What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-10-03 compared with 2022-09-28 · 569 added, 393 removed, 505 unchanged (66% of the section changed)

33 unchanged sentences

Lakewood, Colorado

September 28, 2022

October 2, 2023

PCAOB ID Number 5041

1 unchanged sentence

Current assets

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

Accounts receivable

Due from Bloomios

Deferred tax asset, current

Prepaid expenses and other receivables

Current assets of discontinued operations

Total current assets

2 unchanged sentences

Deferred tax asset

Assets held for sale

Right-of-use asset

4 unchanged sentences

Accrued compensation

Deferred revenue

Accrued liabilities

Acquisition payable

Current portion of notes payable

Current portion of convertible notes payable

Current portion of acquisition note payable

Line of Credit

Current portion of operating lease payable

Current liabilities of discontinued operations

Total current liabilities

Notes payable, net of current portion

Operating lease payable, net of current portion

Convertible notes payable

Acquisition notes payable, net of current

Notes payable, net of current portion

Total long-term liabilities

9 unchanged sentences

Non-controlling interest in subsidiary

Total stockholers' equity

Total stockholders'' equity

Total liabilities and stockholders' equity

5 unchanged sentences

Sales and marketing

Distribution costs

General and administrative expenses

1 unchanged sentence

Amortization of acquired intangible assets

(Loss) income from operations

Loss from operations

( 7,552,007 )

Other expense (income), net

( 6,489,131 )

Other income (expense), net

Interest (expense) income, net

Gain on sale of assets

Gain on SBA PPP loan forgiveness

( 4,761,903 )

Change in derivative liability

Settlement of cancelled lease

Other (income) expense, net

(Loss) income before income tax

Loss on sale of Infusionz and select assets

( 2,212,542 )

Income tax (expense) benefit

Net (loss) income

Impairment of Interactive Offers intangible assets

( 3,746,301 )

Net loss attributable to noncontrolling interest

Deemed dividend related to the issuance of Series A Preferred Stock

Gain on sale of property and equipment

Lease impairment, California facility

Gain on SBA PPP loan extinguishment

Other (expense) income, net

( 10,919,488 )

Net loss before income tax

( 18,471,495 )

( 6,388,049 )

Income tax benefit

Net loss from continuing operations

( 15,422,202 )

( 5,869,651 )

(Loss) income from discontinued operations - Interactive Offers

( 1,729,636 )

( 1,160,160 )

(Loss) income from discontinued operations - Infusionz

Net loss (income) attributable to non-controlling interest

Net (loss) income attributable to Upexi, Inc.

$ ( 16,930,289 )

Basic (loss) income per share

Diluted (loss) income per share

Weighted average shares outstanding

$ ( 2,100,850 )

Basic income (loss) per share:

Loss per share from continuing operations

Income per share from discontinued operations

Total income (loss) per share

Diluted income (loss) per share:

Loss per share from continuing operations

Income per share from discontinued operations

Total income (loss) per share

Basic weighted average shares outstanding

Fully diluted weighted average shares outstanding

5 unchanged sentences

Non-controlling

Shareholders'

Total Stockholders'

Balance, June 30, 2021

$ ( 4,170,036 )

Conversion of Trunano subsidiary stock into Grove common stock

( 1,953,801 )

Issuance of common stock for acquisition

Issuance of common stock for acquisition costs

Repurchase common stock

Stock based compensation

Issuance of common stock for cash

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

Issuance of preferred stock for cash

Deemed dividend for Series A preferred stock issuance

Balance, June 30, 2021

$ ( 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

5 unchanged sentences

$ ( 6,270,886 )

Balance, June 30, 2022

$ ( 6,270,886 )

Amortization of common stock issuance for services

Stock based compensation

Issuance of common stock for acquisition of E-Core

Issuance of common stock for interest on note payable

Common stock issued for cash, net

( 16,930,289 )

( 17,490,256 )

Balance, June 30, 2023

$ ( 23,201,175 )

$ ( 505,147 )

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

2 unchanged sentences

Cash flows from operating activities

Net (loss) income

Net (loss) income from operations

( 16,930,289 )

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

operating activities:

( 2,100,850 )

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

Depreciation and amortization

Non-cash loss on the sale of Infusionz and select assets, net

Gain on forgiveness of PPP loan

Gain on sale of assets

Inventory write-offs

Gain on settlement of cancelled lease

Gain on change in deferred tax allowance

Bad debt expense

Amortization of consideration discount

Amortization of senior security original issue discount

Impairment of goodwill and intangible assets

Non-controlling interest

Change in deferred tax asset

( 3,139,227 )

( 1,061,238 )

Amortization of beneficial conversion feature on convertible notes

Shares issued for services

Bad debt expense

Gain on sale of equipment

Gain on forgiveness of SBA PPP loan

Shares issued for finder fee

Stock based compensation

2 unchanged sentences

( 2,795,486 )

( 2,447,038 )

Prepaid expenses and other assets

Operating lease payable

Accounts payable and accrued liabilities

Accrued liabilities related to acquisition

Deferred revenue

Net cash provided by operating activities - Continuing Operations

Net cash used in operating activities - Discontinued Operations

Net cash provided by operating activities

Cash flows from investing activities

Acquisition of Infusionz, Inc., net of cash acquired

Acquisition of Lucky Tail

( 3,528,239 )

Acquisition of VitaMedica, Inc., net of cash acquired

( 2,574,589 )

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

Acquisition of New England Technology, Inc.

( 2,051,587 )

Acquisition of Cygnet, Inc., net of cash acquired

Acquisition of Cygnet

( 1,050,000 )

Proceeds from sale of property and equipment

( 1,028,763 )

Acquisition of Interactive Offers, net of cash acquired

( 1,854,193 )

Proceeds from the sale of Infusionz and selected assets

Acquisition of property and equipment

( 5,451,773 )

Proceeds from the sale of equipment

Net cash used in investing activities - Continuing Operations

( 2,574,858 )

( 10,903,318 )

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

Net cash used in investing activities

2 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of common stock

Repayment of notes payable

( 1,002,874 )

Repayment of SBA note payable

Repayment of the senior convertible notes payable

( 6,305,406 )

Proceeds of the senior convertible notes payable

Payment on line of credit, net

( 6,318,234 )

Proceeds on note payable on building

Proceeds from the issuance of stock, net

Stock repurchase program

( 1,975,888 )

Proceeds from issuance of preferred stock

Proceeds from issuance of related party note payable

Repayment of related party note payable

Payment of note payable

Repayment on note payable on building

Proceeds from issuance of convertible debt

Proceeds on note payable, related party

Net cash used in financing activities - Continuing Operations

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

Net cash used in financing activities

Net decrease in cash - Continuing Operations

( 2,342,494 )

Proceeds from issuance of notes payable

Net cash provided by financing activities

Net (decrease) increase in cash

( 6,488,424 )

Cash, beginning of period

Cash, end of period

Net decrease in cash - Discontinued Operations

Cash, beginning of year

Cash, end of year

Supplemental cash flow disclosures

1 unchanged sentence

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 Upexi, Inc.

Liabilities assumed from acquisition of Infusionz

Issuance of common stock for acquisition of VitaMedica

Issuance of debt for acquisition of VitaMedica

Liabilities assumed from acquisition of VitaMedica

Issuance of common stock for interest expenses

Issuance of commons stock for services

Issuance of common stock for acquisition of E-Core

Liabilities assumed from acquisition of E-Core

$ ( 7,712,168 )

Operating assets designated as held for sale

Liabilities assumed from acquisition of VitaMedica

1 unchanged sentence

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.

1 unchanged sentence

June 30, 2023 and 2022

Background Information

Upexi is a multi-faceted brand owner with established brands in the health, wellness, pet, beauty and other growing markets.

6 unchanged sentences

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

(the “Company”) is a Nevada corporation with fourteen active subsidiaries, including thirteen wholly owned subsidiaries and one subsidiary, Cygnet Online, LLC, a Delaware limited liability company, that is 55% owned.

The Company’s fourteen active subsidiaries are as follows:

HAVZ, LLC, d/b/a/ Steam Wholesale, a California limited liability company

2 unchanged sentences

Trunano Labs, Inc., a Nevada corporation

Infusionz, Inc., a Nevada corporation

MW Products, 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

VitaMedica, Inc, a Nevada corporation

Upexi Enterprise, LLC, a Delaware limited liability company

1 unchanged sentence

Upexi 17129 Florida, LLC, a Delaware limited liability company

E-Core Technology, Inc.

Upexi Distribution Management 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.

In addition, the Company has four wholly owned subsidiaries that had no activity during the year ended June 30, 2023 or for the year ended June 30, 2022.

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

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.

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.

VitaMedica operates mainly from our California location with product development and day to day management with the primary fulfillment center located in Tampa Florida.

Interactive Offers is operated from its Florida office with day-to-day operations supported by various off site remote positions, and majority of the development team operating through 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.

2 unchanged sentences

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 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 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

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the June 30, 2022 and 2021.

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 the outstanding membership interest of Interactive Offers, LLC, a Delaware limited liability company.

On April 1, 2022, the Company entered into a securities purchase agreement with the single investor to purchase 55% of the equity interest in Cygnet Online, LLC, a Delaware limited liability company, and agreements to enable 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.

On August 12, 2022, the Company completed an asset purchase agreement with GA Solutions, LLC, a Delaware limited liability company (“LuckyTail”), pursuant to which the Company acquired substantially all assets of LuckyTail.

LuckyTail sells pet nail grinders and other pet products through various sales channels including some international sales channels.

On October 31, 2022, the Company and its wholly owned subsidiary Upexi Enterprise, LLC, completed a securities purchase agreement to purchase the outstanding stock of E-Core Technology, Inc.

d/b/a New England Technology, Inc.

(“E-Core”), a Florida corporation.

E-Core distributes non-owned branded products to national retail distributors and has branded products in the toy industry that E-Core sells direct to consumers through online sales channels and to national retail distributors.

Business Divested

On October 26, 2022, the Company executed a membership interest purchase agreement to sell 100% of the membership interests of Infusionz LLC, a Colorado limited liability company (“Infusionz”), included in the sale was all rights to Infusionz brands and the manufacturing of certain private label business.

Infusionz was originally purchased by the Company in July of 2020.

The divestiture of Infusionz and related private label manufacturing represents a strategic shift in our operations and will allow us to become a predominantly product distribution focused company for both our Company owned brands and non-owned brands.

Accordingly, the results of the business were classified as discontinued operations in our condensed statements of operations and excluded from both continuing operations and segment results for all periods presented.

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.

Significant Accounting Policies

6 unchanged sentences

The Company has never experienced any losses related to these balances.

Accounts Receivable - The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Company’s collection experience, customer credit worthiness and current economic trends.

After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Based on management’s review of accounts receivable, the Company recorded $ 65,500 and $ 57,000 as allowance for doubtful accounts at June 30, 2023 and 2022, respectively.

The Company had bad debt expense of $ 131,968 and $ 78,185 for the years ended June 30, 2022 and 2021, respectively, including write-offs of accounts receivables $ 131,968 and $ 45,185 , for the years ended June 30, 2022 and 2021, respectively.

Inventory - Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost or net realizable value, cost is determined by the weighted average moving cost inventory method.

The Company had no bad debt expenses and $ 131,968 for the years ended June 30, 2023 and 2022, respectively.

These amounts were direct write-offs against the specific accounts receivable.

Inventory - Inventory consists of finished goods and is stated at the lower of cost or net realizable value, cost is determined by the weighted average moving cost inventory method.

Net realizable value is determined, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors.

On June 30, 2023 the Company had $ 11,557,128 of finished goods inventory and at June 30, 2022 had $ 4,725,685 of finished goods inventory with an inventory reserve of $ 475,000 and $ 50,000 , respectively.

Property and Equipment - Property and equipment is recorded at cost.

11 unchanged sentences

An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill.

The Company performed its annual test as of June 30, 2022.

No impairment charge was identified in connection with the annual goodwill impairment test

The Company performed its annual test as of June 30, 2023, and 2022, respectively.

There was no impairment charge identified in connection with the annual goodwill impairment test at June 30, 2022.

It was determined by management that the goodwill related to Interactive Offers was completely impaired at June 30, 2023 based on the sale of the business at September 1, 2023.

An impairment of goodwill in the amount of $ 2,889,158 was recorded at June 30, 2023 eliminating all of the goodwill related to Interactive Offers.

Impairment of Long-lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable.

1 unchanged sentence

When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable.

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

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

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

The Company did recognize an impairment of $ 857,143 on the assets held for sale, related to the Interactive Offers long-lived assets during the years ended June 30, 2023, leaving $ 716,944 of intangible assets related to Interactive Offers and classified as assets available for sale.

Revenue Recognition - The Company analyzes its contracts and purchase orders to assess whether 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:

4 unchanged sentences

and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

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

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

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

5 unchanged sentences

E-Commerce product returns must be completed within 45 days of the date of purchase.

The Company does not accrue for estimated sales returns as historical sales returns have been minimal.

The Company does not accrue estimated sales returns as historical sales returns have been minimal.

The Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are refundable.

Substantially all the deferred revenue as of June 30, 2022, was recognized as revenue in the year ended June 30, 2023.

Shipping and handling fees billed to customers are included in revenue.

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

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.

When the points are redeemed, the Company does not recognize any revenue related to the purchase and reduces the accrued liability related to the cost of the purchase.

Shipping and handling fees billed to customers are included in revenue, as this revenue is not directly related to the distribution costs associated with an order.

Shipping fees associated with freight are generally included in distribution costs.

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 branded products.

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

Advertising costs of $ 7,978,607 and $ 3,225,256 were expensed as incurred during the years ended June 30, 2023, and 2022, respectively.

54 unchanged sentences

Preferred stock

Convertible debt

Total potential dilutive weighted average shares outstanding

1 unchanged sentence

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

During the year ended June 30, 2023, and 2022, the Company reported a net loss, so the potential effect is not reflected in the financial statements.

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

12 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.

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

In August 2020, the FASB issued ASU 2020-06- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity , which simplifies the guidance for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature.

As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available.

The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

The Company expects the primary impacts of this new standard will be to increase the carrying value of its Convertible Debt and reduce its reported interest expense.

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 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 consolidated financial statements.

Infusionz LLC

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 (“Sellers”).

Pursuant to the terms of the Infusionz Agreement on July 1, 2020, the Company acquired 100 % of the outstanding interest of Infusionz LLC, a Colorado corporation (“Infusionz”).

Infusionz LLC was incorporated in the state of Colorado in May 2016.

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 Upexi, Inc.

manufactures and markets.

Infusionz 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 .

The estimate was based on the consideration paid or payable, consisting of $ 3,000,000 of equity consideration payable in the form of the Company’s common stock and cash consideration of approximately $ 350,000 , paid based on terms of the Infusionz Agreement.

The Company will issue a minimum of 833,334 shares of common stock Per the Infusionz Agreement, the number of shares of the Company’s Common Stock to be issued to the Sellers will be based on $ 3.60 per share;

provided however, that in the event of and upon any public offering of the Company’s common stock, if the ‘offering price’ of the Company’s successful underwritten initial public offering of the Company’s Common Stock is lower than $3.60 per share (post reverse split), the Company shall promptly issue such additional shares proportionately to each of the Sellers necessary to bring the value of the equity consideration to a total of $3,000,000 .

On July 1, 2020, the closing of the acquisition, the Company issued 222,223 shares of Common Stock (post-reverse split) to the Sellers, based on the most recent price of $1.53 per share of Common Stock .

The Company has an accrued acquisition payable of $ 2,424,745 accrued for the cash and stock to be issued related to the Infusionz Agreement.

Since the closing of the acquisition, the Company has issued an additional 304,181 shares of common stock to the Sellers based on the most recent price of $ 1.53 per share of Common Stock.

Based on this valuation, the Company will issue an additional 1,535,781 shares of Common Stock to the Sellers in equity consideration, as adjusted based on the initial public offering price, pursuant to the Infusionz Agreement as set forth below.

On November 1, 2020 the Company issued 101,389 shares of Common Stock in relations to the acquisition of Infusionz LLC.

The shares were issued at a $ 1.53 per common share with adjustments to the final number of shares and value based on the acquisition agreement.

On January 4, 2021 the Company paid the former members of Infusionz LLC $ 75,000 as per the acquisition agreement.

On February 1, 2021 the Company issued 101,392 shares of Common Stock in relations to the acquisition of Infusionz LLC.

The shares were issued at a $ 1.53 per common share with adjustments to the final number of shares and value based on the acquisition agreement.

On June 25, 2021 the Company issued 101,400 shares of Common Stock in relations to the acquisition of Infusionz LLC.

The shares were issued at a $ 5.75 per common share with adjustments to the final number of shares and value based on the acquisition agreement.

The Company’s equity and cash consideration payment schedule pursuant to the Infusionz Agreement is as follows:

December 31, 2020 (paid January 4, 2021)

November 1, 2020

February 1, 2021

March 31, 2021 (paid April 2, 2021)

June 1, 2021 (issued June 25, 2021)

September 1,2021

Total Consideration

Acquisition payable:

Consideration

July 1, 2020 – cash

July 1, 2020 - equity consideration (222,222 common shares of the acquirer) *

November 1, 2020 - equity consideration (101,389 common shares of the acquirer) *

January 4, 2021 – cash

February 1, 2021 - equity consideration (101,932 common shares of the acquirer) *

March 31, 2021

June 1, 2021 - equity consideration (101,400 common shares of the acquirer)

Acquisition payable **

* Stock consideration was valued at $ 1.53 per common share as that was the last purchase price of the stock.

** 306,945 shares of the Company’s common stock were issued on September 1, 2021, in consideration for this liability.

The assets and liabilities of Infusionz are recorded at their respective fair values as of the closing date of the Infusionz Agreement, and the following table summarizes these values based on the balance sheet at July 1, 2020, the effective closing date.

Tangible Assets

Intangible Assets

Liabilities Acquired

Total Purchase Price

The acquisition of Infusionz LLC provided the Company with additional expertise in the industry, expanded the branded product offerings of the Company, additional manufacturing resources and improved gross margin through synergies recognized with the consolidation of the two companies manufacturing and distribution.

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

Recent Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (“FASB”), or other standard setting bodies and adopted by us as of the specified effective date.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

The Company has considered all other recently issued accounting pronouncements, including the new provisions of ASC 326 (“Financial Instruments – Credit Losses”) pertaining to “current expected credit losses,” and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

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”).

The Company purchased VitaMedica on August 1, 2021.

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.

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

Fair value of consideration transferred:

Cash, working capital adjustment

Common stock, 100,000 shares valued at $4.82 per common share, the closing price on August 4, 2021.

Recognized amounts of identifiable assets acquired, and liabilities assumed:

Accounts receivable

Prepaid expenses

Property and equipment

Customer list

Right of use asset

Accounts payable

Operating lease

Total identifiable net assets

The business was acquired through an asset purchase agreement, that acquired all the tangible and intangible assets of the VitaMedica business.

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 increased by $ 74,589 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 goodwill is deductible for tax purposes and attributable to the Company’s added ability to enter the online seller’s market for surgery supplements, recovery, skin, beauty, health and wellness and provided improved gross margins through synergies recognized with the consolidation of manufacturing and distribution operations.

The Company’s consolidated financial statements for the year ended June 30, 2023 include the actual results for VitaMedica.

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

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

These fees were expensed 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.

These fees were expensed during the year ended 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.

The Company acquired Interactive Offers, LLC, on October 1, 2021.

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

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

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

The purchase price for the sale was $ 4,833,630 , as amended, which consisted of 560,170 shares of common stock of the Company valued at $ 2,733,630 , $ 4.88 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.

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

Fair value of consideration transferred:

Common stock, 100,000 shares valued at $4.88 per common share, the closing price on October 1, 2021.

Recognized amounts of identifiable assets acquired, and liabilities assumed:

Accounts receivable

Prepaid expenses

Property and equipment

Customer list

Accounts payable

Accrued liabilities

Accrued compensation

Deferred revenue

Total identifiable net assets

The business was acquired through an equity interest purchase agreement.

The equity purchase agreement provided for an increase in the purchase price of up to $ 600,000 based on the attainment of certain sales threshold 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 $ 638,978 and was repaid to the Company with 106,497 of the Company’s common stock valued at $ 6.00 per share.

The final purchase price allocation was completed by an independent consulting firm and is no longer subject to change.

The goodwill is deductible for tax purposes and attributable to the Company having a solid entry into the programmatic ad space and added a unique in-house advertising platform to leverage and scale its current and future brands.

Access by sellers to Interactive’s ad platform provides further product sales growth and advertising efficiencies.

These are the factors of goodwill recognized in the acquisition.

On September 1, 2023, the Company sold Interactive Offers.

For the years ended June 30, 2023, and 2022 the operations have been reclassed to discontinued operations and the assets and liabilities reclassed to assets available for sale or current assets and current liabilities of discontinued operations.

On June 30, 2023, the Company recorded an impairment of the assets available for sale of $ 3,746,301 .

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

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 Interactive and the amount of identified assets acquired, and liabilities assumed at the acquisition date.

Fair value of consideration transferred:

Convertible note payable, convertible at $6.00 per common share

Earnout payment

Common stock, 555,489 shares valued at $5.34 per common share, the closing price on April 1, 2022.

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

Prepaid expenses

Property and equipment

Right to use asset

Online sales channels

Vendor relationships

Accrued liabilities

Notes payable

( 7,298,353 )

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.

Operating lease

Total identifiable net assets

The 55% of the business was acquired through a stock purchase agreement on March 31, 2022.

The purchase agreement provided for an increase in the purchase price of up to $ 700,000 based on the attainment of certain sales threshold 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 the reduction in the loan to the seller.

The 55% purchase price allocation is final and is no longer subject to change.

The Company’s consolidated financial statements for the year ended June 30, 2023, include the actual results of Cygnet and for the year ended June 30, 2022 include the results for Cygnet from April 1, 2022 to June 30, 2022.

On September 1, 2023, the Company completed the acquisition of the remaining 45% interest for structured cash payments equaling $800,000 and 90,909 shares of the Company’s common stock valued at $162,727 .

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.

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 payment, 90 days after close

Cash payment, 180 days after close

Contingent consideration

Cash payment, working capital adjustment

Recognized amounts of identifiable assets acquired, and liabilities assumed:

Customer list

Total identifiable net assets

The business was acquired through an asset purchase agreement, that acquired all elements of a business, including all of 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 Company’s consolidated financial statements for the year ended June 30, 2023, include the actual results of LuckyTail from August 13, 2022, through June 30, 2023.

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.

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 payment, 120 days

Note payable 2

Convertible note payable, convertible at $4.81 per common share

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

Recognized amounts of identifiable assets acquired, and liabilities assumed:

Accounts receivable

Prepaid expenses

Customer relationships

Accrued liabilities

Line of credit

( 7,201,079 )

Total identifiable net assets

The business was acquired through membership interest purchase agreement on October 21, 2022.

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 for the year ended June 30, 2023, include the actual results of E-Core from October 21, 2022, through June 30, 2023.

The Company recorded interest on the consideration of $ 969,098 during the year ended June 30, 2023.

At June 30, 2023 there was $ 1,738,295 of unamortized debt discount that will be expensed over the next two years.

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.

Revenue from acquisitions included in the financial statements.

Net revenue included in the financial statements:

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

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on July 1, 2021, nor is the financial information indicative of the results of future operations.

The following table represents the unaudited consolidated pro forma results of operations for the 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.

The following table represents the unaudited consolidated pro forma results of operations for the year ended June 30, 2023 and the year ended June 30, 2022.

The results of operations for VitaMedica and Cygnet are included in the year ended June 30, 2023 and the results of operations for LuckyTail are included from August 13, 2022 to June 30, 2023 and the results of operations for E-Core are included from October 21, 2022 to June 30, 2023.

Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of VitaMedica, Cygnet, LuckyTail and E-Core by approximately $ 41,363 , $ 175,000 , $ 44,619 , and $ 134,625 per month, respectively.

Pro Forma, Unaudited

2 unchanged sentences

Operating expenses

Net income (loss)

$ ( 2,046,030 )

Net income (loss) from continuing operations

$ ( 15,422,202 )

5 unchanged sentences

Year ended June 30, 2022

$ 101,104,667

Cost of sales

Operating expenses

Net income (loss)

Net income (loss) from continuing operations

$ ( 5,869,651 )

3 unchanged sentences

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.

VitaMedica amortization expense of $ 496,356 annually and $41,363 monthly is based on the purchase price allocation report.

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.

The total weighted average shares includes 560,170 shares of common stock outstanding from October 1, 2021 to June 30, 2022 for the acquisition of Interactive Offers.

The Company estimated the annual Cygnet amortization expense at $ 2,100,000 annually and $ 175,000 monthly, based on management’s 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:

Raw materials

Finished goods

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

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

The Company estimated the annual LuckyTail amortization expense at $ 535,428 annually and $ 44,619 monthly, based on management’s preliminary allocation of the purchase price.

For the year ended June 30, 2023, the proforma adjustment included $ 66,929 of amortization expense for one and a half months.

For the year ended June 30, 2022, the proforma adjustment included $ 648,000 of amortization and for the year.

The Company estimated the annual E-Core amortization expense at $ 1,615,500 annually and $ 134,625 monthly, based on management’s preliminary allocation of the purchase price.

For the year ended June 30, 2023, the proforma adjustment included $ 534,721 of amortization expense, three and a half months.

For the year ended June 30, 2022, the proforma adjustment included $ 1,615,500 of amortization expense.

These costs are primarily external legal, accounting and consulting services directly related to completed acquisitions, due diligence, and review of possible target acquisitions.

These acquisition-related costs are included in the general and administrative expenses on the Company’s condensed consolidated statements of operations.

Property and Equipment

1 unchanged sentence

Furniture and fixtures

Computer equipment and software

Computer equipment

Internal use software

Manufacturing equipment

3 unchanged sentences

( 1,921,780 )

Deposits on equipment

Property and equipment, net

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 .

Depreciation expense for the years ended June 30, 2023 and 2022 was $ 944,704 and $ 574,309 , respectively.

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

Intangible Assets

Intangible assets as of June 30, 2023:

Customer relationships

Non-compete agreements

Online sales channels

Vender relationships

For the years ended June 30, 2023 and 2022, the Company amortized approximately $ 4,208,991 and $ 979,988 , respectively.

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

Customer relationships

Intangible Assets from Purchase

Customer relationships

Intangible Assets from Purchase

Intangible assets as of June 30, 2022:

Customer relationships, amortized over four years

3 unchanged sentences

Vender relationships, amortized over five years

Software, amortized over five years

As of June 30, 2021

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, 2022, from the acquisition of VitaMedica, Interactive and Cygnet.

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

Customer relationships

3 unchanged sentences

Intangible Assets from Purchase

Future amortization of intangible assets are as follows:

Future amortization of intangible assets at June 30, 2023 are as follows:

June 30, 2024

4 unchanged sentences

Prepaid Expense and Other Current Assets

Prepaid and other assets consist of the following:

Prepaid and other receivables consist of the following:

Prepayment to vendors

2 unchanged sentences

Subscriptions and services being amortized over the service period

Prepaid sales tax

Other deposits

Stock issued for prepaid interest on convertible note payable

Other prepaid expenses

Other receivables

Operating Leases

4 unchanged sentences

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

Lease expense was $ 568,031 and $ 227,967 for the years ended June 30, 2022 and 2021, respectively.

Lease expense was $ 568,031 for the year ended June 30, 2022.

Lease expenses for the year ended June 30, 2023 are included discontinued operations.

The operating lease expired in 2022 and the Company continues to occupy the facility and pays rent on a month-to-month basis.

During May 2021, the Company entered into a lease for an additional Nevada facility that commenced on May 1, 2021, and recorded a right of use asset and corresponding lease liability.

The Company uses this leased facility for additional warehouse space.

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.

In March 2020, the Company consolidated operations to its Nevada facility and abandoned its manufacturing and sales facility in Costa Mesa.

For the year ended June 30, 2020, the Company recorded an impairment loss of $ 558,918 and subsequently negotiated a settlement for this liability and recognized a gain of $ 387,860 in December of 2020.

Lease expense was $ 117,992 for each of the years ended June 30, 2023 and 2022.

During September 2020, the Company entered into a one-year lease for a Colorado facility that commenced on September 1, 2020, and recorded a right of use asset and corresponding lease liability.

The Company uses this facility for office and manufacturing space.

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

The Company used this facility for office and manufacturing space.

Lease expense was $ 22,803 for the year ended June 30, 2022.

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.

Lease expenses were $ 6,744 and $ 6,428 for the years ended June 30, 2023 and June 30, 2022, respectively.

On July 1, 2021, the Company entered into a 39-month lease for Florida facility and recorded a right to use asset and corresponding lease liability for Interactive Offers.

The Company uses this facility for office space.

Lease expense was $ 39,820 for each of the years ended June 30, 2023 and 2022 and has been included in discontinued operations.

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

1 unchanged sentence

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.

Lease expenses were $ 105,600 and $ 79,200 for the years ended June 30, 2023 and 2022, respectively.

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.

3 unchanged sentences

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.

Lease expenses were $ 102,228 and $ 21,800 for the years ended June 30, 2023 and 2022, respectively.

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, 2023:

Total undiscounted future minimum lease payments

Imputed interest

Present value of operating lease obligation

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2023 are:

1 unchanged sentence

Weighted average incremental borrowing rate

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:

For the years ended June 30, 2023 and 2022, the components of lease expense, included general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:

June 30, 2023

5 unchanged sentences

Total lease cost

Total undiscounted future minimum lease payments

Imputed interest

Present value of operating lease obligation

Accrued Liabilities

2 unchanged sentences

Accrued interest

Accrued federal and state tax

Accrued expenses on credit cards

Accrued vendor liabilities

Accrued sales tax

Derivative liability

Accrued expenses from sale of manufacturing operations

Other accrued liabilities

Convertible Promissory Notes and Notes Payable

During October of 2019, the Company entered into convertible promissory notes (Notes) for total proceeds of $ 1,500,000 .

The principal and interest of the Notes are payable in full at the maturity date of April 2021, if not previously converted.

The Notes have an interest rate of 8 %, total accrued interest is to be repaid at maturity, and are convertible into common stock if the Company enters a financing arrangement which results in the Company’s common stock becoming listed or trading.

The conversion rate would be equal to the price of the Company’s common stock sold in the financing arrangement.

During the year ended June 30, 2021, the Notes and related accrued interest were converted into 348,310 shares of the Company’s common stock.

On April 28, 2020, the Company entered into a Paycheck Protection Program loan for $ 398,945 in connection with COVID-19.

The promissory note has a fixed payment schedule, commencing seven months following the funding of the note and consisting of seventeen monthly payments of principal and interest, with the principal component of each payment based upon the level of amortization of principal over a two year period from the funding date.

A final payment for the unpaid principal and accrued interest will be payable no later than April 28, 2022 .

The note bears interest at a rate of 1.00 % per annum and is deferred for the first six months of the loan.

Certain portions of the loan may qualify for loan forgiveness based on the terms of the program.

During the year ended June 30, 2021, the Company submitted its PPP Loan Forgiveness Application to the SBA.

On June 11, 2021, the SBA confirmed that application for forgiveness had been approved and that its PPP loan, in the amount of $ 398,945 plus accrued interest of $ 4,551 , had been forgiven.

On May 13, 2020, Infusionz entered a Paycheck Protection Program loan for $ 297,100 in connection with COVID-19.

A final payment for the unpaid principal and accrued interest will be payable no later than May 13, 2022 .

The note bears interest at a rate of 1.00 % per annum and is deferred for the first six months of the loan.

Certain portions of the loan may qualify for loan forgiveness based on the terms of the program.

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.

The promissory note has a fixed payment schedule commencing on June 3, 2021, consisting of principal and interest payments of $ 731 monthly.

The balance of the principal and interest will payable thirty years from the date of the promissory note.

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

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.

The principal and interest of the note is payable in full in December 2022.

The note bears interest at 2 % and is unsecured.

The Company repaid the note in full during February 2021.

In February and March 2021, the Company entered into convertible promissory notes (“Convertible Notes”) for total proceeds of $ 1,000,080 .

The term of the Convertible Notes is two years and bear interest at the rate of 8 % per annum, compounded annually.

The Convertible Notes and accrued interest are automatically converted into any initial public offering by the Company at a rate of seventy five percent of the initial public offering price of the shares of capital stock of the Company sold in the initial public offering.

During the year ended June 30, 2021, the Convertible Notes and related accrued interest were converted into 274,330 shares of the Company’s common stock.

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:

Convertible Notes:

Promissory Note, 21- month term note, 18.11% interest payable with common stock and subordinate to the Convertible Notes

November 22, 2024

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

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

June 28, 2025

Less current portion of notes payable

Notes payable, net of current portion

Acquisition Notes:

Convertible Notes, 36-month term notes, 0% cash interest, collateralized with all the assets of the Company

October 31, 2025

Subordinated Promissory Notes, 24-month term notes, 4% cash interest, collateralized with all the assets of the Company

October 31, 2024

Subordinated Promissory Notes, 12-month term notes, 4% cash interest, collateralized with all the assets of the Company

October 31, 2023

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

1 unchanged sentence

April 15, 2023

Discount on acquisition notes payable, current

Acquisition notes payable, current

Acquisition notes payable, current net

Discount on acquisition notes payable, long-term

( 1,644,915 )

Acquisition notes payable, long-term

Acquisition notes payable, long-term net

Notes Payable:

Marshall Loan, 2-year term note, 8.5% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes

June 28, 2024

Mortgage Loan, 10-year term note, 4.8% interest, collateralized by land and warehouse building

September 26, 2032

Promissory Note, 21-month term note, 10% cash interest and subordinate to the Convertible Notes

November 22, 2024

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

5 unchanged sentences

Total notes payable

Less current portion of notes payable

Notes payable, net of current portion

Discount on notes payable, current

Notes payable, current

Notes payable, current net

Discount on acquisition notes payable, long-term

Notes payable, long-term

Notes payable, long-term, net

Total convertible notes payable, acquisition notes payable and notes payable

Future payments on notes payable are as follows:

For the year ended June 30:

Marshall Loan, related party and received July 31, 2022

Convertible Notes

Acquisition Notes Payable

Note original discount

$ ( 118,358 )

Convertible note, remaining holdback not received

Convertible note, original discount and related fees and costs

$ ( 1,738,295 )

$ ( 1,856,653 )

Convertible Notes Payable:

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 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 customary anti-dilution protection, and an investor put right to require the Company to redeem the Warrants for a total of $ 250,000 .

There was a loss of $ 1,770 for the change in the derivative liability for the period ended March 31, 2023.

On October 31, 2022, the Company entered into a letter agreement with the accredited investors in which all amounts owed were paid in full and the related convertible notes and all security interests were cancelled.

Additionally, the Company terminated the related Form S-3 registration statement.

On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $ 2,150,000 together with the issuance of 134,000 restricted shares (“the PIK shares”) of the Company’s common stock at a price of $ 4.53 per share.

The promissory note has a 21-month term and bears interest at 18.11 % payable with the PIK shares.

The promissory note provides for 12 monthly payments of principal beginning on December 22, 2023, and PIK interest of restricted shares on the Effective Date of the promissory note.

The Company shall have the right at any time to convert all or any part of the outstanding and unpaid principal into fully paid and non-assessable shares of common stock, or any shares of capital stock or other securities, together with the PIK shares at a price per conversion share equal to $ 5.00 .

Acquisition Notes Payable:

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.

The Company repaid the note in full plus all outstanding accrued interest during April 2023.

The Company and its wholly owned subsidiary, Upexi Enterprises, LLC entered into a securities purchase agreement with E-Core Technology, Inc.

d/b/a New England Technology, Inc., a Florida corporation, and its three principals.

The Company entered into a series of promissory notes with the principal parties:

(a) promissory notes in the total original principal amount of $5,750,000 payable upon maturity with a term of 12 months at an interest rate of 4%, $ 600,000 of which shall be satisfied through the cancellation of an equal amount owed by one of the principals to the Company;

(b) promissory notes in the total original principal amount of $ 5,750,000 payable upon maturity with a term of 24 months at an interest rate of 4 %;

and (c) promissory notes in the original principal amounts of $3,500,000 with a term of 36 months at an interest rate of 0%.

The principals may convert the notes into shares of the Company’s restricted common stock at a conversion price equal to $4.81.

If the principals do not exercise their conversion rights, the principal balance of the notes will be paid in 12 equal monthly payments commencing on the two-year anniversary of the issuance of the notes, subject to adjustments based on the Company’s EBITDA over the term of the notes.

Notes Payable:

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 2-year term and bears cash interest at the rate of 8.5 % per annum with an additional PIK of 3.5 % per annum.

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

On October 19, 2022, Upexi, Inc.

(the “Company”) and its indirect wholly owned subsidiary, Upexi 17129 Florida, LLC entered into a loan agreement, promissory note and related agreements with Professional Bank, a Florida state-chartered bank, providing for a mortgage on the Company’s principal office in N.

Clearwater, Florida.

The Company received $ 3,000,000 in connection with the transaction.

The principal is to be repaid to Professional Bank over a term of ten years.

The proceeds of the loan were utilized by the Company to pay down its loan facility with Acorn Capital, LLC in the amount of $ 2,780,200 .

On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $560,000.

The promissory note has a 21-month term and bears cash interest at the rate of 10 % per annum.

The promissory note provides for monthly payments of interest beginning on March 22, 2023 and 12 monthly payments of principal beginning on December 22, 2023.

There were certain loan outstanding prior to the acquisition of Cygnet Online prior to acquisition and continued to be outstanding post acquisition.

Cygnet Online, entered into a loan for $ 4,436,900 with the Small Business Administration.

The promissory note has a scheduled payment commencing on November 6, 2021, consisting of principal and interest.

The interest rate is adjustable of prime plus 2.5 % and is currently at 10.25 %.

The balance of the principal and interest will be payable ten years from the date of the promissory note.

Cygnet Online, entered into a 60 month inventory consignment note with the first payment due June 30, 2022 .

The note bears interest at 3.5 % per annum.

Cygnet Online, executed a promissory note in the amount of $ 850,000 payable in six annual installments of principal and interest, the final payment due December 1, 2027 .

The note bears interest at 3.5 % per annum.

Related Party Transactions

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

The loan was $ 750,000 , two years and has an interest rate of 2 %.

Management repaid the loan during the three months ended March 31, 2021.

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

The loan was $ 12,000 and was due upon demand.

During the year ended June 30, 2021, a member of management purchased 500,000 shares of preferred stock for $ 50,000 cash.

The Company recognized $50,000 for the beneficial conversion feature as a deemed preferred stock dividend in the Consolidated Statements of Operations.

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 Company purchased Interactive Offers, Interactive Offers, LLC, a Delaware limited liability company 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.

During the year ended June 30, 2022, the Company entered into a promissory note with Allan Marshall, CEO of the Company.

The loan was for $ 1,500,000 and has a two-year term with an interest rate of 8.5 % per annum with an additional PIK of 3.5 % per annum.

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.

12 unchanged sentences

After deducting the underwriting commissions, discounts, and offering expenses payable by the Company, the Company received net proceeds of $ 10,950,315 .

This registration is no longer effective.

During the year ended June 30, 2021, the Company issued 526,404 shares of common stock for the acquisition of Infusionz.

1 unchanged sentence

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

Trunano Labs, Inc.

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 the Company’s Common Stock, 10.8 % of the then outstanding shares.

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

is a wholly owned subsidiary of Upexi Inc.

Trunano Labs, Inc.

has 10,000,000 shares of common stock authorized with a par value of $ 0.001 .

As of June 30, 2020, Trunano Labs, Inc, had 7,261,261 issued and outstanding shares of common stock, of which 5,500,000 is owned by the Company.

During the year ended June 30, 2019, Trunano Labs, Inc.

issued 1,490,991 shares of common stock for cash proceeds of approximately $ 1,655,000 .

During the year ended June 30, 2020, Trunano Labs, Inc.

issued 270,270 shares of common stock for cash proceeds of approximately $ 300,000 .

Primarily due to the decline in CBD isolate price, there were no operations during the year ended June 30, 2019 for Trunano Labs, Inc.

During the year ended June 30, 2020, Trunano Labs, Inc.

had a net loss of $ 5,850 .

During the year ended June 30, 2022:

The Company issued 306,945 shares of common stock for the acquisition of Infusionz, the shares were valued at $ 1,764,876 .

The Company issued 100,000 shares of common stock for the acquisition of VitaMedica, the shares were valued at $ 482,000 .

During the year ended June 30, 2023:

The Company issued 1,247,403 shares of common stock for the acquisition of E-Core Technologies Inc., a Florida corporation, valued at $ 6,000,000 .

The Company issued 134,000 shares of common stock for prepayment of interest on a note payable.

The shares were valued at $ 607,020 or $4.52 per common share and recorded as prepaid interest as the shares were issued at that time.

The Company agreed to sell 2,121,213 shares of common stock for a purchase price of approximately $7,000,000.

After deducting the underwriter’s commissions, discounts, and offering expenses payable by the company, the Company expects to receive net proceeds of approximately $6,060,000.

In addition, the Company issued warrants to purchase approximately 169,000 shares of the Company’s common stock at a purchase price of $4.774 per common share.

In September of 2023, the Company issued 90,909 shares of common stock for the purchase of the remaining 45% of Cygnet Online, LLC.

The shares were valued at $ 162,727 or $1.79 per common share.

Stock Based Compensation

20 unchanged sentences

June 30, 2023

June 30, 2022

Dividend rate

4 unchanged sentences

Grant date stock price

$ 4.18 – 5.34

$ 0.85 – 2.00

The basis for the above assumptions are as follows:

3 unchanged sentences

the expected term was calculated based on the Company’s historical pattern of options granted and the period of time they are expected to be outstanding;

and expected volatility was calculated based upon historical trends in Charlotte’s Web Holdings, Inc.

(CWBHF) stock prices for periods prior to the date the Company’s trading information was available.

Management selected Charlotte’s Web Holdings, Inc.

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

and expected volatility was calculated based upon historical trends in the Company’s stock prices.

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

1 unchanged sentence

There were 4,648,624 shares available for issuance as of September 27, 2023, under the 2019 Plan as amended.

One Hit Wonder, Inc.

has elected S Corporation status for federal income tax and California corporation business tax purposes, Steam Distribution, LLC, Havz, LLC and One Hit Wonder Holdings, LLC elected partnership status for federal income tax and California corporation business tax purposes.

Under these elections, the Company is not a taxpaying entity for federal and state income tax purposes and, accordingly, no provision has been made for such income taxes, except for a minimum state corporate business tax.

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 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.

Cresco Management, LLC and SWCH, LLC elected partnership status for federal income tax and California and Delaware corporation business tax purposes, respectively.

Under these elections, these Subsidiaries are not a taxpaying entity for federal and state income tax purposes and, accordingly, no provision has been made for such income taxes, except for a minimum state corporate business tax through December 31, 2018.

The stockholders’ allocable share of the Company’s income or loss is reportable on his or her income tax return through December 31, 2018.

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

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.

consolidated from 2018 to current.

The first consolidated tax return for all entities was filed for the tax year December 31, 2019.

The components of the provision for income taxes are as follows:

Current tax provision

Deferred tax asset valuation allowance adjustment

Deferred tax provision

( 3,601,298 )

6 unchanged sentences

Nondeductible expense

Tax return to provision

State tax rate change

Valuation allowance

1 unchanged sentence

The net deferred income tax asset balance related to the following:

Net operating losses

Deferred tax provision (credit) related to:

Net operating losses carry forward

Reward points

Inventory write off

Adverse lease

Impairment loss – Interactive Offers

Intangible assets

11 unchanged sentences

The Company determined that it is more likely than not that the Company will have future taxable income.

The Company eliminated the valuation allowance on the deferred tax asset and recognized a benefit of $ 1,282,815 during the year ended June 30, 2021.

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.

The Company used $ 2,506,514 of the federal 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.

13 unchanged sentences

Significant Customers

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

The Company had significant customers during the year ended June 30, 2023.

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.

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

Net revenues for the year ended June 30, 2023, include revenues from significant customers in the product segment as follows:

Accounts receivable balances as of June 30, 2023, from significant customers are as follows:

Discontinued Operations – Sale of Infusionz to Bloomios

On October 28, 2022, the Company determined that the best course of action related to Infusionz, LLC and certain manufacturing business was to accept an offer to sell those operations.

The Company received from Bloomios, Inc.(OTCQB:BLMS), the purchaser (i) $5,500,000 paid at closing;

(ii) a convertible secured subordinated promissory note in the original principal amount of $ 5,000,000 ;

(iii) 85,000 shares of Series D convertible preferred stock, with a total stated value of $ 8,500,000 ;

(iv) a senior secured convertible debenture with a subscription amount of $ 4,500,000 , after original issue discount of $ 779,117 ;

and (v) a common stock purchase warrant to purchase up to 2,853,910 shares of Bloomios’s common stock.

The Company recorded the consideration received at the estimated value at the time of the transaction and as part of that estimate valued the additional warrants to purchase Bloomios shares of common stock at $ 8,500,000 and a valuation allowance of $ 8,500,000 .

The assets transferred were recorded at their respective book values, the accrued and incurred expenses estimated by management were recorded and the consideration received was recorded at managements estimated fair value based on the balance sheet on October 26, 2022, the effective closing date.

Tangible assets, inventory / working capital*

$ ( 1,344,000 )

Tangible assets, warehouse and manufacturing equipment, net of accumulated depreciation*

( 2,413,814 )

Intangible assets, net of accumulated amortization

Accrued and incurred expenses related to the transaction and additional working capital*

( 2,051,500 )

Consideration received, including cash, debt and equity, net

Total gain recognized

*During the continuing transition period, all of the inventory or working capital has not been transferred to the buyer.

At closing, the Company provided working capital, in the form of inventory, in excess of the working capital agreement and during the transition period, there are certain expenses and purchases incurred that are to be netted against funds collected on behalf of the buyer.

June 30, 2023, there was a receivable balance from the buyer of 845,443 , net of a reserve of $931,613.

Advance for payroll

Operating expense

Management fees

Excess working capital

Accrued Interest

Subtotal due from Bloomios

Total due from Bloomios

For several reasons, including but not limited to the non-payment per the terms of several agreements and the continuous delay in getting the business transitioned, the Company notified Bloomios of its termination of the transition agreement.

Management accrued a reserve on the receivable balance of $ 1,179,498 leaving a receivable balance of $845,443 on June 30, 2023.

Accrued interest and the gain from the original issue discount were reversed and the remaining balance was expensed to loss from discontinued operations.

These are recorded on the balance sheet as due from Bloomios.

Investments - Bloomios:

Senior secured convertible debenture, net of unamortized original issue discount

Series D convertible preferred stock

Convertible Secured Subordinate Promissory Note

Reserve on Investments - Bloomios

( 18,718,209 )

Total Investments - Bloomios

Senior Secured convertible debenture:

The Company received a senior secured convertible debenture of $ 4,500,000 , net of the original issue discount.

The Debentures have a maturity date of October 26, 2024, an interest rate of 10 % and are convertible into shares of Bloomios common stock.

The debenture contains customary representations, warranties and indemnification provisions.

The Debentures are secured by a senior security interest in all assets of the Company and its subsidiaries.

In addition, the Company received a warrant to purchase shares of Bloomios common stock.

The Company did not place any value on this warrant.

Bloomios has agreed to use commercially reasonable efforts to complete a Qualified Offering within six months of October 26, 2022, to file a registration statement covering the resale of the warrant shares and the underlying shares convertible with the debenture.

Series D convertible preferred stock

85,000 shares of Series D preferred stock.

The preferred shares have a stated value per share of $100 and we are to receive dividends equal to 8.5% per year on a monthly basis, 30 days in arrears , for each month during which the Series D Preferred shares remain outstanding.

The preferred stock shall not receive the declared dividends until the senior secured debentures are all repaid in full for all investors, including the debentures held by the Company.

Convertible Secured Subordinate Promissory Note

The note has an interest rate of eight and one-half percent ( 8.5 %) per annum and requires Bloomios to make a prepayment to the note in the amount equal to 40 % of the net proceeds received by Bloomios in connection with any offering of securities conducted in connection with an up listing.

Interest is due monthly and the note is convertible, at the Company’s option, into shares of Bloomios common stock at a conversion price of $ 5.00 per share subject to adjustments.

The full principal and interest is due on or before October 26, 2024 .

The note is secured by a subordinated security interest in all assets of Infusionz pursuant to a certain pledge and security agreement, dated as of October 26, 2022, which security interest shall rank junior to all liens and security interests granted by Bloomios to the senior secured convertible note, which the Company is a holder of a portion of this security.

Summary of discontinued operations:

Year ended June 30,

Discontinued Operations

Cost of sales

Sales, general and administrative expenses

Depreciation and amortization

Income (loss) from discontinued operations, net of tax

$ ( 338,418 )

Accounts receivable net of allowance for doubtful accounts

Fixed assets, net of accumulated depreciation

Total liabilities

Assets Held for Sale

On August 31, 2023, the Company sold Interactive offers to Amplifyir Inc.

The purchase price is $ 1,250,000 with a provision to adjust the final purchase price based on the business being transferred to Amplifyer Inc.

with a net zero working capital.

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.

Summary of discontinued operations:

Year ended June 30,

Discontinued Operations

Cost of sales

Sales, general and administrative expenses

Depreciation and amortization

Income (loss) from discontinued operations

$ ( 1,729,636 )

$ ( 1,160,160 )

Accounts receivable net of allowance for doubtful accounts

Fixed assets, net of accumulated depreciation

Total liabilities

Subsequent Events

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.

On September 1, 2023 (the “Closing Date”), the Company exercised its option to acquire forty-five percent ( 45 %) of the issued and outstanding equity of Cygnet Online, LLC (“Cygnet”) As a result of the foregoing the Company now owns one hundred percent ( 100 %) of the issued and outstanding equity of Cygnet.

In consideration for the September 1, 2023, acquisition the Company paid Hanig Five Hundred Thousand Dollars ($ 500,000 ) on the Closing Date, issued Ninety Thousand Nine Hundred and Nine ( 90,909 ) shares of the Company’s common stock to Hanig, and agreed to pay Hanig Three Hundred Thousand Dollars ($ 300,000 ) on the one-year anniversary of the Closing Date.

On August 31, 2023, Upexi, 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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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