8-K: Schwazze Restructures Debt, Sells Assets to Vireo Affiliate

Medicine Man Technologies, Inc. (Schwazze) entered a Restructuring Support Agreement to sell a majority of its assets to a Vireo Growth Inc. affiliate and liquidate remaining operations, following debt defaults.

Summary

• Medicine Man Technologies, Inc. (Schwazze) and its subsidiaries entered into a Restructuring Support Agreement (RSA) with an affiliate of Vireo Growth Inc. and other parties on October 10, 2025.
• The RSA outlines a plan to restructure operations and capital structure through an Asset Sale of a majority of the company's total assets to a newly-formed entity (NewCo), which will be majority-owned by Vireo.
• Following the Asset Sale, the company's remaining assets will be liquidated, and remaining operations will be wound down.
• All obligations under the 13% Senior Secured Convertible Notes due December 7, 2026 (Senior Secured Notes) and certain seller notes (Star Bud Notes) will be extinguished.
• Certain parties have agreed to provide NewCo with up to approximately $62 million in financing, a portion of which will refinance the Star Bud Holders' claims in full.
• Existing preferred and common stockholders are not anticipated to receive any distributions from the liquidation.
• The restructuring follows events of default declared on May 15, 2025, by holders of over 51% of the Senior Secured Notes, including failure to pay cash interest, deliver financial reports, and satisfy financial covenants.
• As a result of the defaults, the Senior Secured Notes, totaling at least $108,404,323.98 plus 15% default interest from January 6, 2025, were accelerated and declared immediately due and payable.

Sentiment

Score: 2

Explanation: The sentiment is highly negative for existing equity holders, as their investment is expected to be completely wiped out. While the restructuring provides a path forward for a new entity with less debt and new capital, this comes at the expense of the current company's shareholders and signifies a distressed situation for the original entity.

Positives

• The restructuring is expected to result in the continuation of the business as a new, growth-oriented company with less debt, improved liquidity, and a streamlined asset portfolio.
• NewCo will receive up to approximately $62 million in new financing, which includes funds for refinancing the Star Buds seller notes and providing working capital.
• The Star Buds seller notes will be refinanced in full, resolving those specific liabilities.
• The company aims to optimize tax efficiency and preserve favorable tax attributes for NewCo through the restructuring.

Negatives

• Existing preferred and common stockholders are not anticipated to receive any amounts from the liquidation of the company's remaining assets.
• The company's Senior Secured Notes, totaling at least $108,404,323.98 plus 15% default interest, were accelerated due to multiple events of default.
• The restructuring involves the sale of a majority of the company's total assets and the winding down of remaining operations, indicating a significant contraction of the existing entity.

Risks

• Adverse impact of the contemplated transactions on the company's business, financial condition, and results of operations.
• Uncertainty regarding the company's ability to successfully consummate the transactions, including satisfying all conditions and RSA Milestones.
• Challenges in the company's ability to make required payments under its current debt obligations.
• Potential difficulties in maintaining relationships with suppliers, customers, employees, and other third parties due to the transactions.
• Uncertain effects of the transactions on the company and the interests of various constituents.
• Risks and uncertainties associated with the transactions, many of which are beyond the company's control.
• The nature, cost, impact, and outcome of pending and future litigation, other legal or regulatory proceedings, or governmental investigations and actions.
• No assurance that the company will successfully complete the transactions on the described terms, different terms, or at all.

Future Outlook

The company anticipates that the restructuring will lead to the continuation of its business as a new, growth-oriented entity with reduced debt, enhanced liquidity, and a more focused asset portfolio. Management expects this new structure to enable the company to deliver value to stakeholders and capitalize on market consolidation opportunities. The plan includes specific milestones for the asset sale and liquidation, with a target completion of liquidation by April 23, 2026.

Management Comments

• "Today's announcement represents a pivotal milestone in our journey to build a stronger, more agile organization."
• "This structure positions us to deliver exceptional value to our customers, employees, and partners."
• "Vireo's support and commitment demonstrates strong confidence in our management team's strategic vision and our ability to capitalize on market consolidation opportunities."
• "We are excited about the path forward and the significant potential this partnership creates."

Industry Context

This restructuring occurs within the context of the evolving U.S. cannabis industry, which is characterized by ongoing market consolidation. The company's CEO explicitly mentions the intent to "capitalize on market consolidation opportunities" with the new, streamlined entity. The involvement of Vireo Growth Inc., another player in the cannabis sector, as the majority owner of the new entity, highlights the trend of strategic acquisitions and consolidation among cannabis operators, often driven by financial distress or the pursuit of scale.

Management Changes

Corporate Governance

Legal Proceedings

• The filing mentions 'pending and future litigation, other legal or regulatory proceedings, or governmental investigations and actions' as a risk factor that could cause actual results to differ materially from forward-looking statements. However, no new specific legal proceedings initiated by or against the company are announced in the filing beyond the triggering events of default.

Related Party Transactions

• Justin Dye (Consulting Party) has the opportunity to purchase up to $15 million in New Tranche A and B First Lien Debt in NewCo. He will also receive approximately 4.55% of New Equity Interests as a consulting fee and will be appointed Chairman of the New Board, receiving $300,000 per year for two years, contingent on his full financing participation.
• The Star Buds Lessor Parties, affiliates of Star Buds, will consent to the assignment of their lease agreements to NewCo and enter into lease extensions. Star Brands LLC will consent to the assignment of its Trademark License Agreement to NewCo.
• The company has existing obligations to Dye Capital & Company LLC and its Affiliates in the ordinary course of business on account of a marketing services agreement dated June 17, 2025.

Stakeholder Impact

• **Shareholders (Common and Preferred):** Existing equity holders are not anticipated to receive any distributions from the liquidation, effectively wiping out their investment.
• **Senior Noteholders:** Holders of the Senior Secured Notes will receive a pro rata share of approximately 82.39% (pre-MIP/Tranche B conversion) or 63.38% (fully-diluted) of New Equity Interests in NewCo, plus a consent premium of 11.70% (pre-MIP/Tranche B conversion) or 9.00% (fully-diluted) for supporting the RSA. This converts their debt into equity in the new entity.
• **Star Buds Seller Note Parties:** Their claims will be refinanced in full through the New Tranche A First Lien Debt.
• **Employees:** An Employee Retention Plan and Executive Employment Agreements will be adopted by the New Board, and a Management Incentive Plan (8.0% of New Equity Interests) will be established, indicating efforts to retain key personnel for NewCo.
• **Customers and Suppliers:** The company acknowledges the risk of adverse impacts on relationships with suppliers, customers, employees, and other third parties as a result of the transactions, and commits to using commercially reasonable efforts to preserve these relationships.
• **Creditors (other than Senior Notes and Star Buds Notes):** Other unsecured claims will be entitled to net cash proceeds from the liquidation of Excluded Assets, if any, in accordance with their priority, and will then be discharged or canceled.

Next Steps

• Agree in writing on the substantially final form of the definitive asset purchase agreement (APA) by October 10, 2025.
• Send notification of the Asset Sale, publish advertisements, and send marketing materials to interested parties by October 13, 2025.
• Deadline for submission of bids for the Asset Sale by November 10, 2025.
• Conduct the public disposition auction by November 13, 2025.
• Execute the APA by November 17, 2025 (APA Effective Date).
• Complete the Asset Sale within 90 days following the APA Effective Date (Outside Sale Transaction Effective Date), with a possible 30-day extension for regulatory approvals.
• Commence Liquidation Proceedings within ten business days after the Sale Transaction Effective Date.
• Complete all Liquidation Transactions and Liquidation Proceedings by April 23, 2026.
• NewCo's New Board will adopt an equity incentive plan (Management Incentive Plan) and enter into Executive Employment Agreements following the Sale Transaction Effective Date.
• NewCo will enter into new organizational documents on the APA Effective Date.

Key Dates

Recommendation

The filing explicitly states that existing preferred and common stockholders are not anticipated to receive any distributions from the liquidation of the company's remaining assets. This means the current equity is effectively worthless. While a new entity (NewCo) will emerge with new capital and a restructured balance sheet, the value for existing shareholders of Medicine Man Technologies, Inc. (Schwazze) is being eliminated. Therefore, a 'strong sell' recommendation is appropriate for any remaining holders of the existing stock.

Keywords

Restructuring Support Agreement, Asset Sale, Liquidation, Debt Restructuring, Senior Secured Notes, Vireo Growth Inc., NewCo, Cannabis Industry, Financial Default, Corporate Governance, Capital Raise, SEC Filing, Schwazze