ZenaTech, Inc.(ZENA) - 2025 Q1 - Quarterly Report

Acquisition and Membership Interests Purchase Agreement Recitals This agreement, effective January 22, 2025, is between ZenaTech, Inc. (Purchaser), KJM Land Surveying LLC. (Company), and its members (Sellers), outlining terms for the Purchaser's acquisition of 100% of the Company's membership interests - The agreement's effective date is January 22, 2025[1] - The Purchaser is ZenaTech, Inc., and the Sellers are KJM Land Surveying LLC. and its members[1] - Members own 100% of the Company's membership interests and agree to sell them to the Purchaser[3] Acquisition and Sale of Company Membership Interests This chapter details the terms for the purchase and sale of company membership interests, including the purchase price, payment methods, closing process, and treatment of options and warrants, with the Purchaser acquiring 100% of the company for a total of $400,000, paid $200,000 in cash and $200,000 via a three-year, 6% annual interest promissory note - The Purchaser will acquire 100% of the Company's issued and outstanding membership interests[5] Purchase Price and Payment Method | Payment Type | Amount (USD) | Recipient/Notes | | :----------- | :----------- | :-------------- | | Total Purchase Price | 400,000 | | | Cash Payment | 200,000 | Paid to Schultz Law Group, P.L.L.C. as Escrow Agent | | Promissory Note Payment | 200,000 | Paid to Kenneth D. Monie (Majority Holder), three-year term, 6% annual interest, monthly principal and interest payments | - All outstanding options, warrants, or other rights to purchase Company membership interests will terminate at closing without assumption[9] - Members will retain certain cash items (e.g., cash, accounts receivable, prepaid expense-related cash, other current assets) and are responsible for pre-closing Company debts (e.g., accounts payable, accrued expenses, payroll, and taxes)[10][13] - A $20,000 shareholder retained cash amount will be reserved as working capital to cover ordinary business expenses up to January 22, 2025[12] - The Purchaser will deposit the $200,000 cash purchase price and shareholder retained cash into an escrow account[15] Representations and Warranties of the Company and the Members This chapter details the Company's and Members' representations and warranties to the Purchaser, covering organizational structure, operational qualifications, financial condition, assets, contracts, compliance, employee matters, and absence of material adverse changes, ensuring comprehensive and accurate disclosure of the Company's status - The Company is duly organized and in good standing in Florida, possessing all necessary licenses and authorizations to conduct its business[17] - The Company's organizational documents and meeting minutes have been provided to the Purchaser, and the Company is not in violation of its organizational documents[17][18] - The membership interests held by the Members constitute 100% of the Company's issued and outstanding equity prior to closing, free of any pledges, liens, or restrictions[20] - The Company has no subsidiaries and has never owned any subsidiaries[21] - The completion of the acquisition does not require any permits, authorizations, or consents from public or governmental bodies, unless the failure to obtain such would not have a material adverse effect[22] - Pensacola Business Brokers is the Sellers' sole agent, with fees paid by the Sellers[24] - The Company has provided the Purchaser with unaudited financial statements for the past three fiscal years and a balance sheet as of one business day prior to closing, which fairly present the Company's financial condition and results of operations in all material respects[25] - Since the balance sheet date, the Company's business has been conducted in the ordinary course, with no material adverse changes[26] - The Company has no undisclosed liabilities, other than those fully accrued or reserved for in the balance sheet, and those incurred in the ordinary course of business since the balance sheet date[27] - All Company activities comply with all applicable state, local, or foreign laws and regulations[28] - The Company has filed all required tax returns, all taxes have been timely paid or accrued, and there are no pending tax investigations or assessments[31][32] - The Company owns no real property, and all leased real property is in good operating condition and complies with all applicable laws and regulations[33][34] - The Company owns or has applied for all necessary intellectual property rights and has not received any allegations of infringing others' intellectual property[35] - The Company owns or leases all tangible assets necessary to conduct its business, which are in good condition and suitable for their intended use[36] - The Company has performed all material contractual obligations, and no events of default have occurred[37][38] - The Company maintains insurance policies as listed in Disclosure Schedule 2.17, all policies are in effect, and premiums have been paid[39] - The Company has no pending or threatened litigation, investigations, or claims[40] - The Company has provided a complete list of employees, consultants, and collaborators, complies with all labor laws and regulations, and the acquisition will not result in any additional payment obligations[41][42][46] - The Company does not maintain employee benefit plans not listed in Disclosure Schedule 2.20, nor is it a guarantor of any other individual's or entity's liabilities or obligations[48] - There are no undisclosed material transactions between the Company and related parties[49] - All accounts receivable on the Company's balance sheet represent actual debts, arise from genuine transactions in the ordinary course of business, and are collectible[52] - The Company has good and valid title to all assets on its balance sheet, free of any liens, and these assets are sufficient to support the Company's ongoing business operations[53] Representations and Warranties of the Majority Holder This chapter outlines the Majority Holder's representations and warranties to the Purchaser, primarily concerning their authority as the sole owner of the Company's membership interests, the enforceability of the agreement, the unrestricted nature of the interests, and the absence of pending claims, ensuring clear title and right to sell - The Majority Holder is the sole owner of the Company's membership interests, possessing full power and authority to execute and deliver this agreement[55] - This agreement constitutes a valid and legally binding obligation of the Majority Holder[55] - The Company's membership interests held by the Majority Holder are free of any transfer restrictions, taxes, security interests, or other liens[57] - The Majority Holder has no current claims against the Company, other than rights or claims related to their ownership of membership interests[58] - The Majority Holder irrevocably terminates any interest or right to purchase in any Company securities[58] Representations and Warranties of Purchaser This chapter lists the Purchaser's (ZenaTech, Inc.) representations and warranties to the Sellers, including its organizational status as a limited liability company, authority to execute the agreement, compliance with laws, and absence of broker fees, ensuring the Purchaser's legal capacity to complete the acquisition - Purchaser ZenaTech, Inc. is a limited liability company duly organized, validly existing, and in good standing in Wyoming[62] - The Purchaser has full corporate power and authority to execute and deliver this agreement and to consummate the transactions contemplated by the acquisition[63] - The Purchaser is not in violation of any terms of its organizational documents or operating agreement, and the execution of this agreement will not result in any material breach[64] - The Purchaser is not responsible for any broker, intermediary, or agent fees, commissions, or expenses related to this acquisition[65] Conditions to Closing This chapter details the conditions precedent for both Buyers and Sellers to complete closing, including the truthfulness of representations and warranties, authorization of agreements, signing of non-compete agreements, delivery of promissory notes and pledge agreements, absence of material adverse changes, termination of options and warrants, PPP loan forgiveness, completion of due diligence, and retention of key employees - Sellers' conditions to closing include the truthfulness of Purchaser's representations and warranties, Purchaser's authorization and execution of the agreement, the Majority Holder's execution of non-compete and non-solicitation agreements with Purchaser, Purchaser's delivery of the promissory note and pledge agreement, and Purchaser's performance of all agreement obligations[66] - Purchaser's conditions to closing include the truthfulness of the Company's and Majority Holder's representations and warranties, all members having sold their interests to Purchaser, and no material adverse changes since the balance sheet date[68][69] - All agreements, arrangements, or plans related to Company equity securities have been terminated, and all options, warrants, or other rights to purchase Company equity have been terminated or exercised[70][72] - All Company PPP loans will be forgiven prior to closing[72] - The Purchaser has completed due diligence and is fully satisfied[72] - Company employee Ricky Sears has signed a six-month part-time contract extension with a weekly compensation of $750[73] - The Majority Holder and Purchaser have executed a commercial lease agreement for the Company's current operating premises[74] Covenants This chapter outlines the covenants to be observed by both Buyers and Sellers before and after closing, including maintaining insurance, restricting public statements, the Majority Holder's non-compete and non-solicitation obligations, members' indemnification of the Purchaser and Company, commitments for further actions, and efforts for PPP loan forgiveness, all aimed at protecting the Purchaser's interests and ensuring a smooth transaction - The Company shall maintain all insurance policies listed in Disclosure Schedule 2.17[75] - Neither party shall issue public statements regarding this agreement or its terms without the Purchaser's prior written approval[75] - The Majority Holder shall not engage in or assist others in the Company's real estate surveying business within the United States for three years post-closing, nor solicit Company employees or clients[76][77][78] - Members irrevocably release the Company and Purchaser from all claims, liabilities, and obligations arising from their ownership of Company membership interests[81][82] - The Purchaser and Members agree to take all reasonable and lawful actions before and after closing to facilitate the acquisition[85] - The Purchaser commits to actively seek forgiveness for the PPP loan; if the PPP loan is not forgiven due to Company actions prior to closing, the Purchaser may deduct the corresponding amount from the outstanding promissory note balance[87] Indemnification This chapter defines the survival period of representations and warranties and the Majority Holder's indemnification obligations and procedures to the Purchaser, covering damages from breaches of representations and warranties, third-party claims pre-closing, and Company creditor claims, subject to a deductible and cap, with certain key terms exempt from these limitations - All representations and warranties in this agreement survive for 36 months post-closing, except for those related to capitalization, financial statements, environmental law, taxes, litigation, and employees, which survive indefinitely or until the expiration of the applicable statute of limitations[88][89] - The Majority Holder shall indemnify the Purchaser for damages arising from breaches of representations and warranties, third-party claims occurring pre-closing, and Company creditor claims[90] - Indemnification obligations are subject to a 5% deductible and a $100,000 cap, but breaches of certain specific sections (e.g., 2.2, 2.6, 2.7, 2.10, 2.12, 2.14, 2.20, and 2.22) are not subject to these limitations[96] Reserved This section is explicitly marked as 'Reserved,' indicating its content is not currently used or defined within this agreement Miscellaneous This chapter covers general terms of the agreement, including assignment, amendments, governing law, notices, severability, expenses, the Majority Holder's consulting agreement, and the entire agreement and electronic signatures, ensuring the legal effectiveness and operational details of the agreement - This agreement and any of its rights, interests, or obligations may not be assigned without the prior written consent of the Purchaser and the Majority Holder[97][98] - Any modification, amendment, waiver, or supplement to this agreement must be in writing and signed by the Purchaser and the Majority Holder[99] - This agreement is governed by Florida law, and any disputes shall be exclusively governed by Florida state or federal courts[102] - Each party will pay its own fees and expenses related to the proposed transaction, including those of investment bankers, brokers, attorneys, and accountants[106] - Majority Holder Kenneth D. Monie will remain a Company executive for one year post-closing, with a total compensation of $90,000, plus benefits and other allowances, and additional bonuses based on Company revenue targets[107] - This agreement constitutes the entire agreement between the parties regarding the subject matter of the agreement[108] - The parties agree that this agreement and related documents may be executed with electronic signatures, which shall have the same force and effect as handwritten signatures[109] Exhibits Exhibit A - Members Exhibit A lists the Company's members and their respective equity ownership percentages Member Equity Holdings | Member Name | Equity Percentage | | :---------- | :---------------- | | Kenneth D. Monie | 99.9% | | Michael Watts Austin | 0.1% | Exhibit B - Note Exhibit B is a copy of the promissory note referenced in the agreement - Exhibit B contains details of the promissory note, which is part of the purchase price, for $200,000, with a three-year term and a 6% annual interest rate[6][115] Exhibit C - Pledge Exhibit C is a copy of the pledge agreement referenced in the agreement, used to secure payment of the promissory note - Exhibit C contains details of the pledge agreement, which grants the Majority Holder a first-priority lien on the Company's membership interests to secure payment of the promissory note[6][116] Exhibit D - Escrow Agreement Exhibit D is a copy of the escrow agreement, executed by the Purchaser, Majority Holder, Company, and escrow agent Schultz Law Group, P.L.L.C., outlining the terms for escrow and payment of the cash portion of the purchase price and shareholder retained cash - The escrow agreement is executed by the Purchaser, Majority Holder, Company, and Schultz Law Group, P.L.L.C. (Escrow Agent)[15][119] - The Escrow Agent will hold and disburse funds according to the closing statement signed by both parties[120] - If there is a dispute between the parties regarding fund disbursement, the Escrow Agent may disburse funds based on written mutual agreement or by initiating an interpleader action in court[120] - The Escrow Agent is not liable for losses due to any party's financial condition or misrepresentations, insufficient legal effect, breach, financial institution insolvency, or other similar reasons[120] Disclosure Schedule Table of Contents The Disclosure Schedule Table of Contents lists all detailed disclosures, covering assets, personnel, capitalization, expenses, liabilities, real property, intellectual property, contracts, insurance, litigation, and employees - The Disclosure Schedule includes detailed information on assets, personnel, capitalization, expenses, liabilities, real property, intellectual property, contracts, insurance, litigation, employees, related party transactions, and accounts receivable and payable[129] Disclosure Schedule 2.1 - Officers and Directors Disclosure Schedule 2.1 lists the Company's officers and directors Company Officers and Directors | Name | Position/Notes | | :---------------- | :------------- | | Kenneth Daniel Monie | | | Mike Austin | | | Stephen Moorhead | Registered Agent, non-voting | Disclosure Schedule 2.3 - Capitalization Schedule Disclosure Schedule 2.3 details the Company's equity capitalization structure Company Equity Capitalization Structure | Member Name | Equity Percentage | | :---------------- | :---------------- | | Kenneth Daniel Monie | 99.9% | | Mike Austin | 0.1% | Disclosure Schedule 2.6 - Brokers Fees Due Disclosure Schedule 2.6 lists the broker fees payable due to this acquisition Broker Fees Due | Recipient | Amount (USD) | Payer | | :---------------- | :----------- | :---- | | Pensacola Business Brokers | 34,000 | Sellers | Disclosure Schedule 2.8 - Adverse Changes Disclosure Schedule 2.8 states that no material adverse changes have occurred in the Company's business since the balance sheet date - No material adverse changes have occurred in the Company's business since the balance sheet date[133] Disclosure Schedule 2.9 - Liabilities Disclosure Schedule 2.9 details the Company's accounts payable and annual bills, including insurance, utilities, payroll, operating expenses, and annual subscription fees Accounts Payable (to be paid by former management) | Item | Amount (USD) | Bill Date | Next Due Date | | :-------------------------------- | :----------- | :-------- | :------------ | | Auto Insurance | 822.75 | 18th | 2/8/25 | | Republic Services | 183.00 | 25th | 2/15/25 | | Cox Cable | 230.00 | 19th | 2/9/25 | | Culligan | 20.00 | 30th | 2/15/25 | | Professional Liability Insurance | 1,421.95 | 14th | 2/8/25 | | Florida Power and Light | 262.54 | 18th | 2/6/25 | | ECUA | 47.38 | 19th | 2/5/25 | | Verizon | 1,000.00 | 15th | 2/15/25 | | Colonial Life (Supplemental Insurance) | 140.00/week | 20th | 2/12/25 | | Payroll (1/12-1/18) | 10,169.22 | | 1/22/25 | | Total | 11,899.22| | | Operating Expenses (Prepaid) | Item | Amount (USD) | Bill Date | Next Due Date | | :---------------------------- | :----------- | :-------- | :------------ | | CPC | 121.00 | 2nd | 2/17/25 | | Rocky's Termite | 55.00 | | 2/1/25 | | Florida Blue Health Insurance | 3,525.77 | 1/4/25 | 1/15/25 | Annual Bills (Prepaid) | Item | Amount (USD) | Next Due Date | | :------------------------ | :----------- | :------------ | | Caspio | 2,100.00 | 2/21/25 | | Godaddy (kjmsurvey.com) | 45.00 | 11/2025 | | Godaddy (kimsurveying.com) | 185.00 | 8/2031 | | Autocad | 7,500.00 | 4/2026 | | Autocad | 2,600.00 | 4/2025 | | Dropbox | 170.00 | 12/2025 | | HBA | 800.00 | 3/25 | | General Liability | 2,200.00 | 6/23/25 | | Microsoft | 100.00 | 12/2025 | Disclosure Schedule 2.10 - Indebtedness Disclosure Schedule 2.10 states that the Company has no undisclosed indebtedness - The Company has no undisclosed indebtedness[138] Disclosure Schedule 2.13 - Real Property Disclosure Schedule 2.13 states that the Company does not own any real property - The Company does not own any real property[139] Disclosure Schedule 2.14 - Intellectual Property Rights Disclosure Schedule 2.14 states that the Company has no known intellectual property rights - The Company has no known intellectual property rights[140] Disclosure Schedule 2.16 - Contracts Disclosure Schedule 2.16 details the Company's significant contracts, including Caspio platform subscriptions, CPC Office Technologies copier lease, Republic Services waste disposal agreement, and other routine subscription services - Caspio platform subscription costs $2,322.00 per year, with the next payment due on February 21, 2025[142] - CPC Office Technologies contract invoice shows contract number SYSMO KL04-01 for $125.64, with a service period from October 2, 2019, to October 1, 2025, and a 12-month renewal[145][146] - The Republic Services waste disposal service agreement has an initial term of 36 months from the service commencement date and automatically renews for 36 months unless either party provides written termination notice 60 to 180 days before the current term ends[165] - The Republic Services agreement requires customers to pay all charges within 20 days of the invoice date, with late payments incurring a late fee[170] - The Republic Services agreement includes additional service fees such as a container removal fee of $219.01, a container relocation fee of $265.00, and an extra service/pickup fee of $241.50[171][172] Subscription Services (Prepaid) | Item | Amount (USD) | Next Due Date | | :---------- | :----------- | :------------ | | Adobe | 19.99 | 2/2/25 | | Adobe | 19.99 | 2/7/25 | | Wix | 34.00 | 2/9/25 | | Eversign | 9.99 | 2/2/25 | | Linxup | 105.00 | 2/4/25 | | Gmail Suite | 64.00 | 2/1/25 | | Gmail Storage | 54.00 | 2/1/25 | Disclosure Schedule 2.17 - Insurance Disclosure Schedule 2.17 details the Company's insurance policies, including general liability, professional liability, and auto insurance, along with Evanston Insurance Company's general policy statements, privacy notice, claims reporting guidelines, and various endorsements and exclusions - The Company holds insurance policies including general liability, professional liability, and auto insurance[220] - KJM Land Surveying LLC's policy number is 3AA797656, with a policy period from June 23, 2024, to June 23, 2025[222] Policy Fee Details | Item | Amount (USD) | | :---------------- | :----------- | | Policy Premium | 2,021.00 | | Inspection Fee | 104.78 | | Taxes | 100.00 | | EMPA Surcharge | 1.27 | | Policy Fee | | | Service Fee | | | Citizens Assessment | | | FHCF Assessment | | | Total | 2,227.05 | - Evanston Insurance Company's privacy notice explains how the company collects, shares, and protects customer personal information, noting federal and state laws grant customers rights to limit certain information sharing[235][236] - Claims reporting guidelines provide contact information for reporting new claims and sending supplemental information, including email, fax, and phone[244][247][248][249] - The OFAC advisory notice states that if the insured or any beneficiary violates U.S. sanctions laws or is identified by OFAC as a 'Specially Designated National and Blocked Person,' the insurance will be considered a blocked contract, and no payments or premium refunds may be made without OFAC authorization[252] Commercial General Liability Limits | Item | Limit (USD) | | :-------------------------------- | :---------- | | General Aggregate (other than Products/Completed Operations) | 2,000,000 | | Products/Completed Operations Aggregate | 2,000,000 | | Personal and Advertising Injury | 1,000,000 | | Each Occurrence | 1,000,000 | | Damage to Premises Rented to You | 100,000 | | Medical Expense | 5,000 | - General policy conditions stipulate terms for policy cancellation, changes, examination of books and records, inspections and surveys, premium payments, and transfer of rights and duties[269][270][271][272][274][275][276] - The Nuclear Energy Liability Exclusion endorsement excludes bodily injury or property damage caused by the hazardous properties of nuclear material or the operation of nuclear facilities[279][281] - The Service of Suit endorsement stipulates that the insurer will submit to the jurisdiction of any court of competent jurisdiction within the United States if the insurer fails to pay amounts due[288] - The Civil Union Change endorsement extends all references to 'spouse' or 'family member' in the policy to include a party to a civil union or domestic partnership recognized under applicable statutes[291] - The Trade or Economic Sanctions endorsement states that no insurance is provided if providing such insurance, paying a claim, or providing a benefit would cause the insurer to violate any applicable trade or economic sanctions law or regulation[295] - Commercial General Liability Coverage A covers legal liability for 'bodily injury' or 'property damage' and includes multiple exclusions such as expected or intended injury, contractual liability, liquor liability, workers' compensation, employer's liability, pollution, aircraft/auto/watercraft, mobile equipment, war, damage to property, damage to your product, damage to your work, impaired property or property not physically injured, product recall, personal and advertising injury, and electronic data[306][308][309][311][312][316][318][320][321][322][325][326][327][328][329][330][332] - Commercial General Liability Coverage B covers legal liability for 'personal and advertising injury' and includes multiple exclusions such as intentional infringement of rights, knowingly false publication of material, publication of material prior to policy period, criminal acts, contractual liability, breach of contract, failure to conform to quality or performance, wrong price description, infringement of copyright/patent/trademark/trade secret, insureds in media and internet business, electronic chatrooms or bulletin boards, unauthorized use of another's name or product, pollution, and war[337][339][340][341][342][343][344][345][346][348][349][350][351][352][354] - Commercial General Liability Coverage C covers medical expenses for 'bodily injury' caused by an accident and includes multiple exclusions such as the insured, employed persons, injury to persons usually occupying premises, workers' compensation, athletic activities, and products-completed operations hazard[355][356][357][358][359][360] - The policy defines key terms such as 'advertisement,' 'auto,' 'bodily injury,' 'coverage territory,' 'employee,' 'executive officer,' 'hostile fire,' 'impaired property,' 'insured contract,' 'leased worker,' 'loading or unloading,' 'mobile equipment,' 'occurrence,' 'personal and advertising injury,' 'pollutants,' 'products-completed operations hazard,' 'property damage,' 'suit,' 'temporary worker,' 'volunteer worker,' 'your product,' and 'your work'[396][397][399][400][401][405][406][407][408] Disclosure Schedule 2.18 - Litigation Disclosure Schedule 2.18 states that the Company has no pending or threatened litigation - The Company has no pending or threatened litigation[40] Disclosure Schedule 2.19 - Employment Disclosure Schedule 2.19 details the Company's employee, consultant, and collaborator information, stating compliance with labor laws and that the acquisition will not result in additional payment obligations - Disclosure Schedule 2.19 contains a complete list of all Company employees, consultants, and collaborators, including position, start date, compensation, accrued vacation, and equity incentive information[41] - The Company has not entered into any collective bargaining agreements, has experienced no strikes, and complies with all employment laws and regulations[42] - The acquisition will not result in any additional payment obligations for the Company to any employee, consultant, or other party, nor will it grant any employee or consultant the right to terminate or modify their relationship with the Company[46] Disclosure Schedule 2.22 - Related Party Transactions Disclosure Schedule 2.22 states that there are no undisclosed material transactions or debts between the Company and related parties - There are no undisclosed debts or material contracts between the Company and current or former employees, consultants, officers, members, directors, or related parties[49][50] Disclosure Schedule 2.24 - Accounts Receivables and Accounts Payables Disclosure Schedule 2.24 states that all Company accounts receivable are genuine and collectible, with no material bad debt write-offs since the balance sheet date - All accounts receivable reflected in the Company's balance sheet or accounting records represent actual debts, arise from genuine transactions in the ordinary course of business, and are collectible[52] - Since the balance sheet date, the Company has not experienced any write-offs of customer accounts receivable, except for those in the ordinary course of business[52] Final Audit Report The final audit report documents the creation, sending, and electronic signing process of the KJM Membership Agreement, confirming the signing dates and times for all parties KJM Membership Agreement Pages 1-93 - Documents Part 2 of 3 History This section records the electronic signature history of the KJM Membership Agreement, including document creation, sending for signatures, and final signature completion times - The document was created by KIMBERLY OKELLEY on January 22, 2025[413] - James Sherman signed the document on January 22, 2025, at 7:00:50 PM GMT[413] - Kenneth D. Monie signed the document on January 22, 2025, at 7:04:09 PM GMT[413] - Kerry Anne Schultz, Esq. signed the document on January 22, 2025, at 7:39:38 PM GMT[414] - Michael Watts Austin signed the document on January 22, 2025, at 9:19:38 PM GMT[414] - The agreement was completed on January 22, 2025, at 9:19:38 PM GMT[414]