MEDICINE MAN TECHNOLOGIES, INC. MD&A and Analysis of Financial Condition and Results of Operations (Form 10-Q/A)

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/A, particularly in Part II, Item 1A, "Risk

Overview of the Company

Founded in 2014 and based in Denver, Colorado, Medicine Man Technologies, Inc., a cannabis consumer packaged product company and retailer. The company’s goal is to create the first vertically integrated cannabis company by bringing operating systems to other states where it can develop a differentiated leadership position. The company is rooted in a high performance culture that combines customer-centric thinking and data science to test, measure and drive decisions and outcomes.

Results of Operations – Consolidated

The following table sets forth the Company's selected consolidated financial
results for the periods, and as of the dates, indicated. The (i) consolidated
statements of operations for the quarterly and year-to-date periods ended March
31, 2022 and March 31, 2021 and (ii) consolidated balance sheet as of March 31,
2022 and March 31, 2021 have been derived from and should be read in conjunction
with the consolidated financial statements and accompanying notes presented
this report.

The Company's consolidated financial statements have been prepared in accordance
with GAAP and on a going-concern basis that contemplates continuity of
operations and realization of assets and liquidation of liabilities in ordinary
course of business.

                                        For the Periods Ended March 31,                2022 vs 2021
                                            2022                  2021               $               %
Total revenue                         $      31,777,554       $ 19,340,115     $  12,437,439            64%
Total cost of goods and services             20,840,051         12,087,111 
      (8,752,940 )         -72%
Gross profit                                 10,937,503          7,253,004         3,684,499            51%
Total operating expenses                     15,728,043          8,737,910        (6,973,589 )         -80%
Income (loss) from operations                (4,790,540 )       (1,484,906 )      (3,289,090 )         222%
Total other income (expense)                (20,728,268 )       (1,707,987 )     (19,020,281 )        1114%
Provision for income taxes
(benefit)                                     1,259,894            456,614          (803,280 )        -176%
Net income (loss)                     $     (26,778,702 )     $ (3,649,507 )   $ (23,112,651 )         633%
Earnings (loss) per share
attributable to common shareholders
- basic                               $           (0.77 )     $      (0.09 )   $       (0.68 )         794%
Earnings (loss) per share
attributable to common shareholders
- diluted                             $           (0.77 )     $      (0.09 )   $       (0.68 )         794%
Weighted average number of shares
outstanding - basic                          46,841,971         42,616,309
Weighted average number of shares
outstanding - diluted                        46,841,971         42,616,309

                         March 31, 2022       December 31, 2021
Total Assets            $    318,006,636     $       285,030,792
Long-Term Liabilities        131,946,159             151,461,127


Revenue segments

The Company has consolidated financial statements for all of its operating activities with retail, wholesale and other operating segments.

Quarter Ended  March 31, 2022 Compared to the Quarter Ended March 31, 2021


Revenues for the quarter ended March 31, 2022, totaled $31,777,554 including (i)
retail sales of $26,525,716 (ii) wholesale sales of $5,207,388 and (iii) other
operating revenues of $44,450, compared to revenues of $11,816,200 including (i)
retail sales of $11,816,200, (ii) wholesale of $7,446,265, and (iii) other
operating revenues of $77,650 during the quarter ended March 31, 2021
representing an increase of $12,437,439 or 64%. This increase was due to
increased sale of our products as well as growth through acquisition. In 2022,
we acquired thirteen new retail dispensaries. The decrease in wholesale and
other operating revenue in 2022 was largely due to wholesale distillate pricing
pressure and over-supply in the state of Colorado.

Cost of Goods and Services

Cost of goods and services for the quarter ended March 31, 2022, totaled
$20,840,051 compared to cost of services of $12,087,111 during the quarter ended
March 31, 2021, representing an increase of $8,752,940 or 72%. This increase was
due to increased sales of our products as well as growth through acquisition.
The cost of goods and services increased at a slightly higher rate than revenue
due to purchase accounting on retail acquisitions requiring revaluation of
inventory to retail value, therefore reducing margins which were made in the
first quarter.

Operating Expenses

Operating expenses for the quarter ended March 31, 2022, totaled $15,728,043,
compared to operating expenses of $8,737,910 during the quarter ended March 31,
2021, representing an increase of $6,990,133 or 80%. This increase was due to
increased selling, general and administrative expenses, professional service
fees, salaries, benefits and related employment costs related to growth from
acquisitions and non-cash stock-based compensation.

Other Income (Expense), Net

Other expense, net for the quarter ended March 31, 2022, totaled $20,728,268,
compared to $1,707,987 during the quarter ended March 31, 2021, representing an
increase of $19,020,281 or 1,114%. The increase in other expense, net was due to
increase in interest payments due to various indebtedness and by the loss on
derivative liability related to the Investor Notes.

Net Income (Loss)

Due to the factors mentioned above, we generated a net loss for the quarter ended March 31, 2022 of $26,778,702compared to the net loss of $3,649,507
during the quarter ended March 31, 2021.

Operating revenue by segment

                  For the Periods Ended March 31,             2022 vs 2021
                      2022                 2021               $             %
Retail          $     26,525,716       $  11,816,200     $ 14,709,516       124%
Wholesale              5,207,388           7,446,265       (2,238,877 )     -30%
Other                     44,450              77,650          (33,200 )     -43%
Total revenue   $     31,777,554       $  19,340,115     $ 12,437,439        64%


Drivers of operating results


The Company derives its revenue from three revenue streams: Retail which sells
finished goods sourced internally and externally to the end consumer in retail
stores; Wholesale which is the cultivation of flower and biomass sold internally
and externally and the manufacturing of biomass into distillate for integration
into externally developed products, such as edibles and internally developed
products such as vapes and cartridges under the Purplebee's brand; Other which
includes other income and expenses, such as, licensing and consulting services,
facility design services, facility management services, the Company's Three A
Light™ publication, and corporate operations.

Gross Profit

Gross profit is revenue less cost of goods sold. Cost of goods sold includes
costs directly attributable to product sales and includes amounts paid for
finished goods such as flower, edibles, and concentrates, as well as
manufacturing and cultivation labor, packaging, supplies and overhead such as
rent, utilities and other related costs. Cannabis costs are affected by market
supply. Gross margin measures our gross profit as a percentage of revenue.

Total Operating Expenses

Total operating expenses other than the costs of goods sold consists of selling
costs to support customer relations, marketing and branding activities. It also
includes an investment in the corporate infrastructure required to support
Company's ongoing business.

Cash and capital resources

As of March 31, 2022 and December 31, 2021, the Company had total current
liabilities of $70,277,925 and $45,263,179, respectively. The increase in
current liabilities is driven by the derivative liability associated with the
Investor Notes as well as from general growth of the Company. As of March 31,
2022 and December 31, 2021, the Company had cash and cash equivalents of
$47,688,094 and $106,400,216, respectively to meet its current obligations. The
Company had working capital of $1,103,293 as of March 31, 2022, a decrease of
$77,545,783 as compared to December 31, 2021. The reduction in working capital
is primarily driven by an increase in derivative liability from the Investor
Notes issued on December 7, 2021.

The Company is an early-stage growth company, generating cash from revenues and
capital raise. Cash is being reserved primarily for capital expenditures,
facility improvements and strategic investment opportunities. The Company
anticipates overall revenue to increase in 2022 due to acquisitions and
adult-use becoming legalized in New Mexico on April 1, 2022. It is possible the
Company will seek additional external financing to meet capital needs. The
Company relies on internal capital that is generated through revenue and any
other internal sources of liquidity. The Company utilizes various forms of
external financing, including loan arrangements, capital raises, and cash from
the Investor Notes. The Company maintains the unused portion of the funds
received from the Investor Notes for future acquisitions and execution of growth


Due to our participation in the cannabis industry and the regulatory framework
governing cannabis in the United States, our debt and loan arrangements are
sometimes subject to higher interest rates than are market for other industries,
which has an unfavorable impact on our liquidity and capital resources.

Cash Flows

Cash used in operating, investing and financing activities

Net cash provided by (used in) operating, investing and financing activities for the quarters ended March 31, 2022 and 2021 were as follows:

                                                         For the Periods Ended March 31,
                                                             2022                 2021

Net cash provided by (used in) operating activities $5,831,074

   $   1,698,519
Net cash provided by (used in) Investing Activities          (92,924,719 )      (65,600,473 )
Net cash provided by used in Financing Activities             28,381,522   

The Company's cash provided by operating activities is driven by increase in
sales from acquisitions. Our use of cash from investing activities is driven by
acquisition of businesses and property, plant and equipment for existing
entities. Our cash provided by financing activities is mainly from proceeds from
our credit facility, the Investor Notes and the issuance of shares of Preferred


The following table quantifies the Company's future contractual obligation as of
March 31, 2022:

                              Total             2022             2023             2024             2025             2026          Thereafter
Notes Payable (a)         $ 155,453,333     $          -     $  2,250,000  

$3,000,000 $40,651,759 $109,551,574 $ – Interest due on notes payable

                      75,878,422       16,833,160       16,559,990       16,504,822       15,542,869        10,437,581               -

Right of use assets 24,706,524 3,325,483 3,843,353

     3,949,553        3,989,432         2,971,217       6,627,486
Total                     $ 256,038,279     $ 20,158,643     $ 22,653,343     $ 23,454,375     $ 60,184,060     $ 122,960,372     $ 6,627,486

(a) – This amount excludes $46,721,616 the discount on unamortized debt and
$7,868,231 unamortized debt issuance costs. See Note 10 – Debt

The Company expects to use funds from operations and, if necessary, we may seek additional external financing to support contractual cash obligations.

Off-balance sheet arrangements

As of March 31, 2022 and March 31, 2021, we were not party to any off-balance
sheet arrangement that had or was reasonably likely to have a material current
or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, cash requirements or
capital resources.


Critical Accounting Estimates and Recent Accounting Pronouncements

The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect the amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates based on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company believes that of its significant
accounting policies (see Note 2 to Financial Statements), the ones that may
involve a higher degree of uncertainty, judgment and complexity are revenue
recognition, stock based compensation, derivative instruments, income taxes,
goodwill and commitments and contingencies are the most important to the
portrayal of our financial condition and results of operations and that require
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effects of matters that are inherently

Revenue recognition and related allowances

Our 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. A
contract liability is recorded when consideration is received in advance of the
delivery of goods or services. We identify revenue contracts upon acceptance
from the customer when such contract represents a single performance obligation
to sell our products.

We have three primary sources of revenue: (i) retail sales, (ii) wholesale sales, and (iii) other revenue from consultancy, licensing, and other miscellaneous sources.

The Company's 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, we consider several indicators,
including significant risks and rewards of products, our right to payment, and
the legal title of the products. Based on the assessment of control indicators,
our sales are generally recognized when products are delivered to customers.

The Company's other revenue, typically from licensing and consulting services,
is recognized when our obligations to our client are fulfilled which is
determined when milestones in the contract are achieved. The Company's revenue
from seminar fees is related to one-day seminars and is recognized as earned
upon the completion of the seminar. We also recognize expense reimbursement from
clients as revenue for expenses incurred during certain jobs.

Stock Based Compensation

We account for share-based payments in accordance with Accounting Standards Codification (“ASC”) subject 718, Stock Compensation and accordingly we record compensation expense for share-based awards on the basis of a measurement of the grant date fair value of shares and restricted stock. awards using the Black-Scholes option pricing model.

Our stock compensation expense for stock options is recognized over the vesting
period of the award or expensed immediately under ASC 718 when stock or options
are awarded for previous or current service without further recourse.

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,
the Company's 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. Our deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.


Good will 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 our 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. We amortizable intangible assets
consist of licensing agreements, product licenses and registrations, and
intellectual property or trade secrets. Their estimated useful lives range
3 to 15 years.

Goodwill and indefinite-lived assets are not amortized but are subject to annual
impairment testing unless circumstances dictate more frequent assessments. We
perform 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, we
determine 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, we rely 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, our risk relative
to the overall market, our size and industry and other risks specific to us.
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 our 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 us to perform an impairment
test prior to scheduled annual impairment tests.

We performed our annual assessment of the fair value of our subsidiaries with significant goodwill and intangible assets on their respective balance sheets at
December 31, 2021, and determined that no impairment exists. No additional factors or circumstances existed at the March 31, 2022this would indicate a deficiency.

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