Revenues increased by 489% to $882,353 in the second quarter of 2017
Medicine Man Technologies Reports Second Quarter 2017 Results
4:36 PM ET
Medicine Man Technologies Inc. (OTCQB: MDCL), one of the United States' leading cannabis branding and consulting companies, reported financial results for the quarter ended June 30, 2017.
Financial and Business Highlights:
-- Revenues increased by 489% to $882,353 in the second quarter of 2017, from $149,766 in the corresponding period in 2016, driven by higher consulting-based revenues and the contribution of the newly acquired Pono Publications and Success Nutrient businesses
-- The acquisitions of Pono Publications and Success Nutrients provide industry leading cannabis cultivation technologies and products. These businesses generated $352,158 of revenue in the second quarter of 2017, providing full-quarter contributions to Company revenue
-- Brett Roper named as Chief Executive Officer at the first annual shareholders meeting, replacing Andrew Williams who assumed Brett Roper's prior role as Chairperson of the Board of Directors
-- Named recognized cannabis cultivation expert, Joshua Haupt, as Chief Cultivation Officer
-- The Company experienced extraordinary one-time expenses related to acquisition costs and stock compensation totaling $4,579,019, which accounted for more than the entire net loss in the second quarter of 2017
-- Subsequent to the end of the second quarter, Medicine Man completed the acquisition of Denver Consulting Group in July 2017
-- Demand for services and recent acquisitions have allowed our Company to grow from 5 full time and 2 part time positions at year end 2016 to 19 full time and 2 part time positions as of this date
-- We have increased our Board of Directors to five persons, three of which are independent and held our first annual shareholder meeting in Denver on June 3, 2017
"We are pleased with our second quarter results, which reflect the integration of Pono Publications, led by its flagship the Three A Light(TM) publication and Success Nutrients into Medicine Man Technologies," commented Brett Roper, Chief Executive Officer of the Company. "We view these acquisitions as transformatio nal, as not only do these businesses provide the Company with industry leading cultivation methodologies that we are already leveraging across our broad range of product and consulting services offerings, but also bring Joshua Haupt, their founder and a world-renowned cannabis cultivation thought leader, to Medicine Man Technologies as our Chief Cultivation Officer. We look forward to continuing to execute on our Brand Warehouse acquisition strategy, seeking synergistic companies across the cannabis industry that can support our U.S. and international expansion plan," concluded Mr. Roper.
During the second quarter of 2017, Medicine Man added 13 new clients, spanning the states of Florida, Arkansas, Ohio, Michigan, Nevada, and California. Subsequent to the end of the quarter, the Company added one Ohio based processing application group, three Arkansas based dispensary application groups, two Florida based application groups, and two Michigan cultivation/processor application group, and one Canadian cultivation entity bringing our total active clients number (including DCG Legacy Clients) up to 44. Revenue generation for the Company is expected to run through the entirety of the general application process as determined by each state.
The initial Cultivation Max harvest clients in Nevada are expected later in the third quarter of 2017, from which Medicine Man expects to earn init ial revenues beginning in the fourth quarter of this year.
The Company remains encouraged by the prospects for rapid expansion of its product and service footprint resulting from recent acquisitions. Medicine Man continues to experience a robust pace of inquiries on the west coast and elsewhere in the United States for its services, driven by its Denver Consulting Group division, the Company's internal marketing and event presence, and its Three A Light publication and Success Nutrients business presence.
Results of Operations for the three months ended June 30, 2017 and 2016
During the three months ended June 30, 2017, Medicine Man generated revenues of $882,353, which represented an increase of 489% over the same period in 2016. Second quarter 2017 revenue consisted of consulting/licensing fees of $527,895, product sales of $352,158 and the balance from fees arising from our participation in cannabis seminars. In the three months ended June 30, 2016, revenue totaled $149,766, consisting of $142,986 from consulting/licensing fees, and the balance from seminars.
Cost of services, consisting of expense related to delivery of services and product procurement, was $272,001 during the three months ended June 30, 20 17, compared to $44,177 during the comparable period in 2016, with the increase largely attributable to the addition of product procurement expenses and increases in wages. The Company notes that during the second quarter of 2017, Medicine Man had eight full-time and two part-time employees, as compared to three full-time and two part-time employees in the second quarter of 2016.
Operating expenses during the three months ended June 30, 2017, were $5,172,869, including a one-time stock compensation expense of $4,480,318, compared with $207,059 in the corresponding period in 2016. General and administrative expense in the three months ended June 30, 2017 totaled $331,425, compared to $197,879 during the three months ended June 30, 2016. Increased operating expenses during the three months ended J une 30, 2017 included professional fees of $141,953 and advertising expense of $56,025. Advertising expense during the three months ended June 30, 2016 totaled $9,180. During the three months ended June 30, 2017, the Company incurred $98,701 in one-time acquisition costs related to the Pono and Success acquisitions.
Net loss for the three months ended June 30, 2017 was $4,494,435, or $0.23 per share, compared to net loss of $99,662, or $0.01 per share, during the three months ended June 30, 2016, primarily due to one-time costs related to stock compensation.
Results of Operations for the six months ended Jun e 30, 2017 and 2016
During the six months ended June 30, 2017, we generated revenues of $1,423,489, which represented an increase of 307% over the same period in 2016. Six-month 2017 revenue consisted of consulting/licensing fees of $1,067,109, product sales of $352,158 and the balance of fees arising from our participation in cannabis seminars. In the six months ended June 30, 2016 revenue totaled $349,381, consisting of $337,221 from consulting/licensing fees, and the balance from seminars. This increase was due to the acquisition of Pono and Success, growth in our service model and growth within our client base.
Cost of services, consisting of expense related to delivery of services and product procurement, was $437,160 during the six months ended June 30, 2017, compared to $181,618 during the comparable period in 2016, with the increase largely attributable to the addition of product procurement expenses and increases in wages from an expanded employee base, as discussed earlier.
Operating expenses during the six months ended June 30, 2017, were $5,401,754, including a one-time stock compensation expense of $4,480,318. General and administrative expense were $435,296, compared to $312,217 during the six months ended June 30, 2016. Increased operating expenses during the six months ended June 30, 2017 included additional cost incurred related to professional fees of $233,483, as well as $89,509 in advertising expense, compared to advertising expenses of $21,672 during the same period in 2016. The Company has increased its investment substantially in the Marijuana Business Daily conference offerings as well as publication platform based upon their continued growth in popularity and prospect generation capacities. During the six months ended June 30, 2017, the Company incurred $98,701 in one-time acquisition costs related to the Pono and Success acquisition.
Net loss during the six months ended June 30, 2017 totaled $4,383,271, or $0.22 per share, compared to net loss of $213,518, or $0.02 per share, for the six months ended June 30, 2016, with the increase primarily driven by one-time stock-based compensation costs, as discussed above.
At June 30, 2017, the Company reported cash and cash equivalents of $200,600, compared with $351,524 at December 31, 2016. At June 30, 2017, receivables were $231,399, compared with $25,000 at June 30, 2016, with the increase attributable to collections of earned income that were due near the end of the quarter, that have been fully collected subsequent to the end of the quarter.
About Medicine Man Technologies, Inc.
Established in March 2014, the Company secured its fir st client/licensee in April 2014. To date, the Company has provided guidance for several clients that have successfully secured licenses to operate cannabis businesses within their state. It currently has twenty eight active clients in 12 states and Puerto Rico, focusing on working with clients to 1) utilize its experience, technology, and training to help secure a license in states with newly emerging regulations, 2) deploy the Company's highly effective variable capacity constant harvest cultivation practices through its deployment of Cultivation MAX, and eliminate the liability of single grower dependence, 3) avoid the costly mistakes generally made in start-up, 4) stay engaged with an ever expanding team of licensees and partners, all focused on quality and safety that will 'share' the ever-improving experience and knowledge of the network, and 5) continuing the expansion of its Brands Warehouse concept.
Safe Harbor Statement
This press release may contain forward looking statements which are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from those anticipated or expected, including statements related to the amount and timing of expected revenues and any payment of dividends on our common and preferred stock, statements related to our financial performance, expected income, distributions, and future growth for upcoming quarterly and annual periods. These risks and uncertainties are further defined in filings and reports by the Company with the U.S. Securities and Excha nge Commission (SEC). Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors detailed from time to time in our filings with the Securities and Exchange Commission. Among other matters, the Medicine Man Technologies may not be able to sustain growth or achieve profitability based upon many factors including, but not limited to, general stock market conditions. Reference is hereby made to cautionary statements set forth in the Company's most recent SEC filings. We have incurred and will continue to incur significant expenses in our expansion of our existing and new service lines, noting there is no assurance that we will generate enough revenues to offset those costs in both the near and long term. Additional service offerings may expose us to additional legal and regulatory costs and unknown exposure(s) based upon the various geopolitical locations where we will be pr oviding services, the impact of which cannot be predicted at this time.
MEDICINE MAN TECHNOLOGIES, INC.
STATEMENT OF COMPREHENSIVE (LOSS) AND INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
Express in U.S. Dollars < br xmlns:ms="urn:schemas-microsoft-com:xslt" xmlns:dt="urn:schemas-microsoft-com:datatypes" />
Three Months Ended June 30, Six Months Ended June, 30 2017 2016 2017 2016 Operating revenues Product sales $ 229,214 $ - $ 229,214 $ - Product sales - related party 122,944 - 122,944 - Licensing fees 301,313 142,986 501,313 337,221 Consulting fees 226,582 - 565,796 $ - Seminar fees 2,300 6,780 4,222 12,160 Total revenue 882,353 149,766 1,423,489 349,381 Cost of services Cost of services $ 245,965 $ 44,177 $ 411,124 $ 181,618 Cost of services - related party 26,036 - 26,036 - Total cost of services 272,001 44,177 437,160 181,618 Gross profit $ 610,352 $ 105,589 $ 986,329 $ 167,763 Operating expenses General and administrative $ 331,425 $ 197,879 $ 435,296 $ 312,217 Professional services 141,953 - 233,483 - One-time Acquisition costs 98,701 - 98,701 - Stock based compensation expense 4,480,318 - 4,480,318 49,200 Advertising 56,025 9,180 89,509 21,672 Salaries 64,447 - 64,447 - Total operating expenses $ 5,172,869 $ 207,059 $ 5,401,754 $ 383,089 Income from operations $ (4,562,517 ) $ (101,470 ) $ (4,415,425 ) $ (215,326 ) Other income/expense Interest income $ (7,480 ) $ (1,808 ) $ (14,877 ) $ (1,808 ) Net gain on derivative (82,373 ) - (131,382 ) - Interest expense related to convertible notes 21,990 - 44,329 - Loss on management fee contracts - - 70,257 - Net unrealized (loss) on available for sale securities - - (262 ) - Other income (219 ) - (219 ) - Total other expense (68,082 ) (1,808 ) (32,154 ) (1,808 ) Net income (loss) $ (4,494,435 ) $ (99,662 ) $ (4,383,271 ) $ (213,518 ) Earnings per share attributable to common shareholders: Basic and diluted (loss)/earnings per share $ (0.23 ) $ (0.01 ) $ (0.22 ) $ (0.02 ) Weighted average number of shares outstanding - basic and diluted 19,548,087 10,092,500 19,548,087 10,031,875 Other comprehensive income (loss), net of tax Net unrealized (loss) on available for sale securities (9,248 ) (16,000 ) (10,551 ) (5,600 ) Total other comprehensive income (loss), net of tax (9,248 ) (16,000 ) (10,551 ) (5,600 ) Comprehensive gain (loss) $ (4,503,683 ) $ (115,662 ) $ (4,393,822 ) $ (219,118 ) MEDICINE MAN TECHNOLOGIES, INC.
Express in U.S. Dollars
June 30, 2017 December 31, 2016 Assets Current assets Cash and cash equivalents $ 200,600 $ 351,524 Accounts receivable, net 231,399 25,000 Accounts receivable - related party 24,294 - Available for sale securities 17,701 13,998 Short-term note receivable 278,893 264,016 Inventory 109,174 - Other assets 50,006 27,479 Total current assets 912,067 682,017 Non-current assets Fixed assets, net accumulated depreciation of $46,278 $ 154,033 $ 42,126 Intangible assets, net accumulated amortization of $3,055 72,869 3,708 Goodwill 6,301,080 - Total non-current assets 6,527,982 45,834 Total assets $ 7,440,049 $ 727,851 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 32,328 $ - Derivative liability 23,017 294,002 Other liabil ities 10,713 175 Total current liabilities 66,058 294,177 Long-term liabilities Note payable - related party $ 58,280 $ - Convertible loan 675,000 810,000 Total long-term liabilities 733,280 810,000 Total liabilities 799,338 1,104,177 Commitments and contingencies, note 13 Shareholders' equity Common stock $0.001 par value, 90,000,000 authorized, 18,948,087 and 10,402,500 were issued and outstanding June 30, 2017 and December 31, 2016, respectively $ 19,118 $ 10,403 Additional paid-in capital 10,327,876 1,026,052 Additional paid-in capital - Warrants 2,100,318 - Accumulated other comprehensive income (loss) (14,854 ) (4,303 ) Retained earnings (5,791,747 ) (1,408,478 ) Total shareholders' equity 6,640,711 (376,326 ) Total liabilities and stockholders' equity $ 7,440,049 $ 727,851 MEDICINE MAN TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
Expressed in U.S. Dollars
2017 2016 Cash flows from operating activities Net income for the period $ (4,383,271 ) $ (213,518 ) Adjustments to reconcile net income to net cash provided by operating activities Loss (gain) on derivative, net (131,382 ) - S tock based compensation 4,480,318 49,200 Depreciation and amortization 24,822 8,531 Changes in operating assets and liabilities Short term note receivable (14,877 ) (100,000 ) Accounts receivable (230,693 ) 70,447 Inventory (109,174 ) - Other assets (83,085 ) (26,765 ) Accounts payable and other liabilities 99,725 (12,429 ) Net cash used from operating activities (347,617 ) (224,534 ) Cash flows from investing activities Purchase of assets $ (205,890 ) $ - Proceeds from AFS securities, net (10,551 ) - Acquisition investment 233,357 - Net cash earned in investing activities 16,916 - Cash flows from financing activities Cash raised by sale of convertible debt 179,777 - Net cash earned for financing activities 179,777 - Net decrease in cash and cash equivalents $ (150,924 ) $ (224,534 ) Cash and cash equivalents - beginning of year 351,524 262,146 Cash and cash equivalents - end of year $ 200,600 $ 37,612 Non-Cash Transactio ns Acquisition investment $ 233,357 $ - Contact Information: KCSA Strategic Communications MDCL@kcsa.com https://resource.globenewswire.com/Resource/Download/aa6b23a6-0de6-4739-883e-4344e2101fac?size=1