Item 1.01.Entry into a Material Definitive Agreement.
(a)Amendment of December 30, 2021 Agreement with Insiders
Merger Related Promissory Note
On February 24, 2020, we acquired Lifted Liquids, Inc. d/b/a Lifted Made
("Lifted") as a wholly owned subsidiary for cash and stock paid to Lifted's then
owner Nicholas C. Warrender ("Warrender"). The $7,500,000 money component of the
purchase consideration was paid to Warrender in the form of $3,750,000 in cash
at closing and a $3,750,000 promissory note ("Note"). Over the past two years,
we have paid down about half of the principal balance of the Note to a current
balance of $1,833,334. As our business has developed, Warrender has been
flexible and we have mutually agreed with Warrender from time to time to extend
the maturity dates for payments toward the principal balance of the Note.
On July 5, 2022, we entered into a new agreement ("Acceleration Agreement") with
Warrender and others to accelerate the repayment of 75%, or $1,374,999, of the
current $1,833,334 balance of the Note to on or before December 31, 2022 from
the previously agreed upon installment dates in 2023 and 2024. Despite the
acceleration of the foregoing payment dates, the final $458,335 Note principal
installment payment will remain unchanged and due on or before December 31,
2024. The Acceleration Agreement contains a provision that if we raise
$5,000,000 all unpaid principal balance due under the Note will be immediately
paid to Warrender within two days.
Obligation to Purchase Headquarters Building
Toward the end of 2020, Warrender, through his assigned entity 95th Holdings,
LLC, purchased a building located at 5511 95th Avenue in Kenosha, Wisconsin
("5511 Building") that was immediately leased to us to conduct our expanded
operations. The 5511 Building includes office, laboratory and warehouse space.
As part of the lease agreement with 95th Holdings, LLC, the parties agreed that
our wholly owned subsidiary Lifted would eventually purchase the 5511 Building.
The purchase price for the 5511 Building was originally subject to variation
based on a formula agreed upon by the parties. Pursuant to an agreement with
Warrender on December 30, 2021, the parties agreed to set the purchase price for
the 5511 Building at $1,375,000. Prior to the Acceleration Agreement, Lifted had
an obligation to complete the purchase of the 5511 Building on or before
December 31, 2022. Pursuant to the Acceleration Agreement, the deadline to
purchase the 5511 Building has been extended by one year to December 31, 2023.
In addition, the Acceleration Agreement contains a provision that if we raise
$5,000,000, Lifted Liquids Inc. or our designee shall immediately purchase the
Property from 95th Holdings, LLC at the agreed upon $1,375,000 purchase price.
The foregoing description of the terms of the Acceleration Agreement does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Acceleration Agreement, a copy of which is attached hereto as
Exhibit 10.70.
(b)Sublease For Commuter Employees
On July 6, 2022, our wholly owned subsidiary Lifted entered into a sublease for
office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago,
Illinois 60612. The sublease costs $3,000 per month, plus supplemental lease
related charges such as real estate taxes and common expenses of the property
that we anticipate will be commercially typical costs. The sublease is
retroactively effective as of June 1, 2022 and for a five-month term that
extends to through October 31, 2022. The purpose of the sublease is to make
available office space for the members of Lifted Made's sales team who live in
Chicago. These salespeople were spending significant time in their cars
commuting from Chicago to Kenosha.
The sublessor is one of our affiliates, Bill McLaughlin, Lifted's Chief Strategy
Officer. The sublease is structured so that Mr. McLaughlin's lease payment
obligations to the landlord are passed on to Lifted on a dollar-for-dollar
basis, such that Mr. McLaughlin does not realize a cashflow profit or loss from
the sublease.
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The foregoing description of the terms of the Commercial Sublease does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Commercial Sublease, a copy of which is attached hereto as Exhibit
10.71.
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" of this Current Report on Form 8-K is incorporated into this Item
2.03 by reference.
Item 9.01 Financial Statements and Exhibits.
Exhibit 10.70 Acceleration Agreement
Exhibit 10.71 Commercial Sublease
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