upxi_10q.htm

UNITED STATES

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 December 31, 2022

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

For the transition period from __________ to _______

Commission File Number 333-255266

UPEXI, INC.

(Exact name of registrant as specified in its charter)

Nevada

83-3378978

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

17129 US Hwy 19 N.

Clearwater, FL

33760

(Address of principal executive offices)

(Zip Code)

(701) 353-5425

(Registrant’s telephone number, including area code)

________________________________________________________

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	UPXI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has 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 every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of February 13, 2023, the registrant had 17,960,748 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Interim Unaudited Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	32

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURES		35

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

We operate in a rapidly changing environment and new risks emerge from time to time. As a result, it is not possible for our management to predict all risks, such as the COVID-19 outbreak and associated business disruptions including delayed clinical trials and laboratory resources, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Considering these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements included in this report speak only as of the date hereof, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

Our unaudited condensed consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this quarterly report. 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. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Upexi, Inc., unless otherwise indicated.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

UPEXI, INC.

Interim Unaudited Condensed Consolidated Financial Statements

For the Three and Six Month Periods Ended December 31, 2022 and 2021

		Page

Condensed Consolidated Balance Sheets as of December 31, 2022 and June 30, 2022 (Unaudited)		5

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021 (Unaudited)		6

Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 31, 2022 and 2021 (Unaudited)		7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 (Unaudited)		8

Notes to the Unaudited Condensed Consolidated Financial Statements		9

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UPEXI, INC.
CONDENSED CONSOLDIATED BALANCE SHEETS (UNAUDITED)

	December 31,			June 30,
	2022			2022

ASSETS
Current assets
Cash	$	4,508,161		$	7,149,806
Accounts receivable		8,869,297			1,137,637
Inventory		6,779,997			4,725,685
Deferred tax asset, current		-			462,070
Prepaid expenses and other receivables		1,967,088			840,193
Assets of discontinued operations, net		-			6,449,210
Total current assets		22,124,543			20,764,601

Property and equipment, net		7,231,404			7,343,783
Intangible assets, net		18,712,409			10,641,382
Goodwill		15,342,089			5,887,393
Deferred tax asset		2,479,918			2,002,759
Investments - Bloomios		10,081,255			-
Other assets		56,703			100,372
Right-of-use asset		608,488			926,570
Total other assets		54,512,266			26,902,259

Total assets	$	76,636,809		$	47,666,860

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	4,162,121		$	2,018,541
Accrued compensation		718,764			531,259
Deferred revenue		31,724			105,848
Accrued liabilities		3,898,318			955,327
Acquisition payable		3,978,523			-
Current portion of notes payable		2,117,683			5,424,752
Current portion of operating lease payable		187,777			267,029
Total current liabilities		15,094,910			9,302,756

Operating lease payable, net of current portion		375,552			700,411
Notes payable, net of current portion		24,420,152			8,876,949
Total long-term liabilities		24,795,704			9,577,360

Commitments and contingencies		-			-

Stockholders' equity
Preferred stock, $0.001 par value, 100,000,000 shares authorized, and 500,000 and 500,000 shares issued and outstanding, respectively		500			500
Common stock, $0.001 par value, 100,000,000 shares authorized, and 17,960,748 and 16,713,345 shares issued and outstanding, respectively		17,960			16,713
Additional paid in capital		43,105,223			34,985,597
Accumulated deficit		(6,198,722	)		(6,270,886	)
Total stockholders' equity attributable to Upexi, Inc.		36,924,961			28,731,924
Non-controlling interest in subsidiary		(178,766	)		54,820
Total stockholders' equity		36,746,195			28,786,744

Total liabilities and stockholders' equity	$	76,636,809		$	47,666,860

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UPEXI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Month's Ended December 31,						Six Month's Ended December 31,
	2022			2021			2022			2021

Revenue
Revenue	$	27,086,672		$	4,983,557		$	38,643,683		$	8,853,667

Cost of Revenue		16,773,493			711,246			22,289,773			1,982,975

Gross profit		10,313,179			4,272,311			16,353,910			6,870,692

Operating expenses
Sales and marketing		3,707,925			1,735,194			5,733,385			2,735,258
Distribution costs		3,575,545			821,630			6,063,379			933,463
General and administrative expenses		2,910,655			3,003,919			5,409,524			4,586,351
Share-based compensation		1,052,847			852,455			1,980,173			1,479,293
Amortization of acquired intangible assets		962,077			236,001			1,842,973			304,835
Depreciation		242,551			159,073			437,048			246,579
		12,451,600			6,808,272			21,466,482			10,285,779

Loss from operations		(2,138,421	)		(2,535,960	)		(5,112,572	)		(3,415,086	)

Other income (expense), net
Interest (expense) income, net		(1,790,144	)		(48,541	)		(2,225,973	)		(41,994	)
Change in derivative liability		(3,540	)		-			(1,770	)		-
Gain on sale of Infusionz and select assets		7,564,363			-			7,564,363			-
Gain on SBA PPP loan extinguishment		-			-			-			300,995

Other income (expense), net		5,770,679			(48,541	)		5,336,620			259,001

Income (loss) on operations before income tax		3,632,258			(2,584,501	)		224,048			(3,156,085	)
Income tax expense		(755,253	)		(493,936	)		(47,052	)		(235,033	)

Net income (loss) from continuing operations		2,877,005			(3,078,437	)		176,996			(3,391,118	)

(Loss) income from discontinued operations		(292,907	)		2,820,190			(338,418	)		3,967,662

Net loss attributable to non-controlling interest		(85,581	)		-			(233,586	)		-

Net income (loss) attributable to Upexi, Inc.	$	2,669,679		$	(258,247	)	$	72,164		$	576,544

Basic income (loss) per share:
Income (loss) per share from continuing operations	$	0.16		$	(0.32	)	$	0.01		$	(0.22	)
(Loss) income per share from discontinued operations	$	(0.02	)	$	0.29		$	(0.02	)	$	0.26
Total income (loss) per share	$	0.16		$	(0.32	)	$	0.01		$	(0.22	)

Diluted income (loss) per share:
Income (loss) per share from continuing operations	$	0.15		$	(0.32	)	$	0.01		$	(0.20	)
(Loss) income per share from discontinued operations	$	(0.02	)	$	0.29		$	(0.02	)	$	0.23
Total income (loss) per share	$	0.15		$	(0.32	)	$	0.01		$	(0.20	)

Basic weighted average shares outstanding		17,540,427			9,755,663			17,126,886			15,452,453
Fully diluted weighted average shares outstanding		19,030,705			9,755,663			18,617,164			17,220,564

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UPEXI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

	Preferred		Preferred		Common		Common		Additional					Non-			Total
	Stock		Stock		Stock		Stock		Paid		Accumulated			controlling			Stockholders'
	Shares		Par		Shares		Par		In Capital		Deficit			Interest			Equity

2021
Balance, June 30, 2021		500,000	$	500		15,262,394	$	15,262	$	25,372,247	$	(4,170,036	)	$	-		$	21,217,973

Issuance of common stock for acquisition of Infusionz		-		-		306,945		307		1,764,569		-			-			1,764,876

Issuance of common stock for acquisition of VitaMedica		-		-		100,000		100		481,900		-			-			482,000

Issuance of common stock for acquisition costs		-		-		7,000		7		33,733		-			-			33,740

Stock based compensation		-		-		-		-		593,098		-			-			593,098

Issuance of common stock for services		-		-		35,000		35		174,965		-			-			175,000

Net income for the three months ended September 30, 2021		-		-		-		-		-		511,711			-			511,711

Balance, September 30, 2021		500,000	$	500		15,711,339	$	15,711	$	28,420,512	$	(3,658,325	)	$	-		$	24,778,398

Stock based compensation		-		-		-		-		677,455		-			-			677,455

Issuance of common stock for acquisition of Interactive Offers		-		-		666,667		667		3,999,333		-			-			4,000,000

Net income for the three months ended December 31, 2021		-		-		-		-		-		64,833			-			64,833

Balance, December 31, 2021		500,000	$	500		16,378,006	$	16,378	$	33,097,300	$	(3,593,492	)	$	-		$	29,520,686



2022
Balance, June 30, 2022		500,000	$	500		16,713,345	$	16,713	$	34,985,597	$	(6,270,886	)	$	54,820		$	28,786,744

Amortization of common stock issuance for services		-		-		-		-		70,350		-			-			70,350

Stock based compensation		-		-		-		-		927,326		-			-			927,326

Net loss for the three months ended September 30, 2022		-		-		-		-		-		(2,597,515	)		(148,005	)		(2,745,520	)

Balance, September 30, 2022		500,000	$	500		16,713,345	$	16,713	$	35,983,273	$	(8,868,401	)	$	(93,185	)	$	27,038,900

Amortization of common stock issuance for services		-		-		-		-		70,350		-			-			70,350

Stock based compensation		-		-		-		-		1,052,847		-			-			1,052,847

Issuance of common stock for acquisition of E-Core		-		-		1,247,403		1,247		5,998,753		-			-			6,000,000

Net income (loss) for the three months ended December 31, 2022		-		-		-		-		-		2,669,679			(85,581	)		2,584,098

Balance, December 31, 2022		500,000	$	500		17,960,748	$	17,960	$	43,105,223	$	(6,198,722	)	$	(178,766	)	$	36,746,195

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UPEXI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Month's Ended December 31,
	2022			2021
Cash flows from operating activities
Net income (loss) attributable to Upexi, Inc.		72,164			576,544

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		2,280,021			304,835
Non-cash consideration for sale of Infusionz and select assets, net		(7,094,296	)		-
Inventory write-offs		34,328			140,000
Bad debt expense		-			1,000
Amortization of senior security original issue discount		(192,690	)		-
Noncontrolling interest		(233,586	)		-
Change in deferred tax asset		(15,089	)		177,674
Shares issued for services		-			175,000
Shares issued for finder fee		1,770			33,740
Stock based compensation		1,980,173			1,270,553
Changes in assets and liabilities, net of acquired amounts
Accounts receivable		(1,031,715	)		113,826
Inventory		6,043,078			(779,808	)
Prepaid expenses and other assets		(1,007,505	)		(258,054	)
Operating lease payable		(86,029	)		(49,468	)
Accounts payable and accrued liabilities		2,916,158			(699,488	)
Deferred revenue		(74,124	)		209,833
Net cash provided by operating activities - Continuing Operations		3,592,658			1,216,187
Net cash used in operating activities - Discontinued Operations		-			(826,188	)
Net cash provided by operating activities		3,592,658			389,999

Cash flows from investing activities
Acquisition of Lucky Tail		(2,500,000	)		-
Acquisition of VitaMedica, Inc., net of cash acquired		(500,000	)		(2,074,589	)
Acquisition of New England Technology, Inc.		914,611			-
Acquisition of Interative Offers, net of cash acquired		-			(1,854,193	)
Proceeds from the sale of Infusionz and selected assets		5,500,000			-
Acquisition of property and equipment		(183,969	)		(4,282,430	)
Net cash provided by (used in) investing activities - Continuing Operations		3,230,642			(8,211,212	)
Net cash (used in) provided by investing activities - Discontinued Operations		-			-
Net cash provided by (used in) investing activities		3,230,642			(8,211,212	)

Cash flows from financing activities
Repayment of notes payable		(311,938	)		-
Repayment of the senior convertible notes payable		(6,382,989	)		(151,004	)
Payment on line of credit		(7,201,079	)		-
Proceeds from note payable		-			33,967
Proceeds on note payable on building		3,000,000			-
Repayment on note payable on building		(38,939	)		-
Proceeds on note payable, related party		1,470,000			-
Net cash used in financing activities - Continuing Operations		(9,464,945	)		(117,037	)
Net cash (used in) provided by financing activities - Discontinued Operations		-			-
Net cash used in financing activities		(9,464,945	)		(117,037	)

Net decrease in cash - Continuing Operations		(2,641,645	)		(7,112,062	)
Net decrease in cash - Discontinued Operations		-			(826,188	)

Cash, beginning of period		7,149,806			14,534,211
Cash, end of period	$	4,508,161		$	6,595,961

Supplemental cash flow disclosures
Interest paid	$	-		$	-
Income tax paid	$	-		$	-
Non-cash financing activities
Issuance of common stock for acquisition of Infusionz	$	-		$	1,764,876
Issuance of common stock for acquisition of VitaMedica	$	-		$	482,000
Issuance of debt for acquisition of VitaMedica	$	-		$	1,000,000
Liabilities assumed from acquisition of E-Core	$	(7,712,168	)	$	-
Non-cash consideration received from Bloomios for the sale of Infusionz	$	18,000,000		$	-
Assets available for sale	$	6,446,210		$	6,786,289
Liabilities assumed from acquisition of VitaMedica	$	-		$	(309,574	)
Issuance of stock for acquisition of Interactive	$	-		$	4,000,000
Liabilities assumed from acquisition of Interactive	$	-		$	(1,099,993	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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UPEXI, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Description of the Business

Upexi is a multi-faceted brand owner with established brands in health, wellness, pet, beauty and other growing markets. We operate in emerging industries with high growth trends and look to drive organic growth of our current brands. We focus on direct to consumer and Amazon brands that are scalable and have anticipated, high industry growth trends. Our goal is to continue to accumulate consumer data and build out a significant customer database across all industries we sell into. The growth of our current customer database has been key to the year-over-year gains in sales and profits. To drive additional growth, we have and will continue to acquire profitable Amazon and eCommerce businesses that can scale quickly and reduce costs through corporate synergies. We utilize our in-house SaaS programmatic ad technology to help achieve a lower cost per acquisition and accumulate consumer data for increased cross-selling between our growing portfolio of brands.

The Company primarily conducts its business operations through the following subsidiaries:

☐	HAVZ, LLC, d/b/a/ Steam Wholesale, a California limited liability company
	o	SWCH, LLC, a Delaware limited liability company
	o	Cresco Management, LLC, a California limited liability company
☐	Trunano Labs, Inc., a Nevada corporation
☐	MW Products, Inc., a Nevada corporation
☐	Upexi Holding, LLC, a Delaware limited liability company
	o	Upexi Pet Products, LLC, a Delaware limited liability company
☐	VitaMedica, Inc, a Nevada corporation
☐	Upexi Enterprise, LLC, a Delaware limited liability company
	o	Upexi Property & Assets, LLC, a Delaware limited liability company
		■	Upexi 17129 Florida, LLC, a Delaware limited liability company
	o E-Core Technology, Inc.
☐	Interactive Offers, LLC (“Interactive”), a Delaware limited liability company
☐	Cygnet Online, LLC (“Cygnet”), a Delaware limited liability company, 55% owned

We operate throughout our locations in the USA with operations in Florida, California, Nevada, and Colorado through our various Brands and entities.

Upexi operates from our corporate location in Clearwater, Florida where direct to consumer and Amazon sales are driven by on-site and remote teams for all brands. The location also supports all the other locations with accounting, corporate oversight, day to day finances and all business growth and management operating from this location.

VitaMedica operates mainly from our California location with product development, fulfillment, and day-to-day operations from that location, primarily focused on our health and beauty products.

Interactive Offers operates from its Florida office with day-to-day operations supported by various off site remote positions, with the majority of the development team operating out of Portugal.

Cygnet Online operates from our South Florida location with a full on-site GMP warehouse and distribution center, day to day operations of our Amazon liquidation business team from this location with support of remote team members.

LuckyTail operates from our Clearwater, Florida location with sales and marketing driven by on-site and remote teams that operate Amazon and direct to consumer sales strategy and daily business operations for our pet products.

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E-Core Technology, Inc. operates from offices in Massachusetts, New York, New Jersey, and Florida and uses third-party logistic providers to receive, store and distribute its products. E-Core Technology, Inc. focuses on name brand consumer electronics and offers several innovative distribution models based on retailer requirements and programs. In addition, E-Core operates Tytan Tiles a children’s toy brand for popular magnetic tiles and building blocks.

HAVZ, LLC, d/b/a/ Steam Wholesale operates manufacturing and/or distribution centers in Henderson, Nevada supporting our health and wellness products, including those products manufactured with hemp ingredients and our overall distribution operations. We have continued to manage these operations with corporate focus on larger opportunities that have warranted management focus and investments for the future.

Business Acquisitions

On August 1, 2021, the Company completed an asset purchase agreement with Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company and the members of VitaMedica Corporation, a California corporation to purchase all the assets and assume certain liabilities of VitaMedica. VitaMedica is a leading online seller of supplements for surgery, recovery, skin, beauty, health, and wellness.

On October 1, 2021, the Company completed an equity interest purchase agreement with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company to acquire all of the outstanding membership interest of Interactive Offers, LLC, a Delaware limited liability corporation.

On April 1, 2022, the Company completed a securities purchase agreement with a single investor to acquire 55% of the equity interest in Cygnet Online, LLC, a Delaware limited liability corporation. The agreement also enables the Company to purchase the remaining 45% over the following two years.

On August 12, 2022, the Company completed an asset purchase agreement with GA Solutions, LLC, a Delaware limited liability company (“LuckyTail”), pursuant to which the Company acquired substantially all assets of LuckyTail. LuckyTail sells pet nail grinders and other pet products through various sales channels including some international sales channels.

On October 31, 2022, the Company and its wholly owned subsidiary Upexi Enterprise, LLC, completed a securities purchase agreement to purchase the outstanding stock of E-Core Technology, Inc. d/b/a New England Technology, Inc. (“E-Core”), a Florida corporation. E-Core distributes non-owned branded products to national retail distributors and has branded products in the toy industry that E-Core sells direct to consumers through online sales channels and to national retail distributors.

Business Divested

On October 26, 2022, the Company executed a membership interest purchase agreement to sell 100% of the membership interests of Infusionz LLC, a Colorado limited liability company (“Infusionz”), included in the sale was all rights to Infusionz brands and the manufacturing of certain private label business. Infusionz was originally purchased by the Company in July of 2020. The divestiture of Infusionz and related private label manufacturing represents a strategic shift in our operations and will allow us to become a predominantly product distribution focused company for both our Company owned brands and non-owned brands. Accordingly, the results of the business were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for all periods presented.

Basis of Presentation and Principles of Consolidation

The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of December 31, 2022, and June 30, 2022.

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In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

Discontinued Operations

A discontinued operation is a component of an entity that has either been disposed of or that is classified as held for sale, which represents a separate major line of business or geographic area of options and is part of a single coordinated plan to dispose of a separate line of business or geographical area of operations. In accordance with the rules regarding the presentation of discontinued operations, the assets, liabilities, and activity of Infusionz and certain manufacturing business have been reclassified as discontinued operations for all periods presented.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguished between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumption about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identified fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 established a three-tier fair value hierarchy that distinguishes between the following:

Level 1—Quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3—Unobservable inputs developed using estimates or assumptions developed by the Company, which reflect those that a market participant would use.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the balance sheets for cash and cash equivalents, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature. For the three and six months ended December 31, 2022, management believed it necessary to record a reserve against the debt and equity instruments obtained in the sale of Infusionz of $8,500,000.

Reclassification

Certain reclassifications have been made to the condensed consolidated financial statements as of and for the year ended June 30, 2022, and for the three and six months ended December 31, 2021 to conform to the presentation as of and for the three and six months ended December 31, 2022.

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Note 2. Acquisitions

VitaMedica Corporation

Effective August 1, 2021, the Company entered into and closed an asset purchase agreement (the “VitaMedica Agreement”) with Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company and VitaMedica Corporation, a California corporation, David Rahm and Yvette La-Garde (“Seller”). VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.

The Company agreed to purchase substantially all of the assets of the Seller as of August 1, 2021. The transaction was valued at an estimated fair value of $3,556,589. The purchase price consisted of 100,000 shares of the Company’s common stock valued at $482,000, $4.82 per common share, the closing price on August 4, 2021 (close date of the transaction), a non-negotiable promissory note from the Company in favor of the Seller in the original principal amount of $500,000, a non-negotiable convertible promissory note from the Company in favor of the Seller in the original principal amount of $500,000, convertible at $5.00 per share for a total of 100,000 shares of the Company’s Common Stock and a cash payment of $2,000,000 which was paid on August 5, 2021. In addition, a $74,589 cash payment was made on October 29, 2021, for excess working capital acquired.

A finder’s fee of $103,740 was paid by the Company, $70,000 in cash and 7,000 shares of common stock, valued at $33,740, $4.82 per common share, the closing market price on August 4, 2021 (close date of the transaction). These fees were expensed during the three and six months ended December 31, 2021.

The assets and liabilities of VitaMedica are recorded at their respective fair values and the following table summarizes these values based on the balance sheet on August 1, 2021, the effective closing date.

Tangible Assets	$	860,738
Intangible Assets		1,935,000
Goodwill		960,780
Liabilities Acquired		(199,929	)
Total Purchase Price	$	3,556,589

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2022 include the actual results for VitaMedica. For the three and six months ended December 31, 2021, the Company’s condensed consolidated financial statements include the actual results of VitaMedica for the period August 1, 2021 to December 31, 2021.

The acquisition of VitaMedica provided the Company with entrance into the online seller’s market for supplements for surgery, recovery, skin, beauty, health and wellness and provided improved gross margins through synergies recognized with the consolidation of manufacturing and distribution operations. These are the factors of goodwill recognized in the acquisition.

Interactive Offers, LLC

Effective October 1, 2021, the Company entered into an equity interest purchase agreement (the “I/O Agreement”) with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company (each an “I/O Seller” and collectively the “I/O Sellers”). The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”). The Company’s CEO and Chairman, Allan Marshall, was the controlling stockholder and the president of MFA Holdings Corp, which owned 20% of the outstanding membership interests in Interactive. Interactive provides programmatic advertising with its SaaS platform which allows for programmatic advertisement placement automatically on any partners’ sites from a simple dashboard.

The Company purchased all the outstanding membership interests of Interactive as of October 1, 2021. The purchase price for the sale was $4,833,630, as amended, which consisted of 560,170 shares of common stock of the Company valued at $2,733,630, $4.88 per share, the stock price on October 1, 2022, and a cash payment of $2,100,000.

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The assets and liabilities of Interactive are recorded at their respective fair values and the following table summarizes these values based on the balance sheet on October 1, 2021, the effective closing date.

Tangible Assets	$	413,465
Intangible Assets		2,631,000
Goodwill		2,889,158
Liabilities Acquired		(1,099,993	)
Total Purchase Price	$	4,833,630

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2022 include the actual results of Interactive.

The acquisition of Interactive provided the Company with a solid entry into the programmatic ad space and added a unique in-house advertising platform to leverage and scale its current and future brands. Access by sellers to Interactive’s ad platform provides further product sales growth and advertising efficiencies. These are the factors of goodwill recognized in the acquisition.

Cygnet Online, LLC

The Company entered into a securities purchase agreement to purchase Cygnet Online, LLC, a Delaware limited liability company effective as of April 1, 2022. The Company purchased 55% of the equity in the business with a purchase price of $5,100,000, as amended. The consideration consisted of $1,500,000 in cash, $2,550,000 or 555,489 shares of restricted common stock and a non-negotiable convertible promissory note in the original principal amount of $1,050,000, which can be converted into common stock of the Company at a price of $6.00 per share and is payable in full, to the extent not previously converted, on April 15, 2023. The purchase price is subject to a two-way adjustment based on the amount of Closing Working Capital, as defined in the agreement.

Additionally, Seller will be paid up to $700,000 in the form of an earn-out payment based on 7% of Cygnet’s net revenue during the earn-out period, in accordance with and subject to the terms and conditions of the agreement. The earn-out payment, if any, will be paid 50% in immediately available funds and 50% in Company restricted common stock.

The Agreement contains customary confidentiality, non-competition, and non-solicitation provisions for the Seller and Seller’s affiliates.

In addition, the Company has the right to purchase Seller’s remaining membership interests in Cygnet. Commencing on October 10, 2022 and continuing for 180 days thereafter, the Company has the right, but not the obligation, to cause the Seller to sell 15% of the membership interests in Cygnet for $1,650,000 in immediately available funds. Commencing on the date that the Company completes its financial statements for the year ended December 31, 2023, and continuing for 120 days thereafter, the Company has the right, but not the obligation, to cause the Seller to sell the remaining 30% of the membership interests in Cygnet for 30% of the amount equal to four times Cygnet’s Adjusted EBITDA (as defined in the Call Agreement) for calendar year 2023, payable by wire transfer of immediately available funds equal to at least 50% of said purchase price with the balance payable through the issuance to Seller of shares of restricted common stock of the Company.

The Seller has the right, but not the obligation, at any time commencing on the date that is 120 days after the date the Company completes Cygnet’s financial statements for the year ended December 31, 2023, and continuing for 90 days thereafter, to cause the Company to purchase all of the Seller’s remaining membership interests in Cygnet for a purchase price equal to the product of (i) four times Cygnet’s Adjusted EBITDA (as defined in the Put Agreement) for calendar year 2023, and (ii) the percentage of Cygnet membership interests being sold, payable in shares of restricted common stock of the Company.

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The assets and liabilities of Cygnet are recorded at their preliminary respective fair values as of the closing date of the Cygnet Agreement, and the following table summarizes these values based on the balance sheet on April 1, 2022, the effective closing date.

Tangible Assets	$	3,683,829
Intangible Assets		7,800,000
Goodwill		2,037,455
Liabilities Acquired		(8,421,284	)
Total Purchase Price	$	5,100,000

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2022, include the actual results of Cygnet.

The acquisition of Cygnet provided the Company with the opportunity to expand its operations as an Amazon and eCommerce seller. The resulting combination increased Cygnet’s product offerings through the Company’s distributors and partnerships as it continues to focus on over-the -counter supplements and beauty products. Cygnet will be the anchor company for Upexi’s Amazon strategy. These are the factors of goodwill recognized in the acquisition.

LuckyTail

The Company entered into an asset purchase agreement with GA Solutions, LLC to acquire substantially all assets of the business. The base consideration totals $3,000,000 plus the amount of working capital transferred to the Company. The consideration for the purchase consisted of $2,000,000, paid into escrow and released when certain assets were transferred to the Company, (ii) $500,000 payable on the latter of the release from escrow and 90 days post-closing, and (iii) $500,000 payable on the latter of the release from escrow and 180 days post-closing. In addition, the Company has agreed to purchase certain inventory from the Seller upon its valuation having been determined, at close the inventory and other current assets were estimated at $490,822. The asset purchase agreement also provides for a two-way post-closing adjustment based on a target adjusted revenue for the business acquired of $1,492,329 for the period of August 1, 2022 through December 31, 2022.

The Agreement contains customary confidentiality, non-competition, and non-solicitation provisions for the Seller and Seller’s affiliates.

The assets and liabilities of LuckyTail are recorded at their preliminary respective fair values as of the closing date of the asset purchase agreement, and the following table summarizes these values based on the balance sheet on August 12, 2022, the effective closing date.

Tangible Assets	$	490,822
Intangible Assets		2,664,000
Goodwill		336,000
Liabilities Acquired		-
Total Purchase Price	$	3,490,822

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2022, include the actual results of LuckyTail from August 13, 2022, through December 31, 2022.

The acquisition of LuckyTail provided the Company a foothold in the pet care industry and a strong presence on Amazon and its eCommerce store, offering nutritional and grooming products domestically and internationally. The acquisition provided both top line growth and improved EBITDA for the Company. These are the factors of goodwill recognized in the acquisition.

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E-Core, Inc. and its subsidiaries

On October 31, 2022, Upexi, Inc. (the “Company”), and its wholly owned subsidiary Upexi Enterprises, LLC entered into a securities purchase agreement, effective October 21, 2022, to purchase 100% of E-Core Technology, Inc. (“E-Core”) d/b/a New England Technology, Inc., a Florida corporation (“New England Technology”), for $24,100,000, subject to adjustments. The consideration consisted of $3,100,000 in cash, 1,247,402 shares of the Company’s restricted common stock with a value equal to $6,000,000, two promissory notes in the original principal amount of $5,750,000 each, payable upon maturity and a convertible promissory note in the original principal amount of $3,500,000, convertible in full on the two-year anniversary of the issuance of the note at a conversion price of $4.81 per share. If the conversion right is not exercised, the principal balance will be paid in twelve monthly installments beginning on the two-year anniversary of the executed promissory note. The principal amount of the convertible promissory note is subject to a two-way adjustment based on the Company’s Adjusted EBITDA for the three-year period commencing on the closing date.

In addition, on October 31, 2022, the Company issued options to purchase up to 360,000 shares of the Company’s common stock at an exercise price of $5.30 per share.

The agreement contains customary confidentiality, non-competition, and non-solicitation provisions for E-Core and its affiliates.

Within 90 days after the closing date, Buyer shall prepare and deliver to E-Core a statement, setting forth Buyer’s calculation of closing working capital and the purchase price resulting therefrom. The two-way post-closing adjustment based on target working capital shall be an amount equal to the closing working capital minus the target closing working capital.

The assets and liabilities of E-Core are recorded at their preliminary respective fair values as of the closing date of the asset purchase agreement, and the following table summarizes these values based on the balance sheet on October 21, 2022, the effective closing date.

Tangible Assets	$	15,540,288
Intangible Assets		7,250,000
Goodwill		8,988,076
Liabilities Acquired		(7,712,168	)
Total Purchase Price	$	24,066,196

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2022, include the actual results of E-Core from October 21, 2022, through December 31, 2022.

The acquisition of E-Core provided the Company with an entrance into the children’s toy sector as well as national retail distribution for owned and non-owned branded products. The acquisition expands the Company’s ability to leverage direct-to-consumer distribution and further develop the broad distribution capabilities of E-Core. These are the factors of goodwill recognized in the acquisition.

Revenue from acquisitions included in the financial statements.

Net revenue included in the six months ended:

	December 31,
	2022		2021
VitaMedica	$	3,561,264	$	2,406,266
Interactive		683,322		853,017
Cygnet		14,607,180		-
LuckyTail		2,219,234		-
E-core		13,647,412		-

	$	34,718,412	$	3,259,283

Net revenue included in the three months ended:

	December 31,
	2022		2021
VitaMedica	$	1,943,955	$	1,417,483
Interactive		345,110		-
Cygnet		7,359,661		-
LuckyTail		1,394,459		-
E-core		13,647,412		-

	$	24,690,597	$	1,417,483

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Consolidated pro-forma unaudited financial statements.

The following unaudited pro forma combined financial information is based on the historical financial statements of the Company, VitaMedica, Interactive, Cygnet, LuckyTail and E-Core after giving effect to the Company’s acquisitions as if the acquisitions occurred on July 1, 2021.

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on July 1, 2021, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the three and six months ended December 31, 2022 and the three and six months ended December 31, 2021, as if the acquisitions occurred on July 1, 2021. The results of operations for VitaMedica, Interactive and Cygnet are included in the three and six months ended December 31, 2022 and the results of operations for LuckyTail are included from August 13, 2022 to December 31, 2022.

Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of VitaMedica, Interactive, Cygnet, LuckyTail and E-Core by approximately $41,363, $50,329, $175,000, $54,000, and $145,833 per month, respectively.

Pro Forma, Unaudited					Proforma
Three months ended December 31, 2022	Grove, Inc.		E-Core		Adjustments			Proforma

Net sales	$	27,086,672	$	3,483,909	$			$	30,570,581
Cost of sales	$	16,773,493	$	2,968,750	$			$	19,742,243
Operating expenses	$	12,451,600	$	414,994	$	97,222		$	12,963,816
Net income (loss) from continuing operations	$	2,877,005	$	82,823	$	(97,222	)	$	2,862,606
Basic income (loss) per common share	$	0.16	$	0.27	$			$	0.16
Weighted average shares outstanding		17,540,427		311,851					17,852,278

Pro Forma, Unaudited
Six months ended December 31, 2022	Grove, Inc.		LuckyTail		E-Core		Adjustments			Proforma

Net sales	$	38,643,683	$	892,270	$	12,905,836	$			$	52,441,789
Cost of sales	$	22,289,773	$	137,088	$	11,177,032	$			$	33,603,893
Operating expenses	$	21,466,482	$	383,476	$	1,050,602	$	561,721		$	23,462,281
Net income (loss) from continuing operations	$	176,996	$	371,706	$	660,860	$	(561,721	)	$	647,841
Basic income (loss) per common share	$	0.01	$	-	$	-	$			$	0.04
Weighted average shares outstanding		17,126,886		-		779,626					17,126,886

Pro Forma, Unaudited											Proforma
Three months ended December 31, 2021	Grove, Inc.			Cygnet		LuckyTail		E-core			Adjustments			Proforma

Net sales	$	4,983,557			7,527,927	$	936,289	$	13,062,408		$			$	18,045,965
Cost of sales	$	711,246			6,372,432	$	265,506	$	11,637,510		$			$	12,348,756
Operating expenses	$	6,808,272			695,574	$	475,502	$	1,424,898		$	1,124,499		$	9,357,669
Net income (loss) from continuing operations	$	(3,078,437	)		382,657	$	195,281	$	(4,021	)	$	(1,124,499	)	$	(4,206,957	)
Basic income (loss) per common share	$	(0.32	)		0.69	$	-	$	-		$			$	(0.38	)
Weighted average shares outstanding		9,755,663			555,489		-		1,247,402						11,003,065

Pro Forma, Unaudited															Proforma
Six months ended December 31, 2021	Grove, Inc.			VitaMedica		Interactive			Cygnet		LuckyTail		E-core		Adjustments			Proforma

Net sales	$	8,853,667		$	384,391	$	1,329,522		$	15,055,854	$	1,927,313	$	22,484,335	$			$	50,035,082
Cost of sales	$	1,982,975		$	93,509	$	-		$	12,744,864	$	562,355	$	19,845,792	$			$	35,229,495
Operating expenses	$	10,285,779		$	255,286	$	1,816,464		$	1,391,148	$	971,139	$	2,079,906	$	2,441,348		$	19,241,070
Net income (loss) from continuing operations	$	(3,391,118	)	$	35,596	$	(376,987	)	$	765,314	$	393,818	$	574,016	$	(2,441,348	)	$	(4,440,709	)
Basic income (loss) per common share	$	(0.22	)	$	0.36	$	(0.57	)	$	1.38	$	-	$	0.46	$			$	(0.26	)
Weighted average shares outstanding		15,452,453			100,000		666,667			555,489		-		1,247,402					17,255,344

VitaMedica amortization expense of $496,356 annually and $41,363 monthly is based on the purchase price allocation report. For the six months ended December 31, 2021, the proforma adjustment included $41,363, one month of amortization expense.

Interactive amortization expense at $603,948 annually and $50,329 monthly is based on the purchase price allocation report. For the six months ended December 31, 2021, the proforma adjustment included $150,987, three months of amortization expense.

The Company estimated the annual Cygnet amortization expense at $2,100,000 annually and $175,000 monthly, based on management’s preliminary allocation of the purchase price. For the three months ended December 31, 2021, the proforma adjustment included $525,000, three months of amortization expense.

The Company estimated the annual LuckyTail amortization expense at $648,000 annually and $54,000 monthly, based on management’s preliminary allocation of the purchase price. For the six months ended December 31, 2022, the proforma adjustment included $27,000 of amortization expense for half a month. For the three months ended December 31, 2021, the proforma adjustment included $162,000 of amortization of three months and for the six months ended December 31, 2021, the proforma adjustment included $324,000, six months of amortization expense.

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The Company estimated the annual E-Core amortization expense at $1,750,000 annually and $145,833 monthly, based on management’s preliminary allocation of the purchase price. For the six months ended December 31, 2022, the proforma adjustment included $437,499 of amortization expense of three months. For the three months ended December 31, 2021, the proforma adjustment included $437,499 of amortization of three months and for the six months ended December 31, 2021, the proforma adjustment included $874,998 of amortization expense for six months.

Note 3. Inventory

Inventory consisted of the following:

	December 31, 2022		June 30, 2022
Raw materials	$	-	$	-
Finished goods		6,779,997		4,725,685
	$	6,779,997	$	4,725,685

The Company writes off the value of inventory deemed excessive or obsolete.

During the three and six months ended December 31, 2021, the Company wrote off inventory valued at $34,328 and $140,000, respectively.

Note 4. Property and Equipment

Property and equipment consist of the following:

	December 31, 2022			June 30, 2022
Furniture and fixtures	$	170,661		$	51,273
Computer equipment		130,507			103,615
Manufacturing equipment		3,136,286			1,002,796
Leasehold improvements		90,245			2,144,341
Building		4,876,133			4,656,435
Vehicles		261,362			253,229
Property and equipment, gross		8,665,194			8,211,689
Less accumulated depreciation		(1,433,790	)		(867,906	)
	$	7,231,404		$	7,343,783

Depreciation expense for the three months ended December 31, 2022, and 2021 was $242,551 and $159,073, respectively.

Depreciation expense for the six months ended December 31, 2022, and 2021 was $437,048 and $246,579, respectively.

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Note 5. Intangible Assets

Intangible assets as of December 31, 2022:

	Estimated Life	Cost		Accumulated Amortization		Net Book Value
Customer relationships, amortized over four years	4 years	$	10,396,000	$	1,091,242	$	9,304,758
Trade name, amortized over five years	5 years		2,219,000		278,349		1,940,651
Non-compete agreements	Term of agreement		275,000		225,500		49,500
Online sales channels	2 years		1,800,000		675,000		1,125,000
Vender relationships	5 years		6,000,000		900,000		5,100,000
Software	5 years		1,590,000		397,500		1,192,500
		$	22,280,000	$	3,567,591	$	18,712,409

For the three months ended December 31, 2022 and 2021, the Company amortized approximately $962,077 and $417,549, respectively.

For the six months ended December 31, 2022 and 2021, the Company amortized approximately $1,842,973 and $667,932, respectively.

The following intangible assets were added during the six months ended December 31, 2022 from the acquisition of LuckyTail:

Customer relationships	$	2,304,000
Trade name		360,000
Intangible Assets from Purchase	$	2,664,000

E-Core:

Customer relationships	$	6,000,000
Trade name		1,250,000
Intangible Assets from Purchase	$	7,250,000

Intangible assets as of June 30, 2022:

	Cost		Accumulated Amortization		Net Book Value
Customer relationships, amortized over four years	$	2,092,000	$	689,293	$	1,402,707
Trade name, amortized over five years		609,000		156,783		452,217
Non-compete agreements, amortized over the term of the agreement		275,000		115,042		159,958
Online sales channels, amortized over two years		1,800,000		225,000		1,575,000
Vender relationships, amortized over five years		6,000,000		300,000		5,700,000
Software, amortized over five years		1,590,000		238,500		1,351,500
	$	12,366,000	$	1,724,618	$	10,641,382

The following intangible assets were added during the year ended June 30, 2022, from the acquisition of VitaMedica, Interactive and Cygnet.

Customer relationships	$	2,092,000
Trade name		609,000
Non-compete agreements		275,000
Online sales channels		1,800,000
Vender relationships		6,000,000
Software		1,590,000
Intangible Assets from Purchase	$	12,366,000

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Future amortization of intangible assets at December 31, 2022 are as follows:

June 30, 2023	$	2,762,694
June 30, 2024		5,410,338
June 30, 2025		5,387,879
June 30, 2026		3,823,146
June 30, 2027		1,194,352
Thereafter		134,000
	$	18,712,409

Note 6. Prepaid Expense and Other Current Assets

Prepaid and other receivables consist of the following:

	December 31, 2022		June 30, 2022
Insurance	$	348,006	$	32,045
Prepayment to vendors		821,690		175,378
Deposits on services		33,187		13,762
Prepaid monthly rent		73,266		6,900
Subscriptions and services being amortized over the service period		94,820		274,959
Receivables for transition services from sale of Infusionz and select manufacturing		449,484		-
Other deposits		84,269		337,149
Accrued interest receivable from Bloomios on note receivable		35,385		-
Other receivables		26,981		-

Total	$	1,967,088	$	840,193

Note 7. Operating Leases

The Company has operating leases for corporate offices, warehouses and office equipment that have remaining lease terms of 1 year to 5 years.

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the condensed consolidated balance sheet as of December 31, 2022:

2023	$	187,777
2024		147,623
2025		135,632
2026		113,633
2027		28,684
Total undiscounted future minimum lease payments		613,349
Less: Imputed interest		(50,020	)
Present value of operating lease obligation	$	563,329

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The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of December 31, 2022 are:

Weighted average remaining lease term		33 Months
Weighted average incremental borrowing rate			5.0	%

For the three and six months ended December 31, 2022, the components of lease expense, included in general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:

	Three Months Ended December 31, 2022		Six Months Ended December 31, 2022
Operating lease cost:
Operating lease cost	$	93,377	$	186,754
Amortization of ROU assets		83,644		166,321
Interest expense		9,735		20,435
Total lease cost	$	186,756	$	373,510

Note 8. Accrued Liabilities and Acquisition Payable

Accrued liabilities consist of the following:

	December 31, 2022		June 30, 2022
Accrued expenses for loyalty program	$	8,618	$	6,418
Accrued interest		209,698		147,887
Accrued vendor liabilities		438,291		29,960
Accrued expenses on credit cards		585,285		108,735
Accrued sales tax		35,056		108,425
Derivative liability		-		81,909
Accrued expenses from sale of manufacturing operations		1,786,655		-
Other accrued liabilities		834,715		471,993
	$	3,898,318	$	955,327

Acquisition Payable consist of the following:

December 31,

2022

June 30,

2022

Payments related to the acquisition of E-core

2,966,196

Payments related to the acquisition of LuckyTail

1,012,327