SHWZ Medicine Man Technologies Inc (CE)

Item 8.01 Other Events.

On May 10, 2023, Smoke Holdco, LLC (“Smokey’s Buyer”), a wholly-owned subsidiary of the Company, acquired certain of the operating assets of Smokey’s, and assumed specific obligations of Smokey’s’ pursuant to the terms of the Asset Purchase Agreement, dated January 25, 2023 (the “Purchase Agreement”), among Smokey’s Buyer, Smokey’s, Jeremy Lewchuk, Thomas Wilczynski, and T&B Holdings, LLC (together with Jeremy Lewchuk and Thomas Wilczynski, the “Equityholders”), and Thomas Wilczynski, as Representative. Pursuant to the Purchase Agreement, Smokey’s Buyer acquired substantially all of Smokey’s’ assets related to its retail and medical cannabis stores located in Garden City, Colorado and Fort Collins, Colorado (other than assets expressly excluded from the acquisition under the Purchase Agreement), which included, the associated leases and cannabis licenses, and assumed certain liabilities for contracts acquired under the Purchase Agreement (collectively, the “Acquisition”).

After purchase price adjustments for transaction and related expenses, the aggregate consideration for the Acquisition was approximately $7.5 million, of which approximately $3.75 million was paid in cash and $3.15 million was paid in Company stock at a share price of $1.092 per share. Total shares issued at the closing of the Purchase Agreement equaled 3,434,066 of Company common stock. The stock consideration is subject to post-closing reduction if any of the actual cannabis product inventory or cash at closing is less than certain targets stated in the Purchase Agreement. The company held back from issuance $600,000 worth of Company common stock (the price of such shares to be determined based on the Company’s closing stock price on November 11, 2024), and $150,000 from the cash consideration, as collateral for potential claims for indemnification from Smokey’s under the Purchase Agreement. Any of the purchase price held back and not used to satisfy indemnification will be issued and released on November 11, 2024. The Company funded the Acquisition from cash on hand and cash from the proceeds of the convertible notes issued pursuant to the Indenture entered into on December 7, 2021.

The issuances of the shares of the Company’s common stock at the closing of the Acquisition was 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 shares were issued in a privately negotiated transaction. The Equityholders are sophisticated and represented in writing that they are accredited investors and acquired 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.

The Company entered into a lock-up agreement with each Equityholder providing limitations on the resale of the Company common stock issued to the Equityholders at closing.

The company previously reported the terms of the Purchase Agreement and the transaction contemplated thereby in Item 8.01 of the Company’s Current Report on Form 8-K filed on January 31, 2023. The foregoing description of the Acquisition and the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the copy of the Purchase Agreement attached hereto as Exhibit 10.1 and incorporated by reference herein.