Item 1.01. Entry into a Material Definitive Agreement..
On June 1, 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 Amendment
to Asset Purchase Agreement (the "Amendment") 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 under the Asset Purchase Agreement, dated April 21,
2023, by and among the Company, Everest Purchaser, Seller, the Equityholders,
and Brook Laskey, as Representative (as amended, the "Everest Purchase
Agreement"). The Amendment amended the terms of the Everest Purchase Agreement
to (i) revise the Closing Purchase Price by virtue of amendments to the
Estimated Closing Purchase Price, the Closing Inventory Statement and the Kirk
Payment, (ii) warrant that all outstanding indebtedness as the date of the
Agreement which include certain Promissory Notes between Seller and the Holders
have been paid in full and the Holders have acknowledged the receipt of payment
in full, and (iii) make other amendments to provisions addressing, among other
things, Financial Statements of the Seller, Real Estate Lease Obligations and
Related Guarantees, and direction of shares to the Equityholders. All
capitalized terms herein are defined in the Purchase Agreement and the Amendment
to the Purchase Agreement.
On June 1, 2023, following execution of the Amendment, Everest Purchaser
acquired substantially all of the operating assets of Seller and assumed
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"). At the closing, Everest
Purchaser gained control over the NFPs by replacing the officers and directors
of the NFP with officers of the Company. On the same date, Everest Purchaser
entered into a separate Call Option Agreement (the "Call Agreement"). The Call
Agreement gives Everest Purchaser the right to acquire 100% of the equity or
100% of the assets of the NFP for a purchase price of $100 if, in the future,
the New Mexico legislature adopts legislation that permits the 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.
Everest Purchaser will have one year after receipt of notice of the approval of
such legislation from the NFP to exercise its call option.
After purchase price adjustments and subject to post-closing adjustments, the
aggregate purchase price for Everest Acquisition paid at closing was
approximately $37.19 million, of which $11.69 million was paid in cash, $17.5
million was paid in the form of an unsecured promissory note issued by Everest
Purchaser to Seller (the "Everest Note"), and $8 million was paid in Company
common stock in the amount of 7,619,047 shares. The Everest Note 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"). Two Initial Principal
Payments of $1,250,000 are due to the Seller at 90 and 180 days. The Note
provides for customary events of default such as failure to pay amounts due
under the Note, and certain bankruptcy, insolvency, reorganization, winding-up,
composition or readjustments 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, Seller 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, Everest Purchaser may
be required to make 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").
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 Everest Note. The
Company and Everest Purchaser have also agreed to indemnify Seller, the
. . .
Item 2.01. Completion of Acquisition or Disposition of Assets.
The information contained in Item 1.01 above is incorporated herein by
reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 above is incorporated herein by
reference.
Item 3.02. Unregistered Sales of Equity Securities.
The information contained in Item 1.01 above is incorporated herein by
reference.
The issuance of the shares of common stock at the closing of the Everest
Acquisition were 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. The Company will issue the shares in a privately negotiated
transaction and the Seller and the Equityholders will acquire the securities for
their own accounts for investment purposes. A legend will be placed on the
certificates representing shares of common stock referencing the restricted
nature of the shares.
Item 7.01. Regulation FD Disclosure.
On June 5, 2023, the Company issued a press release announcing the closing of
the Everest Acquisition. A copy of the press release is furnished as Exhibit
99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The information under Item 7.01 of this Current Report on Form 8-K and the press
release attached as Exhibit 99.1 are being furnished by the Company pursuant to
Item 7.01. In accordance with General Instruction B.2 of Form 8-K, the
information under Item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1, shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. In addition, this information shall not be deemed
incorporated by reference into any of the Company's filings with the Securities
and Exchange Commission, except as shall be expressly set forth by specific
reference in any such filing.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Any financial statement information required under this Item 9.01 will be filed
by amendment to the original Current Report on Form 8-K no later than 71
calendar days after the date on which this Current Report on Form 8-K was
required to be filed.
(b) Pro Forma Financial Information
Any pro forma financial information required under this Item 9.01 will be filed
by amendment to the original Current Report on Form 8-K no later than 71
calendar days after the date on which this Current Report on Form 8-K was
required to be filed.
(d) Exhibits
Exhibit No. Description
2.1 * Asset Purchase Agreement, dated April 21, 2023, by and among
Medicine Man Technologies, Inc., Evergreen Holdco, LLC,
Sucellus, LLC, Brook Laskey, as Representative, and the
Equityholders named therein (Incorporated by reference to
Exhibit 2.1 to Medicine Man Technologies, Inc.'s Current Report
on Form 8-K filed April 26, 2023 (Commission File No.
000-5540))
2.2 Amendment to Asset Purchase Agreement, dated June 1, 2023, by
and among Medicine Man Technologies, Inc., Evergreen Holdco,
LLC, Sucellus, LLC, Brook Laskey, as Representative, and the
Equityholders named therein
2.3 Call Option Agreement, dated June 1, 2023, by and between
Evergreen Holdco, LLC and Sucellus, LLC
4.1 Promissory Note, dated June 1, 2023, by and between Evergreen
Holdco, LLC and Sucellus, LLC
99.1 Press Release, dated June 5, 2023
104 Cover Page Interactive Data File (embedded within the Inline
XBRL document)
* Certain information has been redacted pursuant to Instruction 5 to Item 1.01
of Form 8-K and Item 601(a)(6) of Regulation S-K. The Company hereby undertakes
to supplementally furnish any redacted information to the SEC upon request.
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