipulated to stay the case in favor of arbitration. On February
25, 2020 ACC filed a counterclaim alleging breach of contract,
which the Company believes is without merit. The Company discovered
new facts that lead it to believe that a related entity not
previously named as a party to the arbitration should be brought in
as a party to the arbitration. Based upon the new facts, the
Company filed a motion to amend the complaint to add new claims and
the related entity as a party. On September 1, 2020, the court
ruled in favor of the Company and permitted the Company to amend
the complaint to add the related entity. On September 1, 2020, the
Company filed an amended complaint naming the related entity a
party and added intentional misrepresentation, fraudulent
inducement, civil conspiracy, aiding and abetting, successor
liability and fraudulent concealment claims. The Company began
arbitration proceedings on November 2, 2020. The Company completed
arbitration in February 2021. On May 14, 2021, the Arbitrator
entered an award in favor of the Company in the amount of
$1,935,273 with an offset of $150,000 for a total award of
$1,785,273. The arbitration will now enter into a second phase to
adjudicate the remaining alter ego claims once mutually scheduled
by the parties.
On July 6, 2018, the Company filed a complaint in the Eight
Judicial Court, Clark County, Nevada against Vegas Valley Growers
(“VVG”). In the complaint, the Company alleges breach by VVG of the
Technologies License Agreement dated April 27, 2017 between the
parties and seeks general, special and punitive damages in the
amount of $3,876,850. On August 28, 2018, VVG filed an Answer and
Counterclaim against the Company. On August 2, 2019, a jury found
in favor of the Company and awarded the Company damages totaling
$2,773,321 plus pre and post judgment interest as well as
attorneys’ fees. In March 2020, VVG filed its opening appeal brief
with the Nevada Supreme Court. The Company’s response brief was due
on May 15, 2020. After VVG filed its opening brief in March 2020,
the Company filed a Motion to Strike portions of the brief and
record. On August 27, 2020, the court ordered VVG to supplement its
brief and the record. On October 27, 2020, the Company, in a joint
request with VVG, filed a motion to extend its time to file its
answering brief. The Company filed its answering brief in January
2021. VVG’s reply brief was filed in March 2021. On July 23, 2021,
the Nevada Supreme Court affirmed the trial court’s damage award,
but remanded the case to the trial court to properly calculate
post-judgement interest.
On March 6, 2020, the Company’s former Chief Operating Officer, Joe
Puglise, issued an arbitration demand against the Company claiming
breach of contract and seeking equity compensation and cash
damages. The Company counterclaimed with breach of contract and
breach of fiduciary duty claims for unspecified damages. The
ultimate resolution of the matter could result in a Company loss of
up to $3,500,000 in stock-based compensation. The parties commenced
arbitration on January 25, 2021 and concluded it in March 2021.
On May 12,
2021, the arbitration panel entered an award in favor of Mr.
Puglise for $189,920 for a performance bonus plus interest, and
2,000,000 vested options to purchase shares of common stock. Mr.
Puglise was also awarded attorneys’ fees and costs in the amount of
$391,768.28.
Item 1A. Risk
Factors
There have been no material changes in the risk factors applicable
to us from those identified in the Annual Report on Form 10-K for
the period ended December 31, 2020 filed with the Securities and
Exchange Commission on March 31, 2021.
Item 2. Unregistered Sales of
Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior
Securities
None.
Item 4. Mine
Safety Disclosures
Not applicable.
Item 5. Other
Information
None.
Item 6. Exhibits
|
|
|
2.1+ |
|
Asset Purchase Agreement, dated May 27, 2021, by and among SCG
Holding, LLC, Medicine Man Technologies, Inc., SCG Services, LLC,
and John Sakun and Vladimir Sakun (Incorporated by reference to
Exhibit 2.1 to Medicine Man Technologies, Inc.’s Current Report on
Form 8-K filed June 2, 2021 (Commission File No.
000-55450)) |
2.2+ |
|
Agreement of Purchase and Sale, dated May 27, 2021, by and between
SCG Holding, LLC and BWR L.L.C. (Incorporated by reference to
Exhibit 2.2 to Medicine Man Technologies, Inc.’s Current Report on
Form 8-K filed June 2, 2021 (Commission File No.
000-55450)) |
2.3+ |
|
Asset Purchase Agreement, dated June 25, 2021, by and among Double
Brow, LLC, Medicine Man Technologies, Inc., BG3 Investments, LLC,
Black Box Licensing, LLC, and Brian Searchinger (Incorporated
by reference to Exhibit 2.1 to Medicine Man Technologies, Inc.’s
Current Report on Form 8-K filed July 1, 2021 (Commission File No.
000-55450)) |
10.1 |
|
First
Amendment to Justin Dye Employment Agreement, dated June 14, 2021
(Incorporated by reference to Exhibit 10.1 to Medicine Man
Technologies, Inc.’s Current Report on Form 8-K filed June 21, 2021
(Commission File No. 000-55450)) |
10.2 |
|
Second Amendment to Nancy Huber Employment Agreement, dated June
14, 2021 (Incorporated by reference to Exhibit 10.2 to Medicine
Man Technologies, Inc.’s Current Report on Form 8-K filed June 21,
2021 (Commission File No. 000-55450)) |
10.3 |
|
First Amendment to Nirup Krishnamurthy Employment Agreement, dated
June 14, 2021 (Incorporated by reference to Exhibit 10.3 to
Medicine Man Technologies, Inc.’s Current Report on Form 8-K filed
June 21, 2021 (Commission File No. 000-55450)) |
10.4 |
|
First Amendment to Dan Pabon Employment Agreement, dated June 14,
2021 (Incorporated by reference to Exhibit 10.4 to Medicine Man
Technologies, Inc.’s Current Report on Form 8-K filed June 21, 2021
(Commission File No. 000-55450)) |
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 |
|
Inline
XBRL Instance Document (the instance document does not appear in
the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document) |
101.SCH |
|
Inline
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline
XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL
document and included in Exhibit 101) |
______________________
+ Certain exhibits and schedules to the agreement have been omitted
pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby
undertakes to supplementally furnish copies of any omitted
schedules to the Securities and Exchange Commission upon
request.
* Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Quarterly Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Dated: August
16, 2021 |
MEDICINE MAN
TECHNOLOGIES, INC. |
|
|
|
By: /s/ Justin
Dye |
|
Justin Dye, Chief Executive Officer
(Authorized Officer)
|
|
|
|
|
|
By:
/s/ Nancy
Huber |
|
Nancy
Huber, Chief Financial Officer |
|
(Principal Financial and
Accounting Officer) |
Medicine Man Technologies (QX) (USOTC:SHWZ)
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