# Upexi, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Upexi, Inc.](/companies/upxi.md) (CIK 1775194)
- Form: 10-Q
- Filed: 2024-12-19
- Accepted by EDGAR: Dec 19, 2024, 22:29 ET
- Period: 2024-09-30
- Accession: 0001477932-24-008219
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1775194/000147793224008219/upxi_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1775194/000147793224008219/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $4.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.4m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $2.9m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$1.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $290.4k | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$1.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.55 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.55 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 1,045,429 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-07-01 to 2024-09-30 | −$2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-30 | $167.4k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2024-09-30 | $6.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $18.6m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $9.8m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-09-30 | $5.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 9,145 characters.

### General Overview

As used in this current report and unless otherwise indicated, the terms “we”, “us” and “our” mean Upexi, Inc.

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

For the three months ended September 30, 2024, the consolidated financial statements of Upexi, Inc. include all of the subsidiary accounts included in the consolidated financial statements for the three months ended September 30, 2023.

Interactive Offers, LLC a Delaware limited liability corporation; VitaMedica, a Nevada corporation; and E-Core Technology, Inc. d/b/a New England Technology, Inc. have been classified as discontinued operations for the three months ended September 30, 2023 and the assets and liabilities have been classified as current assets, and liabilities of discontinued operations and assets held for sale on the balance sheets for September 30, 2023. There were no operations, assets or liabilities related to these discontinued operations for the three months ended September 30, 2024.

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

### Operating Segments

The Company’s financial reporting is organized into a single segment that includes production, sales and distribution of branded products, following the sale of E-Core, Technology Inc. and its subsidiaries. Other sources of revenue and related costs are aggregated and viewed by management as immaterial or have similar economic characteristics, products, production, distribution processes and regulatory environment as the other product sales or directly support the Company’s single segment.

### Results of Operations

The following summary of the Company’s operations should be read in conjunction with its unaudited condensed consolidated financial statements for the three months ended September 30, 2024 and 2023, which are included herein.

### Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

|  | September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $4,356,515 | $8,274,690 | $(3,918,175) |
| Cost of revenue | $1,426,447 | $2,845,201 | $(1,418,754) |
| Sales and marketing expenses | $1,041,425 | $1,816,702 | $(775,277) |
| Distribution costs | $1,455,725 | $2,131,892 | $(676,167) |
| General and administrative expenses | $1,367,690 | $1,578,350 | $(210,660) |
| Other operating expenses | $400,393 | $1,358,358 | $(957,965) |
| Other expenses (income) | $290,412 | $853,283 | $(562,871) |
| Gain on the sale of business | $- | $380,624 | $(380,624) |
| Discontinued operations | $- | $100,717 | $(100,717) |
| Net (loss) income from continuing operations | $(1,625,577) | $(1,355,388) | $(270,189) |

Revenues declined by $3,918,175 or 47% to $4,356,515 compared with revenue of $8,274,690 in the same period last year. Approximately $3,170,000 of the decline was related to the discontinued recommerce business in other subsidiaries after the sale of E-core. Management has augmented the overall strategy of the Company to focus on product sales, including the development, production and distribution of branded products. In addition, sales were affected by the manufacturing consolidation to Florida, which was completed by August 1, 2024, with manufacturing returning to full production.

Cost of revenue decreased by 1,418,754 or 50% compared with the same period last year. The cost of revenue decrease is directly related to the sales declines described above. Gross margin remained the same between the two periods with less than a 2% change.

Sales and marketing expenses decreased by $775,277 or 43% compared with the same period last year. The decrease in sales and marketing expenses was primarily related to the reduction of unnecessary agency expenses and a focused strategy on our core products.

Distribution costs decreased by $676,167 or 32% compared with the same period last year. The decrease in distribution costs was primarily related to the overall decline in the recommerce revenue. Management will continue to reduce overall distribution costs with the consolidation of products and facilities.

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General and administrative expenses decreased by $210,660 or 13% compared with the same period last year. Since the consolidation to Florida and other changes in the business, management has actively been reducing general and administrative costs. Management expects that general and administrative expenses to continue to decline, with the most significant declines being realized in periods ending after December 31, 2024.

Other operating expenses decreased by $957,965 or 71% compared with the same period last year. The decrease in other operating expenses was primarily related to the change in amortization of acquired intangible assets and the decreased amortization of stock-based compensation.

Other expenses, which is primarily interest decreased by $562,871 or 66% compared with the same period last year. The decrease in interest expense was primarily related to the elimination of the acquisition debt for E-core and the elimination of debt with the sale of VitaMedica in the prior year.

A gain of $380,624 was recognized on the sale of Interactive offers and there was net income of $100,717 from discontinued operations.

The Company had a net loss of $1,625,577 for the three months ended September 30, 2024 compared to a loss of $1,333,388 for the three months ended September 30, 2023. The increase in the net loss is primarily related to the above-mentioned changes.

### Liquidity and Capital Resources

#### Working Capital

|  | As of September 30, 2024 | As of June 30, 2024 |
| --- | ---: | ---: |
| Current assets | $6,790,280 | $11,419,918 |
| Current liabilities | 9,771,401 | 12,655,152 |
| Working capital | $(2,981,121) | $(1,235,234) |

#### Cash Flows

|  | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Cash flows used by operating activities – continuing operations | $(1,974,592) | $(2,073,232) |
| Cash flows used by investing activities – continuing operations | 5,838,106 | 145,324 |
| Cash flows (used in) provided by financing activities – continuing operations | (2,734,538) | (325,942) |
| Cash flows used in operating activities – discontinued operations | - | (1,718,972) |
| Cash flows used by investing activities – discontinued operations | - | - |
| Cash flows provided (used by) financing activities – discontinued operations | - | - |
| Net increase (decrease) in cash during the period | $1,128,976 | $(3,972,822) |

On September 30, 2024, the Company had cash of $1,790,391, an increase of $1,128,976 from June 30, 2024. The increase in cash was primarily the sale of the building and the collection of the purchase price for E-core.

Net cash from operating activities benefited from non-cash expenses of $402,964, which was offset by an approximate $400,000 increase in accounts receivable and inventory and approximately $500,000 in the reduction of several liabilities. The negative cash flow from operations was anticipated by management as the Company augmented the overall strategy of the Company to focus on product sales, including the development, production and distribution of branded products.

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Net cash provided by investing activities for the three months ended September 30, 2024 and 2023 was $5,838,106 and $145,324, respectively. For the three months ended September 30, 2024 the primary cash provided was the sale of the building and the collection of the purchase price for E-core. For the three months ended September 30, 2023, $940,000 was provided by the sale of Interactive offers and $500,000 and $294,676 was used for the purchase of the remaining equity of Cygnet and the acquisition of property and equipment, respectively.

Net cash flows used in financing activities for the three months ended September 30, 2024 was $2,734,538 compared to $325,942 used during the three months ended September 30, 2023. $2,634,538 used was the repayment of the loan collateralized by the building and the $100,000 advance to the Company by Allan Marshall, the CEO, was repaid during the three months ended September 30, 2024. During the three months ended September 30, 2023 the use of cash was for the scheduled repayment of debts.

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

### Off-Balance Sheet Arrangements

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

## Controls and procedures

As filed, 4,445 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2023 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.

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In performing the above-referenced assessment, our management identified the following material weaknesses:

(i) inadequate segregation of duties consistent with control objectives; and

(ii) lack of multiple levels of supervision and review.

We believe the weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the appointment of additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies, by the end of our 2024 fiscal year as resources allow.

We are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the current fiscal year, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.

Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rules 12a-15(f) and 15d-15(f) under Exchange Act) that occurred during the quarter ended September 30, 2024, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting. The Company has added significant qualified resources to ensure proper segregation of duties and proper review of the financial reporting policies and procedures.

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Filed Dec 19, 2024.
Source: SEC EDGAR, the filing index for accession 0001477932-24-008219. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.