Exhibit 99.3

 

Medicine Man Technologies, Inc.

Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2021 and the unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2021 and for the year ended December 31, 2020 combine the financial statements of Medicine Man Technologies, Inc. (“Medicine Man”), MCG, LLC (“MCG”) giving effect to the transaction described in the Agreement, as if they had occurred on January 1, 2020 in respect of the unaudited pro forma condensed combined statements of operations and on September 30, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with:

 

  · Medicine Man’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2020, as contained in the Form 10-K filed on March 31, 2021 with the United States Securities and Exchange Commission (the “SEC”).

 

  · Medicine Man’s unaudited condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2021, as contained in its Quarterly Report on Form 10-Q filed on November 15, 2021 with the SEC.

 

  · MCG’s audited financial statements as of and for the year ended December 31, 2020, contained elsewhere herein.

 

  · MCG’s unaudited condensed financial statements as of September 30, 2021 and for the nine months ended September 30, 2021, contained elsewhere herein.

 

  · the other information contained in or incorporated by reference into this filing.

 

The final purchase consideration and the allocation of the purchase consideration may materially differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following the completion of the acquisition.

 

The unaudited pro forma adjustments give effect to events that are directly attributable to the transaction and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the acquisition. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of Medicine Man and MCG and the related notes included elsewhere in this Form 8-K. The unaudited pro forma condensed combined financial information is based on Medicine Man’s accounting policies. Further review may identify additional differences between the accounting policies of Medicine Man and MCG. The unaudited pro forma adjustments and the pro forma condensed combined financial information do not reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the transaction taken place on the dates noted, or of Medicine Man’s future financial position or operating results.

 

 

 

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Medicine Man Technologies, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended September 30. 2021

 

           Transaction     
           Accounting   Pro Forma 
   Medicine Man   MCG   Adjustments   Combined 
                 
Operating revenues:                    
Product sales, net  $54,083,880   $19,938,322        $74,022,202 
Product sales – related party, net   27,654,965            27,654,965 
Consulting and licensing services                
Other operating revenues   165,416            165,416 
                     
Total revenue   81,904,261    19,938,322        101,842,583 
                     
Cost of goods and services:                    
Cost of goods and services   44,692,765    8,691,772        53,384,537 
                     
Gross profit   37,211,496    11,246,550        48,458,046 
                     
Operating expenses:                    
Selling, general and administrative expenses   13,580,469    5,033,157        18,613,626 
Professional services   4,466,696            4,466,696 
Salaries, benefits and related expenses   8,505,733             8,505,733 
Stock based compensation   3,865,588            3,865,588 
Transaction costs             112,544    112,544 
Depreciation       455,339        455,339 
                     
Total operating expenses   30,418,486    5,488,496    112,544    36,019,526 
                     
Income from operations (loss)   6,793,010    5,758,054    (112,544)   12,438,520 
                     
Other income (expense):                    
Interest expense   (4,526,746)       (3,087,500(D)  (7,614,246)
Amortization of debt discount           (2,079,809(E)  (2,079,809)
Gain (loss) on sale of assets   242,494             242,494 
Other income (expense)       292,959        292,959 
Unrealized gain (loss) on derivative liabilities   967,751            967,751 
Unrealized gain (loss) on investments   210,685            210,685 
                     
Total other income (expense)   (3,105,816)   292,959    (5,167,309)   (7,980,166)
                     
Income (loss) before income tax expense   3,687,194    6,051,013    (5,279,853)   4,458,354 
                     
Income tax benefit (expense)   (1,997,905)   (2,878,600)       (4,876,505)
                     
Net income (loss)  $1,689,289   $3,172,413   $(5,279,853)  $(418,151)
                     
Earnings (loss) per share attributable to common stockholders:                    
Basic earning (loss) per share  $0.04           $(0.01)
Diluted earning (loss) per share  $0.03           $(0.01)
Weighted average number of shares outstanding - basic   42,903,008        6,547,239   $49,450,247 
Weighted average number of shares outstanding - diluted   56,688,640        6,547,239   $63,235,879 

 

 

 

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Medicine Man Technologies, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2020

 

           Transaction     
           Accounting   Pro Forma 
   Medicine Man   MCG   Adjustments   Combined 
                 
Operating revenues:                    
Product sales, net  $21,371,408   $22,930,146   $   $44,301,554 
Product sales – related party, net   1,170,398            1,170,398 
Consulting and licensing services   1,425,778            1,425,778 
Other operating revenues   33,268            33,268 
                     
Total revenue   24,000,852    22,930,146        46,930,998 
Cost of goods and services:                    
Cost of goods and services   17,226,486    9,868,301        27,094,787 
                     
Gross profit   6,774,366    13,061,845        19,836,211 
                     
Operating expenses:                    
Selling, general and administrative expenses   3,054,091    6,184,758        9,238,849 
Professional services   5,390,186            5,390,186 
Salaries, benefits and related expenses   5,973,482             5,973,482 
Stock based compensation   5,815,808            5,815,808 
Transaction costs             112,544    112,544 
Depreciation       602,961        602,961 
                     
Total operating expenses   20,233,567    6,787,719    112,544    27,133,830 
                     
Income from operations (loss)   (13,459,201)   6,274,126    (112,544)   (7,297,619)
                     
                     
                     
Other income (expense):                    
Gain on forfeiture of contingent consideration   1,462,636            1,462,636 
Interest expense   (41,460)       (2,099,500(D)  (2,140,960)
Amortization of debt discount           (2,772,078(E)  (2,772,078)
Other income (expense)   32,621    60,332        92,953 
Unrealized gain (loss) on derivative liabilities   1,263,264            1,263,264 
Unrealized gain (loss) on investments   (129,992)           (129,992)
                     
Total other income (expense)   2,587,069    60,332    (4,871,578)   (2,224,177)
                     
Income (loss) before income tax expense   (10,872,132)   6,334,458    (4,984,122)   (9,521,796)
                     
Income tax benefit (expense)   899,109    (3,128,990)       (2,229,881)
                     
Net income (loss)  $(9,973,023)  $3,205,468   $(4,984,122)  $(11,751,677)
                     
Earnings (loss) per share attributable to common stockholders:                    
Basic earning (loss) per share  $0.04           $(0.24)
Diluted earning (loss) per share  $0.03           $(0.19)
Weighted average number of shares outstanding - basic   42,903,008        6,547,239   $49,450,247 
Weighted average number of shares outstanding - diluted   56,688,640        6,547,239   $63,235,879 

 

 

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Medicine Man Technologies, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

September 30, 2021

 

           Transaction     
           Accounting   Pro Forma 
   Medicine Man   MCG   Adjustments   Combined 
                 
ASSETS                    
Current assets:                    
Cash and cash equivalents  $21,168,816   $2,688,628   $(2,688,628(A) $21,168,816 
Accounts receivable, net of allowance for doubtful accounts   3,530,520            3,530,520 
Inventory   10,678,381    1,045,089        11,723,470 
Prepaid expenses and other current assets   2,579,035    92,847    (92,847   2,579,035 
                     
Total current assets   37,956,752    3,826,564    (2,781,475)   39,001,841 
                     
Non-current assets:                    
Fixed assets, net   8,805,348    1,062,549        9,867,897 
Goodwill   42,090,944        26,699,969 (C)  68,790,913 
Intangible assets, Net   98,072,970            98,072,970 
Investment   487,467            487,467 
Note receivable - noncurrent, net   179,167             179,167 
Accounts receivable – litigation   3,063,968            3,063,968 
Operating lease right of use assets   3,626,617            3,626,617 
Other assets   448,062    192,000        640,062 
                     
Total non-current assets   156,774,543    1,254,549    26,699,969    184,729,061 
                     
Total assets  $194,731,295   $5,081,113   $23,918,494   $223,730,902 
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Accounts payable  $953,467   $252,064   $(252,064(A) $953,467 
Accounts payable – related party   87,143            87,143 
Accrued expenses   11,660,237    693,786    (693,786(A)  11,660,237 
Note payable- related party   134,498            134,498 
Deferred rent       19,190    (19,190(A)   
Derivative liabilities   79,730        8,319,235 (B)  8,398,965 
Income taxes payable   1,029,482            1,029,482 
                     
Total current liabilities   13,944,556    965,040    7,354,195    22,263,792 
                     
Noncurrent liabilities:                    
Long term debt   59,246,338        7,688,765 (B)  66,935,103 
Lease liabilities   3,807,306            3,807,306 
                     
Total noncurrent liabilities   63,053,644        7,688,765    70,742,409 
                     
Total liabilities   76,998,200    965,040    15,042,960    93,006,200 
                     
Stockholders’ equity                    
Common stock $0.001 par value, 250,000,000 authorized, 45,139,297 shares issued and 44,400,853 shares outstanding at September 30, 2021, and 42,601,773 shares issued and 42,169,041 outstanding at December 31, 2020, respectively.   45,140            45,140 
Preferred Stock $0.001 par value, 10,000,000 authorized, 82,838 shares issued and outstanding at September 30, 2021, and 10,000,000 shares authorized; 19,716 shares issued and outstanding at December 31, 2020.   87             87 
Additional paid-in capital   165,393,733        10,671,999 ((B)  176,065,732 
Accumulated equity (deficit)   (46,188,829)   4,116,073    (1,796,465(A)  (43,869,221)
Common stock held in treasury, at cost, 517,044 shares held at September 30, 2021 and 432,732 shares held at December 31, 2020   (1,517,036)           (1,517,036)
                     
Total stockholders' equity   117,733,095    4,116,073    8,875,534    130,724,702 
                     
Total liabilities and stockholders’ equity  $194,731,295   $5,081,113   $23,918,494   $223,730,902 

 

 

 

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Medicine Man Technologies, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

 

Note 1. Basis of Presentation

 

The unaudited pro forma condensed combined financial information set forth herein is based upon the consolidated financial statements of Medicine Man Technologies, Inc. and MCG, LLC. The unaudited pro forma condensed combined financial information is presented as if the transaction had been completed on January 1, 2020 with respect to the unaudited pro forma condensed combined statements of operations for each of the nine months ended September 30, 2021 and for the year ended December 31, 2020 and on September 30, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the transaction occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the transactions.

 

We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

 

Pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are factually supportable and directly attributable to the transaction. Pro forma adjustments reflected in the pro forma condensed combined statements of operations are based on items that are factually supportable, directly attributable to the transaction and expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the transaction, including potential synergies that may be generated in future periods.

 

Note 2. Description of the Transaction

 

On February 10, 2022, Medicine Man Technologies, Inc. operating its business under the trade name Schwazze (the “Company”) consummated the Agreement with MCG. The aggregate purchase price is $29,000,000, which comprised of cash and stock in Medicine Man, Inc.

 

 

 

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Note 3. Purchase Price Allocation

 

The fair value of the consideration transferred was valued as of the date of the acquisition as follows. The source of the cash that funded the purchase was debt taken out by Medicine Man prior to the acquisition.

 

MCG Purchase Consideration    
     
Cash  $16,008,000 
Stockholders’ Equity   12,992,000 
Total Purchase Consideration  $29,000,000 

   

The preliminary allocation for the consideration recorded for the acquisition is as follows if the acquisition had taken place as of September 30, 2021:

 

Current Assets  $1,045,482 
Property and Equipment   1,062,549 
Goodwill   26,699,969 
Other Assets   192,000 
Total  $29,000,000 

 

The purchase price allocation is preliminary. The purchase price allocation will continue to be preliminary until a third-party valuation is finalized and the fair value and useful life of the assets acquired is determined. The amounts from the final valuation may significantly differ from the preliminary allocation.

 

Note 4. Pro Forma Adjustments

 

The following pro forma adjustments give effect to the transaction.

 

Unaudited Pro Forma Condensed Combined Balance Sheet – As of September 30, 2021

 

Note A To remove MCG assets, liabilities, and equity not purchased pursuant to the asset purchase agreements.

 

Note B To record purchase consideration and transaction financing. The purchase consideration included cash and a common stock in Medicine Man.  The transaction financing consisted of convertible notes (which the Company determined included an embedded derivative). The convertible notes were allocated pro-rata to the transaction based on the amount of cash used to fund the transaction.

 

Note C To record assets acquired and liabilities assumed from MCG at preliminary estimated fair value. The Company has not completed its purchase price allocation and the amounts noted are preliminary.

 

Unaudited Pro Forma Condensed Combined Statement of Operations – For The Nine Months Ended September 30, 2021 

 

Note D To record interest on convertible notes.

 

Note E To record amortization of debt discount related to the derivative associated with the convertible note.  

   

Unaudited Pro Forma Condensed Combined Statement of Operations – For The Year Ended December 31, 2020

 

Note D To record interest on convertible notes.

 

Note E To record amortization of debt discount related to the derivative associated with the convertible note.  

 

  

 

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