Item 1.01. Entry into a Material Definitive Agreement.
On February 8, 2022, Medicine Man Technologies,
Inc. (the “Company”) entered into a Modification Agreement (the “Modification Agreement”) with Nuevo Holding,
LLC, a wholly-owned subsidiary of the Company (the “RGA Purchaser”), Nuevo Elemental Holding, LLC, a wholly-owned subsidiary
of the Company (the “Elemental Purchaser” and together with the RGA Purchaser, the “Acquisition Subsidiaries”),
and William Ford (“Representative”), in his capacity as Representative under the Purchase Agreement, dated November 29, 2021,
by and among the Company, the Acquisition Subsidiaries, Representative, Reynold Greenleaf & Associates, LLC, a New Mexico limited
liability company (“RGA”), Elemental Kitchen and Laboratories, LLC (“Elemental” and together with RGA, the “Acquired
Companies”), and the parties identified as “Equityholders” named therein (the “Purchase Agreement”). The
Modification Agreement amended the terms of the Purchase Agreement to (i) exclude a parcel of real property owned by RGA and a loan made
by RGA from the Acquisitions (as defined below), (ii) increase the purchase price for the Acquisitions by $800,000 to account for certain
inventory recently acquired by one of the NFPs (as defined below), and (iii) make other amendments to provisions addressing Line Item
Adjustment multipliers, Base Cash Amount (in each case, as such terms are defined in the Purchase Agreement), and the payment of the cash
purchase price.
Also on February 8, 2022, the Acquisition Subsidiaries
acquired substantially all of the operating assets of RGA and all of the equity of Elemental and assumed specified liabilities of RGA
and Elemental pursuant to the terms of the Purchase Agreement (collectively, the “Acquisitions”). Pursuant to existing laws
and regulations in New Mexico, the cannabis licenses for certain facilities managed by RGA are held by two not-for-profit entities: Medzen
Services, Inc. (“Medzen”) and R. Greenleaf Organics, Inc. (“Greenleaf” and together with Medzen, the “NFPs”).
At the closing, Nuevo Holding, LLC gained control over the NFPs by becoming the sole member of each of the NFPs and replacing the directors
of the two NFPs with Justin Dye, the Company’s Chief Executive Officer and one of its directors, Nancy Huber, the Company’s
Chief Financial Officer, and Dan Pabon, the Company’s General Counsel, Chief Government Affairs Officer and Corporate Secretary.
On the same date, the RGA Purchaser entered into
two separate Call Option Agreements containing substantially identical terms with each of the NFPs (each, a “Call Agreement”).
Each Call Agreement gives the RGA Purchaser the right to acquire 100% of the equity or 100% of the assets of the applicable NFP for a
purchase price of $100 if, in the future, the New Mexico legislature adopts legislation that permits a NFP to (i) convert to a for-profit
corporation and maintain its cannabis license or (ii) sell its assets (including its cannabis license) to a for-profit corporation. The
RGA Purchaser will have one year after receipt of notice of the approval of such legislation from the NFPs to exercise its call option.
After purchase price adjustments and subject to
post-closing adjustments, the aggregate purchase price for the Acquisitions paid at closing was approximately $44.7 million, of which
approximately $27.7 million was paid in cash and $17.0 million was paid in the form of an unsecured promissory note issued by the RGA
Purchaser to RGA (the “Note”). The principal of the Note is payable on February 8, 2025, with interest payable monthly at
an annual interest rate of 5%. The Note provides for customary events of default, such as the failure to pay amounts due under the Note,
and certain bankruptcy, insolvency, reorganization, winding-up, composition or readjustment of debts, or receivership proceedings or similar
actions. Upon the occurrence and during the continuation of an event of default under the Note, among other remedies, RGA may declare
the unpaid principal amount of the Note, together with all accrued and unpaid interest thereon, to be immediately due and payable. In
addition to the foregoing, the Acquisition Subsidiaries may be required to make a potential “earn-out” payment of up to an
additional $4.5 million in cash to RGA and Representative based on the EBITDA of the acquired business for calendar year 2021.
The Company previously reported the terms of the
Purchase Agreement and the transactions contemplated thereby in Item 1.01 of the Company’s Current Report on Form 8-K filed on December
3, 2021. The foregoing description of the Acquisition, the Purchase Agreement, the Modification Agreement, the Call Option Agreements
and the Note does not purport to be complete and is qualified in its entirety by reference to the copies of the Purchase Agreement, the
Modification Agreement, the Form of Call Option Agreement and the Note attached hereto as Exhibits 2.1, 2.2, 2.3 and 4.1 and incorporated
by reference herein.