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RISKS AND UNCERTAINTIES
3 Months Ended
Mar. 31, 2024
RISKS AND UNCERTAINTIES  
RISKS AND UNCERTAINTIES

NOTE 3 - RISKS AND UNCERTAINTIES 

 

Going Concern – The Company currently has one revenue-generating subsidiary, Lifted. Prior to the acquisition of Lifted on February 24, 2020, the Company had no sources of revenue, and the Company had a history of recurring losses, which has resulted in an accumulated deficit of $3,241,142 as of March 31, 2024. 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. If and to the extent that the revenue generated by Lifted is not adequate to pay the Company’s operating expenses, the Company's financial obligations under its loan agreements with Surety Bank, and the dividends accruing on its preferred stock, then Company management plans to sustain the Company as a going concern by taking the following actions: (1) acquiring and/or developing profitable businesses that will create positive income from operations; and/or (2) completing private placements of the Company’s common stock and/or preferred stock. Management believes that by taking these actions, the Company will be provided with sufficient future operations and cash flow to continue as a going concern. However, there can be no assurances or guarantees whatsoever that the Company will be successful in consummating such actions on acceptable terms, if at all. 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 will evaluate whether there has been a potential impairment of value.

 

The regulatory risks and uncertainties associated with Lifted's cannabinoid-infused products, vaping and nicotine products industries, together with the other significant risks described in our 2023 Annual Report on Form 10-K filed with the SEC on March 29, 2024, have created significant adverse risks to the Company, which have caused substantial doubt about the Company’s ability to continue as a going concern.

 

The Company has significant financial obligations under its loan agreements with Surety Bank, and also the Company is accruing and paying 3% annual dividends on its outstanding Series A and Series B Convertible Preferred Stock.

 

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

 

No assurance or guarantee whatsoever can be given that the net income of the Company’s wholly owned subsidiary Lifted will be sufficient to allow the Company to pay all of its operating expenses, its financial obligations under its loan agreements with Surety Bank, the dividends accruing and being paid on the Company’s preferred stock, future company-wide management bonus pool payments, and other obligations.

 

As a result of all of the foregoing described factors, there is substantial doubt that the Company will be able to continue as a going concern. Bankruptcy of the Company at some point in the future is a possibility. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Customer Concentration Risk – During the quarter ended March 31, 2024, five customers made up approximately 27% of Lifted’s sales. In comparison, during the quarter ended March 31, 2023, five customers made up approximately 26% of Lifted’s sales.

 

Vendor Dependence – Regarding the purchases of raw goods and finished goods (“Inventory”), during the quarter ended March 31, 2024, approximately 71% of the Inventory that Lifted purchased was from five vendors. In comparison, during the quarter ended March 31, 2023, approximately 79% of the Inventory that Lifted purchased was from five vendors.

 

The loss of Lifted’s relationships with these customers and vendors could have a material adverse effect on Lifted’s business.