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 fixed assets, impairment of fixed assets, impairment of investments, 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 $250,000. Deposits at this bank exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.

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 Act (defined below) necessitated the calculation and recording of an impairment charge on the Lifted Goodwill (defined below) and Oculus Goodwill (defined below). Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

NOTE 4 – THE COMPANY’S INVESTMENTS

The Company’s Investment in Lifted

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, from $399,200 to $0 as of December 31, 2025. Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

NOTE 4 – THE COMPANY’S INVESTMENTS

The Company’s Investments in Ablis and Bendistillery

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 $99,800. Then, due primarily to regulatory challenges faced by Bendistillery, as of June 30, 2026, LFTD Partners recorded an impairment charge on its remaining investment in Bendistillery, reducing the carrying value of its investment in Bendistillery to $0. Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

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:

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.

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 $2,915,373, net of $1,207,367 allowance for doubtful accounts, were outstanding at June 30, 2026. In comparison, accounts receivable of $2,531,524, net of $1,269,590 allowance for doubtful accounts, were outstanding at December 31, 2025.

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 $350,000 was reported as of June 30, 2026 and as of December 31, 2025.

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 Accounts Payable and Accrued Expenses on the Consolidated Balance Sheets. In periods prior to December 31, 2025, 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 in the following section, 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:

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 – As of June 30, 2026 and 2025, one and two customers represented more than 10% of gross accounts receivable, respectively.

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 June 30, 2026 and December 31, 2025:

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 June 30, 2026, $345,325 of overhead expenses were allocated to finished goods. In comparison, at December 31, 2025, $373,269 of overhead expenses were allocated to finished goods.

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 $6,596,096 was recorded against Lifted’s inventory as of June 30, 2026; of which, $5,007,427 was recorded against its hemp-derived or hemp-related inventory, $1,434,458 was recorded against its kratom-derived or kratom-related inventory, and $154,211 was recorded against other inventory unrelated to hemp or kratom.

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 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 $5,007,427 was taken against Lifted’s hemp-derived inventory as of June 30, 2026. No inventory reserve was taken against Lifted’s hemp-derived inventory as of December 31, 2025; at the time, management believed that such an action would be premature. During each of the fiscal quarters leading up to November 12, 2026, management will carefully consider the quantity of hemp-derived raw goods and finished goods that are in Lifted’s inventory relative to historical hemp-derived raw goods usage or finished goods sales data, respectively, while also considering expected market demand, the current regulatory landscape, and potentially other factors, to decide if an inventory reserve over its hemp-derived raw goods and/or finished goods is necessary.

Regarding Lifted’s inventory reserve against its kratom-derived inventory: Schedule I placement or other significant federal regulatory restrictions may occur, as the FDA and the DEA have expressed concerns regarding products containing 7-hydroxymitragynine (“7-OH”). In July 2026, the Department of Health and Human Services (“HHS”) initiated a Request for Information regarding proposed scheduling thresholds for 7-OH, and the DEA issued two notices of intent to issue temporary scheduling orders, which were published in the Federal Register. The first proposal would temporarily place 7-OH into Schedule I when present above specified concentration or dosage thresholds in botanical kratom and certain processed products. The second would place mitragynine pseudoindoxyl, MGM-15, and MGM-16 into Schedule I without concentration thresholds. If finalized, these proposals could materially restrict or prohibit the manufacture, distribution, and sale of certain kratom-derived products sold by the Company and materially reduce the Company’s revenue, potentially by approximately half or more. Based on these developments, the Company recorded an inventory reserve of $1,434,458 against its kratom-derived inventory as of June 30, 2026. The Company continues to monitor these regulatory developments and will evaluate their impact as the rulemaking process progresses.

Regarding Lifted’s inventory reserve of $154,211 against its other inventory unrelated to hemp or kratom: management booked a reserve against raw goods with an expiration date on or before July 31, 2026. Reference is hereby made to the disclosures in the following section, 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. During the quarters ended June 30, 2026 and 2025, $207,274 and $316,408, respectively, of obsolete and spoiled inventory was written off. During the six months ended June 30, 2026, and 2025, $296,378 and $780,929 of obsolete and spoiled inventory was written off, respectively.

The process of determining obsolete or spoiled inventory involves: 

Inventory reserve (allowance) expense is also a component of cost of goods sold. $1,534,423 and $0 of inventory reserve expense is included in cost of goods sold for the quarters ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, and 2025, $6,596,096 and $0 of inventory reserve (allowance) expense was reported, respectively.

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 $2,500 are expensed, and fixed assets that cost $2,500 or more are capitalized. Depreciation of Lifted’s main operations building located at 5511 95^th Avenue, Kenosha, Wisconsin (“5511 Building”), machinery and equipment, furniture and fixtures, building improvements, leasehold improvements, computer equipment, vehicles and trade show booths, is based on the asset’s estimated useful life and is calculated using the straight-line method. Normal repairs and maintenance costs are expensed as incurred. Expenditures that materially increase values or extend useful lives are capitalized. The related costs and accumulated depreciation of disposed assets are eliminated and any resulting gain or loss on disposition is included in net income.

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 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. Fair value is determined using valuation techniques appropriate under the circumstances and consistent with ASC 820. Estimates of future cash flows and fair value involve significant management judgment and are based on information available at the time the estimates are made.

During the first quarter of 2026, management compared Lifted’s undiscounted cash flows 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, as of March 31, 2026, management recorded an impairment charge of $143,421 against Lifted’s hemp-specific fixed assets.

Similarly, during the second quarter of 2026, management updated its impairment analysis using current information available as of June 30, 2026, including revised estimates of the undiscounted future cash flows expected to be generated by the Company’s hemp-specific fixed assets through November 12, 2026. Based on this updated analysis and continued uncertainty regarding the future use and recoverability of these assets, management concluded that an additional impairment charge was warranted. Accordingly, the Company recognized an additional impairment charge of $64,628 during the second quarter of 2026, bringing the cumulative impairment recognized on hemp-specific fixed assets to $208,049 as of June 30, 2026. The Company may be required to record additional impairment charges on its hemp-derived assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts.

Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

NOTE 3 - RISKS AND UNCERTAINTIES

Going Concern

Assets Held for Sale – The Company classifies a long-lived asset or disposal group as held for sale in the period in which all applicable criteria under ASC 360 are met. Assets classified as held for sale are presented separately from property and equipment and measured at the lower of their carrying amount or fair value less cost to sell. Depreciation ceases upon classification as held for sale. Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

              NOTE 6 - ASSETS HELD FOR SALE

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 in the following section, 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 $10,000,000 or more, then the term of the ENM agreement will automatically renew for a Renewal Term of 60 months (and similarly in regard to Renewal Terms).

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:

Then, as of September 30, 2025, Lifted and ENM signed an Agreement pursuant to which ENM has acknowledged that it owes Lifted a total $421,835 in loans, and is obligated to pay Lifted a total of $102,686 in invoices; provided that the Agreement acknowledges that the repayment dates for those loans and invoices are uncertain, and that Lifted and ENM intend to restructure their deal no later than December 31, 2025, in a writing to be mutually agreed upon by Bobby Hallock on behalf of ENM and by Nicholas S. Warrender (“NWarrender”) on behalf of Lifted, so that, among other things, such loans and invoices are to be repaid by Extrax to Lifted over time using just Lifted’s share of the free cash flow generated by ENM’s operations under such restructured deal.

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 $421,835, and a Provision for Credit Losses – Extrax NM Loans for the same amount is recorded. The loans are non-interest bearing.

No License Fee was reported during the six months ended June 30, 2026 or 2025.

ENM also owed Lifted a total of $102,686 of invoices as of June 30, 2026 and December 31, 2025; there is an allowance recorded against the $102,686 of receivable invoices as of June 30, 2026 and as of December 31, 2025, because they were all older than 90 days, and the Company’s policy is to record an allowance for doubtful accounts for accounts receivable older than 90 days.

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: 

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 various brands, new product and diversification 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:

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 June 30, 2026, total deferred revenue was $335,984, all of which is expected to be recognized as revenue in 2026. At December 31, 2025, total deferred revenue was $1,380,049, all of which was recognized as revenue in the first quarter of 2026. Deposits from customers on unfulfilled orders totaled $166,540 and $393,501 as of June 30, 2026 and December 31, 2025, respectively.

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 and six months ended June 30, 2026 and 2025:

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.

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. These reclassifications had no effect on previously reported net income (loss), total assets, total liabilities, or stockholders’ equity.

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.

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:

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. 

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 in the following section, which are hereby incorporated by reference thereto:

NOTE 3 - RISKS AND UNCERTAINTIES

Going Concern