U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 000-52102

LFTD PARTNERS INC.

(Exact name of registrant as specified in its charter)

Nevada

87-0479286

(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification Number)

14155 Pine Island Drive, Jacksonville, FL 32224

(Address of principal executive offices)

(847) 915-2446

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 of the Act:

Common Stock, $0.001 par value		LIFD		None
Title of each class		Trading symbol(s)		Name of exchange on which registered

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November ~~11, 2022,~~10, 2023, there were ~~14,102,578~~14,805,678 shares of the registrant’s common stock outstanding.

LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.

TABLE OF CONTENTS

~~Part~~PART I — FINANCIAL INFORMATION
Item 1.	Financial ~~Information~~Statements			F-1
~~Item 1. Financial Statements~~		~~F-1~~
Consolidated Balance Sheets, September 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022 (Audited)			F-1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 ~~and 2021~~ (Unaudited)			F-2
	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 ~~and 2021~~ (Unaudited)			F-3
	Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 ~~and 2021~~ (Unaudited)			F-4
	Notes to the Consolidated Financial Statements (Unaudited)			F-5
Item 2.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations			3
Item 3.	Quantitative And Qualitative Disclosures About Market Risk		7	9
Item 4.	Controls And Procedures		7	9
PART II — OTHER INFORMATION					9
Item 1.	Legal Proceedings.		9	11
Item 1A.	Risk Factors.		9	11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		9	14
Item 3.	Defaults Upon Senior Securities.		11	14
Item 4.	Mine Safety Disclosures.		11	14
Item 5.	Other Information.		11	14
Item 6.	Exhibits		12	15
	SIGNATURES		13	16

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.	LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.							LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS							CONSOLIDATED BALANCE SHEETS

		September 30, 2022 (Unaudited)			December 31, 2021				September 30, 2023 (Unaudited)			December 31, 2022 (Audited)
ASSETS
Current Assets
Cash and Cash Equivalents		$	4,350,959		$	1,602,731			$	3,081,393		$	3,530,623
Dividend Receivable from Bendistillery, Inc.			-			2,495
Prepaid Expenses			1,946,318			4,262,237				1,066,975			1,668,961
Accounts Receivable, net of allowance of $128,589 in 2022 and $239,101 in 2021			1,967,391			3,461,499
Accounts Receivable, net of allowance of $166,503 in 2023 and $281,762 in 2022										3,728,002			2,410,327
Inventory			6,344,677			3,809,944				9,865,202			6,023,967
Income Tax Receivable										946,931			-
Current Portion of Settlement Asset										185,024			185,024
Other Current Assets			7,254			13,790				-			35,047
Total Current Assets			14,616,599			13,152,696				18,873,527			13,853,949
Goodwill			22,292,767			22,292,767				23,092,794			22,292,767
Investment in Ablis			399,200			399,200				399,200			399,200
Investment in Bendistillery and Bend Spirits			1,497,000			1,497,000				1,497,000			1,497,000
Net Deferred Tax Asset			666,852			331,551				-			87,422
Fixed Assets, less accumulated depreciation of $164,384 in 2022 and $77,967 in 2021			989,688			433,213
Intangible Assets, less accumulated amortization of $4,098 in 2022 and $3,058 in 2021			347			1,386
Security and State Licensing Deposits			25,600			6,900
Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $195,208 in 2022 and $252,876 in 2021			1,285,200			1,227,532
Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $71,554 in 2022 and $6,807 in 2021			525,942			76,412
Fixed Assets, less accumulated depreciation of $472,129 in 2023 and $209,143 in 2022										1,834,490			1,020,255
Security and State Licensing Deposits and Bonds										43,421			25,600
Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $238,408 in 2023 and $206,008 in 2022										1,242,000			1,274,400
Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $223,030 in 2023 and $100,892 in 2022										670,675			496,604
Debt Financing Costs										29,285			-
Non-Current Portion of Settlement Asset										46,256			185,024
Total Assets		$	42,299,196		$	39,418,657			$	47,728,647		$	41,132,221
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Finance Lease Liability		$	(26,079	)	$	1,262,260			$	1,376,595		$	1,357,524
Operating Lease Liability			115,010			26,047				172,834			117,719
Deferred Revenue			784,047			2,174,393				1,243,128			594,086
Minimum Earnout Consideration to be paid pursuant to the Oculus Merger Agreement ($200,000 in cash, and $800,000 in the form of 160,000 shares of common stock valued at $5.00 per share)										1,000,000			-
Income Tax Payable			509,127			1,242,974				-			77,641
Management Bonuses Payable - Related Party
Management Bonus Payable - Related Party - Payable to William C. Jacobs			-			500,000
Management Bonus Payable - Related Party - Payable to Gerard M. Jacobs			-			441,562
Management Bonuses Payable - Related Party			-			941,562
Company-Wide Management Bonus Pool			-			1,556,055
Collab Commissions and Royalties Payable										629,552			-
Accounts Payable and Accrued Expenses			5,168,054			4,671,382				3,768,038			4,049,897
Accounts Payable - Related Party			16,101			4,607				1,720			2,229
Interest Payable - Related Party
Interest - Payable to William C. Jacobs			-			4,000
Interest - Payable to Gerard M. Jacobs			-			9,269
Interest Payable - Related Party			-			13,269
Preferred Stock Dividends Payable
Series A Convertible Preferred Stock Dividends Payable			5,838			11,926
Series B Convertible Preferred Stock Dividends Payable			1,783			1,796
Preferred Stock Dividends Payable			7,621			13,722				5,221			11,036
Total Current Liabilities		$	6,573,881		$	11,906,270			$	8,197,089		$	6,210,133
Non-Current Liabilities
Finance Lease Liability			1,376,439			-
Operating Lease Liability			414,875			50,583				501,625			384,417
Net Deferred Tax Liability			-			-				232,161			-
Total Non-Current Liabilities		$	1,791,314		$	50,583			$	733,786		$	384,417
Total Liabilities		$	8,365,195		$	11,956,853			$	8,930,874		$	6,594,549
Commitments and Contingencies			-			-				-			-
Shareholders' Equity
Preferred Stock, $0.001 par value; 10,000,000 total shares authorized; out of which 400,000 shares of Series A Convertible Preferred Stock are authorized, and 4,500 shares of Series A Convertible Preferred Stock shares were issued and outstanding at September 30, 2022, and 5,750 shares of Series A Convertible Preferred Stock shares were issued and outstanding at December 31, 2021; and out of which 5,000,000 shares of Series B Convertible Preferred Stock are authorized, and 40,000 shares of Series B Convertible Preferred Stock shares were issued and outstanding at September 30, 2022, and 40,000 shares of Series B Convertible Preferred Stock shares were issued and outstanding at December 31, 2021			45			46
Common Stock, $0.001 par value; 100,000,000 shares authorized; 14,102,578 shares issued and outstanding at September 30, 2022, and 14,027,578 shares issued and outstanding at December 31, 2021			14,103			14,028
Preferred Stock, $0.001 par value; 10,000,000 total shares authorized; out of which two Series of Preferred Stock are authorized and outstanding, as follows:
Series A Convertible Preferred Stock: 400,000 shares authorized, and:										3			5
2,500 shares issued and outstanding at September 30, 2023
4,500 shares issued and outstanding at December 31, 2022
Series B Convertible Preferred Stock: 5,000,000 shares authorized, and:										40			40
40,000 shares issued and outstanding at September 30, 2023
40,000 shares issued and outstanding at December 31, 2022
Common Stock, $0.001 par value; 100,000,000 shares authorized, and:										14,806			14,103
14,805,678 shares issued and outstanding at September 30, 2023
14,102,578 shares issued and outstanding at December 31, 2022
Additional Paid-in Capital			38,762,260			38,862,333				40,429,213			38,762,260
142,000 shares of Deferred Contingent Stock issuable upon instruction by the respective Deferred Contingent Stock Recipients at September 30, 2023; no shares of Deferred Contingent Stock issuable at December 31, 2022										470,730			-
Accumulated Deficit			(4,842,407	)		(11,414,602	)			(2,117,018	)		(4,238,735	)
Total Shareholders' Equity			33,934,000			27,461,804				38,797,773			34,537,671
Total Liabilities and Shareholders' Equity		$	42,299,196		$	39,418,657			$	47,728,647		$	41,132,221

Please see the accompanying notes to the consolidated financial statements for more information.

F-1

Table of Contents

LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.	LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.													LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS	CONSOLIDATED STATEMENTS OF OPERATIONS													CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)	(UNAUDITED)													(UNAUDITED)

		For the Three Months Ended						For the Nine Months Ended							For the Three Months Ended						For the Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2022			2021			2022			2021				2023			2022			2023			2022
Net Sales		$	11,237,277		$	8,820,952		$	46,102,656		$	18,869,366			$	13,106,280		$	11,237,277		$	38,090,615		$	46,102,656
Cost of Goods Sold			10,423,533			4,720,057			29,241,016			9,463,210				8,684,277			10,423,533			22,383,810			29,241,016
Gross Profit			813,744			4,100,895			16,861,640			9,406,156				4,422,003			813,744			15,706,805			16,861,640
Operating Expenses:
Payroll, Consulting and Independent Contractor Expenses			1,482,455			803,796			5,148,284			1,902,320
Accrual for Company-Wide Management Bonus Pool			(2,121,532	)		400,000			-			1,559,335
Deferred Contingent Stock Expense																-			-			2,138,175			-
Payroll Expenses																1,710,806			1,482,455			5,363,633			5,148,284
Company-Wide Management Bonus Pool																-			(2,121,532	)		233,332			-
Professional Fees			143,180			139,526			463,809			366,452				264,898			143,180			870,042			463,809
Bank Charges and Merchant Fees			106,845			104,485			372,351			289,111				148,411			106,845			425,961			372,351
Advertising and Marketing			334,215			86,438			550,612			236,598				184,432			334,215			663,181			550,612
Bad Debt (Income)/Expense			(11,898	)		61,449			(75,107	)		81,621
Bad Debt Income/(Expense)																(82,935	)		(11,898	)		138,565			(75,107	)
Depreciation and Amortization			7,793			16,344			17,202			84,342				48,332			7,793			131,454			17,202
Collab Commission and Royalty Expense																846,714			-			846,714			-
Other Operating Expenses			377,416			170,820			1,288,486			350,985				641,806			377,416			1,968,419			1,288,486
Total Operating Expenses			318,474			1,782,858			7,765,637			4,870,764				3,762,464			318,474			12,779,476			7,765,637
Income From Operations			495,270			2,318,037			9,096,003			4,535,392				659,539			495,270			2,927,329			9,096,003
Other Income/(Expenses)
Income/(Loss) From 50% membership interest in SmplyLifted LLC (FR3SH)			-			(44,858	)		-			(95,399	)
Income from SmplyLifted for WCJ Labor			-			313			-			2,154
Interest Expense			(37,181	)		(35,368	)		(95,839	)		(107,113	)			(23,986	)		(37,181	)		(72,537	)		(95,839	)
Warehouse Buildout Credits			-			-			-			1,200
Debt Financing Expenses																(60,000	)		-			(60,000	)		-
Dividend Income																1,193			-			2,386			-
Penalties			(4,461	)		(2,162	)		(6,191	)		(2,612	)			105			(4,461	)		(11,587	)		(6,191	)
Gain on Forgiveness of Debt			-			-			5,026			151,147				-			-			-			5,026
Settlement Income/Gain on Settlement			-			-			108,570			-
Gain(Loss) on Disposal of Fixed Assets			(8,243	)		-			(8,243	)		(4,750	)
Loss on Deposits			-			-			-			(30,000	)
Settlement Income																-			-			-			108,570
Gain/(Loss) on Disposal of Fixed Assets																-			(8,243	)		-			(8,243	)
Interest Income			2,127			217			3,139			671				2,221			2,127			27,697			3,139
Total Other Income/(Expenses)			(47,758	)		(81,859	)		6,462			(84,702	)			(80,467	)		(47,758	)		(114,041	)		6,462
Income Before Provision for Income Taxes			447,513			2,236,178			9,102,465			4,450,690				579,072			447,513			2,813,288			9,102,465
Provision for Income Taxes			(24,027	)		-			(2,514,726	)		-				38,576			(24,027	)		(677,921	)		(2,514,726	)
Net Income Attributable to LFTD Partners Inc. common stockholders		$	423,486		$	2,236,178		$	6,587,739		$	4,450,690			$	617,648		$	423,486		$	2,135,367		$	6,587,739

Basic Net Income per Common Share		$	0.03		$	0.17		$	0.47		$	0.42			$	0.04		$	0.03		$	0.15		$	0.47
Diluted Net Income per Common Share		$	0.03		$	0.14		$	0.41		$	0.32			$	0.04		$	0.03		$	0.14		$	0.41

Weighted average number of common shares outstanding:
Basic			14,102,578			13,015,717			14,073,366			10,525,461				14,648,874			14,102,578			14,470,895			14,073,366
Diluted			15,884,776			16,257,915			15,855,564			13,767,659				15,356,374			15,884,776			15,178,395			15,855,564

Please see the accompanying notes to the consolidated financial statements for more information.

F-2

Table of Contents

LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.	LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.																												LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)																													CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)	(UNAUDITED)																												(UNAUDITED)

																				Additional						Total																				Additional			Deferred Contingent Stock						Total
		Preferred Stock						Common Stock						Treasury Stock						Paid-in			Accumulated			Shareholders'				Preferred Stock						Common Stock						Treasury Stock				Paid-in			to be			Accumulated			Shareholders'
		Shares			Amount			Shares			Amount			Shares			Amount			Capital			Deficit			Equity
Balance, December 31, 2020			166,150		$	166			6,485,236		$	6,485			36,000		$	(34,200	)	$	38,787,444		$	(17,141,175	)	$	21,618,720
Series A Preferred Stock dividend payable																							$	(24,855	)	$	(24,855	)
Series B Preferred Stock dividend payable																							$	(3,316	)	$	(3,316	)
LIFD's January 8, 2021 purchase of 36,000 shares of common stock at $0.95 per share, for a total of $34,200, from an unrelated shareholder															36,000		$	(34,200	)							$	(34,200	)
Conversions of Series A Convertible Preferred Stock to Common Stock			(32,900	)	$	(33	)		3,290,000			3,290									(3,257	)					-
Conversions of Series B Convertible Preferred Stock to Common Stock			(60,000	)	$	(60	)		60,000			60														$	-
Net Income																							$	618,359		$	618,359
Balance, March 31, 2021			73,250		$	73			9,835,236		$	9,835			72,000		$	(68,400	)	$	38,784,187		$	(16,550,988	)	$	22,174,708
Series A Preferred Stock dividend payable																								(33,521	)		(33,521	)
Series B Preferred Stock dividend payable																								(1,496	)		(1,496	)
Exercise of warrants									143,090			143									6,878						7,021
Conversions of Series A Convertible Preferred Stock to Common Stock			(27,500	)		(28	)		2,750,000			2,750									(2,723	)					-
Net Income																								1,596,154			1,596,154
Balance, June 30, 2021			45,750		$	46			12,728,326		$	12,728			72,000		$	(68,400	)	$	38,788,342		$	(14,989,850	)	$	23,742,866
Series A Preferred Stock dividend payable																								(2,829	)		(2,829	)
Series B Preferred Stock dividend payable																								(1,533	)		(1,533	)
Cancellation of Common Stock held in treasury									(72,000	)		(72	)		(72,000	)	$	68,400			(68,328	)					-
Exercise of warrants and options									1,346,250			1,346									142,093						143,439
Net Income																								2,236,179			2,236,178
Balance, September 30, 2021			45,750		$	46			14,002,576		$	14,002			-		$	-		$	38,862,107		$	(12,758,033	)	$	26,118,122
																														Shares			Amount			Shares			Amount			Shares		Amount		Capital			Issued			Deficit			Equity
Balance, December 31, 2021			45,750		$	46			14,027,576		$	14,028			-		$	-		$	38,862,333		$	(11,414,602	)	$	27,461,804				45,750		$	46			14,027,578		$	14,028			-	$	-	$	38,862,333		$	-		$	(11,414,602	)	$	27,461,804
Series A Preferred Stock dividend payable																								(4,253	)		(4,253	)																									(4,253	)		(4,253	)
Series B Preferred Stock dividend payable																								(1,476	)		(1,476	)																									(1,476	)		(1,476	)
Issuance of Common Stock Upon Exercise of Warrant									50,000			50									49,950						50,000										50,000			50							49,950									50,000
Repurchase and cancellation of Common Stock									(100,000	)		(100	)								(149,900	)					(150,000	)									(100,000	)		(100	)						(149,900	)								(150,000	)
Net Income																								2,944,793			2,944,793																										2,944,793			2,944,793
Balance, March 31, 2022			45,750		$	46			13,977,576		$	13,978			-		$	-		$	38,762,383		$	(8,475,539	)	$	30,300,868				45,750		$	46			13,977,578		$	13,978			-	$	-	$	38,762,383		$	-		$	(8,475,539	)	$	30,300,868
Series A Preferred Stock dividend payable																								(3,403	)		(3,403	)																									(3,403	)		(3,403	)
Series B Preferred Stock dividend payable																								(1,496	)		(1,496	)																									(1,496	)		(1,496	)
Conversions of Series A Convertible Preferred Stock to Common Stock			(1,250	)		(1	)		125,000			125									(124	)					-				(1,250	)		(1	)		125,000			125							(124	)								-
Issuance of Common Stock																																																								-
Repurchase and cancellation of Common Stock																																																								-
Net Income																								3,219,460			3,219,460																										3,219,460			3,219,460
Balance, June 30, 2022			44,500		$	45			14,102,576		$	14,103			-		$	-		$	38,762,260		$	(5,260,978	)	$	33,515,429				44,500		$	45			14,102,578			14,103			-	$	-	$	38,762,260		$	-		$	(5,260,978	)	$	33,515,429
Series A Preferred Stock dividend payable																								(3,402	)		(3,402	)																									(3,402	)		(3,402	)
Series B Preferred Stock dividend payable																								(1,512	)		(1,512	)																									(1,512	)		(1,512	)
Net Income																								423,486			423,486																										423,486			423,486
Balance, September 30, 2022			44,500		$	45			14,102,576		$	14,103			-		$	-		$	38,762,260		$	(4,842,407	)	$	33,934,000				44,500		$	45			14,102,578			14,103			-	$	-	$	38,762,260		$	-		$	(4,842,407	)	$	33,934,000

Balance, December 31, 2022																															44,500		$	45			14,102,578		$	14,103			-	$	-	$	38,762,260					$	(4,238,735	)	$	34,537,671
Issuance of 410,000 of the total 645,000 shares of Deferred Contingent Stock related to the acquisition of Lifted, of which shares began being issued on February 24, 2023 upon direction by the Deferred Contingent Stock Recipients																																					410,000			410						$	1,358,740		$	779,025						2,138,175
Series A Preferred Stock dividend payable																																																					(3,329	)		(3,329	)
Series B Preferred Stock dividend payable																																																					(1,480	)		(1,480	)
Net Loss																																																					(141,742	)		(141,742	)
Balance, March 31, 2023																															44,500		$	45			14,512,578		$	14,513			-	$	-	$	40,121,000		$	779,025		$	(4,385,286	)	$	36,529,296
Series A Preferred Stock dividend payable																																																					(3,366	)		(3,366	)
Series B Preferred Stock dividend payable																																																					(1,497	)		(1,497	)
Issuance of 100 shares of common stock pursuant to the Oculus Merger Agreement																																					100			0.10							208.90									209
Net Income																																																					1,659,461			1,659,461
Balance, June 30, 2023																															44,500		$	45			14,512,678		$	14,513		$	-	$	-	$	40,121,209		$	779,025		$	(2,730,688	)	$	38,184,103
Series A Preferred Stock dividend payable																																																					(2,466	)		(2,466	)
Series B Preferred Stock dividend payable																																																					(1,512	)		(1,512	)
Conversion of 2,000 shares of Series A Preferred Stock held by a non-affiliate into 200,000 shares of common stock, on August 4, 2023																															(2,000	)		(2	)		200,000			200							(198	)								-
Issuance of 93,000 shares of Deferred Contingent Stock related to the acquisition of Lifted, of which shares began being issued on February 24, 2023 upon direction by the Deferred Contingent Stock Recipient																																					93,000			93							308,202			(308,295	)					-
Net Income																																																					617,648			617,648
Balance, September 30, 2023																															42,500		$	43			14,805,678		$	14,806		$	-	$	-	$	40,429,213		$	470,730		$	(2,117,018	)	$	38,797,773

Please see the accompanying notes to the consolidated financial statements for more information

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LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.	LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.							LFTD PARTNERS INC. AND SUBSIDIARY LIFTED LIQUIDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS							CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)	(UNAUDITED)							(UNAUDITED)

		For the Nine Months Ended							For the Nine Months Ended
		September 30,							September 30,
		2022			2021				2023			2022
Cash Flows From Operating Activities
Net Income		$	6,587,739		$	4,450,690			$	2,135,367		$	6,587,739
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Lifted Made's Portion of SmplyLifted's Net Loss			-			95,399
Bad Debt (Income)/Expense			(75,107	)		81,621
Deferred Contingent Stock Compensation Expense										2,138,175			-
Bad Debt Expense										138,565			(75,107	)
Depreciation and Amortization			128,176			100,435				295,386			128,176
Gain on Forgiveness of Debt			(5,026	)		(151,147	)			-			(5,026	)
Loss (Gain) on Disposal of Fixed Assets			8,243			4,750
Loss on Deposits			-			30,000
Loss on Disposal of Fixed Assets										-			8,243
Spoiled and Written Off Inventory			3,279,262			234,351				771,355			3,279,262
Sales Allowance			841,269			-
Sales Allowances										(603,710	)		841,269
Deferred Income Taxes			(335,301	)		-				319,583			(335,301	)
Effect on Cash of Changes in Operating Assets and Liabilities
Accounts Receivable			727,946			(598,935	)			(792,002	)		727,946
Prepaid Expenses			2,315,918			(190,737	)			601,986			2,315,918
Dividend Receivable from Bendistillery, Inc.			2,495			2,495				-			2,495
Income Tax Receivable and Payable			(733,847	)		2,715
Income Tax Payable										(1,024,573	)		(733,847	)
Management Bonuses Payable			(941,562	)		(50,000	)			-			(941,562	)
Company-wide Management Bonus Pool			(1,556,055	)		1,559,335				-			(1,556,055	)
Interest Receivable			-			1,676
Inventory			(5,813,995	)		(1,690,562	)			(4,465,159	)		(5,813,995	)
Other Current Assets			(12,161	)		(9,475	)			21,956			(12,161	)
Collab Commissions and Royalties Payable										629,552			-
Trade Accounts Payable and Accrued Expenses			501,698			827,789				(281,860	)		501,698
Accounts Payable and Interest Payable to Related Parties			(1,774	)		65,897				(509	)		(1,774	)
Change in ROU Asset			(28,394	)		-
Change in Settlement Asset										138,768			-
Change in Right Of Use Asset										122,138			(28,394	)
Change in Finance & Operating Lease Liabilities			37,418			4,442				(51,060	)		37,418
Deferred Revenue			(1,390,346	)		(420,381	)			649,042			(1,390,346	)
Net Cash Provided by Operating Activities			3,536,595			4,350,358				743,001			3,536,595
Cash Flows From Investing Activities
Reduction of CBD Lion Note Receivable			-			15,318
Net Cash Paid as Part of the Oculus Transaction										(342,068	)		-
Net Purchase of Fixed Assets			(656,381	)		(288,332	)			(747,662	)		(656,381	)
Loans to SmplyLifted LLC			-			(93,750	)
Net Cash Used in Investing Activities			(656,381	)		(366,764	)			(1,089,730	)		(656,381	)
Cash Flows From Financing Activities
Proceeds from Exercise of Warrants			-			142,024
Issuance of Common Stock			50,000			-				-			50,000
Payments of Dividends to Series A Convertible Preferred Stockholders			(17,147	)		(199,188	)			(14,962	)		(17,147	)
Payments of Dividends to Series B Convertible Preferred Stockholders			(4,500	)		(10,344	)			(4,500	)		(4,500	)
Financing Cost - Net Proceeds from Borrowing Under Notes Payable to Related Party - Nick Warrender			1,833,334			-
Financing Cost - Repayment of Borrowings Under Notes Payable to Related Party - Nick Warrender			(1,833,334	)		-
Payment of Debt Financing Costs										(29,285	)		-
Proceeds from Borrowings Under Notes Payable to Related Party - Nick Warrender										-			2,750,000
Repayment of Borrowings Under Notes Payable to Related Party - Nick Warrender										-			(2,750,000	)
Purchase of Shares of Common Stock			(150,000	)		(34,200	)			-			(150,000	)
Repayment of Finance Lease Liability			(10,340	)		(16,386	)
Payments on Finance Lease Liability										(53,754	)		(10,340	)
Net Cash Used In Financing Activities			(131,987	)		(118,094	)			(102,501	)		(131,987	)
Net Increase in Cash			2,748,228			3,865,500
Net Increase/(Decrease) in Cash										(449,230	)		2,748,228
Cash and Cash Equivalents at Beginning of Period			1,602,731			439,080				3,530,623			1,602,731
Cash and Cash Equivalents at End of Period		$	4,350,959		$	4,304,580			$	3,081,393			4,350,959

		For the Nine Months Ended							For the Nine Months Ended
		September 30,							September 30,
		2022			2021				2023			2022
Supplemental Cash Flow Information
Supplemental Cash Flow Information:
Cash Paid For Interest		$	61,257		$	-			$	72,537		$	61,257
Cash Paid for Interest - Related Party		$	47,851		$	-
Cash Paid For Interest - Related Party									$	-		$	47,851
Cash Paid For Income Taxes		$	3,526,509		$	-			$	1,342,111		$	3,526,509

Non-Cash Activities:
Right-of-Use assets acquired from inception of Finance Leases		$	-		$	1,480,408
Right-of-Use assets acquired from inception of Operating Leases		$	514,278		$	-			$	296,209		$	514,278
Conversion of Series A and Series B Preferred Stock to Common Stock		$	125		$	6,100			$	200		$	125
Cashless exercise of Warrants		$	-		$	136
Cancellation of Common Stock held in Treasury		$	-		$	68,400
Reduction in bonus payable to Gerard M. Jacobs by the cost of exercising warrants		$	-		$	8,439

Please see the accompanying notes to the consolidated financial statements for more information.

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LFTD ~~Partners Inc.~~PARTNERS INC.

~~Notes to the Consolidated Financial Statements~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

~~Description of the Business of LFTD Partners Inc.~~– LFTD Partners Inc. (hereinafter sometimes referred to as “LFTD Partners”, the “Company”, “LIFD”, the “Company”, “we”, “us”, “our”, etc.) was organized under the laws of the State of Nevada on January 2, 1986. Shares of the Company’s common stock are traded on the OTCQB Venture Market under the trading symbol LIFD.

On May 18, 2021, the Company changed its name to LFTD Partners Inc. from Acquired Sales Corp. On March 15, 2022, the Company changed its stock trading symbol to LIFD.

After acquiring, operating and then selling businesses involved in the defense sector, our business is currently directly or indirectly involved in ~~developing, manufacturing and selling~~the development, manufacture and/or sale or re-sale of a wide variety of branded, hemp-derived, psychoactive and alternative lifestyle products, ~~containing hemp-derived cannabinoids~~ and ~~non-hemp-derived psychedelic products.~~ of products involving, nicotine, tobacco and marijuana.

We are primarily interested in acquiring rapidly growing, profitable companies that are also involved in ~~manufacturing and selling branded products containing hemp-derived cannabinoids, and in acquiring companies that~~the manufacture and ~~sell~~sale of branded, ~~products containing kratom, kava~~hemp-derived, psychoactive and ~~non-hemp-derived psychedelic~~alternative lifestyle products (a “Canna-Infused Products Company”).

Management of the Company is open-minded to the concept of also acquiring operating businesses and/or assets directly or indirectly involving products containing nicotine, tobacco, marijuana, distilled spirits, beer, wine, ~~and~~and/or real estate. In addition, management of the Company is open-minded to the concept of diversifying, by acquiring all or a portion of one or more operating businesses and/or assets that are considered to be “essential” businesses which are unlikely to be shut down by the government during pandemics such as ~~COVID-19. We are currently engaged in discussions with potential acquisition targets, both within and outside the hemp-derived cannabinoid industry.~~COVID-19, or that have less regulatory risk than a Canna-Infused Products Company.

Lifted Made

On February 24, 2020, we acquired 100% of the ownership interests in one Canna-Infused Products Company called Lifted Liquids, Inc. d/b/a Lifted Made ~~(formerly Warrender Enterprise Inc.~~and d/b/a ~~Lifted Liquids) (www.LiftedMade.com)~~Urb Finest Flowers (www.urb.shop), Kenosha, Wisconsin (“Lifted Made” or “Lifted”). Lifted manufactures and sells hemp-derived and psychoactive products under its award-winning Urb Finest Flowers (“Urb”) and Silly Shruum brands. Products currently sold by Lifted include, for example: disposable vapes, cartridges and gummies containing hemp-derived cannabinoids; joints and blunts containing various strains of hemp flower; gummies containing various ingredients such as muscimol, mushroom extracts, and kanna; and kava.

Cali Sweets Agreement

On January 11, 2023, Lifted entered into a Manufacturing Sales and Marketing Agreement (“Cali Agreement”) with Cali Sweets, LLC (“Cali”). Cali is headquartered in North Hollywood, California, and currently sells products under the brand name Koko Nuggz. The Cali Agreement entitles Lifted to be the exclusive worldwide manufacturer and distributor of Cali’s disposable vape products (under the brand name Koko Puffz) and gummy products (under the brand name Koko Yummiez) (“Cali Products”).

Pursuant to the Cali Agreement, Lifted manufactures, markets, and distributes certain Cali Products and brands worldwide. Lifted and Cali equally share certain production and marketing costs associated with such Cali Products on a dollar-for-dollar basis. Revenue from the sale of such Cali Products are divided on a 60/40 basis, net of any returns, discounts, or replacements, with 60% allocated to Lifted, and the remaining 40% to Cali.

Under the terms of the Cali Agreement, Lifted has the right, in its discretion, to add new Cali brands and Cali Products as they are developed. Lifted can also set prices for Cali Products it supplies or unilaterally discontinue the supply of any Cali product if it no longer makes business sense to Lifted. The parties also agreed that Cali will provide social media marketing services for both Cali Products and brands, and for Lifted’s Urb branded products.

The term of the Cali Agreement is five years and may be extended with the mutual consent of the parties. However, after the initial 24 months, the Cali Agreement may be terminated by either party, for any or no reason, upon providing the other party with 180 days written notice. Cali may become subject to early exit payments to Lifted if it early terminates. The exit fee formula is based on estimated profits that Lifted may have enjoyed had Cali not early terminated the relationship.

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For information regarding the accounting for the Cali Agreement: please refer to the “Revenue” section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES.

Manufacturing, Sales and Marketing Agreement With Diamond Supply Co.

On April 23, 2023, Lifted entered into a Manufacturing, Sales and Marketing Agreement (“Diamond Agreement”) with Diamond Supply Co. (“Diamond”), Calabasas, California. Founded in 1998, Diamond develops and sells a full range of skateboard hard and soft goods including bolts, bearings, t-shirts, hoodies, and other skateboarding and streetwear accessories. The Diamond Agreement entitles Lifted to be the exclusive worldwide manufacturer and distributor of Diamond’s disposable vapes, gummies, pre-rolled joints, and hard candies (“Diamond Products”). These Diamond Products may contain CBD, hemp, delta-8-THC, delta-10-THC, cannabis and/or cannabinoid derivatives and are to be branded under one or more of Diamond’s brands or marks.

Lifted shall pay Diamond a royalty of twenty percent (20%) of Adjusted Gross Revenue (defined below) on the initial manufacturing run of each Diamond Product manufactured and sold by Lifted Made under the Diamond Agreement. The Diamond Agreement defines Adjusted Gross Revenue as revenue on the Diamond Product “less any sales taxes, actual returns, pre-approved discounts, replacements, refunds and credits for returns.”

After the initial manufacturing run of a Diamond Product, Lifted shall pay Diamond a royalty of forty five percent (45%) of Adjusted Gross Revenue on subsequent manufacturing runs for that Diamond Product; however, under the terms of the Diamond Agreement, the parties will split manufacturing costs 50/50 for Diamond Products sold after each Diamond Product’s first manufacturing run. Alternatively, under the terms of the Diamond Agreement, Diamond is entitled to notify Lifted that it elects to be paid a flat 7% of Adjusted Gross Revenue on specific subsequent manufacturing runs without sharing in the manufacturing costs for that run. Diamond is also entitled to purchase Diamond Products produced under the Diamond Agreement from Lifted for direct sale on Diamond’s website and via certain other channels used by Diamond. Under the terms of the Diamond Agreement, Diamond’s cost for these Diamond Products acquired for direct sale is 30% below wholesale.

Under the terms of the Diamond Agreement, the parties will together set prices for Diamond Products. The term of the Agreement is three years and may be extended with the mutual consent of the parties. However, the Diamond Agreement may be extended for one-year with notice by Diamond at least three months prior to the end of the 3-year term, or by mutual consent of the parties. If Lifted pays to Diamond aggregate annual royalty payments of at least $1,000,000 per year, then the Diamond Agreement shall automatically renew for an additional one-year term.

For information regarding the accounting for the Diamond Agreement: please refer to the “Revenue” section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES.

Lifted Purchase of Assets of Oculus CRS, LLC, and Merger With Oculus CHS Management Corp.

Asset Purchase Agreement

On April 28, 2023, Lifted purchased nearly all of the assets (the “Purchased Assets”) of its hemp flower products supplier Oculus CRS, LLC, Aztec, New Mexico (“Oculus”) for $342,068, net of $26,420 cash acquired. The Purchased Assets include, but are not limited to, Oculus’ operational equipment, office equipment, raw materials, inventory, cash on hand, accounts receivable, and a contract (the “Machine Purchase Contract”) to purchase, for a total of $309,213 (the “Machine Purchase Price”), a new machine that is ready for delivery, and that when delivered and installed will be used to automate a substantial portion of the manufacturing of the hemp flower products. $99,910 of the Machine Purchase Price had already been paid by Oculus, leaving $209,303 as the remaining portion of the Machine Purchase Price (the “Machine Purchase Final Payment”).

The gross Purchase Price of $368,488 purchase was paid by Lifted using cash on hand. At the closing, Oculus applied the entire Purchase Price to pay off all of Oculus’ liabilities as of the closing date (the “Oculus Liabilities”), including the Machine Purchase Final Payment. The only asset of Oculus that was not included in the Purchased Assets was Oculus’ rights as the plaintiff in a pending lawsuit filed by Oculus against a particular customer for an alleged breach of contract.

Agreement and Plan of Merger

Simultaneously with Lifted’s purchase of the Purchased Assets, Lifted executed an Agreement and Plan of Merger (“Oculus Merger Agreement”) with Oculus CHS Management Corp. (the “Management Corp.”), pursuant to which the Management Corp. was merged with and into Lifted, with Lifted being the surviving corporation in the merger (the “Merger”). The only assets of the Management Corp. were multi-year employment contracts with the owners/managers of Oculus, Chase and Hagan Sanchez (the “Employment Agreements”).

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The Merger consideration (the “Merger Consideration”) will be paid by Lifted to Chase and Hagan Sanchez in two installments.

The first installment of the Merger Consideration was paid by Lifted to Chase and Hagan Sanchez at the closing of the Merger, and consisted of 100 shares of unregistered common stock of LIFD.

The second installment of the Merger Consideration will be paid by Lifted to Chase and Hagan Sanchez following the first anniversary of the closing of the Merger which will be April 28, 2024. The second installment of the Oculus Merger Agreement will be calculated and paid out as follows:

(1) Lifted’s CEO Nicholas S. Warrender (“NWarrender”), in consultation with LIFD’s President and CFO William C. “Jake” Jacobs (“WJacobs”), will analyze and make a written determination (the “Determination”) of the incremental pre-tax cash flow that NWarrender estimates that the hemp flower products division is generating for Lifted above and beyond the annual profits that are currently being generated for Lifted due to Lifted’s current business relationship with Oculus (the “Incremental Pre-Tax Profits”), after taking into account all relevant financial factors including but not limited to the purchase price of the Purchased Assets, the merger consideration, and all items of income, expense and investment directly and indirectly associated with Lifted’s hemp flower products division, which Determination will be final and legally binding on all of the parties; and

(2) Within five days following delivery of the Determination, Lifted will pay Chase and Hagan Sanchez a second installment of Merger consideration equal to five times the Incremental Pre-Tax Profits, provided that (a) 20% of such second installment of Merger consideration shall be paid in the form of cash, (b) 80% of such second installment of Merger consideration shall be paid in the form of unregistered shares of common stock of LIFD, which unregistered shares of common stock of LIFD shall be valued at $5 per share regardless of whether LIFD’s common stock is then trading at a price that is lower or higher than $5 per share, and (c) such second installment of Merger consideration shall be subject to a minimum value of $1 million dollars (“Minimum Earnout Consideration”) and a maximum value of $6 million dollars (with the stock portion of the second installment of Merger consideration being valued at $5 per share under all circumstances).

As examples, for illustrative purposes only:

	(a)	If, according to NWarrender’s Determination, the Incremental Pre-Tax Profits of Lifted being generated by the business is $500,000, then the second installment of the Merger Consideration would be calculated as $500,000 X 5 = $2,500,000, of which ($2,500,000 X .2) = $500,000 would be in the form of cash, and the remaining $2,000,000 would be paid in the form of ($2,000,000/$5) = 400,000 newly issued shares of unregistered LIFD Common Stock;

	(b)	If, according to NWarrender’s Determination, the Incremental Pre-Tax Profits of Lifted being generated by the business is $25,000, then the second installment of the Merger Consideration would be the Minimum Earnout Consideration of $1,000,000, of which ($1,000,000 X .2) = $200,000 would be in the form of cash, and the remaining $800,000 would be paid in the form of ($800,000/$5) = 160,000 newly issued shares of unregistered LIFD Common Stock; and

	(c)	If, according to NWarrender’s Determination, the Incremental Pre-Tax Profits of Lifted being generated by the business is $2,000,000, then the second installment of the Merger Consideration would be the maximum of $6,000,000, of which ($6,000,000 X .2) = $1,200,000 would be in the form of cash, and the remaining $4,800,000 would be paid in the form of ($4,800,000/$5) = 960,000 newly issued shares of unregistered LIFD Common Stock.

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Accounting for Lifted’s Purchase of Assets of Oculus CRS, LLC, and Merger With Oculus CHS Management Corp.

Consideration Paid Pursuant to the Asset Purchase Agreement

Cash used to pay off Oculus' liabilities at the closing

$ 368,488

Consideration Paid Pursuant to the Oculus Merger Agreement

First Installment of Merger Consideration

100 shares of common stock of LIFD issued at the closing of the Merger to Chase and Hagan Sanchez

$ 209

Second Installment of Merger Consideration

Value of Minimum Earnout Consideration to be paid in cash

$ 200,000

Value of Minimum Earnout Consideration to be paid in shares of common stock of LIFD (160,000 shares of common stock valued at $5.00 per share)

$ 800,000

Total Consideration

$ 1,368,697

Assets Acquired:

Cash

$ 26,420

Accounts receivable

$ 60,528

Inventory

$ 147,431

Fixed Assets

$ 329,559

Security and Utility Deposits

$ 4,732

Goodwill

$ 800,027

Total Assets Acquired

$ 1,368,697

Total Liabilities Assumed

$ -

Net Assets Acquired

$ 1,368,697

Employment Agreements
Pursuant to the terms of the Oculus Merger Agreement, upon the closing of the Merger, all of the Management Corp.’s rights and obligations under the Employment Agreements have been assumed by Lifted. Chase and Hagan Sanchez are now the Vice President of Flower and General Manager of Flower of Lifted, respectively, and will continue to manage the hemp flower products business in Aztec, NM, which will operate as a hemp flower products division within Lifted, reporting to NWarrender, Lifted’s CEO. Pursuant to Chase Sanchez’s employment agreement, his salary is $150,000 per year. Hagan Sanchez’s salary is $100,000 per year. Both agreements are subject to termination with or without cause, non-solicitation, non-competition and non-disclosure clauses.
In addition to Chase and Hagan Sanchez, a total of 20 other people who previously worked at Oculus have now transitioned to become full-time employees of Lifted. Lifted has agreed to pay employment bonuses to certain of these new people, in an aggregate amount totaling $50,000, pursuant to written instructions to Lifted from Chase and Hagan Sanchez.
Lease Agreement – Aztec, New Mexico
Pursuant to the terms of the Oculus Merger Agreement, upon the closing of the Merger, Lifted has assumed Oculus’ lease of office and operational space in Aztec, New Mexico. The leased premises includes a shop building of approximately 4,800 square feet and adjacent fenced parking area located at 16178 US Hwy 550, Aztec, San Juan County, New Mexico. The term of this lease shall be for a period of one (1) year, commencing on the 1st day of December 2022, and continuing in force until the 30th day of November, 2023, unless terminated earlier as provided in this lease. The lease payments are $3,850 per month. All monthly payments are due and payable in advance on the first day of each month. The lessee is also required to pay taxes, insurance and certain maintenance costs of the leased premises. The lease is accounted for as an operating lease.
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Jeeter Agreement
On July 17, 2023, Lifted and DreamFields Brands Inc. d/b/a Jeeter (“Jeeter”) entered a Manufacturing, Sales and Marketing Agreement dated as of July 14, 2023 (the “Jeeter Agreement”). Pursuant to the Jeeter Agreement: (1) Jeeter has appointed Lifted as its exclusive manufacturer, seller and distributor within the United States of vape, gummies and pre-rolled products containing hemp-derived cannabinoids sold under the Jeeter brand (“Jeeter Products”); (2) Jeeter and Lifted will agree upon the devices, formulation, design, packaging, run costs, and marketing of each of the Jeeter Products; (3) Jeeter and Lifted will share equally the costs of manufacturing, marketing, distributing and insuring the Jeeter Products (“Product Costs”); and (4) the revenue from all Product sales, minus applicable Product offsets and sales commissions (“Aggregate Product Revenue”), will be allocated 60% to Jeeter and 40% to Lifted.
The Jeeter Agreement is for an Initial Term of two years, provided that if the completed Product sales during the first year of the Initial Term are a minimum of $48 million (the “Minimum Sales”), then the Initial Term will automatically continue until the end of the second year of the Initial Term. Jeeter and Lifted may mutually agree in writing to extend the Jeeter Agreement for Renewal Terms of at least one year each, but if not so extended then the Jeeter Agreement will automatically terminate.
Jeeter may terminate the Jeeter Agreement at any time upon written notice to Lifted upon any of the following: (1) if Lifted fails to achieve the Minimum Sales during any 12 month period; (2) if there is any material change in federal legislation regarding the manufacturing, sale, use or consumption of hemp-derived delta-8-THC that in Jeeter’s sole and absolute determination has an adverse impact upon the Jeeter Agreement; or (3) if Jeeter determines in its sole and absolute discretion that the sale of Jeeter Products under the Jeeter Agreement has or is reasonably likely to have an adverse impact on Jeeter’s delta-9-THC product business.
The Jeeter Agreement provides that if Aggregate Product Revenue achieves $1.5 million or more in a single month, then thereafter so long as Aggregate Product Revenue achieves $9 million or more in each six month period, Lifted shall be prohibited from directly or indirectly manufacturing, marketing, distributing, promoting or selling pre-rolled joints made from hemp or cannabis in the United States (except under the Jeeter Agreement) during the remaining term of the Jeeter Agreement.
For information regarding the accounting for the Jeeter Agreement: please refer to the “Revenue” section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES.
Mirsky Agreement
On July 11, 2023, Lifted and Florence Mirsky (“Mirsky”) entered into an Agreement (the “Mirsky Agreement”). Pursuant to the Mirsky Agreement, in consideration of Mirsky’s introduction of Jeeter to Lifted, Lifted shall pay to Mirsky finder’s fees equal to 6.5% of the amount, if any, by which Lifted’s share of the Aggregate Product Revenue under the Jeeter Agreement exceeds Lifted’s share of the Product Costs under the Jeeter Agreement.
Extrax NM Agreement
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 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.
For information regarding the accounting for the ENM Agreement: please refer to the “Revenue” section under NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES.
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Ablis, Bendistillery and Bend Spirits

On April 30, 2019, we also closed on the acquisition of 4.99% of the common stock of each of CBD-infused beverages maker Ablis Holding Company (“Ablis”) ~~(www.AblisCBD.com)~~(www.ablisbev.com), and of distilled spirits manufacturers Bendistillery Inc. (“Bendistillery”) (www.bendistillery.com) and Bend Spirits, Inc. (“Bend Spirits”), all located in Bend, Oregon.
~~Prior to February 9, 2022, Lifted Made had a 50% membership interest in SmplyLifted LLC, which~~ Ablis manufactures and sells ~~tobacco-free nicotine pouches~~flavored, lightly carbonated, canned, CBD-infused beverages and shots, CBD-infused muscle rub, among other products. Bendistillery manufactures and sells straight and flavored vodka and gin and various types of whiskey under ~~the~~its brand name FR3SH (www.GETFR3SH.com). On February 9, 2022, Lifted Made sold its 50% membership interest in SmplyLifted LLC to Corner Vapory LLC, an affiliate of Nicholas S. Warrender (“NWarrender”), CEO of Lifted, for $1, plus ninety-nine percent (99%) of any and all payments and other consideration received or owed to Corner Vapory LLC in regard to SmplyLifted’s existing inventory of FR3SH brand tobacco-free nicotine pouches. Lifted has the option to re-purchase the 50% membership interest in SmplyLifted LLC from Corner Vapory LLC for $1,000 in cash at any time on or before December 31, 2032.
~~Merger Related Promissory Note~~
On February 24, 2020, we acquired Lifted as a wholly-owned subsidiary for cash and stock paid to Lifted’s then owner NWarrender. The $7,500,000 money component of the purchase consideration was paid to NWarrender in the form of $3,750,000 in cash at closing and a $3,750,000 promissory note that accrued interest at the rate of 2% per annum (“$3.75M Note”).
~~F-5~~
~~Table of Contents~~
The $3.75M Note was secured by (a) a first lien security interest in all of the assets of the Company and Lifted; and (b) a pledge of: (i) all of the capital stock of Lifted; (ii) all of the common stock of Bendistillery, BendCrater Lake Spirits and Ablis that is owned by the Company; and (iii) all of the capital stock of any other entity owned by the Company, Lifted or any of their subsidiaries, pursuant to a Collateral Stock Pledge Agreement between NWarrender, as Secured Party, and the Company and Lifted, as Pledgors.
~~On December 30, 2021, the Company repaid all principal and interest due under the $3.75M Note.~~
NWarrender kept $1,000,000 of the repayment of the $3.75M Note, plus accrued interest, and on January 3, 2022, reloaned $2,750,000 to LIFD and Lifted (collectively “Payors”) at the rate of 2.5% (the “$2.75M Note”)(www.craterlakespirits.com). The $2.75M Note payable jointly by the Company and Lifted to NWarrender was secured by a perfected first lien security interest (the “Security Interest”) that encumbers all of the assets of the Company and Lifted. The Company was obligated to pay off the principal of the $2.75M Note in five semi-annual payments to NWarrender of $458,333 and a sixth and final semi-annual payment to NWarrender of $458,335, in each case plus accrued interest, starting on June 30, 2022.
On June 7, 2022, LFTD Partners prepaid $916,666 of the principal of the $2.75M Note, and $29,384 of related accrued interest through that date, which left $1,833,334 remaining principal on the $2.75M Note. On July 5, 2022, we entered into an agreement (“Acceleration Agreement”) with NWarrender. Under the terms of the Acceleration Agreement, we were obligated to repay the remaining principal balance as follows: $1,374,999 on or before December 31, 2022, and $458,335 on or before December 31, 2024. Then, on July 8, 2022, we prepaid $916,666, along with accrued interest, and then, on July 25, 2022, we prepaid the remaining principal balance of $916,668 and accrued interest in full, and all collateral securing the $2.75M Note was released.

Obligation to Purchase Headquarters Building

Toward the end of 2020, our Vice Chairman and Chief Operating Officer NWarrender, through his assigned entity 95th Holdings, LLC (“Holdings”), purchased a building located at 5511 95th Avenue in Kenosha, Wisconsin (“5511 Building”) that was immediately leased to us to conduct our expanded operations. The 5511 Building includes office, laboratory and warehouse space. As part of the lease agreement with ~~95th~~ Holdings, ~~LLC,~~ the parties agreed that our wholly owned subsidiary Lifted would eventually purchase the 5511 Building. The purchase price for the 5511 Building was originally subject to ~~variation~~valuation based on a formula agreed upon by the parties. Pursuant to an agreement with ~~Warrender~~NWarrender on December 30, 2021, the parties agreed to set the purchase price for the 5511 Building at $1,375,000. Prior to the Acceleration Agreement, which was entered into by the Company with NWarrender on July 5, 2022, Lifted had an obligation to complete the purchase of the 5511 Building on or before December 31, 2022. Pursuant to the Acceleration Agreement, the deadline to purchase the 5511 Building has been extended by one year to December 31, 2023. In addition, the Acceleration Agreement contains a provision that if we raise $5,000,000 of debt or equity capital, then Lifted or our designee shall purchase the 5511 Building from ~~95th~~ Holdings ~~LLC~~ at the agreed upon $1,375,000 purchase price within two days.

~~Sublease For Commuter Employees~~The Company desires to have all of its operations under one roof at the 5511 Building in order to become more efficient. The Company has hired and paid an architectural and construction company (the “Construction Company”) which has created a preliminary design for expanding the 5511 Building by approximately 30,000 square feet. The Construction Company has provided a preliminary estimate that the potential expansion could cost the Company approximately $3,500,000. Neither the management nor the Board of Directors of the Company has committed to such potential expansion, but it is under active consideration. The Company, in its discussions with potential lenders, has disclosed this potential use of borrowed funds to pay for a potential expansion of the 5511 Building.

On July 6, 2022, Lifted entered into a sublease for office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago, Illinois 60612. The sublease costs $3,000 per month, plus supplemental lease related charges such as real estate taxes and common expenses of the property that we anticipate will be commercially typical costs. The sublease was retroactively effective as of June 1, 2022 and for a five-month term that ended on October 31, 2022. The purpose of the sublease is to make available office space for the members of Lifted’s sales team who live in Chicago. These salespeople were spending significant time in their cars commuting from Chicago to Kenosha.
The sublessor is one of our affiliates, Bill McLaughlin, Lifted’s Chief Strategy Officer. The sublease is structured so that Mr. McLaughlin's lease payment obligations to the landlord are passed on to Lifted on a dollar-for-dollar basis, such that Mr. McLaughlin does not realize a cashflow profit or loss from the sublease.
~~As described in “~~~~NOTE 15 – SUBSEQUENT EVENTS~~~~”, the sublease is currently operating on a month-to-month basis. Management expects to extend the sublease once Mr. McLaughlin is presented a new lease from his landlord.~~
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~~Termination of Letter of Intent relating to the proposed acquisition by the Company of Savage Enterprises, Premier Greens LLC and MKRC Holdings, LLC~~
On December 15, 2021, the Company, our Chairman and CEO Gerard M. Jacobs (“GJacobs”), our President and CFO William C. “Jake” Jacobs (“WJacobs”), and our Vice Chairman and COO NWarrender, Savage Enterprises, a Wyoming corporation (“Savage”), Premier Greens LLC, a California limited liability company (“Premier Greens”), MKRC Holdings, LLC, a Wyoming limited liability company (“MKRC”), Christopher G. Wheeler (“Wheeler”), and Matt Winters (“Winters”), mutually stipulated to terminate the Letter of Intent dated June 15, 2021 that set out the Company’s possible acquisition of Savage, Premier Greens and MKRC.
~~Termination of Letter of Intent relating to the proposed acquisition by the Company of Fresh Farms E-Liquid, LLC~~
On December 16, 2021, the Company, Fresh Farms E-Liquid, LLC, a California limited liability company (“Fresh Farms”), Anthony J. Devincentis (“Devincentis”), Jakob M. Audino (“Audino”), Forrest F. Town (“Town”), John Z. Petti (“Petti”), GJacobs, NWarrender, WJacobs, Wheeler and Winters mutually stipulated to terminate the Letter of Intent dated September 1, 2021 that set out the Company’s possible acquisition of Fresh Farms.
Capital Raise

Cash on hand is currently limited, so in order to purchase for $1.375 million the 5511 Building, to build our available working capital, to close future acquisitions, and potentially also in order to pay other corporate obligations such as certain bonuses, our company-wide bonus pool, and/or income taxes, it may be necessary for us to raise substantial additional capital, and no guarantee or assurance can be made that such capital can be raised on acceptable terms, if at all.

We are currently exploring the possibility of raising ~~$5 million or more through some combination of~~capital via bank debt, ~~and equity offerings~~ in order to purchase for $1.375 million the ~~building located at~~ 5511 95^th ~~Avenue, Kenosha, Wisconsin, that is currently being rented by Lifted,~~Building, to pay the cash portion of the Merger Consideration under the Oculus Merger Agreement, to build our available working capital, to pay transactional fees and expenses, and potentially also to pay off other liabilities of the Company and Lifted such as certain bonuses, our company-wide bonus pool, and/or income ~~taxes, and to pay transactional fees and expenses.~~taxes. If we were ever to proceed forward with an equity raise, it may be in conjunction with a potential listing of our common stock on a stock exchange. However, there can be no guarantee or assurance that any such debt and/or equity capital raise or listing will be completed on acceptable terms, if at all.

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Consolidated Financial Statements – The consolidated financial statements of the Company should be read in conjunction with the Company’s consolidated financial statements and related notes that appear in the ~~annual report~~Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March ~~31, 2022.~~21, 2023. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements and consist of only normal recurring adjustments, except as disclosed herein. As part of the consolidation, all significant intercompany transactions are eliminated, and on the Consolidated Statements of Operations, certain expenses are consolidated into the Other Operating Expenses category.

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Use of Estimates – The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“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 the allowance for doubtful accounts, sales allowance, estimated useful lives of property, plant and equipment, valuation allowance on deferred income tax assets, the earnout liability pursuant to the Oculus Merger Agreement, and the fair value of stock options and warrants.

Cash and Cash Equivalents – Cash and cash equivalents as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 included 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 with these banks may 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.
~~F-7~~
~~Table of Contents~~

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under 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.

Ablis Holding Company, Bendistillery Inc. and Bend Spirits, Inc. are not publicly traded, and as such their financial instruments are 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. During the periods reported, there were no changes in the unobservable inputs associated with these investments, and there no other investments of the Company that had Level 3 unobservable inputs.

Prepaid Expenses – Prepaid expenses relate primarily to advance payments made for purchases of inventory; prepaid inventory is transferred to inventory when the purchased items are received by the Company. Other expenses, such as prepaid commercial property and general liability 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. 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. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s recent loss history and an overall assessment of past due trade accounts receivable outstanding. As of December 31, 2021, the Company implemented a new policy regarding allowances for doubtful accounts, which is that all accounts receivable older than 90 days at quarter end are accrued for in allowances for doubtful accounts.
Allowances for doubtful accounts of ~~$128,589~~$166,503 and ~~$239,101~~$281,762 were ~~recorded~~reported at September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Sales allowances, which reduce gross sales on the Consolidated Statements of Operations, are recorded for estimated future discounts/refunds and product returns and are netted against accounts receivable on the Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, accounts receivable were reduced by $332,170 and $935,881, respectively, as a result of the sales allowance.
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ASU No. 2016-13, Financial Instruments—Credit Losses

Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses, which is codified as ASC 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:
1. The CECL Model applies to financing receivables measured at amortized cost, which includes trade accounts receivable.
2. An entity will recognize an allowance for credit losses that results in the financial statements reflecting the net amount expected to be collected from the financial asset.
3. The allowance represents the portion of the amortized cost basis that an entity does not expect to collect due to credit over the asset’s contractual life, considering past events, current conditions and reasonable and supportable forecasts of future economic conditions.
The Company’s existing policy for estimating its Allowance for Doubtful Accounts on trade receivables includes the following:
1. Management of the Company reviews and discusses all outstanding customer trade balances as of reporting period end. If a credit loss is expected for an individual balance, the expected balance is accrued for in Allowance for Doubtful Accounts.
2. The Company establishes an allowance for 100% of the balance of invoices per the accounts receivable aging schedule that are more than 90 days past due.
3. The Company incorporates industry-specific factors into its estimate of Allowance for Doubtful Accounts when its evaluation of historical loss experience does not fully encompass expected future economic conditions or other factors.
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.
Based on its evaluation of the requirements of ASU 2016-13, the Company concludes that no further modification is needed to its existing policy to materially meet the requirements of the current expected credit loss model for Lifted’s trade accounts receivable.
Inventory – Inventory is valued at the lower of average cost or market value (net realizable value). Inventory consisted of the following at September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

September 30, 2022

December 31, 2021

September 30,
2023

December 31,
2022

Raw Goods

$ 3,213,772

$ 2,927,727

$ 5,877,926

$ 3,407,196

Finished Goods

$ 3,130,905

$ 882,217

$ 3,987,276

$ 2,616,771

Total Inventory

$ 6,344,677

$ 3,809,944

$ 9,865,202

$ 6,023,967

Monthly overhead costs such as payments for rent, 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 September 30, ~~2022, $112,507~~2023, $313,743 of overhead costs were allocated to finished goods. In comparison, during the quarter ended ~~September 30, 2021, $36,457~~December 31, 2022, $127,485 of overhead costs were allocated to finished goods.

During the ~~nine months~~quarters ended September 30, 2023, and 2022, ~~$3,279,262~~$597,098 and $2,479,798 of obsolete and spoiled inventory was written ~~off; this is compared~~off, respectively. The primary driver of the write offs in the third quarter of 2023 was related to ~~$234,351~~$489,022 of expired cannabinoid-infused gummies.
In the third quarter of 2022, Lifted wrote-off $2,313,902 of obsolete and spoiled inventory ~~written off during the nine months ended September 30, 2021.~~
~~Of the $3,279,262~~ of obsolete inventory that was written off during the nine months ended September 30, 2022, $2,479,798 of it was recognized during the quarter ended September 30, 2022. This write-off primarily related to $2,313,902 worth of certain 2 mL disposable ~~vapes written off~~vape devices (“Clogged Vapes”) due to clogging issues ~~(the “Clogged Vapes”). Management~~that management believes ~~that the clogging~~ was caused by ~~the~~a summer heat ~~wave (the third hottest summer on record~~wave. In the fourth quarter of 2022, Lifted negotiated a settlement agreement with its third-party disposable vape device manufacturer, which included both the forgiveness of $630,000 of payables owed to the manufacturer and credits totaling $370,047 to be provided by the manufacturer at a quarterly rate of $46,255 in 2023 and 2024. The forgiveness of the payables was recorded as a reduction of cost of goods sold, and the settlement credits were recorded as a settlement asset and other income, both in the ~~USA).~~fourth quarter of 2022. The ~~heat caused~~settlement asset is being amortized ratably to cost of goods sold over the oil in the Clogged Vapes to lose viscosity, so more oil solidified in the coils as they were brought to room temperature. Because these Clogged Vapes did not have preheat or variable voltage settings, the oil could not be unclogged from the coils. Management discontinued the salebenefit period of ~~the Clogged Vapes during the third quarter. Lifted’s 2 mL disposable vapes have now been superseded by 3 mL disposable vapes that do have preheat~~2023 and variable voltage settings, so management expects that this write off of Clogged Vapes should be a one-time occurrence. Management is attempting to negotiate an agreement pursuant to which the manufacturer of the Clogged Vapes will subsidize or share, in some fashion, in the losses that have been sustained by Lifted due to the Clogged Vapes; however, there can be no guarantees or assurances whatsoever that such an agreement to subsidize or share in such losses can be successfully negotiated.2024.
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The process of determining obsolete inventory during the quarter involved:

1)
Identifying raw goods that would no longer be used in the manufacture of finished goods;

2)
Identifying finished goods that would no longer be sold or that are slow moving; and

3)
Valuing and expensing raw and finished goods that would no longer be sold.

~~F-8~~
~~Table of Contents~~
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 machinery and equipment, furniture and fixtures, leasehold improvements, and computer equipment, 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 then 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. The fair value is estimated using the present value of the future cash flows discounted at a rate commensurate with management’s estimates of the business risks.

Preparation of estimated expected future cash flows is inherently subjective and is based on management’s best estimate of assumptions concerning expected future conditions. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell.

Security Deposits – The Company has not paid a security deposit for its leased facility located at 5511 95^th Avenue, Kenosha, WI 53144 for the Company’s current office, manufacturing and warehouse space.

The Company has paid security deposits for its leased facilities located at 8920 58^th Place, Suite 850, Kenosha, WI 53144, 8910 58^th Place, Suites 600 and 700, Kenosha, WI 53144, 9560 58^th Place, Suite 360, Kenosha, WI 53144, ~~and~~ 2701-09 West Fulton PH, Chicago, Illinois ~~60612.~~60612, 5732 95th Avenue, Suites 100-300, Kenosha, WI 53144.
As part of Lifted’s acquisition of the assets of Oculus, Lifted has assumed Oculus’ lease of office and operational space in Aztec, New Mexico, and the security deposit that had been previously paid by Oculus to the landlord of the leased space in Aztec, New Mexico.

The Company ~~had~~has paid a security ~~deposit~~deposits for utilities to its lessor for the Company’s former office, manufacturing and warehouse space in Zion, IL, that was rented on a month-to-month basis from June 1, 2021 through November 2021. The security deposit was written off at December 31, 2021.various vendors.

State Licensing Deposits and Bonds – The Company is required to pay deposits and bonds for certain licenses in various states.

Revenue – The Company recognizes revenue in accordance with Accounting Standards Codification 606.

The majority of the Company’s sales are of branded products ~~goods~~ to distributors, wholesalers, and end consumers. A minority of the Company’s sales are of raw goods to manufacturers, distributors and wholesalers. The majority of the Company’s sales are to distributors, followed by the Company’s sales to wholesalers, and then the Company’s sales to end consumers. Distributors primarily sell Lifted’s products to vape and smoke shops, stores specializing in cannabinoid-infused products, convenience stores, ~~gas stations,~~ health food stores, and other outlets.

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.
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Table of Contents

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.
~~F-9~~
~~Table of Contents~~

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:

1)
The ordered item breaks, melts, ~~clogs, leaks~~ or separates in transit to the customer. In this case, the Company will replace the broken, melted or separated item at no cost to the customer.

2)
The Company sent the wrong item to the customer. In this case, the Company will allow the customer to keep, at no cost to the customer, the item that was mistakenly sent to the customer. The Company will also send the correct product to the customer, at no cost to the customer.

3)
The customer ordered the wrong product. In this case, the customer, at his/her own expense, must mail the mistakenly ordered product back to the Company, and the Company will mail the correct product to the customer.

4)
The ordered item is recalled. In a situation where product is recalled, the Company will offer a replacement, credit, or refund.

~~As described above in the section “~~~~Inventory~~”, during the quarter ended September 30, 2022, some of Lifted’s customers returned certain Clogged Vapes. In total for the quarter ended September 30, 2022, the Company recorded a sales allowance of $841,269 for estimated future discounts/refunds and product returns, primarily associated with the Clogged Vapes. Please refer to the description in “~~Inventory~~~~” for more information regarding the Clogged Vapes.~~
Disaggregation of Revenue
During the quarter ended September 30, 2022, approximately 99% of the Company’s sales occurred inside of the United States of America. During the quarter ended September 30, 2021, approximately 99% of the Company’s sales occurred inside of the United States of America as well.

The Company has considered providing disaggregation of revenue by information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments, such as type of good, geographical region, market or type of customer, type of contract, contract duration, timing of transfer of goods, and sales channels. Due to the rapidly evolving nature of our industry, the Company is constantly launching new products to stay ahead of trends, finding new sales channels, initiating new distribution networks and modifying the prices of its products.

Shown below ~~is a table~~are tables showing the approximate disaggregation of historical revenue:

Type of Sale

For the three months ended September 30, 2022

% of Net Sales

For the three months ended September 30, 2021

% of Net Sales

For the nine months ended September 30, 2022

% of Net Sales

For the nine months ended September 30, 2021

% of Net Sales

Net sales of raw materials to customers

$ 21,707

0.2 %

$ 105,960

1.2 %

$ 40,339

0.1 %

$ 155,695

0.8 %
Net sales of products to private label clients

766,129

6.8 %

$ 663,968

7.5 %

$ 850,271

1.8 %

$ 2,692,091

14.3 %
Net sales of products to wholesalers

1,404,590

12.5 %

$ 1,255,947

14.2 %

$ 5,825,584

12.6 %

$ 2,842,714

15.1 %
Net sales of products to distributors

8,653,948

77.0 %

$ 6,273,836

71.1 %

$ 36,393,678

78.9 %

$ 12,060,313

63.9 %
Net sales of products to end consumers

390,903

3.5 %

$ 521,242

5.9 %

$ 2,992,784

6.5 %

$ 1,118,554

5.9 %
Net Sales

$ 11,237,277

100.0 %

$ 8,820,952

100.0 %

$ 46,102,656

100.0 %

$ 18,869,366

100.0 %

For the three months ended

For the nine months ended

September 30,

September 30,

Location of Sale

2023

2022

2023

2022

Inside of USA

$ 13,096,973

99.9 %

$ 11,124,904

99.0 %

$ 38,056,082

99.9 %

$ 45,955,418

99.7 %
Outside of USA

$ 9,307

0.1 %

$ 112,373

1.0 %

$ 34,533

0.1 %

$ 147,238

0.3 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100.0 %

For the three months ended

For the nine months ended

September 30,

September 30,

Type of Sale

2023

2022

2023

2022

Net sales of raw materials to customers

$ 618

0 %

$ 21,707

0.2 %

$ 3,696

0 %

$ 40,339

0.1 %
Net sales of products to private label clients

312,905

2 %

766,129

6.8 %

$ 1,178,686

3 %

850,271

1.8 %
Net sales of products to wholesalers

2,535,597

19 %

1,404,590

12.5 %

$ 7,437,453

20 %

5,825,584

12.6 %
Net sales of products to distributors

9,640,568

74 %

8,653,948

77.0 %

$ 27,738,487

73 %

36,393,678

78.9 %
Net sales of products to end consumers

616,592

5 %

390,903

3.5 %

$ 1,732,293

5 %

2,992,784

6.5 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

46,102,656

100.0 %

For the three months ended

For the nine months ended

September 30,

September 30,

Hemp vs Non-Hemp Product Sales

2023

2022

2023

2022

Net sales of hemp products

$ 12,957,460

99 %

$ 11,012,531

98 %

$ 35,587,865

93 %

$ 45,180,603

98 %
Net sales of non-hemp products

148,820

1 %

224,746

2 %

2,502,750

7 %

922,053

2 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100 %

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

Product Type

2023

2022

2023

2022

Vapes

$ 7,405,541

57 %

$ 4,768,956

42 %

$ 19,846,178

52 %

$ 23,506,451

51 %
Edibles

3,293,422

25 %

3,990,484

36 %

$ 10,849,438

28 %

13,147,861

29 %
Flower

1,165,926

9 %

851,219

8 %

$ 4,203,894

11 %

2,885,302

6 %
Cartridges

1,223,320

9 %

1,625,513

14 %

$ 3,165,575

8 %

6,561,937

14 %
Apparel and Accessories

18,071

0 %

1,106

0 %

$ 25,530

0 %

1,106

0 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100 %
F-14
Table of Contents

Cali Agreement
Regarding the accounting for the Cali Agreement: the Company has evaluated the principal versus agent considerations in Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company has considered the following facts to assess whether Lifted has control of the Cali Products that are manufactured and distributed pursuant to the Cali Agreement:
·
Lifted is the exclusive worldwide manufacturer and distributor of the Cali Products. To fulfill its obligations pursuant to the Cali Agreement, Lifted sources raw goods, labor, and other resources to manufacture the Cali Products at Lifted’s facilities and holds these raw goods and Cali Products in its facilities until the Cali Products are sold and shipped to customers.
·
Customers’ orders of Cali Products are received through Lifted’s website www.urb.shop. Lifted processes these orders, prepares the Cali Products for shipment from Lifted’s inventories, and ships the Cali Products directly to the customers. Lifted is responsible for collecting payments from customers but does not guarantee collection.
·
Lifted has the right, in its discretion, to add new Cali brands and Cali Products as they are developed.
·
Lifted can set prices for Cali Products it supplies or unilaterally discontinue the supply of any Cali product if it no longer makes business sense to Lifted.
Based on these considerations, the Company concludes that Lifted is the principal relative to Cali in the Cali Agreement.
Therefore, sales of Cali Products are recognized and reported by the Company on a gross basis on the Consolidated Statements of Operations, and once payment is collected from a customer from the sale of Cali Products, the Commission Payable to Cali is reported as a currently liability on the Company’s Consolidated Balance Sheets, and Commission Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations.
Diamond Agreement
Regarding the accounting for the Diamond Agreement: the Company has evaluated the principal versus agent considerations in ASC 606, Revenue from Contracts with Customers. The Company has considered the following facts to assess whether Lifted has control of the Diamond products that are manufactured and distributed pursuant to the Diamond Agreement:
·
Lifted is the exclusive worldwide manufacturer and distributor of the Diamond Products. To fulfill its obligations pursuant to the agreement, Lifted sources raw goods, labor, and other resources to manufacture the Diamond Products at its own facilities and holds these raw goods and Diamond Products in its facilities until the Diamond Products are sold and shipped to customers.
·
Customers’ orders of Diamond Products are received through Lifted’s website www.urb.shop. Customers that attempt to purchase the Diamond Products from www.diamondsupplyco.com are redirected to www.urb.shop. Lifted processes these orders, prepares the Diamond Products for shipment from Lifted’s inventories, and ships the Diamond Products directly to customers.
·
Lifted and Diamond agree upon the retail sales prices for the Diamond Products, and both Lifted and Diamond are to make good faith efforts to collect all payments in connection with each party’s sales of Diamond Products to all of its customers.
Based on these considerations, the Company concludes that Lifted is the principal relative to Diamond in the Diamond Agreement.
Therefore, sales of Diamond Products are recognized and reported by the Company on a gross basis on the Consolidated Statements of Operations, and once payment is collected from a customer from the sale of Diamond Products, the Royalty Payable to Diamond is reported as a currently liability on the Company’s Consolidated Balance Sheets, and Royalty Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations.
F-15
Table of Contents
Jeeter Agreement
Regarding the accounting for the Jeeter Agreement: the Company has evaluated the principal versus agent considerations in ASC 606, Revenue from Contracts with Customers. The Company has considered the following facts to assess whether Lifted has control of the Jeeter Products that are manufactured and distributed pursuant to the Jeeter Agreement:
·
Lifted is the exclusive manufacturer, seller, and distributor of the applicable Jeeter branded products in the USA. To fulfill its obligations pursuant to the agreement, Lifted sources raw goods, labor, and other resources to manufacture the Jeeter Products at its own facilities and holds these raw goods and Jeeter Products in its facilities until the Jeeter Products are sold and shipped to customers. Initially, Lifted was manufacturing all of the Jeeter Products, but in the middle of Q3 2023 Jeeter also began manufacturing joints at its facility after being authorized by Lifted to do so. Nonetheless, Jeeter produces joints during Monday through Friday, and then ships the finished joints to Lifted’s headquarters in Kenosha on Saturday. Lifted controls the Jeeter Products until they are then sold and shipped to the customers.
·
Customers’ orders of Jeeter Products are received through Lifted’s website www.urb.shop. Lifted processes these orders, prepares the Jeeter Products for shipment from Lifted’s inventories, and ships the Jeeter Products directly to the customers. Lifted is responsible for collecting payments from customers but does not guarantee collection, nor the timetable of such collection.
Based on these considerations, the Company concludes that Lifted is the principal relative to Jeeter in the Jeeter Agreement.
Therefore, sales of Jeeter Products are recognized and reported by the Company on a gross basis on the Consolidated Statements of Operations, and once payment is collected from a customer from the sale of Jeeter Products, the Commission Payable to Jeeter is reported as a currently liability on the Company’s Consolidated Balance Sheets, and Commission Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations.
ENM Agreement
Regarding the accounting for the ENM Agreement: the Company has evaluated the principal versus agent considerations in ASC 606, Revenue from Contracts with Customers. Management has considered the following facts to assess Lifted’s position relative to ENM under the ENM Agreement:
·
ENM has the right to use the Urb brand name on marijuana products sold within New Mexico in accordance with ENM’s license to manufacture marijuana products that can be sold to marijuana dispensaries in New Mexico. ENM sources raw goods, labor, and other resources to manufacture the Urb-branded products at its own facilities and holds these raw goods and Urb-branded products in its facilities until the Urb-branded products are sold and shipped to customers. ENM controls the Urb-branded products until they are then sold and shipped to the customers.
·
Customers’ orders of Urb-branded products are received by ENM. ENM processes these orders, prepares the Urb-branded products for shipment from ENM’s inventories, and ships the Urb-branded products directly to the customers. ENM is responsible for collecting payments from the customers.
·
ENM will source some of the raw goods, fixed assets and supplies from Lifted for manufacture of the Urb-branded products. The raw goods sourced from Lifted are referred to in the ENM Agreement as “Unit Components”. These Unit Components are maintained in Lifted’s inventories and shipped to ENM based on agreement between the CEOs of both Lifted and ENM. Lifted receives an agreed upon price, referred to in the ENM Agreement as the “Unit Component Price”, for each Unit Component shipped to ENM.
·
ENM shall pay over to Lifted one-half of the Unit Sale Proceeds, 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 the Unit Components; and thirdly, to pay to Lifted a License Fee.
Based on these considerations, the Company concludes that Lifted is a principal relative to ENM in the ENM Agreement in regards to Lifted’s sale of Unit Components to ENM. Therefore, Lifted recognizes sales of Unit Components to ENM on a gross basis on Lifted’s Consolidated Statements of Operations.
The Company concludes that Lifted is an agent relative to ENM in the ENM Agreement in regards to ENM’s sale of Urb-branded products to dispensary customers. When ENM pays over to Lifted one-half of the Unit Sale Proceeds, Lifted will first apply this money to the loans receivable from ENM, and then the money will be applied to the receivable(s) related Lifted’s sale of the Unit Components to ENM. Then, any of the excess/remaining money will be recognized and reported by Lifted as License Fee revenue on Lifted’s Consolidated Statements of Operations.
Deferred Revenue

Amounts received from a customer before the purchased product is shipped to the customer isare 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. Accounts receivable ~~includes~~include amounts associated with partially shipped orders, for which the unshipped portion is a contract asset. Contract assets represent invoiced but unfulfilled performance obligations.

~~F-10~~F-16
Table of Contents

The table shown below represents the composition of deferred revenue between contract assets (invoiced but unfulfilled performance obligations) and deposits from customers from unfulfilled orders as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

September 30, 2022

December 31, 2021

September 30,
2023

December 31,
2022

Contract Assets (invoiced but unfulfilled performance obligations)

$ 784,047

$ 1,650,258

$ 806,388

$ 224,141

Deposits from customers for unfulfilled orders

$ -

$ 524,135

$ 436,741

$ 369,945

Total Deferred Revenue

$ 784,047

$ 2,174,393

$ 1,243,128

$ 594,086

Cost of Goods Sold – Cost of goods sold consists of the costs of raw materials utilized in the manufacture of products, direct labor, co-packing fees, repacking fees, freight and shipping charges, warehouse expenses incurred prior to the manufacture of Lifted’s finished products and certain quality control costs. Finished goods that are sold account for the largest portion of cost of sales. Raw materials include ingredients, product components and packaging materials. ~~$3,279,262~~
Cost of goods sold amounted to $8,684,277 and ~~$234,351~~$10,423,533 during the quarters ended September 30, 2023 and 2022, respectively. $597,098 and $2,479,798 of cost of goods sold relates to spoiled and obsolete inventory written off during the ~~nine months~~quarters ended September 30, ~~2022~~2023 and ~~September 30, 2021,~~2022, respectively.

Operating Expenses – Operating expenses include accounts such as payroll ~~consulting and independent contractor~~ expenses, ~~the accrual for~~deferred stock compensation expense, the company-wide management bonus pool, management bonuses, professional fees, bank charges and merchant fees, advertising and marketing, bad debt expense, ~~and~~ depreciation and ~~amortization.~~amortization, commissions and royalties expenses related to the Cali, Diamond and Jeeter collaborations, and other operating expenses. Total operating expenses ~~decreased~~increased to ~~$318,474~~$3,762,464 for the quarter ended September 30, ~~2022, down~~2023, up from ~~$1,782,858~~$318,474 during the quarter ended September 30, 2021, primarily as a result of the complete elimination of the company-wide bonus pool accrual of $2,121,532, which had been accrued through June 30, 2022. Moreover, no company-wide management bonus pool accrual was booked for the quarter ended September 30, 2022.

During the nine months ended September 30 2023, total operating expenses included a one-time, non-cash stock compensation expense of $2,138,175, which was $1,663,163 on an after-tax basis. No stock compensation was recorded in the nine months ended September 30, 2022. At the closing of the acquisition of Lifted in February 2020, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company (the “Deferred Contingent Stock Recipients”), as an employee retention incentive. Now that certain conditions and requirements have been met, the Deferred Contingent Stock vested on February 24, 2023, and on this date, in accordance with US GAAP, the Company expensed the value of the vested Deferred Contingent Stock. This one-time, non-cash charge swung our Company from net income for the nine months ended September 30, 2023 of $3,798,530 to net income of $2,135,367. But for this charge, our Company would have reported a basic and fully diluted EPS for the nine months ended September 30, 2023 of $0.26 and $0.25, respectively.
Income Taxes – Provisions for income taxes are based on taxes payable or refundable for the current year and deferred income taxes. Deferred income taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements and on tax carry forwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is provided against deferred income tax assets when it is not more likely than not that the deferred income tax assets will be realized.

F-17
Table of Contents
Basic and Diluted Earnings (Loss) Per Common Share – Basic earnings (loss) per common share is determined by dividing earnings (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per common share is calculated by dividing earnings (loss) 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 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 nine months ended September 30, ~~2022~~2023 and 2022:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2023

2022

2023

2022

Net Income

$ 617,648

$ 423,486

Net Income

$ 2,135,367

$ 6,587,739

Weighted average number of common shares outstanding:

Weighted average number of common shares outstanding:

Basic

14,648,874

14,102,578

Basic

14,470,895

14,073,366

Diluted

15,356,374

15,884,776

Diluted

15,178,395

15,855,564

Basic Net Income per Common Share

$ 0.04

$ 0.03

Basic Net Income per Common Share

$ 0.15

$ 0.47

Diluted Net Income per Common Share

$ 0.04

$ 0.03

Diluted Net Income per Common Share

$ 0.14

$ 0.41

As of September 30, ~~2021:~~2023, in addition to our outstanding common stock, we have issued (a) options to purchase 1,076,698 shares of common stock at $2.00 per share, (b) warrants to purchase 155,500 shares of common stock at $1.00 per share, (c) rights to purchase warrants to purchase 100,000 shares of common stock at $1.85 per share, and (d) warrants to purchase 2,280,000 shares of common stock at $5.00 per share, all of which are vested.

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Net Income/(Loss)

$ 423,486

$ 2,236,178

$ 6,587,739

$ 4,450,690

Weighted average number of common shares outstanding:

Basic

14,102,578

13,015,717

14,073,366

10,525,461

Diluted

15,884,776

16,257,915

15,855,564

13,767,659

Basic Net Income (Loss) per Common Share

$ 0.03

$ 0.17

$ 0.47

$ 0.42

Diluted Net Income (Loss) per Common Share

$ 0.03

$ 0.14

$ 0.41

$ 0.32

At September 30, 2023, the Company had 2,500 shares of Series A Preferred Stock outstanding convertible into 250,000 shares of common stock; these are included in the diluted earnings calculation. At September 30, 2023, the Company had 40,000 shares of Series B Preferred Stock outstanding convertible into 40,000 shares of common stock; these are not included in the diluted earnings calculation because the exercise price ($5.00/share) was higher than the stock closing price at September 30, 2023 ($1.30/share). There were also 142,000 shares of issuable Deferred Contingent Stock included in the September 30, 2023 diluted EPS calculation. Also included in the September 30, 2023 diluted EPS calculation was the minimum number of shares of common stock (160,000) that will eventually be issued pursuant to the Oculus Merger Agreement.

AsIn comparison, as of September 30, 2022, in addition to our outstanding common stock, we have issued (a) options to purchase 1,076,698 shares of common stock at $2.00 per share, (b) warrants to purchase 155,500 shares of common stock at $1.00 per share, (c) rights to purchase warrants to purchase 100,000 shares of common stock at $1.85 per share, and (d) warrants to purchase 2,295,000 shares of common stock at $5.00 per share.

~~F-11~~
~~Table of Contents~~
Regarding the aforementioned warrants to purchase 2,295,000 shares of our common stock at an exercise price of $5.00 per share: of the total, warrants to purchase 1,550,000 shares of our common stock are vested, while the remaining warrants to purchase 745,000 shares of our common stock are not vested and are subject to certain conditions and requirements.

AtAlso at September 30, 2022, the Company had Series A Preferred Stock outstanding convertible into 450,000 shares of common stock; these are included in the diluted earnings calculation. Also at September 30, 2022, the Company had Series B Preferred Stock outstanding convertible into 40,000 shares of common stock; these are not included in the diluted earnings calculation because the exercise price ($5.00/share) was higher than the stock closing price at September 30, 2022 (3.40/share).

In comparison, as of September 30, 2021, in addition to our outstanding common stock, we have issued (a) options to purchase 1,086,698 shares of common stock at $2.00 per share, (b) warrants to purchase 205,500 shares of common stock at $1 per share, (c) rights to purchase warrants to purchase 1,375,000 shares of common stock at between $0.01 and $1.85 per share, and (d) warrants to purchase 2,295,000 shares of common stock at $5.00 per share.
Regarding the aforementioned rights to purchase warrants to purchase 1,375,000 shares of common stock at between $0.01 and $1.85 per share as of September 30, 2021: exercise rights to purchase 1.25 million shares of our common stock by exercise of the foregoing warrants are not vested and are not exercisable until a performance contingency is met.
Regarding the aforementioned warrants to purchase 2,295,000 shares of our common stock at an exercise price of $5.00 per share as of September 30, 2021: of the total, warrants to purchase 1,650,000 shares of our common stock are vested, while the remaining warrants to purchase 645,000 shares of our common stock are not vested and are subject to certain conditions and requirements.
Also outstanding at September 30, 2021, the Company had Series A Preferred Stock outstanding convertible into 575,000 shares of common stock; these are included in the diluted earnings calculation. At September 30, 2021, the Company also had Series B Preferred Stock outstanding convertible into 40,000 shares of common stock; these are not included in the diluted earnings calculation.
Recent Accounting Pronouncements – In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ~~(ASU)~~(“ASU”) No. 2016-13, Financial Instruments – Credit Losses (codified as Accounting Standards Codification (“ASC”) Topic 326). ASC 326 adds to US ~~GAAP~~Generally Accepted Accounting Principles (“GAAP”) the current expected credit loss model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 and its amendments ~~will be~~were effective for the Company for interim and annual periods in fiscal years beginning after December 15, ~~2022, though early adoption is permitted.~~2022. The Company ~~believes~~adopted ASU 2016-13 effective January 1, 2023, and the adoption ~~will modify~~did not have a significant impact on the ~~way~~Allowance for Doubtful Accounts associated with the ~~Company analyzes financial instruments. The Company is currently evaluating~~Company’s trade accounts receivable.Please refer to the ~~impact of ASU 2016-13 on its consolidated financial statements.~~
~~In December 2019, the FASB issued~~ section “ASU No. ~~2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting~~2016-13, Financial Instruments—Credit Losses” in NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES for ~~Income Taxes~~ (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022, though early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company is currently evaluating the impact of ASU 2019-12 on its consolidated financial statements.more information.
~~On August 5, 2020, the FASB issued ASU No. 2020-06,~~ ~~Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)~~, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is effective for public business entities that meet the definition of a SEC filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The FASB noted that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.
~~F-12~~
~~Table of Contents~~

The Company is researching what other pronouncements may be applicable to the Company’s accounting and whether or not any other pronouncements should be adopted.

Advertising and Marketing Expenses – Advertising and marketing costs are expensed as incurred. During the three and nine months ended September 30, 2023, the Company incurred $184,432 and $663,181, respectively, in advertising and marketing expenses, which primarily related to advertising, trade shows, promotional products and marketing. In comparison, during the three and nine months ended September 30, 2022, the Company incurred $334,215 and $550,612, respectively, in advertising and marketing expenses, which related to trade shows, marketing, promotional products and public relations. In comparison, during the three and nine months ended September 30, 2021, the Company incurred $86,438 and $236,598 in advertising and marketing expenses, of which were related to trade shows, public relations and digital marketing.

~~Compensated Absences~~ – During the year ended December 31, 2021, paid time off (“PTO”) was provided to employees who obtained approval for it from NWarrender. Any approved PTO was granted at NWarrender’s discretion, and mandatory PTO was zero days, thus no accrual was necessary at December 31, 2021. Effective January 1, 2022, certain PTO policies have been adopted by Lifted, and a PTO accrual of $13,912 was recognized at September 30, 2022.
F-18
Table of Contents

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.

~~NOTE 3~~ Business Combinations and Consolidated Results of Operations and Outlook – ~~RECEIPT OF LOANS UNDER THE ECONOMIC INJURY DISASTER LOAN PROGRAM AND THE PAYCHECK PROTECTION PROGRAM~~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.

~~Lifted also applied for~~When the Company acquires a business, we allocate the purchase price to the assets acquired and received a loan (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020. The PPP Loan was issued by BMO Harris Bank (the “Lender”)liabilities assumed in the ~~aggregate principal amount~~transaction at their respective estimated fair values. We record any premium over the fair value of ~~$149,622.50~~net assets acquired as goodwill. The allocation of the purchase price involves judgments and ~~evidenced by a promissory note (the “Note”), dated April 14, 2020 issued by Lifted~~estimates both in characterizing the assets and in determining their fair value. We use all available information to ~~the Lender. On April 20, 2021, the entire PPP Loan ($149,622)~~make these fair value determinations and ~~the interest payable on the PPP Loan ($1,525) was forgiven by the SBA, and a related gain on forgiveness of debt~~engage independent valuation specialists to assist in the amount of $151,147 was recorded. In accordance with its terms, the Note was originally scheduled to mature on April 14, 2022 and bore interest at a rate of 1.00% per annum, payable monthly commencing on November 14, 2020, following an initial deferral period as specified under the PPP. In addition, the Note could be prepaid by Lifted at any time prior to its original maturity with no prepayment penalties. Proceeds from the PPP Loan were available to Lifted to fund designated expenses, including certain payroll costs and other permitted expenses, in accordance with the PPP. Under the termsfair value determination of the PPP, up to the entire amount of principal and accrued interest of the PPP Loan could be forgiven to the extent that at least 75% of the PPP Loan proceeds are used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the SBA under the PPP. As of March 31, 2021, Lifted had an accrual of $1,443 for the interest on the PPP Loan. During the three months ended June 30, 2021, interest of $82 was accrued prior to the forgiveness of the Loan.acquired long-lived assets.

NOTE 43 - RISKS AND UNCERTAINTIES

Going Concern – 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 ~~$4,842,407~~$2,117,018 as of September 30, ~~2022.~~2023. 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 or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 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. 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, Bendistillery and Bend Spirits made the Company a minority owner of these companies. As a minority owner, the Company is not able to recognize any portion of Ablis’, Bendistillery’s or Bend Spirits’ revenues or earnings in the Company’s financial statements. The Company monitors its investments in Ablis, Bendistillery and Bend Spirits, and from time to time and will evaluate whether there has been a potential impairment of value.

The COVID-19 pandemic and its ramifications, combined with the expenses and potential liabilities associated with litigation involving Lifted, combined with the regulatory risks and uncertainties associated with the cannabinoid-infused products, vaping and nicotine products industries, combined with the risks associated with internet hacking or sabotage, combined with the risks of employee and/or independent contractor disloyalty or theft of Company information and opportunities, have created significant adverse risks to the Company, which have caused substantial doubt about the Company’s ability to continue as a going concern.

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Prior to the Acceleration Agreement, which was entered into by the Company with NWarrender on July 5, 2022, Lifted had an obligation to complete the purchase of the 5511 Building on or before December 31, 2022. Pursuant to the Acceleration Agreement, the deadline to purchase the 5511 Building has been extended by one year to December 31, 2023. In addition, the Acceleration Agreement contains a provision that if we raise $5,000,000 of debt or equity capital, then Lifted or our designee shall purchase the Property from 95th Holdings, LLC at the agreed upon $1,375,000 purchase price within two days.

The Company is also accruing and paying 3% annual dividends on its Series A and Series B Convertible Preferred Stock.
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Also, on February 14, 2022, NWarrender, GJacobs and WJacobs (together the “Parties”) and LFTD Partners, entered into an agreement (the “Amended Omnibus Agreement”) that amends in part the Agreement dated as of December 30, 2021 entered into by and among LFTD Partners Inc., the Parties, Lifted Liquids, Inc. d/b/a Lifted Made and 95th Holdings, LLC (the “Omnibus Agreement”). The Amended Omnibus Agreement (1) terminates the right for the Parties to receive bonus compensation in regard to 2021 that is in excess of the Modified 2021 Bonus Pool Amount of $1,556,055 set out in the Omnibus Agreement; (2) places a cap on the 2022 company-wide bonus pool such that the 2022 company-wide bonus pool shall not be allowed to be accrued or paid by LIFD if and to the extent that doing so would decrease LIFD’s 2022 diluted earnings per share of common stock below $0.56 per share; and (3) the $500,000 of additional bonus set out in the Omnibus Agreement, is now allocated and defined as a retention bonus of $166,667 to each of NWarrender, GJacobs and WJacobs to be paid at the end of 2022 so long as each respective executive has not earlier resigned from LFTD Partners (the “2022 Retention Bonuses”).

Moreover, LFTD Partners agrees and covenants that the Chairman of the Compensation Committee is authorized to negotiate and agree on behalf of LFTD Partners in regard to a 2023 supplemental retention bonus for NWarrender, GJacobs and WJacobs (in addition to the company-wide Bonus Pool) (the “2023 Retention Bonuses”), and if and only if the amounts of the 2023 Retention Bonuses are mutually agreed upon in writing among the Chairman of the Compensation Committee, NWarrender, GJacobs and WJacobs, then one-third of the 2023 Retention Bonuses shall be paid by LFTD Partners to each of NWarrender, GJacobs and WJacobs on or before March 15, 2024, provided that such officer shall not have earlier resigned as an officer of LFTD Partners.

During 2022, Lifted for the first time hired an outside laboratory to conduct research and development on a potential new, non-hemp-derived, synthetic psychedelic product (the “New Psychedelic Product”) for a total of $19,800. Such research and development of the New Psychedelic Product has been put on indefinite ~~hold, as~~hold. Lifted has recently successfully purchased from third parties a natural equivalent of the New Psychedelic Product. No guarantee or assurance can be given that in the future Lifted will be able to purchase more of this natural equivalent of the New Psychedelic Product, or a synthesized version thereof.

In addition, factors that could materially affect future operating results include, but are not limited to, changes to laws and regulations, especially any future changes to the so-called “Farm Bill” at the federal level, 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 related to hemp-derived cannabinoids, nicotine or tobacco products, kratom, ~~psychedelic~~psychoactive products and/or vaping. The company is also subject to vendor concentration risk, customer concentration risk, customer credit risk, and counterparty risk.

The Company maintains levels of cash bank accounts that, at times, may 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 net income of the Company’s wholly-owned subsidiary Lifted will be sufficient to allow the Company to pay all of its operating expenses, the dividends accruing and being paid on the Company’s preferred stock, the company-wide bonus pool, ~~and the 2022 Retention Bonuses~~ and the 2023 Retention Bonuses. As a result, there is substantial doubt that the Company will be able to continue as a going concern. 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 ~~or amounts~~ and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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The Company currently has one revenue-generating subsidiary, Lifted. 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 additional 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. Moreover, any such actions can be expected to result in substantial dilution to the existing shareholders of the Company.

~~Customer~~ Concentration ~~Risk~~of Credit Risks – During the quarter ended September 30, ~~2022, twelve~~2023, 15 customers made up approximately 50% of Lifted Made’s sales. During the nine ended September 30, 2023, 21 customers made up approximately 50% of Lifted Made’s sales. In comparison, during the quarter ended September 30, ~~2021, eight~~2022, 12 customers made up approximately 50% of Lifted Made’s sales. During the nine months ended September 30, 2022, 15 customers made up approximately 50% of Lifted Made’s sales. ~~In comparison, during the nine months ended September 30, 2021, five customers made up approximately 50% of Lifted Made’s sales.~~

Vendor Dependence–Regarding the purchases of raw goods and finished goods (“Inventory”), during the quarter ended September 30, 2023, approximately 62% of the Inventory that Lifted purchased were from three vendors. During the nine ended September 30, 2023, approximately 56% of the Inventory that Lifted purchased were from three vendors. In comparison, during the quarter ended September 30, 2022, approximately 88% of the Inventory that Lifted purchased were from five ~~vendors. In comparison, regarding the purchases of Inventory during the quarter ended September 30, 2021, approximately 70% of the Inventory purchases were from six~~ vendors. Regarding the purchases of Inventory during the nine months ended September 30, 2022, approximately 73% of the Inventory purchases were from five vendors. ~~In comparison, regarding the purchases of Inventory during the nine months ended September 30, 2021, approximately 62% of the Inventory purchases were from five vendors.~~
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The loss of Lifted’s relationships with these customers and vendors could have a material adverse effect on Lifted’s business.

NOTE 54 – THE COMPANY’S INVESTMENTS

The Company’s Investments in Ablis, Bendistillery and Bend Spirits

On April 30, 2019, the Company purchased 4.99% of the common stock of each of Ablis Holding Company, Bendistillery Inc., and Bend Spirits, Inc. for an aggregate purchase price of $1,896,200.

Under US Generally Accepted Accounting Principles (“GAAP”), the Company uses the cost method to account for our minority equity ownership interests in businesses in which the Company owns less than 20% of equity ownership and have no substantial influence over the management of the businesses. Under the cost method of accounting, the Company reports the historical costs of the investments as assets on its balance sheet. However, US GAAP does not permit the consolidation of its financial statements with the financial statements of companies in which the Company owns minority equity ownership interests.

As such, the Company’s investments in Ablis, Bendistillery and Bend Spirits made the Company a minority owner of these companies. As a minority owner, the Company will not be able to recognize any portion of Ablis’, Bendistillery’s or Bend Spirits’ revenues or earnings in the Company’s financial statements. US GAAP also requires the Company to record these types of investments 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. As such, the Company will not be allowed to consolidate into its financial statements any portion of the revenues, earnings or assets of companies in which it owns minority equity ownership interests such as Ablis, Bendistillery and Bend Spirits. Moreover, even if there is evidence that the fair market values of the investments have increased above their historical costs, US GAAP does not allow increasing the recorded values of the investments. Under US GAAP, the only adjustments that may be made to the historical costs of the investments are write downs of the values of the investments, which must be made if there is evidence that the fair market values of the investments have declined to below the recorded historical costs.

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. Up to the date of this ~~report~~Quarterly Report on Form 10-Q, none of ~~the above~~ the above factors have been applicable to the Company’s investments.
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The qualitative assessments at the end of quarters one, two and three are done via conference ~~or video~~ calls with the management teams of Ablis, Bendistillery and Bend Spirits. The qualitative assessment at the end of the fourth quarter ~~four~~ relating to these entities also includes review of their respective financial statements that have been reviewed by a ~~third party~~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.

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On October ~~19, 2022,~~13, 2023, the management of LFTD Partners had a video conference ~~meeting of~~with the ~~board of directors and management~~officers of Ablis, Bendistillery and Bend ~~Spirits, and GJacobs and WJacobs was held.~~Spirits. During this meeting, the management of ~~Ablis, Bendistillery and Bend Spirits~~those companies discussed the performance of Ablis, Bendistillery and Bend Spirits during the ~~three~~quarter and nine months ended September 30, ~~2022.~~2023. Based upon the financial and non-financial information that was shared with LFTD Partners during that conference call, the management of LFTD Partners believes that no impairment of the value of Bendistillery, Bend Spirits or Ablis is warranted at this point in time. The information that was shared by the management of Ablis included, among other things: the planned launching of new ~~product launches~~Ablis products; growth in sales and ~~expansion into more stores.~~profitability; and a continued focus on cost savings. The information that was shared by the management of Bendistillery and Bend Spirits included, among other things: ~~increased on-premise sales are up from~~positive net income for the ~~third~~three and nine months ended September 30, 2023; the planned launch of a new Crater Lake Spirits product in the first quarter of ~~2021, Bendistillery’s in-house sales team~~2024; the installation of new equipment, which should reduce costs, is ~~making up for~~expected to be installed in the ~~loss~~first half of ~~revenue from third party distributors who have fired their own sales people as~~November 2023; a ~~result of the pandemic,~~fully operational new warehouse; and existing markets and new markets opening up. It is our understanding that the management of Bendistillery periodically receives inquiries regarding from large competitors about potentially investing in or acquiring Bendistillery.a continued focus on cost savings.

The Company’s Investment in Lifted Made

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 but is subject to annual impairment testing unless circumstances dictate more frequent assessments. 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. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess.

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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. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests.

The Company performed its annual fair value assessment at December 31, ~~2021~~2022 on the goodwill recognized as part of the acquisition of Lifted, and determined that no impairment was necessary. The factors that led the Company to this conclusion include, among other things: continued growth in sales and profitability year-over-year, the launch of first-to-market, ground-breaking new products, the addition of ~~more and~~ more wholesalers and distributors nationwide, increased sales to wholesalers and end consumers, the continued growth of Lifted’s flagship brand Urb Finest Flowers, and continued positive publicity of Lifted.

The Company’s Investment in SmplyLifted LLC

On September 22, 2020, LFTD Partners Inc. and Lifted Made and privately-held SMPLSTC, Costa Mesa, CA formed an equally-owned new entity called SmplyLifted LLC, which sold tobacco-free nicotine pouches in several flavors and nicotine strengths under the brand name FR3SH (www.GETFR3SH.com).
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Lifted had a 50% membership interest in SmplyLifted LLC. The other 50% of SmplyLifted is owned by SMPLSTC LLC and its principals, who are located in Costa Mesa, California. Under US GAAP, the Company used the equity method to account for its 50% membership interest in SmplyLifted. Under the equity method of accounting, the Company recorded its share (50%) of SmplyLifted’s earnings (or losses) as income (or losses) on the Consolidated Statements of Operations. The Company recorded its initial investment in SmplyLifted, which was $200,000, as an asset at historical cost. Under the equity method, the investment’s value was periodically adjusted to reflect the changes in value due to Lifted’s share in SmplyLifted’s income or losses.

During the ~~year ended December 31,~~ 2020 Stub Year, the Company recognized a loss of $4,429 from its 50% membership interest in SmplyLifted, and wrote down the value of its investment in SmplyLifted to $195,571. During the year ended December 31, 2021, the Company recognized a loss of $195,571 from its 50% membership interest in SmplyLifted. At December 31, 2021, Lifted Made wrote off its receivables from SmplyLifted, and its loans to SmplyLifted, which totaled $388,727.

On February 9, 2022, Lifted Made signed an Agreement to sell its 50% membership interest in SmplyLifted LLC to Corner Vapory LLC, an affiliate of NWarrender, CEO of Lifted, for $1, plus ninety-nine percent (99%) of any and all payments and other consideration received or owed to Corner Vapory LLC in regard to SmplyLifted’s existing inventory of FR3SH brand tobacco-free nicotine pouches. Lifted ~~has~~had the option to re-purchase the 50% membership interest in SmplyLifted LLC from Corner Vapory LLC for $1,000 in cash at any time on or before December 31, 2032. However, Lifted never exercised this option, and SmplyLifted was dissolved on November 28, 2022, due to insolvency.

NOTE 65 – PROPERTY AND EQUIPMENT, NET

Property and Equipment consist of the following:

Asset Class

September 30, 2022

December 31, 2021

Machinery & Equipment

$ 593,208

$ 258,533

Leasehold Improvements

$ 385,220

$ 152,985

Trade Show Booths

$ 10,000

$ 23,488

Vehicles

$ 75,047

$ 22,309

Computer Equipment

$ 7,312

$ 7,312

Furniture & Fixtures

$ 83,286

$ 46,553

Sub-total:

$ 1,154,073

$ 511,180

Less: accumulated depreciation

$ (164,384 )

$ (77,967 )

$ 989,688

$ 433,213

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Asset Class

September 30,
2023

December 31,
2022

Machinery & Equipment

$ 1,468,609

$ 664,606

Leasehold Improvements

$ 581,394

$ 379,499

Trade Show Booths

$ 55,081

$ 10,000

Vehicles

$ 75,047

$ 75,047

Computer Equipment

$ 18,979

$ 7,312

Furniture & Fixtures

$ 107,509

$ 92,934

Sub-total:

$ 2,306,619

$ 1,229,398

Less: accumulated depreciation

$ (472,129 )

$ (209,143 )

$ 1,834,490

$ 1,020,255

The useful lives of the Company’s fixed assets by asset class are as follows:

Asset Class
Estimated
Useful Life
Machinery & Equipment

60 months
Leasehold Improvements

60 months
Trade Show Booths

36 months
Vehicles

60 months
Computer Equipment

60 months
Furniture & Fixtures

60 months

Leasehold Improvements are depreciated over the shorter of the length of the lease or the estimated useful life. ~~Depreciation~~After allocating depreciation of machinery and equipment of $66,768 and $144,493, respectively, as overhead to finished goods, depreciation expense of ~~$18,279~~$44,012 and ~~$49,854~~$118,493, respectively, was recognized during the three and nine months ended September 30, ~~2022.~~ 2023.
In comparison, ~~depreciation expense of $10,992 and $53,483 was recognized~~ during the three and nine months ended September 30, ~~2021, respectively.~~
~~NOTE 7 – NOTES RECEIVABLE~~
~~SmplyLifted LLC~~
~~At March 31, 2021, the Company had made shortfall loans~~2022, $15,682 and $41,809, respectively, of depreciation related to ~~SmplyLifted LLC totaling $387,500, used primarily~~machinery and equipment was allocated as overhead to finished goods. After allocating depreciation of machinery and equipment for the ~~purchase~~quarter as overhead to finished goods, depreciation expense of ~~inventory. As of March 31, 2021, imputed interest receivable on the loans totaled $149.~~
~~At December 31, 2021, the Company had made interest-free loans to SmplyLifted LLC totaling $387,500, used primarily~~$18,279 and $49,854, respectively, was recognized for the ~~purchase~~three and nine months ended September 30, 2022. Also, in the Consolidated Statements of ~~inventory. As of December 31, 2021, imputed interest receivable on the loans totaled $580. As described above, at December 31, 2021, these notes and related interest receivable were written off.~~Operations, depreciation expense is consolidated with amortization expense.

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NOTE 6 – NOTES RECEIVABLE
The William Noyes Webster Foundation, Inc.
The Foundation, a non-profit Massachusetts corporation, has received a provisional registration from the Commonwealth of Massachusetts to own and operate a medical marijuana cultivation facility in Plymouth, Massachusetts, and a medical marijuana dispensary in Dennis, Massachusetts. Jane W. Heatley (“Heatley”) is the founder and a member of the board of directors of the Foundation.
Teaming Agreement – The Company believes it is highly likely that the board of directors of the Foundation will only approve contracts that have been negotiated and approved by Heatley. Consequently, on July 8, 2014, the Company entered into a Teaming Agreement (the “Teaming Agreement”) with Heatley, in which, among other things: (1) the Company and Heatley agreed to use their respective best efforts, working exclusively together as a team, and not as a partnership or other entity, in order to consummate transactions, agreements, contracts or other arrangements pursuant to which the Company will provide capital and expertise to the Foundation; and (2) Heatley agreed that Heatley shall not, and shall not permit the Foundation to, discuss or negotiate for debt or equity financing, or consulting services or other expertise, from any third party. The Company claims that Heatley violated the Teaming Agreement by discussing and negotiating for debt or equity financing, or consulting services or other expertise, from at least one third party. Heatley claims that the Company violated the Teaming Agreement alleging that the Company failed to lend funds to the Foundation in accordance with the Teaming Agreement. The Company believes Heatley’s claim to be baseless. No assurances whatsoever can be made that Heatley will comply with the terms of the Teaming Agreement, nor that the Company will be able to adequately enforce the terms of the Teaming Agreement if it is ever the subject of litigation.
Promissory Note – On July 14, 2014, the Foundation signed and delivered to the Company a Secured Promissory Note (the “Note”) which is in the stated loan amount of $1,500,000, and is secured by a Security Agreement of even date therewith (the “Security Agreement”). The Note provides that the $1,500,000 loan may be advanced in one or more installments as the Foundation and the Company may mutually agree upon. The Foundation and the Company mutually agreed that the first installment of this loan would be $602,500. Pursuant to instructions from the Foundation, on July 14, 2014, the Company paid $2,500 owed by the Foundation to one of its consultants, and the Company advanced $600,000 directly to the Foundation. The amount and timing of subsequent loan installments under the Note, which could have totaled $897,500, had not yet been mutually agreed upon between the Foundation and the Company as of the date of the Note.
Between April and July 2015, the Company loaned an additional $135,350 to the Foundation, evidenced by the Note and secured by the Security Agreement. Following such additional loans, the principal of the loan from the Company to the Foundation, evidenced by the Note and secured by the Security Agreement, is now $737,850. The principal balance outstanding under the Note bore interest at the rate of 12.5% per annum, compounded monthly. It was contemplated that the first payment of accrued interest by the Foundation under the Note would be made as soon after the Foundation commences operations of the Plymouth Cultivation Facility and the Dennis Dispensary as the Foundation’s cash flows shall reasonably permit, but in any event no later than one year after the Foundation commences operations. The principal of the Note would be payable in eight consecutive equal quarterly installments, commencing on the last day of the calendar quarter in which the Foundation commences operations. Principal on the Note and related accrued interest would be considered past due if the aforementioned payments were not received by their due dates.
Uncollectable Note and Interest Receivable – The Company assessed the collectability of the Note based on the adequacy of the Foundation’s collateral and the Foundation’s capability of repaying the Note according to its terms. Based on this assessment, on September 1, 2015, the Company concluded that Note and interest receivable would not be collectible. As such, the Company wrote off the Note totaling $737,850 and interest receivable totaling $97,427 as bad debt expense on September 1, 2015.
NOTE 7 – INTANGIBLE ASSETS, NET

~~www.LiftedMade.com~~ Website

The cost of developing Lifted’s website, www.LiftedMade.com, ~~is being~~which has been superseded by www.urb.shop, was amortized over 32 months. No amortization related to the website was recognized during the three and nine months ~~and~~ended September 30, 2023 since the website intangible asset was fully amortized as of December 31, 2022. In comparison, $347 and $1,040, respectively, in amortization related to the website was recognized during the three and nine months ended September 30, 2022. ~~In comparison, $417 and $1,251 in amortization related to the website was recognized during the three and nine months ended September 30, 2021.~~
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NOTE 98 – RELATED PARTY TRANSACTIONS

Sublease ~~For Commuter Employees~~ of Space Located at 2701-09 West Fulton PH, Chicago, Illinois 60612

On July 6, 2022, ~~our wholly owned subsidiary~~ Lifted entered into a sublease for office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago, Illinois 60612. The sublease costs $3,000 per month, plus supplemental lease related charges such as real estate taxes and common expenses of the property that we anticipate will be commercially typical costs. The sublease was retroactively effective as of June 1, 2022 and for a five-month term that ended on October 31, 2022. The purpose of the sublease is to make available office space for the members of ~~Lifted Made's~~Lifted’s sales team who live in Chicago. These salespeople were spending significant time in their cars commuting from Chicago to Kenosha.

The sublessor is one of our affiliates, Bill McLaughlin, Lifted’s Chief Strategy Officer. The sublease is structured so that Mr. McLaughlin's lease payment obligations to the landlord are passed on to Lifted on a dollar-for-dollar basis, such that Mr. McLaughlin does not realize a cashflow profit or loss from the sublease.

~~As described in “~~~~NOTE 15 – SUBSEQUENT EVENTS~~~~”, the~~The sublease is currently operating on a month-to-month basis. ~~Management expects to extend~~Since the ~~sublease once Mr. McLaughlin~~term is ~~presented~~less than twelve months, this lease is not recorded on the Consolidated Balance Sheet, and lease expense is recognized on a ~~new~~straight-line basis over the lease ~~from his landlord.~~ term.

~~Shipping Costs~~
~~Lifted has shared a shipping account with a company operated by NWarrender’s father,~~ Robert T. Warrender II who is also an employee of Lifted and a member of the board of directors of LFTD Partners Inc. Lifted did this in an effort to reduce shipping costs, as the shipper gave a price discount based on volume. Lifted reimbursed Robert T. Warrender II’s company for the cost of shipping. During the quarter ended September 30, 2022, Lifted did not reimburse Robert T. Warrender II for any shipping costs. During the nine months ended September 30, 2022, Robert T. Warrender II’s company refunded Lifted a net amount of $7,377. During the quarter ended September 30, 2022, also, Lifted bought a manual fork lift from Robert T. Warrender II’s company for a price that we believe reflected its fair market value. In comparison, during the three and nine months ended September 30, 2021, Lifted reimbursed Robert T. Warrender II $75,838 and $150,266 in shipping costs, respectively.
~~Robert T. Warrender II~~

In January 2022, Lifted hired Mr. Robert T. Warrender II, NWarrender’s father, as an employee. ~~Robert T.~~Mr. Warrender II is also a Director of LFTD Partners Inc. During the three and nine months ended September 30, 2023, $19,940 and $49,940, respectively, in wages were paid to Mr. Warrender. As of September 30, 2023, $1,720 in expense reimbursements were owed to Mr. Warrender. In comparison, during the three and nine months ended September 30, 2022, $16,154 and $39,231 in wages were paid to Robert T. Warrender II. As of September 30, 2022, $4,977 in expense reimbursements were owed to Robert T. Warrender II.

Through the second quarter of 2022, Lifted shared a shipping account with a company formerly operated by Mr. Warrender. Lifted did this in an effort to reduce shipping costs, as the shipper gave a price discount based on volume. Lifted reimbursed Mr. Warrender’s company for the cost of shipping. During the quarter ended September 30, 2022, Lifted did not reimburse Robert T. Warrender II for any shipping costs. During the nine months ended September 30, 2022, Mr. Warrender II’s company refunded Lifted a net amount of $7,377. During the quarter ended September 30, 2022, also, Lifted bought a manual fork lift from Mr. Warrender’s company for a price that we believe reflected its fair market value.
Robert T. Warrender III

Mr. Robert T. Warrender III is NWarrender’s brother, and Director Mr. Robert T. Warrender II’s son. From January 9, 2023 until July 1, 2023, Mr. Warrender worked for Lifted as an employee in sales; previously, Mr. Warrender operated as an independent contractor of Lifted. During the three and nine months ended September 30, 2023, $0 and $22,700 in compensation was paid to Mr. Warrender. In comparison, during the three and nine months ended September 30, 2022, $0 and $54,384 in sales commissions were paid to Robert T. Warrender ~~III, who is NWarrender’s brother, and Director Robert T. Warrender II’s son.~~III.

~~In comparison, during the~~Vincent J. Mesolella
During three and nine months ended September 30, ~~2021, $26,196~~2023 and ~~$43,678 in sales commissions were paid to Robert T. Warrender III.~~
2022, Lead Outside Director Mr. Vincent J. Mesolella
received directors fees in the amount of $4,000 for each quarter. During the quarter ended March 31, 2022, ~~Lead Outside Director Vincent J.~~Mr. Mesolella was also paid $40,000 of the Modified 2021 Bonus Pool Amount.

~~During each of the first, second and third quarters of 2022, Mr. Mesolella also received his $4,000 quarterly director fee.~~Joshua A. Bloom

~~There were no quarterly director fees or other compensation paid to Mr. Mesolella during~~During the three and nine months ended September 30, ~~2021.~~
2023 and 2022, Director Dr. Joshua A. Bloom
received quarterly directors fees in the amount of $4,000 for each quarter. During the quarter ended March 31, 2022, Dr. ~~Joshua A.~~ Bloom ~~Director,~~ was also paid $20,000 of the Modified 2021 Bonus Pool Amount.

Richard E. Morrissy
During the three and nine months ended September 30, 2023 and 2022, Director Mr. Richard E. Morrissy received quarterly directors fees in the amount of $4,000 for each ~~of the first, second and third quarters of 2022, Dr. Bloom also received his $4,000 quarterly director fee.~~quarter.

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~~Richard E. Morrissy~~James S. Jacobs

During ~~each of the first, second~~three and ~~third quarters of~~nine months ended September 30, 2023 and 2022, ~~Richard E. Morrissy,~~ Director ~~received his $4,000 quarterly director fee.~~
~~James S. Jacobs~~
~~During each of the first, second and third quarters of 2022,~~ Dr. James S. Jacobs received quarterly directors fees in the amount of $4,000 for each quarter. Dr. Jacobs is the brother of CEO GJacobs, and Dr. Jacobs is the uncle of WJacobs.
Kevin J. Rocio
During the three and nine months ended September 30, 2023 and 2022, Director Mr. Kevin J. Rocio received ~~his~~quarterly directors fees in the amount of $4,000 ~~quarterly director fee.~~for each quarter.

~~Kevin J. Rocio~~
~~During each of the first, second and third quarters of 2022, Kevin J. Rocio, Director, received his $4,000 quarterly director fee.~~
Gerard M. Jacobs

The Compensation Agreement contemplated an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon the closing of the Company’s acquisition of Lifted and an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon December 1, 2020, but such payments were not timely made, and pursuant to the Amendment No. 1 such aggregate of $700,000 of compensation was deferred and made due and payable by the Company to GJacobs and WJacobs together with interest accrued at the rate of 2% annually commencing January 1, 2021, upon demand by GJacobs and WJacobs, and through the date of the Omnibus Agreement only $58,439 of such deferred compensation had been paid to GJacobs (the remaining unpaid deferred compensation together with accrued interest is hereby referred to as the “Deferred Compensation”). Pursuant to the Omnibus Agreement, the Deferred Compensation was paid by the Company to GJacobs and WJacobs in January 2022. During the quarter ended March 31, 2022, GJacobs was also paid $143,713 of the Modified 2021 Bonus Pool Amount.

~~On April 29, 2021, the Company paid GJacobs a portion ($50,000) of the bonus payable to GJacobs in regard to the closing of the acquisition of Lifted.~~
On August 30, 2021, GJacobs exercised, for an aggregate purchase price of $1, his right to purchase a warrant to purchase an aggregate of 750,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised. GJacobs also exercised his right to purchase an aggregate of 31,250 shares of unregistered common stock of the Company at an exercise price of $0.03 per share under separate warrants. GJacobs also demanded immediate payment of $8,438.50 of the bonuses which are currently due and payable by the Company to GJacobs, and GJacobs allocated and applied such $8,438.50 to pay for the aggregate cost of purchasing and exercising the above warrants.
~~As of September 30, 2021, there was total interest of $7,043 payable to GJacobs related to the Deferred Compensation.~~
William C. “Jake” Jacobs

As described above, the Compensation Agreement contemplated an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon the closing of the Company’s acquisition of Lifted and an aggregate of $350,000 being paid by the Company to GJacobs and WJacobs upon December 1, 2020, but such payments were not timely made, and pursuant to the Amendment No. 1 such aggregate of $700,000 of compensation was deferred and made due and payable by the Company to GJacobs and WJacobs together with interest accrued at the rate of 2% annually commencing January 1, 2021, upon demand by GJacobs and WJacobs, and through the date of the Omnibus Agreement only $58,439 of such deferred compensation had been paid to GJacobs (the remaining unpaid deferred compensation together with accrued interest is hereby referred to as the “Deferred Compensation”). Pursuant to the Omnibus Agreement, the Deferred Compensation was paid by the Company to GJacobs and WJacobs in January 2022. Moreover, pursuant to the Omnibus Agreement and simultaneously with such payment of the Deferred Compensation as set out above, the Company paid WJacobs a bonus of $300,000 in January 2022. During the quarter ended March 31, 2022, WJacobs was also paid $152,341 of the Modified 2021 Bonus Pool Amount.

As of September 30, 2021, there was total interest of $2,992 payable to WJacobs related to the Deferred Compensation. Also as of September 30, 2021, there were $233 in travel expense reimbursements owed to WJacobs.
$2,681 in income tax previously erroneously paid by WJacobs to the Illinois Department of Revenue during the year ended December 31, 2021, and refunded back to Lifted by the Illinois Department of Revenue in January 2021, was repaid to WJacobs during the quarter ended June 30, 2021.
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Nicholas S. Warrender

On February 24, 2020 we closed on the acquisition of 100% of the ownership of CBD-infused products maker Warrender Enterprise Inc. d/b/a Lifted Made (formerly d/b/a Lifted Liquids) of Zion, Illinois (the “Merger”), for consideration of (1) $3,750,000 in cash, (2) $3,750,000 in the form of a secured promissory note accruing interest of 2% per year (the “$3.75M Note”), (3) 3,900,455 shares of unregistered common stock of the Company (the “Stock Consideration”), (4) 645,000 shares of unregistered common stock of the Company that constitute deferred contingent compensation to be issued and delivered to certain persons specified by NWarrender in a schedule delivered by NWarrender to the Company at the closing of the Merger (the “Deferred Contingent Stock”), and (5) warrants to purchase an aggregate of 1,820,000 shares of unregistered common stock of the Company at an exercise price of $5.00 per share that will be issued and delivered to certain persons specified by NWarrender in a schedule delivered by NWarrender to the Company at the closing of the Merger (the “Warrants”).

On December 30, 2021, LIFD repaid all principal and interest due under the $3.75M Note between NWarrender and LIFD dated February 24, 2020 that was a portion of the Merger Consideration paid by LIFD to NWarrender under the Merger Agreement. Pursuant to the terms of that promissory note, the unpaid balance of the note accrued interest at the rate of 2% per annum.

On December 30, 2021, NWarrender kept $1,000,000 of the repayment, plus accrued interest, and on January 3, 2022, reloaned $2,750,000 back to LIFD at the rate of 2.5% (the “$2.75M Note”).
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Prior to July 25, 2022, the $2.75M Note payable jointly by the Company and Lifted to NWarrender was secured by a perfected first lien security interest (the “Security Interest”) that encumbered all of the assets of the Company and Lifted. The Company was obligated to pay off the principal of the $2.75M Note in five semi-annual payments to NWarrender of $458,333 and a sixth and final semi-annual payment to NWarrender of $458,335, in each case plus accrued interest, starting on June 30, 2022.

On June 7, 2022, LFTD Partners prepaid $916,666 of the principal of the $2.75M Note, and $29,384 of related accrued interest through that date, which left $1,833,334 remaining principal on the $2.75M Note. On July 5, 2022, we entered into an agreement (“Acceleration Agreement”) with NWarrender. Under the terms of the Acceleration Agreement, we were obligated to repay the remaining principal balance as follows: $1,374,999 on or before December 31, 2022, and $458,335 on or before December 31, 2024. Then, on July 8, 2022, we prepaid $916,666, along with accrued interest, and then, on July 25, 2022, we prepaid the remaining principal balance of $916,668 and accrued interest in full, and all collateral securing the $2.75M Note was released.

Bonus

During the quarter ended March 31, 2022, NWarrender was also paid $680,000 of the Modified 2021 Bonus Pool Amount.

Obligation to Purchase Headquarters Building

Toward the end of 2020, NWarrender, through his assigned entity 95th Holdings, LLC, purchased a building located at 5511 95th Avenue in Kenosha, Wisconsin (“5511 Building”) that was immediately leased to us to conduct our expanded operations. The 5511 Building includes office, laboratory and warehouse space. As part of the lease agreement with 95th Holdings, LLC, the parties agreed that our wholly owned subsidiary Lifted would eventually purchase the 5511 Building. The purchase price for the 5511 Building was originally subject to variation based on a formula agreed upon by the parties. Pursuant to an agreement with Warrender on December 30, 2021, the parties agreed to set the purchase price for the 5511 Building at $1,375,000. Prior to the Acceleration Agreement, Lifted had an obligation to complete the purchase of the 5511 Building on or before December 31, 2022. Pursuant to the Acceleration Agreement, the deadline to purchase the 5511 Building has been extended by one year to December 31, 2023. In addition, the Acceleration Agreement contains a provision that if we raise $5,000,000 of debt or equity capital, then Lifted or our designee shall purchase the 5511 Building from 95th Holdings, LLC at the agreed upon $1,375,000 purchase price within two days.

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~~SmplyLifted LLC~~Warrender Enterprise Inc.
On a quarterly basis, SmplyLifted LLC reimbursed Lifted for WJacobs’ time as the Chief Financial Officer at WJacobs’ hourly rate. As of September 30, 2021, SmplyLifted LLC owed $313 to Lifted as reimbursement for WJacobs’ time as the Chief Financial Officer.
~~On February 2, 2021, Lifted owed SmplyLifted $450; on February 10, 2021, Lifted paid SmplyLifted the $450.~~

As of ~~March~~December 31, 2021, $4,607 was owed by Lifted ~~owed~~ to Warrender Enterprise Inc., an affiliate of NWarrender; this was related to an income tax refund related to Warrender Enterprise Inc. that was deposited into Lifted’s account. This money was returned to NWarrender in the first quarter of 2022, and Lifted did not owe any money to Warrender Enterprise Inc. at December 31, 2022.
SmplyLifted ~~$9,719. Between April 1, 2021 and April 5, 2021, Lifted paid SmplyLifted the $9,719.~~LLC

During the quarter ended September 30, 2022, SMPLSTC, one of Lifted’s partners in SmplyLifted, wrote a check to Lifted for $19,992 on behalf of SmplyLifted LLC, to cover two third-party accounting-related invoices of SmplyLifted. SMPLSTC’s check was short of the total of the two invoices by $146. Lifted paid the remaining $146 that SmplyLifted owed one of the third party accounting firms and wrote off the corresponding receivable from SmplyLifted, due to the lack of collectability from SmplyLifted because of SmplyLifted’s insolvency.

Corner Vapory LLC

NWarrender is a 50% owner in Corner Vapory LLC. Corner Vapory LLC owns a vape shop (called Corner Vapory), and Canna Vita, a CBD shop, both located in Kenosha, Wisconsin. The other owners of Corner Vapory LLC consist of Lifted’s Director of Operations and his wife. Periodically, Corner Vapory may purchase products from Lifted. No sales were made during the nine months ended September 30, 2023, and no accounts receivable were outstanding as of September 30, 2023.
During the three and nine months ended September 30, 2022, Corner Vapory LLC purchased $9,306 and $40,410, respectively, worth of products from Lifted, and Lifted wrote off its receivable of $17,260 from Corner Vapory as of September 30, 2022.

In comparison, during the three and nine months ended September 30, 2021, Corner Vapory purchased $21,842 and $34,032, respectively, worth of products from Lifted, and Lifted recorded a receivable of $9,070 from Corner Vapory as of September 30, 2021.
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95th Holdings, LLC

From June 1, 2018 through June 1, 2021, Lifted rented 3,300 square feet of space located in Zion, Illinois, for manufacturing, warehousing and office space. From June 1, 2021 through November 2021, Lifted leased such space on a month-to-month basis. From May 2020 until April 1, 2021, Lifted also temporarily used additional space located adjacent to its rented space in Zion, Illinois, and made payments in lieu of rent ~~therefor.~~therefore.

Lifted’s rented space in Zion, Illinois, was not adequate in light of various issues including zoning uncertainties, lack of air conditioning, and small size. As such, on December 18, 2020, Lifted as tenant entered into a Lease Agreement (the “Lease) with 95^th Holdings, LLC (“Landlord”) for office, laboratory and warehouse space in a building located at 5511 95^th Avenue, in the City of Kenosha, State of Wisconsin (the “Premises”). The lease commencement date was January 1, 2021, and lease termination date is January 1, 2026.

Lifted constructed improvements including a clean room, and gradually moved into the Kenosha Premises over the course of the first quarter of 2021. Under the terms of the “triple-net” Lease, starting on January 1, 2021, Lifted leased approximately 11,238 square feet at the Premises at $6.13 per square foot per year in base rent ($68,888.94 in 2021), which is subject to a 2% increase in base rent each year, plus certain operating expenses and taxes. The Lease will continue until midnight on the fifth anniversary date of the commencement date of the Lease. Lifted shall have the right to extend the original five year term of the Lease for one extension period of two years, commencing upon the expiration of the original term. Lifted and Landlord are required to execute an “Amendment of Extension” prior to six months before the expiration of the original term.

Rent Schedule
Date

Base
Monthly
Rent

January 1, 2021 – December 31, 2021

$ 5,740.75

January 1, 2022 – December 31, 2022

$ 5,855.57

January 1, 2023 – December 31, 2023

$ 5,972.68

January 1, 2024 – December 31, 2024

$ 6,092.13

January 1, 2025 – December 31, 2025

$ 6,213.97

Under the terms of the ~~lease,~~Lease, the tenant, Lifted, has the option to purchase the property at any time prior to December 31, 2025, and in any event, Lifted is obligated to purchase the property on or before that date. Pursuant to the Lease, in all cases Lifted’s purchase price for the Premises shall be in an amount equal to the greater of: (1) the fair market value of the Premises at the time Lifted purchases the Premises; or (2) any remaining principal balance of any purchase-money mortgage for the Premises existing at the time of the closing of Lifted’s purchase, plus the corresponding amount identified in the Additional Purchase Price Schedule attached as Exhibit B to the Lease, which is an additional amount ranging between $300,000 and $375,000 based on the number of years that have passed between the commencement of the Lease and the purchase of the Premises by Lifted.

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Landlord is an entity owned by NWarrender, the Company’s Vice Chairman and COO, the CEO of Lifted, and the largest stockholder of the Company as beneficial owner of 3,900,455 common stock shares. Due to the potential conflict of interest, the terms and conditions of the Lease were negotiated on behalf of Lifted by Mr. Vincent J. Mesolella, the Lead Outside Director of the Company. Landlord and Lifted were represented by their own independent legal counsel in connection with the Lease. Under the terms of the Lease, NWarrender is able to benefit through his entity 95^th Holdings, LLC by receiving rent and by eventually selling the Premises to Lifted.

~~During the quarter ended September 30, 2022, Lifted paid $17,567 in rent to 95~~^th Holdings, LLC. In comparison, during the three months ended September 30, 2021, Lifted paid $17,219 in rent to 95th Holdings, LLC, and owed $3.25 in September 2021 rent at September 30, 2021 to 95th Holdings, LLC. During the nine months ended September 30, 2022 and September 30, 2021, Lifted paid $52,700 and $51,663, respectively, in rent to 95th Holdings, LLC.
Under the terms of the Omnibus Agreement, Lifted is obligated to purchase the Premises from Landlord on or before December 31, 2022 for a fixed purchase price of $1,375,000. Pursuant to the terms of the Acceleration Agreement, the purchase date has been delayed until on or before December 31, 2023.

~~Liquid Event Marketing~~
Liquid Event Marketing is a company owned by Lifted’s Director of Operations, who was hired by Lifted on March 29, 2021. During the quarter and nine months ended September 30, 2022, Lifted purchased $0 and $6,470 of services from Liquid Event Marketing, and $2,262 was payable to Liquid Event Marketing as of September 30, 2022. There were also $8,862 in expense reimbursements owed to Lifted’s Director of Operations as of September 30, 2022.
In comparison, during the quarter ended September 30, 2021, Lifted paid $26,465 to Liquid Event Marketing for labor and consulting, and Lifted recognized a payable to Liquid Event Marketing for $19,965 at September 30, 2021. During the quarter ended June 30, 2021, Lifted paid Liquid Event Marketing $54,829 for the purchase of fixed assets, the installation of fixed assets, and other services.
NOTE 109 – SHAREHOLDERS’ EQUITY

Issuance of Series A Convertible Preferred Stock

The Company has authorized 400,000 shares of its Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may be converted into 100 shares of common stock. The Series A Convertible Preferred Stock accrues and pays dividends at the rate of 3% annually. The accrued Series A Convertible Preferred Stock dividends are cumulative. The Series A Convertible Preferred Stock dividends shall cease to accrue at such time as the Company’s Common Stock has closed at $3.00 per share or higher for 20 consecutive trading days after the first date that the Series A Registration Statement is effective, and there have been, on average, at least 25,000 shares traded on each of those 20 consecutive trading days. The Series A Convertible Preferred Stock have no voting rights. The holders of the Series A Convertible Preferred Stock shall have voluntary conversion rights. Shares of Series A Convertible Preferred Stock are subject to mandatory conversion (in the discretion of the Company) at such time as the Company’s common stock has closed at $5.00 per share or higher for 20 consecutive trading days after the first date that the Series A Registration Statement is effective, and there have been, on average, at least 50,000 shares traded on each of those 20 consecutive trading days.
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Between February 27, 2019 and May 13, 2019, the Company accepted subscriptions from accredited investors to purchase 66,150 shares of newly issued Series A Preferred Stock for an aggregate purchase price of $6,615,000 in cash. These 66,150 shares of Series A Preferred Stock are convertible at the option of the holders into 6,615,000 shares of newly issued common stock of the Company, or $1.00 per share of common stock of the Company. The Series A Preferred Stock will receive an annual 3% dividend, and will be subject to mandatory conversion, under terms and conditions set forth in the Certificate of Designation of the Series A Preferred Stock. On August 2, 2019, the Company filed a Form S-1 Registration Statement covering the shares of newly issued common stock of the Company into which the Series A Convertible Preferred Stock can be converted. On July 6, 2020, the Company filed with the SEC an amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On December 10, 2020, the Company filed with the SEC a second amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On June 2, 2021, the Company filed with the SEC a third amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On July 2, 2021, the Company filed with the SEC a fourth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On July 26, 2021, the Company filed with the SEC a fifth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On August 19, 2021, the Company filed with the SEC a sixth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. The Registration Statement was approved and deemed effective by the SEC on August 26, 2021.
As of September 30, ~~2022, 61,650~~2023, 63,650 shares of Series A Preferred Stock have been converted into a total of ~~6,165,000~~6,365,000 shares of common stock of the Company, which leaves ~~4,500~~2,500 shares of Series A Preferred Stock currently outstanding, convertible into ~~450,000~~250,000 shares of common stock of the Company.

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As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company has accrued a liability of ~~$5,838~~$3,438 and ~~$11,926,~~$9,240, respectively, as dividends payable to holders of the Series A Convertible Preferred Stock. The Company fully intends on paying the annual dividends to the holders of the Series A Convertible Preferred ~~Stock, and as such, the Company has accrued the liability on the Series A Convertible Preferred~~ Stock. During the three and nine months ended September 30, ~~2022,~~2023, a total of $0$1,463 and ~~$17,147,~~$14,963, respectively, of cash dividends were paid to the Series A Convertible Preferred Stock holders. In comparison, during the three and nine months ended September 30, ~~2021,~~2022, a total of $0 and ~~$199,187,~~$17,147, respectively, of cash dividends were paid to the Series A Convertible Preferred Stock holders.

All of the issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. Each investor represented that they were accredited investors, as defined in Rule 501 of Regulation D and, there was no general solicitation or general advertising used to market the securities. We made available to each investor disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates for notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.

Issuance of Series B Convertible Preferred Stock

The Company has authorized 5,000,000 shares of its Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock may be converted into one ~~shares~~share of common stock. The Series B Convertible Preferred Stock accrues and pays dividends at the rate of 3% annually. The accrued Series B Convertible Preferred Stock dividends are cumulative. The Series B Convertible Preferred Stock dividends shall cease to accrue at such time as the Company’s Common Stock has closed at $7.00 per share or higher for 20 consecutive trading days after the first date that the Series B Registration Statement is effective, and there have been, on average, at least 25,000 shares traded on each of those 20 consecutive trading days. The Series B Convertible Preferred Stock have no voting rights. The holders of the Series B Convertible Preferred Stock shall have voluntary conversion rights. Shares of Series B Convertible Preferred Stock are subject to mandatory conversion (in the discretion of the Company) at such time as the Company’s common stock has closed at $9.00 per share or higher for 20 consecutive trading days after the first date that the Series B Registration Statement is effective, and there have been, on average, at least 50,000 shares traded on each of those 20 consecutive trading days.
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Between July 24, 2019 and December 5, 2019, the Company accepted subscriptions from accredited investors to purchase 100,000 shares of newly issued Series B Preferred Stock for an aggregate purchase price of $500,000 in cash. These 100,000 shares of Series B Preferred Stock are convertible at the option of the holder into 100,000 shares of newly issued common stock of the Company. The Series B Preferred Stock will receive an annual 3% dividend, and will be subject to mandatory conversion, under terms and conditions set forth in the Certificate of Designation of the Series B Preferred Stock. On August 2, 2019, the Company filed a Form S-1 Registration Statement covering the shares of newly issued common stock of the Company into which the Series B Convertible Preferred Stock can be converted. On July 6, 2020, the Company filed with the SEC an amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On December 10, 2020, the Company filed with the SEC a second amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On June 2, 2021, the Company filed with the SEC a third amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On July 2, 2021, the Company filed with the SEC a fourth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On July 26, 2021, the Company filed with the SEC a fifth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On August 19, 2021, the Company filed with the SEC a sixth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. The Registration Statement was approved and deemed effective by the SEC on August 26, 2021.
As of September 30, ~~2022,~~2023, 60,000 shares of Series B Preferred Stock have been converted into a total of 60,000 shares of common stock of the Company, which leaves 40,000 shares of Series B Preferred Stock currently outstanding, convertible into 40,000 shares of common stock of the Company.
~~F-24~~
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As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company has accrued a liability of ~~$1,783~~$1,784 and $1,796, respectively as dividends payable to holders of the Series B Convertible Preferred Stock. The Company fully intends on paying the annual dividends to the holders of the Series B Convertible Preferred Stock, and as such, the Company has accrued the liability on the Series B Convertible Preferred Stock. During the three and nine months ended September 30, ~~2022,~~2023, a total of $4,500 and $4,500, respectively, of cash dividends were paid to the Series B Convertible Preferred Stock holders. In comparison, during the three and nine months ended September 30, ~~2021,~~2022, a total of $4,500 and ~~$10,344,~~$4,500, respectively, of cash dividends were paid to the Series B Convertible Preferred Stock holders.

All of the issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. Each investor represented that they were accredited investors, as defined in Rule 501 of Regulation D and, there was no general solicitation or general advertising used to market the securities. We made available to each investor disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates for notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.

Share-Based Compensation
At the closing of acquisition of Lifted, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company at the closing of the Merger (the “Deferred Contingent Stock Recipients”). Now that certain conditions and requirements have been met, starting on February 24, 2023, the Deferred Contingent stock has begun to be issued to certain Deferred Contingent Stock Recipients who have instructed the Company to issue to them their respective, earned Deferred Contingent Stock.
Due to the lack of marketability of the Company’s common stock, LFTD Partners hired a third-party valuation firm (the “Valuation Firm”) to calculate discount rates to apply to the value of the Deferred Contingent Stock for both financial reporting and tax purposes. The Valuation Firm used the Finnerty Protective Put Model to determine the discount rates to apply to the Deferred Contingent Stock in order to value it, for both financial reporting and tax reporting purposes. The Finnerty model is variant of the protective put method that estimates the discount based on the average price over the restriction period rather than based on the final price.
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The Valuation Firm’s report indicated that, for financial reporting purposes, a 22% discount for lack of marketability should be used when valuing all 645,000 shares of Deferred Contingent Stock, as of February 24, 2023. Assumptions used in the model for financial reporting purposes include: that no dividends on common stock will be paid, that the expected volatility is based on the historical volatility of the trading of LIFD’s common stock, and that there is a 0.5 year term based on the six-month holding period due to Rule 144. As of February 24, 2023, total stock compensation expense of $2,138,175 related to the 645,000 shares of Deferred Contingent Stock was recognized.
The Valuation Firm’s report also indicated that, for tax reporting purposes, discounts ranging from 23% to 31% for lack of marketability and blockage should be used when valuing the 410,000 shares of Deferred Contingent Stock that were issued during the first quarter of 2023. In the Finnerty Protective Put model for each unique block of issued stock, the Valuation Firm has assumed a minimum term of six months, equal to the minimum time to sell the subject shares due to their restricted nature; and a maximum term equal to the amount of time it would take for the market to absorb the additional shares based upon an assumed additional volume of 7.5%. The Valuation Firm also assumed that no dividends on common stock will be paid, and that the expected volatility is based on the historical volatility of the trading of LIFD’s common stock.

No shares of Deferred Contingent Stock were issued during the second quarter of 2023.
On September 21, 2023, 93,000 shares of Deferred Contingent Stock were issued. A different valuation firm (“Second Valuation Firm”) was engaged to estimate the discount for lack of marketability and blockage applicable to the fair market value of these 93,000 shares of Deferred Contingent Stock for tax reporting purposes. The Second Valuation Firm used the Finnerty Protective Put Model to determine the discount rate to apply to the Deferred Contingent Stock in order to value it for tax reporting purposes. In the Finnerty Protective Put model, the Second Valuation Firm has assumed a minimum term of six months, equal to the minimum time to sell the subject shares due to their restricted nature; and a maximum term equal to the amount of time it would take for the market to absorb the additional shares based upon an assumed additional volume of 20% and 7.5%. The Second Valuation Firm also assumed that no dividends on common stock will be paid, expected volatility based on observed volatility of the trading of LIFD’s common stock, and risk-free rate based on the yield on U.S. Treasury bonds. The Second Valuation Firm’s report indicated that, for tax reporting purposes, a 27% discount should be used when valuing the 93,000 shares of Deferred Contingent Stock that were issued on September 21, 2023.
As of September 30, 2023, 503,000 shares of Deferred Contingent Stock have been issued to certain Deferred Contingent Stock Recipients, including 200,000 shares of Deferred Contingent Stock to WJacobs.
In comparison, no share-based compensation expense was recognized during the three orand nine months ended September 30, ~~2022 or September 30, 2021.~~2022.

The following is a summary of share-based compensation, stock option and warrant activity as of September 30, ~~2022~~2023 and changes during the ~~quarter~~three months then ended:

Weighted-Average

Aggregate

Weighted-Average

Remaining Contractual

Intrinsic

Shares

Exercise Price

Term (Years)

Value

Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, July 1, 2022

2,882,198

$ 3.55

2.55

$ 2,834,897

Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, September 30, 2022

2,882,198

$ 3.55

2.30

$ 2,035,579

Outstanding Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants, September 30, 2022

3,627,198

$ 3.85

2.32

$ 2,035,579

Weighted-

Weighted-Average
Remaining

Aggregate

Average

Contractual

Intrinsic

Shares

Exercise Price

Term (Years)

Value

Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, July 1, 2023

3,612,198

$ 3.85

1.57

$ 453,593

Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, September 30, 2023

3,612,198

$ 3.85

1.32

$ 46,650

Outstanding Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants, September 30, 2023

3,612,198

$ 3.85

1.32

$ 46,650

Conversion of Series A Preferred Stock by a Non-Affiliated Shareholder
On August 4, 2023, a non-affiliated shareholder of the Company converted his 2,000 shares of Series A Preferred Stock into 200,000 shares of unregistered common stock of the Company.

~~F-25~~F-31
Table of Contents

~~Stock Buy-back Transactions~~Cancellation of Warrants Issued in Connection with ~~a Non-Affiliate Stockholder and Retirement~~the Acquisition of ~~72,000 Shares of Common Stock Held in Treasury~~
On November 24, 2020, LFTD Partners purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.
On January 8, 2021, LFTD Partners Inc. purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.
~~Exercise of Warrant by a Non-Affiliated Entity~~Lifted Made

On February ~~19, 2022, an entity non-affiliated with the Company exercised an option~~24, 2023, warrants to purchase ~~50,000~~15,000 shares of unregistered common stock of the Company ~~at an exercise price~~were cancelled because the Warrant recipient was no longer continuously employed by Lifted or was no longer a contractor, consultant, paid advisor, or informal paid advisor of ~~$1.00 per share, which the entity paid.~~Lifted.

Stock Buy-back Transactions with a Non-Affiliate Stockholder Stock and Retirement of 100,000 Shares of Common Stock

On March 1, 2022, LFTD Partners signed an agreement to purchase a total of 100,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $1.50 per share for a total purchase price of $150,000. On March 8, 2022, all 100,000 shares were transferred to the Company and immediately cancelled.

~~Conversion~~Exercise of ~~Series A Preferred Stock~~Warrant by a Non-Affiliated ~~Shareholder~~Entity

On ~~April 1,~~February 19, 2022, aan entity non-affiliated ~~shareholder of~~with the Company ~~converted his 1,000 shares of Series A Preferred Stock into 100,000~~exercised an option to purchase 50,000 shares of unregistered common stock of the ~~Company.~~
~~Conversion~~Company at an exercise price of ~~Series A Preferred Stock by a Non-Affiliated Shareholder~~
~~On April 14, 2022, a non-affiliated shareholder of~~$1.00 per share, which the ~~Company converted 250 shares of his Series A Preferred Stock into 25,000 shares of unregistered common stock of the Company.~~entity paid.

NOTE 1110 – CONTINGENT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Operating and Finance Lease Right-of-Use Assets – In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”). The amended guidance, which is effective for the Company on January 1, 2019, requires the recognition of lease assets and lease liabilities on the balance sheet for those leases with terms in excess of 12 months and currently classified as operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet; lease expense for these types of leases are recognized on a straight-line basis over the lease term. Options to extend or terminate a lease are not included in the determination of the right-of-use asset or lease liability unless it is reasonably certain to be exercised. Lifted adopted ASU 2016-02 using the modified retrospective approach, electing the package of practical expedients.

Lifted does not own any physical properties.

Lease of Building Located at 5511 95th Ave, Kenosha, Wisconsin

On December 18, 2020, Lifted as tenant entered into a Lease Agreement (the “Lease) with 95th Holdings, LLC (“Landlord”) for office, laboratory and warehouse space in a building located at 5511 95^th Avenue, in the City of Kenosha, State of Wisconsin (the “Premises”). The lease commencement date was January 1, 2021, and the lease termination date is January 1, 2026.
~~F-26~~
~~Table of Contents~~

Landlord is an entity owned directly or indirectly by NWarrender, the Company’s Vice Chairman and COO, the CEO of Lifted, and the largest stockholder of the Company as the beneficial owner of 3,900,455 shares of common stock of the Company. Due to the potential conflict of interest, the terms and conditions of the Lease were negotiated on behalf of Lifted by Vincent J. Mesolella, the Lead Outside Director of the Company. Landlord and Lifted were represented by their own independent legal counsel in connection with the Lease. Under the terms of the Lease, NWarrender is able to benefit through his ownership of Landlord by Landlord’s receiving rent and eventually selling the Premises to Lifted.

Lifted constructed improvements to the Premises including a clean room, and gradually moved into the Premises over the course of the first quarter of 2021.

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Table of Contents
Under the terms of the “triple-net” Lease, starting on January 1, 2021, Lifted leased approximately 11,238 square feet at the Premises at $6.13 per square foot per year in base rent ($68,888.94 in 2021), which is subject to a 2% increase in base rent each year, plus certain operating expenses and taxes. The Lease will continue until midnight on the fifthanniversary date of the commencement date of the Lease. Lifted shall have the right to extend the original five year term of the Lease for one extension period of two years, commencing upon the expiration of the original term. Lifted and Landlord are required to execute an “Amendment of Extension” prior to six months before the expiration of the original term.
Rent Schedule
Date

Base
Monthly
Rent

January 1, 2021 – December 31, 2021

$ 5,740.75

January 1, 2022 – December 31, 2022

$ 5,855.57

January 1, 2023 – December 31, 2023

$ 5,972.68

January 1, 2024 – December 31, 2024

$ 6,092.13

January 1, 2025 – December 31, 2025

$ 6,213.97

Under the terms of the Omnibus Agreement, Lifted was obligated to purchase the Premises from Landlord on or before December 31, 2022 for a fixed purchase price of $1,375,000. As a result, as of December 31, 2021, the Company modified its methodology for accounting of this finance lease (the “Modification Date”), such that the only liability recognized as of December 31, 2021 was a current (within one year) liability, and there was no long-term liability recognized. An immaterial loss on lease modification of $1,446 was also recognized as of the Modification Date. The Finance Lease Right-of-Use Asset value was reduced to reflect the fixed purchase price agreed to under the Omnibus Agreement.

Pursuant to the Acceleration Agreement, Lifted’s obligation to purchase the Premises from Landlord was delayed to on or before December 31, 2023.

Prior to the signing of the Acceleration Agreement, the Finance Lease Right-of-Use Asset was to be amortized over its useful life (39 years) on a prospective basis from the Modification Date. That is, the Finance Lease Right-of-Use Asset was previously amortized over the lease term, but given mandatory purchase by December 31, 2022, the Finance Lease Right-of-Use Asset will be amortized over 39 years starting on the Modification Date. As a result of the signing of the Acceleration Agreement, the accounting for the Finance Lease Right-of-Use Asset will be adjusted accordingly.

Lease of Space Located at 8920 58th Place, Suite 850, Kenosha, Wisconsin

On September 23, 2021, Lifted entered into a Lease Agreement (the “58^th Lease”) with TI Investors of Kenosha LLC, (“TI”) for office and warehouse space ~~(the “58~~^th~~Suite 850”)~~ located at 8920 58th Place, Suite 850, Kenosha, WI ~~53144.~~53144 (the“58^thLease”). The 58^th ~~Suite 850 serve~~Lease serves as sales offices, ~~and~~ finished goods storage and outgoing shipping for Lifted.

The term of the 58^th Lease commenced on October 1, 2021. The initial term of the 58^th Lease will extend approximately three year, unless earlier terminated in accordance with the terms and conditions of the 58^th Lease. While extensions are not prohibited, Lifted does not have the right to unilaterally elect to extend the term of the 58^th Lease for an additional term.

Under the terms of the 58^th Lease, Lifted leases approximately 5,000 square feet of ~~the 58~~^th ~~Suite 850~~space and pays a base square foot charge of $5.75 per square foot per annum, with a 3% increase in rent each year during the term. Lifted is also be responsible for paying its proportionate share of real estate taxes and other operating costs. This lease is accounted for as an operating lease.

~~F-27~~
~~Table of Contents~~
Rent Schedule

Date

Base
Monthly
Rent

Base
Monthly
Rent

10/01/2021 – 09/30/2022

$
2,395.84

$ 2,395.84

10/01/2022 – 09/30/2023

$
2,467.72

$ 2,467.72

10/01/2023 – 09/30/2024

$
2,541.75

$ 2,541.75

Lease of Space Located at 8910 58th Place, Suites 600 and 700, Kenosha, Wisconsin

On November 17, 2021, Lifted entered into a lease agreement with TI for office and warehouse space located at 8910 58th Place, Suites 600 & 700, Kenosha, WI 53144 (the “Second 58^th Lease”). The Second 58^th Lease is used for raw goods storage.

The term of the Second 58^th Lease commenced on January 1, 2022. The initial term of the Second 58^th Lease will extend approximately five years, unless extended or earlier terminated in accordance with the Second 58^th Lease. While extensions are not prohibited, Lifted does not have the right to unilaterally elect to extend the term of the Second 58^th Lease for an additional term.

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Table of Contents
Under the terms of the Second 58^th Lease, Lifted leases approximately 8,000 square feet ~~at 8910 58th Place, Suites 600 & 700, Kenosha, WI~~of space and ~~pay~~pays a base square foot charge of $6.00 per square foot per annum, with increases in rent each year during the term as set out in the table titled “Rent Schedule” below. Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs. This lease is accounted for as an operating lease.

Rent Schedule

Date

Base
Monthly
Rent

01/01/2022 – 12/31/2022

$ 4,000.00

01/01/2023 – 12/31/2023

$ 4,120.00

01/01/2024 – 12/31/2024

$ 4,243.60

01/01/2025 – 12/31/2025

$ 4,370.91

01/01/2026 – 12/31/2026

$ 4,502.34

Lease of Space Located at 9560 58th Place, Suite 360, Kenosha, Wisconsin 53144

On May 31, 2022, Lifted entered into another lease agreement with TI for office and warehouse space located at 9560 58th Place, Suite 360, Kenosha, WI 53144 (the “Third 58^th Lease”). The Third 58^th Lease is ~~expected to be~~ used for ~~gummy~~ manufacturing, as well as ~~provide additional needed~~ office space.

The term of the Third 58^th Lease commenced on July 1, 2022 (the “Commencement Date”). The initial term of the Third 58^th Lease will extend approximately five years from the Commencement Date and ending June 30, 2027, unless extended or earlier terminated in accordance with the Lease. While extensions are not prohibited, Lifted does not have the right to unilaterally elect to extend the term of the Third 58^th Lease for an additional term.

Under the terms of the Third 58^th Lease, Lifted leases approximately 6,132 square feet ~~at 9560 58th Place, Suite 360, Kenosha, WI 53144~~of space and ~~pay~~pays an initial base square foot charge of $10.75 per square foot per annum, with increases in rent each year during the term as set out in the table titled “Rent Schedule” below. Lifted is also responsible for paying its proportionate share of real estate taxes and other operating ~~cost.~~costs. This lease is accounted for as an operating lease.

~~F-28~~
~~Table of Contents~~
Rent Schedule

Date

Base Monthly Rent

Base
Monthly
Rent

07/01/2022 – 06/30/2023

$ 5,493.25

$ 5,493.25

07/01/2023 – 06/30/2024

$ 5,630.58

$ 5,630.58

07/01/2024 – 06/30/2025

$ 5,771.35

$ 5,771.35

07/01/2025 – 06/30/2026

$ 5,915.63

$ 5,915.63

07/01/2026 – 06/30/2027

$ 6,063.52

$ 6,063.52

Sublease of Space Located at 2701-09 West Fulton PH, Chicago, Illinois 60612

On July 6, 2022, Lifted entered into a sublease for office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago, Illinois 60612. The sublease costs $3,000 per month, plus supplemental lease related charges such as real estate taxes and common expenses of the property that we anticipate will be commercially typical costs. The sublease was retroactively effective as of June 1, 2022 and for a five-month term that ended on October 31, 2022. The purpose of the sublease is to make available office space for the members of Lifted’s sales team who live in Chicago. ~~These salespeople were spending significant time in their cars commuting from Chicago to Kenosha.~~

The sublessor is one of our affiliates, Bill McLaughlin, Lifted’s Chief Strategy Officer. The sublease is structured so that Mr. McLaughlin's lease payment obligations to the landlord are passed on to Lifted on a dollar-for-dollar basis, such that Mr. McLaughlin does not realize a cashflow profit or loss from the sublease.

~~As described in “~~~~NOTE 15 – SUBSEQUENT EVENTS~~~~”, the~~The sublease is currently operating on a month-to-month basis. ~~Management expects~~Since the term is less than twelve months, this lease is not recorded on the Consolidated Balance Sheet, and lease expense is recognized on a straight-line basis over the lease term.
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Table of Contents
Lease of Space Located at 5732 95th Avenue, Suites 100-300, Kenosha, Wisconsin 53144
On November 28, 2022, Lifted entered into a lease agreement with Ladi Investments LLC (“Ladi”) for commercial space located at 5732 95th Avenue, Suite 200 and 300, Kenosha, WI 53144 (the “5732 Lease”). The 5732 Lease is used for manufacturing operations.
The 5732 Lease will commence on February 1, 2023. The initial term of the 5732 Lease will extend approximately five years (sixty-one months) from February 1, 2023 and end February 29, 2028, unless extended or earlier terminated in accordance with the 5732 Lease. While extensions are not prohibited, Lifted does not have the right to unilaterally elect to extend the ~~sublease once Mr. McLaughlin~~term of the 5732 Lease for an additional term.
Under the terms of the 5732 Lease, Lifted leases approximately 4,657 square feet of space. Lifted was not obligated to pay any base square foot charge during February 2023. During the next twelve months, Lifted will pay a base square foot charge of $0.73 per square foot per annum, with a 4% increase in rent each twelve months thereafter during the term as set out in the table titled “Rent Schedule” below. Lifted is ~~presented~~also responsible for paying its proportionate share of real estate taxes and other operating costs.
Rent Schedule
Date

Base
Monthly
Rent

February 1, 2023 – February 28, 2023

$ 0.00

March 1, 2023 – February 29, 2024

$ 3,395.73

March 1, 2024 – February 28, 2025

$ 3,531.56

March 1, 2025 – February 28, 2026

$ 3,672.82

March 1, 2026 – February 28, 2027

$ 3,819.73

March 1, 2027 – February 29, 2028

$ 3,972.52

First Amendment to the 5732 Lease
Effective April 1, 2023 (the “Expansion Date”), the 5732 Lease was amended (the "First Amendment to the 5732 Lease”) to expand the square footage of the leased space to include an additional 2,668 square feet of space located at 5732 95^th Avenue, Suite 100, Kenosha, Wisconsin 53144 (the “Expansion Area”).
Commencing on the Expansion Date, the base monthly rent for the Expansion Area is:
Date

Base Monthly
Rent

April 1, 2023 – January 31, 2024

$ 1,945.42

February 1, 2024 – January 31, 2025

$ 2,023.23

February 1, 2025 – January 31, 2026

$ 2,104.16

February 1, 2026 – January 31, 2027

$ 2,188.33

February 1, 2027 – January 31, 2028

$ 2,275.86

February 1, 2028 – February 29, 2028

$ 2,366.90

Lifted is also responsible for paying its proportionate share of real estate taxes and other operating costs.
The 5732 Lease and the First Amendment to the 5732 Lease are accounted for as a ~~new lease from his landlord.~~single operating lease.

Lease of Space ~~in Zion, Illinois~~Located at 16178 US Hwy 550, Aztec, San Juan County, New Mexico

~~From June 1, 2018 through June 1, 2021,~~Pursuant to the terms of the Oculus Merger Agreement, upon the closing of the Merger, Lifted ~~rented 3,300~~has assumed Oculus’ lease of office and operational space in Aztec, New Mexico. The leased premises includes a shop building of approximately 4,800 square feet and adjacent fenced parking area located at 16178 US Hwy 550, Aztec, San Juan County, New Mexico. The term of ~~space located~~this lease shall be for a period of one (1) year, commencing on the 1st day of December 2022, and continuing in ~~Zion, Illinois, for manufacturing, warehousing~~force until the 30th day of November, 2023, unless terminated earlier as provided in this lease. The lease payments are $3,850 per month. All monthly payments are due and ~~office space. From June 1, 2021 through November 2021, Lifted~~payable in advance on the first day of each month. The lessee is also required to pay taxes, insurance and certain maintenance costs of the leased ~~such space~~premises. Since the term is less than twelve months, this lease is not recorded on the Consolidated Balance Sheet, and lease expense is recognized on a month-to-month basis. From May 2020 until April 1, 2021, Lifted also temporarily used additional space located adjacent to its rented space in Zion, Illinois, and made payments in lieu of rent therefor.straight-line basis over the lease term.
F-35
Table of Contents

Third Party Facilities

From time to time, the Company maintains inventory at third party ~~manufacturer or copacker~~ facilities around the USA.

Balance Sheet Classification of Operating Lease Assets and Liabilities

Asset

Balance Sheet Line

September 30, 2022

Balance Sheet
Line

September 30,
2023

Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $71,554 in 2022

Non-Current Assets

$ 525,942

Operating Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $223,030

Non-Current Assets

$ 670,675

Liability

Balance Sheet Line

September 30, 2022

Balance Sheet
Line

September 30,
2023

Operating Lease Liabilities

Current Liabilities

$ 115,010

Current Liabilities

$ 172,834

Non-Current Liabilities

$ 414,875

Non-Current Liabilities

$ 501,625

Balance Sheet Classification of Finance Lease Assets and Liabilities
Asset

Balance Sheet
Line

September 30,
2023

Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $238,408 in 2023

Non-Current Assets

$ 1,242,000

Liability

Balance Sheet
Line

June 30,
2023

Finance Lease Liabilities

Current Liabilities

$ 1,376,595

Lease Costs
The table below summarizes the components of lease costs for the following periods:

For the Three Months Ended
September 30,

Lease Cost:

2023

2022

Finance lease expense:

Amortization of Right-of-Use Assets

$ 10,800

$ 10,800

Interest on lease liabilities

24,388

23,924

Operating lease expense

55,314

$ 20,147

Total

$ 90,502

$ 54,871

For the Nine Months Ended
September 30,
Lease Cost:

2023

2022

Finance lease expense:

Amortization of Right-of-Use Assets

$ 32,400

$ 35,473

Interest on lease liabilities

72,825

46,445

Operating lease expense

155,336

$ 60,442

Total

$ 260,561

$ 142,360

~~F-29~~F-36
Table of Contents

~~Balance Sheet Classification of Finance Lease Assets and Liabilities~~
Asset

Balance Sheet Line

September 30, 2022

Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $195,208 in 2022

Non-Current Assets

$ 1,285,200

Liability

Balance Sheet Line

September 30, 2022

Finance Lease Liabilities

Current Liabilities

$ (26,079 )
Finance Lease Liabilities

Non-Current Liabilities

$ 1,376,439

~~Lease Costs~~
~~The tables below summarizes the components of lease costs for the three and nine month periods ended September 30, 2022:~~
Lease Cost:

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Finance lease expense:

Amortization of Right-of-Use Assets

$ 10,800

$ 12,337

Interest on lease liabilities

23,924

13,188

Operating lease expense

20,147

-

Total

$ 54,871

$ 25,525

Lease Cost:

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

Finance lease expense:

Amortization of Right-of-Use Assets

$ 35,473

$ 37,010

Interest on lease liabilities

46,445

39,673

Operating lease expense

60,442

8,000

Total

$ 142,360

$ 84,683

As described in ~~Note 1,~~NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, a portion of monthly overhead costs such as lease expense are allocated to finished goods. For example, monthly overhead costs such as payments for rent, 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.

Maturity Analysis as of September 30, 2022:

Finance

Operating

2022

$ 35,133

$ 55,070

2023

1,445,970

146,018

2024

-

142,211

2025

-

122,573

2026

-

125,903

Thereafter

-

36,381

Total

1,481,103

628,156

Less: Present value discount

(138,730 )

(98,271 )
Lease liability

$ 1,342,373

$ 529,885

Maturity Analysis as of September 30, 2023:

~~F-30~~
~~Table of Contents~~

Finance

Operating

2023

$ 1,392,918

$ 52,900

2024

-

208,519

2025

-

191,533

2026

-

197,622

2027

-

110,969

Thereafter

-

12,588

Total

1,392,918

774,131

Less: Present value discount

(16,323 )

(99,672 )
Lease liability

$ 1,376,595

$ 674,459

Potential Issuance of Warrants to Purchase Shares of Common Stock of the Company

The Compensation Committee of the Company’s Board of Directors may, from time to time, recommend that certain warrants to purchase shares of common stock of the Company should be issued to new or current members of the Company’s Board of Directors, to officers and employees of the Company and its subsidiaries, or to members of any advisory board or consultants to the Company.

Bonus to Lifted’s Chief Strategy Officer

Lifted’s Chief Strategy Officer (the “CSO”) hired on July 1, 2021 has developed and implemented certain important strategies which have assisted Lifted’s efforts to increase its production, fulfillment and sales capabilities. ~~This employee’s~~The CSO’s two-year agreement with Lifted entitles such ~~Chief Strategy Officer~~CSO to be paid an annual salary of $180,000 plus a bonus equal to 5% of total net sales for Lifted in excess of $6,000,000 per quarter.

At September 30, 2023, the bonus payable to the CSO totaled $161,533. In comparison, at December 31, 2022, the bonus payable to the ~~Chief Strategy Officer~~CSO totaled ~~$261,864.~~$265,694. This bonus is accrued ~~for~~ in the Accounts Payable and Accrued Expenses liability account on the Consolidated Balance Sheets.

Company-Wide Management Bonus Pool

Please refer to “NOTE 1312 – COMPANY-WIDE MANAGEMENT BONUS ~~POOL”~~POOL for more information about the company-wide management bonus pool.

Payment of Brokers’ Fees Related to the Sale of Preferred Stock
The Company has committed to pay brokers’ fees in regard to the capital being raised for the Company by such brokers in the Company’s private placements of preferred stock, such fee to consist of warrants to purchase unregistered shares of common stock of the Company at an exercise price equal to the conversion price per share of such preferred stock, exercisable at any time during a five year period; the number of such shares will be calculated as six percent of the aggregate capital raised by such brokers in the private placement of preferred stock divided by the conversion price per share of such preferred stock.
Other Contingent Contractual Obligations and Commercial Commitments
For other contingent contractual obligations and commercial commitments, please refer to NOTE 128 – RELATED PARTY TRANSACTIONS.
NOTE 11 – LEGAL PROCEEDINGS

The Companymay be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies, the Company records accruals for contingencies to the extent that management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred.

F-37
~~The Company~~may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies, the Company records accruals for contingencies to the extent that management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred.
Table of Contents

Lifted currently is involved in ~~three~~one pending lawsuits, as the plaintiff:

(1)
~~Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe –~~ The Company has filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow. The Company is also requesting approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The matter is in the discovery phase and the Company intends to continue pursuing the action and recover its damages.
~~(2)~~
Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. – The Company has filed an action seeking to recover approximately $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter has been filed in California and the Company intends to pursue the action and recover its damages.
~~(3)~~
~~Lifted Liquids, Inc. v. DEV Distribution, LLC~~~~, No, DC-22-15080~~– In October 2022, Lifted filed an action against Dev Distribution LLC, a vendor who failed to deliver certain products that Lifted has purchased and paid $263,938 for. The case is pending in the State of Texas 14th Civil District Court of Dallas County and is in its early stages. Lifted is seeking an injunction requiring the vendor to provide to Lifted the products that Lifted has purchased and paid for. Lifted is considering amending the complaint to seek the return of its molds and its packaging materials. The Company will also seek to recover any damages as a result of the vendor's actions.

Lifted currently is involved in one pending lawsuit, as the defendant:

(1)
~~Martha, Edgar v.~~ Lifted Liquids, Inc. v. Brian Koff, ERD Case No.: CR202301774; EEOC Case No: 26G202301223 – ~~Edgar Martha, who worked as~~A disgruntled former Lifted employee has filed an ~~independent contractor in Lifted’s production facility,~~action with the Wisconsin Department of Workforce Development claiming discrimination and retaliation. Lifted has ~~sued Lifted in regard~~responded to ~~an alleged chemical burn. Mr. Martha has expressed~~the charges, denying them, and intends to ~~Lifted’s attorney that Mr. Martha is inclined to settle~~vigorously defend against the case for $5,000. However, there can be no assurance or guarantee that the case can be settled for $5,000, as the medical bills in the case are significant and Mr. Martha’s medical insurance carrier has refused coverage.claims.
On November 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe. The Company had filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000.00 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000.00 over time.
On October 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080. In October 2022, Lifted filed an action against Dev Distribution LLC (“Dev”), a vendor who failed to deliver certain products that Lifted has purchased for $263,938 for. Dev filed a counterclaim alleging breach of contract. In October 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for Dev paying $230,000.00 and providing certain equipment and product.
On May 25, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Martha, Edgar v. Lifted Liquids. Mr. Edgar Martha, who worked in Lifted’s production facility, had sued Lifted in regard to an alleged chemical burn. In May 2023, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $5,000 paid by Lifted to Mr. Martha.

On February 1, 2022, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit:
~~(1)~~
Lifted Liquids, Inc. v. Monkey Bones Distribution LLC (United States Circuit Court for Kenosha County of the State of Wisconsin; Civil Case No. 2021 CV 001196).
~~F-31~~
~~Table of Contents~~

In December 2021, ~~our wholly-owned subsidiary~~ Lifted sued distributor Monkey Bones Distribution, LLC (“Monkey Bones”) for breach of contract for its failure to pay funds due under the agreement between the parties. In February 2022, the parties settled the litigation and agreed to mutual releases and dismissal of the lawsuit in exchange for $36,100.28 paid by Monkey Bones to Lifted Liquids and 15,000 custom gray scale empty disposable devices delivered to Monkey Bones by ~~Lifted Liquids.~~Lifted. The parties performed the settlement agreement and the matter was dismissed on February 3, 2022.

NOTE 1312 – COMPANY-WIDE MANAGEMENT BONUS POOL

Pursuant to the employment agreements entered into between the Company and its three principal executives GJacobs, WJacobs and NWarrender (individually, “Executive”), the Company is obligated to compensate management of the Company via a management bonus pool.

For each fiscal year during the Employment Term, the Executive shall be eligible to be considered for an annual bonus (the “Annual Bonus”) as part of a Company-wide management bonus pool arrangement. During the fourth quarter of each year, the Chairman of the Compensation Committee of the Board (the “Compensation Committee”) shall recommend in writing a consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) target (each, a “Target”) for the following year (the “Target Year”), which Target must be approved in writing by each of the following for as long as he remains employed by the Company: GJacobs, WJacobs, and NWarrender (collectively, and with respect to each for only as long as he is an employee of the Company, the “Executive Management Group”). If the Chairman of the Compensation Committee does not recommend in writing a Target for a Target Year that is approved in writing by all of the members of the Executive Management Group prior to the commencement of the Target Year, then the Target for the Target Year shall be equal to the actual consolidated EBITDA of the Company and its subsidiaries during the then-current year (i.e., the year preceding the Target Year) as certified in writing by the Company’s outside firm of independent certified public accountants. If the actual consolidated EBITDA of the Company and its subsidiaries during the Target Year as certified in writing by the Company’s outside firm of independent certified public accountants exceeds the Target (the amount by which the actual consolidated EBITDA of the Company and its subsidiaries during the Target Year as certified in writing by the Company’s outside firm of independent certified public accountants exceeds the Target, the “Excess Amount”), then cash equal to 33% of the Excess Amount shall be set aside by the Company as a cash management bonus pool (the “Bonus Pool”), and the amount of the Bonus Pool shall be allocated and paid out by the Company as bonuses or fees to the officers of the Company and its subsidiaries (and potentially, to directors or third parties who have significantly helped the Company and its subsidiaries during the Target Year), with the amount to be paid to each payee, including the amount of any Annual Bonus to be paid to the Executive, to be determined by unanimous written agreement of the Executive Management Group, in their sole discretion. The Executive expressly agrees and acknowledges that the amount of the Annual Bonus (if any) allocated and paid to the Executive as so determined by unanimous written agreement of the Executive Management Group shall be final, non-appealable, and binding upon the Executive, regardless of whether the Executive receives any Annual Bonus, and regardless of whether any Annual Bonus received by the Executive is higher or lower than any other person’s bonus, under any and all circumstances whatsoever. The Company shall pay the Executive the Annual Bonus, if any, no later than March 15^th of the year following the applicable Target Year.) In the event that there is funding for the Bonus Pool but the Executive Management Group does not reach a unanimous decision on Bonus allocations, then no annual bonus shall be paid. The Annual Bonus Pool would then be placed in escrow and the Executive Management Group would mediate.

F-38
The company-wide Bonus Pool for 2021 was $1,559,334 (the “Modified 2021 Bonus Pool Amount”), which was the aggregate amount that was accrued for in LIFD’s financial statements covering the period from January 1, 2021 through September 30, 2021. The Modified 2021 Bonus Pool Amount was distributed during the quarter ended March 31, 2022.
Table of Contents

Pursuant to the Amended Omnibus Agreement, the 2022 company-wide bonus pool shall not be allowed to be accrued or paid by LIFD if and to the extent that doing so would decrease LIFD’s 2022 diluted earnings per share of common stock below $0.56 per share. As of September 30, 2022, the Company did not meet the diluted earnings per share of common stock requirement of $0.42 per share ($0.56 x 3/4), and as a result, the Company eliminated the company-wide bonus pool accrual of $2,121,532, which had been accrued through June 30, 2022. ~~Moreover, no company-wide management bonus pool accrual was booked for~~During the fourth quarter ~~ended September 30, 2022. In comparison, as~~ of ~~December 31, 2021,~~2022 and the first quarter of 2023, the Company ~~reported a~~did pay bonuses totaling $466,668 to certain members of the management team of Lifted; however, none of this $466,668 went to GJacobs, WJacobs or NWarrender, and it is accounted for as Company-Wide Management Bonus Pool expense on the Consolidated Statements of Operations. This $466,668 will be deducted from the anticipated 2023 company-wide bonus pool ~~accrual of $1,556,055.~~on a dollar-for-dollar basis.
~~F-32~~
~~Table of Contents~~

NOTE 1413 – INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduced the U.S. federal statutory tax rate, broadened the corporate tax base through the elimination or reduction of deductions, exclusions, and credits, limited the ability of U.S. corporations to deduct interest expense, and transitioned to a territorial tax system which allows for the repatriation of foreign earnings to the U.S. with a 100% federal dividends received deduction prospectively. In addition, the Tax Act required a one-time transitional tax on foreign cash equivalents and previously unremitted earnings. Several of the new provisions enacted as part of the Tax Act require clarification and guidance from the U.S. Internal Revenue Service (“IRS”) and Treasury Department. These or other changes in U.S. tax laws could impact our profits, effective tax rate, and cash flows.

Significant components on the Company’s income tax provision (benefit) for continuing operations is as follows:

For the Three Months Ended

For the Nine Months Ended

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2022

2021

2022

2021

2023

2022

2023

2022

Current

Domestic-Federal

$ 584,994

$ -

$ 1,970,372

$ -

$ 86,824

$ 584,994

$ 460,617

$ 1,970,372

Domestic-State

165,096

-

822,289

-

(358,419 )

165,096

(142,132 )

822,289

Texas Franchise Tax

838

-

57,366

-

Franchise taxes

(140 )

838

39,853

57,366

Foreign

-

-

-

-

-

-

-

-

750,929

-

2,850,027

-

(271,735 )

750,929

358,338

2,850,027

Deferred

Domestic-Federal

$ (555,760 )

$ -

(253,605 )

-

83,512

(555,760 )

180,776

(253,605 )
Domestic-State

(171,142 )

-

(81,696 )

-

149,647

(171,142 )

138,807

(81,696 )
Foreign

-

-

-

-

-

-

-

-

(726,902 )

-

(335,301 )

-

233,459

(726,902 )

319,583

(335,301 )
Total Provision (Benefit) for Income Taxes

$ 24,027

$ -

$ 2,514,726

$ -

$ (38,576 )

$ 24,027

$ 677,921

$ 2,514,726

The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon audit. Therefore, the Company has no significant reserves for uncertain tax positions and no adjustments to such reserves were required by ~~generally accepted accounting principles.~~US GAAP. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company’s tax returns are subject to examination for the years ended December 31, ~~2016~~2017 through ~~2021.~~ 2022.
F-39
Table of Contents
A reconciliation of the amount of tax provision (benefit) computed using the U.S. federal statutory income tax rate to the provision (benefit) for income taxes on continuing operations is as follows:

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Domestic-Federal

$ 103,010

$ 469,597

$ 1,911,512

$ 934,645

State tax benefit, net of federal benefit

(38,623 )

135,138

$ 582,681

268,966

Non-deductible expenses

13,941

2,334

$ 20,522

7,825

Texas franchise tax

838

-

57,366

-

Revision of prior years' provision to return filing

(72,471 )

-

$ (72,471 )

-

Change in estimated future income tax rates

94,839

-

$ (37,079 )

-

Change in valuation allowance

(79,303 )

(607,069 )

$ 38,257

(1,211,436 )
Other

1,796

-

$ 13,939

-

Total Provision (Benefit) for Income Taxes

$ 24,027

$ -

$ 2,514,726

$ -

~~F-33~~
~~Table of Contents~~

For the Three Months
Ended

For the Nine Months
Ended

September 30,

September 30,

2023

2022

2023

2022

Domestic-Federal

$ 121,208

$ 103,010

$ 582,113

$ 1,911,512

State taxes, net of federal benefit

3,719

(38,623 )

$ 153,695

582,681

Non-deductible expenses

63,384

13,941

$ 127,360

20,522

Franchise taxes

(140 )

838

39,853

57,366

Revision of prior years' provision to return filing

(361,047 )

(72,471 )

$ (316,097 )

(72,471 )
Change in estimated future income tax rates

133,908

94,839

$ 91,217

(37,079 )
Change in valuation allowance

-

(79,303 )

$ -

38,257

Other

392

1,796

$ (220 )

13,939

Total Provision (Benefit) for Income Taxes

$ (38,576 )

$ 24,027

$ 677,921

$ 2,514,726

Deferred tax assets and liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:

September 30,

December 31,

September 30,

December 31,

2022

2021

2023

2022

Deferred Tax Assets:

Stock-based compensation

$ 2,752,667

$ 2,714,410

$ 2,791,555

$ 2,754,875

Sales Allowances

230,519

-

88,173

256,650

Spoiled and Written-Off Inventory

634,040

-

Accrued Related Party Expenses

4,412

259,463

456

612

Impairment of SmplyLifted Note and Other Receivables

-

105,124

Allowance for Doubtful Accounts

40,838

64,661

44,198

77,269

Other

17,867

8,725

Less: Valuation allowance

(2,752,667 )

(2,714,410 )
Lease Liabilities

39,167

23,060

Less: Valuation allowance for stock-based compensation

(2,754,875 )

(2,754,875 )
Total Deferred Tax Assets

927,676

437,973

208,674

357,591

Deferred Tax Liabilities:

Depreciation & Amortization

(260,824 )

(105,143 )

(434,936 )

(270,169 )
Other

-

(1,279 )
Goodwill

(5,899 )

-

Total Deferred Tax Liabilities

(260,824 )

(106,422 )

(440,835 )

(270,169 )

Net Deferred Tax Assets

$ 666,852

$ 331,551

Net Deferred Tax Assets/(Liabilities)

$ (232,161 )

$ 87,422

NOTE 1514 – SUBSEQUENT EVENTS

Management of the Company has evaluated the events that have occurred through the date of the filing of this ~~quarterly report~~Quarterly Report on Form 10-Q and has noted the following subsequent events for disclosure purposes:

Settlement of Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe Lawsuit
On November 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe. The Company had filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow by the Law Offices of Saul Roffe. The Company also sought approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The Company has obtained a $30,000.00 default judgment against the Law Offices of Saul Roffe and is attempting to collect on the judgment. The action against Girish GPO has been resolved with the Girish defendants agreeing to pay the Company $34,000.00 over time.
Settlement of Lifted Liquids, Inc. v. DEV Distribution, LLC, ~~No, DC-22-15080~~ Lawsuit

On October 9, 2023, Lifted entered into a settlement agreement that was mutually acceptable to the parties which has resolved the following lawsuit: Lifted Liquids, Inc. v. DEV Distribution, LLC, No, DC-22-15080. In October 2022, Lifted filed an action against Dev Distribution LLC (“Dev”), a vendor who failed to deliver certain products that Lifted has purchased ~~and paid~~for $263,938 for. ~~The case is pending in~~Dev filed a counterclaim alleging breach of contract. In October 2023, the ~~State of Texas 14th Civil District Court of Dallas County~~parties settled the litigation and ~~is in its early stages. Lifted is seeking an injunction requiring the vendor~~agreed to ~~provide to Lifted the products that Lifted has purchased~~mutual releases and ~~paid for. Lifted is considering amending the complaint to seek the return of its molds and its packaging materials. The Company will also seek to recover any damages as a result~~dismissal of the ~~vendor's actions.~~
~~2701-09 West Fulton PH, Chicago, Illinois 60612~~
~~On July 6, 2022, our wholly owned subsidiary Lifted entered into a sublease~~lawsuit in exchange for ~~office space in Chicago, Illinois located at 2701-09 West Fulton PH, Chicago, Illinois 60612. The sublease costs $3,000 per month, plus supplemental lease related charges such as real estate taxes~~Dev paying $230,000 and ~~common expenses of the property that we anticipate will be commercially typical costs. The sublease was retroactively effective as of June 1, 2022~~providing certain equipment and for a five-month term that ended on October 31, 2022. The purpose of the sublease is to make available office space for the members of Lifted Made's sales team who live in Chicago. These salespeople were spending significant time in their cars commuting from Chicago to Kenosha.
The sublessor is one of our affiliates, Bill McLaughlin, Lifted’s Chief Strategy Officer. The sublease is structured so that Mr. McLaughlin's lease payment obligations to the landlord are passed on to Lifted on a dollar-for-dollar basis, such that Mr. McLaughlin does not realize a cashflow profit or loss from the sublease.
~~The sublease is currently operating on a month-to-month basis. Management expects to extend the sublease once Mr. McLaughlin is presented a new lease from his landlord.~~product.

~~F-34~~F-40
Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this Quarterly Report on Form 10-Q, references to the “Company,” “LFTD Partners,” “LIFD,” “we,” “our” or “us” refer to LFTD Partners Inc. and Lifted, unless the context otherwise indicates.

During the quarter ended September 30, 2023, $597,098 of obsolete and spoiled inventory, which related primarily to $489,022 of expired HHC-infused gummies, was written off. Nearly all of these expired gummies were manufactured by third-party suppliers prior to the commencement of Lifted’s in-house gummy manufacturing operations in Kenosha, Wisconsin. Management believes that these expired gummies were manufactured pursuant to formulations and manufacturing protocols that were of lower quality than Lifted’s in-house gummy products, and sold more slowly due to the relative lack of consumer excitement for HHC-infused gummies. This $489,022 charge reduced our net income per share for the three and nine month periods ended September 30, 2023 by approximately $0.02.
During the first quarter of 2023, the Company recognized a net loss after ten straight quarters of profitability, solely because of the impact of a one-time, non-cash stock compensation expense of $2,138,175, which was $1,663,163 on an after-tax basis. At the closing of the acquisition of Lifted in February 2020, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company (the “Deferred Contingent Stock Recipients”), as an employee retention incentive. Now that certain conditions and requirements have been met, the Deferred Contingent Stock vested on February 24, 2023, and on this date, in accordance with US GAAP, the Company expensed the value of the vested Deferred Contingent Stock. This one-time, non-cash charge reduced net income for the nine months ended September 30, 2023 from $3,798,530 to $2,135,367. But for this charge, our Company would have reported a basic and fully diluted EPS of $0.26 and $0.25, respectively, for the nine months ended September 30, 2023.
Prior to the acquisition of Lifted on February 24, 2020, LFTD Partners Inc.~~, formerly known as Acquired Sales Corp.,~~ had no sources of revenue, and LFTD Partners Inc. had a history of recurring losses, which has resulted in an accumulated deficit of ~~$4,842,407~~$2,117,018 as of September 30, ~~2022.~~2023. LFTD Partners Inc. ~~has~~is currently also accruing and paying dividends on outstanding Series A Preferred Stock ~~outstanding that is currently accruing dividends~~and Series B Preferred Stock at the rate of 3% per year, and has certain bonuses being ~~accrued.~~accrued, among other ongoing financial obligations. In addition, as extensively discussed in the Company’s 2022 Annual Report on Form 10-K, we are subject to a wide variety of Risk Factors including substantial legal and regulatory risks. These matters cumulatively raise substantial doubt about our ability to continue as a going concern.
The legal and regulatory risks facing Lifted's business are particularly acute at this point in time, in at least two respects: (1) An official of the federal Drug Enforcement Administration (the "DEA") made a presentation at a conference in Houston in April 2023, in which that official reportedly stated that the DEA plans to issue a new rule that would have the effect of classifying certain hemp-derived cannabinoids as controlled substances. If such a new rule were to be issued and become legally binding upon Lifted, it could have a material adverse effect upon over 90% of Lifted's business and upon the trading price of the Company's common stock. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any draft DEA rule that would materially affect Lifted’s business; and (2) a new or amended federal "Farm Bill" is expected to be passed by Congress and signed by the President sometime during the second half of 2023 or the first half of 2024. If such a new or amended federal "Farm Bill" were to eliminate or limit the legality of hemp and hemp-derivatives, it could have a material adverse effect upon over 90% of Lifted's business and upon the trading price of the Company's common stock. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any draft "Farm Bill" legislation that would materially adversely affect Lifted’s business.

This Management’s Discussion and Analysis (“MD&A”) section discusses our results of operations, liquidity and financial condition and certain factors that may affect our future results. You should read this MD&A in conjunction with our financial statements and accompanying notes included elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that are considered forward-looking statements. Forward-looking statements give the Company’s current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company’s current plans, and the Company’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this ~~annual~~quarterly report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.

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Table of Contents
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in our ~~annual report~~Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~31, 2022.~~21, 2023. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Certain information included herein contains statements that may be considered forward-looking statements, such as statements relating to our anticipated revenues and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include the “Risk Factors” included herein and in our ~~annual report~~Annual Report on Form 10-K filed with the SEC on March ~~31, 2022,~~21, 2023, that can be read at www.sec.gov.

Overview

Please refer to “NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.” for information.

Liquidity and Capital Resources

The following table summarizes our current assets, current liabilities and working capital as of September 30, 2022 and December 31, 2021, as well as cash flows for the nine months ended September 30, 2022 and 2021.

September 30, 2022

December 31, 2021

Current Assets

$ 14,616,599

$ 13,152,696

Current Liabilities

6,573,881

11,906,270

Working Capital

8,042,718

1,246,426

For the Nine Months Ended

September 30,

2022

2021

Net Cash Provided by Operating Activities

$ 3,536,595

$ 4,350,358

Net Cash Used in Investing Activities

$ (656,381 )

$ (366,764 )
Net Cash Used In Financing Activities

$ (131,987 )

$ (118,094 )
3
~~Table of Contents~~
~~Comparison of the balance sheet at September 30, 2022 to December 31, 2021~~
Total current assets at September 30, 2022 of $14,616,599 were adequate for us to fund current operations; total current assets primarily consisted of inventory of $6,344,677, cash on hand of $4,350,959, net accounts receivable of $1,967,391, and prepaid expenses of $1,946,318. In comparison, consolidated current assets of $13,152,696 at December 31, 2021 primarily consisted of prepaid expenses of $4,262,237, inventory of $3,809,944, net accounts receivable of $3,461,499, and cash on hand of $1,602,731.
The buildup of our inventory to the level of $10,049,245 as of June 30, 2022 reflected our strategy to have enough of our current product lineup on hand to meet anticipated customer demand, but also to try to schedule our production so that a significant portion of our lab and production staff, then in the third quarter, could be allocated toward the production of certain new products that were under research and development for months. However, this research and development took longer than expected. In addition, we experienced delays in the supply of certain raw materials from China. Also, we experienced slower sales in the second and third quarters of 2022, which we believe is attributable, at least in part, to the seasonality of certain products.
As a result of all these factors, Lifted Made furloughed 69 of its lab and production workers from August 15 through September 2, 2022, to allow our supply chain to catch up. Following the completion of this furlough, certain of Lifted Made’s employees did not return to employment by Lifted Made, and certain of Lifted Made’s employees were terminated for cause during the third quarter of 2022. As of September 30, 2022, Lifted Made’s employee and independent contractor headcount was approximately 117.
As of September 30, 2022, inventory was valued at $6,344,677; this is after the write off of $2,313,902 of certain Clogged Vapes which were determined to be obsolete after random sampling of our inventory convinced us that the vast majority of the Clogged Vapes were clogged and unsellable. Please refer to the description in “~~Inventory~~~~” under~~ ~~NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES~~ ~~for more information regarding the Clogged Vapes. In comparison, as of December 31, 2021, inventory was valued at $3,809,944.~~
At September 30, 2022 and December 31, 2021, our other assets primarily included goodwill of $22,292,767 related to the acquisition of Lifted on February 24, 2020. Also, at both September 30, 2022 and December 31, 2021, our other assets included our investments in Ablis, Bendistillery and Bend Spirits, which total $1,896,200. At September 30, 2022, we also reported a net finance lease right-of-use asset of $1,285,200, net fixed assets of $989,688, and a net operating lease right-of-use asset of $525,942. In comparison, at December 31, 2021, we reported a net finance lease right-of-use asset of $1,227,532, net fixed assets of $433,213, and a net operating lease right-of-use asset of $76,412.
At September 30, 2022, current liabilities of $6,573,881 primarily consisted of accounts payable and accrued expenses of $5,168,054, deferred revenue of $784,047 and income tax payable of $509,127. In comparison, current liabilities as of December 31, 2021 of $11,906,270 primarily consisted of accounts payable and accrued expenses of $4,671,382, deferred revenue of $2,174,393, a company-wide bonus accrual of $1,556,055, current finance lease liability of $1,262,260, income tax payable of $1,242,974, and $941,562 in accrued management bonuses payable to GJacobs and WJacobs.
~~The Company had an accumulated deficit of $4,842,407 and $11,414,602 as of September 30, 2022 and December 31, 2021, respectively.~~
~~Comparison of operations for the three and nine months ended September 30, 2022 to September 30, 2021~~
On February 24, 2020, wethe Company acquired 100% of the ownership interests of Lifted. All of ~~our~~the Company’s sales are generated by ~~our~~the Company’s wholly-owned subsidiary Lifted; LFTD Partners as an entity by itself generates no sales. We also do not recognize any revenue or earnings from our investments in Bendistillery, Ablis or Bend Spirits.

~~During~~The Company's cash needs for working capital, capital expenditures, growth opportunities, the ~~three~~payments of Series A and ~~nine months ended September 30, 2022, net sales increased to $11,237,277~~Series B Preferred Stock dividends, bonuses, and ~~$46,102,656, respectively. As described above in the section “~~~~Inventory~~~~” under~~ ~~NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES~~, during the quarter ended September 30, 2022, some of Lifted’s customers returned certain Clogged Vapes. In total for the quarter ended September 30, 2022, the Company recorded a sales allowance of $841,269 for estimated future discounts/refunds and product returns, primarily associated with the Clogged Vapes. Please refer to the description in “~~Inventory~~~~” for more information regarding the Clogged Vapes.~~
In comparison, during the three and nine months ended September 30, 2021, Lifted recognized net sales of $8,820,952 and $18,869,366, respectively. Gross profit for the three and nine months ended September 30, 2022 was $813,744 and $16,861,640, respectively. In comparison, gross profit for the three and nine months ended September 30, 2021 was $4,100,895 and $9,406,156, respectively.
During the three months ended September 30, 2022, hemp-derived products and non-hemp-derived psychedelic products made up approximately 98% and 2% of Lifted’s sales, respectively. Similarly, during the nine months ended September 30, 2022, hemp-derived products and non-hemp-derived psychedelic products made up approximately 98% and 2% of Lifted’s sales, respectively. In comparison, during the three months ended September 30, 2021, approximately 99% and 1% of sales were generated from the sale of hemp and hemp-derived products and e-liquid and disposable e-cigarettes, respectively. During the nine months ended September 30, 2021, approximately 96% and 4% of sales were generated from the sale of hemp and hemp-derived products and e-liquid and disposable e-cigarettes, respectively.
During the three and nine months ended September 30, 2022, the Company expensed $1,482,455 and $5,148,284, respectively, related to payroll, consulting and independent contractor expenses; this is up from $803,796 and $1,902,320, respectively, in payroll, consulting and independent contractor expenses during the three and nine months ended September 30, 2021. Year-over-year, Lifted has increased the size of its workforce, including production, fulfillment and sales people, and in conjunction with these increases, Lifted’s payroll, consulting and independent contractor expenses have increased significantly. In addition, Lifted’s Chief Strategy Officer, who was hired on July 1, 2021, has developed and implemented certain important strategies which have assisted Lifted’s efforts to increase its production, fulfillment and sales capabilities. The Chief Strategy Officer’s two-year agreement with Lifted entitles such employeeother obligations, are expected to be paid an annual salary of $180,000 plus a bonus equal to 5% of total net sales for Lifted in excess of $6,000,000 per quarter. At September 30, 2022, the bonus payable to the Chief Strategy Officer totaled $261,864.
~~Pursuant to the Amended Omnibus Agreement, the 2022 company-wide bonus pool shall not be allowed to be accrued or paid by the Company if~~met with current cash on hand and to the extent that doing so would decrease LIFD’s 2022 diluted earnings per share of common stock below $0.56 per share. As of September 30, 2022, the Company did not meet the diluted earnings per share of common stock requirement of $0.42 per share ($0.56 x 3/4), and as a result, the Company eliminated the company-wide bonus pool accrual of $2,121,532, which had been accrued through June 30, 2022. Moreover, no company-wide management bonus pool accrual was booked for the quarter ended September 30, 2022.
~~In comparison, the Company recognized a company-wide management bonus pool expense of $400,000 and $1,559,335 for the three months and nine months ended September 30, 2021, respectively.~~
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~~Table of Contents~~
Driven by increased sales, bank charges and merchant fees increased to $106,845 and $372,351 during the three and nine months ended September 30, 2022, respectively, up from $104,485 and $289,111 during the three and nine months ended September 30, 2021, respectively.
During the three and nine months ended September 30, 2022, the Company incurred $334,215 and $550,612, respectively, in advertising and marketing expenses, which related to trade shows, marketing, promotional products and public relations. In comparison, during the three and nine months ended September 30, 2021, the Company incurred $86,438 and $236,598 in advertising and marketing expenses, of which were related to trade shows, public relations and digital marketing.
Bad debt expense reflects a net benefit of $11,898 and $75,107 during the three and nine months ended September 30, 2022, respectively, compared to a net expense of $61,449 and $81,621 during the three and nine months ended September 30, 2021, respectively. As of December 31, 2021, the Company implemented a new, conservative accounting policy regarding allowances for doubtful accounts, which is that all accounts receivable older than 90 days at quarter end are accrued for in allowances for doubtful accounts. The benefit recognized for bad debt expense in the third quarter of 2022 of $11,898 is due to improved collections in the quarter and an improved receivables aging at the end of the quarter.
Other operating expenses increased to $377,416 and $1,288,486 during the three and nine months ended September 30, 2022, respectively, from $170,820 and $350,985 during the three and nine months ended September 30, 2021, respectively. Other operating expenses include, for example, lease expenses, office expenses, insurance expenses, health expenses, software expenses, excise taxes, lobbying, lab testing, lab supplies, dues and subscriptions, meals and entertainment, repairs and maintenance, and state license & filing fees.
During the quarter ended September 30, 2022, total, non-operating net Other Expenses of $47,758 primarily consisted of interest expense of $37,181, loss on disposal of fixed assets of $8,243 and penalties of $4,461. In comparison, during the quarter ended September 30, 2021, total, non-operating net Other Expenses of $81,859 primarily consisted of the loss from Lifted Made’s 50% membership interest in SmplyLifted of $44,858 and interest expense of $35,368.
During the nine months ended September 30, 2022, total, non-operating net Other Income of $6,462 primarily consisted of interest expense of $95,839 offset by settlement income of $108,570. In comparison, during the nine months ended September 30, 2021, total, non-operating net Other Expenses of $84,702 primarily consisted of interest of $107,113, the loss from Lifted Made’s 50% membership interest in SmplyLifted of $95,399 and loss on deposits of $30,000, offset by gain on forgiveness of debt of $151,147.
~~During the quarter ended September 30, 2022, the Company recognized net income of $423,486. In comparison, during the quarter ended September 30, 2021, the Company recognized net income of $2,236,178.~~
During the nine months ended September 30, 2022, the Company recognized net income of $6,587,739. In comparison, during the nine months ended September 30, 2021, the Company recognized net income of $4,450,690.
~~Net~~ cash flows provided by operating activities was $3,536,595 and $4,350,358 for the nine months ended September 30, 2022, and September 30, 2021, respectively. During the nine months ended September 30, 2022, net cash provided by operating activities was primarily generated from net income of $6,587,739; cash was primarily used for the purchase of inventory. Net cash provided by operating activities during the nine months ended September 30, 2021 was primarily generated from net income of $4,450,690; cash during this period was also primarily used for the purchase of inventory.activities.

Net cash used in investing activities was $656,381 and $366,764 during the nine months ended September 30, 2022 and September 30, 2021, respectively. Net cash used in investing activities during the nine months ended September 30, 2022 related to the net purchase of fixed assets. Net cash used in investing activities during the nine months ended September 30, 2021 also primarily related to the purchases of fixed assets.
~~During the nine months ended September 30, 2022, net cash used in financing activities was $131,987. On December 30, 2021, the Company repaid all principal and interest due under the $3.75M Note.~~
NWarrender kept $1,000,000 of the repayment of the $3.75M Note, plus accrued interest, and on January 3, 2022, reloaned $2,750,000 to LIFD and Lifted (collectively “Payors”) at the rate of 2.5% (the “$2.75M Note”). The $2.75M Note payable jointly by the Company and Lifted to NWarrender was secured by a perfected first lien security interest (the “Security Interest”) that encumbers all of the assets of the Company and Lifted. The Company was obligated to pay off the principal of the $2.75M Note in five semi-annual payments to NWarrender of $458,333 and a sixth and final semi-annual payment to NWarrender of $458,335, in each case plus accrued interest, starting on June 30, 2022.
On June 7, 2022, LFTD Partners prepaid $916,666 of the principal of the $2.75M Note, and $29,384 of related accrued interest through that date, which left $1,833,334 remaining principal on the $2.75M Note. On July 5, 2022, we entered into an agreement (“Acceleration Agreement”) with NWarrender. Under the terms of the Acceleration Agreement, we were obligated to repay the remaining principal balance as follows: $1,374,999 on or before December 31, 2022, and $458,335 on or before December 31, 2024. Then, on July 8, 2022, we prepaid $916,666, along with accrued interest, and then, on July 25, 2022, we prepaid the remaining principal balance of $916,668 and accrued interest in full, and all collateral securing the $2.75M Note was released.
Also, net cash used in financing activities was driven by the purchase of $150,000 worth of common stock, and payments of dividends to the holders of the Series A Convertible Preferred Stock and Series B Convertible Preferred Stock totaling $21,647, offset by $50,000 received from the exercise of a warrant. In comparison, during the nine months ended September 30, 2021, $118,094 net cash was used in financing activities, primarily to make dividend payments totaling $209,532 to holders of the Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, and to purchase $34,200 worth of shares of common stock, offset by $142,024 in proceeds from the exercise of warrants.
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~~Table of Contents~~
During the nine months ended September 30, 2022, net cash increased by $2,748,228, and we had $4,350,959 in unrestricted cash at September 30, 2022. In comparison, during the nine months ended September 30, 2021, cash increased by $3,865,500, and we had $4,304,580 in unrestricted cash at September 30, 2021.
~~Prior to the acquisition of Lifted on February 24, 2020, the Company had~~has a history of losses as evidenced by the accumulated deficit at September 30, ~~2022~~2023 of ~~$4,842,407.~~$2,117,018. We plan to sustain the Company as a going concern by taking the following actions: (1) continuing to operate Lifted; (2) acquiring and/or developing profitable businesses that will create positive income from operations; and/or (3) completing private placements of our common stock and/or preferred stock. We believe that by taking these actions, we will be provided with sufficient future operations and cash flow to continue as a going concern. However, there can be no assurance that we will be successful in consummating such actions on acceptable terms, if at all. Moreover, many of such actions can be expected to result in substantial dilution to the existing shareholders of the Company.

The following table summarizes our Company’s cash flows for the nine months ended September 30, 2023 and 2022.

For the Nine Months Ended

September 30,

2023

2022

Net Cash Provided by/(Used in) Operating Activities

$ 743,001

$ 3,536,595

Net Cash Used in Investing Activities

$ (1,089,730 )

$ (656,381 )
Net Cash Used in Financing Activities

$ (102,501 )

$ (131,987 )
Cash Flows From Operating Activities
Net cash provided by operating activities was $743,001 for the nine months ended September 30, 2023, compared to net cash provided by operating activities of $3,536,595 for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, net cash provided by operating activities primarily resulted from net income of $2,135,367, which includes non-cash expenses of $3,059,353, offset by net increases in operating assets and liabilities of $4,451,719. Non-cash expenses are primarily related to $2,138,175 of stock compensation expense and $771,355 of spoiled and written off inventory. Working capital of $4,465,159 was used to purchase inventory. In comparison, during the nine months ended September 30, 2022, net cash provided by operating activities was primarily resulted from net income of $6,587,739, which includes non-cash expenses of $3,841,515, offset by net increases in operating assets and liabilities of $6,892,659. Non-cash expenses are primarily related to $3,279,262 of spoiled and written off inventory and $841,269 of sales allowances. Working capital totaling $8,311,612 was primarily used to purchase inventory and fund management bonuses.
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Table of Contents
Cash Flows From Investing Activities
Net cash used in investing activities was $1,089,730 and $656,381 during the nine months ended September 30, 2023 and 2022, respectively. In 2023, Lifted spent $342,068 to purchase net assets from Oculus CRS, LLC and spent $747,662 for net purchases of fixed assets. In 2022, cash used in investing activities of $656,381 was used to purchase fixed assets.
Cash Flows From Financing Activities
During the nine months ended September 30, 2023, net cash used in financing activities was $102,501, primarily driven by finance lease liability payments of $53,754. During the nine months ended September 30, 2022, net cash used in financing activities was $131,987, and was primarily driven by the repurchase and cancellation of 100,000 shares of common stock from a non-affiliate for $150,000. In 2022, the Company also temporarily borrowed $2,750,000 from NWarrender in the first quarter of 2022 and repaid these notes in full in the second and third quarters of 2022.
During the nine months ended September 30, 2023, net cash decreased by $449,230, and we had $3,081,393 of unrestricted cash at September 30, 2023. In comparison, during the nine months ended September 30, 2022, net cash increased by $2,748,228, and we had $4,350,959 of unrestricted cash at September 30, 2022.
Comparison of the balance sheet at September 30, 2023 to December 31, 2022
The following table summarizes our current assets, current liabilities and working capital as of September 30, 2023 and December 31, 2022.

September 30,
2023

December 31,
2022

Current Assets

$ 18,873,527

$ 13,853,949

Current Liabilities

$ 8,197,089

$ 6,210,133

Working Capital

$ 10,676,438

$ 7,643,816

Total current assets at September 30, 2023 of $18,873,527 were adequate for us to fund current operations; total current assets primarily consisted of inventory of $9,865,202, net accounts receivable of $3,728,002 and cash on hand of $3,081,393.
Sales allowances, which reduce gross sales on the Consolidated Statements of Operations, are recorded for estimated future discounts/refunds and product returns and are netted against accounts receivable on the Consolidated Balance Sheets. Consequently, as of September 30, 2023 and December 31, 2022, accounts receivable were reduced by $332,170 and $935,881, respectively, for sales allowances. The primary impetus for the need of a sales allowance and a reduction in accounts receivable as of September 30, 2023 was that, sometimes, when employees of federal, state and local regulatory agencies and/or law enforcement make statements and/or issue correspondence that claim or imply that certain hemp-derived cannabinoid products are unsafe or illegal, these statements and correspondence, and industry publications and/or news media coverage of such statements and correspondence, may trigger confusion, uncertainty or alarm among the distributors, retailers and consumers who purchase our products, and consequently result in decreased sales or returns/exchanges of our products. However, the Company has been able to re-sell the returned products to other distributors, retailers and consumers. Nonetheless, in anticipation of the need to honor exchanges of these certain products, management records a credit note reserve and corresponding sales allowance for these types of products.
All accounts receivable older than 90 days are accrued for in the allowance for doubtful accounts, which totaled $166,503 and $281,762 at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, the Company also reported prepaid expenses of $1,066,975.
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Table of Contents
In comparison, consolidated current assets of $13,853,949 at December 31, 2022 primarily consisted of prepaid expenses of $1,668,961, inventory of $6,023,967, net accounts receivable of $2,410,327, and cash on hand of $3,530,623. Prepaid expenses include prepaid inventory at September 30, 2023 and December 31, 2022 of $878,862 and $1,527,920, respectively.
At September 30, 2023, current liabilities of $8,197,089 primarily consisted of accounts payable and accrued expenses of $3,768,038, finance lease liability of $1,376,595, Minimum Earnout Consideration of $1,000,000 pursuant to the Oculus Merger Agreement, deferred revenue of $1,243,128, and collaboration commissions and royalties payable of $629,552. Minimum Earnout Consideration to be paid pursuant to the Oculus Merger Agreement consists of $200,000 in cash, and $800,000 in the form of 160,000 shares of common stock valued at $5.00 per share.
Due to an extreme need for additional employee parking spots at the 5511 Building, the Company in the fourth quarter of 2022 built a parking lot at the 5511 Building for $193,216, which is accounted for as a leasehold improvement (a capitalized fixed asset). The investment in this necessary parking lot has no impact on the $1,375,000 purchase price that Lifted has committed to pay for the 5511 Building on or before December 31, 2023.
In comparison, at December 31, 2022, we also reported a net finance lease right-of-use asset of $1,274,400, a net operating lease right-of-use asset of $496,604, net fixed assets of $1,020,255, the non-current portion of the settlement asset at $185,024, and security and state licensing deposits of $25,600.
At September 30, 2023, current liabilities of $8,197,089 primarily consisted of accounts payable and accrued expenses of $3,768,038, finance lease liability of $1,376,595, Minimum Earnout Consideration of $1,000,000 pursuant to the Oculus Merger Agreement, deferred revenue of $1,243,128, and collaboration commissions and royalties payable of $629,552. Minimum Earnout Consideration to be paid pursuant to the Oculus Merger Agreement consists of $200,000 in cash, and $800,000 in the form of 160,000 shares of common stock valued at $5.00 per share.
In comparison, current liabilities as of December 31, 2022 of $6,210,133 primarily consisted of accounts payable and accrued expenses of $4,049,897, finance lease liability of $1,357,524, and deferred revenue of $594,086.
The Company had an accumulated deficit of $2,117,018 and $4,238,735 as of September 30, 2023 and December 31, 2022, respectively.
Comparison of operations for the three and nine months ended September 30, 2023 to September 30, 2022
During the three and nine months ended September 30, 2023, the Company recognized net sales of $13,106,280 and $38,090,615, respectively. In comparison, during the three and nine months ended September 30, 2022, the Company recognized net sales of $11,237,277 and $46,102,656, respectively. Reasons for the decrease in net sales include, but are not limited to: greater competition in the marketplace for branded hemp-derived and psychoactive products that are similar to those that Lifted sells; more distributors creating their own brands and selling their own branded products at a lower price than Lifted’s products; increased competition for products containing more milligrams of cannabinoids per unit at a lower price point; and other competing brands paying distributors and wholesalers to replace Lifted’s products on valuable shelf space.
During the quarter ended September 30, 2023, $597,098 of obsolete and spoiled inventory, which related primarily to $489,022 of expired HHC-infused gummies, was written off. Nearly all of these expired gummies were manufactured by third-party suppliers prior to the commencement of Lifted’s in-house gummy manufacturing operations in Kenosha, Wisconsin. Management believes that these expired gummies were manufactured pursuant to formulations and manufacturing protocols that were of lower quality than Lifted’s in-house gummy products, and sold more slowly due to the relative lack of consumer excitement for HHC-infused gummies. This $489,022 charge reduced our net income per share for the three and nine month periods ended September 30, 2023 by approximately $0.02.
During the quarter ended September 30, 2022, some of Lifted’s customers returned certain Clogged Vapes. In total for the quarter ended September 30, 2022, the Company recorded a sales allowance of $841,269 for estimated future discounts/refunds and product returns, primarily associated with the Clogged Vapes. Please refer to the description in “Inventory” for more information regarding the Clogged Vapes.
Below are tables showing the approximate disaggregation of historical revenue:

For the three months ended

For the nine months ended

September 30,

September 30,

Location of Sale

2023

2022

2023

2022

Inside of USA

$ 13,096,973

99.9 %

$ 11,124,904

99.0 %

$ 38,056,082

99.9 %

$ 45,955,418

99.7 %
Outside of USA

$ 9,307

0.1 %

$ 112,373

1.0 %

$ 34,533

0.1 %

$ 147,238

0.3 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100.0 %
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Table of Contents

For the three months ended

For the nine months ended

September 30,

September 30,

Type of Sale

2023

2022

2023

2022

Net sales of raw materials to customers

$ 618

0 %

$ 21,707

0.2 %

$ 3,696

0 %

$ 40,339

0.1 %
Net sales of products to private label clients

312,905

2 %

766,129

6.8 %

$ 1,178,686

3 %

850,271

1.8 %
Net sales of products to wholesalers

2,535,597

19 %

1,404,590

12.5 %

$ 7,437,453

20 %

5,825,584

12.6 %
Net sales of products to distributors

9,640,568

74 %

8,653,948

77.0 %

$ 27,738,487

73 %

36,393,678

78.9 %
Net sales of products to end consumers

616,592

5 %

390,903

3.5 %

$ 1,732,293

5 %

2,992,784

6.5 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

46,102,656

100.0 %

For the three months ended

For the nine months ended

September 30,

September 30,

Hemp vs Non-Hemp Product Sales

2023

2022

2023

2022

Net sales of hemp products

$ 12,957,460

99 %

$ 11,012,531

98 %

$ 35,587,865

93 %

$ 45,180,603

98 %
Net sales of non-hemp products

148,820

1 %

224,746

2 %

2,502,750

7 %

922,053

2 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100 %

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

Product Type

2023

2022

2023

2022

Vapes

$ 7,405,541

57 %

$ 4,768,956

42 %

$ 19,846,178

52 %

$ 23,506,451

51 %
Edibles

3,293,422

25 %

3,990,484

36 %

$ 10,849,438

28 %

13,147,861

29 %
Flower

1,165,926

9 %

851,219

8 %

$ 4,203,894

11 %

2,885,302

6 %
Cartridges

1,223,320

9 %

1,625,513

14 %

$ 3,165,575

8 %

6,561,937

14 %
Apparel and Accessories

18,071

0 %

1,106

0 %

$ 25,530

0 %

1,106

0 %
Net Sales

$ 13,106,280

100 %

$ 11,237,277

100 %

$ 38,090,615

100 %

$ 46,102,656

100 %
Gross profit for the three and nine months ended September 30, 2023 was $4,422,003 and $15,706,805, respectively. Gross margin percentage was 34% and 41%, respectively, for the three and nine months ended September 30, 2023. In comparison, gross profit for the three and nine months ended September 30, 2022 was 7% and 37%, respectively.
During the nine months ended September 30, 2023, the Company recognized net income of $2,135,367, which includes the impact of a one-time, non-cash stock compensation expense of $2,138,175, which was $1,663,163 on an after-tax basis. At the closing of the acquisition of Lifted in February 2020, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation (the “Deferred Contingent Stock”) to certain persons specified by NWarrender in a schedule delivered by him to the Company (the “Deferred Contingent Stock Recipients”), as an employee retention incentive. Now that certain conditions and requirements have been met, the Deferred Contingent Stock vested on February 24, 2023, and on this date, in accordance with US GAAP, the Company expensed the value of the vested Deferred Contingent Stock. This one-time, non-cash charge reduced net income for the nine months ended September 30, 2023 from $3,798,530 to $2,135,367. But for this charge, our Company would have reported a basic and fully diluted EPS of $0.26 and $0.25, respectively, for the nine months ended September 30, 2023.
During the three and nine months ended September 30, 2023, the Company recognized $1,710,806 and $5,363,633, respectively, of payroll expenses; this is up from $1,482,455 and $5,148,284, respectively, of payroll expenses recognized during the three and nine months ended September 30, 2022. In addition, Lifted’s Chief Strategy Officer (“CSO”), who was hired on July 1, 2021, has developed and implemented certain important strategies which have assisted Lifted’s efforts to increase its production, fulfillment and sales capabilities. The CSO’s two-year agreement with Lifted entitles the CSO to be paid an annual salary of $180,000 plus a bonus equal to 5% of total net sales for Lifted in excess of $6,000,000 per quarter. For the three and nine months ended September 30, 2023, the bonus earned by the CSO was $161,533 and $749,397, respectively. In comparison, for the three and nine months ended September 30, 2022, the bonus earned by the CSO was $261,864 and $1,405,133, respectively.
During the nine months ended September 30, 2023, the Company expensed and paid $233,332 to certain members of the management team of Lifted; however, none of this $233,332 went to GJacobs, WJacobs or NWarrender, and it is accounted for as Company-Wide Management Bonus Pool expense on the Consolidated Statements of Operations. This $233,332, along with the $233,336 Company-Wide Management Bonus Pool expense paid to certain members of the management team of Lifted (again excluding GJacobs, WJacobs or NWarrender) in the fourth quarter of 2022 will be deducted from the anticipated 2023 company-wide bonus pool on a dollar-for-dollar basis. In comparison, during the three and nine months ended September 30, 2022, the Company recognized an expense reversal of $2,121,532 and $0, respectively, related to the company-wide management bonus pool. In the third quarter of 2022, the company-wide bonus pool accrual for 2022 was fully reversed, except for $233,336 paid to certain members of the management team in the fourth quarter of 2022.
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During the three and nine months ended September 30, 2023, the Company incurred $184,432 and $663,181, respectively, in advertising and marketing expenses, which primarily related to trade shows, marketing, and the cost of promotional items. In comparison, during the three and nine months ended September 30, 2022, the Company incurred $334,215 and $550,612, respectively, in advertising and marketing expenses, which related to trade shows, marketing, promotional products and public relations.
Bad debt expense for the three and nine months ended September 30, 2023, totaled a net benefit of $82,935 and expense of $138,565, respectively. In comparison, bad debt expense reflects a net benefit of $11,898 and $75,107 during the three and nine months ended September 30, 2022, respectively.
For the three and nine months ended September 30, 2023, commission and royalty expense of $846,714 related to the Jeeter, Diamond and Cali Agreements was recognized. No commission and royalty expense related to the Jeeter, Diamond and Cali Agreements was recognized in 2022.
Other operating expenses increased to $641,806 and $1,968,419, respectively, during the three and nine months ended September 30, 2023, from $377,416 and $1,288,486, respectively, during the three and nine months ended September 30, 2022. Other operating expenses include, for example, lab supplies, dues and subscriptions, meals and entertainment, insurance expenses, repairs and maintenance, and state license & filing fees. The annual cost of certain insurance policies that the Company has in place are based on the Company’s revenue; as such, these policies are costly for the Company.
During the quarter ended September 30, 2023, total net non-operating Other Expenses of $80,467 primarily consisted of debt financing expenses of $60,000 and interest expense of $23,986, offset by interest income of $2,221. In comparison, during the quarter ended September 30, 2022, total, non-operating net Other Expenses of $47,758 primarily consisted of interest expense of $37,181, loss on disposal of fixed assets of $8,243 and penalties of $4,461.
During the nine months ended September 30, 2023, total, non-operating net Other Expenses of $114,041 primarily consisted of interest expense of $72,537 and debt financing expenses of $60,000, offset by interest income of $27,697. In comparison, during the nine months ended September 30, 2022, total, non-operating net Other Income of $6,462 primarily consisted of interest expense of $95,839 offset by settlement income of $108,570.
During the quarter ended September 30, 2023, the Company recognized net income of $617,648. In comparison, during the quarter ended September 30, 2022, the Company recognized net income of $423,486.
During the nine months ended September 30, 2023, the Company recognized net income of $2,135,367. In comparison, during the nine months ended September 30, 2022, the Company recognized net income of $6,587,739.
Critical Accounting Policies

Critical accounting policies are discussed in “NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES.”
~~SmplyLifted LLC~~
~~Please refer to “~~~~NOTE 8 – NOTES RECEIVABLE~~”. of the consolidated financial statements accompanying this Quarterly Report on Form 10-Q.

Tax Provision

Please refer to “NOTE 1513 – INCOME ~~TAXES”~~TAXES for more information about the Company’s quarterly tax provision.

Other Matters

We may be subject to other legal proceedings, claims, and litigation arising in the ordinary course of business in addition to the matters discussed above in “NOTE 1311 – LEGAL ~~PROCEEDINGS”~~PROCEEDINGS.. We intend to vigorously pursue and defend such litigation. Although the outcome of these other matters is currently not determinable, our management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our Company’s financial position, results of operations, or cash flows.

Impact of COVID-19 on Our Business

The COVID-19 pandemic has resulted, and may continue to result, in significant economic disruption despite progress made in recent months in the development and distribution of vaccines. It has already disrupted Lifted’s operations, global travel and supply chains, and adversely impacted global commercial activity. Considerable uncertainty still surrounds COVID-19, the evolution and future impact of its variants, its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses and of various efforts to inoculate the global population. The travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other efforts to curb the spread of COVID-19 and its variants have significantly disrupted business activity globally and there is uncertainty as to if and when these disruptions will fully subside.
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Significant uncertainty continues to exist concerning the impact of the COVID-19 pandemic on Lifted’s, our customers’ and target companies’ business and operations in future periods. Although our total revenues for the ~~three and nine months~~year ended ~~September 30,~~December 31, 2022 were not materially impacted by COVID-19, we believe that our revenues may be negatively impacted in future periods until the effects of the pandemic have fully subsided and the current macroeconomic environment has substantially recovered. The uncertainty related to COVID-19 may also result in increased volatility in the financial projections we use as the basis for estimates and assumptions used in our financial statements. We have made some efforts to try to adapt our operations to meet the challenges of this uncertain and rapidly evolving situation, including expanding operations in areas where we perceive government restrictions on business operations are relatively less burdensome, and focusing some of our new product development in areas where we perceive government restrictions and prohibitions on hemp-derived cannabinoid products are relatively less likely. The COVID-19 pandemic and its ramifications, including Illinois Governor Pritzker’s Executive Order in response to the pandemic, materially damaged Lifted’s business, among other things by disrupting Lifted’s access to its employees, suppliers, packaging, distributors and customers. That is why Lifted applied for and received funding under the federal Economic Injury Disaster Loan program and the federal Paycheck Protection Program.

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Effects of the COVID-19 pandemic that may negatively impact our business in future periods include, but are not limited to: inflation; higher interest rates; disruption of the banking system; disruptions of Lifted’s workforce; limitations on the ability of our customers to conduct their business, purchase our products, and make timely payments; curtailed consumer spending; deferred purchasing decisions; supply chain problems and delays, and changes in demand from retail customers. We will continue to actively monitor the nature and extent of the impact to our business, operating results, and financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Financial Officer, WJacobs, evaluated the effectiveness of the Company’s disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, WJacobs concluded that because of the material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of September 30, ~~2022.~~2023.

(b) Management’s annual report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. “Internal Control Over Financial Reporting” is defined in Exchange Act Rules 13a -15(f) and 15d - 5(f) as a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by an issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:

(1)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of an issuer;

(2)
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

(3)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material adverse effect on the financial statements.

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During September ~~2022,~~2023, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, ~~2022~~2023 based on the framework set forth in the report entitled Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management concluded that our internal control over financial reporting as of September 30, ~~2022~~2023 was not effective. Management identified the following material weaknesses as of September 30, ~~2022:~~2023:

(1)
There existed a lack of segregation of duties in regard to the Company’s financial reporting, procedures for depositing of funds, procedures for cash disbursements, procedures for checkbook entries, period close procedures, and procedures for financial statement preparation.

Management has determined that the Company should seek to enhance its internal controls over financial reporting by maintaining the following steps first commenced in 2010:

(1)
During November 2010, the Company increased its Board of Directors to six members by adding another independent member, Mr. Vincent J. Mesolella. Mr. Mesolella is the Chairman of the Narragansett Bay Commission, Providence, Rhode Island. Mr. Mesolella is also the Founder, President and Chief Executive Officer of MVJ Realty, LLC, a real estate development company. Mr. Mesolella has previously served as the Chairman of the Audit Committee of the Board of Directors of a publicly traded company.

Beginning in March 2010, the Company began emailing or mailing to ~~Vincent J.~~Mr. Mesolella a copy of each monthly statement from its bank summarizing all activity in the Company’s checking account, for review and questioning as appropriate. The purpose of Mr. Mesolella’s involvement is to provide monitoring, oversight and assistance to GJacobs, ~~Chief Executive Officer,~~CEO, in the preparation and reporting of the Company’s financial statements.

In December 2021, the Company engaged a ~~third party~~third-party consulting firm that specializes in the implementation of the Sarbanes-Oxley Act, to assist management with the implementation of ~~internal controls and procedures pursuant to~~ the Sarbanes-Oxley Act. ~~This implementation~~The Company is ~~progressing,~~actively engaged in a comprehensive effort to comply with the Sarbanes-Oxley Act, but ~~it has not yet been completed, and~~ additional work is ~~required. This implementation is imposing~~required, and no guarantee or assurance can be given as to when such work will ~~on an on-going basis, impose substantial costs on the Company.~~be completed.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

This ~~quarterly report~~Quarterly Report on Form 10-Q does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this ~~quarterly report~~Quarterly Report on Form 10-Q.

Management is unaware of any material inaccuracies or errors in the Company’s financial statements as of September 30, ~~2022.~~2023.

(c) Changes in internal control over financial reporting

Our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.

Description of Legal Proceedings

Lifted currently is involved in four pending lawsuits, three as the plaintiff, and one as the defendant. Please refer to NOTE 1211 – LEGAL PROCEEDINGS above for more information.

ITEM 1A. RISK ~~FACTORS~~FACTORS..

The Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 continue to represent the most significant risks to the Company’s future results of operations and financial conditions, without further modification or ~~amendment.~~amendment, except as follows:
Lifted and target companies may be subject to risks related to their information technology systems, including the risk that they may be the subject of a cyber-attack and the risk that they may be in non-compliance with applicable privacy laws
Lifted and target companies may have purchased or entered into agreements with third parties for website services, hardware, networks, equipment, software, payment processing services, website “plug-in” software, applications, telecommunications and other information technology services (“IT”) in connection with their operations. Lifted’s and target companies’ operations depend, in part, on how well they and their vendors protect their IT against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, disruptions in internet and mobile commerce, hacking, computer viruses, vandalism, theft, malware, ransomware and phishing attacks. Any of these and other events may result in IT failures, operational and financial reporting delays, increases in capital expenses, including potentially ransom payments, or other potential costs and business disruptions that may result if Lifted’s or target companies’ customers assert claims regarding Lifted’s or target companies’ technology. Lifted’s and target companies’ operations may also depend on the timely maintenance, upgrade and replacement of networks, equipment and IT systems, software and applications. The failure of IT systems, or a component of IT systems, may, depending on the nature of any such failure, adversely impact Lifted’s and target companies’ reputations and results of operations.
There are a number of laws protecting the confidentiality of customer personal information, and restricting the use and disclosure of that protected information. Lifted and target companies may collect and store personal information about their customers and are responsible for protecting that information from privacy breaches. A privacy breach may occur through a procedural or process failure, an IT malfunction or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly customer lists and preferences, is an ongoing risk whether perpetrated through employee collusion or negligence or through deliberate cyber-attack. Moreover, if Lifted or target companies are found to be in violation of the privacy or security rules under laws protecting the confidentiality of customer information, including as a result of data theft and privacy breaches, Lifted and target companies may be subject to sanctions and civil or criminal penalties, which may increase their liabilities and harm their reputations.
As cyber threats continue to evolve, Lifted and target companies may be required to expand significant additional resources to continue to modify or enhance their protective measures or to investigate and remediate any information security vulnerabilities. Significant disruption to Lifted's and target companies' IT system or breaches of data security may have a material adverse effect on their businesses' financial condition and results of operations.
The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
Cyber incidents or malicious attacks on Lifted's and target companies' information technology systems could damage our reputation, negatively impact our businesses, and expose us to litigation risk
Lifted and target companies use computers in substantially all aspects of their business operations. They also use mobile devices, social networking and other online activities to connect with their team members and their customers. They rely heavily on various proprietary and third-party information systems. Their reputation for the secure handling of customer and other sensitive information is critical to the success of their businesses. Like other businesses, they are potentially subject to a range of cyber incidents, including but not limited to state-sponsored cyber-attacks, industrial espionage, insider threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, data leakage and compromise, wire fraud, phishing incidents and other cyber incidents. They may not detect cyber incidents and may not be able to quickly or properly respond to cyber incidents. Their information technology and network infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance, computer viruses, power outages, natural disasters, acts of terrorism, breaches with respect to third-party systems or vendors, or other disruptions. A cybersecurity incident and breach of their information systems could lead to theft, destruction, loss of life, damage to property, environmental issues, misappropriation or release of sensitive and/or confidential information or intellectual property, which could result in business disruption, negative publicity, violation of privacy laws, loss of customers, brand damage, adverse financial and operational results, and potential litigation.
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Our management depends on relevant and reliable information for decision-making purposes, including key performance indicators and financial reporting. Any significant loss of data, failure to maintain reliable data, disruptions affecting our information systems, or delays or difficulties in transitioning to new systems could adversely affect our business, financial condition and results of operations. In addition, our ability to continue to operate our businesses without significant interruption in the event of a disaster or other disruption depends in part on the ability of our information systems to continue to operate properly. If our information systems fail and/or if our insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced, and the reputation of our brands and our business could be adversely affected. In addition, remediation of such problems could result in significant, unplanned capital investments.
The foregoing risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted's or target companies' computer systems, or the computer systems of third party software or service providers, or the underlying infrastructure of the internet, are breached or compromised, and unauthorized access is obtained to Lifted's or target companies' data or customer’s data, or authorized access is blocked or disabled, then we may incur significant legal exposure and liabilities, or a negative financial impact
Lifted's and target companies' businesses involve the storage and transmission of their customers’ proprietary and sensitive data. We can provide no assurances that Lifted and target companies can effectively protect our customers’ data, as such data may in the future be materially breached or compromised as a result of events such as: third-party attempts to fraudulently induce Lifted's or target companies' employees, independent contractors, partners or customers to disclose sensitive information such as usernames, passwords or other information to gain access to our customers’ data or IT systems, or our data or our IT systems; efforts by individuals or groups of hackers and sophisticated organizations, such as state-sponsored organizations or nation-states, to launch coordinated attacks, including ransomware, destructive malware and distributed denial-of-service attacks; third-party attempts to abuse marketing, advertising, messaging or social products and functionalities to impersonate persons or organizations and disseminate information that is false, misleading or malicious; cyberattacks on third party and/or internally built IT infrastructure on which much of Lifted's and target companies' businesses rely; vulnerabilities resulting from enhancements and updates to software and IT systems; vulnerabilities in the products or components across the broad ecosystem within which Lifted's and target companies' services operate in conjunction with and are dependent on; vulnerabilities existing within or resulting from new technologies, infrastructures, protocols, laws, rules, and regulations; attacks on, or vulnerabilities in, the many different underlying networks and services that power the internet that Lifted and target companies depend on, most of which are not under our control or the control of our vendors, partners or customers; and employee or contractor errors or intentional acts that compromise Lifted and target companies' computer systems.
We can provide no assurances or guarantees whatsoever that our IT systems will provide security or otherwise be effective or that a material breach will not occur. For examples, and without limitations, Lifted's and target companies' ability to mitigate these risks may be impacted by the following among other events: changes to, and growth in the complexity of, the techniques used to breach, obtain unauthorized access to, or sabotage IT systems and infrastructure, which are generally not recognized until launched against a target, and could result in Lifted and target companies being unable to anticipate or implement adequate measures to prevent such techniques; the continued evolution of internal IT systems as Lifted and target companies adopt new technologies and new ways of sharing data and communicating internally and with partners and customers, which increases the complexity of IT systems; the acquisition of new subsidiaries, requiring Lifted to incorporate and secure different or more complex IT environments; authorization by customers to third-party technology providers to access their customer data, which may lead to Lifted and target companies' customers’ inability to protect their data that is stored on Lifted and target companies servers and on third parties' servers; and lack of control over customers or third-party technology providers, or the processing of data by third-party technology providers, which may not allow Lifted and target companies to maintain the integrity or security of such transmissions or processing.
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We believe that, in the normal course of business, Lifted and target companies have been the target of malicious cyberattack attempts and have experienced other IT security incidents especially in regard to Lifted's banking, credit card, and other financial activities. There can be no assurance that future cyberattacks and other IT security incidents will not be material or significant. An IT security breach or incident could result in unauthorized parties obtaining access to, or the denial of authorized access to, Lifted's or target companies' IT systems or data, or customers’ systems or data, including intellectual property and proprietary, sensitive or other confidential information. An IT security breach or incident could also result in a litigation against us, negatively impact our future sales, disrupt our business, and lead to increases in insurance premiums and legal, regulatory and financial exposure and liability.
All of the foregoing described risks may have a material adverse effect on our Company and the trading price of our common stock.
Lifted and target companies do not have the manpower, expertise or financial resources to effectively identify, detect, prevent or remediate cybersecurity risks
The identification, detection, prevention and remediation of known or potential IT security vulnerabilities, including those arising from third-party hackers, hardware or software, is extremely costly and time consuming. Lifted and target companies do not have the manpower, expertise or financial resources to effectively identify, detect, prevent or remediate cybersecurity risks. No assurance or guarantee whatsoever can be given that Lifted and target companies will not be seriously damaged by the exploitation of their cybersecurity vulnerabilities. These risks may have a material adverse effect on our Company and the trading price of our common stock.
If Lifted, target companies, or our third-party service providers experience an actual or perceived cybersecurity event, our platform may be perceived as not being secure, and we may lose customers or incur significant liabilities, which would harm our business and operating results
Lifted's and target companies' operations involve the storage, transmission and processing of internal and customers’ confidential, proprietary and sensitive data, which may include personally identifiable information, and financial information. Computer malware, ransomware, viruses, hacking, phishing and denial of service attacks by third parties have become more prevalent in internet-enabled commerce, and we believe that Lifted has been the target of hackers and scammers in the past, and likely will be the target of hackers and scammers in the future.
We may not be able to prevent material breaches of our IT systems caused by intentional or unintentional action or inaction by employees or third parties, which may result in the unauthorized access or release of our instances and ultimately our or our customers’ data, IP and other confidential business information.
A security breach suffered by Lifted, target companies, or third-party service providers, an attack against our service availability or unauthorized access or loss of data could result in a disruption to our service, litigation, service level agreement claims, indemnification and other contractual obligations, regulatory investigations, government fines and penalties, reputational damage, loss of sales and customers, mitigation and remediation expenses and other significant costs and liabilities. In addition, we may incur significant economic and operational consequences in order to appropriately assess and respond to security incidents and to implement appropriate safeguards to protect against future incidents. We do not believe that Lifted's or target companies' insurance will be adequate or sufficient to cover the potentially significant losses that may result from an IT security incident.
Additionally, as we increase reliance on third-party and public cloud infrastructure, we depend in part on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of data. However, we have little or no ability to monitor our third-party service providers’ data security. Similarly, employee error or malfeasance in configuring, maintaining, and using services offered by third-party providers may affect our ability to monitor and secure such services. Any breach of our providers’ security measures or misconfiguration or misuse of our software or our providers’ services may result in unauthorized access to, or the misuse, loss or destruction of, our and our customers’ data or in a violation of our terms or applicable law, which may result in reputational harm or liability.
We cannot guarantee that Lifted's and target companies' IT systems have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems and network or the systems and networks of third parties that support us and our business. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, systems, networks, or physical facilities utilized by us or our third-party vendors or service providers. Furthermore, supply chain disruptions due to wars and/or sanctions (and resulting legal or regulatory developments) and any indirect effects may further complicate any existing supply chain constraints.
All of these risks may have a material adverse effect on our Company and the trading price of our common stock.
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Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may subject us to substantial negative financial consequences and civil or criminal penalties
Complex local, state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These privacy and data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement. In addition, our legal and regulatory obligations in jurisdictions outside the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations or to increase penalties significantly. Becoming aware of, and complying with, these laws and regulations can be costly and can impede the development and offering of new products and services.
Any failure by Lifted and target companies to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our brand reputation, any of which could have a material adverse effect on our operations, financial performance and business. These risks may have a material adverse effect on our Company and the trading price of our common stock.
An infectious hop latent viroid might adversely affect the availability and cost of our raw materials
It has been reported that experts have sounded an alarm over the global spread of a dangerous and infectious hop latent virus (HpLVd) that is threatening to spiral out of control and potentially cause billions of dollars of losses for cannabis and hop growers. If this viroid were to cause significant problems for hemp growers in the US, it might potentially decrease the availability, and increase the cost, of hemp and hemp-derived cannabinoids that are the principal raw materials for our products. This risk may have a material adverse effect on our Company and the trading price of our common stock.
Communications by employees of regulatory agencies and/or law enforcement may disrupt the sales of our products
Employees of federal, state and local regulatory agencies and/or law enforcement sometimes make statements and/or issue correspondence that claim or imply that certain hemp-derived cannabinoid products are unsafe or illegal. These statements and correspondence, and industry publications and/or news media coverage of such statements and correspondence, sometimes trigger confusion, uncertainty or alarm among the distributors, retailers and consumers who purchase our products, and sometimes result in decreased sales or returns/exchanges of our products. This situation may have a material adverse effect on our Company and the trading price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~We claimed exemption from registration under~~Issuance of Deferred Contingent Stock
At the ~~Securities Act for the sales and issuances of securities in the following transactions under Section 4(a)(2)~~closing of the Securities Act and/or Regulations D and S promulgated thereunder, in that such sales and issuances (i) did not involve a public offering, or (ii) were made to non-U.S. Persons and otherwise complied with Rule 903 promulgated under the Securities Act, or (iii) were made pursuant to Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701. Allacquisition of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.
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~~Stock Buy-back Transactions with a Non-Affiliate Stockholder and Retirement of 72,000 Shares of Common Stock Held in Treasury~~
On November 24, 2020, LFTD Partners purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.
On January 8, 2021, LFTD Partners Inc. purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.
~~Exercise of Warrant by a Non-Affiliated Entity~~
~~On February 19, 2022, an entity non-affiliated with the Company exercised an option to purchase 50,000~~Lifted, 645,000 shares of unregistered common stock of the Company were designated as contingent deferred compensation to certain persons specified by NWarrender in a schedule delivered by him to the Company at ~~an exercise price~~the closing of ~~$1.00 per share, which~~ the ~~entity paid.~~Merger. Now that certain conditions and requirements have been met, starting on February 24, 2023, the deferred contingent stock has begun to be issued to certain recipients of the deferred contingent stock who have instructed the Company to issue to them their respective, earned deferred contingent stock. As of September 30, 2023, 503,000 shares of deferred contingent stock have been issued to certain recipients of deferred contingent stock, including 200,000 shares of deferred contingent stock to WJacobs. See NOTE 9 – SHAREHOLDERS’ EQUITY.

~~Stock Buy-back Transaction with a Non-Affiliate Stockholder~~Lifted Purchase of Assets of Oculus CRS, LLC, and ~~Retirement of 100,000 Shares of Common Stock~~Merger With Oculus CHS Management Corp.

On ~~March 1, 2022, LFTD Partners signed an agreement to purchase a total of 100,000 shares of common stock~~April 28, 2023, Lifted purchased nearly all of the ~~Company from a non-affiliate stockholder in a private transaction for $1.50 per share for a total purchase price~~assets of ~~$150,000. On March 8, 2022, all 100,000 shares were transferred to~~its hemp flower products supplier Oculus CRS, LLC, Aztec, New Mexico, and merged with Oculus CHS Management Corp. In connection with the ~~Company and immediately cancelled.~~
~~Exercise of Warrants by Gerard M. Jacobs~~
~~On August 30, 2021, CEO Gerard M. Jacobs exercised, for an aggregate purchase price of $1, his right to purchase a warrant to purchase an aggregate of 750,000~~merger, 100 shares of unregistered common stock of ~~the Company at an exercise price~~LIFD were issued, and a minimum of ~~$0.01 per share, which warrant he immediately exercised. Gerard M. Jacobs also exercised his right to purchase an aggregate of 31,250~~160,000 more shares of ~~unregistered~~ common stock ~~of the Company~~will be issued at an exercise price of $0.03 per share under separate warrants. Gerard M. Jacobs also demanded immediate payment of $8,439 of the bonuses which are currently due and payable by the Company to Gerard M. Jacobs, and Gerard M. Jacobs hereby allocated and applied such $8,439 to pay for the aggregate cost of purchasing and exercising the above warrants.a later date.See NOTE 1 – DESCRIPTION OF THE BUSINESS OF LFTD PARTNERS INC.

~~Exercise~~The Company relied on the exemption from registration contained in Section 4(2) of ~~Warrants by Vincent J. Mesolella~~
~~On September 13, 2021, lead outside director Vincent J. Mesolella exercised,~~the Securities Act for ~~an aggregate purchase price~~the issuance of ~~$1.00, his right to purchase a warrant to purchase an aggregate of 500,000~~the shares of ~~unregistered~~ common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised and paid for, and he also exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.
~~Exercise of Option by Joshua A. Bloom~~
~~On September 22, 2021, director Joshua A. Bloom exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.~~
~~Exercise of Option by Richard E. Morrissy~~
~~On September 15, 2021, director Richard E. Morrissy exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.~~
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~~Table of Contents~~
~~Exercise of Option by a Non-Affiliated Shareholder~~
On September 26, 2021, a non-affiliated shareholder of the Company exercised an option to purchase 50,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which she paid.
~~Exercise of Option by a Non-Affiliated Shareholder~~
On December 7, 2021, a non-affiliated shareholder of the Company exercised a warrant to purchase 25,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which he paid.
~~Conversion of Series A Preferred Stock by a Non-Affiliated Shareholder~~
~~On April 1, 2022, a non-affiliated shareholder of the Company converted his 1,000 shares of Series A Preferred Stock into 100,000 shares of unregistered common stock of the Company.~~
~~Conversion of Series A Preferred Stock by a Non-Affiliated Shareholder~~
~~On April 14, 2022, a non-affiliated shareholder of the Company converted 250 shares of his Series A Preferred Stock into 25,000 shares of unregistered common stock of the Company.~~described above.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None; not applicable.

ITEM 4. MINE SAFETY ~~DISCLOSURES~~DISCLOSURES..

None; not applicable.

ITEM 5. OTHER ~~INFORMATION~~INFORMATION..

None; not applicable.

1114
Table of Contents

ITEM 6. EXHIBITS.

The following Exhibits have been previously filed in the below referenced filings or have been attached hereto, and in any case, as is stated on the cover of this Report, all of the below Exhibits are incorporated herein by reference.

10.53

Compensation Agreement between Acquired Sales Corp., Gerard M. Jacobs and William C. "Jake" Jacobs dated as of June 19, 2019
10.58
Lease Agreement - 5511 95th Avenue, Kenosha, WI 53144
10.61

Lease Agreement - 8920 58th Place, Suite 850, Kenosha, WI 53144
10.62

Lease Agreement - 8910 58th Place, Suites 600 and 700, Kenosha, WI 53144
10.67

Omnibus Agreement dated December 30, 2021 between LFTD Partners Inc. Nicholas S. Warrender, 95th Holdings, LLC, Gerard M. Jacobs and William C. “Jake” Jacobs
10.68

Amended Omnibus Agreement dated February 14, 2022 between LFTD Partners Inc. Nicholas S. Warrender, Gerard M. Jacobs and William C. “Jake” Jacobs
10.69

Lease Agreement - 9560 58th Place, Suite 360, Kenosha, WI 53144
10.70

Acceleration Agreement
10.71

Commercial Sublease – 2701-09 West Fulton PH, Chicago, IL 60612
~~This Form 10-Q~~
~~99.1~~10.72

~~Press Release (earnings)~~Lease Agreement - 5732 95th Ave, Suites 200 and 300, Kenosha, WI 53144
10.72.1
Manufacturing, Sales and Marketing Agreement – Cali Sweets, LLC
10.73
Manufacturing, Sales and Marketing Agreement – Diamond Supply Co.
10.74
Agreement and Plan of Merger - Oculus CHS Management Corp.
10.75
Hagan Sanchez Employment Agreement
10.76
Chase Sanchez Employment Agreement
10.77
Assignment and Assumption of Lease and Landlord Consent and Lease Agreement – Aztec New Mexico
10.78
Manufacturing Sales and Marketing Agreement – DreamFields Brands Inc. d/b/a Jeeter
10.79
Finders Agreement – Florence Mirsky
This Form 10-Q
31.1

Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
31.2

Certification of principal accounting officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
32.1

Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2

Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Press Release dated November 13, 2023
101.INS

XBRL Instance Document
101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.
101.LAB

XBRL Taxonomy Extension Label Linkbase Document.
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.
101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.
101.SCH

XBRL Taxonomy Extension Schema Document.

1215
Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LFTD Partners Inc.

Dated: November ~~11, 2022~~13, 2023
By:
/s/ Gerard M. Jacobs

Gerard M. Jacobs

Chief Executive Officer

1316

Consideration Paid Pursuant to the Asset Purchase Agreement

Cash used to pay off Oculus' liabilities at the closing	$	368,488

Consideration Paid Pursuant to the Oculus Merger Agreement

First Installment of Merger Consideration
100 shares of common stock of LIFD issued at the closing of the Merger to Chase and Hagan Sanchez	$	209

Second Installment of Merger Consideration
Value of Minimum Earnout Consideration to be paid in cash	$	200,000
Value of Minimum Earnout Consideration to be paid in shares of common stock of LIFD (160,000 shares of common stock valued at $5.00 per share)	$	800,000
Total Consideration	$	1,368,697

Assets Acquired:

Cash	$	26,420
Accounts receivable	$	60,528
Inventory	$	147,431
Fixed Assets	$	329,559
Security and Utility Deposits	$	4,732
Goodwill	$	800,027
Total Assets Acquired	$	1,368,697

Total Liabilities Assumed	$	-

Net Assets Acquired	$	1,368,697

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Raw Goods	$	3,213,772	$	2,927,727	$	5,877,926	$	3,407,196
Finished Goods	$	3,130,905	$	882,217	$	3,987,276	$	2,616,771
Total Inventory	$	6,344,677	$	3,809,944	$	9,865,202	$	6,023,967

	1)	Identifying raw goods that would no longer be used in the manufacture of finished goods;
	2)	Identifying finished goods that would no longer be sold or that are slow moving; and
	3)	Valuing and expensing raw and finished goods that would no longer be sold.

	1)	The ordered item breaks, melts, ~~clogs, leaks~~ or separates in transit to the customer. In this case, the Company will replace the broken, melted or separated item at no cost to the customer.
	2)	The Company sent the wrong item to the customer. In this case, the Company will allow the customer to keep, at no cost to the customer, the item that was mistakenly sent to the customer. The Company will also send the correct product to the customer, at no cost to the customer.
	3)	The customer ordered the wrong product. In this case, the customer, at his/her own expense, must mail the mistakenly ordered product back to the Company, and the Company will mail the correct product to the customer.
	4)	The ordered item is recalled. In a situation where product is recalled, the Company will offer a replacement, credit, or refund.

Type of Sale	For the three months ended September 30, 2022		% of Net Sales			For the three months ended September 30, 2021		% of Net Sales			For the nine months ended September 30, 2022		% of Net Sales			For the nine months ended September 30, 2021		% of Net Sales
Net sales of raw materials to customers	$	21,707		0.2	%	$	105,960		1.2	%	$	40,339		0.1	%	$	155,695		0.8	%
Net sales of products to private label clients		766,129		6.8	%	$	663,968		7.5	%	$	850,271		1.8	%	$	2,692,091		14.3	%
Net sales of products to wholesalers		1,404,590		12.5	%	$	1,255,947		14.2	%	$	5,825,584		12.6	%	$	2,842,714		15.1	%
Net sales of products to distributors		8,653,948		77.0	%	$	6,273,836		71.1	%	$	36,393,678		78.9	%	$	12,060,313		63.9	%
Net sales of products to end consumers		390,903		3.5	%	$	521,242		5.9	%	$	2,992,784		6.5	%	$	1,118,554		5.9	%
Net Sales	$	11,237,277		100.0	%	$	8,820,952		100.0	%	$	46,102,656		100.0	%	$	18,869,366		100.0	%

	·	Lifted is the exclusive worldwide manufacturer and distributor of the Cali Products. To fulfill its obligations pursuant to the Cali Agreement, Lifted sources raw goods, labor, and other resources to manufacture the Cali Products at Lifted’s facilities and holds these raw goods and Cali Products in its facilities until the Cali Products are sold and shipped to customers.
	·	Customers’ orders of Cali Products are received through Lifted’s website www.urb.shop. Lifted processes these orders, prepares the Cali Products for shipment from Lifted’s inventories, and ships the Cali Products directly to the customers. Lifted is responsible for collecting payments from customers but does not guarantee collection.
	·	Lifted has the right, in its discretion, to add new Cali brands and Cali Products as they are developed.
	·	Lifted can set prices for Cali Products it supplies or unilaterally discontinue the supply of any Cali product if it no longer makes business sense to Lifted.

	·	Lifted is the exclusive worldwide manufacturer and distributor of the Diamond Products. To fulfill its obligations pursuant to the agreement, Lifted sources raw goods, labor, and other resources to manufacture the Diamond Products at its own facilities and holds these raw goods and Diamond Products in its facilities until the Diamond Products are sold and shipped to customers.
	·	Customers’ orders of Diamond Products are received through Lifted’s website www.urb.shop. Customers that attempt to purchase the Diamond Products from www.diamondsupplyco.com are redirected to www.urb.shop. Lifted processes these orders, prepares the Diamond Products for shipment from Lifted’s inventories, and ships the Diamond Products directly to customers.
	·	Lifted and Diamond agree upon the retail sales prices for the Diamond Products, and both Lifted and Diamond are to make good faith efforts to collect all payments in connection with each party’s sales of Diamond Products to all of its customers.

	·	Lifted is the exclusive manufacturer, seller, and distributor of the applicable Jeeter branded products in the USA. To fulfill its obligations pursuant to the agreement, Lifted sources raw goods, labor, and other resources to manufacture the Jeeter Products at its own facilities and holds these raw goods and Jeeter Products in its facilities until the Jeeter Products are sold and shipped to customers. Initially, Lifted was manufacturing all of the Jeeter Products, but in the middle of Q3 2023 Jeeter also began manufacturing joints at its facility after being authorized by Lifted to do so. Nonetheless, Jeeter produces joints during Monday through Friday, and then ships the finished joints to Lifted’s headquarters in Kenosha on Saturday. Lifted controls the Jeeter Products until they are then sold and shipped to the customers.

	·	Customers’ orders of Jeeter Products are received through Lifted’s website www.urb.shop. Lifted processes these orders, prepares the Jeeter Products for shipment from Lifted’s inventories, and ships the Jeeter Products directly to the customers. Lifted is responsible for collecting payments from customers but does not guarantee collection, nor the timetable of such collection.

	·	ENM has the right to use the Urb brand name on marijuana products sold within New Mexico in accordance with ENM’s license to manufacture marijuana products that can be sold to marijuana dispensaries in New Mexico. ENM sources raw goods, labor, and other resources to manufacture the Urb-branded products at its own facilities and holds these raw goods and Urb-branded products in its facilities until the Urb-branded products are sold and shipped to customers. ENM controls the Urb-branded products until they are then sold and shipped to the customers.
	·	Customers’ orders of Urb-branded products are received by ENM. ENM processes these orders, prepares the Urb-branded products for shipment from ENM’s inventories, and ships the Urb-branded products directly to the customers. ENM is responsible for collecting payments from the customers.
	·	ENM will source some of the raw goods, fixed assets and supplies from Lifted for manufacture of the Urb-branded products. The raw goods sourced from Lifted are referred to in the ENM Agreement as “Unit Components”. These Unit Components are maintained in Lifted’s inventories and shipped to ENM based on agreement between the CEOs of both Lifted and ENM. Lifted receives an agreed upon price, referred to in the ENM Agreement as the “Unit Component Price”, for each Unit Component shipped to ENM.
	·	ENM shall pay over to Lifted one-half of the Unit Sale Proceeds, 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 the Unit Components; and thirdly, to pay to Lifted a License Fee.

Asset Class	September 30, 2022			December 31, 2021
Machinery & Equipment	$	593,208		$	258,533
Leasehold Improvements	$	385,220		$	152,985
Trade Show Booths	$	10,000		$	23,488
Vehicles	$	75,047		$	22,309
Computer Equipment	$	7,312		$	7,312
Furniture & Fixtures	$	83,286		$	46,553
Sub-total:	$	1,154,073		$	511,180

Less: accumulated depreciation	$	(164,384	)	$	(77,967	)
	$	989,688		$	433,213

Asset Class	Estimated Useful Life
Machinery & Equipment		60 months
Leasehold Improvements		60 months
Trade Show Booths		36 months
Vehicles		60 months
Computer Equipment		60 months
Furniture & Fixtures		60 months

Date	Base Monthly Rent
January 1, 2021 – December 31, 2021	$	5,740.75
January 1, 2022 – December 31, 2022	$	5,855.57
January 1, 2023 – December 31, 2023	$	5,972.68
January 1, 2024 – December 31, 2024	$	6,092.13
January 1, 2025 – December 31, 2025	$	6,213.97

					Weighted-Average		Aggregate
			Weighted-Average		Remaining Contractual		Intrinsic
	Shares		Exercise Price		Term (Years)		Value
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, July 1, 2022		2,882,198	$	3.55		2.55	$	2,834,897
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, September 30, 2022		2,882,198	$	3.55		2.30	$	2,035,579
Outstanding Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants, September 30, 2022		3,627,198	$	3.85		2.32	$	2,035,579

			Weighted-		Weighted-Average Remaining		Aggregate
			Average		Contractual		Intrinsic
	Shares		Exercise Price		Term (Years)		Value
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, July 1, 2023		3,612,198	$	3.85		1.57	$	453,593
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, September 30, 2023		3,612,198	$	3.85		1.32	$	46,650
Outstanding Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants, September 30, 2023		3,612,198	$	3.85		1.32	$	46,650

Date	Base Monthly Rent
01/01/2022 – 12/31/2022	$	4,000.00
01/01/2023 – 12/31/2023	$	4,120.00
01/01/2024 – 12/31/2024	$	4,243.60
01/01/2025 – 12/31/2025	$	4,370.91
01/01/2026 – 12/31/2026	$	4,502.34

Date	Base Monthly Rent		Base Monthly Rent
07/01/2022 – 06/30/2023	$	5,493.25	$	5,493.25
07/01/2023 – 06/30/2024	$	5,630.58	$	5,630.58
07/01/2024 – 06/30/2025	$	5,771.35	$	5,771.35
07/01/2025 – 06/30/2026	$	5,915.63	$	5,915.63
07/01/2026 – 06/30/2027	$	6,063.52	$	6,063.52

Date	Base Monthly Rent
February 1, 2023 – February 28, 2023	$	0.00
March 1, 2023 – February 29, 2024	$	3,395.73
March 1, 2024 – February 28, 2025	$	3,531.56
March 1, 2025 – February 28, 2026	$	3,672.82
March 1, 2026 – February 28, 2027	$	3,819.73
March 1, 2027 – February 29, 2028	$	3,972.52

Date	Base Monthly Rent
April 1, 2023 – January 31, 2024	$	1,945.42
February 1, 2024 – January 31, 2025	$	2,023.23
February 1, 2025 – January 31, 2026	$	2,104.16
February 1, 2026 – January 31, 2027	$	2,188.33
February 1, 2027 – January 31, 2028	$	2,275.86
February 1, 2028 – February 29, 2028	$	2,366.90

Asset	Balance Sheet Line	September 30, 2023
Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $238,408 in 2023	Non-Current Assets	$	1,242,000

Liability	Balance Sheet Line	June 30, 2023
Finance Lease Liabilities	Current Liabilities	$	1,376,595

	For the Three Months Ended September 30,
Lease Cost:	2023		2022
Finance lease expense:
Amortization of Right-of-Use Assets	$	10,800	$	10,800
Interest on lease liabilities		24,388		23,924
Operating lease expense		55,314	$	20,147
Total	$	90,502	$	54,871

	For the Nine Months Ended September 30,
Lease Cost:	2023		2022
Finance lease expense:
Amortization of Right-of-Use Assets	$	32,400	$	35,473
Interest on lease liabilities		72,825		46,445
Operating lease expense		155,336	$	60,442
Total	$	260,561	$	142,360

Asset	Balance Sheet Line	September 30, 2022
Finance Lease Right-of-Use Asset, net of Right-of-Use Asset Amortization of $195,208 in 2022	Non-Current Assets	$	1,285,200

Liability	Balance Sheet Line	September 30, 2022
Finance Lease Liabilities	Current Liabilities	$	(26,079	)
Finance Lease Liabilities	Non-Current Liabilities	$	1,376,439

Lease Cost:	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021
Finance lease expense:
Amortization of Right-of-Use Assets	$	10,800	$	12,337
Interest on lease liabilities		23,924		13,188
Operating lease expense		20,147		-
Total	$	54,871	$	25,525

Lease Cost:	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Finance lease expense:
Amortization of Right-of-Use Assets	$	35,473	$	37,010
Interest on lease liabilities		46,445		39,673
Operating lease expense		60,442		8,000
Total	$	142,360	$	84,683

Maturity Analysis as of September 30, 2022:
	Finance			Operating
2022	$	35,133		$	55,070
2023		1,445,970			146,018
2024		-			142,211
2025		-			122,573
2026		-			125,903
Thereafter		-			36,381
Total		1,481,103			628,156
Less: Present value discount		(138,730	)		(98,271	)
Lease liability	$	1,342,373		$	529,885

	(1)	~~Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe –~~ The Company has filed an action in a case styled “Lifted Liquids, Inc. v. Girish GPO, Inc., Girish Ray, and the Law Offices of Saul Roffe” seeking to recover $30,000 that was to be held in escrow. The Company is also requesting approximately $14,569 in damages resulting from Girish GPO’s failure to pay for product it ordered and that the Company delivered. The matter is in the discovery phase and the Company intends to continue pursuing the action and recover its damages.
	~~(2)~~	Lifted Liquids, Inc. v. Asad Awawdeh and Habib Cash and Carry SD, Inc. – The Company has filed an action seeking to recover approximately $98,000 in damages resulting from Defendants’ failure to pay for product they ordered. The matter has been filed in California and the Company intends to pursue the action and recover its damages.
	~~(3)~~	~~Lifted Liquids, Inc. v. DEV Distribution, LLC~~~~, No, DC-22-15080~~– In October 2022, Lifted filed an action against Dev Distribution LLC, a vendor who failed to deliver certain products that Lifted has purchased and paid $263,938 for. The case is pending in the State of Texas 14th Civil District Court of Dallas County and is in its early stages. Lifted is seeking an injunction requiring the vendor to provide to Lifted the products that Lifted has purchased and paid for. Lifted is considering amending the complaint to seek the return of its molds and its packaging materials. The Company will also seek to recover any damages as a result of the vendor's actions.

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Domestic-Federal	$	121,208		$	103,010		$	582,113		$	1,911,512
State taxes, net of federal benefit		3,719			(38,623	)	$	153,695			582,681
Non-deductible expenses		63,384			13,941		$	127,360			20,522
Franchise taxes		(140	)		838			39,853			57,366
Revision of prior years' provision to return filing		(361,047	)		(72,471	)	$	(316,097	)		(72,471	)
Change in estimated future income tax rates		133,908			94,839		$	91,217			(37,079	)
Change in valuation allowance		-			(79,303	)	$	-			38,257
Other		392			1,796		$	(220	)		13,939
Total Provision (Benefit) for Income Taxes	$	(38,576	)	$	24,027		$	677,921		$	2,514,726

	September 30,			December 31,			September 30,			December 31,
	2022			2021			2023			2022
Deferred Tax Assets:
Stock-based compensation	$	2,752,667		$	2,714,410		$	2,791,555		$	2,754,875
Sales Allowances		230,519			-			88,173			256,650
Spoiled and Written-Off Inventory		634,040			-
Accrued Related Party Expenses		4,412			259,463			456			612
Impairment of SmplyLifted Note and Other Receivables		-			105,124
Allowance for Doubtful Accounts		40,838			64,661			44,198			77,269
Other		17,867			8,725
Less: Valuation allowance		(2,752,667	)		(2,714,410	)
Lease Liabilities								39,167			23,060
Less: Valuation allowance for stock-based compensation								(2,754,875	)		(2,754,875	)
Total Deferred Tax Assets		927,676			437,973			208,674			357,591

Deferred Tax Liabilities:
Depreciation & Amortization		(260,824	)		(105,143	)		(434,936	)		(270,169	)
Other		-			(1,279	)
Goodwill								(5,899	)		-
Total Deferred Tax Liabilities		(260,824	)		(106,422	)		(440,835	)		(270,169	)

Net Deferred Tax Assets	$	666,852		$	331,551
Net Deferred Tax Assets/(Liabilities)							$	(232,161	)	$	87,422

	September 30, 2022		December 31, 2021
Current Assets	$	14,616,599	$	13,152,696
Current Liabilities		6,573,881		11,906,270
Working Capital		8,042,718		1,246,426

	(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of an issuer;
	(2)	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and
	(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material adverse effect on the financial statements.

10.53		Compensation Agreement between Acquired Sales Corp., Gerard M. Jacobs and William C. "Jake" Jacobs dated as of June 19, 2019
10.58		Lease Agreement - 5511 95th Avenue, Kenosha, WI 53144
10.61		Lease Agreement - 8920 58th Place, Suite 850, Kenosha, WI 53144
10.62		Lease Agreement - 8910 58th Place, Suites 600 and 700, Kenosha, WI 53144
10.67		Omnibus Agreement dated December 30, 2021 between LFTD Partners Inc. Nicholas S. Warrender, 95th Holdings, LLC, Gerard M. Jacobs and William C. “Jake” Jacobs
10.68		Amended Omnibus Agreement dated February 14, 2022 between LFTD Partners Inc. Nicholas S. Warrender, Gerard M. Jacobs and William C. “Jake” Jacobs
10.69		Lease Agreement - 9560 58th Place, Suite 360, Kenosha, WI 53144
10.70		Acceleration Agreement
10.71		Commercial Sublease – 2701-09 West Fulton PH, Chicago, IL 60612

~~99.1~~10.72		~~Press Release (earnings)~~Lease Agreement - 5732 95th Ave, Suites 200 and 300, Kenosha, WI 53144
10.72.1		Manufacturing, Sales and Marketing Agreement – Cali Sweets, LLC
10.73		Manufacturing, Sales and Marketing Agreement – Diamond Supply Co.
10.74		Agreement and Plan of Merger - Oculus CHS Management Corp.
10.75		Hagan Sanchez Employment Agreement
10.76		Chase Sanchez Employment Agreement
10.77		Assignment and Assumption of Lease and Landlord Consent and Lease Agreement – Aztec New Mexico
10.78		Manufacturing Sales and Marketing Agreement – DreamFields Brands Inc. d/b/a Jeeter
10.79		Finders Agreement – Florence Mirsky