Medicine Man Tech Inc

Greetings and welcome to the second quarter 2021 conference call and webcast for Schwoz. We are being hosted by Justin Dye, Chairman and Chief Executive Officer, and Nancy Huber, Chief Financial Officer. Following the presentation, management will take questions submitted via the web link found on Schwoz's Investor Relations website and in the earnings press release. I would also like to remind you that management's prepared remarks and answers to your submitted questions may contain forward-looking statements, which are subject to risks and uncertainties. The words expect, anticipate, could, estimate, believe, potential, will, should, project, and similar expressions, as they are related to choix and anticipated events, outcomes, and results, are such forward-looking statements. Investors are cautioned that our forward-looking statements involve risks and uncertainties that may cause actual events, outcomes, and results to differ materially from those anticipated by Schwoz at this time. Additional information on such risks and uncertainties is available in Schwoz's earnings release and in Schwoz's Form 10-K for the year ended December 31st, 2020 and its foreign chain Q for the quarter ended June 30th, 2021. In addition, other remarks are more fully described in Schwarz's public filing with the U.S. Security and Exchange Commission, which can be reviewed at www.sec.gov or on the company's investor relations website. I would now like to turn the call over to CEO and Chairman Justin Dai.

hello and thank you for joining us this afternoon i will provide a business update and our cfo nancy huber will review our second quarter financial results in detail before i conclude our presentation with some final thoughts we would then be happy to take your questions during the second quarter of 2021 the company announced the acquisition of southern colorado growers or scg and subsequently announced the signing of the acquisition of two drift dispensaries, bringing the number of overall Schwoz dispensaries to 19. The SCG acquisition includes 36 acres of land with outdoor cultivation capacity, as well as indoor greenhouse and hoop house cultivation facilities and equipment. SCG is the company's first major move into cultivation. and will provide high end premium cannabis directly to our Starbucks dispensaries, as well as significant production of biomass for our purple bees extraction and manufacturing facility. This acquisition was significant as it reaffirms our commitment to grow within Colorado. And as a result, we will demonstrate our overall vertical expansion quarter by quarter as expected and planned. During this quarter, we announced that our revenue increased to $30.7 million compared to $5.4 million during the same period last year, representing a 467% increase. The company's adjusted EBITDA for the quarter of 2021 was $10 million, representing 32.6% of revenue. I'm also pleased to report that we also recorded positive cash flow from operations of $1.4 million over the last six month period. Same store sales of the 17 Starbucks dispensaries when compared to last year prior to taking ownership of the assets were $21.5 million up 16%, 8% above the Colorado market as reported by BDS analytics. Our average basket size increased to $61.04 up 6.4%, and recorded customer transactions increasing as well to 357,056, up 8.9%. This data now includes our four Mesa organic stores acquired in April of 2020. Since completing our acquisitions, approximately 70% of our revenue is derived from retail and 30% from wholesale products. Along with strong revenue growth and adjusted EBITDA results, we continue to be encouraged with our retail results with 68.9% growth on a two-year basis. Wholesale results led by Purple Bee's distillate production also had another record-breaking sales quarter. We continue to improve our operations by executing our playbook in the areas of retail execution, marketing, merchandising, and procurement. Our growth team continues to leverage our in-house best practices in the areas of M&A integration, data analytics, and synergy realization to drive operational efficiencies. As for the federal and state government laws regarding cannabis legislation, in July of this year, Senate Majority Leader Chuck Schumer, Senate Finance Committee Chair Ron Wyden, and Senator Booker released a discussion draft of the Cannabis Administration and Opportunity Act. We applaud their efforts to engage in much needed dialogue around removing cannabis from the federal list of controlled substances. Federal cannabis reforms are seen to be especially urgent as more and more states legalize the adult and medical use of cannabis. To date, adult use of cannabis is legal in 18 states and 37 states have advanced laws to allow medical cannabis. Today, more than a majority of Americans believe cannabis should be legal, either for adult or medical use. We expect both chambers and parties will continue to look at financial reform in our cannabis laws in order to pass the Safe Banking Act so that we can continue to invest and reinvest in our customers and our communities. As always, we'll closely monitor any federal and state changes that would impact our industry and and are poised to make any changes necessary. We have been approved for home delivery of products to Aurora Suburb of Denver, Colorado, and will begin delivery in August. We are awaiting licensing approval for Denver. We are excited to add this service to meet our customers' demands. And now, let's move into Colorado cannabis market in general. Based on recent DDS analytics estimates, Colorado sold $586 million of adult use and medical cannabis product during the past quarter, representing approximately 8% growth year-over-year compared to $544 million recorded for the same quarter last year. I'm pleased to report that once again, Schwoz surpassed this number with 16% growth, which includes stores where we have year-over-year measurements. continuing to demonstrate to the market that we can outpace and capture market share in this growth industry. Turning to the future, we continue to evaluate additional opportunities across the cannabis industry in the areas of cultivation, manufacturing, and dispensaries, not just in Colorado, but in other states as well. Our current criteria for potential acquisitions includes the following, revenue growth, or growth potential that exceeds Colorado's averages, EBITDA, profitability with synergy opportunities, attractive acquisition prices that are accretive to our shareholders, and provides additional products in attractive locations. Any announcements regarding expansion intentions will be made once we've reached definitive agreements with prospective partners. Let me also reiterate that we believe our home state of Colorado continues to represent attractive geography to build out our platform as it provides us with the opportunity to acquire targets that are sophisticated and profitable and have already weathered the early boom and bust cycle of the industry. And now I'd like to turn the discussion over to Nancy to continue our second quarter financial review.

Thank you, Justin. I would now like to review our financial results for the quarter ended June 30th, 2021. As Justin mentioned at the top of the presentation, total revenue for SWAS during the quarter was $30.7 million, representing an increase of approximately 467% compared to $5.4 million during the same period in 2020. Also, just a reminder that in the first quarter of 2021, we changed our segment reporting to align how we now manage and evaluate business performance today. Therefore, we are now reporting by retail, which includes dispensary, and wholesale, which includes MIPS, Big Tomato, and Success Nutrients, and other, which includes revenue from consulting and other small revenue areas. Retail sales for this quarter were $21.5 million compared to $0.7 million reported for the same period in 2020. Wholesale operations increased to $9.2 million from $4.1 million compared to the same period last year. Other sales decreased to $0.02 million from $0.6 million due to a reduced focus on consulting. The continued increase in retail and wholesale revenue is attributed to the acquisition of Mesa Organics in April of 2020, and the completion of the acquisition of Starbucks assets between December and March of 2021, as well as same store sales growth. Total cost of goods and services were $15.8 million during the three months ended June 30th, 2021, compared to $3.1 million during the same period in 2020. This increase was due to added dispensaries and improved sales from our retail and wholesale operations. Gross profit increased $14.9 million during the three months ended June 30th, 2021, compared to $2.3 million during the same period in 2020. Gross profit margin increased as a percentage of revenue to 48.5% from 42.7%. mostly driven by the strength of Starbucks acquisitions and our consolidated purchasing approach. Total operating expenses were $10.5 million during the second quarter, compared to $8.7 million during the same period in 2020. The higher expenses were due to increasing selling, general and administrative expenses, and salaries from the addition of the dispensaries. Q2 2021 adjusted EBITDA was $10 million representing 32.6% of revenue. This number 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 in our press release for Q2 2021 adjusted EBITDA reconciliation for adjustments from income from operations for the quarter. This can be found on our website at schwoz.com in the investor section under press releases. Q2 2021 net income was $4.4 million or a gain of approximately 10 cents per share on a basic weighted average as compared to a net loss of $6.6 million or a loss of approximately 16 cents per share on a basic weighted average during the three months ended June 30th, 2020. The company generated positive operating cash flow of $1.4 million and $19.9 million in total cash flow for the first two quarters with $21.1 million in cash and cash equivalents at the end of Q2 2021. Operating cash flow generated in Q2 was used for strategic inventory purchases to be used in the third quarter of this year. Turning now to the outlook of 2021, We are reiterating our 2021 guidance, which excludes transactions that are announced but not closed. The annual revenue guidance is $110 million to $125 million, and projected annual adjusted EBITDA is between $30 million and $36 million. The company remains optimistic regarding the full year based upon reported results to date and the SEG acquisition. Closing the drift dispensaries and feature acquisitions will be additive to these projections. Thank you for your time today, and now I'd like to turn back to Justin, who will open the call to questions and answers.