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

 

or

 

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.

ClearwaterFL

 

33760

(Address of principal executive offices)

 

(Zip Code)

 

(701353-5425

(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

 

 
2

Table of Contents

 

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.

 

 
3

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

 

 
4

Table of Contents

 

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.

 

 
5

Table of Contents

 

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.

 

 
6

Table of Contents

 

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.

 

 
7

Table of Contents

 

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.

 

 
8

Table of Contents

 

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.

 

 
9

Table of Contents

 

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.

 

 
10

Table of Contents

 

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.

 

 
11

Table of Contents

 

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.

 

 
12

Table of Contents

 

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.

 

 
13

Table of Contents

 

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.

 

 
14

Table of Contents

 

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

 

 

 
15

Table of Contents

 

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.

 

 
16

Table of Contents

 

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