10-Q: LFTD Partners Q3 2025: Profit Rebound Amidst Hemp Ban Threat

LFTD Partners Inc. reports a return to net income in Q3 2025, but faces significant future challenges from a new federal ban on intoxicating hemp-derived products.

Summary

• Net sales for Q3 2025 increased 4% to $9,056,742, up from $8,691,675 in Q3 2024.
• Operating income for Q3 2025 was $1,312,791, a significant improvement from an operating loss of $140,703 in Q3 2024.
• Net income for Q3 2025 was $634,257, compared to a net loss of $194,399 in Q3 2024.
• Basic and diluted EPS for Q3 2025 were $0.04, up from a loss of $0.01 in Q3 2024.
• Net sales for the nine months ended September 30, 2025, decreased slightly to $28,505,928 from $28,845,623 in the prior year period.
• Net income for the nine months ended September 30, 2025, was $62,265, a substantial improvement from a net loss of $1,858,615 in the prior year period.
• Cash on hand (including restricted cash) decreased 7% to $2,920,664 from $3,146,947 at December 31, 2024.
• Inventory increased 8% to $10,077,375 from $9,316,291 at December 31, 2024.
• Current liabilities decreased year-to-date to $4,827,091 from $6,084,011.
• Notes payable to Surety Bank decreased 30% to $2,336,259 from $3,348,790.
• A new federal law (H.R. 5371) signed on November 12, 2025, bans intoxicating hemp-derived consumable products nationally effective November 12, 2026, which is expected to eliminate half or more of Lifted's sales (47% of Q3 2025 sales were hemp products).
• The company experienced a $358,072 loss from inventory theft in Q3 2025, with $250,000 recovered from insurance post-period.
• A $350,000 theft of USD Coin occurred on April 1, 2025, leading to a non-interest bearing loan from Beachin Company (an affiliate of CEO/CFO) to cover the loss.
• Material weaknesses in internal control over financial reporting persist, including lack of segregation of duties and inadequate independent oversight.

Sentiment

Score: 2

Explanation: While Q3 showed a return to profit and improved operating income, the overwhelming negative impact of the impending federal ban on a significant portion of the company's revenue, coupled with persistent internal control weaknesses and going concern doubts, creates a highly negative outlook.

Positives

• Return to net income in Q3 2025 ($634,257) and for the nine months ended September 30, 2025 ($62,265), reversing losses from the prior year periods.
• Significant improvement in operating income for Q3 2025 ($1,312,791) compared to an operating loss of ($140,703) in Q3 2024.
• Net sales increased 4% in Q3 2025 compared to Q3 2024, driven by non-hemp products.
• Current ratio improved to 3.02 from 2.78, indicating better short-term liquidity.
• Notes payable to Surety Bank decreased by 30% to $2,336,259, with a $592,050 paydown using tax refunds.
• Bad debt expense significantly decreased to $418,918 in Q3 2025 from $864,345 in Q3 2024, and to $664,686 for the nine months from $2,304,898.
• Collaboration commission and royalty expense decreased due to de-emphasizing collaboration efforts and termination of the Cali Agreement.
• Successful recovery of $250,000 from insurance for the July 2025 inventory theft (subsequent event).
• Creation of Highlandia Inc., a new wholly-owned subsidiary, to enter the hemp-derived beverage industry.

Negatives

• New federal legislation (H.R. 5371) bans intoxicating hemp-derived consumable products nationally effective November 12, 2026, which is expected to eliminate half or more of Lifted's sales (47% of Q3 2025 sales were hemp products).
• The federal ban will necessitate significant goodwill impairment charges (potentially half or more of $23,092,794 total goodwill) and an investment impairment charge for Ablis (potentially half or more of $399,200).
• Significant inventory write-offs are expected due to the federal ban, including all hemp-derived products in inventory on November 12, 2026.
• Overall net sales for the nine months ended September 30, 2025, decreased slightly compared to the prior year, attributed to increased competition and regulatory uncertainty.
• A $350,000 theft of USD Coin occurred on April 1, 2025, with recovery doubtful.
• The company has a history of recurring losses and an accumulated deficit of $3,915,542 as of September 30, 2025, raising substantial doubt about its ability to continue as a going concern.
• Material weaknesses in internal control over financial reporting persist, including a lack of segregation of duties and inadequate independent oversight.
• Customer concentration risk and vendor concentration risk are highlighted.
• Regulatory uncertainty in key states (Florida, Texas, Illinois, California, Tennessee, Alabama, Minnesota) continues to impact sales of hemp-derived products.
• Low visibility and trading volume of common stock, with an inability to guarantee listing on a recognized stock exchange.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to recurring losses and financial obligations.
• New federal legislation (H.R. 5371) banning intoxicating hemp-derived consumable products nationally effective November 12, 2026, will have a devastating impact, potentially eliminating half or more of Lifted's sales.
• Goodwill impairment charges are expected due to the federal ban, potentially half or more of the $23,092,794 total goodwill.
• Investment impairment charge for Ablis is expected due to the federal ban, potentially half or more of the $399,200 investment.
• Significant inventory write-offs are expected due to the federal ban, including all hemp-derived products in inventory on November 12, 2026.
• Other changes to federal laws and regulations, or new rules by the DEA, could classify certain hemp-derived products as controlled substances.
• Federal or state laws and regulations prohibiting or restricting hemp-derived, nicotine or tobacco products, kratom, psychoactive products, and/or vaping.
• Risk of being accused of selling products containing ingredients considered an analog of a controlled substance.
• Vendor concentration risk and customer concentration risk.
• Customer credit risk due to delays in payments from distributors.
• Counterparty risk.
• Maintaining cash balances exceeding federally insured limits.
• Inability to generate sufficient operating cash flow to meet financial obligations and preferred stock dividends.
• Potential for substantial dilution to existing shareholders if capital raises are pursued.
• Material weaknesses in internal control over financial reporting, including lack of segregation of duties and inadequate independent oversight.
• Low visibility and trading volume of common stock, and inability to satisfy listing requirements for a recognized stock exchange.
• Ongoing legal proceedings as defendant (Hernandez v Lifted Liquids, Jessie Hooks v. Lifted Made et al.) and plaintiff (Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc., Lifted Liquids, Inc. v RanCo, LLC).
• Inability to predict future sales and raw goods needs, leading to inventory write-offs.
• Regulatory uncertainty in states like Tennessee, Alabama, and Minnesota, and lobbying efforts in Texas and other states, could adversely affect sales.

Future Outlook

The company plans to sustain itself by continuing Lifted's operations, acquiring and/or developing profitable businesses outside the hemp or marijuana industries, and completing private placements of common stock and/or preferred stock. However, there are no assurances of success, and such actions could lead to substantial dilution. The new federal ban on intoxicating hemp-derived products, effective November 12, 2026, is expected to have a devastating impact, eliminating half or more of sales, necessitating goodwill and investment impairment charges, and significant inventory write-offs. The company is currently evaluating the impact of new FASB accounting standards (ASU 2023-09 and ASU 2024-03) on its consolidated financial statements.

Management Comments

• "Management believes that by taking these actions [acquiring/developing profitable businesses, private placements], the Company will be provided with sufficient future operations and cash flow to continue as a going concern."
• "However, there can be no assurances or guarantees whatsoever that the Company will be successful in consummating such actions on acceptable terms, if at all."
• "Moreover, any such actions can be expected to result in substantial dilution to the existing shareholders of the Company."
• "The Act in all likelihood will have a devastating impact on the Company and the price of its common stock. The material adverse effects of the Act cannot be overstated."
• "The 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."
• "We intend to vigorously pursue and defend such litigation."

Industry Context

The company operates in the rapidly evolving hemp and cannabis-related product industry, which is subject to significant and increasing regulatory risks at both federal and state levels. The new federal ban on intoxicating hemp-derived products (H.R. 5371) represents a major shift, potentially crippling a significant portion of the company's current business model. This trend of increased regulation and prohibition is also seen at the state level (Tennessee, Alabama, Minnesota, Texas), indicating a challenging environment for hemp-derived product manufacturers. The company's strategy to acquire non-hemp/marijuana businesses and develop hemp-free brands (Mielos, Rebel Energy Gummy) reflects an attempt to diversify away from these regulatory pressures.

Comparison to Industry Standards

• The filing does not provide specific industry benchmarks or comparable company data to assess results against global standards.
• The company's investments in Ablis (hemp-derived beverage) and Bendistillery (craft distiller) are mentioned, but no performance comparisons are offered.
• The challenges faced by the company due to increasing regulatory changes in the hemp industry are broadly consistent with the volatile and uncertain nature of this emerging market in the U.S.

Management Changes

Corporate Governance

Legal Proceedings

• Hernandez v Lifted Liquids: Putative class action alleging underreported delta-9-THC content in vape cartridges, fraudulent misrepresentation, breach of implied warranty, and unjust enrichment. Company contends it's without merit.
• Jessie Hooks v. Lifted Made, URB Cannabis, Barry Hollingsworth, Gerard Jacobs, Nicholas Warrender, and Pharmlabs, LLC: Plaintiff alleged products exceeded legal hemp limitations and misrepresentation. RICO claims dismissed with prejudice, other claims dismissed, claims against individuals dismissed. Plaintiff filed a second amended complaint, company filed motion to dismiss.
• Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc.: Company seeking to recover approximately $98,000 in damages resulting from Defendants' failure to pay for product they ordered.
• Lifted Liquids, Inc. v RanCo, LLC: Company seeking to recover approximately $354,000 in damages resulting from Defendants' failure to pay for products.
• Settlement Agreement with Chris Hillseth Enterprises Corporation and Ameri-Kal LLC: Resolved a dispute over equipment that did not work as represented, company recouped a total of $177,500. Defendants met their settlement obligations in September 2025.
• Dismissal of Loree Perry, Individually and on Behalf of All Others Similarly Situated v. Sheikhani Group, et al: Plaintiff voluntarily dismissed the complaint without prejudice, alleging underreported delta-9-THC content and illegal sales.
• Settlement Agreement with Girish GPO, Inc.: Resolved lawsuit, company obtained a $30,000 default judgment against the Law Offices of Saul Roffe and Girish defendants agreed to pay $34,000 over time.
• Amendment to Settlement With Dev Distribution, LLC: Resolved lawsuit, Dev paid $240,000 (increased from $230,000) and provided certain equipment and product. Dev met its settlement obligations in April 2025.
• Settlement with Former Insurance Carrier: Lifted compromised and settled a dispute with one of its former insurance carriers on October 2, 2025.

Related Party Transactions

• Sales to Ablis: Lifted sold $0 (Q3 2025) and $5,038 (YTD Sep 2025) worth of finished goods to Ablis (4.99% owned by LFTD Partners).
• Robert T. Warrender II (NWarrender's father): Employee until December 2024, Director of LFTD Partners. $0 accrued payable as of Sep 30, 2025.
• Sublease of Chicago Office Space: Sublessor was Lifted's former Chief Strategy Officer. Terminated June 30, 2024.
• Lease and Purchase of 5511 Building: NWarrender, through 95th Holdings, LLC, purchased and leased the building to Lifted. Lifted purchased the building for $1,375,000 on December 14, 2023, using proceeds from Surety Bank loans.
• Laurie Warrender (NWarrender's mother): Hired as consultant/advisor to NWarrender on December 30, 2024, with a salary of $5,000/month. $2,094 accrued payable as of Sep 30, 2025.
• Mystic Foods LLC (owned by NWarrender's brother): Lifted purchased $0 (Q3 2025) and $1,260 (YTD Sep 2025) worth of food.
• Outside Director Fees: Each outside director (Vincent Mesolella, Dr. Joshua Bloom, Ms. Sharial Howard, Mr. Richard Morrissy, Dr. James Jacobs, Mr. Kevin Rocio) receives $4,000 quarterly. Dr. James Jacobs is brother of CEO Gerard M. Jacobs and uncle of President/CFO William Jacobs.
• William C. Jake Jacobs: Received 200,000 shares of Deferred Contingent Stock.
• Related Party Note (Beachin Company): On April 22, 2025, the Company borrowed $350,000 from Beachin Company (an affiliate of CEO/CFO) to cover the USD Coin theft. Loan is non-interest bearing and repaid using funds otherwise paid to CEO/CFO as salary/bonuses. $138,462 non-current liability as of Sep 30, 2025.
• Listing Contract with @properties: Kevin Rocio (director) is one of the listing agents for the 5511 Building sale.
• Executive Employment Agreements: NWarrender, GJacobs, and WJacobs have five-year, automatically renewing agreements.
• Stockholders Agreement: NWarrender, GJacobs, and WJacobs agreed to vote shares in accordance with unanimous agreement on certain corporate matters.

Stakeholder Impact

• Shareholders: Significant negative impact expected from the federal ban, leading to potential revenue loss, goodwill/investment impairment, and inventory write-offs, likely affecting share price. Potential dilution from future capital raises.
• Employees: Restructuring of sales team, layoffs in Kenosha and Durango mentioned as initiatives to decrease operating expenses.
• Customers: Regulatory uncertainty and bans on hemp-derived products could lead to decreased product availability and confusion.
• Suppliers: Impacted by potential changes in production forecasting and raw goods needs due to regulatory changes.
• Creditors (Surety Bank): Company has significant financial obligations and maintains restricted cash as collateral. Going concern doubt could raise concerns.

Next Steps

• Management plans to acquire and/or develop profitable businesses outside the hemp or marijuana industries.
• Management plans to complete private placements of common stock and/or preferred stock.
• The company is actively engaged in remediating material weaknesses in internal control over financial reporting.
• Lifted and ENM intend to restructure their deal no later than December 31, 2025.
• Highlandia Inc. intends to enter the hemp-derived beverage industry.
• The company will continue to vigorously defend against meritless claims in the Jessie Hooks v. Lifted Made et al. lawsuit.
• The company intends to pursue action and recover damages in Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. and Lifted Liquids, Inc. v RanCo, LLC.
• The Board of Directors has authorized management to explore a sale of the 5511 Building and apply net proceeds to loan repayments.
• The company is evaluating the impact of new FASB accounting standards (ASU 2023-09 and ASU 2024-03).

Key Dates

Recommendation

Despite a return to net income in Q3 2025, the impending federal ban on intoxicating hemp-derived products, effective November 12, 2026, poses an existential threat to a substantial portion of the company's revenue (47% of Q3 2025 sales). This will lead to massive goodwill and investment impairment charges, and significant inventory write-offs. The company already faces substantial doubt about its ability to continue as a going concern, has persistent material weaknesses in internal controls, and experienced a significant digital asset theft. While management is pursuing diversification and capital raises, the scale of the regulatory headwind is overwhelming and creates an extremely high-risk profile with a severely negative outlook for future profitability and shareholder value.

Keywords

Hemp products, Cannabis, Psychoactive products, Vapes, Edibles, SEC filing, 10-Q, Financial results, Regulatory risk, Goodwill impairment, Inventory write-offs, Going concern, Internal controls, LFTD Partners, Lifted Made, Urb Finest Flowers, Ablis, Bendistillery, Federal ban, H.R. 5371, USD Coin theft, Surety Bank loans