Item 1.01 Entry into a Material
Definitive Agreement.
On September 5, 2019 (the
“Execution Date”), Medicine Man Technologies (the “Company”), a Nevada corporation, entered into a
binding term sheet dated September 2, 2019 (the “Term Sheet”) with RSFCG, LLC, RFSCA LLC, RFSCB, LLC, RFSCEV,
LLC, RFSCED LLC, RFSCLV, LLC, RFSCG-1 LLC, and RFSCLVG LLC, which entities operate under the name RootsRX (collectively, the
“Targets”) pursuant to which the Company will purchase the membership interests of the Targets (the
“Acquisition”).
As consideration, the Company shall pay
a total purchase price of $15,000,000 (the “Purchase Price”) consisting of $9,750,000 in cash ($2,250,000 of which
is payable over a period of twelve months after the closing as set forth in the Term Sheet) and 1,779,661 shares of its common
stock, par value $0.001 per share. The 1,779,661 shares was determined by averaging the closing price of Company’s common
stock for the five (5) days prior to August 29, 2019, which equated to $2.95 per share. A portion of the stock consideration will
be subject to certain trading restrictions in the first year after issuance, to be defined in the Long-Form Agreement, as defined
below. In addition, claw-back language for twenty percent (20%) of the stock consideration will also be included in the Long-Form
Agreement, as defined below. The Purchase Price is predicated on Targets’ projected annual gross revenues at existing
stores and facility, with an EBITDA margin of no less than 17.5%, and may be subject to adjustment in certain instances as outlined
in the Term Sheet.
The Term Sheet provides for a closing on
or before May 31, 2020, unless the parties agree to an extension.
The obligations of the Company and Targets
under the Term Sheet and the Long-Form Agreement (as defined below), as applicable, are conditioned upon the satisfaction or mutual
waiver of certain closing conditions (the “Conditions”) on or before May 31, 2020 or unless the parties agree to a
mutual extension, including the following:
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i.
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regulatory approval relating to all applicable filings and expiration or early termination of any
applicable waiting periods;
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ii.
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regulatory approval of the Marijuana Enforcement Division and applicable local licensing authority
approval;
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iii.
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receipt of all material necessary, third party, consents and approvals;
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iv.
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each party's compliance in all material respects with the respective obligations under the Term
Sheet;
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v.
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a tax structure that is satisfactory to both the Company and Targets;
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vi.
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the execution of leases (at cannabis industry market prices) with right of first offer to purchase
the real property; and
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vii.
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the execution of employment agreements that are mutually acceptable to each party.
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The Term Sheet may be terminated by the
Targets if the Company fails to raise sufficient funding to effect on or before April 15, 2020, to effect the closing.
The Term Sheet also contemplates the entry
into an employment agreement with Robert Holmes, the sole owner of the Targets.
Under the terms of the Term Sheet, the
Company and the Targets agreed to mutual indemnification upon the terms and conditions outlined therein.
The Term Sheet contemplates the parties
entering into a long-form agreement and other ancillary documents to memorialize the Acquisition (the “Long-Form Agreement”)
upon the conclusion of all standard legal and business due diligence. In the event the Long-Form Agreement is not agreed to on
or before May 31, 2020 and all of the Conditions are either satisfied or waived, the Acquisition shall be consummated and governed
by the terms of the Term Sheet.
On September 6, 2019, the Company issued
a press release with respect to the foregoing, a copy of which is attached hereto as Exhibit 99.1.