Item 1.01 Entry into a Material Definitive Agreement.
Sale of LTRMN, Inc.
Unrivaled Brands, Inc. (the "Company"), through its wholly-owned subsidiary,
UMBRLA, Inc., a Nevada corporation ("UMBRLA"), owned all of the equity interests
(the "LTRMN Equity") of LTRMN, Inc., an Oregon corporation ("LTRMN"). LTRMN
conducts cannabis distribution and wholesale activities in Oregon. On December
28, 2022, the Company entered into a Stock Purchase and Sale Agreement (the
"LTRMN SPA") pursuant to which it sold the LTRMN Equity to Buchanan Group, LLC,
an Oregon limited liability company (the "LTRMN Purchaser") and an unaffiliated
third-party buyer, for an aggregate purchase price of $250,000.
The purchase price for the LTRMN Equity was paid in the form of a secured
promissory note issued by the LTRMN Purchaser to the Company (the "LTRMN Note").
Interest on the LTRMN Note is calculated on the basis of a 365-day year and
actual days elapsed, at a rate of 8.0% simple interest per annum. The
outstanding principal balance of the LTRMN Note, together with all accrued but
unpaid interest thereon, is due and payable on the third anniversary of the date
of issuance of the LTRMN Note. Upon a final and binding settlement of the
certain ongoing litigation that is approved by UMBRLA: (i) the Purchase Price
(as defined in the LTRMN SPA) shall be automatically revised to be $0 and the
promissory note shall be deemed to be paid and satisfied in-full and (ii) the
Intercompany Balance (as defined on Schedule 1.3 to the LTRMN SPA) shall be
automatically revised to be $0 and the Intercompany Balance shall be deemed to
be paid and satisfied in-full.
The LTRMN SPA contains customary representations, warranties, covenants, and
indemnification provisions. The LTRMN SPA is contingent on certain closing
conditions being met, including, among other things, (i) the accuracy of the
representations and warranties, and (ii) compliance by the parties with their
respective covenants. The parties to the LTRMN SPA also agreed to use
commercially reasonable efforts to negotiate and execute a binding license
agreement for the non-exclusive use by the Company of the "Korova" brand,
including related trademarks and corresponding intellectual property.
Sale of Psychonaut Oregon, LLC
The Company owned 50% of the equity interests (the "Psychonaut Equity") of
Psychonaut Oregon, LLC, an Oregon limited liability company ("Psychonaut").
Psychonaut conducts cannabis cultivation activities in Oregon. On December 28,
2022, the Company entered into a Membership Interest Purchase and Sale Agreement
(the "Psychonaut MIPA") pursuant to which it sold the Psychonaut Equity to
Joseph Gerlach for an aggregate purchase price of $1. Mr. Gerlach owns the other
50% of the equity interests in Psychonaut and is also the Company's Chief
Cultivation Officer. As part of the transaction, Mr. Gerlach is assuming a five
year long-term lease liability with $500,000 of remaining lease payments (under
which the Company was previously obligated as the lessee) and the assumption of
all operational liabilities and expenditures including the payroll and related
expenses for Psychonaut employees. In connection with sale of Psychonaut, the
Company entered into an unsecured promissory note dated as of December 28, 2022
(the "Psychonaut Note") pursuant to which the Company will consolidate all
current liabilities due to Mr. Gerlach into a total principal amount of $153,798
due in 60 months. Interest on the Psychonaut Note is calculated on the basis of
a 365-day year and actual days elapsed, at a rate of 1.0% simple interest per
annum. The outstanding principal balance of the Psychonaut Note, together with
all accrued but unpaid interest thereon, is due and payable on the fifth
anniversary of the date of issuance of the Psychonaut Note.
The Psychonaut MIPA contains customary representations, warranties, covenants,
and indemnification provisions. The Psychonaut MIPA is contingent on certain
closing conditions being met, including, among other things, (i) the accuracy of
the representations and warranties, and (ii) compliance by the parties with
their respective covenants.
Management Services Agreement at San Leandro Dispensary
On December 28, 2022, the Company entered into a Management Services Agreement
(the "San Leandro MSA") with Brick City Productions, Inc. ("Manager") to provide
certain services at the Company's San Leandro dispensary location including such
things as operations management and management support, inventory management,
labor administration, vendor relations, and customer service. Consideration for
Manager's performance of the services under the agreement is a management fee
equal to 25% of the "gross top line revenue" as such term is defined in the San
Leandro MSA. The Company will receive an administrative fee equal to 4% of the
gross revenue of the San Leandro dispensary payable monthly. If, in any month,
the net cash after all operational expenses are paid is less than $20,000, such
payments shall be accrued and postponed unless and until such time that net cash
after all operational expenses sufficiently exceeds $20,000. In addition,
Manager will dedicate and use up to 50% of the San Leandro dispensary to sell
the Company's licensed products. The San Leandro MSA has a term of 12 months.
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The San Leandro MSA contains customary representations, warranties, covenants,
and indemnification provisions.
The foregoing descriptions of the LTRMN SPA, LTRMN Note, Psychonaut MIPA,
Psychonaut Note, and San Leandro MSA are qualified in their entirety by
reference to the full text of such documents, copies of which are filed as
Exhibits 10.1, 10.2, 10.3, 10.4, and 10.5, respectively, to this Current Report
and which are incorporated by reference herein in their entirety.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Officer Appointments
Chief Executive Officer
On December 23, 2022, the Company's board of directors (the "Board") appointed
Sabas Carrillo as the Company's Chief Executive Officer. Mr. Carrillo had
previously served as the Company's Interim Chief Executive Officer since August
12, 2022. Mr. Carrillo will continue to serve as the Company's Principal
Executive Officer.
Other information regarding Mr. Carrillo, including his biographical information
and other affiliations with the Company, is included in the Company's Current
Reports on Form 8-K filed with the SEC on August 12, 2022 and August 16, 2022,
and is hereby incorporated by reference herein
The Company has not proposed a final Employment Agreement with Mr. Carrillo and
the Company intends to continue to discuss the specific terms of Mr. Carrillo's
employment to be finalized in a future Employment Agreement.
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Chief Operating Officer
On December 23, 2022, the Board appointed James Miller as the Company's Chief
Operating Officer. Mr. Miller most recently served as Chief Financial Officer of
Operators Only, Inc., a cannabis operations service provider supporting
Cookies-branded retail and cultivation licensees, from January 2022 to October
2022. Mr. Miller was Corporate Controller at 3PL Central LLC, a private equity
owned eCommerce WMS provider, from February 2020 until December 2021.
Previously, Mr. Miller served as interim Chief Financial Officer and was the
Vice President of Accounting at MedMen Enterprises Inc. ("MedMen"), a cannabis
MSO and cultivation company, from January 2018 until December 2019, where he was
responsible for financial reporting, financial controls and various operating
departments through its formation, initial public offering and subsequent growth
stage. He was also Chief Financial Officer of MedMen's affiliated Treehouse Real
Estate Investment Trust from December 2018 until October 2019. Mr. Miller has
held several senior executive and finance roles at leading entertainment firms
such as the Walt Disney Company and Viacom as well as various technology and
e-commerce companies. Mr. Miller received a Bachelor of Arts degree in
Economics from University of California at Los Angeles, and is a CPA (license
inactive), in California.
The Company has not proposed a final Employment Agreement with Mr. Miller and
the Company intends to continue to discuss the specific terms of Mr. Miller's
employment to be finalized in a future Employment Agreement. Currently Mr.
Miller is on the Company's payroll for an annual salary of $205,000 and his
stock compensation will be determined at a later date.
There is no arrangement or understanding between Mr. Miller and any other person
pursuant to which he was selected as an officer of the Company and there are no
family relationships between Mr. Miller and any of the Company's directors or
executive officers. There are no transactions to which the Company is a party
and in which Mr. Miller has a direct or indirect material interest that would be
required to be disclosed under Item 404(a) of Regulation S-K.
Director Appointment
On December 23, 2022, the Board appointed Mr. Carrillo, as a member of the
Board.
Other information regarding Mr. Carrillo, including his biographical information
and other affiliations with the Company, is included in the Company's Current
Reports on Form 8-K filed with the SEC on August 12, 2022 and August 16, 2022,
and is hereby incorporated by reference herein.
Other than as set forth in this Current Report and the Company's other filings
with the SEC, there is no arrangement or understanding between Mr. Carrillo and
any other person pursuant to which he was selected as a director of the Company,
and there are no family relationships between Mr. Carrillo and any of the
Company's directors or executive officers. Other than as set forth in this
Current Report and the Company's other filings with the SEC, there are no
transactions to which the Company is a party and in which Mr. Carrillo has a
direct or indirect material interest that would be required to be disclosed
under Item 404(a) of Regulation S-K.
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Item 7.01 Regulation FD Disclosure.
On January 4, 2023, the Company issued a press release announcing the
appointment of Mr. Carrillo as Chief Executive Officer and a member of the
Board, Mr. Miller as Chief Operations Officer, and Ms. McCourt as Chief Revenue
Officer. A copy of the press release is furnished as Exhibit 99.1 to this
Current Report.
The information contained in this Item 7.01, and in Exhibit 99.1, referenced
herein is being furnished and shall not be deemed to be "filed" for the purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any registration statement or other filing under the Securities
Act of 1933, as amended, unless the Company expressly so incorporates such
information by reference.
Item 8.01 Other Events.
On December 23, 2022, the Company appointed Tracy McCourt as the Company's Chief
Revenue Officer. Ms. McCourt is a seasoned retail, marketing, e-commerce, sales
and product management executive with over 20 years of experience. Ms. McCourt
has developed growth strategies for highly successful brands including Zappos,
Skechers, Guess, Murad, Frederick's of Hollywood, and most recently, MedMen
Enterprises Inc., where she also served as Chief Revenue Officer. In this role,
she reported directly to the Chief Executive Officer and lead the omni-channel
marketing strategy as well as the Company's product, merchandising and business
intelligence efforts. Prior to that, she led the strategy for the brand affinity
team at Zappos.
Safe Harbor Statement
Information provided in this Current Report on Form 8-K may contain statements
relating to current expectations, estimates, forecasts and projections about
future events that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
generally relate to the Company's plans, objectives and expectations for future
operations and are based upon management's current estimates and projections of
future results or trends. These forward-looking statements may also relate to
the officer appointments, any future employment agreements related to such
officer appointments, and other matters described above. Actual future results
may differ materially from those projected as a result of certain risks and
uncertainties. For a discussion of such risks and uncertainties, see "Risk
Factors" as described in the Company's Annual Report on Form 10-K filed with the
U.S. Securities and Exchange Commission on April 15, 2022 and other reports on
file with the U.S. Securities and Exchange Commission.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
10.1 LTRMN SPA.
10.2 LTRMN Note.
10.3 Psychonaut MIPA.
10.4 Psychonaut Note.
10.5 San Leandro MSA.
99.1 Press Release
104 Cover Page Interactive Data File (embedded within the Inline XBRL
Document).
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