Note 1. Background Information
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Upexi is a multi-faceted brand owner with established brands in the health, wellness, pet, beauty and other growing markets. We operate in emerging industries with high growth trends and look to drive organic growth of our current brands. We focus on direct to consumer and Amazon brands that are scalable and have anticipated, high industry growth trends. Our goal is to continue to accumulate consumer data and build out a significant customer database across all industries we sell into. The growth of our current customer database has been key to the year over year gains in sales and profits. To drive additional growth, we have and will continue to acquire profitable Amazon and eCommerce businesses that can scale quickly and reduce costs through corporate synergies. We utilize our in-house, SaaS programmatic ad technology to help achieve a lower cost per acquisition and accumulate consumer data for increased cross-selling between our growing portfolio of brands.
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The Company primarily conducts its business operations through the following subsidiaries:
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\u00a0 | \u00b7 | HAVZ, LLC, d/b/a/ Steam Wholesale, a California limited liability company |
\u00a0 | o | SWCH, LLC, a Delaware limited liability company |
\u00a0 | o | Cresco Management, LLC, a California limited liability company |
\u00a0 | \u00b7 | Trunano Labs, Inc., a Nevada corporation |
\u00a0 | \u00b7 | Infusionz, Inc., a Nevada corporation |
\u00a0 | \u00b7 | Upexi Holding, LLC, a Delaware limited liability company |
\u00a0 | o | Upexi Pet Products, LLC, a Delaware limited liability company |
\u00a0 | \u00b7 | Infusionz LLC (\u201cInfusionz\u201d), a Colorado limited liability company |
\u00a0 | \u00b7 | Grove Acquisition Subsidiary, Inc. (\u201cVitaMedica\u201d), a Nevada corporation |
\u00a0 | \u00b7 | Upexi Enterprise, LLC, a Delaware limited liability company |
\u00a0 | o | Upexi Property & Assets, LLC, a Delaware limited liability company |
\u00a0 | \u25a0 | Upexi 17129 Florida, LLC, a Delaware limited liability company |
\u00a0 | \u00b7 | Interactive Offers, LLC (\u201cInteractive\u201d), a Delaware limited liability company |
\u00a0 | \u00b7 | Cygnet Online, LLC (\u201cCygnet\u201d), a Delaware limited liability company, 55% owned |
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We operate throughout our locations in the USA with operations in Florida, California, Nevada, Colorado through our various Brands and entities.
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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.
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VitaMedica operates mainly from our California location with product development, fulfillment and day to day operations from that location
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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.
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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.
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Lucky Tail operates from our Clearwater, Florida location with sales and marketing driven by on-site and remote teams that operate the Amazon sales strategy and daily business operations
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HAVZ, LLC, d/b/a/ Steam Wholesale operates manufacturing and/or distribution centers in Henderson, Nevada supporting our health and wellness products, including those products manufactured with hemp ingredients and our overall distribution operations. We have continued to manage these operations with corporate focus on larger opportunities that have warranted the majority of corporate focus and investments for the future.
Consolidations
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On July 1, 2020, the noncontrolling shareholders of the Company\u2019s 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.
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Business Acquisitions
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On July 1, 2020, the Company entered into an Agreement and Plan of Merger with Infusionz LLC (the \u201cInfusionz Agreement\u201d) with the members of Infusionz LLC (the \u201cSellers\u201d). 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 (\u201cInfusionz\u201d).
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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.
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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.
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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.\u00a0\u00a0
Basis of Presentation and Principles of Consolidation
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The Company\u2019s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (\u201cGAAP\u201d). 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.
"}]},{"name":"rpt:f-422","factDimensions":{"xbrl:concept":"upxi:DescriptionOfConversionOfShares","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","srt:TitleOfIndividualAxis":"upxi:TrunanoLabsIncMember"},"factValues":[{"value":"the noncontrolling shareholders of the Company\u2019s 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"}]},{"name":"rpt:f-423","factDimensions":{"xbrl:concept":"us-gaap:VariableInterestEntityOwnershipPercentage","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","srt:ConsolidatedEntitiesAxis":"us-gaap:AnnualMembershipFeesMember"},"factValues":[{"value":"1"}]},{"name":"rpt:f-424","factDimensions":{"xbrl:concept":"upxi:AgreementDescription","xbrl:period":"2022-03-28T00:00:00/2022-04-02T00:00:00","xbrl:entity":"cik:0001775194","us-gaap:TypeOfArrangementAxis":"upxi:SecuritiesPurchaseAgreementMember"},"factValues":[{"value":"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."}]},{"name":"rpt:f-425","factDimensions":{"xbrl:concept":"us-gaap:SignificantAccountingPoliciesTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Note 2. Significant Accounting Policies
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The significant accounting policies followed are:
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Use of Estimates\u00a0-\u00a0The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Significant estimates underlying the Company\u2019s 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.
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Cash and Cash Equivalents\u00a0-\u00a0The Company considers all highly liquid investment instruments with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances.
Accounts Receivable\u00a0-\u00a0The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Company\u2019s 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\u2019s review of accounts receivable, the Company recorded $57,500 and $45,000 as allowance for doubtful accounts at June 30, 2022 and 2021, 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.
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Inventory\u00a0-\u00a0Inventory 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. Net realizable value is determined, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors.
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Property and Equipment\u00a0-\u00a0Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Gains and losses upon disposition are reflected in the Statements of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. The Company disposed of some equipment during 2022 and 2021 which resulted in gains on the sales as shown in the accompanying Statements of Operations.
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Business Combinations\u00a0- 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\u2019s 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.
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Goodwill - The Company evaluates its goodwill for possible impairment, simplifying the test for goodwill Impairment at least annually and\u00a0when 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\u2019s fair value, not to exceed the carrying value of goodwill.
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The Company performed its annual test as of June 30, 2022. No impairment charge was identified in connection with the annual goodwill impairment test
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Impairment of Long-lived Assets\u00a0-\u00a0Long-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 did not recognize impairment on its long-lived assets during the years ended June 30, 2022 or 2021.
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Revenue Recognition\u00a0-\u00a0The Company analyzes its contracts and purchase orders to assess that revenue is properly recognized. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; 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. Generally, the Company recognizes revenue for its products when ownership is transferred to the customer, provided no significant obligations remain and collection is probable.
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Product Revenue\u00a0-\u00a0Most of the Company\u2019s revenue contracts are from domestic sales and represent a single performance obligation related to the fulfillment of customer orders for the purchase of its products. Net sales reflect the transaction prices for these contracts based on the Company\u2019s selling list price, which is then reduced by estimated costs for trade promotional programs, consumer incentives, and allowances and discounts used to incentivize sales growth and build brand awareness.
The Company recognizes revenue at the point in time that control of the ordered product is transferred to the customer, which is upon shipment to the customer or other customer-designated delivery point. Taxes collected from customers that are remitted to governmental agencies are accounted for on a net basis and not included as revenue.
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The Company does not accept sales returns from wholesale customers, as the products are pre-approved prior to production and shipment. 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 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, 2021 was recognized as revenue in the year ended June 30, 2022.
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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.
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Loyalty Program\u00a0- 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.
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Advertising\u00a0-\u00a0The Company supports its products with advertising to build brand awareness of the Company\u2019s various products in addition to other marketing programs executed by the Company\u2019s marketing team. The Company believes the continual investment in advertising is critical to the development and sale of its branded products. Advertising costs of $3,225,256 and $771,546 were expensed as incurred during the years ended June 30, 2022 and 2021, respectively.
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Stock Based Compensation\u00a0- The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the 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.
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Non-employee Stock-based Payments\u00a0-\u00a0The Company\u2019s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 2018-07, which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor\u2019s own operations by issuing share-based payment awards. Stock-based payments related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor\u2019s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
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Fair Value Measurements\u00a0- The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 \u201cFair value Measurement and Disclosures\u201d (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity\u2019s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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\u00a0 | \u00b7 | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
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\u00a0 | \u00b7 | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
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\u00a0 | \u00b7 | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
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The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue and debt are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
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Leases\u00a0-\u00a0The Company determines if a contract contains a lease at inception. GAAP requires that the Company\u2019s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option will result in an economic penalty. All of the Company\u2019s real estate leases are classified as operating leases.
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Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional two years. The exercise of lease renewal options is at the Company\u2019s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.
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The Company\u2019s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment.
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Income Taxes\u00a0-\u00a0Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
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The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
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The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, \u201cIncome Taxes.\u201d Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity\u2019s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.\u00a0
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ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise\u2019s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There are no material uncertain tax positions at June 30, 2021.
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On December 22, 2017, the U.S. government enacted the Tax Act, which made significant changes to the Internal Revenue Code of 1986, as amended, including, but not limited to, reducing the U.S. corporate statutory tax rate and the net operating loss incurred after December 31, 2017 can be carried forward indefinitely and the two year net operating loss carried back was eliminated (prohibited).
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Earnings (loss) per Share\u00a0- Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and upon the conversion of notes. For the year ended, the dilutive common shares are as follows:
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\u00a0 | \u00a0 | June 30, | \u00a0 | \u00a0 | June 30, | \u00a0 | ||
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Stock options | \u00a0 | \u00a0 | 4,279,888 | \u00a0 | \u00a0 | \u00a0 | 1,697,889 | \u00a0 |
Warrants | \u00a0 | \u00a0 | 106,850 | \u00a0 | \u00a0 | \u00a0 | 129,667 | \u00a0 |
Preferred stock | \u00a0 | \u00a0 | 277,778 | \u00a0 | \u00a0 | \u00a0 | 277,778 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Total potential dilutive weighted average shares outstanding | \u00a0 | \u00a0 | 4,414,516 | \u00a0 | \u00a0 | \u00a0 | 2,105,334 | \u00a0 |
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The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company\u2019s 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.
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The following table shows the computation of basic and diluted earnings per share for the year ended:
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\u00a0 | \u00a0 | June 30, | \u00a0 | |
\u00a0 | \u00a0 | 2021 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Numerator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Net income attributable to Upexi, Inc. | \u00a0 | \u00a0$ | \u00a02,928,948 | \u00a0 |
Denominator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Weighted-average basic shares outstanding | \u00a0 | \u00a0 | \u00a011,930,378 | \u00a0 |
Effect of dilutive securities | \u00a0 | \u00a0 | 2,327,556 | \u00a0 |
Fully diluted weighted average shares outstanding | \u00a0 | \u00a0 | 14,257,556 | \u00a0 |
Basic earnings per share | \u00a0 | \u00a0$ | \u00a00.25 | \u00a0 |
Diluted earnings per share | \u00a0 | \u00a0$ | \u00a00.21 | \u00a0 |
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Deferred Revenue\u00a0-\u00a0The Company records deposits as deferred revenue when a customer pays in advance of shipping the product. Once the product is shipped, the deposit is recorded as revenue and the related commissions are paid. All products were shipped related to deposits in deferred revenue, in less than one year.
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Convertible Debt and Securities - The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option\u2019s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.
Non-controlling Interests in Consolidated Financial Statements\u00a0-\u00a0In December 2007, the FASB issued ASC 810-10-65, \u201cNon-controlling Interests in consolidated Financial Statements\u201d. This ASC clarifies that a non-controlling (minority) interest in subsidiaries is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary\u2019s equity. 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.
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Recent Accounting Pronouncements\u00a0-\u00a0There are new accounting pronouncements issued by the Financial Accounting Standards Board (\u201cFASB\u201d) which are not yet effective as follows:
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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\u2019s 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.
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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\u2019s present or future unaudited consolidated financial statements.
"}]},{"name":"rpt:f-426","factDimensions":{"xbrl:concept":"us-gaap:UseOfEstimates","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Use of Estimates\u00a0-\u00a0The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Significant estimates underlying the Company\u2019s 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.
"}]},{"name":"rpt:f-427","factDimensions":{"xbrl:concept":"us-gaap:CashAndCashEquivalentsPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Cash and Cash Equivalents\u00a0-\u00a0The Company considers all highly liquid investment instruments with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances.
"}]},{"name":"rpt:f-428","factDimensions":{"xbrl:concept":"us-gaap:TradeAndOtherAccountsReceivablePolicy","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Accounts Receivable\u00a0-\u00a0The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Company\u2019s 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\u2019s review of accounts receivable, the Company recorded $57,500 and $45,000 as allowance for doubtful accounts at June 30, 2022 and 2021, 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.
"}]},{"name":"rpt:f-429","factDimensions":{"xbrl:concept":"us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent","xbrl:period":"2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"57500","decimals":0}]},{"name":"rpt:f-430","factDimensions":{"xbrl:concept":"us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent","xbrl:period":"2021-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"45000","decimals":0}]},{"name":"rpt:f-431","factDimensions":{"xbrl:concept":"upxi:BadDebtExpense","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"131968","decimals":0}]},{"name":"rpt:f-432","factDimensions":{"xbrl:concept":"upxi:BadDebtExpense","xbrl:period":"2020-07-01T00:00:00/2021-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"78185","decimals":0}]},{"name":"rpt:f-433","factDimensions":{"xbrl:concept":"us-gaap:AccountsReceivableNet","xbrl:period":"2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"131968","decimals":0}]},{"name":"rpt:f-434","factDimensions":{"xbrl:concept":"us-gaap:AccountsReceivableNet","xbrl:period":"2021-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"45185","decimals":0}]},{"name":"rpt:f-435","factDimensions":{"xbrl:concept":"us-gaap:InventoryPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Inventory\u00a0-\u00a0Inventory 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. Net realizable value is determined, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors.
"}]},{"name":"rpt:f-436","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Property and Equipment\u00a0-\u00a0Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Gains and losses upon disposition are reflected in the Statements of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. The Company disposed of some equipment during 2022 and 2021 which resulted in gains on the sales as shown in the accompanying Statements of Operations.
"}]},{"name":"rpt:f-437","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentUsefulLife","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","srt:RangeAxis":"srt:MinimumMember"},"factValues":[{"value":"P3Y"}]},{"name":"rpt:f-438","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentUsefulLife","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","srt:RangeAxis":"srt:MaximumMember"},"factValues":[{"value":"P20Y"}]},{"name":"rpt:f-439","factDimensions":{"xbrl:concept":"upxi:LeaseTerm1","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"P5Y"}]},{"name":"rpt:f-440","factDimensions":{"xbrl:concept":"us-gaap:BusinessCombinationsAndOtherPurchaseOfBusinessTransactionsPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Business Combinations\u00a0- 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\u2019s 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.
"}]},{"name":"rpt:f-441","factDimensions":{"xbrl:concept":"us-gaap:GoodwillAndIntangibleAssetsGoodwillPolicy","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Goodwill - The Company evaluates its goodwill for possible impairment, simplifying the test for goodwill Impairment at least annually and\u00a0when 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\u2019s fair value, not to exceed the carrying value of goodwill.
\u00a0
The Company performed its annual test as of June 30, 2022. No impairment charge was identified in connection with the annual goodwill impairment test
"}]},{"name":"rpt:f-442","factDimensions":{"xbrl:concept":"us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Impairment of Long-lived Assets\u00a0-\u00a0Long-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 did not recognize impairment on its long-lived assets during the years ended June 30, 2022 or 2021.
"}]},{"name":"rpt:f-443","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Revenue Recognition\u00a0-\u00a0The Company analyzes its contracts and purchase orders to assess that revenue is properly recognized. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; 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. Generally, the Company recognizes revenue for its products when ownership is transferred to the customer, provided no significant obligations remain and collection is probable.
"}]},{"name":"rpt:f-444","factDimensions":{"xbrl:concept":"upxi:ProductRevenuePolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Product Revenue\u00a0-\u00a0Most of the Company\u2019s revenue contracts are from domestic sales and represent a single performance obligation related to the fulfillment of customer orders for the purchase of its products. Net sales reflect the transaction prices for these contracts based on the Company\u2019s selling list price, which is then reduced by estimated costs for trade promotional programs, consumer incentives, and allowances and discounts used to incentivize sales growth and build brand awareness.
The Company recognizes revenue at the point in time that control of the ordered product is transferred to the customer, which is upon shipment to the customer or other customer-designated delivery point. Taxes collected from customers that are remitted to governmental agencies are accounted for on a net basis and not included as revenue.
\u00a0
The Company does not accept sales returns from wholesale customers, as the products are pre-approved prior to production and shipment. 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 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, 2021 was recognized as revenue in the year ended June 30, 2022.
\u00a0
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.
"}]},{"name":"rpt:f-445","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionLoyaltyPrograms","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Loyalty Program\u00a0- 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.
"}]},{"name":"rpt:f-446","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingCostsPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Advertising\u00a0-\u00a0The Company supports its products with advertising to build brand awareness of the Company\u2019s various products in addition to other marketing programs executed by the Company\u2019s marketing team. The Company believes the continual investment in advertising is critical to the development and sale of its branded products. Advertising costs of $3,225,256 and $771,546 were expensed as incurred during the years ended June 30, 2022 and 2021, respectively.
"}]},{"name":"rpt:f-447","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingExpense","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"3225256","decimals":0}]},{"name":"rpt:f-448","factDimensions":{"xbrl:concept":"us-gaap:AdvertisingExpense","xbrl:period":"2020-07-01T00:00:00/2021-07-01T00:00:00","xbrl:entity":"cik:0001775194","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"771546","decimals":0}]},{"name":"rpt:f-449","factDimensions":{"xbrl:concept":"us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Stock Based Compensation\u00a0- The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the 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.
"}]},{"name":"rpt:f-450","factDimensions":{"xbrl:concept":"us-gaap:CompensationRelatedCostsPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Non-employee Stock-based Payments\u00a0-\u00a0The Company\u2019s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 2018-07, which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor\u2019s own operations by issuing share-based payment awards. Stock-based payments related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor\u2019s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
"}]},{"name":"rpt:f-451","factDimensions":{"xbrl:concept":"us-gaap:FairValueMeasurementPolicyPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Fair Value Measurements\u00a0- The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 \u201cFair value Measurement and Disclosures\u201d (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity\u2019s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
\u00a0
\u00a0 | \u00b7 | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
\u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00b7 | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
\u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00b7 | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
\u00a0
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue and debt are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
"}]},{"name":"rpt:f-452","factDimensions":{"xbrl:concept":"us-gaap:LesseeLeasesPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Leases\u00a0-\u00a0The Company determines if a contract contains a lease at inception. GAAP requires that the Company\u2019s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option will result in an economic penalty. All of the Company\u2019s real estate leases are classified as operating leases.
\u00a0
Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional two years. The exercise of lease renewal options is at the Company\u2019s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.
\u00a0
The Company\u2019s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment.
"}]},{"name":"rpt:f-453","factDimensions":{"xbrl:concept":"us-gaap:IncomeTaxPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Income Taxes\u00a0-\u00a0Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
\u00a0
The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
\u00a0
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, \u201cIncome Taxes.\u201d Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity\u2019s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.\u00a0
\u00a0
ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise\u2019s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There are no material uncertain tax positions at June 30, 2021.
\u00a0
On December 22, 2017, the U.S. government enacted the Tax Act, which made significant changes to the Internal Revenue Code of 1986, as amended, including, but not limited to, reducing the U.S. corporate statutory tax rate and the net operating loss incurred after December 31, 2017 can be carried forward indefinitely and the two year net operating loss carried back was eliminated (prohibited).
"}]},{"name":"rpt:f-454","factDimensions":{"xbrl:concept":"us-gaap:EarningsPerSharePolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Earnings (loss) per Share\u00a0- Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and upon the conversion of notes. For the year ended, the dilutive common shares are as follows:
\u00a0
\u00a0 | \u00a0 | June 30, | \u00a0 | \u00a0 | June 30, | \u00a0 | ||
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Stock options | \u00a0 | \u00a0 | 4,279,888 | \u00a0 | \u00a0 | \u00a0 | 1,697,889 | \u00a0 |
Warrants | \u00a0 | \u00a0 | 106,850 | \u00a0 | \u00a0 | \u00a0 | 129,667 | \u00a0 |
Preferred stock | \u00a0 | \u00a0 | 277,778 | \u00a0 | \u00a0 | \u00a0 | 277,778 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Total potential dilutive weighted average shares outstanding | \u00a0 | \u00a0 | 4,414,516 | \u00a0 | \u00a0 | \u00a0 | 2,105,334 | \u00a0 |
\u00a0
The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company\u2019s 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.
\u00a0
The following table shows the computation of basic and diluted earnings per share for the year ended:
\u00a0
\u00a0 | \u00a0 | June 30, | \u00a0 | |
\u00a0 | \u00a0 | 2021 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Numerator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Net income attributable to Upexi, Inc. | \u00a0 | \u00a0$ | \u00a02,928,948 | \u00a0 |
Denominator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Weighted-average basic shares outstanding | \u00a0 | \u00a0 | \u00a011,930,378 | \u00a0 |
Effect of dilutive securities | \u00a0 | \u00a0 | 2,327,556 | \u00a0 |
Fully diluted weighted average shares outstanding | \u00a0 | \u00a0 | 14,257,556 | \u00a0 |
Basic earnings per share | \u00a0 | \u00a0$ | \u00a00.25 | \u00a0 |
Diluted earnings per share | \u00a0 | \u00a0$ | \u00a00.21 | \u00a0 |
\u00a0 | \u00a0 | June 30, | \u00a0 | \u00a0 | June 30, | \u00a0 | ||
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Stock options | \u00a0 | \u00a0 | 4,279,888 | \u00a0 | \u00a0 | \u00a0 | 1,697,889 | \u00a0 |
Warrants | \u00a0 | \u00a0 | 106,850 | \u00a0 | \u00a0 | \u00a0 | 129,667 | \u00a0 |
Preferred stock | \u00a0 | \u00a0 | 277,778 | \u00a0 | \u00a0 | \u00a0 | 277,778 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Total potential dilutive weighted average shares outstanding | \u00a0 | \u00a0 | 4,414,516 | \u00a0 | \u00a0 | \u00a0 | 2,105,334 | \u00a0 |
\u00a0 | \u00a0 | June 30, | \u00a0 | |
\u00a0 | \u00a0 | 2021 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Numerator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Net income attributable to Upexi, Inc. | \u00a0 | \u00a0$ | \u00a02,928,948 | \u00a0 |
Denominator: | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Weighted-average basic shares outstanding | \u00a0 | \u00a0 | \u00a011,930,378 | \u00a0 |
Effect of dilutive securities | \u00a0 | \u00a0 | 2,327,556 | \u00a0 |
Fully diluted weighted average shares outstanding | \u00a0 | \u00a0 | 14,257,556 | \u00a0 |
Basic earnings per share | \u00a0 | \u00a0$ | \u00a00.25 | \u00a0 |
Diluted earnings per share | \u00a0 | \u00a0$ | \u00a00.21 | \u00a0 |
Deferred Revenue\u00a0-\u00a0The Company records deposits as deferred revenue when a customer pays in advance of shipping the product. Once the product is shipped, the deposit is recorded as revenue and the related commissions are paid. All products were shipped related to deposits in deferred revenue, in less than one year.
"}]},{"name":"rpt:f-471","factDimensions":{"xbrl:concept":"us-gaap:DebtPolicyTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Convertible Debt and Securities - The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option\u2019s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.
"}]},{"name":"rpt:f-472","factDimensions":{"xbrl:concept":"upxi:NonControllingInterestsInConsolidatedFinancialStatementspolicytextblock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Non-controlling Interests in Consolidated Financial Statements\u00a0-\u00a0In December 2007, the FASB issued ASC 810-10-65, \u201cNon-controlling Interests in consolidated Financial Statements\u201d. This ASC clarifies that a non-controlling (minority) interest in subsidiaries is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, those losses attributable to the parent and the non-controlling interest in subsidiaries may exceed their interests in the subsidiary\u2019s equity. 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.
"}]},{"name":"rpt:f-473","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Recent Accounting Pronouncements\u00a0-\u00a0There are new accounting pronouncements issued by the Financial Accounting Standards Board (\u201cFASB\u201d) which are not yet effective as follows:
\u00a0
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\u2019s 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.
\u00a0
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\u2019s present or future unaudited consolidated financial statements.
"}]},{"name":"rpt:f-474","factDimensions":{"xbrl:concept":"us-gaap:DeferredPolicyAcquisitionCostsTextBlock1","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Note 3. Acquisition
\u00a0
Infusionz LLC
\u00a0
On July 1, 2020, the Company entered into an Agreement and Plan of Merger with Infusionz LLC (the \u201cInfusionz Agreement\u201d) with the Members of Infusionz LLC (\u201cSellers\u201d). 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 (\u201cInfusionz\u201d).
\u00a0
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 (\u201cCBD\u201d) 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.
\u00a0
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\u2019s 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\u2019s 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\u2019s common stock, if the \u2018offering price\u2019 of the Company\u2019s successful underwritten initial public offering of the Company\u2019s 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.
\u00a0
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\u00a0to the Sellers in equity consideration, as adjusted based on the initial public offering price, pursuant to the Infusionz Agreement as set forth below.
\u00a0
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.
\u00a0
On January 4, 2021 the Company paid the former members of Infusionz LLC $75,000 as per the acquisition agreement.
\u00a0
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.
\u00a0
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.
\u00a0
The Company\u2019s equity and cash consideration payment schedule pursuant to the Infusionz Agreement is as follows:
\u00a0
Date | \u00a0 | Cash | \u00a0 | \u00a0 | Shares of \u00a0Common Stock | \u00a0 | ||
July 1, 2020 | \u00a0 | $ | 300,000 | \u00a0 | \u00a0 | \u00a0 | 222,223 | \u00a0 |
December 31, 2020 (paid January 4, 2021) | \u00a0 | \u00a0 | 75,000 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
November 1, 2020 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
February 1, 2021 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
March 31, 2021 (paid April 2, 2021) | \u00a0 | $ | 75,000 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
June 1, 2021 (issued June 25, 2021) | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
September 1,2021 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 306,935 | \u00a0 |
Total Consideration | \u00a0 | $ | 450,000 | \u00a0 | \u00a0 | \u00a0 | 833,334 | \u00a0 |
\u00a0
Acquisition payable:
\u00a0
Date | \u00a0 | Consideration | \u00a0 | |
Acquisition | \u00a0 | $ | 3,350,000 | \u00a0 |
July 1, 2020 \u2013 cash | \u00a0 | \u00a0 | (200,000 | ) |
July 1, 2020 - equity consideration (222,222 common shares of the acquirer) * | \u00a0 | \u00a0 | (340,000 | ) |
November 1, 2020 - equity consideration (101,389 common shares of the acquirer) * | \u00a0 | \u00a0 | (155,125 | ) |
January 4, 2021 \u2013 cash | \u00a0 | \u00a0 | (75,000 | ) |
February 1, 2021 - equity consideration (101,932 common shares of the acquirer) * | \u00a0 | \u00a0 | (155,130 | ) |
March 31, 2021 | \u00a0 | \u00a0 | (75,000 | ) |
June 1, 2021 - equity consideration (101,400 common shares of the acquirer) | \u00a0 | \u00a0 | (584,869 | ) |
Acquisition payable ** | \u00a0 | $ | 1,764,876 | \u00a0 |
\u00a0
* Stock consideration was valued at $1.53 per common share as that was the last purchase price of the stock.
\u00a0
** 306,945 shares of the Company\u2019s 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.
\u00a0
Tangible Assets | \u00a0 | $ | 778,331 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 1,920,720 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 1,331,429 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (680,480 | ) |
Total Purchase Price | \u00a0 | $ | 3,350,000 | \u00a0 |
\u00a0
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. \u00a0
\u00a0
VitaMedica Corporation
\u00a0
Effective August 1, 2021, the Company entered into and closed an asset purchase agreement (the \u201cVitaMedica Agreement\u201d) 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 (\u201cSeller\u201d). VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.
\u00a0
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\u00a0100,000\u00a0shares of the Company\u2019s common stock valued at $482,000, $4.82\u00a0per 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\u00a0per share for a total of\u00a0100,000\u00a0shares of Company Common Stock and a cash payment of $2,000,000\u00a0which was paid on August 5, 2021. In addition, a $74,589\u00a0cash payment was made on October 29, 2021, for the excess working capital acquired.
\u00a0
A finder\u2019s fee of $103,740\u00a0was paid by the Company, $70,000\u00a0in cash and\u00a07,000\u00a0shares of common stock, valued at $33,740, $4.82\u00a0per 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.
\u00a0
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.
\u00a0
Tangible Assets | \u00a0 | $ | 860,738 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 1,935,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 960,780 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (199,929 | ) |
Total Purchase Price | \u00a0 | $ | 3,556,589 | \u00a0 |
\u00a0
The Company\u2019s consolidated financial statements, include the actual results of VitaMedica for the period August 1, 2021 to June 30, 2022.
\u00a0
Interactive Offers, LLC
\u00a0
Effective October 1, 2021, the Company entered into an Equity Interest Purchase Agreement (the \u201cI/O Agreement\u201d) 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 \u201cI/O Seller\u201d and collectively the \u201cI/O Sellers\u201d). The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (\u201cInteractive\u201d). The Company\u2019s CEO and Chairman, Allan Marshall, was the controlling stockholder and the president of MFA Holdings Corp. MFA Holdings Corp., owning 20% of the outstanding membership interests in Interactive. Interactive provides programmatic advertising with its SaaS platform which allows for programmatic advertisement placement automatically on any partners\u2019 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\u00a0560,170\u00a0shares 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.
\u00a0
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.
\u00a0
Tangible Assets | \u00a0 | $ | 413,465 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 2,631,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 2,889,158 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (1,099,993 | ) |
Total Purchase Price | \u00a0 | $ | 4,833,630 | \u00a0 |
\u00a0
The Company\u2019s 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.
\u00a0
Cygnet Online, LLC
\u00a0
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.
\u00a0
Additionally, Seller will be paid up to $700,000 in the form of an earn-out payment based on 7% of Cygnet\u2019s 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.
\u00a0
The Agreement contains customary confidentiality, non-competition, and non-solicitation provisions for the Seller and Seller\u2019s affiliates.
\u00a0
In addition, the Company has the right to purchase Seller\u2019s 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\u2019s 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.
\u00a0
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\u2019s 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\u2019s remaining membership interests in Cygnet for a purchase price equal to the product of (i) four times Cygnet\u2019s 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.
\u00a0
Tangible Assets | \u00a0 | $ | 3,683,829 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 7,800,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 2,037,455 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (8,421,284 | ) |
Total Purchase Price | \u00a0 | $ | 5,100,000 | \u00a0 |
\u00a0
The Company\u2019s 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.
\u00a0\u00a0
Consolidated pro-forma unaudited financial statements.
\u00a0
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\u2019s acquisitions of the companies as if the acquisitions occurred on July 1, 2020.
\u00a0
The following unaudited pro forma information does not purport to present what the Company\u2019s actual results would have been had the acquisitions occurred on July 1, 2020, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the June 30, 2022 and June 30, 2021, as if the acquisition occurred on July 1, 2020. \u00a0Operating 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\u00a0and $3,200,304\u00a0per year, respectively.
\u00a0
Pro Forma, Unaudited | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Proforma | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Year ended June 30, 2022 | \u00a0 | Upexi, Inc. | \u00a0 | \u00a0 | VitaMedica | \u00a0 | \u00a0 | Interactive | \u00a0 | \u00a0 | Cygnet | \u00a0 | \u00a0 | Adjustments | \u00a0 | \u00a0 | Proforma | \u00a0 | ||||||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Net sales | \u00a0 | $ | 44,584,996 | \u00a0 | \u00a0 | $ | 384,391 | \u00a0 | \u00a0 | $ | 416,700 | \u00a0 | \u00a0 | $ | 22,583,781 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 67,969,868 | \u00a0 | |
Cost of sales | \u00a0 | $ | 19,396,123 | \u00a0 | \u00a0 | $ | 93,509 | \u00a0 | \u00a0 | $ | - | \u00a0 | \u00a0 | $ | 19,117,296 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 38,606,928 | \u00a0 | |
Operating expenses | \u00a0 | $ | 27,841,203 | \u00a0 | \u00a0 | $ | 255,286 | \u00a0 | \u00a0 | $ | 795,507 | \u00a0 | \u00a0 | $ | 2,086,722 | \u00a0 | \u00a0 | $ | 1,767,350 | \u00a0 | \u00a0 | $ | 32,746,068 | \u00a0 |
Net income (loss) | \u00a0 | $ | (2,046,030 | ) | \u00a0 | $ | 35,596 | \u00a0 | \u00a0 | $ | (378,807 | ) | \u00a0 | $ | 1,117,971 | \u00a0 | \u00a0 | $ | (1,767,350 | ) | \u00a0 | $ | (3,038,620 | ) |
Basic income (loss) per common share | \u00a0 | $ | (0.13 | ) | \u00a0 | $ | 0.36 | \u00a0 | \u00a0 | $ | (0.68 | ) | \u00a0 | $ | 2.01 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | (0.17 | ) | |
Weighted average shares outstanding | \u00a0 | \u00a0 | 16,224,520 | \u00a0 | \u00a0 | \u00a0 | 100,000 | \u00a0 | \u00a0 | \u00a0 | 560,170 | \u00a0 | \u00a0 | \u00a0 | 555,489 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 17,440,179 | \u00a0 |
Pro Forma, Unaudited | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Proforma | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Year ended June 30, 2021 | \u00a0 | Upexi, Inc. | \u00a0 | \u00a0 | VitaMedica | \u00a0 | \u00a0 | Interactive | \u00a0 | \u00a0 | Cygnet | \u00a0 | \u00a0 | Adjustments | \u00a0 | \u00a0 | Proforma | \u00a0 | ||||||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Net sales | \u00a0 | $ | 24,095,025 | \u00a0 | \u00a0 | $ | 4,109,443 | \u00a0 | \u00a0 | $ | 1,790,714 | \u00a0 | \u00a0 | $ | 30,111,708 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 29,995,182 | \u00a0 | |
Cost of sales | \u00a0 | $ | 12,196,123 | \u00a0 | \u00a0 | $ | 1,117,547 | \u00a0 | \u00a0 | $ | - | \u00a0 | \u00a0 | $ | 25,489,728 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 13,313,670 | \u00a0 | |
Operating expenses | \u00a0 | $ | 10,472,165 | \u00a0 | \u00a0 | $ | 2,743,824 | \u00a0 | \u00a0 | $ | 2,683,937 | \u00a0 | \u00a0 | $ | 2,782,296 | \u00a0 | \u00a0 | $ | 3,200,304 | \u00a0 | \u00a0 | $ | 19,100,230 | \u00a0 |
Net income (loss) | \u00a0 | $ | 2,978,948 | \u00a0 | \u00a0 | $ | 380,047 | \u00a0 | \u00a0 | $ | (783,342 | ) | \u00a0 | $ | 1,485,628 | \u00a0 | \u00a0 | $ | (3,200,304 | ) | \u00a0 | $ | (624,651 | ) |
Basic income (loss) per common share | \u00a0 | $ | 0.25 | \u00a0 | \u00a0 | $ | 3.80 | \u00a0 | \u00a0 | $ | (1.40 | ) | \u00a0 | $ | 2.67 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | (0.05 | ) | |
Weighted average shares outstanding | \u00a0 | \u00a0 | 11,930,378 | \u00a0 | \u00a0 | \u00a0 | 100,000 | \u00a0 | \u00a0 | \u00a0 | 560,170 | \u00a0 | \u00a0 | \u00a0 | 555,489 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 12,590,548 | \u00a0 |
\u00a0
The Company estimated the annual VitaMedica amortization expense at $496,356\u00a0annually and $41,363\u00a0monthly, based on the allocation of the purchase price. For the year ended June 30, 2022, the proforma adjustment included $41,363, one month of amortization expense. For the year ended June 30, 2021, the proforma adjustment includes $496,356 twelve months of amortization expense.
\u00a0
The Company\u2019s 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.
\u00a0
The Company estimated the annual Interactive amortization expense at $603,948\u00a0annually and $50,329\u00a0monthly, 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.
\u00a0\u00a0
The Company\u2019s 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.
\u00a0
The Company estimated the annual Cygnet amortization expense at $2,100,000\u00a0annually and $175,000\u00a0monthly, based on management\u2019s preliminary allocation of the purchase price. For the year ended June 30, 2022, the proforma adjustment included $1,575,000, nine months of amortization expense. For the year ended June 30, 2021, the proforma adjustment includes $2,100,000, twelve months of amortization expense.
\u00a0\u00a0
The Company\u2019s 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\u00a0and $152,981, respectively. This includes amortization of intangible assets of $525,000.
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the \u2018offering price\u2019 of the Company\u2019s successful underwritten initial public offering of the Company\u2019s 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"}]},{"name":"rpt:f-482","factDimensions":{"xbrl:concept":"us-gaap:StockholdersEquityReverseStockSplit","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194","us-gaap:AwardDateAxis":"upxi:JulyOneTwoThousandTwentyMember","srt:TitleOfIndividualAxis":"upxi:InfusionzLLCMember"},"factValues":[{"value":"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 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| \u00a0 | Cash | \u00a0 | \u00a0 | Shares of \u00a0Common Stock | \u00a0 | ||
July 1, 2020 | \u00a0 | $ | 300,000 | \u00a0 | \u00a0 | \u00a0 | 222,223 | \u00a0 |
December 31, 2020 (paid January 4, 2021) | \u00a0 | \u00a0 | 75,000 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
November 1, 2020 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
February 1, 2021 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
March 31, 2021 (paid April 2, 2021) | \u00a0 | $ | 75,000 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
June 1, 2021 (issued June 25, 2021) | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 101,392 | \u00a0 |
September 1,2021 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 306,935 | \u00a0 |
Total Consideration | \u00a0 | $ | 450,000 | \u00a0 | \u00a0 | \u00a0 | 833,334 | \u00a0 |
Date | \u00a0 | Consideration | \u00a0 | |
Acquisition | \u00a0 | $ | 3,350,000 | \u00a0 |
July 1, 2020 \u2013 cash | \u00a0 | \u00a0 | (200,000 | ) |
July 1, 2020 - equity consideration (222,222 common shares of the acquirer) * | \u00a0 | \u00a0 | (340,000 | ) |
November 1, 2020 - equity consideration (101,389 common shares of the acquirer) * | \u00a0 | \u00a0 | (155,125 | ) |
January 4, 2021 \u2013 cash | \u00a0 | \u00a0 | (75,000 | ) |
February 1, 2021 - equity consideration (101,932 common shares of the acquirer) * | \u00a0 | \u00a0 | (155,130 | ) |
March 31, 2021 | \u00a0 | \u00a0 | (75,000 | ) |
June 1, 2021 - equity consideration (101,400 common shares of the acquirer) | \u00a0 | \u00a0 | (584,869 | ) |
Acquisition payable ** | \u00a0 | $ | 1,764,876 | \u00a0 |
Tangible Assets | \u00a0 | $ | 778,331 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 1,920,720 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 1,331,429 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (680,480 | ) |
Total Purchase Price | \u00a0 | $ | 3,350,000 | \u00a0 |
Tangible Assets | \u00a0 | $ | 860,738 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 1,935,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 960,780 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (199,929 | ) |
Total Purchase Price | \u00a0 | $ | 3,556,589 | \u00a0 |
Tangible Assets | \u00a0 | $ | 413,465 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 2,631,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 2,889,158 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (1,099,993 | ) |
Total Purchase Price | \u00a0 | $ | 4,833,630 | \u00a0 |
Tangible Assets | \u00a0 | $ | 3,683,829 | \u00a0 |
Intangible Assets | \u00a0 | \u00a0 | 7,800,000 | \u00a0 |
Goodwill | \u00a0 | \u00a0 | 2,037,455 | \u00a0 |
Liabilities Acquired | \u00a0 | \u00a0 | (8,421,284 | ) |
Total Purchase Price | \u00a0 | $ | 5,100,000 | \u00a0 |
Pro Forma, Unaudited | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Proforma | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Year ended June 30, 2022 | \u00a0 | Upexi, Inc. | \u00a0 | \u00a0 | VitaMedica | \u00a0 | \u00a0 | Interactive | \u00a0 | \u00a0 | Cygnet | \u00a0 | \u00a0 | Adjustments | \u00a0 | \u00a0 | Proforma | \u00a0 | ||||||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Net sales | \u00a0 | $ | 44,584,996 | \u00a0 | \u00a0 | $ | 384,391 | \u00a0 | \u00a0 | $ | 416,700 | \u00a0 | \u00a0 | $ | 22,583,781 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 67,969,868 | \u00a0 | |
Cost of sales | \u00a0 | $ | 19,396,123 | \u00a0 | \u00a0 | $ | 93,509 | \u00a0 | \u00a0 | $ | - | \u00a0 | \u00a0 | $ | 19,117,296 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 38,606,928 | \u00a0 | |
Operating expenses | \u00a0 | $ | 27,841,203 | \u00a0 | \u00a0 | $ | 255,286 | \u00a0 | \u00a0 | $ | 795,507 | \u00a0 | \u00a0 | $ | 2,086,722 | \u00a0 | \u00a0 | $ | 1,767,350 | \u00a0 | \u00a0 | $ | 32,746,068 | \u00a0 |
Net income (loss) | \u00a0 | $ | (2,046,030 | ) | \u00a0 | $ | 35,596 | \u00a0 | \u00a0 | $ | (378,807 | ) | \u00a0 | $ | 1,117,971 | \u00a0 | \u00a0 | $ | (1,767,350 | ) | \u00a0 | $ | (3,038,620 | ) |
Basic income (loss) per common share | \u00a0 | $ | (0.13 | ) | \u00a0 | $ | 0.36 | \u00a0 | \u00a0 | $ | (0.68 | ) | \u00a0 | $ | 2.01 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | (0.17 | ) | |
Weighted average shares outstanding | \u00a0 | \u00a0 | 16,224,520 | \u00a0 | \u00a0 | \u00a0 | 100,000 | \u00a0 | \u00a0 | \u00a0 | 560,170 | \u00a0 | \u00a0 | \u00a0 | 555,489 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 17,440,179 | \u00a0 |
Pro Forma, Unaudited | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Proforma | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Year ended June 30, 2021 | \u00a0 | Upexi, Inc. | \u00a0 | \u00a0 | VitaMedica | \u00a0 | \u00a0 | Interactive | \u00a0 | \u00a0 | Cygnet | \u00a0 | \u00a0 | Adjustments | \u00a0 | \u00a0 | Proforma | \u00a0 | ||||||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||||||
Net sales | \u00a0 | $ | 24,095,025 | \u00a0 | \u00a0 | $ | 4,109,443 | \u00a0 | \u00a0 | $ | 1,790,714 | \u00a0 | \u00a0 | $ | 30,111,708 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 29,995,182 | \u00a0 | |
Cost of sales | \u00a0 | $ | 12,196,123 | \u00a0 | \u00a0 | $ | 1,117,547 | \u00a0 | \u00a0 | $ | - | \u00a0 | \u00a0 | $ | 25,489,728 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | 13,313,670 | \u00a0 | |
Operating expenses | \u00a0 | $ | 10,472,165 | \u00a0 | \u00a0 | $ | 2,743,824 | \u00a0 | \u00a0 | $ | 2,683,937 | \u00a0 | \u00a0 | $ | 2,782,296 | \u00a0 | \u00a0 | $ | 3,200,304 | \u00a0 | \u00a0 | $ | 19,100,230 | \u00a0 |
Net income (loss) | \u00a0 | $ | 2,978,948 | \u00a0 | \u00a0 | $ | 380,047 | \u00a0 | \u00a0 | $ | (783,342 | ) | \u00a0 | $ | 1,485,628 | \u00a0 | \u00a0 | $ | (3,200,304 | ) | \u00a0 | $ | (624,651 | ) |
Basic income (loss) per common share | \u00a0 | $ | 0.25 | \u00a0 | \u00a0 | $ | 3.80 | \u00a0 | \u00a0 | $ | (1.40 | ) | \u00a0 | $ | 2.67 | \u00a0 | \u00a0 | $ | \u00a0 | \u00a0 | $ | (0.05 | ) | |
Weighted average shares outstanding | \u00a0 | \u00a0 | 11,930,378 | \u00a0 | \u00a0 | \u00a0 | 100,000 | \u00a0 | \u00a0 | \u00a0 | 560,170 | \u00a0 | \u00a0 | \u00a0 | 555,489 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 12,590,548 | \u00a0 |
Note 4. Inventory
\u00a0
Inventory consisted of the following:
\u00a0
\u00a0 | \u00a0 | June 30, | \u00a0 | |||||
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
Raw materials | \u00a0 | $ | 1,725,801 | \u00a0 | \u00a0 | $ | 1,680,471 | \u00a0 |
Finished goods | \u00a0 | \u00a0 | 4,728,627 | \u00a0 | \u00a0 | \u00a0 | 414,481 | \u00a0 |
Total | \u00a0 | $ | 6,454,428 | \u00a0 | \u00a0 | $ | 2,094,952 | \u00a0 |
\u00a0
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\u00a030, 2022, and 2021, respectively.
"}]},{"name":"rpt:f-658","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfInventoryCurrentTableTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"\u00a0 | \u00a0 | June 30, | \u00a0 | |||||
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
Raw materials | \u00a0 | $ | 1,725,801 | \u00a0 | \u00a0 | $ | 1,680,471 | \u00a0 |
Finished goods | \u00a0 | \u00a0 | 4,728,627 | \u00a0 | \u00a0 | \u00a0 | 414,481 | \u00a0 |
Total | \u00a0 | $ | 6,454,428 | \u00a0 | \u00a0 | $ | 2,094,952 | \u00a0 |
Note 5. Property and Equipment
\u00a0
Property and equipment consist of the following:
\u00a0
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Furniture and fixtures | \u00a0 | $ | 51,273 | \u00a0 | \u00a0 | $ | 20,173 | \u00a0 |
Computer equipment and software | \u00a0 | \u00a0 | 103,615 | \u00a0 | \u00a0 | \u00a0 | 62,430 | \u00a0 |
Manufacturing equipment | \u00a0 | \u00a0 | 1,903,719 | \u00a0 | \u00a0 | \u00a0 | 1,867,509 | \u00a0 |
Leasehold improvements | \u00a0 | \u00a0 | 2,144,341 | \u00a0 | \u00a0 | \u00a0 | 764,225 | \u00a0 |
Building | \u00a0 | \u00a0 | 4,656,435 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Vehicles | \u00a0 | \u00a0 | 253,229 | \u00a0 | \u00a0 | \u00a0 | 98,859 | \u00a0 |
Property and equipment, gross | \u00a0 | \u00a0 | 9,112,612 | \u00a0 | \u00a0 | \u00a0 | 2,813,196 | \u00a0 |
Less accumulated depreciation | \u00a0 | \u00a0 | (1,066,126 | ) | \u00a0 | \u00a0 | (515,990 | ) |
\u00a0 | \u00a0 | \u00a0 | 8,046,486 | \u00a0 | \u00a0 | \u00a0 | 2,297,206 | \u00a0 |
Deposits on equipment | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 535,194 | \u00a0 |
Property and equipment, net | \u00a0 | $ | 8,046,486 | \u00a0 | \u00a0 | $ | 2,832,400 | \u00a0 |
\u00a0
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.
\u00a0
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.
\u00a0
Depreciation expense for the years ended June 30, 2022, and 2021 was $574,309 and $303,496, respectively.
"}]},{"name":"rpt:f-668","factDimensions":{"xbrl:concept":"upxi:ScheduleOfPropertyAndEquipmenttabletextblock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Furniture and fixtures | \u00a0 | $ | 51,273 | \u00a0 | \u00a0 | $ | 20,173 | \u00a0 |
Computer equipment and software | \u00a0 | \u00a0 | 103,615 | \u00a0 | \u00a0 | \u00a0 | 62,430 | \u00a0 |
Manufacturing equipment | \u00a0 | \u00a0 | 1,903,719 | \u00a0 | \u00a0 | \u00a0 | 1,867,509 | \u00a0 |
Leasehold improvements | \u00a0 | \u00a0 | 2,144,341 | \u00a0 | \u00a0 | \u00a0 | 764,225 | \u00a0 |
Building | \u00a0 | \u00a0 | 4,656,435 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Vehicles | \u00a0 | \u00a0 | 253,229 | \u00a0 | \u00a0 | \u00a0 | 98,859 | \u00a0 |
Property and equipment, gross | \u00a0 | \u00a0 | 9,112,612 | \u00a0 | \u00a0 | \u00a0 | 2,813,196 | \u00a0 |
Less accumulated depreciation | \u00a0 | \u00a0 | (1,066,126 | ) | \u00a0 | \u00a0 | (515,990 | ) |
\u00a0 | \u00a0 | \u00a0 | 8,046,486 | \u00a0 | \u00a0 | \u00a0 | 2,297,206 | \u00a0 |
Deposits on equipment | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 535,194 | \u00a0 |
Property and equipment, net | \u00a0 | $ | 8,046,486 | \u00a0 | \u00a0 | $ | 2,832,400 | \u00a0 |
Note 6. Intangible Assets
\u00a0
Intangible assets as of June 30, 2022:
\u00a0
\u00a0 | \u00a0 | Cost | \u00a0 | \u00a0 | Accumulated Amortization | \u00a0 | \u00a0 | Net Book\u00a0Value | \u00a0 | |||
Customer relationships, amortized over four years | \u00a0 | $ | 4,167,347 | \u00a0 | \u00a0 | $ | 1,810,152 | \u00a0 | \u00a0 | $ | 2,357,195 | \u00a0 |
Trade name, amortized over five years | \u00a0 | \u00a0 | 1,454,305 | \u00a0 | \u00a0 | \u00a0 | 545,940 | \u00a0 | \u00a0 | \u00a0 | 908,365 | \u00a0 |
Non-compete agreements, amortized over the term of the agreement | \u00a0 | \u00a0 | 351,592 | \u00a0 | \u00a0 | \u00a0 | 191,632 | \u00a0 | \u00a0 | \u00a0 | 159,960 | \u00a0 |
Online sales channels, amortized over two years | \u00a0 | \u00a0 | 1,800,000 | \u00a0 | \u00a0 | \u00a0 | 225,000 | \u00a0 | \u00a0 | \u00a0 | 1,575,000 | \u00a0 |
Vender relationships, amortized over five years | \u00a0 | \u00a0 | 6,000,000 | \u00a0 | \u00a0 | \u00a0 | 300,000 | \u00a0 | \u00a0 | \u00a0 | 5,700,000 | \u00a0 |
Software, amortized over five years | \u00a0 | \u00a0 | 1,590,000 | \u00a0 | \u00a0 | \u00a0 | 238,500 | \u00a0 | \u00a0 | \u00a0 | 1,351,500 | \u00a0 |
\u00a0 | \u00a0 | $ | 15,363,244 | \u00a0 | \u00a0 | $ | 3,311,224 | \u00a0 | \u00a0 | $ | 12,052,020 | \u00a0 |
\u00a0
As of June 30, 2021
\u00a0
\u00a0 | \u00a0 | Cost | \u00a0 | \u00a0 | Accumulated Amortization | \u00a0 | \u00a0 | Net Book Value | \u00a0 | |||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |||
Customer relationships, amortized over four years | \u00a0 | $ | 2,075,347 | \u00a0 | \u00a0 | $ | 843,636 | \u00a0 | \u00a0 | $ | 1,231,711 | \u00a0 |
Trade name, amortized over five years | \u00a0 | \u00a0 | 845,305 | \u00a0 | \u00a0 | \u00a0 | 270,147 | \u00a0 | \u00a0 | \u00a0 | 575,158 | \u00a0 |
Non-compete agreements, amortized over term of the agreement | \u00a0 | \u00a0 | 76,592 | \u00a0 | \u00a0 | \u00a0 | 38,295 | \u00a0 | \u00a0 | \u00a0 | 38,297 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00a0 | $ | 2,997,244 | \u00a0 | \u00a0 | $ | 1,152,078 | \u00a0 | \u00a0 | $ | 1,845,166 | \u00a0 |
\u00a0
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.
\u00a0
The following intangible assets were added during the year ended June 30, 2022, from the acquisition of VitaMedica, Interactive and Cygnet.
\u00a0
Customer relationships | \u00a0 | $ | 2,092,000 | \u00a0 |
Trade name | \u00a0 | \u00a0 | 609,000 | \u00a0 |
Non-compete agreements | \u00a0 | \u00a0 | 275,000 | \u00a0 |
Online sales channels | \u00a0 | \u00a0 | 1,800,000 | \u00a0 |
Vender relationships | \u00a0 | \u00a0 | 6,000,000 | \u00a0 |
Software | \u00a0 | \u00a0 | 1,590,000 | \u00a0 |
Intangible Assets from Purchase | \u00a0 | $ | 12,366,000 | \u00a0 |
\u00a0
Future amortization of intangible assets are as follows: | \u00a0 | \u00a0 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
June 30, 2023 | \u00a0 | $ | 3,948,748 | \u00a0 |
June 30, 2024 | \u00a0 | \u00a0 | 3,155,530 | \u00a0 |
June 30, 2025 | \u00a0 | \u00a0 | 2,238,249 | \u00a0 |
June 30, 2026 | \u00a0 | \u00a0 | 1,715,176 | \u00a0 |
June 30, 2027 | \u00a0 | \u00a0 | 994,317 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00a0 | $ | 12,052,020 | \u00a0 |
\u00a0 | \u00a0 | Cost | \u00a0 | \u00a0 | Accumulated Amortization | \u00a0 | \u00a0 | Net Book\u00a0Value | \u00a0 | |||
Customer relationships, amortized over four years | \u00a0 | $ | 4,167,347 | \u00a0 | \u00a0 | $ | 1,810,152 | \u00a0 | \u00a0 | $ | 2,357,195 | \u00a0 |
Trade name, amortized over five years | \u00a0 | \u00a0 | 1,454,305 | \u00a0 | \u00a0 | \u00a0 | 545,940 | \u00a0 | \u00a0 | \u00a0 | 908,365 | \u00a0 |
Non-compete agreements, amortized over the term of the agreement | \u00a0 | \u00a0 | 351,592 | \u00a0 | \u00a0 | \u00a0 | 191,632 | \u00a0 | \u00a0 | \u00a0 | 159,960 | \u00a0 |
Online sales channels, amortized over two years | \u00a0 | \u00a0 | 1,800,000 | \u00a0 | \u00a0 | \u00a0 | 225,000 | \u00a0 | \u00a0 | \u00a0 | 1,575,000 | \u00a0 |
Vender relationships, amortized over five years | \u00a0 | \u00a0 | 6,000,000 | \u00a0 | \u00a0 | \u00a0 | 300,000 | \u00a0 | \u00a0 | \u00a0 | 5,700,000 | \u00a0 |
Software, amortized over five years | \u00a0 | \u00a0 | 1,590,000 | \u00a0 | \u00a0 | \u00a0 | 238,500 | \u00a0 | \u00a0 | \u00a0 | 1,351,500 | \u00a0 |
\u00a0 | \u00a0 | $ | 15,363,244 | \u00a0 | \u00a0 | $ | 3,311,224 | \u00a0 | \u00a0 | $ | 12,052,020 | \u00a0 |
\u00a0 | \u00a0 | Cost | \u00a0 | \u00a0 | Accumulated Amortization | \u00a0 | \u00a0 | Net Book Value | \u00a0 | |||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |||
Customer relationships, amortized over four years | \u00a0 | $ | 2,075,347 | \u00a0 | \u00a0 | $ | 843,636 | \u00a0 | \u00a0 | $ | 1,231,711 | \u00a0 |
Trade name, amortized over five years | \u00a0 | \u00a0 | 845,305 | \u00a0 | \u00a0 | \u00a0 | 270,147 | \u00a0 | \u00a0 | \u00a0 | 575,158 | \u00a0 |
Non-compete agreements, amortized over term of the agreement | \u00a0 | \u00a0 | 76,592 | \u00a0 | \u00a0 | \u00a0 | 38,295 | \u00a0 | \u00a0 | \u00a0 | 38,297 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00a0 | $ | 2,997,244 | \u00a0 | \u00a0 | $ | 1,152,078 | \u00a0 | \u00a0 | $ | 1,845,166 | \u00a0 |
Customer relationships | \u00a0 | $ | 2,092,000 | \u00a0 |
Trade name | \u00a0 | \u00a0 | 609,000 | \u00a0 |
Non-compete agreements | \u00a0 | \u00a0 | 275,000 | \u00a0 |
Online sales channels | \u00a0 | \u00a0 | 1,800,000 | \u00a0 |
Vender relationships | \u00a0 | \u00a0 | 6,000,000 | \u00a0 |
Software | \u00a0 | \u00a0 | 1,590,000 | \u00a0 |
Intangible Assets from Purchase | \u00a0 | $ | 12,366,000 | \u00a0 |
Future amortization of intangible assets are as follows: | \u00a0 | \u00a0 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
June 30, 2023 | \u00a0 | $ | 3,948,748 | \u00a0 |
June 30, 2024 | \u00a0 | \u00a0 | 3,155,530 | \u00a0 |
June 30, 2025 | \u00a0 | \u00a0 | 2,238,249 | \u00a0 |
June 30, 2026 | \u00a0 | \u00a0 | 1,715,176 | \u00a0 |
June 30, 2027 | \u00a0 | \u00a0 | 994,317 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
\u00a0 | \u00a0 | $ | 12,052,020 | \u00a0 |
Note 7. Prepaid Expense and Other Current Assets
\u00a0
Prepaid and other assets consist of the following:
\u00a0
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Insurance | \u00a0 | $ | 32,045 | \u00a0 | \u00a0 | $ | 100,307 | \u00a0 |
Prepayment to vendors | \u00a0 | \u00a0 | 175,378 | \u00a0 | \u00a0 | \u00a0 | 118,283 | \u00a0 |
Deposits on services | \u00a0 | \u00a0 | 13,762 | \u00a0 | \u00a0 | \u00a0 | 3,225 | \u00a0 |
Prepaid monthly rent | \u00a0 | \u00a0 | 6,900 | \u00a0 | \u00a0 | \u00a0 | 66,551 | \u00a0 |
Subscriptions and services being amortized over the service period | \u00a0 | \u00a0 | 274,959 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Other deposits | \u00a0 | \u00a0 | 337,149 | \u00a0 | \u00a0 | \u00a0 | 97,892 | \u00a0 |
Total | \u00a0 | $ | 840,193 | \u00a0 | \u00a0 | $ | 386,258 | \u00a0 |
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Insurance | \u00a0 | $ | 32,045 | \u00a0 | \u00a0 | $ | 100,307 | \u00a0 |
Prepayment to vendors | \u00a0 | \u00a0 | 175,378 | \u00a0 | \u00a0 | \u00a0 | 118,283 | \u00a0 |
Deposits on services | \u00a0 | \u00a0 | 13,762 | \u00a0 | \u00a0 | \u00a0 | 3,225 | \u00a0 |
Prepaid monthly rent | \u00a0 | \u00a0 | 6,900 | \u00a0 | \u00a0 | \u00a0 | 66,551 | \u00a0 |
Subscriptions and services being amortized over the service period | \u00a0 | \u00a0 | 274,959 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Other deposits | \u00a0 | \u00a0 | 337,149 | \u00a0 | \u00a0 | \u00a0 | 97,892 | \u00a0 |
Total | \u00a0 | $ | 840,193 | \u00a0 | \u00a0 | $ | 386,258 | \u00a0 |
Note 8. Operating Leases
\u00a0
The Company has operating leases for corporate offices,\u00a0warehouses and office equipment that have remaining lease terms of 1 year to 5 years.
\u00a0
During November 2019, the Company entered into a lease for a Nevada facility that commenced on November 13, 2019 and recorded a right of use asset and corresponding lease liability. The Company uses this leased facility for office, manufacturing, and warehouse space. The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Therefore, all lease and non-lease components are combined and accounted for as single lease component. Lease expense was $568,031 and $227,967 for the years ended June 30, 2022 and 2021, respectively.
\u00a0
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.
\u00a0
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.
\u00a0
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.
\u00a0
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.
\u00a0\u00a0
During October 2021, the Company entered into a\u00a03-year lease for a California warehouse. The Company recorded a right of use asset and corresponding lease liability of $295,305. The Company will use this leased facility for assembly and distribution of finished goods. Lease expense was $71,042 for the year ended June 30, 2022.
\u00a0
On April 1, 2022, the Company acquired Cygnet which had entered into a lease for a Florida facility that commenced on October 8, 2021, and Cygnet had recorded a right of use asset and corresponding lease liability. The lease expires on October 8, 2026. The Company uses this leased facility for warehouse and office space. The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Therefore, all lease and non-lease components are combined and accounted for as single lease component. Lease expense was $21,800 for the year ended June 30, 2022.
The Company\u2019s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2022, are:
\u00a0
Weighted average remaining lease term | \u00a0 | 35 Months | \u00a0 | |
Weighted average incremental borrowing rate | \u00a0 | \u00a0 | 5.0 | % |
\u00a0
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:
\u00a0
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Operating lease cost: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Operating lease cost | \u00a0 | $ | 368,680 | \u00a0 | \u00a0 | $ | 316,060 | \u00a0 |
Amortization of ROU assets | \u00a0 | \u00a0 | 273,746 | \u00a0 | \u00a0 | \u00a0 | 302,268 | \u00a0 |
Interest expense | \u00a0 | \u00a0 | 38,290 | \u00a0 | \u00a0 | \u00a0 | 13,946 | \u00a0 |
Total lease cost | \u00a0 | $ | 680,716 | \u00a0 | \u00a0 | $ | 632,274 | \u00a0 |
\u00a0
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 consolidated balance sheet as of June 30, 2022:\u00a0
\u00a0
2023\u00a0 | \u00a0 | $ | 333,684 | \u00a0 |
2024\u00a0 | \u00a0 | \u00a0 | 326,952 | \u00a0 |
2025\u00a0 | \u00a0 | \u00a0 | 231,142 | \u00a0 |
2026 | \u00a0 | \u00a0 | 113,633 | \u00a0 |
2027 | \u00a0 | \u00a0 | 28,684 | \u00a0 |
Total undiscounted future minimum lease payments\u00a0 | \u00a0 | \u00a0 | 1,034,095 | \u00a0 |
Less: Imputed interest\u00a0 | \u00a0 | \u00a0 | (65,838 | ) |
Present value of operating lease obligation\u00a0 | \u00a0 | $ | 968,257 | \u00a0 |
Weighted average remaining lease term | \u00a0 | 35 Months | \u00a0 | |
Weighted average incremental borrowing rate | \u00a0 | \u00a0 | 5.0 | % |
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Operating lease cost: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Operating lease cost | \u00a0 | $ | 368,680 | \u00a0 | \u00a0 | $ | 316,060 | \u00a0 |
Amortization of ROU assets | \u00a0 | \u00a0 | 273,746 | \u00a0 | \u00a0 | \u00a0 | 302,268 | \u00a0 |
Interest expense | \u00a0 | \u00a0 | 38,290 | \u00a0 | \u00a0 | \u00a0 | 13,946 | \u00a0 |
Total lease cost | \u00a0 | $ | 680,716 | \u00a0 | \u00a0 | $ | 632,274 | \u00a0 |
2023\u00a0 | \u00a0 | $ | 333,684 | \u00a0 |
2024\u00a0 | \u00a0 | \u00a0 | 326,952 | \u00a0 |
2025\u00a0 | \u00a0 | \u00a0 | 231,142 | \u00a0 |
2026 | \u00a0 | \u00a0 | 113,633 | \u00a0 |
2027 | \u00a0 | \u00a0 | 28,684 | \u00a0 |
Total undiscounted future minimum lease payments\u00a0 | \u00a0 | \u00a0 | 1,034,095 | \u00a0 |
Less: Imputed interest\u00a0 | \u00a0 | \u00a0 | (65,838 | ) |
Present value of operating lease obligation\u00a0 | \u00a0 | $ | 968,257 | \u00a0 |
Note 9. Accrued Liabilities
\u00a0
Accrued liabilities consist of the following:
\u00a0
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Accrued expenses for loyalty program | \u00a0 | $ | 6,418 | \u00a0 | \u00a0 | $ | 24,768 | \u00a0 |
Accrued interest | \u00a0 | \u00a0 | 147,887 | \u00a0 | \u00a0 | \u00a0 | 9,817 | \u00a0 |
Accrued federal and state tax | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 120,776 | \u00a0 |
Accrued expenses on credit cards | \u00a0 | \u00a0 | 108,735 | \u00a0 | \u00a0 | \u00a0 | 111,700 | \u00a0 |
Accrued sales tax | \u00a0 | \u00a0 | 108,425 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Derivative liability | \u00a0 | \u00a0 | 81,909 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Other accrued liabilities | \u00a0 | \u00a0 | 498,875 | \u00a0 | \u00a0 | \u00a0 | 28,960 | \u00a0 |
\u00a0 | \u00a0 | $ | 952,249 | \u00a0 | \u00a0 | $ | 296,021 | \u00a0 |
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | \u00a0 | June 30, 2021 | \u00a0 | ||
Accrued expenses for loyalty program | \u00a0 | $ | 6,418 | \u00a0 | \u00a0 | $ | 24,768 | \u00a0 |
Accrued interest | \u00a0 | \u00a0 | 147,887 | \u00a0 | \u00a0 | \u00a0 | 9,817 | \u00a0 |
Accrued federal and state tax | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 120,776 | \u00a0 |
Accrued expenses on credit cards | \u00a0 | \u00a0 | 108,735 | \u00a0 | \u00a0 | \u00a0 | 111,700 | \u00a0 |
Accrued sales tax | \u00a0 | \u00a0 | 108,425 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Derivative liability | \u00a0 | \u00a0 | 81,909 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Other accrued liabilities | \u00a0 | \u00a0 | 498,875 | \u00a0 | \u00a0 | \u00a0 | 28,960 | \u00a0 |
\u00a0 | \u00a0 | $ | 952,249 | \u00a0 | \u00a0 | $ | 296,021 | \u00a0 |
Note 10. Convertible Promissory Notes and Notes Payable
\u00a0
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\u2019s common stock becoming listed or trading. The conversion rate would be equal to the price of the Company\u2019s 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\u2019s common stock.
\u00a0
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.
\u00a0
On\u00a0May\u00a013, 2020, Infusionz entered a Paycheck Protection Program loan for $297,100\u00a0in 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\u00a0May 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.\u00a0The 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.
\u00a0
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.
\u00a0
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.
\u00a0
In February and March 2021, the Company entered into convertible promissory notes (\u201cConvertible Notes\u201d) 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\u2019s common stock. The Company recorded interest expense of $342,813 for the beneficial conversion of the Convertible Note.
\u00a0
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 (\u201cVitaMedica Note\u201d), convertible at $5.00\u00a0per share for a total of\u00a0100,000\u00a0shares of Company Common Stock. The Company repaid the note in full during August of 2022.
\u00a0
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, (\u201cCygnet Note\u201d) 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 \u201cConvertible Notes\u201d), 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 \u201cWarrants\u201d) 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.
\u00a0
In June 2022, the Company executed a promissory note with Allan Marshall, the Company\u2019s Chief Executive Officer, in the original principal amount of $1,500,000 (\u201cMarshall Loan\u201d). 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.
\u00a0
Convertible promissory notes and notes payable outstanding as of June 30, 2022, are summarized below:
\u00a0
\u00a0 | \u00a0 | Maturity Date | \u00a0 | June 30, 2022 | \u00a0 | |
Convertible Notes, 3-year term note, 8.5% cash interest, 3.5% PIK interest and collateralized with all the assets of the Company | \u00a0 | June 28, 2025 | \u00a0 | $ | 6,305,406 | \u00a0 |
Marshall Loan, 3-year term note, 8.5% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes | \u00a0 | June 28, 2025 | \u00a0 | \u00a0 | - | \u00a0 |
VitaMedica Loan, 1-year term note, 6% interest and is convertible at $5.00 per share. The note was fully repaid in August 2022. | \u00a0 | August 1, 2022 | \u00a0 | \u00a0 | 500,000 | \u00a0 |
Cygnet Loan, 1-year term note, 6% interest and is convertible at $6.00 per share. | \u00a0 | April 15, 2023 | \u00a0 | \u00a0 | 1,050,000 | \u00a0 |
SBA note payable, 30-year term note, 6% interest rate and collateralized with all assets of the Company | \u00a0 | October 6, 2031 | \u00a0 | \u00a0 | 4,216,248 | \u00a0 |
Inventory consignment note, 60 monthly payments, with first payment due June 30, 2022, 3.5% interest rate and no security interest in the assets of the business | \u00a0 | June 30, 2027 | \u00a0 | \u00a0 | 1,379,230 | \u00a0 |
GF Note, 6 annual payments, with first payment due December 31, 2022, 3.5% interest rate and no security interest in the assets of the business | \u00a0 | November 7, 2026 | \u00a0 | \u00a0 | 850,000 | \u00a0 |
Total notes payable | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 14,300,884 | \u00a0 |
Less current portion of notes payable | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 5,424,752 | \u00a0 |
Notes payable, net of current portion | \u00a0 | \u00a0 | \u00a0 | $ | 8,876,132 | \u00a0 |
Future payments on notes payable are as follows: | \u00a0 | \u00a0 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
For the year ended June 30: | \u00a0 | \u00a0 | \u00a0 | |
2022 | \u00a0 | $ | 5,424,752 | \u00a0 |
2023 | \u00a0 | \u00a0 | 4,574,305 | \u00a0 |
2024 | \u00a0 | \u00a0 | 3,066,787 | \u00a0 |
2025 | \u00a0 | \u00a0 | 872,940 | \u00a0 |
2026 | \u00a0 | \u00a0 | 764,673 | \u00a0 |
Thereafter | \u00a0 | \u00a0 | 2,292,021 | \u00a0 |
\u00a0 | \u00a0 | $ | 16,995,478 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Marshall Loan, related party and received July 31, 2022 | \u00a0 | \u00a0 | (1,500,000 | ) |
Convertible note, remaining holdback not received | \u00a0 | \u00a0 | (500,000 | ) |
Convertible note, original discount and related fees and costs | \u00a0 | \u00a0 | (694,594 | ) |
\u00a0 | \u00a0 | $ | 14,300,884 | \u00a0 |
\u00a0 | \u00a0 | Maturity Date | \u00a0 | June 30, 2022 | \u00a0 | |
Convertible Notes, 3-year term note, 8.5% cash interest, 3.5% PIK interest and collateralized with all the assets of the Company | \u00a0 | June 28, 2025 | \u00a0 | $ | 6,305,406 | \u00a0 |
Marshall Loan, 3-year term note, 8.5% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes | \u00a0 | June 28, 2025 | \u00a0 | \u00a0 | - | \u00a0 |
VitaMedica Loan, 1-year term note, 6% interest and is convertible at $5.00 per share. The note was fully repaid in August 2022. | \u00a0 | August 1, 2022 | \u00a0 | \u00a0 | 500,000 | \u00a0 |
Cygnet Loan, 1-year term note, 6% interest and is convertible at $6.00 per share. | \u00a0 | April 15, 2023 | \u00a0 | \u00a0 | 1,050,000 | \u00a0 |
SBA note payable, 30-year term note, 6% interest rate and collateralized with all assets of the Company | \u00a0 | October 6, 2031 | \u00a0 | \u00a0 | 4,216,248 | \u00a0 |
Inventory consignment note, 60 monthly payments, with first payment due June 30, 2022, 3.5% interest rate and no security interest in the assets of the business | \u00a0 | June 30, 2027 | \u00a0 | \u00a0 | 1,379,230 | \u00a0 |
GF Note, 6 annual payments, with first payment due December 31, 2022, 3.5% interest rate and no security interest in the assets of the business | \u00a0 | November 7, 2026 | \u00a0 | \u00a0 | 850,000 | \u00a0 |
Total notes payable | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 14,300,884 | \u00a0 |
Less current portion of notes payable | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 5,424,752 | \u00a0 |
Notes payable, net of current portion | \u00a0 | \u00a0 | \u00a0 | $ | 8,876,132 | \u00a0 |
Future payments on notes payable are as follows: | \u00a0 | \u00a0 | \u00a0 | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | |
For the year ended June 30: | \u00a0 | \u00a0 | \u00a0 | |
2022 | \u00a0 | $ | 5,424,752 | \u00a0 |
2023 | \u00a0 | \u00a0 | 4,574,305 | \u00a0 |
2024 | \u00a0 | \u00a0 | 3,066,787 | \u00a0 |
2025 | \u00a0 | \u00a0 | 872,940 | \u00a0 |
2026 | \u00a0 | \u00a0 | 764,673 | \u00a0 |
Thereafter | \u00a0 | \u00a0 | 2,292,021 | \u00a0 |
\u00a0 | \u00a0 | $ | 16,995,478 | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Marshall Loan, related party and received July 31, 2022 | \u00a0 | \u00a0 | (1,500,000 | ) |
Convertible note, remaining holdback not received | \u00a0 | \u00a0 | (500,000 | ) |
Convertible note, original discount and related fees and costs | \u00a0 | \u00a0 | (694,594 | ) |
\u00a0 | \u00a0 | $ | 14,300,884 | \u00a0 |
Note 11. Related Party Transactions
\u00a0
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.
\u00a0
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.\u00a0
\u00a0
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\u2019s common stock at a ratio of 1.8 shares of preferred stock for a single share of the Company\u2019s common stock at the holder\u2019s 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.
\u00a0
Effective October 1, 2021, the Company entered into an Equity Interest Purchase Agreement (the \u201cI/O Agreement\u201d) 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 \u201cI/O Seller\u201d and collectively the \u201cI/O Sellers\u201d). The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (\u201cInteractive\u201d). The Company\u2019s 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.
\u00a0
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.
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\u00a0
Convertible Preferred Stock
\u00a0
The Company\u2019s Board of Directors has authorized 1,000,000 shares of preferred stock with a par value of $0.001 and issued 500,000 shares of preferred stock for a purchase price of $50,000. This preferred stock is convertible into shares of common stock at a ratio of 1.8 shares of preferred stock for a single share of the Company\u2019s common stock with additional terms and conditions determined by the Board of Directors. During the year ended June 30, 2020, an investor converted 500,000 shares of preferred stock into 277,778 shares of common stock.
\u00a0
On February 2, 2021, the Company sold the 500,000 shares of Preferred Stock to Allan Marshall, CEO for net proceeds of $50,000. The preferred stock is convertible into the Company\u2019s common stock at a ratio of 1.8 shares of preferred stock for a single share of the Company\u2019s common stock at the holder\u2019s option, has preferential liquidation rights and the preferred stock shall vote together with the common stock as a single class on all matters to which shareholders of the Company are entitled to vote at the rate of ten votes per share of preferred stock.
Common Stock
\u00a0
On February 8, 2021, the Shareholders consented, and the Board of Directors approved the Reverse Stock Split at the rate of 1 share of Common Stock for each 1.8 shares of Common Stock of the Company issued and outstanding (rounded up to the nearest whole number after giving effect to the Reverse Stock Split) on the Record Date of February 5, 2021.\u00a0
\u00a0
On February 8, 2021, the Board of Directors approved the officers of the Company to file a Registration Statement on Form S-1 (the \u201cRegistration Statement\u201d) to be prepared for the purposes of registering (i) up to $20,000,000 of Common Stock at a purchase price of no less than $4.50 per share (post reverse split), including an over-allotment option for the underwriter named therein (the \u201cUnderwriter\u201d) to purchase additional shares of Common Stock amounting to 15% of the number of shares of Common Stock offered to the public; and (ii) a warrant to be issued to the Underwriter for the purchase of shares of Common Stock (the \u201cUnderwriter Warrant\u201d); and (iii) the shares of Common Stock underlying the Underwriter Warrant (collectively, the \u201cSecurities\u201d).
\u00a0
On June 28, 2021, and the Company completed the sale of 2,530,000 shares of Common Stock to the Underwriters, which includes 330,000 shares sold upon the full exercise of the option, for total gross proceeds of approximately $12,650,000. After deducting the underwriting commissions, discounts, and offering expenses payable by the Company, the Company received net proceeds of $10,950,315.
\u00a0
During the year ended June 30, 2021, the Company issued 526,404 shares of common stock for the acquisition of Infusionz. The shares were valued at $1,235,124 and the Company issued 306,935 of the Company\u2019s stock on September 1, 2021, for the remaining acquisition liability of $1,764,876. In addition, the Company issued 83,334 shares of common stock valued at $127,500 for acquisition costs.
\u00a0
Trunano Labs, Inc. Common Stock
\u00a0
On July 1, 2020, the noncontrolling shareholders of the Company\u2019s 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\u2019s 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.
\u00a0
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.
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13. Stock Based Compensation
\u00a0
The Company has established a Company an incentive plan, 2019 Equity Incentive Plan (the \u201c2019 Plan\u201d). The plan grants incentives to select persons who can make, are making and continue to make substantial contributions to the growth and success of the Company, to attract and retain the employment and services of such persons and to encourage and reward such contributions by providing these individuals with an opportunity to acquire or increase stock ownership in the Company through either the grant of options or restructured stock. The 2019 Plan is administered by the Compensation Committee or such other committee as is appointed by the Board of Directors pursuant to the 2019 Plan (the \u201cCommittee\u201d). The Committee has full authority to administer and interpret the provisions of the 2019 Plan including, but not limited to, the authority to make all determinations with regard to the terms and conditions of an award made under the 2019 Plan. On February 8, 2021, the Shareholders consented, and the Board of Directors approved the amendment of the 2019 Plan to increase the maximum number of Shares that may be issued thereunder by 2,777,778 Shares to 5,555,555 Shares. On May 24, 2022, the Shareholders consented and the Board of Directors approved the amendment of the 2019 Plan to increase the maximum number of Shares that may be issued thereunder by 5,555,555 Shares to 10,000,000 Shares.
The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares. The options are exercisable for a period of up to 10 years from the date of the grant.
\u00a0
The following table reflects the continuity of stock options for the year ended June 30, 2022, and 2021:
\u00a0
A summary of stock option activity is as follows:
\u00a0
\u00a0 | \u00a0 | \u00a0 | \u00a0 | Weighted | \u00a0 | \u00a0 | Average | \u00a0 | \u00a0 | \u00a0 | ||||||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | Average | \u00a0 | \u00a0 | Remaining | \u00a0 | \u00a0 | Aggregated | \u00a0 | |||||
\u00a0 | \u00a0 | Options | \u00a0 | \u00a0 | Exercise | \u00a0 | \u00a0 | Contractual | \u00a0 | \u00a0 | Intrinsic | \u00a0 | ||||
\u00a0 | \u00a0 | Outstanding | \u00a0 | \u00a0 | Price | \u00a0 | \u00a0 | Life (Years) | \u00a0 | \u00a0 | Value | \u00a0 | ||||
Outstanding at June 30, 2020 | \u00a0 | \u00a0 | 1,000,667 | \u00a0 | \u00a0 | $ | 1.53 | \u00a0 | \u00a0 | \u00a0 | 8.5 | \u00a0 | \u00a0 | $ | - | \u00a0 |
Granted | \u00a0 | \u00a0 | 1,092,222 | \u00a0 | \u00a0 | \u00a0 | 1.58 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Forfeited | \u00a0 | \u00a0 | (3,889 | ) | \u00a0 | \u00a0 | 3.60 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Outstanding at June 30, 2021 | \u00a0 | \u00a0 | 2,089,000 | \u00a0 | \u00a0 | $ | 1.55 | \u00a0 | \u00a0 | \u00a0 | 7.49 | \u00a0 | \u00a0 | $ | 9,689,865 | \u00a0 |
Granted | \u00a0 | \u00a0 | 2,302,000 | \u00a0 | \u00a0 | \u00a0 | 4.36 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Exercised | \u00a0 | \u00a0 | (111,112 | ) | \u00a0 | \u00a0 | 1.53 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Outstanding at June 30, 2022 | \u00a0 | \u00a0 | 4,279,888 | \u00a0 | \u00a0 | $ | 3.05 | \u00a0 | \u00a0 | \u00a0 | 7.42 | \u00a0 | \u00a0 | $ | 4,919,182 | \u00a0 |
Options exercisable at June 30, 2022 (vested) | \u00a0 | \u00a0 | 2,987,772 | \u00a0 | \u00a0 | $ | 2.43 | \u00a0 | \u00a0 | \u00a0 | 7.57 | \u00a0 | \u00a0 | $ | 7,977,353 | \u00a0 |
Options exercisable at June 30, 2021 (vested) | \u00a0 | \u00a0 | 1,334,005 | \u00a0 | \u00a0 | $ | 1.55 | \u00a0 | \u00a0 | \u00a0 | 7.89 | \u00a0 | \u00a0 | $ | 6,189,783 | \u00a0 |
\u00a0
The average fair value of stock options granted was estimated to be $4.36 per share for the period ended June 30, 2022, and the closing stock price on June 30, 2022, was $4.20 per common share.
\u00a0
The average fair value of stock options granted was estimated to be $1.58 per share for the period ended June 30, 2021, and the closing stock price on June 30, 2021, was $6.19 per common share.
\u00a0
Stock-based compensation expense attributable to stock options was approximately $2,755,016 and $611,432 for the years ended June 30, 2022, and 2021, respectively. As of June 30, 2022, there was approximately $3,935,458 unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 2 years.
\u00a0
The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended June 30, 2022, and 2021.
\u00a0
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | June 30, 2021 | \u00a0 | |
Dividend rate | \u00a0 | - | \u00a0 | \u00a0 | - | \u00a0 |
Risk free interest rate | \u00a0 | 0.69%-2.91% | \u00a0 | 0.23%-0.87 | %\u00a0 | |
Expected term | \u00a0 | 6.5 | \u00a0 | \u00a0 | 6.5 | \u00a0 |
Expected volatility | \u00a0 | 69% | \u00a0 | 71%-72 | % | |
Grant date stock price | $ | 4.18 \u2013 5.34 | \u00a0 | $ | 0.85 \u2013 2.00 | \u00a0 |
The basis for the above assumptions are as follows: the dividend rate is based upon the Company\u2019s history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company\u2019s 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\u2019s Web Holdings, Inc. (CWBHF) stock prices for periods prior to the date the Company\u2019s trading information was available. Management selected Charlotte\u2019s Web Holdings, Inc. for its length of time as a publicly trading company and the similarities of the business and industry.
\u00a0
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the years ended June 30, 2022, and 2021, respectively.
\u00a0
There were 4,642,888 shares available for issuance as of September 26, 2022, under the 2019 Plan as amended.
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\u00a0 | \u00a0 | \u00a0 | \u00a0 | Average | \u00a0 | \u00a0 | Remaining | \u00a0 | \u00a0 | Aggregated | \u00a0 | |||||
\u00a0 | \u00a0 | Options | \u00a0 | \u00a0 | Exercise | \u00a0 | \u00a0 | Contractual | \u00a0 | \u00a0 | Intrinsic | \u00a0 | ||||
\u00a0 | \u00a0 | Outstanding | \u00a0 | \u00a0 | Price | \u00a0 | \u00a0 | Life (Years) | \u00a0 | \u00a0 | Value | \u00a0 | ||||
Outstanding at June 30, 2020 | \u00a0 | \u00a0 | 1,000,667 | \u00a0 | \u00a0 | $ | 1.53 | \u00a0 | \u00a0 | \u00a0 | 8.5 | \u00a0 | \u00a0 | $ | - | \u00a0 |
Granted | \u00a0 | \u00a0 | 1,092,222 | \u00a0 | \u00a0 | \u00a0 | 1.58 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Forfeited | \u00a0 | \u00a0 | (3,889 | ) | \u00a0 | \u00a0 | 3.60 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Outstanding at June 30, 2021 | \u00a0 | \u00a0 | 2,089,000 | \u00a0 | \u00a0 | $ | 1.55 | \u00a0 | \u00a0 | \u00a0 | 7.49 | \u00a0 | \u00a0 | $ | 9,689,865 | \u00a0 |
Granted | \u00a0 | \u00a0 | 2,302,000 | \u00a0 | \u00a0 | \u00a0 | 4.36 | \u00a0 | \u00a0 | \u00a0 | 10 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Exercised | \u00a0 | \u00a0 | (111,112 | ) | \u00a0 | \u00a0 | 1.53 | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
Outstanding at June 30, 2022 | \u00a0 | \u00a0 | 4,279,888 | \u00a0 | \u00a0 | $ | 3.05 | \u00a0 | \u00a0 | \u00a0 | 7.42 | \u00a0 | \u00a0 | $ | 4,919,182 | \u00a0 |
Options exercisable at June 30, 2022 (vested) | \u00a0 | \u00a0 | 2,987,772 | \u00a0 | \u00a0 | $ | 2.43 | \u00a0 | \u00a0 | \u00a0 | 7.57 | \u00a0 | \u00a0 | $ | 7,977,353 | \u00a0 |
Options exercisable at June 30, 2021 (vested) | \u00a0 | \u00a0 | 1,334,005 | \u00a0 | \u00a0 | $ | 1.55 | \u00a0 | \u00a0 | \u00a0 | 7.89 | \u00a0 | \u00a0 | $ | 6,189,783 | \u00a0 |
\u00a0 | \u00a0 | June 30, 2022 | \u00a0 | June 30, 2021 | \u00a0 | |
Dividend rate | \u00a0 | - | \u00a0 | \u00a0 | - | \u00a0 |
Risk free interest rate | \u00a0 | 0.69%-2.91% | \u00a0 | 0.23%-0.87 | %\u00a0 | |
Expected term | \u00a0 | 6.5 | \u00a0 | \u00a0 | 6.5 | \u00a0 |
Expected volatility | \u00a0 | 69% | \u00a0 | 71%-72 | % | |
Grant date stock price | $ | 4.18 \u2013 5.34 | \u00a0 | $ | 0.85 \u2013 2.00 | \u00a0 |
14. Income Taxes
\u00a0
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\u2019 allocable share of the Company\u2019s 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.
\u00a0
Cresco Management,\u00a0LLC 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\u2019 allocable share of the Company\u2019s income or loss is reportable on his or her income tax return through December 31, 2018. The Company\u2019s 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\u00a0LLC and SWCH, LLC were contributed to Upexi, Inc. in a non-taxable transaction. Upexi, Inc. consolidated from 2018 to current. The first consolidated tax return for all entities was filed for the tax year December 31, 2019.
\u00a0\u00a0
The components of the provision for income taxes are as follows:
\u00a0
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Current tax provision | \u00a0 | $ | 80,769 | \u00a0 | \u00a0 | $ | 120,776 | \u00a0 |
Deferred tax asset valuation allowance adjustment | \u00a0 | \u00a0 | (599,167 | ) | \u00a0 | \u00a0 | (1,403,594 | ) |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Provision for income taxes (benefit) | \u00a0 | $ | (518,398 | ) | \u00a0 | $ | (1,282,815 | ) |
\u00a0
The differences between income taxes calculated at the statutory US federal income tax rate and the Company\u2019s provision for income taxes are as follows:
\u00a0\u00a0
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Income tax provision at statutory federal and state tax rate | \u00a0 | \u00a0 | 21.00 | % | \u00a0 | \u00a0 | 21.00 | % |
State taxes, net of federal benefit | \u00a0 | \u00a0 | (2.70 | )% | \u00a0 | \u00a0 | 5.80 | % |
Nondeductible expense | \u00a0 | \u00a0 | 2.79 | % | \u00a0 | \u00a0 | 2.16 | % |
Other, net | \u00a0 | \u00a0 | 0.72 | % | \u00a0 | \u00a0 | (11.52 | )% |
Valuation allowance | \u00a0 | - | % | \u00a0 | \u00a0 | (95.37 | )% | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Provision for income taxes | \u00a0 | \u00a0 | 20.37 | % | \u00a0 | \u00a0 | (77.93 | )% |
The net deferred income tax asset balance related to the following:
\u00a0
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Net operating losses | \u00a0 | $ | 296,352 | \u00a0 | \u00a0 | $ | 573,464 | \u00a0 |
Deferred tax provision (credit) related to: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reward points | \u00a0 | \u00a0 | 1,536 | \u00a0 | \u00a0 | \u00a0 | 17,677 | \u00a0 |
Inventory write off | \u00a0 | \u00a0 | 11,965 | \u00a0 | \u00a0 | \u00a0 | 106,275 | \u00a0 |
Adverse lease | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Intangible assets | \u00a0 | \u00a0 | 691,411 | \u00a0 | \u00a0 | \u00a0 | 245,677 | \u00a0 |
Stock Options | \u00a0 | \u00a0 | 887,550 | \u00a0 | \u00a0 | \u00a0 | 278,980 | \u00a0 |
Allowance for doubtful accounts | \u00a0 | \u00a0 | 13,760 | \u00a0 | \u00a0 | \u00a0 | 12,753 | \u00a0 |
Accrued compensation | \u00a0 | \u00a0 | 19,970 | \u00a0 | \u00a0 | \u00a0 | 30,024 | \u00a0 |
Deferred revenue | \u00a0 | \u00a0 | 80,215 | \u00a0 | \u00a0 | \u00a0 | 137,725 | \u00a0 |
Other, net | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 1,015 | \u00a0 |
Valuation allowances | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Deferred tax asset | \u00a0 | $ | 2,002,758 | \u00a0 | \u00a0 | $ | 1,403,591 | \u00a0 |
\u00a0
There were approximately $1,411,198 and $2,730,782 of losses available to reduce federal taxable income in future years and can be carried forward indefinitely as of June 30, 2022 and June 30, 2021 respectively.
\u00a0
Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of June 30, 2021 and 2020, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company also considered whether there was any currently available information about future years. 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\u2019s performance and expected taxable income for the year ended June 30, 2022 and the known gain on SBA PPP loan\u00a0extinguishment during the first quarter ended September 30, 2021. \u00a0The Company used $1,319,584 of the net operating loss carryover during the year ended June 30, 2022.
\u00a0
We file federal and state income tax returns in jurisdictions with varying statutes of limitations. Income tax returns generally remain subject to examination by federal and most state tax authorities. We are not currently under examination in any federal or state jurisdiction.
"}]},{"name":"rpt:f-1001","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Current tax provision | \u00a0 | $ | 80,769 | \u00a0 | \u00a0 | $ | 120,776 | \u00a0 |
Deferred tax asset valuation allowance adjustment | \u00a0 | \u00a0 | (599,167 | ) | \u00a0 | \u00a0 | (1,403,594 | ) |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Provision for income taxes (benefit) | \u00a0 | $ | (518,398 | ) | \u00a0 | $ | (1,282,815 | ) |
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Income tax provision at statutory federal and state tax rate | \u00a0 | \u00a0 | 21.00 | % | \u00a0 | \u00a0 | 21.00 | % |
State taxes, net of federal benefit | \u00a0 | \u00a0 | (2.70 | )% | \u00a0 | \u00a0 | 5.80 | % |
Nondeductible expense | \u00a0 | \u00a0 | 2.79 | % | \u00a0 | \u00a0 | 2.16 | % |
Other, net | \u00a0 | \u00a0 | 0.72 | % | \u00a0 | \u00a0 | (11.52 | )% |
Valuation allowance | \u00a0 | - | % | \u00a0 | \u00a0 | (95.37 | )% | |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Provision for income taxes | \u00a0 | \u00a0 | 20.37 | % | \u00a0 | \u00a0 | (77.93 | )% |
\u00a0 | \u00a0 | 2022 | \u00a0 | \u00a0 | 2021 | \u00a0 | ||
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | ||
Net operating losses | \u00a0 | $ | 296,352 | \u00a0 | \u00a0 | $ | 573,464 | \u00a0 |
Deferred tax provision (credit) related to: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reward points | \u00a0 | \u00a0 | 1,536 | \u00a0 | \u00a0 | \u00a0 | 17,677 | \u00a0 |
Inventory write off | \u00a0 | \u00a0 | 11,965 | \u00a0 | \u00a0 | \u00a0 | 106,275 | \u00a0 |
Adverse lease | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Intangible assets | \u00a0 | \u00a0 | 691,411 | \u00a0 | \u00a0 | \u00a0 | 245,677 | \u00a0 |
Stock Options | \u00a0 | \u00a0 | 887,550 | \u00a0 | \u00a0 | \u00a0 | 278,980 | \u00a0 |
Allowance for doubtful accounts | \u00a0 | \u00a0 | 13,760 | \u00a0 | \u00a0 | \u00a0 | 12,753 | \u00a0 |
Accrued compensation | \u00a0 | \u00a0 | 19,970 | \u00a0 | \u00a0 | \u00a0 | 30,024 | \u00a0 |
Deferred revenue | \u00a0 | \u00a0 | 80,215 | \u00a0 | \u00a0 | \u00a0 | 137,725 | \u00a0 |
Other, net | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | 1,015 | \u00a0 |
Valuation allowances | \u00a0 | \u00a0 | - | \u00a0 | \u00a0 | \u00a0 | - | \u00a0 |
\u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Deferred tax asset | \u00a0 | $ | 2,002,758 | \u00a0 | \u00a0 | $ | 1,403,591 | \u00a0 |
Note 15. Risks and Uncertainties
\u00a0
There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the U.S. Drug Enforcement Administration, or DEA, and/or the FDA and the extent to which manufacturers of products containing Farm Bill-compliant cultivators and processors may engage in interstate commerce. The uncertainties cannot be resolved without further federal, and perhaps even state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets.
\u00a0
In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company is unable to predict with certainty the potential impact of COVID-19 on its business, results of operations, financial condition and cash flows.
"}]},{"name":"rpt:f-1048","factDimensions":{"xbrl:concept":"upxi:SignificantCustomerstextblock","xbrl:period":"2021-07-01T00:00:00/2022-07-01T00:00:00","xbrl:entity":"cik:0001775194"},"factValues":[{"value":"Note 16. Significant Customers
\u00a0
The Company had no significant customers during the year ended June 30, 2022. The Company had significant customers during the year ended June 30, 2021. A significant customer is defined as one that makes up ten percent or more of total revenues in a particular year or ten percent of outstanding accounts receivable balance as of the year end.
\u00a0
Net revenues for the year ended June 30, 2021, include revenues from significant customers in the product segment as follows:
\u00a0
\u00a0 | \u00a0 | June 30, 2021 | \u00a0 | |
Customer A | \u00a0 | \u00a0 | 12 | % |
Customer B | \u00a0 | \u00a0 | 15 | % |
\u00a0
Accounts receivable balances as of June 30, 2021, from significant customers are as follows:
\u00a0
\u00a0 | \u00a0 | June 30, | \u00a0 | |
\u00a0 | \u00a0 | 2021 | \u00a0 | |
Customer A | \u00a0 | \u00a0 | 7 | % |
Customer B | \u00a0 | \u00a0 | 30 | % |
\u00a0 | \u00a0 | June 30, 2021 | \u00a0 | |
Customer A | \u00a0 | \u00a0 | 12 | % |
Customer B | \u00a0 | \u00a0 | 15 | % |
\u00a0 | \u00a0 | June 30, | \u00a0 | |
\u00a0 | \u00a0 | 2021 | \u00a0 | |
Customer A | \u00a0 | \u00a0 | 7 | % |
Customer B | \u00a0 | \u00a0 | 30 | % |
Note 17. Subsequent Events
\u00a0
Issuance of Equity
\u00a0
The Company granted stock options to purchase 363,000 shares of the Company\u2019s 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.
\u00a0
Acquisition of assets for the Lucky Tail brand
\u00a0
On August 12, 2022, Grove, Inc. (the \u201cCompany\u201d), and its indirect wholly owned subsidiary Upexi Pet Products, LLC, a Delaware limited liability company (\u201cUPP\u201d) entered into an Asset Purchase Agreement (the \u201cAPA\u201d) with GA Solutions, LLC, a Delaware limited liability company (\u201cLuckyTail\u201d), 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.
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