What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-09-28 compared with 2021-09-28 · 336 added, 161 removed, 562 unchanged (47% of the section changed)

10 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Grove, Inc.

To the shareholders and the board of directors of Upexi, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Grove, Inc.

We have audited the accompanying consolidated balance sheets of Upexi, Inc.

(“the Company”) as of June 30, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Grove, Inc.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Upexi, Inc.

as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

17 unchanged sentences

September 28, 2022

PCAOB ID Number 5041

CONSOLDIATED BALANCE SHEETS

1 unchanged sentence

Accounts receivable, net of allowance for doubtful accounts of $ 57,500 and $ 45,000 , respectively

Prepaid expenses and other current assets

Deferred tax asset, current

Prepaid expenses and other receivables

Total current assets

12 unchanged sentences

Current portion of notes payable

Convertible notes payable

Current portion of operating lease payable

9 unchanged sentences

Accumulated deficit

Total stockholders' equity attributable to Grove, Inc.

( 6,270,886 )

( 4,170,036 )

Total stockholders' equity attributable to Upexi, Inc.

Non-controlling interest in subsidiary

Total stockholders' equity

Total stockholers' equity

Total liabilities and stockholders' equity

2 unchanged sentences

Year Ended June 30,

Product revenue

Trade show revenue

Product costs

Trade show costs

Cost of Revenue

Operating expenses

1 unchanged sentence

General and administrative expenses

Income (loss) from operations

Share-based compensation

Amortization of acquired intangible assets

(Loss) income from operations

( 2,652,330 )

Other expense (income), net

1 unchanged sentence

Gain on sale of assets

Gain on SBA PPP loan extinguishment

Gain on SBA PPP loan forgiveness

Change in derivative liability

Settlement of cancelled lease

Impairment of cancelled lease expense

Other expense (income), net

Income (loss) before income tax

Income tax benefit (expense)

Net income (loss)

Other (income) expense, net

(Loss) income before income tax

( 2,564,428 )

Income tax (expense) benefit

Net (loss) income

( 2,046,030 )

Net loss attributable to noncontrolling interest

Deemed dividend related to the issuance of Series A Preferred Stock

Net income (loss) attributable to Grove, Inc.

Net (loss) income attributable to Upexi, Inc.

$ ( 2,100,850 )

Basic income (loss) per share

Diluted income (loss) per share

Basic (loss) income per share

Diluted (loss) income per share

Weighted average shares outstanding

9 unchanged sentences

$ ( 7,098,984 )

Conversion of preferred stock to common stock for cash

Trunano subsidiary stock issued for cash

Stock based compensation

Common stock issued for cash

Balance, June 30, 2020

$ (7,098,984 )

Balance, June 30, 2020

$ (7,098,984 )

Conversion of Trunano subsidiary stock into Grove common stock

( 1,953,801 )

Issuance of common stock for acquisition

7 unchanged sentences

$ ( 4,170,036 )

Issuance of common stock for acquisitions

Common stock repurchase

( 1,975,420 )

( 1,975,888 )

Issuance of common stock for services

Stock based compensation

Issuance of common stock for exercise of warrants

Issuance of common stock for exercise of options

Warrant issued related to debt

( 2,100,850 )

Balance, June 30, 2022

$ ( 6,270,886 )

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

2 unchanged sentences

Cash flows from operating activities

Net income (loss)

Net (loss) income

$ ( 2,046,030 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net (loss) income to net cash provided by

operating activities:

Depreciation and amortization

Inventory write-offs

Gain on change in deferred tax allowance

Gain on settlement of cancelled lease

Impairment on leased asset

Gain on change in deferred tax allowance

( 1,061,238 )

( 1,282,815 )

Amortization of beneficial conversion feature on convertible notes

6 unchanged sentences

Accounts receivable

Other receivables

Prepaid expenses and other current assets

( 1,138,228 )

( 2,447,038 )

Prepaid expenses and other assets

Accounts payable and accrued liabilities

1 unchanged sentence

Deferred revenue

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities

Acquisition of Infusionz, Inc., net of cash acquired

Acquisition of VitaMedica, Inc., net of cash acquired

( 2,574,589 )

Acquisition of Interactive Offers, Inc., net of cash acquired

( 1,854,193 )

Acquisition of Cygnet, Inc., net of cash acquired

( 1,028,763 )

Proceeds from sale of property and equipment

Acquisition of property and equipment

( 6,154,476 )

( 1,422,129 )

Net cash used in investing activities

( 11,606,021 )

( 1,281,007 )

Cash flows from financing activities

Proceeds from issuance of common stock

Proceeds from issuance of common stock for conversion of preferred stock

Proceeds from issuance of non-controlling interest

Stock repurchase program

( 1,975,888 )

Proceeds from issuance of preferred stock

2 unchanged sentences

Payment of note payable

( 1,002,874 )

Proceeds from issuance of notes payable

Net cash provided by financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

( 7,384,405 )

Cash, beginning of period

3 unchanged sentences

Income tax paid

Non-cash financing activities

Issuance of common stock for acquisition of Infusionz

Issuance of common stock for conversion of notes payable and accrued interest

Repayment of Infusionz LLC debt to Grove, Inc.

Repayment of Infusionz LLC debt to Upexi, Inc.

Liabilities assumed from acquisition of Infusionz

Stock issuance for payroll accrual

$ ( 680,480 )

Liabilities assumed from acquisition of VitaMedica

$ ( 309,574 )

Issuance of stock for acquisition of Interactive

Issuance of stock for acquisition of Cygnet

Liabilities assumed from acquisition of Cygnet

Stock issued for construction services

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

2 unchanged sentences

Background Information

We are in the business of developing, producing, marketing, and selling raw materials, white label products and end consumer products containing the hemp plant extract, Cannabidiol (“CBD”).

We sell to numerous consumer markets including the nutraceutical, beauty care, pet care and functional food sectors.

We seek to take advantage of an emerging worldwide trend to re-energize the production of industrial hemp and to foster its many uses for consumers.

In addition, we are an operator of an annual tradeshow in the United States related to the CBD industry.

The Company only has one trade show, CBD.IO, which is held in November each year.

Because event revenue is recognized when a particular event is held, the Company experiences fluctuations in quarterly revenue based on the completion of the trade show event.

(the “Company”) is a Nevada Corporation and has eight wholly owned subsidiaries, Trunano Labs, Inc., a Nevada corporation, Cresco Management, a California corporation, Steam Distribution, LLC, a California limited liability company;

One Hit Wonder, Inc., a California corporation;

Havz, LLC, d/b/a Steam Wholesale, a California limited liability company, and One Hit Wonder Holdings, LLC a California corporation, Infusionz LLC, a Colorado corporation and SWCH, a Delaware corporation.

Upexi is a multi-faceted brand owner with established brands in the 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

SWCH, LLC, a Delaware limited liability company

Cresco Management, LLC, a California limited liability company

Trunano Labs, Inc., a Nevada corporation

Infusionz, Inc., a Nevada corporation

Upexi Holding, LLC, a Delaware limited liability company

Upexi Pet Products, LLC, a Delaware limited liability company

Infusionz LLC (“Infusionz”), a Colorado limited liability company

Grove Acquisition Subsidiary, Inc.

(“VitaMedica”), a Nevada corporation

Upexi Enterprise, LLC, a Delaware limited liability company

Upexi Property & Assets, LLC, a Delaware limited liability company

Upexi 17129 Florida, LLC, a Delaware limited liability company

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, 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 the 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

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

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

Lucky Tail operates from our Clearwater, 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.

Consolidations

On July 1, 2020, the noncontrolling shareholders of the Company’s subsidiary, Trunano Labs Inc., converted 1,761,261 shares of Trunano Labs, Inc.

stock, representing all the outstanding stock by minority interest holders, into 1,277,778 shares of Grove Inc.

stock, representing all the outstanding stock held by minority interest holders, into 1,277,778 shares of Upexi Inc.

common stock, 10.8% of the then outstanding shares .

As of July 1, 2020, Trunano Labs, Inc.

is a wholly owned subsidiary of Grove Inc.

On July 1, 2020, the Company entered into an agreement and plan of merger with Infusionz LLC (the “Infusionz Agreement”) with the members of Infusionz LLC.

Pursuant to the terms of the Infusionz Agreement, on July 1, 2020, the Company acquired 100% of the outstanding membership interests of Infusionz LLC.

is a wholly owned subsidiary of Upexi Inc.

Business Acquisitions

On July 1, 2020, the Company entered into an Agreement and Plan of Merger with Infusionz LLC (the “Infusionz Agreement”) with the members of Infusionz LLC (the “Sellers”).

Pursuant to the terms of the Infusionz Agreement, on July 1, 2020, the Company acquired 100 % of the outstanding membership interests of Infusionz LLC, a Colorado limited liability company (“Infusionz”).

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 entered into 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 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.

Basis of Presentation and Principles of Consolidation

6 unchanged sentences

Significant estimates underlying the Company’s reported financial position and results of operations include the allowance for doubtful accounts, useful lives of property and equipment, impairment of long-lived assets, inventory valuation, fair value of stock-based compensation and valuation allowance on deferred tax assets.

Cash and Cash Equivalents - The Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents.

Cash and Cash Equivalents - The Company considers all highly liquid investment instruments with a maturity of three months or less to be cash equivalents.

Cash and cash equivalents are maintained at financial institutions and at times, balances may exceed federally insured limits.

9 unchanged sentences

Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term.

Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition.

Gains and losses upon disposition are reflected in the Statements of Operations in the period of disposition.

Maintenance and repair expenditures are charged to expense as incurred.

The Company disposed of some equipment during 2020 which resulted in a gain on the sale.

The Company disposed of some equipment during 2022 and 2021 which resulted in gains on the sales as shown in the accompanying Statements of Operations.

Business Combinations - The Company accounts for its business combinations using the acquisition method of accounting.

2 unchanged sentences

The excess of (i) the total costs of acquisition over (ii) the fair value of the identifiable net assets of the acquiree is recorded as identifiable intangible assets and goodwill.

Goodwill - The Company evaluates its goodwill for possible impairment as prescribed by ASC 350-20-35, Intangibles — Goodwill and Other (Topic 350).

The Company test for Goodwill Impairment at least annually and when one or more triggering events or circumstances indicate that the goodwill might be impaired.

Goodwill - The Company evaluates its goodwill for possible impairment, simplifying the test for goodwill Impairment at least annually and when one or more triggering events or circumstances indicate that the goodwill might be impaired.

Under this guidance, annual or interim goodwill impairment testing is performed by comparing the estimated fair value of a reporting unit with its carrying amount.

6 unchanged sentences

The Company did not recognize impairment on its long-lived assets during the years ended June 30, 2022 or 2021.

Revenue Recognition - The Company has adopted the new revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606), commencing from the period under this report.

The Company analyzes its contracts to assess that they are within the scope and in accordance with ASC 606.

Revenue Recognition - The Company analyzes its contracts and purchase orders to assess that revenue is properly recognized.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps:

5 unchanged sentences

The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions.

Generally, the Company recognizes revenue for its products upon shipment to customers, provided no significant obligations remain and collection is probable.

Generally, the Company recognizes revenue for its products when ownership is transferred to the customer, provided no significant obligations remain and collection is probable.

Product Revenue - Most of the Company’s revenue contracts are from domestic sales and represent a single performance obligation related to the fulfillment of customer orders for the purchase of its products.

9 unchanged sentences

Shipping and handling fees associated with freight are generally included in cost of revenue.

Trade Show Revenue - A significant portion of the Company’s annual revenue is generated from the production of a single trade show.

The revenue includes booth space sales, registration fees and sponsorship fees.

The Company recognizes revenue upon completion of the CBD.IO trade show.

Amounts invoiced prior to the completion of the trade show are recorded as deferred revenues in the consolidated balance sheets until the completion of the event.

As of June 30, 2021, and 2020, the Company had no deferred revenue related to trade show business.

Loyalty Program - The Company grants customers loyalty points for each purchase on the website and at the time of the sale, accrues the estimated cost related to fulfilling the future purchase in accrued liabilities.

1 unchanged sentence

Advertising - The Company supports its products with advertising to build brand awareness of the Company’s various products in addition to other marketing programs executed by the Company’s marketing team.

The Company believes the continual investment in advertising is critical to the development and sale of its CBD branded products.

The Company believes the continual investment in advertising is critical to the development and sale of its branded products.

Advertising costs of $ 3,225,256 and $ 771,546 were expensed as incurred during the years ended June 30, 2022 and 2021, respectively.

21 unchanged sentences

Leases - The Company determines if a contract contains a lease at inception.

US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes.

GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes.

The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option will result in an economic penalty.

27 unchanged sentences

Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and upon the conversion of notes.

There were no potentially dilutive common shares for the year ended June 30, 2020.

For the year ended June 30, 2021, the dilutive common shares are as follows:

For the year ended, the dilutive common shares are as follows:

Stock options

Preferred stock

Weighted average shares outstanding

Fully diluted weighted average shares outstanding

Total potential dilutive weighted average shares outstanding

The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method.

Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.

During the year ended June 30, 2022 the Company reported a net loss so the potential affect is not reflected on the financial statements.

The following table shows the computation of basic and diluted earnings per share for the year ended:

Net income attributable to Upexi, Inc.

Weighted-average basic shares outstanding

Effect of dilutive securities

Fully diluted weighted average shares outstanding

Basic earnings per share

Diluted earnings per share

Deferred Revenue - The Company records deposits as deferred revenue when a customer pays in advance of shipping the product.

1 unchanged sentence

All products were shipped related to deposits in deferred revenue, in less than one year.

The Company recognizes revenue upon completion of the CBD.IO trade show.

Amounts invoiced prior to the completion of the trade show are recorded as deferred revenues in the consolidated balance sheets until the completion of the event.

Convertible Debt and Securities - The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt.

9 unchanged sentences

The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance.

Operating Segments - The Company’s financial reporting is organized into two segments:

products and trade shows for revenue and cost of revenue.

The Company’s internal reporting for product sales is organized into three channels of distribution:

branded products, manufacturing of products to be sold under customers brands and white label products that are sold under customer brands.

These product sales are aggregated and viewed by management as one reportable segment due to their similar economic characteristics, products, production, distribution processes and regulatory environment.

The Company does not allocate or track certain general and administrative expenses to individual reportable segments.

Recent Accounting Pronouncements - There are new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective as follows:

5 unchanged sentences

In addition, the Company will be required to use the if-converted method for calculating diluted earnings per share.

The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future unaudited condensed consolidated financial statements.

The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Infusionz LLC

3 unchanged sentences

The Infusionz, Inc.

develops, manufactures, and markets products based on Hemp-based Cannabidiol (“CBD”) including, but not limited to edibles, tinctures, topicals, capsules and pet products, similar to the same products Grove, Inc.

manufactures and markets.

Infusionz Inc.

will also manufacture CBD products for other businesses under their brand and specifications, similar to Grove, Inc.

will also manufacture CBD products for other businesses under their brand and specifications, similar to Upexi, Inc.

Under the purchase method of accounting, the transaction was valued at an estimated fair value of $ 3,350,000 .

40 unchanged sentences

These are the factors of the goodwill recognized in the acquisition.

VitaMedica Corporation

Effective August 1, 2021, the Company entered into and closed an asset purchase agreement (the “VitaMedica Agreement”) with Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company and VitaMedica Corporation, a California corporation, David Rahm and Yvette La-Garde (“Seller”).

VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.

The Company agreed to purchase substantially all of the assets of the Seller as of August 1, 2021.

The transaction was valued at an estimated fair value of $ 3,556,589 .

The purchase price consisted of 100,000 shares of the Company’s common stock valued at $ 482,000 , $ 4.82 per common share, the closing price on August 4, 2021 (close date of the transaction), a non-negotiable promissory note from the Company in favor of the Seller in the original principal amount of $ 500,000 , a non-negotiable convertible promissory note from the Company in favor of the Seller in the original principal amount of $ 500,000 , convertible at $ 5.00 per share for a total of 100,000 shares of Company Common Stock and a cash payment of $ 2,000,000 which was paid on August 5, 2021.

In addition, a $ 74,589 cash payment was made on October 29, 2021, for the excess working capital acquired.

A finder’s fee of $ 103,740 was paid by the Company, $ 70,000 in cash and 7,000 shares of common stock, valued at $ 33,740 , $ 4.82 per common share, the closing market price on August 4, 2021 (close date of the transaction).

These fees were expensed in the nine-month period ended March 31, 2022.

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

Tangible Assets

Intangible Assets

Liabilities Acquired

Total Purchase Price

The Company’s consolidated financial statements, include the actual results of VitaMedica for the period August 1, 2021 to June 30, 2022.

Interactive Offers, LLC

Effective October 1, 2021, the Company entered into an Equity Interest Purchase Agreement (the “I/O Agreement”) with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company (each an “I/O Seller” and collectively the “I/O Sellers”).

The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”).

The Company’s CEO and Chairman, Allan Marshall, was the controlling stockholder and the president of MFA Holdings Corp.

MFA Holdings Corp., owning 20% of the outstanding membership interests in Interactive.

Interactive provides programmatic advertising with its SaaS platform which allows for programmatic advertisement placement automatically on any partners’ sites from a simple dashboard.

The Company purchased all the outstanding membership interests of Interactive as of October 1, 2021.

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

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

Tangible Assets

Intangible Assets

Liabilities Acquired

( 1,099,993 )

Total Purchase Price

The Company’s consolidated financial statements for the year ended June 30, 2022, include the actual results of Interactive for the period October 1, 2021, to June 30, 2022.

Cygnet Online, LLC

The Company entered into a Securities Purchase Agreement to purchase Cygnet Online, LLC, a Delaware limited liability company effective as of April 1, 2022.

The Company purchased 55% of the equity in the business with a purchase price of $ 5,100,000 , as amended.

The consideration consisted of $ 1,500,000 in cash, $ 2,550,000 or 555,489 shares of restricted common stock and a non-negotiable convertible promissory note in the original principal amount of $ 1,050,000 , which can be converted into common stock of the Company at a price of $ 6.00 per share and is payable in full, to the extent not previously converted, on April 15, 2023.

The purchase price is subject to a two-way adjustment based on the amount of Closing Working Capital, as defined in the agreement.

Additionally, Seller will be paid up to $700,000 in the form of an earn-out payment based on 7% of Cygnet’s net revenue during the earn-out period, in accordance with and subject to the terms and conditions of the agreement.

The earn-out payment, if any, will be paid 50% in immediately available funds and 50% in Company restricted common stock .

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

In addition, the Company has the right to purchase Seller’s remaining membership interests in Cygnet.

Commencing on October 10, 2022 and continuing for 180 days thereafter, the Company has the right, but not the obligation, to cause the Seller to sell 15% of the membership interests in Cygnet for $1,650,000 in immediately available funds.

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

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

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

Tangible Assets

Intangible Assets

Liabilities Acquired

( 8,421,284 )

Total Purchase Price

The Company’s consolidated financial statements for the year ended June 30, 2022, include the actual results of Cygnet for the period April 1, 2022, to June 30, 2022.

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 and Cygnet after giving effect to the Company’s acquisitions of the companies as if the acquisitions occurred on July 1, 2020.

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, 2020, 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 year ended June 30, 2020, as if the acquisition occurred on July 1, 2019.

Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of approximately $333,000 per year.

The following table represents the unaudited consolidated pro forma results of operations for the June 30, 2022 and June 30, 2021, as if the acquisition occurred on July 1, 2020.

Operating expenses for the year ended June 30, 2022 and June 30, 2021 have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of VitaMedica, Interactive and Cygnet by $ 1,767,350 and $ 3,200,304 per year, respectively.

Pro Forma, Unaudited

Year ended June 30, 2022

Infusionz LLC

Cost of sales

3 unchanged sentences

$ ( 378,807 )

Basic loss per common share

$ ( 1,767,350 )

$ ( 3,038,620 )

Basic income (loss) per common share

Weighted average shares outstanding

The Company’s consolidated financial statements for year ended June 30, 2021, include the actual results of Infusionz, Inc.

Revenue and net income for Infusionz, Inc.

included in the consolidated statement of operations for the year ended June 30, 2021, was $4,134,464 and $615,977, respectively.

Pro Forma, Unaudited

Year ended June 30, 2021

Cost of sales

Operating expenses

Net income (loss)

$ ( 783,342 )

$ ( 3,200,304 )

$ ( 624,651 )

Basic income (loss) per common share

Weighted average shares outstanding

The Company estimated the annual VitaMedica amortization expense at $ 496,356 annually and $41,363 monthly, based on the allocation of the purchase price.

For the year ended June 30, 2022, the proforma adjustment included $ 41,363 , one month of amortization expense.

For the year ended June 30, 2021, the proforma adjustment includes $ 496,356 twelve months of amortization expense.

The Company’s consolidated financial statements for the year ended June 30, 2022 include the actual results of VitaMedica for the period August 1, 2021 to June 30, 2022.

Revenue for VitaMedica included in the statements of operations for the year ended June 30, 2022 was $ 5,124,583 .

Net income for VitaMedica included in the statements of operations for the year June 30, 2022, was $ 224,735 .

This includes amortization of intangible assets of $ 454,988 .

The Company estimated the annual Interactive amortization expense at $ 603,948 annually and $50,329 monthly, based on the allocation of the purchase price.

For year ended, 2022, the proforma adjustment included $ 150,987 , three months of amortization expense.

For the year ended June 30, 2021, the proforma adjustment includes $ 603,948 , twelve months of amortization expense.

The Company’s consolidated financial statements for the year ended June 30, 2022, include the actual results of Interactive for the period October 1, 2021, to June 30, 2022.

Revenue and net loss for Interactive included in the statement of operations for the year ended June 30, 2022, was $2,192,183 and $ 1,160,160 , respectively and includes amortization of intangible assets of $ 452,963 .

The Company estimated the annual Cygnet amortization expense at $ 2,100,000 annually and $175,000 monthly, based on management’s preliminary allocation of the purchase price.

For the year ended June 30, 2022, the proforma adjustment included $ 1,575,000 , nine months of amortization expense.

For the year ended June 30, 2021, the proforma adjustment includes $ 2,100,000 , twelve months of amortization expense.

The Company’s consolidated financial statements for the year ended June 30, 2022, include the actual results of Cygnet for the period April 1, 2022 to June 30, 2022.

Revenue and net income for Cygnet included in the statements of operations for the year ended June 30, 2022, was $ 7,634,153 and $ 152,981 , respectively.

This includes amortization of intangible assets of $ 525,000 .

Inventory consisted of the following:

2 unchanged sentences

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

During the year ended June 30, 2021 the Company wrote off $375,000 of inventory and during the year ended June 30, 2020, the Company did not deem that an inventory write-off was considered necessary.

The Company wrote off $ 1,044,607 and $ 375,000 of inventory during the year ended June 30, 2022, and 2021, respectively.

Property and Equipment

1 unchanged sentence

Furniture and fixtures

Computer equipment

Computer equipment and software

Manufacturing equipment

2 unchanged sentences

Less accumulated depreciation

( 1,066,126 )

Deposits on equipment

Property and equipment, net

During the year ended June 30, 2020, the Company sold manufacturing equipment with a carrying value of approximately $289,789 for cash proceeds of $470,000 which resulting in a gain on the disposal of approximately $180,211.

During the year ended June 30, 2022, the Company sold vehicles with a carrying value of approximately $ 500 for cash proceeds of $ 6,000 which resulting in a gain on the disposal of approximately $ 5,500 .

During the year ended June 30, 2021, the Company sold manufacturing equipment with a carrying value of approximately $ 70,292 for cash proceeds of $ 79,000 which resulting in a gain on the disposal of approximately $ 8,708 .

1 unchanged sentence

Intangible Assets

As of June 30, 2021

Customer relationships

Non-compete agreements

Intangible assets as of June 30, 2022:

Customer relationships, amortized over four years

Trade name, amortized over five years

Non-compete agreements, amortized over the term of the agreement

Online sales channels, amortized over two years

Vender relationships, amortized over five years

Software, amortized over five years

As of June 30, 2021

Net Book Value

Customer relationships

For the years ended June 30, 2021, and 2020, the Company amortized approximately $726,525 and $393,478, respectively, related to the customer list and trade name intangible assets.

Customer relationships, amortized over four years

Trade name, amortized over five years

Non-compete agreements, amortized over term of the agreement

For the years ended June 30, 2022, and 2021, the Company amortized approximately $ 2,159,146 and $ 726,525 , respectively.

The customer list is being amortized on a straight-line basis over 4 years.

The trade names are being amortized on a straight-line basis over 5 years.

The following intangible assets were added during the year ended June 30, 2021, from the acquisition of Infusionz LLC.

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

Customer relationships

Non-compete agreements

Online sales channels

Vender relationships

Intangible Assets from Purchase

The employee contracts – non compete are being amortized on a straight-line basis over 2 years.

Future amortization of intangible assets are as follows:

3 unchanged sentences

June 30, 2026

June 30, 2027

Prepaid Expense and Other Current Assets

1 unchanged sentence

Prepayment to vendors

Deposit on services

Deposits on services

Prepaid monthly rent

Subscriptions and services being amortized over the service period

Other deposits

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 .

During November 2019, the Company entered into a lease for a Nevada facility that commenced on November 13, 2019 and recorded a right of use asset and corresponding lease liability.

5 unchanged sentences

The Company uses this leased facility for additional warehouse space.

Lease expense was $19,665 for the year ended June 30, 2021.

Lease expense was $ 117,992 and $ 19,665 for the years ended June 30, 2022, and 2021, respectively.

During July 2019, the Company entered a lease for a California facility that commenced on July 1, 2019 and recorded a right of use asset and corresponding lease liability.

3 unchanged sentences

The Company uses this facility for office and manufacturing space.

Lease expense was $62,000 for the year ended June 30, 2021.

Lease expense was $ 22,803 and $ 62,000 for the years ended June 30, 2022, and June 30, 2021, respectively.

During November 2018, the Company entered into a lease for equipment that commenced on November 1, 2018 and recorded a right of use asset and corresponding lease liability.

Lease expense was $ 6,428 and $ 6,428 for the years ended June 30, 2022, and June 30, 2021, respectively.

During October 2021, the Company entered into a 3-year lease for a California warehouse.

The Company recorded a right of use asset and corresponding lease liability of $ 295,305 .

The Company will use this leased facility for assembly and distribution of finished goods.

Lease expense was $ 71,042 for the year ended June 30, 2022.

On April 1, 2022, the Company acquired Cygnet which had entered into a lease for a Florida facility that commenced on October 8, 2021 , and Cygnet had recorded a right of use asset and corresponding lease liability.

The lease expires on October 8, 2026 .

The Company uses this leased facility for warehouse and office space.

The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases.

Therefore, all lease and non-lease components are combined and accounted for as single lease component.

Lease expense was $ 21,800 for the year ended June 30, 2022.

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2022, are:

1 unchanged sentence

Weighted average incremental borrowing rate

For the year ended June 30, 2021, the components of lease expense, included in general and administrative expenses and interest expense in the condensed consolidated statements of operations income, are as follows:

For the years ended June 30, 2022 and June 30, 2021, the components of lease expense, included in general and administrative expenses and interest expense in the consolidated statements of operations income, are as follows:

June 30, 2022

June 30, 2021

Operating lease cost:

3 unchanged sentences

Total lease cost

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the condensed consolidated balance sheet as of June 30, 2021:

Total undiscounted future minimum lease payments

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Accrued interest

Accrued state income tax

Accrued federal and state tax

Accrued expenses on credit cards

Accrued sales tax

Derivative liability

Other accrued liabilities

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The Company has not been required to make installment payments as of the date of this report and has submitted its PPP Loan Application to the SBA.

On August 30, 2021, the SBA confirmed that application for forgiveness had been approved and that its PPP loan, in the amount of $ 297,100 plus accrued interest of $ 3,895 , had been forgiven.

On June 3, 2020, the Company entered into a loan for $ 150,000 with the Small Business Administration.

2 unchanged sentences

The note bears interest at a rate of 3.75 % per annum.

The Small Business Administration has filed a UCC Financing Statement on this loan confirming it is collateralized by any and all tangible and intangible properties of the Company.

The Company repaid this note in August of 2022 and the UCC has been terminated.

On December 7, 2020, the Company entered into a note agreement for total proceeds of $ 750,000 with a related party.

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The Company recorded interest expense of $ 342,813 for the beneficial conversion of the Convertible Note.

On August 1, 2021, the Company entered into a non-negotiable convertible promissory note related to the purchase of VitaMedica in the original principal amount of $ 500,000 (“VitaMedica Note”), convertible at $ 5.00 per share for a total of 100,000 shares of Company Common Stock.

The Company repaid the note in full during August of 2022.

On April 15, 2022, the Company entered into a non-negotiable convertible promissory note in the original principal amount of $ 1,050,000 , as adjusted, (“Cygnet Note”) which can be converted into common stock of the Company at a price of $ 6.00 per share and is payable in full, to the extent not previously converted, on April 15, 2023.

In June 2022, the Company entered into a Securities Purchase Agreement with two accredited investors pursuant to which the Company could receive up to $15,000,000 during the following twelve months of the agreement.

The Company received $ 6,678,506 for a Convertible Notes in the original principal amount of $ 7,500,000 (the “Convertible Notes”), representing the original purchase amount, less fees, costs and a $ 500,000 holdback by the investors.

In addition to the Convertible Notes, the investors received Common Stock Purchase Warrants (the “Warrants”) to acquire an aggregate of 56,250 shares of common stock.

The Warrants are exercisable for five years at an exercise price of $ 4.44 per share, provide for customary anti-dilution protection, and an investor put right to require the Company to redeem the Warrants for a total of $ 250,000 .

The Company has the option until June 28, 2023, to draw down up to an additional $ 7,500,000 of Convertible Notes under the Securities Purchase Agreement to provide financing for acquisitions, pursuant to certain underwriting conditions set forth in the Securities Purchase Agreement.

The Company is subject to customary covenants, financial and otherwise, under the Securities Purchase Agreement.

In June 2022, the Company executed a promissory note with Allan Marshall, the Company’s Chief Executive Officer, in the original principal amount of $ 1,500,000 (“Marshall Loan”).

The promissory note has a 3-year term and bears cash interest at the rate of 8.5 % per annum with an additional PIK of 3.5 % per annum.

The promissory note provides for monthly payments of principal, on an even line 36-month basis, plus cash interest, with a balloon payment of all outstanding principal, cash interest, and PIK interest at maturity.

The Company received and deposited the principal amount on July 31, 2022.

Convertible promissory notes and notes payable outstanding as of June 30, 2022, are summarized below:

Maturity Date

Convertible Notes, 3-year term note, 8.5% cash interest, 3.5% PIK interest and collateralized with all the assets of the Company

June 28, 2025

3.75% $150,000 Note Payable

1% $297,100 Note Payable

Marshall Loan, 3-year term note, 8.5% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes

June 28, 2025

VitaMedica Loan, 1-year term note, 6% interest and is convertible at $5.00 per share.

The note was fully repaid in August 2022.

August 1, 2022

Cygnet Loan, 1-year term note, 6% interest and is convertible at $6.00 per share.

April 15, 2023

SBA note payable, 30-year term note, 6% interest rate and collateralized with all assets of the Company

October 6, 2031

Inventory consignment note, 60 monthly payments, with first payment due June 30, 2022, 3.5% interest rate and no security interest in the assets of the business

June 30, 2027

GF Note, 6 annual payments, with first payment due December 31, 2022, 3.5% interest rate and no security interest in the assets of the business

November 7, 2026

Total notes payable

Less current portion of notes payable

Notes payable, less current portion

Notes payable, net of current portion

Future payments on notes payable are as follows:

For the year ended June 30:

Marshall Loan, related party and received July 31, 2022

( 1,500,000 )

Convertible note, remaining holdback not received

Convertible note, original discount and related fees and costs

Related Party Transactions

For the years ended June 30, 2020, the Company leased the Las Vegas warehouse from a shareholder for $22,071 per month.

This lease ended December 31, 2019, and there were no further liabilities related to this lease.

The owner of the warehouse is also related to one of the members of management.

During the year ended June 30, 2021, the Company received a note from one of the members of management.

6 unchanged sentences

The preferred stock is convertible into the Company’s common stock at a ratio of 1.8 shares of preferred stock for a single share of the Company’s common stock at the holder’s option, has preferential liquidation rights and the preferred stock shall vote together with the common stock as a single class on all maters to which shareholders of the Company are entitled to vote at the rate of ten votes per share of preferred stock.

The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”).

The Company’s CEO and Chairman, Allan Marshall, is the controlling stockholder and the president of MFA Holdings Corp., which owned 20 % of the outstanding membership interests in Interactive.

The above related party transactions are not necessarily indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent parties.

15 unchanged sentences

In addition, the Company issued 83,334 shares of common stock valued at $ 127,500 for acquisition costs.

During the year ended June 30, 2020, the Company issued 13,072 shares of common stock for cash of $20,000.

The Company also issued 277,778 shares of common stock for the exercise of an option for $400,000 of cash proceeds and forgiveness of accrued payroll of $25,000 from the investor.

Finally, the Company converted preferred stock into 277,778 shares of common stock for cash proceeds of $50,000.

The Company issued a total of 568,628 shares of common stock for cash consideration of $470,000 and a reduction of accrued payable of $25,000.

Trunano Labs, Inc.

2 unchanged sentences

As of July 1, 2020, Trunano Labs, Inc.

is a wholly owned subsidiary of Grove Inc.

is a wholly owned subsidiary of Upexi Inc.

Trunano Labs, Inc.

13 unchanged sentences

The Committee has full authority to administer and interpret the provisions of the 2019 Plan including, but not limited to, the authority to make all determinations with regard to the terms and conditions of an award made under the 2019 Plan.

On February 8, 2021, the Shareholders consented, and the Board of Directors approved the amendment of the Stock Option Plan to increase the maximum number of Shares that may be issued thereunder by 2,777,778 Shares to 5,555,555 Shares.

On February 8, 2021, the Shareholders consented, and the Board of Directors approved the amendment of the 2019 Plan to increase the maximum number of Shares that may be issued thereunder by 2,777,778 Shares to 5,555,555 Shares.

On May 24, 2022, the Shareholders consented and the Board of Directors approved the amendment of the 2019 Plan to increase the maximum number of Shares that may be issued thereunder by 5,555,555 Shares to 10,000,000 Shares.

The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares.

The options are exercisable for a period of up to 10 years from the date of the grant.

The following table reflects the continuity of stock options for the year ended June 30, 2021:

The following table reflects the continuity of stock options for the year ended June 30, 2022, and 2021:

A summary of stock option activity is as follows:

1 unchanged sentence

Outstanding at June 30, 2021

Options exercisable at June 30, 2021 (vested)

Outstanding at June 30, 2022

Outstanding at June 30, 2020

Options exercisable at June 30, 2022 (vested)

Options exercisable at June 30, 2021 (vested)

The average fair value of stock options granted was estimated to be $ 4.36 per share for the period ended June 30, 2022, and the closing stock price on June 30, 2022, was $ 4.20 per common share.

The average fair value of stock options granted was estimated to be $ 1.58 per share for the period ended June 30, 2021, and the closing stock price on June 30, 2021, was $ 6.19 per common share.

Stock-based compensation expense attributable to stock options was approximately $ 2,755,016 and $ 611,432 for the years ended June 30, 2022, and 2021, respectively.

As of June 30, 2022, there was approximately $ 3,935,458 unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 2 years.

The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the year ended June 30, 2021.

There were no options granted during the year ended June 30, 2020.

The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended June 30, 2022, and 2021.

June 30, 2022

Dividend rate

Risk free interest rate

0.69 %- 2.91 %

Expected term

2 unchanged sentences

$ 4.18 – 5.34

$ 0.85 – 2.00

The basis for the above assumptions are as follows:

6 unchanged sentences

Management selected Charlotte’s Web Holdings, Inc.

for it length of time as a publicly trading company and the similarities of the business and industry.

for its length of time as a publicly trading company and the similarities of the business and industry.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Based on historical experience of forfeitures, the Company estimated forfeitures at 0 % for each of the years ended June 30, 2022, and 2021, respectively.

There were 4,642,888 shares available for issuance as of September 26, 2022, under the 2019 Plan as amended.

One Hit Wonder, Inc.

2 unchanged sentences

The stockholders’ allocable share of the Company’s income or loss is reportable on his or her income tax return through May 31, 2019.

These entities under Grove, Inc.

These entities under Upexi, Inc.

are tax paying entities and the period from June 1, 2019 to June 30, 2019 remains open and subject to examination by the Internal Revenue Service.

3 unchanged sentences

The Company’s 2019 through 2020 tax years remain open and subject to examination by the Internal Revenue Service.

Grove had no operations through December 31, 2018.

On January 1, 2019 Cresco Management LLC and SWCH, LLC were contributed to Grove, Inc.

Upexi had no operations through December 31, 2018.

On January 1, 2019, Cresco Management LLC and SWCH, LLC were contributed to Upexi, Inc.

in a non-taxable transaction.

4 unchanged sentences

Deferred tax asset valuation allowance adjustment

( 1,403,594 )

Provision for income taxes (benefit)

$ ( 518,398 )

The differences between income taxes calculated at the statutory U.S.

federal income tax rate and the Company’s provision for income taxes are as follows:

$ ( 1,282,815 )

The differences between income taxes calculated at the statutory US federal income tax rate and the Company’s provision for income taxes are as follows:

Income tax provision at statutory federal and state tax rate

16 unchanged sentences

Deferred tax asset

As of June 30, 2021, there were approximately $2,730,782 of losses available to reduce federal taxable income in future years and can be carried forward indefinitely.

There were approximately $ 1,411,198 and $ 2,730,782 of losses available to reduce federal taxable income in future years and can be carried forward indefinitely as of June 30, 2022 and June 30, 2021 respectively.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.

5 unchanged sentences

The eliminated of the valuation allowance was based on the historical income of the Company for the fourth quarter ended June 30, 2021, the Company’s performance and expected taxable income for the year ended June 30, 2022 and the known gain on SBA PPP loan extinguishment during the first quarter ended September 30, 2021.

The Company used $ 1,319,584 of the net operating loss carryover during the year ended June 30, 2022.

We file federal and state income tax returns in jurisdictions with varying statutes of limitations.

12 unchanged sentences

and international economies and, as such, the Company is unable to predict with certainty the potential impact of COVID-19 on its business, results of operations, financial condition and cash flows.

Segment Information

The Company provides the following segments:

(a) product segment and (b) trade show segment.

For the year ended June 30, 2021:

Income from operations

Depreciation expense

Income tax expense

Segment assets:

Additions to property, plant and equipment

For the year ended June 30, 2020:

Loss from operations

$ (5,083,154 )

$ (4,838,330 )

Other expense

Depreciation expense

Income tax expense

Segment assets:

Additions to property, plant and equipment

Significant Customers

The Company had significant customers during the year ended June 30, 2021 and there were no significant customers during the year ended June 30, 2020.

The Company had no significant customers during the year ended June 30, 2022.

The Company had significant customers during the year ended June 30, 2021.

A significant customer is defined as one that makes up ten percent or more of total revenues in a particular year or ten percent of outstanding accounts receivable balance as of the year end.

2 unchanged sentences

Subsequent Events

On August 1, 2021, the Company entered into an asset purchase agreement (VitaMedica Agreement) with Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company and VitaMedica Corporation, a California corporation, David Rahm and Yvette La-Garde (Seller).

VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.

Pursuant to the terms and conditions of the VitaMedica Agreement, the Company agreed to purchase substantially all of the assets of the Seller.

The purchase price for the sale consists of $500,000 of Grove’s common stock, a non-negotiable promissory note from Grove in favor of the Seller in the original principal amount of $500,000, a non-negotiable convertible promissory note from Grove in favor of the Seller in the original principal amount of $500,000, convertible at $5.00 per share for a total of 100,000 shares of Grove Common Stock and a cash payment of $2,000,000.

On July 21, 2021 the Company granted stock options to purchase 1,900,000 shares of the Company’s common stock at an exercise price of $4.18 per share, with a vesting period of two years and a term of five years.

Issuance of Equity

The Company granted stock options to purchase 363,000 shares of the Company’s common stock at an exercise prices between $ 4.59 and $ 4.86 per share, with a vesting period of three years and a term of five years .

Acquisition of assets for the Lucky Tail brand

On August 12, 2022, Grove, Inc.

(the “Company”), and its indirect wholly owned subsidiary Upexi Pet Products, LLC, a Delaware limited liability company (“UPP”) entered into an Asset Purchase Agreement (the “APA”) with GA Solutions, LLC, a Delaware limited liability company (“LuckyTail”), pursuant to which UPP acquired substantially all of the assets of LuckyTail.

The base consideration paid by the Company in the transaction totals Three Million Dollars ($ 3,000,000 ), subject to adjustment, and consists of:

(i) Two Million Dollars ($ 2,000,000 ) less a broker fee and other Transaction expenses totaling Three Hundred Fourteen Thousand Five Hundred Dollars ($ 314,500 ) that was paid into escrow, to be released upon the transfer of certain assets from Seller to UPP, (ii) Five Hundred Thousand Dollars ($ 500,000 ) payable on the latter of the release from escrow and 90 days post closing, and (iii) Five Hundred Thousand Dollars ($ 500,000 ) payable on the latter of the release from escrow and 180 days post closing.

In addition, the Company has agreed to purchase certain inventory from the Seller upon its valuation having been determined.

There is a two way post-closing working capital adjustment based on target working capital of Zero Dollars ($ 0.00 ).

The APA also provides for a two way post-closing adjustment based on a target adjusted revenue for the business acquired of One Million Four Hundred Ninety-Two Thousand Three Hundred Twenty-Nine Dollars ($1,492,329) for the period of August 1, 2022 through December 31, 2022.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data