RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2022

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

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 was retroactively effective as of June 1, 2022 and for a five-month term that ended on 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.

The sublease is currently operating on a month-to-month basis.

Shipping Costs

Lifted has shared a shipping account with a company operated by NWarrender’s father, Robert T. Warrender II, who is also an employee of Lifted and a member of the board of directors of LFTD Partners Inc. Lifted did this in an effort to reduce shipping costs, as the shipper gave a price discount based on volume. Lifted reimbursed Robert T. Warrender II’s company for the cost of shipping. During the year ended December 31, 2022, Robert T. Warrender II’s company refunded Lifted a net amount of $7,377. During the year ended December 31, 2022, also, Lifted bought a manual fork lift from Robert T. Warrender II’s company for a price that we believe reflected its fair market value. In comparison, during the year ended December 31, 2021, Lifted reimbursed Robert T. Warrender II $220,708 in shipping costs. In comparison, during the 2020 Stub Year, Lifted reimbursed Robert T. Warrender II $39,569 in shipping costs.

Robert T. Warrender II

In January 2022, Lifted hired Robert T. Warrender II, NWarrender’s father, as an employee. Robert T. Warrender II is also a Director of LFTD Partners Inc. During the year ended December 31, 2022, $55,385 in wages were paid to Robert T. Warrender II. As of December 31, 2022, $2,229 in expense reimbursements were owed to Robert T. Warrender II.  

Robert T. Warrender III

During the year ended December 31, 2022, $54,384 in compensation was paid to Robert T. Warrender III, who is a salesman for Lifted Made, and who is NWarrender’s brother, and Director Robert T. Warrender II’s son. During the year ended December 31, 2021, $69,177 in compensation was paid to Robert T. Warrender III. Robert T. Warrender III was hired as an independent contractor of Lifted in 2021; Robert T. Warrender III was not paid any compensation by Lifted during the 2020 Stub Year. On January 9, 2023, Robert T. Warrender III was hired by Lifted as an employee.

Vincent J. Mesolella

During the quarter ended March 31, 2022, Lead Outside Director Vincent J. Mesolella was paid $40,000 of the Modified 2021 Bonus Pool Amount.

During each of quarter of 2022, Mr. Mesolella also received his $4,000 quarterly director fee.

There were no quarterly director fees or other compensation paid to Mr. Mesolella during the year ended December 31, 2021.

During the 2020 Stub Year, Vincent J. Mesolella was paid commissions totaling $172, in connection with the sale of Lifted product arranged by him.

Joshua A. Bloom

During the quarter ended March 31, 2022, Dr. Joshua A. Bloom, Director, was paid $20,000 of the Modified 2021 Bonus Pool Amount.

During each quarter of 2022, Dr. Bloom also received his $4,000 quarterly director fee.

Richard E. Morrissy

During each quarter of 2022, Richard E. Morrissy, Director, received his $4,000 quarterly director fee.

James S. Jacobs

During each quarter of 2022, Dr. James S. Jacobs, Director, received his $4,000 quarterly director fee.

Kevin J. Rocio

During each quarter of 2022, Kevin J. Rocio, Director, received his $4,000 quarterly director fee.

Gerard M. Jacobs            

The Compensation Agreement contemplated an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon the closing of the Company’s acquisition of Lifted and an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon December 1, 2020, but such payments were not timely made, and pursuant to the Amendment No. 1 such aggregate of $700,000 of compensation was deferred and made due and payable by the Company to GJacobs and WJacobs together with interest accrued at the rate of 2% annually commencing January 1, 2021, upon demand by GJacobs and WJacobs, and through the date of the Omnibus Agreement only $58,439 of such deferred compensation had been paid to GJacobs (the remaining unpaid deferred compensation together with accrued interest is hereby referred to as the “Deferred Compensation”). Pursuant to the Omnibus Agreement, the Deferred Compensation was paid by the Company to GJacobs and WJacobs in January 2022. During the quarter ended March 31, 2022, GJacobs was also paid $143,713 of the Modified 2021 Bonus Pool Amount.

On April 29, 2021, the Company paid GJacobs a portion ($50,000) of the bonus payable to GJacobs in regard to the closing of the acquisition of Lifted.

On August 30, 2021, GJacobs exercised, for an aggregate purchase price of $1, his right to purchase a warrant to purchase an aggregate of 750,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised. GJacobs also exercised his right to purchase an aggregate of 31,250 shares of unregistered common stock of the Company at an exercise price of $0.03 per share under separate warrants. GJacobs also demanded immediate payment of $8,439 of the bonuses which are currently due and payable by the Company to GJacobs, and GJacobs allocated and applied such $8,439 to pay for the aggregate cost of purchasing and exercising the above warrants.

As of December 31, 2021, there was total interest of $9,269 payable to GJacobs related to the Deferred Compensation.  

William C. “Jake” Jacobs

As described above, the Compensation Agreement contemplated an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon the closing of the Company’s acquisition of Lifted and an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon December 1, 2020, but such payments were not timely made, and pursuant to the Amendment No. 1 such aggregate of $700,000 of compensation was deferred and made due and payable by the Company to GJacobs and WJacobs together with interest accrued at the rate of 2% annually commencing January 1, 2021, upon demand by GJacobs and WJacobs, and through the date of the Omnibus Agreement only $58,439 of such deferred compensation had been paid to GJacobs (the remaining unpaid deferred compensation together with accrued interest is hereby referred to as the “Deferred Compensation”). Pursuant to the Omnibus Agreement, the Deferred Compensation was paid by the Company to GJacobs and WJacobs in January 2022. Moreover, pursuant to the Omnibus Agreement and simultaneously with such payment of the Deferred Compensation as set out above, the Company paid WJacobs a bonus of $300,000 in January 2022. During the quarter ended March 31, 2022, WJacobs was also paid $152,341 of the Modified 2021 Bonus Pool Amount.

As of December 31, 2021, there was total interest of $4,000 payable to WJacobs related to the Deferred Compensation.

$2,681 in income tax previously erroneously paid by WJacobs to the Illinois Department of Revenue during the year ended December 31, 2021, and refunded back to Lifted by the Illinois Department of Revenue in January 2021, was repaid to WJacobs during the quarter ended June 30, 2021.

Nicholas S. Warrender

On February 24, 2020 we closed on the acquisition of 100% of the ownership of CBD-infused products maker Warrender Enterprise Inc. d/b/a Lifted Made (formerly d/b/a Lifted Liquids) of Zion, Illinois (the “Merger”), for consideration of (1) $3,750,000 in cash, (2) $3,750,000 in the form of a secured promissory note accruing interest of 2% per year (the “$3.75M Note”), (3) 3,900,455 shares of unregistered common stock of the Company (the “Stock Consideration”), (4) 645,000 shares of unregistered common stock of the Company that constitute deferred contingent compensation to be issued and delivered to certain persons specified by NWarrender in a schedule delivered by NWarrender to the Company at the closing of the Merger (the “Deferred Contingent Stock”), and (5) warrants to purchase an aggregate of 1,820,000 shares of unregistered common stock of the Company at an exercise price of $5.00 per share that will be issued and delivered to certain persons specified by NWarrender in a schedule delivered by NWarrender to the Company at the closing of the Merger (the “Warrants”).

On December 30, 2021, LIFD repaid all principal and interest due under the $3.75M Note between NWarrender and LIFD dated February 24, 2020 that was a portion of the Merger Consideration paid by LIFD to NWarrender under the Merger Agreement. Pursuant to the terms of that promissory note, the unpaid balance of the note accrued interest at the rate of 2% per annum.

On December 30, 2021, NWarrender kept $1,000,000 of the repayment, plus accrued interest, and on January 3, 2022, reloaned $2,750,000 back to LIFD at the rate of 2.5% (the “$2.75M Note”).

Prior to July 25, 2022 the $2.75M Note payable jointly by the Company and Lifted to NWarrender was secured by a perfected first lien security interest (the “Security Interest”) that encumbered all of the assets of the Company and Lifted. The Company was obligated to pay off the principal of the $2.75M Note in five semi-annual payments to NWarrender of $458,333 and a sixth and final semi-annual payment to NWarrender of $458,335, in each case plus accrued interest, starting on June 30, 2022. 

On June 7, 2022, LFTD Partners prepaid $916,666 of the principal of the $2.75M Note, and $29,384 of related accrued interest through that date, which left $1,833,334 remaining principal on the $2.75M Note. On July 5, 2022, we entered into an agreement (“Acceleration Agreement”) with NWarrender. Under the terms of the Acceleration Agreement, we were obligated to repay the remaining principal balance as follows: $1,374,999 on or before December 31, 2022, and $458,335 on or before December 31, 2024. Then, on July 8, 2022, we prepaid $916,666, along with accrued interest, and then, on July 25, 2022, we prepaid the remaining principal balance of $916,668 and accrued interest in full, and all collateral securing the $2.75M Note was released.

Bonus

During the quarter ended March 31, 2022, NWarrender was also paid $680,000 of the Modified 2021 Bonus Pool Amount.

Obligation to Purchase Headquarters Building

Toward the end of 2020, NWarrender, 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 of debt or equity capital, then Lifted or our designee shall purchase the 5511 Building from 95th Holdings, LLC at the agreed upon $1,375,000 purchase price within two days.

Payment of an Aggregate of $500,000 in Bonuses to GJacobs, WJacobs and NWarrender

The Amended Compensation Agreement provides that an aggregate of $350,000 shall be paid by the Company to GJacobs and WJacobs on December 1, 2021, but has not yet been paid (the “December 1, 2021 Compensation”). Pursuant to the Omnibus Agreement, the December 1, 2021 Compensation was terminated, but provided that GJacobs and WJacobs have not resigned as officers of the Company on or before December 31, 2022, an aggregate of $500,000 in bonuses shall be paid by the Company to GJacobs and WJacobs. This aggregate of $500,000 in bonuses to GJacobs and WJacobs is in addition to the $300,000 bonus payable to WJacobs described in the preceding section. On February 14, 2022, pursuant to the Amended Omnibus Agreement, this $500,000 was recharacterized as a retention bonus and allocated among NWarrender, GJacobs and WJacobs wherein each received $166,666, respectively, on December 30, 2022.

Warrender Enterprise Inc.

As of December 31, 2021, $4,607 was owed by Lifted to Warrender Enterprise Inc., an affiliate of NWarrender; this was related to an income tax refund related to Warrender Enterprise Inc. that was deposited into Lifted’s account. This money was returned to NWarrender in the first quarter of 2022, and Lifted did not owe any money to Warrender Enterprise Inc. at December 31, 2022.

SmplyLifted LLC

On a quarterly basis, SmplyLifted LLC reimbursed Lifted for WJacobs’ time as the Chief Financial Officer at WJacobs’ hourly rate.

As of December 31, 2021, SmplyLifted LLC owed $457 to Lifted as reimbursement for WJacobs’ time as the Chief Financial Officer. Lifted was reimbursed this $457 in January 2022. As of December 31, 2021, SmplyLifted LLC also owed $646 to Lifted for employee wage reimbursement.

On February 2, 2021, Lifted owed SmplyLifted $450; on February 10, 2021, Lifted paid SmplyLifted the $450.

As of March 31, 2021, Lifted owed SmplyLifted $9,719. Between April 1, 2021 and April 5, 2021, Lifted paid SmplyLifted the $9,719.

During the quarter ended September 30, 2022, SMPLSTC, one of Lifted’s partners in SmplyLifted, wrote a check to Lifted for $19,992 on behalf of SmplyLifted LLC, to cover two third-party accounting-related invoices of SmplyLifted. SMPLSTC’s check was short of the total of the two invoices by $146. Lifted paid the remaining $146 that SmplyLifted owed one of the third party accounting firms and wrote off the corresponding receivable from SmplyLifted, due to the lack of collectability from SmplyLifted because of SmplyLifted’s insolvency.  

During the quarter ended December 31, 2022, Lifted paid a $392 debt on behalf of SmplyLifted, and wrote off the corresponding receivable from SmplyLifted.

Corner Vapory LLC

NWarrender is a 50% owner in Corner Vapory LLC. Corner Vapory LLC owns a vape shop (called Corner Vapory), and Canna Vita, a CBD shop, both located in Kenosha, Wisconsin. The other owners of Corner Vapory LLC consist of Lifted’s Director of Operations and his wife. During the year ended December 31, 2022, Corner Vapory LLC purchased $42,384 worth of products from Lifted, and Lifted did not report any receivable from Corner Vapory as of December 31, 2022. Lifted did write off its receivable of $17,260 from Corner Vapory as of September 30, 2022.   

In comparison, during the year ended December 31, 2021, Corner Vapory LLC purchased $45,599 worth of products from Lifted, and Lifted recorded a receivable of $22,000 from Corner Vapory LLC as of December 31, 2021. In comparison, during the 2020 Stub Year, Corner Vapory LLC purchased $19,203 worth of products from Lifted, and Lifted recorded a receivable of $1,839 from Corner Vapory LLC as of December 31, 2020.

95th Holdings, LLC

From June 1, 2018 through June 1, 2021, Lifted rented 3,300 square feet of space located in Zion, Illinois, for manufacturing, warehousing and office space. From June 1, 2021 through November 2021, Lifted leased such space on a month-to-month basis. From May 2020 until April 1, 2021, Lifted also temporarily used additional space located adjacent to its rented space in Zion, Illinois, and made payments in lieu of rent therefor.

Lifted’s rented space in Zion, Illinois, was not adequate in light of various issues including zoning uncertainties, lack of air conditioning, and small size. As such, on December 18, 2020, Lifted as tenant entered into a Lease Agreement (the “Lease) with 95^th Holdings, LLC (“Landlord”) for office, laboratory and warehouse space in a building located at 5511 95^th Avenue, in the City of Kenosha, State of Wisconsin (the “Premises”). The lease commencement date was January 1, 2021, and lease termination date is January 1, 2026. 

Lifted constructed improvements including a clean room, and gradually moved into the Kenosha Premises over the course of the first quarter of 2021. Under the terms of the “triple-net” Lease, starting on January 1, 2021, Lifted leased approximately 11,238 square feet at the Premises at $6.13 per square foot per year in base rent ($68,888.94 in 2021), which is subject to a 2% increase in base rent each year, plus certain operating expenses and taxes. The Lease will continue until midnight on the fifth anniversary date of the commencement date of the Lease. Lifted shall have the right to extend the original five year term of the Lease for one extension period of two years, commencing upon the expiration of the original term. Lifted and Landlord are required to execute an “Amendment of Extension” prior to six months before the expiration of the original term.

Rent Schedule

Date	Base Monthly Rent
January 1, 2021 – December 31, 2021	$	5,740.75
January 1, 2022 – December 31, 2022	$	5,855.57
January 1, 2023 – December 31, 2023	$	5,972.68
January 1, 2024 – December 31, 2024	$	6,092.13
January 1, 2025 – December 31, 2025	$	6,213.97

Under the terms of the lease, the tenant, Lifted, has the option to purchase the property at any time prior to December 31, 2025, and in any event, Lifted is obligated to purchase the property on or before that date. Pursuant to the Lease, in all cases Lifted’s purchase price for the Premises shall be in an amount equal to the greater of: (1) the fair market value of the Premises at the time Lifted purchases the Premises; or (2) any remaining principal balance of any purchase-money mortgage for the Premises existing at the time of the closing of Lifted’s purchase, plus the corresponding amount identified in the Additional Purchase Price Schedule attached as Exhibit B to the Lease, which is an additional amount ranging between $300,000 and $375,000 based on the number of years that have passed between the commencement of the Lease and the purchase of the Premises by Lifted.

Landlord is an entity owned by NWarrender, the Company’s Vice Chairman and COO, the CEO of Lifted, and the largest stockholder of the Company as beneficial owner of 3,900,455 common stock shares. Due to the potential conflict of interest, the terms and conditions of the Lease were negotiated on behalf of Lifted by Vincent J. Mesolella, the Lead Outside Director of the Company. Landlord and Lifted were represented by their own independent legal counsel in connection with the Lease. Under the terms of the Lease, NWarrender is able to benefit through his entity 95^th Holdings, LLC by receiving rent and by eventually selling the Premises to Lifted.

Under the terms of the Omnibus Agreement, Lifted is obligated to purchase the Premises from Landlord on or before December 31, 2022 for a fixed purchase price of $1,375,000. Pursuant to the terms of the Acceleration Agreement, the purchase date has been delayed until on or before December 31, 2023.

Financing Warrants

On July 13, 2018, the Audit Committee, Compensation Committee, and full Board of Directors of LIFD approved by unanimous written consent borrowings by LIFD on the following terms: (1) proceeds of the borrowings will be used to pay professional fees owed to our outside auditors, our stock transfer agent, and our securities counsel, and to pay other obligations of LIFD; (2) the borrowings will be evidenced by promissory notes of LIFD, accruing interest at the rate of 15% annually; (3) the notes will be jointly secured by a first lien security interest in all of the assets of LIFD, pursuant to a security agreement signed by LIFD in favor of the lenders, UCC filings in favor of the lenders, and a pledge to the lenders of the note payable by the William Noyes Webster Foundation Inc. to LIFD; (4) the notes shall be due and payable upon demand by the lenders delivered to LIFD; and (5) for each $1,000 loaned by LIFD on these terms, the lender of such $1,000 shall receive warrants to purchase 1,250 shares of common stock of LIFD, at an exercise price of $0.03 per share, exercisable at the discretion of such lender any time on or before July 16, 2023.

As of December 31, 2018, a total of $30,791 had been borrowed by LIFD on such terms, and warrants to purchase 25,000 shares of common stock of LIFD had been issued to Joshua A. Bloom and warrants to purchase 12,500 shares of common stock of LIFD had been issued to GJacobs. As of December 31, 2018, there was also a total of $1,381 in interest payable to Joshua A. Bloom and GJacobs, related to these borrowings.

The warrants to purchase common stock that were issued to Joshua A. Bloom and GJacobs on July 16, 2018 and July 18, 2018 were valued using the Black-Scholes valuation model as of the date they were issued. The values of these warrants were fully expensed because the notes were payable upon demand. The expense recognized related to the issuance of the warrants to Joshua A. Bloom on July 16, 2018 was $3,250. GJacobs’ warrants were issued to him on July 18, 2018, and the expense recognized related to the issuance of these warrants was $1,300.

The warrants to purchase common stock that were issued to GJacobs on November 8, 2018, and to Joshua A. Bloom on November 12, 2018, were valued using the Black-Scholes valuation model, which incorporated the following assumptions: expected future stock volatility 465%; risk-free interest rates of 2.98% and 2.94%, respectively; dividend yield of 0% and an expected terms of 2.38 years and 2.37 years, respectively. The expected future stock volatility was based on the volatility of LIFD’s historical stock prices. The risk-free interest rate was based on the U.S. Federal treasury rate for instruments due over the expected term of the warrants. The expected term of each warrant was based on the midpoint between the date the warrant vests and the contractual term of the warrant. The values of the warrants were fully expensed as of the date of issuance because they are payable upon demand. The expense recognized related to the issuance of the warrants to GJacobs on November 8, 2018 was $11,250. The expense recognized related to the issuance of the warrants to Joshua A. Bloom on November 12, 2018 was $21,874.

On January 7, 2019, GJacobs loaned to the Company $5,968. In exchange, a warrant to purchase 7,500 shares of common stock of LIFD was issued to GJacobs. This warrant was valued using the Black-Scholes valuation model as of the date it was issued. The value of this warrant was fully expensed because the loan was payable upon demand. The expense recognized related to the issuance of the warrant to GJacobs on January 7, 2019 was $10,949.

On January 21, 2019, GJacobs loaned to the Company $804. In exchange, a warrant to purchase 1,250 shares of common stock of LIFD was issued to GJacobs. This warrant was valued using the Black-Scholes valuation model as of the date it was issued. The value of this warrant was fully expensed because the loan was payable upon demand. The expense recognized related to the issuance of the warrant to GJacobs on January 21, 2019 was $1,825.

On February 6, 2019, GJacobs loaned to the Company $8,000. In exchange, a warrant to purchase 10,000 shares of common stock of LIFD was issued to GJacobs. This warrant was valued using the Black-Scholes valuation model as of the date it was issued. The value of this warrant was fully expensed because the loan was payable upon demand. The expense recognized related to the issuance of the warrant to GJacobs on February 6, 2019 was $13,999.

On March 13, 2019, all of these borrowings and the related interest payable to Joshua A. Bloom and GJacobs was repaid. In total, $21,540 was paid to Joshua A. Bloom, and $26,628 was paid to GJacobs.

On August 30, 2021, GJacobs exercised, for an aggregate purchase price of $1, his right to purchase a warrant to purchase an aggregate of 750,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised. GJacobs also exercised his right to purchase an aggregate of 31,250 shares of unregistered common stock of the Company at an exercise price of $0.03 per share under separate warrants. GJacobs also demanded immediate payment of $8,439 of the bonuses which are currently due and payable by the Company to GJacobs, and GJacobs hereby allocated and applied such $8,439 to pay for the aggregate cost of purchasing and exercising the above warrants.