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, 2024

 

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.)

 

3030 North Rocky Point Drive

Tampa, Florida

 

33607

(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 July 5, 2024, the registrant had 20,889,384 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

 

5

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

12

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

13

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

14

 

 

 

 

 

 

Item 1A.

Risk Factors

 

14

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

14

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

14

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

14

 

 

 

 

 

 

Item 5.

Other Information

 

14

 

 

 

 

 

 

Item 6.

Exhibits

 

15

 

 

 

 

 

 

SIGNATURES

 

16

 

 

2

 

  

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, as well as the other risks and uncertainties disclosed under the heading “Item 1A. Risk Factors” in our most recent annual report on Form 10-K.

 

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

 

  

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, 2024 and 2023

 

 

 

Page

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and June 30, 2023

 

F-1 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2024 and 2023 (Unaudited)

 

F-2 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended March 31, 2024 and 2023 (Unaudited)

 

F-3 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023 (Unaudited)

 

F-4 

 

 

 

 

 

Notes to the Unaudited Condensed Consolidated Financial Statements

 

F-5 

 

 

4

Table of Contents

 

UPEXI, INC.

CONDENSED CONSOLDIATED BALANCE SHEETS (UNAUDITED)

 

 

 

March 31,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$498,287

 

 

$4,492,291

 

Accounts receivable

 

 

4,707,128

 

 

 

6,963,915

 

Inventory

 

 

8,801,901

 

 

 

9,267,892

 

Due from Bloomios

 

 

-

 

 

 

845,443

 

Prepaid expenses and other receivables

 

 

720,582

 

 

 

1,283,617

 

Current assets of discontinued operations

 

 

2,111,952

 

 

 

2,602,556

 

Total current assets

 

 

16,839,850

 

 

 

25,455,714

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

7,520,005

 

 

 

7,442,623

 

Intangible assets, net

 

 

9,469,923

 

 

 

12,588,124

 

Goodwill

 

 

10,847,791

 

 

 

9,290,501

 

Deferred tax asset

 

 

8,273,049

 

 

 

5,604,056

 

Other assets

 

 

368,004

 

 

 

76,728

 

Assets held for sale

 

 

1,675,112

 

 

 

2,984,868

 

Right-of-use asset

 

 

1,513,693

 

 

 

410,453

 

Total other assets

 

 

39,667,577

 

 

 

38,397,353

 

 

 

 

 

 

 

 

 

 

                   Total assets

 

$56,507,427

 

 

$63,853,067

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$2,124,024

 

 

$3,930,540

 

Accrued compensation

 

 

841,064

 

 

 

533,842

 

Deferred revenue

 

 

111,519

 

 

 

-

 

Accrued liabilities

 

 

2,551,149

 

 

 

3,350,541

 

Acquisition payable

 

 

300,000

 

 

 

-

 

Current portion of notes payable

 

 

5,473,136

 

 

 

1,302,021

 

Current portion of convertible notes payable

 

 

-

 

 

 

1,254,167

 

Current portion of acquisition note payable

 

 

8,048,562

 

 

 

5,656,620

 

Current portion of related party note payable

 

 

-

 

 

 

1,429,356

 

Line of Credit

 

 

3,938,772

 

 

 

882,845

 

     Current portion of operating lease payable

 

 

803,558

 

 

 

419,443

 

     Current liabilities of discontinued operations

 

 

-

 

 

 

975,310

 

Total current liabilities

 

 

24,191,784

 

 

 

19,734,685

 

 

 

 

 

 

 

 

 

 

   Operating lease payable, net of current portion

 

 

1,055,301

 

 

 

34,684

 

     Related party note payable

 

 

1,479,815

 

 

 

-

 

Convertible notes payable

 

 

1,650,000

 

 

 

895,833

 

Acquisition notes payable, net of current

 

 

2,929,393

 

 

 

7,605,085

 

Notes payable, net of current portion

 

 

3,144,327

 

 

 

7,746,157

 

Total long-term liabilities

 

 

10,258,836

 

 

 

16,281,759

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 100,000,000 shares authorized, and 500,000 and 500,000 shares issued and outstanding, respectively

 

 

500

 

 

 

500

 

Common stock, $0.001 par value, 100,000,000 shares authorized, and 20,906,870 and 20,215,961 shares issued and outstanding, respectively

 

 

20,909

 

 

 

20,216

 

Additional paid in capital

 

 

53,149,492

 

 

 

51,522,229

 

Accumulated deficit

 

 

(31,114,094)

 

 

(23,201,175)

Total stockholders' equity attributable to Upexi, Inc.

 

 

22,056,807

 

 

 

28,341,770

 

Non-controlling interest in subsidiary

 

 

 

 

 

 

(505,147)

Total stockholders' equity

 

 

22,056,807

 

 

 

27,836,623

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$56,507,427

 

 

$63,853,067

 

  

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

 

 
F-1

Table of Contents

 

UPEXI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

Three Month's Ended March 31,

 

 

Nine Month's Ended March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

  Revenue

 

$14,444,957

 

 

$21,883,445

 

 

$59,586,148

 

 

$56,282,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Cost of Revenue

 

 

11,561,834

 

 

 

14,305,698

 

 

 

42,864,857

 

 

 

35,555,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

2,883,123

 

 

 

7,577,747

 

 

 

16,721,291

 

 

 

20,726,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

1,547,161

 

 

 

2,258,937

 

 

 

5,427,358

 

 

 

5,331,948

 

Distribution costs

 

 

2,291,945

 

 

 

2,352,684

 

 

 

7,516,748

 

 

 

8,010,373

 

General and administrative expenses

 

 

2,399,387

 

 

 

2,602,312

 

 

 

6,685,881

 

 

 

6,807,739

 

Share-based compensation

 

 

212,758

 

 

 

1,146,299

 

 

 

965,229

 

 

 

3,126,472

 

Amortization of acquired intangible assets

 

 

1,062,734

 

 

 

1,124,500

 

 

 

3,188,201

 

 

 

2,709,167

 

     Depreciation

 

 

306,185

 

 

 

225,879

 

 

 

901,521

 

 

 

649,883

 

 

 

 

7,820,170

 

 

 

9,710,611

 

 

 

24,684,938

 

 

 

26,635,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(4,937,047)

 

 

(2,132,864)

 

 

(7,963,647)

 

 

(5,908,786)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in derivative liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,770)

Interest (expense) income, net

 

 

661,878

 

 

 

152,360

 

 

 

2,612,617

 

 

 

2,370,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

661,878

 

 

 

152,360

 

 

 

2,612,617

 

 

 

2,368,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) on operations before income tax

 

 

(5,598,925)

 

 

(1,980,504)

 

 

(10,576,264)

 

 

(8,277,310)

       Gain on sale of Infusionz and select assets

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,564,363

 

Gain (loss) from the sale of Interactive Offers

 

 

(103,263)

 

 

-

 

 

 

237,670

 

 

 

 

 

Lease settlement, California facility

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

Lease impairment, Delray Beach facility

 

 

-

 

 

 

-

 

 

 

(289,968)

 

 

 

 

Income tax benefit (expense)

 

 

1,501,595

 

 

 

496,880

 

 

 

2,668,769

 

 

 

449,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

 

(4,200,593)

 

 

(1,483,624)

 

 

(7,959,793)

 

 

(263,119)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from discontinued operations

 

 

81,981

 

 

 

(287,119)

 

 

46,874

 

 

 

(1,663,451)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to non-controlling interest

 

 

-

 

 

 

124,804

 

 

 

-

 

 

 

358,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Upexi, Inc.

 

$(4,118,612)

 

$(1,645,939)

 

$(7,912,919)

 

$(1,568,180)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilutive loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per share from continuing operations

 

$(0.20)

 

$(0.08)

 

$(0.39)

 

$(0.02)

(Loss) income per share from discontinued operations

 

$-

 

 

$(0.02)

 

$0.00

 

 

$(0.10)

Total income (loss) per share

 

$(0.20)

 

$(0.09)

 

$(0.39)

 

$(0.09)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

20,723,542

 

 

 

18,015,837

 

 

 

20,423,924

 

 

 

17,418,877

 

Fully diluted weighted average shares outstanding

 

 

20,723,542

 

 

 

18,015,837

 

 

 

20,423,924

 

 

 

17,418,877

 

 

 

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

 

 
F-2

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

$(7,842,606)

 

$(303,570)

 

$36,730,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2023

 

 

500,000

 

 

$500

 

 

 

20,215,961

 

 

$20,216

 

 

$51,522,229

 

 

$(23,201,175)

 

$(505,147)

 

$27,836,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock and equity for purchase of Cygnet

 

 

 -

 

 

 

 -

 

 

 

90,909

 

 

 

91

 

 

 

162,636

 

 

 

 -

 

 

 

505,147

 

 

 

667,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

421,887

 

 

 

-

 

 

 

-

 

 

 

421,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the three months ended September 30, 2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,356,388)

 

 

 -

 

 

 

(1,356,388)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

 

500,000

 

 

$500

 

 

 

20,306,870

 

 

$20,307

 

 

$52,106,752

 

 

$(24,557,563)

 

$-

 

 

$27,569,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

330,584

 

 

 

-

 

 

 

-

 

 

 

330,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) for the three months ended December 31, 2023

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,437,919)

 

 

-

 

 

 

(2,437,919)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2023

 

 

500,000

 

 

$500

 

 

 

20,306,870

 

 

$20,307

 

 

$52,437,336

 

 

$(26,995,482)

 

$-

 

 

$25,462,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock for conversion of debt

 

 

 -

 

 

 

 -

 

 

 

500,000

 

 

 

502

 

 

 

499,498

 

 

 

 -

 

 

 

 -

 

 

 

500,000

 

 

 

 

 

 

 

 

 

 

 

.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

100

 

 

 

212,658

 

 

 

-

 

 

 

-

 

 

 

212,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) for the three months ended March 31, 2024

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,118,612)

 

 

-

 

 

 

(4,118,612)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2024

 

 

500,000

 

 

$500

 

 

 

20,906,870

 

 

$20,909

 

 

$53,149,492

 

 

$(31,114,094)

 

$-

 

 

$22,056,807

 

 

 

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

 

 
F-3

Table of Contents

 

UPEXI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

Nine Month's Ended

March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net (loss) income from operations

 

$(7,912,919)

 

$(1,568,180)

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,089,722

 

 

 

3,359,050

 

Accrued interest on note recievable from Bloomios

 

 

-

 

 

 

(141,635)

Amortization of senior security original issue discount

 

 

-

 

 

 

(455,450)

Unreimburesed transition fees from Bloomios

 

 

-

 

 

 

(428,500)

Amortization of loan costs

 

 

50,459

 

 

 

-

 

Amortization of consideration discount

 

 

900,339

 

 

 

-

 

Non-cash consideration for sale of Infusionz and select assets, net

 

 

-

 

 

 

(7,564,363)

Inventory write-offs

 

 

1,812,319

 

 

 

34,328

 

Gain on sale of interactive offers

 

 

(237,670)

 

 

-

 

Change in deferred tax asset

 

 

(2,668,993)

 

 

(515,089)

Noncontrolling interest

 

 

-

 

 

 

(358,390)

Shares issued for finder fee

 

 

-

 

 

 

1,770

 

Stock based compensation

 

 

965,229

 

 

 

3,126,472

 

Changes in assets and liabilities, net of acquired amounts

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,413,987

 

 

 

2,175,850

 

Inventory

 

 

(255,500)

 

 

2,561,502

 

Prepaid expenses and other assets

 

 

492,343

 

 

 

94,178

 

Operating lease payable

 

 

301,492

 

 

 

(22,830)

Accounts payable and accrued liabilities

 

 

(2,775,503)

 

 

1,744,961

 

Deferred revenue

 

 

(22,431)

 

 

-

 

Net cash provided by operating activities - Continuing Operations

 

 

(2,847,126)

 

 

2,043,674

 

Net cash provided by (used in) operating activities - Discontinued Operations

 

 

(187,280)

 

 

190,539

 

Net cash provided by operating activities

 

 

(3,034,406)

 

 

2,234,213

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisition of Lucky Tail

 

 

-

 

 

 

(3,012,327)

Acquisition of VitaMedica, Inc., net of cash acquired

 

 

-

 

 

 

(500,000)

Acquisition of New England Technology, Inc.

 

 

-

 

 

 

(1,698,748)

Proceeds from the sale of Interactive Offers, net of liabilities paid

 

 

940,000

 

 

 

-

 

Acquisition of patent rights for Tytan Tiles

 

 

(70,000)

 

 

-

 

Acquisition of Cygnet Online LLC, net of cash acquired

 

 

(500,000)

 

 

(1,050,000)

Proceeds from the sale of Infusionz and selected assets

 

 

-

 

 

 

5,173,610

 

Acquisition of property and equipment

 

 

(770,721)

 

 

(278,683)

Net cash provided by (used in) investing activities - Continuing Operations

 

 

(400,721)

 

 

(1,366,148)

Net cash (used in) provided by investing activities - Discontinued Operations

 

 

-

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

(400,721)

 

 

(1,366,148)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayment of notes payable

 

 

(430,715)

 

 

(470,168)

Repayment of the senior convertible notes payable

 

 

-

 

 

 

(6,307,775)

Proceeds (payments) on line of credit, net

 

 

3,055,927

 

 

 

(6,826,338)

Payment on acquisition notes payable

 

 

(3,184,089)

 

 

 

 

Repayment of SBA note payable

 

 

 

 

 

 

(254,804)

Proceeds from convertible note payable

 

 

-

 

 

 

2,650,000

 

Proceeds on note payable on building

 

 

-

 

 

 

3,000,000

 

Repayment on note payable on building

 

 

 

 

 

 

(97,744)

Proceeds on note payable, related party

 

 

-

 

 

 

1,470,000

 

Net cash used in financing activities - Continuing Operations

 

 

(558,877)

 

 

(6,836,829)

Net cash (used in) provided by financing activities - Discontinued Operations

 

 

-

 

 

 

-

 

Net cash used in financing activities

 

 

(558,877)

 

 

(6,836,829)

 

 

 

 

 

 

 

 

 

Net decrease in cash - Continuing Operations

 

 

(3,806,724)

 

 

(6,159,303)

Net (decrease) increase in cash - Discontinued Operations

 

 

(187,280)

 

 

190,539

 

 

 

 

 

 

 

 

 

 

Cash, beginning of period

 

 

4,492,291

 

 

 

7,149,806

 

Cash, end of period

 

$498,287

 

 

$1,181,042

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures

 

 

 

 

 

 

 

 

Interest paid

 

$1,505,162

 

 

$326,918

 

Income tax paid

 

$-

 

 

$-

 

Issuance of common stock for acquisition of Cygnet

 

$162,727

 

 

$-

 

Issuance of debt for acquisition of Cygnet

 

$300,000

 

 

$-

 

Bloomios non-cash payment of receivables, net

 

$845,443

 

 

$-

 

Issuance of common stock for the repayment of convertible note payable

 

$500,000

 

 

$-

 

Liabilities assumed from acquisition of E-Core

 

$-

 

 

$(7,712,168)

Issuance of stock for acquisition of E-Core

 

$-

 

 

$6,000,000

 

Assets available for sale

 

$-

 

 

$6,446,210

 

  

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

 

 
F-4

Table of Contents

 

UPEXI, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. Background Information

 

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.

 

Upexi, Inc. (the “Company”) is a Nevada corporation with fourteen active subsidiaries through which the Company primarily conducts its business.  The Company’s fourteen active subsidiaries are as follows:

 

 

HAVZ, LLC, d/b/a/ Steam Wholesale, 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

 

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.

 

 

o

Upexi Distribution Management LLC, a Delaware limited liability company

 

 

o

Upexi Distribution LLC, a Delaware limited liability company

 

Cygnet Online, LLC (“Cygnet”), a Delaware limited liability company.

 

In addition, the Company has six wholly owned subsidiaries that had no activity during the three and nine months ended March 31, 2024 and March 31, 2023, respectively.   All of the entities were dissolved or cancelled in the three months ended March 31, 2024.

 

 

·

Steam Distribution, LLC, a California limited liability company

 

·

One Hit Wonder, Inc., a California corporation

 

·

One Hit Wonder Holdings, LLC, a California limited liability company

 

·

Vape Estate, Inc., a Nevada Corporation

 

·

SWCH, LLC, a Delaware limited liability company

 

·

Cresco Management, LLC, a California limited liability company

 

Our products are distributed in the United States of America and internationally through multiple entities and managed through our locations in Florida, California, and Nevada.

 

 
F-5

Table of Contents

 

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

 

Cygnet Online operates from our Florida warehouse and distribution center, day to day operations of our Amazon liquidation business team from this location with support of remote team members.

 

Lucky Tail operates from our Florida location with sales and marketing driven by on-site and remote teams that operate the Amazon sales strategy and daily business operations.

 

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

 

Business Acquisitions

 

On April 1, 2022, the Company entered into 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 September 1, 2023, the Company purchased the remaining 45% of Cygnet Online, LLC for $500,000 cash, 90,909 shares of the Company’s common stock and a $300,000 cash payment due on September 1, 2024. The Company has not released the shares to the seller.

 

On August 12, 2022, the Company entered into an asset purchase agreement with GA Solutions, LLC, a Delaware limited liability company (“LuckyTail”), pursuant to which the Company acquired substantially all  the 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, entered into 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 sells to national retail distributors. 

 

Business Divested

 

On October 26, 2022, the Company entered into 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 the 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. As a result, 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.

 

 
F-6

Table of Contents

 

On August 31, 2023, Upexi, Inc. (the “Company”) entered into an Equity Interest Purchase Agreement (“EIPA”) pursuant to which the Company sold one hundred percent (100%) of the issued and outstanding equity (the “Interests”) of its wholly owned subsidiary Interactive Offers, LLC (“Interactive”) to Amplifyir Inc. (the “Buyer”). The purchase price for the Interests was One Million Two Hundred Fifty Thousand Dollars ($1,250,000), subject to certain customary post-closing adjustments. In addition, the Buyer is obligated to pay the Company two-and one- half percent (2.5%) of certain advertising revenues of Interactive for a two-year period post-closing.  Accordingly, the results of the business were classified as discontinued operations in our statements of operations and excluded from both continuing operations and segment results for all periods presented.

  

On June 13, 2024, Upexi, Inc. (the “Company”) entered into a Stock Purchase Agreement (“SPA”) pursuant to which the Company sold one hundred percent (100%) of the issued and outstanding equity (the “Interests”) of its wholly owned subsidiary VitaMedica, Inc. to three investors (the “Buyers”). One of the minority Interest Buyers is Allan Marshall, the Company’s Chief Executive Officers. The purchase price for the stock was Six Million Dollars ($6,000,000), subject to certain customary post-closing adjustments. In addition, the Buyers are obligated to pay the Company for services provided according to the Transition Services Agreement.  Accordingly, the results of the business were classified as discontinued operations in our 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, 2024, and June 30, 2023.

 

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, Interactive Offers, VitaMedica 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.

 

 
F-7

Table of Contents

 

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, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.  For the three months ended September 30, 2022, management believed it necessary to record a reserve against the debt and equity instruments obtained in the sale of Infusionz of $8,500,000

 

Reclassification

 

Certain reclassifications have been made to the condensed consolidated financial statements as of and for the three and nine months ended March 31, 2024, for the three and nine month periods ended March 31, 2023, and as of June 30, 2023 to conform to the presentation as of and for the three and nine months ended March 31, 2024.

 

Note 2. Acquisitions

 

Cygnet Online, LLC

 

The Company acquired 55% of Cygnet Online, LLC, on April 1, 2022.  The purchase price was $5,515,756, as amended. 

 

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

 

 
F-8

Table of Contents

 

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

 

 

55% of the business was acquired through a stock purchase agreement on April 1, 2022. The purchase agreement provided for an increase in the purchase price of up to $700,000 based on the attainment of certain sales thresholds in the first year.  Our management believed that the attainment of those sales threshold at the time of acquisition was unlikely and valued the contingency at $0.  The sales thresholds were not met, and no consideration was recorded for the contingency.  The equity interest purchase agreement has standard provisions to adjust the purchase price based on the final working capital transferred to the Company. The purchase price was decreased by $950,000 and was repaid to the Company with a reduction in the loan to the seller.  The 55% purchase price allocation is final and is no longer subject to change.

  

On September 1, 2023, the Company completed the acquisition of the remaining 45% interest for structured cash payments equaling $800,000, the forgiveness of advances of $89,416 and 90,909 shares of the Company’s common stock valued at $162,727.   As of June 24, 2024, the Company has not released the 90,909 shares or paid the remaining $300,000 owed related to this additional acquisition. 

 

 
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Table of Contents

 

Fair value of consideration transferred:

 

Cash

 

$800,000

 

Noncontrolling interest

 

 

505,147

 

Forgiveness of advances

 

 

89,416

 

Common stock, 90,909 shares valued at $1.79 per common share, the closing price on September 1, 2023.

 

 

162,727

 

 

 

$1,557,290

 

 

The additional consideration was recorded as goodwill by management and will be subject to change based on the final purchase price allocation.

 

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.  The Company’s management is evaluating the intangible assets of this acquisition and had not reached a conclusion on any impairment of these intangible assets at the time of this report. 

 

LuckyTail

 

On August 13, 2022, the Company acquired the pet product brand and the rights to the products 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

 

 

484,729

 

Cash payment, 180 days after close

 

 

469,924

 

Contingent consideration

 

 

112,685

 

Cash payment, working capital adjustment

 

 

460,901

 

 

 

$3,528,239

 

 

 

 

 

 

Recognized amounts of identifiable assets acquired, and liabilities assumed:

 

 

 

 

 

 

 

 

 

Inventory

 

$460,901

 

Trade name

 

 

383,792

 

Customer list

 

 

1,834,692

 

Total identifiable net assets

 

$2,679,385

 

Goodwill

 

$848,854

 

 

 
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Table of Contents

 

The business was acquired through an asset purchase agreement, that acquired all elements of the business, including all the tangible and intangible assets of the LuckyTail business.  The purchase agreement provided for an increase in the purchase price based on the attainment of certain sales thresholds in the first six months.  The Company estimated the value of this at approximately $150,000 at the time of purchase. The sales calculated to a $112,685 payout and the purchase price was adjusted. The asset purchase agreement has standard provisions to adjust the purchase price based on the final working capital transferred to the Company. The purchase price was increased by $460,901 for the excess working capital that was transferred in the business and the final purchase price allocation was completed by an independent consulting firm and is no longer subject to change. 

 

The consolidated financial include the actual results of LuckyTail from August 13, 2022 through March 31, 2024. The Company recorded interest on the consideration of $63,282 during the year ended June 30, 2023.

 

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.  The purchase price allocation was performed by a third party and is no longer subject to change. 

 

E-Core, Technology Inc., and its subsidiaries

 

On 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

 

 

5,189,718

 

Note payable 2

 

 

4,684,029

 

Convertible note payable, convertible at $4.81 per common share

 

 

2,418,860

 

Common stock, 1,247,402 shares valued at $4.81 per common share, the calculated closing price on October 21, 2022.

 

 

6,000,000

 

 

 

$21,039,765

 

 

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

 

 

1,727,249

 

Customer relationships

 

 

5,080,305

 

Accrued liabilities

 

 

(192,051 )

Line of credit

 

 

(7,201,079 )

Total identifiable net assets

 

$14,635,673

 

Goodwill

 

$6,404,092

 

 

 
F-11

Table of Contents

 

The business was acquired through a membership interest purchase agreement on October 21, 2022.  There was no contingent consideration payable under the asset purchase agreement, although a provision was used to adjust the purchase price based on the final working capital transferred to the Company. The purchase price was decreased by $33,803, net and was repaid to the Company with an adjustment to the $3,000,000 cash payment.  The final purchase price allocation was completed by an independent consulting firm and is no longer subject to change. 

 

The Company’s consolidated financial statements include the actual results of E-Core from November 1, 2022 to March 31, 2024. The Company recorded interest on the consideration of $969,098 during the year ended June 30, 2023 and $900,339 during the nine months ended March 31, 2024. At June 30, 2023 there was $1,738,295 of unamortized debt discount that will be expensed over the next two years.   At March 31, 2024 there was $810,545 of unamortized debt discount that will be expensed over the following nineteen months. 

 

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 develops the broad distribution capabilities of E-Core. These are the factors of goodwill recognized in the acquisition.  The purchase price allocation was performed by a third party and is no longer subject to change. 

 

Revenue from acquisitions included in the financial statements.

 

 

 

Nine months ended

March 31,

 

 

 

2024

 

 

2023

 

Cygnet

 

$10,629,121

 

 

$20,806,317

 

LuckyTail

 

 

2,219,111

 

 

 

3,573,727

 

E-Core

 

 

38,625,335

 

 

 

25,822,931

 

 

 

 

 

 

 

 

 

 

 

 

$51,473,567

 

 

$50,202,975

 

 

 

 

Three months ended

March 31,

 

 

 

2024

 

 

2023

 

Cygnet

 

 

1,956,310

 

 

 

7,359,955

 

LuckyTail

 

 

673,738

 

 

 

1,394,459

 

E-Core

 

 

9,221,715

 

 

 

13,647,412

 

 

 

 

 

 

 

 

 

 

 

 

$11,851,763

 

 

$22,401,826

 

 

Consolidated pro-forma unaudited financial statements.

 

The following unaudited pro forma combined financial information is based on the historical financial statements of the Company, LuckyTail and E-Core after giving effect to the Company’s acquisitions as if the acquisitions occurred on July 1, 2022.  

 

 
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Table of Contents

 

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, 2022, 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 nine months ended March 31, 2023, as if the acquisitions occurred on July 1, 2022.  The results of operations for Cygnet, LuckyTail and E-Core are included in the three and nine months ended March 31, 2024.  The results of operations for include LuckyTail from August 13, 2022 to March 31, 2023 and E-Core from October 21, 2022 to March 31, 2023. 

 

Operating expenses for the nine months ended March 31, 2023 have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of LuckyTail and E-Core by approximately $44,619, and $134,625, per month respectively and $363,415 of interest expense. 

 

Pro Forma, Unaudited

 

 

 

 

 

 

 

 Proforma

 

 

 

Nine months ended March 31, 2023

 

Upexi, Inc.

 

 

LuckyTail

 

 

E-Core

 

 

Adjustments

 

 

Proforma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

56,282,542

 

 

$

892,270

 

 

$

12,905,836

 

 

$

 -

 

 

$

70,080,648

 

Cost of sales

 

$

35,555,746

 

 

$

137,088

 

 

$

11,177,032

 

 

$

 -

 

 

$

46,869,866

 

Operating expenses

 

$

26,635,582

 

 

$

383,476

 

 

$

1,050,602

 

 

$

567,721

 

 

$

28,637,381

 

Net income (loss) from continuing operations

 

$

(263,119

)

 

$

371,706

 

 

$

660,860

 

 

$

(567,721

)

 

$

201,726

 

Basic income (loss) per common share

 

$

(0.02

)

 

$

-

 

 

$

0.53

 

 

$

 -

 

 

$

0.01

 

Weighted average shares outstanding

 

 

17,418,877

 

 

 

-

 

 

 

1,247,402

 

 

 

(693,001

 

 

17,973,278

 

 

Note 3. Inventory

 

Inventory consisted of the following:

 

 

 

March 31,

2024

 

 

June 30,

2023

 

Raw materials

 

$1,007,749

 

 

$-

 

Finished goods

 

 

7,794,152

 

 

 

11,557,128

 

 

 

$8,801,901

 

 

$11,557,128

 

 

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

 

During the three and nine months ended March 31, 2024, the Company wrote off inventory valued at $1,722,289 and $1,812,319, respectively. During the three and nine months ended March 31, 2023, the Company wrote off inventory valued none and $34,328, respectively.

 

 
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Table of Contents

 

Note 4. Property and Equipment

 

Property and equipment consist of the following:

 

 

 

March 31,

2024

 

 

June 30,

2023

 

Furniture and fixtures

 

$216,143

 

 

$172,663

 

Computer equipment

 

 

166,569

 

 

 

155,506

 

Internal use software

 

 

570,645

 

 

 

541,705

 

Manufacturing equipment

 

 

3,495,666

 

 

 

3,291,557

 

Leasehold improvements

 

 

1,554,771

 

 

 

-

 

Building

 

 

4,923,464

 

 

 

4,923,464

 

Vehicles

 

 

261,362

 

 

 

261,362

 

Property and equipment, gross

 

 

10,325,160

 

 

 

9,346,256

 

Less accumulated depreciation

 

 

(2,805,155 )

 

 

(1,903,633 )

 

 

$7,520,005

 

 

$7,442,623

 

 

Depreciation expense for the three months ended March 31, 2024, and 2023 was $264,817 and $225,879, respectively. 

 

Depreciation expense for the nine months ended March 31, 2024, and 2023 was $901,521 and $649,883, respectively.

 

Note 5. Intangible Assets

 

Intangible assets as of March 31, 2024:

 

 

Estimated

Life

 

Cost

 

 

Accumulated

Amortization

 

 

Net

Book Value

 

Customer relationships, amortized over four years

4 years

 

$

6,914,897

 

 

$

2,597,503

 

 

$

4,317,394

 

Trade name, amortized over five years

5 years

 

 

2,111,041

 

 

 

628,512

 

 

 

1,482,529

 

Online sales channels

2 years

 

 

1,800,000

 

 

 

1,800,000

 

 

 

-

 

Vender relationships

5 years

 

 

6,000,000

 

 

 

2,400,000

 

 

 

3,600,000

 

Tytan Tiles Patents

15 years

 

 

70,000

 

 

 

-

 

 

 

70,000

 

 

 

 

$

16,825,938

 

 

$

7,426,015

 

 

$

9,469,923

 

 

 
F-14

Table of Contents

 

For the three months ended March 31, 2024 and 2023, the Company amortized approximately $1,062,734 and $1,124,500, respectively.

 

For the nine months ended March 31, 2024 and 2023, the Company amortized approximately $3,188,201 and $2,709,167, respectively.

 

The following intangible asset was added during the nine months ended March 31, 2024:

 

Patent

 

$70,000

 

 

Intangible assets as of June 30, 2023:

 

 

Estimated

Life

 

Cost

 

 

Accumulated

Amortization

 

 

Net

Book Value

 

Customer relationships, amortized over four years

 4 years

 

$

6,914,897

 

 

$

1,300,958

 

 

$

5,613,939

 

Trade name, amortized over five years

 5 years

 

 

2,111,041

 

 

 

311,856

 

 

 

1,799,185

 

Online sales channels

 2 years

 

 

1,800,000

 

 

 

1,125,000

 

 

 

675,000

 

Vender relationships

 5 years

 

 

6,000,000

 

 

 

1,500,000

 

 

 

4,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

16,825,938

 

 

$

4,237,814

 

 

$

12,588,124

 

 

The following intangible assets were added during the year ended June 30, 2023, from the acquisitions noted below:

 

LuckyTail

 

Customer relationships

 

$1,834,692

 

Trade name

 

 

383,792

 

Intangible Assets from Purchase

 

$2,218,484

 

E-Core:

 

 

 

 

Customer relationships

 

$5,080,205

 

Trade name

 

 

1,727,249

 

Intangible Assets from Purchase

 

$6,807,454

 

 

 
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Table of Contents

 

Future amortization of intangible assets at March 31, 2024 are as follows:

 

June 30, 2024

 

$838,900

 

June 30, 2025

 

 

3,355,599

 

June 30, 2026

 

 

3,355,599

 

June 30, 2027

 

 

1,754,640

 

June 30, 2028

 

 

115,018

 

June 30, 2029

 

 

4,667

 

Thereafter

 

 

45,500

 

 

 

$9,469,923

 

 

Note 6. Prepaid Expense and Other Current Assets

 

Prepaid and other receivables consist of the following:

 

 

 

March 31,

2024

 

 

June 30,

2023

 

Insurance

 

$84,249

 

 

$187,949

 

Prepayment to vendors

 

 

68,143

 

 

 

239,970

 

Deposits on services

 

 

21,000

 

 

 

45,678

 

Prepaid monthly rent

 

 

22,500

 

 

 

27,813

 

Prepaid sales tax

 

 

-

 

 

 

70,021

 

Other deposits

 

 

-

 

 

 

70,826

 

Stock issued for prepaid interest on convertible note payable

 

 

161,189

 

 

 

465,595

 

Other prepaid expenses

 

 

155,946

 

 

 

31,000

 

Other receivables

 

 

207,555

 

 

 

144,765

 

Total

 

$720,582

 

 

$1,307,299

 

 

All prepaid expenses will be expensed in the following 12 months. 

 

 
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Table of Contents

 

Note 7. Operating Leases

 

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

 

The table below reconciles the undiscounted future minimum lease payments (displayed by fiscal year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the condensed consolidated balance sheet as of March 31, 2024:

 

2024

 

$131,679

 

2025

 

 

508,665

 

2026

 

 

529,284

 

2027

 

 

268,530

 

2028

 

 

246,013

 

Thereafter

 

 

21,114

 

Total undiscounted future minimum lease payments

 

 

1,705,285

 

Less: Imputed interest

 

 

(137,670 )

Accrued adverse lease obligation

 

 

291,244

 

Present value of operating lease obligation

 

$1,858,859

 

 

In October 2023, the Company consolidated its Delray Beach facility with the Tampa facility and recognized a lease impairment of 291,244, which is accrued as part of the $803,558 current portion of operating lease payable. 

 

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2024 are:

 

Weighted average remaining lease term

 

43 Months

 

Weighted average incremental borrowing rate

 

 

5.0%

 

For the three and nine months ended March 31, 2024, the components of lease expense, included in general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:

 

 

 

Three Months

Ended

March 31,

2024

 

 

Nine Months

Ended

March 31,

2024

 

Operating lease cost:

 

 

 

 

 

 

Operating lease cost

 

$148,794

 

 

$462,496

 

Amortization of ROU assets

 

 

144,983

 

 

 

455,006

 

Interest expense

 

 

19,587

 

 

 

66,832

 

Total lease cost

 

$313,364

 

 

$984,334

 

 

For the three and nine months ended March 31, 2023, the components of lease expense, included in general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:

 

 

 

Three Months

Ended

March 31,

2023

 

 

Nine Months

Ended

March 31,

2023

 

Operating lease cost:

 

 

 

 

 

 

Operating lease cost

 

$99,101

 

 

$285,855

 

Amortization of ROU assets

 

 

67,088

 

 

 

233,409

 

Interest expense

 

 

4,595

 

 

 

25,030

 

Total lease cost

 

$170,784

 

 

$544,294

 

 

 

 

 
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Table of Contents

 

Note 8. Accrued Liabilities and Acquisition Payable

 

Accrued liabilities consist of the following:

 

 

 

March 31,

2024

 

 

June 30,

2023

 

Accrued interest

 

$876,775

 

 

 

655,187

 

Accrued vendor liabilities

 

 

278,689

 

 

 

861,664

 

Accrued sales tax

 

 

35,491

 

 

 

47,070

 

Accrued expenses from sale of manufacturing operations

 

 

1,191,423

 

 

 

1,360,000

 

Other accrued liabilities

 

 

168,771

 

 

 

441,641

 

 

 

 

 

 

 

 

 

 

 

 

$2,551,149

 

 

$3,365,562

 

 

Acquisition Payable consists of the following:

 

 

 

March 31,

2024

 

 

June 30,

2023

 

Payments related to the acquisition of Cygnet

 

$300,000

 

 

$-

 

 

 

$300,000

 

 

$-

 

 

These payables are amounts estimated by management that are due to the sellers of and acquisition and include the original purchase price installment payments not represented with a debt, equity, or other instrument, estimates of excess or deficiencies in working capital and estimates of future earnout payments. 

 

 
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Table of Contents

 

Note 9. Convertible Promissory Notes and Notes Payable

 

Convertible promissory notes and notes payable outstanding as of March 31, 2024 and June 30, 2023 are summarized below:

 

 

 

Maturity

 

March 31,

 

 

June 30,

 

 

 

Date

 

2024