Item 1.01. Entry into a Material Definitive Agreement.
Asset Purchase Agreement
On June 25, 2021, Medicine Man Technologies, Inc.
(the “Company”) entered into an Asset Purchase Agreement (the “APA”) with Double Brow, LLC, a wholly-owned subsidiary
of the Company (the “Purchaser”), BG3 Investments, LLC (“BG3”), Black Box Licensing, LLC (“Black Box”,
and together with BG3, individually, “Seller” and collectively, “Sellers”), and Brian Searchinger, the sole equityholder
of BG3 and an equityholder of Black Box, pursuant to which the Purchaser will (i) purchase the Sellers’ assets used in or held for
use in or related to the operation of the Sellers’ business of distributing, marketing and selling recreational cannabis products,
other than certain excluded assets (the “Asset Purchase”), and (ii) assume obligations under contracts acquired as part of
the Asset Purchase, in each case, on the terms and subject to the conditions set forth in the APA.
The aggregate purchase price for the Seller’s
assets will be approximately $3.5 million (subject to adjustment for actual inventory levels at closing of the Asset Purchase), (i) 54.3%
of which will be paid in cash, with 15.8% of such cash payment to be paid to BG3 and 84.2% of such cash payment to be paid to Black Box,
and (ii) 45.7% of which will be paid in unregistered shares of the Company’s common stock to BG3 based on the closing price per
share of the Company’s common stock on the trading day immediately before the closing date of the Asset Purchase. The Company will
hold back $350,000 as collateral for potential claims for indemnification from the Sellers and Mr. Searchinger under the APA (the “Holdback
Consideration”). Any portion of the Holdback Consideration not used to satisfy indemnification claims will be released to the Sellers
as follows: (i) 34% of the Holdback Consideration will be released on January 1, 2022; (ii) 33% of the Holdback Consideration will be
released on June 30, 2022; and (iii) 33% of the Holdback Consideration will be released on December 31, 2022.
The APA contains customary representations and
warranties, covenants and indemnification provisions for a transaction of this nature, including, without limitation, covenants regarding
the operation of the Sellers’ business before the closing of the Asset Purchase, and confidentiality, non-compete and non-solicitation
undertakings by the Sellers and Mr. Searchinger. The APA also contains certain termination rights for each of the Purchaser, the Company
and the Sellers (on their own behalf and behalf of Mr. Searchinger), subject to the conditions set forth in the APA, including, without
limitation, if the closing of the Asset Purchase has not occurred on or before December 25, 2021.
The closing of the Asset Purchase is subject
to closing conditions customary for a transaction of this nature, including, without limitation, obtaining licensing approval from the
Colorado Marijuana Enforcement Division and local regulatory authorities. The Company expects to fund the cash portion of purchase price
of the Asset Purchase from cash on the Company’s balance sheet.
The summary of the APA and the transactions contemplated
thereby does not purport to be complete and is subject to, and qualified in its entirety by the full text of the APA, which is filed as
Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
Forward-Looking Statements and Limitation of
Representations
This Current Report on Form 8-K contains “forward-looking
statements.” All statements contained in this Current Report on Form 8-K other than statements of historical fact, including statements
regarding the closing of the Asset Purchase are forward-looking statements. In some cases, you can identify forward-looking statements
by the following words: “may,” “will,” “expect,” “plan,” “believe,” “approximately,”
“potential,” or the negative of these terms or other comparable terminology, although the absence of these words does not
necessarily mean that a statement is not forward-looking. Forward-looking statements are based upon the Company’s current assumptions,
expectations and beliefs concerning future developments and their potential effect on the Company and the Asset Purchase. This information
may involve known and unknown risks, uncertainties and other factors which may cause actual events, results, performance or achievements
to be materially different from the future events, results, performance or achievements expressed or implied by any forward-looking statements.
Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although the Company believes
that its plans, intentions and expectations reflected in or suggested by the forward-looking statements in this Current Report on Form
8-K are reasonable, the Company cannot assure stockholders and potential investors that these plans, intentions or expectations will be
achieved. Factors and risks that may cause or contribute to actual events, results, performance or achievements differing from these forward-looking
statements include, but are not limited to, for example, the Company’s ability to consummate the Asset Purchase. Except to the extent
required by law, the Company undertakes no obligation to update or revise any forward-looking statements, whether because of new information,
future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
The representations and warranties of the Company
contained in the APA have been made solely for the benefit of the parties thereto. In addition, such representations and warranties (i)
have been made only for purposes of the APA, (ii) are subject to materiality qualifications contained therein which may differ from what
may be viewed as material by stockholders and investors, (iii) were made only as of the date of the APA or such other date as is specified
therein, as applicable, and (iv) have been included in the APA for the purpose of allocating risk between the contracting parties rather
than establishing matters as facts.
The APA, the summary of the APA and the other
disclosures included in this Current Report on Form 8-K are intended to provide stockholders and investors with information regarding
the terms of the APA, and not to provide stockholders and investors with any other factual information regarding the Company or its subsidiaries
or their respective business. You should not rely on the representations and warranties in the APA or any descriptions thereof as characterizations
of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the
subject matter of the representations and warranties may change after the date of the APA, which subsequent information may or may not
be fully reflected in the Company’s public disclosures. Other than as disclosed in this Current Report on Form 8-K, as of the date
of this Current Report on Form 8-K, the Company is not aware of any material facts that are required to be disclosed under the federal
securities laws that would contradict the representations and warranties in the APA. The Company will provide additional disclosure in
its public reports to the extent that it is aware of the existence of any material facts that are required to be disclosed under federal
securities laws and that might otherwise contradict the representations and warranties contained in the APA and will update such disclosure
as required by federal securities laws. Accordingly, the APA should not be read alone, but should instead be read in conjunction with
the other information regarding the Company and its subsidiaries that has been, is or will be contained in, or incorporated by reference
into, the Forms 10-K, Forms 10-Q, Forms 8-K, proxy statements, registration statements and other documents that the Company files with
the SEC.