Item 1.01. Entry into a Material Definitive Agreement.
On April 21, 2023, Medicine Man Technologies, Inc. (the “Company”) and the Company’s indirect wholly-owned
subsidiary, Evergreen Holdco, LLC, a New Mexico limited liability company (the “Everest Purchaser”), entered into an Asset Purchase
Agreement with Sucellus, LLC, a New Mexico limited liability company (“Seller”), James Griffin, Brook Laskey, William Baldwin,
Andrew Dolan, and Greg Templeton (the “Equityholders”), and Brook Laskey, as Representative (the “Everest Purchase
Agreement”), pursuant to which Everest Purchaser will acquire substantially all of the operating assets of Seller and assume specified
liabilities of Seller, subject to the terms and conditions set forth in the Everest Purchase Agreement (the “Everest Acquisition”).
Pursuant to existing laws and regulations in New Mexico, the cannabis licenses for the facilities managed by Seller are held by a not-for-profit
entity, Everest Apothecary, Inc., (the “NFP” or “Everest Apothecary”).
Seller is
engaged in the business of serving as a management and consulting company, providing managerial and consulting services to Everest Apothecary
and supporting Everest Apothecary to promote, support, and develop sales and distribution of THC-based products. Everest Apothecary in
the business of cultivating, manufacturing, processing, distributing, and dispensing marijuana and cannabis derived products in New Mexico.
Everest Apothecary is a licensed medical and retail
cannabis provider that operates 14 dispensaries, one cultivation facility, and one manufacturing facility. The dispensaries are located
in or near Albuquerque, Santa Fe, Las Cruces, Los Lunas, Sunland Park, Belen, and Texico, New Mexico. Everest Apothecary has approximately
16,000 square feet of indoor cultivation capacity and approximately 34,000 square feet of outdoor cultivation capacity between two facilities
located in Estancia and Albuquerque, New Mexico, as well as approximately 8,500 square feet of manufacturing capacity in Albuquerque,
New Mexico. The State of New Mexico currently allows medical cannabis and adult use recreational cannabis sales.
The aggregate purchase price for Everest
Acquisition will be up to approximately $38 million (subject to customary adjustments for working capital, inventory, debt, seller
transaction costs, and cash), payable $12.5 million in cash, $17.5 million in the form of an unsecured promissory note, the
principal of which is payable on the last day of the calendar quarter following the fourth anniversary of the closing of the Everest
Acquisition (“Closing”) with interest payable quarterly at an annual interest rate of 5% (the “Everest
Note”), and $8 million in Company common stock priced at Closing, as well as a potential “earn-out” payment of up to an
additional $8 million, payable in Company common stock priced at Closing, based on the revenue performance of certain retail stores
of Everest Apothecary for 12 months following such store opening for business (collectively, the “Acquisition
Consideration”).
As a condition to the closing of the Everest Acquisition, Everest
Purchaser must be satisfied that it will have control of the board of directors of the NFP following Closing. Further, the Everest
Purchase Agreement contemplates that Everest Purchaser will enter into a Call Option Agreement with the NFP that would provide
Everest Purchaser with an option to purchase the equity or assets of the NFP, including the cannabis licenses, at such time as such
an acquisition would be permitted under applicable New Mexico laws and regulations.
The Everest Purchase Agreement provides for potential
indemnification claims by the Company and Everest Purchaser against Everest Apothecary and the Equityholders subject to certain limitations
and conditions. Permitted indemnification claims will be first offset against the Note. The Company and Everest Purchaser have also agreed to
indemnify Seller, the Equityholders and certain other persons subject to certain limitations and conditions.
The Everest 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 Everest Apothecary’s business before Closing, and confidentiality, non-disparagement, non-solicitation
and non-competition undertakings by the Equityholders, among others. The Everest Purchase Agreement also contains certain termination
rights for parties, subject to the conditions set forth in the Everest Purchase Agreement, including, without limitation, if the Closing
has not occurred on or before July 20, 2023. The Closing is subject to other closing conditions customary for a transaction of this
nature, including, without limitation, obtaining approval from the New Mexico state and local regulatory authorities. The Company expects
to fund the cash portion of the Acquisition Consideration from the proceeds of the Company’s secured convertible note offering and
cash on hand from operations.
The foregoing description of the Everest Acquisition
and the Everest Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Everest Purchase
Agreement, which is attached hereto as Exhibit 2.1 and incorporated by reference herein.
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, 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 Everest Acquisition, 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 Everest Acquisition. 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 Everest Acquisition or the risk of any event, change or
other circumstance that could give rise to the termination of the Everest Purchase Agreement; (ii) the risk that cost savings and
any revenue synergies from the Everest Acquisition may not be fully realized or may take longer than anticipated to be realized; (iii) the
risk that the integration of Seller’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 Seller’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 Everest
Acquisition, or any other consents required under the Everest Purchase Agreement; (v) the ability to obtain required governmental
approvals of the Everest Acquisition (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 Everest Acquisition); (vi) the failure of the closing conditions in the Everest
Purchase Agreement to be satisfied, or any unexpected delay in closing the Everest Acquisition; and (vii) the Company’s ability
to fund the Everest Acquisition. 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.