10-K: LFTD Partners Inc. Reports Annual Results for Fiscal Year 2024, Cites Regulatory Risks and Financial Obligations

LFTD Partners Inc.'s 10-K filing reveals recurring losses, regulatory challenges, and significant financial obligations, raising concerns about its ability to continue as a going concern.

Summary

• LFTD Partners Inc.'s 10-K filing for the fiscal year ended December 31, 2024, highlights recurring losses and an accumulated deficit of $3,967,708.
• The company faces significant financial obligations, including loan repayments to Surety Bank and dividend payments on Series A and Series B Preferred Stock.
• Regulatory risks are acute, with potential DEA rule changes classifying hemp-derived cannabinoids as controlled substances, a new Farm Bill impacting hemp legality, and state laws restricting product sales.
• The company's stock is not traded on a national exchange, limiting stockholders' ability to sell shares.
• Delays in customer payments, primarily from distributors, are impacting the company's net receivables, net income, and earnings per share.
• Write-offs of inventory continue to be significant due to changing consumer demands.
• The company is involved in developing, manufacturing, and selling a wide variety of branded products containing hemp-derived cannabinoids and psychoactive substances, which are subject to government laws and regulations.
• The market for the company's products is new and developing, subject to significant disruptions and intense competition.
• The company is controlled by a small number of people, and the loss of any of these people could have a detrimental effect on the company.
• The company could be subject to product liability lawsuits, including class action lawsuits.
• The company faces intense competition and is dependent on the popularity and consumer acceptance of its branded products.
• The company may face unfavorable publicity or consumer perception.
• Lifted may lose profits or become subject to liability arising from any breach of contract or fraudulent or illegal activity by our suppliers, testing labs, employees, independent contractors, consultants and others.
• The company is involved in several lawsuits, and more lawsuits are likely in the future.
• The company is subject to the risk that the U.S. Internal Revenue Service may claim that some of its hemp-derived cannabinoid products are federally illegal.
• The company may deem it necessary or desirable in the future to raise additional capital.
• The Oregon Liquor Control Commission (OLCC) has jurisdiction over our directors, officers and significant shareholders.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with recurring losses, regulatory hurdles, and significant financial obligations. The sentiment is negative due to the challenges and uncertainties facing the company.

Positives

• Lifted often generates enough free cash flow to allow the Company and Lifted to fund their operations at their current levels and to grow Lifteds business in a conservative, capital-constrained fashion.

Negatives

• LFTD Partners Inc. has a history of recurring losses, which has resulted in an accumulated deficit of $3,967,708 as of December 31, 2024.
• The company is currently making significant payments of interest and principal on its loans 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.
• The delay in Lifteds receipt of payments from certain customers primarily distributors have increasingly become an issue for Lifted.
• Write offs of inventory continue to be significant for Lifted.

Risks

• Potential DEA rule changes classifying hemp-derived cannabinoids as controlled substances.
• A new Farm Bill in 2025 could eliminate or limit the legality of hemp and hemp-derivatives.
• Numerous states have enacted, or are considering enacting, laws that would prohibit or seriously regulate sales of the Companys products in those states.
• The company's stock is not traded on a national stock exchange and as a result a stockholders ability to sell shares of stock owned by a stockholder could be limited.
• The delay in Lifteds receipt of payments from certain customers primarily distributors have increasingly become an issue for Lifted.
• Write offs of inventory continue to be significant for Lifted.
• The company is currently involved in developing, manufacturing and selling a wide variety of branded products containing hemp-derived cannabinoids and psychoactive substances.
• The market for the products we sell is a fairly new and developing market that is subject to significant disruptions as it develops, including entry of large competitors in the space.
• The company is controlled by a small number of people who are important to the business.
• Due to the fact that we sell consumer products and in particular due to the nature of the products, the Company could be subject to product liability lawsuits, including class action lawsuits.
• We face intense competition and we are dependent on the popularity and of consumer acceptance of our branded products.
• We may face unfavorable publicity or consumer perception.
• Lifted may lose profits or become subject to liability arising from any breach of contract or fraudulent or illegal activity by our suppliers, testing labs, employees, independent contractors, consultants and others.
• We are involved, both as a plaintiff and as a defendant, in several lawsuits, and more lawsuits are likely in the future.
• We are subject to the risk that the U.S. Internal Revenue Service may claim that some of our hemp-derived cannabinoid products are federally illegal.

Future Outlook

The company's future performance is subject to regulatory changes, market competition, and its ability to manage its operations and financial obligations.

Industry Context

The announcement reflects the challenges and uncertainties facing companies in the hemp-derived cannabinoid industry, including evolving regulations, intense competition, and the need to adapt to changing consumer preferences.

Comparison to Industry Standards

• The document does not contain enough information to make a detailed comparison to industry standards.
• However, the document does mention that publicly traded corporations in the cannabis industry have lost billions of dollars of market capitalization, and that investor sentiment regarding equity or debt capital raises within the cannabis industry seems generally negative.
• This negative investor sentiment, combined with many other negative macro factors such as inflation, recessionary pressures, global conflicts, supply chain issues and tariffs, regulatory risks, and high interest rates, has made it extremely difficult for the Company to attract Growth Capital on acceptable terms and conditions.

Legal Proceedings

• The Company has filed a motion to dismiss the complaint which is being briefed by the parties in the case Hernandez v Lifted Liquids.
• On February 6, 2025, the Court ordered that the RICO claims were dismissed with prejudice, and the other claims were also dismissed in the case Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC.
• On March 6, 2025, Plaintiff has filed a second amended complaint alleging that the Company misrepresented various products in the case Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC.
• The Company has obtained a $30,000 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment in the case Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe.
• The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000 over time in the case Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe.
• In October 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for Dev paying $230,000 and providing certain equipment and product in the case Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080.
• Under the Addendum, the total consideration to be paid by Dev has been increased from $230,000 to $240,000, and the end date of the monthly settlement payment schedule (Monthly Payments) has been extended from the earlier of May 1, 2024 or the closing date of Devs sale of its assets, of the sale of some or all of the membership interests owned by its current members, or of obtaining a loan or other cash infusion (a Cash Event), to the earlier of April 10, 2025, or the date of a Cash Event in the case Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080.
• In May 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $5,000 paid by Lifted to Mr. Martha in the case Martha, Edgar v. Lifted Liquids.
• On March 8, 2025, Plaintiff has moved to voluntarily dismiss the complaint without prejudice to refiling it at a later date in the case Loree Perry, Individually and on Behalf of All Others Similarly Situated v. Sheikhani Group, et al.

Related Party Transactions

• NWarrender, through his assigned entity 95th Holdings, LLC (Holdings), purchased the 5511 Building, which was immediately leased to us to conduct our expanded operations.
• At the closing of the Lifted Merger, NWarrender, GJacobs, and WJacobs entered into a Stockholders Agreement which can be summarized as follows: each of them will vote all shares of our common stock now or hereafter owned or controlled by him as unanimously agreed upon by all three of them, including as to the following matters: election, removal and filling vacancies on our board of directors; our charter and bylaws; employment agreements, consulting agreements, fee agreements, base salaries, bonuses, management bonus pools amounts and calculations, management bonus pool allocations and payments, future stock options or warrants issuances, and any other direct or indirect compensation or benefits of any nature whatsoever; acquisitions; divestitures; and capital raises.
• At the closing of the Lifted Merger, the Company entered into employment agreements with NWarrender to serve as Co-Founder, Vice Chairman and Chief Operating Officer of the Company and as Chief Executive Officer of Lifted, with GJacobs to serve as Chairman, Chief Executive Officer and Secretary of the Company, and with WJacobs to serve as President, Chief Financial Officer and Treasurer of the Company (collectively the Executive Employment Agreements), which can be summarized as follows: Each of the Executive Employment Agreements is a rolling five year employment agreement wherein the executives employment is effective and shall continue until the fifth anniversary of the commencement of such Executive Employment Agreement, unless terminated.
• The Company entered into a Compensation Agreement dated as of June 19, 2019, with GJacobs and WJacobs.
• The terms of GJacobs stock options granted by us to purchase shares of common stock of the Company which were set to expire (unless previously exercised) during November 2020 or during September 2021, respectively, have been extended so that all of such stock options may be exercised by GJacobs at any time on or before December 31, 2024.
• We granted to GJacobs and to WJacobs so-called tag along registration rights for all of our shares owned by GJacobs, by WJacobs, or by any of their respective affiliates, and for all of our shares issuable to GJacobs, to WJacobs, or to any of their respective affiliates upon the exercise of his or their options or warrants to purchase shares of common stock of the Company; and
• We issued to GJacobs and WJacobs five-year warrants containing a cashless exercise feature giving GJacobs and WJacobs (or his designee(s)) the right to purchase 250,000 and 225,000 shares, respectively, of common stock of the Company exercisable at $5.00 per share.

Stakeholder Impact

• Shareholders face potential dilution and a decline in stock price due to the company's financial challenges and potential capital raises.
• Employees may experience job insecurity due to cost-cutting measures and the company's uncertain future.
• Customers may be affected by product recalls, changes in product availability, and potential regulatory restrictions.
• Suppliers and distributors face risks related to the company's financial stability and potential changes in business relationships.
• Creditors face increased risk of default due to the company's financial difficulties and regulatory challenges.

Next Steps

• The company intends to continue to operate Lifted.
• The company intends to acquire and/or develop profitable businesses that will create positive income from operations.
• The company intends to complete private placements of our common stock and/or preferred stock.

Key Dates

Keywords

LFTD Partners, Lifted Made, hemp, cannabinoids, regulatory risks, financial obligations, Farm Bill, vaping, OTC, stock, inventory, lawsuits, tax, capital raise, going concern