LFTD PARTNERS INC. As used in this Annual Report on Form 10-K, references to the "Company," "LFTD Partners ," "LIFD," "we," "our" or "us" refer toLFTD Partners Inc. and Lifted, unless the context otherwise indicates. Prior to the acquisition of Lifted onFebruary 24, 2020 ,LFTD Partners Inc. , formerly known asAcquired Sales Corp. , had no sources of revenue, andLFTD Partners Inc. had a history of recurring losses, which has resulted in an accumulated deficit of$11,414,602 as ofDecember 31, 2021 .LFTD Partners Inc. has Preferred Stock outstanding that is currently accruing dividends at the rate of 3% per year. These matters raise substantial doubt about our ability to continue as a going concern. This Management's Discussion and Analysis ("MD&A") section discusses our results of operations, liquidity and financial condition and certain factors that may affect our future results. You should read this MD&A in conjunction with our financial statements and accompanying notes included elsewhere in this report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our risk factors, financial statements and related notes that appear elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Risk factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-K.
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Table of Contents
INTRODUCTION
Management's Discussion and Analysis ("MD&A") of our financial condition and
results of operations is provided as a supplement to the accompanying financial
statements and related notes to help provide an understanding of our financial
condition, the changes in our financial condition and the results of operations.
Basis of Presentation
Overview
Please refer to "Description of the Business of
Liquidity and Capital Resources
The following table summarizes our Company's current assets, current liabilities and working capital as ofDecember 31, 2021 andDecember 31, 2020 , as well as our Company's cash flows for the years endedDecember 31, 2021 , 2020 and 2019: December 31, December 31, 2021 2020 Current Assets$ 13,152,696 $ 3,264,777 Current Liabilities 11,906,270 2,308,722 Working Capital 1,246,426 956,055 For the Year Ended December 31, 2021 2020 2019 Net Cash Provided by (Used in) Operating Activities$ 5,622,612 $ (338,036 ) $ (611,502 ) Net Cash Used in Investing Activities$ (446,655 ) $ (3,509,811 ) $ (2,096,200 ) Net Cash (Used In) Provided By Financing Activities$ (4,012,306 ) $ (98,002 ) $ 7,092,631
Comparison of the balance sheet atDecember 31, 2021 andDecember 31, 2020
At
At
AtDecember 31, 2021 , we had prepaid expenses of$4,262,237 primarily related to prepaid inventory and prepaid health and dental insurance; in comparison, atDecember 31, 2020 , we had prepaid expenses of$455,061 primarily related to prepaid inventory, prepaid payroll, prepaid workers compensation insurance and the prepayment of the OTCQX annual fee. AtDecember 31, 2020 , we had an outstanding loan receivable fromSmplyLifted LLC in the amount of$293,750 ; this money had been used by SmplyLifted to purchase inventory. This loan receivable was written off atDecember 31, 2021 .
At
Accounts receivable of$3,461,499 , net of$239,101 allowance, were outstanding atDecember 31, 2021 ; this is compared to accounts receivable of$1,413,051 , net of$5,743 allowance, outstanding atDecember 31, 2020 .
At
Total current assets at
AtDecember 31, 2021 andDecember 31, 2020 , our other assets primarily included goodwill of$22,292,767 related to the acquisition of Lifted onFebruary 24, 2020 . Also, at bothDecember 31, 2021 andDecember 31, 2020 , our other assets included our investments in Ablis,Bendistillery and Bend Spirits , which total$1,896,200 . AtDecember 31, 2021 , we also reported a net finance lease right-of-use asset of$1,227,532 , a net operating lease right-of-use asset of$76,412 , net fixed assets of$433,213 , net intangible assets of$1,386 and security and state licensing deposits of$6,900 . In 2021, Lifted wrote off its$30,000 deposit at a law firm that was required by Lifted's exclusive Girish GPO distribution agreement; such$30,000 was previously recorded as an other asset as ofDecember 31, 2020 . AtDecember 31, 2021 , Lifted wrote off its investment inSmplyLifted LLC , which was previously valued at$84,451 . AtDecember 31, 2020 , Lifted's investment in SmplyLifted was reported at$195,571 . Lifted's initial capital contribution toSmplyLifted LLC was$200,000 for a 50% membership interest. 53 Table of Contents In comparison, atDecember 31, 2020 , our other assets included net intangible assets of$3,054 and a security and state licensing deposit of$1,600 atDecember 31, 2020 . AtDecember 31, 2020 , we recognized a net operating lease right-of-use asset of$7,705 . AtDecember 31, 2021 , current liabilities of$11,906,270 primarily consisted of accounts payable and accrued expenses of$4,671,382 , accounts payable to an affiliate of NWarrender of$4,607 , deferred revenue of$2,174,393 , a company-wide management bonus pool accrual of$1,556,055 , income tax payable of$1,242,974 , management bonuses payable of$941,562 , interest payable to related parties WJacobs and GJacobs of$13,269 ,$11,926 in Series A convertible preferred stock dividends payable to preferred stockholders, and$1,796 in Series B convertible preferred stock dividends payable to preferred stockholders. In comparison, atDecember 31, 2020 , current liabilities of$2,308,722 primarily consisted of deferred revenue of$1,096,120 , management bonuses payable of$350,000 , accounts payable and accrued expenses of$639,479 , interest payable to NWarrender of$64,110 ,$145,561 in Series A convertible preferred stock dividends payable to preferred stockholders, and$5,782 in Series B convertible preferred stock dividends payable to preferred stockholders.
The Company had an accumulated deficit of
Comparison of operations for the year ended
During the year endedDecember 31, 2021 , the Company recognized net sales of$31,656,932 . From the periodFebruary 24, 2020 (closing on Lifted) throughDecember 31, 2020 , the Company recognized net sales of$5,344,320 . The Company did not generate revenue from continuing operations during the year endedDecember 31, 2019 . During the year endedDecember 31, 2021 , hemp-derived, nicotine and sanitizer products made up approximately 99%, 1% and 0% of Lifted's sales, respectively. During the year endedDecember 31, 2020 , hemp-derived, nicotine and sanitizer products made up approximately 60%, 20% and 20% of Lifted's sales, respectively. LIFD did not generate any revenue in 2019. No stock compensation expense of was recognized during the year endedDecember 31, 2021 . In comparison, stock compensation expense of$1,393,648 was recognized during the year endedDecember 31, 2020 . Of this,$733,499 related to the value of warrants issued to GJacobs upon the execution of his employment agreement onFebruary 24, 2020 , pursuant to theJune 19, 2019 compensation agreement. The difference,$660,149 , related to the value of warrants issued to WJacobs upon the execution of his employment agreement onFebruary 24, 2020 , pursuant to theJune 19, 2019 compensation agreement. Stock compensation expense of$874,154 was recognized during the year endedDecember 31, 2019 . Of this,$833,446 related to the value of 402,900 warrants to purchase unregistered shares of common stock of the Company issued to brokers for the capital raised for the Company by the brokers. The difference,$40,708 , was the value of a total of 14,042 warrants to purchase unregistered shares of common stock of the Company, issued to two finders (7,021 warrants were issued to each finder) in regard to the purchase of 4.99% of the stock of Ablis. In comparison, stock compensation expense of$72,500 was recognized during the year endedDecember 31, 2018 . As background: onApril 1, 2018 , we issued to directorJames S. Jacobs and to WJacobs, then an independent contractor and now our President and Chief Financial Officer, rights to purchase warrants, for an aggregate purchase price of$2.00 , an aggregate of 250,000 shares of common stock of the Company (40,000 toJames S. Jacobs , and 210,000 to WJacobs), at an exercise price of$0.01 per share, such warrants to be fully vested and to be exercisable on or prior toDecember 31, 2024 . We recorded total stock compensation expense of$72,500 related to these rights to purchase warrants; this consists of$11,600 of stock compensation for the rights to purchase warrants issued toJames S. Jacobs , and$60,900 of stock compensation for the rights to purchase warrants issued to WJacobs. During the year endedDecember 31, 2021 , the Company expensed$3,621,624 related to payroll, consulting and independent contractor expenses; this is up from$809,966 in payroll, consulting and independent contractor expenses during the year endedDecember 31, 2020 ; and up from$112,500 in payroll, consulting and independent contractor expenses during the year endedDecember 31, 2019 . Lifted has been dramatically increasing 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 onJuly 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 employee 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. AtDecember 31, 2021 , the bonus payable to this Lifted employee totaled$339,510 . During the year endedDecember 31, 2021 , the Company expensed$1,559,334 related to the company-wide management bonus pool. There was no company-wide management bonus pool accrued for during the years endedDecember 31, 2020 andDecember 31, 2019 . 54 Table of Contents
Driven by increased sales, bank charges and merchant fees increased to
During the year ended
Bad debt expense increased to$380,621 during the year endedDecember 31, 2021 , from$124,802 during the year endedDecember 31, 2020 , from$0 during the year endedDecember 31, 2019 .
Depreciation and amortization expense increased to$90,147 during the year endedDecember 31, 2021 , from$16,385 during the year endedDecember 31, 2020 , from$0 during the year endedDecember 31, 2019 . Other operating expenses increased to$629,012 during the year endedDecember 31, 2021 , from$222,052 during the year endedDecember 31, 2020 , from$58,478 during the year endedDecember 31, 2019 . Other operating expenses include, for example, lab supplies, dues and subscriptions, meals and entertainment, insurance expenses, repairs and maintenance, and state license & filing fees. Total, non-operating Other Expenses in 2021 of$613,539 primarily consisted of$388,727 in impairment of Lifted's investment in SmplyLifted,$195,571 in loss from Lifted's 50% membership interest in SmplyLifted, and interest expense of$142,427 . In comparison, total non-operating Other Expenses in 2020 of$16,221 primarily consisted of gain of forgiveness of debt of$91,272 , interest expense of$65,186 , settlement costs of$97,000 , refund of merchant account fees of$34,429 , settlement income of$12,500 , and interest income of$8,098 . During the year endedDecember 31, 2019 , Total Other Income consisted of interest expense of$27,998 , settlement income of$29,196 , and interest income of$25,628 . During the year endedDecember 31, 2021 , the Company recognized net income of$5,799,982 . In comparison, during the year endedDecember 31, 2020 , the Company incurred a net loss of$1,534,589 . In comparison, during the year endedDecember 31, 2019 , the Company incurred a net loss of$1,236,105 . Net cash provided by operating activities was$5,622,613 for the year endedDecember 31, 2021 , compared to net cash used in operating activities was$338,036 for the year endedDecember 31, 2020 , compared to$611,502 net cash used in operating activities for the year endedDecember 31, 2019 . Net cash provided by operating activities was primarily generated from net income of$5,799,982 . Net cash used in operating activities in 2021 was primarily for prepaid expenses and for the purchase of inventory. Offsetting the used cash were increases in accounts payable and accrued expenses and deferred revenue. Net cash used in operating activities in 2020 of$338,036 was also primarily for the purchase of inventory and prepaid expenses. Offsetting the used cash were increases in accounts payable and accrued expenses of$255,908 and deferred revenue of$1,031,424 . Net cash used in operating activities in 2019 was primarily for professional fees and independent contractor and consulting fees. Net cash used in investing activities was$446,655 ,$3,509,811 and$2,096,200 during the years endedDecember 31, 2021 , 2020 and 2019, respectively. Net cash used in investing activities in 2021 primarily related to the net purchase of fixed assets and loans to SmplyLifted, offset by the reduction of the CBD Lion note receivable. Net cash used in investing activities in 2020 primarily related to the net cash paid to NWarrender as part of the acquisition of Lifted, purchases of fixed assets, and a reduction of the CBD Lion note receivable as we received payments from CBD Lion. We also invested$200,000 intoSmplyLifted LLC ; this investment amount was reduced by SmplyLifted's net loss in 2020. We also made loans totaling$293,750 toSmplyLifted LLC for the purchase of inventory. Net cash used in investing activities in 2019 related to our$399,200 investment in Ablis, our$1,497,000 investment inBendistillery and Bend Spirits , and our$300,000 loan toCBD Lion LLC , of which$200,000 was outstanding atDecember 31, 2019 . During the year endedDecember 31, 2021 , net cash used in financing activities was$4,012,306 , primarily driven by the repayment of the$3,750,000 promissory note payable to NWarrender. Net cash used in financing activities was$98,002 during the year endedDecember 31, 2020 , primarily driven by the payments of dividends to Series A convertible preferred stockholders. In comparison, during the year endedDecember 31, 2019 , net cash provided by financing activities was$7,092,631 , primarily driven by the raise of$6,615,000 in exchange for Series A convertible preferred stock. During the year endedDecember 31, 2021 , net cash increased by$1,163,651 . In comparison, during the year endedDecember 31, 2020 , net cash decreased by$3,945,849 , and net cash increased by$4,384,929 during the year endedDecember 31, 2019 .
The Company has a history of losses as evidenced by the accumulated deficit atDecember 31, 2021 of$11,414,602 . 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. 55 Table of Contents
Selected Quarterly Financial Information
LFTD PARTNERS INC. (FORMERLY KNOWN AS ACQUIRED SALES
CORP.) AND SUBSIDIARY LIFTED LIQUIDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three For the Three For the Three For the Three
Months Ended Months Ended For the Three For the Three Months Ended Months Ended
December 31, September 30, Months Ended Months Ended December 31, September 30,
2021 2021 June 30, 2021 March 31, 2021 2020 2020
Net Sales $ 12,787,566 $ 8,820,952 $
6,695,144
6,252,549 4,720,057 3,035,630 1,707,523 1,312,946 878,327
Gross Profit 6,535,017 4,100,895 3,659,515 1,645,747 883,572 631,110
Operating
Expenses:
Payroll,
Consulting and
Independent
Contractor
Expenses 1,719,305 803,796 791,000 307,524 211,851 275,149
Accrual for
Company-Wide
Management Bonus
Pool - 400,000 816,388 342,947 - -
Management
Bonuses 650,000 - - - - -
Professional Fees 133,300 139,526 133,892 93,033 80,810 50,235
Bank Charges and
Merchant Fees 103,647 104,485 118,055 66,570 27,824 14,702
Advertising and
Marketing 100,446 86,438 98,133 52,027 22,384 26,670
Bad Debt Expense 299,000 61,448 19,196 977 2,915 94,251
Depreciation and
Amortization 5,805 16,344 26,215 41,783 5,245 5,092
Other Operating
Expenses 278,024 170,821 99,773 80,394 56,902 51,289
Total Operating
Expenses 3,289,526 1,782,858 2,102,652 985,254 407,931 517,388
Income/(Loss)
From Operations 3,245,491 2,318,037 1,556,863 660,493 475,641 113,722 Other Income/(Expenses) Income/(Loss) From 50% membership interest in SmplyLifted LLC (FR3SH) (100,172 ) (44,858 ) (43,330 ) (7,211 ) (4,429 ) - Impairment of Investment in - - - - - SmplyLifted (388,727 ) Income from SmplyLifted for WCJ Labor 144 313 769 1,072 - - Loss on Lease Modification (1,445 ) - - - - - Interest Expense (35,314 ) (35,368 ) (35,398 ) (36,347 ) (19,281 ) (19,281 ) Dividend Income 2,495 - - - 2,495 - Warehouse Buildout Credits - - 600 600 600 600 Penalties (5,434 ) (2,162 ) - (450 ) - - Gain on Forgiveness of Debt 521 - 151,147 - 81,272 - Settlement Income/Gain on Settlement - - - - 12,500 - Gain(Loss) on Disposal of Fixed Assets - - (4,750 ) - - - Loss on Deposits (1,600 ) - (30,000 ) - - - Interest Income 694 217 253 202 733 782 Total Other Income/(Expenses) (528,837 ) (81,858 ) 39,292 (42,134 ) 73,890 (17,899 ) Income/(Loss) Before Provision for Income Taxes 2,716,654 2,236,179 1,596,154 618,359 549,531 95,823 Provision for Income Taxes (1,367,362 ) - - - - - Net Income/(Loss) Attributable to LFTD Partners Inc. common stockholders$ 1,349,292 $ 2,236,179 $ 1,596,154 $ 618,359 $ 549,531 $ 95,823 Earnings/(Loss) Per Common Share Attributable to LFTD Partners Inc. common shareholders: Basic $ 0.10 $ 0.17 $ 0.14 $ 0.08 $ 0.06 $ 0.01 Diluted $ 0.08 $ 0.14 $ 0.11 $ 0.04 $ 0.02 $ 0.01 Weighted average number of common shares outstanding Basic 14,005,567 13,015,717 11,042,657 7,456,925 6,463,301 6,460,236 Diluted 15,962,765 16,257,915 14,381,105 16,084,794 16,040,170 6,460,236 OnFebruary 24, 2020 , we acquired 100% of the ownership interests of Lifted. All of our sales are generated by our 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 orBend Spirits . Critical Accounting Policies
Critical accounting policies are discussed in Note 1 of the financial statements accompanying this annual report.
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 12 - LEGAL 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.
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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 have significantly disrupted business activity globally and there is uncertainty as to if and when these disruptions will fully subside. 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 months endedDecember 31, 2021 were not materially impacted by COVID-19, we believe 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, includingIllinois 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.
Effects of the COVID-19 pandemic that may negatively impact our business in future periods include, but are not limited to: 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.
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