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 March 31, 2023

☐	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 May 12, 2023, the registrant had 18,094,748 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	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

SIGNATURES		37

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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.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

UPEXI, INC.

Interim Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Month Periods Ended March 31, 2023 and 2022

		Page

Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 (Unaudited)		5

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2023 and 2022 (Unaudited)		6

Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended March 31, 2023 and 2022 (Unaudited)		7

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022 (Unaudited)		8

Notes to the Unaudited Condensed Consolidated Financial Statements		9

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UPEXI, INC.

CONDENSED CONSOLDIATED BALANCE SHEETS (UNAUDITED)

	March 31,			June 30,
	2023			2022

ASSETS
Current assets
Cash	$	1,181,042		$	7,149,806
Accounts receivable		5,346,853			1,137,637
Inventory		10,140,644			4,725,685
Due from Bloomios		1,617,216			-
Deferred tax asset, current		-			462,070
Prepaid expenses and other receivables		1,809,730			840,193
Assets of discontinued operations, net		-			6,449,210
Total current assets		20,095,485			20,764,601

Property and equipment, net		7,618,148			7,343,783
Intangible assets, net		17,312,833			10,641,382
Goodwill		15,056,856			5,887,393
Deferred tax asset		2,979,918			2,002,759
Investments - Bloomios		9,955,450			-
Other assets		118,040			100,372
Right-of-use asset		678,145			926,570
Total other assets		53,719,390			26,902,259

Total assets	$	73,814,875		$	47,666,860

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	2,635,876		$	2,018,541
Accrued compensation		889,634			531,259
Deferred revenue		48,162			105,848
Accrued liabilities		4,172,455			955,327
Acquisition payable		500,000			-
Current portion of notes payable		9,164,189			5,424,752
Current portion of operating lease payable		272,116			267,029
Total current liabilities		17,682,429			9,302,756

Operating lease payable, net of current portion		449,874			700,411
Notes payable, net of current portion		18,951,762			8,876,949
Total long-term liabilities		19,401,636			9,577,360

Commitments and contingencies

Stockholders' equity
Preferred stock, $0.001 par value, 100,000,000 shares authorized, 500,000 and 500,000 shares issued and outstanding, respectively		500			500
Common stock, $0.001 par value, 100,000,000 shares authorized, 18,094,748 and 16,713,345 shares issued and outstanding, respectively		18,094			16,713
Additional paid in capital		44,858,392			34,985,597
Accumulated deficit		(7,842,606	)		(6,270,886	)
Total stockholders' equity attributable to Upexi, Inc.		37,034,380			28,731,924
Non-controlling interest in subsidiary		(303,570	)		54,820
Total stockholders' equity		36,730,810			28,786,744

Total liabilities and stockholders' equity	$	73,814,875		$	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 Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022

Revenue
Revenue	$	24,219,445		$	4,426,898		$	62,863,128		$	13,280,565

Cost of Revenue		14,614,754			1,098,137			36,904,527			3,081,112

Gross profit		9,604,691			3,328,761			25,958,601			10,199,453

Operating expenses
Sales and marketing		3,476,918			1,085,823			9,210,303			3,821,081
Distribution costs		2,578,180			605,368			8,641,559			1,538,830
General and administrative expenses		2,878,255			1,970,276			8,287,779			6,556,627
Share-based compensation		1,146,299			854,013			3,126,472			2,333,306
Amortization of acquired intangible assets		1,691,243			236,001			3,534,216			540,836
Depreciation		232,492			115,011			669,540			361,590
		12,003,387			4,866,492			33,469,869			15,152,270

Loss from operations		(2,398,696	)		(1,537,731	)		(7,511,268	)		(4,952,817	)

Other income (expense), net
Interest (expense) income, net		(154,999	)		(19,705	)		(2,380,972	)		(61,699	)
Change in derivative liability		-			-			(1,770	)		-
Gain on sale of Infusionz and select assets		-			-			7,564,363			-
Gain (loss) on sale of property and equipment		-			5,500			-			5,500
Gain on SBA PPP loan extinguishment		-			-			-			300,995

Other income (expense), net		(154,999	)		(14,205	)		5,181,621			244,796

Net loss before income tax		(2,553,695	)		(1,551,936	)		(2,329,647	)		(4,708,021	)
Income tax benefit		496,880			1,351,686			449,828			1,116,653

Net loss from continuing operations		(2,056,815	)		(200,250	)		(1,879,819	)		(3,591,368	)

Loss (income) from discontinued operations		288,127			147,583			(50,291	)		4,115,245

Net loss attributable to non-controlling interest		124,804			-			358,390			-

Net (loss) income attributable to Upexi, Inc.	$	(1,643,884	)	$	(52,667	)	$	(1,571,720	)	$	523,877

Basic income (loss) per share:
Loss per share from continuing operations	$	(0.11	)	$	(0.01	)	$	(0.11	)	$	(0.22	)
Income (loss) per share from discontinued operations	$	0.02		$	0.01		$	(0.00	)	$	0.26
Total (loss) income per share	$	(0.11	)	$	(0.00	)	$	(0.11	)	$	0.03

Diluted (loss) income per share:
Loss per share from continuing operations	$	(0.11	)	$	(0.01	)	$	(0.11	)	$	(0.20	)
Income (loss) per share from discontinued operations	$	0.02		$	0.01		$	(0.00	)	$	0.23
Total (loss) income per share	$	(0.11	)	$	(0.00	)	$	(0.11	)	$	0.03

Basic weighted average shares outstanding		18,015,837			16,426,399			17,418,877			16,080,699
Fully diluted weighted average shares outstanding		18,015,837			17,821,810			17,418,877			17,586,030

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

2022
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

Stock based compensation		-		-		-			-			670,098			-			-		670,098

Repurchase common stock		-		-		(467,765	)		(468	)		(1,975,420	)		-			-		(1,975,888	)

Issuance of common stock for exercise of options		-		-		36,582			36			(36	)		-			-		-

Issuance of common stock for stock compensation		-		-		91,500			92			183,823			-			-		183,915

Issuance of common stock for stock compensation for building remodel		-		-		70,000			70			70,280			-			-		70,350

Net loss for the three months ended March 31, 2022		-		-		-			-			-			(52,667	)		-		(52,667	)

Balance, March 31, 2022		500,000	$	500		16,108,323		$	16,108		$	32,046,045		$	(3,646,159	)	$	-	$	28,416,494

2023
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 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

Stock based compensation	-		-	-		-		1,146,299		-			-			1,146,299

Issuance of common stock for interest on note payable	-		-	134,000		134		606,870								607,004

Net loss for the three months ended March 31, 2023	-		-	-		-		-		(1,643,884	)		(124,804	)		(1,768,688	)

Balance, March 31, 2023	500,000	$	500	18,094,748	$	18,094	$	44,858,392	$	(7,842,605	)	$	(303,570	)	$	36,730,810

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)

	Nine Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net (loss) income from operations		(1,571,720	)		523,877

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization		4,203,756			902,426
Gain on sale of Infusionz and select assets		(7,564,363	)		-
Gain on sale of assets		-			(5,500	)
Inventory write-offs		34,328			140,000
Bad debt expense		-			1,000
Accrued interest on note receivable from Bloomios		(141,635	)		-
Amortization of senior security original issue discount		(455,450	)		-
Uncollected transition fees from Bloomios		(428,500	)		-
Non-controlling interest		(358,390	)		-
Change in deferred tax asset		(515,089	)		156,204
Shares issued for services		-			358,915
Shares issued for finder fee		1,770			33,740
Stock based compensation		3,126,472			1,940,651
Changes in assets and liabilities, net of acquired amounts
Accounts receivable		2,490,729			21,735
Inventory		2,293,866			(604,325	)
Prepaid expenses and other assets		(28,090	)		533,103
Operating lease payable		2,975			(17,062	)
Accounts payable and accrued liabilities		2,488,065			731,726
Deferred revenue		(57,686	)		85,030
Net cash provided by operating activities - Continuing Operations		3,521,038			4,801,520
Net cash used in operating activities - Discontinued Operations		-			(2,634,975	)
Net cash provided by operating activities		3,521,038			2,166,545

Cash flows from investing activities
Acquisition of Lucky Tail		(3,012,327	)		-
Acquisition of VitaMedica, Inc., net of cash acquired		(500,000	)		(2,574,589	)
Acquisition of New England Technology, Inc.		(2,085,390	)		-
Acquisition of Cygnet		(1,050,000	)		-
Acquisition of Interative Offers, net of cash acquired		-			(1,854,193	)
Proceeds from the sale of Infusionz and selected assets		4,273,427			6,000
Acquisition of property and equipment		(278,683	)		(5,649,100	)
Net cash used in investing activities - Continuing Operations		(2,652,973	)		(10,071,882	)
Net cash (used in) provided by investing activities - Discontinued Operations		-			-
Net cash used in investing activities		(2,652,973	)		(10,071,882	)

Cash flows from financing activities
Repayment of notes payable		(470,168	)		(150,000	)
Repayment of SBA note payable		(254,804	)		-
Repayment of the senior convertible notes payable		(6,307,775	)		-
Payment on line of credit, net		(6,826,338	)		-
Proceeds on note payable on building		3,000,000			-
Stock repurchase program		-			(1,975,888	)
Repayment on note payable on building		(97,744	)		-
Proceeds from issuance of convertible debt		2,650,000			-
Proceeds on note payable, related party		1,470,000			-
Net cash used in financing activities - Continuing Operations		(6,836,829	)		(2,125,888	)
Net cash (used in) provided by financing activities - Discontinued Operations		-			-
Net cash used in financing activities		(6,836,829	)		(2,125,888	)

Net decrease in cash - Continuing Operations		(5,968,764	)		(7,396,250	)
Net decrease in cash - Discontinued Operations		-			(2,634,975	)

Cash, beginning of period		7,149,806			14,534,211
Cash, end of period	$	1,181,042		$	4,502,986

Supplemental cash flow disclosures
Interest paid	$	326,918		$	-
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 LuckyTail		-			-
Issuance of common stock for acquisition of E-Core	$	6,000,000		$	-
Liabilities assumed from acquisition of E-Core	$	(7,712,168	)	$	-
Non-cash consideration received from Bloomios for the sale of Infusionz	$	18,000,000		$	-
Operating assets designated as held 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 much 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 a 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 April 12, 2023, the Company entered a deal to acquire the remaining 45% interest for structured cash payments equaling $1.95 million over the subsequent 12 months. The deal is expected to close the week of May 15, 2023.

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 March 31, 2023 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 nine months ended March 31, 2023, 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 nine months ended March 31, 2022 to conform to the presentation as of and for the three and nine months ended March 31, 2023.

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Note 2. Acquisitions

VitaMedica Corporation

Effective August 1, 2021, the Company purchased VitaMedica through Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company from VitaMedica Corporation, a California corporation, David Rahm and Yvette La-Garde. VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.

The following table summarizes the consideration transferred to acquire VitaMedica and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Cash	$	2,000,000
Cash, working capital adjustment		74,589
Common stock, 100,000 shares valued at $4.82 per common share, the closing price on August 4, 2021.		482,000
Note payable		500,000
	$	3,556,589

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable	$	107,446
Inventory		619,837
Prepaid expenses		117,268
Property and equipment		13,220
Trade name		463,000
Customer list		1,329,000
Non-compete		143,000
Right of use asset		112,612
Accounts payable		(140,068	)
Operating lease		(56,894	)
Operating lease		(112,612	)
Total identifiable net assets	$	2,595,809
Goodwill	$	960,780

No contingent consideration was recorded with this acquisition.

The goodwill is deductible for tax purposes and attributable to the Company’s added ability to enter the online seller’s market for surgery supplements, recovery, skin, beauty, health and wellness and provided improved gross margins through synergies recognized with the consolidation of manufacturing and distribution operations.

The Company’s condensed consolidated financial statements for the three and nine months ended March 31, 2023 include the actual results for VitaMedica. For the three and nine months ended March 31, 2022, the Company’s condensed consolidated financial statements include the actual results of VitaMedica for the period August 1, 2021 to March 31, 2022.

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 nine months ended March 31, 2022.

Interactive Offers, LLC

Effective October 1, 2021, the Company acquired Interactive Offers, LLC, a Delaware limited liability company (“Interactive”) from 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. 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.

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The following table summarizes the consideration transferred to acquire Interactive and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Cash	$	2,100,000
Common stock, 100,000 shares valued at $4.88 per common share, the closing price on October 1, 2021.		2,733,630
	$	4,833,630

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash	$	245,247
Accounts receivable		23,791
Prepaid expenses		32,543
Property and equipment		3,212
Trade name		146,000
Customer list		763,000
Software		1,590,000
Non-compete		132,000
Accounts payable		(174,943	)
Accrued liabilities		(313,800	)
Accrued compensation		(24,193	)
Deferred revenue		(478,385	)
Total identifiable net assets	$	1,944,472
Goodwill	$	2,889,158

No contingent consideration was recorded with this acquisition.

The goodwill is deductible for tax purposes and attributable to the Company having 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.

The Company’s condensed consolidated financial statements for the three and nine months ended March 31, 2023, include the actual results of Interactive.

Cygnet Online, LLC

Effective April 1, 2022, the Company acquired 55% of Cygnet Online, LLC, a Delaware limited liability company (“Cygnet”). The Company purchased 55% of the equity in the business with a purchase price of $5,515,756, as amended.

The following table summarizes the consideration transferred to acquire Interactive and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Cash	$	1,500,000
Convertible note payable, convertible at $6.00 per common share		1,050,000
Earnout payment		-
Common stock, 555,489 shares valued at $5.34 per common share, the closing price on April 1, 2022.		2,965,756
	$	5,515,756

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash	$	471,237
Accounts receivable		860,882
Inventory		2,337,208
Prepaid expenses		6,900
Property and equipment		7,602
Right to use asset		410,365
Other asset		6,545
Online sales channels		1,800,000
Vendor relationships		6,000,000
Accrued liabilities		(701,606	)
Notes payable		(7,298,353	)
Operating lease		(422,479	)
Total identifiable net assets	$	3,478,301
Goodwill	$	2,037,455

The Company’s condensed consolidated financial statements for the three and nine months ended March 31, 2022, include the actual results of 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. The Company did not exercise its right to purchase Seller’s remaining membership interests in Cygnet.

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.

On April 12, 2023, the Company entered into an agreement to acquire the remaining 45% interest for structured cash payments equaling $1.95 million over the subsequent 12 months. The deal is expected to close the week of May 15, 2023. If the deal does not close, the Seller’s right to cause the Company to purchase all of the Seller’s remaining membership interest would still be available to the Seller.

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.

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LuckyTail

Effective August 13, 2023, the Company acquired the business of LuckyTail from GA Solutions, LLC.

The following table summarizes the consideration transferred to acquire LuckyTail and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Cash	$	2,000,000
Cash payment, 90 days after close		500,000
Cash payment, 180 days after close		500,000
Contingent consideration		130,620
Cash payment, working capital adjustment		490,822
	$	3,621,442

Recognized amounts of identifiable assets acquired and liabilities assumed:

Inventory	$	490,822
Trade name		360,000
Customer list		2,304,000
Total identifiable net assets	$	3,154,822
Goodwill	$	466,620

The Company’s condensed consolidated financial statements for the three and nine months ended March 31, 2023, include the actual results of LuckyTail from August 13, 2022, through March 31, 2023.

The Company agreed to purchase certain inventory from the Seller upon its valuation having been determined, at close the inventory and other current assets were agreed to be $490,822, consisting of inventory and prepaid inventory. 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 March 31, 2023. The Company adjusted its estimate of $150,000 for this contingent consideration to $130,320 with the offset to goodwill.

The acquisition of LuckyTail provided the Company with 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

Effective October 21, 2022, the Company acquired E-Core Technology, Inc. (“E-Core”) d/b/a New England Technology, Inc., a Florida corporation (“New England Technology”).

The following table summarizes the consideration transferred to acquire E-core and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Cash	$	100,000
Cash payment, 120 days		3,000,000
Note payable		5,750,000
Note payable 2		5,750,000
Convertible note payable, convertible at $4.81 per common share		3,500,000
Common stock, 1,247,402 shares valued at $4.81 per common share, the calculated closing price on October 21, 2023.		6,000,000
	$	24,100,000

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash	$	1,014,610
Accounts receivable		6,699,945
Inventory		7,750,011
Prepaid expenses		75,721
Trade name		1,250,000
Customer relationships		6,000,000
Accrued liabilities		(192,051	)
Line of credit		(7,201,079	)
Total identifiable net assets	$	15,397,157
Goodwill	$	8,702,843

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 Company’s condensed consolidated financial statements for the three and nine months ended March 31, 2023, include the actual results of E-Core from October 21, 2022 through March 31, 2023.

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 nine months ended:

	March 31,
	2023		2022
VitaMedica	$	5,525,651	$	3,571,237
Interactive		1,054,935		1,543,651
Cygnet		20,806,317
LuckyTail		3,579,727		-
E-Core		25,822,931		-

	$	56,789,561	$	5,114,888

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Net revenue included in the three months ended:

	March 31,
	2023		2022
VitaMedica	$	1,943,955	$	1,164,971
Interactive		345,110		690,634
Cygnet		7,359,661		-
LuckyTail		1,394,459		-
E-Core		13,647,412		-

	$	24,690,597	$	1,855,605

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 nine months ended March 31, 2023 and the three and nine months ended March 31, 2022, as if the acquisitions occurred on July 1, 2021. The results of operations for VitaMedica, Interactive and Cygnet are included in the three and nine months ended March 31, 2023 and the results of operations for LuckyTail are included from August 13, 2022 to March 31, 2023.

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
Nine months ended March 31, 2023	Upexi, Inc.			LuckyTail		E-Core		Adjustments			Proforma

Net sales	$	62,863,128		$	892,270	$	12,905,836	$			$	76,661,234
Cost of sales	$	36,904,527		$	137,088	$	11,177,032	$			$	48,218,647
Operating expenses	$	33,469,868		$	383,476	$	1,050,602	$	561,721		$	35,465,667
Net income (loss) from continuing operations	$	(1,879,818	)	$	371,706	$	660,860	$	(561,721	)	$	(1,408,973	)
Basic income (loss) per common share	$	(0.11	)	$	-	$	0.53	$			$	(0.08	)
Weighted average shares outstanding		17,418,877			-		1,247,402		(693,001	)		17,973,278

Pro Forma, Unaudited										Proforma
Three months ended March 31, 2022	Upexi, Inc.			Cygnet		LuckyTail		E-Core		Adjustments			Proforma

Net sales	$	4,426,898			7,527,927	$	1,389,012	$	11,191,296	$			$	24,535,133
Cost of sales	$	1,098,137			6,372,432	$	274,175	$	9,947,860	$			$	17,692,604
Operating expenses	$	4,866,492			695,574	$	766,952	$	638,501	$	1,124,499		$	8,092,018
Net income (loss) from continuing operations	$	(200,250	)		382,657	$	347,885	$	604,475	$	(1,124,499	)	$	10,268
Basic income (loss) per common share	$	(0.01	)		0.69	$	-	$	-	$			$	0.00
Weighted average shares outstanding		16,426,399			555,489		-		1,247,402					18,229,290

Pro Forma, Unaudited															Proforma
Nine months ended March 31, 2022	Upexi, Inc.			VitaMedica		Interactive			Cygnet		LuckyTail		E-core		Adjustments			Proforma

Net sales	$	13,280,565		$	384,391	$	1,329,522		$	22,583,781	$	3,316,325	$	33,675,631	$			$	74,570,215
Cost of sales	$	3,081,112		$	93,509	$	-		$	19,117,296	$	836,530	$	29,793,652	$			$	52,922,099
Operating expenses	$	15,152,270		$	255,286	$	1,816,464		$	2,086,722	$	1,738,091	$	2,718,407	$	3,128,348		$	26,895,588
Net income (loss) from continuing operations	$	(3,591,368	)	$	35,596	$	(376,987	)	$	1,147,971	$	741,703	$	1,178,491	$	(3,128,348	)	$	(3,992,942	)
Basic income (loss) per common share	$	(0.22	)	$	0.36	$	(0.67	)	$	2.07	$	-	$	0.94	$			$	(0.22	)
Weighted average shares outstanding		16,080,699			100,000		560,170			555,489		-		1,247,402		(462,336	)		18,081,424

VitaMedica amortization expense of $496,356 annually and $41,363 monthly is based on the purchase price allocation report. For the nine months ended March 31, 2022, the proforma adjustment included $41,363, one month of amortization expense.

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Interactive amortization expense at $603,948 annually and $50,329 monthly is based on the purchase price allocation report. For the nine months ended March 31, 2022, the proforma adjustment included $150,987, three months of amortizatio