Item 8.01. Other Matters.
On March 11, 2022, the Company entered into an
Asset and Personal Goodwill Purchase Agreement (the “Purchase Agreement”) with Double Brow, LLC, a wholly-owned subsidiary
of the Company (the “Purchaser”), Urban Health & Wellness, Inc. d/b/a Urban Dispensary (“Urban Dispensary”),
Productive Investments, LLC (“Productive Investments”), and Patrick Johnson (together with Productive Investments, the “Equityholders”),
pursuant to which the Purchaser will purchase (i) all of Urban Dispensary’s assets used or held for use in Urban Dispensary’s
business of owning and operating a retail marijuana store and a grow facility, each located in Denver, Colorado, and (ii) all of Equityholders’
personal goodwill arising from Equityholders’ independent, separate, individual and personal efforts relating to Urban Dispensary’s
business on the terms and subject to the conditions set forth in the Purchase Agreement (the “Asset Purchase”), and assume
obligations under contracts acquired as part of the Asset Purchase.
The aggregate consideration for the Asset
Purchase will be up to $1,317,500 million in cash and shares of the Company’s common stock in an amount equal to $1,900,000
divided by the price per share of the Company’s common stock as of market close on the first trading day immediately before
the closing. The Company will deposit $30,000 of the cash portion of the purchase price as an earnest money deposit with Urban
Dispensary. At the closing, (i) the Company will use the cash portion of the purchase price to pay off certain indebtedness and
transaction expenses of Urban Dispensary and then pay the balance to Urban Dispensary, and (ii) the Company will issue the stock
portion of the purchase price directly to the Equityholders. The stock consideration is subject to post-closing reduction if any of
the actual marijuana product inventory, marijuana plant inventory or cash at closing is less than certain targets stated in the
Purchase Agreement. The Company will hold back $288,000 of the stock consideration at closing as collateral for potential claims for
indemnification from Urban Dispensary under the Purchase Agreement. Any portion of the held back cash consideration not used to
satisfy indemnification claims will be released to Urban Dispensary on the 18-month anniversary of the closing date of the Asset
Purchase.
The Company will enter into lock-up agreements
with the recipients of the stock consideration providing limitations on the resale of the shares of Company common stock received as part
of the consideration.
The Purchase
Agreement contains customary representations and warranties, covenants and indemnification provisions for a transaction of this nature,
including, without limitation, covenants regarding the operation of Urban Dispensary’s business before the closing of the Asset
Purchase, and confidentiality, non-compete and non-solicitation undertakings by Urban Dispensary and the Equityholders. The Purchase Agreement
also contains certain termination rights for each of the Purchaser (on its own behalf and on behalf of the Company) and Urban Dispensary
(on its own behalf and on behalf of the Equityholders), subject to the conditions set forth in the Purchase Agreement, including, without
limitation, if the closing has not occurred on or before June 15, 2022. The earnest money deposit will be released to Urban Dispensary
if the Purchaser (on its own behalf or on behalf of the Company) terminates the Purchase Agreement under certain circumstances.
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 issuances
of the shares of the Company’s common stock at the closing of the Asset Purchase will be exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act and Securities
Act Rule 506(b). The Company will issue such shares in a privately negotiated transaction. The Equityholders are sophisticated and represented
in writing that they are accredited investors and will acquire the securities for their own accounts for investment purposes. Further,
the Purchase Agreement states that the shares in question have not been registered under the Securities Act and cannot be sold or otherwise
transferred without registration or an exemption therefrom. A legend will be placed on any certificates representing such shares referencing
the restricted nature of the shares.
Forward-Looking Statements
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 Acquisition, are forward-looking statements. In some cases, you
can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,”
“should,” “expect,” “intend,” “plan,” “anticipate,” “believe,”
“approximately,” “potential,” or the negative of these terms or other words of similar meaning in connection with
a discussion of the Asset Purchase, 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 intentions, plans, 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 outside of the Company’s control 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: (i) the Company’s ability to consummate the Asset Purchase or the risk of any event, change or other circumstance
that could give rise to the termination of the Purchase Agreement; (ii) the risk that cost savings and any revenue synergies from the
Asset Purchase may not be fully realized or may take longer than anticipated to be realized; (iii) the risk that the integration of Urban
Dispensary’s assets and operations will be materially delayed or will be more costly or difficult than expected or that the Company
is otherwise unable to successfully integrate Urban Dispensary’s assets and operations into the Company’s business; (iv) the
failure to obtain the necessary approvals and consents from third parties and regulators to consummate the Asset Purchase, or any other
consents required under the Purchase Agreement; (v) the ability to obtain required governmental approvals of the Asset Purchase (and the
risk that such approvals may result in the imposition of conditions that could adversely affect the Company or the expected benefits of
the Asset Purchase); (vi) the failure of the closing conditions in the Purchase Agreement to be satisfied, or any unexpected delay in
closing the Asset Purchase; and (vii) the Company’s ability to fund the Asset Purchase. All forward-looking statements speak only
as of the date of this Current Report on Form 8-K. 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.