Item 1.01.Entry into a Material Definitive Agreement.
A.Asset Purchase Agreement
On April 28, 2023, Lifted Liquids, Inc. doing business as Lifted Made ("Lifted
Made"), a wholly owned subsidiary of LFTD Partners Inc. purchased nearly all of
the assets (the "Purchased Assets") of its hemp flower products supplier Oculus
CRS, LLC, Aztec, New Mexico ("Oculus") for a total purchase price of $368,488 in
cash. The Purchased Assets include, but are not limited to, Oculus' operational
equipment, office equipment, raw materials, inventory, cash on hand, accounts
receivable, and a contract (the "Machine Purchase Contract") to purchase, for a
total of $309,213 (the "Machine Purchase Price"), a new machine that is ready
for delivery, and that when delivered and installed will be used to automate a
substantial portion of the manufacturing of the hemp flower products. $99,910 of
the Machine Purchase Price had already been paid by Oculus, leaving $209,303 as
the remaining portion of the Machine Purchase Price (the "Machine Purchase Final
Payment").
The $368,488 purchase was paid by Lifted Made using cash on hand. At the
closing, Oculus applied the entire Purchase Price to pay off all of Oculus'
liabilities as of the closing date (the "Oculus Liabilities"), including the
Machine Purchase Final Payment. The only asset of Oculus that was not included
in the Purchased Assets was Oculus' rights as the plaintiff in a pending lawsuit
filed by Oculus against a particular customer for an alleged breach of contract.
B.Agreement and Plan of Merger
Simultaneously with Lifted Made's purchase of the Purchased Assets, Lifted Made
executed an Agreement and Plan of Merger ("Merger Agreement") with Oculus CHS
Management Corp. (the "Management Corp."), pursuant to which the Management
Corp. was merged with and into Lifted Made, with Lifted Made being the surviving
corporation in the merger (the "Merger"). The only assets of the Management
Corp. were multi-year employment contracts with the owners/managers of Oculus,
Chase and Hagan Sanchez (the "Employment Agreements").
The Merger consideration (the "Merger Consideration") will be paid by Lifted
Made to Chase and Hagan Sanchez in two installments.
The first installment of the Merger Consideration was paid by Lifted Made to
Chase and Hagan Sanchez at the closing of the Merger, and consisted of 100
shares of unregistered common stock of LIFD.
The second installment of the Merger Consideration will be paid by Lifted Made
to Chase and Hagan Sanchez following the first anniversary of the closing of the
Merger which will be April 28, 2024. The second installment of the Merger
Agreement will be calculated and paid out as follows:
(1) Lifted Made's CEO Nick Warrender, in consultation with LIFD's President and
CFO William "Jake" Jacobs, will analyze and make a written determination (the
"Determination") of the incremental pre-tax cash flow that Nick Warrender
estimates is generating for Lifted Made above and beyond the annual profits that
are currently being generated for Lifted Made due to Lifted Made's current
business relationship with Oculus (the "Incremental Pre-Tax Profits"), after
taking into account all relevant financial factors including but not limited to
the purchase price of the Purchased Assets, the merger consideration, and all
items of income, expense and investment directly and indirectly associated with
Lifted Made's hemp flower products division, which Determination will be final
and legally binding on all of the parties; and
(2) Within five days following delivery of the Determination, Lifted Made will
pay Chase and Hagan Sanchez a second installment of Merger consideration equal
to five times the Incremental Pre-Tax Profits, provided that (a) 20% of such
second installment of Merger consideration shall be paid in the form of cash,
(b) 80% of such second installment of Merger consideration shall be paid in the
form of unregistered shares of common stock of LIFD, which unregistered shares
of common stock of LIFD shall be valued at $5 per share regardless of whether
LIFD's common stock is then trading at a price that is lower or higher than $5
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per share, and (c) such second installment of Merger consideration shall be
subject to a minimum value of $1 million dollars and a maximum value of $6
million dollars (with the stock portion of the second installment of Merger
consideration being valued at $5 per share under all circumstances.)
As examples, for illustrative purposes only:
(a)If, according to Mr. Warrender's Determination, the Incremental Pre-Tax
Profits of Lifted being generated by the business is $500,000, then the second
installment of the Merger Consideration would be calculated as $500,000 X 5 =
$2,500,000, of which ($2,500,000 X .2) = $500,000 would be in the form of cash,
and the remaining $2,000,000 would be paid in the form of ($2,000,000/$5) =
400,000 newly issued shares of unregistered LIFD Common Stock;
(b)If, according to Mr. Warrender's Determination, the Incremental Pre-Tax
Profits of Lifted being generated by the business is $25,000, then the second
installment of the Merger Consideration would be the minimum of $1,000,000, of
which ($1,000,000 X .2) = $200,000 would be in the form of cash, and the
remaining $800,000 would be paid in the form of ($800,000/$5) = 160,000 newly
issued shares of unregistered LIFD Common Stock; and
(c)If, according to Mr. Warrender's Determination, the Incremental Pre-Tax
Profits of Lifted being generated by the business is $2,000,000, then the second
installment of the Merger Consideration would be the maximum of $6,000,000, of
which ($6,000,000 X .2) = $1,200,000 would be in the form of cash, and the
remaining $4,800,000 would be paid in the form of ($4,800,000/$5) = 960,000
newly issued shares of unregistered LIFD Common Stock.
The foregoing description of the terms of the Merger Agreement does not purport
to be complete and is qualified in its entirety by reference to the full text of
the Agreement, a copy of which is attached hereto as Exhibit 10.74.
C.Employment Agreements
Pursuant to the terms of the Merger Agreement, upon the closing of the Merger,
all of the Management Corp.'s rights and obligations under the Employment
Agreements have been assumed by Lifted Made. Chase and Hagan Sanchez are now the
Vice President of Flower and General Manager of Flower of Lifted Made,
respectively, and will continue to manage the hemp flower products business in
Aztec, NM, which will operate as a hemp flower products division within Lifted
Made, reporting to Nick Warrender, Lifted Made's CEO. Pursuant to Chase
Sanchez's employment agreement, his salary is $150,000 per year. Hagan Sanchez's
salary is $100,000 per year. Both agreements are subject to termination with or
without cause, non-solicitation, non-competition and non-disclosure clauses.
The foregoing description of the terms of the Sanchez Employment Agreements does
not purport to be complete and is qualified in its entirety by reference to the
full text of the Sanchez Employment Agreements, copies of which are attached
. . .
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The discussion contained in "Item 1.01 Entry into a Material Definitive
Agreement" "D.Lease Agreement - Aztec New Mexico" of this Current Report on Form
8-K is incorporated into this Item 2.03 by reference.
Item 3.02 Unregistered Sale of Equity Securities.
This information in Item 1.01 above is incorporated into this Item 3.02 by
reference. The Company relied on the exemption from registration contained in
Section 4(2) of the Securities Act for the issuance of the shares of Common
Stock issuable pursuant to the Merger Agreement.
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.74 Agreement and Plan of Merger - Oculus CHS Management Corp.
Exhibit 10.75 Hagan Sanchez Employment Agreement
Exhibit 10.76 Chase Sanchez Employment Agreement
Exhibit 10.77 Assignment and Assumption of Lease and Landlord Consent and
Lease Agreement - Aztec New Mexico
Exhibit 99.1 Press Release Dated May 2, 2023
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