Upexi, Inc.: Form 10-Q for the period ended Dec 31, 2024

General Overview

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

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

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

For the three and six months ended December 31, 2024, the condensed consolidated financial statements of Upexi, Inc. include all of the subsidiary accounts included in the condensed consolidated financial statements for the three and six months ended December 31, 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 and six months ended December 31, 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 December 31, 2023. There were no operations, assets or liabilities related to these discontinued operations for the three and six months ended December 31, 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 December 31, 2024 and 2023, which are included herein.

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

32

Table of Contents

Revenues declined by $3,457,388 or 46% to $4,005,492 compared with revenue of $7,462,880 in the same period last year. Approximately $3,350,000 of the decline was related to the strategic shift away from recommerce business and approximately $350,000 decline in our MW Products, direct to consumer sales. These declines were offset by increased sales of approximately $275,000 in manufacturing and the LuckyTail pet products sales. Management has augmented the overall strategy of the Company to focus on product sales, including the development, production and distribution of branded products.

Cost of revenue decreased by 1,864,452 or 64% compared with the same period last year. The cost of revenue decrease is directly related to the sales declines described above. The gross profit decreased by approximately $1,593,000 compared with the same period last year, although the gross profit margin increase approximately 13% to 74% compared to 61% from the same period last year Management expects the trend to continue with the focus on sales of branded products.

Sales and marketing expenses decreased by $536,311 or 36% 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 $1,223,790 or 49% 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.

General and administrative expenses decreased by $35,749 or 2% 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 $1,034,835 or , or 79%, compared with the same period last year. The decrease was primarily related to the impairment of intangibles at the end of the prior year, which drastically reduced amortization expense for the current period of acquired intangible assets and the decreased amortization of stock-based compensation.

Other expenses, which is primarily interest decreased by $814,101 or 78% compared with the same period last year. The decrease in interest expense was primarily related to the elimination of the acquisition debt on continuing entities for E-core and VitaMedica in the prior year.

A loss of $39,691 was recognized on the sale of Interactive offers and there was net income from discontinued operations of $88,524 and $460,570 from VitaMedica and E-core, respectively for the three months ended December 31, 2023.

The Company had a net loss of $1,301,310 for the three months ended December 31, 2024 compared to a loss of $2,438,919 for the three months ended December 31, 2023. The decrease in the net loss is primarily related to the above-mentioned changes.

Six Months Ended December 31, 2024 Compared to Six Months Ended December 31, 2023

33

Table of Contents

Revenues declined by $7,375,563 or 47% to $8,362,007 compared with revenue of $15,737,570 in the same period last year. Approximately $6,500,000 of the decline was related to the strategic shift away from recommerce business and approximately $800,000 net decline in our branded products and manufacturing. Management expects that these declines are temporary as the primary factor was the transition and consolidation of the business to facilities in Florida. Management has augmented the overall strategy of the Company to focus on product sales, including the development, production and distribution of branded products.

Cost of revenue decreased by 3,283,206 or 57% compared with the same period last year. The cost of revenue decrease is directly related to the sales declines described above. The gross profit decreased by approximately $4,092,000 compared with the same period last year, although the gross profit margin increased approximately 7% to 71% compared to 64% from the same period last year Management expects the trend to continue with the focus on sales of branded products.

Sales and marketing expenses decreased by $1,311,588 or 40% 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 $1,899,957 or 41% 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.

General and administrative expenses decreased by $246,409 or 8% 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 $2,282,769 or 77% compared with the same period last year. The decrease was primarily related to the impairment of intangibles at the end of the prior year, which drastically reduced amortization expense for the current period of acquired intangible assets, and the decreased amortization of stock-based compensation.

Other expenses, which is primarily interest decreased by $1,376,972 or 73% compared with the same period last year. The decrease in interest expense was primarily related to the elimination of the acquisition debt on continuing entities for the sale E-core and VitaMedica in the prior year.

A gain of $340,933 was recognized on the sale of Interactive offers and there was net income from discontinued operations of $157,930 and $649,811 from VitaMedica and E-core, respectively for the three months ended December 31, 2023.

The Company had a net loss of $2,926,887 for the six months ended December 31, 2024 compared to a loss of $3,794,307 for the six months ended December 31, 2023. The decrease in the net loss is primarily related to the above-mentioned changes.

Liquidity and Capital Resources

Working Capital

34

Table of Contents

Cash Flows

On December 31, 2024, the Company had cash of $406,347, a decrease of $255,068 from June 30, 2024. The decrease in cash was primarily the operating losses, the increase in account receivable and the increase in inventory. This was offset by 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 $675,294, which was offset by an approximate $550,000 increase in accounts receivable and an increase in inventory of approximately $800,000 and 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.

Net cash provided by investing activities for the six months ended December 31, 2024 was $5,838,106 and net cash used in investing activities for the six months ended December 31, 2023 was $832,864. For the six months ended December 31, 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 December 31, 2023, $147,592 was provided by the sale of Interactive offers, net of liabilities paid, $500,000 was used for the purchase of the remaining equity of Cygnet and $345,586 was used for the acquisition of property and equipment, respectively.

Net cash flows used in financing activities for the six months ended December 31, 2024 was $2,734,538 compared to $2,702,648 used during the six months ended December 31, 2024. The $100,000 advance to the Company by Allan Marshall, the CEO, and the loan on the building of $2,634,538 was repaid during the six months ended December 31, 2024. During the six months ended December 31, 2023 the use of cash was for the scheduled repayment of debts and the Company made a $2,000,000 payment and instalment payments of $313,818 on the acquisition debt related to E-core.

The net cash flow provided by discontinued operations for the six months ended December 31, 2023 was $1,346,534. Cash flow from financing activities increased $3,284,532 from an increase in the E-core line of credit and offset by cash flows used in operating activities of discontinued operations from increases in inventory and accounts receivables.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months from the date of the issuance of these consolidated financial statements with existing cash on hand, cash flow from operations, proceeds from the sale of VitaMedica not yet received and additional short term debt financings, if necessary.

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

35

Table of Contents

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.

Going Concern

Management has determined during the quarter that its strategic plan will require additional capital in the near term. While the Company is in the process of pursuing capital raises, those funds have not be realized as of the date of this report. As such, Management has disclosure in the financial statements the effect of this determination. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

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 December 31, 2024 (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.

36

Table of Contents

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 2025 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.

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 December 31, 2024, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

37

Table of Contents