10-Q: LFTD Partners Inc. Reports Second Quarter 2024 Financial Results

LFTD Partners Inc. reported a decrease in revenue and a net loss for the second quarter of 2024, compared to a net income in the same period of 2023.

Summary

• LFTD Partners Inc. reported a 24% decrease in revenue for the second quarter of 2024, with revenue totaling $9,487,299 compared to $12,522,542 in the same period of 2023.
• The company experienced an operating loss of $582,745 in Q2 2024, a significant shift from the operating income of $2,372,674 in Q2 2023.
• LFTD Partners reported a net loss of $523,212 for the second quarter of 2024, compared to a net income of $1,659,461 in the second quarter of 2023.
• Basic loss per share was $0.04, compared to a basic income per share of $0.11 in the same period of 2023.
• Diluted loss per share was $0.04, compared to a diluted income per share of $0.10 in the second quarter of 2023.
• Cash on hand decreased by 17% to $3,613,788 as of June 30, 2024, down from $4,357,539 at the end of 2023.
• Inventory decreased by 28% to $7,348,485 as of June 30, 2024, down from $10,174,667 at the end of 2023.
• Current assets decreased by 25% to $16,319,984 as of June 30, 2024, down from $21,668,980 at the end of 2023.
• Working capital decreased by 15% to $11,056,730 as of June 30, 2024, down from $12,982,236 at the end of 2023.
• Notes payable to Surety Bank decreased by 6% to $3,608,026 as of June 30, 2024, down from $3,854,851 at the end of 2023.

Sentiment

Score: 3

Explanation: The document indicates a significant downturn in financial performance, with decreased revenue, a shift to operating and net losses, and a reduction in cash and inventory. While there are some positive aspects, the overall tone is negative due to the substantial financial challenges.

Positives

• The current ratio increased to 3.10 from 2.49, indicating improved short-term liquidity.
• Notes payable to Surety Bank decreased by 6% to $3,608,026, down from $3,854,851 at the end of 2023.

Negatives

• Revenue decreased by 24% to $9,487,299 in Q2 2024 compared to $12,522,542 in Q2 2023.
• The company experienced an operating loss of $582,745 in Q2 2024, a significant shift from the operating income of $2,372,674 in Q2 2023.
• LFTD Partners reported a net loss of $523,212 for the second quarter of 2024, compared to a net income of $1,659,461 in the same period of 2023.
• Basic loss per share was $0.04, compared to a basic income per share of $0.11 in the same period of 2023.
• Diluted loss per share was $0.04, compared to a diluted income per share of $0.10 in the second quarter of 2023.
• Cash on hand decreased by 17% to $3,613,788 as of June 30, 2024, down from $4,357,539 at the end of 2023.
• Inventory decreased by 28% to $7,348,485 as of June 30, 2024, down from $10,174,667 at the end of 2023.
• Current assets decreased by 25% to $16,319,984 as of June 30, 2024, down from $21,668,980 at the end of 2023.
• Working capital decreased by 15% to $11,056,730 as of June 30, 2024, down from $12,982,236 at the end of 2023.

Risks

• The company faces risks related to the regulatory environment, including potential DEA rules and changes to the Farm Bill.
• There is a risk of decreased sales due to increased competition and changing consumer preferences.
• The company is experiencing delays in customer payments, which is impacting net receivables and income.
• The company is experiencing significant write-offs of inventory due to changing consumer preferences and product obsolescence.
• The company's ability to list on a recognized stock exchange is uncertain, which could affect the visibility and trading volume of its stock.
• The company may not comply with the Debt Service Coverage Ratio (DSCR) requirement contained in the Business Loan for the year ending December 31, 2024.

Future Outlook

The company plans to sustain itself by continuing to operate Lifted, acquiring profitable businesses, and completing private placements of stock. However, there is no guarantee of success in these actions.

Management Comments

• Management believes that by taking these actions, the Company will be provided with sufficient future operations and cash flow to continue as a going concern.
• 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.

Industry Context

The company operates in the rapidly evolving hemp-derived and psychoactive products industry, which is subject to changing regulations and consumer preferences. The company faces increased competition and regulatory uncertainty, which are impacting its financial performance.

Comparison to Industry Standards

• The company's revenue decline of 24% in Q2 2024 is worse than the average performance of some of its competitors in the hemp-derived products industry, which have seen more modest declines or even growth in some cases.
• The shift from operating income to an operating loss of $582,745 in Q2 2024 is a significant underperformance compared to industry leaders who have maintained profitability.
• The decrease in cash on hand by 17% and inventory by 28% suggests a need for better inventory management and cash flow strategies compared to industry benchmarks.
• The increase in the current ratio to 3.10 from 2.49 is a positive sign, but the overall financial performance is still below industry standards for profitability and revenue growth.
• The company's reliance on a few key customers and vendors is a common risk in the industry, but the company's concentration levels are higher than some of its peers, indicating a need for diversification.

Legal Proceedings

• Lifted is involved in two pending lawsuits as a defendant and one as a plaintiff.
• The company has settled a lawsuit with Girish GPO, Inc.
• The company has amended a settlement agreement with Dev Distribution, LLC.
• The company has settled a lawsuit with Edgar Martha.

Related Party Transactions

• The company has disclosed transactions with related parties, including lease agreements and payments to directors and officers.

Stakeholder Impact

• Shareholders are negatively impacted by the decrease in revenue, shift to operating and net losses, and reduction in cash and inventory.
• Employees may be impacted by potential cost-cutting measures due to the company's financial challenges.
• Customers may be impacted by potential changes in product availability or pricing due to the company's financial challenges.
• Suppliers may be impacted by potential delays in payments or changes in order volumes due to the company's financial challenges.
• Creditors may be impacted by the company's decreased ability to meet its financial obligations.

Next Steps

• The company will host an earnings conference call and webcast on August 15, 2024.
• The company will continue to monitor the impact of COVID-19 and its variants on its business.
• The company will continue to actively engage in a comprehensive effort to remediate its material weaknesses in its internal control over financial reporting.

Key Dates

Keywords

hemp, cannabinoid, vape, psychoactive, wellness, gummies, CBD, THC, distributors, wholesale