MEDICINE MAN TECHNOLOGIES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) - Marketscreener.com

The pursuing treatment should beryllium work successful conjunction with our unaudited consolidated fiscal statements and notes thereto included herein and with our audited consolidated fiscal statements included successful our Annual Report on Form 10-K for the twelvemonth ended December 31, 2021, arsenic filed with the SEC. In addition to our humanities unaudited condensed consolidated financial information, the pursuing treatment contains forward-looking statements that reflect our plans, estimates, and beliefs. Our existent results could differ materially from those discussed successful the forward-looking statements. Factors that could origin oregon lend to these differences see those discussed beneath and elsewhere successful this Quarterly Report connected Form 10-Q, peculiarly successful Part II, Item 1A, "Risk Factors." See also, "CAUTIONARY NOTE ABOUT FORWARD-LOOKING INFORMATION."

OVERVIEW OF THE COMPANY

Established successful 2014 and headquartered successful Denver, Colorado, Medicine Man Technologies, Inc., is simply a cannabis user packaged goods institution and retailer. The Company's absorption is connected gathering the premier, vertically integrated cannabis company by taking operating systems to different states wherever it tin make a differentiated enactment position. The Company is anchored by a high-performance civilization that combines customer-centric reasoning and data science to test, measure, and thrust decisions and outcomes. The Company currently operates successful Colorado and New Mexico.

Results of Operations - Consolidated

The pursuing array sets distant the Company's selected consolidated financial results for the periods, and arsenic of the dates, indicated. The (i) consolidated statements of operations for the 3 and 9 months ended September 30, 2022 and September 30, 2021 and (ii) consolidated equilibrium expanse arsenic of September 30, 2022 and December 31, 2021 person been derived from and should be read successful conjunction with the consolidated fiscal statements and accompanying notes presented successful this report. The Company's consolidated fiscal statements person been prepared successful accordance with GAAP and connected a going-concern ground that contemplates continuity of operations and realization of assets and liquidation of liabilities successful ordinary course of business. Revenue segments The Company has consolidated fiscal statements crossed its operating businesses with operating segments of retail, wholesale and other. The Company also accounts for gross by authorities wrong the operating segments of retail, wholesale, and different for the State of Colorado and the State of New Mexico, each of which are reported below.

REVENUE OF OPERATION BY SEGMENT

For the Three Months Ended September 30, 2022 vs 2021 2022 2021 $ % Retail $ 39,759,734 $ 20,741,864 $ 19,017,870 92 % Wholesale 3,335,252 11,022,519 $ (7,687,267) (70) % Other 96,000 70,922 $ 25,078 35 % Total gross $ 43,190,986 $ 31,835,305 $ 11,355,681 36 % For the Nine Months Ended September 30,

2022 vs 2021

2022 2021 $ % Retail $ 104,386,464 $ 54,083,880 $ 50,302,584 93 % Wholesale 14,661,268 27,654,965 $ (12,993,697) (47) % Other 184,200 165,416 $ 18,784 11 % Total gross $ 119,231,932 $ 81,904,261 $ 37,327,671 46 % 32 Table of Contents REVENUE OF OPERATION BY STATE For the Three Months Ended September 30, 2022 vs 2021 2022 2021 $ % Colorado $ 30,953,225 $ 31,835,305 $ (882,080) (3) % New Mexico 12,237,761 - $ 12,237,761 *** Total gross $ 43,190,986 $ 31,835,305 $ 11,355,681 36 % For the Nine Months Ended September 30, 2022 vs 2021 2022 2021 $ % Colorado $ 90,986,990 $ 81,904,261 $ 9,082,729 11 % New Mexico 28,244,942 - $

28,244,942 *** Total gross $ 119,231,932 $ 81,904,261 $ 37,327,671 46 %

Revenues for Colorado and New Mexico for the 3 months ended September 30, 2022, totaled $30,953,225 and $12,237,761, respectively. Revenue for Colorado for the 3 months ended September 30, 2022 decreased by $882,080, oregon 3% compared to the anterior period. Revenues for New Mexico for the three months ended September 30, 2022 accrued $12,237,761 compared to the prior period, arsenic the Company purchased the New Mexico concern successful the first quarter of 2022. For the 3 months ended September 30, 2022, Colorado and New Mexico represented 72% and 28%, respectively, of the Company's full revenue. Revenues for Colorado and New Mexico for the 9 months ended September 30, 2022, totaled $90,986,990 and $28,244,942, respectively. Revenue for Colorado for the 9 months ended September 30, 2022 accrued by $9,082,729, oregon 11% compared to the anterior period. Revenues for New Mexico for the nine months ended September 30, 2022 accrued $28,244,942 compared to the prior period, arsenic the Company purchased the New Mexico concern successful the archetypal 4th of 2022. For the 9 months ended September 30, 2022, Colorado and New Mexico represented 76% and 24%, respectively, of the Company's full revenue. For the Three Months Ended September 30, 2022 vs 2021 2022 2021 $ % Total gross $ 43,190,986 $ 31,835,305 $ 11,355,681 36 % Total outgo of goods and services 17,226,451 16,779,313 447,138 3 % Gross nett 25,964,535 15,055,992 10,908,543 72 % Total operating expenses 14,849,677 11,218,992 3,630,685 32 % Income (loss) from operations 11,114,858 3,837,000 7,277,858 190 % Total different income (expense) (3,712,108) (1,555,427) (2,156,681) 139 % Provision for income taxes (benefit) 5,593,513 1,312,817 4,280,696 326 % Net income (loss) $ 1,809,237 $ 968,756 $ 840,481 87 % Earnings (loss) per share attributable to communal shareholders - basal $ 0.00 $ 0.02 $ (0.02) (98) % Earnings (loss) per share attributable to communal shareholders - diluted $ 0.00 $ 0.02 $ (0.02) (99) % Weighted mean fig of shares outstanding - basal 51,232,943 44,145,709 Weighted mean fig of shares outstanding - diluted 137,954,532 44,145,709 33 Table of Contents

Quarter Ended September 30, 2022 Compared to the Quarter Ended September 30, 2021

Revenue

Revenues for the 3 months ended September 30, 2022 totaled $43,190,986, including (i) retail income of $39,759,734 (ii) wholesale income of $3,335,252 and (iii) different operating revenues of $96,000, compared to revenues of $31,835,305, including (i) retail income of $20,741,864, (ii) wholesale income of $11,022,519, and (iii) different operating revenues of $70,922 during the 3 months ended September 30, 2021, representing an summation of $11,355,681 oregon 36%. The most influential origin driving gross increases successful the 3rd 4th of 2022 as compared to the aforesaid play successful 2021 is acquisition activity. Revenue for the quarter ended September 30, 2022 included gross from 4 consummated acquisitions successful Colorado and gross from the Company's archetypal entranceway into the New Mexico marketplace with the acquisition of R. Greenleaf, which were not in revenue for the aforesaid play successful 2021. Revenue from wholesale income decreased, due in ample portion to continued pricing unit successful the Colorado wholesale marketplace as a effect of proviso saturation successful angiosperm and bulk distillate products.

Cost of Goods and Services

Cost of goods and services for the 3 months ended September 30, 2022 totaled $17,226,451 compared to outgo of goods and services of $16,779,313 during the three months ended September 30, 2021, representing an summation of $447,138 or 3%. Overall outgo of goods and services accrued owed to the aforesaid acquisition activities that generated important increases successful revenue, but the complaint at which outgo of goods and services increases from acquisition enactment occurs astatine a lower complaint than increases successful gross from acquisition enactment owed to lower wholesale angiosperm pricing successful Colorado and important vertical integration successful New Mexico generating favorable outgo savings.

Operating Expenses

Operating expenses for the 3 months ended September 30, 2022 totaled $14,849,677, compared to operating expenses of $11,218,992 during the three months ended September 30, 2021, representing an summation of $3,630,685 oregon 32%. This summation is owed to accrued selling, wide and administrative expenses, professional work fees, salaries, benefits and related employment costs, all largely driven by maturation from acquisitions.

Other Income (Expense), Net

Other expense, nett for the 3 months ended September 30, 2022 totaled $3,712,108 compared to $1,555,427 during the 3 months ended September 30, 2021, representing an summation successful different disbursal of $2,156,681 or 139%. The summation successful different expenses is owed to higher involvement payments owed on the Company's indebtedness obligations arsenic a effect of compounding involvement with the passage of clip and higher indebtedness balances, which was partially offset this quarter by the revaluation of the derivative liability related to the Investor Notes issued successful December 2021 that was recognized arsenic income successful the 3 months ended September 30, 2022. 34 Table of Contents Net Income (Loss)

As a effect of the factors discussed above, we generated nett nonaccomplishment for the three months ended September 30, 2022 of $1,809,237, compared to nett income of $968,756 for the 3 months ended September 30, 2021.

For the Nine Months Ended September 30, 2022 vs 2021 2022 2021 $ % Total gross $ 119,231,932 $ 81,904,261 $ 37,327,671 46 % Total outgo of goods and services 57,173,192 44,692,765 12,480,427 28 % Gross nett 62,058,740 37,211,496 24,847,244 67 % Total operating expenses 46,698,772 30,418,486 16,280,286 54 % Income (loss) from operations 15,359,968 6,793,010 8,566,958 126 % Total different income (expense) 4,770,919 (3,105,816) 7,876,735 (254) % Provision for income taxes (benefit) 11,259,369 1,997,905 9,261,464 464 % Net income (loss) $ 8,871,518 $ 1,689,289 $ 7,182,229 425 % Earnings (loss) per stock attributable to communal shareholders - basal $ 0.07 $ 0.04 $ 0.03 80 % Earnings (loss) per stock attributable to communal shareholders - diluted $ 0.03 $ 0.03 $ (0.00) (13) % Weighted mean fig of shares outstanding - basal 50,615,437 42,903,008 Weighted mean fig of shares outstanding - diluted 137,337,027 56,688,640

Year to Date September 30, 2022 Compared to the Year to Date September 30, 2021

Revenue

Revenues for the 9 months ended September 30, 2022 totaled $119,231,932, including (i) retail income of $104,386,464 (ii) wholesale income of $14,661,268 and (iii) different operating revenues of $184,200, compared to revenues of $81,904,261, including (i) retail income of $54,083,880, (ii) wholesale of $27,654,965, and (iii) different operating revenues of $165,416 during the nine months ended September 30, 2021, representing an summation of $37,327,671 oregon 46%. The astir influential origin driving gross increases successful the archetypal 9 months of 2022 arsenic compared to the aforesaid play successful 2021 is acquisition activity. Revenue for the 9 months ended September 30, 2022 included gross from 4 new acquisitions successful Colorado, which included 5 caller retail dispensaries, and revenue from the Company's archetypal entranceway into the New Mexico marketplace with the acquisition of R. Greenleaf that created an contiguous archetypal portfolio of ten retail dispensaries crossed the authorities of New Mexico, nary of which were in revenue for the aforesaid play successful 2021.

Cost of Goods and Services

Cost of goods and services for the 9 months ended September 30, 2022 totaled $57,173,192 compared to outgo of goods and services of $44,692,765 during the nine months ended September 30, 2021, representing an summation of $12,480,427 or 28%. Year to day outgo of goods and services successful 2022 accrued arsenic compared to 2021 owed to the aforesaid acquisition activities that generated important increases in revenue, but the complaint astatine which outgo of goods and services increases from acquisition enactment occurs astatine a little complaint than increases successful gross from acquisition enactment owed to little wholesale angiosperm pricing successful Colorado and substantial vertical integration successful New Mexico generating favorable cost savings.

Operating Expenses

Operating expenses for the 9 months ended September 30, 2022 totaled $46,698,772, compared to operating expenses of $30,418,486 during the nine months ended September 30, 2021, representing an summation of $16,280,286 oregon 54%. This summation is owed to accrued selling, wide and administrative expenses, professional work fees, salaries, benefits and related employment costs, all largely driven by maturation from acquisitions. 35 Table of Contents Other Income (Expense), Net Other income, nett for the 9 months ended September 30, 2022 totaled $4,770,919 compared to different expenses, net, of ($3,105,816) during the nine months ended September 30, 2021, representing an summation successful income of $7,876,735 oregon (254)%. The summation successful different income, nett is chiefly owed to significant gains recognized successful transportation with revaluation of the derivative liability related to the Investor Notes for the 9 months ended September 30, 2022, partially offset by higher involvement payments owed connected the Company's debt obligations arsenic a effect of compounding involvement with the transition of clip and higher indebtedness balances. Net Income (Loss)

As a effect of the factors discussed above, we generated nett income for the nine months ended September 30, 2022 of $8,871,518, compared to nett income of $1,689,289 for the 9 months ended September 30, 2021.

DRIVERS OF RESULTS OF OPERATIONS & KEY PERFORMANCE INDICATORS

Revenue

The Company derives its gross from 3 gross streams: (i) Retail, which sells finished goods sourced internally and externally to the extremity user in retail stores; (ii) Wholesale, which is the cultivation of angiosperm and biomass sold internally and externally and the manufacturing of biomass into distillate for integration into externally developed products, specified arsenic edibles and internally developed products specified arsenic vapes and cartridges nether the Purplebee's brand; and (iii) Other, which includes different income and expenses, specified as, licensing and consulting services, installation plan services, installation management services, the Company's Three A Light™ publication, and firm operations.

Gross Profit

Gross nett is gross little outgo of goods sold. Cost of goods sold includes costs straight attributable to merchandise income and includes amounts paid for finished goods specified arsenic flower, edibles, and concentrates, arsenic good as manufacturing and cultivation labor, packaging, supplies and overhead specified as rent, utilities and different related costs. Cannabis costs are affected by market supply. Gross borderline measures our gross nett arsenic a percent of revenue.

Total Operating Expenses

Total operating expenses different than the costs of goods sold consists of selling costs to enactment lawsuit relations, selling and branding activities. It also includes an concern successful the firm infrastructure required to support the Company's ongoing business. Adjusted EBITDA Adjusted EBITDA is derived from Operating Income, which is adjusted for one-time expenses, merger and acquisition and superior raising costs, non-cash related compensation costs, and depreciation and amortization.

Average Basket Size

Average Basket Size is calculated based connected the mean dollar worth of each total items purchased by a azygous lawsuit during a azygous sojourn to 1 of the Company's retail dispensary stores. Management monitors and utilizes Average Basket Size to measure user preferences and behavior, effectiveness of consistent reward and discount offerings, and merchandise performance. Management believes this metric tin beryllium utile to investors for a amended knowing of average lawsuit walk and gross crossed each Company retail dispensaries. 36 Table of Contents Recorded Customer Visits The Recorded Customer Visits metric reports the fig of customers that have visited immoderate of the Company's retail dispensary stores and made a purchase. Customer visits are recorded astatine the clip of purchase. If a lawsuit makes multiple purchases successful a day, each acquisition is counted arsenic an idiosyncratic visit. Management uses Recorded Customer Visits to show and measure Company performance successful the markets wherever it operates, user acceptance of the Company's marque and products, lawsuit retention, and store traffic. Recorded Customer Visits is simply a utile non-financial metric for investors to contextualize the Company's appraisal of wide marketplace show and user appetite for cannabis products.

Same Store Sales and Stacked IDs

The Company utilizes Same Store Sales and Stacked Identical Store Sales ("Stacked IDs") to measure and show integrated maturation from existing dispensaries. Management believes these metrics are utile for investors to assess absorption of our retail stores and to separate gross and growth from operations from gross and maturation from acquisitions. Same Store Sales and Stacked IDs are some expressed arsenic a percent that indicates the relative increase oregon alteration to gross for definite retail stores from the relevant previous reporting period, which are reported separately for retail operations in Colorado and New Mexico. Same Store Sales is calculated by comparing revenue from income for each dispensaries successful beingness for much than 1 twelvemonth against the revenue from the income for the aforesaid dispensaries for a specified previous period. Stacked IDs, which is derived from Same Store Sales, reflects Same Store Sales arsenic adjusted for dating discrepancies to study comparable income for the identical play of days for a specified erstwhile period.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2022 and December 31, 2021, the Company had full current liabilities of $30,041,901 and $45,263,179, respectively. The alteration is driven by the revaluation of the derivative liability associated with the Investor Notes. As of September 30, 2022 and December 31, 2021, the Company had currency and cash equivalents of $38,725,187 and $106,400,216, respectively to conscionable its current obligations. The Company had moving superior of $41,548,525 arsenic of September 30, 2022, a alteration of $37,594,104 arsenic compared to December 31, 2021. The simplification successful cash, and successful crook moving capital, is chiefly driven by expenditure of currency to money acquisitions and operations. The Company is an early-stage maturation company, generating currency from operational revenue and superior raises. Cash is being reserved chiefly for capital expenditures, installation improvements, acquisitions, and strategical investment opportunities. The Company predominantly relies connected interior superior that is generated done gross and immoderate different interior sources of liquidity to meet its short-term and definite semipermanent superior demands. Management believes the Company's existent projected growth, gross from consummated acquisitions, and revenue from operations volition beryllium capable to conscionable its existent obligations as they go due. The Company relies connected a operation of interior and external capital to conscionable its semipermanent obligations, with interior liquidity sourced from revenue from operations and outer financing acquired from assorted sources, including commercialized indebtedness arrangements, superior raises and backstage placement transactions, and currency from the Investor Notes. Management believes this combination of interior gross and outer liquidity volition beryllium capable to meet the Company's semipermanent obligations; however, it is imaginable the Company will question further outer financing to conscionable superior needs successful the future. The Company maintains the unused information of the funds received from the Investor Notes for aboriginal acquisitions and execution of strategical maturation initiatives. Due to our information successful the cannabis manufacture and the regulatory framework governing cannabis successful the United States, our indebtedness and indebtedness arrangements are sometimes taxable to higher involvement rates than are marketplace for different industries, which has an unfavorable interaction connected our liquidity and superior resources. Additionally, the currency requirements to work our indebtedness obligations increase with the transition of clip owed to involvement accrual, which increases constraints on our superior resources and tends to trim liquidity successful the magnitude of such accruals. We presently expect gathering these currency requirements from operating revenue and currency connected hand. One of our strategical goals is to stimulate growth through acquisitions, which besides tends to negatively interaction liquidity during periods erstwhile we consummate an identified acquisition. We expect to continue executing this strategy successful aboriginal periods, gathering specified superior requirements in connection therewith from some interior superior and outer financing (including unused funds from the Investor Notes), which volition alteration liquidity. Additional factors oregon trends that person impacted oregon could perchance impact liquidity successful aboriginal periods see wide economical conditions specified arsenic market saturation, inflation, and wide economical downturn. The Colorado cannabis market has 37 Table of Contents experienced downward pricing unit from over-supply of definite cannabis products successful the market, which has improved retail margins successful existent periods but will apt interaction the narration betwixt outgo and gross if and/or when supply is decreased successful the Colorado market. Increasing ostentation whitethorn also negatively interaction our liquidity, arsenic our outgo of goods and services whitethorn increase without corresponding increases to revenue. Increasing ostentation and general economic downturn successful the United States could besides negatively interaction gross to the grade specified factors impact user behavior.

Cash Flows

Cash Provided by (Used in) Operating, Investing and Financing Activities

Net currency provided by (used in) operating, investing and financing activities for the periods ended September 30, 2022 and 2021 were arsenic follows:

For the Periods

Ended September 30,

2022 2021

Net currency provided by (used in) operating activities $ (3,957,263) $ 4,814,104 Net currency utilized successful investing activities

(105,117,739) (75,644,398) Net currency provided by financing activities

41,399,973 90,761,874

The Company's currency utilized successful operating activities for 2022 is predominantly driven by the summation connected derivative liabilities from the Investor Note. The Company's use of currency from investing activities is driven by acquisition of businesses, cannabis licenses, and property, works and instrumentality for existing entities such as store remodels. Our currency provided by financing activities is chiefly from proceeds from our recognition facility, the Investor Notes and the issuance of shares of Common Stock.

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