LIFD 10-K
Lftd Partners Inc. (LIFD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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Securities registered under Section 12(g) of the Exchange Act:
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Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $2,437,778. The voting stock held by non-affiliates on that date consisted of
As of March 31, 2026, there were
The exhibit index as required by Item 601(a) of Regulation S-K is included in ITEM 15 of Part IV of this report on Form 10-K.
Documents Incorporated by Reference: None
LFTD Partners Inc.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2025
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ITEM 6. | [Reserved] |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 85 |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 99 |
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DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 101 |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 108 |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 109 |
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PART I
Use of Names
In this Annual Report on Form 10-K, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” “Corporation” or “LFTD Partners” refer to LFTD Partners Inc. together with its wholly owned subsidiaries Lifted Liquids, Inc. d/b/a Lifted Made (“Lifted”), d/b/a Urb Finest Flowers (“Urb”) d/b/a LM Nutra and Highlandia Inc.
Currency
Unless otherwise indicated, all references to “$” in this document refer to United States dollars.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains statements that are considered forward-looking statements. Forward-looking statements give the Company’s current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this Annual Report on Form 10-K, including statements regarding the Company’s future financial position, planned acquisitions, prospects of our industries or our prospects, plans, performance, operations, business strategy, budgets, projected costs, capital spending, sources of liquidity and financing sources, and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “anticipate,” “foresee,” “project,” “forecast,” “could”, “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” or the negative of these terms or variations of them or similar terms or expressions of similar meaning, as they relate to the Company. Furthermore, forward-looking statements may be included in various filings that we make with the Securities and Exchange Commission (the “SEC”), and in press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are based on the Company’s current plans, and the Company’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements.
These known and unknown risks and uncertainties include, without limitation, the risk factors described in sections “SUMMARY OF RISK FACTORS”, “ITEM 1A. RISK FACTORS”, and “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K and in our other SEC public filings, which can be read at www.sec.gov. Therefore, these forward-looking statements are not guarantees or promises of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. As a result, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements.
Any or all of the forward-looking statements in this Annual Report on Form 10-K may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Annual Report on Form 10-K.
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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this document, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. We undertake no obligation to further update any such statement, or the risk factors described in the sections “SUMMARY OF RISK FACTORS”, “ITEM 1A. RISK FACTORS”, and “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, our consolidated financial statements, the related notes included elsewhere in this Annual Report on Form 10-K and in our other SEC public filings, to reflect new information, the occurrence of future events or circumstances or otherwise. None of the statements contained herein have been approved by the Food and Drug Administration, and none of the products manufactured or sold by the Company are intended to diagnose, treat, cure or prevent any disease.
SUMMARY OF RISK FACTORS
Significant Financial Obligations and Acute Regulatory Risks
LFTD Partners Inc. has a history of recurring losses, which has resulted in an accumulated deficit of $28,839,889 as of December 31, 2025. The Company currently is making payments of interest and principal on its loan from Surety Bank, and is accruing and paying dividends on outstanding Series A Preferred Stock and Series B Preferred Stock at the rate of 3% per year, among other ongoing financial obligations. As extensively discussed in this document, the Company is subject to a wide variety of Risk Factors including substantial legal and regulatory risks. These matters cumulatively raise substantial doubt about our ability to continue as a going concern.
The legal and regulatory risks facing our business are particularly acute at this point in time, in at least the following respects:
| (1) | On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also bans intoxicating hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. However, the Act in all likelihood will have a devastating impact on the Company and the price of its common stock. The material adverse effects of the Act cannot be overstated; these material adverse effects include, but are not limited to, the following: |
| a) | The elimination of half or more of Lifted’s sales. Sales of hemp-derived products made up approximately 52% of Lifted’s sales during the year ended December 31, 2025; thus, the Act could eliminate approximately half or more of the Company’s revenue; |
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| b) | Goodwill impairment charges. As a result of LFTD Partners' acquisition of Lifted, LFTD Partners recognized goodwill of $22,292,767 ("Lifted Goodwill"). As a result of Lifted’s purchase of assets of hemp-derived products maker Oculus CRS, LLC, and merger with Oculus CHS Management Corp., LFTD Partners recognized goodwill of $800,027 ("Oculus Goodwill"). The Act necessitated the calculation and recording of an impairment charge on the Lifted Goodwill and Oculus Goodwill. As of December 31, 2025, LFTD Partners recorded a goodwill impairment charge on the Lifted Goodwill and Oculus Goodwill, reducing the carrying value of both to $0. |
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| c) | An investment impairment charge. The Act necessitated the calculation and recording of an impairment of LFTD Partners’ investment in hemp-derived beverage and products maker Ablis. On April 30, 2019, LFTD Partners purchased 4.99% of the common stock of Ablis for $399,200. As of December 31, 2025, LFTD Partners recorded an impairment charge on its investment in Ablis, reducing the carrying value of the investment to $0. |
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| d) | Significant write offs of inventory. The Act will most likely negatively impact the pricing of hemp-derived products, the availability and price of raw goods, and production forecasting and sales, which may lead to the recording of inventory allowances against, or write offs of, our hemp-derived inventory each quarter end leading up to November 12, 2026. Moreover, any hemp-derived products in inventory on November 12, 2026 will have to be written off. |
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| e) | Significant write offs of accounts receivable. The Act will have a material adverse effect on the wholesalers and distributors that sell our products. In turn, these wholesalers and distributors may disregard their payment terms and not pay us for the product that they have purchased, causing us to have to correspondingly increase our allowance for doubtful accounts, and eventually writing off the accounts receivable. |
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| f) | Impairments of, or losses on the disposition of, hemp-related fixed assets. The Act is expected to materially reduce or eliminate the utility and marketability of fixed assets used primarily in the manufacture of hemp-derived products. As a result, we may be required to record impairment charges on these assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts. |
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| g) | Sales of fixed or other assets to fund ongoing operations. If the Act materially reduces our revenue from hemp-derived products, our cash flow may be insufficient to support ongoing operating expenses. In that event, we may be required to sell fixed assets or other assets to generate liquidity, which could occur at unfavorable prices and materially adversely affect our financial condition. |
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| h) | Workforce reductions and termination of contractor relationships. If the Act materially reduces demand for our hemp-derived products, we may be required to reduce our workforce and terminate relationships with independent contractors. Such actions could disrupt our operations, result in restructuring costs, and adversely affect our ability to operate or pursue future business opportunities. |
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| i) | Reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates. Just the passing of the Act has significantly reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates, because the Act calls into question our Company’s short-term and long-term financial and operational viability, growth prospects, liquidity, and potential for listing on a national stock exchange; and if the Act is not replaced, impacted or amended by subsequent acts of Congress prior to November 12, 2026, then these negative impacts on our Company and our common stock are likely to even further intensify. |
| (2) | The Company’s stock is not traded on a national stock exchange and as a result a stockholder’s ability to sell shares of stock owned by a stockholder could be limited. The visibility and trading volume of our common stock are low, and any material increase in such visibility and trading volume is likely dependent upon our ability to list our common stock on a recognized stock exchange, but our ability to satisfy the listing requirements for a recognized stock exchange cannot be guaranteed or assured. A continued inability to satisfy the listing requirements for a recognized stock exchange could materially adversely affect the visibility, trading volume, and trading price of our common stock; |
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| (3) | Numerous states have enacted, or are considering enacting, laws or regulations that would prohibit or seriously curb sales of the Company’s hemp-derived products in those states. For example, in September 2025, a bill was proposed in Wisconsin that would significantly restrict the production and sale of hemp-derived products in Wisconsin. On May 21, 2025, the Governor of Tennessee signed House Bill 1376, which significantly restricts the production and sale of hemp-derived products beginning in 2026. In Alabama, new regulations took effect on July 1, 2025, which are intended to curb or eliminate the sales of hemp-derived products in Alabama. In Minnesota, new regulations take effect on January 1, 2026, which are intended to curb or eliminate the sales of hemp-derived products in Minnesota. On December 6, 2023, Wisconsin’s Governor signed a new law that requires that an electronic vaping device be listed on the state’s electronic vaping device directory or it is illegal to sell or offer such device for sale in Wisconsin. In order for an electronic vaping device to become listed on such electronic vaping device directory, its manufacturer must certify that such electronic vaping device meets certain criteria. Selling electronic vaping devices in Wisconsin in violation of this new law carries significant penalties, beginning on September 1, 2025 for electronic vaping devices that contain nicotine, and beginning on July 1, 2026 for electronic vaping devices that contain hemp and do not contain nicotine. There can be no guarantee or assurance that Lifted will be successful in adding its electronic vaping devices to Wisconsin’s electronic vaping device directory, or will find a route to exempt its electronic vaping devices from this new law. Since the sale of electronic vaping devices constitutes one of the largest categories of product sales for Lifted, any inability of Lifted to sell electronic vaping devices in accordance with the new Wisconsin law could have a significant, direct impact on the Company’s revenue, net income and earnings per share, or could require Lifted to take extraordinary steps such as moving its vape manufacturing and selling outside of Wisconsin in an attempt to avoid the impacts of this new Wisconsin law. Other states also require hemp or hemp-derived products to be formally registered, listed, or otherwise approved with a state regulatory directory or registry before they can legally be sold. These new laws, regulations, or proposed bills, to prohibit or curb the Company’s sales of products in those states could materially adversely affect our financial results and business operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock; |
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| (4) | Opponents of our industry are known to be lobbying for legislation in Texas and other states intended to prohibit or restrict sales of hemp-derived products, and if such legislation becomes law, it could materially adversely affect our sales of hemp-derived products in those jurisdictions and the trading price of our common stock; |
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| (5) | An official of the federal Drug Enforcement Administration (the "DEA") made a presentation at a conference in Houston in April 2023, in which that official reportedly stated that the DEA plans to issue a new rule that would have the effect of classifying certain hemp-derived cannabinoids as controlled substances. If such a new rule were to be issued and become legally binding upon Lifted, it could have a material adverse effect upon 50% or more of Lifted's business and upon the trading price of the Company's common stock. As of the date of this Annual Report on Form 10-K, we are not aware of any draft DEA rule that would materially affect Lifted’s business; and |
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| (6) | Regarding LFTD Partners' investment in Bendistillery, Inc. d/b/a Crater Lake Spirits (“Bendistillery”): distillers such as Bendistillery are navigating a tougher, more complex environment than they did even a few years ago. Liquor companies today are balancing category decline, stricter rules, and higher costs while trying to stay culturally relevant. Consequently, as of December 31, 2025, LFTD Partners recorded an impairment charge on its investment in Bendistillery, reducing the carrying value of LFTD Partners’ investment in Bendistillery to $99,800. There can be no assurance that the business of Bendistillery will be successful or generate any profit or other financial benefit for LFTD Partners |
Additional Significant Risk Factors
In addition to the Significant Financial Obligations and Acute Regulatory Risks described above, LFTD Partners is subject to a number of risks and uncertainties of which you should be aware before making a decision to invest in LFTD Partners. This SUMMARY OF RISK FACTORS does not address all of the risks that we face. Additional discussion of the risks summarized in this SUMMARY OF RISK FACTORS, and other risks that we face, may be found below in ITEM 1A. RISK FACTORS and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC, before making a decision to invest in our Company. The principal factors (in addition to the Significant Financial Obligations and Acute Regulatory Risks described above) that make an investment in LFTD Partners speculative or risky include the following, among others:
(1) The delay in Lifted’s receipt of payments from certain customers – primarily distributors – have increasingly become an issue for Lifted. Certain customers have become slower to pay Lifted for purchased product (“Slow Paying Customers”), and the Slow Paying Customers disregard payment terms. Management speculates that some Slow Paying Customers may be slow-paying Lifted because of their own sales collection issues, which may in part be caused by the regulatory uncertainty over our industry. As described below in the Accounts Receivable section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, the Company has an accounting protocol which effectively causes the Company to recognize an allowance for doubtful accounts for all invoices older than 90 days. Consequently, the delay in Lifted’s receipt of payments from certain customers has a direct impact on the Company’s net receivables, net income, and earnings per share. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
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(2) Write offs of inventory continue to be significant for Lifted. Because consumers’ demands change very quickly, Lifted may find it necessary to write off certain raw goods because they will no longer be used in production. Or, if consumers are no longer interested in certain products, and the finished goods are slow-moving, those finished goods are written off. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(3) The Company is currently involved in developing, manufacturing and selling a wide variety of intoxicating products containing hemp-derivatives, kratom derivatives and other psychoactive substances. All of these products are, or may become, subject to significant government laws and regulations, enforcement of which could be a threat to the survival of our Company. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(4) The market for the products we sell is a fairly new and developing market that is subject to significant disruptions as it develops, including entry of large competitors in the space. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(5) The Company is controlled by a small number of people who are important to the business. The loss of any of these people could have a detrimental effect on our Company. Such a small number of people also can skew the direction of the Company in a manner in which stockholders do not agree. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(6) Due to the fact that we sell consumer products and in particular due to the nature of the products, the Company could be subject to product liability lawsuits, including class action lawsuits. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(7) We face intense competition and we are dependent on the popularity and consumer acceptance of our branded products. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
(8) We may face unfavorable publicity or consumer perception. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(9) Lifted may lose profits or become subject to liability arising from any breach of contract or fraudulent or illegal activity by our suppliers, testing labs, employees, independent contractors, consultants and others. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(10) We are involved, both as a plaintiff and as a defendant, in several lawsuits, and more lawsuits are likely in the future. We have been spending, and expect in the future to continue to spend, significant management time and effort, and significant legal fees and expenses, on these lawsuits. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
(11) We are subject to the risk that the U.S. Internal Revenue Service may claim that some of our hemp-derived products are federally illegal. And, if we enter the marijuana industry, under current law marijuana products are federally illegal. The costs of selling federally illegal products cannot be deducted as expenses under U.S. Internal Revenue Code Section 280E, which could significantly increase our federal tax liabilities, both for prior years and for future years. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
ITEM 1. BUSINESS
Description of the Business of LFTD Partners Inc.
LFTD Partners Inc., Jacksonville, Florida, was organized under the laws of the State of Nevada on January 2, 1986. Shares of the Company’s common stock are listed for trading on the OTCQB Venture Market under the symbol “LIFD”.
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LFTD Partners is the parent corporation of Lifted Liquids, Inc. d/b/a Lifted Made, d/b/a Urb Finest Flowers, d/b/a Highlandia and d/b/a LM Nutra, Kenosha, Wisconsin (“Lifted Made” or “Lifted”), which manufactures and sells hemp-derived and other psychoactive products under its award-winning Urb Finest Flowers (“Urb”) brand (www.urb.shop) and other brands, hemp-derived beverages under the Highlandia brand (www.Highlandia.com), and hemp-free health and wellness gummies under its Mielos brand (www.mielos.com), and hemp-free energy gummies under its Rebel Energy Gummy brand (www.RebelEnergyGummy.com). Lifted is the worldwide, exclusive manufacturer and seller of Diamond Supply Co. (www.DiamondSupplyCo.com) hemp-derived products. LFTD Partners Inc. also owns 4.99% of hemp-derived beverage and products maker Ablis (www.Ablis.shop), and of craft distiller Bendistillery, Inc. d/b/a Crater Lake Spirits (www.CraterLakeSpirits.com), both located in Bend, Oregon.
Management of the Company is primarily interested in acquiring companies operating outside of the hemp or marijuana industries, which have many regulatory risks.
Lifted
Background
On February 24, 2020, we acquired 100% of the ownership interests in Lifted. Lifted was originally incorporated in the state of Wisconsin on September 19, 2014, and was created with a passion to build a culture-based organization focused upon quality products and a healthier lifestyle.
Lifted primarily sells psychoactive products, but also non-intoxicating energy and wellness products. Many of Lifted’s products contain hemp-derived cannabinoids (such as delta-8-THC and delta-9-THC). Lifted’s award-winning hemp-derived products brand is called Urb Finest Flowers (“Urb”) (www.urb.shop). In the second quarter of 2024, Lifted launched Mielos (www.mielos.com), a new brand of health and wellness products that do not contain hemp derivatives. In the third quarter of 2024, Lifted launched hemp-free energy gummies under its Rebel Energy Gummy brand (www.RebelEnergyGummy.com). In the first quarter of 2026, Lifted began selling Highlandia hemp-derived beverages (www.Highlandia.com). Lifted also sells products derived from kratom; the Company has sold nicotine products in the past. Lifted sells its products via distributors and wholesalers and online direct to consumers. Products currently sold by Lifted under its Urb brand include, for example: vapes, cartridges, edibles, joints and blunts. Lifted is the worldwide, exclusive manufacturer and seller of Diamond Supply Co. (www.DiamondSupplyCo.com) hemp-derived products. Lifted also manufactures and sells hemp-derived and non-hemp-derived products to private label clients, and licenses the Urb brand name to Extrax NM LLC in New Mexico for use on marijuana products.
Government Laws and Regulations
Lifted is attempting to only conduct business to the extent permitted under applicable laws and regulations. The manufacture and/or sale of hemp-derived, kratom-derived and other psychoactive and consumable products involve significant risks associated with federal, state and local laws and regulations, and regulatory agencies, that have the potential to bankrupt Lifted and the Company, or at least to negatively impact the trading price of our common stock.
In regard to the sale of hemp-derived products in the United States, despite cannabis having been legalized at the state level for medical use in many states and for adult recreational use in a number of states, cannabis, other than plants of the same genus that meet the definition of industrial hemp, continues to be categorized as a Schedule I controlled substance under the federal Controlled Substances Act (“CSA”), and subject to the Controlled Substances Import and Export Act (“CSIEA”).
On December 20, 2018, President Donald J. Trump signed the Agricultural Improvement Act of 2018, which is more commonly known as the “2018 Farm Bill”. The 2018 Farm Bill legalizes hemp cultivation and declassifies hemp as a Schedule I controlled substance. However:
| (1) | The Act: On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also bans intoxicating hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. However, the Act in all likelihood will have a devastating impact on the Company and the price of its common stock. |
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| (2) | FDA: The U.S. Food and Drug Administration (“FDA”) has stated that while hemp is no longer classified as an illegal substance under the Farm Bill, cannabis-derived products remain subject to regulation under the Federal Food, Drug, and Cosmetic Act (which protects the public from unsafe food, drugs, medical devices, and cosmetics) and Section 351 of the Public Health Service Act (which regulates the licensing of biological products). The health and safety effects of delta-8-THC and other cannabinoids have not been conclusively established through traditional scientific or clinical studies. The FDA has expressed concerns that CBD, delta-8-THC, and other hemp-derived cannabinoids may pose significant health risks, including potential liver toxicity or damage. Additionally, the FDA has taken the position that certain cannabinoids may be classified as drugs and that the sale of cannabinoid-infused products without FDA approval may be unlawful. In alignment with the FDA’s stance, several states and municipalities have imposed restrictions or outright bans on the sale of hemp-derived cannabinoid products, particularly those containing delta-8-THC or delta-9-THC. Future regulatory actions by the FDA could include stricter licensing requirements, additional compliance obligations, or outright prohibitions on the sale of certain hemp-derived products. Any such measures could materially and adversely impact Lifted’s business operations and the market value of our common stock; |
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| (3) | DEA: The US Drug Enforcement Agency (“DEA”) has stated that although hemp is no longer an illegal substance under the Farm Bill, the FDA continues to pursue Schedule I controlled substances as well as certain synthetic substances. In particular: |
| (a) | Hemp and hemp-derived cannabinoid-infused products which exceed a delta-9-THC concentration of 0.3% by dry weight are illegal under the Farm Bill. Any failure to keep the delta-9-THC concentration in Lifted’s hemp-derived or cannabinoid-infused products below 0.3% by dry weight could subject us to action by the DEA or other regulatory authorities and/or to lawsuits by consumers, which could have a material adverse effect upon our Company’s business and the trading price of our common stock. In addition, certain hemp-derived products may, over time, gradually increase their delta-9-THC concentration, and this may ultimately cause such products to exceed the 0.3% delta-9-THC by dry weight concentration level, making such products illegal in certain jurisdictions. If this happens, we could be subject to regulatory action that could have a material adverse effect upon our Company and the trading price of our common stock. In addition, the approval of medical and recreational marijuana by many states has created a situation in which it may be difficult or impossible for regulators and courts to determine whether the THC levels reflected in consumers’ blood tests are the result of legal hemp-derived products or marijuana-infused products. This may result in regulatory actions or lawsuits against the Company; |
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| (b) | The DEA has issued a statement that some have interpreted as making hemp-derived delta-8-THC illegal. In deference to the DEA, certain state and local governments have imposed restrictions or prohibitions upon the sale of certain products containing delta-8-THC. Lifted sells significant quantities of products containing hemp-derived delta-8-THC, and any crackdown by the DEA or other regulatory authorities on products containing delta-8-THC may have a material adverse effect upon Lifted’s business and the trading price of our common stock; and |
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| (c) | The DEA has sent a letter saying that delta-9-THCO and delta-8-THCO “do not occur naturally in the cannabis plant and can only be obtained synthetically, and therefore do not fall under the definition of hemp.” While we disagree with the opinion expressed by the DEA in that letter and do not believe that the DEA has any legal authority to nullify the so-called "Farm Bill", which is federal law, by issuing such a letter, any crackdown by the DEA or other regulatory authorities on products containing delta-9-THCO and/or delta-8-THCO may have a material adverse effect upon Lifted’s business and the trading price of our common stock. |
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| (4) | Amended PACT act: The amended federal PACT act makes the online sale of certain of Lifted’s products to end users difficult or impossible. The amended federal PACT act may have a material adverse effect upon Lifted’s business and the trading price of our common stock. |
Regarding the sale of products containing nicotine: products containing nicotine are addictive and are subject to heavy regulation by U.S. federal, state and local governments. The legislative and regulatory landscape surrounding nicotine-containing products has created risks for Lifted’s business. Laws and regulations have been adopted that can impose significant liabilities upon companies operating in the nicotine industry, especially in regard to sales to minors. Existing and future laws and regulations affecting nicotine products may have a material adverse effect upon Lifted’s business and the trading price of our common stock.
Furthermore, the regulation of hemp-derived, kratom-derived, psychoactive and nicotine products is evolving. Lifted may become subject to new laws, rules, regulations, moratoriums, prohibitions, or other restrictions or impediments upon nicotine and companies involved in the marijuana and/or hemp industries (each a “Cannabis Company”) that may be imposed by the U.S. President, Congress, federal agencies such as the FDA and/or the DEA, and/or by state and local governments. Lifted’s business may also be impacted by any language relating to hemp-derived, kratom-derived or psychoactive products that might be contained in a bill, or that intentionally or unintentionally might be contained in other legislation at the federal or state level. Without limiting the generality of the foregoing, governmental laws, rules and regulations may impose significant new rules, restrictions, limitations, prohibitions and/or taxes on when, where, how and to whom Lifted may sell its products, and these new rules, restrictions, limitations, prohibitions and/or taxes may have a material adverse effect on Lifted’s business and the trading price of our common stock.
Competition
Lifted faces intense competition in the hemp-derived, kratom-derived and psychoactive products industries from both existing and emerging companies that offer similar products to Lifted. More distributors are creating their own brands and selling their own branded products at a lower price than Lifted’s products; there is increased competition for products containing more milligrams of cannabinoids or active ingredients per unit at a lower price point; and other competing brands pay distributors and wholesalers more than what Lifted is willing to pay (if anything) for valuable shelf space.
Some of Lifted’s current and potential competitors may have longer operating histories, more innovative or popular products, greater financial, marketing and other resources and larger customer bases. Given the rapid changes affecting the hemp-derived, kratom-derived and psychoactive products industries nationally and locally, Lifted may not be able to create and maintain a competitive advantage in the marketplace. Lifted’s success will depend on its ability to keep pace with any changes in local and national markets, especially in light of frequent and rapid legal and regulatory changes.
Competition is also based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing and promotional activity, the ability to identify and satisfy consumer preferences, as well as convenience and service. Lifted’s success will depend on its ability to respond to, among other things, changes in the economy, market conditions and competitive pressures. Any failure to anticipate or respond adequately to such changes could have a material adverse effect on Lifted’s financial condition, operating results, liquidity, cash flow and operational performance.
Officers and Employees
The executives of Lifted have backgrounds in various consumer goods industries, sales, graphic design, distribution, marketing, accounting, and supply chain management, skills that have helped Lifted distinguish itself from the competition.
As of December 31, 2025, Lifted had approximately 100 full time and part time employees and independent contractors who are engaged in product formulation, design and branding, website development, private label client management, sales, strategy, distribution, supply chain management, new business development, warehouse management and order fulfillment, operations management, accounting, new product development, trade shows and evaluation of potential acquisitions and joint ventures. Currently, most of Lifted’s employees and independent contractors are based in Wisconsin, and the rest are located in Colorado, Illinois, Nevada, New Mexico and Florida.
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The Market
The majority of Lifted’s product sales are made through distributors, and a smaller number of sales are made directly to retailers, and then the smallest number of sales are made directly to end consumers online.
Distribution
Lifted’s distribution is done internally and through third party distributors who distribute throughout the U.S. Lifted and these distributors distribute Lifted’s products to vape and smoke shops, convenience stores, grocery stores, natural food stores, wellness stores, and other outlets. Lifted believes but cannot guarantee that in the event that Lifted lost its relationship with one or more of its current distributors, that other replacement distributors could be found without significant disruption to Lifted’s business.
Product Risks
Lifted’s products contain hemp-derived cannabinoids and other psychoactive substances. There is a risk that Lifted could be targeted by regulators, plaintiffs lawyers, and/or consumers with claims that its products are unsafe. Potential product safety risks, and potential laws and regulations including but not limited to any issued by the FDA could have a material adverse effect on Lifted’s financial condition, operating results, liquidity, cash flow and operational performance.
Sources of Supply
Lifted sources its raw goods from different suppliers. Lifted’s raw goods are third-party lab tested, and Lifted’s finished goods are also third-party lab tested. Lifted does not grow or manufacture its raw goods, nor does Lifted process or extract cannabinoids or other substances from raw goods. However, many of Lifted’s finished goods are made in-house using the raw goods purchased from third party vendors. From time to time, Lifted has engaged third party vendors to manufacture finished goods for Lifted in accordance with Lifted’s specifications. Lifted designs the majority of its packaging in-house, and typically employs a third party firm to manufacture that packaging.
Lifted currently believes that it would be able to find replacement manufacturers with minimal negative impact on its business. However, certain components, such as Lifted’s vapes and cartridges, are sourced exclusively from China. COVID-19 and variants, Chinese holidays, backups at U.S. ports, tariffs imposed on products sourced from China or other foreign countries, and potential hostilities involving China, could make it difficult or impossible to source these products cost effectively, or at all, from China. These risks associated with China could drastically increase Lifted’s product costs, all of which could have a serious detrimental impact on Lifted’s sales and profit margins.
Intellectual Property
Lifted maintains proprietary formulations, a trademark for “Urbar”, and other trade secrets. Lifted does not currently own any registered patents.
Research and Development Expenditures
Research and development costs are expensed as they are incurred.
Marketing
Lifted primarily markets itself by networking throughout the industry through word of mouth, through its website, using online ads, by attending trade shows, and via other marketing campaigns. In the past, Lifted has also engaged public relations, marketing and search engine optimization firms to improve Lifted’s public relations, marketing and search engine optimization efforts. There can be no guarantee or assurance that Lifted’s marketing efforts will be successful or result in any additional sales or profits for Lifted.
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Costs and effects of compliance with environmental laws
To Lifted’s knowledge, Lifted does not currently use or generate any hazardous materials in its operations.
Amendment of Articles of Incorporation of Lifted
On October 27, 2025, the Board of Directors of Lifted, an Illinois corporation and wholly owned subsidiary of LFTD Partners, adopted a Unanimous Written Consent pursuant to Section 8.45 of the Illinois Business Corporation Act of 1983 approving an amendment to its Articles of Incorporation to change the par value of its common stock from “no par value” to $0.001 per share. The amendment was adopted under Section 10.15 of the Act, which permits the board to increase, decrease, create or eliminate par value without shareholder approval so long as no class or series is adversely affected. Articles of Amendment reflecting this change were filed with the Illinois Secretary of State following Board approval. The change in par value does not affect the number of authorized or outstanding shares of Lifted or have any impact on the consolidated financial statements of LFTD Partners. The change may have positive tax implications in future periods.
Highlandia Inc.
On October 24, 2025, LFTD Partners created a new wholly owned subsidiary in Florida called Highlandia Inc. (“Highlandia”) (www.Highlandia.com). Highlandia, which has not yet conducted any business, and owns the brand “Highlandia”, under which Lifted began selling hemp-derived beverages in the first quarter of 2026.
Ablis and Bendistillery
On April 30, 2019, we closed on the acquisition of 4.99% of the common stock of each of hemp-derived beverage and products maker Ablis Holding Company (“Ablis”) (www.Ablis.shop), and of distilled spirits manufacturers Bendistillery, Inc. d/b/a Crater Lake Spirits (“Bendistillery”) (www.CraterLakeSpirits.com) and Bend Spirits, Inc. (“Bend Spirits”), all located in Bend, Oregon, for an aggregate purchase price of $1,896,200. In the second quarter of 2025, Bend Spirits was merged into Bendistillery for operational efficiency.
Ablis manufactures and sells flavored, lightly carbonated canned beverages, including “functails” – a term coined by Ablis which means a beverage crafted with hemp-derived THC and/or CBD, and other high-quality functional ingredients such as caffeine from guarana, L-theanine and ashwagandha. Ablis also sells CBD-infused muscle rub, among other products.
Bendistillery manufactures and sells straight and flavored vodka and gin and various types of whiskey under its brand Crater Lake Spirits.
As of December 31, 2025, LFTD Partners recorded an impairment charge on its investment in Ablis, reducing the carrying value of LFTD Partners’ investment in Ablis to $0. LFTD Partners also recorded an impairment charge on its investment in Bendistillery, reducing the carrying value of LFTD Partners’ investment in Bendistillery to $99,800.
Properties
The Company owns one real property in Kenosha, Wisconsin (the “5511 Building”) and leases additional facilities used in its operations (the “Additional Facilities”). The 5511 Building is an 11,238 square foot building located at 5511 95th Avenue, Kenosha, Wisconsin, which was purchased on December 14, 2023 for $1,375,000. The 5511 Building is used for office space, manufacturing and storage. As of December 31, 2025, the 5511 Building is subject to a first priority mortgage in the principal amount of $852,755. The 5511 Building is currently for sale, and if it is sold then the Company will use the net sale proceeds to pay off the mortgage, and plans to consolidate its operations in the Additional Facilities.
The Additional Facilities are located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, Wisconsin and 5732 95th Avenue, Suites 100-300, Kenosha, Wisconsin. Effective February 1, 2026, the Company expanded the 5732 95th Avenue lease to include Suite 400. The Additional Facilities comprise an aggregate of approximately 41,000 square feet of leased space. The leased space located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, Wisconsin is used by the Company for shipping, receiving, packaging and office space. The leased space located at 5732 95th Avenue, Suites 100-400, Kenosha, Wisconsin is used for gummy manufacturing and storage.
The Company does not lease space for its corporate headquarters. Executive officers operate from offices located at their homes.
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Manufacturing, Sales and Marketing Agreements
During 2023, Lifted entered into manufacturing, sales and marketing agreements with Cali Sweets, LLC, Diamond Supply Co., DreamFields Brands Inc. (d/b/a Jeeter), and in January 2024 with a wholly owned subsidiary of a large publicly traded U.S. marijuana company (“SubCo”). As of December 31, 2025, only the Diamond agreement remained in effect; the Jeeter agreement terminated January 1, 2024, the Cali agreement was mutually terminated effective January 1, 2025, and the SubCo agreement was terminated December 17, 2025. Moreover, Lifted stopped selling the Diamond products on or about April 30, 2025. Lifted and Diamond are in the process of formally terminating the Diamond Agreement. Management does not believe any individual agreement had a material impact on revenues, as no single agreement accounted for more than 5% of Lifted’s revenues. Aggregate net revenue generated under these agreements was $5,728,663 in 2023, $2,094,864 in 2024, and $159,968 in 2025.
Lifted Purchase of Assets of Oculus CRS, LLC, and Merger With Oculus CHS Management Corp.
On April 28, 2023, Lifted purchased substantially all of the assets of Oculus CRS, LLC, its hemp flower products supplier, for $342,068 in cash (net of $26,420 cash acquired). The acquired assets included operational and office equipment, inventory, receivables, and a machine purchase contract, and the purchase price was applied to satisfy all of Oculus’ liabilities at closing. Concurrently, Lifted merged with Oculus CHS Management Corp., whose primary assets were employment agreements with its owners, Chase and Hagan Sanchez. In connection with the merger, Lifted issued 100 shares of LIFD common stock at closing and, following the first anniversary of closing, paid the minimum earnout consideration of $1,000,000, consisting of $200,000 in cash and 160,000 shares of LIFD common stock valued at $5.00 per share. Total transaction consideration was $1,368,697, including recognized goodwill of $800,027.
In November 2025, federal legislation banning intoxicating hemp-derived consumable products beginning in November 2026 triggered a goodwill impairment analysis, and the Company recorded a full impairment of the Oculus goodwill as of December 31, 2025. Following the acquisition, Chase and Hagan Sanchez continued to manage the hemp flower division under employment agreements, and approximately 20 former Oculus employees joined Lifted.
Extrax NM Agreement
On June 1, 2023, Lifted entered into a five-year agreement with Extrax NM LLC (“ENM”) under which ENM manufactures and exclusively sells Urb-branded marijuana products in New Mexico, and was obligated to remit 50% of gross sales proceeds (excluding taxes) to Lifted. Payments were applied first to repay loans from Lifted, second to pay for inventory and equipment sold by Lifted, and third as a license fee. In July 2025, the parties modified the arrangement so that ENM would no longer remit 50% of monthly gross revenue, Lifted would stop advancing loans, and future inventory purchases would be paid in full upon invoice (the “July Modification”).
As of December 31, 2025, ENM owed Lifted $421,835 in non-interest-bearing loans and $102,686 in unpaid invoices. Because no restructuring agreement was finalized and collectability was uncertain, the Company recorded a full allowance against both the loans (“Provision for Credit Losses – Extrax NM Loans”) and the aged receivables as of year-end 2025. No license fee revenue was recorded in 2025; license fee revenue was $280,814 in 2024 and zero in 2023. For accounting purposes under ASC 606, Lifted recognizes revenue on a gross basis for sales of inventory (“Unit Components”) to ENM, as it acts as principal for those transactions; under this relationship, in 2025, Lifted recognized $481,063 of sales to ENM. However, Lifted acts as an agent with respect to ENM’s sale of Urb-branded products to dispensaries and does not recognize those product sales on a gross basis; under this relationship, in 2025, prior to the July Modification, ENM remitted $286,860 to Lifted.
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Manufacturing, Sales and Marketing Agreement With SubCo
On January 20, 2024, Lifted entered into a Manufacturing, Sales and Marketing Agreement with SubCo under which Lifted served as the exclusive U.S. manufacturer and distributor of certain hemp-derived vape and gummy products. Lifted was responsible for manufacturing, order fulfillment, collections, regulatory compliance, and quality control, while SubCo primarily funded production costs and marketing. Product revenues were first applied to reimburse SubCo’s purchase order costs, after which remaining net revenue was split 60% to SubCo and 40% to Lifted as a royalty. The agreement had an initial 18-month term but was mutually terminated on December 17, 2025. Certain provisions, including warranty and indemnification obligations, survive termination. For accounting purposes, Lifted concluded it acted as principal under ASC 606 and recognized product sales on a gross basis during the term of the agreement.
Capital Raise
We may deem it necessary or desirable in the future to raise additional capital in order to build our available working capital, to close future acquisitions, to potentially expand the 5511 Building, or to pay other corporate obligations. No guarantee or assurance can be made that such capital can be raised on acceptable terms, if at all.
If we were ever to proceed forward with an equity raise, it may be in conjunction with a potential listing of our common stock on a stock exchange. However, there can be no guarantee or assurance that any such debt and/or equity capital raise or listing will be completed on acceptable terms, if at all. If we were to acquire a company that is involved in the marijuana and/or hemp industries (a “Cannabis Company”) that "touches the marijuana plant" in the U.S., or if we were to otherwise directly enter the marijuana industry in the U.S., then it would not be possible, under current federal laws and the current policies of NASDAQ and the NYSE, for our common stock to be listed on either of those exchanges at this point in time, even if those exchanges' other listing requirements were met.
Corporate Information
Our principal headquarters are located at 14155 Pine Island Drive, Jacksonville, Florida 32224. Our telephone number is (847) 915-2446. Our corporate website address is www.LFTDPartners.com.
OLCC Review of New Directors of the Company
Due to our minority ownership interest in Bendistillery, the Oregon Liquor Control Commission (“OLCC”) has jurisdiction over our directors, officers and significant shareholders. If the OLCC were to refuse to approve any of our directors, officers or significant shareholders, it could disrupt our management and corporate governance, which could materially adversely affect our Company and the trading price of our common stock.
Liquidity Overview
LFTD Partners is a holding company whose operations and revenue are generated entirely through its wholly owned subsidiary, Lifted. The Company does not generate revenue at the parent level and does not recognize earnings from minority investments. Lifted historically has not always generated operating cash flow sufficient to fund ongoing operations. The Company’s operating cash flow is subject to variability due to regulatory developments, customer payment timing, and industry conditions. The Company’s liquidity depends heavily on operating cash flow and the collectability of accounts receivable, particularly from wholesale and distributor customers that often have extended payment terms. Delays in customer payments can materially impact working capital and short-term liquidity. As of December 31, 2025, the Company has an accumulated deficit and continues to evaluate strategies to support operations and long-term growth, including organic expansion, acquisitions, and potential capital raises.
The Company has ongoing financial obligations, including payments on its Business Loan and dividend payments on outstanding preferred stock. Although management believes current cash on hand and operating cash flows are expected to meet near-term needs, there can be no assurance that additional capital will be available on acceptable terms if required to fund growth initiatives or acquisitions. The Company’s ability to obtain additional capital depends on market conditions, regulatory developments, investor demand, and overall operating performance.
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Acquisition Process
The Company evaluates acquisition opportunities on a situational basis and generally expects to structure transactions as either tax-free stock-for-stock mergers or asset purchases, although alternative structures may be considered when appropriate. In stock-based mergers, a substantial portion of consideration may consist of newly issued Company shares, which could result in significant dilution and potentially a change in control. Acquisitions may require the Company to raise substantial additional capital to fund any cash component of the purchase price, and there can be no assurance that such capital will be available on acceptable terms. Market conditions, regulatory uncertainty in the hemp and cannabis industries, macroeconomic pressures, and investor sentiment may limit the Company’s ability to obtain financing.
Potential acquisitions are reviewed by an Investment Committee appointed by the Board of Directors, currently consisting of GJacobs, NWarrender, and WJacobs. The Company intends to proceed only with unanimous Investment Committee approval and majority Board approval. Opportunities are sourced through management’s industry contacts and professional networks. Due diligence investigations are conducted to the extent reasonable given the Company’s financial and operational resources. Given current market and regulatory uncertainty, the Company has generally adopted a conservative approach to capital raising, stock issuance, borrowing, and acquisition terms.
Employees
GJacobs, our Chairman, Chief Executive Officer and Secretary, manages the Company’s operations with the assistance of WJacobs, our Director, President, Chief Financial Officer and Treasurer, and NWarrender, our Vice Chairman and Chief Operating Officer, under the Executive Employment Agreements described above.
We expect to continue to use consultants, attorneys, accountants, other professionals and independent contractors as necessary.
Reports to Security Holders
LFTD Partners Inc. is subject to reporting obligations under the Exchange Act. These obligations include an annual report under cover of Form 10-K, with audited financial statements, unaudited quarterly reports under cover of Form 10-Q, occasional reports under cover of Form 8-K, and other required filings. The public may read and copy any materials LFTD Partners Inc. files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information of the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC including LFTD Partners Inc.
ITEM 1A. RISK FACTORS
Our business is subject to numerous risks and uncertainties (“Risk Factors”). Certain Risk Factors may have a material adverse effect on our business, financial condition, and results of operations. Investing in our shares involves a high degree of risk. You should carefully consider the following risks, together with all of the other information contained in this Annual Report on Form 10-K, including the sections titled “Cautionary Note Regarding Forward-Looking Statements”, “SUMMARY OF RISK FACTORS”, and “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Any of the following risks could have an adverse effect on our business, financial condition, operating results, or prospects and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition, operating results, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
In the following Risk Factors, the terms “us”, “we”, “Company,” “LFTD Partners” and “Lifted” are meant to include references to LFTD Partners, Lifted (including Lifted’s arrangement with Extrax NM, and Lifted’s collaboration with Diamond Supply Co., and Lifted’s past collaborations with Cali Sweets, Jeeter and SubCo), Highlandia, Lifted’s co-packers and co-manufacturers, future acquisition targets, and future asset purchases and/or joint ventures), Ablis and Bendistillery, as appropriate in the context of particular Risk Factors. These Risk Factors may cause our operations to vary materially from those contemplated by our forward-looking statements. These Risk Factors include:
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RISK FACTORS RELATING TO OUR COMPANY AND OUR STOCK
Because we are operating in a relatively new and evolving industry, we may not be able to successfully manage our business or maintain profitability
Because Lifted is operating in a relatively new and evolving industry, certain operating and business risks may not be recognized by management before substantial losses are incurred. Lifted's industry, and customer preferences, are constantly and quickly evolving. Consequently, Lifted finds it extremely difficult to predict future sales of its products and to anticipate raw goods needs for future production. This exposes Lifted to the risk that it will need to write off obsolete raw goods and slow-moving finished goods. No assurance or guarantee can be provided that future substantial losses will not occur.
Our acquisition of Lifted, our acquisitions of 4.99% of the outstanding equity of each of Ablis, Bend Spirits and Bendistillery d/b/a Crater Lake Spirits, and Lifted’s purchase of assets of hemp-derived products maker Oculus CRS, LLC, and merger with Oculus CHS Management Corp., involve significant risk, and there can be no assurance that the business of Lifted, or 4.99% of the common stock of each of Ablis, Bend Spirits and Bendistillery d/b/a Crater Lake Spirits, will be successful or generate any profit or other financial benefit for our Company.
As of December 31, 2025, LFTD Partners recorded a goodwill impairment charge on the Lifted Goodwill and Oculus Goodwill, reducing the carrying value of both to $0.
Also as of December 31, 2025, LFTD Partners recorded an impairment charge on its investments in Ablis, reducing the carrying value of LFTD Partners’ investment in Ablis to $0. LFTD Partners also recorded an impairment charge on its investments in Bendistillery (Bend Spirits had previously merged into Bendistillery in the second quarter of 2025), reducing the carrying value of LFTD Partners’ investment in Bendistillery to $99,800.
An inability by LFTD Partners to achieve financial benefit from Lifted, Ablis or Bendistillery may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We have incurred substantial losses in the past
Prior to the acquisition of Lifted on February 24, 2020, the Company had no sources of revenue, and the Company had a history of recurring losses, which has resulted in an accumulated deficit as of reported period end. We may incur significant losses in the future for a number of reasons, including the risks described in ITEM 1A. RISK FACTORS, and unforeseen expenses, difficulties, legal or regulatory challenges, complications and delays and other unknown events. Any failure to achieve and sustain profitability may materially adversely affect our Company and the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We have substantial ongoing payment obligations
We have substantial ongoing payment obligations, including payments on our Business Loan, payroll and benefits, rent and overhead costs, inventory purchases, legal fees and other professional fees, bonuses, preferred stock dividends, other operating expenses, income taxes, excise taxes, and other liabilities. A failure to pay our financial obligations when they become due and payable may materially adversely affect our Company and the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We have significant financial risk if our principal depository bank were to become bankrupt or insolvent
Surety Bank serves as our principal depository bank. If Surety Bank ever were to become bankrupt or insolvent, we could potentially lose millions of dollars of our cash on hand that is held in our checking and money market accounts at Surety Bank. We do not have insurance covering that risk. That risk may have a material adverse effect on our Company and the trading price of our common stock.
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We are subject to restrictions and covenants under our loan from Surety Bank
Prior to the WCL Payoff and Loan Term Changes (terms defined below), under the terms of our loan agreements with Surety Bank, we were obligated to comply with certain loan covenants and restrictions, including the following: (1) the ratio of our annual EBIDA (earnings before interest, depreciation and amortization), divided by our scheduled annual debt service payments to Surety Bank, must have been 1.5 or higher based on our tax returns, beginning with the 2023 return (although this loan covenant had been waived by Surety Bank in regard to 2024); (2) we must not permit the outstanding principal balance of the $3,000,000 Working Capital Loan to exceed 40% of the fair market value of the collateral securing the Working Capital Loan; and (3) we must have maintained our primary operating accounts with a $1,000,000 minimum deposit account balance with Surety Bank for the life of the $910,000 Business Loan. If for any reason we had failed to comply with these loan covenants and restrictions, Surety Bank would have been entitled to declare a default under the loan agreements. Such a default could have a material adverse effect on our Company and the trading price of our common stock.
Under the Business Loan, we are also subject to covenants not to take certain actions without the consent of Surety Bank, including such things as not, among other things:
| · | Become subject to other liens or encumbrances; |
| · | Change ownership of Lifted; |
| · | Directly or indirectly issue, assume or create any additional indebtedness on the collateral. |
If we were to violate any of these negative covenants, Surety Bank would be entitled to declare a default under the Business Loan Agreement. Such a default could have a material adverse effect on our Company and the trading price of our common stock.
We may need to raise substantial amounts of additional capital to pay our ongoing obligations and to pay for our operations
There is no guarantee that Lifted’s operations will generate sufficient free cash flow to allow us to pay our ongoing obligations described in the preceding risk factor. We may need to raise millions of dollars of additional capital just to pay our ongoing obligations. There is no guarantee that we can obtain the funding needed to pay these ongoing obligations on acceptable terms, if at all, and neither our directors, officers, nor any third party is obligated to provide any financing. Failure to raise substantial amounts of additional capital may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be profitable in the future
We currently have one revenue-generating subsidiary, Lifted. Prior to the acquisition of Lifted on February 24, 2020, we had no sources of revenue, and had a history of recurring losses. We face many risks that could prevent us from achieving profits in future years. We cannot assure you that we will be profitable. Failure to achieve profitability will materially adversely affect our Company and the trading price of our common stock.
Also, our efforts to grow our business may be more costly than we expect and we may not be able to increase our revenue enough to offset higher operating expenses. We may incur significant losses in the future for a number of reasons, including as a result of newly-proposed or enacting laws or regulations, such as H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026”, unforeseen laws, restrictions, taxes, expenses, difficulties, complications and delays, the other risks described herein and other unknown events. The amount of any future net losses will depend, in part, on the growth of our future expenses and our ability to generate revenue. Any future losses will have an adverse effect on our stockholders’ equity and working capital. Because of the numerous risks and uncertainties associated with producing and selling hemp-derived, kratom-derived, psychoactive and potentially nicotine products, as outlined herein, we are unable to accurately predict our future financial results. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease and our ability to raise capital, expand our business or continue our operations may be impaired. Our failure to remain profitable would decrease the value of our Company and could impair our ability to raise capital, expand our business, diversify our product offerings and continue our operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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The “going concern” qualification in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q adversely impact our potential to raise capital
Our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q contain a so-called “going concern” qualification. This qualification is attributable to the substantial risk factors associated with our business and the regulatory environment surrounding the industries in which we operate, which at the present time make it very difficult for our management to represent to our auditors that we will be able to continue as a going concern. The presence of the “going concern” qualification in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q adversely impacts our potential to raise debt or equity capital on acceptable terms and conditions, if at all. The foregoing qualification and related risks may have a material adverse effect on our Company and the trading price of our common stock.
Our future profitability may be significantly reduced by our annual company-wide management bonus pool
Our future profitability may be significantly reduced by our annual company-wide management bonus pool. Pursuant to the terms of the employment agreements that we have entered into with our senior executives, we have agreed to pay to our senior executives and their designees (who may include employees, contractors, consultants, and directors of our Company) an annual management bonus pool, which will be an aggregate annual amount that is equal to 33% of the amount, if any, by which our earnings before interest, taxes, depreciation and amortization (“EBITDA”) in a given calendar year exceeds our EBITDA during the prior calendar year, or 33% of the amount by which our EBITDA in a given calendar year exceeds a target amount that has been mutually agreed upon by the Chairman of our Compensation Committee of our Board of Directors and our senior executives. Depending upon the trajectory of our future growth, if any, in our EBITDA, which potentially could be achieved via mergers that might dilute our existing stockholders, the annual company-wide management bonus pool may turn out to be an extremely large amount of money. The obligation to pay such annual company-wide management bonus pool may materially adversely affect our Company and the trading price of our common stock.
We are adversely affected by many significant economic, health, safety and financial issues
Businesses are materially adversely affected by periods of significant economic slowdown or recession, wars, tariffs, pandemics, inflation, deflation, rising interest rates, or a public perception that any of these events are occurring or may occur, which could adversely affect our revenues, results of operations, and cash flow. In addition, as they relate to our proposed acquisitions, the capital and credit markets have experienced volatility and disruption. National and global political, trade, financial and business conditions have experienced difficulties. Access to financing often is negatively impacted. Credit is often limited. In many cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers. Prominent risks include high interest rates, wars, pandemics, supply chain disruptions, regulatory risks, tariffs, energy dislocations and costs, rising health care costs, social and political unrest, safety and health risks, and many other issues. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We could be adversely affected by changes in the economy including inflation
Our operations, margins, and cash flow could be adversely affected by significant volatility in regard to tariffs, inflation, stress on the consumer, and many other national and international economic factors. We can provide no guarantee or assurance that our Company can successfully navigate these factors. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Our payroll, benefits, sales commissions, rent and other operational costs are significant
Our operational costs are significant. We now employ over 100 people as employees and independent contractors. Our payroll and benefits costs, including health, dental and vision insurance for employees, are significant. We have expanded into more leased spaces. Our costs for accountants, lawyers and other consultants are significant. Our costs of raw materials, packaging, fulfillment and sales are significant. We have compensation arrangements for our salespeople that include significant commissions that are percentages of their sales. Lifted entered into an agreement with its Chief Strategy Officer (the “CSO”), effective as of April 1, 2025, pursuant to which, in addition to his base compensation of $10,000 every two weeks plus health insurance coverage, the CSO receives (1) a royalty on certain gummies manufactured by Lifted of between $0.005 and $0.01, and (2) certain quarterly and annual bonuses based upon Lifted’s quarterly and annual collected revenues on certain sales exceeding targets of $9,000,000 and $58,000,000, respectively. These and other significant operational costs may materially adversely affect our Company and the trading price of our common stock.
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Growth Capital may be unavailable or only available on dilutive, expensive, or otherwise unattractive or risky terms
The continued expansion of our business will require Growth Capital. For example, from time to time, we may enter into transactions to acquire assets or the capital stock or other equity interests of other entities, and it is likely that closing such transactions will require a significant amount of cash.
There can be no assurance that Lifted or any other acquisitions that we may make will be profitable or will generate the Growth Capital we need in the future.
There can be no assurance that we will obtain Growth Capital from third party equity investors. Our ability to obtain Growth Capital from third party equity investors will depend on investor demand, our performance and reputation, market conditions and other factors. Our inability to obtain Growth Capital from third party equity investors could result in the delay or indefinite postponement of our current business objectives or in our inability to continue to carry on our business. Even if Growth Capital is available from third party equity investors, it may only be available on highly dilutive or otherwise unattractive terms and conditions.
There can be no assurance that we will obtain Growth Capital from debt providers. Even if debt financing is available, it may only be available on very expensive or otherwise unattractive terms and conditions. For example, any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may be operationally burdensome and may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Debt financings may also contain provisions that, if breached, may entitle lenders or their agents to accelerate the repayment of loans or realize upon security over our assets, and there is no assurance that we would be able to repay such loans in such an event or prevent the exercise of rights granted to secured parties pursuant to any such debt financing. Debt agreements may also contain covenant restrictions that limit our ability to operate our business, including restrictions on our ability to invest in our existing facilities, incur additional debt or issue guarantees, create additional liens, repurchase stock or make other restricted payments. As a result of these covenants, our ability to respond to changes in business and economic conditions and to engage in beneficial transactions, including obtaining additional financing and pursuing business opportunities, may be restricted.
In summary, we cannot assure you that we will be able to raise needed equity or debt capital on commercially acceptable terms, or at all. Delay, disruption, or failure to obtain sufficient financing may result in the delay or failure of our business plans. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our future capital requirements are uncertain
Our aggregate future capital requirements are uncertain. The amount of capital that we will need in the future will depend on many factors that we cannot predict with any certainty, including: the market acceptance of Lifted’s products and services; the amounts of packaging, inventory, employees, space and equipment that will be needed to operate our business and to be able to increase our production to meet consumer demand for our products in the future; the levels of promotion and advertising that will be required to launch Lifted’s new products and services and to achieve and maintain a competitive position in the marketplace; our business, product, capital expenditures and technology plans, and product and technology roadmaps; technological advances; our competitors’ responses to our products and services; our pursuit of mergers and acquisitions; our relationships with our vendors and customers; and our need to attract and retain talented employees and independent contractors. The terms and conditions, amounts and timing of our capital raises may not be in sync with our capital needs. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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The visibility and trading volume of our common stock are low
The visibility and trading volume of our common stock are low, and any material increase in such visibility and trading volume may depend upon our ability to list our common stock on a recognized stock exchange, but our ability to satisfy the listing requirements for a recognized stock exchange cannot be guaranteed or assured, especially if we acquire a business that "touches the marijuana plant" in the U.S., which would prevent us from listing our common stock on NASDAQ or the NYSE under current law and the current policies of such exchanges. A continued inability to satisfy the listing requirements for a recognized stock exchange could materially adversely affect our Company and the visibility, trading volume, and trading price of our common stock.
Our common stock lacks a meaningful public market
At present, only a limited market exists for our common stock with a low average daily trading volume. There is no assurance that a regular trading market will develop and if developed, that it will be sustained. A potential investor may choose not to invest because of the low trading volume in our common stock, and an existing owner of our common stock may be unable to sell our common stock should he or she desire to do so. Or, if an existing owner of our common stock decides to sell our common stock, such sales could drive the price of our common stock significantly lower. Furthermore, it is unlikely that a lending institution will accept our common stock as pledged collateral for loans. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our common stock may never be listed on a recognized national exchange
Our common stock trades on the OTCQB Venture Market. Even if we do not acquire companies that "touch the marijuana plant" in the U.S., you should not assume that any effort to uplist the trading of our common stock to a recognized national exchange would be successful, or if successful, that compliance with the listing requirements of such recognized national exchange will be maintained, including but not limited to requirements associated with maintenance of a minimum net worth, minimum stock price, minimum number of shareholders, and ability to establish a sufficient number of market makers. A failure or inability to uplist the trading of our common stock to a recognized national exchange, or any failure to maintain compliance with the listing requirements of such recognized national exchange, may materially adversely affect our Company and the trading price of our common stock.
Unless and until our common stock is approved for listing on a recognized national exchange, many potential investors may be unwilling to purchase our common stock
Our common stock currently trades on the OTCQB Venture Market. Many funds and other potential investors are unable or unwilling to purchase stocks on the OTCQB Venture Market, being required or simply preferring to purchase stocks that have been approved for listing on a recognized national exchange, such as NASDAQ or the NYSE. Recognizing this situation, we would like to uplist from the OTCQB Venture Market to a recognized national exchange such as NASDAQ, if and when we meet NASDAQ’s listing requirements. Unless and until we successfully uplist, potential investor interest in our common stock may be muted, which may adversely affect our company and the trading price of our common stock.
Our common stock may be considered a “penny stock” and may be difficult to trade
The U.S. Securities and Exchange Commission (the “SEC”) has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock may be less than $5.00 per share and, therefore, may be designated as a penny stock according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, to obtain a written agreement from the purchaser, and to determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may adversely affect the ability of investors to sell our common stock, and may materially adversely affect our business and the trading price of our common stock.
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A return on our securities is not guaranteed
There is no guarantee that our securities will earn any positive return in the short term or long term. A holding of our securities is speculative and involves a high degree of risk and should be undertaken only by holders whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. Holding of our securities is appropriate only for holders who have the capacity to absorb a loss of some or all of their holdings. This risk may materially adversely affect our Company and the trading price of our common stock.
Certain stock brokers will not handle our common stock
Certain stock brokers will not handle our common stock due to the SEC’s “penny stock” rules and heightened internal compliance scrutiny. Additionally, we believe that many brokers will not allow stockholders to deposit or hold our stock in their brokerage accounts due to our involvement in the cannabis industry. This has made it difficult for some investors to purchase, deposit, or even maintain holdings of our common stock in brokerage accounts. Further, while hemp is no longer classified as an illegal substance under the Farm Bill, the U.S. Food and Drug Administration (“FDA”) continues to regulate cannabis-derived products under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) and Section 351 of the Public Health Service Act. The FDA has raised concerns about the potential health risks of hemp-derived cannabinoids, including delta-8-THC and CBD, particularly regarding possible liver toxicity. The agency has also suggested that certain cannabinoids may be classified as drugs, making their sale without FDA approval potentially unlawful. In deference to the FDA’s position, some states and municipalities have imposed restrictions or outright bans on the sale of certain hemp-derived cannabinoid products. If the FDA or other regulatory authorities impose stricter licensing requirements, compliance obligations, or prohibitions on the sale of hemp-derived products, this could further limit investor access to our stock and negatively impact our business operations. These factors, combined with existing brokerage restrictions may materially and adversely affect our Company and the trading price of our common stock.
Options trading of our common stock is not currently possible
At the present time, potential investors have no ability to purchase or sell options to trade in our common stock. This situation has made it difficult for some potential investors to accumulate positions in our common stock, or to achieve their desired level of liquidity in their position in our common stock. The foregoing situation may materially adversely affect our Company and the trading price of our common stock.
Our common stock lacks institutional or analyst support
Our Company lacks institutional support. In addition, investment banks with research capabilities do not currently follow our common stock. This lack of institutional or analyst support lessens the trading volume and general market interest in our common stock, and may adversely affect an investor’s ability to trade a significant amount of our common stock. This lack of institutional or analyst support may materially adversely affect our Company and the trading price of our common stock. Moreover, in the event that we obtain securities or industry analyst coverage, if one or more of the analysts who cover us or our business downgrade our securities or publish inaccurate or unfavorable research about us or our business, our Company and the trading price of our common stock may be materially adversely affected.
The public float of our common stock is small
The public float of our common stock is small, which may limit the willingness or ability of some individuals, funds and institutions to invest in our common stock. This lack of liquidity may materially adversely affect our Company and the trading price of our common stock.
The trading price of our common stock may be volatile and could drop quickly and unexpectedly
The stocks of micro-cap and small-cap companies have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macro-economic developments in North America and globally, financial crises, pandemics, trade wars, military conflicts, and market perceptions of the attractiveness of particular industries. This volatility may materially adversely affect our Company by making it more difficult to raise capital or complete acquisitions. In addition, securities class-action litigation often has been brought against companies following periods of volatility in the market price of their securities. Our Company may in the future be the target of similar litigation, and/or litigation associated with the ingredients, formulations, labeling and packaging of products manufactured by Lifted and other acquired Cannabis Companies. Litigation could result in substantial legal fees and other costs and damages and divert our management’s attention and resources away from our business. For these reasons and others, quick and unexpected drops in the trading price of our common stock are likely from time to time. Volatility in our common stock price may materially adversely affect our Company and the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may be damaged by lawsuits
We are currently involved in multiple legal proceedings, both as a plaintiff and as a defendant, and we anticipate that additional lawsuits may arise in the future. Defending against or pursuing litigation requires significant management time, resources, and financial expenditures, including substantial legal fees and related costs. Ongoing or future legal disputes could divert management’s focus from business operations, result in unfavorable judgments or settlements, and create financial uncertainty. These legal risks may have a material adverse effect on our business, financial condition, and the trading price of our common stock.
Sales of shares of our common stock, or the perception in the public markets that these sales may occur in the future, may cause the trading price of our common stock to fall
Since the trading volume of our common stock is very low and the amount of our common stock in the public float is very small, any sales or attempts to sell our common stock, or the perception that sales or attempts to sell our common stock may occur, may adversely affect the trading price of our common stock. The market price of our common stock may decline significantly as a result of sales of a large number of shares of our common stock in the market. In addition, if any of our stockholders sells a large number of shares, or if we issue a large number of shares, the market price of our stock may decline.
Any issuance of additional common stock or common stock equivalents by us would result in dilution to our existing shareholders. Such issuances may be made at a price that reflects a discount to the then-current trading price of our common stock. Moreover, the perception in the public market that stockholders may sell shares of our stock or that we may issue additional shares of common stock may depress the market for our shares and make it more difficult for us to sell equity securities in the future at any time, if at all. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may issue additional shares of common stock, and options and warrants to purchase additional shares of common stock, without stockholder approval, which would dilute the current holders of our common stock
Our Board of Directors has authority, without action or vote of our shareholders, to issue shares of common stock, and/or options and warrants to purchase shares of common stock. We may issue shares of our common stock, or options or warrants to purchase shares of our common stock, to complete a business combination or to raise capital, or to incentivize our directors, officers and employees. Such stock issuances, and such issuances of options and warrants, could be made at a price that reflects a discount from the then-current trading price of our common stock. These issuances may dilute our stockholders’ ownership interests significantly. These issuances also may have the effect of reducing our stockholders’ influence on matters on which our stockholders vote. In addition, our stockholders and prospective investors may incur additional dilution if holders of currently outstanding stock options and warrants exercise those options or warrants to purchase shares of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The rights of the holders of our common stock may be impaired by the potential issuance of preferred stock
Our certificate of incorporation gives our Board of Directors the right to create one or more new series of preferred stock. As a result, the Board of Directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that may adversely affect the voting power and equity interests of the holders of our common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be used to discourage, delay or prevent a change of control of our Company, which may materially adversely affect the price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Our common stock may be subject to significant dilution
Our capital raising may include the sale of significant numbers of shares of our common stock or other securities convertible into our common stock, and may also include the issuance of significant numbers of options, warrants or other securities convertible into shares of our common stock. We also may issue significant numbers of shares of our common stock, or options, warrants, or other securities convertible into shares of our common stock, as a portion of the consideration for acquisitions. We are also likely to issue significant numbers of shares of common stock, options and/or warrants, or rights to purchase warrants, to our officers, directors, employees and/or independent contractors, and to investment bankers and finders, especially in connection with the closing of capital raises and acquisitions, or as incentives to attract and retain talented personnel. Such transactions may significantly increase the number of outstanding shares of our common stock, and may be highly dilutive to our existing stockholders. In addition, the securities that we issue may have rights, preferences or privileges senior to those of the holders of our outstanding common stock. This dilution may have a material adverse effect on our Company and the trading price of our common stock. In addition, we have options, warrants, and rights to purchase warrants, outstanding covering several million shares of our common stock. If all of these millions of options and warrants were to be exercised, the number of outstanding shares of our common stock would increase significantly. Moreover, additional shares may be issued in connection with future acquisition and business operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Raising capital by selling our common stock or convertible preferred stock is difficult to accomplish
Selling equity is difficult to accomplish in the current market, especially because of the regulatory landscape of the hemp industry and because the prices of stocks of many publicly traded Cannabis Companies have experienced significant declines during the past few years. This difficulty may make future acquisitions either unlikely, or too difficult and expensive. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Raising capital by selling our common stock or convertible preferred stock could be expensive
If we were to raise capital by selling common stock or securities convertible into common stock, it could be expensive. Many potential purchasers of equity securities in micro-cap and small-cap publicly traded companies with extremely low trading volumes are only willing to purchase at a significant discount to the trading price of the common stock of such companies. In addition, we may be required to pay cash fees and/or fees in the form of warrants equal to 7% or more of the gross sales proceeds raised, in addition to legal, accounting and other fees and expenses. In addition, when it becomes known within the investment community that an issuer is seeking to raise equity capital, it is common for the common stock of that issuer to be sold off in the market, lowering the trading price of the issuer’s common stock in advance of the pricing of the issue. This may make our raising capital by selling equity securities significantly more expensive. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Debt financing is difficult to obtain and could be expensive
Debt financing is difficult to obtain in the current credit markets, especially for Cannabis Companies and companies involved in the hemp-derived, psychoactive and nicotine industries. This difficulty may make future acquisitions either unlikely, or too difficult and expensive. Providers of debt may also be issued options, warrants, or rights to purchase warrants, to purchase shares of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Raising capital by borrowing could be risky
If we were to raise capital by borrowing amounts to fund our operations or for additional acquisitions, that would be risky. Interest rates charged to Cannabis Companies typically are high, and often have short terms. Cash is required to service the debt and ongoing covenants and negative covenants are typically employed which can restrict the way in which we operate our business. If the debt comes due either upon maturity or an event of default, we may lack the resources at that time to either pay off or refinance the debt, or if we are able to refinance, the refinancing may be on terms that are less favorable than those originally in place, and may require additional equity or quasi-equity accommodations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our financing decisions may be made without stockholder approval
Our financing decisions and related decisions regarding levels of debt, capitalization, distributions, acquisitions and other key operating parameters are determined by our Board of Directors in its discretion, in many cases without any notice to or vote by our stockholders. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our investor relations efforts may not be successful
Our investor relations efforts may not be successful. At the present time, due to the fact that billions of dollars of market capitalization have been lost by publicly traded corporations in the cannabis industry over the past few years, investor sentiment regarding equity or debt capital raises by Cannabis Companies is negative. This negative investor sentiment, combined with many other negative macro factors such as inflation, global conflicts, supply chain issues, tariffs, and high interest rates, has made it extremely difficult for the Company to attract Growth Capital on acceptable terms and conditions. The Company can provide no guarantee or assurance whatsoever that this profoundly negative investor sentiment could be reversed by traditional investor relations efforts. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
High interest rates may have an adverse effect on the trading price of our common stock
High interest rates may tend to make our common stock less attractive relative to other investments. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Taxes and regulatory compliance costs may reduce our margins
Costs resulting from changes in or new income taxes, value added taxes, service taxes, sales and use taxes, excise taxes, taxes associated with Section 280E of the U.S. Internal Revenue Code, and other taxes, and the costs of managing compliance with taxes and regulatory matters, may adversely affect our margins. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Tax interpretations and changes in tax regulations and legislation may adversely affect us
Tax interpretations, regulations and legislation in the various jurisdictions in which we operate are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or recovery, and deferred income tax assets or liabilities. Tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by us that may be challenged by the applicable taxation authorities upon audit. Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits may significantly impact the amounts provided for income taxes in our consolidated financial statements.
Moreover, the IRS or other taxing authorities may claim that certain hemp-derived cannabinoids, such as THC-O, are illegal, and the IRS or other taxing authorities may attempt to disallow the tax deductions of expenses related to those certain products pursuant to Section 280E of the U.S. Internal Revenue Code. Defending ourselves in this sort of matter, or in other matters brought before us by the IRS or by other taxing authorities, may impose significant burdens upon our management’s time and resources, and may require us to expend significant fees on consultants, lawyers and accounting professionals. No guarantee or assurance can be given that Lifted will be successful in any disputes or litigation against the IRS or other taxing authority, and any losses in such disputes or litigation could result in significant additional taxes and penalties becoming due and payable, which could materially adversely affect our Company's balance sheet, net worth and liquidity, and could trigger defaults under our loans from Surety Bank.
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On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be made in interpretation of the provisions of the U.S. Tax Act, significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The Tax Act reduced the U.S. federal statutory tax rate, broadened the corporate tax base through the elimination or reduction of deductions, exclusions, and credits, limited the ability of U.S. corporations to deduct interest expense, and transitioned to a territorial tax system which allows for the repatriation of foreign earnings to the U.S. with a 100% federal dividends received deduction prospectively. In addition, the Tax Act required a one-time transitional tax on foreign cash equivalents and previously unremitted earnings. Several of the new provisions enacted as part of the Tax Act require clarification and guidance from the IRS and Treasury Department. The Treasury Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may materially impact our financial statements in the period in which the adjustments are made. Additionally, further guidance may be forthcoming from the Financial Accounting Standards Board (“FASB”) and SEC, as well as regulations, interpretations and rulings from state tax agencies, which could result in additional impacts, possibly with retroactive effect. Any such changes or potential additional impacts could adversely affect our business and financial condition. These or other changes in U.S. tax laws could impact our profits, effective tax rate, and cash flows.
In addition, we may periodically restructure our legal entities and/or engage in mergers, and if taxing authorities were to disagree with our tax positions in connection with any such restructurings or mergers, our effective tax rate may be materially affected. In connection with such restructurings, we may also incur additional charges associated with consulting fees and other charges.
In addition, changes in tax interpretations and changes in tax regulations and legislation may impose significant burdens upon our management’s time and resources, and may require us to expend significant additional amounts on accounting, tax, legal and other matters.
All of the foregoing risks may materially adversely affect our Company and the trading price of our common stock.
We are adversely affected by regulatory uncertainties
Regulatory uncertainties regarding Cannabis Companies, and potential adverse changes in federal and state laws and government regulations, materially adversely affect our business and the trading price of our common stock. This risk is especially important relative to the hemp-derived, marijuana, psychoactive products and nicotine products industries, which are controversial socially, scientifically and legally. The foregoing risk may materially adversely affect our Company and the trading price of our common stock.
Legislative or regulatory changes that affect our products, including new taxes, could reduce demand for products or increase our costs
Taxes imposed on the sale of certain of our products by federal, state, and local governments in the United States, or other countries in which we operate could cause consumers to shift away from purchasing our products. This risk may materially adversely affect our Company and the trading price of our common stock.
A small number of stockholders have significant influence over us
A small number of our stockholders and members of our board of directors and management acting together are able to exert significant influence over us through their ability to influence the election of directors and all other matters that require action by our stockholders. The voting power of these individuals may have the effect of preventing or delaying a change in control of our Company which they oppose even if our other stockholders believe it is in their best interests.
In addition, our shareholders have authorized GJacobs to seek shareholders agreements and/or proxies from other parties, including potential future capital sources and the owners of potential future acquisition candidates. Pursuant to this authorization, GJacobs has signed a Stockholders Agreement with our largest stockholder, NWarrender, and with WJacobs, that will ensure that all 3,900,455 shares of our common stock issued to NWarrender in the Lifted Merger, and the many shares of our common stock owned and controlled by GJacobs and WJacobs, will be voted in concert on the election of directors, compensation matters, acquisitions and divestitures, capital raises, and other significant matters.
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Accordingly, our officers GJacobs, WJacobs and NWarrender, voting together, have substantial influence over our policies and management. We may take actions supported by the three of them that may not be viewed by some stockholders to be in our best interest, or the three of them could prevent or delay a change in our control which they oppose even if our other stockholders believe it is in their best interests. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
State law and our articles of incorporation and bylaws help preserve insiders’ control over us
Provisions of Nevada state law, our articles of incorporation and bylaws may discourage, delay or prevent a change in our management team that stockholders may consider favorable. These provisions may include: (1) authorizing the issuance of “blank check” preferred stock without any need for action by stockholders; (2) permitting stockholder action by written consent; and (3) establishing advance notice requirements for nominations for election to the board of directors, or for proposing matters that can be acted on by stockholders at stockholder meetings. These provisions, if included in our articles of incorporation or by-laws, could allow our board of directors to affect an investor’s rights as a stockholder since our board of directors could make it more difficult for preferred stockholders or common stockholders to replace members of the board of directors. Because the board of directors is responsible for appointing the members of the management team, these provisions may in turn affect any attempt to replace the current or future management team. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Retaining and attracting directors and officers may be expensive
We cannot make any assurances regarding the retention of our current directors and officers. We do not currently have any director and officer liability insurance, which is a disincentive to serving as a director or officer of our Company. Some of our directors and officers may resign upon our raising money, upon our consummation of a business combination, or otherwise. Attracting new directors and officers, and retaining our current directors and officers, may be expensive. Certain other publicly traded companies pay their directors and officers significantly more than we do. The costs of future cash, bonus and equity incentives to retain and attract directors and officers may materially adversely affect our Company and the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We indemnify our directors and officers, and certain other parties
Our bylaws specifically limit the liability of our officers and directors to the fullest extent permitted by law. As a result, aggrieved parties may have a more limited right to action than they would have had if such provisions were not present. The bylaws also provide for indemnification of our officers and directors for any losses or liabilities they may incur as a result of the manner in which they operated our business or conducted internal affairs, provided that in connection with these activities they acted in good faith and in a manner which they reasonably believed to be in, or not opposed to, our best interest. In the ordinary course of business, we also may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, independent contractors and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. We may also agree to indemnify former officers, directors, employees and independent contractors of acquired companies in connection with the acquisition of such companies. Such indemnification agreements may not be subject to maximum loss clauses. It is not possible to determine the maximum potential amount of exposure in regard to these obligations to indemnify, due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular situation. Use of our capital or assets for such indemnification would reduce amounts available for Company operations or for other purposes, which may materially adversely affect our Company and the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We do not expect to pay dividends to holders of our common stock
For the foreseeable future, it is anticipated that earnings, if any, which may be generated from our operations will be used to finance our growth and that dividends may not be paid to the holders of our common stock. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Our cost of being a publicly traded company will increase as our business operations expand
As we grow, our management expenses, legal, consulting and accounting fees, and other costs associated with being a publicly traded company will continue to increase. In the past, we have hired additional employees and professionals in order to improve our internal financial controls and accurate financial reporting, and otherwise to comply with the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). From time to time, the Company has engaged a third party consulting firm that specializes in the implementation of the Sarbanes-Oxley Act, to assist management with the implementation of the Sarbanes-Oxley Act; we expect the services of this consulting firm to be costly. Our management expenses, legal and accounting fees, and other costs associated with being a publicly traded company are expected to increase. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Decreased effectiveness of stock options and warrants could adversely affect our ability to attract and retain employees
We expect to use stock options, warrants, and/or rights to purchase warrants to purchase common stock as key components of our employee compensation program in order to align employees’ interests with the interests of our stockholders, encourage employee retention, and to provide competitive compensation packages. Volatility or lack of positive performance in our common stock price may adversely affect our ability to retain key employees or to attract additional highly-qualified personnel. At any given time, a portion of our outstanding employee stock options, warrants, and/or rights to purchase warrants to purchase common stock may have exercise prices in excess of our then-current common stock trading price, or may have expired worthless. To the extent these circumstances occur, our ability to retain employees may be adversely affected. As a result, we may have to incur increased compensation costs, change our equity compensation strategy, or find it difficult to attract, retain and motivate employees. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The issuance of shares of Deferred Contingent Stock pursuant to the terms of the Lifted Merger could reduce our earnings and stock price
Pursuant to the terms of the Lifted Merger, a total of 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) payable after the third anniversary of the Lifted Merger to certain employees of Lifted and the Company who have been specified by NWarrender in his discretion (the “Deferred Contingent Stock Recipients”), subject to certain conditions and requirements. The issuance of Deferred Contingent Stock increases the number of outstanding shares of our common stock, and thereby decreases our earnings per share. And, the potential sale of Deferred Contingent Stock by the Deferred Contingent Stock Recipients may depress the trading price of our common stock. As of December 31, 2025, 503,000 shares of Deferred Contingent Stock have been issued to the Deferred Contingent Stock Recipients and there were 142,000 shares of Deferred Contingent Stock that are issuable at the direction of the Deferred Contingent Stock Recipients. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
RISK FACTORS RELATING TO ACCOUNTING AND INTERNAL FINANCIAL CONTROLS
Tax and accounting requirements may change in ways that are unforeseen to us and we may face difficulty or be unable to implement or comply with any such changes
We are subject to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on our financial results, our financial and operational resources, and the manner in which we conduct our business or the marketability of any of our products. We plan to expand our operations in the future. These operations, and any expansion thereto, will require us to comply with the tax laws and regulations of multiple jurisdictions, within and outside of the United States of America, which may vary substantially. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially subject us to penalties and fees in the future if we fail to comply. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may have exposure to greater than anticipated tax liabilities, which may harm our business
We may be subject to tax audits by federal, state, and local tax authorities, both within and outside of the United States of America. Any adverse outcome from a tax audit could seriously harm our business. In addition, determining our tax liabilities requires significant judgment by management, and there may be transactions where the ultimate tax determination is uncertain. Although we believe that the tax liabilities recorded in our financial statements are reasonable, the ultimate tax outcome relating to such amounts may differ for such period or periods and may seriously harm our business. Furthermore, due to shifting economic and political conditions, tax policies, laws, or rates in various jurisdictions, we may be subject to significant changes in ways that impair our financial results. Our results of operations and cash flows may be adversely affected by additional taxes imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply with any collection obligations or failure to provide information for tax reporting purposes to various government agencies. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We incur increased costs as a result of operating as a public company and our management is required to devote substantial time to new compliance initiatives
As a public company, we incur significant legal, accounting, consulting and other expenses. In addition, the Sarbanes-Oxley Act, and rules implemented by the SEC, impose various requirements on public companies, including requirements to file annual, quarterly and event-driven reports with respect to our business and financial condition and operations and to establish and maintain effective disclosure and financial controls and corporate governance practices. Our management and other personnel may fail to improve or maintain effective internal controls over financial reporting (“ICFR”) and disclosure controls and procedures (“DCP”) necessary to ensure timely and accurate reporting of operational and financial results. Our management team has to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional personnel to assist us with complying with these requirements. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance costs and will make some activities more time consuming and costly. As mentioned above, from time-to-time, the Company has engaged a third party consulting firm that specializes in the implementation of the Sarbanes-Oxley Act, to assist management with the implementation of the Sarbanes-Oxley Act; the services of this consulting firm are costly.
Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), we will be required to furnish a report by our management on our ICFR, which, after we have met certain requirements, must be accompanied by an attestation report on ICFR issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will document and evaluate our ICFR, which is both costly, time-consuming and challenging. In this regard, we will need to continue to dedicate internal resources and adopt a detailed work plan to assess and document the adequacy of our ICFR, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for ICFR. Despite our efforts, there is a risk that we will not be able to conclude within the prescribed timeframe that our ICFR is effective as required by Section 404. This may result in one or more material weaknesses in our ICFR, which may cause an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Management may not be able to successfully implement adequate internal controls over financial reporting
We are subject to various SEC reporting and other regulatory requirements. Management is responsible for establishing and maintaining adequate internal control over financial reporting.
As defined in Rules 13a-15(f) and 15d(f) under the Exchange Act, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Proper systems of ICFR and disclosure are critical to the operation of a public company. However, management may not be able to successfully establish and maintain effective internal controls over financial reporting, and our DCP or ICFR may not prevent all errors and all fraud. Due to complications associated with organic growth and acquisitions, and with modifications to internal control over financial reporting and other policies and procedures associated with many factors, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions or operations, or that the degree of compliance with the policies or procedures may deteriorate. Our efforts to remediate material weaknesses may not be effective or prevent future material weaknesses or significant deficiencies in our internal control over financial reporting. It is not expected that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of such controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. We cannot guarantee that we will not have a material weakness in our internal controls in the future.
We anticipate that sometime in the future, we are going to be subject to having our internal financial controls audited by our outside accounting firm pursuant to the Sarbanes-Oxley Act. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information.
We are making, and are continuing to make, efforts to design, implement and document these internal financial controls, but these internal financial controls are complicated, time-consuming and expensive. Our internal financial controls are not complete, and additional work is required, which will continue to require substantial expenditure of management time and consulting fees. If the internal financial controls are deemed to not have been designed properly, or if they are not documented properly, or if they are implemented improperly or inadequately documented or deemed to be ineffective, our internal financial controls may not be approved by our outside auditors, and consequently our reputation may be damaged, or we may be subject to scrutiny by regulators or investors. If we experience any material weakness in our internal controls in the future, our financial statements may contain misstatements and we may be required to restate our financial statements. If we cannot provide reliable financial reports or prevent fraud, or if we are required to restate our financial statements, our reputation and operating results may be materially and adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
RISK FACTORS RELATING TO LFTD PARTNERS, LIFTED (INCLUDING LIFTED’S ARRANGEMENT WITH EXTRAX NM, AND LIFTED’S COLLABORATION WITH DIAMOND SUPPLY CO., AND LIFTED’S PAST COLLABORATIONS WITH CALI SWEETS, JEETER AND SUBCO), HIGHLANDIA, LIFTED’S CO-PACKERS AND CO-MANUFACTURERS, FUTURE ACQUISITION TARGETS, AND FUTURE ASSET PURCHASES AND/OR JOINT VENTURES, ABLIS AND BENDISTILLERY (COLLECTIVELY, “LIFTED” OR THE “COMPANY”)
The delay in Lifted’s receipt of payments from certain customers have increasingly become an issue for Lifted
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The delay in Lifted’s receipt of payments from certain customers – primarily distributors – have increasingly become an issue for Lifted. Certain customers have become slower to pay Lifted for purchased product (“Slow Paying Customers”), and the Slow Paying Customers disregard payment terms. Management speculates that some Slow Paying Customers may be slow-paying Lifted because of their own sales collection issues, which may in part be caused by the regulatory uncertainty over our industry. As described below in the Accounts Receivable section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, the Company has an accounting protocol which effectively causes the Company to recognize an allowance for doubtful accounts for all invoices older than 90 days. Consequently, the delay in Lifted’s receipt of payments from certain customers has a direct impact on the Company’s net receivables, net income, and earnings per share. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Write offs of inventory continue to be significant for Lifted
Write offs of inventory continue to be significant for Lifted. Because consumers’ demands change very quickly, and because of the legal and regulatory challenges that Lifted faces, Lifted may find it necessary to write off certain raw goods because they will no longer be used in production. Or, if consumers are no longer interested in certain products, and the finished goods are slow-moving, those finished goods are written off. Lifted may have to record allowances against the value of hemp-derived products in inventory each quarter end, and these allowances may increase, as November 12, 2026 (the date by which intoxicating hemp-derived consumable products are banned under the Act) approaches. Moreover, any hemp-derived products in inventory on November 12, 2026 will have to be written off. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s collaborations with third-party companies may be unprofitable and fail
Collaborations with third-party companies may be unprofitable and fail. Factors that may contribute to failed, unprofitable collaborations include, but are not limited to:
| 1) | Leadership absent from planning/update calls; |
| 2) | Inequality in regard to each side’s contributions to the collaborations, financial or otherwise; |
| 3) | Lack of cooperation; |
| 4) | Disagreement on topics such as formulation, product presentation, production needs, pricing, packaging, and marketing; |
| 5) | Micro-management to the point of annoyance or resentment of the other party, and operational inefficiency; |
| 6) | Lack of communication; |
| 7) | Lack of fulfillment of monetary obligations; |
| 8) | Limited or no ability to publicly announce the collaboration or the results of the collaboration; |
| 9) | Forced recalls; |
| 10) | Disclosure of Lifted's suppliers and distributors; and |
| 11) | Self-imposed testing requirements that are too stringent and cause delays in the launching of products, or testing results that cause products not be launched |
The above factors are some of the reasons why Lifted’s collaborations with third-party companies may be unprofitable and fail, or may be unworkable. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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The FDA has not approved any of Lifted’s products, and Lifted could face cease and desist letters, lawsuits or other enforcement actions by the FDA or DEA
Our hemp-derived, kratom-derived and other products are not intended for use in the diagnosis, cure, mitigation, treatment, or prevention of a disease or condition. Lifted has not applied to the FDA for any approvals of any of Lifted’s products, and may never do so. The FDA has not approved any of Lifted’s products for any purpose, and may never do so. Lifted may be subject to cease and desist letters, lawsuits or other enforcement actions by the FDA or the DEA for failure to obtain FDA or DEA approval of its products, or for Lifted’s packaging, labeling, advertisements and promotions of its products without any FDA or DEA approvals. For example, the FDA might take action against Lifted alleging that Lifted has engaged in the promotion of an unapproved drug. Historically, the FDA has issued cease and desist letters, filed lawsuits and taken enforcement actions against Lifted and other companies selling products that are similar to the products that Lifted sells. Defending cease and desist letters, lawsuits or other enforcement actions by the FDA or DEA may cause Lifted and LFTD Partners to expend a great deal of management time and legal fees. Any cease and desist letters, lawsuits or other enforcement actions by the FDA or DEA may have a material adverse effect on our company and the trading price of our common stock. There can be no guarantee or assurance whatsoever that the FDA’s or the DEA’s regulatory concerns about hemp-derived, kratom-derived or other products that Lifted sells will be resolved in our favor. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Investors may file litigation including class action lawsuits against Lifted and/or LFTD Partners because the FDA has not approved Lifted’s products for any medical purpose, or because the FDA or DEA has issued cease and desist letters, or brought lawsuits or other enforcement actions against Lifted, or for other reasons associated with the formulation, packaging, labeling, lab testing, advertising, promotion, medical claims, ineffectiveness, or other characteristics of Lifted’s products
Investors may file litigation including class action lawsuits against Lifted and/or LFTD Partners for many different reasons, such as: (1) Lifted has not applied to the FDA for any approvals of any of Lifted’s products, and may never do so; (2) The FDA has not approved any of Lifted’s products for any medical purpose, and may never do so; (3) Lifted may be subject to cease and desist letters, lawsuits or other enforcement actions by the FDA for failure to obtain FDA approval of its products, or for Lifted’s packaging, labeling, advertisements and promotions of its products without any FDA approvals. For example, the FDA might take action against Lifted alleging that Lifted has engaged in the promotion of an unapproved drug. The FDA has issued cease and desist letters, filed lawsuits and taken enforcement actions against Lifted and other companies selling intoxicating products that are similar to Lifted’s products; (4) Lifted may be subject to cease and desist letters, lawsuits or other enforcement actions by the DEA alleging that Lifted’s products are illegal; and (5) Investors may file litigation including class action lawsuits against Lifted and/or LFTD Partners for other reasons associated with the formulation, packaging, labeling, lab testing, advertising, promotion, medical claims, ineffectiveness, or other characteristics of Lifted’s products. Defending any lawsuits by investors may cause Lifted and LFTD Partners to expend a great deal of management time and legal fees. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Investors may file litigation including class action lawsuits against Lifted and/or LFTD Partners due to drops in the trading price of LFTD Partners’ common stock triggered by FDA or DEA cease and desist letters, lawsuits or enforcement actions against Lifted
Our common stock has relatively low trading volume, and the trading price is volatile. FDA or DEA cease and desist letters, lawsuits or enforcement actions against Lifted may cause drops in the trading price of LFTD Partners’ common stock. Defending lawsuits by investors may cause Lifted and LFTD Partners to expend a great deal of management time and legal fees. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may become subject to FDA or Bureau of Alcohol, Tobacco, Firearms and Explosives regulation
Cannabis remains a Schedule I controlled substance under U.S. federal law. If the federal government reclassifies cannabis to a Schedule III controlled substance, it is possible that the FDA would seek to regulate cannabis under the Food, Drug and Cosmetics Act of 1938. Additionally, the FDA may issue rules and regulations, including good manufacturing practices, related to the growth, cultivation, harvesting and processing of medical cannabis. Clinical trials may be needed to verify the efficacy and safety of cannabis.
It is also possible that the FDA would require facilities where medical use cannabis is grown to register with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, the impact they would have on the cannabis industry is unknown, including the costs, requirements and possible prohibitions that may be enforced. If the Company is unable to comply with the potential regulations or registration requirements prescribed by the FDA, it may have an adverse effect on the Company’s business, prospects, revenue, results of operation and financial condition. It is also possible that the federal government could seek to regulate cannabis under the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives. The Bureau of Alcohol, Tobacco, Firearms and Explosives may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products, including smokeless cannabis products. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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The Preventing Online Sales of E-Cigarettes to Children Act may have a material adverse effect on certain portions of Lifted’s online sales
The “Consolidated Appropriations Act, 2021” signed into law on December 27, 2020, includes the Preventing Online Sales of E-Cigarettes to Children Act, which extends the Jenkins Act and Prevent All Cigarette Trafficking Act (“PACT”) to cover all electronic nicotine delivery system (“ENDS”) products, including related accessories that do not contain nicotine (collectively, the “Amended PACT Act”). Under the Amended PACT Act, the United States Postal Service (“USPS”) was required to impose new restrictions that prohibit the shipping of ENDS products through USPS no later than April 2021. The Amended PACT Act also imposes a number of stringent requirements for online sales. As of March 27, 2021, online vape retailers were required to: (1) engage in third party identity verification for all sales; (2) use a shipping service that verifies age at delivery; (3) follow all Amended PACT Act shipping requirements; (4) register with the US Attorney General; (5) register with the tobacco tax administrator of any state in which products are sold; (6) collect all applicable local taxes; (7) share all transactions for a state with that state’s tax administrator following that state’s reporting rules; and (8) maintain records of any delivery interruptions or incomplete deliveries due to failure to confirm identity for five years.
These requirements are applicable to certain portions of Lifted’s online sales, and cause the online sale and delivery of certain of Lifted’s products to be restricted. The state-by-state reporting requirements of the Amended PACT Act are time-consuming. No assurance or guarantee whatsoever can be provided that the Amended Pact Act will not have a material adverse impact on a portion of Lifted’s future online sales. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We could be subject to litigation that includes claims under RICO
The Racketeer Influenced Corrupt Organizations Act (“RICO”), which was originally designed to give prosecutors an additional tool to prosecute organized crime, is now sometimes being weaponized against cannabis companies, as Plaintiff’s attorneys sometimes add so-called “RICO” claims to ordinary commercial litigation in the cannabis industry. For example, Lifted and certain executives were sued by the same plaintiff’s attorney in two ordinary commercial lawsuits, and such plaintiff’s attorney chose to add RICO claims to the complaints in those cases. In one case, the judge has dismissed those RICO claims with prejudice. While we flatly deny that our Company has or is engaged in any “racketeering” activities, no assurance or guarantee can be given that RICO claims will not continue to be asserted either by plaintiff’s attorneys or by criminal prosecutors. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Shipping companies may be unwilling to serve Lifted
The Amended PACT Act has spurred shipping companies to terminate their relationships with Lifted because the shipping companies are unwilling to ship or mail ENDS products on behalf of Lifted. The loss of reliable and consistent shipping companies negatively impacts Lifted’s ability to serve its customers, and thus Lifted’s financial results are negatively impacted. Moreover, the fewer shipping/mailing companies that are willing to ship/mail products on behalf of Lifted, may cause shipping/mailing to become prohibitively expensive, causing lost sales. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Pandemics or disease outbreaks, such as the coronavirus, may disrupt consumption and trade patterns, supply chains, and production processes, which may materially affect Lifted’s operations and results of operations
A public health epidemic, such as the COVID-19 pandemic that began in 2020, or the fear of a potential epidemic or pandemic, poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns or other preventative measures that may be requested or mandated by governmental authorities, or the risk that our access to employees, raw materials supply, manufacturing, distribution, transportation, sales, collections, insurance, banking relationships, cash flow, customers or other important aspects of our business could be seriously disrupted. There can be no assurances that we will be allowed to operate during any future actual or anticipated epidemic disease outbreak or pandemic. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted, Cannabis Companies, or the hemp-derived, kratom-derived, marijuana, psychoactive and nicotine industries more generally, may receive unfavorable publicity or become subject to negative consumer or investor perception
The hemp-derived, kratom-derived, marijuana, psychoactive and nicotine industries are highly dependent upon positive consumer and investor perception regarding the benefits, safety, efficacy and quality of the hemp-derived, kratom-derived, marijuana, psychoactive and nicotine products sold to consumers. The perception of the hemp-derived, kratom-derived, marijuana, psychoactive and nicotine products industries, and hemp-derived, kratom-derived, marijuana, psychoactive and nicotine products, currently and in the future, may be significantly influenced by scientific research or findings, regulatory investigations, litigation, political statements, media attention and other publicity (whether or not accurate or with merit) relating to the consumption of hemp-derived, kratom-derived, marijuana, psychoactive or nicotine products, including unexpected safety or efficacy concerns arising with respect to hemp-derived, kratom-derived, marijuana, psychoactive or nicotine products or the activities of industry participants. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media or governmental attention or other research findings or publicity will be favorable to the hemp-derived, marijuana, psychoactive or nicotine markets. Adverse future scientific research reports, findings and regulatory proceedings that are, or litigation, media attention or other publicity that is, perceived as less favorable than, or that questions earlier research reports, findings or publicity (whether or not accurate or with merit) may result in a significant reduction in the demand for Lifted’s products. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of hemp-derived, kratom-derived, marijuana, psychoactive or nicotine products, or of Lifted’s products specifically, or associating the consumption of hemp-derived, kratom-derived, marijuana, psychoactive or nicotine products with illness or other negative effects or events, may adversely affect Lifted. This adverse publicity may arise even if the adverse effects associated with hemp-derived, kratom-derived, marijuana, psychoactive or nicotine products resulted from consumers’ failure to use such products legally, appropriately or as directed. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Nicotine is an addictive chemical and governmental health authorities want to curb its use
Nicotine is a highly addictive chemical, and governmental health authorities want to curb its use, especially by minors. Nicotine products are subject to extensive scrutiny, regulations, restrictions and/or prohibition by governmental health authorities in order to curb nicotine use. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Many nicotine products have been linked to cancer
Many nicotine products such as cigarettes and cigars have been linked to lung, mouth, throat and other cancers. If Lifted’s nicotine-containing products are perceived by government health authorities, or proven by scientific studies, as being carcinogenic, then such products could be subject to regulations, restrictions and/or prohibitions by governmental health authorities in order to prevent cancer. Governmental regulations may already prohibit or require warning labels to be displayed on such products in certain jurisdictions. Lawsuits related to the use of such products may also occur. Such governmental regulations, restrictions and/or prohibitions by governmental health authorities, and such lawsuits, may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Some vaping products may have been linked to deaths and illnesses
Federal, state and local authorities are investigating deaths and illnesses apparently related to vaping. We can provide no guarantees or assurances that nicotine products, vapes, e-liquids and electronic cigarettes will not be prohibited, banned and/or heavily regulated in response to these deaths and illnesses, nor that Lifted will not be sued by customers who use Lifted’s nicotine products, vapes, e-liquids and electronic cigarette products. Prohibition, banning or regulation of such products, or lawsuits related to the use of Lifted’s products, may have a material adverse effect on our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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If Lifted is not able to comply with all safety, health and environmental regulations applicable to its operations and industry, Lifted may be held liable for any breaches of those regulations
Safety, health and environmental laws and regulations may affect aspects of Lifted’s operations, including product development, working conditions, waste disposal, emission controls, the maintenance of air and water quality standards and land reclamation, and, with respect to environmental laws and regulations, impose limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Lifted may also follow other standards for the conduct of its operations and may be subject to ongoing compliance inspections in respect of these standards. Compliance with safety, health and environmental laws and regulations may require significant expenditures, and failure to comply with such safety, health and environmental laws and regulations may result in the imposition of fines and penalties, the temporary or permanent suspension of operations, the imposition of clean-up costs resulting from contaminated properties, the imposition of damages and the loss of or refusal of governmental authorities to issue permits or licenses to Lifted or to certify Lifted’s compliance with good manufacturing practices (“GMP”) standards. Exposure to these liabilities may arise in connection with Lifted’s existing operations, its historical operations and operations that it may undertake in the future. Lifted could also be held liable for worker exposure to hazardous substances and for accidents causing injury or death. There can be no assurance that Lifted will at all times be in compliance with all safety, health and environmental laws and regulations notwithstanding Lifted’s attempts to comply with such laws and regulations.
Changes in applicable safety, health and environmental standards may impose stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for Lifted and its officers, directors, employees and independent contractors. Lifted may not be able to determine the specific impact that future changes in safety, health and environmental laws and regulations may have on its industry, operations and/or activities and our resulting financial position; however, Lifted may anticipate that capital expenditures and operating expenses may increase in the future as a result of the implementation of new and increasingly stringent safety, health and environmental laws and regulations. Further changes in safety, health and environmental laws and regulations, new information on existing safety, health and environmental conditions or other events, including legal proceedings based upon such conditions or an inability to obtain necessary permits in relation thereto, may require increased compliance expenditures by Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Obtaining GMP certification may be expensive and time-consuming
Obtaining GMP certification may be expensive and consuming of management’s time. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be unable to obtain GMP certification, and as a result, may lose business opportunities and/or existing customers
Certain potential, or existing customers, of Lifted’s products may require that Lifted’s products are manufactured in a facility that has obtained GMP certification. Lifted may be unable to obtain GMP certification, and thus may lose these potential business opportunities and/or existing customers. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may lose profits or become subject to liability arising from any breach of contract or fraudulent or illegal activity by our suppliers, testing labs, employees, independent contractors, consultants and others
Lifted is exposed to the risk that its suppliers, testing labs, employees, independent contractors, consultants, service providers, business partners and licensors may engage in breach of contract or fraudulent, disreputable or other illegal activity. Misconduct by these parties could include, but is not limited to, intentional undertakings of unauthorized activities, or reckless or negligent undertakings of authorized activities, in each case on Lifted’s behalf or in Lifted’s service, that violate: (1) confidentiality agreements; (2) other contracts; (3) government regulations; (4) manufacturing standards; (5) laws that require the true, complete and accurate reporting of financial information or data; or (6) Lifted’s agreements with insurers. Or, an individual or company may illicitly replicate Lifted’s products and attempt to sell these knock-off products as Lifted or as Lifted’s agent. Consequently, Lifted could be exposed to the loss of sales, revenue and profits, class action and other litigation, increased governmental inspections and related sanctions, the loss of any compliance certifications or the inability to obtain future compliance certifications, and reputational or brand damage as a result of prohibited activities that are undertaken without Lifted’s knowledge or permission and contrary to Lifted’s confidentiality agreements, contracts, internal policies, procedures and operating requirements. Lifted may be required to expend substantial time, effort and legal fees in order to address such situations.
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Lifted may not always identify and prevent misconduct by its suppliers, testing labs, employees, independent contractors, consultants, service providers, business partners and licensors, and the precautions taken by Lifted to detect and prevent this activity may not be effective in controlling unknown, unanticipated or unmanaged risks or losses or in protecting Lifted from governmental investigations or other actions or lawsuits stemming from such misconduct. If any such actions are instituted against Lifted, and Lifted is not successful in defending itself or asserting its rights, those actions may have a significant impact on its business, including the imposition of civil, criminal or administrative penalties, damages, monetary fines and contractual damages, reputational harm, diminished profits and future earnings or curtailment of its operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted, Lifted’s co-packers, or third party facilities where Lifted stores inventory, may experience security breaches at its/their facilities, or losses as a result of the theft of inventory
Because of the concentration of inventory at Lifted’s, Lifted’s co-packers', and at third parties’ facilities, Lifted, Lifted’s co-packers, and Lifted’s third parties’ storage facilities are subject to the potential risks of security breaches and theft of inventory. These risks may result in significant losses of raw goods, finished goods, inventory, or supplies, expose Lifted to additional liability under applicable regulations and to potentially costly litigation or increased expenses relating to the resolution and future prevention of similar thefts, any of which may have an adverse effect on Lifted’s business, financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be subject to risks related to its information technology systems, including the risk that it may be the subject of a cyber-attack and the risk that it may be in non-compliance with applicable privacy laws
Lifted may have purchased or entered into agreements with third parties for website services, hardware, networks, equipment, software, payment processing services, website “plug-in” software, applications, telecommunications and other information technology services (“IT”) in connection with its operations. Lifted’s operations depend, in part, on how well it and its vendors protect its IT against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, disruptions in internet and mobile commerce, hacking, computer viruses, vandalism, theft, malware, ransomware and phishing attacks. Any of these and other events may result in IT failures, operational and financial reporting delays, increases in capital expenses, including potentially ransom payments, or other potential costs and business disruptions that may result if Lifted’s customers assert claims regarding Lifted’s technology. Lifted’s operations may also depend on the timely maintenance, upgrade and replacement of networks, equipment and IT systems, software and applications. The failure of IT systems, or a component of IT systems, may, depending on the nature of any such failure, adversely impact Lifted’s reputations and results of operations.
There are a number of laws protecting the confidentiality of customer personal information, and restricting the use and disclosure of that protected information. Lifted may collect and store personal information about its customers and is responsible for protecting that information from privacy breaches. A privacy breach may occur through a procedural or process failure, an IT malfunction or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly customer lists and preferences, is an ongoing risk whether perpetrated through employee collusion or negligence or through deliberate cyber-attack. Moreover, if Lifted is found to be in violation of the privacy or security rules under laws protecting the confidentiality of customer information, including as a result of data theft and privacy breaches, Lifted and may be subject to sanctions and civil or criminal penalties, which may increase its liabilities and harm its reputation.
As cyber threats continue to evolve, Lifted may be required to expand significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. Significant disruption to Lifted's IT system or breaches of data security may have a material adverse effect on its business' financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Cyber incidents or malicious attacks on Lifted's information technology systems could damage our reputation, negatively impact our business, and expose us to litigation risk
Lifted uses computers in substantially all aspects of its business operations. It also uses mobile devices, social networking and other online activities to connect with team members and customers. Lifted relies heavily on various proprietary and third-party information systems. Its reputation for the secure handling of customer and other sensitive information is critical to the success of its business. Like other businesses, Lifted is potentially subject to a range of cyber incidents, including but not limited to state-sponsored cyber-attacks, industrial espionage, insider threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, data leakage and compromise, wire fraud, phishing incidents and other cyber incidents. Due to such constant evolving nature and methods of security threats, Lifted may not detect cyber incidents and may not be able to quickly or properly respond to cyber incidents, and the cost and operational expense of implementing, maintaining and enhancing protective measures to guard against increasingly complex and sophisticated cyber threats could increase significantly. Lifted's information technology and network infrastructure may be vulnerable to attacks by hackers or breaches during routine operations, such as system upgrades, or during network or hardware failures, or due to employee error, malfeasance, malicious or disruptive software or computer viruses, malicious actions of employees or contractors, power outages, natural disasters, acts of terrorism, breaches with respect to third-party systems or vendors, or other disruptions.
A cybersecurity incident and breach of its information systems could lead to theft, destruction, loss of life, damage to property, environmental issues, misappropriation or release of sensitive and/or confidential information or intellectual property, which could result in business disruption, facility shutdown, negative publicity, violation of privacy laws, loss of customers, partners or suppliers, brand damage, adverse financial and operational results, potential litigation, and additional expenses, including the cost of remediating incidents or improving security measures, increased insurance costs, or ransomware payments; and corruption of data.
Our management depends on relevant and reliable information for decision-making purposes, including key performance indicators and financial reporting. Any significant loss of data, failure to maintain reliable data, disruptions affecting our information systems, or delays or difficulties in transitioning to new systems could adversely affect our business, financial condition and results of operations. In addition, our ability to continue to operate our businesses without significant interruption in the event of a disaster or other disruption depends in part on the ability of our information systems to continue to operate properly. If our information systems fail and/or if our insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced, and the reputation of our brands and our business could be adversely affected. In addition, remediation of such problems could result in significant, unplanned capital investments. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted's computer systems, or the computer systems of third party software or service providers, or the underlying infrastructure of the internet, are breached or compromised, and unauthorized access is obtained to Lifted's data or customer’s data, or authorized access is blocked or disabled, then we may incur significant legal exposure and liabilities, or a negative financial impact
Lifted's business involves the storage and transmission of its customers’ proprietary and sensitive data. We can provide no assurances that Lifted can effectively protect its customers’ data, as such data may in the future be materially breached or compromised as a result of events such as: third-party attempts to fraudulently induce Lifted's employees, independent contractors, partners or customers to disclose sensitive information such as usernames, passwords or other information to gain access to its customers’ data or IT systems, or data or our IT systems; efforts by individuals or groups of hackers and sophisticated organizations, such as state-sponsored organizations or nation-states, to launch coordinated attacks, including ransomware, destructive malware and distributed denial-of-service attacks; third-party attempts to abuse marketing, advertising, messaging or social products and functionalities to impersonate persons or organizations and disseminate information that is false, misleading or malicious; cyberattacks on third party and/or internally built IT infrastructure on which much of Lifted's business rely; vulnerabilities resulting from enhancements and updates to software and IT systems; vulnerabilities in the products or components across the broad ecosystem within which Lifted's services operate in conjunction with and are dependent on; vulnerabilities existing within or resulting from new technologies, infrastructures, protocols, laws, rules, and regulations; attacks on, or vulnerabilities in, the many different underlying networks and services that power the internet that Lifted depends on, most of which are not under our control or the control of our vendors, partners or customers; and employee or contractor errors or intentional acts that compromise Lifted's computer systems.
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We can provide no assurances or guarantees whatsoever that our IT systems will provide security or otherwise be effective or that a material breach will not occur. For examples, and without limitations, Lifted's ability to mitigate these risks may be impacted by the following among other events: changes to, and growth in the complexity of, the techniques used to breach, obtain unauthorized access to, or sabotage IT systems and infrastructure, which are generally not recognized until launched against a target, and could result in Lifted being unable to anticipate or implement adequate measures to prevent such techniques; the continued evolution of internal IT systems as Lifted adopts new technologies and new ways of sharing data and communicating internally and with partners and customers, which increases the complexity of IT systems; the acquisition of new subsidiaries, requiring Lifted to incorporate and secure different or more complex IT environments; authorization by customers to third-party technology providers to access their customer data, which may lead to Lifted's customers’ inability to protect its data that is stored on Lifted’s servers and on third parties' servers; and lack of control over customers or third-party technology providers, or the processing of data by third-party technology providers, which may not allow Lifted to maintain the integrity or security of such transmissions or processing.
We believe that, in the normal course of business, Lifted has been the target of malicious cyberattack attempts and has experienced other IT security incidents especially in regard to Lifted's banking, credit card, and other financial activities. There can be no assurance that future cyberattacks and other IT security incidents will not be material or significant. An IT security breach or incident could result in unauthorized parties obtaining access to, or the denial of authorized access to, Lifted's IT systems or data, or customers’ systems or data, including intellectual property and proprietary, sensitive or other confidential information. An IT security breach or incident could also result in litigation against us, negatively impact our future sales, disrupt our business, and lead to increases in insurance premiums and legal, regulatory and financial exposure and liability. All of the foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Cybersecurity attacks, business interruptions and compliance issues experienced by third parties could materially and adversely affect our financial condition, results of operation and cash flows
We rely on relationships with third parties, including suppliers, distributors, contract packers, contractors, cloud data storage and other information technology service providers and other external business partners, for certain functions or for services in support of our operations. These third-party service providers and partners, with whom we may share data, have, and could in the future, experience cybersecurity attacks. Third parties have been, and could in the future, experience challenges complying with laws and regulation, such as data protection requirements, and interruptions to business systems, disruption to operations, and employee failures. While we have procedures in place for selecting and managing our relationships with third-party service providers and other business partners, we do not have control over their business operations or governance and compliance systems, practices and procedures. Furthermore, our management of multiple third party service providers increases our operational complexity. Third parties have and could in the future experience cybersecurity attacks that may involve data we share with them or rely on them to provide to us with respect to timely notification and access to personnel and information concerning an incident, which may complicate our efforts to resolve any issues that arise. As a result, we are subject to the risk that the activities associated with our third party service providers and partners will adversely affect our business, even if the cyber security attack does not directly impact our systems or information. Additionally, these risks are also present in target companies, acquired businesses, joint ventures or companies that we invest in or with whom we partner. Such businesses use separate information systems or have not yet been fully integrated into our information systems. These risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted does not have the manpower, expertise or financial resources to effectively identify, detect, prevent or remediate cybersecurity risks
The identification, detection, prevention and remediation of known or potential IT security vulnerabilities, including those arising from third-party hackers, hardware or software, is extremely costly and time consuming. Lifted does not have the manpower, expertise or financial resources to effectively identify, detect, prevent or remediate cybersecurity risks. No assurance or guarantee whatsoever can be given that Lifted will not be seriously damaged by the exploitation of its cybersecurity vulnerabilities. These risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted or our third-party service providers experience an actual or perceived cybersecurity event, our platform may be perceived as not being secure, and we may lose customers or incur significant liabilities, which would harm our business and operating results
Lifted's operations involve the storage, transmission and processing of internal and customers’ confidential, proprietary and sensitive data, which may include personally identifiable information, and financial information. Computer malware, ransomware, viruses, hacking, phishing and denial of service attacks by third parties have become more prevalent in internet-enabled commerce, and we believe that Lifted has been the target of hackers and scammers in the past, and likely will be the target of hackers and scammers in the future.
We may not be able to prevent material breaches of our IT systems caused by intentional or unintentional action or inaction by employees or third parties, which may result in the unauthorized access or release of our instances and ultimately our or our customers’ data, IP and other confidential business information.
A security breach suffered by Lifted or third-party service providers, an attack against our service availability or unauthorized access or loss of data could result in a disruption to our service, litigation, service level agreement claims, indemnification and other contractual obligations, regulatory investigations, government fines and penalties, reputational damage, loss of sales and customers, mitigation and remediation expenses and other significant costs and liabilities. In addition, we may incur significant economic and operational consequences in order to appropriately assess and respond to security incidents and to implement appropriate safeguards to protect against future incidents. We do not believe that Lifted's insurance will be adequate or sufficient to cover the potentially significant losses that may result from an IT security incident.
Additionally, as we increase reliance on third-party and public cloud infrastructure, we depend in part on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of data. However, we have little or no ability to monitor our third-party service providers’ data security. Similarly, employee error or malfeasance in configuring, maintaining, and using services offered by third-party providers may affect our ability to monitor and secure such services. Any breach of our providers’ security measures or misconfiguration or misuse of our software or our providers’ services may result in unauthorized access to, or the misuse, loss or destruction of, our and our customers’ data or in a violation of our terms or applicable law, which may result in reputational harm or liability.
We cannot guarantee that Lifted's IT systems have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems and network or the systems and networks of third parties that support us and our business. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, systems, networks, or physical facilities utilized by us or our third-party vendors or service providers. Furthermore, supply chain disruptions due to wars and/or sanctions (and resulting legal or regulatory developments) and any indirect effects may further complicate any existing supply chain constraints. All of the foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may subject us to substantial negative financial consequences and civil or criminal penalties
Complex local, state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These privacy and data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement. In addition, our legal and regulatory obligations in jurisdictions outside the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations or to increase penalties significantly. Becoming aware of, and complying with, these laws and regulations can be costly and can impede the development and offering of new products and services.
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These laws and regulations, as well as changes and new laws and regulations that apply to personal data, subject the Company to, among other things, additional costs and may require changes to our business practices, security systems, policies, and procedures. Any failure by Lifted to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, loss of consumer confidence, and damage to our brand reputation, and which may subject us to government enforcement actions (including fines and injunctions), any of which could have a material adverse effect on our operations, financial performance, business. These risks may have a material adverse effect on our Company and the trading price of our common stock.
An infectious hop latent viroid might adversely affect the availability and cost of our raw materials
It has been reported that experts have sounded an alarm over the global spread of a dangerous and infectious hop latent virus (HpLVd) that is threatening to potentially cause billions of dollars of losses for cannabis and hop growers. If this viroid were to cause significant problems for hemp growers in the US, it might potentially decrease the availability, and increase the cost, of hemp and hemp-derived cannabinoids that are the principal raw materials for many of our products. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Communications by employees of regulatory agencies and/or law enforcement may disrupt the sales of our products
Employees of federal, state and local regulatory agencies and/or law enforcement sometimes make statements and/or issue correspondence that claim or imply that certain hemp-derived cannabinoid products are unsafe or illegal. These statements and correspondence, and industry publications and/or news media coverage of such statements and correspondence, sometimes trigger confusion, uncertainty or alarm among the distributors, retailers and consumers who purchase our products, and sometimes result in decreased sales or returns/exchanges of our products. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s production and shipping facilities are integral to its business and adverse changes or developments affecting our facilities may have an adverse impact on our business
Lifted production and shipping facilities are integral to its business. Adverse changes or developments affecting these facilities, including, but not limited to, the spoiling of raw and finished goods, a fire, an explosion, equipment failure, a power failure, a natural disaster, inclement weather, an epidemic, pandemic or other public health crisis, or a material failure of our security infrastructure, could reduce or require Lifted to entirely suspend operations at the affected facilities. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be unable to grow
Lifted's business is subject to a variety of business risks generally associated with developing companies. Lifted’s ability to grow, and to expand and maintain market acceptance for its products, will depend on a number of factors, many of which may be beyond its control. Future development and expansion could place significant strain on Lifted’s management personnel and likely will require them to recruit additional management personnel, and there is no assurance that it will be able to do so. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be unable to expand its operations quickly enough to meet demand or manage its operations beyond their current scale
There can be no assurance that Lifted will be able to manage its expanding operations effectively, that it will be able to sustain or accelerate its growth, or that such growth, if achieved, will result in profitable operations, or that Lifted will be able to attract and retain sufficient management personnel necessary for continued growth.
Demand for Lifted’s products is dependent on a number of social, political and economic factors that are beyond Lifted’s control. There is no assurance that an increase in existing demand will occur, that Lifted will benefit from any such demand increase or that its business will remain profitable even in the event of such an increase in demand. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may experience significant fluctuations in its operating results and growth rate
Lifted may not be able to accurately forecast its growth rate. Lifted’s revenue growth may not be sustainable, and its percentage growth rates may decrease. Lifted’s revenue and operating profit growth may depend on the continued growth of demand for its products and services, and its business may be affected by general economic and business conditions worldwide, and an evolving regulatory and legal landscape for Lifted’s products. A softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, may result in decreased revenue or growth.
Lifted’s sales and operating results may also fluctuate for many other reasons, including due to risks described elsewhere in this section and due to risks and uncertainties associated with the following topics and issues:
| · | Issues associated with the legality or safety of products containing hemp-derived cannabinoids, kratom derivatives, marijuana, psychoactive substances, or other consumable products, including nicotine products; | |
| · | Labor unavailability, supply chain disruptions, and other issues and problems associated with pandemics and other force majeure-type events and conditions; | |
| · | Lifted’s ability to retain and increase sales to existing customers, attract new customers, satisfy customers’ demands, and maintain profit margins; | |
| · | Lifted’s ability to retain and expand its network of wholesalers and distributors; | |
| · | Lifted’s ability to expand its online sales; | |
| · | Competition from substantially larger and financially stronger competitors; | |
| · | Continued access to inventory and suppliers, some of whom may be acquired by competitors or otherwise become unavailable to Lifted; | |
| · | Lifted’s ability to offer products on favorable terms, manage inventory, and fulfill orders; | |
| · | The introduction of competitive stores, websites, applications, products, services, price decreases, or improvements, and changes in consumer preferences and trends; | |
| · | Changes in usage or adoption rates of the internet, e-commerce, electronic devices, and web services, including outside the U.S.; | |
| · | Timing, effectiveness, and costs of expansion and upgrades of Lifted’s systems and infrastructure; | |
| · | The success of Lifted’s geographic, service, and product line expansions; | |
| · | Lifted’s ability to properly store inventory to avoid spoilage and to ensure that devices (such as vapes) work properly; | |
| · | Lifted’s ability to properly forecast product demand, so that excess inventory (which could eventually become spoiled or obsolete) is not built up; | |
| · | The extent to which Lifted finances, and the terms of any such financing for, Lifted’s current operations and future growth; | |
| · | The outcomes of current and future legal proceedings and claims, which may include significant settlement costs, legal fees, monetary damages or injunctive relief and which could have a material adverse impact on Lifted's operating results, balance sheet and liquidity; | |
| · | Tax laws, rules and regulations, the interpretation of tax laws, rules and regulations such as IRS Code Section 280E, and tax audits and the potential for increased taxes and penalties, which could have a material adverse impact on Lifted's operating results, balance sheet and liquidity | |
| · | Variations in the mix of products and services that Lifted sells; | |
| · | Variations in Lifted’s level of merchandise and vendor returns; | |
| · | The extent to which Lifted offers favorable shipping terms, reduces prices, offers discounts, and provides additional benefits to its customers; | |
| · | Factors affecting Lifted’s reputation or brand images; | |
| · | The extent to which Lifted invests in technology and content, fulfillment, and other expense categories; | |
| · | Increases in the prices of energy products and commodities like plastic, batteries, paper and packing supplies; | |
| · | The ability to collect amounts owed to Lifted when they become due; | |
| · | The extent to which Lifted is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data theft, computer intrusions, outages, and similar events or cyberattacks; and | |
| · | Terrorist attacks and armed hostilities. | |
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The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be subject to risks related to the protection and enforcement of its intellectual property rights, or intellectual property it licenses from others, and may become subject to allegations that it or its licensors are in violation of intellectual property rights of third parties
The ownership, licensing and protection of trademarks, patents and intellectual property rights may be significant aspects of Lifted’s future success. Unauthorized parties may attempt to replicate or otherwise obtain and use Lifted’s look and feel, packaging, products and technology. Policing the unauthorized use of Lifted’s current or future trademarks, patents or other intellectual property rights now or in the future may be difficult, expensive, time consuming and unpredictable, as may be enforcing these rights against the unauthorized use by others. Identifying the unauthorized use of intellectual property rights is difficult as Lifted may be unable to effectively monitor and evaluate the products being distributed by its competitors, and the processes used to produce such products.
In addition, in any infringement proceeding, some or all of Lifted’s trademarks, patents or other intellectual property rights or other proprietary know-how, and that which they may license from others, or arrangements or agreements seeking to protect the same for Lifted’s benefit, may be found invalid, unenforceable, anticompetitive or not infringed or may be interpreted narrowly and such proceeding may put existing intellectual property applications at risk of not being issued. In addition, other parties may claim that Lifted’s products, or those that they license from others, infringe on their proprietary, copyright or patent protected rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources and legal fees, result in injunctions or temporary restraining orders or require the payment of damages. As well, Lifted may need to obtain licenses from third parties who allege that Lifted has infringed on their lawful rights. Such licenses may not be available on terms acceptable to Lifted, or at all. In addition, Lifted may not be able to obtain or utilize on terms that are favorable to them, or at all, licenses or other rights with respect to intellectual property that they do not own.
Lifted may also rely on certain trade secrets, technical know-how and proprietary information that are not protected by patents to maintain its competitive position. Lifted’s trade secrets, technical know-how and proprietary information, which are not protected by patents, may become known to or be independently developed by competitors, which may adversely affect Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If we fail to protect our trademarks and trade secrets, we may be unable to successfully market our products and compete effectively
We rely on a combination of trademark and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. Failure to protect our intellectual property could harm our brands and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks and trade secrets, as crucial to our business and our success. However, the steps taken by us to protect these proprietary rights may not be adequate and may not prevent third parties from infringing or misappropriating our trademarks, trade secrets or similar proprietary rights. In addition, other parties may seek to assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our products or recoup our associated research and development costs. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may be exposed to risks relating to the laws of various countries as a result of its expanding international sales and distribution
Lifted’s products are currently sold and distributed internationally, and Lifted plans to expand these international sales and distribution. As a result, we are exposed to various levels of political, economic, legal and other risks and uncertainties associated with selling, distributing and exporting to these jurisdictions. These risks and uncertainties include, but are not limited to, changes in the laws, regulations and policies governing the production, sale and use of Lifted’s products, political instability, instability at the United Nations level, currency controls, fluctuations in currency exchange rates and rates of inflation, labor unrest, changes in taxation laws, regulations and policies, restrictions on foreign exchange and repatriation and changing political conditions and governmental regulations relating to foreign investment and our industries more generally.
Changes, if any, in the laws, regulations and policies relating to the advertising, production, sale and use of Lifted’s products or in the general economic policies in these jurisdictions, or shifts in political attitude related thereto, may adversely affect the profitability of our sales and distribution in these countries. As we explore novel business models, international regulations will become increasingly challenging to manage. Specifically, our operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on advertising, production, price controls, controls on currency remittance, and increased income taxes. Failure to comply strictly with applicable laws, regulations and local practices may result in additional taxes, costs, civil or criminal fines or penalties or other expenses being levied on our international operations, as well as other potential adverse consequences such as the loss of necessary permits or governmental approvals.
Furthermore, there is no assurance that we will be able to secure any requisite import and export approvals, licenses or permits that are necessary or desirable for the international sale and distribution of our products. Even if we obtain the necessary import and export approvals, there may be shipment delays or other challenges related to the delivery of our products to customers in other countries. Countries may also impose restrictions or limitations on imports. As a result, we may be required to establish facilities in one or more countries in the European Union (or elsewhere) where we wish to distribute our products in order to take advantage of the favorable legislation offered to producers located in these countries. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted faces risks associated with its expansion into new markets outside of the current jurisdictions where we conduct business
We plan in the future to expand our operations and business into jurisdictions outside of the jurisdictions where we currently conduct business. There can be no assurance that any market for our products will develop in any such foreign jurisdiction. We may face new or unexpected risks or significantly increase our exposure to one or more existing risk factors, including economic instability, new competition, changes in laws and regulations, the possibility that we may be in violation of these laws and regulations as a result of such changes, taxes, and potential litigation, among other risks. These risk factors may limit our capability to successfully expand our sales, distribution or export of our products to such jurisdictions. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may be unable to grow our revenues, or our revenues may decrease, and we may be forced to adjust our operations accordingly
Lifted’s ability to grow its revenues will depend on a number of factors, many of which are beyond our control, including, but not limited to, the availability of sufficient capital on suitable terms, changes in laws and regulations respecting the production and distribution of our products, competition from others, the size of the illicit market, and our ability to produce sufficient volumes of our products to meet demand. Our revenues may decrease for many reasons. Regulatory changes, particularly in the primary jurisdictions where we operate, may prohibit or restrict the sale of our products, or may attract new market entrants and more competition. In addition, any future development and expansion may place significant strain on our management personnel and likely will require us to recruit additional management personnel, and there is no assurance that we will be able to do so. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Price volatility may adversely affect operations
Lifted’s profitability is sensitive to fluctuations in the costs of raw goods, which may be impacted by changes in availability of supply (which itself depends on other factors such as weather, fuel, equipment, labor costs, raw goods costs, shipping costs, national holidays, and demand), tariffs, taxes, governmental policies, and other market conditions, all of which are factors beyond the control of Lifted. Lifted's operational results are also sensitive to manufacturing costs, and the overall condition of the intoxicating product industry. Price volatility may have a material adverse effect on Lifted's business, financial condition, and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We depend on a limited number of customers for a substantial portion of our revenue. If we fail to retain or expand our customer relationships or significant customers reduce their purchases, our revenue may decline significantly
Our business is dependent on a limited number of customers for a substantial portion of our revenue. If we fail to retain or expand our customer relationships or significant customers reduce their purchases, our revenue may decline significantly. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Consumers in our industry are brand-conscious, so brand name recognition and acceptance of our products are critical to our success
Our business is in part dependent upon customer awareness of our brands and market acceptance of our products. If we do not successfully grow our brands and product offerings, we may not achieve and maintain satisfactory levels of acceptance by distributors, wholesalers and end consumers. Any failure of our brands to maintain or increase acceptance or market penetration may likely have a material adverse effect on our revenues and financial results. There can be no guarantee or assurance that any rebrand of Lifted’s brands will be successful or result in any additional sales or profits for Lifted. Moreover, we cannot predict whether our advertising, marketing and promotional programs will have the desired impact on our sales, products' branding and on consumer preferences. In addition, negative public relations and product quality issues, including negative perceptions regarding the industries in which we operate, whether real or imagined, may damage our reputation and brands and may cause customers to choose other brands’ products over our products. Our brand image may also be adversely affected by unfavorable reports, studies and articles, litigation, or regulatory or other governmental action, whether involving our products or those of our competitors. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may have limited access to financial and insurance services and products
Some financial institutions and insurance companies refuse to provide a full range of financial and insurance services and products to Lifted because its business involves hemp-derived products, marijuana, psychoactive products, vaping products, and nicotine products. Or, the cost of insurance may be prohibitively high. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to obtain or afford insurance coverage in respect of the risks our business faces, or there may be coverage limitations and other exclusions which may result in such insurance not being sufficient to cover potential liabilities that we face
We may not be able to obtain or afford insurance coverage in respect of certain risks that our business faces, including product liability insurance, protecting our assets, the loss of employees, and operations. Even if insurance is obtained, our insurance coverage may be subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities, including potential product liability claims or product recall costs, or will be generally available in the future or, if available, that premiums will be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, then we may be exposed to material uninsured liabilities that may impede our liquidity, profitability or solvency. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may sustain losses that cannot be recovered through insurance or other preventative measures
There is no assurance that Lifted will not incur uninsured liabilities and losses, especially in regard to uninsured or uninsurable products, and product recalls. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Increased labor costs, potential organization of our workforce, employee strikes, and other labor-related disruption may adversely affect our operations
It is difficult for Lifted to identify and hire new employees and independent contractors in the current environment: the labor market is limited and labor costs have increased. None of our employees are represented by a labor union or subject to a collective bargaining agreement. We cannot assure that our labor costs going forward will remain competitive based on various factors, such as: (1) labor costs may continue to increase as the labor supply is tight; (2) our workforce may organize in the future and labor agreements may be put in place that have significantly higher labor rates and company obligations; (3) our competitors may maintain significantly lower labor costs, putting us at a competitive disadvantage; and (4) our labor costs may increase in connection with our growth. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Significant interruptions in our access to certain supply chains for key inputs such as raw materials, supplies, electricity, water and other utilities may impair our operations
Our business is dependent on a number of key inputs and their related costs, including raw materials, supplies and equipment related to our operations, co-packers, as well as electricity, water and other utilities. Our suppliers, co-packers and customers are dispersed. Governments may regulate or restrict the flow of labor or products, and Lifted’s operations, suppliers, customers and distribution channels could be severely impacted. For examples: China or other nations could regulate or restrict the flow of raw materials and products to the United States; the shipment of raw materials and products by sea and/or air from China and other locations to the United States may be banned, limited, disrupted, delayed or increased in cost; the Chinese New Year celebrations may disrupt or delay shipments of raw materials and products; states in which Lifted operates could impose prohibitions or restrictions on the operation of “non-essential” businesses, and might characterize Lifted as a “non-essential” business. Any significant future governmental-mandated or market-related delay, interruption, price increase or negative change in the availability or economics of the supply chain for key inputs and, in particular, rising or volatile shipping and energy costs, may curtail or preclude our ability to continue production. In addition, our operations would be significantly affected by power outages, or equipment breakage. Our ability to compete is dependent on us having access, at a reasonable cost and in a timely manner, to skilled labor, equipment, parts and components. No assurances can be given that we will be successful in maintaining our required supply of labor, equipment, parts and components. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may be negatively impacted by challenging global economic conditions
Our business, financial condition, results of operations and cash flow may be negatively impacted by challenging global conditions, including high interest rates, inflation, bankruptcies, layoffs, wars, tariffs, pandemics, civil unrest, and many other factors beyond Lifted’s control. We are unable to predict the likelihood of the occurrence, duration or severity of such global economic conditions and disruptions caused thereby. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations and cash flow. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We face risks associated with the transportation of our products to consumers in a safe and efficient manner
We depend on fast, cost-effective, and efficient transportation services to distribute our products to distributors, wholesalers and end users. Any prolonged disruption of third-party transportation services may have a material adverse effect on our sales volumes or satisfaction with our services. Rising costs associated with third-party transportation services used by us to ship our products may also adversely impact our profitability, and more generally our business, financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted’s inventory may be stolen in transit
Lifted is subject to the potential risk of theft of inventory in transit. This risk, which has already occurred more than once, may result in significant losses of raw goods, finished goods, inventory, or supplies, expose Lifted to additional liability under applicable regulations and to potentially costly litigation or increased expenses relating to the resolution and future prevention of similar thefts, any of which may have an adverse effect on Lifted’s business, financial condition and results of operations. There can be no assurance that this risk can be effectively mitigated via insurance. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Our products may be subject to recalls for a variety of reasons, which could require us to expend significant management and capital resources
Manufacturers and distributors of products such as those that Lifted sells are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, adulteration, unintended harmful side effects or interactions with other substances, packaging safety, and inadequate or inaccurate labeling disclosure. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or otherwise. If any of the products produced by us are recalled due to an alleged product defect or for any other reason, we may be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. As a result of any such recall, we may lose a significant amount of sales and may not be able to replace those sales at an acceptable gross profit or at all. In addition, a product recall may require significant management attention or damage our reputation and goodwill or that of our products or brands, and our relationships with customers.
Additionally, product recalls may lead to increased scrutiny of our operations by the FDA or by state regulatory agencies, requiring further management attention, increased compliance costs and potential lawsuits, legal fees, fines, penalties and other expenses. Any product recall affecting the hemp-derived, marijuana, psychoactive and nicotine products industries more broadly, whether or not involving us, may also lead consumers to lose confidence in the general safety and security of hemp-derived, marijuana, psychoactive and nicotine products, including products sold by us. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Companies and regulators in the marijuana and alcohol industries are often hostile to the hemp-derived products industry, and sometimes use their political strength to seek prohibition, regulation and/or taxation of hemp-derived products including products, such as those containing delta-8-THC and delta-9-THC
Companies and regulators in the marijuana and alcohol industries are often hostile to the hemp-derived products industry, as they witness the growing popularity of hemp-derived products taking sales away from state-licensed marijuana dispensaries, or alcohol sales. They sometimes use their political strength to seek prohibition, stricter regulations and/or additional taxation of hemp-derived products, including for example, products containing delta-8-THC and delta-9-THC. Prohibitions, restrictions and taxes are now imposed on the shipment and/or sale of certain hemp-derived products in many states, and are being considered by other states. These restrictions, prohibitions and taxes may have a material adverse effect on Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may be subject to product liability claims or regulatory action if its products are alleged to have caused significant loss or injury
Lifted, as a manufacturer and distributor of products which in some cases are ingested by humans, face the risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused loss or injury. Lifted may be subject to these types of claims due to allegations that its products caused or contributed to injury, illness or death, failed to include adequate instructions for use, were defective, or failed to include adequate warnings concerning possible side effects or interactions with other substances. Previously unknown adverse reactions resulting from human consumption of hemp-derived products, marijuana, psychoactive substances, and nicotine alone or in combination with other medications or substances may also occur. Lifted may also be named as co-parties in product liability suits that are brought against manufacturing partners that produce our products, packaging for those products, or the ingredients in those products. In addition, our customers and partners may bring suits against us alleging damages for the failure of our products to meet stated specifications or other requirements. Any such suits, even if not successful, could be costly, disrupt the attention of our management and damage our negotiations with distributors and/or customers. In addition, the manufacture and sale of any such products, like the manufacture and sale of any ingested product, involves a risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Lifted may in the future have to recall certain of its products as a result of potential contamination and quality assurance concerns. A product liability claim or regulatory action against Lifted may result in increased costs and may adversely affect Lifted’s reputation and goodwill with its customers. There can be no assurance that Lifted will be able to obtain product liability insurance on acceptable terms or with adequate coverage against potential liabilities, if at all. Any attempt by us to limit our product liability through any of our insurance policies may not be enforceable or may be subject to exceptions. Insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims may result in us becoming subject to significant liabilities that are uninsured and also may adversely affect Lifted’s leases and other commercial arrangements with third parties. Our contract manufacturers or manufacturing partners may not have adequate insurance coverage themselves to cover against claims, and we may not be named on their policies as an additionally insured party. If we experience a large loss, it may exceed any insurance coverage limits we have at that time, or our insurance carrier may decline to cover us or may raise our insurance rates to unacceptable levels, any of which could impair our financial position. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We rely on third-party distributors to distribute our products, and those distributors may not perform their obligations
We rely on third-party distributors to distribute our products. If these distributors do not successfully sell our products, if there is a delay or interruption in the distribution of our products, or if these third parties damage our products, our revenue may be negatively impacted. Any damage to our products, such as product spoilage, may expose us to potential product liability, damage our reputation and the reputation of our brands or otherwise harm our business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We rely on third party vendors to manufacture some of our products, and those third party vendors may not perform their obligations
We rely on third party vendors to manufacture some of our products. If these third party vendors do not successfully carry out their contractual duties, if there is a delay or interruption in the manufacture of our products, or if these third party vendors produce defective products, it may negatively impact our revenue from product sales. Any negative impact to the production of our products by the third party vendors may expose us to potential product liability, damage our reputation and the reputation of our brands or otherwise harm our business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Certain events or developments in the cannabis and psychoactive products industries more generally may impact our reputation
Damage to our reputation can result from the actual or perceived occurrence of any number of events, including any negative publicity, whether true or not. As a producer and distributor of hemp-derived and other psychoactive products, there is a risk that our business might attract negative publicity. There is also a risk that the actions of other companies and service providers in the cannabis and psychoactive products industries may negatively affect the reputation of the industries as a whole and thereby negatively impact our reputation. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share negative opinions and views in regards to our activities and the cannabis and psychoactive products industries in general, whether true or not. We do not ultimately have direct control over how we or the cannabis or psychoactive products industries are perceived by others. Reputational issues may result in decreased investor confidence, increased challenges in developing and maintaining community relations and present an impediment to our overall ability to advance our business strategy and realize on our growth prospects. This may also impact our ability to attract and/or maintain business partners that are not primarily engaged in the cannabis and psychoactive products industries, such as major convenience stores. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Some companies in the cannabis and psychoactive products industries are owned or controlled by people with criminal backgrounds or by people with little regard for compliance with applicable laws, rules and regulations
The cannabis and psychoactive products industries includes people with criminal backgrounds or who operated their cannabis and psychoactive products businesses illegally for many years. In addition, the cannabis and psychoactive products industries include people who seem to have little regard for compliance with all applicable laws, rules and regulations. This has sometimes resulted in a competitive environment in which publicly traded companies are at a relative disadvantage to certain privately held companies. This “unlevel playing field” may have a material adverse effect on Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The seasonality of Lifted’s business creates variable financial results, and may place increased strain on its operations
Sometimes a disproportionate amount of Lifted's net sales occur during a particular quarter. If Lifted does not stock or restock popular products in sufficient amounts such that it fails to meet seasonal customer demand, it may significantly affect Lifted’s revenue and future growth. In addition, Lifted may be unable to adequately staff its fulfillment operations during these peak periods and may be unable to meet the seasonal demand. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted cannot accurately predict future sales of particular products, so inventory write-offs occur
The hemp-derived, psychoactive and consumable goods industries are ever-evolving. Lifted cannot accurately predict future sales of particular products that Lifted sells. Some products sell faster than expected, and some products sell slower than expected. And some products sell fast, but then sales unexpectedly drop off quickly. When Lifted overstocks raw goods or finished goods, and the demand for finished goods is not as expected, then Lifted is required to take significant inventory markdowns or write-offs, which reduces profitability. Such inventory markdowns or write-offs are not uncommon. Also, if too many customers access Lifted’s websites within a short period of time due to increased demand, Lifted may experience system interruptions that make its website unavailable or prevent Lifted from efficiently fulfilling orders, which may reduce the volume of goods it sells and the attractiveness of its products and services. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to identify, audit, negotiate, finance or close future acquisitions
A significant component of our growth strategy focuses on acquiring majority equity ownership interests in companies outside of the hemp-derived and psychoactive products industries (“Outside Companies”). One of the challenges we have faced while having merger discussions with Outside Companies is that management of the Outside Companies is apprehensive of merging their companies with Lifted, given the tremendous regulatory challenges that Lifted faces. We generally have pursued a conservative mentality regarding the potential issuance of additional common stock of the Company, and regarding the pricing, term and other conditions of potential borrowings by the Company, so we may not be able to identify, audit, or acquire such equity ownership interests on acceptable terms, if at all. No guarantee or assurance whatsoever can be given that discussions/negotiations with any potential acquisition candidates will result in any letter of intent or definitive acquisition agreement. If we do enter any letter of intent or definitive acquisition agreement, we may need to finance all or a portion of the purchase price for an acquisition by incurring indebtedness or by selling shares of our common stock or convertible preferred stock. There can be no assurance that we will be able to obtain financing on terms that are favorable, if at all, which will limit our ability to acquire such equity ownership interests in the future. Target companies may not decide to proceed forward with mergers that are the subject of letters of intent. Failure to acquire such equity ownership interests on acceptable terms, if at all, may have a material adverse effect on our ability to increase assets, revenues and net income, and on the trading price of our common stock. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Cannabis Companies and companies involved in selling products containing psychoactive substances or nicotine are subject to regulatory risks, both nationally and internationally
Lifted and other Cannabis Companies are subject to risks associated with the federal government’s and state and local governments’ evolving regulation of hemp, hemp-derived products, kratom-derived products, marijuana, psychoactive substances, tobacco, nicotine, and other consumable products. We can provide no assurance that one or more federal agencies, such as the FDA or the DEA, or state and local governments, will not attempt to impose rules, regulations, moratoriums, prohibitions, restrictions, limitations, taxes, or other impediments upon Cannabis Companies, and companies involved in selling hemp-derived products, kratom-derived products, marijuana, psychoactive substances, tobacco, nicotine, and other consumable products. For example, the US federal government has enacted a law that makes it more difficult to sell online and ship vape products. In addition, the FDA and certain states have enacted laws and regulations that prohibit or otherwise negatively impact the sale of certain hemp-derived, kratom-derived, psychoactive and nicotine products. Moreover, if Lifted or Cannabis Companies or companies involved in selling hemp-derived products, kratom-derived products, marijuana, psychoactive substances, tobacco, or nicotine expand internationally (of which there is no guarantee that they ever would), we can provide no guarantee or assurance that these companies will be able to comply with all applicable governmental laws and regulations related to the sales of the products. Any failure to comply with all of such rules, regulations, moratoriums, prohibitions, restrictions, limitations, taxes, or other impediments upon Cannabis Companies, and companies involved in selling the aforementioned products, could potentially result in lawsuits, substantial fines and penalties, and/or other negative governmental actions. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s sales are dependent upon the sale of hemp-derived, kratom-derived and psychoactive products, which may be restricted or prohibited by the FDA, the DEA or other governmental agencies, laws or regulations
Lifted’s sales are significantly dependent upon the sale of hemp-derived, kratom-derived and psychoactive products. The FDA, the DEA and other federal, state and local governments and agencies may impose laws, rules, regulations and executive orders that effectively prohibit Lifted from selling products containing hemp-derived, kratom-derived or psychoactive products. For example, the DEA has sent a letter saying that delta-9-THCO and delta-8-THCO “do not occur naturally in the cannabis plant and can only be obtained synthetically, and therefore do not fall under the definition of hemp”, and there could be a crackdown by the DEA or other regulatory authorities on products containing delta-9-THCO and/or delta-8-THCO, even though we believe that such products are federally lawful pursuant to the so-called "Farm Bill". Consequently, Lifted’s future financial prospects are uncertain, and no guarantee or assurance whatsoever can be made that Lifted will be able to continue to pay their financial obligations when they become due and payable in the future. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be forced to record allowances against, or write off, inventories of hemp-derived products, kratom-derived products, marijuana, psychoactive products, and/or nicotine-infused products, and/or the raw goods used in the manufacture of such products, if those products are subject to prohibitions on sales, either nationally or in particular states
Lifted may find it necessary to build and carry significant quantities of inventory, in order to be able to fulfill large orders received from distributors or other customers. If federal, FDA, DEA, and/or state laws and regulations prohibit the sale of certain hemp-derived products, kratom-derived products, marijuana, psychoactive products, and/or nicotine-infused products, then Lifted may find itself holding significant inventories of such products that cannot be sold, or raw goods that cannot be used, and therefore must be written off. Such write offs could be significant.
The Act will most likely negatively impact the pricing of hemp-derived products, the availability and price of raw goods, and production forecasting and sales, which may lead to the recording of inventory allowances against our hemp-derived inventory each quarter end leading up to November 12, 2026. Moreover, any hemp-derived products in inventory on November 12, 2026 (the date by which intoxicating hemp-derived consumable products are banned under the Act) will have to be written off. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Improper storage of hemp flower, or the improper infusion of hemp-distillate into hemp flower, may cause spoilage, and the hemp flower may need to be written off
If hemp flower is stored improperly, or if hemp-distillate is not properly infused into the hemp flower, the hemp flower may be spoiled and subsequently written off, hurting Lifted’s financial results. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Machinery and equipment may be unusable or become obsolete, and may need to be written off
Certain machinery and equipment may not be able to be used by Lifted in the production of products, especially new products. For example, Lifted has experienced problems trying to use two machines that were designed to manufacture gummies and joints, respectively. If certain machinery and equipment is unusable or becomes obsolete, then the machinery and equipment may need to be written off, hurting Lifted’s financial results. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to successfully identify and execute future acquisitions or dispositions or to successfully manage the impacts of such transactions on our operations
We may not be able to successfully identify and execute future acquisitions or dispositions or to successfully manage the impacts of such transactions on our operations. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (1) the potential disruption of our ongoing business; (2) the distraction of management away from the ongoing oversight of our existing business activities; (3) incurring additional indebtedness or stock dilution; (4) the anticipated benefits and cost savings of those transactions not being realized fully, or at all, or taking longer to realize than anticipated; (5) an increase in the scope and complexity of our operations; and (6) the loss or reduction of control over certain of our assets. Material acquisitions have been and may continue to be material to our business strategy. There is no guarantee that any acquisition will be accretive. The existence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition may result in our incurring those liabilities. A strategic transaction may result in a significant change in the nature of our business, operations and strategy, and we may encounter unforeseen obstacles or costs in closing or implementing a strategic transaction or integrating any acquired business into our operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may seek to enter into product collaborations, marketing relationships, affiliations, strategic alliances, or expand the scope of currently existing relationships, with third parties that Lifted believes will have a beneficial impact on Lifted, and there are risks that such product collaborations or other arrangements may not enhance Lifted's business in the desired manner
Lifted may expand the scope of, and may in the future enter into, product collaborations, strategic alliances and other arrangements with third parties that Lifted believes will complement or augment its existing business. Lifted's ability to complete further product collaborations, strategic alliances or other arrangements is dependent upon, and may be limited by, among other things, the availability of suitable candidates and capital. In addition, product collaborations, strategic alliances and other arrangements could present unforeseen obstacles or costs, may not enhance Lifted's business, and may involve risks that may adversely affect Lifted, including the investment of significant amounts of management time that may be diverted from Lifted's core operations in order to pursue and complete such product collaborations, strategic alliances or other arrangements. Lifted may become dependent on its product collaborators, strategic partners or other third parties, and actions by such entities may harm Lifted's business. Future product collaborations, strategic alliances or other arrangements may result in the incurrence of debt, costs and contingent liabilities, and there can be no assurance that future product collaborations, strategic alliances or other arrangements will be developed, maintained or achieve the expected benefits to Lifted's businesses or that Lifted will be able to consummate future product collaborations, strategic alliances or other arrangements on satisfactory terms, or at all. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Third parties with whom we do business may perceive themselves as being exposed to reputational risk as a result of their relationship with us
The parties with whom we do business, or with whom we would like to do business, may perceive that they are exposed to reputational risk as a result of our business activities relating to hemp-derived products, psychoactive substances and nicotine, which may hinder our ability to establish or maintain business relationships. These perceptions relating to our business activities may interfere with our relationship with service providers, particularly in the financial services industry in the United States and certain jurisdictions where our products are not legal. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may be exposed to reputational risk as a result of our relationship with third parties with whom we do business
The parties with whom we do business may conduct themselves in such a way as to expose us to reputational risk. This reputational risk may damage Lifted's brands and its relationships with distributors, retailers, consumers, service providers, and others. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted relies on third-party distributors and wholesalers to distribute and/or sell a portion of its products, and those distributors and wholesalers may not perform their obligations or may have allegiances to their own or other competitors’ products
Lifted relies on third-party distributors and wholesalers to distribute a portion of its products. If these distributors and wholesalers do not successfully carry out their contractual duties, if these distributors and wholesalers have allegiances to their own or other competitors’ products, if there is a delay or interruption in the distribution of Lifted’s products, or if these third parties damage Lifted’s products in transit or improperly store the products, causing spoilage or functionality issues, then Lifted’s revenue may be negatively impacted. Any damage to Lifted’s products may expose Lifted to potential product liability, damage the reputation of Lifted’s brands or otherwise harm Lifted’s business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The FDA and the DEA are seriously concerned about many hemp-derived and kratom-derived products and plan to ban certain of them including 7-OH, which could severely reduce Lifted's sales and profits
The FDA and the DEA are seriously concerned about many hemp-derived, kratom-derived and psychoactive products, and plan to ban certain of them including kratom-derived 7-hydroxymitragynine (“7-OH”), which could severely reduce Lifted's sales and profits. The FDA and the DEA appear to believe that certain hemp-derived cannabinoids are drugs, and therefore that the sale of hemp-derived products containing cannabinoids should require FDA and DEA approval. In deference to the FDA and the DEA, various states and municipalities have declared that the sale of certain hemp-derived products are illegal. Separately, on July 29, 2025, during a joint press conference, the U.S. Food and Drug Administration (FDA or the Agency) recommended to the Drug Enforcement Administration (DEA) to classify 7-OH, a concentrated byproduct of the kratom plant, as a Schedule I controlled substance under the Controlled Substances Act (CSA). A classification of 7-OH as a Schedule I controlled substance now appears likely to occur, and could severely reduce Lifted's sales and profits. There can be no guarantee or assurance whatsoever that the FDA’s or the DEA's regulatory concerns about hemp-derived products or other intoxicating products including 7-OH will be resolved favorably for the hemp-derived products industry or other intoxicating products industries. Aggressive law enforcement against the hemp-derived and intoxicating products industries by federal, state or local authorities and agencies may have a material adverse effect upon Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Hemp-derived and kratom-derived products may be shown to have negative health and/or safety impacts upon consumers
The health and safety impacts of hemp-derived products have not yet been established via traditional scientific and/or clinical studies. The FDA appears to believe that certain hemp-derived products may have significant adverse health impacts upon human beings, especially in regard to potential liver toxicity or liver damage. If the FDA, scientific research and/or clinical studies ultimately demonstrate negative health and/or safety impacts of hemp-derived or kratom-derived products upon consumers, then Lifted’s business may be materially adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Kratom-derived products may be shown to have negative health and/or safety impacts upon consumers
The health and safety impacts of kratom-derived products such as 7-OH have not yet been established via traditional scientific and/or clinical studies. The FDA appears to believe that 7-OH products are potentially harmful and believes that they pose serious health risks. The FDA notes that it has received reports of harmful effects associated with products containing 7-OH. If the FDA, scientific research and/or clinical studies ultimately demonstrate negative health and/or safety impacts of kratom-derived products, such as 7-OH, upon consumers, then Lifted’s business may be materially adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Hemp-derived products are federally illegal if they exceed 0.3% delta-9-THC on a dry weight basis
Hemp-derived products which exceed a delta-9-THC concentration of 0.3% on a dry weight basis are federally illegal. Certain states may consider hemp and hemp-derived products which exceed 0.3% total THC on a dry weight basis to be illegal. Any failure to keep the delta-9-THC or total THC concentration in hemp or hemp-derived products below the applicable legal standard could subject Lifted to action by regulatory authorities and/or to lawsuits by consumers, which may have a material adverse effect upon Lifted’s business and the trading price of our common stock.
In addition, the approval of medical and recreational marijuana by many states has created a situation in which it may be difficult or impossible for regulators and courts to determine whether the delta-9-THC levels reflected in consumers’ blood tests are the result of hemp-derived products or marijuana products. This may result in regulatory actions or lawsuits that may have a material adverse effect upon Lifted’s business.
Also, certain hemp-derived products may, over time, gradually increase their delta-9-THC or total THC concentration, and this may ultimately cause such products to exceed the applicable concentration level, making such products illegal in certain jurisdictions. If this happens, we may be subject to regulatory action that may have a material adverse effect upon Lifted and the trading price of our common stock.
Also, federal and state authorities may seek to classify cannabinoids that naturally occur in hemp, such as delta-8-THC, THCA, or THCO, as illegal. If this happens, we may be subject to regulatory action that may have a material adverse effect upon Lifted. All of the foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The price of raw materials could spike as demand for certain products increases
Increased demand for certain raw materials may cause a spike in the price of these raw materials, which may materially adversely affect Lifted. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Target companies may not be of the same caliber company as previous acquisitions, or target companies’ management may not fit well into our corporate culture
If we acquire a company that is not of the same caliber company as Lifted, or if we acquire a company that does not have management that is as talented and high energy as Lifted’s management, or if for whatever reason the management of the acquired company does not fit in well with the rest of our team, we may become less attractive for potential investors, future acquisition targets may be uninterested in merging into our Company, and the overall camaraderie among the players in our Company may disappear. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be unable to keep pace with rapid industry, technological and market changes
Lifted may be unable to keep pace with rapid industry, technological and market changes that could affect Lifted’s services, products and businesses, or so keeping pace may require a substantial amount of Lifted’s management time and substantial fees being paid to outside legal counsel and consultants. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Large competitors have entered the hemp-derived, marijuana, psychoactive and nicotine product industries, and we expect increased competition in the future; Lifted may be unable to compete effectively against larger companies in these industries
More and more major marijuana companies, tobacco companies, chain stores, manufacturers, retailers, alcoholic beverage and other consumer products companies, and distributors, with tremendous financial resources and marketing expertise are competing against Lifted in the hemp-derived, marijuana, psychoactive, and nicotine products industries. We expect increased competition in the future. Lifted may not have the personnel, products, marketing and distribution capabilities, and/or financial resources to compete effectively against such larger companies. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Increases in labor costs could harm Lifted’s business
The U.S. in general, and Bend, Oregon in particular, have experienced very low unemployment, and higher minimum wages, which generally results in rising labor costs and limited access to qualified employment candidates. Such rising labor costs are adversely affecting the expenses of Ablis and Bendistillery, and may adversely affect the expenses of Lifted's business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We cannot predict the effect of inquiries, audits, lawsuits or actions by the DEA, the FDA, Federal Trade Commission, state attorneys general, other government agencies and/or quasi-government agencies, or plaintiffs’ attorneys, into the production, advertising, marketing, promotion, labeling, ingredients, usage and/or sale of Lifted’s products
Lifted is subject to the risks of investigations and/or enforcement actions or lawsuits by the DEA, the FDA, Federal Trade Commission (“FTC”), state attorneys general and/or other government and/or quasi-governmental agencies, or plaintiffs’ attorneys, relating to the advertising, marketing, promotion, ingredients, usage and/or sale of Lifted's products. If an inquiry by the DEA, the FDA, FTC, a state attorney general or other government or quasi-government agency, or by plaintiffs' attorneys, finds that Lifted’s products and/or the advertising, marketing, promotion, ingredients, usage and/or sale of such products are not in compliance with applicable laws or regulations, or that they are misleading, untruthful or unsubstantiated, Lifted may become subject to fines, product reformulations, product recalls, container changes, changes in the usage or sale of Lifted’s products, changes in its advertising, marketing and promotion practices, and/or injunctions on the sale of the products, or lawsuits, each of which may have a material adverse effect on our business, financial condition or results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may be required to obtain state, DEA and/or FDA permits, certifications and/or approvals in order to conduct business
Lifted may be required to obtain and maintain state, DEA and/or FDA permits, certifications and/or approvals in order to conduct business involving hemp-derived products, marijuana, psychoactive substances, nicotine, food, other edibles, and consumer goods. These permits, certifications and/or approvals may not be obtainable, or obtaining and maintaining them may involve enormous expenditures of time and money for consultants, studies, facilities, compliance, purchases, acquisitions and other matters. Failure to obtain and maintain all necessary permits, certifications and approvals, or the enormous expenditures of time and money associated with obtaining and maintaining all necessary permits, certifications and approvals, may have a material adverse effect on our business, financial condition or results of operations, and on the trading price of our common stock.
Lifted may be subject to investigations by OSHA or other workplace safety agencies
Lifted’s manufacturing, storage and shipping departments include the use of various machinery, equipment, vehicles and raw goods. Notwithstanding appropriate training protocols and safety measures, workplace accidents or deaths may occur, and may subject Lifted to investigations, fines and penalties by the Occupational Safety and Health Administration (“OSHA”) or other state or local workplace safety agencies. Such accidents, investigations, fines and penalties may have a material adverse effect on our business, reputation, financial condition or results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may be subject to personal injury or workman’s compensation claims
If notwithstanding appropriate training protocols and safety measures, Lifted’s employees are injured or killed on the job, Lifted may be subject to personal injury or workman’s compensation claims. Defending these claims may require the expenditure of substantial management time and legal fees, and may result in material judgments or settlements that may or may not be covered by insurance. Such settlements or judgments related to personal injury or workman’s compensation claims may have a material adverse effect on our business, reputation, financial condition or results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Litigation regarding Lifted’s business and products, and related unfavorable media attention, may expose Lifted to significant liabilities and reduce demand for its products
From time to time third parties may claim that certain statements made in Lifted’s advertisements, certificates of analysis and/or on the labels of its products were false and/or misleading or otherwise not in compliance with standards applicable to food, other edibles, or non-prescription cannabinoid formulations under local, state or federal law, and/or that Lifted's products are not safe. Pending or threatened business-related and product-related litigation may consume significant financial and managerial resources and result in decreased demand for Lifted’s products, significant monetary awards against Lifted, and injury to Lifted’s and its management’s reputations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Criticism of Lifted’s products and/or criticism or a negative perception of Lifted’s industry, could adversely affect Lifted
Unfavorable reports on the health effects or pricing of Lifted’s products, specific ingredients in Lifted’s products, or product safety concerns, whether generated by scientists, researchers, journalists, consumers, government regulators, industry groups, or on social media may have an adverse effect on Lifted’s business, financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Vape, e-liquid, e-cigarette, and nicotine product risks
Some of Lifted’s inhalable products may contain nicotine or other substances. There is a risk that Lifted may be targeted by regulators or consumers with claims that its products are unsafe for vaping or consumption. The market for vapes, e-liquid, e-cigarettes, nicotine, and associated cartridges and paraphernalia is currently subjected to regulations and prohibitions of certain products in certain jurisdictions in response to deaths and illnesses that have occurred and that are apparently associated with vaping, and also in response to other health concerns of various types. These various prohibitions and regulations may have a material adverse effect on Lifted’s financial condition, operating results, liquidity, cash flow and operational performance. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Sales of Lifted’s vape products are subject to uncertainty in the evolving vape market due to negative public sentiment and regulatory scrutiny
Vaping and electronic cigarettes were recently developed and therefore the scientific community has not yet had a sufficient period of time to study the long-term health effects of their use. Currently, there is no way of knowing with absolute certainty whether these products are safe for their intended use and the medical community is still studying these products’ health effects. If the scientific community were to determine conclusively that use of any or all of these products poses long-term health risks, then market demand for these products and their use may materially decline. Such a determination may also lead to litigation and significant regulation. Loss of demand for vape products, product liability claims and increased regulation stemming from unfavorable scientific studies on vaping products may have a material adverse effect on Lifted’s business, results of operations and financial condition. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Research regarding the health effects of hemp-derived products, marijuana, psychoactive substances and e-liquid containing nicotine is in relatively early stages and subject to further study which may impact demand for these products
Research and clinical trials on the potential benefits and the short-term and long-term effects of the use of hemp-derived products, marijuana, psychoactive substances and e-liquid containing nicotine on human health remains in relatively early stages and there is limited standardization. As such, there are inherent risks associated with using hemp-derived products, marijuana, psychoactive products and e-liquid containing nicotine. Moreover, future research and clinical trials may reach different or negative conclusions regarding the benefits, viability, safety, efficacy, dosing or other facts and perceptions related to hemp-derived products, marijuana, psychoactive products, and e-liquid containing nicotine, which may adversely affect social acceptance of hemp-derived products, marijuana, psychoactive products, e-liquid containing nicotine, and the demand for Lifted’s products. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s inability to innovate successfully and to provide new cutting edge products may adversely affect Lifted’s business and financial results
Lifted’s ability to compete in its highly competitive industry and to achieve its business growth objectives depends, in part, on its ability to develop new products and unique packaging. The success of Lifted's innovation, in turn, depends on its ability to identify consumer trends and cater to consumer preferences. If Lifted is not successful in its innovation activities, then its business, financial conditions and results of operations may be adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Changes in consumer preferences may reduce demand for some of Lifted’s products
Lifted’s industry is subject to changing consumer preferences and shifts in consumer preferences may adversely affect Lifted. There is increasing awareness of and concern for health, wellness and nutrition considerations, including concerns regarding caloric intake associated with sugar-sweetened beverages and the perceived undesirability of artificial ingredients. Lifted’s future success will depend, in part, upon its continued ability to develop and introduce different and innovative products that appeal to consumers. In order to retain and expand its market share, Lifted must continue to develop and introduce different and innovative products, although there can be no assurance of Lifted’s ability to do so. There is no assurance that consumers will continue to purchase Lifted’s products in the future. If certain finished goods are slow moving, they will be written off. Product lifecycles are uncertain and may never sell. The products Lifted currently market are in varying stages of their product lifecycles, and there can be no assurance that such products will become or remain profitable for Lifted. Lifted may be unable to achieve volume growth through product and packaging initiatives. Lifted may also be unable to penetrate new markets.
Moreover, consumers are concerned about their health and wellness, and public and governmental officials and groups are increasingly vocal about smoking, vaping, and their potential adverse impacts. There has been a trend among many public health advocates to pursue a reduction in smoking and vaping, as well as increased public scrutiny of smoking and vaping. Increasing public concern in regard to smoking and vaping may reduce demand for Lifted’s products.
Additionally, as shopping patterns are being affected by the digital evolution and pandemics, with customers embracing shopping by way of mobile device applications, e-commerce retailers and e-commerce websites or platforms, Lifted may be unable to address or anticipate changes in consumer shopping preferences. If Lifted’s revenues decline, its business, financial condition and results of operations may be adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Any expansion of Lifted outside of the United States exposes Lifted to uncertain conditions and other risks in international markets
As Lifted’s growth strategy includes eventually expanding internationally, if Lifted is unable to expand distribution of its products outside the United States, its growth rate could be adversely affected. In many international markets, Lifted has limited operating experience and in some areas it has no operating experience. It is costly to establish, develop and maintain international operations and to develop and promote brands in international markets. Lifted's percentage gross profit margins in many international markets are expected to be less than the comparable percentage gross profit margins obtained in the United States. Lifted faces substantial risks associated with having foreign operations, including: economic and/or political instability in international markets; unfavorable foreign currency exchange rates; restrictions on or costs relating to the repatriation of foreign profits to the United States, including possible taxes and/or withholding obligations on any repatriations; and tariffs and/or trade restrictions. These risks may have a significant impact on Lifted's ability to sell its products on a competitive basis in international markets and may have a material adverse effect on its business, financial condition and results of operations. Also, operations outside of the United States are subject to risks relating to appropriate compliance with legal and regulatory requirements in local jurisdictions, potential difficulties in staffing and managing local operations, higher product damages, particularly when products are shipped long distances, potentially higher incidence of fraud and/or corruption, credit risk of local customers and distributors and potentially adverse tax consequences. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
International expansion efforts would likely significantly increase our operational expenses
We may in the future expand into other geographic areas, which could increase our operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of our operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require us to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. We may not be able to successfully identify suitable acquisition and expansion opportunities or integrate such operations successfully with our existing operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Global or regional catastrophic events may impact Lifted’s operations and affect its ability to grow its business
Lifted’s business may be affected by unstable political conditions, civil unrest, large-scale terrorist acts, especially those directed against the United States or other major industrialized countries where its products are distributed, the outbreak or escalation of armed hostilities, major natural disasters or widespread outbreaks of infectious diseases such as COVID-19 and its mutations. Such events may impact the production and/or distribution of Lifted's products. In addition, such events may disrupt global or regional economic activity, which may affect consumer purchasing power, thereby reducing demand for Lifted's products. If Lifted is unable to grow its business internationally as a result of these factors, its growth rate may decline. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We are currently operating in a period of significant economic and political uncertainty and capital markets disruption, and our business may be materially adversely affected in such an environment
Many factors are contributing to economic and political uncertainty and capital markets disruption in the U.S. and globally, including inflation, high interest rates, political polarization, natural catastrophes, and ongoing military conflicts in Ukraine, Israel, Syria, Yemen and other parts of the world. The durations and impacts of these adverse factors are unpredictable, and may lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may rely on third party vendors to manufacture its products
Lifted may not manufacture certain raw or finished goods, but instead outsource manufacturing of these goods to third party vendors. In the event of a disruption and/or delay, or significant tariffs, Lifted may be unable to procure alternative vendors at commercially reasonable rates and/or within a reasonably short time period. If Lifted is unable to maintain good relationships with its largest vendors, or if its costs of co-packing increase, its business, financial condition and results of operations may be adversely affected.
Lifted does not have exclusive contracts with the majority of its vendors, which subjects Lifted to the risk that those vendors may sell the same products to Lifted’s competitors. In some cases, Lifted’s vendors may be affiliated with and manufacture other hemp-derived, marijuana, psychoactive or consumable products. In such cases, these products may compete directly with Lifted’s products.
Lifted’s vendors may make raw materials or finished products that sometimes fail to meet Lifted’s standards. This subjects Lifted to the risk that distributors, retail locations and consumers may be dissatisfied with Lifted’s products and demand a refund or a credit, and/or may refuse in the future to purchase Lifted’s products. In addition, Lifted’s contract manufacturers may not deliver their products to Lifted on schedule. Delays in scheduled product deliveries may cause distributors, retail locations and consumers to not purchase Lifted’s products, damaging Lifted’s brand reputation. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted relies upon third parties to carry and market its products
Unilateral decisions may be taken by Lifted’s distributors and wholesalers to discontinue carrying certain or all of Lifted's products that they are carrying at any time, which may cause Lifted’s business to suffer. The marketing efforts of Lifted’s distributors and wholesalers are important for Lifted’s success. If Lifted’s brands prove to be less attractive to Lifted’s existing distributors and wholesalers, or if Lifted fails to attract additional distributors and wholesalers, and/or if Lifted’s distributors and wholesalers do not market, promote and distribute Lifted’s products effectively, Lifted’s business, financial condition and results of operations may be adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Increases in costs and/or shortages of raw materials and/or ingredients and/or fuel/energy and/or costs of co-packing may harm Lifted’s business
The costs and availability of the raw materials used by Lifted are subject to fluctuations. For certain terpenes, distillate, flavors, raw goods, formulas and other products purchased from third-party suppliers, these suppliers own the proprietary rights to certain of their products. Lifted does not have possession of the list of the ingredients or formulas used in the production of certain of their products and certain of their blended concentrates, and Lifted may be unable to obtain comparable products from alternative suppliers on short notice. Industry-wide shortages of certain products have been, and may from time to time in the future be, encountered, which may interfere with and/or delay production of certain of Lifted’s products.
Moreover, volatility in the global oil markets has resulted in high fuel prices, which many shipping companies have passed on to their customers by way of higher base pricing and increased fuel surcharges. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers. In addition, certain of Lifted’s co-packing arrangements may allow such co-packers to increase their fees based on certain of their own cost increases. The prices of any of the above and other raw materials such as batteries and packaging, among others, may continue to rise or may rise in the future. Lifted may or may not be able to pass any of such increases on to its customers. In recent years, the United States has imposed tariffs on many products and goods imported from China and certain other countries. Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, may result in an increase in supply chain costs and/or shortages of raw materials. In addition, some of these raw materials are available from limited suppliers. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted’s inability to accurately estimate demand for its products may adversely affect its business and financial results
Lifted may not correctly estimate demand for its existing products and/or new products. Lifted's ability to estimate demand for its products is imprecise, particularly with regard to new products, and may be less precise during periods of rapid growth, particularly in new markets. If Lifted materially underestimates demand for its products or is unable to secure sufficient ingredients or raw materials or experiences difficulties with its co-packing arrangements, including production shortages or quality issues, it may not be able to satisfy demand on a short-term basis. Moreover, industry-wide shortages of certain raw materials and products have been and may, from time to time in the future, be experienced, resulting in production fluctuations and/or product shortages. Such shortages may interfere with and/or delay production of certain of Lifted's products and may have a material adverse effect on its business and financial results. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted does not maintain sufficient inventory levels, if Lifted is unable to deliver its products to its customers in sufficient quantities, and/or if Lifted's customers’ or retailers’ inventory levels are too high, Lifted's operating results may be adversely affected
If Lifted does not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, Lifted’s inventory levels may be inadequate and its results of operations may be negatively impacted. If Lifted fails to meet its shipping schedules, Lifted may damage its relationships with distributors and/or retailers, increase its distribution costs and/or cause sales opportunities to be delayed or lost. In order to be able to deliver its products on a timely basis, Lifted needs to maintain adequate inventory levels of the desired products. If the inventory of its products held by its distributors and/or retailers is too high, they will not place orders for additional products, which may unfavorably impact Lifted’s future sales and adversely affect its operating results. If Lifted overestimates distributor or retailer demand for its products, Lifted may end up with too much inventory, resulting in higher storage costs or less warehouse space and the risk of inventory spoilage. If Lifted fails to manage its inventory to meet demand, Lifted may damage its relationships with its distributors and retailers and may delay or lose sales opportunities, which may unfavorably impact its future sales and adversely affect its operating results. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The costs of packaging supplies are subject to price increases from time to time, and Lifted may be unable to pass all or some of such increased costs on to its customers
Lifted’s packaging suppliers may increase the prices that they charge Lifted for packaging supplies based on changes in the costs of the underlying commodities that are used to produce those packaging supplies. If the costs of these packaging supplies increase, Lifted may be unable to pass these costs along to its customers through corresponding adjustments to the prices it charges, which could have a material adverse effect on its results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted encounters product recalls, its business may suffer and it may incur material losses
Lifted may be required from time to time to recall products entirely or from specific co-packers, markets or batches if such products become contaminated, damaged, mislabeled, cause fires, explode or otherwise become materially non-compliant with applicable federal, state or local regulatory requirements. Material product recalls may adversely affect Lifted’s profitability and its brand image. Lifted typically does not maintain recall insurance, so the negative financial impact of a recall upon Lifted may be significant. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s working capital may be inadequate or strained, and the issue may be exacerbated by account receivable collection issues
There has been significant financial stress on Lifted's industry. This stress, in certain cases, has caused distributors to refuse to make up-front payments, or to refuse to make timely payments on purchases, from vendors such as Lifted. Some distributors are apparently so cash-strapped that they are demanding that products be supplied to them on consignment, or to be subject to shelf-stocking fees. This difficult financial environment has strained Lifted’s working capital balance, and has made it increasingly difficult for Lifted to aggressively purchase the larger quantities of raw materials and inventory that are needed to fuel Lifted’s growth. Lifted’s inadequate or strained working capital is exacerbated by account receivable collection issues. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may be subject to payments-related risks and costs
Lifted may accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and future payment options Lifted offers to its customers, Lifted may become subject to additional regulations and compliance requirements (including obligations to implement enhanced authentication processes that may result in significant costs and reduce the ease of use of its payments products), as well as fraud. For certain payment methods, including credit and debit cards, Lifted pays interchange and other fees, which may increase over time and raise its operating costs and lower profitability. Lifted may rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, electronic checks, and promotional financing. In each case, it may disrupt Lifted’s business if these companies become unwilling or unable to provide these services to Lifted. Lifted may also be subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which may change or be reinterpreted to make it difficult or impossible for Lifted and to comply. If Lifted fails to comply with these rules or requirements, or if Lifted's data security systems are breached, compromised, or otherwise unable to detect or prevent fraudulent activity, Lifted may be liable for card issuing banks’ costs, may be subject to fines and higher transaction fees, and may lose its ability to accept credit and debit card payments from its customers, process electronic funds transfers, or facilitate other types of online payments, and Lifted’s business and operating results may be adversely affected. Lifted may also be subject to or voluntarily comply with a number of other laws and regulations relating to payments, money laundering, international money transfers, privacy and information security, and electronic fund transfers. If Lifted were found to be in violation of applicable laws or regulations, Lifted may be subject to additional requirements and civil and criminal penalties, or may be forced to cease providing certain services. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted is not able to retain the full-time services of senior management, there may be an adverse effect on its operations and/or its operating performance until Lifted finds suitable replacements
Lifted's business is dependent, to a large extent, upon the services of its senior management. Lifted does not currently maintain key person life insurance on any members of its senior management. The loss of services of Lifted’s senior management may adversely affect its business until suitable replacements can be found. There may be a limited number of personnel with the requisite skills to serve in these positions, and Lifted may be unable to locate or employ such qualified personnel on acceptable terms. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Climate change may negatively affect Lifted’s business
There is concern that a gradual increase in global average temperatures due to increased carbon dioxide and other greenhouse gases in the atmosphere may cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Changing weather patterns may result in decreased agricultural productivity in certain regions, which may limit availability and/or increase the cost of certain raw goods used in Lifted’s products and may impact the food security of communities around the world. Increased frequency or duration of extreme or inclement weather conditions may also impair production capabilities, disrupt Lifted’s supply chains (including, without limitation, the availability of, and/or result in higher prices for raw goods and finished goods) and/or impact demand for Lifted’s products. Natural disasters and extreme weather conditions, such as bomb cyclones, hurricanes, wildfires, freezing temperatures, heavy snow, earthquakes or floods, may affect Lifted’s operations and the operation of Lifted’s supply chains and unfavorably impact the demand for, or Lifted’s consumers’ ability to purchase, Lifted’s products. The predicted effects of climate change may also result in challenges regarding availability and quality of water, or less favorable pricing for water, which may adversely impact Lifted’s businesses and results of operations. In addition, public expectations for reductions in greenhouse gas emissions may result in increased energy, transportation and raw material costs, and may require Lifted to make additional investments in facilities and equipment. As a result, the effects of climate change may have a long-term adverse impact on Lifted’s business and results of operations. Sales of Lifted’s products may also be influenced to some extent by weather conditions in the markets in which Lifted operates. Weather conditions may influence consumer demand for certain of Lifted’s products, which may have an effect on Lifted’s operations, either positively or negatively. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Potential changes in accounting standards or practices and/or taxation or new accounting standards, or changes in the assumptions used in accounting matters, may adversely affect Lifted’s financial results
From time to time, the FASB, the SEC and other regulatory bodies may issue new and revised standards, interpretations and other guidance that change US GAAP. Future changes in accounting standards or practices may have an impact on Lifted’s financial results. New accounting standards may be issued that change the way Lifted records revenues, expenses, assets and liabilities. The effects of such changes may include prescribing an accounting method where none had been previously specified, prescribing a single acceptable method of accounting from among several acceptable methods that currently exist, or revoking the acceptability of a current method and replacing it with an entirely different method, among others. These changes in accounting standards may adversely affect Lifted reported earnings or results of operations, financial condition and other financial measurers. Increases in direct and indirect income tax rates may affect after-tax income. Equally, increases in indirect taxes (including, but not limited to, environmental taxes pertaining to the disposal of beverage containers and/or indirect taxes on beverages) may affect Lifted’s products’ affordability and reduce Lifted’s sales. Accounting principles related to stock based compensation, inventory, revenue recognition, sales allowances, and income tax provisions, among others, are highly complex and involve many subjective assumptions, estimates and judgments by management. Changes to the accounting rules related to these areas or the interpretation of the rules, or changes in underlying assumptions, estimates or judgments by our management may adversely affect reported financial results and Lifted’s financial position. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Fluctuations in Lifted’s effective tax rates may adversely affect its financial conditions and results of operations
Lifted may be subject to income and other taxes in both the U.S. and certain foreign jurisdictions. Therefore, Lifted may be subjected to audits for multiple tax years in various jurisdictions at once. At any given time, events may occur which change Lifted’s expectations about how any such tax audits will be resolved and thus, there may be variability in Lifted’s quarterly and/or annual tax rates. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which imposes broad and complex changes to the U.S. tax code and may have tax implications for Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Growth of operations will depend on the acceptance of Lifted’s products and consumer discretionary spending
The acceptance of Lifted’s products by distributors, wholesalers and consumers is critically important to the success of Lifted. Acceptance of our products depends on several factors, including, but not limited to, availability, cost, ease of use, familiarity of use, convenience, effectiveness, safety and reliability. If customers do not accept our products, or if such products fail to adequately meet customers’ needs and expectations, our ability to continue generating revenues could be reduced. Shifts in customer preferences away from Lifted’s products, Lifted’s inability to develop products that appeal to both retailers and consumers, or changes in Lifted’s products that eliminate items popular with some consumers, may harm Lifted’s business. Also, Lifted's success will depend to a significant extent on discretionary user spending, which is influenced by general economic conditions and the availability of discretionary income. Accordingly, Lifted may experience an inability to generate revenue during economic downturns or during periods of uncertainty, such as during pandemics, when users may decide to purchase products that are cheaper or to forego purchasing any type of Lifted’s products, due to a lack of available capital. Any material decline in the amount of discretionary spending may have a material adverse effect on Lifted’s sales, results of operations, business and financial condition. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We cannot be certain that the products that Lifted offers will become, or continue to be, appealing and as a result there may not be any demand for these products and Lifted’s sales may decrease, which may result in a loss of revenue
Demand for Lifted’s products depends on many factors, including the number of customers that Lifted is able to attract and retain over time, and the competitive environments in Lifted’s industry. This may force Lifted to reduce prices below the desired price levels or to increase promotional spending. Inability to anticipate changes in user preferences and to meet consumers’ needs in a timely and cost-effective manner all may result in immediate and longer term declines in the demand for the products Lifted plans to offer, which may adversely affect Lifted’s sales, cash flows and overall financial condition, or may lead to write-offs of slow-moving inventory. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Competition that Lifted faces is varied and strong
Lifted’s products and industries are subject to intense competition. Lifted faces intense competition from other companies, some of which have longer operating histories and more financial resources and manufacturing, retail and marketing experience than us. Increased competition by larger and better financed competitors could materially and adversely affect our business, financial condition and results of operations. There is no guarantee that Lifted can develop or sustain a market position or expand its business. We anticipate that the intensity of competition in the future will increase.
Lifted competes with a number of entities in providing products to its customers. Such competitor entities include: (1) a variety of large multinational corporations, including but not limited to companies that have established loyal customer bases over several decades; (2) companies that have an established customer base, and have the same or a similar business plan as Lifted does and may be looking to expand nationwide; and (3) a variety of other local and national companies with which Lifted either currently or may, in the future, compete.
Many of Lifted’s current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and greater name and brand recognition than Lifted has. As a result, these competitors may have greater credibility with both existing and potential customers. They also may be able to offer more products and more aggressively promote and sell their products. Lifted’s competitors may also be able to support more aggressive pricing than Lifted will be able to, which may adversely affect sales, cause Lifted to decrease its prices to remain competitive, or otherwise reduce the overall gross profit earned on Lifted’s products. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Competition from large, well-financed consumer products, marijuana, tobacco, kratom-derived or nicotine product manufacturers or distributors may adversely affect Lifted’s distribution relationships and may hinder development of Lifted’s existing markets, as well as prevent Lifted from expanding its markets
The tobacco, nicotine, hemp, marijuana, kratom-derived and consumer goods industries are highly competitive. Lifted competes with other hemp brands, marijuana, tobacco, nicotine, and other consumer goods companies for consumer acceptance, shelf space in retail outlets, and for the marketing support of distributors and wholesalers, many of whom also distribute or carry their own brands which compete with Lifted’s brands. Some of Lifted’s competitors have substantially greater financial resources than Lifted. Some of Lifted’s competitors place tremendous pressure on independent distributors to not carry competing brands such as Lifted’s.
Lifted’s competitors may have advantages such as lower production costs, greater financial and marketing resources, and more developed and extensive distribution networks. Lifted may not be able to grow its sales or inventory, or maintain its selling prices, whether in existing markets or as it enters new markets.
Increased competitor consolidations, marketplace competition, and competitive product and pricing pressures could impact Lifted’s earnings, market share and volume growth. Due to competition, Lifted may be unable to sufficiently maintain or develop its distribution channels, and it may be unable to achieve its revenue and financial targets. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted’s success depends, in part, on the attraction and retention of talented employees, which is not guaranteed
Lifted’s success does and will continue to require the acquisition and retention of highly talented and experienced individuals. Due to the growth in hemp-derived and psychoactive products industries, such individuals and the talent and experience they possess is in high demand. There is no guarantee that Lifted will be able to attract and maintain access to such individuals. The attraction and retention of such individuals may require the Company to offer stock, warrants and/or bonuses as incentives. If Lifted fails to attract, train, motivate and retain talented personnel, Lifted’s business, financial conditions, and operating results may be materially and adversely impacted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted depends on a limited number of suppliers of raw and packaging materials
Lifted relies upon a limited number of suppliers for raw and packaging materials used to make and package its products. Lifted’s success will depend in part upon its ability to successfully secure such materials from suppliers that are delivered with consistency and at a quality that meets its requirements. The price and availability of these materials are subject to market conditions. Increases in the price of Lifted’s products due to the increase in the cost of raw materials may have a negative effect on Lifted’s business.
If Lifted is unable to obtain sufficient quantities of raw and packaging materials, delays or reductions in product shipments may occur which would have a material adverse effect on Lifted’s business, financial conditions and results of operations. If Lifted's packaging suppliers replicate and sell Lifted’s proprietary or custom packaging designs to competitors, or disclose to competitors Lifted’s future products, there may be material adverse effects on Lifted’s business, financial conditions and results of operations. The supply and price of raw materials used to produce Lifted’s products can be affected by a number of factors beyond Lifted’s control, such as political tensions between the US and China, tariffs, freight- and port-related backups and other logistical problems, wildfires, frosts, droughts, other weather conditions, economic factors affecting growing decisions, and various plant diseases and pests. If any of the foregoing were to occur, no assurance can be given that such condition would not have a material adverse effect on Lifted’s business, financial condition and results of operations. In addition, Lifted’s results of operations are dependent upon its ability to accurately forecast its requirements of raw materials. Any failure by Lifted to accurately forecast its demand for raw materials may result in an inability to meet higher than anticipated demand for products or producing excess inventory, either of which may adversely affect its results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted depends on a small number of customers for a significant portion of its sales
Distributors’ and wholesalers’ buying power has increased, as competition in the hemp and consumer goods industries has increased, and as distributors and wholesalers have increased their own private brand offerings, leading to increasing margin demands of Lifted. Distributors and wholesalers are increasingly in a better position to resist Lifted’s price increases and demand lower prices, and to demand Lifted to provide larger and more tailored promotional programs. If Lifted does not successfully provide appropriate marketing, product, packaging, pricing and service to these distributors and wholesalers, Lifted’s product availability, sales and margins may suffer. Certain distributors and wholesalers make up a significant percentage of Lifted’s sales. The loss of sales of any of Lifted’s products by a major retailer may have a material adverse effect on our business and financial performance. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Third party manufacturers may make decisions adverse to Lifted’s best interests
A portion of Lifted’s sales revenue is dependent on third party manufacturers that Lifted does not control. The majority of these manufacturers’ business comes from producing and/or selling either their own products or competitors’ products. As independent companies, these manufacturers make their own business decisions. They may have the right to determine whether, and to what extent, they manufacture Lifted’s products, Lifted’s competitors’ products and their own products. They may devote more resources to other products or take other actions detrimental to Lifted’s brands. In many cases, they are able to terminate their manufacturing arrangements with Lifted without cause. Lifted may need to increase support for its brands in their territories and may not be able to pass on price increases to them. Lifted’s financial condition may also be adversely affected by conditions beyond Lifted’s control, and Lifted’s business may suffer as a result. Deteriorating economic conditions may negatively impact the financial viability of third party manufacturers. Any of these factors may negatively affect Lifted’s business and financial performance. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Failure of third-party distributors upon which Lifted relies may adversely affect its business
Lifted may rely heavily on third party distributors for the sale of a portion of Lifted’s products to retailers. The loss of a significant distributor may have a material adverse effect on Lifted’s business, financial condition and results of operations. Lifted’s distributors may also provide distribution services to competing brands, as well as larger, national or international brands, and may be to varying degrees influenced by their continued business relationships with other larger companies. Lifted’s independent distributors may be influenced by a large competitor if they rely on that competitor for a significant portion of their sales. There can be no assurance that Lifted’s distributors will continue to effectively market and distribute Lifted’s products. The loss of any distributor or the inability to replace a poorly performing distributor in a timely fashion may have a material adverse effect on Lifted’s business, financial condition and results of operations. Furthermore, no assurance can be given that Lifted will successfully attract new distributors as it increases its presence in its existing markets or expand into new markets. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Disruptions to production at Lifted’s manufacturing and distribution facilities may occur
Disruptions in production at Lifted’s manufacturing facilities may have material adverse effects on Lifted’s business. In addition, disruptions may occur at any of Lifted’s other facilities or those of Lifted’s suppliers or distributors. The disruptions may occur for many reasons, including pandemics, fire, natural disaster, inclement weather, bomb cyclones, water scarcity, manufacturing problems, disease, strikes, transportation or supply interruption, government regulation, cybersecurity attacks or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which may negatively affect Lifted’s business and financial performance. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be subject to seasonality related to sales of its products
Lifted’s business may be subject to substantial seasonal fluctuations. Lifted’s operating results for any particular quarter may not necessarily be indicative of any other results. If for any reason Lifted’s sales were to be substantially below seasonal norms, then Lifted’s annual revenues and earnings may be materially and adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may fail to comply with applicable government laws and regulations
Lifted is subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of its business including the manufacture, safety, labeling, transportation, advertising, sale of its products, consumer age verification, the collection and remittance of sales and use taxes, income taxes, payroll taxes, marijuana, tobacco and excise taxes, other fees, and the filing of related returns. Some of these laws (including tax laws and regulations such as excise and sales tax) and regulations are complex, ambiguous, subject to multiple interpretations, and/or subject to frequent changes. Sales and use taxes, excise taxes, or other fees or taxes may be improperly collected or remitted improperly or late. In addition, filings and amendments to filings may not be prepared and filed on time with the appropriate regulatory or government entity.
Violations of these laws or regulations in regard to the manufacture, safety, labeling, consumer age verification, transportation and advertising of Lifted's products may damage its reputation and/or result in regulatory actions with substantial penalties, or lawsuits filed against Lifted. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, may result in increased compliance costs or capital expenditures. In particular, regulatory focus on the health, safety and marketing of vapes, smokable products, edible/ingestible products, and beverage products is increasing. Certain federal or state regulations or laws affecting the labeling of Lifted’s products, such as California’s “Prop 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, are or may become applicable to Lifted’s products. If a regulatory authority finds that a current or future product, its label, or a production run or facility is not in compliance with the applicable regulations, we may be fined, or the products in question may have to be recalled, removed from the market, reformulated and/or have their packaging changed, which could adversely affect our business, financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may be subject to complex and/or ambiguous laws and regulations
Some of the laws and regulations governing Lifted's industry are complex and/or ambiguous, and are subject to different legal interpretations. Depending on what legal interpretations are enforced by regulatory agencies and the courts, we may be subject to prohibitions, restrictions, regulations, taxation or other requirements that we currently do not believe are applicable to us. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted faces various operating hazards that may result in the reduction of its operations
Lifted operations are subject to certain hazards and liability risks faced by beverage, food and edibles companies that manufacture and distribute drink products, food and other edibles, such as defective products, contaminated products and damaged products. The occurrence of such problems may result in a costly product recall and serious damage to Lifted’s reputation for product quality, and may potentially lead to lawsuits and governmental investigations. No assurance can be given that insurance (if any) will be adequate to fully cover any incidents of product contamination or injuries resulting from Lifted's operations and products. Lifted may not be able to continue to maintain insurance (if any) with adequate coverage for liabilities or risks arising from its business operations on acceptable terms. Even if insurance (if any) is adequate, insurance premiums may increase significantly which may result in higher costs for Lifted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Litigation and publicity concerning product safety or quality, health, human and workplace rights, and other issues may damage Lifted’s brand image and corporate reputation, and may adversely affect Lifted’s results of operations, business and financial conditions
Lifted’s success depends on its ability to build and maintain the brand images for its existing products, new products and brand extensions, and maintaining its corporate reputation. There can be no assurance that Lifted's advertising, marketing and promotional programs and its commitment to product safety and quality and human rights will have the desired impact on its products’ brand image and on consumer preference and demand. Product safety, quality and/or ingredient content issues, efficacy or lack thereof (real or imagined), or allegations of product contamination, even if false or unfounded, could tarnish the image of the affected brands and may cause consumers to choose other products. Furthermore, Lifted’s brand images or perceived product quality may be adversely affected by litigation, unfavorable reports in the media (internet or elsewhere), studies in general and regulatory or other governmental inquiries (in each case whether involving Lifted's products or those of its competitors) and proposed or new legislation affecting its industry. In addition, from time to time, there may be public policy endeavors that are either directly or indirectly related to Lifted’s products and packaging or to its business. These public policy debates can occasionally be the subject of backlash from advocacy groups that have a differing point of view and may result in adverse media and consumer reaction, including product boycotts.
Similarly, Lifted’s sponsorship relationships or collaborations may subject Lifted to negative publicity as a result of actual or alleged misconduct by individuals or entities associated with organizations or individuals Lifted sponsors or supports or collaborates with. Likewise, campaigns by activists connecting Lifted or its supply chains with human and workplace rights issues may adversely impact Lifted’s corporate image and reputation. Allegations, even if untrue, that Lifted is not respecting one or more of the human rights found in the United Nations Universal Declaration of Human Rights; actual or perceived failure by Lifted’s suppliers or other business partners to comply with applicable labor and workplace rights laws, including child labor laws, or its actual or perceived abuse or misuse of migrant workers; and adverse publicity surrounding obesity and health concerns related to Lifted’s products, water usage, environmental impact, labor relations or the like may negatively affect Lifted’s overall reputation and brand image, which in turn may have negative impacts on Lifted’s products’ acceptance by consumers.
Lifted may also incur significant liabilities, if lawsuits or claims result in decisions against Lifted, or litigation costs, regardless of the result. Further, any litigation may cause Lifted’s key employees to expend resources and time normally devoted to the operations of Lifted's business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
It is difficult and costly for Lifted to protect its proprietary rights
Lifted’s commercial success will depend in part on obtaining and maintaining trademark protection, patent protection, and trade secret protection of its products and brands, as well as successfully defending that intellectual property against third-party challenges, which Lifted might not be able to do. Lifted will only be able to protect its intellectual property related to its trademarks, patents and brands (if any) to the extent that it has rights under valid and enforceable trademarks, patents or trade secrets that cover its products and brands, which it might not have. Changes in either the trademark and patent laws or in interpretations of trademark and patent laws in the U.S. and other countries may diminish the value of Lifted’s intellectual property (if any). Accordingly, Lifted cannot predict the breadth of claims that may be allowed or enforced in its issued trademarks or its issued patents (if any). The degree of future protection for Lifted’s proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect Lifted’s rights or permit Lifted to gain or keep its competitive advantage. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted may face intellectual property infringement claims that may be time-consuming and costly to defend, and could result in loss of significant rights and the assessment of treble damages
From time to time Lifted may face intellectual property infringement, misappropriation, or invalidity/non-infringement claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome may affect Lifted negatively. For example, were a third party to succeed on an infringement claim against Lifted, Lifted may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, Lifted may face an injunction, barring it from conducting the allegedly infringing activity. The outcome of the litigation may require Lifted to enter into a license agreement which may not be acceptable, commercially reasonable, or practical terms or Lifted may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against Lifted may require it to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible.
Finally, Lifted may initiate claims to assert or defend its own intellectual property against third parties. Any intellectual property litigation, irrespective of whether Lifted is the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and may divert Lifted’s management’s attention from its business and negatively affect Lifted’s operating results or financial condition. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Lifted may be subject to claims by third parties asserting that Lifted or Lifted’s employees have misappropriated the third parties’ intellectual property, or claiming ownership of what Lifted regards as its own intellectual property
Although Lifted tries to ensure that it, its employees, and independent contractors do not use the proprietary information or know-how of others in their work for Lifted, Lifted may be subject to claims that it, its employees, or independent contractors have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to Lifted’s trademarks, as well as claims that its employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, Lifted may be forced to bring claims against third parties, or defend claims they may bring against Lifted, to determine the ownership of what Lifted regards as its intellectual property. If Lifted fails in prosecuting or defending any such claims, in addition to paying monetary damages, Lifted may lose valuable intellectual property rights or personnel. Even if Lifted is successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We will not control businesses in which we own a minority equity ownership interest
We will not control any business in which we own a minority equity ownership interest, such as Ablis and Bendistillery. We can provide no assurance that the owner of the majority equity ownership interest of such business will be able to manage such business successfully. A failure by the controlling owner of a company in which we own a minority equity ownership interest may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Under US GAAP, we will not be able to consolidate our financial statements with the financial statements of companies in which we own minority equity ownership interests
US GAAP does not permit the consolidation of our financial statements with the financial statements of companies in which we own minority equity ownership interests and have no substantial influence over the management of the businesses. US GAAP also requires us to record these types of investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As such, we will not be allowed to consolidate into our financial statements any portion of the revenues, earnings or assets of companies in which we own minority equity ownership interests such as Ablis, and Bendistillery.
As a result of these effects of US GAAP, potential buyers or sellers of our stock may be confused because they may not be able to immediately understand the financial results and the values of the minority ownership interests that we have in certain businesses such as Ablis and Bendistillery, or future businesses. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to exit from minority equity ownership interests
We may not be able to exit from minority equity ownership interests in companies such as Ablis and Bendistillery on acceptable terms, if at all. Because our equity ownership interests in these companies will not allow us to clearly control the management, operations, and direction of the businesses, a potential sale or other exit from such investment may be extremely difficult or impossible to achieve on acceptable terms, if at all. The other owners of equity ownership interests in such businesses may refuse to cooperate with such a sale or exit, or may engage in business practices including but not limited to inflated salaries, stock dilution, obstructionist or delaying tactics, or other behavior that would result in our equity ownership interests having an extremely limited or non-existent market. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to properly brand our Company
In September 2021, we changed the name of our company to “LFTD Partners Inc.” from “Acquired Sales Corp.”, and we changed our ticker symbol to “LSFP” from “AQSP”. On March 15, 2022 we changed our ticker symbol to “LIFD”. Because we may acquire equity ownership interests in many different Cannabis Companies, with a range of products, packaging, names and cultures, we may not be able to properly brand our Company or properly represent all of the companies in which we are invested. Potential acquisition candidates, consumers, and potential investors may have difficulty assimilating all of our diverse business interests, and consequently may not give our common stock a proper valuation. Even if we change the name of our Company to a name that more properly reflects our focus on acquiring equity ownership interests in Cannabis Companies, such a name change may not be embraced by consumers or potential investors. Moreover, no assurances or guarantees may be provided that the Financial Industry Regulatory Authority (“FINRA”) will grant requests for ticker symbol changes, or that such ticker symbol changes will be embraced by consumers or potential investors. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may not be able to properly market our products
Marketing our products properly will require a great deal of marketing expertise, an extensive and trained staff, and large amounts of marketing dollars. Our marketing expertise and experience is limited, our staff size and training is limited, and we lack large amounts of marketing dollars. A failure or inability to properly market our products may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to properly manage multiple businesses
We may not be able to properly manage multiple businesses in the hemp-derived, psychoactive, and consumable products industries. Managing multiple businesses may be more complicated than managing a single line of business, and may require that we hire and manage executives with experience and expertise in different fields. We can provide no assurance that we will be able to do so successfully. A failure to properly manage multiple businesses may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to successfully integrate new acquisitions
Even if we are able to acquire additional companies or assets, we may not be able to successfully integrate or achieve synergies among those companies or assets. For example, we may need to integrate or coordinate widely dispersed operations with different corporate cultures, operating margins, competitive environments, computer systems, accounting software, compensation schemes, business plans and growth potential requiring significant management time and attention. In addition, the successful integration or coordination of any companies we acquire will depend in large part on the retention of personnel critical to our combined business operations due to, for example, unique technical skills or management expertise. We may be unable to retain existing management, finance, accounting, engineering, sales, customer support, and operations personnel that are critical to the success of the integrated Company, resulting in disruption of operations, loss of key information, expertise or know-how, unanticipated additional recruitment and training costs, and otherwise diminishing anticipated benefits of these acquisitions, including loss of revenue and profitability. Failure to successfully integrate acquired businesses may have a material adverse effect on our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Any future acquisitions we may make that expand our business into new sectors also pose unique risks
Risks associated with entering into a new sector through an acquisition include, but are not limited to: (1) having no or limited experience in such sector; (2) exposure to certain governmental regulations and compliance requirements; (3) difficulties developing, manufacturing, and marketing the products of a newly acquired company; and (4) our lesser familiarity with consumer preferences in the new sector. Entry into new sectors may bring us into competition with new competitors that have potentially a larger, more established market presence. We cannot ensure that our entry into any new sectors will be profitable, and future profitability may be delayed or otherwise materially adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our acquisitions of businesses may be extremely risky and we may lose all of our investments
We may invest in the marijuana, nicotine, hemp-derived, psychoactive, consumable products, or other risky industries. An investment in these companies may be extremely risky because, among other things, the companies we are likely to focus on: (1) may be viewed as being dangerous or illegal by the DEA or FDA, by state governments, or by other governmental or regulatory bodies and agencies; (2) typically have limited operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; (3) tend to be privately-owned and generally have little publicly available information and, as a result, we may not learn all of the material information we need to know regarding these businesses; (4) are more likely to depend on the management talents and efforts of a small group of people; and, as a result, the death, disability, resignation or termination of one or more of these people could have an adverse impact on the operations of any business that we may acquire; (5) may have less predictable operating results; (6) may from time to time be parties to litigation; (7) may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence; (8) may require substantial additional capital to support their working capital, operations, expansion, marketing, research, or maintain their competitive position; and (9) their financial statements may be unaudited, improperly prepared, and/or their internal financial controls may be inadequate or non-existent. Our failure to efficiently make accretive acquisitions that meet all of our criteria may have a material adverse effect on our business, results of operations, and financial condition. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Future acquisitions may fail to perform as expected
Future acquisitions may fail to perform as expected, for many reasons, many of which may be unforeseen. For examples: information supplied to us regarding future acquisitions may be incomplete, inaccurate or misleading; we may overestimate future acquisitions’ cash flow, underestimate their costs, or fail to understand their risks; the management of future acquisitions may clash with our management or our board of directors, lose focus on growing the profitability of their businesses, or may resign to pursue other interests; or future acquisitions may be crushed by larger and more experienced and financially stronger competitors. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Competition may result in overpaying for acquisitions
Other investors with significant capital may compete with us for attractive investment opportunities. These competitors may include publicly traded companies, private equity firms, privately held buyers, individual investors, and other types of investors. Such competition may increase the price of acquisitions, or otherwise adversely affect the terms and conditions of acquisitions. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may have insufficient resources to cover our debts, operating expenses, dividends owed on our preferred stock, and the expenses of raising money and consummating acquisitions
We have limited cash to cover the costs of building inventory, hiring employees, expanding our operational footprint, our company-wide bonus pool, other business operating expenses, dividends owed on our preferred stock, and the expenses incurred in connection with money raising, performing due diligence and acquiring businesses, and the SEC filings and audit responsibilities associated with being a publicly traded company. If we do not have sufficient proceeds available to cover our expenses, we may be forced to attempt to obtain additional financing, either from our management or third parties. We may not be able to obtain additional financing on acceptable terms, if at all, and neither our management nor any third party is obligated to provide any financing. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to identify good acquisitions in the future
There can be no assurance that we will be successful in locating acquisition candidates meeting our criteria in the future. In the event that we complete a future merger or acquisition transaction, of which there can be no assurance, our success, if any, will be dependent upon the operations, financial condition and management of the target company, and upon numerous other factors beyond our control. If the operations, profitability, financial condition or management of the target company were to be disrupted or otherwise negatively impacted following a transaction, our Company and our common stock price may be negatively impacted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may carry out actions that will not require our stockholders’ approval
The terms and conditions of any acquisition may require us to take actions that may not require our stockholders’ approval. In order to acquire certain companies or assets, we may issue additional shares of common or convertible preferred stock, or borrow money or issue debt instruments including debt convertible into capital stock. Not all of these actions would require our stockholders’ approval even if these actions dilute our stockholders’ economic or voting interests as shareholders. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our investigation of potential acquisitions will be limited
Our analysis of new business opportunities will be undertaken by or under the supervision of our Investment Committee. Inasmuch as we will have limited funds available to search for business opportunities and ventures, we will not be able to expend significant funds on a complete and exhaustive investigation of such business or opportunity. We will, however, investigate, to the extent believed reasonable by our Investment Committee, such potential business opportunities or ventures by conducting a “due diligence investigation”. In a due diligence investigation, we intend to obtain and review materials regarding the business opportunity. Typically, such materials will include information regarding a target company’s products, services, contracts, management, ownership, and financial information. In addition, we intend to cause our Investment Committee to personally meet with management and key personnel of target companies, ask questions regarding the target companies’ prospects, tour facilities, and conduct other reasonable investigation of the target companies to the extent of our limited financial resources and management and technical expertise. There is a risk that the owners and/or the managers of potential acquisitions could misrepresent and/or fail to disclose material adverse facts regarding the potential acquisitions, or that our shareholders may institute litigation claiming that our “due diligence investigations” of potential acquisitions were insufficient or negligent in some way. Any failure of our typical due diligence investigation to uncover issues and problems relating to target companies may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We will have only a limited ability to evaluate the directors and management of potential acquisitions
We may make a determination that our current directors and officers should not remain, or should change or reduce their roles, following money raising or a business combination, based on an assessment of the experience and skill sets of new directors and officers and the management of target companies. We cannot assure you that our assessment of these individuals will prove to be correct. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We will be dependent on outside advisors to assist us
In order to supplement the business experience of management, we may employ investment bankers, accountants, technical experts, appraisers, attorneys, independent contractors or other consultants or advisors. The selection of any such advisors will be made by management and without any control from shareholders. Additionally, it is anticipated that such persons may be engaged by us on an independent basis without a continuing fiduciary or other obligation to us. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If we are unable to successfully execute on our future operating plans, our financial condition and results of operation may be materially adversely affected, and we may not be able to continue as a going concern
It is critical that we meet our sales goals and increase sales going forward. If we do not meet our sales goals, our available cash and working capital may decrease and our financial condition will be negatively impacted. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may fail to manage our growth effectively
Future growth through acquisitions and organic expansion may place a significant strain on our managerial, operational, technical, training, systems and financial resources. We can give you no assurance that we will be able to manage our expanding operations properly or cost effectively. A failure to properly and cost-effectively manage our expansion may materially adversely affect our Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may be unable to effectively manage future growth
We may be subject to growth-related risks, including capacity constraints and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our operational and financial systems and to expand, train and manage our employee base. Rapid growth of our business may significantly strain our management, operations and technical resources. We may be unable to properly manage future growth. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The management of companies we acquire may lose their enthusiasm or entrepreneurship after the sale of their businesses
We can give no assurance that the management of future companies we acquire will have the same level of enthusiasm for operating their businesses following their acquisition by us; or, if they cease performing services for the acquired businesses, that we will be able to install replacement management with the same skill sets, leadership and determination. There also is always a risk that management of companies we acquire will attempt to reenter the market and possibly seek to recruit our employees and independent contractors. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Complications with the implementation of our Inventory Management Software could adversely impact our business and operations
We rely on information systems and technology to manage our business and summarize operating results. We are in the process of implementing Inventory Management Software (“IMS”). IMS is designed to accurately maintain the quantities and costs of the Company’s raw goods and finished goods. The IMS implementation process has required, and will continue to require, the investment of significant personnel and financial resources. We may not be able to successfully implement the IMS without experiencing increased costs and other difficulties and our planned timeline to implement the remaining phases of our IMS may be delayed. If we are unable to successfully implement our IMS system as planned, our business, results of operations, and financial condition may be negatively impacted. Additionally, if we do not effectively implement the IMS as planned or the IMS does not operate as intended, the effectiveness of our internal controls over financial reporting may be adversely affected or our ability to adequately assess those controls could be delayed. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Law enforcement officials may claim that Lifted's products are contaminated
There is a risk that law enforcement officials may claim that Lifted's products are contaminated with illegal drugs or other harmful substances. This risk may be heightened by some law enforcement officials' belief that hemp-derived, kratom-derived, and other intoxicating products need to be prohibited or heavily regulated, or by some law enforcement officials' use of mobile testing devices that may produce inaccurate and/or misleading test results that allow law enforcement officials to knowingly or unknowingly claim that legitimate products constitute threats to the public's health. For example, in February 2023, the district attorney in Montgomery County, Pennsylvania, held a press conference claiming that heroin and fentanyl had been found in certain hemp-derived cannabinoid-infused products being sold at a local retailer under three product brands, including the "Urb Extrax" brand of hemp-derived delta-8-THC gummies manufactured and sold by a third party unrelated to Lifted. These claims apparently were based upon mobile testing results obtained by Montgomery County law enforcement. However, when these products were later tested by a recognized lab hired by Montgomery County law enforcement, apparently no heroin or fentanyl was detected. Despite the absence of any detectable levels of heroin or fentanyl in these products, the district attorney's allegations made at the press conference were widely reported by various media outlets, and caused great concern among consumers, and possibly caused damage to the companies and product brands involved and/or to the entire hemp-derived products industry. If in the future law enforcement officials were to claim that Lifted's products contain illegal drugs or other harmful contaminants, our Company may be materially adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
RISK FACTORS ASSOCIATED WITH THE U.S. MARIJUANA INDUSTRY
At this point in time, our Company does not directly participate in the U.S. marijuana industry and does not "touch the marijuana plant" in the U.S. However, our Company may participate in the U.S. marijuana industry, and is actively considering mergers and acquisitions in the U.S. marijuana industry. Any such merger and acquisition of a Cannabis Company that "touches the marijuana plant" in the U.S. would subject our Company to a large number of significant risks. In anticipation of the potential consummation of such a merger and acquisition, set forth below are descriptions of some of the most significant risks associated with direct participation in the U.S. marijuana industry.
Cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change
Cannabis is illegal under U.S. federal law. In those states in which the use of cannabis has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act (21 U.S.C. § 811) (“CSA”). Under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal, and any such acts are criminalized under the CSA. Cannabis is a Schedule I controlled substance under the CSA, and is thereby deemed to have a high potential for abuse, no accepted medical use in the United States, and a lack of safety for use under medical supervision. The concepts of “medical cannabis,” “retail cannabis” and “adult-use cannabis” do not exist under U.S. federal law. Even if cannabis is re-scheduled to Schedule III under the CSA, medical and adult-use cannabis would remain illegal under U.S. federal law without additional statutory changes, and the negative tax ramifications of U.S. Internal Revenue Code Section 280E may persist.
Unless and until Congress amends the CSA with respect to cannabis (and the President approves such amendment), there is a risk that federal authorities may enforce current federal law. If that occurs, we may be deemed to be producing, cultivating or dispensing cannabis and drug paraphernalia in violation of federal law. Since federal law criminalizing the use of cannabis pre-empts state laws that legalize its use, enforcement of federal law regarding cannabis is a significant risk and would greatly harm our business, prospects, revenue, results of operation and financial condition.
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Our activities may, and may continue to be, subject to evolving regulation by governmental authorities. We may become directly or indirectly engaged in the medical and adult-use cannabis industry in the U.S. where local and state law permits such activities. The legality of the production, cultivation, extraction, distribution, retail sales, transportation and use of cannabis differs among states in the U.S. Due to the current regulatory environment in the U.S., new risks may emerge, and management may not be able to predict all such risks.
Activities in the medical and adult-use cannabis industry are illegal under the applicable federal laws of the United States. There can be no assurances that the federal government of the United States will not seek to enforce the applicable laws against us. The consequences of such enforcement would be materially adverse to us and our business, including our reputation, profitability and the market price of our publicly traded shares, and could result in the forfeiture or seizure of all or substantially all of our assets.
Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. It is further possible that Department of Justice or an aggressive federal prosecutor could allege that our Company, executives, and board of directors, and, potentially, our shareholders, “aided and abetted” violations of federal law by providing finances and services to our Company. Under these circumstances, federal prosecutors could seek to seize our assets, and to recover the “illicit profits” generated by our Company. In these circumstances, the Company’s operations would cease, shareholders may lose their entire investments and directors, officers and/or shareholders may be left to defend any criminal charges against them at their own expense and, if convicted, be sent to federal prison.
Additionally, there can be no assurance as to the position the Trump administration or any future administration may take on cannabis, and a new administration could decide to enforce federal laws against state-regulated cannabis companies. Any enforcement of current federal cannabis laws could cause significant financial damage to us and our shareholders.
These results could have a material adverse effect on us, including, but not limited to, our reputation and ability to conduct business, our holding (directly or indirectly) of cannabis licenses in the United States, the marketability of our securities, our financial position, operating results, profitability or liquidity or the trading price of our common stock. In addition, it is difficult to estimate the time or resources that would be needed for the investigation or final resolution of any such matters because: (1) the time and resources that may be needed depend on the nature and extent of any information requested by the authorities involved, and (2) such time or resources could be substantial. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
State regulation of cannabis is uncertain
There is no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing state laws are repealed or curtailed, the Company’s business or operations in those states or under those laws would be materially and adversely affected. As they amend or develop legislation and regulations, state and local regulators and legislatures may use the regulatory process to slow the growth of the Company, with the intent of creating increased opportunities for resident farmers and entrepreneurs, which could severely restrict our ability to operate in those jurisdictions. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis-related legislation could adversely affect the Company, our business and our assets or investments. Maintaining compliance with complex and ever-changing regulations and laws, including sometimes unclear regulations and laws, can be a difficult task, and a materially compliant business can be found in violation of one or more laws, rules or regulations while remaining materially or substantially compliant with applicable state cannabis laws.
The rulemaking process at the state level that applies to cannabis operators in any state will be ongoing and result in frequent changes. As a result, a compliance program will be essential to manage regulatory risk. All operating policies and procedures implemented by the Company are expected to be compliance-based and are expected to be derived from the state regulatory structure governing ancillary cannabis businesses and their relationships to state-licensed or permitted cannabis operators, if any. Notwithstanding the Company’s efforts and diligence, regulatory compliance and the process of obtaining and maintaining regulatory approvals could be costly and time-consuming. No assurance can be given that the Company will receive or be able to maintain the requisite licenses, permits or cards to operate.
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In addition, local laws and ordinances could restrict the Company’s business activity. Although the Company’s operations are legal under the laws of the states in which the Company’s business operate, local governments have the ability to limit, restrict and ban cannabis businesses from operating within their jurisdiction. Land use, zoning, local ordinances and similar laws could be adopted or changed and have a material adverse effect on the Company’s business.
Multiple states where medical and/or adult-use cannabis is legal have or are considering special taxes or fees on businesses in the cannabis industry. It is uncertain at this time whether other states are in the process of reviewing such additional taxes and fees.
The implementation of special taxes or fees could have a material adverse effect upon the Company’s business, prospects, revenue, results of operation and financial condition. Certain of the states in which we may operate have enacted strict regulations regarding marketing and sales activities on cannabis products. There may be restrictions on sales and marketing activities imposed by government regulatory bodies that could hinder the development of our business and operating results. Restrictions may include regulations that specify what, where and to whom product information and descriptions may appear and/or be advertised. Marketing, advertising, packaging and labeling regulations also vary from state to state, potentially limiting the consistency and scale of consumer branding communication and product education efforts. The regulatory environment in the U.S. limits our ability to compete for market share in a manner similar to other industries. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and operating results could be adversely affected. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
The cannabis industry is relatively new
The cannabis industry and market are relatively new. In addition to being subject to general business risks, we expect to need to continue to build brand awareness in the industry and market share through significant investments in our strategy, production capacity, quality assurance and compliance with regulations. Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids, remains in relatively early stages. Few clinical trials on the benefits of cannabis or isolated cannabinoids have been conducted. Future research and clinical trials may draw opposing conclusions to statements contained in the articles, reports and studies currently favored, or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing or other facts and perceptions related to medical cannabis, which could adversely affect social acceptance of cannabis and the demand for our products and dispensary services.
Accordingly, there is no assurance that the cannabis industry and the market for medicinal and/or adult-use cannabis will continue to exist and grow as currently anticipated or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that adversely affects the cannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets could have a material adverse effect on our business, financial condition and results of operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We face risks due to industry immaturity or limited comparable, competitive or established industry best practices
As a relatively new industry, there are not many established operators in the medical and adult-use cannabis industries whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us.
Shareholders and investors should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies, like us, that are in their early stages. For example, unanticipated expenses and problems or technical difficulties may occur, which may result in material delays in the operation of our business. We may fail to successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock, to the extent that investors may lose their entire investments. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
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Our ability to grow our medical and adult-use cannabis product offerings and dispensary services may be limited
If we introduce or expand our medical and adult-use cannabis product offerings and dispensary services, we may incur losses or otherwise fail to enter certain markets successfully. Our expansion into new markets may place us in competitive and regulatory environments with which we are unfamiliar and involve various risks, including the need to invest significant resources and the possibility that returns on those investments will not be achieved for several years, if at all. In attempting to establish new product offerings or dispensary services, we may incur significant expenses and face various other challenges, such as expanding our work force and management personnel to cover these markets and complying with complicated cannabis regulations that apply to these markets. In addition, we may not successfully demonstrate the value of these product offerings and dispensary services to consumers, and failure to do so would compromise our ability to successfully expand these additional revenue streams. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may not be able to obtain or maintain necessary permits and authorizations
We may not be able to obtain or maintain the necessary licenses, permits, certificates, authorizations or accreditations to operate our business in a timely fashion, if at all, or we may only be able to do so at great effort and expense. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable to the cannabis industry. Failure to comply with or to obtain the necessary licenses, permits, certificates, authorizations or accreditations could result in restrictions on our Company’s ability to operate in the cannabis industry, which could have a material adverse effect on our business, financial condition or results of operations. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may face limitations on ownership of cannabis licenses
In certain states, the cannabis laws and regulations limit not only the number of cannabis licenses issued, but also the number of cannabis licenses that one person or entity may own. Such limitations on the ownership of additional licenses within certain states may limit the Company’s ability to grow in such states. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may be adversely affected by the issuance of additional cannabis licenses to third parties
As the number of available licenses increase in the markets in which we operate, additional competition and increased product availability may result in competitors undercutting our prices. From time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share, which could materially reduce our revenues. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may become subject to FDA or Bureau of Alcohol, Tobacco, Firearms and Explosives regulation
Cannabis remains a Schedule I controlled substance under U.S. federal law. If the federal government reclassifies cannabis to a Schedule III controlled substance, it is possible that the FDA would seek to regulate cannabis under the Food, Drug and Cosmetics Act of 1938. Additionally, the FDA may issue rules and regulations, including good manufacturing practices, related to the growth, cultivation, harvesting and processing of cannabis. Clinical trials may be needed to verify the efficacy and safety of cannabis. It is also possible that the FDA would require facilities where medical use cannabis is grown to register with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, the impact they would have on the cannabis industry is unknown, including the costs, requirements and possible prohibitions that may be enforced. If the Company is unable to comply with the potential regulations or registration requirements prescribed by the FDA, it may have an adverse effect on the Company’s business, prospects, revenue, results of operation and financial condition.
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It is also possible that the federal government could seek to regulate cannabis under the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives. The Bureau of Alcohol, Tobacco, Firearms and Explosives may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products, including smokeless cannabis products. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
As a cannabis business, we are subject to applicable anti-money laundering laws and regulations and have restricted access to banking and other financial services
Our plans to enter the marijuana industry may adversely affect our banking relationships, our access to banking and other financial services, and our ability to provide collateral and other security for loans.
We are subject to a variety of laws and regulations in the United States that involve money laundering, financial record- keeping and proceeds of crime, including the U.S. Currency and Foreign Transactions Reporting Act of 1970 (the “Bank Secrecy Act”), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States. Accordingly, pursuant to the Bank Secrecy Act, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan or any other service could be found guilty of money laundering, aiding and abetting, or conspiracy.
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), issued a memorandum on February 14, 2014 (the “FinCEN Memorandum”), outlining the pathways for financial institutions to bank cannabis businesses in compliance with federal enforcement priorities. The FinCEN Memorandum states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. The FinCEN Memorandum refers to the Cole Memorandum’s enforcement priorities.
The Department of Justice continues to have the right and power to prosecute crimes committed by banks and financial institutions, such as money laundering and violations of the Bank Secrecy Act, that occur in any state including states that have in some form legalized the sale of cannabis. Further, the conduct of the Department of Justice’s enforcement priorities could change for any number of reasons. A change in the Department of Justice’s priorities could result in the prosecution of banks and financial institutions for crimes that were not previously prosecuted.
If our operations, or proceeds thereof, dividend distributions or profits or revenues derived from our operations are found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds from a crime (the sale of a Schedule I drug) under the Bank Secrecy Act’s money laundering provisions. This may restrict our ability to declare or pay dividends or effect other distributions.
The FinCEN Memorandum does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the Department of Justice, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the United States do not appear comfortable providing banking services to cannabis-related businesses or relying on this guidance given that it has the potential to be amended or revoked by the current administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, we may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it operates in permits cannabis sales. Our inability or limitation of our ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for us to operate and conduct our business as planned or to operate efficiently.
In the United States, the “SAFE Banking Act” which has been passed by the U.S. House of Representatives seven times, most recently on July 14, 2022 as an amendment to the National Defense Authorization Act, would grant banks and other financial institutions immunity from federal criminal prosecution for servicing marijuana-related businesses if the underlying cannabis business follows state law. However, while the U.S. Senate Banking Committee passed the “SAFER Banking Act” on a bipartisan vote of 14-9 in September 2023, that bill has yet to be brought to the U.S. Senate floor and faces an uncertain future in the U.S. House of Representatives. The potential future passage of a bill is further complicated by the change in party control and the current narrow majorities in both chambers of the U.S. Congress. There can be no assurance that a bill will be passed as presently proposed or at all. Our Company does not undertake to provide any future updates to potential investors on potential federal or state legislation affecting cannabis.
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Transactions involving banks and other financial institutions are both difficult and unpredictable under the current legal and regulatory landscape. Legislative changes could help to reduce or eliminate these challenges for companies in the cannabis space and would improve the efficiency of both significant and minor financial transactions. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We lack access to U.S. bankruptcy protections
Many courts have denied cannabis businesses bankruptcy protections because the use of cannabis is illegal under federal law. In the event of a bankruptcy, it would be very difficult for lenders to recoup their investments in the cannabis industry. If the Company were to experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections would be available to us, which would have a material adverse effect on us. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We operate in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business
Our business and activities may be heavily regulated in all jurisdictions where we conduct business. Our operations are expected to be subject to various laws, regulations and guidelines by state and local governmental authorities relating to the manufacture, marketing, management, transportation, storage, sale, pricing and disposal of cannabis and cannabis oil, and also including laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment. Laws and regulations, applied generally, are expected to grant government agencies and self-regulatory bodies broad administrative discretion over our activities, including the power to limit or restrict business activities as well as impose additional disclosure requirements on our products and services. Achievement of our business objectives is expected to be contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all necessary regulatory approvals for the manufacture, production, storage, transportation, sale, import and export, as applicable, of our products. The commercial cannabis industry is still a new industry at the state and local level. The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, prospects, revenue, results of operation and financial condition. Any failure to comply with the regulatory requirements applicable to our operations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate our business; the suspension or expulsion from a particular market or jurisdiction or of our key personnel; the imposition of additional or more stringent inspection, testing and reporting requirements; and the imposition of fines and censures. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increase compliance costs or give rise to material liabilities and/or revocation of our licenses and other permits, which could have a material adverse effect on our business, results of operations and financial condition. Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely impact our ongoing costs relating to regulatory compliance. Maintaining compliance with complex and ever-changing regulations, including sometimes unclear regulations and laws, can be a difficult task, and a materially compliant business can be found in violation of one or more laws, rules or regulations while remaining materially or substantially compliant with applicable state cannabis laws. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We expect to face intense competition
We expect to face intense competition from other companies, some of which have longer operating histories and more financial resources and manufacturing, retail and marketing experience than we do. Increased competition by larger and better financed competitors could materially and adversely affect our business, financial condition and results of operations.
Because of the early stage of the industry in which we may operate, we expect to face additional competition from new entrants, participants in the illicit market that face significantly lower costs to operate, and psychoactive hemp-derived products manufacturers. If the number of consumers of cannabis in the states in which we operate our business increases, the demand for products and qualified talent will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, we expect to require a high level of investment in research and development, marketing, operations, accounting, sales, talent retention and client support. We may not have sufficient resources to maintain research and development, marketing, operations, accounting, sales, talent retention, and client support efforts on a competitive basis, which could materially and adversely affect our business, financial condition and results of operations. Additionally, as the number of available licenses increase in the markets in which we operate, additional competition and increased product availability may result in competitors undercutting our prices. From time to time, we may need to reduce our prices in response to competitive and customer pressures and to maintain our market share, which could materially reduce our revenues. A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital, if needed. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We expect to face competition from the illicit market as well as the psychoactive hemp-derived products industry
We expect to face competition from the illicit market as well as the psychoactive hemp-derived products industry. The competition presented by illicit cannabis businesses, and the inability or unwillingness of law enforcement authorities to enforce existing laws prohibiting the unlicensed or otherwise illegal cultivation and sale of cannabis, could result in the perpetuation of the illegal market for cannabis and/or have a material adverse effect on the perception of cannabis use.
Psychoactive hemp-based products, which were legalized under the Farm Bill, are generally not subject to the intensive and costly state-level regulatory regimes that medical and adult-use cannabis are subject to. These products generally are not produced in adherence with the same laws, regulations, rules, tax regimes and other restrictions that are applicable to the sale and manufacture of cannabis; as a result, hemp product manufacturers have advantages over licensed cannabis manufacturers and sellers. In addition, although not subject to the same quality and health and safety regulations applicable to medical and adult-use cannabis businesses, if Farm Bill-compliant hemp products cause harm to their users, that could result in a material adverse effect on the perception of cannabis use and its legality. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may face difficulties in enforcing our contracts
Because our contracts may involve cannabis and other activities that are not legal under federal law and in some state jurisdictions, we may face difficulties in enforcing our contracts in federal courts and certain state courts. We cannot be assured that we will have a remedy for breach of contract, which could have a material adverse effect on us. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We have limited trademark protection
We may not able to register any federal trademarks for our cannabis products. Because producing, manufacturing, processing, possessing, distributing, selling and using cannabis is a crime under the CSA, the Patent and Trademark Office will not permit the registration of any trademark that identifies cannabis products. As a result, we likely will be unable to protect our cannabis product trademarks beyond the geographic areas in which we conduct business. The use of our trademarks outside the states in which we operate by one or more other persons could have a material adverse effect on the value of such trademarks. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may be subject to constraints on marketing our products
Certain states in which we may operate have enacted strict regulations regarding marketing and sales activities on cannabis products. There may be restrictions on sales and marketing activities imposed by government regulatory bodies that can hinder the development of the Company’s business and operating results. Restrictions may include regulations that specify what, where and to whom product information and descriptions may appear and/or be advertised. Marketing, advertising, packaging and labeling regulations also vary from state to state, potentially limiting the consistency and scale of consumer branding communication and product education efforts. The regulatory environment in the U.S. limits our ability to compete for market share in a manner similar to other industries. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products, our sales and operating results could be adversely affected. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We face risks related to the results of future clinical research
Research regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids. Although we believe that various articles, reports and studies support our beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Further, the federal illegality of cannabis and associated limits on our ability to properly fund and conduct research on cannabis and the lack of formal FDA oversight of cannabis, there is limited information about the long-term safety and efficacy of cannabis in it various forms, when combusted or combined with various cannabis and/or non-cannabis derived ingredients and materials or when ingested, inhaled or topically applied. Future research or oversight may reveal negative health and safety effects, which may significantly impact our reputation, operations and financial performance.
Given these risks, uncertainties and assumptions, prospective purchasers of our common stock should not place undue reliance on such articles and reports. Future research studies and clinical trials may draw opposing conclusions to those stated in this Annual Report on Form 10-K or reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, which could have a material adverse effect on the demand for our products, with the potential to have a material adverse effect on our business, prospects, revenue, results of operation and financial condition. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
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The re-classification of cannabis or changes in U.S. controlled substance laws and regulations could have a material adverse effect on our business, financial condition, and results of operations
If cannabis is re-classified as a Schedule II or lower controlled substance under the CSA, the ability to conduct research on the medical benefits of cannabis would most likely be more accessible; however, if cannabis is re-categorized as a Schedule II or lower controlled substance, the resulting re-classification would result in the need for approval by the FDA, if medical claims are made about our medical cannabis products. As a result of such a re-classification, the manufacture, importation, exportation, domestic distribution, storage, sale and use of such products could become subject to a significant degree of regulation by the DEA. In that case, we may be required to be registered to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Obtaining the necessary registrations may result in delay of the manufacturing or distribution of our products. The DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance could have a material adverse effect on our business, financial condition and results of operations. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Cannabis businesses are subject to unfavorable U.S. tax treatment and may incur significant tax liability
Under U.S. Internal Revenue Code Section 280E, we will not be allowed to take any deductions or credits for any amounts paid or incurred during the taxable year in carrying on business if the business (or the activities which comprise the trade or business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act). The IRS has applied this provision to cannabis operations, prohibiting them from deducting certain expenses associated with cannabis businesses. Section 280E may have a lesser impact on cannabis cultivation and manufacturing operations. Accordingly, Section 280E has a significant impact on the operations and financial results of cannabis companies and an otherwise profitable business may operate at a loss, after taking into account its U.S. income tax expenses. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may be at a higher risk of IRS audit
We believe there is a greater likelihood that the IRS will audit the tax returns of cannabis-related businesses. Any such audit of our tax returns could result in us being required to pay additional tax, interest and penalties, as well as incremental accounting and legal expenses, which could be material. Moreover, an audit will divert our management’s attention and resources away from our business. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
As a cannabis businesses, we may be subject to civil asset forfeiture
Any property owned by participants in the cannabis industry used in the course of conducting such business, or that is the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture because of the illegality of the cannabis industry under federal law. Even if the owner of the property is never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We are subject to proceeds of crime statutes
We are subject to a variety of laws that concern money laundering, financial recordkeeping and proceeds of crime. These include: the Bank Secrecy Act, as amended by Title III of the USA Patriot Act, the Proceeds of Crime (Money Laundering), and regulations or guidelines, issued, administered or enforced by governmental authorities in the United States.
In the event that any of our business agreements, or any proceeds thereof, in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above, or any other applicable legislation. This could have a material adverse effect on us, among other things, and could restrict or otherwise jeopardize our ability to declare or pay dividends, or effect other distributions. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
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Competition for the acquisition and leasing of properties suitable for the cultivation, production and sale of medical and adult-use cannabis may impede our ability to make acquisitions or increase the cost of these acquisitions, which could adversely affect our operating results and financial condition
We may compete for the acquisition of properties suitable for the cultivation, production and sale of medical and adult-use cannabis with entities engaged in agriculture and real estate investment activities, including corporate agriculture companies, cultivators, producers and sellers of cannabis. In addition, in certain markets the local governments have authority to choose where any cannabis establishment will be located. These authorized areas are frequently removed from other retail operations. Because the cannabis industry remains illegal under U.S. federal law, the disadvantaged tax status of businesses deriving their income from cannabis, and the reluctance of the banking industry to support cannabis businesses, it may be difficult for us to locate and obtain the rights to operate at various preferred locations. Property owners may violate their mortgages by leasing to us, and those property owners that are willing to allow use of their facilities may require payment of above fair market value rents to reflect the scarcity of such locations and the risks and costs of providing such facilities. All of these factors may prevent us from acquiring and leasing desirable properties, may cause an increase in the price we must pay for properties or may result in us having to lease our properties on less favorable terms than we expect.
Our competitors may adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms. In addition, due to a number of factors, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. If we pay higher prices for properties or enter into leases for such properties on less favorable terms than we expect, our profitability and ability to generate cash flow and make distributions to our stockholders may decrease. Increased competition for properties may also preclude us from acquiring those properties that would generate attractive returns to us. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may face risks due to industry immaturity or limited comparable, competitive or established industry best practices
As a relatively new industry, there are not many established operators in the medical and adult-use cannabis industries whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us.
Shareholders and investors should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies, like us, that are in their early stages. For example, unanticipated expenses and problems or technical difficulties may occur, which may result in material delays in the operation of our business. We may fail to successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the extent that investors may lose their entire investment. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Our business may be subject to the risks inherent in agricultural operations
The Company’s business may involve the growing of cannabis, an agricultural product. The Company’s business may be subject to the risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks. Even if the Company’s cultivation is substantially completed indoors under climate control, some cultivation may be completed outdoors, and there can be no assurance that natural elements will not have a material adverse effect on any future production. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
We may be adversely impacted by rising or volatile energy costs and availability
The Company’s cannabis growing operations may require energy supply, which makes it vulnerable to rising energy costs. Accordingly, rising or volatile energy costs may adversely affect the business of the Company and our ability to operate profitably. Further, from time to time in some markets in which we operate, our demand for energy may exceed the available supply. We may have to rely on alternative power sources such as generators to power our cultivation and processing facilities. A more prolonged disruption in our ability to maintain sufficient power to operate our facilities could result in a significant disruption of our operations, damage to our agricultural products or equipment, and result in a material adverse effect to our business. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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We may encounter unknown environmental risks
There can be no assurance that the Company will not encounter hazardous conditions, such as asbestos or lead, at the sites of the real estate used to operate our businesses, which may delay the development of our businesses. Climate change or significant weather events may accelerate or exacerbate environmental conditions in ways that adversely affect the business due to potential negative effects on agricultural conditions, increased difficulty in construction projects to support our operations, and ownership or leasing of real property generally. Upon encountering a hazardous condition, work at the facilities of the Company may be suspended. If the Company receives notice of a hazardous condition, it may be required to correct the condition prior to continuing construction. If additional hazardous conditions were present, it would likely delay construction and may require significant expenditure of the Company’s resources to correct the conditions. Such conditions could have a material impact on the investment returns of the Company.
In addition, the operations of the Company may be subject to environmental regulation in the various jurisdictions in which we operate. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors (or the equivalent thereof) and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the operations of the Company. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may have increased labor costs based on union activity
Labor unions are working to organize workforces in the cannabis industry in general, and regulators are increasingly requiring licensed cannabis companies to enter into labor peace agreements with unions as a condition of receiving a license. It is possible that our workforce will elect to be represented by a labor organization for purposes of collective bargaining, which could lead to work stoppages or increased labor costs and adversely affect our business, profitability and our ability to reinvest into the growth of our business. We cannot predict how stable our relationships with U.S. labor organizations will remain or whether we can meet any unions’ requirements without impacting our financial condition. Labor unions may also limit our flexibility in dealing with our workforce. Work stoppages and instability in our union relationships could delay the production and sale of our products, which could strain relationships with customers and cause a loss of revenues which would adversely affect our operations. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We may be required to disclose personal information of our investors, officers, directors and employees to regulators and failure to do so could endanger our ability to expand, endanger our licenses, or cause the Company to incur costs to redeem securities held by uncooperative shareholders
Ownership in and applications for cannabis licenses can entail lengthy disclosures of personal information to the relevant regulatory authorities. The obligation often extends to all persons holding an ownership interest in the license, whether direct, indirect, present, or future, and often includes those with a mere nominal interest. Analogous disclosures are often required from persons with managerial authority or control over the licenses, as well, including officers, directors, and managers. Disclosures can include providing personal information needed to satisfy extensive criminal history reports and investigations (e.g., fingerprints, address and employment history), tax returns, social security numbers, a history of personal addresses, employment agreements, and other personal information. While some states allow exceptions for individuals with ownership in publicly traded companies like the Company, not all states provide such exceptions. If these requirements were applied to all persons with ownership in the Company, all such persons would be required to comply or the Company would risk losing the opportunity to apply for or renew the license(s), or similarly face the possibility that the license may be revoked. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
There may be monthly, quarterly or annual charitable donation requirements tied to our receipt or maintaining of cannabis licenses; these charitable donation requirements may be costly, time-consuming and challenging (or impossible) to properly manage, value, or accrue for in our financial statements
In order to obtain or maintain a cannabis license that is issued to us, we may be required by a licensing body to make monthly, quarterly or annual charitable donations to individuals or entities. These charitable donations may be in the form of cash, goods, or services, and may be costly, both in terms of money and time. It may be challenging (or impossible) to properly manage, value, or accrue for our charitable obligations in our financial statements, or to properly disclose the status of our charitable obligations.
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Any failure to comply with our charitable obligations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate our business; the suspension or expulsion from a particular market or jurisdiction or of our key personnel; the imposition of additional or more stringent inspection, testing and reporting requirements; and the imposition of fines and censures. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We could be subject to criminal prosecution or civil liabilities under RICO
The Racketeer Influenced Corrupt Organizations Act (“RICO”) criminalizes the use of any profits from certain defined “racketeering” activities in interstate commerce. While intended to provide an additional cause of action against organized crime, due to the fact that cannabis is illegal under U.S. federal law, the production and sale of cannabis qualifies cannabis-related businesses as “racketeering” as defined by RICO. As such, all officers, directors and shareholders in a cannabis-related business could be subject to criminal prosecution under RICO, which carries substantial criminal penalties.
RICO can create civil liability as well: persons harmed in their business or property by actions which would constitute racketeering under RICO often have a civil cause of action against such “racketeers,” and can claim triple their amount of estimated damages in attendant court proceedings. The Company, as well as its officers, directors and shareholders could all be subject to civil claims under RICO. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
We could be subject to litigation regarding the potency of our marijuana products
Cannabis testing labs frequently employ different testing machines, protocols and methodologies, and in addition, testing machines, protocols and methodologies are constantly evolving. Consequently, cannabis testing labs sometimes disagree on the potency and other characteristics of tested marijuana product samples, such as in regard to delta-9-THC potency, and the presence of molds, pesticides, heavy metals, and other contaminants. As a result, even though our Company plans to use independent third party cannabis testing labs, our products may be subject to litigation questioning the accuracy of our certificates of analysis and/or our product labeling. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Publicly traded marijuana companies are generally unprofitable and have lost hundreds of millions, if not billions, of dollars of investor money
Since publicly traded marijuana companies emerged during the past decade, most of those companies have been unprofitable and have lost hundreds of millions, if not billions, of dollars of investor money. No assurance or guarantee whatsoever can be given that our marijuana business will be profitable, and our investment in the marijuana industry may result in our stockholders losing a significant portion or all of the value of their investments in our Company. The foregoing risk may have a material adverse effect on our Company and the trading price of our common stock.
Federal legalization of marijuana could have significant negative impacts
We believe it is possible that federal legalization of marijuana could have significant negative impacts on our marijuana business. If marijuana is federally legalized in the U.S., then, for examples: (1) it may be impossible to prevent the importation of massive quantities of marijuana from Latin American countries such as Columbia, Jamaica, Paraguay, Mexico, or others, which could materially adversely impact the sales and profitability of our marijuana business; and (2) huge consumer products companies with substantially more resources than our Company, such as companies in the tobacco, alcohol and food products industries, may enter the marijuana industry. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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RISK FACTORS RELATING TO THE BEVERAGE ALCOHOL BUSINESS
Changes in consumer preferences or public attitudes about alcohol may decrease demand for our beverage alcohol products
According to various news media reports, drinking alcohol is becoming less popular in the U.S., partly due to health concerns, and partly due to the rising popularity of marijuana, hemp-derived products, psychedelics or other psychoactive products, and so-called "mocktails". There is increasing awareness of and concern for health, wellness and nutrition considerations, including concerns regarding caloric intake and the perceived undesirability of artificial ingredients. There are also increasing studies on and concern for the potential adverse consequences from excess consumption of alcohol beverages. Some consumer advocacy groups and others have called for the curtailment of alcohol dissemination and consumption. If general consumer trends lead to a decrease in the demand for Bendistillery’s products or liquor in general, our sales and results of operations in the beverage alcohol segment, or our investment in Bendistillery, may be adversely affected. There is no assurance that the liquor segment will be able to maintain its current sales levels or experience growth in future periods. Further, the alcoholic beverage industry is subject to public concern and political attention over alcohol-related social problems, including drunk driving, underage drinking and health consequences from the misuse of alcohol. In reaction to these concerns, steps may be taken to restrict advertising, to impose additional cautionary labeling or packaging requirements, or to increase excise or other taxes on beverage alcohol products. Any such developments may have an adverse impact on the financial condition, operating results and cash flows of Bendistillery, which may subsequently lead to an impairment of our investment in Bendistillery. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Alcohol related laws, regulatory measures, or governmental policies could cause Bendistillery to incur material additional costs or liabilities
We own 4.99% of hemp-infused beverage maker Ablis, and of craft distiller Bendistillery. Bendistillery produces and sells alcohol. Federal, state, local, and foreign authorities regulate how companies produce, store, transport, distribute, and sell products containing alcohol and distilled spirits. Some countries and local jurisdictions prohibit or restrict the marketing or sale of distilled spirits in whole or in part. In the United States, at the federal level, the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of the Treasury regulates the spirits and wine industry with respect to the production, blending, bottling, labeling, sales, advertising, and transportation of beverage alcohol. Similar regulatory regimes exist at the state level and in non-U.S. jurisdictions where Bendistillery sells its products. In addition, beverage alcohol products are subject to customs duties or excise taxation in many countries, including taxation at the federal, state, and local level in the United States. Laws of each nation define distilling and maturation requirements; for example, under U.S. federal and state regulations, bourbon and Tennessee whiskeys must be aged in new charred oak barrels. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state are required in connection with the lawful selling of liquor. As 4.99% owner of Bendistillery, we are impacted by the regulatory risks relating to the production and sale of alcohol which is subject to extensive regulatory requirements regarding production, exportation, importation, marketing and promotion, labeling, distribution, pricing, and trade practices, among others.
Changes in laws, regulatory measures, or governmental policies, or the manner in which current ones are interpreted, could cause Bendistillery and target companies to incur material additional costs or liabilities, and jeopardize the growth of its business in any affected market. For instance, federal, state, or local governments may prohibit, impose, or increase limitations on advertising and promotional activities, or times or locations where beverage alcohol may be sold or consumed, or adopt other measures that could limit Bendistillery’s, and target companies’ opportunities to reach consumers or sell products. It is conceivable that television, newspaper, magazine, and/or internet advertising for beverage alcohol products could be limited or banned completely. Increases in regulation of this nature could substantially reduce consumer awareness of the products of Bendistillery and target companies in the affected markets and make the introduction of new products more challenging. If governmental bodies require increased additional product labeling, warning requirements, or otherwise limit the marketing or sale of Bendistillery’s products due to their contents or allegations concerning their potential to cause adverse health effects, or Bendistillery’s marketing of such products, Bendistillery’s sales of alcohol beverages may be adversely affected. The impact of increased taxation on alcohol and distilled spirits may also have additional negative financial impacts on Bendistillery and target companies. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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Developments affecting production at Bendistillery’s distillery may negatively impact Bendistillery’s financial results
Adverse changes or developments affecting Bendistillery’s distillery in Bend, Oregon, including, but not limited to, management turnover, fire, power failure, natural disaster, public health crisis, or a material failure of security infrastructure, may reduce or require Bendistillery to entirely suspend operations. Additionally, due to many factors, including seasonality and production schedules of Bendistillery’s various products and packaging, actual production capacity may fluctuate throughout the year and may not reach full working capacity. If Bendistillery experiences contraction in their sales and distilling volumes, the excess capacity and unabsorbed overhead may have an adverse effect on gross margins, operating cash flows and overall financial performance of Bendistillery. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Bendistillery faces substantial competition in the liquor industry and the broader market for alcoholic beverage products which may impact its business and financial results
The market for alcoholic beverage products within the United States is highly competitive due to the increasing number of domestic and international beverage companies with similar pricing and target drinkers, the introduction and expansion of hard seltzers, ready-to-drink canned cocktails, low alcohol-by-volume drinks and no-alcohol alternatives, gains in market share achieved by domestic specialty beers and imported beers, and the acquisition of craft distillers and brewers by larger distillers and brewers. Drinking habits are shifting, and the decline in alcohol consumption means that there are fewer target customers for distillers. We anticipate competition among domestic craft distillers and brewers will also remain strong as existing distillers and breweries build more capacity, expand geographically and add more products, flavors and styles. The continued growth in the sales of hard seltzers, ready-to-drink canned cocktails, low alcohol-by-volume drinks and no-alcohol alternatives, craft-brewed domestic beers and imported beers is expected to increase competition in the market for alcoholic beverages within the United States and, as a result, prices and market share of Bendistillery’s products may fluctuate and possibly decline.
The liquor and beer industry has seen continued consolidation among distillers and brewers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Due to the increased leverage that these combined operations have in distribution and sales and marketing expenses, the costs to Bendistillery of competing may increase. The potential also exists for these large competitors to increase their influence with their distributors, making it difficult for smaller distillers and brewers to maintain their market presence or enter new markets. The increase in the number and availability of competing products and brands, the costs to compete and potential decrease in distribution support and opportunities may adversely affect Bendistillery’s business and financial results. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Alcoholic beverage sales are subject to slowdowns and are seasonal
Bendistillery and target companies are involved in the sale of a variety of distilled alcoholic beverages including vodka, whiskey and gin, and their sales of such beverages are subject to occasional slowdowns and are seasonal. Also, many consumers are reducing or eliminating their alcohol consumption entirely. These factors could adversely affect the value of our ownership interest in those companies, which may materially adversely affect our Company and the trading price of our common stock.
Alcoholic beverage distributors are powerful and control much of the marketplace
Bendistillery and target companies distribute their distilled alcoholic beverages through a limited number of powerful distributors that control much of the marketplace for alcoholic beverages. Shelf space is limited, and distributors prioritize proven volume. On-premise sales have not fully rebounded in some markets post-pandemic. E-commerce and direct-to-consumer opportunities remain restricted or fragmented. In order for Bendistillery to grow, it will be required to maintain such relationships with their distributors and to enter into agreements with additional distributors. No assurance can be given that Bendistillery will be able to maintain its current distribution network or secure additional distributors on terms favorable to Bendistillery. If Bendistillery’s existing distribution agreements are terminated, it may not be able to enter into new distribution agreements on substantially similar terms, which may result in an increase in the costs of distribution. The loss of such distributors, or disruptions to the operations of such distributors, may adversely affect the value of our ownership interest in Bendistillery. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
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The Oregon Liquor Control Commission has jurisdiction over our directors, officers and significant shareholders
Due to our minority ownership interest in Bendistillery, the Oregon Liquor Control Commission (“OLCC”) has jurisdiction over our directors, officers and significant shareholders. If the OLCC were to refuse to approve any of our directors, officers or significant shareholders, it may disrupt our management and corporate governance. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
The identification, detection,
During the year ended December 31, 2025,
See “ITEM 1A. RISK FACTORS” for more information regarding the Company’s cybersecurity-related risks.
ITEM 2. PROPERTIES
The Company does not lease a corporate headquarters. LFTD Partners’ Chief Executive Officer and its President and Chief Financial Officer reside in Florida, and its Chief Operating Officer resides part time in Wisconsin and part time in Florida. The Company’s executive functions are currently conducted from home office spaces provided by the Chief Executive Officer and the President and Chief Financial Officer. The future location of any corporate office, if established, will depend on a number of factors, including the residence of senior management.
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The Company conducts its operating activities through its wholly owned subsidiary, Lifted, at owned and leased facilities located in Kenosha, Wisconsin.
The Company owns one real property in Kenosha, Wisconsin (the “5511 Building”) and leases additional facilities used in its operations (the “Additional Facilities”). The 5511 Building is an 11,238 square foot building located at 5511 95th Avenue, Kenosha, Wisconsin, which was purchased on December 14, 2023 for $1,375,000. The 5511 Building is used for office space, manufacturing and storage. As of December 31, 2025, the 5511 Building is subject to a first priority mortgage in the principal amount of $852,755. The 5511 Building is currently for sale, and if it is sold then the Company will use the net sale proceeds to pay off the mortgage, and plans to consolidate its operations in the Additional Facilities.
The Additional Facilities are located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, Wisconsin and 5732 95th Avenue, Suites 100-300, Kenosha, Wisconsin. Effective February 1, 2026, the Company expanded the 5732 95th Avenue lease to include Suite 400. The Additional Facilities comprise an aggregate of approximately 41,000 square feet of leased space. The leased space located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, Wisconsin is used by the Company for shipping, receiving, packaging and office space. The leased space located at 5732 95th Avenue, Suites 100-400, Kenosha, Wisconsin is used for gummy manufacturing and storage.
Refer to NOTE 10 – LEASES to the Consolidated Financial Statements for additional information regarding the Company’s leased and owned real property. From time to time, the Company also maintains inventory at third-party facilities located throughout the United States.
Management believes that the Company’s facilities are adequate for its current operational requirements.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
For more information, please refer to NOTE 12 – LEGAL PROCEEDINGS under the Notes to the Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted under the symbol LIFD on the OTCQB Venture Market. Our shares trade infrequently and the trading price of our shares is not necessarily indicative of the existence of a trading market for our securities or indicative of our value. The following table sets forth, for the periods indicated, the high and low closing sales prices per share of our common stock.
Closing Sales Prices (1) | ||||||||
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Year Ended December 31, 2025 |
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4th Quarter |
| $ | 0.30 |
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| $ | 0.18 |
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3rd Quarter |
| $ | 0.39 |
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| $ | 0.17 |
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2nd Quarter |
| $ | 0.40 |
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| $ | 0.26 |
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1st Quarter |
| $ | 0.75 |
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| $ | 0.26 |
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Year Ended December 31, 2024 |
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4th Quarter |
| $ | 0.79 |
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| $ | 0.32 |
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3rd Quarter |
| $ | 1.10 |
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| $ | 0.30 |
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2nd Quarter |
| $ | 1.95 |
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| $ | 0.56 |
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1st Quarter |
| $ | 2.90 |
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| $ | 1.80 |
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(1) | The above table sets forth the range of high and low closing sales prices per share of our common stock as reported by Yahoo! Finance for the periods indicated. |
Approximate Number of Holders of Our Common Stock
As of January 29, 2026, a total of 14,822,678 shares of LFTD Partners’ common stock were outstanding and there were approximately 719 holders of record of LFTD Partners’ common stock.
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Issuance of Deferred Contingent Stock
At the closing of the acquisition of Lifted, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company at the closing of the Merger (the “Deferred Contingent Stock Recipients”). Now that certain conditions and requirements have been met, starting on February 24, 2023, the Deferred Contingent Stock has begun to be issued to the Deferred Contingent Stock Recipients who have instructed the Company to issue to them their respective, earned Deferred Contingent Stock. As of December 31, 2025, 503,000 shares of Deferred Contingent Stock have been issued to Deferred Contingent Stock Recipients, and there were 142,000 shares of Deferred Contingent Stock that are issuable at the direction of the Deferred Contingent Stock Recipients.
Recent Sales of Unregistered Securities
We have not sold any unregistered securities except those already reported in prior quarterly reports.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Annual Report on Form 10-K, references to the “Company,” “LFTD Partners,” “LIFD,” “Lifted,” “Highlandia”, “we,” “our” or “us” refer to LFTD Partners Inc. and Lifted, unless the context otherwise indicates.
The following Management’s Discussion and Analysis (“MD&A”) section includes a discussion of our results of operations, liquidity and financial condition and certain factors that may affect our future results. This MD&A should be read in conjunction with the Company’s risk factors, consolidated financial statements and related, accompanying notes that appear elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following MD&A contains forward-looking statements and forward-looking information, as defined under applicable United States securities laws, that reflect our plans, estimates and beliefs. MD&A of our financial condition and results of operations is provided as a supplement to the accompanying financial statements and related notes to help provide an understanding of our financial condition, the changes in our financial condition and the results of operations.
As a result of many factors, the Company’s actual results may differ materially from those anticipated in these forward-looking statements and information. The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$”).
Cautionary Note Regarding Forward-Looking Statements
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
PART I
Cautionary Note Regarding Forward-Looking Statements
SUMMARY OF RISK FACTORS
ITEM 1A. RISK FACTORS
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Overview
Reference is hereby made to the description of the business of LFTD Partners Inc. in the following section, which is hereby incorporated by reference thereto:
ITEM 1. BUSINESS
Description of the Business of LFTD Partners Inc.
Lifted
Highlandia Inc.
Ablis and Bendistillery
Properties
Manufacturing, Sales and Marketing Agreements
Lifted Purchase of Assets of Oculus CRS, LLC, and Merger With Oculus CHS Management Corp.
Extrax NM Agreement
Manufacturing, Sales and Marketing Agreement With SubCo
Capital Raise
Liquidity and Capital Resources
On February 24, 2020, the Company acquired 100% of the ownership interests of Lifted. All of the Company’s sales are generated by the Company’s wholly owned subsidiary Lifted; LFTD Partners by itself generates no sales. We also do not recognize any revenue or earnings from our investments in Bendistillery and Ablis. LFTD Partners’ other wholly owned subsidiary, Highlandia Inc., does not generate any sales.
The Company's cash needs for working capital, capital expenditures, growth opportunities, the payments of Series A and Series B Preferred Stock dividends, bonuses, its financial obligations under its loan agreements with Surety Bank, and other obligations, are expected to be met with current cash on hand and cash flows provided by operating activities.
The Company’s ability to generate sufficient operating cash flow is directly affected by the timing and collectability of its accounts receivable. A significant portion of the Company’s revenue comes from wholesale and distributor sales, which often involve extended payment terms. As a result, delays in customer payments can have a material impact on cash flow, liquidity, and working capital availability. Fluctuations in cash collections can impact the Company’s ability to meet short-term obligations, fund inventory purchases, and invest in growth initiatives. Prolonged delays in accounts receivable collection could necessitate further adjustments to working capital management strategies, including modifications to vendor payment schedules, securing additional financing, or reevaluating sales terms to improve cash flow predictability. Management assesses the impact of delayed customer payments on overall liquidity and considers credit risk and allowance for doubtful accounts, in an effort to provide some safeguard against potential cash flow disruptions. However, if economic conditions deteriorate or customer creditworthiness declines further, additional measures may be required to preserve liquidity and operational stability.
The Company has a history of losses as evidenced by the accumulated deficit at December 31, 2025 of $28,839,889. We plan to sustain the Company as a going concern by taking the following actions: (1) continuing to operate Lifted; (2) acquiring and/or developing profitable businesses that will create positive income from operations; and/or (3) completing private placements of our common stock and/or preferred stock. We believe that by taking these actions, we will be provided with sufficient future operations and cash flow to continue as a going concern. However, there can be no assurance that we will be successful in consummating such actions on acceptable terms, if at all. Moreover, many of such actions can be expected to result in substantial dilution to the existing shareholders of the Company.
The following table summarizes our Company’s cash flows for the years ended December 31, 2025, 2024 and 2023:
|
| For the Years Ended |
| |||||||||
|
| December 31, |
| |||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
| |||
Net Cash Provided By/(Used In) Operating Activities |
| $ | 1,321,503 |
|
| $ | (960,067 | ) |
| $ | 638,925 |
|
Net Cash Used in Investing Activities |
|
| (121,639 | ) |
|
| (479,574 | ) |
|
| (2,516,955 | ) |
Net Cash Provided by/(Used In) Financing Activities |
|
| (2,579,688 | ) |
|
| (770,951 | ) |
|
| 3,704,945 |
|
Cash Flows From Operating Activities
Net cash provided by operating activities was $1,321,503 during the year ended December 31, 2025; this resulted from a net loss of $24,858,678 decreased by changes in net, non-cash expenses of $27,875,349 and increased by changes in net operating assets and liabilities of $1,695,168. Non-cash expenses are primarily related to Impairment of Goodwill of $23,092,794, Impairment of Investment in Bendistillery of $1,397,200, Provision for Credit Losses – Extrax NM Loans of $421,835, and Impairment of Investment in Ablis of $399,200. Changes in net operating assets and liabilities primarily related to net purchases of inventory totaling $3,016,708.
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In comparison, net cash used in operating activities was $960,067 for the year ended December 31, 2024; this resulted from a net loss of $1,857,429 decreased by net, non-cash expenses of $3,861,942 and increased by changes in net operating assets and liabilities of $2,964,580. Non-cash expenses are primarily related to spoiled and written off inventory of $1,550,599, bad debt expense of $1,469,078, and the loss on the Jeeter collaboration of $1,349,467. Changes in net operating assets and liabilities primarily related to net purchases of inventory totaling $2,552,003.
Net cash provided by operating activities was $638,925 for the year ended December 31, 2023; this resulted from net income of $2,159,007 increased by net, non-cash expenses of $4,328,412 and reduced by changes in net operating assets and liabilities of $5,848,494. Non-cash expenses are primarily related to Deferred Contingent Stock Compensation expense of $2,138,175 and spoiled and written off inventory of $2,056,603. Changes in net operating assets and liabilities primarily related to net purchases of inventory totaling $5,936,752.
Cash Flows From Investing Activities
Net cash used in investing activities was $121,639 during the year ended December 31, 2025, and was due to the purchase of fixed assets.
Net cash used in investing activities was $479,574 during the year ended December 31, 2024. In 2024, Lifted spent $313,763 on purchases of fixed assets and paid $200,000 for the cash portion of the second installment of merger consideration pursuant to the Oculus Merger Agreement.
Net cash used in investing activities was $2,516,955 during the year ended December 31, 2023, of which $1,385,225 was reported used for the purchase of Lifted’s main operations building located at 5511 95th Avenue, Kenosha, Wisconsin, and of which $789,662 related to net purchases of fixed assets. In 2023, Lifted spent the net amount of $342,068 to purchase the net assets of Oculus CRS, LLC.
Cash Flows From Financing Activities
During the year ended December 31, 2025, net cash used in financing activities was $2,579,688, primarily consisting of payments on the Surety Bank loans of $2,570,033 and payments on the Related Party Note (defined below) of $346,154, offset by proceeds of $350,000 from the Related Party Note. On November 20, 2025, the Company paid off the principal balance of $1,408,894 and accrued interest on the Working Capital Loan, which totaled $1,411,125, with no prepayment penalty (“WCL Payoff”). Following the WCL Payoff, Surety Bank also agreed to immediately waive the covenants of the Business Loan Agreement regarding maintaining a minimum 1.50x debt service coverage ratio, and a $1,000,000 minimum deposit account balance (“Loan Term Changes”). During the year ended December 31, 2025, net cash decreased by $1,379,824, and we had $1,767,123 of unrestricted cash at December 31, 2025.
During the year ended December 31, 2024, net cash used in financing activities was $770,951, which is primarily driven by payments on the Surety Bank loans of $517,213 and purchases of shares of the Company’s common stock of $240,240. During the year ended December 31, 2024, net cash decreased by $2,210,592, and we had $2,146,947 of unrestricted cash and $1,000,000 of restricted cash at December 31, 2024.
During the year ended December 31, 2023, net cash provided by financing activities was $3,704,945, primarily driven by the proceeds from the Surety Bank loans of $3,910,000, offset by the payment of debt financing costs of $115,697, and payments of dividends to the Company’s Series A and Series B Convertible Preferred stockholders totaling $20,961. During the year ended December 31, 2023, net cash increased by $1,826,916, and we had $4,357,539 of unrestricted cash and $1,000,000 of restricted cash at December 31, 2023.
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Comparison of the Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024
The following table summarizes our Company’s current assets, current liabilities and working capital as of December 31, 2025 and December 31, 2024:
|
| December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Current Assets |
| $ | 15,691,047 |
|
| $ | 17,232,023 |
|
Current Liabilities |
|
| 5,162,410 |
|
|
| 6,388,029 |
|
Working Capital |
|
| 10,528,637 |
|
|
| 10,843,994 |
|
As of December 31, 2025, we had unrestricted cash of $1,767,123; in comparison, as of December 31, 2024, we had unrestricted cash of $2,146,947.
As of December 31, 2025, we reported prepaid expenses of $348,667, primarily consisting of prepaid inventory of $272,968. In comparison, as of December 31, 2024, we reported prepaid expenses of $1,598,654, primarily consisting of prepaid inventory of $1,470,957.
Accounts receivable of $2,531,524, net of $1,269,590 allowance for doubtful accounts, were outstanding as of December 31, 2025. In comparison, accounts receivable of $2,662,841, net of $853,329 allowance for doubtful accounts, were outstanding as of December 31, 2024.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Accounts Receivable
NOTE 3 - RISKS AND UNCERTAINTIES Going Concern |
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Inventory is valued at the lower of average cost or market value (net realizable value). Inventory consisted of the following at December 31, 2025 and December 31, 2024:
|
| December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Raw Goods |
| $ | 5,906,501 |
|
| $ | 5,867,526 |
|
Finished Goods |
|
| 5,051,322 |
|
|
| 3,448,765 |
|
Total Inventory |
| $ | 10,957,823 |
|
| $ | 9,316,291 |
|
Overhead expenses related to leases, utilities, insurance, and indirect labor are allocated to finished goods based on the estimated percentage cost toward the finished goods. Depreciation expense related to certain machinery and equipment is also allocated to finished goods. At December 31, 2025, $373,269 of overhead expenses were allocated to finished goods. In comparison, at December 31, 2024, $383,646 of overhead expenses were allocated to finished goods. Finished goods inventory increased by $1,641,532 year-over-year primarily due to a $1,461,476 increase in inventory of non-hemp products.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Inventory
NOTE 3 - RISKS AND UNCERTAINTIES Going Concern |
|
As of December 31, 2024, our other assets primarily included goodwill of $23,092,794, which was comprised of $22,292,767 of goodwill from the acquisition of Lifted on February 24, 2020 ("Lifted Goodwill"), and $800,027 of goodwill from Lifted’s purchase of nearly all of the assets of Oculus CRS, LLC, and Lifted’s merger with Oculus CHS Management Corp. in April 2023 ("Oculus Goodwill").
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On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also bans intoxicating hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. However, the Act in all likelihood will have a devastating impact on the Company and the price of its common stock. The material adverse effects of the Act cannot be overstated.
The Act necessitated the calculation and recording of an impairment charge on the Lifted Goodwill and Oculus Goodwill. As of December 31, 2025, LFTD Partners recorded a goodwill impairment charge on the Lifted Goodwill and Oculus Goodwill, reducing the carrying value of both to $0.
Also, as of December 31, 2024, our other assets included our investments in hemp-derived beverage and products maker Ablis, and distillers Bendistillery and Bend Spirits, which total $1,896,200. In the second quarter of 2025, Bend Spirits was merged into Bendistillery for operational efficiency.
The Act necessitated the calculation and recording of an impairment of LFTD Partners’ investment in Ablis. On April 30, 2019, LFTD Partners purchased 4.99% of the common stock of Ablis for $399,200. On December 31, 2025, LFTD Partners recorded an impairment charge on its investments in Ablis, reducing the carrying value of LFTD Partners’ investment in Ablis to $0.
Regarding LFTD Partners' investment in Bendistillery: distillers such as Bendistillery are navigating a tougher, more complex environment than they did even a few years ago. Liquor companies today are balancing category decline, stricter rules, and higher costs while trying to stay culturally relevant. Consequently, as of December 31, 2025, LFTD Partners also recorded an impairment charge on its investments in Bendistillery (Bend Spirits had previously merged into Bendistillery in the second quarter of 2025), reducing the carrying value of LFTD Partners’ investment in Bendistillery to $99,800.
Net fixed assets as of December 31, 2025 and December 31, 2024 were $2,273,377 and $2,704,615, respectively; the decrease is driven by $552,877 of depreciation offset by $121,639 of capital expenditures. The Act is expected to materially reduce or eliminate the utility and marketability of fixed assets used primarily in the manufacture of hemp-derived products. As a result, we may be required to record impairment charges on these assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts.
In addition, as of December 31, 2024, our other assets also included restricted cash of $1,000,000. Prior to the Loan Term Changes, we were required by our Business Loan Agreement with Surety Bank to maintain a minimum depository balance of $1,000,000 with Surety Bank for the duration of our Business Loan. The Business Loan matures on December 14, 2028.
If the Act materially reduces our revenue from hemp-derived products, our cash flow may be insufficient to support ongoing operating expenses. In that event, we may be required to sell fixed assets or other assets to generate liquidity, which could occur at unfavorable prices and materially adversely affect our financial condition.
As of December 31, 2025, current liabilities of $5,162,410 primarily consisted of accounts payable and accrued expenses of $3,326,650 and deferred revenue of $1,380,049. In comparison, as of December 31, 2024, current liabilities of $6,388,029 primarily consisted of accounts payable and accrued expenses of $4,867,481, the current portion of the notes payable to Surety Bank of $559,418, and deferred revenue of $674,676. The year-to-date decline in current liabilities was primarily attributable to a year-to-date reduction in our accounts payable and accrued expenses due to the timing of payments to suppliers and other vendors.
The second installment of the Oculus CHS Management Corp. merger consideration was paid by Lifted to Chase and Hagan Sanchez following the first anniversary of the closing of the merger, which was April 28, 2024. The second installment of merger consideration consists of:
| (1) | Two Hundred Thousand Dollars ($200,000) in cash; and |
| (2) | One Hundred Sixty Thousand (160,000) newly issued shares of unregistered LIFD Common Stock. |
On May 13, 2024, the cash component of the second installment of merger consideration was paid, and the stock component of the second installment of merger consideration was issued.
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On April 1, 2025, the Company converted $350,000 of its cash into USD Coin (USDC), a digital stablecoin pegged to the U.S. dollar. Shortly thereafter, the digital wallet containing the USDC was compromised by an unauthorized and unknown third party, resulting in the theft of the full amount. The Company promptly reported the incident to the U.S. Federal Bureau of Investigation and continues to cooperate fully in the ongoing investigation. The Company's outside law firm is also advising the Company regarding the matter. At this time, the Company is doubtful whether any of the stolen funds will be recovered. On April 22, 2025, the Company borrowed $350,000 from Beachin Company, an affiliate of the Company’s CEO and CFO (the “Related Party Note”). The $350,000 loan does not bear interest, and is being repaid by the Company using funds that otherwise would have been paid to the Company’s CEO and CFO in the form of salary or bonuses pursuant to their employment agreements with the Company.
As of December 31, 2025, non-current liabilities of $1,477,877 consisted of the non-current portion of the loan payable to Surety Bank which totaled $797,597, and operating lease liability of $680,280. The Board of Directors of the Company had authorized management of the Company to apply certain tax refunds expected to be received by the Company, plus certain cash on hand held by the Company, to the partial or full repayment of the Working Capital Loan. Pursuant to this authorization, during the third quarter ended September 30, 2025, the Working Capital Loan was paid down $592,050 using certain tax refunds received by the Company. Then, on November 20, 2025, the remaining principal and accrued interest on the Working Capital Loan (totaling $1,411,125) was paid off.
In comparison, at December 31, 2024, non-current liabilities of $3,727,360 consisted of the non-current portion of the loans payable to Surety Bank which totaled $2,789,372, and operating lease liability of $937,988.
In prior years, the Company’s payables have been greater than its cash on hand. Prior to the Company’s acquisition of Lifted, the Company had inconsistent income-generating ability and was therefore reliant on raising money from loans or stock sales. The Company had an accumulated deficit of $28,839,889 and $3,967,708 as of December 31, 2025 and 2024, respectively.
Comparison of Operations During the Years Ended December 31, 2025, 2024, and 2023
During the year ended December 31, 2025, the Company recognized net sales of $36,920,799. During the years ended December 31, 2024 and 2023, the Company recognized net sales of $37,325,228 and $51,610,562, respectively. Reasons for the decrease in year-over-year net sales, include, but are not limited to: prohibition of, or tighter regulation of, intoxicating hemp-derived and kratom-derived products has been adopted or proposed in many states that are significant markets for Lifted, such as in Florida, Texas, Illinois and California; greater competition in the marketplace for branded hemp-derived and psychoactive products that are similar to those that Lifted sells; more distributors creating their own brands and selling their own branded products at a lower price than Lifted’s products; increased competition for products containing more milligrams of cannabinoids or active ingredients per unit at a lower price point; and other competing brands paying distributors and wholesalers more than what Lifted is willing to pay (if anything), for valuable shelf space.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Revenue License Fee
NOTE 3 - RISKS AND UNCERTAINTIES Going Concern |
|
During the year ended December 31, 2025, Lifted has launched certain initiatives in order to attempt to increase net sales and decrease operating expenses, including: laying off certain employees and independent contractors in Kenosha and Durango; restructuring its sales team; consolidating operations; developing the marketing and distribution networks of hemp-free brands including Rebel Energy Gummy, Mielos, and other brands and products; and increasing spending on marketing and advertising, and digital marketing.
Cost of Goods Sold
Cost of Goods Sold amounted to $24,300,144 during the year ended December 31, 2025, compared to $24,570,399 and $31,906,278 during the years ended December 31, 2024 and 2023, respectively.
Lifted's industry, and customer preferences, are constantly and quickly evolving. Consequently, Lifted finds it extremely difficult to predict future sales of its products and to anticipate raw goods needs for future production. This exposes Lifted to the risk that it will need to write off obsolete raw goods and slow-moving finished goods, causing an increase in cost of goods sold.
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During the year ended December 31, 2025, $1,017,103 of obsolete and spoiled inventory was written off, net of a $185,781 reversal of packaging previously written off.
During the year ended December 31, 2024, $1,550,599 of obsolete and spoiled inventory was written off. During the fourth quarter of 2024, $170,618 of obsolete and spoiled inventory was written off, consisting of $61,532 of finished goods, and $109,085 worth of raw goods. The most significant write offs during the year ended December 31, 2024 occurred during the second quarter of 2024. During the second quarter of 2024, $651,190 of inventory, primarily comprised of packaging that cost $434,402, was written off.
During the year ended December 31, 2023, $2,056,603 of obsolete and spoiled inventory was written off, primarily driven by the write-offs in the third and fourth quarters of 2023. During the quarter ended December 31, 2023, $1,285,248 of obsolete and spoiled inventory, which related primarily to $570,778 worth of raw goods packaging and vapes, and $497,811 of finished goods, such as amanita mushroom gummies, and slow-moving hemp-infused gummies manufactured by third-party suppliers prior to the commencement of Lifted’s in-house gummy manufacturing operations in Kenosha, Wisconsin. And during the quarter ended September 30, 2023, $597,098 of obsolete and spoiled inventory, which related primarily to $489,022 of expired HHC-infused gummies, was written off. Nearly all of these expired gummies were manufactured by third-party suppliers prior to the commencement of Lifted’s in-house gummy manufacturing operations in Kenosha, Wisconsin. Management believes that these expired gummies were manufactured pursuant to formulations and manufacturing protocols that were of lower quality than Lifted’s in-house gummy products, and sold more slowly due to the relative lack of consumer excitement for HHC-infused gummies.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Inventory Cost of Goods Sold
NOTE 3 - RISKS AND UNCERTAINTIES Going Concern |
|
Settlement With Vape Device Manufacturer
On December 30, 2022, Lifted was able to reach an agreement for the forgiveness of $630,000 of payables owed to its third-party disposable vape device manufacturer. The agreement also includes credits to Lifted against future purchases from the device manufacturer totaling $370,047. The credit was to be provided by the manufacturer at the rate of $46,255.87 per quarter beginning with the first quarter of 2023 and continuing for the next six consecutive quarters, with a final quarterly credit of $46,255.91 for the fourth quarter of 2024. The agreement was a result of the vape manufacturer agreeing to share a portion of the Company’s prior $2,313,902 write-off of certain 2 mL disposable vapes that were written off due to clogging issues. The payable forgiveness resulted in a net $485,496 improvement to the cost of goods sold and accrued liabilities sections of the Company’s consolidated statements of operations as of December 30, 2022. The $370,047 in credits had been booked as an asset as of December 30, 2022 and was recognized as other income amortized quarterly by December 31, 2024.
Segment Disclosures
Reference is hereby made to the disclosures above in the following section, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Segment Disclosures
Operating Expenses
Operating expenses include accounts such as payroll expense, deferred contingent stock expense, company-wide management bonus pool, professional fees, bank charges and merchant fees, advertising and marketing, bad debt expense, depreciation and amortization, collaboration commission and royalty expense, and other operating expenses.
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Deferred Contingent Stock
No stock compensation expense was recognized during the years ended December 31, 2025 and December 31, 2024. During the first quarter of 2023, the Company recognized a net loss after ten straight quarters of profitability, solely because of the impact of a one-time, non-cash stock compensation expense of $2,138,175, which, for the year ended December 31, 2023, was $1,666,155 on an after-tax basis. At the closing of the acquisition of Lifted in February 2020, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company (the “Deferred Contingent Stock Recipients”), as an employee retention incentive. Now that certain conditions and requirements have been met, the Deferred Contingent Stock vested on February 24, 2023, and on this date, in accordance with US GAAP, the Company expensed the value of the vested Deferred Contingent Stock. This one-time, non-cash charge reduced net income for the year ended December 31, 2023 from $3,825,162 to $2,159,007. But for this charge, our Company would have reported a basic and fully diluted EPS of $0.26 and $0.23, respectively, for the year ended December 31, 2023. As of December 31, 2025 and as December 31, 2024, 503,000 shares of Deferred Contingent Stock have been issued to the Deferred Contingent Stock Recipients and there were 142,000 shares of Deferred Contingent Stock that are issuable at the direction of the Deferred Contingent Stock Recipients.
Payroll Expense
Payroll expenses include sales commissions paid to independent contractors. If the Act materially reduces demand for our hemp-derived products, we may be required to reduce our workforce and terminate relationships with independent contractors. Such actions could disrupt our operations, result in restructuring costs, and adversely affect our ability to operate or pursue future business opportunities. During the year ended December 31, 2025, the Company reported payroll expenses of $4,757,465. In March 2025, an Employee Retention Tax Credit (“ERC”) of $22,357 related to the second quarter of 2020 was recovered. The $22,357 ERC is accounted for as a reduction in payroll expenses in the first quarter of 2025.
Lifted entered into an agreement with its Chief Strategy Officer (the “CSO”), effective as of April 1, 2025, pursuant to which, in addition to his base compensation of $10,000 every two weeks plus health insurance coverage, the CSO receives (1) a royalty on certain gummies manufactured by Lifted of between $0.005 and $0.01, and (2) certain quarterly and annual bonuses based upon Lifted’s quarterly and annual collected revenues on certain sales exceeding targets of $9,000,000 and $58,000,000, respectively.
During the year ended December 31, 2024, the Company reported payroll expenses of $5,840,846. Lifted’s former CSO, who worked for Lifted from July 1, 2021 through April 30, 2024, had been hired to develop and implement certain important strategies to assist Lifted’s efforts to increase its production, fulfillment and sales capabilities. The CSO’s two-year agreement with Lifted entitled the CSO to be paid an annual salary of $180,000 plus a bonus equal to 5% of total net sales for Lifted in excess of $6,000,000 per quarter. The CSO’s final bonus, for April 2024, was $27,941, and was paid in May 2024. For the year ended December 31, 2024, the bonus earned by the CSO was $191,273.
During the second half of 2024, Lifted has, and is continuing to, selectively pare its payroll expense in order to conserve working capital and increase its profit margins. Employee and independent contractor headcount has decreased from approximately 166 as of December 31, 2023 to 148 as of December 31, 2024, to approximately 100 as of December 31, 2025.
During the year ended December 31, 2023, the Company reported payroll expenses of $7,476,955. The Company recognized bonus expense related to the bonus earned by the CSO of $526,535 in the fourth quarter of 2023.
Company-Wide Management Bonus Pool
During the years ended December 31, 2025 and 2024, there was no reported Company-Wide Management Bonus Pool expense. During the year ended December 31, 2023, the Company expensed and paid $233,332 to certain members of the management team of Lifted; however, none of this $233,332 went to GJacobs, WJacobs or NWarrender. This $233,332, along with the $233,336 Company-Wide Management Bonus Pool expense paid to certain members of the management team of Lifted (again excluding GJacobs, WJacobs or NWarrender) in the fourth quarter of 2022 will be deducted from future company-wide management bonus pools on a dollar-for-dollar basis.
Advertising and Marketing Expenses
Advertising and marketing costs are expensed as incurred. Advertising and marketing expenses primarily relate to marketing campaigns, trade shows, digital marketing, and promotional products. Lifted has been engaging with third party specialists to increase its presence in the direct-to-consumer space. Direct-to-consumer sales have increased year-over-year from 2023 to 2025. During the year ended December 31, 2025, the Company incurred $1,985,021 of advertising and marketing expenses. In comparison, during the years ended December 31, 2024 and 2023, the Company incurred $1,155,067 and $951,266 of advertising and marketing expenses, respectively.
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Provision for Credit Losses – Extrax NM Loans
Reference is hereby made to the disclosures above in the following section, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
License Fee
Bad Debt Expense
Bad debt expense of $558,522 was recognized during the year ended December 31, 2025, compared to bad debt expense of $1,469,078 and $353,162 during the years ended December 31, 2024 and 2023, respectively.
Bad debt expense stems from the change in the Company’s allowance for doubtful accounts, which stems from the Company’s CECL Model analysis. The delay in Lifted’s receipt of payments from certain customers—primarily distributors—have increasingly become an issue for Lifted. Certain customers have become slower to pay Lifted for purchased product (“Slow Paying Customers”), and the Slow Paying Customers disregard payment terms. Management speculates that some Slow Paying Customers may be slow-paying Lifted because of their own sales collection issues, which may in part be caused by the regulatory uncertainty over our industry. The Company has an accounting protocol which effectively causes the Company to recognize an allowance for doubtful accounts for all invoices older than 90 days. Consequently, the delay in Lifted’s receipt of payments from certain customers has a direct impact on the Company’s net receivables, net income, and earnings per share.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable
Collaboration Commission and Royalty Expense
For the years ended December 31, 2025, 2024 and 2023, the Company reported collaboration commission and royalty expense of $74,791, $692,971 and $1,733,800, respectively. The change in collaboration commission and royalty expense primarily stems from decreased sales of the products covered by respective collaborations. Lifted has been de-emphasizing its collaboration efforts with outside brands due to the collaborations’ lack of traction in sales. As of December 31, 2025, the only Manufacturing, Sales and Marketing Agreement (“Agreement”) still in effect was the Diamond Agreement. The Jeeter Agreement had been terminated on January 1, 2024. On or about April 28, 2025, Lifted and Cali mutually agreed to terminate the Cali Agreement and all agreements, obligations and responsibilities of the parties thereunder, as of January 1, 2025. On December 17, 2025, Lifted and SubCo mutually agreed to terminate their Agreement.
Other Operating Expenses
Other operating expenses include, for example, software expenses, travel, insurance expense, rent expense, repairs and maintenance, state license and filing fees, excise and sales tax expense, health benefits, warehouse and lab expenses below the Company’s capitalization threshold, and other expenses.
Other operating expenses were $2,276,941 during the year ended December 31, 2025, compared to $2,607,704 during the year ended December 31, 2024, and $2,541,263 during the year ended December 31, 2023. The premiums of certain insurance policies that the Company has had in place have typically been based on the Company’s revenue; as such, these policies are costly for the Company.
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Other Income or Expenses
During the year ended December 31, 2025, net non-operating Other Expenses of $25,339,062 were primarily driven by the Impairment of Goodwill of $23,092,794, Impairment of Investment in Bendistillery of $1,397,200, Impairment of Investment in Ablis of $399,200, and Theft Expense of $350,000. Reference is hereby made to the disclosures above in the following section, which are hereby incorporated by reference thereto:
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
The Company’s Investments in Ablis and Bendistillery
NOTE 6 – THEFT OF INVENTORY
Also included in net non-operating Other Expenses of for the year ended December 31, 2025 was Loss From Inventory Theft of $108,072. In July 2025, $335,460 worth of finished goods were stolen off of Lifted’s third-party shipper's truck just after leaving Lifted's co-packer's facility in Orange County, California. The thieves were apprehended by authorities, and Lifted filed an insurance claim with the shipping company's insurance company. Lifted’s co-packer credited Lifted $40,000. On November 6, 2025, Lifted executed a Property Damage-Liability Release with the insurance carrier of the shipping company, in exchange for the insurance company paying $250,000. Also included in Loss From Inventory Theft for the year ended December 31, 2025 is $11,507 worth of finished goods that were stolen in September 2025 in transit to a customer. Lifted has filed an insurance claim with the shipping company's insurance company, but it is an unknown how much, if any, of the stolen product will be reimbursed by the insurance company.
During the year ended December 31, 2024, net non-operating Other Expenses of $1,608,390 primarily consisted of the $1,349,467 loss related to the termination of the Jeeter collaboration. In comparison, during the year ended December 31, 2023, net non-operating other income of $346,883 consisted primarily of settlement income of $506,211, offset by interest expense of $110,517, and debt financing expenses of $60,548.
Net Income or Loss
During the year ended December 31, 2025, the Company reported a net loss of $24,858,678. During the year ended December 31, 2024, the Company reported a net loss of $1,857,429. During the year ended December 31, 2023, the Company reported net income of $2,159,007.
Prior to the Loan Term Changes, the Business Loan required that Borrower maintained a minimum 1.50x DSCR based on Borrower's annual corporate tax return. The DSCR was to be tested annually, beginning with the 2023 return. The DSCR was to be calculated as EBIDA (earnings before interest, depreciation, and amortization) divided by contractual annual debt service payments. Borrower met the DSCR requirement contained in the Business Loan for the year ended December 31, 2023. Surety Bank agreed to waive any claim of default based on Borrower’s 2024 DSCR.
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Off-Balance Sheet Arrangements
As of reported period end, the Company has no off-balance sheet arrangements.
Comparison of Operations for the Quarters Ended December 31, 2025 and September 30, 2025
LFTD PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| For the Three Months Ended |
| |||||
|
| December 31, |
|
| September 30, |
| ||
|
| 2025 |
|
| 2025 |
| ||
Net Sales |
| $ | 8,414,871 |
|
| $ | 9,056,742 |
|
Cost of Goods Sold |
|
| 5,415,498 |
|
|
| 4,899,247 |
|
Gross Profit |
|
| 2,999,373 |
|
|
| 4,157,495 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
Payroll Expense |
|
| 1,092,074 |
|
|
| 1,169,117 |
|
Professional Fees |
|
| 212,223 |
|
|
| 132,424 |
|
Bank Charges and Merchant Fees |
|
| 162,859 |
|
|
| 159,042 |
|
Advertising and Marketing |
|
| 611,003 |
|
|
| 426,573 |
|
Provision for Credit Losses – Extrax NM Loans |
|
| 421,835 |
|
|
| - |
|
Bad Debt (Recovery)/Expense |
|
| (106,164 | ) |
|
| 418,918 |
|
Depreciation and Amortization |
|
| 60,836 |
|
|
| 62,161 |
|
Collab Commission and Royalty Expense |
|
| (31,948 | ) |
|
| 33,899 |
|
Other Operating Expenses |
|
| 538,212 |
|
|
| 442,570 |
|
Total Operating Expenses |
|
| 2,960,930 |
|
|
| 2,844,704 |
|
Income From Operations |
|
| 38,443 |
|
|
| 1,312,791 |
|
Other Income/(Expenses) |
|
|
|
|
|
|
|
|
| Impairment of Investment in Ablis |
|
| (399,200 | ) |
|
| - |
|
| Impairment of Investment in Bendistillery |
|
| (1,397,200 | ) |
|
| - |
|
| Impairment of Goodwill |
|
| (23,092,794 | ) |
|
| - |
|
Interest Income |
|
| 13,650 |
|
|
| 23,695 |
|
Interest Expense |
|
| (55,647 | ) |
|
| (73,481 | ) |
(Loss)/Recovery From Inventory Theft |
|
| 250,000 |
|
|
| (358,072 | ) |
| Settlement Income |
|
| 55,912 |
|
|
| - |
|
Debt Financing Expenses |
|
| (2,803 | ) |
|
| (32,803 | ) |
Penalties |
|
| (5,098 | ) |
|
| (1,316 | ) |
| Gain on Forgiveness of Debt |
|
| 4,597 |
|
|
| - |
|
Total Other Income/(Expenses) |
|
| (24,628,583 | ) |
|
| (441,977 | ) |
Income/(Loss) Before Provision for Income Taxes |
|
| (24,590,140 | ) |
|
| 870,814 |
|
Benefit/(Provision) for Income Taxes |
|
| (330,803 | ) |
|
| (236,557 | ) |
Net Income/(Loss) |
| $ | (24,920,943 | ) |
| $ | 634,257 |
|
Less: Accrued Preferred Stock Dividends |
|
| (3,403 | ) |
|
| (3,403 | ) |
Net Income/(Loss) Attributable to Common Stockholders |
| $ | (24,924,346 | ) |
| $ | 630,854 |
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) Per Common Share Attributable to Common Stockholders |
|
|
|
|
|
|
|
|
Basic |
| $ | (1.68 | ) |
| $ | 0.04 |
|
Diluted |
| $ | (1.68 | ) |
| $ | 0.04 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
| 14,822,678 |
|
|
| 14,822,678 |
|
Diluted |
|
| 14,822,678 |
|
|
| 14,964,678 |
|
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Comparison of Operations for the Quarters Ended December 31, 2025 and December 31, 2024
LFTD PARTNERS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| For the Three Months Ended December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Net Sales |
| $ | 8,414,871 |
|
| $ | 8,479,605 |
|
Cost of Goods Sold |
|
| 5,415,498 |
|
|
| 6,420,952 |
|
Gross Profit |
|
| 2,999,373 |
|
|
| 2,058,653 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
Payroll Expenses |
|
| 1,092,074 |
|
|
| 1,408,312 |
|
Professional Fees |
|
| 212,223 |
|
|
| 195,378 |
|
Bank Charges and Merchant Fees |
|
| 162,859 |
|
|
| 134,414 |
|
Advertising and Marketing |
|
| 611,003 |
|
|
| 317,605 |
|
Provision for Credit Losses – Extrax NM Loans |
|
| 421,835 |
|
|
| - |
|
Bad Debt (Recovery)/Expense |
|
| (106,164 | ) |
|
| (835,820 | ) |
Depreciation and Amortization |
|
| 60,836 |
|
|
| 62,265 |
|
Collab Commission and Royalty Expense |
|
| (31,948 | ) |
|
| 103,100 |
|
Other Operating Expenses |
|
| 538,212 |
|
|
| 601,081 |
|
Total Operating Expenses |
|
| 2,960,930 |
|
|
| 1,986,335 |
|
Income From Operations |
|
| 38,443 |
|
|
| 72,318 |
|
Other Income/(Expenses) |
|
|
|
|
|
|
|
|
Impairment of Investment in Ablis |
|
| (399,200 | ) |
|
| - |
|
Impairment of Investment in Bendistillery |
|
| (1,397,200 | ) |
|
| - |
|
Impairment of Goodwill |
|
| (23,092,794 | ) |
|
| - |
|
Interest Income |
|
| 13,650 |
|
|
| 27,853 |
|
Interest Expense |
|
| (55,647 | ) |
|
| (85,279 | ) |
Dividend Income |
|
| - |
|
|
| 1,193 |
|
(Loss)/Recovery From Inventory Theft |
|
| 250,000 |
|
|
| - |
|
Settlement Income |
|
| 55,912 |
|
|
| - |
|
Settlement Costs |
|
| - |
|
|
| (2,000 | ) |
Debt Financing Expenses |
|
| (2,803 | ) |
|
| (2,803 | ) |
Penalties |
|
| (5,098 | ) |
|
| (4,935 | ) |
Gain/(Loss) on Disposal of Fixed Assets |
|
| - |
|
|
| (2,423 | ) |
Gain on Forgiveness of Debt |
|
| 4,597 |
|
|
| - |
|
Total Other Income/(Expenses) |
|
| (24,628,583 | ) |
|
| (68,394 | ) |
Income/(Loss) Before Provision for Income Taxes |
|
| (24,590,140 | ) |
|
| 3,924 |
|
Provision for Income Taxes |
|
| (330,803 | ) |
|
| (2,738 | ) |
Net Income/(Loss) |
| $ | (24,920,943 | ) |
| $ | 1,186 |
|
Less: Accrued Preferred Stock Dividends |
|
| (3,403 | ) |
|
| (3,400 | ) |
Net Income/(Loss) Attributable to Common Stockholders |
| $ | (24,924,346 | ) |
| $ | (2,214 | ) |
|
|
|
|
|
|
|
|
|
Earnings/(Loss) Per Common Share Attributable to Common Stockholders |
|
|
|
|
|
|
|
|
Basic |
| $ | (1.68 | ) |
| $ | (0.00 | ) |
Diluted |
| $ | (1.68 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
| 14,822,678 |
|
|
| 14,822,678 |
|
Diluted |
|
| 14,822,678 |
|
|
| 14,964,678 |
|
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Critical Accounting Policies and Estimates
Critical accounting policies and estimates are discussed in NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES of the consolidated financial statements accompanying this Annual Report on Form 10-K.
The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts recognized in the consolidated financial statements are described below.
Inventory
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Inventory
Goodwill Impairment
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Accounting for Goodwill
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
Revenue
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Revenue
License Fee
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
Tax Provision
Please refer to NOTE 14 – INCOME TAXES for more information about the Company’s tax provision.
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Other Matters
We may be subject to other legal proceedings, claims, and litigation arising in the ordinary course of business in addition to the matters discussed in NOTE 12 – LEGAL PROCEEDINGS. We intend to vigorously pursue and defend such litigation. Although the outcome of these other matters is currently not determinable, our management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our Company’s financial position, results of operations, or cash flows.
Impact of Pandemics and Inflation
The COVID-19 pandemic caused significant disruption to global supply chains, labor markets, and commercial activity, including adverse impacts on Lifted’s operations through workforce interruptions, supply constraints, and limitations affecting distributors and customers. Lifted received federal assistance under the Economic Injury Disaster Loan and Paycheck Protection Program during that period. While the Company’s revenues for the years ended December 31, 2025, 2024 and 2023 were not materially impacted by COVID-19, broader economic effects—including inflation, higher interest rates, supply chain volatility, and changes in consumer spending—have contributed to an uncertain operating environment. Future public health events, including potential new variants or other pandemics, could negatively affect the Company’s business, including through workforce disruptions, reduced customer demand, delayed customer payments, supply chain interruptions, banking system instability, or increased costs. Inflationary pressures and elevated interest rates may also increase operating expenses and financing costs and affect consumer purchasing behavior. The Company continues to monitor economic and public health developments and may adjust operations, product strategy, and capital allocation as conditions evolve.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by ITEM 8. is located beginning on page F-1 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Financial Officer, WJacobs, evaluated the effectiveness of the Company’s disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, WJacobs concluded that because of the material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2025.
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(b) Management’s annual report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. “Internal Control Over Financial Reporting” is defined in Exchange Act Rules 13a -15(f) and 15d - 5(f) as a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by an issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:
| (1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of an issuer; |
|
|
|
| (2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and |
|
|
|
| (3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material adverse effect on the financial statements. |
During December 2025, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the framework set forth in the report entitled Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management concluded that our internal control over financial reporting as of December 31, 2025 was not effective. Management identified the following material weaknesses as of December 31, 2025:
| (1) | There existed a lack of segregation of duties in regard to the Company’s financial reporting, procedures for depositing of funds, procedures for cash disbursements, procedures for checkbook entries, period close procedures, and procedures for financial statement preparation. |
|
|
|
| (2) | There are not effective policies and procedures in place to provide adequate, independent oversight over financial reporting, timely preparation, and review of accounting records, and there is a lack of segregation of duties. |
Management is continually working to improve the effectiveness of our internal control over financial reporting. Our actions have included the following to improve controls over our financial statement preparation and reporting process:
| (1) | We have enhanced certain resources available within our accounting team. We hired a Chief Financial Officer of Lifted who is specifically responsible for overseeing the financial reporting processes of Lifted. We have also engaged a licensed, external certified public accountant who advises and assists us with various aspects of the financial reporting process, including at our direction, objectively reviewing work product significant to the closing of our financial statements. |
|
|
|
| (2) | We have enhanced the use of specialist involvement in complex, non-routine, and technical areas of accounting, valuation, new accounting standards adoption, and tax matters. These specialists include the licensed, external certified public accountant referred to above, a third-party tax firm, and a valuation firm. |
|
|
|
| (3) | We are in the process of implementing tools to manage the structure of our financial closing processes. These tools include: (a) formalizing checklists designed to ensure accounting requirements and account reconciliations are completed and (b) formalizing required work instructions for completing and objectively reviewing financial closing work product, account reconciliations and analyses, which includes documenting preparer and reviewer responsibilities and signoffs. |
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| (4) | We are archiving, in an access-restricted retention domain, documentation critical to supporting our financial reporting, including financial closing work product, account reconciliations and analyses, supporting documents and agreements, accounting technical memoranda, and other documentation supporting complex, non-routine accounting and valuation matters. Starting with the April 2024 expense reports, all LFTD Partners and Lifted employee expense reports are also stored online in this access-restricted retention domain. We have made this documentation transparent and accessible to our registered public accounting firm, other advisers, and to our lead independent director, Vincent J. Mesolella. |
|
|
|
| (5) | From time to time, we have engaged a third-party consulting firm with expertise in corporate governance, internal controls, risk management, and assurance. This firm has been engaged to assist management with remediating internal control deficiencies and designing and implementing controls over our financial processes and reporting. |
|
|
|
| (6) | Providing copies of LFTD Partners’ and Lifted’s bank statements to Mr. Mesolella. Starting with LFTD Partners’ April 2024 bank statements, the LFTD Partners bank statements and bank reconciliations are stored online in an access-restricted retention domain, in the same location as where Lifted’s bank statements and bank reconciliations are stored. Previously, our Chief Financial Officer, WJacobs, emailed copies of LFTD Partners and Lifted’s bank statements to Mr. Mesolella monthly. WJacobs engages with Mr. Mesolella, as needed, to address any questions or concerns. |
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include, but are not limited to, that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
The Company is actively engaged in a comprehensive effort to remediate its material weaknesses in our internal control over financial reporting, but additional work is required, and no guarantee or assurance can be given as to when such work will be completed.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal controls over financial reporting.
Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.
Notwithstanding the existence of the material weaknesses as described above, we believe that the consolidated financial statements in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with U.S. GAAP.
(c) Changes in internal control over financial reporting
Our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Board of Directors and Committees of the Board
The following table sets forth certain information regarding our current Directors and Executive Officers as of March 1, 2026:
Name |
| Age |
| Position |
Gerard M. Jacobs, J.D. |
| 70 |
| Chairman of the Board, Chief Executive Officer and Secretary |
Nicholas S. Warrender |
| 36 |
| Vice Chairman of the Board and Chief Operating Officer |
Vincent J. Mesolella |
| 76 |
| Lead Outside Director |
Joshua A. Bloom, MD |
| 69 |
| Director |
Sharial Howard |
| 44 |
| Director |
James S. Jacobs, MD |
| 72 |
| Director |
William C. “Jake” Jacobs, CPA |
| 37 |
| Director, President, Chief Financial Officer and Treasurer |
Richard E. Morrissy |
| 71 |
| Director |
Kevin J. Rocio |
| 62 |
| Director |
Our Directors serve in such capacity until the next annual meeting of our shareholders and until their successors have been elected and qualified.
Gerard M. Jacobs, J.D., age 70, is Chairman of our Board of Directors, Chief Executive Officer and Secretary of the Company. Mr. Jacobs has been a private investor since 2006. In 2001, Mr. Jacobs took control of CGI Holding Corporation, and served as its Chief Executive Officer and member of its board of directors until 2006. Under Mr. Jacobs’ guidance, CGI Holding Corporation changed its name to Think Partnership Inc., made 15 acquisitions primarily of businesses involved in online marketing and advertising, and succeeded in having its common stock listed on the American Stock Exchange. Previously, in 1995, Mr. Jacobs took control of General Parametrics Corporation, a NASDAQ company, and served as its Chief Executive Officer and member of its board of directors until 1999. Under Mr. Jacobs’ guidance, General Parametrics changed its name to Metal Management Inc., made 37 acquisitions primarily of businesses involved in scrap metal recycling, and succeeded in building one of the largest scrap metal recycling companies in the world. Mr. Jacobs has also served as the lead outside director for America’s Car-Mart, Inc. (NASDAQ: CRMT) and Patient Home Monitoring Corp. (Toronto: PHM). Mr. Jacobs received a law degree from the University of Chicago Law School, which he attended as a Weymouth Kirkland Law Scholar, in 1978; and an A.B from Harvard College, in 1976, where he was elected to Phi Beta Kappa. Mr. Jacobs’ brother, James S. Jacobs, M.D., is also a member of our board of directors. Mr. Jacobs’ son, William C. Jacobs, is also a member of our board of directors, and is also our President and Chief Financial Officer and Treasurer. We believe that Mr. Jacobs’ experience serving as the Chief Executive Officer of three publicly traded companies and as a director of two other publicly traded companies, his work as an investment banker and as an attorney, and his intelligence and educational background, qualifies him to serve as a director of the Company.
Nicholas S. Warrender, age 36, is Vice Chairman of our Board of Directors and Chief Operating Officer of the Company. Nicholas S. Warrender founded Lifted in 2015 and has served as CEO since. Nicholas S. Warrender is an expert in brand design and development and has a degree in Communications with a focus on Business and Cinematography from Carthage College. Previously, Nicholas S. Warrender was a recruited high school basketball player and successful rapper, performing music shows at prestigious clubs, such as the Viper Room. Nicholas S. Warrender’s mother, Laurie Warrender, is also an employee of Lifted. We believe that Mr. Warrender’s experience as the founder and CEO of Lifted qualifies him to serve as a director of the Company.
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Vincent J. Mesolella, age 76, is Lead Outside Director of our Board of Directors and has been a member of our board of directors since October 2010. He has served for many years as the Chairman of the Narragansett Bay Commission, Providence, Rhode Island, one of the largest wastewater treatment utilities in the U.S. Mr. Mesolella also served for over twenty years as a member of the Rhode Island House of Representatives, including serving as the Majority Whip. Mr. Mesolella is the founder, President and Chief Executive Officer of MVJ Realty, LLC, a diversified real estate investment firm. Mr. Mesolella has served on the board of directors of Think Partnership Inc., an American Stock Exchange company. Mr. Mesolella has raised a great deal of money for charities including the Make-A-Wish Foundation. Mr. Mesolella resides in Rhode Island. We believe that Vincent J. Mesolella’s experience serving as a director of two publicly traded companies including service as Chairman of the Audit Committee of both, his work as a developer and business owner, his experience as an elected public official, his Chairmanship of a major wastewater treatment organization that has been nationally recognized for its excellence, his intelligence and educational background, and his familiarity with the real estate industry, qualifies him to serve as a director of the Company.
Joshua A. Bloom, M.D., age 69, has been a member of our board of directors since July 2007. Dr. Bloom has been a practicing physician in Kenosha, Wisconsin since completion of his training in 1988. He is board Certified in Internal Medicine, Pulmonary Diseases, Critical Care Medicine and in Hospice and Palliative Care. He has been employed by Froedtert South (formerly known as United Hospital System) in the Clinical Practice Division from 1995 to present. He had been in private practice at the same address from 1988 to 1995. Dr. Bloom served on the board of directors of Kenosha Health Services Corporation from 1993 to approximately 2010 and the board of Hospice Alliance, Inc. since 1994 and Medical Director there since 1998. Dr. Bloom also served on the board of the Beth Israel Sinai Congregation 1998 to 2014, where he served as the President from 2004 until 2010. Dr. Bloom received a medical degree from the University of Illinois in 1982 and completed his residency in internal medicine in 1985 and fellowship in Respiratory & Critical Care Medicine in 1988; both at the University of Illinois. He received an MS in Organic Chemistry from the University of Chicago in 1978 and a BS in Chemistry from Yale College in 1977. We believe that Dr. Bloom’s experience serving as a director of the Corporation since 2007, and his intelligence and educational background, qualifies him to serve as a director of the Company.
Sharial Howard, age 44, has been a member of our board of directors since August 2024. Ms. Howard is a Senior Real Estate Professional with @properties Christie’s International Real Estate in the Chicago/Chicagoland area where she practices residential and commercial real estate. She has a 15-year real estate law background composed of 5 years in residential real estate law and 10 years in commercial real estate law. She holds the Accredited Buyer Representative Designation and is a Certified Pricing Strategy Advisor and Certified Real Estate Negotiation Expert. She is a member of the Chicago Association of REALTORS®, Illinois REALTORS® and the National Association of REALTORS® and has been featured in CS Magazine, Crain’s Chicago Business Magazine, Chicago Real Producers Magazine and N’Digo Magazine for her contributions in the real estate industry. Ms. Howard is a proud graduate of the University of Illinois at Urbana-Champaign. We believe that Ms. Howard's intelligence and educational background qualifies her to serve as a director of the Company.
James S. Jacobs, M.D., age 72, has been a member of our board of directors since July 2007. Prior to his retirement in 2024, he was a Physician in the Department of Radiation Oncology, at St. Joseph Hospital in Denver, Colorado. He was previously the Resident Physician in Radiation Oncology at Rush Medical Center in Chicago, Illinois. Dr. Jacobs did a residency in Radiation Oncology at Rush Medical Center in Chicago, Illinois and an internal medicine internship and residency at the University of Colorado Medical Center in Denver, Colorado. Dr. Jacobs received a BA in Neuroscience from Amherst College in Amherst, Massachusetts in 1976. We believe that Dr. Jacobs’ experience serving as a director of the Company since 2007, and his intelligence and educational background, qualifies him to serve as a director of the Company.
William C. “Jake” Jacobs, CPA, age 37, is President, Chief Financial Officer and Treasurer of the Company, and has been a member of our board of directors since December 2024. Effective as of February 27, 2019, the Board appointed Mr. Jacobs, the son of our Company’s Chief Executive Officer Gerard M. Jacobs, to serve as the President, Chief Financial Officer and Treasurer of the Company. Prior to becoming President, Chief Financial Officer and Treasurer of the Company, Mr. Jacobs served as an independent contractor for the Company for the past several years. Previously, Mr. Jacobs worked in the Assurance Division of Ernst & Young (doing business as EY), auditing both publicly traded and privately held companies. Mr. Jacobs graduated from the University of Southern California, with a double major in Accounting and Business Administration with a concentration in Finance. In both 2024 and 2015, Mr. Jacobs won the Gold Medal at the United States of America Snowboard and Freeski Association (USASA) National Championships in the Boardercross Snowboard Men’s event, in the Master (30-39) and Senior (23-29) divisions, respectively. We believe that Mr. Jacobs’ experience serving as an officer of the Company since 2019, and his intelligence and educational background, qualifies him to serve as a director of the Company.
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Richard E. Morrissy, age 71, has been a member of our board of directors since July 2007. From August 2016 through September 2023, Mr. Morrissy worked at the UIC Department of Medicine’s Section of Infectious Disease in a research clinic called Project WISH as Clinical Coordinator in Regulatory Affairs. Previously, Mr. Morrissy was the Senior Research Specialist at the Department of Surgery – CS within the UIC College of Medicine. Mr. Morrissy was a project coordinator for the School of Pharmacy. His duties included serving as project coordinator on four clinical trial research projects funded by the National Institutes of Health’s National Cancer Institute. The School of Pharmacy projects have involved multiple research projects utilizing Lycopene in restoring DNA damage in men’s prostates. The project at UIC’s internationally acclaimed Occupational Therapy School involved the setup and running of focus groups with impaired individuals to create a movement and activity computer survey for the World Health Organization. During his tenure, Mr. Morrissy managed clinical research trials including the submission of institutional review board documents and grant proposals, recruitment of subjects and data management and storage. He also designed and led focus groups, designed and critiqued research surveys, and edited manuscripts and scientific journals. Mr. Morrissy received a B.A. in History from Western Illinois University in 1976. We believe that Mr. Morrissy’s experience serving as a director of the Company since 2007, and his intelligence and educational background, qualifies him to serve as a director of the Company.
Kevin J. Rocio, age 62, has been a member of our board of directors since February 2020. Mr. Rocio is a seasoned award-winning real estate professional, including commercial, residential, finance and development. Mr. Rocio is a graduate of Elmhurst College and an immediate past board member of the Albany Park Community Center. In 2014, Mr. Rocio was accepted into the CCIM (Certified Commercial Investment Member) Institute, a recognized group of experts in the commercial and investment real estate industry. Most recent accolades received by Mr. Rocio include: the Chicago Defenders “Men of Excellence Award”, the Chicago Association of REALTORS Commercial Award, and the National Association of Realtors “National Commercial Award.” We believe that Mr. Rocio’s experience as a business owner qualifies him to serve as a director of the Company.
There are no agreements or understandings for our officers or directors to resign at the request of another person, and neither our officers nor directors are acting on behalf of nor will any of them act at the direction of any other person. Directors are elected until their successors are duly elected and qualified.
Family Relationships
Gerard M. Jacobs is the Company’s Chairman and CEO, and the father of the Company’s Director, President, CFO and Treasurer William C. “Jake” Jacobs.
Director James S. Jacobs and Gerard M. Jacobs are brothers.
Nicholas S. Warrender is the Company’s Vice Chairman of the Board and Chief Operating Officer, CEO of Lifted, and the son of Laurie Warrender. Laurie Warrender is an employee of Lifted.
Former Director Robert T. Warrender II, who passed away in December 2024, is the father of Nicholas S. Warrender, Vice Chairman of the Board and Chief Operating Officer, and the CEO of Lifted. Robert T. Warrender II was also an employee of Lifted.
Robert T. Warrender III is Nicholas S. Warrender’s brother, and former Director Mr. Robert T. Warrender II’s son. From January 9, 2023 until July 1, 2023, Robert T. Warrender III worked for Lifted as an employee in sales; previously, Mr. Warrender operated as an independent contractor of Lifted.
There are no other family relationships among any of our officers or directors.
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Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers have been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or have been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in Item 13, “Certain Relationships and Related Transactions, and Director Independence,” none of our directors or executive officers have been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Board Composition and Committees
Our board of directors is currently composed of nine members: Gerard M. Jacobs (Chairman), Nicholas S. Warrender (Vice Chairman), Vincent J. Mesolella (Lead Outside Director), Joshua A. Bloom, Sharial Howard, James S. Jacobs, William C. Jacobs, Richard E. Morrissy and Kevin J. Rocio. Our board of directors has determined that Joshua A. Bloom, Sharial Howard, Richard E. Morrissy, Vincent J. Mesolella and Kevin J. Rocio are independent directors at this time because they do not currently own a significant percentage our shares, are not currently employed by the Company, have not been actively involved in the management of the Company and do not fall into any of the enumerated categories of people who cannot be considered independent directors.
Audit Committee and Audit Committee Financial Expert
We have an audit committee consisting of Joshua A. Bloom, Sharial Howard, Vincent J. Mesolella, Richard E. Morrissy and Kevin J. Rocio as members. We have not adopted an Audit Committee charter. Vincent J. Mesolella serves as our audit committee chairman and financial expert. Our audit committee performs the following functions including: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. Our Board of Directors has determined that each of its members is able to read and understand fundamental financial statements and has substantial business experience that results in that member’s financial sophistication. Accordingly, the Board of Directors believes that each of its members has the sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee member should have for a business such as the Company.
Board Meetings
Due to the current size and scope of our operations and size and geographic diversity of our Board of Directors, much of the Board’s decision making is made through telephone calls and intermittent informal meetings; when formalization is necessary, the Board conducts formal meetings or acts by written consent. During the year ended December 31, 2025, we held only telephonic Board Meetings and there were no in-person Board Meetings attended by all directors.
Nominating Committee
We have a nominating committee consisting of the following members: Joshua A. Bloom, Sharial Howard, Vincent J. Mesolella, Richard E. Morrissy and Kevin J. Rocio. The Company has not adopted a Nominating Committee charter. During the year ended December 31, 2024, Richard E. Morrissy was the nominating committee Chairman. On February 18, 2025, director Kevin J. Rocio was appointed as the new Chair of the Nominating Committee of the Board of Directors, replacing Richard E. Morrissy.
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Investment Committee
Our board of directors has appointed an Investment Committee currently consisting of our Chief Executive Officer Gerard M. Jacobs, our President and Chief Financial Officer William C. Jacobs, and our Chief Operating Officer Nicholas S. Warrender.
Compensation Committee
We have a compensation committee consisting of Joshua A. Bloom, Sharial Howard, Vincent J. Mesolella, Richard E. Morrissy, and Kevin J. Rocio as members. The Company has not adopted a Compensation Committee charter. Joshua A. Bloom serves as the committee’s chairman.
Code of Ethics
We currently have not adopted a code of ethics due to our limited size and operations. We have considered adopting a Code of Business Conduct and Ethics (“Code”) in the past. We expect to adopt a Code or something similar in the future. The purpose of a Code is to assist the Company and its employees, officers and directors with the Company’s goals of conducting its business and affairs in accordance with applicable laws, rules and regulations and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. The Company expects that any consultants or other service providers it retains will adhere to a Code.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Such persons are further required by SEC regulation to furnish us with copies of all Section 16(a) forms (including Forms 3, 4 and 5) that they file.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
Upon the Company’s acquisition of Lifted on February 24, 2020, GJacobs, WJacobs, and NWarrender began serving in full-time executive roles pursuant to multi-year Executive Employment Agreements. Prior to the acquisition, GJacobs served on a part-time basis and was compensated primarily with equity, and both GJacobs and WJacobs received consulting fees through February 2020. Effective January 1, 2022, base salaries for GJacobs, WJacobs, and NWarrender were increased from $100,000 to $250,000 annually pursuant to an Omnibus Agreement. In January 2023, NWarrender’s base salary was further increased to $500,000 annually in recognition of expanded responsibilities. Executives are eligible to participate in a Company-wide management bonus pool tied to EBITDA performance and receive standard employee benefits, including health insurance and reimbursement of business expenses. The Company has not provided retirement, severance, or change-of-control benefits to these executives. The Omnibus Agreement and subsequent amendment addressed prior deferred compensation obligations, bonus payments, retention incentives, and amendments to existing merger-related and compensation agreements. Deferred compensation and agreed bonuses were paid in accordance with those agreements, including retention bonuses paid in December 2022. Management believes executive compensation arrangements are structured to align incentives with Company performance and long-term shareholder value.
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Summary Table - Compensation of Executives
Name |
| Year |
| Gross Fees Paid in Cash ($) |
|
| Bonus Paid in Cash ($) |
|
| Stock awards ($) |
|
| Option/Warrant Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Non-Qualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
Gerard M. Jacobs, Chairman and CEO |
| 2025 |
| $ | 76,923 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 76,923 | (A) |
|
| 2024 |
| $ | 250,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. "Jake" Jacobs, Director, |
| 2025 |
| $ | 76,923 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 76,923 | (A) |
President and CFO |
| 2024 |
| $ | 250,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas S. Warrender, |
| 2025 |
| $ | 500,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 500,000 |
|
Vice Chairman and COO |
| 2024 |
| $ | 500,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 500,000 |
|
Notes
| (A) | GJacobs and WJacobs voluntarily waived all payments of salary that otherwise would be due and payable to them under their employment agreements with LFTD Partners from April 22, 2025 through December 31, 2025, and all such payments of salary were allocated and applied to the repayment of the principal of the Related Party Note (defined below), on a dollar-for-dollar basis. |
Director Compensation
The Company compensates its non-employee directors through cash director fees. Directors who also serve as executive officers do not receive separate compensation for service on the Board and are compensated pursuant to their respective Executive Employment Agreements. The Company does not currently provide equity awards, non-equity incentive plan compensation, deferred compensation, or retirement benefits to directors in their capacity as directors. Director compensation for the fiscal years ended December 31, 2025 and 2024 is set forth in the table below.
Summary Table - Compensation of Directors
Name |
| Year |
| Director Fees Paid in Cash ($) |
|
| Gross Fees Paid in Cash ($) |
|
| Bonus Paid in Cash ($) |
|
| Stock awards ($) |
|
| Option/Warrant Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Non-Qualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||||||
Gerard M. Jacobs, |
| 2025 |
| $ | - |
|
| $ | 76,923 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 76,923 | (A) |
Chairman and CEO |
| 2024 |
| $ | - |
|
| $ | 250,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 250,000 | (A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas S. Warrender, |
| 2025 |
| $ | - |
|
| $ | 500,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 500,000 | (A) |
Vice Chairman and COO |
| 2024 |
| $ | - |
|
| $ | 500,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 500,000 | (A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent J. Mesolella, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
Lead Outside Director |
| 2024 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua A. Bloom, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
MD, Director |
| 2024 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharial Howard, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
Director |
| 2024 |
| $ | 8,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 8,000 | (B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Jacobs, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
MD, Director |
| 2024 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. "Jake" Jacobs, |
| 2025 |
| $ | - |
|
| $ | 76,923 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 76,923 | (A) |
Director, President and CFO |
| 2024 |
| $ | - |
|
| $ | 250,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 250,000 | (A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard E. Morrissy, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
Director |
| 2024 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Rocio, |
| 2025 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
Director |
| 2024 |
| $ | 16,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 16,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert T. Warrender II, |
| 2025 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Director |
| 2024 |
| $ | - |
|
| $ | 60,000 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 60,000 | (C) |
Notes
| (A) | Please refer to the section above “Executive Compensation” for information about GJacobs’, NWarrender’s, and WJacobs’ compensation during the presented years. Note: none of GJacobs’, NWarrender’s, and WJacobs’ compensation is considered compensation for serving as a member of the board of directors of the Company. GJacobs, NWarrender and WJacobs have entered into employment agreements with the Company. |
| (B) | Ms. Sharial Howard was appointed to the Board of Directors on August 20, 2024, and during each of the third and fourth quarters of 2024, Ms. Howard was paid a $4,000 director fee. |
| (C) | During the year ended December 31, 2024, Mr. Warrender was paid a gross salary of $60,000. Note: this compensation is not considered compensation for serving as a member of the board of directors of the Company. |
| 107 |
| Table of Contents |
Pursuant to the Omnibus Agreement, commencing on March 31, 2022, each of the non-officer members of the board of directors of the Company began receiving a quarterly fee of $4,000 from the Company.
In the future, it is possible that other directors may serve us in another capacity and may receive compensation from us in connection with that service.
Outstanding Equity Awards
There were no equity awards for GJacobs, WJacobs, or NWarrender outstanding as of December 31, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of common stock of the Company by (i) each person who, to the Company’s knowledge, owns more than 5% of its common stock, (ii) each of the Company’s named executive officers and directors, and (iii) all of the Company’s named executive officers and directors as a group. Shares of the Company’s Common Stock subject to options, warrants, or other rights currently exercisable, or exercisable within 60 days of the date hereof, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person.
| Common shares of stock outstanding as of December 31, 2025: | 14,822,678 |
|
| Fully diluted shares outstanding as of December 31, 2025: | 15,254,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Name |
| Number of Series A Preferred Stock Shares Owned |
|
| Beneficial Ownership Percentage |
|
| Number of Series B Preferred Stock Shares Owned |
|
| Beneficial Ownership Percentage |
|
| Number of Common Stock Shares Owned or Controlled |
|
| Beneficial Ownership Percentage out of the Common Shares of Stock Outstanding as of December 31, 2025 |
|
| Options/ Warrants Owned |
|
| Overall Voting Power |
|
| Overall Voting Power (%) out of Fully Diluted Shares as of December 31, 2025 |
| |||||||||
(1) Nicholas S. Warrender |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,900,455 |
|
|
| 26.31 | % |
|
| - |
|
|
| 3,900,455 |
|
|
| 25.57 | % |
(2) ZIE Partners LLC |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,500,000 |
|
|
| 16.87 | % |
|
| - |
|
|
| 2,500,000 |
|
|
| 16.39 | % |
(3) Gerard M. Jacobs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,063,448 |
|
|
| 7.17 | % |
|
| - |
|
|
| 1,063,448 |
|
|
| 6.97 | % |
(4) Vincent J. Mesolella |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 537,862 |
|
|
| 3.63 | % |
|
| - |
|
|
| 537,862 |
|
|
| 3.53 | % |
(5) William C. "Jake" Jacobs, CPA |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 400,000 |
|
|
| 2.70 | % |
|
| - |
|
|
| 400,000 |
|
|
| 2.62 | % |
(6) Roberti Jacobs Family Trust |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 181,623 |
|
|
| 1.23 | % |
|
| - |
|
|
| 181,623 |
|
|
| 1.19 | % |
(7) James S. Jacobs, M.D. |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 79,500 |
|
|
| 0.54 | % |
|
| - |
|
|
| 79,500 |
|
|
| 0.52 | % |
(8) Joshua A. Bloom, M.D. |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 55,000 |
|
|
| 0.37 | % |
|
| - |
|
|
| 55,000 |
|
|
| 0.36 | % |
(9) Richard E. Morrissy |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 30,000 |
|
|
| 0.20 | % |
|
| - |
|
|
| 30,000 |
|
|
| 0.20 | % |
(10) Miss Mimi Corporation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 100,000 |
|
|
| 0.67 | % |
|
| - |
|
|
| 100,000 |
|
|
| 0.66 | % |
(11) Kevin J. Rocio |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.00 | % |
|
| - |
|
|
| 0 |
|
|
| 0.00 | % |
(12) Sharial Howard |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.00 | % |
|
| - |
|
|
| 0 |
|
|
| 0.00 | % |
Total of All Officers, Directors, and Affiliates as a group |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 8,566,265 |
|
|
| 57.79 | % |
|
| 0 |
|
|
| 8,566,265 |
|
|
| 56.16 | % |
Total of All Officers and Directors as a group |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,066,265 |
|
|
| 40.93 | % |
|
| 0 |
|
|
| 6,066,265 |
|
|
| 39.77 | % |
(1) | The address for Mr. Nicholas S. Warrender is 5511 95th Avenue, Kenosha, WI 53144. Mr. Warrender owns 3,900,455 shares of LFTD Partners’ common stock. |
(2) | The address for ZIE Partners LLC is 14155 Pine Island Drive, Jacksonville, FL 32224. ZIE Partners LLC owns 2,500,000 shares of LFTD Partners' common stock. |
(3) | The address for Mr. Gerard M. Jacobs is 14155 Pine Island Drive, Jacksonville, FL 32224. Mr. Jacobs has voting control over the following: (a) 781,625 shares of unregistered common stock; (b) 181,623 Company shares owned by the Roberti Jacobs Family Trust, over which Mr. Jacobs has voting control via a shareholders agreement; (c) 100,000 shares of common stock owned by his affiliate Miss Mimi Corporation; and (d) 200 shares of common stock owned by his wife. |
(4) | The address for Mr. Vincent J. Mesolella is 14155 Pine Island Drive, Jacksonville, FL 32224. Mr. Mesolella has voting control over 537,862 shares of the Company’s common stock. |
(5) | The address of Mr. William C. “Jake” Jacobs is 14155 Pine Island Drive, Jacksonville, FL 32224. Mr. Jacobs owns 400,000 shares of common stock of the Company. |
(6) | The address for the Roberti Jacobs Family Trust is 14155 Pine Island Drive, Jacksonville, FL 32224. The Roberti Jacobs Family Trust irrevocably conveyed all of its voting power to Mr. Gerard M. Jacobs pursuant to the 2007 shareholder agreement described above. Mr. Gerard M. Jacobs is one of the grantors of the trust corpus, Mr. William C. “Jake” Jacobs currently is the trustee, and Mr. Gerard M. Jacobs’ children are the beneficiaries. The trust is irrevocable. The Trust owns 181,623 shares of the Company’s common stock. |
(7) | The address for Dr. James S. Jacobs is 14155 Pine Island Drive, Jacksonville, FL 32224. Dr. Jacobs owns 79,500 shares of LFTD Partners’ common stock. |
(8) | The address for Dr. Joshua A. Bloom is 14155 Pine Island Drive, Jacksonville, FL 32224. Dr. Bloom owns 55,000 shares of the Company’s common stock. |
(9) | The address for Mr. Richard E. Morrissy is 14155 Pine Island Drive, Jacksonville, FL 32224. Mr. Morrissy owns 30,000 shares of common stock. |
(10) | Miss Mimi Corporation is an affiliate entity controlled by Mr. Gerard M. Jacobs. The address for Miss Mimi Corporation is 14155 Pine Island Drive, Jacksonville, FL 32224. Miss Mimi Corporation owns 100,000 shares of common stock. |
(11) | The address for Mr. Kevin J. Rocio is 14155 Pine Island Drive, Jacksonville, FL 32224. |
(12) | The address for Ms. Sharial Howard is 14155 Pine Island Drive, Jacksonville, FL 32224. |
| 108 |
| Table of Contents |
COMPENSATION PLANS
Equity Compensation Plans
None.
Option Plans
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The following describes transactions since January 1, 2025 to which we have been a party and, in which:
| · | the amounts involved exceeded or will exceed $120,000; and |
|
|
|
| · | any of our directors, executive officer, or beneficial holders of more than 5% of our voting securities, or their affiliates or immediate family members, had or will have a direct or indirect material interest. |
We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, from unrelated third parties. Compensation arrangements for our directors and named executive officers are described in ITEM 11. EXECUTIVE COMPENSATION.
Listing Agreement with @properties
On July 21, 2025, Lifted (the “Company” or “Seller”) entered into an exclusive right-to-sell listing contract (the “Listing Agreement”) with @properties (the “Firm”) in connection with the proposed sale of the Company’s 5511 Building. The Company’s listing agents under the Listing Agreement are Kevin Rocio, a member of the Company’s Board of Directors, and Jake Hansen, each affiliated with the Firm. Pursuant to the Listing Agreement, the Firm has the exclusive right to sell the 5511 Building during the term of the agreement. The term commenced on July 21, 2025 and continues through the earlier of (i) midnight on July 21, 2026 or (ii) the conveyance of the entire 5511 Building. The Firm is entitled to a commission equal to 3% of the sale price of the 5511 Building; and the commission is deemed earned if, during the term of the Listing Agreement (1) the Company sells all or any part of the 5511 Building; (2) the Company grants an option to purchase all or any part of the 5511 Building that is subsequently exercised; (3) the Company exchanges all or any portion of the 5511 Building; or (4) a transaction occurs resulting in an effective change in ownership or control of all or any part of the 5511 Building. Once earned, the commission is due and payable in full at closing.
Because Mr. Rocio serves as a director of the Company and is affiliated with the Firm, the Listing Agreement constitutes a related person transaction under Item 404(a) of Regulation S-K. The amount of compensation payable to the Firm will depend on the ultimate sale price of the 5511 Building. As of the date of this report, no commission has been earned or paid. The Company’s Board of Directors reviewed and approved the Listing Agreement. The Company believes the commission rate and terms of the Listing Agreement are consistent with prevailing market rates for comparable commercial real estate brokerage services.
| 109 |
| Table of Contents |
Related Party Note
On April 1, 2025, the Company converted $350,000 of its cash into USD Coin (USDC), a digital stablecoin pegged to the U.S. dollar. Shortly thereafter, the digital wallet containing the USDC was compromised by an unauthorized and unknown third party, resulting in the theft of the full amount. The Company promptly reported the incident to the U.S. Federal Bureau of Investigation and continues to cooperate fully in the ongoing investigation. The Company's outside law firm is also advising the Company regarding the matter. At this time, the Company is doubtful whether any of the stolen funds will be recovered. On April 22, 2025, the Company borrowed $350,000 from Beachin Company, an affiliate of the Company’s CEO and CFO (the “Related Party Note”). The $350,000 loan does not bear interest, and is being repaid by the Company using funds that otherwise would have been paid to the Company’s CEO and CFO in the form of salary or bonuses pursuant to their employment agreements with the Company.
Indemnification of Officers and Directors
Our bylaws specifically limit the liability of our officers and directors to the fullest extent permitted by law. As a result, aggrieved parties may have a more limited right to action than they would have had if such provisions were not present. The bylaws also provide for indemnification of our officers and directors for any losses or liabilities they may incur as a result of the manner in which they operated our business or conducted internal affairs, provided that in connection with these activities they acted in good faith and in a manner which they reasonably believed to be in, or not opposed to, our best interest. In the ordinary course of business, we also may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, independent contractors and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. We may also agree to indemnify former officers, directors, employees and independent contractors of acquired companies in connection with the acquisition of such companies.
Director Independence
We are not listed on a national exchange, such as NASDAQ, at this time. As such, we are not required to have independent directors. Our management believes that, consistent with Rule 5605(a)(2) of the NASDAQ Listing Rules that a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our management has reviewed the composition of our Board of Directors and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors has determined that each of our directors, with the exceptions of Gerard M. Jacobs, Dr. James S. Jacobs, William C. "Jake" Jacobs and Nicholas S. Warrender, is an “independent director”.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On July 16, 2018, the Company engaged Fruci & Associates II, PLLC (“Fruci”) as the Company’s independent registered public accounting firm.
Mr. Vincent J. Mesolella, the Company’s Audit Committee Chairman, signs an engagement letter with Fruci before Fruci performs any audit or review services for the Company. Fruci was approved to provide audit and review services for the Company for the years ended December 31, 2025 and 2024.
The following describes the audit fees, audit-related fees, tax fees, and all other fees for professional services provided by Fruci:
For the year ended December 31, 2025: | For the year ended December 31, 2024: | |
Audit Fees: $136,517 | Audit Fees: $210,029 | |
Audit-Related Fees: $0 | Audit-Related Fees: $0 | |
Tax Fees: $3,500 | Tax Fees: $8,000 | |
All Other Fees: $0 | All Other Fees: $0 |
| 110 |
| Table of Contents |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements and Schedules
The financial statements are set forth under ITEM 8. of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
Exhibit List
The following Exhibits have been previously filed in the below referenced filings or have been attached hereto, and in any case, as is stated on the cover of this Report, all of the below Exhibits are incorporated herein by reference.
| 111 |
| Table of Contents |
This Form 10-K |
| March 31, 2026 |
| ||
| ||
| ||
| ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase* |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase* |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase* |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase* |
101.SCH |
| XBRL Taxonomy Extension Schema* |
_____________
*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under these sections.
ITEM 16. FORM 10–K SUMMARY
This Item is optional. We may provide summaries in future Form 10-K filings.
| 112 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LFTD Partners Inc. |
| |
|
|
|
By: | /s/ Gerard M. Jacobs |
|
| Gerard M. Jacobs, Chief Executive Officer and Director |
|
| (Chief Executive Officer) |
|
|
|
|
| Date: March 31, 2026 |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Gerard M. Jacobs |
|
| Gerard M. Jacobs, Chief Executive Officer and Director |
|
| Principal Executive Officer |
|
| Date: March 31, 2026 |
|
| /s/ William C. “Jake” Jacobs, CPA |
|
| William C. “Jake” Jacobs, CPA, Director, President, Chief Financial Officer and Treasurer |
|
| Principal Financial Officer |
|
| Date: March 31, 2026 |
|
| /s/ Nicholas S. Warrender |
|
| Nicholas S. Warrender |
|
| Chief Operating Officer and Director |
|
| Date: March 31, 2026 |
|
| /s/ Vincent J. Mesolella |
|
| Vincent J. Mesolella |
|
| Director |
|
| Date: March 31, 2026 |
|
| /s/ Joshua A. Bloom, M.D. |
|
| Joshua A. Bloom, M.D. |
|
| Director |
|
| Date: March 31, 2026 |
|
| /s/ Sharial Howard |
|
| Sharial Howard |
|
| Director |
|
| Date: March 31, 2026 |
|
| /s/ James S. Jacobs, M.D. |
|
| James S. Jacobs, M.D. |
|
| Director |
|
| Date: March 31, 2026 |
|
| /s/ Richard E. Morrissy |
|
| Richard E. Morrissy |
|
| Director |
|
| Date: March 31, 2026 |
|
| /s/ Kevin J. Rocio |
|
| Kevin J. Rocio |
|
| Director |
|
| Date: March 31, 2026 |
|
| 113 |
| Table of Contents |
LFTD PARTNERS INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of LFTD Partners Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of LFTD Partners Inc. (“the Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has an accumulated deficit, net losses, and is subject to unique regulatory risks and uncertainties. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Inventory Allowance Valuation – Refer to Note 2 to the financial statements.
The valuation of the inventory allowance was identified as a critical audit matter due to the significant judgment and subjectivity involved in determining that inventory is appropriately measured at the lower of cost or net realizable value. During the year, new federal regulations were enacted restricting the sale of certain hemp derived products, increasing the uncertainty that inventory costs presented at year end are fully realizable. Auditing this area involved a high degree of auditor judgment, particularly in evaluating management’s assumptions regarding future demand and the anticipated effects of regulatory changes.
How the Critical Account Matter Was Addressed in the Audit
Our principal audit procedures to evaluate management’s inventory valuation allowance consisted of the following, among others:
| 1. | Evaluate management’s qualitative analysis of the impact of newly passed federal legislation on potential impairment of inventory. |
| 2. | Evaluate management’s assumptions by comparing them to analytical procedures, testing of subsequent activity, and inquiries of individuals outside of the management and accounting staff. |
We have served as the Company’s auditor since 2018.
March 31, 2026
| F-2 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(AUDITED) | ||||||||
|
|
|
|
|
|
| ||
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
| ||
Cash and Cash Equivalents |
| $ |
|
| $ |
| ||
Prepaid Expenses |
|
|
|
|
|
| ||
Accounts Receivable, net of allowance of $ |
|
|
|
|
|
| ||
Inventory |
|
|
|
|
|
| ||
Income Tax Receivable |
|
|
|
|
|
| ||
Current Portion of Settlement Asset and Receivables |
|
|
|
|
|
| ||
Receivable Loans from Extrax NM - Current |
|
|
|
|
|
| ||
Other Current Assets |
|
|
|
|
|
| ||
Total Current Assets |
|
|
|
|
|
| ||
Restricted Cash |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
Investment in Ablis |
|
|
|
|
|
| ||
Investment in Bendistillery |
|
|
|
|
|
| ||
Net Deferred Tax Asset |
|
|
|
|
|
| ||
Fixed Assets, less accumulated depreciation of $ |
|
|
|
|
|
| ||
Security and State Licensing Deposits and Bonds |
|
|
|
|
|
| ||
Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $ |
|
|
|
|
|
| ||
Total Assets |
| $ |
|
| $ |
| ||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Operating Lease Liability |
| $ |
|
| $ |
| ||
Deferred Revenue |
|
|
|
|
|
| ||
Income Tax Payable |
|
|
|
|
|
| ||
Collab Commissions and Royalties Payable |
|
|
|
|
|
| ||
Accounts Payable and Accrued Expenses |
|
|
|
|
|
| ||
Accounts Payable - Related Party |
|
|
|
|
|
| ||
Note Payable - Related Party |
|
|
|
|
|
| ||
Preferred Stock Dividends Payable |
|
|
|
|
|
| ||
Notes Payable to Surety Bank |
|
|
|
|
|
| ||
Interest Payable to Surety Bank |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
Non-Current Liabilities |
|
|
|
|
|
|
|
|
Operating Lease Liability |
|
|
|
|
|
| ||
Notes Payable to Surety Bank |
|
|
|
|
|
| ||
Total Non-Current Liabilities |
|
|
|
|
|
| ||
Total Liabilities |
|
|
|
|
|
| ||
Commitments and Contingencies |
|
|
|
|
|
| ||
Shareholders' Equity |
|
|
|
|
|
|
|
|
Preferred Stock, $ which two Series of Preferred Stock are authorized and outstanding, as follows: |
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock: |
|
|
|
|
|
| ||
Series B Convertible Preferred Stock: |
|
|
|
|
|
| ||
Common Stock, $ |
|
|
|
|
|
| ||
Additional Paid-in Capital |
|
|
|
|
|
| ||
respective Deferred Contingent Stock Recipients at December 31, 2025 and December 31, 2024 |
|
|
|
|
|
| ||
Accumulated Deficit |
|
| ( | ) |
|
| ( | ) |
Total Shareholders' Equity |
|
|
|
|
|
| ||
Total Liabilities and Shareholders' Equity |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(AUDITED) |
|
| For the Years Ended |
| |||||||||
|
| December 31, |
| |||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
| |||
Net Sales |
| $ |
|
| $ |
|
| $ |
| |||
Cost of Goods Sold |
|
|
|
|
|
|
|
|
| |||
Gross Profit |
|
|
|
|
|
|
|
|
| |||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Payroll Expense |
|
|
|
|
|
|
|
|
| |||
Deferred Contingent Stock Expense |
|
|
|
|
|
|
|
|
| |||
Company-Wide Management Bonus Pool |
|
|
|
|
|
|
|
|
| |||
Professional Fees |
|
|
|
|
|
|
|
|
| |||
Bank Charges and Merchant Fees |
|
|
|
|
|
|
|
|
| |||
Advertising and Marketing |
|
|
|
|
|
|
|
|
| |||
Provision for Credit Losses – Extrax NM Loans |
|
|
|
|
|
|
|
|
| |||
Bad Debt Expense |
|
|
|
|
|
|
|
|
| |||
Depreciation and Amortization |
|
|
|
|
|
|
|
|
| |||
Collab Commission and Royalty Expense |
|
|
|
|
|
|
|
|
| |||
Other Operating Expenses |
|
|
|
|
|
|
|
|
| |||
Total Operating Expenses |
|
|
|
|
|
|
|
|
| |||
Income/(Loss) From Operations |
|
|
|
|
| ( | ) |
|
|
| ||
Other Income/(Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in Ablis |
|
| ( | ) |
|
|
|
|
|
| ||
Impairment of Investment in Bendistillery |
|
| ( | ) |
|
|
|
|
|
| ||
Impairment of Goodwill |
|
| ( | ) |
|
|
|
|
|
| ||
Gain on Lease Modification |
|
|
|
|
|
|
|
|
| |||
Interest Income |
|
|
|
|
|
|
|
|
| |||
Interest Expense |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Dividend Income |
|
|
|
|
|
|
|
|
| |||
(Loss)/Recovery From Inventory Theft |
|
| ( | ) |
|
|
|
|
|
| ||
Theft Expense |
|
| ( | ) |
|
|
|
|
|
| ||
Settlement Income |
|
|
|
|
|
|
|
|
| |||
Settlement Costs |
|
|
|
|
| ( | ) |
|
| - |
| |
Debt Financing Expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Penalties |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Gain/(Loss) on Disposal of Fixed Assets |
|
|
|
|
| ( | ) |
|
|
| ||
Loss on Jeeter Collab |
|
|
|
|
| ( | ) |
|
|
| ||
Loss on Deposits |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Gain on Forgiveness of Debt |
|
|
|
|
|
|
|
|
| |||
Total Other Income/(Expenses) |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Income/(Loss) Before Provision for Income Taxes |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Benefit/(Provision) for Income Taxes |
|
| ( | ) |
|
|
|
|
| ( | ) | |
Net Income/(Loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
Less: Accrued Preferred Stock Dividends |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net Income/(Loss) Attributable to Common Stockholders |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) Per Common Share Attributable to Common Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
| |||
Diluted |
|
|
|
|
|
|
|
|
| |||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||||||||||||||||||
(AUDITED) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Deferred Contingent Stock |
|
| Accumulated |
|
| Total Shareholders' |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| to be Issued |
|
| Deficit |
|
| Equity |
| ||||||||
Balance, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Issuance of 410,000 of the total 645,000 shares of Deferred Contingent Stock related to the acquisition of Lifted, of which shares began being issued on February 24, 2023 upon direction by the Deferred Contingent Stock Recipients |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, March 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Payment of the first installment of Merger Consideration (the issuance of 100 shares of common stock) pursuant to the Oculus Merger Agreement, on April 28, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, June 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Conversion of 2,000 shares of Series A Preferred Stock held by a non-affiliate into 200,000 shares of common stock, on August 4, 2023 |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |||
Issuance of 93,000 shares of Deferred Contingent Stock related to the acquisition of Lifted, of which shares began being issued on February 24, 2023 upon direction by the Deferred Contingent Stock Recipient |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
| ||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, September 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, March 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Common stock buybacks and immediate cancellations between April 2, 2024 and April 9, 2024 |
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Payment of the stock component of the second installment of Merger Consideration (the issuance of 160,000 shares of common stock) pursuant to the Oculus Merger Agreement, on May 13, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, June 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Excise taxes payable on common stock buybacks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, September 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, March 31, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance, June 30, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
|
| ( | ) |
|
|
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Balance, September 30, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
|
| ( | ) |
|
|
| |||||||
Series A Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Series B Preferred Stock dividend payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
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Balance, December 31, 2025 |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
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Cash Flows From Operating Activities |
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Net Income/(Loss) |
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Adjustments to Reconcile Net Income/(Loss) to Net Cash Provided by/(Used in) Operating Activities |
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Deferred Contingent Stock Compensation Expense |
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Impairment of Investment in Ablis |
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Impairment of Investment in Bendistillery |
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Impairment of Goodwill |
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Provision for Credit Losses – Extrax NM Loans |
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Sales Allowance |
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Spoiled and Written Off Inventory |
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Bad Debt Expense |
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Depreciation and Amortization |
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Loss/(Gain) on Lease Modification |
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Loss From Inventory Theft |
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Settlement Income |
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Debt Financing Expenses |
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Loss on Disposal of Fixed Assets |
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Loss on Jeeter Collab |
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Loss on Deposits |
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Gain on Forgiveness of Debt |
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Deferred Income Taxes |
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Effect on Cash of Changes in Operating Assets and Liabilities |
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Prepaid Expenses |
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Accounts Receivable |
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Inventory |
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Change in Right Of Use Asset |
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Change in Receivable Loans from Extrax NM |
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Other Assets |
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Income Tax Receivable and Payable, net |
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Management Bonuses Payable |
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Company-wide Management Bonus Pool |
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Interest Receivable |
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Collab Commissions and Royalties Payable |
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Deferred Revenue |
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Accounts Payable and Accrued Expenses |
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Accounts Payable and Interest Payable to Related Parties |
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Change in Settlement Asset and Receivables |
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Change in Finance and Operating Lease Liabilities |
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Net Cash Provided By/(Used In) Operating Activities |
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Cash Flows From Investing Activities |
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Net Cash Paid as Part of the Oculus Transaction |
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Purchase of Headquarters Building |
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Purchases of Fixed Assets |
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Proceeds from Disposal of Fixed Assets |
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Net Cash Used in Investing Activities |
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Cash Flows From Financing Activities |
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Proceeds from Related Party Note |
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Payments on Related Party Note |
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Proceeds from Surety Bank Loans |
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Payments on Surety Bank Loans |
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Payments of Dividends to Preferred Stockholders |
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Payment of Debt Financing Costs |
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Purchase of Shares of Common Stock |
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Payments on Finance Lease Liability |
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Net Cash Provided by/(Used In) Financing Activities |
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Net Increase/(Decrease) in Cash |
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Cash, Cash Equivalents and Restricted Cash at Beginning of Period |
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Cash, Cash Equivalents and Restricted Cash at End of Period |
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| For the Years Ended |
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| December 31, |
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| 2025 |
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| 2024 |
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| 2023 |
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Supplemental Cash Flow Information |
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Cash Paid For Interest |
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Cash Paid/(Received) For Income Taxes |
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Non-Cash Activities |
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Right-of-Use assets acquired from inception of Operating Leases |
| $ |
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Issuance of stock component of the second installment of Merger Consideration (the issuance of 160,000 shares of common stock) pursuant to the Oculus Merger Agreement, on May 13, 2024 |
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Conversion of Series A and Series B Preferred Stock to Common Stock |
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Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets |
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Cash and Cash Equivalents |
| $ |
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Restricted Cash |
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Total Cash, Cash Equivalents and Restricted Cash at End of Period |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
LFTD PARTNERS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.
LFTD Partners Inc., Jacksonville, Florida, was organized under the laws of the State of Nevada on January 2, 1986. Shares of the Company’s common stock are listed for trading on the OTCQB Venture Market under the symbol “LIFD”.
LFTD Partners is the parent corporation of Lifted Liquids, Inc. d/b/a Lifted Made, d/b/a Urb Finest Flowers and d/b/a LM Nutra, Kenosha, Wisconsin (“Lifted Made” or “Lifted”), which manufactures and sells hemp-derived and other psychoactive products under its award-winning Urb Finest Flowers (“Urb”) brand (www.urb.shop) and other brands, hemp-free health and wellness gummies under its Mielos brand (www.mielos.com), and hemp-free energy gummies under its Rebel Energy Gummy brand (www.RebelEnergyGummy.com). Lifted is the worldwide, exclusive manufacturer and seller of Diamond Supply Co. (www.DiamondSupplyCo.com) hemp-derived products. Lifted also manufactures and sells hemp-derived and non-hemp-derived products to private label clients, and licenses the Urb brand name to Extrax NM LLC in New Mexico for use on marijuana products. LFTD Partners Inc. also owns 4.99% of hemp-derived beverage and products maker Ablis (www.Ablis.shop), and of craft distiller Bendistillery, Inc. d/b/a Crater Lake Spirits (www.CraterLakeSpirits.com), both located in Bend, Oregon.
Management of the Company is primarily interested in acquiring companies operating outside of the hemp or marijuana industries, which have many regulatory risks.
Prior to becoming involved in the development, manufacture and/or sale or re-sale of branded, hemp-derived and other psychoactive products, health and wellness products, energy gummies, and nicotine products, through our subsidiary Lifted, we were involved in acquiring, operating and then selling businesses involved in the defense sector. On May 18, 2021, the Company changed its name to LFTD Partners Inc. from Acquired Sales Corp. On March 15, 2022, the Company changed its stock trading symbol to LIFD.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Consolidated Financial Statements – The accompanying audited consolidated financial statements include the accounts of LFTD Partners and have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for financial information and in accordance with the rules and regulations of the SEC. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been included in the accompanying audited consolidated financial statements and consist of only normal recurring adjustments, except as disclosed herein. As part of the consolidation, all intercompany transactions are eliminated. Certain previously reported amounts have been reclassified between line items to conform to the current period presentation.
Use of Estimates – The preparation of financial statements in conformity with US GAAP typically requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. Key estimates in these financial statements include the allowance for doubtful accounts, sales allowance, estimated useful lives of property, plant and equipment, valuation allowance on deferred income tax assets, and the fair value of stock options and warrants.
Cash and Cash Equivalents – Cash and cash equivalents as of the reported period ends include cash on-hand. The Company considers all highly liquid investments with an original maturity date within 90 days to be cash equivalents. Cash equivalents are carried at cost. The Company maintains its cash balance at a credit-worthy financial institution that is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
| F-7 |
| Table of Contents |
Restricted Cash – The Company considers cash balances that are legally restricted as to withdrawal or usage to be restricted cash. Prior to the Loan Term Changes, the Company’s Business Loan Agreement with Surety Bank required the Company to maintain a $
Fair Value of Financial Instruments – The historical carrying amount of the financial instruments, which principally include cash, trade receivables, historical accounts payable and accrued expenses, approximates fair value due to the relative short maturity of such instruments.
Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair-value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Accounting for Investments
The Company’s Investment in Lifted
The financial statements of LFTD Partners are consolidated with Lifted’s, since Lifted is a wholly owned subsidiary of LFTD Partners.
The Company’s Investments in Ablis and Bendistillery
The Company’s investments in Ablis and Bendistillery are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company owns less than 20% of the equity ownership of each of these entities and has no substantial influence over the management of the businesses. In accordance with US GAAP, the Company does not consolidate its financial statements with those of Ablis and Bendistillery.
At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether its investments are impaired. Factors that the Company would consider indicators of impairment include: (1) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, (2) a significant adverse change in the regulatory, economic, or technological environment of the investee, (3) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, (4) a bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment, and (5) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants, if any.
The qualitative assessments at the end of first, second and third quarters are done via conference calls with the management teams of Ablis and Bendistillery. The qualitative assessment at the end of the fourth quarter relating to these entities also includes review of their respective financial statements that have been reviewed by a third-party accounting firm. At that time, the Company performs an annual impairment assessment. The reviewed financial statements of these companies are not audited, and the Company is not active in the management of these companies, and except for these companies’ quarterly meetings with the management of the Company, the Company’s assessment of these companies is inherently limited to infrequent and relatively brief conversations with officers of these companies and to reviews of those reviewed financial statements.
| F-8 |
| Table of Contents |
Prepaid Expenses – Prepaid expenses relate primarily to advance payments made for purchases of inventory; prepaid inventory is transferred to inventory when the purchased items are received by the Company. Other expenses, such as prepaid commercial property insurance and prepaid health and dental insurance, among others, are also recognized as prepaid expenses when advance payments are made for services that will be performed in periods subsequent to the balance sheet date. Prepaids for these other expenses are recognized as expenses ratably over the applicable service period.
Accounts Receivable – The Company evaluates the collectability of its trade accounts receivable based on a number of factors. Management of the Company reviews and discusses all outstanding customer trade balances as of reporting period end. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded (the “Allowance for Doubtful Accounts”), which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. Management also considers industry-specific factors which may impact customers’ ability to meet their financial obligations to the Company.
In addition to specific customer identification of potential bad debts, management takes into consideration Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses, which is codified as Accounting Standards Codification Topic 326, adds to US GAAP the current expected credit loss model (“CECL Model”), which is a measurement model based on expected losses rather than incurred losses. Under the CECL Model, an entity recognizes its estimate of expected losses as an allowance. The Company has considered the applicable guidance in ASU 2016-13. Key aspects of the CECL Model include the following:
| 1. | The CECL Model applies to financing receivables measured at amortized cost, which includes trade accounts receivable. |
| 2. | An entity will recognize an allowance for credit losses that results in the financial statements reflecting the net amount expected to be collected from the financial asset. |
| 3. | The allowance represents the portion of the amortized cost basis that an entity does not expect to collect due to credit over the asset’s contractual life, considering past events, current conditions and reasonable and supportable forecasts of future economic conditions. |
Accounting Standards Update 2025-05 (“Update”) to ASC Topic 326 is effective for periods beginning after December 15, 2025. The amendments in this Update provide a practical expedient under which an entity assumes that current conditions as of the balance sheet date do not change for the remaining life of the current trade receivables, thereby eliminating the requirement to identify, analyze, and document macroeconomic data as part of developing a reasonable and supportable forecast when estimating expected credit losses.
LFTD Partners elects the practical expedient, starting with its financial statements for the year ended December 31, 2025, to assume balance sheet date conditions do not change for the remaining life of current trade receivables.
In performing its CECL Model Analysis, management calculates the ratio of write offs to sales made to wholesalers and distributors for the trailing three-year period (the “Bad Debt Loss Rate”). The Bad Debt Loss Rate is then multiplied by sales made to wholesalers and distributors during the trailing twelve months (the “Bad Debt Calc”). The Bad Debt Calc is compared to the total accounts receivable that is older than 90 days as of reported period end; for conservatism, whichever is larger is considered the Allowance for Doubtful Accounts as of reported period end. The Company’s position is that the Company’s conservative approach toward the treatment of Allowance for Doubtful Accounts provides sufficient coverage in relation to potential credit losses from outstanding invoice write-offs. Accounts receivable of $
| F-9 |
| Table of Contents |
The Company records an allowance for sales for estimated future discounts and refunds related to products sold prior to the reporting period end that are expected to be credited or refunded to customers. The allowance represents management’s estimate of consideration to which the Company does not expect to be entitled and is recorded as a reduction of net sales. Sales allowances of $
Adjustments to the allowance for sales, whether increases or decreases, are recorded as adjustments to net sales in the Consolidated Statements of Operations, with a corresponding adjustment to the Return Liability within current liabilities on the Consolidated Balance Sheets. In prior periods, the allowance was presented as a contra accounts receivable account; however, the Company has reclassified the balance to a Return Liability to more appropriately reflect the nature of the obligation under ASC 606.
A primary impetus for the need of a sales allowance is because the regulatory landscape at the municipal, state and federal levels in which Lifted operates is unstable and unpredictable. Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
Moreover, sometimes in the past, when employees of federal, state and local regulatory agencies and/or law enforcement have made statements and/or issue correspondence that claim or imply that certain products that Lifted sells are unsafe or illegal, these statements and correspondence, and industry publications and/or news media coverage of such statements and correspondence, have triggered confusion, uncertainty or alarm among the distributors, retailers and consumers who purchase our products, and consequently have resulted in returns of our products. On a case-by-case basis, the Company has credited or refunded the customer for returns. In many cases, the Company has been able to re-sell the returned products to other distributors, retailers and consumers. In anticipation of making discretionary concessions and issuing credits for certain returned products, management records a sales allowance.
Described below are some of the reasons why a customer may want to return an ordered item, and how the Company responds in each situation:
| 1) | The ordered item breaks, melts, or separates in transit to the customer. In this case, the Company will replace the broken, melted or separated item at no cost to the customer. |
| 2) | The Company sent the wrong item to the customer. In this case, the Company will allow the customer to keep, at no cost to the customer, the item that was mistakenly sent to the customer. The Company will also send the correct product to the customer, at no cost to the customer. |
| 3) | The customer ordered the wrong product. In this case, the customer, at his/her own expense, must mail the mistakenly ordered product back to the Company, and the Company will mail the correct product to the customer. |
| 4) | The ordered item is recalled. In a situation where product is recalled, the Company will offer a replacement, credit, or refund. |
Impact of Delayed Customer Payments on Cash Flow – The Company’s ability to generate sufficient operating cash flow is directly affected by the timing and collectability of its accounts receivable. A significant portion of the Company’s revenue comes from wholesale and distributor sales, which often involve extended payment terms. As a result, delays in customer payments can have a material impact on cash flow, liquidity, and working capital availability. Fluctuations in cash collections can impact the Company’s ability to meet short-term obligations, fund inventory purchases, and invest in growth initiatives. Prolonged delays in accounts receivable collection could necessitate further adjustments to working capital management strategies, including modifications to vendor payment schedules, securing additional financing, or reevaluating sales terms to improve cash flow predictability. Management assesses the impact of delayed customer payments on overall liquidity and considers credit risk and allowance for doubtful accounts, in an effort to provide some safeguard against potential cash flow disruptions. However, if economic conditions deteriorate or customer creditworthiness declines further, additional measures may be required to preserve liquidity and operational stability.
Customer Concentration Risk – As of December 31, 2025, and 2024, three customers each represented more than
| F-10 |
| Table of Contents |
Inventory – Inventory is valued at the lower of average cost or market value (net realizable value). The net realizable value of inventory represents the estimated selling price for inventory in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale. The determination of net realizable value requires significant judgment, including consideration of factors such as shrinkage, the aging of and future demand for inventory, and expected future selling price the Company expects to realize by selling the inventory. The estimates are judgmental in nature and are made at a point in time, using available information, expected business plans and expected market conditions. As a result, the actual amount received on sale could differ from the estimated value of inventory. Periodic reviews are performed on the inventory balance.
Inventory consisted of the following at December 31, 2025 and December 31, 2024:
|
| December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Raw Goods |
| $ |
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| $ |
| ||
Finished Goods |
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| ||
Total Inventory |
| $ |
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| $ |
| ||
Overhead expenses related to leases, utilities, insurance, and indirect labor are allocated to finished goods based on the estimated percentage cost toward the finished goods. Depreciation expense related to certain machinery and equipment is also allocated to finished goods. At December 31, 2025, $
On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also bans intoxicating hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress.
During each of the fiscal quarters leading up to November 12, 2026, management will carefully consider the value of hemp-derived finished goods and raw goods that are in Lifted’s inventory, relative to recent sales and market demand and the regulatory landscape, in order to make a determination if hemp-related product inventory write-offs or if an inventory allowance over hemp-derived products is necessary. It is unknown to management what the demand for hemp products will be through November 12, 2026. No allowance was taken against Lifted's hemp-derived inventory as of December 31, 2025; management believes that such an action would be premature.
Events that might trigger the need for an inventory reserve include, but are not limited to:
-Sustained decline in sales of particular products;
-Adverse regulatory developments with increased certainty;
-Significant increases in inventory aging or obsolescence; and
-Observable deterioration in customer demand.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
Cost of Goods Sold – Cost of goods sold primarily consist of the costs of raw goods utilized in the manufacture of products, direct labor, co-packing fees, freight and shipping charges, and certain quality control costs, such as lab testing costs.
Spoiled and obsolete inventory that is written off is a component of cost of goods sold. The process of determining obsolete or spoiled inventory involves:
| 1) | Identifying raw goods that would no longer be used in the manufacture of finished goods; |
| 2) | Identifying expired raw goods; |
| 3) | Identifying finished goods that would no longer be sold or that are slow moving; |
| 4) | Identifying finished goods that are expired; and |
| 5) | Valuing and expensing raw and finished goods that would no longer be sold. |
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Inventory
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
On December 30, 2022,
The payable forgiveness resulted in a net $
Fixed Assets – Fixed assets are recorded and stated at cost. Fixed assets that cost less than $
Management regularly reviews property and equipment and other long-lived assets for possible impairment. This review occurs annually, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is an indication of impairment, management then prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. The fair value is estimated using the present value of the future cash flows discounted at a rate commensurate with management’s estimates of the business risks.
| F-11 |
| Table of Contents |
Preparation of estimated expected future cash flows is inherently subjective and is based on management’s best estimate of assumptions concerning expected future conditions. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell.
Security and State Licensing Deposits and Bonds – The Company has paid security deposits for its leased facilities located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, WI 53144 and 5732 95th Avenue, Suites 100-300, Kenosha, WI 53144.
The majority of the Company’s security deposit for the lease of 789 Tech Center Drive, Unit C, Durango, Colorado 81301 was returned to the Company in the second quarter of 2025 after the termination of the lease. The Company’s security deposit for its former sublease of the space located at 2701-09 West Fulton PH, Chicago, Illinois 60612 was written off in the second quarter of 2025. As part of Lifted’s acquisition of the assets of Oculus, Lifted had assumed the Aztec Lease, and the security deposit that had been previously paid by Oculus to the landlord of the Aztec Lease. The Aztec Lease was terminated on May 7, 2024, and the security deposit was not returned to Lifted.
Prior to the Company’s acquisition of the 5511 Building on December 14, 2023, the Company had not paid a security deposit for its lease of the 5511 Building.
The Company is required to, and has, paid bonds and deposits to various state departments and vendors for licenses and utilities, respectively.
As described in NOTE 16 – SUBSEQUENT EVENTS, effective as of February 1, 2026 (the “Expansion Date #2”), the lease of the space located at 5732 95th Ave., Suites 100, 200 and 300, Kenosha, WI 53144 was amended (the “Third Amendment to the 5732 Lease”) to expand the square footage of the leased space to include an additional 2,700 square feet of space located at 5732 95th Avenue, Suite 400, Kenosha, Wisconsin 53144 (the “Expansion Area #2”). This space is currently being used for storage. Under the Third Amendment to the 5732 Lease, Tenant is required to remit an additional security deposit of $
Revenue – The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. The majority of the Company’s sales are of branded products to distributors, wholesalers, and end consumers. A minority of the Company’s sales are of raw goods to manufacturers, distributors and wholesalers. The majority of the Company’s sales are to distributors, followed by the Company’s sales to wholesalers, and then the Company’s sales to end consumers. Distributors primarily sell Lifted’s products to vape and smoke shops, stores specializing in hemp-derived products, convenience stores, health food stores, and other outlets. Lifted extends terms selectively to certain distributors and wholesalers. End consumers do not have payment terms; end consumers pay at the time of purchase.
Typically, the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. If the shipping terms on a sale are FOB destination, the revenue is deferred until the product reaches its destination.
The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers. Discounts and rebates provided to customers are recorded as a reduction to gross sales.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
License Fee – On June 1, 2023, Lifted and Extrax NM LLC (“ENM”) entered into an Agreement (the “ENM Agreement”). Pursuant to the ENM Agreement, (1) Lifted will sell certain devices/objects to ENM, and Lifted will loan certain amounts to ENM, and (2) ENM will manufacture and exclusively sell Urb-branded marijuana products to licensed marijuana dispensaries located in New Mexico. ENM shall pay over to Lifted one-half of the gross sales proceeds, excluding only governmentally-imposed taxes, received by ENM from product sales, which payments shall be allocated and applied as follows: firstly, to repay Lifted for its loans to ENM; secondly, to pay to Lifted mutually agreed upon amounts for said devices/objects sold by Lifted to ENM; and thirdly, to pay to Lifted a license fee (the “License Fee”). The License Fee shall be calculated as an amount equal to (a) one-half of the gross sales proceeds paid to Lifted, minus (b) the loan repayment(s) and the amounts paid for said devices/objects sold by Lifted to ENM. License Fee is included in Net Sales, if any.
| F-12 |
| Table of Contents |
The ENM Agreement is for an Initial Term of 60 months, provided that if the aggregate product sales during the Initial Term are $
Lifted and ENM each shall have the right to terminate the ENM Agreement in specified circumstances, including in the event that its CEO determines in good faith, and provides evidence to other party proving, that the business being conducted pursuant to the terms and conditions of the ENM Agreement is no longer profitable for such company.
In July 2025, the Parties agreed:
| a) | That Extrax would not remit 50% of its monthly gross revenue to Lifted, starting with April 2025; |
| b) | Lifted would not make any more loans to Extrax; and |
| c) | For any future purchase of inventory from Lifted, Extrax would pay Lifted in full upon receipt of an invoice from Lifted (“July Agreement”) |
Then, as of September 30, 2025, Lifted and ENM signed an Agreement pursuant to which ENM has acknowledged that it owes Lifted a total $
Because no restructuring of the deal occurred by December 31, 2025, and because the loans receivable from ENM are subject to allowance considerations under ASC 326, the Company determined that an allowance against the outstanding loans (“Provision for Credit Losses – Extrax NM Loans”) was necessary as of December 31, 2025.
As such, as of December 31, 2025, the loans receivable from ENM (a non-current asset) total $
No License Fee was reported during the twelve months ended December 31, 2025. $
ENM also owed Lifted a total of $
Deferred Revenue – Amounts received from a customer before the purchased product is shipped to the customer are treated as deferred revenue. If cash is not received, an accounts receivable is recognized for the invoiced order, but revenue is not recognized until the order is fully shipped.
At December 31, 2025, total deferred revenue was $
| F-13 |
| Table of Contents |
Segment Disclosures
The financial statements of LFTD Partners are consolidated with Lifted’s, since Lifted is a wholly owned subsidiary of LFTD Partners. All of the Company’s sales are generated by the Company’s wholly owned subsidiary Lifted; LFTD Partners as an entity by itself generates no sales.
Pursuant to Accounting Standards Codification (“ASC”) 280-10-50-1: “an operating segment is a component of a public entity that has all of the following characteristics:
| a. | It engages in business activities from which it may recognize revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). |
| b. | Its operating results are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance. |
| c. | Its discrete financial information is available.” |
Based on the similarities and shared resources of our production and related product portfolio, the Company views its operations and manages its business as one operating and one reporting segment. The Company’s CODM is NWarrender. Due to the rapidly evolving nature of the Company’s industry, NWarrender leads the Company’s efforts to launch new products to stay ahead of trends, find new sales channels, and modify sales strategies. Consumer demands, changes to regulations, proposed legislation, resource needs for Lifted’s collaborations with third parties, and new product opportunities with novel cannabinoids or other active ingredients, are some of the factors that are considered by NWarrender when determining how to allocate the Company’s resources for operations and business development.
Shown below are tables showing the approximate disaggregation of historical revenue:
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| F-14 |
| Table of Contents |
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Cost of Goods Sold – Cost of goods sold primarily consist of the costs of raw goods utilized in the manufacture of products, direct labor, co-packing fees, freight and shipping charges, and certain quality control costs, such as lab testing costs.
Spoiled and obsolete inventory that is written off is a component of cost of goods sold. The process of determining obsolete or spoiled inventory involves:
| 1) | Identifying raw goods that would no longer be used in the manufacture of finished goods; |
| 2) | Identifying expired raw goods; |
| 3) | Identifying finished goods that would no longer be sold or that are slow moving; |
| 4) | Identifying finished goods that are expired; and |
| 5) | Valuing and expensing raw and finished goods that would no longer be sold. |
Cost of goods sold amounted to $
Operating Expenses – Operating expenses include accounts such as payroll expenses, deferred stock compensation expense, the company-wide management bonus pool, management bonuses, professional fees, bank charges and merchant fees, advertising and marketing, bad debt expense, depreciation and amortization, collaboration commissions and royalties expense, and other operating expenses. Total operating expenses were $
The Company’s reported bad debt expense stems from the Company’s CECL Model analysis, which is described above, in the Accounts Receivable section. As described in ITEM 1A. RISK FACTORS, the delay in Lifted’s receipt of payments from certain customers—primarily distributors—have increasingly become an issue for Lifted. Certain customers have become slower to pay Lifted for purchased product (“Slow Paying Customers”), and the Slow Paying Customers disregard payment terms. Management speculates that some Slow Paying Customers may be slow-paying Lifted because of their own sales collection issues, which may in part be caused by the regulatory uncertainty over our industry. As described in the Accounts Receivable section above, the Company has an accounting protocol which effectively causes the Company to recognize an allowance for doubtful accounts for all invoices older than 90 days. Consequently, the delay in Lifted’s receipt of payments from certain customers has a direct impact on the Company’s net receivables, net income, and earnings per share.
| F-15 |
| Table of Contents |
During the first quarter of 2023, the Company recognized a net loss after ten straight quarters of profitability, solely because of the impact of a one-time, non-cash stock compensation expense of $
Income Taxes – Provisions for income taxes are based on taxes payable or refundable for the current year and deferred income taxes. Deferred income taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements and on tax carry forwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is provided against deferred income tax assets when it is not more likely than not that the deferred income tax assets will be realized.
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Net Income/(Loss) |
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Earnings/(Loss) Per Common Share Attributable to Common Stockholders |
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Included in the December 31, 2023 diluted EPS calculation was the minimum number of shares of common stock (160,000) that would eventually be issued pursuant to the Oculus Merger Agreement.
Recent Accounting Pronouncements – On December 14, 2023, the FASB issued a final standard on improvements to income tax disclosures, ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024, and as such the guidance was adopted by the Company in its 2025 year-end financial statements. Refer to NOTE 14 – INCOME TAXES for more information.
| F-16 |
| Table of Contents |
In addition, in November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40); Disaggregation of Income Statement Expenses. ASU 2024-03 is effective for public business entities for annual periods beginning after December 15, 2026. The Company is currently evaluating the impact, if any, that the updated standard will have on the consolidated financial statements.
On November 27, 2023, the FASB issued ASU 2023-07-Segment Reporting. The new guidance was issued primarily to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments. The guidance is effective for calendar year public entities in 2024 year-end financial statements, and as such was adopted by the Company in its 2024 year-end financial statements. Refer to the section Segment Disclosures above.
In July 2025, the FASB issued Accounting Standards Update 2025-05 to Financial Instruments – Credit Losses (Topic 326) (“Update”). The amendments in this Update provide a practical expedient under which an entity assumes that current conditions as of the balance sheet date do not change for the remaining life of the current trade receivables, thereby eliminating the requirement to identify, analyze, and document macroeconomic data as part of developing a reasonable and supportable forecast when estimating expected credit losses. LFTD Partners elects the practical expedient, starting with its financial statements for the year ended December 31, 2025, to assume balance sheet date conditions do not change for the remaining life of current trade receivables.
Advertising and Marketing Expenses – Advertising and marketing costs are expensed as incurred. Advertising and marketing expenses primarily relate to marketing campaigns, trade shows, digital marketing, and promotional products. Lifted has been engaging with third party specialists to increase its presence in the direct-to-consumer space. During the year ended December 31, 2025, the Company incurred $
Off-Balance Sheet Arrangements – The Company has no off-balance sheet arrangements.
Reclassifications – Some items from the prior period have been reclassified within the financial statements to conform with the current presentation.
Business Combinations – The Company accounts for its acquisitions under ASC Topic 805, Business Combinations and Reorganizations (“ASC Topic 805”). ASC Topic 805 provides guidance on how the acquirer recognizes and measures the consideration transferred, identifiable assets acquired, liabilities assumed, non-controlling interests, and goodwill acquired in a business combination. ASC Topic 805 also expands required disclosures surrounding the nature and financial effects of business combinations. Acquisition costs are expensed as incurred.
When the Company acquires a business, we allocate the purchase price to the assets acquired and liabilities assumed in the transaction at their respective estimated fair values. We record any premium over the fair value of net assets acquired as goodwill. The allocation of the purchase price involves judgments and estimates both in characterizing the assets and in determining their fair value. We use all available information to make these fair value determinations and engage independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.
Accounting for Operating and Finance Lease Right-of-Use Assets – In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”). The amended guidance, which was effective for the Company on January 1, 2019, requires the recognition of lease assets and lease liabilities on the balance sheet for those leases with terms in excess of 12 months and currently classified as operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet; lease expense for these types of leases are recognized on a straight-line basis over the lease term. Options to extend or terminate a lease are not included in the determination of the right-of-use asset or lease liability unless it is reasonably certain to be exercised. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Lifted adopted ASU 2016-02 using the modified retrospective approach, electing the package of practical expedients.
| F-17 |
| Table of Contents |
The Company currently has operating leases for its leased facilities located at 8910 58th Place, Suites 100, 600 and 700, Kenosha, WI 53144 and 5732 95th Avenue, Suites 100-300, Kenosha, WI 53144. These facilities are used for manufacturing, packaging, storage and office space in Kenosha, Wisconsin. The Company has paid security deposits for these leases. From time to time, the Company maintains inventory at third party facilities around the USA.
As described in NOTE 16 – SUBSEQUENT EVENTS, effective as of February 1, 2026 (the “Expansion Date #2”), the lease of the space located at 5732 95th Ave., Suites 100-300, Kenosha, WI 53144 was amended (the “Third Amendment to the 5732 Lease”) to expand the square footage of the leased space to include an additional 2,700 square feet of space located at 5732 95th Avenue, Suite 400, Kenosha, Wisconsin 53144 (the “Expansion Area #2”). This space is currently being used for storage. Pursuant to a fourth amendment to the lease of the space located at 5732 95th Ave., Suites 100-400, Kenosha, WI 53144 (the “Fourth Amendment to the 5732 Lease”), the Termination Date of Expansion Area #2 is February 29, 2028, which is consistent with the Termination Date of the lease of the space located at 5732 95th Ave., Suites 100-300, Kenosha, WI 53144.
Accounting for Goodwill – Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers.
Goodwill is not amortized. Goodwill is tested at least annually for impairment at the report unit level. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount.
Impairment of goodwill is the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. However, an entity shall consider the related income tax effect from any tax deductible goodwill, if applicable, when measuring the goodwill impairment loss.
An entity may first assess qualitative factors, to determine whether it is necessary to perform the quantitative goodwill impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any).
An entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill.
An entity has an unconditional option to bypass the qualitative assessment described in the preceding paragraph for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period.
In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, an entity shall assess relevant events and circumstances. Examples of such events and circumstances include the following:
| a. | Macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets |
| b. | Industry and market considerations such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for an entity’s products or services, or a regulatory or political development |
| c. | Cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows |
| d. | Overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods |
| e. | Other relevant entity-specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation |
| f. | Events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing of all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit |
| g. | If applicable, a sustained decrease in share price (considered in both absolute terms and relative to peers). |
| F-18 |
| Table of Contents |
If, after assessing the totality of events or circumstances such as those described in the preceding paragraph, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.
If, after assessing the totality of events or circumstances such as those described previously, an entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity shall perform the quantitative goodwill impairment test.
The examples included above are not all-inclusive, and an entity shall consider other relevant events and circumstances that affect the fair value or carrying amount of a reporting unit in determining whether to perform the quantitative goodwill impairment test. An entity shall consider the extent to which each of the adverse events and circumstances identified could affect the comparison of a reporting unit's fair value with its carrying amount. An entity should place more weight on the events and circumstances that most affect a reporting unit's fair value or the carrying amount of its net assets. An entity also should consider positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity has a recent fair value calculation for a reporting unit, it also should include as a factor in its consideration the difference between the fair value and the carrying amount in reaching its conclusion about whether to perform the quantitative goodwill impairment test.
An entity shall evaluate, on the basis of the weight of evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. None of the individual examples of events and circumstances included above are intended to represent standalone events or circumstances that necessarily require an entity to perform the quantitative goodwill impairment test. Also, the existence of positive and mitigating events and circumstances is not intended to represent a rebuttable presumption that an entity should not perform the quantitative goodwill impairment test.
The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. In estimating the fair value of a reporting unit, a valuation technique based on multiples of earnings or revenue or a similar performance measure may be used if that technique is consistent with the objective of measuring fair value. Use of multiples of earnings or revenue in determining the fair value of a reporting unit may be appropriate, for example, when the fair value of an entity that has comparable operations and economic characteristics is observable and the relevant multiples of the comparable entity are known. Conversely, use of multiples would not be appropriate in situations in which the operations or activities of an entity for which the multiples are known are not of a comparable nature, scope, or size as the reporting unit for which fair value is being estimated.
If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Additionally, an entity shall consider the income tax effect from any tax deductible goodwill on the carrying amount of the reporting unit, if applicable, when measuring the goodwill impairment loss.
| F-19 |
| Table of Contents |
Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future.
Goodwill impairment charges on the Lifted Goodwill and Oculus Goodwill were recorded as of December 31, 2025; reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern – The Company currently has one revenue-generating subsidiary, Lifted. Prior to the acquisition of Lifted on February 24, 2020, the Company had no sources of revenue, and the Company had a history of recurring losses, which has resulted in an accumulated deficit of $
The Company’s investments in Ablis and Bendistillery made the Company a minority owner of these companies. As a minority owner, the Company is not able to recognize any portion of Ablis’ or Bendistillery’s revenues or earnings in the Company’s financial statements. The Company monitors its investments in Ablis and Bendistillery and from time to time will evaluate whether there has been a potential impairment of value, which there was as of December 31, 2025. Refer to the following sections for more information about the impairment charges recorded against the Company’s investments in Ablis and Bendistillery as of December 31, 2025:
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investments in Ablis and Bendistillery
The Company currently is making payments of interest and principal on its loan from Surety Bank, and is accruing and paying dividends on outstanding Series A Preferred Stock and Series B Preferred Stock at the rate of 3% per year, among other ongoing financial obligations. As extensively discussed in this document, the Company is subject to a wide variety of Risk Factors including substantial legal and regulatory risks. You should carefully consider the risks outlined in ITEM 1A. RISK FACTORS, together with all of the other information contained in this Annual Report on Form 10-K, including the sections titled “Cautionary Note Regarding Forward-Looking Statements”, “SUMMARY OF RISK FACTORS”, and “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. These matters cumulatively raise substantial doubt about the Company’s ability to continue as a going concern.
The legal and regulatory risks facing the Company’s business are particularly acute at this point in time, in at least the following respects:
| F-20 |
| Table of Contents |
On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also bans intoxicating hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. However, the Act in all likelihood will have a devastating impact on the Company and the price of its common stock. The material adverse effects of the Act cannot be overstated; these material adverse effects include, but are not limited to, the following:
| 1) | The elimination of half or more of Lifted’s sales. Sales of hemp-derived products made up approximately 52% of Lifted’s sales during the year ended December 31, 2025; thus, the Act could eliminate approximately half or more of the Company’s revenue; |
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| 2) | Goodwill impairment charges. As a result of LFTD Partners' acquisition of Lifted, LFTD Partners recognized goodwill of $ |
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| 3) | An investment impairment charge. The Act necessitated the calculation and recording of an impairment of LFTD Partners’ investment in hemp-derived beverage and products maker Ablis. On April 30, 2019, LFTD Partners purchased |
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| 4) | Significant write offs of inventory. The Act will most likely negatively impact the pricing of hemp-derived products, the availability and price of raw goods, and production forecasting and sales, which may lead to the recording of inventory allowances against, or write offs of, our hemp-derived inventory each quarter end leading up to November 12, 2026. Moreover, any hemp-derived products in inventory on November 12, 2026 will have to be written off. |
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| 5) | Significant write offs of accounts receivable. The Act will have a material adverse effect on the wholesalers and distributors that sell our products. In turn, these wholesalers and distributors may disregard their payment terms and not pay us for the product that they have purchased, causing us to have to correspondingly increase our allowance for doubtful accounts, and eventually writing off the accounts receivable. |
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| 6) | Impairments of, or losses on the disposition of, hemp-related fixed assets. The Act is expected to materially reduce or eliminate the utility and marketability of fixed assets used primarily in the manufacture of hemp-derived products. As a result, we may be required to record impairment charges on these assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts. |
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| 7) | Sales of fixed or other assets to fund ongoing operations. If the Act materially reduces our revenue from hemp-derived products, our cash flow may be insufficient to support ongoing operating expenses. In that event, we may be required to sell fixed assets or other assets to generate liquidity, which could occur at unfavorable prices and materially adversely affect our financial condition. |
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| 8) | Workforce reductions and termination of contractor relationships. If the Act materially reduces demand for our hemp-derived products, we may be required to reduce our workforce and terminate relationships with independent contractors. Such actions could disrupt our operations, result in restructuring costs, and adversely affect our ability to operate or pursue future business opportunities. |
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| 9) | Reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates. Just the passing of the Act has significantly reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates, because the Act calls into question our Company’s short-term and long-term financial and operational viability, growth prospects, liquidity, and potential for listing on a national stock exchange; and if the Act is not replaced, impacted or amended by subsequent acts of Congress prior to November 12, 2026, then these negative impacts on our Company and our common stock are likely to even further intensify. |
Additional factors that could materially adversely affect the Company’s future operating results include, but are not limited to: other changes to federal laws and regulations; any new rule proposed by the federal Drug Enforcement Administration that might attempt to classify certain hemp-derived products as controlled substances; and any other federal or state laws and regulations prohibiting or restricting hemp-derived, kratom-derived, nicotine or other psychoactive products and/or vaping.
There is also a risk that the Company potentially might be accused of selling products containing ingredients that might be considered an analog of a controlled substance. The Company is also subject to vendor concentration risk, customer concentration risk, customer credit risk, and counterparty risk. A limited number of customers have historically made up a significant portion of the Company’s sales. Also, historically, the Company has purchased raw goods and finished goods from a limited number of suppliers. The loss of Lifted’s relationships with these customers and vendors could have a material adverse effect on Lifted’s business.
The Company maintains levels of cash bank accounts that typically exceed federally insured limits. The Company has not experienced any losses in such accounts and it believes that it is not exposed to any significant credit risk on cash.
No assurance or guarantee whatsoever can be given that the net income of the Company’s wholly owned subsidiary Lifted will be sufficient to allow the Company to pay all of its operating expenses, its financial obligations under its loan agreements with Surety Bank, the dividends accruing and being paid on the Company’s preferred stock, future company-wide management bonus pool payments, and other obligations.
As a result of all of the foregoing described factors, there is substantial doubt that the Company will be able to continue as a going concern.
| F-21 |
| Table of Contents |
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
As a result of LFTD Partners' acquisition of Lifted, LFTD Partners recognized goodwill of $
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
The Act necessitated the calculation and recording of an impairment charge on the Lifted Goodwill and Oculus Goodwill. As of December 31, 2025, LFTD Partners recorded a goodwill impairment charge on the Lifted Goodwill and Oculus Goodwill, reducing the carrying value of both to $
The Company’s Investments in Ablis and Bendistillery
On April 30, 2019, the Company purchased
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
The Act necessitated the calculation and recording of an impairment of LFTD Partners’ investment in Ablis. On April 30, 2019, LFTD Partners purchased
Regarding LFTD Partners investment in Bendistillery: distillers such as Bendistillery are navigating a tougher, more complex environment than they did even a few years ago. Liquor companies today are balancing category decline, stricter rules, and higher costs while trying to stay culturally relevant. Consequently, as of December 31, 2025, LFTD Partners recorded an impairment charge on its investment in Bendistillery, reducing the carrying value of LFTD Partners’ investment in Bendistillery to $
NOTE 5 – PROPERTY AND EQUIPMENT, NET
Property and Equipment consist of the following:
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Building |
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Land |
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Machinery & Equipment |
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Furniture & Fixtures |
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Computer Equipment |
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Building & Leasehold Improvements |
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Vehicles |
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Trade Show Booths |
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Less: Accumulated Depreciation |
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| F-22 |
| Table of Contents |
The useful lives of the Company’s property and equipment by asset class are as follows:
Asset Class | Estimated Useful Life | |
Building | ||
Land | ||
Machinery & Equipment | ||
Building Improvements | ||
Leasehold Improvements | ||
Trade Show Booths | ||
Vehicles | ||
Computer Equipment | ||
Furniture & Fixtures | ||
In the Consolidated Statements of Operations, depreciation expense is consolidated with amortization expense.
Depreciation expense related to machinery and equipment and depreciation expense related to the 5511 Building, totaling $
Depreciation expense related to machinery and equipment and depreciation expense related to the 5511 Building, totaling $
Depreciation expense related to machinery and equipment, totaling $
NOTE 6 – THEFT OF INVENTORY
Included in net non-operating Other Expenses of for the year ended December 31, 2025 was Loss From Inventory Theft of $
NOTE 7 – INTANGIBLE ASSETS, NET
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Combinations
Accounting for Goodwill
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
| F-23 |
| Table of Contents |
NOTE 8 – RELATED PARTY TRANSACTIONS
Ablis
During the year ended December 31, 2025, Lifted sold $
Compensation of Executives and Directors
Please refer to the section ITEM 11. EXECUTIVE COMPENSATION for executive and director compensation information.
Robert T. Warrender II
In January 2022, Lifted hired Mr. Robert T. Warrender II, NWarrender’s father, as an employee, with a salary of $
Robert T. Warrender III
Mr. Robert T. Warrender III is NWarrender’s brother, and former Director Mr. Robert T. Warrender II’s son. From January 9, 2023 until July 1, 2023, Robert T. Warrender III worked for Lifted as an employee in sales; previously, Mr. Warrender operated as an independent contractor of Lifted. During the years ended December 31, 2023 and 2022, $
Sublease of Space Located at 2701-09 West Fulton PH, Chicago, Illinois 60612
On July 6, 2022, Lifted entered into a sublease for office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago, Illinois 60612. The sublease was terminated as of June 30, 2024. Prior to the termination of the sublease, the sublease cost $
The sublessor was Lifted’s former Chief Strategy Officer. The sublease was structured so that the sublessor's lease payment obligations to the landlord were passed on to Lifted on a dollar-for-dollar basis, such that the sublessor did not realize a cashflow profit or loss from the sublease. Since the term was less than twelve months, this lease was not recorded on the Consolidated Balance Sheet, and lease expense was recognized on a straight-line basis over the lease term.
Lease and Purchase of 5511 95th Avenue, Kenosha, Wisconsin 53144
Toward the end of 2020, NWarrender, through his assigned entity 95th Holdings, LLC ("Holdings"), purchased a building located at 5511 95th Avenue, Kenosha, Wisconsin 53144 (“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 Holdings, the parties agreed that 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 the Omnibus Agreement with NWarrender on December 30, 2021, Lifted was obligated to purchase the 5511 Building from Holdings on or before December 31, 2022 for a fixed purchase price of $
Pursuant to an Acceleration Agreement, the deadline to purchase the 5511 Building was extended by one year to December 31, 2023. In addition, the Acceleration Agreement contained a provision that if we raised $
| F-24 |
| Table of Contents |
On December 14, 2023, LFTD Partners and Lifted (together the “Borrower”), jointly borrowed a total of $
The Lender made two five-year loans to the Borrower, as joint borrowers: (1) a working capital loan of $
Then, on November 20, 2025, Borrower paid off the principal balance and accrued interest on the Working Capital Loan, which totaled $
Prior to the WCL Payoff, the Board of Directors of the Company had authorized management of the Company to explore a sale of the 5511 Building, and, if the 5511 Building is sold, to apply the net proceeds of such sale, firstly to the full repayment of the Building Loan, and secondly to the partial repayment of the Working Capital Loan. Simultaneously with such authorization, the Board of Directors of the Company had authorized management of the Company to apply certain tax refunds expected to be received by the Company, plus certain cash on hand held by the Company, to the partial or full repayment of the Working Capital Loan. Pursuant to this authorization, during the third quarter ended September 30, 2025, the Working Capital Loan was paid down $
Laurie Warrender
On December 30, 2024, Laurie Warrender, NWarrender’s mother, was hired as an employee of Lifted, as a consultant and advisor to NWarrender, with a salary of $
Mystic Foods LLC
During the year ended December 31, 2025, Lifted purchased $
William C. “Jake” Jacobs
At the closing of the acquisition of Lifted,
| F-25 |
| Table of Contents |
Related Party Note
On April 1, 2025, the Company converted $
Listing Contract
On July 21, 2025, Lifted (“Seller”) entered into a listing contract with @properties (the “Firm”). The Seller’s listing agents with @properties are Seller’s director Kevin Rocio and Jake Hansen. The listing contract gives the Firm the exclusive right to sell the 5511 Building. The term of the contract is from July 21, 2025 up to the earlier of midnight on July 21, 2026, or the conveyance of the entire 5511 Building. The Firm’s commission shall be 3% of the sale price. Seller shall pay the Firm’s commission, which shall be earned, if, during the term of the listing: (1) Seller sells all or any part of the 5511 Building; (2) Seller grants an option to purchase all or any part of the 5511 Building which is subsequently exercised; (3) Seller exchanges all or any part of the 5511 Building; or (4) A transaction occurs which causes an effective change in ownership or control of all or any party of the 5511 Building. Once earned, the Firm’s commission is due and payable in full at the closing.
NOTE 9 – SHAREHOLDERS’ EQUITY AND STOCK BASED COMPENSATION
Issuance of Series A Convertible Preferred Stock
The Company has authorized
Issuance of Series B Convertible Preferred Stock
The Company has authorized
Share-Based Compensation
In connection with the acquisition of Lifted,
| F-26 |
| Table of Contents |
Options and Warrants
As of December 31, 2025, the Company did not have any options or warrants outstanding.
As of December 31, 2024, in addition to our outstanding common stock, we had outstanding warrants to purchase
In comparison, as of December 31, 2023, in addition to our outstanding common stock, we had outstanding (a) options to purchase
Stock Buyback Transactions and Cancellations
On April 2, 2024, LFTD Partners signed a Stock Buyback Agreement to purchase
On April 8, 2024, LFTD Partners signed a Stock Buyback Agreement to purchase
On April 9, 2024, LFTD Partners signed a Stock Buyback Agreement to purchase
The following is a summary of share-based compensation, stock option and warrant activity as of December 31, 2025 and changes during the year then ended:
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| Weighted-Average Exercise Price |
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| Weighted-Average Remaining Contractual Term (Years) |
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| Aggregate Intrinsic Value |
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| Exercisable Warrant Outstanding, December 31, 2024 |
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Warrants That Expired During Q1 2025 |
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| Exercisable Option and Warrant Outstanding, December 31, 2025 |
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| $ |
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| $ |
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Outstanding Options and Warrants, December 31, 2025 |
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| $ |
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| $ |
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NOTE 10 – LEASES
Lease and Purchase of 5511 95th Avenue
On December 18, 2020, the Company’s wholly owned subsidiary, Lifted, entered into a five-year triple-net lease, effective January 1, 2021, for approximately 11,238 square feet located at 5511 95th Avenue, Kenosha, Wisconsin (the “5511 Building”). The landlord, 95th Holdings, LLC, was an entity owned by Nicholas S. Warrender, the Company’s Vice Chairman and Chief Operating Officer, and the transaction was therefore considered a related-party transaction.
The lease provided for annual base rent beginning at approximately $
On December 14, 2023, Lifted purchased the 5511 Building for $
| F-27 |
| Table of Contents |
Lease of 8920 58th Place, Suite 850, Kenosha, Wisconsin
On September 23, 2021, Lifted entered into a lease agreement for approximately 5,000 square feet of office and warehouse space located at 8920 58th Place, Suite 850, Kenosha, Wisconsin. The lease commenced on October 1, 2021 and had an initial three-year term. The property was subsequently sold, and the successor landlord assumed the lease. The lease provided for base rent beginning at approximately $2,396 per month, subject to annual increases of 3%, plus Lifted’s proportionate share of real estate taxes and operating expenses. The facility was used for sales offices, finished goods storage, and shipping operations. The lease was accounted for as an operating lease.
The lease was terminated effective March 31, 2024 in connection with amendments to the Company’s other 58th Place lease arrangements.
Lease of Space Located at 8910 58th Place, Suites 600 and 700, Kenosha, Wisconsin 53144
On November 17, 2021, Lifted entered into a lease agreement with TI for office and warehouse space located at 8910 58th Place, Suites 600 & 700, Kenosha, WI 53144 (the “Second 58th Lease”). Subsequent to Lifted entering into the Second 58th Lease, the property was sold to Ladi Investments, LLC (“Ladi”); thus Ladi is the current landlord. The Second 58th Lease space is used for raw goods storage.
The term of the Second 58th Lease commenced on January 1, 2022. The initial term of the Second 58th Lease was to be five years, unless extended or earlier terminated in accordance with the Second 58th Lease. While extensions were not prohibited, Lifted did not have the right to unilaterally elect to extend the term of the Second 58th Lease for an additional term.
Under the terms of the Second 58th Lease, Lifted leases approximately 8,000 square feet of space and pays a base square foot charge of $6.00 per square foot per annum, with increases in rent each year during the term as set out in the table titled “Rent Schedule” below. Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs. This lease is accounted for as an operating lease.
Rent Schedule
Date |
| Base Monthly Rent |
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01/01/2022 – 12/31/2022 |
| $ |
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01/01/2023 – 12/31/2023 |
| $ |
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01/01/2024 – 12/31/2024 |
| $ |
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01/01/2025 – 12/31/2025 |
| $ |
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01/01/2026 – 12/31/2026 |
| $ |
| |
First Amendment to the Second 58th Lease
On February 23, 2022, the Second 58th Lease was amended (the “First Amendment to the Second 58th Lease”) to change the lease commencement date from January 1, 2022 to February 1, 2022, and to change the lease termination date from December 31, 2026 to January 31, 2027. The First Amendment to the Second 58th Lease did not change the base monthly rent amounts; it simply pushed them back one month.
Second Amendment to the Second 58th Lease
On March 25, 2024, the Second 58th Lease was amended for a second time (the “Second Amendment to the Second 58th Lease”).
| F-28 |
| Table of Contents |
The Expansion Area is being used for office, manufacturing and warehouse space.
Under the Second Amendment to the Second 58th Lease, the term of the Second 58th Lease is extended through May 31, 2029.
Commencing on February 1, 2027, the base monthly rent for Suites 600 and 700 of the Second 58th Lease, exclusive of the Expansion Area (Suite 100), is extended as follows:
Suites 600 and 700 | ||||
Date |
| Base Monthly Rent |
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February 1, 2027 – January 31, 2028 |
| $ |
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February 1, 2028 – January 31, 2029 |
| $ |
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February 1, 2029 – May 31, 2029 |
| $ |
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Commencing on the Expansion Date, the base monthly rent for the Expansion Area (Suite 100) is as follows:
Suite 100 | ||||
Date |
| Base Monthly Rent |
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April 1, 2024 – May 31, 2024 |
| $ |
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June 1, 2024 – March 31, 2025 |
| $ |
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April 1, 2025 – March 31, 2026 |
| $ |
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April 1, 2026 – March 31, 2027 |
| $ |
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April 1, 2027 – March 31, 2028 |
| $ |
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April 1, 2028 – March 31, 2029 |
| $ |
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April 1, 2029 – May 31, 2029 |
| $ |
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Under the Second Amendment to the Second 58th Lease, Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs. Pursuant to the Second Amendment to the Second 58th Lease, Lifted is required to remit an additional security deposit of $
The effectiveness of the Second Amendment to the Second 58th Lease was contingent upon the successful execution of all three of the following documents:
| (i) | the Lease Termination Agreement dated March 18, 2024, by and between Ladi and Lifted for Lifted’s leased space located at 8920 58th Place, Suite 850, Kenosha, Wisconsin 53144 (the “8920 Suite 850 Termination Agreement”), |
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| (ii) | the Lease Termination Agreement dated March 18, 2024, by and between Ladi and Lifted for Lifted’s leased space located at 9560 58th Place, Suite 360, Kenosha, Wisconsin 53144 (the “the 9560 Suite 360 Termination Agreement”), and |
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| (iii) | the Lease Termination Agreement dated March 18, 2024, by and between Ladi and a third party that currently leases the space located at 8910 58th Place, Suite 100, Kenosha, Wisconsin 53144 (the “8910 Suite 100 Termination Agreement”). |
These contingencies were met on or about March 27, 2024.
| F-29 |
| Table of Contents |
Lease of Space Located at 9560 58th Place, Suite 360, Kenosha, Wisconsin 53144
On May 31, 2022,
Lease of Space Located at 5732 95th Avenue, Suites 100-400, Kenosha, Wisconsin 53144
On November 28, 2022, Lifted entered into a lease agreement with Ladi for commercial space located at 5732 95th Avenue, Suite 200 and 300, Kenosha, WI 53144 (the “5732 Lease”). The 5732 Lease is used for Lifted’s gummy manufacturing operations.
The 5732 Lease commenced on February 1, 2023. The initial term of the 5732 Lease extends approximately five years (sixty-one months) from February 1, 2023 to February 29, 2028, unless extended or earlier terminated in accordance with the 5732 Lease. While extensions are not prohibited, Lifted does not have the right to unilaterally elect to extend the term of the 5732 Lease for an additional term.
Rent Schedule
Date |
| Base Monthly Rent |
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February 1, 2023 – February 28, 2023 |
| $ |
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March 1, 2023 – February 29, 2024 |
| $ |
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March 1, 2024 – February 28, 2025 |
| $ |
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March 1, 2025 – February 28, 2026 |
| $ |
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March 1, 2026 – February 28, 2027 |
| $ |
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March 1, 2027 – February 29, 2028 |
| $ |
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First Amendment to the 5732 Lease
Commencing on the Expansion Date, the base monthly rent for the Expansion Area is:
Date |
| Base Monthly Rent |
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April 1, 2023 – January 31, 2024 |
| $ |
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February 1, 2024 – January 31, 2025 |
| $ |
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February 1, 2025 – January 31, 2026 |
| $ |
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February 1, 2026 – January 31, 2027 |
| $ |
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February 1, 2027 – January 31, 2028 |
| $ |
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February 1, 2028 – February 29, 2028 |
| $ |
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Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs.
| F-30 |
| Table of Contents |
The 5732 Lease and the First Amendment to the 5732 Lease are accounted for as a single operating lease.
Third and Fourth Amendments to the 5732 Lease
As described in NOTE 16 – SUBSEQUENT EVENTS, effective as of February 1, 2026 (the “Expansion Date #2”), the 5732 Lease was amended (the "Third Amendment to the 5732 Lease”) to expand the square footage of the leased space to include an additional 2,700 square feet of space located at 5732 95th Avenue, Suite 400, Kenosha, Wisconsin 53144 (the “Expansion Area #2”). This space is currently being used for storage.
Commencing on the Expansion Date #2, the base monthly rent for the Expansion Area #2 is:
Date |
| Base Monthly Rent |
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February 1, 2026 - February 28, 2026 |
| $ |
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March 1, 2026 – February 28, 2027 |
| $ |
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March 1, 2027 – February 29, 2028 |
| $ |
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March 1, 2028 – February 28, 2029 |
| $ |
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Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs. Ladi is currently in receipt of $
Pursuant to a fourth amendment to the lease of the space located at 5732 95th Ave., Suites 100-400, Kenosha, WI 53144 (the “Fourth Amendment to the 5732 Lease”), the Termination Date of Expansion Area #2 is February 29, 2028, which is consistent with the Termination Date of the lease of the space located at 5732 95th Ave., Suites 100-300, Kenosha, WI 53144.
The 5732 Lease, the First Amendment to the 5732 Lease, the Third Amendment to the 5732 Lease and the Fourth Amendment to the 5732 Lease are accounted for as a single operating lease.
Lease of Space Located at 16178 US Hwy 550, Aztec, New Mexico
In connection with the Oculus merger,
| F-31 |
| Table of Contents |
Lease of Space Located at 789 Tech Center Drive, Unit C, Durango, Colorado 81301
On February 27, 2024,
Third Party Facilities
From time to time, the Company maintains inventory at third party facilities around the USA.
Lease Tables
The following table is the maturity analysis of the Company’s operating leases as of the reported period end:
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2029 |
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Thereafter |
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Total |
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Less: Present value discount |
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Lease liability |
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Weighted Average Discount Rate
In calculating the right-of-use assets and liabilities, the Company uses a discount rate based on a published range of conventional commercial mortgage interest rates corresponding to the life of each lease. The Company uses the higher end of the range due to the Company’s limited credit history and the riskiness of the industries in which the Company operates.
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| December 31, 2025 |
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Weighted Average remaining lease term (years) |
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Weighted Average Discount rate |
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| F-32 |
| Table of Contents |
Lease Costs
The table below summarizes the components of lease costs for the following periods:
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| For the Twelve Months Ended December 31, |
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Lease Cost: |
| 2025 |
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| 2023 |
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Finance lease expense: |
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Amortization of Right-of-Use Assets |
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Interest on lease liabilities |
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Operating lease expense |
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Total |
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Balance Sheet Classification of Operating Lease Assets and Liabilities
Asset |
| Balance Sheet Line |
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| December 31, 2025 |
| |
Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $457,742 |
| Non-Current Assets |
|
| $ |
| |
|
|
|
|
|
|
|
|
Liability |
| Balance Sheet Line |
|
| December 31, 2025 |
| |
Operating Lease Liabilities |
| Current Liabilities |
|
| $ |
| |
| Non-Current Liabilities |
| | ||||
As described in NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, a portion of monthly overhead costs such as lease expense are allocated to finished goods. For example, monthly overhead costs such as payments for rent, utilities, insurance, and indirect labor are allocated to finished goods based on the estimated percentage cost toward the finished goods. Depreciation expense related to certain machinery and equipment is also allocated to finished goods.
NOTE 11 – CONTINGENT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Potential Issuance of Warrants to Purchase Shares of Common Stock of the Company
The Compensation Committee of the Company’s Board of Directors may, from time to time, recommend that certain warrants to purchase shares of common stock of the Company should be issued to new or current members of the Company’s Board of Directors, to officers and employees of the Company and its subsidiaries, or to members of any advisory board or consultants to the Company.
Compensation of Lifted’s Chief Strategy Officer
Lifted entered into an agreement with its Chief Strategy Officer (the “CSO”),
Lifted’s former CSO, who worked for Lifted
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| Table of Contents |
Company-Wide Management Bonus Pool
Please refer to NOTE 13 – COMPANY-WIDE MANAGEMENT BONUS POOL for more information about the company-wide management bonus pool.
Other Contingent Contractual Obligations and Commercial Commitments
For other contingent contractual obligations and commercial commitments, please refer to NOTE 8 – RELATED PARTY TRANSACTIONS.
NOTE 12 – 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 in two pending lawsuits, as the defendant:
| (1) | Hernandez v Lifted Liquids – Plaintiffs have sued the Company as representatives of a putative class action case in the United States District Court for the Northern District of Illinois. The Complaint alleges that Plaintiffs bought the Company’s vape cartridge products and that the delta-9-THC cannabinoid content of those products was underreported. The Complaint alleges that the Company fraudulently misrepresented the nature of the products, breached an implied warranty, and was unjustly enriched. The Parties have engaged in settlement discussions to resolve the matter without the need to incur further expenses and attorney’s fees. As described in NOTE 16 – SUBSEQUENT EVENTS, on February 12, 2026, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit with prejudice. In the settlement agreement, the parties acknowledged that there has been no evidence that any of Lifted’s officers, directors, employees or agents acted improperly or was engaged in any deceptive conduct. |
| (2) | Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC – Plaintiff had 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. In his Amended Complaint, plaintiff asserted seven causes of action including civil RICO claims and alleged the existence of 1,000 “John Doe” defendants. The Company contended that this lawsuit was without merit and is vigorously defending the action. On February 6, 2025, the Court ordered that the RICO claims were dismissed with prejudice, and the other claims were also dismissed. The Court noted that the RICO claims were “borderline frivolous”. The Court further dismissed all claims against the individual defendants. On March 6, 2025, Plaintiff filed a second amended complaint alleging that the Company misrepresented various products. The Company filed a motion to dismiss the amended complaint. As described in NOTE 16 – SUBSEQUENT EVENTS, on February 23, 2026, the court orally announced that it was granting the motion to dismiss and dismissed the case with prejudice. On March 30, 2026, Plaintiff filed a notice of appeal. |
Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc.
The Company filed an action seeking to recover approximately $
Lifted Liquids, Inc. v RanCo, LLC
On September 9, 2025, the Company had filed an action to recover approximately $
| F-34 |
| Table of Contents |
Settlement Agreement with Former Insurance Carrier
On or about October 2, 2025, Lifted compromised and settled a dispute with one of its former insurance carriers, on terms agreeable to the parties.
Settlement Agreement with Chris Hillseth Enterprises Corporation and Ameri-Kal LLC
The Company had filed an action seeking to recover amounts paid for equipment that did not work as represented. On or about April 28, 2025, the parties resolved the matter via a signed settlement agreement, pursuant to which the Company will recoup a total of $
Dismissal of 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 filed a motion to dismiss. On March 8, 2025, Plaintiff has voluntarily dismissed the complaint without prejudice to refiling it at a later date.
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 $
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”),
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 $
| F-35 |
| Table of Contents |
NOTE 13 – COMPANY-WIDE MANAGEMENT BONUS POOL
Pursuant to the employment agreements entered into between the Company and its three principal executives GJacobs, WJacobs and NWarrender (individually, “Executive”), the Company is obligated to compensate management of the Company via a management bonus pool.
For each fiscal year during the Employment Term, the Executive shall be eligible to be considered for an annual bonus (the “Annual Bonus”) as part of a Company-wide management bonus pool arrangement. During the fourth quarter of each year, the Chairman of the Compensation Committee of the Board (the “Compensation Committee”) shall recommend in writing a consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) target (each, a “Target”) for the following year (the “Target Year”), which Target must be approved in writing by each of the following for as long as he remains employed by the Company: GJacobs, WJacobs, and NWarrender (collectively, and with respect to each for only as long as he is an employee of the Company, the “Executive Management Group”). If the Chairman of the Compensation Committee does not recommend in writing a Target for a Target Year that is approved in writing by all of the members of the Executive Management Group prior to the commencement of the Target Year, then the Target for the Target Year shall be equal to the actual consolidated EBITDA of the Company and its subsidiaries during the then-current year (i.e., the year preceding the Target Year) as certified in writing by the Company’s outside firm of independent certified public accountants. If the actual consolidated EBITDA of the Company and its subsidiaries during the Target Year as certified in writing by the Company’s outside firm of independent certified public accountants exceeds the Target (the amount by which the actual consolidated EBITDA of the Company and its subsidiaries during the Target Year as certified in writing by the Company’s outside firm of independent certified public accountants exceeds the Target, the “Excess Amount”), then cash equal to 33% of the Excess Amount shall be set aside by the Company as a cash management bonus pool (the “Bonus Pool”), and the amount of the Bonus Pool shall be allocated and paid out by the Company as bonuses or fees to the officers of the Company and its subsidiaries (and potentially, to directors or third parties who have significantly helped the Company and its subsidiaries during the Target Year), with the amount to be paid to each payee, including the amount of any Annual Bonus to be paid to the Executive, to be determined by unanimous written agreement of the Executive Management Group, in their sole discretion. The Executive expressly agrees and acknowledges that the amount of the Annual Bonus (if any) allocated and paid to the Executive as so determined by unanimous written agreement of the Executive Management Group shall be final, non-appealable, and binding upon the Executive, regardless of whether the Executive receives any Annual Bonus, and regardless of whether any Annual Bonus received by the Executive is higher or lower than any other person’s bonus, under any and all circumstances whatsoever. The Company shall pay the Executive the Annual Bonus, if any, no later than March 15th of the year following the applicable Target Year. In the event that there is funding for the Bonus Pool but the Executive Management Group does not reach a unanimous decision on Bonus allocations, then no annual bonus shall be paid. The Annual Bonus Pool would then be placed in escrow and the Executive Management Group would mediate.
Pursuant to the Amended Omnibus Agreement, the 2022 company-wide bonus pool shall not be allowed to be accrued or paid by LIFD if and to the extent that doing so would decrease LIFD’s 2022 diluted earnings per share of common stock below $
| F-36 |
| Table of Contents |
NOTE 14 – INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable for the current year and deferred income taxes. Deferred income taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements and on tax carry forwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is provided against deferred income tax assets when it is not more likely than not that the deferred income tax assets will be realized.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduced the U.S. federal statutory tax rate, broadened the corporate tax base through the elimination or reduction of deductions, exclusions, and credits, limited the ability of U.S. corporations to deduct interest expense, and transitioned to a territorial tax system which allows for the repatriation of foreign earnings to the U.S. with a
Significant components on the Company’s income tax provision (benefit) for continuing operations is as follows:
|
| For the Year Ended |
| |||||||||
|
| December 31, |
| |||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
| |||
Current |
|
|
|
|
|
|
|
|
| |||
Domestic-Federal |
| $ |
|
| $ | ( | ) |
| $ |
| ||
Domestic-State |
|
|
|
|
|
|
|
| ( | ) | ||
Franchise taxes |
|
|
|
|
|
|
|
|
| |||
Foreign |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic-Federal |
|
|
|
|
| ( | ) |
|
|
| ||
Domestic-State |
|
|
|
|
| ( | ) |
|
|
| ||
Foreign |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
| ( | ) |
|
|
| ||
Total Provision/(Benefit) for Income Taxes |
| $ |
|
| $ | ( | ) |
| $ |
| ||
The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has no significant reserves for uncertain tax positions and no adjustments to such reserves were required by US GAAP. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.
A reconciliation of the amount of tax provision (benefit) computed using the U.S. federal statutory income tax rate to the provision for income taxes on continuing operations is as follows:
|
| For the Year Ended |
| |||||||||
|
| December 31, |
| |||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Domestic-Federal |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
State taxes, net of federal benefit |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Non-deductible expenses |
|
|
|
|
|
|
|
|
| |||
Franchise taxes |
|
|
|
|
|
|
|
|
| |||
Revision of prior years' provision to return filing |
|
|
|
|
|
|
|
| ( | ) | ||
Change in estimated future income tax rates |
|
|
|
|
| ( | ) |
|
|
| ||
Change in valuation allowance |
|
|
|
|
|
|
|
| ( | ) | ||
Other |
|
| ( | ) |
|
| ( | ) |
|
|
| |
Total Provision/(Benefit) for Income Taxes |
| $ |
|
| $ | ( | ) |
| $ |
| ||
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| Table of Contents |
Deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:
|
| December 31, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Operating Loss Carry forwards |
| $ |
|
| $ |
| ||
Stock-Based Compensation |
|
|
|
|
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| ||
Sales Allowances |
|
|
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|
|
| ||
Provision for Credit Losses – Extrax NM Loans |
|
|
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| ||
Accrued Related Party Expenses |
|
|
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| ||
Interest Carryforward |
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| ||
Allowance for Doubtful Accounts |
|
|
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|
| ||
Lease Liabilities |
|
|
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|
|
| ||
Investment Impairments |
|
|
|
|
|
| ||
Less: Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Assets |
|
|
|
|
|
| ||
|
|
|
|
|
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|
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciation & Amortization |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Liabilities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets/(Liabilities) |
| $ |
|
| $ |
| ||
Annual Rate Reconciliation Disclosure for ASU 2023-09:
|
| For the Year Ended December 31, 2025 |
| |||||
|
| Amount |
|
| Percent |
| ||
|
|
|
|
|
|
| ||
U.S. Federal Statutory Tax Rate |
| $ | ( | ) |
|
| % | |
State and Local Income Taxes, Net of Federal Income Tax Effect * |
|
| ( | ) |
|
| % | |
Foreign Tax Effects |
|
|
|
|
| % | ||
Effect of Changes in Tax Laws or Rates Enacted in the Current Period |
|
|
|
|
| % | ||
Effect of Cross-Border Tax Laws |
|
|
|
|
| % | ||
Tax Credits |
|
|
|
|
| % | ||
Changes in Valuation Allowance |
|
|
|
|
| - | % | |
Nontaxable or Nondeductible Items |
|
|
|
|
|
| % | |
Goodwill impairment |
|
|
|
|
| - | % | |
Lobbying expenses |
|
|
|
|
| % | ||
Meals and entertainment expenses |
|
|
|
|
| % | ||
Penalties |
|
|
|
|
| % | ||
Changes in Unrecognized Tax Benefits |
|
|
|
|
| % | ||
Other Adjustments |
|
|
|
|
|
| % | |
Domestic franchise taxes included in provision for income taxes |
|
|
|
|
| 0 | % | |
Change in estimated state effective tax rates |
|
|
|
|
| % | ||
Revision of prior years' deferred tax assets |
|
|
|
|
| % | ||
Revision of prior years' estimated tax liability |
|
| ( | ) |
|
| % | |
Other |
|
| ( | ) |
|
| % | |
Effective Tax Rate |
| $ |
|
|
| - | % | |
__________
*State taxes in Illinois and Wisconsin in 2025 made up the majority (greater than 50%) of the tax effect in this category.
| F-38 |
| Table of Contents |
Income Taxes Paid Disclosure for ASU 2023-09:
|
| For the Year Ended December 31, 2025 |
| |
Net Income Taxes Paid/(Received) by Jurisdiction |
|
|
| |
|
|
|
| |
Domestic-Federal |
| $ | ( | ) |
Domestic-State: |
|
|
|
|
Wisconsin |
|
| ( | ) |
Illinois |
|
| ( | ) |
Other |
|
| ( | ) |
Foreign |
|
|
| |
Total Net Income Taxes Paid/(Received) |
| $ | ( | ) |
NOTE 15 – DEBT
On December 14, 2023, LFTD Partners and Lifted (together the “Borrower”), jointly borrowed a total of $
The Lender made two five-year loans to the Borrower, as joint borrowers: (1) a working capital loan of $
On November 20, 2025, Borrower paid off the principal balance and accrued interest on the Working Capital Loan, which totaled $
The Working Capital Loan had been evidenced by a credit agreement, promissory note, security agreement, collateral assignment agreement, and pledge agreement. The Working Capital Loan was to mature on
The Business Loan bears interest at a fixed annual rate of
As of December 31, 2025, the Business Loan is secured by a first priority mortgage on the 5511 Building, along with a first priority security interest on all furniture, equipment, inventory, intangibles and fixtures, and other collateral, and also contains late payment penalties.
Prior to the WCL Payoff and Loan Term Changes, any default under these agreements could have resulted in the lender seizing the pledged collateral, including equity in key subsidiaries, intellectual property, and real estate, which could have a catastrophic impact on the Company.
| F-39 |
| Table of Contents |
The following presents the Working Capital Loan and Business Loan in the Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024:
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||
|
|
|
|
|
|
| ||
Working Capital Loan |
| $ |
|
| $ |
| ||
Real Estate Loan |
|
|
|
|
|
| ||
Total principal amount |
|
|
|
|
|
| ||
Less: Unamortized debt financing costs |
|
| ( | ) |
|
| ( | ) |
Less: Current portion of Surety Bank notes |
|
| ( | ) |
|
| ( | ) |
Non-Current portion of Surety Bank notes |
| $ |
|
| $ |
| ||
The following represents aggregate payments due on the Business Loan as of December 31, 2025:
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
Total |
|
|
| |
Less: Interest portion |
|
| ( | ) |
Total principal amount |
| $ |
|
NOTE 16 – SUBSEQUENT EVENTS
Management of the Company has evaluated the events that have occurred through the date of the filing of this Annual Report on Form 10-K and has noted the following subsequent events for disclosure purposes:
Third and Fourth Amendments to the 5732 Lease
Effective as of February 1, 2026 (the “Expansion Date #2”), the 5732 Lease was amended (the "Third Amendment to the 5732 Lease”) to expand the square footage of the leased space to include an additional 2,700 square feet of space located at 5732 95th Avenue, Suite 400, Kenosha, Wisconsin 53144 (the “Expansion Area #2”). This space is currently being used for storage.
Commencing on the Expansion Date #2, the base monthly rent for the Expansion Area #2 is:
Date |
| Base Monthly Rent |
| |
February 1, 2026 - February 28, 2026 |
| $ |
| |
March 1, 2026 – February 28, 2027 |
| $ |
| |
March 1, 2027 – February 29, 2028 |
| $ |
| |
March 1, 2028 – February 28, 2029 |
| $ |
| |
| F-40 |
| Table of Contents |
Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs. Ladi is currently in receipt of $
Pursuant to a fourth amendment to the lease of the space located at 5732 95th Ave., Suites 100-400, Kenosha, WI 53144 (the “Fourth Amendment to the 5732 Lease”), the Termination Date of Expansion Area #2 is February 29, 2028, which is consistent with the Termination Date of the lease of the space located at 5732 95th Ave., Suites 100-300, Kenosha, WI 53144.
The 5732 Lease, the First Amendment to the 5732 Lease, the Third Amendment to the 5732 Lease and the Fourth Amendment to the 5732 Lease are accounted for as a single operating lease.
Settlement Agreement with Sergio Hernandez and Josue Hernandez
On February 12, 2026, the parties settled the litigation and agreed to mutual releases and dismissal of the Hernandez v Lifted Liquids lawsuit with prejudice in exchange for Lifted paying $
Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC
On February 23, 2026, the court orally announced that it was granting the motion to dismiss and dismissed the case with prejudice. On March 30, 2026, Plaintiff filed a notice of appeal.
| F-41 |