LEGAL PROCEEDINGS

6 Months Ended

Jun. 30, 2026

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 and the briefing has been completed and the parties are waiting for oral argument.

Lifted currently is involved in five pending lawsuits, as the plaintiff:

	(1)	Lifted Liquids, Inc. v RanCo, LLC

		On September 9, 2025, the Company had filed an action to recover approximately $354,000 in damages resulting from Defendant’s failure to pay for products. The matter had been filed in Federal Court in California. On October 31, 2025, the matter was voluntarily dismissed without prejudice. On April 2, 2026, the complaint was refiled and the Company has moved for a default judgment based on Defendant’s failure to respond.

	(2)	Lifted Liquids, Inc. v. Buckbee Seed Company LLC

		On May 29, 2026, Lifted Liquids, Inc. filed a complaint against Buckbee Seed Company LLC in the Circuit Court of the 17th Judicial Circuit, Winnebago County, Illinois, alleging breach of contract arising from Defendant’s failure to pay for products purchased from Lifted. The complaint seeks recovery of approximately $29,397 in unpaid invoices, together with applicable interest, costs, and other relief deemed appropriate by the Court. Defendant has been served but has not appeared in the action. The Company intends to file a motion for default judgment.

	(3)	MoHemp Trade Association, Lifted Liquids, Inc. and MNG 2005, Inc. vs. Mike Kehoe, Catherine Hanaway and Sarah Wilson

		On July 16, 2026, the Company, together with the MoHemp Trade Association and MNG 2005, Inc., filed a lawsuit in the United States District Court for the Western District of Missouri against Missouri Governor Mike Kehoe, Attorney General Catherine Hanaway, and Sarah Wilson, Director of the Missouri Department of Health and Senior Services, challenging the constitutionality and enforceability of Missouri House Bill 2641. The complaint alleges, among other things, that certain provisions of the statute are preempted by federal law, violate the Dormant Commerce Clause, and are unconstitutionally vague under the Due Process Clause. The plaintiffs seek declaratory and injunctive relief to prevent enforcement of the challenged provisions before they become effective. The litigation is in its preliminary stages, and the Company is unable to predict the ultimate outcome or reasonably estimate any potential loss or recovery associated with the matter.

	(4)	Delta Beverages, Inc., et al. v. Canepa, et al.

		As described in NOTE 16 – SUBSEQUENT EVENTS, on July 30, 2026, Lifted and other parties filed an action in the United States District Court for the Northern District of Ohio challenging the constitutionality of certain provisions of Ohio Senate Bill 56. The complaint seeks declaratory and injunctive relief, and the plaintiffs simultaneously moved for a temporary restraining order to prohibit enforcement of the challenged provisions during the pendency of the litigation. The litigation is in its preliminary stages, and the Company is unable to predict the ultimate outcome.

	(5)	Monti, et al. v. Garcia, et al.

		As described in NOTE 16 – SUBSEQUENT EVENTS, on July 31, 2026, Lifted, together with Thomas Monti and The Happy Cactus Apothecary LLC, filed a complaint in the United States District Court for the Southern District of Texas challenging the legality of certain reinstated Schedule I definitions adopted by the Texas Department of State Health Services relating to hemp-derived cannabinoids. The complaint seeks declaratory and injunctive relief, alleging, among other things, that the challenged definitions are preempted by federal law and violate the Due Process and Commerce Clauses of the United States Constitution. Concurrent with the complaint, the plaintiffs filed an emergency motion for a temporary restraining order and expedited preliminary injunction seeking to enjoin enforcement of the challenged definitions while the litigation is pending. The litigation is in its preliminary stages, and the Company is unable to predict the ultimate outcome.

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 Hernandez v Lifted Liquids lawsuit with prejudice in exchange for Lifted paying $100,000 over time, with the final payment of $10,000 due on or before August 31, 2026. 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 $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter was filed in California. The Company has received a judgment by default and is considering enforcement action.

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 $177,500 that will be paid by Defendants to the Company in installments over a period of six months. 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 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 $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000 over time.

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”), a vendor who had failed to deliver certain products that Lifted had purchased for $263,938. Dev filed a counterclaim alleging breach of contract. 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.

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 $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 Dev’s 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. Similar to the original Settlement Agreement and Mutual General Release, in the event of a Cash Event, Dev shall be obligated to contemporaneously pay Lifted $240,000 less any Monthly Payments made by Dev to Lifted up to the point of such Cash Event. Dev met its settlement obligations in April 2025.