What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-09-24 compared with 2024-12-16 · 131 added, 160 removed, 97 unchanged (75% of the section changed)

6 unchanged sentences

See also “Cautionary Note Regarding Forward-Looking Statements” above.

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

The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

For the year ended June 30, 2024, the consolidated financial statements of Upexi, Inc.

include all of the subsidiary accounts included in the consolidated financial statements for the year ended June 30, 2023, and include the subsidiaries in which the Company holds a controlling financial interest as of June 30, 2024 and 2023.

Infusionz LLC, a Colorado limited liability company, along with select CBD asset;

Interactive Offers, LLC a Delaware limited liability corporation;

VitaMedica, a Nevada corporation;

and E-Core Technology, Inc.

d/b/a New England Technology, Inc.

have been classified as discontinued operations for the years ended June 30, 2024 and 2023, respectively and the assets and liabilities have been classified as current assets, and liabilities of discontinued operations and assets held for sale on the balance sheets for June 30, 2024 and 2023.

All intercompany accounts and transactions have been eliminated as a result of the consolidation.

We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens.

We continue to be a brand owner specializing in the development, manufacturing, and distribution of consumer products.

Our Solana Treasury Strategy

Early in 2025, we updated and modified our cash management and treasury strategy to include holding digital currency assets directly on our balance sheet.

This was a shift from before when we held excess cash primarily in FDIC-insured interest-bearing accounts.

The change to adopt this strategy results from our intention to obtain the highest yield on excess cash.

Under our new approach, our treasury policy focuses primarily on Solana (“SOL”).

The approach involves applying a public-market treasury model to an asset that is considered earlier in its lifecycle than, with respect to both development and usage, as well as institutional adoption, Bitcoin.

Management will focus its resources to this digital asset strategy and a significant portion of the balance sheet will be allocated to holding Solana in the Company’s digital asset treasury.

Key Factors Affecting Operating Results

9 unchanged sentences

$ (11,174,316 )

Cost of revenue

Digital asset revenue

Product costs

$ (8,232,768 )

Sales and marketing expenses

Distribution costs

$ (3,919,738 )

Sales and marketing expenses

$ (1,988,633 )

General and administrative expenses

Unrealized and realized (gain) loss on digital assets

Other operating expenses

3 unchanged sentences

$ (3,141,166 )

Loss attributable to non-controlling interest

Impairment of intangible assets and goodwill

Lease impairment

(Loss) on the sale of assets and businesses

Discontinued operations

$ (7,869,425 )

Lease (gain on sale) impairment

(Gain) on the sale of assets and businesses

Income from discontinued operations

$ (1,164,184 )

2 unchanged sentences

$ (23,658,438 )

$ (6,728,149 )

Revenues decreased by $11,174,316, or 43%, for the fiscal year ended June 30, 2025, compared with the fiscal year ended June 30, 2024.

The product sales were down approximately $15,400,000 or 42% compared to the prior year, with the most significant decline being the sales of products through third party sales channels, such as Amazon, with the largest decline coming from the products where we do not own the brand.

The decline in sales was partially offset by approximately $5,000,000 in manufacturing sales.

Management has augmented the overall strategy of the Company to focus on product sales, including the development, production and distribution of branded products.

In addition, sales were affected by the manufacturing consolidation to Florida, which was completed by August 1, 2024, with manufacturing returning to full production.

Cost of revenue decreased by $2,245,642 or 15% compared with the fiscal year ended June 30, 2023.

The gross profit decreased by $8,195,401 or 39% compared with the prior year and gross margin declined by 8.36% to 49.32% compared to 57.68%.

The majority of the decline in gross profit was the $10,441,043 decrease in year over year sales, however the gross margin decline was primarily related to the $3,020,062 inventory write off and increase in the inventory reserves compared to only $92,378 expense in the year ended June 30, 2023.

This additional $2,927,684, non-cash expense recognized during the year ended June 30, 2024, reduced the gross margin by 11.26%.

The inventory write off was caused by both the strategic consolidation of operations to Florida and the change in overall strategy with the elimination of the recommerce strategy.

Management expects the gross margin to improve with the change in strategic focus and the completed consolidation of operations.

Sales and marketing expenses decreased by $77,665 or 1% compared with the same period last year.

The expenditures for both years was similar in total.

We anticipate our advertising expenses will remain consistent with an overall decrease in sales and marketing as a percentage of total sales as we have impended our overall brand marketing strategy and we will be able to increase sales significantly without large increases in the expenses.

Distribution costs decreased $853,447 or 9% compared with the same period last year.

The decrease was related to the decreased sales and the consolidation of facilities.

Management has implemented a strategy to change promotions, increase shipping prices and adjust packaging for whole sales verses direct to consumer shipments to lower the overall percentage of distribution costs to sales.

The consolidation strategy and other distribution cost reduction strategies are expected to be fully realized in the coming year.

General and administrative expenses decreased by $103,638 or 2% compared with the same period last year.

General and administrative expenses were similar to the prior year.

Since the consolidation to Florida and other changes in the business, management has actively been reducing general and administrative costs.

Management expects that general and administrative expenses will decline for the period July 1, 2024 to September 30, 2024, with the most significant declines being realized in periods ending after December 31, 2024.

Other operating expenses decreased by $2,297,657 or 32% compared with the same period last year.

The Company divested from the recommerce business to focus primarily on brands that are owned or products that the Company produces as white label products for the brand owner.

The elimination of the recommerce business decreased sales by approximately $9,787,000, or 85%, of the decline in sales compared to the prior year.

The Company had revenue of approximately $985,000 from the newly implemented treasury strategy.

This digital asset treasury was established in May of 2025 and management expects the revenue generated from the treasury to significantly increase in fiscal year 2026.

Product costs decreased by $8,232,768, or 62%, compared with the fiscal year ended June 30, 2024.

The two primary reasons for the decrease in products costs were the overall lower sales and the elimination of the lower margin recommerce business.

In addition, in the prior year there were significant inventory write offs and other non-cash expenses in the product costs that decreased the overall gross profit compared to the current year’s gross profit.

Gross profit decreased by approximately $2,942,000, or approximately 22.9% compared with the prior year, excluding the increase in gross profit related to the $985,000 of digital asset revenue.

The profit margin increased to approximately 67% of revenue compared to 49% of revenue in the prior year, excluding the digital asset revenue.

Management’s focus in fiscal year 2026 is on improving the overall gross profit and the profit margin of the business and increasing the revenue from our digital asset treasury.

Sales and marketing expenses decreased by approximately $1,988,000, or 33%, compared with the same period last year.

We have decreased the number of fixed costs in our marketing budget and focused our advertising expenditures.

The percentage of sales and marketing to the total sales will increase based on our elimination of the recommerce business, however with the elimination of many fixed expenditures, the changes should align with the overall total sales.

Distribution costs decreased by approximately $3,920,000 or 46%, compared with the fiscal year ended June 30, 2024.

The strategic change and divesture of the two businesses in 2024, along with the consolidation of operations to Florida reduced the Amazon fees by approximately $2,668,000, reduced the facility expenses by approximately $255,000 and the labor costs by approximately $743,000.

The remaining product sales do not rely on the Amazon distribution network and are distributed from one facility in Florida.

General and administrative expenses increased by approximately $5,163,645, or 76%, compared with the same period last year.

Over 75% of the increase was related to these three factors:

1) approximately $2,668,000 of additional expense in corporate compensation;

2) approximately $576,000 in additional professional services fees, including legal, audit and tax services;

and 3) approximately $686,000 of additional public company expenses.

Our overall general and administrative expenses are expected to increase over the next year and then stabilize as we implement this overall treasury and business strategy.

Our continuous capital raising efforts and professional and public company expenses necessary to drive this strategy is significantly more than what the Company has required in the past.

Other operating expenses decreased by approximately $1,734,000, or 36%, compared with the same period last year.

These expenses are primarily non-cash expense for amortization of stock compensation, amortization of acquired intangible assets and depreciation.

The decrease in the amortization of stock compensation was $2,494,695 as older grants are fully amortized and there have only been limited grants in the past year.

This decline was offset by slightly higher depreciation expense during the year.

Other expense decreased by $1,534,994 or 33%, which related to the significant amount of interest expensed in the prior year when the Company entered into a letter of agreement to repay all amounts owed and terminate all security interests the lender held, including the Form S-3 registration statement.

The Company also had non-cash interest related to the amortization of the consideration discount of $1,112,676 and $969,098 for the years ended June 30, 2024, and June 30, 2023, respectively.

There was a loss of $559,967 attributable to non-controlling interest in 2023 compared to none in 2024 as the Company purchased the remaining non-controlling interest in the current year.

There was an impairment of intangible assets and goodwill of $7,869,425 in the year ended June 30, 2024.

$6,844,745 of the impairment was from the acquisition of Cygnet and related to the Company exiting the recommerce business.

The remaining $974,680 impairment was related to the LuckyTail acquisition and the significant decline in direct to consumer business as LuckyTail primarily sells through Amazon.

There was an impairment of intangible assets and goodwill of $3,746,301 in the year ended June 30, 2023, and related to the valuation of the Interactive Offers and the subsequent sale of the business.

The Company recognized an impairment $289,969 on the Delray Beach warehouse during 2024 as part of closing the warehouse and the Company exiting the recommerce business.

No such items for 2023.

The Company recognized a valuation allowance on its deferred tax asset of $6,100,000 during the year ended June 30, 2024.

This was done as management estimated the probable future usage of the Company’s net operating loss carry forward.

The loss on the sale of assets and businesses of $456,747 was related to a loss on the sale of E-Core of $1,737,326, the loss on the sale or abandonment of assets not necessary for operations at the new Florida facility and an impairment on the largo facility that was sold on July 8, 2024.

This loss was offset by a $1,948,538 gain on the sale of VitaMedica and a gain on the sale of Infusionz and CBD related assets, which was recorded as a $2,212,542 loss in the prior year.

The decrease in the amortization of acquired intangible assets was approximately $2,334,000 as approximately $7,869,000 was impaired in the prior year.

Depreciation expense declined by approximately $587,000.

These expenses were partially offset by approximately $1,187,000 of additional share-based compensation expense.

Our realized and unrealized gains was approximately $105,474 with none in the same period last year.

The price of Solana on June 30, 2025 was $154.74, as quoted on coinmarketcap.com and is the approximate cost basis of our Solana treasury at June 30, 2025.

Other expense decreased by approximately $1,957,000 or 63%, as compared with the same period last year, which primarily relates to the continued decrease in interest expense from payoffs of debts.

The Company recognized an impairment $289,969 on the Delray Beach warehouse during the year ended June 30, 2024 as part of closing the warehouse and the Company exiting the recommerce business.

This liability was settled in January of 2025 and resulted in a gain on the lease impairment of approximately $270,000.

In the prior year, the Company recognized a gain on the sale of assets and businesses of approximately $449,000.

This gain was from approximately $1,948,538 gain on the sale of VitaMedica, the gain of approximately $238,000 on the sale of Infusionz and CBD related assets, which recorded an approximate loss of $2,186,000 in the prior year.

This gain was offset by the loss of approximately $1,737,326 on the sale of E-Core.

The income and loss on discontinued operations was as follows:

Interactive Offers

$ (1,729,636 )

$ (1,370,124 )

The Company had a net loss of $21,396,857 compared to a net loss of $16,930,289 in the prior year.

The increase in the net losses primarily related to the above-mentioned changes.

Liquidity and Capital Resources

The Company had a net loss of approximately $13,684,000 compared to a net loss of approximately $23,658,000 in the prior year.

The decrease in the net losses primarily related to the above-mentioned changes.

Liquidity, Capital Resources and Cash Requirements

Working Capital

9 unchanged sentences

$ (4,894,751 )

Cash flows provided by (used in) investing activities – continuing operations

Cash flows (used in) provided by financing activities – continuing operations

Cash flows (used in) provided by investing activities – continuing operations

(99,293,083 )

Cash flows provided by (used in) financing activities – continuing operations

Cash flows provided by operating activities – discontinued operations

1 unchanged sentence

Cash flows used by financing activities – discontinued operations

Net decrease in cash during the period

$ (3,830,877 )

Net increase (decrease) in cash during the period

$ (3,830,877 )

On June 30, 2024, the Company had cash of $661,415 or a decrease of $3,830,877 from June 30, 2023.

The decrease in cash was primarily the net loss from operations and the significant change in continuing operations with the recent sale of businesses and the change of the Company’s overall strategy.

The net cash used by continuing operating activities was $4,894,751 and offset by cash provided by discontinued operations of $4,793,374.

The loss of $23,658,438 was offset by the non-cash expenses of $3,948,084 depreciation and amortization, $7,869,425 impairment of goodwill and identifiable intangible assets, $1,112,676 amortization of stock compensation and $1,812,319 write of inventory.

The sale of business and the impairment recognized on the warehouse were minimal at a total of $112,448 used.

The change in deferred tax asset was $344,802 with a valuation reserve of $6,100,000.

The change in operating assets and liabilities provided cash of $2,907,978.

Cash provided by discontinued operating activities was $4,793,374 and primarily related to decreases in E-core’s inventory and accounts receivable.

Net cash provided by investing activities for the years ended June 30, 2024 and 2023 was $831,112 and use of $23,271, respectively.

For the year ended June 30, 2024, cash of $539,348 was used for the acquisition of the remaining 45% of Cygnet and $932,565 for the acquisition of property and equipment.

Cash was provided during the year ended June 30, 2024 of $2,100,000 and $203,025 from the sale of VitaMedica and Interactive offers, respectively.

In addition, the Company used $4,206,823 for discontinued investing activities related to the payments in the acquisition of E-core.

In the prior year, the net cash used was $23,271.

The proceeds from the sale of Infusionz and selected assets was $5,492,532 and offset by $3,528,239 and $1,050,000 for the purchase of LuckyTail and Cygnet, respectively.

$937,564 was used in the acquisition of property and equipment.

The $2,511,587 used in discontinued investing activities was $500,000 for the acquisition of VitaMedica and $2,051,587, net of cash acquired, for the acquisition of E-core.

Net cash flows used in financing activities for the year ended June 30, 2024 was $353,789 compared to $285,333 used during the year ended June 30, 2023.

During the year ended June 30, 2024 cash was used for the payment of debt related to the acquisition of Cygnet and the payment of the loan on the building.

This was offset during the year by a $100,000 advance to the Company by Allan Marshall, the CEO, which was repaid in July 2024.

During the year ended June 30, 2023, the Company had net proceeds of $6,127,893 from the issuance of stock and $7,120,000 in proceeds from the issuance of notes payable, including $1,470,000 of proceeds from a related party note payable, $3,000,000 of proceeds related to a note payable with a security interest in our building in Clearwater and $2,650,000 of unsecured debt.

The newly issued debt was primarily used to repay the senior convertible note payable and the line of credit.

On October 19, 2022, the Company and its indirect wholly owned subsidiary, Upexi 17129 Florida, LLC entered into a loan agreement 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 paid back 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, net of fees and other expenses.

On October 31, 2022, the “Company, paid $4,275,071 in principal, $613,466 in accrued interest, $250,000 for settlement of a put option and $7,900 in miscellaneous fees for a total of $5,146,437 to the holders of the $15 million senior secured convertible notes entered into on June 28, 2022.

The payment terminated the agreement with the noteholders.

The Company also terminated the registration statement covering the senior secured notes payable.

On June 30, 2025, the Company had cash of $2,975,150, or an increase of approximately $2,314,000, from June 30, 2024.

The increase in cash was due to significant capital raised during the period and offset by the net loss from operations and capital investments in Solana for the digital asset treasury.

The significant increase in working capital is a result of the liquid SOL held by the Company in its digital asset treasury.

The net cash used by continuing operating activities was approximately $8,423,000.

The net loss of approximately $13,684,000 was offset by the non-cash expenses of approximately $758,000 for depreciation and amortization, $2,357,000 for stock-based compensation and issuance of common stock for services rendered by consultants, and the write off of inventory and credit losses relating to Amazon of approximately $1,682,824.

The change in operating assets and liabilities provided cash of approximately $1,931,000.

The digital asset revenue and unrealized gains and losses from the digital asset treasury is non-cash as the value was from staking revenue paid in additional Solana and the increase in market value over the purchase price for the Solana held in the digital asset treasury.

Net cash used in investing activities for the years ended June 30, 2025 and 2024 was approximately $99,293,000 and use of $3,376,000, respectively.

The most significant use of cash in investing activities was the purchase of Solana for the Company’s digital asset treasury.

This was offset by the collection of the purchase price in the sale of E-core and the proceeds from the sale of the building.

Net cash flows provided by financing activities for the year ended June 30, 2025 was approximately $110,030,000 compared to approximately $354,000 used during the year ended June 30, 2024.

During the year ended June 30, 2025, the Company raised approximately $92,556,000 from the sale of the Company’s common stock and obtained a short-term loan of $20,000,000 that is collateralized by certain assets of the digital asset treasury.

This was offset by the payment of debt and other common stock issued for the exercise of warrants or the issuance of convertible debt that was subsequently converted into common stock.

On April 1, 2024, the Company entered into a lease agreement with MFA 2510 Merchant LLC.

2 unchanged sentences

The estimated cost of this facility is a reduction of overall facility costs of approximately $240,000 in rent and approximately $138,000 per year in utilities, repairs and maintenance.

Management also expects to have additional savings in labor and administrative costs, which is expected to add additional cash flow for fiscal year 2025.

On May 28, 2024, the Company entered into an agreement to sell its Clearwater warehouse for a sale price of $4,300,000.

On May 28, 2024, the Company entered into an agreement to sell its Clearwater, Florida warehouse for a sale price of $4,300,000.

The sale of the building was completed on July 8, 2024 and provided $1,370,978 of working capital.

2 unchanged sentences

One of the minority interest buyers is Allan Marshall, the Company’s Chief Executive Officers.

The purchase price for the stock was Six Million Dollars ($6,000,000), subject to certain customary post-closing adjustments.

The net cash provided from the sale was $2,100,000, reduced liabilities of $1,900,000 and will provide an additional $2,000,000 in cash flow next year.

The purchase price for the stock was $6,000,000, subject to certain customary post-closing adjustments.

The net cash provided from the sale was $2,100,000, reduced liabilities of $1,900,000, a loan for $1,000,000 and a final $1,000,000 payment subject to certain inventory and working capital adjustments.

On August 1, 2024, the Company sold all of outstanding stock of E-Core Technology, Inc., a Florida corporation (d/b/a New England Technology, Inc.) (“E-core”), to E-Core Holdings, LLC, a Florida limited liability company pursuant to the terms of an Agreement to Unwind Securities Purchase Agreement dated July 31, 2024 and effective June 30, 2024.

1 unchanged sentence

The purchase price in the transaction was $2,000,000 paid by the Buyer to the Company at closing and will be used for working capital.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

Management intends to finance operating costs over the next twelve months from the date of the issuance of these consolidated financial statements with existing cash on hand, cash flow from operations, proceeds from the sale of VitaMedica not yet received and additional short term debt financings, if necessary.

We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these condensed consolidated financial statements and meet all our debt obligations.

On March 7, 2025 the Company closed on $350,000 of convertible debt with a term of two years and an interest rate of 3%.

The debt was convertible into 116,118 shares of the Company’s common stock or $3.00 per share and was converted in June of 2025.

The convertible debt included warrants to purchase up to 116,118 shares of the Company’s common stock at a per share price of $3.00 per common share or for $350,000.

Warrants for $250,000 or 83,334 shares of common stock were exercised.

The Company received approximately $600,000 during the year related to the convertible debt and the exercised warrants.

On April 24, 2025 the Company closed on a private placement offering to sell 35,970,383 shares of the Company’s common stock at an offering price of $2.28 per share and pre-funded warrants to purchase 7,889,266 shares of common stock at an offering price of $2.279 per share of the Company’s common stock that may be exercised at a per share price of $0.0001.

The Company received approximately $92,556,000, net of broker fees, legal fees and other expenses incurred for the private placement.

Since June 30, 2025, all of the pre-funded warrants have been exercised and the 7,889,266 shares of common stock issued.

On May 23, 2023, The Company entered into a credit facility with BitGo Prime, LLC (“BitGo”).

Pursuant to a Master Loan Agreement (the “Agreement”) the Company may borrow up to $20,000,000 of Digital Currency or United States Dollars with interest at the rate of 11.5% per year.

The term of the credit facility is for one year and is renewable for successive one year options.

Each individual loan under the facility is negotiable as to the amount, term prepayment or recall (payment demand).

The loans shall be collateralized by the Company’s treasury assets, already held at BitGo, the initial availability is based on 260% collateral level and a margin call level of 175%.

There are no requirements or fees for non-use of the credit facility and the facility can be increased in the future based on the value of the assets BitGo is the custodian of for the Company.

At June 30,2025, the outstanding balance of the credit facility was $20,000,000.

Subsequent to June 30, 2025 the credit facility increased to $50,000,000.

The $50,000,000 credit facility is outstanding as of the date of this report and was used for the purchase of Solana.

Liquidity of SOL Management

The Company purchases Locked Solana that cannot be purchased or sold on the normal market exchanges and is purchased and sold through negotiations directly with the owner of the Locked Solana or their agent.

The Locked Solana is unlocked through a schedule that will continue through January of 2028 and once unlocked is the same as any other liquid Solana in the Company’s treasury.

Since this Locked Solana could create significant delays if the Company needed liquidity, management monitors the overall percentage of the digital assets that are locked or do not have the normal liquidity as other digital assets.

The Company has 421,451 tokens that are considered locked at June 30, 2025.

The following table summarizes the unlocking schedule of Solana tokens currently locked as of June 30, 2025, valued at $133.07 or a 14% discount to the closing price of $154.74:

June 30, 2026

June 30, 2027

June 30, 2028

The Company’s Staking Program involves the temporary loss of the ability to transfer, assign a new validator or otherwise dispose of the SOL.

Under normal conditions, the Company will regain complete control over its unstaked SOL within two days of initiating the unstaking.

However, there can be no guarantee that such process will result in the Company regaining complete control of its SOL in time to satisfy its current obligations.

We maintain a certain amount of liquid SOL in the treasury and a certain amount of cash to ensure that the Company is able to satisfy its current obligations.

Subsequent to June 30, 2025

On July 11, 2025 the Company closed on a private placement offering to sell 12,457,186 shares of the Company’s common stock at an offering price of $4.00 per share.

The Company received approximately $37,077,000, net of broker fees, the fees on the convertible debt offering completed on July 16, 2025, legal fees, filing fees and other expenses incurred for the private placement.

We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these consolidated financial statements and meet all of our debt obligations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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

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

The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed by the Company to the seller’s cash consideration and equity instruments issued.

Transaction costs directly attributable to the acquisition are expensed as incurred.

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

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

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

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, 2024 and 2023, respectively.

It was determined by management that the goodwill related to Cygnet was completely impaired at June 30, 2024 based on the strategic decision to exit the recommerce business.

An impairment of goodwill in the amount of $3,594,745 was recorded at June 30, 2024 eliminating all of the goodwill related to Cygnet.

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.

Critical Accounting Policies and Estimates

Preparation of financial statements requires the application of accounting policies, judgments, assumptions and estimates that can significantly affect the reported results of operations, cash flows or the amounts of assets and liabilities recognized in the financial statements.

Judgments made include those related to accounting for revenue recognition and realizability of deferred tax assets.

Management discusses these policies, estimates and assumptions with senior members of management on a regular basis and provides periodic updates on management decisions to the Audit Committee.

Management believes the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods.

For further information, see Note 2 to the Consolidated Financial Statements, “Significant Accounting Policies.”

Revenue Recognition - In accordance with ASC No.

15 unchanged sentences

The Company accrues an allowance for refunds, returned deposits and discounts given by customer services post shipment of the product based on historical experience and management’s estimate of future expenses, including replacement, freight charges and other fulfilment expenses.

Conditions of Acceptance:

Sales of our consumable products and pet products, generally do not have customer acceptance terms.

Contract Assets

A contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer.

ASC 606, Revenue from Contracts with Customers, distinguishes between a contract asset and a receivable based on whether receipt of the consideration is conditional on something other than the passage of time.

When the Company transfers control of goods or services to a customer before the customer pays consideration, the Company records either a contract asset or a receivable depending on the nature of the Company’s right to consideration for its performance.

The point at which a contract asset becomes an account receivable may be earlier than the point at which an invoice is issued.

The Company assesses a contract asset for impairment in accordance with ASC 310, Receivables.

The following table discloses the deferred revenue:

Deferred revenue

The deferred revenue or also referred to as funded backlog was $235,255 and $0 at June 30,2024 and June 30, 2023, respectively.

We expect to recognize approximately 100% of the deferred revenue as revenue in the year ended June 30, 2025.

There was no opening liability balance at June 30, 2023 or June 30, 2022 to be recognized in the years ended June 30, 2024 or June 30, 2023, respectively.

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.

The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment.

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 recognized an impairment on its building of $336,434 during the year ended June 30, 2024, based on the fair market value of the buildings pending sale, completed on July 8, 2024.

The Company recognized $569,195 loss on the sale of assets that were either liquidated or abandoned in the move of its manufacturing facility from Nevada to Florida.

In addition, the Company recognized an impairment of intangible assets of $4,274,680 for the year ended June 30, 2024.

$974,680 of the impairment is related to LuckyTail’s rapid decline of direct-to-consumer sales and $3,300,000 of the impairment is related to the unamortized vendor list of Cygnet, as the Company no longer purchases products from the majority of the original vendors Cygnet was using when the Company purchased Cygnet.

The Company recognized an impairment on its long-lived assets during the year ended June 30, 2023, of $857,143 on the assets held for sale, related to Interactive Offers, leaving $716,944 of Interactive’s original intangible assets classified as assets available for sale.

Stock Based Compensation - The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the consolidated financial statements based on their fair values.

That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period) or immediately if the share-based payments vest immediately.

Inventory - The Company reviews the inventory level of all products and raw materials quarterly.

For most products that have been in the market for one year or more, we consider inventory levels of greater than one year’s sales to be excess or other items that show slower than projected sales.

Due to limited market penetration for our products, we have decided to write down 50% of the cost against certain raw materials and finished products.

Products that are no longer part of the current product offering are considered obsolete.

The potential for re-sale of slow-moving and obsolete inventories is based upon our assumptions about future demand and market conditions.

The recorded cost of obsolete inventories is then reduced to zero and the slow-moving and obsolete inventory is written off and are recorded as charges to cost of goods sold.

All adjustments for obsolete inventory establish a new cost basis for that inventory as we believe such reductions are permanent declines in the market price of our products.

Generally, obsolete inventory is sold to companies that specialize in liquidation, while we continue to market slow-moving inventories until they are sold or become obsolete.

As obsolete or slow-moving inventory is sold or disposed of, we write it off.

Inventory consists of raw materials 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.

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

On June 30, 2024, the Company had $465,535 of raw materials and $966,021 of finished goods inventory.

On June 30, 2023, the Company had no raw material inventory and $4,804,299 of finished goods inventory.

The Company had inventory reserves at June 30, 2024 and 2023 of $605,470 and $154,400, respectively.

Staking Revenue:

The recognition of staking revenue from delegated digital assets represents a critical accounting estimate due to the complexity and evolving nature of blockchain protocols and regulatory guidance.

As a delegator, the Company earns staking rewards by participating in proof-of-stake networks through third-party validators, without directly operating the nodes.

Revenue is recognized when control of the staking rewards is obtained, typically upon receipt into the Company’s wallet, and measured at fair value using quoted market prices at the time of receipt.

Management must assess the reliability of validator performance, the timing and frequency of reward distributions, and potential slashing risks that could impact future earnings.

Additionally, the Company evaluates whether staking rewards meet the criteria for revenue recognition under applicable accounting standards, including considerations of principal versus agent relationships.

Changes in protocol rules, validator reliability, or regulatory developments may materially affect the timing and amount of staking revenue recognized.

Income taxes - The assessment of the realizability of deferred tax assets is a critical accounting estimate that requires significant judgment and evaluation of both positive and negative evidence.

Deferred tax assets arise primarily from temporary differences, net operating losses, and tax credit carryforwards, and their recoverability depends on the Company’s ability to generate sufficient future taxable income.

Management must consider all available information, including historical earnings, projected future income, tax planning strategies, and the expiration dates of carryforwards.

If it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is recorded to reduce the asset to the amount expected to be recoverable.

Changes in assumptions or actual results that differ from expectations may result in significant adjustments to the valuation allowance and income tax expense.

Recent Accounting Pronouncements

Refer to Note 2 – Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of this date of this Annual Report on Form 10-K.

Reverse Stock Split

13 unchanged sentences

Unless otherwise indicated, all issued and outstanding shares of common stock and all outstanding securities entitling their holders to purchase shares of our common stock or acquire shares of our common stock, including stock options, restricted stock units, and warrants per share data, share prices and exercise prices, as required by the terms of those securities, have been adjusted retroactively to reflect the Reverse Stock Split.

On October 17, 2024, Company received written notice (the “Compliance Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Stock Market maintain a minimum bid price of $1.00 per share.

On October 17, 2024, Company received written notice (the “Compliance Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it had regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Stock Market maintain a minimum bid price of $1.00 per share.

Nasdaq notified the Company in the Compliance Notice that, from October 3, 2024 to October 16, 2024, the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.

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 7. Management’s Discussion and Analysis