Item 1.01. Entry into a Material Definitive Agreement.
On August 20, 2021, Double Brow, LLC (the “Purchaser”),
a wholly owned subsidiary of Medicine Man Technologies, Inc. (the “Company”), entered into an Asset Purchase Agreement (the
“APA”) with Brow 2, LLC (the “Seller”) and Brian Welsh (the “Seller Owner”), pursuant to which the
Purchaser will purchase all of the assets of the Seller that are used in or held for use in or are related to the operation of the Seller’s
business of indoor cultivation other than certain expressly excluded assets, and assume post-closing obligations under contracts acquired
as part of the Asset Purchase, on the terms and subject to the conditions set forth in the APA (the “Asset Purchase”).
The aggregate purchase price for the Seller’s
assets will be $6.7 million payable in cash, subject to adjustment at closing based on Seller’s marijuana plant inventory. The Purchaser
has placed into escrow a $400,000 deposit on the purchase price with an escrow agent in anticipation of closing. The Company will hold
back $500,000 of the purchase price from the closing payment as collateral for potential claims for indemnification from the Seller and
the Seller Owner under the APA. Any portion of the held-back purchase price not used to satisfy indemnification claims, plus 3% interest
per annum, will be released to the Seller on the first anniversary of the closing date of the Asset Purchase. In addition, at the closing,
the Purchaser will reimburse the Seller for up to $200,000 of the costs incurred by Seller before the closing relating to a construction
project at the Seller’s facility.
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 Seller’s business before the closing of the Asset Purchase, and confidentiality and non-solicitation undertakings
by the Seller, among others. The APA also contains certain termination rights for each of the Purchaser and the Seller (on its own behalf
and on behalf of the Seller Owner), 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 February 20, 2022.
The closing of the Asset Purchase is subject to
other closing conditions customary for a transaction of this nature, including, without limitation, repayment of Seller debt and 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 [from cash on hand].
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 Asset Purchase are forward-looking statements. In some cases, you can identify forward-looking statements
by the following words: “may,” “will,” “expect,” “plan,” “believe,” “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.