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, inventory allowance, prepaid inventory 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.

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 Federal Hemp Restrictions (described in NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.) 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 Federal Hemp Restrictions 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 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. 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.

Inventory – Inventory is stated at the lower of cost and net realizable value. Cost of raw materials is determined using an average-cost method. Cost of finished goods is determined using bill-of-material calculations that include raw material and labor costs, together with allocated manufacturing overhead. Net realizable value represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The determination of net realizable value requires significant judgment and is based on information available at the measurement date, expected business plans and market conditions, including anticipated shrinkage, inventory age, future demand, expected selling prices, and the regulatory environment and related challenges affecting the industries in which the Company operates.

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 September 30, 2026 and December 31, 2025:

Certain overhead costs, including facility leases, utilities, insurance, indirect labor and depreciation on certain machinery and equipment, are allocated to finished goods based on the estimated percentage cost toward the finished goods. Finished goods inventory included allocated overhead costs of $299,866 and $373,269 as of September 30, 2026 and December 31, 2025, respectively.

Inventory Allowance

The Company records an inventory allowance when the carrying value of inventory exceeds its estimated net realizable value. In determining the appropriate allowance, management considers, among other factors, historical and current sales, months’ supply of inventory, expected customer demand, expected production needs, historical raw material usage, inventory aging and expiration dates, obsolescence, expected selling prices, and regulatory developments affecting the Company’s products.

As of September 30, 2026, Lifted’s total inventory allowance was $5,062,613, consisting of $4,991,182 related to hemp-derived or hemp-related inventory and $71,431 related to other inventory. No inventory reserve was recorded against Lifted’s hemp-derived inventory as of December 31, 2025 because, based on the information then available, management believed that recording such a reserve would have been premature.

Regarding Lifted’s hemp-derived inventory, federal legislation enacted in November 2025 will cause many intoxicating hemp-derived products to no longer qualify as hemp and instead be treated as marijuana under federal law. Subsequent legislation postponed, until December 11, 2026, the application of certain 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. However, restrictions on products containing cannabinoids that cannot naturally be produced by the cannabis plant remain scheduled to take effect on November 12, 2026. Numerous states also restrict or prohibit sales of intoxicating hemp-derived products. Management considered these regulatory developments, together with expected demand, historical sales and usage, expected production needs, inventory aging and expiration dates, and other relevant factors, in determining the reserve recorded against Lifted’s hemp-derived inventory as of September 30, 2026. The Company cannot predict whether the federal restrictions will take effect as scheduled or will be delayed, modified or repealed, or what demand for hemp-derived products will be during the fourth quarter of 2026.

Regarding Lifted’s kratom-derived inventory, regulatory developments affecting 7-hydroxymitragynine and related kratom-derived products caused the Company to record an inventory allowance of $341,014 as of March 31, 2026 and to increase the allowance to a $1,434,458 inventory reserve as of June 30, 2026. In July 2026, 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 allowance. Accordingly, as of September 30, 2026, Lifted held no 7-OH inventory and no related inventory reserve remained. For more information, reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.

NOTE 3 - RISKS AND UNCERTAINTIES

Going Concern

Fixed Assets – Fixed assets (property and equipment) are stated at cost. Fixed assets costing less than $2,500 are expensed as incurred, while fixed assets costing $2,500 or more are capitalized. Depreciation of machinery and equipment, furniture and fixtures, building improvements, leasehold improvements, computer equipment, vehicles and trade show booths is calculated using the straight-line method over the assets’ estimated useful lives. Prior to its classification as held for sale on June 16, 2026, Lifted’s former main operations building located at 5511 95th Avenue, Kenosha, Wisconsin (the “5511 Building”) was depreciated on the same basis. Depreciation of the 5511 Building ceased upon its classification as held for sale, and the building was sold on September 29, 2026. Normal repairs and maintenance are expensed as incurred, while expenditures that materially increase an asset’s value or extend its useful life are capitalized. Upon disposition of an asset, its cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized 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 performed an ASC 360 recoverability test of Lifted’s hemp-specific fixed assets by comparing their carrying amount as of March 31, 2026 to projected undiscounted cash flows through mid-November 2026. The cash flow projection was based on first-quarter 2026 results annualized through mid-November and assumed that Lifted’s hemp-derived product sales would cease beginning November 12, 2026, which was the scheduled effective date of the Federal Hemp Restrictions at the time of the analysis. The projected undiscounted cash flows were less than the carrying amount of the hemp-specific fixed assets. At the time of the analysis, management could not predict whether the Federal Hemp Restrictions would take effect as scheduled or would be delayed, modified or repealed, the level of future demand for hemp-derived products, or the proceeds that might be realized from a sale of the affected assets. Given these uncertainties, management recorded an impairment charge equal to 50% of the net book value of the hemp-specific fixed assets, or $143,421, as of March 31, 2026.

During the second quarter of 2026, management performed an updated ASC 360 recoverability test of Lifted’s hemp-specific fixed assets using information available as of June 30, 2026. The cash flow projection was based on results for the six months ended June 30, 2026 annualized through mid-November and assumed that Lifted’s hemp-derived product sales would cease beginning November 12, 2026, which was the scheduled effective date of the Federal Hemp Restrictions at the time of the analysis. The projected undiscounted cash flows were less than the carrying amount of the hemp-specific fixed assets. Based on the updated analysis, the Company fully impaired certain hemp-specific fixed assets and recognized an additional impairment charge of $64,628 during the second quarter of 2026. Following this charge, a pre-roll machine (the “Pre-Roll Machine”) with a carrying amount of approximately $59,266 was the only hemp-specific fixed asset with a remaining positive carrying amount. The cumulative impairment recognized on hemp-specific fixed assets was $208,049 as of June 30, 2026.

On September 2, 2026, H.R. 6500 was enacted as Public Law 119-103, postponing 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. Restrictions on products containing cannabinoids that cannot naturally be produced by the cannabis plant remain scheduled to take effect on November 12, 2026.

As of September 30, 2026, after giving effect to the impairment charges recognized during the first and second quarters of 2026 and depreciation recorded during the third quarter, the Pre-Roll Machine, with a carrying amount of approximately $51,535, was the only hemp-specific fixed asset with a remaining positive carrying amount. Management estimated that the machine could be sold for an amount exceeding its carrying amount. Accordingly, the Company did not recognize an additional impairment charge during the third quarter of 2026.

The Company may be required to record additional impairment charges on its hemp-specific fixed 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 sections, which are hereby incorporated by reference thereto:

NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.

NOTE 3 - RISKS AND UNCERTAINTIES

Going Concern

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 and pay at the time of purchase. During the three months ended September 30, 2026, no customer accounted for more than 10% of the Company’s revenue. One customer accounted for more than 10% of the Company’s revenue during each of the nine months ended September 30, 2026 and the three and nine months ended September 30, 2025. 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

Deferred Revenue – Deferred revenue consists of amounts received or invoiced for product orders before shipment and unrecognized compensation related to certain other services. For product sales, amounts received before shipment are recorded as deferred revenue. If payment has not been received, the Company records an accounts receivable for the invoiced amount but does not recognize revenue until the order is fully shipped. Compensation related to other services is recognized as revenue when earned under the applicable contractual arrangements. Any such compensation that has not yet been earned is recorded as deferred revenue.

At September 30, 2026, total deferred revenue was $493,155, consisting of $476,060 related to unfulfilled product orders, and $17,094 of unearned compensation related to certain other services. All deferred revenue as of September 30, 2026 is expected to be recognized as revenue in 2026. At December 31, 2025, total deferred revenue was $1,380,049, all of which related to unfulfilled product orders, and was recognized as revenue in the first quarter of 2026. Deposits from customers on unfulfilled product orders totaled $61,241 and $393,501 as of September 30, 2026 and December 31, 2025, respectively.

The decrease in deferred revenue from December 31, 2025 to September 30, 2026 was primarily attributable to the fulfillment of orders that were unfulfilled at December 31, 2025 and recognition of the related revenue during the nine months ended September 30, 2026, partially offset by new orders and other amounts for which the applicable revenue recognition criteria had not been satisfied as of September 30, 2026.

Recent Accounting Pronouncements – In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments establish a probable-to-complete recognition threshold for capitalizing internal-use software costs, incorporate website-development-cost guidance into Subtopic 350-40, and supersede Subtopic 350-50. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods, with early adoption permitted. The Company early adopted ASU 2025-06 effective January 1, 2026 using the prospective transition method. Accordingly, the amended guidance is applied to new software and website-development costs incurred on or after January 1, 2026, including costs associated with projects in progress on that date. The adoption did not result in an adjustment to beginning retained earnings or any change to amounts recognized in the Company’s consolidated financial statements.

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. 

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.

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