Item 1.01 Entry into a Material
Definitive Agreement.
On August 29, 2019 (the “Execution
Date”), Medicine Man Technologies (the “Company”), a Nevada corporation, entered into a binding term sheet (the
“Term Sheet”) with High Country Supply d/b/a Colorado Harvest Company (“CHC” ) pursuant to which the
Company will purchase 100% of the capital stock or assets of CHC (the “Acquisition”).
As consideration, the Company shall pay
a total purchase price of $12,500,000 (the “Purchase Price”) consisting of $4,000,000 in cash and 2,881,356 shares
of its common stock, par value $0.001 per share. The 2,881,356 shares was determined by averaging the closing price of Company’s
common stock for the five (5) days prior to July 8, 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-five percent (25%) of the stock consideration will also be included in the Long-Form
Agreement, as defined below.
The Purchase Price is predicated on
projected 2019 gross revenues of CHC. The Purchase Price will be adjusted to reflect the actual 2019 gross revenues as of
December 31, 2019 and will be memorialized in the Long Form Agreement, as defined below. However, no adjustment in the
Purchase Price will be made if the variation between CHC’s actual and projected 2019 sales is plus or minus ten percent
(10%). In addition, the Purchase Price may be adjusted if certain EBITDA targets are not met.
The Term Sheet provides for a closing on
or before May 1, 2020, unless the parties agree to an extension.
The obligations of the Company and CHC
under the Term Sheet are conditioned upon the satisfaction or mutual waiver of certain closing conditions (the “Conditions”)
on or before May 1, 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 CHC;
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vi.
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the execution of leases with right of first refusals to acquire any relevant real estate property;
and
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vii.
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employment agreements that are mutually acceptable to each party.
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Under the terms of the Term Sheet, the
Company and CHC 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 1, 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 4, 2019, the Company issued
a press release with respect to the foregoing, a copy of which is attached hereto as Exhibit 99.1.