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LEGAL PROCEEDINGS

6 Months Ended

Jun. 30, 2024

NOTE 11 – LEGAL PROCEEDINGS

The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies, the Company records accruals for contingencies to the extent that management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred.

Lifted currently is involved as the defendant in two pending lawsuits:

	(1)	Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC – Plaintiff filed suit against the Company, three of its officers, and a testing company in the United States District Court for the Eastern District of Wisconsin alleging that Plaintiff bought 3-4 of the Company’s products, that some of the Company’s products exceeded legal limitations for hemp, and that all of the Defendants misrepresented the nature of the products. The Complaint asserts seven causes of action including a civil RICO claim and alleges the existence of 1,000 “John Doe” defendants. Plaintiff has filed an amended complaint changing the testing company but maintaining similar claims. The Company contends that this lawsuit is without merit and intends to vigorously defend the action. The Company has recently filed a motion seeking dismissal of the Complaint which is in the process of being briefed.

	(2)	Loree Perry, Individually and on Behalf of All Others Similarly Situated v. Sheikhani Group, et al – Plaintiff added the Company and four of its officers to a putative class action case against a Texas retailer, several cannabis industry manufacturers, testing companies, and related individuals in the United States District Court for the Eastern District of Texas. The Amended Complaint alleges that Plaintiff bought two of the Company’s vape cartridge products and that the delta-9-THC cannabinoid content of those and additional unspecified “many” of the Company’s other products was underreported. The Amended Complaint alleges that all of the Defendants misrepresent the nature of their products and are intentionally engaging in ongoing illegal sales. The Amended Complaint asserts seven causes of action including a civil RICO claim and alleges the existence of 1,000 “John Doe” defendants. The Company contends that this lawsuit is without merit and intends to vigorously defend the action.

Lifted currently is involved in one pending lawsuit, as the plaintiff:

(1)

Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. – The Company has filed an action seeking to recover approximately $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter has been filed in California and the Company intends to pursue the action and recover its damages.

Dismissal of Koff v Lifted Made

On November 13, 2023, Lifted received a letter dated November 6, 2023 from the State of Wisconsin Department of Workforce Development (“Department”). The letter stated that the Department had dismissed the case Koff v Lifted Made. Previously, a disgruntled former Lifted employee had filed an action with the Wisconsin Department of Workforce Development claiming discrimination and retaliation.

Settlement Agreement with Girish GPO, Inc.

On November 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe. The Company had filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000 over time.

Settlement Agreement With Dev Distribution, LLC

On October 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080. In October 2022, Lifted filed an action against Dev Distribution LLC (“Dev”), a vendor who had failed to deliver certain products that Lifted had purchased for $263,938. Dev filed a counterclaim alleging breach of contract. In October 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for Dev paying $230,000 and providing certain equipment and product.

Amendment to Settlement With Dev Distribution, LLC

On April 1, 2024, the Company entered into an Addendum to Settlement Agreement and Mutual Release (“Addendum”) with Dev. Under the Addendum, the total consideration to be paid by Dev has been increased from $230,000 to $240,000, and the end date of the monthly settlement payment schedule (“Monthly Payments”) has been extended from the earlier of May 1, 2024 or the closing date of Dev’s sale of its assets, of the sale of some or all of the membership interests owned by its current members, or of obtaining a loan or other cash infusion (a “Cash Event”), to the earlier of April 10, 2025, or the date of a Cash Event. Similar to the original Settlement Agreement and Mutual General Release, in the event of a Cash Event, Dev shall be obligated to contemporaneously pay Lifted $240,000 less any Monthly Payments made by Dev to Lifted up to the point of such Cash Event.

Settlement Agreement With Edgar Martha

On May 25, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Martha, Edgar v. Lifted Liquids. Mr. Edgar Martha, who worked in Lifted’s production facility, had sued Lifted in regard to an alleged chemical burn. In May 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $5,000 paid by Lifted to Mr. Martha.