Press Release

SCHWAZZE ANNOUNCES FOURTH QUARTER 2022 & YEAR-END 2022 RESULTS

March 29, 2023

OTCQX: SHWZ
NEO: SHWZ

Record 2022 Revenue Increases 47% to $159.4 Million Compared to $108.4 Million in 2021

Company Continues to Grow Positive Cash Flow from Operations in Fourth Quarter and Year-End 2022

Expansion into New Mexico Market as well as Colorado Acquisitions Add 23 Retail Dispensaries, One Manufacturing and Four Operating Cultivation Facilities

Conference Call & Webcast Scheduled for Today – 5:00 pm ET

DENVER, March 29, 2023 /CNW/ - Medicine Man Technologies Inc. operating as Schwazze, (OTCQX: SHWZ) (NEO: SHWZ) ("Schwazze" or the "Company"), today announced financial results for the fourth quarter ("Q4 2022") and for the year ended December 31, 2022 ("2022"). 

 Full Year 2022 Financial Summary:

  • Revenues of $159.4 million, an increase of 47% compared to $108.4 million in 2021
  • Gross Profit of $85.0 million, an increase of 72% compared to $49.4 million in 2021
  • Net Loss of ($18.5) million compared to Net Income of $14.5 million for 2021, driven by an impairment charge of $8.0 million, interest expense of $30.1 million, and loss on disposition of assets of $4.7 million
  • Adjusted EBITDA of $52.0 million was 33% of revenue, compared to $32.2 million and 30% of revenue in 2021
  • Cash Flow from operations was $11.4 million compared to $8.4 million in 2021
  • Retail Sales of $141.3 million, an increase of 92% compared to $73.8 million in 2021
  • Two-year stacked identical retail sales ("Stacked IDs")(1) for Colorado and New Mexico were 7.9%

 Q4 2022 Financial Summary:

  • Revenues of $40.1 million, an increase of 51% compared to $26.5 million in Q4 2021
  • Gross Profit of $23.0 million, an increase of 89% compared to Q4 2021
  • Net Loss of ($27.3) compared to Net Income of $12.8 million for Q4 2021
  • Adjusted EBITDA of $13.3 million was 33% of revenue, compared to $7.5 million and 28% of revenue for Q4 2021
  • Cash Flow from operations for the quarter was $5.4 compared to $3.6 million for Q4 2021
  • Retail sales of $36.9 million, an increase of 87% over $19.7 million for Q4 2021
  • Stacked IDs(1) for Colorado and New Mexico were 5.3%

Accomplishments for 2022 and Q1 2023

In 2022, the Company completed seven acquisitions and opened six new stores not related to acquisitions, which increased the Company's retail presence from 18 dispensaries as of December 31, 2021 to 41 dispensaries as of December 31, 2022.  The Company now has five operating cultivation facilities and two manufacturing assets in Colorado and New Mexico. In Q1 2023, the Company subsequently announced the opening of two additional New Mexico retail locations and entry into a definitive agreement to acquire two retail dispensaries in Colorado from Smokey's Cannabis, which will bring the total dispensary count to 45.

Recent Developments

  • Rolled out enhanced custom eCommerce platform in New Mexico for R.Greenleaf
  • Opened two new R.Greenleaf locations in New Mexico – Paseo and Carlsbad
  • Signed definitive agreement to acquire two retail dispensaries in Garden City and Fort Collins, Colorado, two attractive markets currently not served

2022 Business Highlights and Significant Achievements

  • Entered the New Mexico market with the acquisition of ten retail locations, four indoor cultivation facilities and one manufacturing facility, establishing Schwazze as a regionally focused multi-state operator (MSO)
  • Opened six new stores in New Mexico under R.Greenleaf banner located in or near the University of New Mexico, Los Lunas, Clovis, Ruidoso, Sunland Park and Alamogordo
  • Acquired two retail dispensaries in Boulder, Colorado
  • Acquired an indoor cultivation facility in Denver, Colorado
  • Acquired two Emerald Field retail dispensaries in Glendale and Manitou Springs, Colorado
  • Acquired one retail dispensary and one indoor cultivation facility in Denver, Colorado
  • Acquired two retail dispensaries in Aurora and Denver, Colorado
  • Negotiated exclusive licensing, manufacturing and distribution agreement with Lowell Farms and launched premium pre-rolls in both Colorado and New Mexico
    • Launched new and enhanced custom eCommerce platform for Star Buds

"In 2022, Schwazze continued to execute its strategy to "go deep" in our operating states and build customer loyalty and share," stated Justin Dye, CEO of Schwazze. "To date, we have opened, acquired, or announced pending acquisitions of 45 dispensaries with five operating cultivation and two manufacturing facilities across Colorado and New Mexico. We believe our retail brands are really connecting with customers. Schwazze is well-positioned to play offense in this challenging environment. As market forces become more favorable, we believe Schwazze will emerge with a much stronger position which will reward shareholders. For now, we will keep executing our strategy and playbook."

"While we had seasonally lower quarter over quarter revenues, we recorded a solid fourth quarter and outpaced retail sales in the state of Colorado by 11%, despite a challenging environment and continued price compression," said Nirup Krishnamurthy, President of Schwazze. "Along with our New Mexico operations, revenue for the year increased by 47%, with retail sales growing 92% over the prior year with solid execution. In addition, we are focused on building a high-quality house of product brands that deliver good value to our customers. These results could not be achieved without the hard work and dedication of the entire Schwazze team."

2022 Results of Operations

Consolidated revenues for 2022, totaled $159.4 million, increasing $51.0 million or 47% over 2021 revenues of $108.4 million. This increase was influenced by several factors, including consummation of identified acquisitions, new store openings, entrance into the New Mexico market, and adult-use legalization taking effect in New Mexico in 2022.  Based on publicly available sales data, management estimates that overall cannabis sales in the New Mexico market increased approximately 75% as compared to 2021 sales because of increased adult-use recreational cannabis sales following its legalization in April 2022.

Cost of goods and services for 2022, totaled $74.3 million compared to cost of goods and services of $59.1 million in 2021, representing an increase of $15.2 million, or approximately 26%. This increase is primarily due to the New Mexico acquisition and subsequent opening of six new stores in 2022.

Gross profit increased to $85.0 million for the year compared to $49.4 million in 2021. Gross profit margin rose as a percentage of revenue from 46% to 53%, with improvements in our cost structure, buying power and retail playbook.

Operating expenses for 2022, totaled $72.2 million, compared to operating expenses of $38.9 million during 2021, representing an increase of $33.2 million or approximately 85%. This increase was largely due to increased selling, general and administrative expenses related to acquisition growth, the New Mexico market entry, and includes certain one-time impairment charges for 2022.

Other expense for 2022 was ($16.4) million, compared to other income of $8.5 million in 2021. This is largely driven by non-cash debt related interest obligations and a one-time disposition of assets.

As a result of the factors discussed above, Schwazze generated a net loss of ($18.5) million for 2022 compared to net income of $14.5 million for 2021.

Adjusted EBITDA for the year was $52.0 million representing 33% of revenue, compared to $32.2 million and 30% in 2021. This is derived from Operating Income and adjusting one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below for details and a reconciliation to net income (loss). 

For 2022, the Company generated positive operating cash flow of $11.4 million compared to $8.4 million for 2021 and had $38.9 million in cash and cash equivalents as of December 31, 2022

Forrest Hoffmaster, CFO for Schwazze commented, "Despite the challenging economic backdrop, we've delivered an excellent year resulting in the continued generation of operating cash flows from our acquired businesses. This allows us to not only meet our borrowing obligations but reinvest in infrastructure improvements and in our strategy to go deep in both Colorado and New Mexico."

(1)

Stacked IDs are presented as a percentage that indicates the relative increase or decrease to revenue for certain retail stores from the previous two years. Stacked IDs are calculated by comparing revenue from sales for all dispensaries owned by the Company and open for operations for more than one year against the revenue from the sales for the same dispensaries for the previous two years. When the Company reports Stacked IDs for stores that it has not owned for more than one year, the comparison is made against validated sales data from prior owners of such stores provided to the Company upon acquisition and/or publicly available sales and revenue data. The Company did not own all the assets and entities in part of 2022, 2021 and 2020 and is using unaudited numbers for this comparison.



Adjusted EBITDA represents income (loss) from operations, as reported, before tax, adjusted to exclude non-recurring items, other non-cash items, including stock-based compensation expense, depreciation, and amortization, and further adjusted to remove acquisition and capital raise related costs, and other one-time expenses, such as severance, retention, and employee relocation. The Company uses adjusted EBITDA as it believes it better explains the results of its core business.


Webcast – March 29, 20235:00 pm ET
Investors and stakeholders may participate in the conference call by dialing 416-764-8650 or by dialing North American toll free 1-888-664-6383 or listen to the webcast from the Company's website at https://ir.schwazze.com The webcast will be available on the Company's website and on replay until April 5, 2023, and may be accessed by dialing 1-416-764-8677 or North American toll free 1-888-390-0541 / 592815 #.

Following their prepared remarks, Company management will answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink: https://app.webinar.net/x0q6rpnP84n  This weblink has been posted to the Company's website and will be archived on the website. All Company SEC filings can also be accessed on the Company website at https://ir.schwazze.com/sec-filings.

About Schwazze
Schwazze (OTCQX: SHWZ;  NEO: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to take its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company's leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious best practices.

Medicine Man Technologies, Inc. was Schwazze's former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc. Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth.

Forward-Looking Statements
This press release contains "forward-looking statements." Such statements may be preceded by the words "may," "will," "could," "would," "should," "expect," "intends," "plans," "strategy," "prospects," "anticipate," "believe," "approximately," "estimate," "predict," "project," "potential," "continue," "ongoing," or the negative of these terms or other words of similar meaning in connection with a discussion of future events or future operating or financial performance, although the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) regulatory limitations on our products and services and the uncertainty in the application of federal, state, and local laws to our business, and any changes in such laws; (ii) our ability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (iii) our ability to identify, consummate, and integrate anticipated acquisitions; (iv) general industry and economic conditions; (v) our ability to access adequate capital upon terms and conditions that are acceptable to us; (vi) our ability to pay interest and principal on outstanding debt when due; (vii) volatility in credit and market conditions; (viii) the loss of one or more key executives or other key employees; and (ix) other risks and uncertainties related to the cannabis market and our business strategy. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.

MEDICINE MAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
For the Years Ended December 31, 2022 and 2021
Expressed in U.S. Dollars



December 31


December 31



2022


2021



(Audited)


(Audited)

ASSETS







Current assets







Cash and cash equivalents


$

38,949,253


$

106,400,216

Accounts receivable, net of allowance for doubtful accounts



4,471,978



3,866,828

Inventory



22,554,182



11,121,997

Note receivable - current, net



11,944



Note receivable - related party





Marketable securities, net of unrealized loss of $39,270 and gain of $216,771, respectively



454,283



493,553

Prepaid expenses and other current assets



5,293,393



2,523,214

Total current assets



71,735,033



124,405,808

Non-current assets







Fixed assets, net accumulated depreciation of $4,899,977 and $1,988,973, respectively



27,089,026



10,253,226

Investments



2,000,000



Goodwill



94,643,581



43,316,267

Intangible assets, net accumulated amortization of $16,290,862 and $7,652,750, respectively



107,726,718



97,582,330

Note receivable – noncurrent, net





143,333

Accounts receivable – litigation





303,086

Other noncurrent assets



1,527,256



514,962

Operating lease right of use assets



18,199,399



8,511,780

Total non-current assets



251,185,980



160,624,984

Total assets


$

322,921,013


$

285,030,792








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable


$

7,886,893


$

2,548,885

Accounts payable - related party



22,380



36,820

Accrued expenses



10,314,958



5,592,222

Derivative liabilities



16,508,253



34,923,013

Notes payable - related party





134,498

Lease liabilities - current



3,139,289



Current portion of long term debt



2,250,000



Income taxes payable



7,297,815



2,027,741

Total current liabilities



47,419,588



45,263,179

Long term debt, net of debt discount and issuance costs



125,521,520



97,482,468

Lease liabilities



17,314,464



8,715,480

Deferred income taxes, net



502,070



Total long-term liabilities



143,338,054



106,197,948

Total liabilities



190,757,642



151,461,127








Commitments and contingencies (Note 17)












Stockholders' equity







Preferred stock, $0.001 par value. 10,000,000 shares authorized; 86,994 shares issued as of December 31, 2022 and December 31, 2021, 86,050 outstanding at December 31, 2022 and 82,594 outstanding at December 31, 2021.



87



87

Common stock, $0.001 par value. 250,000,000 shares authorized; 56,069,212 shares issued and 54,741,506 shares outstanding at December 31, 2022 and 45,455,490 shares issued and 45,484,314 shares outstanding as of December 31, 2021.



56,353



45,485

Additional paid-in capital



180,381,640



162,815,097

Accumulated deficit



(46,241,582)



(27,773,968)

Common stock held in treasury, at cost, 920,149 shares held as of December 31, 2022 and 517,044 shares held as of December 31, 2021



(2,033,127)



(1,517,036)

Total stockholders' equity



132,163,371



133,569,665

Total liabilities and stockholders' equity


$

322,921,013


$

285,030,792








See accompanying notes to the consolidated financial statements

 

MEDICINE MAN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) AND INCOME
For the Years Ended December 31, 2022 and 2021
Expressed in U.S. Dollars



Qtr Ended


Qtr Ended


Year Ended


Year Ended



December 31,


December 31,


December 31,


December 31,



2022


2021


2022


2021



(Un-audited)


(Un-audited)


(Audited)


(Audited)

Operating revenues









Retail

$

36,868,429

$

19,677,130

$

141,254,893

$

73,761,010

Wholesale


3,158,670


6,779,126


17,819,938


34,434,091

Other


120,188


59,722


304,388


225,138

Total revenue


40,147,287


26,515,978


159,379,219


108,420,239

Total cost of goods and services


17,176,229


14,373,780


74,349,421


59,066,545

Gross profit


22,971,058


12,142,198


85,029,798


49,353,694

Operating expenses









Selling, general and administrative expenses


9,152,587


3,035,837


29,398,324


16,616,306

Professional services


993,215


880,238


6,722,554


5,346,934

Loss on impairment


8,011,405


-


8,011,405


-

Salaries


6,435,095


3,437,676


25,369,968


11,943,409

Stock based compensation


883,890


1,172,291


2,672,713


5,037,879

Total operating expenses


25,476,192


8,526,042


72,174,964


38,944,528

Income from operations


(2,505,134)


3,616,156


12,854,834


10,409,166

Other income (expense)









Interest expense, net


(6,827,557)


(2,487,533)


(30,139,645)


(7,014,279)

Gain on forfeiture of contingent liabilities


-


-


-


-

Unrealized gain on derivative liabilities


(9,690,200)


14,093,391


18,414,760


15,061,142

Other income


3,736


-


24,136


-

Loss on business disposition


(4,684,366)


-


(4,684,366)


-

Gain on sale of assets


-


-


-


242,494

Unrealized (loss) gain on investments


3,083


6,086


(39,270)


216,771

Total other (expense) income


(21,195,304)


11,611,944


(16,424,385)


8,506,128

Pre-tax net (loss) income

$

(23,700,438)

$

15,228,100

$

(3,569,551)

$

18,915,294

Provision for income taxes


3,638,695


2,398,259


14,898,064


4,396,164

Net (loss) income

$

(27,339,133)

$

12,829,841

$

(18,467,615)

$

14,519,130

Less: Accumulated preferred stock dividends for the period


(2,508,677)


(7,346,153)


(7,802,809)


(7,346,153)

Net income attributable to common stockholders

$

(29,847,810)

$

5,483,688

$

(26,270,424)

$

7,172,977

Earnings (loss) per share attributable to common shareholders









Basic (loss) earnings per share

$

(0.53)

$

0.12

$

(0.49)

$

0.17

Diluted (loss) earnings per share

$

(0.53)

$

(0.07)

$

(0.49)

$

(0.06)

Weighted average number of shares outstanding - basic


56,377,351


44,145,709


54,154,047


43,339,092

Weighted average number of shares outstanding - diluted


56,377,351


102,175,575


54,154,047


101,368,958

Comprehensive (loss) income

$

(29,847,810)

$

5,483,688

$

(26,270,424)

$

7,172,977


                                                                                  See accompanying notes to the consolidated financial statements

 

MEDICINE MAN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters & Years Ended December 31, 2022 and 2021
Expressed in U.S. Dollars



Qtr Ended


Qtr Ended


Year Ended


Year Ended



December 31,


December 31,


December 31,


December 31,



2022


2021


2022


2021



(Un-audited)


(Un-audited)


(Audited)


(Audited)

Cash flows from operating activities:









Net income (loss) for the period

$

(27,339,133)

$

12,829,841

$

(18,467,615)

$

14,519,130

Adjustments to reconcile net income to cash for operating activities









Depreciation and amortization


2,682,686


797,037


11,012,453


8,576,865

Non-cash interest expense


981,369


-


4,118,391


-

Impairment of goodwill and intangibles


8,011,080


-


8,011,080


-

Non-cash lease expense


481,779


-


975,561


-

Deferred taxes


(2,712,010)


-


(2,712,010)


-

Loss on disposition of business units


4,684,369


-


4,684,369


-

Change in derivative liabilities


9,690,200


(14,093,391)


(18,414,760)


(15,061,142)

Amortization of debt issuance costs


421,513


-


1,686,049


-

Amortization of debt discount


1,979,193


-


7,484,613


-

Loss (gain) on investment, net


(3,083)


(6,086)


39,270


(216,771)

Loss on sale of asset


-


49,985


-


(242,494)

Stock based compensation


(662,307)


1,172,291


812,073


5,037,879

Changes in operating assets and liabilities (net of acquired amounts):









Accounts receivable


1,567,747


2,424,575


467,692


244,929

Inventory


(2,039,758)


(1,674,942)


789,399


(4,703,186)

Prepaid expenses and other current assets


(14,880)


55,821


(2,631,612)


(1,909,014)

Other assets


(69,610)


(60,900)


(1,009,794)


(457,083)

Operating leases right of use assets and liabilities


999,798


23,010


1,075,093


137,139

Accounts payable and other liabilities


3,076,355


1,062,106


8,204,141


493,719

Deferred revenue


-


-


-


(50,000)

Income taxes payable


3,709,444


998,259


5,270,074


2,027,741

Net cash (used) provided by operating activities

$

5,444,752

$

3,577,606

$

11,394,467

$

8,397,712

Cash flows from investing activities:









Collection of notes receivable


-


-


-


181,911

Cash consideration for acquisition of business, net of cash acquired


(2,785,997)


(3,750,929)


(62,371,226)


(75,678,000)

Purchase of fixed assets


(2,300,191)


(1,768,427)


(14,811,580)


(5,638,085)

Purchase of intangible assets


-


-


-


(29,580)

Investment in private entity


-


-


(2,000,000)


-

Net cash used in investing activities

$

(5,086,188)

$

(5,519,356)

$

(79,182,806)

$

(81,163,754)

Cash flows from financing activities:









Proceeds from issuance of debt


-


87,172,805


-


132,517,383

Repayment of notes payable


(134,498)


-


(134,498)


(4,865,502)

Proceeds from issuance of common stock, net of issuance costs


-


345


471,874


50,283,142

Net cash provided by financing activities

$

(134,498)

$

87,173,150

$

337,376

$

177,935,023

Net (decrease) increase in cash and cash equivalents


224,066


85,231,400


(67,450,963)


105,168,981

Cash and cash equivalents at beginning of period


38,725,187


21,168,816


106,400,216


1,231,235

Cash and cash equivalents at end of period

$

38,949,253

$

106,400,216

$

38,949,253

$

106,400,216

Supplemental disclosure of cash flow information:









Cash paid for interest

$

2,184,305

$

1,896,250

$

15,423,990

$

5,759,220

Cash paid for income taxes

$

2,500,000

$

2,100,000

$

12,340,000

$

2,100,000


                                                               See accompanying notes to the consolidated financial statements

 

MEDICINE MAN TECHNOLOGIES, INC.
Adjusted EBITDA Reconciliation
Non-GAAP measurement
 (UNAUDITED)



Qtr Ended


Qtr Ended


Year Ended


Year Ended



December 31,


December 31,


December 31,


December 31,



2022


2021


2022


2021



(Un-audited)


(Un-audited)


(Un-audited)


(Un-audited)

Net income (loss)

$

(27,339,133)

$

12,829,841

$

(18,467,615)

$

14,519,130

Interest expense, net


6,827,558


2,487,533


30,139,645


7,014,279

Provision for income taxes


3,638,695


2,398,259


14,898,064


4,396,164

Other (income) expense, net of interest expense


14,367,746


(14,099,477)


(13,715,260)


(15,520,407)

Depreciation and amortization


3,701,128


797,037


12,524,677


8,576,865

Earnings before interest, taxes, depreciation and amortization (EBITDA) (non-GAAP measure)

$

1,195,994

$

4,413,193

$

25,379,511

$

18,986,031

Non-cash stock compensation


883,890


1,172,291


2,672,713


5,037,879

Deal related expenses


1,914,820


712,049


6,822,111


2,779,151

Capital raise related expenses


(257,271)


256,321


533,958


1,512,565

Inventory adjustment to fair market value for purchase accounting


-


-


6,541,651


2,164,686

One-time cultivation asset impairment


-


-


329,210


-

One-time goodwill impairment


8,011,405


-


8,011,405


-

Severance


263,374


5,053


334,910


166,557

Retention program expenses


-


1,188


-


90,250

Employee relocation expenses


(3,750)


2,428


15,360


40,819

Other non-recurring items


1,276,064


939,717


1,369,386


1,388,150

Adjusted EBITDA (non-GAAP measure)

$

13,284,526

$

7,502,240

$

52,010,215

$

32,166,088

Revenue

$

40,147,287

$

26,515,978

$

159,379,219

$

108,420,239

Adjusted EBITDA as a Percentage of Revenue


33.1 %


28.3 %


32.6 %


29.7 %


                                                                                        See accompanying notes to the consolidated financial statements

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/schwazze-announces-fourth-quarter-2022--year-end-2022-results-301785135.html

SOURCE Medicine Man Technologies, Inc.

81A43FCC-047F-4245-8138-F851C77535B7
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