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RISKS AND UNCERTAINTIES
 9 Months Ended
Sep. 30, 2026
RISKS AND UNCERTAINTIES  
RISKS AND UNCERTAINTIES

NOTE 3 - RISKS AND UNCERTAINTIES

 

Going Concern

 

The Company currently has one revenue-generating subsidiary, Lifted. Prior to the acquisition of Lifted on February 24, 2020, the Company had no sources of revenue, and the Company had a history of recurring losses, which has resulted in an accumulated deficit of $37,787,673 as of September 30, 2026. Bankruptcy of the Company at some point in the future is a possibility. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. If and to the extent that the revenue generated by Lifted is not adequate to pay the Company’s operating expenses and the dividends accruing on its preferred stock, then Company management plans to sustain the Company as a going concern by taking the following actions: (1) acquiring and/or developing profitable businesses that will create positive income from operations; and/or (2) completing private placements of the Company’s common stock and/or preferred stock. 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. 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, and these plans are not considered sufficient to alleviate substantial doubt about the Company’s ability to continue as a going concern. Moreover, any such actions can be expected to result in substantial dilution to the existing shareholders of the Company.

 

The Company’s investments in Ablis and Bendistillery made the Company a minority owner of these companies. As a minority owner, the Company is not able to recognize any portion of Ablis’ or Bendistillery’s revenues or earnings in the Company’s financial statements. The Company monitors its investments in Ablis and Bendistillery and from time to time will evaluate whether there has been a potential impairment of value, which there was as of December 31, 2025 and as of June 30, 2026. Reference is made to the following section for more information about the impairment charges recorded against the Company’s investments in Ablis and Bendistillery as of December 31, 2025 and June 30, 2026:

 

NOTE 4 – THE COMPANY’S INVESTMENTS

The Company’s Investments in Ablis and Bendistillery

 

The Company currently is 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. Prior to the Business Loan Payoff, the Company was also making payments of interest and principal on its Business Loan. As extensively discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”), in this Quarterly Report on Form 10-Q, and in the Company’s other SEC filings, the Company is subject to a wide variety of Risk Factors including substantial legal and regulatory risks. Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

 

PART I — FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

 

The legal and regulatory risks facing the Company’s business are particularly acute at this point in time, in at least the following respects:

 

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,” enacted as Public Law 119-37. Section 781 of that law enacted the Federal Hemp Restrictions described in NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC. The Company cannot predict whether those restrictions will take effect as scheduled or will be delayed, modified or repealed. Then, on September 2, 2026, President Trump signed into law H.R. 6500, the “Continuing Appropriations and Extensions Act, 2027,” enacted as Public Law 119-103. Section 2019 of that law postponed until December 11, 2026 certain Federal Hemp Restrictions, including new THC limits and restrictions on intermediate and final hemp-derived cannabinoid products containing cannabinoids that can naturally be produced by the cannabis plant but were synthesized or manufactured outside the plant. However, restrictions on intermediate and final hemp-derived cannabinoid products containing cannabinoids that cannot naturally be produced by the cannabis plant remain scheduled to take effect on November 12, 2026. Unless further delayed, modified or repealed, these restrictions are expected to materially adversely affect the Company’s business and financial condition and the price of the Company’s common stock. Certain effects of the Federal Hemp Restrictions have already been reflected in the Company’s financial statements, while others may arise as the applicable restrictions take effect, as described below:

 

 

1)

The elimination of half or more of Lifted’s sales. Sales of hemp-derived products made up approximately 61% and 51% of Lifted’s sales during the three and nine months ended September 30, 2026, respectively, and 52% of Lifted’s sales during the year ended December 31, 2025; thus, the Federal Hemp Restrictions could eliminate approximately half or more of the Company’s revenue;

 

 

 

 

2)

Goodwill impairment charges. As a result of LFTD Partners’ acquisition of Lifted, LFTD Partners recognized goodwill of $22,292,767 (“Lifted Goodwill”). As a result of Lifted’s purchase of assets of hemp-derived products maker Oculus CRS, LLC, and merger with Oculus CHS Management Corp., LFTD Partners recognized goodwill of $800,027 (“Oculus Goodwill”). The Federal Hemp Restrictions necessitated the calculation and recording of an impairment charge on the Lifted Goodwill and Oculus Goodwill. As of December 31, 2025, LFTD Partners recorded a goodwill impairment charge on the Lifted Goodwill and Oculus Goodwill, reducing the carrying value of both to $0.

 

 

 

 

3)

An investment impairment charge. The Federal Hemp Restrictions necessitated the calculation and recording of an impairment of LFTD Partners’ investment in hemp-derived beverage and products maker Ablis. On April 30, 2019, LFTD Partners purchased 4.99% of the common stock of Ablis for $399,200. As of December 31, 2025, LFTD Partners recorded an impairment charge on its investment in Ablis, reducing the carrying value of the investment to $0.

 

 

 

 

4)

Inventory allowance against, or significant write offs of, inventory. The Federal Hemp Restrictions will most likely negatively impact the pricing of hemp-derived products, the availability and price of raw goods, and production forecasting and sales, which may lead to the recording of an inventory allowance against, or write offs of, our hemp-derived inventory each quarter end leading up to the applicable effective dates of the Federal Hemp Restrictions. Beginning November 12, 2026, intermediate and final hemp-derived cannabinoid products containing cannabinoids that cannot naturally be produced by the cannabis plant are scheduled to no longer qualify as hemp and instead be treated as marijuana under federal law. Additional restrictions, including new THC limits and restrictions on products containing cannabinoids that can naturally be produced by the cannabis plant but were synthesized or manufactured outside the plant, are scheduled to take effect on December 11, 2026. These restrictions may render affected inventory unsaleable or reduce its recoverable value, potentially requiring additional inventory reserves or write-offs. An inventory allowance of $4,991,182 was recorded against Lifted’s hemp-derived inventory as of September 30, 2026.

 

 

 

 

5)

Allowance against prepaid inventory. Due to uncertainty regarding when certain hemp-related items will be received and, for raw materials, the additional time required to convert those materials into finished goods before the applicable Federal Hemp Restrictions take effect, management recorded an allowance against hemp-related prepaid inventory as of September 30, 2026. The allowance reflects management’s estimate of amounts that may not be recoverable through the receipt, production and sale of the related products before the applicable restrictions take effect.

 

 

6)

 

Significant write offs of accounts receivable. The Federal Hemp Restrictions will have a material adverse effect on the wholesalers and distributors that sell our products. In turn, these wholesalers and distributors may disregard their payment terms and not pay us for the product that they have purchased, causing us to have to correspondingly increase our allowance for doubtful accounts, and eventually write off the accounts receivable.

 

 

 

 

7)

Impairments of, or losses on the disposition of, hemp-related fixed assets. The Federal Hemp Restrictions are expected to materially reduce or eliminate the utility and marketability of fixed assets used primarily in the manufacture of hemp-derived products. As a result, we may be required to record impairment charges on these assets, and any efforts to sell such assets may result in significant losses due to limited demand or substantial price discounts. During the three and nine months ended September 30, 2026, impairments of hemp-specific fixed assets of $0 and $208,049, respectively, were recognized.

 

 

 

 

8)

Sales of fixed or other assets to fund ongoing operations. If the Federal Hemp Restrictions materially reduce our revenue from hemp-derived products, our cash flow may be insufficient to support ongoing operating expenses. In that event, we may be required to sell fixed assets or other assets to generate liquidity, which could occur at unfavorable prices and materially adversely affect our financial condition.

 

 

 

 

9)

Workforce reductions and termination of contractor relationships. If the Federal Hemp Restrictions materially reduce demand for our hemp-derived products, we may be required to reduce our workforce and terminate relationships with independent contractors. Such actions could disrupt our operations, result in restructuring costs, and adversely affect our ability to operate or pursue future business opportunities. On June 30, 2026, Lifted announced a strategic restructuring to reduce its operating costs as part of its ongoing efforts to align its cost structure with the evolving regulatory environment affecting portions of the hemp-derived and kratom-derived products. As part of this initiative, between June 12-26, 2026, Lifted reduced its workforce from approximately 100 employees and independent contractors to 77. At the time, the restructuring was expected to reduce Lifted’s future operating expenses by approximately $736,000 per year. As of the date of this report, the Company’s workforce is approximately 68.

 

 

 

 

10)

Reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates. Just the enactment of the Federal Hemp Restrictions has significantly reduced interest in our Company and in our common stock from investors, potential financing sources, and potential merger candidates, because the Federal Hemp Restrictions call into question our Company’s short-term and long-term financial and operational viability, growth prospects, liquidity, and potential for listing on a national stock exchange. If the applicable Federal Hemp Restrictions take effect as scheduled on November 12, 2026 and December 11, 2026 without further delay, modification or repeal, these adverse effects on investor interest, access to financing, potential merger opportunities and the market price of the Company’s common stock could further intensify.

 

Additional factors that could materially adversely affect the Company’s future operating results include, but are not limited to: other changes to federal laws and regulations; any new rule proposed by the federal Drug Enforcement Administration that might attempt to classify certain hemp-derived products as controlled substances; and any other federal or state laws and regulations prohibiting or restricting hemp-derived, kratom-derived, or other psychoactive products and/or vaping.

 

On July 29, 2025, during a joint press conference, the FDA announced that it had recommended to the DEA that 7-hydroxymitragynine, a concentrated alkaloid derived from the kratom plant (and one of the kratom-derived compounds included within the previously defined term “7-OH”), be classified as a Schedule I controlled substance under the Controlled Substances Act (“CSA”). Since that time, the FDA and the DEA have continued to express concerns regarding products containing 7-hydroxymitragynine. In July 2026, HHS initiated a Request for Information regarding proposed scheduling thresholds for 7-hydroxymitragynine, 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-hydroxymitragynine 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. Under the standard rulemaking process, the DEA generally would publish a proposed rule, provide an opportunity for public comment, and subsequently issue a final rule. Alternatively, the CSA authorizes the DEA to issue a temporary scheduling order if it determines that a substance presents an imminent hazard to public safety, which could become effective upon publication in the Federal Register and generally remain in effect for up to two years, subject to extension while permanent scheduling proceedings are pending. Based on these developments, the Company recorded an inventory reserve of $1,434,458 against its kratom-derived inventory as of June 30, 2026.

 

Pursuant to a temporary scheduling order issued by the U.S. Drug Enforcement Administration (“DEA”) and published in the Federal Register on August 26, 2026, mitragynine pseudoindoxyl, MGM-15 and MGM-16, including certain related forms, were temporarily placed in Schedule I of the Controlled Substances Act, effective August 26, 2026. On October 14, 2026, the DEA published a new notice of intent proposing to temporarily place 7-hydroxymitragynine and mitragynine pseudoindoxyl in Schedule I when either substance alone, or their combined amount when both are present, exceeds specified thresholds. As of the date of this report, the proposed temporary scheduling order had not been issued, and the August 26, 2026 temporary scheduling order remained in effect.

 

In July 2026, in response to federal regulatory developments and uncertainty affecting 7-OH, Lifted ceased all sales of 7-OH, relinquished all ownership, possession and control of its remaining 7-OH inventory to a third party, and wrote off that inventory against the previously recorded inventory reserve.

 

There is also a risk that the Company potentially might be accused of selling products containing ingredients that might be considered an analog of a controlled substance.

 

The Company is also subject to vendor concentration risk, customer concentration risk, customer credit risk, and counterparty risk. A limited number of customers have historically made up a significant portion of the Company’s sales. Also, historically, the Company has purchased raw goods and finished goods from a limited number of suppliers. The loss of Lifted’s relationships with these customers and vendors could have a material adverse effect on Lifted’s business.

 

The Company maintains levels of cash bank accounts that typically exceed federally insured limits. The Company has not experienced any losses in such accounts and it believes that it is not exposed to any significant credit risk on cash.

 

No assurance or guarantee whatsoever can be given that the cash flows or net income of the Company’s wholly owned subsidiary Lifted will be sufficient to enable the Company to pay all of its operating expenses, dividends on its preferred stock, future company-wide management bonus pool payments, and other financial obligations.

 

As a result of all of the foregoing described factors, there is substantial doubt that the Company will be able to continue as a going concern.

 

Risks Associated With the Use of Artificial Intelligence

 

Our use of artificial intelligence technologies could result in errors in our operations, tax filings, or financial reporting, or expose confidential information. We have begun using artificial intelligence (“AI”) tools to assist personnel with certain business activities. AI-generated information may be inaccurate, incomplete, outdated, or presented with unwarranted confidence. If our personnel rely on such information without adequate review, we could make errors in product development, production planning, quality-related decisions, marketing materials, customer communications, or our assessment of laws and regulations applicable to our products. Such errors could result in production delays, mislabeled or noncompliant products, customer or regulatory claims, recalls, increased costs, or damage to our brands.

 

AI tools may also be used to assist with accounting and tax research, analyses, estimates, the preparation and review of tax returns and supporting workpapers, and the preparation of financial reports and other disclosures. These activities require professional judgment and verification of underlying facts, calculations, and applicable requirements. An error that is not identified through our review processes could result in an incorrect tax return or tax position, additional taxes, interest or penalties, a misstatement in our financial statements, or an inaccurate or untimely disclosure. Such an error could also require amended tax returns, a correction or restatement of our financial statements, or additional expense to investigate and remediate the issue.

 

In addition, entering Company, employee, customer, supplier, or other confidential information into third-party AI tools could result in its unauthorized use or disclosure. AI-generated materials may also give rise to intellectual property, privacy, or other legal claims. We may not be able to identify every error or prevent every improper use of these tools. Any of these events could materially adversely affect our business, financial condition, results of operations, or reputation. The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.