| BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
| Dec. 31, 2023 |
| BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Presentation | Basis of Presentation – 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 the development, manufacture and/or sale or re-sale of a wide variety of branded, hemp-derived, psychoactive and alternative lifestyle products, and of products involving nicotine, tobacco and marijuana. We are primarily interested in acquiring rapidly growing, profitable companies that are also involved in the manufacture and sale of branded, hemp-derived, psychoactive and 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/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 that are outside our industry and that are unlikely to be shut down by the government during pandemics such as 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 and d/b/a 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”) brand. Products currently sold by Lifted include, for example: disposable vapes and cartridges, gummies, joints, blunts, and products containing ingredients such as kanna, muscimol, ashwagandha and kava. Bank Financing and Purchase of Headquarters Building On December 14, 2023, LFTD Partners and Lifted (together the “Borrower”), jointly borrowed a total of $3,910,000 from Surety Bank, of DeLand, Florida (“Lender”). The Lender made two five-year loans to the Borrower, as joint borrowers: (1) a working capital loan of $3,000,000 at 9.5% fixed annual interest, and (2) a $910,000 loan at 10% fixed annual interest, the net proceeds of which were used by Lifted Made to pay a portion of the $1,375,000 purchase price of Lifted Made’s main operations building located at 5511 95th Avenue in Kenosha, Wisconsin (“5511 Building”). The two loans are cross collateralized by a first lien mortgage on the 5511 Building, and by a first lien security interest in all of the other assets owned by LIFD and Lifted Made, in favor of Surety Bank. Purchase of the 5511 Building Toward the end of 2020, our Vice Chairman and Chief Operating Officer Nicholas S. Warrender (“NWarrender”), through his assigned entity 95th Holdings, LLC (“Holdings”), purchased the 5511 Building, which 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 Holdings, 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 valuation based on a formula agreed upon by the parties. Pursuant to an agreement with 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 was extended by one year to December 31, 2023. Lifted purchased the 5511 Building from Holdings on December 14, 2023 for the agreed upon purchase price of $1,375,000 in cash. Improvements to and Potential Expansion of the 5511 Building 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 building improvement (a capitalized fixed asset). The investment in this necessary parking lot had no impact on the $1,375,000 purchase price that Lifted had committed to pay for, and did pay for, the 5511 Building on December 14, 2023. 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. $3,000,000 Working Capital Loan Credit Agreement Pursuant to the Credit Agreement dated as of December 14, 2023 (the “Credit Agreement”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower $3,000,000 (“Working Capital Loan”). The interest rate for the Working Capital Loan is a fixed annual interest rate of 9.5%. The Credit Agreement requires a Promissory Note and Security Agreement. The Credit Agreement requires a prepayment fee if the Working Capital Loan is repaid to the Lender in less than three years, in the amount of 3% of the Working Capital Loan if the loan is repaid in Year-1, 2% of the Working Capital Loan if the Working Capital Loan is repaid in Year-2, and 1% if the Working Capital Loan is repaid in Year-3. The Credit Agreement is also subject to certain negative covenants in which the Borrower agreed (subject to certain exceptions) not to, among other things: · Become subject to other liens or encumbrances; · Change ownership of Lifted Made without the consent of the Lender; · Enter into a merger, acquisition or divestiture; · Conduct stock buybacks; · Serve as a guarantor; · Wind up, liquidate or dissolve; · Enter into the purchase, sale, exchange or transfer of property; · Permit the outstanding principal balance of the Working Capital Loan to exceed 40% of the fair market value of the collateral securing the Working Capital Loan; or · Directly or indirectly issue, assume or create any additional indebtedness on the collateral. Promissory Note Pursuant to the Promissory Note dated as of December 14, 2023 (the “WC Note”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower the Working Capital Loan at a fixed annual interest rate of 9.5%. The WC Note also requires a 5% late fee on outstanding unpaid payments due under the WC Note where payments are not made within 10 days of the due date. The WC Note has cross-default cross-collateralized provisions with the $910,000 Business Loan described below. Security Agreement Pursuant to a Security Agreement dated as of December 14, 2023 (“Security Agreement”), the Borrower granted to the Lender a security interest in all the Borrower’s personal property relating to its business to secure the obligations of the Borrower under the Credit Agreement. The collateral that is secured by the Security Agreement includes all the Borrower’s accounts, general intangibles, inventory, equipment, goods, deposit accounts, contractual rights, fixtures, money, insurance and commercial tort claims. If an event of default under the Credit Agreement occurs, then the Lender may exercise the Borrower’s rights in the collateral. In that event, the Lender will have all the rights of a secured party with respect to the collateral under the Uniform Commercial Code, including, among other things, the right to sell the collateral at public or private sale. Collateral Assignment Agreement Under the Collateral Assignment Agreement dated as of December 14, 2023, between the Borrower and the Lender, the Borrower assigned to the Lender, in connection with the terms of the Credit Agreement, all of Borrower’s “intellectual property”, including but not limited to, all patents, patent rights, trademarks and service marks, works, inventions, copyrights, trade names, software and computer programs, trade secrets, methods, processes, know how, drawings, and specifications. In the event of default under the Credit Agreement or WC Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing intellectual property collateral to the detriment of the Borrower. Pledge Agreement Under the Pledge Agreement dated as of December 14, 2023, between the Borrower and $910,000 Loan Business Loan Agreement Pursuant to the Business Loan Agreement dated as of December 14, 2023 (the “Loan Agreement”), among the Borrower and the Lender, the Lender agreed to loan $910,000 (the “Business Loan”) to the Borrower. The Business Loan requires that Borrower shall maintain a minimum 1.50x Debt Service Coverage Ratio (DSCR) based on Borrower tax returns. The DSCR shall be tested annually, beginning with the 2023 return. The DSCR shall be calculated as EBIDA (earnings before interest, depreciation, and amortization) divided by contractual annual debt service payments. The Business Loan also requires Borrower to maintain its primary operating accounts with a $1,000,000.00 minimum deposit account balance with the Lender for the life of the Business Loan. The Business Loan also requires a Promissory Note, Mortgage and Assignment of Rents, Leases, and Security Deposits described below. Promissory Note Pursuant to the Promissory Note dated as of December 14, 2023 (the “BL Note”), among the Borrower and the Lender, the Lender agreed to loan to the Borrower the Business Loan at a fixed annual interest rate of 10%. The BL Note also requires a 5% late fee on outstanding unpaid payments due under the BL Note. The BL Note requires a mortgage on the 5511 Building, along with a first priority security interest on: all furniture, equipment, inventory, and general intangibles (including but not limited to all software and all payment intangibles); all fixtures; and all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods. Mortgage Pursuant to the Mortgage dated as of December 14, 2023 (the “Mortgage”), among Lifted Made in favor of the Lender, in connection with the terms of the Loan Agreement and BL Note, Lifted Made agreed to a first priority mortgage on the 5511 Building (Parcel Number 08-222-32-410-104). In the event of default under the Loan Agreement or BL Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing equity collateral to the detriment of the Borrower. Assignment of Rents, Leases, and Security Deposits Pursuant to the Assignment of Rents, Leases, and Security Deposits dated as of December 14, 2023 (the “Lease Assignment”), among Lifted Made in favor of the Lender, in connection with the terms of the Loan Agreement and BL Note, Lifted Made agreed to assign its rights to leases and income from the 5511 Building to Lender. In the event of default under the Loan Agreement or BL Note, or other cross collateralized obligations, the Lender would be entitled to the foregoing equity collateral to the detriment of the Borrower. Default under any of the agreements described above could have a highly detrimental, if not catastrophic impact on our company. Consolidated Balance Sheet Presentation of the Working Capital and Business Loans and Maturity Analysis The following presents the Working Capital and Business Loans in the Consolidated Balance Sheets as of December 31, 2023 and 2022: December 31, December 31, 2023 2022 Working Capital Loan $ 3,000,000 $ - Business Loan 910,000 - Total principal amount 3,910,000 - Less: Unamortized debt financing costs (55,149 ) - Less: Current portion of Surety Bank notes (506,061 ) - Non-Current portion of Surety Bank notes $ 3,348,790 $ - The following represents aggregate payments due on the Working Capital and Business Loans during each of the five years subsequent to December 31, 2023 and thereafter: Maturity Analysis: 2024 $ 876,939 2025 876,939 2026 876,939 2027 876,939 2028 1,618,429 Thereafter - Total 5,126,185 Less: interest port ion (1,216,185 ) Total principal amount $ 3,910,000 Manufacturing, Sales and Marketing Agreements During the year ended December 31, 2023 Lifted entered into 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. 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 current liability on the Company’s Consolidated Balance Sheets, and Commission Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations. 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 work together to 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. 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 current liability on the Company’s Consolidated Balance Sheets, and Royalty Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations. 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. 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 current liability on the Company’s Consolidated Balance Sheets, and Commission Expense is reported in the Operating Expenses section of the Consolidated Statements of Operations. The Jeeter Agreement was terminated effective January 1, 2024 pursuant to a Termination Agreement dated as of March 22, 2024 between Jeeter and Lifted, described in NOTE 14 – SUBSEQUENT EVENTS 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. 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”). 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. As of the day of this Annual Report on Form 10-K, the management of the Company does not expect the second installment of Merger Consideration to exceed the Minimum Earnout Consideration. Accounting for Lifted’s Purchase of Assets of Oculus CRS, LLC, and Merger With Oculus CHS Management Corp. Consideration |
| Other Business Information | Other Business Information ITEM 1. BUSINESS |
| Consolidated Financial Statements | Consolidated Financial Statements |
| Use of Estimates | Use of Estimates |
| Cash and Cash Equivalents | Cash and Cash Equivalents |
| Restricted Cash | Restricted Cash |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair-value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows: Level 1 – Level 2 – Level 3 – Accounting for Investments The Company’s Investment in Lifted Made The financial statements of LFTD Partners are consolidated with Lifted’s, since Lifted is a wholly owned subsidiary of LFTD Partners. The Company’s Investments in Ablis, Bendistillery and Bend Spirits The Company’s investments in Ablis Holding Company, Bendistillery Inc. and Bend Spirits, Inc. are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company owns less than 20% of the equity ownership of each of these entities and has no substantial influence over the management of the businesses. In accordance with US GAAP, the Company does not consolidate its financial statements with those of Ablis Holding Company, Bendistillery Inc. and Bend Spirits, Inc. At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether its investments are impaired. Factors that the Company would consider indicators of impairment include: (1) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, (2) a significant adverse change in the regulatory, economic, or technological environment of the investee, (3) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, (4) a bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment, and (5) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants, if any. The qualitative assessments at the end of first, second and third quarters are done via conference calls with the management teams of Ablis, Bendistillery and Bend Spirits. The qualitative assessment at the end of the fourth quarter relating to these entities also includes review of their respective financial statements that have been reviewed by a third-party accounting firm. At that time, the Company performs an annual impairment assessment. The reviewed financial statements of these companies are not audited, and the Company is not active in the management of these companies, and except for these companies’ quarterly meetings with the management of the Company, the Company’s assessment of these companies is inherently limited to infrequent and relatively brief conversations with officers of these companies and to reviews of those reviewed financial statements. The Company’s Investment in SmplyLifted 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). 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. |
| Prepaid Expenses | Prepaid Expenses |
| Accounts Receivable | Accounts Receivable The Company evaluates the collectability of its trade accounts receivable based on a number of factors. Management of the Company reviews and discusses all outstanding customer trade balances as of reporting period end. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded (the “Allowance for Doubtful Accounts”), which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. Management also considers industry-specific factors which may impact customers’ ability to meet their financial obligations to the Company. In addition to specific customer identification of potential bad debts, management takes into consideration Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses, which is codified as Accounting Standards Codification Topic 326, adds to US GAAP the current expected credit loss model (“CECL Model”), which is a measurement model based on expected losses rather than incurred losses. Under the CECL Model, an entity recognizes its estimate of expected losses as an allowance. The Company has considered the applicable guidance in ASU 2016-13. Key aspects of the CECL Model include the following: 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. In performing its CECL Model analysis, management calculates the ratio of write offs to sales made to wholesalers and distributors for the trailing three-year period (the “Bad Debt Loss Rate”). The Bad Debt Loss Rate is then multiplied by sales made to wholesalers and distributors during the trailing twelve months (the “Bad Debt Calc”). The Bad Debt Calc is compared to the total accounts receivable that is older than 90 days as of reported period end; for conservatism, whichever is larger is considered the Allowance for Doubtful Accounts as of reported period end. The Company’s position is that the Company’s conservative approach toward the treatment of Allowance for Doubtful Accounts provides sufficient coverage in relation to potential credit losses from outstanding invoice write-offs. Allowance for Doubtful Accounts of $375,417 and $281,762 were reported at December 31, 2023 and 2022, respectively. Prior to the implementation of the CECL Model analysis, as of December 31, 2021, the Company implemented a new policy regarding the Allowance for Doubtful Accounts, which is that all accounts receivable older than 90 days at quarter end are accrued for in Allowance for Doubtful Accounts. |
| Inventory | Inventory December 31, 2023 December 31, 2022 Raw Goods $ 4,962,652 $ 3,407,196 Finished Goods $ 5,212,015 $ 2,616,771 Total Inventory $ 10,174,667 $ 6,023,967 The process of determining obsolete or spoiled inventory involves: 1) Identifying raw goods that would no longer be used in the manufacture of finished goods; 2) Identifying expired raw goods; 3) Identifying finished goods that would no longer be sold or that are slow moving; 4) Identifying finished goods that are expired; and 5) Valuing and expensing raw and finished goods that would no longer be sold. 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 December 31, 2023, $338,582 of overhead costs incurred during the fourth quarter were allocated to finished goods. In comparison, at December 31, 2022, $127,485 of overhead costs incurred during the fourth quarter were allocated to finished goods. During the year ended December 31, 2023, $2,056,603 of obsolete and spoiled inventory was written off. In comparison, $4,418,922 and $338,799 of obsolete and spoiled inventory was written off during the years ended December 31, 2022 and 2021, respectively. Of the $4,418,922 of obsolete and spoiled inventory that was written off during the year ended December 31, 2022, $2,313,902 of it related to certain 2 mL disposable vapes written off during the third quarter of 2022 due to clogging issues (the “Clogged Vapes”). Management believes that the clogging was caused by the summer heat wave (the third hottest summer on record in the USA). The heat caused 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 sale of the Clogged Vapes during the third quarter. Lifted’s 2 mL disposable vapes have been superseded by 3 mL disposable vapes that do have preheat and variable voltage settings, so management expects that this write off of Clogged Vapes should be a one-time occurrence. On December 30, 2022, Lifted was able to reach an agreement for the forgiveness of $630,000 of payables owed to its third-party disposable vape device manufacturer. The agreement also includes credits to Lifted against future purchases from the device manufacturer totaling $370,047. The credit is to be provided by the manufacturer at the rate of $46,255.87 per quarter beginning with the first quarter of 2023 and continuing for the next six consecutive quarters, with a final quarterly credit of $46,255.91 for the fourth quarter of 2024. The agreement is a result of the vape manufacturer agreeing to share a portion of the Company’s prior $2,313,902 write-off of certain 2 mL disposable vapes that were written off due to clogging issues. The payable forgiveness resulted in a net $485,496 improvement to the cost of goods sold and accrued liabilities sections of the Company’s consolidated statements of operations as of December 30, 2022. The $370,047 in credits had been booked as an asset as of December 30, 2022 and recognized as other income amortized quarterly at the rate of $46,256 per quarter beginning with the first quarter of 2023 and continuing for the next six consecutive quarters, with a final quarterly credit of $46,255 for the fourth quarter of 2024. However, based on the analysis of credits applied to Venom bills in 2023, Lifted received $33,427 more credits than was expected/agreed to per the agreement ($185,024 per year for 2023 and 2024); as such, Lifted’s revised credit going into 2024 was $151,597, and this is amortized quarterly at the rate of $37,899 per quarter. |
| Fixed Assets | Fixed Assets 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 Deposit | Security Deposits The Company has paid security deposits for its leased facilities located at 8920 58 th th th th 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 has paid security deposits for utilities to various vendors. |
| State Licensing Deposits | State Licensing Deposits |
| Revenue | Revenue 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. An allowance for sales is recorded for estimated future discounts/refunds related to returns of products sold prior to the reporting period end. 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, 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. An allowance for sales reduces net sales on the Consolidated Statements of Operations, and also reduces accounts receivable on the Consolidated Balance Sheets. Sales allowances of $635,098 and $939,496 were reported at December 31, 2023 and 2022, respectively. Management believes that an adequate allowance for sales has been made for discounts/refunds as of period end. Disaggregation of Revenue 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 are tables showing the approximate disaggregation of historical revenue: For the Years Ended December 31, Location of Sale 2023 2022 2021 Inside of USA $ 51,576,029 100% $ 56,842,370 99% $ 31,625,275 99.9% Outside of USA 34,533 0.07% 574,165 1% 3,166 0.01% Net Sales $ 51,610,562 100% $ 57,416,535 100% $ 31,656,932 100% For the Years Ended December 31, Type of sale 2023 2022 2021 Net sales of raw goods to customers $ 180,743 0% $ 40,518 0% $ 476,211 2% Net sales of products to private label clients $ 1,500,344 3% $ 975,199 2% $ 3,246,420 10% Net sales of products to wholesalers $ 10,730,095 21% $ 7,503,530 13% $ 4,586,306 15% Net sales of products to distributors $ 36,724,597 71% $ 45,522,229 79% $ 21,661,464 68% Net sales of products to end consumers $ 2,474,784 5% $ 3,375,059 6% $ 1,686,531 5% Net Sales $ 51,610,562 100% $ 57,416,535 100% $ 31,656,932 100% For the Years Ended December 31, Hemp vs Non-Hemp Product Sales 2023 2022 2021 Net sales of hemp products $ 48,064,790 93 % $ 55,694,039 97 % $ 31,340,363 99 % Net sales of non-hemp products 3,545,772 7 % 1,722,496 3 % 316,569 1 % Net Sales $ 51,610,562 100 % $ 57,416,535 100 % $ 31,656,932 100 % For the Years Ended December 31, Product Type 2023 2022 2021 Vapes $ 27,048,471 52% $ 29,143,143 51% $ 14,316,912 45% Edibles 15,125,799 29% 15,810,094 28% $ 7,421,833 23% Flower 5,193,884 10% 4,865,629 8% $ 1,824,049 6% Cartridges 4,135,941 8% 7,471,666 13% $ 6,047,096 19% Other 106,467 0% 126,003 0% $ 2,047,042 6% Net Sales $ 51,610,562 100% $ 57,416,535 100% $ 31,656,932 100% |
| Deferred Revenue | Deferred Revenue Amounts received from a customer before the purchased product is shipped to the customer are treated as deferred revenue. If cash is not received, an accounts receivable is recognized for the invoiced order, but revenue is not recognized until the order is fully shipped. Accounts receivable include amounts associated with partially shipped orders, for which the unshipped portion is a contract asset. Contract assets represent invoiced but unfulfilled performance obligations. At December 31, 2021, total deferred revenue was $2,174,393, all of which was recognized as revenue in 2022. At December 31, 2022, total deferred revenue was $594,086, all of which was recognized as revenue in 2023. At December 31, 2023, total deferred revenue was $235,891, all of which is expected to be recognized as revenue in 2024. 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 December 31, 2023 and December 31, 2022. December 31, 2023 December 31, 2022 Contract Assets (invoiced but unfulfilled performance obligations) $ 131,304 $ 224,141 Deposits from customers for unfulfilled orders $ 104,586 $ 369,945 Total Deferred Revenue $ 235,891 $ 594,086 |
| Cost of Goods Sold | Cost of Goods Sold Cost of goods sold amounted to $31,906,278, $36,423,246 and $15,715,759 during the years ended December 31, 2023, 2022, and 2021, respectively. $2,056,603, $4,418,922 and $338,799 of cost of goods sold relates to spoiled and obsolete inventory written off during the years ended December 31, 2023, 2022 and 2021, respectively. |
| Operating Expenses | Operating Expenses Total operating expenses increased to $17,294,095 for the year ended December 31, 2023, up from $11,180,562 for the year ended December 31, 2022, and up from $8,160,290 for the year ended December 31, 2021. The primary driver for this increase in operating expenses was that 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, for the year ended December 31, 2023, was $1,666,155 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 year ended December 31, 2023 from $3,825,162 to $2,159,007. But for this charge, our Company would have reported a basic and fully diluted EPS of $0.26 and $0.23, respectively, for the year ended December 31, 2023. Also driving the increase in operating expenses from 2022 to 2023 was the reporting of commissions and royalties expenses related to the collaborations with third parties, which amounted to $1,733,800 in 2023. These collaborations were not in place in 2022 The primary driver of the increase in operating expenses from 2021 to 2022 was increased payroll expenses (payroll expenses increased $2,801,960), due to the hiring of more employees and independent contractors, and the bonuses paid to Lifted’s Chief Strategy Officer. |
| Income Taxes | Income Taxes |
| Basic and Diluted Earnings (Loss) Per Common Share | Basic and Diluted Earnings (Loss) Per Common Share For the Years Ended December 31, 2023 2022 2021 Net Income $ 2,159,007 $ 7,196,327 $ 5,799,982 Weighted average number of common shares outstanding: Basic 14,555,279 14,080,729 11,402,639 Diluted 16,439,477 15,862,927 13,359,837 Basic Net Income per Common Share $ 0.15 $ 0.51 $ 0.50 Diluted Net Income per Common Share $ 0.13 $ 0.45 $ 0.43 As of December 31, 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. At December 31, 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 December 31, 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 December 31, 2023 ($2.14/share). There were also 142,000 shares of issuable Deferred Contingent Stock included in the December 31, 2023 diluted EPS calculation. Also included in the December 31, 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. In comparison, as of December 31, 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. 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 December 31, 2022: 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. At December 31, 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 December 31, 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 December 31, 2022 ($2.15/share). |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounts Receivable On December 14, 2023, the FASB issued a final standard on improvements to income tax disclosures, ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact, if any, that the updated standard will have on the consolidated financial statements. On November 27, 2023, the FASB issued ASU 2023-07-Segment Reporting. The new guidance was issued primarily to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments. The guidance is effective for calendar year public entities in 2024 year-end financial statements, and should be adopted retrospectively unless impracticable. The Company is currently evaluating the impact, if any, that the updated standard will have on the consolidated financial statements. |
| Advertising and Marketing Expenses | Advertising and Marketing Expenses |
| Off Balance Sheet Arrangements | Off-Balance Sheet Arrangements |
| Reclassifications | Reclassifications |
| Business Combinations and Consolidated Results of Operations and Outlook | Business Combinations and Consolidated Results of Operations and Outlook Business Combinations and Reorganizations When the Company acquires a business, we allocate the purchase price to the assets acquired and liabilities assumed in the transaction at their respective estimated fair values. We record any premium over the fair value of net assets acquired as goodwill. The allocation of the purchase price involves judgments and estimates both in characterizing the assets and in determining their fair value. We use all available information to make these fair value determinations and engage independent valuation specialists to assist in the fair value determination of the acquired long-lived assets. |
| Accounting for Operating and Finance Lease Right-of-Use Assets | Accounting for Operating and Finance Lease Right-of-Use Assets |
| Accounting for Goodwill | Accounting for Goodwill 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 using the income approach. 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 and other factors. For the discount rate, the Company considered the current market interest rates, including the interest rates on the Company’s recently closed loans from Surety Bank, 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. 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. 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. |
