LIFD 10-Q
Lftd Partners Inc. (LIFD)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission file number
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 of the Act:
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| None | ||
Title of each class |
| Trading symbol(s) |
| Name of exchange on which registered |
Indicate by checkmark whether the registrant (1) 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 14, 2026, there were
LFTD PARTNERS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2026
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION | ||||
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| F-1 |
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| CONSOLIDATED BALANCE SHEETS, MARCH 31, 2026 (UNAUDITED) AND DECEMBER 31, 2025 (AUDITED) |
| F-1 |
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| CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED) |
| F-2 |
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| F-3 |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (UNAUDITED) |
| F-4 |
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| F-5 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| 12 |
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| 12 |
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PART II — OTHER INFORMATION | ||||
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2 |
| Table of Contents |
PART I — FINANCIAL INFORMATION
Use of Names
In this Quarterly Report on Form 10-Q, 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 Highlandia, 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 the consolidated financial statements and the related notes included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) filed with the SEC on April 1, 2026, and within this Quarterly Report on Form 10-Q sections “ITEM 1A. RISK FACTORS” and “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, and the consolidated financial statements and the related notes included elsewhere, and in our other SEC public filings, which can be read at www.sec.gov. These matters cumulatively raise substantial doubt about the Company’s ability to continue as a going concern. 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q.
3 |
| Table of Contents |
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 our 2025 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 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 the consolidated financial statements and the related notes included elsewhere in our 2025 Form 10-K, and within this Quarterly Report on Form 10-Q sections “ITEM 1A. RISK FACTORS” and “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, and the consolidated financial statements and the related notes included elsewhere, and in our other SEC public filings, which can be read at www.sec.gov, 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.
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| Table of Contents |
ITEM 1. FINANCIAL STATEMENTS
LFTD PARTNERS INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
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| March 31, 2026 (Unaudited) |
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| December 31, 2025 (Audited) |
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ASSETS |
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Current Assets |
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Cash and Cash Equivalents |
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Prepaid Expenses |
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Accounts Receivable, net of allowance of $ |
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Inventory, net of Inventory Reserve of $ |
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Current Portion of Settlement Asset and Receivables |
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Other Current Assets |
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Total Current Assets |
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Investment in Bendistillery |
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Net Deferred Tax Asset |
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Fixed Assets, less accumulated depreciation of $ |
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Security and State Licensing Deposits and Bonds |
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Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $ |
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Total Assets |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current Liabilities |
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Operating Lease Liability |
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Deferred Revenue |
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Income Tax Payable |
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Accounts Payable and Accrued Expenses |
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Accounts Payable - Related Party |
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Note Payable - Related Party |
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Preferred Stock Dividends Payable |
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Notes Payable to Surety Bank |
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Interest Payable to Surety Bank |
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Total Current Liabilities |
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Non-Current Liabilities |
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Operating Lease Liability |
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Notes Payable to Surety Bank |
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Total Non-Current Liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Shareholders' Equity |
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Preferred Stock, $ |
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Series A Convertible Preferred Stock: |
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Series B Convertible Preferred Stock: |
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Common Stock, $ |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Shareholders' Equity |
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Total Liabilities and Shareholders' Equity |
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| $ |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| F - 1 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(UNAUDITED) | ||||||||
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| For the Three Months Ended |
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| March 31, |
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| 2026 |
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| 2025 |
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Net Sales |
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Cost of Goods Sold |
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Gross Profit |
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Operating Expenses |
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Payroll Expense |
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Professional Fees |
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Bank Charges and Merchant Fees |
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Advertising and Marketing |
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Bad Debt (Recovery)/Expense |
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Impairment of Hemp-Specific Fixed Assets |
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Depreciation and Amortization |
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Collab Commission and Royalty Expense |
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Other Operating Expenses |
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Total Operating Expenses |
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Loss From Operations |
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Other Income/(Expenses) |
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Interest Income |
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Interest Expense |
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Settlement Costs |
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Debt Financing Expenses |
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Penalties |
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Gain/(Loss) on Disposal of Fixed Assets |
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Loss on Deposits |
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Total Other Income/(Expenses) |
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Loss Before Provision for Income Taxes |
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Benefit/(Provision) for Income Taxes |
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Net Loss |
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Less: Accrued Preferred Stock Dividends |
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Net Loss Attributable to Common Stockholders |
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Earnings/(Loss) Per Common Share Attributable to Common Stockholders |
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Basic |
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Diluted |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| F - 2 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||
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| Deferred |
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| Contingent |
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| Preferred Stock |
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| Common Stock |
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| Additional Paid-in |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balance, December 31, 2024 |
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Series A Preferred Stock dividend payable |
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Series B Preferred Stock dividend payable |
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Net Loss |
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Balance, March 31, 2025 |
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Balance, December 31, 2025 |
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Series A Preferred Stock dividend payable |
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Series B Preferred Stock dividend payable |
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Net Loss |
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Balance, March 31, 2026 |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| F - 3 |
| Table of Contents |
LFTD PARTNERS INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) | ||||||||
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| For the Three Months Ended |
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| March 31, |
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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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Spoiled and Written Off Inventory |
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Inventory Reserve Expense (Allowance) |
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Bad Debt Expense |
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Impairment of Hemp-Specific Fixed Assets |
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Depreciation and Amortization |
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Debt Financing Expenses |
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Loss on Disposal of Fixed Assets |
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Loss on Deposits |
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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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Other Assets |
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Income Tax Receivable and Payable, net |
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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 Operating Lease Liabilities |
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Net Cash Provided By Operating Activities |
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Cash Flows From Investing Activities |
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Purchases 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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Payments on Related Party Note |
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Payments on Surety Bank Loans |
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Payments of Dividends to Preferred Stockholders |
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Net Cash 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 Three Months Ended | ||||||
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| March 31, | ||||||
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| 2025 |
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Supplemental Cash Flow Information |
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Cash Paid For Interest |
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| $ |
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Cash Paid/(Received) For Income Taxes |
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| ( | ) |
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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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| $ |
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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 unaudited interim consolidated financial statements.
| F - 4 |
| Table of Contents |
LFTD PARTNERS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. We were a former shell company, primarily engaged in identifying, structuring, and seeking to execute acquisitions of all or a portion of one or more operating businesses. Between 2011 and 2013, we acquired and operated several businesses linked to the defense industry. In 2018, we shifted focus to the cannabis industry where we have operated since. 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, 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). 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
Management of the Company is primarily interested in acquiring companies operating outside of the hemp or marijuana industries, which have many regulatory risks.
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.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Consolidated Financial Statements – The accompanying unaudited interim consolidated financial statements include the accounts of LFTD Partners and its wholly owned subsidiaries. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements and, accordingly, certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with US GAAP, have been condensed or omitted in accordance with SEC rules and regulations. As part of the consolidation, all intercompany transactions have been eliminated. The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Certain previously reported amounts have been reclassified between line items to conform to the current period presentation. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited consolidated financial statements. Actual results could differ from these estimates.
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, but are not limited to, the inventory reserve (allowance), allowance for doubtful accounts, sales allowance, estimated useful lives of property, plant and equipment, and valuation allowance on deferred income tax assets.
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 - 5 |
| Table of Contents |
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.
The Act (defined below) necessitated the calculation and recording of an impairment of LFTD Partners’ investment in Ablis. Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
| F - 6 |
| Table of Contents |
NOTE 4 – THE COMPANY’S INVESTMENTS
The Company’s Investment in Lifted
Regarding LFTD Partners investment in Bendistillery: for a number of reasons, 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 4 – THE COMPANY’S INVESTMENTS
The Company’s Investments in Ablis and Bendistillery
Prepaid Expenses– Prepaid expenses relate primarily to advance payments made for purchases of inventory; prepaid inventory is reclassified as 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.
| F - 7 |
| Table of Contents |
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 $
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. A sales allowance 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, or should be banned, 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. |
| F - 8 |
| Table of Contents |
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 – During each of the quarters ended March 31, 2026 and 2025, two customers represented more than
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 March 31, 2026 and December 31, 2025:
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| March 31, 2026 |
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| December 31, 2025 |
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Raw Goods |
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Finished Goods |
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Inventory Reserve (Allowance) |
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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 March 31, 2026, $
Inventory Reserve (Allowance)
Under US GAAP, an inventory reserve (allowance) is recorded to ensure inventory is not carried on the balance sheet at more than its recoverable value. 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.
A total inventory reserve of $
Regarding Lifted’s inventory reserve against its hemp-derived inventory: 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. It is unknown to management what the demand for hemp products will be through November 12, 2026. An inventory reserve of $
Regarding Lifted’s inventory reserve against its 7-OH inventory: a federal ban may occur, as the FDA and the DEA have expressed concerns regarding 7-OH products, and the FDA has recommended federal scheduling of such products. If enacted, a ban on products containing 7-OH could materially reduce the Company’s revenue, potentially by approximately half or more. Accordingly, an inventory reserve of $
| F - 9 |
| Table of Contents |
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. $
| 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. |
Inventory reserve (allowance) expense is also a component of cost of goods sold. $
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Inventory
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
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.
During the first quarter of 2026, management compared Lifted’s undiscounted cash flow through mid-November 2026 (November 12, 2026 is when the national hemp ban goes into effect under the Act), based on Lifted’s first quarter hemp-derived product sales; based on this analysis, the undiscounted cash flow for 2026 is less than the carrying value of the hemp-specific fixed assets as of March 31, 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. It is also unknown what hemp sales will be closer to November 12, 2026. The hemp-specific fixed assets may be sold, but it is unknown for what price. Thus, for conservatism, as of March 31, 2026, management recorded a 50% impairment charge against the net book value of Lifted’s hemp-specific fixed assets; the recognized impairment charge totaled $
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Assets
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
| F - 10 |
| 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.
Revenue – The Company recognizes revenue in accordance with ASC 606. The majority of the Company’s sales are of branded products to distributors, followed by the Company’s sales to wholesalers, and then the Company’s sales to end consumers. A minority of the Company’s sales are of raw goods to manufacturers, distributors and wholesalers. 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.
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”) |
| F - 11 |
| Table of Contents |
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 three months ended March 31, 2026 or 2025.
ENM also owed Lifted a total of $
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 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 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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Flower |
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Geographic Market |
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United States |
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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 March 31, 2026, total deferred revenue was $
Earnings/(Loss) Per Common Share Attributable to Common Stockholders – Basic earnings/(loss) per common share attributable to common stockholders is calculated by dividing net income/(loss), less accrued preferred stock dividends, by the weighted-average number of common shares outstanding during the period. Diluted earnings/(loss) per common share attributable to common stockholders is calculated by dividing net income/(loss), less accrued preferred stock dividends, by the weighted-average number of common shares and dilutive common share equivalents outstanding during the period. When dilutive, the incremental potential common shares issuable upon exercise of stock options and warrants, convertible preferred stock and any issuable Deferred Contingent Stock are determined by the treasury stock method. The following table summarizes the calculations of basic and diluted earnings/(loss) per common share for the three months ended March 31, 2026 and 2025:
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| F - 13 |
| Table of Contents |
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 became 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.
In addition, in November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). 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 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 elected 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.
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 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.
| F - 14 |
| Table of Contents |
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). |
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.
| F - 15 |
| Table of Contents |
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.
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 (defined below) and Oculus Goodwill (defined below) 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 3 - RISKS AND UNCERTAINTIES
Going Concern
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 $
| F - 16 |
| Table of Contents |
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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”), in this Quarterly Report on Form 10-Q, and in the Company’s other SEC filings, the Company is subject to a wide variety of Risk Factors including substantial legal and regulatory risks.
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
| F - 17 |
| Table of Contents |
PART I — FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements
The legal and regulatory risks facing the Company’s business are particularly acute at this point in time, in at least the following respects:
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 53% of Lifted’s sales during the quarter ended March 31, 2026 and 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) | Inventory reserve (allowance) against, or 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 an inventory reserve (allowance) 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. An allowance of $ |
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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. During the three months ended March 31, 2026, an impairment of hemp-specific fixed assets of $ |
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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. |
| F - 18 |
| Table of Contents |
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.
On July 29, 2025, during a joint press conference, the FDA announced that it had recommended to the DEA that 7-hydroxymitragynine (“7-OH”), a concentrated derivative of the kratom plant, be classified as a Schedule I controlled substance under the Controlled Substances Act (the “CSA”). The DEA is currently reviewing the FDA’s recommendation and developing the administrative record in connection with a potential scheduling action.
If the DEA proceeds through the standard rulemaking process, it would be required to publish a proposed rule in the Federal Register, provide an opportunity for public comment, and subsequently issue a final rule. The timing of any such action is uncertain. Alternatively, the DEA has authority under the CSA to issue a temporary emergency scheduling order if it determines that 7-OH presents an imminent hazard to public safety. Such an order would become effective upon publication and remain in effect for up to two years, subject to possible extension.
There can be no assurance that the FDA’s or the DEA’s regulatory concerns regarding 7-OH or related products will be resolved in a manner favorable to the Company or the broader hemp-derived or intoxicating products industries. If enacted, a ban or scheduling of products containing 7-OH could materially reduce the Company’s revenue, potentially by approximately half or more.
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.
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 $
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
| F - 19 |
| Table of Contents |
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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Machinery & Equipment, net of accumulated impairment on hemp-specific fixed assets of $84,878 in 2026 and $0 in 2025 |
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Trade Show Booths, net of accumulated impairment on hemp-specific fixed assets of $58,543 in 2026 and $0 in 2025 |
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The useful lives of the Company’s property and equipment by asset class are as follows:
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As of March 31, 2026, management recorded a 50% impairment charge against the net book value of Lifted’s hemp-specific fixed assets; the recognized impairment charge totaled $
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
Fixed Assets
NOTE 3 – RISKS AND UNCERTAINTIES
Going Concern
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 Lifted’s main operations building located at 5511 95th Avenue, Kenosha, Wisconsin (“5511 Building”) totaling $
Comparatively, depreciation expense related to machinery and equipment and depreciation expense related to the 5511 Building, totaling $
| F - 20 |
| Table of Contents |
NOTE 6 – RESERVED
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 - 21 |
| Table of Contents |
NOTE 8 – RELATED PARTY TRANSACTIONS
Ablis
During the quarter ended March 31, 2026, Lifted did not sell any products to Ablis. In comparison, during the quarter ended March 31, 2025, Lifted sold Ablis $
Outside Director Fees
Each of the Company’s outside directors, including Mr. Vincent Mesolella, Dr. Joshua Bloom, Ms. Sharial Howard, Mr. Richard Morrissy, Dr. James Jacobs, and Mr. Kevin Rocio, receive quarterly director fees of $
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 the 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 $
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 $
| F - 22 |
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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 $
William Jacobs
At the closing of the acquisition of Lifted,
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. The 5511 Building is being actively marketed by the Firm. The sale of the 5511 Building may occur in the future, but the current circumstances do not provide enough information to allow management to opine on the probability of a sale occurring within one year, or at what price.
NOTE 9 – SHAREHOLDERS’ EQUITY AND STOCK BASED COMPENSATION
Issuance of Series A Convertible Preferred Stock
The Company has authorized
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Issuance of Series B Convertible Preferred Stock
The Company has authorized
Share-Based Compensation
In connection with the acquisition of Lifted,
Options and Warrants
As of March 31, 2026 and December 31, 2025, the Company did not have any options or warrants outstanding.
Other Agreements
In connection with the Company’s acquisition of Lifted (the “Lifted Merger”), pursuant to the Lifted Merger Agreement, the Company entered into several material agreements with CEO Gerard M. Jacobs (“GJacobs”), COO Nicholas S. Warrender (“NWarrender”) and President and CFO William Jacobs (“WJacobs”).
Registration Rights Agreement
Pursuant to a Registration Rights Agreement, NWarrender was granted demand and piggyback registration rights with respect to the
Stockholders Agreement
At the closing of the Lifted Merger, NWarrender, GJacobs, and WJacobs entered into a Stockholders Agreement under which they agreed to vote all shares of Company common stock now or hereafter held by them in accordance with unanimous agreement among the three on certain corporate matters, including the election and removal of directors, amendments to charter documents, compensation decisions, acquisitions and divestitures, and capital raising activities.
Executive Employment Agreements
Concurrent with the Lifted Merger closing, the Company entered into five-year, automatically renewing Executive Employment Agreements with NWarrender (Vice Chairman, Chief Operating Officer of the Company, and Chief Executive Officer of Lifted), GJacobs (Chairman, Chief Executive Officer, and Secretary), and WJacobs (President, Chief Financial Officer, and Treasurer).
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NOTE 10 – LEASES
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.
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 100-400, 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.
The following table is the maturity analysis of the Company’s operating leases as of the reported period end:
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| Operating |
| ||
2026 |
|
|
|
|
|
| ||
2027 |
|
|
|
|
|
| ||
2028 |
|
|
|
|
|
| ||
2029 |
|
|
|
|
|
| ||
Thereafter |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Less: Present value discount |
|
|
|
|
| ( | ) | |
Lease liability |
| $ |
|
| $ |
| ||
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.
|
| March 31, 2026 |
|
| December 31, 2025 |
| ||
Weighted Average remaining lease term (years) |
|
|
|
|
|
| ||
Weighted Average Discount rate |
|
| % |
|
| % | ||
Lease Costs
The table below summarizes the components of lease costs for the following periods:
|
| For the Three Months Ended March 31, |
| |||||
Lease Cost: |
| 2026 |
|
| 2025 |
| ||
Finance lease expense: |
|
|
|
|
|
| ||
Amortization of Right-of-Use Assets |
| $ |
|
| $ |
| ||
Interest on lease liabilities |
|
|
|
|
|
| ||
Operating lease expense |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
| F - 25 |
| Table of Contents |
Balance Sheet Classification of Operating Lease Assets and Liabilities
Asset |
| Balance Sheet Line |
| March 31, 2026 |
| |
Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $522,956 |
| Non-Current Assets |
| $ |
| |
|
|
|
|
|
|
|
Liability |
| Balance Sheet Line |
| March 31, 2026 |
| |
Operating Lease Liabilities |
| Current Liabilities |
| $ |
| |
|
| Non-Current Liabilities |
|
|
| |
Allocation of a Portion of Lease Expense to Finished Goods
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
Other Deposits and Bonds
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. The Company is required to, and has, paid bonds and deposits to various state departments and vendors for licenses and utilities, respectively.
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”),
Company-Wide Management Bonus Pool
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 13 – COMPANY-WIDE MANAGEMENT BONUS POOL
Other Contingent Contractual Obligations and Commercial Commitments
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 8 – RELATED PARTY TRANSACTIONS.
| F - 26 |
| Table of Contents |
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 one pending lawsuit, as the defendant:
| (1) | 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. 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 currently is involved in one pending lawsuit, as the plaintiff:
| (1) | Lifted Liquids, Inc. v RanCo, LLC
On September 9, 2025, the Company had filed an action to recover approximately $ |
Settlement Agreement with Sergio Hernandez and Josue Hernandez
Plaintiffs had 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. 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.
Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc.
The Company filed an action seeking to recover approximately $
| F - 27 |
| 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 - 28 |
| 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 $
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.
| F - 29 |
| Table of Contents |
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 Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
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 Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
|
|
| ||
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 |
| $ | ( | ) |
| $ | ( | ) |
| F - 30 |
| Table of Contents |
Deferred tax assets and liabilities as of March 31, 2026 and December 31, 2025 were as follows:
|
| March 31, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Operating Loss Carry forwards |
| $ |
|
| $ |
| ||
Stock-Based Compensation |
|
|
|
|
|
| ||
Sales Allowances |
|
|
|
|
|
| ||
Provision for Credit Losses – Extrax NM Loans |
|
|
|
|
|
| ||
Inventory Reserve (Allowance) |
|
|
|
|
|
| ||
Accrued Related Party Expenses |
|
|
|
|
|
| ||
Interest Carryforward |
|
|
|
|
|
| ||
Allowance for Doubtful Accounts |
|
|
|
|
|
| ||
Lease Liabilities |
|
|
|
|
|
| ||
Accumulated Impairment of Hemp-Specific Fixed Assets |
|
|
|
|
|
| ||
Investment Impairments |
|
|
|
|
|
| ||
Less: Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciation & Amortization |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Liabilities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets/(Liabilities) |
| $ |
|
| $ |
| ||
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
| F - 31 |
| Table of Contents |
The Business Loan bears interest at a fixed annual rate of
As of March 31, 2026 and 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.
The following presents the Business Loan in the Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025:
|
| March 31, 2026 |
|
| December 31, 2025 |
| ||
|
|
|
|
|
|
| ||
Business Loan |
| $ |
|
| $ |
| ||
Total principal amount |
|
|
|
|
|
| ||
Less: Unamortized debt financing costs |
|
| ( | ) |
|
| ( | ) |
Less: Current portion of Surety Bank note |
|
| ( | ) |
|
| ( | ) |
Non-Current portion of Surety Bank note |
| $ |
|
| $ |
| ||
The following represents aggregate payments due on the Business Loan as of March 31, 2026:
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 Quarterly Report on Form 10-Q.
| F - 32 |
| Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q. 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 – FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements
PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS
| 5 |
| Table of Contents |
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:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.
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 March 31, 2026 of $33,003,164. 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 three months ended March 31, 2026 and 2025:
|
| For the Three Months Ended March 31, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Net Cash Provided By Operating Activities |
| $ | 458,860 |
|
| $ | 351,751 |
|
Net Cash Used in Investing Activities |
|
| (119,682 | ) |
|
| (77,147 | ) |
Net Cash Used In Financing Activities |
|
| (15,171 | ) |
|
| (141,590 | ) |
| 6 |
| Table of Contents |
Cash Flows From Operating Activities
Net cash provided by operating activities was $458,860 for the three months ended March 31, 2026; this resulted from a net loss of $4,159,949 decreased by changes in net, non-cash expenses of $4,926,553 and increased by changes in net operating assets and liabilities of $307,744. Non-cash expenses are primarily related to Inventory Reserve Expense (Allowance) of $5,061,673. Changes in net operating assets and liabilities primarily related to $1,006,738 of deferred revenue.
In comparison, net cash provided by operating activities was $351,751 for the three months ended March 31, 2025; this resulted from a net loss of $303,042 decreased by net, non-cash expenses of $129,983 and changes in net operating assets of $524,810. Non-cash expenses are primarily related to spoiled and written off inventory of $464,521.
Cash Flows From Investing Activities
Net cash used in investing activities was $119,682 and $77,147 during the quarters ended March 31, 2026 and 2025, respectively, driven by the purchase of fixed assets in both periods.
Cash Flows From Financing Activities
During the three months ended March 31, 2026, net cash used in financing activities was $15,171, primarily consisting of payments on the Surety Bank loan of $8,325 and payments on the Related Party Note (defined below) of $3,846. In comparison, during the quarter ended March 31, 2025, net cash used in financing activities was $141,590, consisting of payments on the Surety Bank loans of $138,589, and payments of preferred stock dividends totaling $3,000.
During the quarter ended March 31, 2026, net cash increased by $324,006, and we had $2,091,129 of unrestricted cash at March 31, 2026. During the quarter ended March 31, 2025, net cash increased by $133,015 and we had $2,279,962 of unrestricted cash and $1,000,000 of restricted cash at March 31, 2025.
Comparison of the Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025
The following table summarizes our Company’s current assets, current liabilities and working capital as of March 31, 2026 and December 31, 2025.
|
| March 31, 2026 |
|
| December 31, 2025 |
| ||
Current Assets |
| $ | 10,264,049 |
|
| $ | 15,691,047 |
|
Current Liabilities |
|
| 4,542,477 |
|
|
| 5,162,410 |
|
Working Capital |
|
| 5,721,572 |
|
|
| 10,528,637 |
|
As of March 31, 2026 and December 31, 2025, we had unrestricted cash of $2,091,129 and $1,767,123, respectively.
As of March 31, 2026, we reported prepaid expenses of $356,953, primarily consisting of prepaid inventory of $278,181. In comparison, as of December 31, 2025, we reported prepaid expenses of $348,667, primarily consisting of prepaid inventory of $272,968.
Accounts receivable of $2,246,020, net of $1,523,796 allowance for doubtful accounts, were outstanding as of March 31, 2026. In comparison, accounts receivable of $2,531,524, net of $1,269,590 allowance for doubtful accounts, were outstanding as of December 31, 2025.
| 7 |
| Table of Contents |
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
Inventory is valued at the lower of average cost or market value (net realizable value). Inventory consisted of the following at March 31, 2026 and December 31, 2025:
|
| March 31, 2026 |
|
| December 31, 2025 |
| ||
Raw Goods |
| $ | 5,615,146 |
|
| $ | 5,906,501 |
|
Finished Goods |
|
| 4,977,046 |
|
|
| 5,051,322 |
|
Inventory Reserve (Allowance) |
|
| (5,061,673 | ) |
|
| - |
|
Total Inventory |
| $ | 5,530,519 |
|
| $ | 10,957,823 |
|
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 March 31, 2026, $388,105 of overhead expenses were allocated to finished goods. At December 31, 2025, $373,269 of overhead expenses were allocated to finished goods. 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
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.
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 $0.
Prior to December 31, 2025, 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.
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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 March 31, 2026 and December 31, 2025 were $2,099,491 and $2,273,377, respectively; the decrease is driven primarily by $139,272 of depreciation offset by $119,682 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 of March 31, 2026, management recorded a 50% impairment charge against the net book value of Lifted’s hemp-specific fixed assets; the recognized impairment charge totaled $143,421. We may be required to record additional impairment charges on these hemp-derived assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts.
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. 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
Fixed Assets
NOTE 3 - RISKS AND UNCERTAINTIES
Going Concern
As of March 31, 2026, current liabilities of $4,542,477 primarily consisted of accounts payable and accrued expenses of $3,449,351. In comparison, 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. The quarter-to-date decline in current liabilities was primarily attributable to the recognition of deferred revenue from December 31, 2025 as revenue as of March 31, 2026.
As of March 31, 2026, non-current liabilities of $1,439,919 consisted of the non-current portion of the loan payable to Surety Bank of $804,706 and operating lease liability of $635,213. In comparison, 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 of $797,597, and operating lease liability of $680,280.
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 $33,003,164 and $28,839,889 as of March 31, 2026 and December 31, 2025, respectively.
Comparison of Operations for the Three Months Ended March 31, 2026 to March 31, 2025
During the three months ended March 31, 2026, the Company recognized net sales of $9,158,206. In comparison, during the three months ended March 31, 2025, the Company recognized net sales of $9,123,850. Some of the business challenges that we face 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, Missouri 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 of Lifted’s brands and products; and increasing spending on marketing and advertising, and digital marketing.
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Cost of Goods Sold
Cost of Goods Sold amounted to $10,864,286 during the three months ended March 31, 2026, compared to $6,906,457 during the three months ended March 31, 2025.
Lifted's industry, and customer preferences, are constantly and quickly evolving. The regulatory landscape at the municipal, state and federal levels in which Lifted operates is unstable and unpredictable. Consequently, Lifted finds it extremely difficult to predict future sales of its products and to anticipate raw goods needs for future production. These factors may cause Lifted to record a significant inventory reserve (allowance) against its inventory. Lifted may also have to record significant write offs of obsolete raw goods and slow-moving finished goods, causing an increase in cost of goods sold. An inventory reserve of $4,720,659 was taken against Lifted's hemp-derived inventory as of March 31, 2026. No inventory reserve was taken against Lifted's hemp-derived inventory as of December 31, 2025. An inventory reserve of $341,014 was recorded against Lifted’s 7-OH inventory as of March 31, 2026. During the quarters ended March 31, 2026 and 2025, $89,104 and $464,521 of obsolete and spoiled inventory was written off, respectively. 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 |
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, impairment of hemp-specific fixed assets, depreciation and amortization, collaboration commission and royalty expense, and other operating expenses. Total operating expenses increased to $2,859,181 for the quarter ended March 31, 2026, up from $2,545,779 during the quarter ended March 31, 2025.
Payroll Expense
Payroll Expense includes sales commissions paid to independent contractors. If the Act materially reduces demand for our hemp-derived products, or if products containing 7-OH are banned, 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 quarter ended March 31, 2026, the Company reported $1,318,781 of payroll expenses. In comparison, during the quarter ended March 31, 2025, the Company reported $1,299,570 of payroll expenses. 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.
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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 expenses. Lifted has been engaging with third party specialists to increase its presence in the direct-to-consumer space. During the quarters ended March 31, 2026 and 2025, the Company incurred $341,401 and $415,572 in advertising and marketing expenses.
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
The Company reported bad debt expense of $249,206 during the quarter ended March 31, 2026. In comparison, the Company reported a benefit from bad debt recovery of $403,869 during the quarter ended March 31, 2025. 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
During the quarters ended March 31, 2026 and 2025, the Company reported collaboration commission and royalty expense of $0 and $67,098, 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 March 31, 2026 and as of December 31, 2025, the only Manufacturing, Sales and Marketing Agreement still in effect was the Diamond 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 $503,364 during the three months ended March 31, 2026, compared to $651,331 during the three months ended March 31, 2025.
Other Income or Expenses
During the quarter ended March 31, 2026, net non-operating Other Expenses of $149,836 were primarily driven by Settlement Costs of $100,000. In comparison, during the quarter ended March 31, 2025, net non-operating Other Expenses of $54,364 were primarily driven by interest expense of $79,993, offset by interest income of $32,884.
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Net Loss
Net loss for the quarter ended March 31, 2026 was $4,159,949, compared to a net loss for the quarter ended March 31, 2025 of $303,042.
Prior to the Loan Term Changes, the Business Loan required that Borrower maintained a minimum 1.50x Debt Service Coverage Ratio (“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.
Off-Balance Sheet Arrangements
As of reported period end, the Company had no off-balance sheet arrangements.
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 Quarterly Report on Form 10-Q.
Tax Provision
Please refer to NOTE 14 – INCOME TAXES for information about the Company’s tax provision.
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.
ITEM 3. 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 4. 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 March 31, 2026.
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(b) Management’s 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; |
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| (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 |
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| (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 March 2026, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2026 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 March 31, 2026 was not effective. Management identified the following material weaknesses as of March 31, 2026:
| (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. |
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| (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. |
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| (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 global public accounting and tax firm, and a valuation firm. |
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| (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, Mr. Vincent J. Mesolella. |
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| (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. |
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| (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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q.
Notwithstanding the existence of the material weaknesses as described above, we believe that the consolidated financial statements in this Quarterly Report on Form 10-Q 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.
(d) Inherent Limitations on Control Systems
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 the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a 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.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Description of Legal Proceedings
Lifted currently is involved in two pending lawsuits, one as the defendant, and one as the plaintiff. Please refer to NOTE 12 – LEGAL PROCEEDINGS for more information.
ITEM 1A. RISK FACTORS
The Risk Factors identified under 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” and the consolidated financial statements and the related notes included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) filed with the SEC on April 1, 2026, continue to represent the most significant risks to the Company’s future results of operations and financial conditions, without further modification or amendment. Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 3 - RISKS AND UNCERTAINTIES
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Reference is hereby made to the disclosures above in the following sections, which are hereby incorporated by reference thereto:
NOTE 9 – SHAREHOLDERS’ EQUITY AND STOCK BASED COMPENSATION
Issuance of Series A Convertible Preferred Stock
Issuance of Series B Convertible Preferred Stock
Share-Based Compensation
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None; not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
None; not applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended March 31, 2026, none of the Company's directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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ITEM 6. EXHIBITS.
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.
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The following exhibits are filed with this Quarterly Report on Form 10-Q:
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101.INS |
| XBRL Instance Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document. |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document. |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
101.SCH |
| XBRL Taxonomy Extension Schema Document. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LFTD Partners Inc. |
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Dated: May 14, 2026 | By: | /s/ Gerard M. Jacobs |
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| Gerard M. Jacobs |
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| Chief Executive Officer |
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