DEF 14A: Schwazze Seeks Stockholder Approval for Director Elections, Equity Plan Amendment, and Share Authorization Increase

Medicine Man Technologies, Inc., doing business as Schwazze, is holding its 2024 Annual Meeting of Stockholders to vote on key proposals including the election of directors, ratification of the independent accountant, amendments to the equity incentive plan and articles of incorporation, and executive compensation.

Summary

• Medicine Man Technologies, Inc., also known as Schwazze, will hold its 2024 Annual Meeting of Stockholders on June 20, 2024, in Denver, CO.
• Stockholders will vote on the election of five Class A directors, including Jonathan Berger, Jeffrey Cozad, Kathy Vrabeck, Paul Montalbano, and Bradley Stewart, each for a two-year term.
• The meeting will also include a vote to ratify the appointment of Baker Tilly US, LLP as the company's independent public accountant for the fiscal year ending December 31, 2024.
• Stockholders will consider an amendment to the company's 2017 Equity Incentive Plan to increase the number of shares issuable from 18,500,000 to 22,200,000.
• An amendment to the company's Articles of Incorporation will be voted on, which would increase the total number of authorized common shares from 250,000,000 to 275,000,000.
• An advisory, non-binding vote on the compensation of the company's named executive officers will also take place.
• As of April 22, 2024, the record date, there were 78,248,389 shares of Common Stock and 82,185 shares of Series A Cumulative Convertible Preferred Stock outstanding and entitled to vote.
• The Series A Preferred Stock is entitled to cast an aggregate of 88,728,416 votes.

Sentiment

Score: 7

Explanation: The document is a standard proxy statement, presenting information in a neutral and factual manner. The proposals are generally positive for the company's flexibility and growth potential, but there are also potential risks associated with dilution. Overall, the sentiment is slightly positive.

Positives

• The proposed increase in authorized shares provides flexibility for future acquisitions, financings, and general corporate purposes.
• The equity incentive plan amendment aims to attract and retain talent by offering competitive equity compensation.
• The company is engaging in sound corporate governance practices by seeking stockholder ratification of the independent accountant appointment.

Negatives

• If the company issues additional shares, the ownership interests of the holders of our Common Stock will be diluted.
• If the company issues shares of Preferred Stock, the shares may have rights, preferences and privileges senior to those of its Common Stock.

Risks

• Failure to approve the equity incentive plan amendment may limit the company's ability to attract and retain qualified personnel.
• Issuance of additional shares could dilute existing stockholders' ownership.
• The advisory vote on executive compensation, while non-binding, could influence future compensation decisions if a significant number of unfavorable votes are cast.

Future Outlook

The Board believes that it is advisable to have a greater number of authorized shares of Common Stock available for issuance in connection with acquisitions and mergers, public or private financing, and various general corporate programs and purposes.

Management Comments

• The Board of Directors recommends a vote FOR the director nominees.
• The Board of Directors recommends you vote FOR proposal 2, proposal 3, proposal 4, and proposal 5.

Industry Context

The document notes that consolidation of the cannabis industry is widely expected to continue and may accelerate, highlighting the importance of having sufficient authorized shares for potential acquisitions and mergers.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it mentions that equity compensation is an integral part of employee compensation in the competitive cannabis industry, suggesting that the company's equity plan is aligned with industry practices for attracting and retaining talent.

Management Changes

Related Party Transactions

• The Company has participated in several transactions involving Dye Capital, Dye Capital Cann Holdings, LLC (Dye Cann I), Dye Capital Cann Holdings II, LLC (Dye Cann II), and Dye Capital LLLP (Dye LLLP).
• On June 13, 2023, Dye LLLP, an entity owned by Mr. Dye, indirectly provided a loan in the amount of approximately $2.3 million to Lakewood Wadsworth Partners, LLC (Lakewood Landlord) to acquire property in the Lakewood neighborhood of Denver, Colorado for the purpose of leasing such property to the Company.
• The Company also acquires certain advertising and marketing services from Tella Digital, an on-premises digital experience solution, of which Mr. Dye is a partial owner and Chairman of the Board.
• On February 26, 2021, the Company entered into a Securities Purchase Agreement (the CRW SPA) with CRW pursuant to which the Company issued and sold 25,350 shares of Series A Preferred Stock to CRW at a price of $1,000 per share for aggregate gross proceeds of $25,350,000.
• On December 7, 2021, the Company entered into a Securities Purchase Agreement with Cozad Investments, LP pursuant to which the Company issued an Investor Note in the aggregate principal amount of $250,000 to Cozad Investments, LP for $245,000 in cash.
• On February 26, 2021, the Company entered into the CRW SPA with CRW, of which Marc Rubin is a beneficial owner.
• On December 7, 2021, the Company entered into a Securities Purchase Agreement with The Rubin Revocable Trust U/A/D 05/09/2011 (the Rubin Revocable Trust) pursuant to which the Company issued an Investor Note in the aggregate principal amount of $100,000 to the Rubin Revocable Trust for $98,000 in cash.
• On December 7, 2021, the Company entered into a Securities Purchase Agreement with Jeff Garwood pursuant to which the Company issued an Investor Note in the aggregate principal amount of $300,000 to Mr. Garwood for $294,000 in cash.
• On December 7, 2021, the Company entered into a Securities Purchase Agreement with Pratap Mukharji pursuant to which the Company issued an Investor Note in the aggregate principal amount of $200,000 to Mr. Mukharji for $196,000 in cash.
• The Company has participated in several transactions involving entities owned or affiliated with one or more of its former directors or 5% or greater beneficial owners that are affiliated with Star Buds and/or the Star Buds Acquisitions.

Stakeholder Impact

• Approval of the proposals could impact shareholders through potential dilution or increased company flexibility.
• Employees may benefit from the equity incentive plan amendment, which could enhance their compensation packages.
• The company's ability to execute its business strategy could be affected by the outcome of the votes, impacting customers and suppliers.

Next Steps

• Stockholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold its Annual Meeting of Stockholders on June 20, 2024, to discuss and vote on the proposals.

Key Dates

Keywords

proxy statement, annual meeting, stockholders, directors, equity incentive plan, authorized shares, executive compensation, Baker Tilly, Schwazze, Medicine Man Technologies