UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of December 31, 2024 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $
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DOCUMENTS INCORPORATED BY REFERENCE
None.
Upexi, Inc.
Form 10-K
For the Fiscal Year Ended June 30, 2025
TABLE OF CONTENTS
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Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains express and implied forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Other than statements of historical fact, all statements contained in this Annual Report on Form 10-K including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “could,” “would,” “expect,” or words or expressions of similar substance or the negative thereof, that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors,” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
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PART I
Item 1. Business
General Overview
As used in this Annual Report and unless otherwise indicated, the terms “we”, “us”, “our”, “Upexi”, and the “Company” mean Upexi, Inc., a Delaware corporation, originally formed as a Nevada corporation in September of 2018. The Company has seven active subsidiaries that are part of the Company.
DESCRIPTION OF BUSINESS
Our Company
We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens. We continue to be a brand owner specializing in the development, manufacturing, and distribution of consumer products.
Our Solana Treasury Strategy
Early in 2025, we updated and modified our cash management and treasury strategy to include holding digital currency assets directly on our balance sheet. This was a shift from before when we held excess cash primarily in FDIC-insured interest-bearing accounts. The change to adopt this strategy results from our intention to obtain the highest yield on excess cash. Under our new approach, our treasury policy focuses primarily on Solana (“SOL”). The approach involves applying a public-market treasury model to an asset that is considered earlier in its lifecycle than, with respect to both development and usage, as well as institutional adoption, Bitcoin. Management will focus its resources to this digital asset strategy and a significant portion of the balance sheet will be allocated to holding Solana in the Company’s digital asset treasury. Currently our treasury is exclusively dedicated to the SOL digital asset and currently we do not intend to dedicate any of the treasury allocated capital to other digital assets. We will stake the vast majority of the Solana in our treasury to earn a staking yield and turn the treasury into a productive asset. Currently we are staking approximately 95% of our SOL treasury, and intend to maintain a similar or higher percentage going forward. We do not hedge our SOL and do not have plans to hedge our SOL in the future.
Our treasury is intended to bring value to our shareholders in these ways:
| · | We plan to utilize intelligent capital markets issuance – including the issuance of both equity and convertible debt - where we may issue capital in an accretive fashion for the benefit of shareholders to purchase and hold more Solana. |
| · | We will stake the majority of the Solana in our treasury to earn a staking yield and turn the treasury into a productive asset. |
| · | We will purchase locked Solana at a discount to the current spot price, which will provide higher gains for our shareholders as the discount moves to par over time. |
Note that we are underpinned by Solana, which we believe is the leading high-performance blockchain and may see its price rise in the future. If this occurs, our Solana treasury will move up in value, also benefiting shareholders.
Our Staking Program
Pursuant to our treasury strategy, we will use our SOL in the treasury to generate a return through various opportunities with the most significant portion being allocated to our Staking Program. We will utilize several validators in the Staking Program to reduce our risk with a single validator and maximize the overall yield from the Staking Program. We will also dedicate a portion of the SOL in our staking program to utilize smaller validators to help improve the overall Solana ecosystem. These Validators are scrutinized through our due diligence program and are initially only given a small amount of SOL for the Company to be able to verify the expected performance and yield, and to ensure that the validator should be included in our future allocation of SOL to validators. Management evaluates the validators on a routine basis around performance, yield, and economics, and makes monthly adjustments on the overall allocation of the SOL in the treasury based on our evaluation. Currently we have approximately 95% of our SOL treasury staked and target a similar or higher percentage in the future.
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We maintain possession and control of the SOL when it is staked at all times. Native staking is generally considered a safe activity, as it is done in-protocol (i.e.. is built into Solana itself), and as, unlike other networks, Solana has not implemented “slashing” penalties for validators that either intentionally misbehave or perform their duties poorly. As such, the major risk with staking is that we choose a validator with poor performance who realizes a low staking yield. Additionally, as part of the “activating” and “exiting” processes of SOL staking, any staked SOL will be inaccessible for a period of time determined by a range of factors, resulting in certain liquidity risks that we manage.
Process of Staking
Management has bi-weekly meetings to evaluate treasury operations, including the staking of the Company’s SOL. Based on these meetings, management determines the allocation of the SOL treasury to the Staking Program and determines the amount of allocation to each validator, ensuring that no single validator has such a large percentage of our stake that it represents concentration risk.
If it is determined to reduce the amount of the SOL dedicated to the Staking Program or it is determined to change the allocation of SOL to a validator, we will initiate an unstaking process and notify the validator of the change, which effectively reverses the delegation of the SOL from the applicable validator node.
Solana has a cooldown period known as the “deactivation period,” which is the time it takes for the unstaked SOL to become fully liquid. During this period, the tokens are not actively earning rewards, but they are also not yet available for transfer or use. The length of this period can vary based on network conditions, but is generally expected to be 48 hours or less. Once the cooldown period is complete, the Company will have complete control over the SOL, including the ability to sell the SOL or transfer it as determined by management.
Liquidity Management
The Company’s Staking Program involves the temporary loss of the ability to transfer, assign a new validator or otherwise dispose of the SOL. Under normal conditions, the Company will regain complete control over its unstaked SOL within two days of initiating the unstaking. However, there can be no guarantee that such process will result in the Company regaining complete control of its SOL in time to satisfy its current obligations. We maintain a certain amount of liquid SOL in the treasury, classified as current digital assets at fair value and a certain amount of cash to ensure that the Company is able to satisfy its current obligations.
How We Earn Staking Rewards
To earn staking rewards, we delegate our SOL to leading Solana validators via Solana’s in-protocol delegation system. This means we deposit our SOL tokens into a staking account, which is then delegated to a validator’s vote account. We utilize native staking only, and stake to top validators who have demonstrated a track record of high performance, high yield generation, and attractive delegator economics. We use multiple validators to both maximize the return on our Solana treasury and to mitigate the risk of having only one or two validators for our treasury staking.
SOL and the Solana Network
SOL is a digital asset that is created and transmitted through the operations of the peer-to-peer Solana network (the “Solana blockchain” or “Solana network”), which is a decentralized network of computers operating the implementation of the Solana protocol. While certain entities such as Solana Labs, Inc. (“Solana Labs”) and the Solana Foundation have influence over the Solana network’s development and governance (which was particularly true during the network’s early years), no single entity owns or operates the Solana network, the infrastructure of which is collectively maintained by a decentralized user base. The Solana network allows the creation and exchange of tokens, including SOL, which are recorded on the Solana network. SOL can be used to pay for goods and services, including to send a transaction on the Solana network, or it can be swapped to other tokens or converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a market-based system. Furthermore, the Solana network allows users to write and implement general purpose code known as smart contracts or programs that create decentralized applications, and for users to openly interact with said decentralized applications. Using programs, users can create decentralized applications covering a variety of categories and subsectors, including borrow/lend protocols, decentralized exchanges, social applications, web3 gaming, tokenized assets, AI agents, decentralized physical infrastructure networks, and many more. As such, the Solana network expands blockchain use well beyond just a peer-to-peer money system.
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The Solana protocol introduced the proof-of-history timestamping mechanism. Proof-of-history is not a consensus mechanism, but a cryptographic clock that enables greater organization without extensive communication, thereby increasing throughput. Proof-of-history enables leaders to know when it’s their turn to produce a block, rather than requiring the entire network to first come to an agreement on the prior block before the leader can begin their work.
In addition to the proof-of-history mechanism, the Solana network uses a proof-of-stake consensus mechanism to incentivize SOL holders to validate transactions. Unlike proof-of-work, in which miners expend computational and energy resources to be the miner to propose a block and receive the block reward, in proof-of-stake, validators pledge or “stake” coins, perform duties such as proposing or validating blocks, and receive staking rewards generally in proportion to the amount of coins staked. A validator that performs its duties poorly, whether maliciously or unintentionally, would receive fewer or no rewards. Proof-of-stake is viewed as more energy efficient and scalable than proof-of-work. Proof-of-history combined with a proof-of-stake consensus model are some of the components on Solana that enable high throughput and low-latency transaction processing.
Overview of the Solana Network
In order to own, transfer or use SOL directly on the Solana network on a peer-to-peer basis (as opposed to through an intermediary, such as a custodian or centralized exchange), a person generally must have internet access to connect to the Solana network and set up a wallet, which is the software that safeguards a user’s keypair (public key plus secret key). SOL transactions may be made directly between end-users without the need for an intermediary. To transact on the Solana network, a user, typically through an application such as a wallet or smart contract, will board the transaction to the current leader, who will organize the transactions into shards before the network processes and validates such transactions. Using cryptography and its proof-of-stake consensus mechanism, the Solana network can come to a shared state of the network in a decentralized fashion and without a centralized leader. Blocks are built on top of prior ones by subsequent leaders, continuing the process.
Prior to transacting on Solana, a user generally must first install on his computer or mobile device a software program that will allow the user to generate a private and public key pair such as a wallet. The wallet also enables the user to connect to the Solana network, interact with decentralized applications, and transfer or swap tokens with other users or applications.
Each user has his own key pair that is stored in such software, like a wallet. To receive SOL in a peer-to-peer transaction, the SOL recipient must provide its public key to the party initiating the transfer. This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the payor so that cash may be wired to the recipient’s account. The payor approves the transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient’s public key with the private key of the address from where the payor is transferring the SOL. The recipient, however, does not make public or provide to the sender its private key (though the network can still verify the validity of the signature – i.e. that it was signed by the holder of the private key – using cryptography). With cold storage, our Custodian maintains all of the private keys.
Neither the recipient nor the sender reveal their private keys in a peer-to-peer transaction because the private key authorizes transfer of the funds in that address to other users. Therefore, if a user loses their private key, the user may permanently lose access to the SOL contained in the associated address. Likewise, SOL is irretrievably lost if the private key associated with them is deleted and no backup has been made. When sending SOL, a user’s Solana network software program must validate the transaction with the sender’s associated private key. In addition, since every computation on the Solana network requires processing power, there is a mandatory transaction fee involved with the transfer that is paid by the payor. The resulting digitally validated transaction is sent by the user’s Solana network software program to the Solana network validators to allow transaction confirmation.
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Solana network validators record and confirm transactions when they validate and add blocks of information to the Solana blockchain. When a validator is selected to validate a block, it creates that block, which includes data relating to (i) the verification of newly submitted and accepted transactions and (ii) a reference to the prior block in the Solana blockchain to which the new block is being added. The validator becomes aware of outstanding, unrecorded transaction requests through peer-to-peer data packet transmission and distribution discussed above.
Upon the addition of a block of SOL transactions, the Solana network software program of both the spending party and the receiving party will show confirmation of the transaction on the Solana blockchain and reflect an adjustment to the SOL balance in each party’s Solana network public key, completing the SOL transaction. Once a transaction is confirmed on the Solana blockchain, it is irreversible.
Some SOL transactions are conducted “off-blockchain” and are therefore not recorded on the Solana blockchain. These “off-blockchain transactions” involve the transfer of control over, or ownership of, a specific digital wallet holding SOL or the reallocation of ownership of certain SOL in a pooled-ownership digital wallet, such as a digital wallet owned by a digital asset trading platform. If a transaction takes place through a centralized digital asset exchange or a custodian’s internal books and records, it is not broadcast to the Solana network or recorded on the Solana blockchain. In contrast to on-blockchain transactions, which are publicly recorded on the Solana blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain transactions are not truly SOL transactions in that they do not involve the transfer of transaction data on the Solana network and do not reflect a movement of SOL between addresses recorded on the Solana blockchain. For these reasons, off-blockchain transactions are not immutable or irreversible as any such transfer of SOL ownership is not cryptographically protected by the protocol behind the Solana network or recorded in, and validated through, the blockchain mechanism.
Since inception, transaction fees on the Solana Network have comprised of a fixed rate of 0.000005 SOL per transaction, plus a variable fee component based on the computation resources used during the transaction. SOL holders can also pay an additional prioritization fee to expedite their transaction.
Validators
In proof-of-stake, validators risk or stake coins to be randomly selected to validate transactions and are rewarded for performing their responsibilities and behaving in accordance with protocol rules. Malfunctions that cause validators to go offline and, in turn, inhibit them from performing their duties can result in financial penalties. Any malicious activity, such as making incorrect attestations or otherwise violating protocol rules results may result in lower rewards or the lost opportunity to gain rewards. The penalty varies depending on the type of offense and correlation to potential offenses by other validators.
Validators are typically professional operations that design and build dedicated machines and data centers, including “clusters,” which are groups of validators that act cohesively and combine their processing to confirm transactions. When a validator confirms a transaction, the validator and any associated stakers receive a fee. During the course of ordering transactions and validating blocks, validators may be able to prioritize certain transactions in return for increased transaction fees, an incentive system known as “Maximal Extractable Value” or “MEV.” For example, in blockchain networks that facilitate DeFi protocols in particular, such as the Solana network, users may attempt to gain an advantage over other users by offering greater transaction fees.
Validators less commonly capture MEV in the Solana network because, unlike the Ethereum network, it does not publicly expose transactions before they are accepted by a validator.
Staking rewards on the Solana network are determined by the protocol and are distributed to validators and their associated stakers based on the proportion of their stake relative to the total active stake in the network. The rewards are funded by inflationary issuance of new tokens and transaction fees collected on the network. The specific amount each validator and staker receives depends on, among other things, their share of the total stake, the validator’s uptime and performance, and the overall network conditions.
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The historical range of staking rewards on the Solana network has varied due to differing levels of network congestion and protocol parameters. The actual annualized reward rate has fluctuated over time, reflecting changes in network activity, inflation rates, and protocol adjustments.
Staking rewards on Solana are distributed at regular intervals. At the end of each epoch, with one epoch being roughly two days, the reward is calculated. The reward is automatically distributed at the beginning of the subsequent epoch. This regular reward frequency ensures that participants receive their share of rewards in a timely manner, reflecting their contribution to network security and transaction validation.
How We Purchase or Sell Digital Assets
Our Management team reviews the Company’s short-term obligations and excess cash available to dedicate to the Treasury Strategy. When it is determined that the Company has excess cash available to dedicate to the Treasury Strategy, we deploy that capital into one of our custodians and through acquisition strategies with the custodians and our asset manager. We acquire the SOL over several days or weeks to maximize the number of SOL that is acquired with the capital deployed. If it is determined that the treasury needs to liquidate part of its SOL, the same process of selling the SOL into the market would be used. The Company has not reduced its treasury or sold any of its SOL staking rewards to date.
Use of Custodians and Storage of SOL Tokens
We do not self-custody and only utilize third-party qualified custodians to hold our Solana. We use qualified custodians that utilize risk management and operational best practices around items like hot vs. cold storage, access controls, custody technology, insurance, etc. Our primary custodian is BitGo Trust Company, Inc. (“BitGo”). We also maintain a custodial relationship with Coinbase, Inc. and are in the process of distributing our treasury to different custodians and onboarding other qualified custodians to ensure that we mitigate our Solana treasury risk through the use of several qualified custodians.
Storage of Our Digital Assets in our SOL Treasury
The Custodians
The Custodians are responsible for safekeeping all of the SOL owned by the Company. We maintain multiple Custodians to reduce the risk of a single failure and we plan to expand to additional custodians as our Treasury grows. The Custodian accounts are all opened by the Company, this segregates our assets into an individual custodian account owned by the Company and access is monitored and controlled by the Company. Our Asset Management Company is given access to the Custodian accounts with established controls to ensure transactions require consensus of a minimum of two individuals when assets are being transferred between wallets and additional controls if an asset of the Treasury is moved out of the Custodians control. The assets go through the Custodians Trust Company, which maintains its own insurance and is regulated by their respective state where the trust is incorporated in.
Our primary custodian is currently BitGo Trust Company, Inc. a South Dakota corporation (“BitGo”) and is regulated by the state of South Dakota. On May 1, 2025, we entered into a Custodial Services Agreement with BitGo (the “BitGo Agreement”) to hold our digital currency. The term of the BitGo Agreement is for one year with successive one-year renewals unless prior notice of non-renewal is given by either party. The Company pays BitGo a monthly digital asset storage fee based upon the market value of the assets in storage, plus $500. The BitGo Agreement is terminable by either the Company or BitGo on thirty days’ notice as a result of a breach of the Agreement and may be suspended by BitGo if the Company violates the intended use of the account or due to a change in the applicable law, litigation or bankruptcy.
Our secondary custodian is Coinbase Inc., a subsidiary of Coinbase Global, Inc., a Delaware corporation, which is primarily used for the acquisition of digital assets. On May 5, 2025, the Company entered into an Institutional Client Agreement with Coinbase (the “Coinbase Agreement”). The Coinbase Agreement is terminable at will by either the Company or Coinbase. The Company pays Coinbase its regularly scheduled fees based on the dollar trading volume over a thirty-day period. The Coinbase Agreement is terminable by either the Company or Coinbase on ten days’ notice as a result of a breach of the Agreement and may be suspended by Coinbase if the Company violates the intended use of the account or due to a change in the applicable law, governmental proceeding, litigation or bankruptcy. Coinbase may also close the Company’s account if it has been inactive for more than one year.
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BitGo maintains a $250,000,000 policy against loss, theft and misuse. Currently we have approximately $253,000,000 of treasury value at Bitgo, based on the SOL price of $202.51 per token. Coinbase has an insurance policy for any cash held in the account of $250,000. We currently have less than $250,000 of cash held at Coinbase and less than $6,000,000 in SOL value, based on the SOL price of $202.51 per token. At the current price of SOL as of the date of this report, these policies are not adequate to fully cover the full loss of our SOL.
Solana, as with all digital assets, can be highly volatile. Management reviews the account balances and the total value held with custodians to allocate the Company’s holdings between multiple accounts and custodians to mitigate risk. We do not use self-storage for any of the SOL treasury assets.
Private keys are generated by the Custodian in key generation ceremonies at secure locations using offline devices that have never been connected to a network. Private keys are generated according to detailed procedures using specialized offline devices and within these secure facilities to mitigate risk of hacks, errors, or other unintended external exposure. Key ceremony processes are highly controlled, require segregation of duties across multiple parties and are reviewed and witnessed by designated oversight personnel. Thorough validations and signoffs are performed to verify the integrity and security of key generation ceremonies.
The Custodians hold a majority of SOL in cold storage and provides a user interface for the Company to manage the allocation of SOL between cold and hot storage for the wallets. The Company maintains more than 98% of its SOL treasury in cold wallets.
The Custodians have multiple, redundant cold storage sites, which are geographically distributed including sites within the United States. Cold storage locations of the Custodian are monitored by 24x7 on-site security, video surveillance and alarms, hardened room structures, and access to these facilities is controlled by multi-person controls, multi-team access rules, and multi-factor authentication. The locations of the cold storage sites may change at the discretion of the Custodian and are kept confidential by the Custodian for security purposes. Transactions from cold to hot storage require physical access, according to the above controls, to one or more cold storage facilities, as well as systematically enforced approvals and integrity verifications, before the secure device can be used to cryptographically complete the transaction. At no point during this process is the private key removed from the secure device(s) nor the cold storage facility. Once these security processes have been completed, a transfer on the Solana network can be executed, as signed using the private keys held offline in cold storage.
The Custodians also maintain geographically dispersed backups of private keys, which are cryptographically generated into shards and stored in separate locations; multiple locations must be accessed to reconstruct a single key. The storage facilities are highly secured, and include 24x7 on-premises security presence, video surveillance, and alarms for unexpected entry. Access to facilities is controlled by multi-person controls, multi- team access rules, and multi-factor authentication.
All of our Custodians have SOC type 2 reports that the Company has reviewed and we get regular bridge reports from our Custodians to help ensure the controls are being maintained. Our Custodians maintain their own insurance policies to cover our loss, which is in addition to the policies that we maintain ourselves. We currently have two qualified Custodians that we have approved for our treasury use and we are in the process of onboarding a third as part of our risk management process.
The Company is charged for storage fees, staking fees and transaction fees for services specifically requested by the Company or the Asset Management Company. Except as set forth above, the contract terms of the agreements are typically for one to three years and can be terminated upon 30 day notice and payment of all fees due and one month of additional fees.
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SOL – the Token of the Solana Blockchain
Solana (SOL) is the native token of the Solana blockchain. According to Solana Compass – a popular website covering the Solana ecosystem that also runs a Solana validator – Solana was created with an initial supply of 500m SOL, though much of the initial supply was locked or earmarked for various use cases such as for the community, investors, foundation, team, etc. New Solana tokens are brought into existence primarily through inflationary rewards distributed to validators (and delegators). Solana currently has a total supply of 606.5m SOL, a circulating supply of 538.2m, and no maximum supply. The Solana staking yield is made up of three primary components: inflationary rewards, transaction/priority fees, and maximal extractable value (MEV). Inflationary rewards started out at 8.0%, currently sit at 4.3%, and will fall 15% every epoch-year until it reaches a long-term floor of 1.5%. There are currently 27.2m locked SOL, representing 6.7% of the total SOL supply with various vesting schedules. Historically, 50% of all transaction fees were burned (with the other 50% going to the validator), but now all transaction fees go to the validator after the passage and adoption of Solana Improvement Document 96 (SIMD-96).
How SOL is Used
SOL is used as part of Solana’s proof-of-stake consensus mechanism. In general, proof-of-stake blockchains have block producers called validators that run nodes, bond or stake the protocol’s native token, propose blocks when chosen to do so, and validate/sign the transactions and blocks of others when not. Validators are chosen to produce a block in proportion to their stake, which makes it extremely costly for bad actors to attempt to control the network and add invalid transactions to the blockchain. Validators receive staking rewards for the work they perform, which further incentivizes validators to behave properly, as they would otherwise miss out on such rewards. Other proof-of-stake networks often “slash” some or all of a validator’s stake if it intentionally or unintentionally performs its duties poorly, for example, by double-signing a transaction, though Solana has not implemented slashing at this time. In addition to its use within consensus, SOL is also a “gas token”, meaning that users of the Solana blockchain pay SOL to validators (and delegators) as compensation for processing their transactions. As such, the value of SOL may increase if/as the Solana blockchain sees greater usage.
We see three particularly notable items giving Solana a technical advantage compared to many smart contract blockchain peers. First, Solana’s proof-of-history gives validators a notion of time and enables them to produce blocks when it’s their turn without requiring the network to first agree upon the current block. This results in immense speed advantages. Second, unlike peer blockchains that often use single-threaded virtual machines, Solana enables parallel transaction execution to increase throughput and advantage of future hardware improvements resulting from an increasing CPU core counts. Lastly, Solana optimized for speed and security, and is naturally growing into decentralization as hardware and bandwidth costs fall over time, optimally positioning it well along the Blockchain Trilemma.
The Solana Ecosystem
As one of the first “second-generation” high performance blockchains, Solana uniquely enjoys both the best-in-class technology described above, as well as strong network effects that have attracted a large, growing, and vibrant ecosystem of users, developers, and decentralized applications. Indeed, while Solana is focused on bringing global finance onchain (commonly referred to as “onchain Nasdaq” or “Internet Capital Markets”), Solana’s performance and technical capabilities enable a plethora of use cases from decentralized finance (“DeFi”) to decentralized physical infrastructure networks (“DePIN”), AI agents, social media, gaming, stablecoins, real-world assets (“RWA”s), and more. Moreover, according to Electric Capital’s 2024 Developer Report, Solana is the #1 ecosystem for new developers, growing 83% in 2024, with this metric often considered a leading indicator of blockchain growth. Lastly, we note that Solana often leads all blockchains in key metrics such as daily active users, decentralized application revenues, and decentralized exchange volumes, sometimes putting up better metrics than all other chains combined.
Asset Management Agreement
On April 23, 2025, the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with GSR Strategies LLC (the “Asset Manager”), pursuant to which the Asset Manager shall provide discretionary investment management services with respect to the Company’s cryptocurrency treasury (the “Account Assets”). According to the Asset Management Agreement, the Asset Manager will invest the Account Assets, including any funds raised in accordance with the funding allocation provided in the Asset Management Agreement, principally with a long-only strategy primarily in Solana, including staking (and restaking0 Solana to improve returns (the “SOL Treasury Strategy”).
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The Company shall pay the Asset Manager an asset-based fee (the “Asset-based Fee”) equal to 1.75% per annum, of the assets under the Asset Manager’s management, which shall be calculated and paid in advance as of the first business day of each calendar month, as determined by the Asset Manager in a commercially reasonable manner and in good faith, by reference to, where applicable, available prices on Coinbase as of 12:00 UTC on such day. For any asset prices not available on Coinbase, the Asset Manager shall determine the value of such assets in a commercially reasonable manner and in good faith by reference to reputable industry sources.
As compensation for services rendered by the Asset Manager, the Company issued warrants (the “GSR Warrants”) to the Asset Manager ( to purchase 2,192,982 shares of Common Stock at various prices per share of common stock as follows: (i) 877,193 shares of Common Stock at an exercise price of $2.28 per share of Common Stock; (ii) 438,596 shares of Common Stock at an exercise price of $3.42 per share of Common Stock; (iii) 438,596 shares of Common Stock at an exercise price of $4.56 per share of Common Stock; (iv) 438,597 shares of Common Stock at an exercise price of $5.70 per share of Common Stock.
The Asset Management Agreement will, unless early terminated in accordance with its terms, continue in effect until the twentieth (20th) anniversary of April 23, 2025. The Asset Management Agreement may be terminated by the Company without cause solely upon a two-thirds majority vote of the Company’s common stockholders to terminate the SOL Treasury Strategy. If the Company terminates the Asset Management Agreement for any other reason other than for cause, the Company shall pay the Asset Manager an early termination fee (the “Termination Fee) in the amount equal or greater of (i) five (5) times the aggregate amount of the management fees paid by the Company to the Asset Manager over the prior ten (10) year period, or (ii) $15 million. The Asset Management Agreement may be terminated for Cause (i) by the Company upon at least thirty (30) days prior written notice to the Asset Manager and (ii) by the Asset Manager upon at least sixty (60) days prior written notice to the Company.
The Brands
As a brand owner specializing in the development, manufacturing, and distribution of consumer products, we have developed or purchased certain brands that we continue to develop.
LuckyTail
LuckyTail, where at-home care meets innovation. We connect pet owners with the products they need to simplify and improve at-home wellness and grooming care for their beloved pets, empowering pet parents to provide their cherished furry companions with the pampering they deserve in the comfort of their own space. LuckyTail products consist of its flagship nail grinder and other pet related products.
PRAX
At PRAX, we fuel modern go-getters to achieve their best selves through innovative energy solutions. Powered by paraxanthine—an advanced alternative to caffeine, our mission is to support your hustle and power your ambitions. Energize better, perform smarter, fuel differently.
Cure Mushrooms
At Cure Mushrooms, we have harnessed the extraordinary benefits of nature’s most powerful superfood: functional mushrooms. Our suite of premium mushroom extracts are meticulously crafted to elevate overall well-being, offering a wide spectrum of health benefits and a holistic approach to everyday wellness. From fortifying your immune system, to sharpening cognition, to combating the rigors of daily stress, our products are designed to deliver full-body wellness and convenience with every serving.
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Moonwalkr
At Moonwlkr, we craft cannabinoid experiences that take you beyond the ordinary. By combining award-winning natural flavors and one-of-a-kind blends, we invite you to feel the thrill of the unknown, the calm of weightless relaxation, or the anticipation of a new adventure.
Gumi Labs
At Gumi Labs we manufacture gummies and other products supporting our health and wellness products, including those products manufactured with hemp ingredients. Our manufacturing facility has been moved to Florida and is at full capacity as of August of 2024.
Upexi Distribution
At Upexi Distribution, we manage the warehousing and logistic needs of the Company and provide storage, consolidation, assembly, Amazon preparation, distribution and fulfilment services to our brands and our manufacturing operation.
Our History
The Company operates manufacturing and/or distribution centers supporting health and wellness products, including those products manufactured with hemp ingredients and our overall distribution operations.
July 2020 - the Company purchased Infusionz LLC. Infusionz was a similar business in the manufacturing and distribution of products and owned certain product brands that we believe could be expanded through the merger.
June 2021 – Upexi, Inc. became a listed Company on the NASDAQ stock exchange.
August 2021 - The Company purchased the assets of VitaMedica Corporation, a California corporation (VitaMedica). VitaMedica is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.
October 2021 - The Company purchased Interactive Offers, LLC, a Delaware limited liability company. Interactive provides programmatic advertising with its SaaS (Software as a Service) platform which allows for programmatic advertisement placement automatically on any partners’ sites from a simple dashboard.
April 2022 – The Company purchased 55% of Cygnet Online, LLC, a Delaware limited liability company (“Cygnet”). Cygnet operates a warehouse and distribution center for the management of day-to-day operations for product liquidation through Amazon and other on-line resellers.
August 2022 – The Company purchased the assets to the brand LuckyTail. The acquisition of LuckyTail provided the Company with a foothold in the pet care industry and a strong presence on Amazon and its eCommerce store, offering nutritional and grooming products domestically and internationally.
October 2022 - The Company purchased E-Core Technology, Inc. d/b/a New England Technology, Inc. (“E-Core”), a Florida corporation. E-Core distributes non-owned branded products to national retail distributors and has branded products in the toy industry that E-Core sells direct to consumers through online sales channels and to national retail distributors.
October 2022 – The Company sold all rights to Infusionz brands and the manufacturing of certain private label business. Infusionz was originally purchased by the Company in July of 2020.
July 2023 – The Company notified the buyer of the Infusionz brands and the manufacturing business of the defaults and notified the buyer that all obligations and undertakings to the buyer are terminated. The Company started manufacturing again for brands owned by the Company to ensure there was no interruption to the supply chain of the products.
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August 2023 – The Company purchased the remaining ownership of Cygnet.
August 2023 – The Company sold one hundred percent (100%) of the issued and outstanding equity of its wholly owned subsidiary Interactive Offers, LLC.
May 2024 – The Company sold its equity interest in the wholly owned subsidiary VitaMedica, a Nevada corporation.
June 2024 – The Company sold its equity interest in the wholly owned subsidiary E-Core Technology, Inc. d/b/a New England Technology, Inc. a Florida corporation.
January 2025 – The Company announced intention of investments into cryptocurrency.
April 2025 - The Company consummated a $100 million private placement offering and used the net proceeds from the offering to fund its treasury strategy.
July 2025 – The Company consummated a $50 million private placement offering and a $151.2 million convertible note offering in consideration for the exchange of Solana to continue to build its SOL treasury strategy.
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Regulations
Digital Asset Treasury
The laws and regulations applicable to Solana and digital assets are evolving and subject to interpretation and change.
Governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as the U.S., digital assets are subject to overlapping, uncertain and evolving regulatory requirements.
As digital assets have grown in both popularity and market size, the U.S. Executive Branch, Congress and a number of U.S. federal and state agencies, including the Financial Crimes Enforcement Network, the CFTC, the SEC, the Financial Industry Regulatory Authority, the Consumer Financial Protection Bureau, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS and state financial regulators, have been examining the operations of digital asset networks, digital asset users and digital asset exchanges, with particular focus on the extent to which digital assets can be used to violate state or federal laws, including to facilitate the laundering of proceeds of illegal activities or the funding of criminal or terrorist enterprises, and the safety and soundness and consumer-protective safeguards of exchanges or other service-providers that hold, transfer, trade or exchange digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries have issued rules or guidance regarding the treatment of digital asset transactions and requirements for businesses engaged in activities related to digital assets.
Depending on the regulatory characterization of Solana, the markets for cryptocurrency in general, and our activities in particular, our business and our Solana acquisition strategy may be subject to regulation by one or more regulators in the United States and globally. Ongoing and future regulatory actions may alter, to a materially adverse extent, the nature of digital assets markets, the participation of industry participants, including service providers and financial institutions in these markets, and our ability to pursue our Solana strategy. Additionally, U.S. state and federal and foreign regulators and legislatures have taken action against industry participants, including digital assets businesses, and enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming from digital assets activity. U.S. federal and state energy regulatory authorities are also monitoring the total electricity consumption of cryptocurrency mining, and the potential impacts of cryptocurrency mining to the supply and dispatch functionality of the wholesale grid and retail distribution systems. Many states legislative bodies have passed, or are actively considering, legislation to address the impact of cryptocurrency mining in their respective states.
The CFTC takes the position that some digital assets fall within the definition of a “commodity” under the Commodities Exchange Act of 1936, as amended, or CEA. Under the CEA, the CFTC has broad enforcement authority to police market manipulation and fraud in spot digital assets markets in which we may transact. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions involving digital asset commodities that do not utilize margin, leverage, or financing. In addition, CFTC regulations and CFTC oversight and enforcement authority apply with respect to futures, swaps, other derivative products and certain retail leveraged commodity transactions involving digital asset commodities, including the markets on which these products trade.
In addition, because transactions in Solana provide a degree of anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse, could lead to greater regulatory oversight of Solana and Solana platforms, and there is the possibility that law enforcement agencies could close Solana platforms or other Solana-related infrastructure with little or no notice and prevent users from accessing or retrieving Solana held via such platforms or infrastructure.
As noted above, activities involving Solana and other digital assets may fall within the jurisdiction of more than one financial regulator and various courts and such laws and regulations are rapidly evolving and increasing in scope.
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Consumer Products Business
In the United States, hemp products that are manufactured by Upexi are regulated by the U.S. Food and Drug Administration, the Federal Trade Commission, the United States Department of Agriculture (“USDA”), and various state agencies within the individual states. As an initial matter, the hemp products manufactured and distributed by Upexi must meet the requirements of the Agricultural Improvement Act of 2018 (the “Farm Bill”). Under the Farm Bill, all hemp products must contain no more than 0.3% of 9-delta-tetraydrocannabidiols (“9-delta”) on a dry weight basis. To ensure compliance with this provision, Upexi requires all hemp products it manufactures and distributes to contain no more than 0.3% of all tetraydrocannabidiols not simply 9-delta. The Farm Bill also requires that Upexi only use hemp manufacturers/producers that are duly licensed under state law or pursuant to the regulations issued by the USDA. Consequently, the Company processes, develops, manufactures, and sells its products pursuant to the Farm Bill. CBD products manufactured and distributed by Upexi Inc. must also meet the requirements of the federal Food, Drug, and Cosmetic Act (“FDCA”) and the federal Food and Drug Administration’s (the “FDA”) regulations implementing the FDCA. While neither the FDCA nor FDA has specific provisions that relate to the marketing of hemp products, the products are subject to the general adulteration and labeling provisions of the FDCA and FDA’s regulations depending on whether the product is marketed as a cosmetic, dietary supplement or food. The permissibility of hemp products containing cannabinoids remains in a state of flux. The FDA has issued guidance titled “FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD)” pursuant to which the FDA has taken the position that cannabidiol (“CBD”) is prohibited from use as an ingredient in a food or beverage or as a dietary ingredient in or as a dietary supplement based on several provisions of the FDCA. In the definition of “dietary supplement” found in the FDCA at Section 201(ff), an article authorized for investigation as a new drug, antibiotic, or biological for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, is excluded from the definition of dietary supplement. A similar provision in the FDCA at 301(ll) makes it a prohibited act to introduce or deliver into commerce any food with a substance that was investigated as a new drug prior to being included in a food. There are no similar exclusions for the use of CBD in non-drug topical products, as long as such products otherwise comply with applicable laws. The FDA created a task force to address the further regulation of CBD and other cannabis-derived products and is currently evaluating the applicable science and pathways for regulating CBD and other cannabis-derived ingredients.
Additionally, various states have enacted state-specific laws pertaining to the handling, manufacturing, labeling, and sale of CBD and other hemp products. Compliance with state-specific laws and regulations could impact our operations in those specific states. It is important to note that FDA has not taken any specific positions regarding the regulatory status of other cannabinoids, for example CBDA, CBDG, and CBDN. Finally, the Federal Trade Commission is the agency that is vested with ensuring that all marketing claims for hemp products are truthful and non-misleading.
Our Company
Our Treasury Strategy
The Company has adopted a treasury policy under which the principal holding in its treasury reserve on the balance sheet will be allocated to digital assets, and specifically long term strategy of holding Solana (“SOL”) by applying a proven public-market treasury model to an asset that we believe is earlier in its lifecycle, structurally reflexive, and vastly underexposed.
Our Products
Upexi is a brand owner specializing in the development, manufacturing, and distribution of consumer products. We reach consumers through our direct-to-consumer network, wholesale partnerships, and major third-party platforms like Amazon.
The market, customers and distribution methods for eCommerce products are large and diverse. While Amazon remains the largest eCommerce channel, others are carving out a big chunk of the market, including Walmart, eBay, and Etsy. More opportunities are popping up for sellers as well. Being able to navigate multiple marketplaces is a key to our success and helps reach different demographics and consumers with specific buying behaviors.
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Our target customers are first and foremost end consumers via internet sales; however, we see growth opportunities in direct-to-consumer retail stores, cooperatives, affiliate sales and master distributors. As we continue to develop our business, these markets may change, be re-prioritized or eliminated as management responds to consumer and regulatory developments.
Our Competitive Strengths
We attribute our success to our consumer products by controlling each phase of the process from manufacturing to order fulfillment.
As the manufacturer of our primary products, we can control our costs and improve profitability at each step of the process, starting with the development of new products. Our products take priority in terms of manufacturing, give us a higher inventory turnover rate, and accelerate the timeline for new product launches. In addition, we can adjust to market demands and change production schedules to ensure we maintain optimized inventory levels.
Our primary sales channel is our eCommerce site and our marketing team is led by an expert in online direct to consumer sales as she has been with the brand since its inception. We have the ability to direct product manufacturing and increase sales with special promotions and product variations with little or no delay in bringing the product to market.
Our direct-to-consumer focus reduces the overall supply costs as we do not have retail outlets or maintain distribution networks for small retail operations.
Our executive team comes from a background in logistics, with CEO, Allan Marshall, the founder of XPO Logistics (formerly known as Segmentz, Inc.). With increased shipping costs affecting online retailers, our strength is understanding this and finding ways to lower our costs and overhead, thus increasing profit margins on all our products.
Our Growth Strategy
Our growth will focus on the expansion of our brands portfolio through organic growth and optimization of our supply chain.
Direct-to-Consumer expansion.Our direct-to-consumer business is expected to be our growth driver for the next several years with additional brands and products.
Talent acquisition.A large part of our acquisition process is to not only evaluate the brand/product offerings, but to understand the team that has been responsible for its success. In a tough market for hiring, this has proven to be a strategic method for bringing on talent. We not only get a great brand, but look to retain the personnel, often the heartbeat of said brand, give them resources, and even utilize them for other brands that we have launched internally or acquired. We strongly believe that continued success relies on a growing team of experts across various industries.
Competition
There is heavy competition in our products. We are able to carve out certain niche markets within the industry as there are few competitors that control their manufacturing to distribution as we do. Our goal is to compete through our product delivery and introduction of new products that we manufacture and deliver directly to the consumer giving us an advantage on our competitors. We will focus on profitability, and grow efficiently, without the requirement of additional capital.
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Employees
The Company has 59 full-time employees as of June 30, 2025 working out of its headquarters in Tampa, Florida, its Odessa, Florida, manufacturing facility, its distribution warehouse in Tampa Florida or individuals’ home-based offices.
Emerging Growth Company Status
We are an emerging growth company under the Jumpstart our Business Startups (JOBS) Act of 2012. We shall continue to be deemed an emerging growth company until the earliest of:
1. | The last day of our fiscal year during which our total annual gross revenues exceed $1,235,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics); | |
2. | The last day of our fiscal year in which the fifth anniversary of the first sale of our common equity securities pursuant to an effective IPO registration statement occurred; | |
3. | The date on which the company has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or | |
4. | The date on which the company qualifies as a ‘large accelerated filer’, as defined in section 240.12b-2(2) of title 46, Code of Federal Regulations, or any successor thereto. |
As an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company, we are also exempt from Section 14A and B of the Securities Exchange Act of 1934, which require shareholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a smaller reporting company that qualifies as a non-accelerated filer.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should consider carefully the risks, uncertainties and other factors described below, in addition to the other information set forth in this Form 10-K, before making an investment decision. Any of these risks, uncertainties and other factors could materially and adversely affect our business, financial condition, results of operations, cash flows or prospects. In that case, the market price of our common stock could decline, and you may lose all or part of your investment in our common stock. See also “Cautionary Statement Regarding Forward-Looking Statements.”
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Risks Related to Upexi
Upexi does not anticipate paying any dividends on its common stock.
No dividends have been paid on Upexi’s common stock. Upexi does not intend to pay cash dividends on its common stock in the foreseeable future, and anticipate that profits, if any, received from operations will be reinvested into its business. Any decision to pay dividends will depend upon its financial condition, operating results, and current and anticipated cash needs.
You may experience additional dilution in the future.
To raise additional capital, Upexi may in the future offer additional securities, including shares of its Common Stock, at prices that may not be the same as the price per share in this offering. Upexi may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which Upexi sells additional shares of common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by investors in prior offerings. Furthermore, sales of a substantial number of shares of Upexi’s common stock in the public markets, or the perception that such sales could occur, could depress the market price of Upexi’s common stock.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of Upexi’s stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain limitations. In general, pursuant to recent amendments to Rule 144, a non-affiliate stockholder who has satisfied a six-month holding period may, under certain circumstances, sell its shares, without limitation. Any substantial sale of Upexi’s common stock pursuant to Rule 144 or pursuant to any resale (including sales by investors of securities purchased in prior offerings) may have a material adverse effect on the market price of the common stock.
Our limited operating history makes it difficult for potential investors to evaluate our business prospects and management.
The Company was incorporated on September 5, 2018, and only commenced operations thereafter. Accordingly, we have a limited operating history upon which to base an evaluation of our business and prospects. Operating results for future periods are subject to numerous uncertainties, and we cannot assure you that the Company will achieve or sustain profitability in the future.
The Company’s prospects must be considered in light of the risks encountered by companies in the early stage of development, particularly companies in new and rapidly evolving markets. Future operating results will depend upon many factors, including our success in attracting and retaining motivated and qualified personnel, our ability to establish short term credit lines or obtain financing from other sources, our ability to develop and market new products, our ability to control costs, and general economic conditions. We cannot assure you that the Company will successfully address any of these risks. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
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If we are unable to protect our intellectual property rights, our competitive position could be harmed.
Our commercial success will depend in part on our ability to obtain and maintain appropriate intellectual property protection in the United States and foreign countries with respect to our proprietary formulations and products. Our ability to successfully implement our business plan depends on our ability to build and maintain brand recognition using trademarks, service marks, trade dress and other intellectual property. We may rely on trade secrets, trademark, patent and copyright laws, and confidentiality and other agreements with employees and third parties, all of which offer only limited protection. The steps we have taken and the steps we will take to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights. If our efforts to protect our intellectual property are unsuccessful or inadequate, or if any third party misappropriates or infringes on our intellectual property, the value of our brands may be harmed, which could have a material adverse effect on the Company’s business and prevent our brands from achieving or maintaining market acceptance. Protecting against unauthorized use of our trademarks and other intellectual property rights may be expensive, difficult and in some cases not possible. In some cases, it may be difficult or impossible to detect third-party infringement or misappropriation of our intellectual property rights and proving any such infringement may be even more difficult.
We may not be able to effectively manage growth.
As we continue to grow our business and develop products, we expect to need additional research, development, managerial, operational, sales, marketing, financial, accounting, legal and other resources. The Company expects its growth to place a substantial strain on its managerial, operational and financial resources. The Company cannot assure that it will be able to effectively manage the expansion of its operations, or that its facilities, systems, procedures or controls will be adequate to support its operations. The Company’s inability to manage future growth effectively would have a material adverse effect on its business, financial condition and results of operations.
Our management may not be able to control costs in an effective or timely manner.
The Company’s management has made reasonable efforts to assess, predict and control costs and expenses. However, the Company only has a brief operating history upon which to base those efforts. Implementing our business plan may require more employees, capital equipment, supplies or other expenditure items than management has predicted. Likewise, the cost of compensating employees and consultants or other operating costs may be higher than management’s estimates, which could lead to sustained losses.
We expect our quarterly financial results to fluctuate.
We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including changes in:
| · | Demand for our products; |
| · | Our ability to obtain and retain existing customers or encourage repeat purchases; |
| · | Our ability to manage our product inventory; |
| · | General economic conditions, both domestically and in foreign markets; |
| · | Advertising and other marketing costs; and |
| · | Costs of creating and expanding product lines. |
As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of our stockholders.
We are subject to the reporting requirements of U.S. federal securities laws, which can be expensive.
We are subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited consolidated financial statements to stockholders will cause our expenses to be higher than they would have if we had remained privately held. In addition, it may be time-consuming, difficult and costly for us to develop and implement the corporate governance requirements, internal controls and reporting procedures required by the federal securities laws. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, and results of operations. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
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Cybersecurity breaches of our IT systems could degrade our ability to conduct our business operations and deliver products and services to our customers, delay our ability to recognize revenue, compromise the integrity of our software products, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.
We increasingly depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and product development activities to our marketing and sales efforts and communications with our customers and business partners. Computer programmers may attempt to penetrate our network security, or that of our website, and misappropriate our proprietary information or cause interruptions of our service. Because the techniques used by such computer programmers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. We have also outsourced a number of our business functions to third-party contractors, including our manufacturers and logistics providers, and our business operations also depend, in part, on the success of our contractors’ own cybersecurity measures. Similarly, we rely upon distributors, resellers and system integrators to sell our products and our sales operations depend, in part, on the reliability of their cybersecurity measures. Additionally, we depend upon our employees to appropriately handle confidential data and deploy our IT resources in a safe and secure fashion that does not expose our network systems to security breaches and the loss of data. Accordingly, if our cybersecurity systems and those of our contractors fail to protect against unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our business effectively could be damaged in a number of ways.
We may incur significant costs and require significant management resources to evaluate our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may have an adverse effect on our stock price.
As a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act, we will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and to include an internal control report. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such an evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities.
Increases in costs, disruption of supply or shortage of raw materials could harm our business.
We may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials in our business including industrial hemp, pecmate, pectin and other raw materials used in the product manufacturing process. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. Substantial increases in the prices for our raw materials increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased prices for our products.
Our failure to meet the continuing listing requirements of the NASDAQ Capital Market could result in a de-listing of our securities.
If we fail to satisfy the continuing listing requirements of NASDAQ, such as the corporate governance, stockholders’ equity or minimum closing bid price requirements, NASDAQ may take steps to delist our Common Stock. Such a delisting would likely have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase our Common Stock when you wish to do so. In the event of a delisting, we would likely take actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken by us would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our Common Stock from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.
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We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission, or SEC, and the NASDAQ. In addition, our management team will also have to adapt to the requirements of being a public company. We expect complying with these rules and regulations will substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly.
The increased costs associated with operating as a public company will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating results.
As a public company, we also expect that it may be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
We are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and a “smaller reporting company” within the meaning of the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our Common Stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this annual report and our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company, we are only required to provide two years of audited consolidated financial statements in this annual report. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Common Stock held by non-affiliates exceeds $700.0 million as of any December 31 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, after which, in each case, we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited consolidated financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares of Common Stock held by non-affiliates exceeds $250 million as of the prior the end of our second fiscal quarter ending December 31 of each year, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior to the end of our second fiscal quarter ending December 31 of each year. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our consolidated financial statements with other public companies difficult or impossible.
After we are no longer an “emerging growth company,” we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
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Risks Relating to Our Business and Industry
We operate in a highly competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
We operate in a highly competitive environment. Our competition includes all other companies that are in the business of producing or distributing hemp-based products for personal use or consumption. Many of our competitors have greater resources that may enable them to compete more effectively than us in the CBD industry. Some of our competitors have a longer operating history and greater capital resources, facilities and product line diversity, which may enable them to compete more effectively in this market. Our competitors may devote their resources to developing and marketing products that will directly compete with our product lines. The Company expects to face additional competition from existing competitors and new market entrants. If a significant number of new entrants enter the market in the near term, the Company may experience increased competition for market share and may experience downward pricing pressure on the Company’s products as new entrants increase production. Such competition may cause us to encounter difficulties in generating revenues and market share, and in positioning our products in the market. If we are unable to successfully compete with existing companies and new entrants to the market, our lack of competitive advantage will have a negative impact on our business and financial condition.
Unfavorable publicity or consumer perception of our products or similar products developed and distributed by other companies could have a material adverse effect on our reputation, which could result in decreased sales and fluctuations in our business, financial condition and results of operations.
We depend on consumer perception regarding the safety and quality of our products, as well as similar products marketed and distributed by other companies. Consumer perception of hemp-based products can be significantly influenced by adverse publicity in the form of published scientific research, national media attention or other publicity, which may associate consumption of our products or other similar products with adverse effects or question the benefits and/or effectiveness of our products or similar products. A new product may initially be received favorably, resulting in high sales of that product, but that level of sales may not be sustainable as consumer preferences change over time. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and may not be consistent with earlier favorable research or publicity. Unfavorable research or publicity could have a material adverse effect on our ability to generate sales.
Our failure to appropriately and timely respond to changing consumer preferences and demand for new products could significantly harm our customer relationships and have a material adverse effect on our business, financial condition and results of operations.
Our business is subject to changing consumer trends and preferences. Our failure to accurately predict or react to these trends could negatively impact on consumer opinion of us as a source for the latest products, which in turn could harm our customer relationships and cause us to lose market share. The success of our product offerings depends upon a number of factors, including our ability to:
| · | Anticipate customer needs; |
| · | Innovate and develop new products; |
| · | Successfully introduce new products in a timely manner; |
| · | Price our products competitively with retail and online competitors; |
| · | Deliver our products in sufficient volumes and in a timely manner; and |
| · | Differentiate our product offerings from those of our competitors. |
If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could be rendered obsolete, which could have a material adverse effect on our financial condition and results of operations.
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Future acquisitions or strategic investments and partnerships could be difficult to identify and integrate with our business, disrupt our business, and adversely affect our financial condition and results of operations.
We may seek to acquire or invest in businesses and product lines that we believe could complement or expand our product offerings or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not the acquisitions are completed. Future acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our financial position and results of operations. In addition, if an acquired business or product line fails to meet our expectations, our business, financial condition, and results of operations may be adversely affected.
Failure to successfully integrate acquired businesses and their products and other assets into our Company, or if integrated, failure to further our business strategy, may result in our inability to realize any benefit from such acquisition.
We expect to grow by acquiring relevant businesses. The consummation and integration of any acquired business, product or other assets into our Company may be complex and time consuming and, if such businesses and assets are not successfully integrated, we may not achieve the anticipated benefits, cost-savings or growth opportunities. Furthermore, these acquisitions and other arrangements, even if successfully integrated, may fail to further our business strategy as anticipated, expose our Company to increased competition or other challenges with respect to our products or geographic markets, and expose us to additional liabilities associated with an acquired business, technology or other asset or arrangement.
The failure to attract and retain key employees could hurt our business.
Our success also depends upon our ability to attract and retain numerous highly qualified employees. The loss of one or more members of our management team or other key employees or consultants could materially harm our business, financial condition, results of operations and prospects. We face competition for personnel and consultants from other companies, universities, public and private research institutions, government entities and other organizations. Our failure to attract and retain skilled management and employees may prevent or delay us from pursuing certain opportunities. If we fail to successfully fill many management roles, fail to fully integrate new members of our management team, lose the services of key personnel, or fail to attract additional qualified personnel, it will be significantly more difficult for us to achieve our growth strategies and success.
We have limited supply sources, and price increases or supply shortages of key raw materials could materially and adversely affect our business, financial condition and results of operations.
Our products are composed of certain key raw materials. If the prices of such raw materials increase significantly, it could result in a significant increase in our product development costs. If raw material prices increase in the future, we may not be able to pass on such price increases to our customers. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on our business, financial condition and results of operations.
The Company believes that its continued success will depend upon the availability of raw materials that permit the Company to meet its labeling claims and quality control standards. The supply of our industrial hemp is subject to the same risks normally associated with agricultural production, such as climactic conditions, insect infestations and availability of manual labor or equipment for harvesting. Any significant delay in or disruption of the supply of raw materials could substantially increase the cost of such materials, could require product reformulations, the qualification of new suppliers and repackaging and could result in a substantial reduction or termination by the Company of its sales of certain products, any of which could have a material adverse effect upon the Company. Accordingly, there can be no assurance that the disruption of the Company’s supply sources will not have a material adverse effect on the Company.
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Loss of key contracts with our suppliers, renegotiation of such agreements on less favorable terms or other actions these third parties may take could harm our business.
Most of our agreements with suppliers of our industrial hemp, including our key supplier contract, are short term. The loss of these agreements, or the renegotiation of these agreements on less favorable economic or other terms, could limit our ability to procure raw material to manufacture our products. This could negatively affect our ability to meet consumer demand for our products. Upon expiration or termination of these agreements, our competitors may be able to secure industrial hemp from our existing suppliers which will put the Company at a competitive disadvantage in the market.
There is limited availability of clinical studies.
Although hemp plants have a long history of human consumption, there is little long-term experience with human consumption of certain of these innovative product ingredients or combinations thereof in concentrated form. Although the Company performs research and/or tests the formulation and production of its products, there is limited clinical data regarding the safety and benefits of ingesting industrial hemp-based products. Any instance of illness or negative side effects of ingesting industrial hemp-based products would have a material adverse effect on our business and operations.
We face substantial risk of product liability claims and potential adverse product publicity.
Like any other retailer, distributor or manufacturer of products that are designed to be ingested, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused loss or injury. In the event we do not have adequate insurance or contractual indemnification, product liability claims could have a material adverse effect on the Company. The Company is not currently a named defendant in any product liability lawsuit; however, other manufacturers and distributors of hemp-based products currently are or have been named as defendants in such lawsuits. The successful assertion or settlement of any uninsured claim, a significant number of insured claims, or a claim exceeding the Company’s insurance coverage could have a material adverse effect on the Company.
We may be unable to attract and retain independent distributors for our products.
As a direct selling company, our revenue depends in part upon the number and productivity of our independent distributors. Like most direct selling companies, we experience high levels of turnover among our independent distributors from year to year, who may terminate their service at any time. Generally, we need to increase the productivity of our independent distributors and/or retain existing independent distributors and attract additional independent distributors to maintain and/or increase product sales. Many factors affect our ability to attract and retain independent distributors, including the following:
| · | publicity regarding our Company, our products, our distribution channels and our competitors; |
| · | public perceptions regarding the value and efficacy of our products; |
| · | ongoing motivation of our independent distributors; |
| · | government regulations; |
| · | general economic conditions; |
| · | our compensation arrangements, training and support for our independent distributors; and |
| · | competition in the market. |
Our results of operations and financial condition could be materially and adversely affected if our independent distributors are unable to maintain their current levels of productivity, or if we are unable to retain existing distributors and attract new distributors in sufficient numbers to maintain present sales levels and sustain future growth.
We could incur obligations resulting from the activities of our independent distributors.
We sell our products through a network of independent distributors. Independent distributors are independent contractors who operate their own business separately and apart from the Company. We may not be able to control certain aspects of our distributors’ activities that may impact our business. If local laws and regulations, or the interpretation thereof, change and require us to treat our independent distributors as employees, or if our independent distributors are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors under existing laws and interpretations, we may be held responsible for a variety of obligations that are imposed upon employers relating to their employees, including employment-related taxes and penalties, which could have a material adverse effect on our financial condition and results of operations. In addition, there is the possibility that some jurisdictions may seek to hold us responsible for false product or earnings-related claims due to the actions of our independent distributors. Liability for any of these issues could have a material adverse effect on our business, financial condition and results of operations.
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If our independent distributors’ failure to comply with applicable advertising laws and regulations could adversely affect our financial conditions and results of operations.
The advertisement of our products is subject to extensive regulations in the markets in which we do business. Our independent distributors may fail to comply with such regulations governing the advertising of our products. We cannot ensure that all marketing materials used by our independent distributors comply with applicable regulations, including bans on false or misleading product and earnings-related claims. If our independent distributors fail to comply with applicable regulations, we could be subjected to claims of false advertising, misrepresentation, significant financial penalties, and/or costly mandatory product recalls and relabeling requirements with respect to our products, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
Risks Related to the CBD Industry
Laws and regulations affecting the CBD industry are evolving under the Farm Bill, and changes to applicable regulations may materially affect our future operations in the CBD market.
The CBD used by the Company is derived from hemp as defined in the Agriculture Improvement Act of 2018 (United States) (the “Farm Bill”) and codified at 7 USC 1639o means “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” The Cannabis sativa plant and its derivatives may also be deemed marijuana, depending on certain factors. “Marijuana” is a Schedule I controlled substance and is defined in the Federal Controlled Substances Act at 21 USC Section 802(16) as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.” Exemptions to that definition provided in 21 USC Section 802(16) include “the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination” or hemp as defined in 7 USC 1639o.
Substances meeting the definition of “hemp” in the Farm Bill and 7 USC 1639o may be used in clinical studies and research through an Investigational New Drug (“IND”) application with the Food and Drug Administration (the “FDA”). Substances scheduled as controlled substances, like marijuana, require more rigorous regulation, including interaction with several agencies including the FDA, the DEA, and the NIDA within the National Institutes of Health (“NIH”).
Accordingly, if the CBD used by the Company is deemed marijuana and, therefore, a Schedule I controlled substance, the Company could be subject to significant additional regulation, as well as enforcement actions and penalties pertaining to the Federal Controlled Substances Act, and any resulting liability could require the Company to modify or cease its operations.
Furthermore, in conjunction with the Farm Bill, the FDA released a statement about the status of CBD use in food and dietary supplements, noting that the Farm Bill explicitly preserved the FDA’s authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and Section 351 of the Public Health Service Act. Any difficulties we experience in complying with existing and/or new government regulation could increase our operating costs and adversely impact our results of operations in future periods. The FDA has issued guidance titled “FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD)” pursuant to which the FDA has taken the position that CBD is prohibited from use as an ingredient in a food or beverage or as a dietary ingredient in or as a dietary supplement based on several provisions of the FDCA. In the definition of “dietary supplement” found in the FDCA at 201(ff), an article authorized for investigation as a new drug, antibiotic, or biological for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, is excluded from the definition of dietary supplement. A similar provision in the FDCA 301(ll) makes it a prohibited act to introduce or deliver into commerce any food with a substance that was investigated as a new drug prior to being included in a food. There are no similar exclusions for the use of CBD in non-drug topical products, as long as such products otherwise comply with applicable laws. The FDA created a task force to address the further regulation of CBD and other cannabis-derived products and is currently evaluating the applicable science and pathways for regulating CBD and other cannabis-derived ingredients.
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As a result of the Farm Bill’s recent passage, we expect that there will be a constant evolution of laws and regulations affecting the CBD industry which could affect the Company’s plan of operations. Local, state and federal hemp laws and regulations may be broad in scope and subject to changing interpretations. These changes may require us to incur substantial costs associated with legal compliance and may ultimately require us to alter our business plan. Furthermore, violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations. We cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to our business.
Changes to state laws pertaining to industrial hemp could slow the use of industrial hemp, which could impact our revenues in future periods. Approximately 40 states have authorized industrial hemp programs pursuant to the Farm Bill. Additionally, various states have enacted state-specific laws pertaining to the handling, manufacturing, labeling, and sale of CBD and other hemp products. Compliance with state-specific laws and regulations could impact our operations in those specific states. Continued development of the industrial hemp industry will be dependent upon new legislative authorization of industrial hemp at the state level, and further amendment or supplementation of legislation at the federal level. Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp industry is currently encouraging, growth is not assured, and while there appears to be ample public support for favorable legislative action, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests.
Unfavorable interpretations of laws governing hemp processing activities could subject us to enforcement or other legal proceedings and limit our business and prospects.
There are no express protections in the United States under applicable federal or state law for possessing or processing hemp biomass derived from lawful hemp not exceeding 0.3% THC on a dry weight basis and intended for use in finished product, but that may temporarily exceed 0.3% THC during the interim processing stages. While it is a common occurrence for hemp biomass to have variance in THC content during interim processing stages after cultivation but prior to use in finished products, there is risk that state or federal regulators or law enforcement could take the position that such hemp biomass is a Schedule I controlled substance in violation of the CSA and similar state laws. In the event that the Company’s operations are deemed to violate any laws, the Company could be subject to enforcement actions and penalties, and any resulting liability could cause the Company to modify or cease its operations.
Costs associated with compliance with various laws and regulations could negatively impact our financial results.
The manufacture, labeling and distribution of CBD products is regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict our ability to market CBD-based products in the future. The FDA regulates our products to ensure that the products are not adulterated or misbranded. We may also be subject to regulation by other federal, state and local agencies with respect to our CBD-based products. Our advertising activities are subject to regulation by the FTC under the Federal Trade Commission Act. In recent years, the FTC and state attorneys general have initiated numerous investigations of dietary and nutritional supplement companies and products. Any actions or investigations initiated against the Company by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations. Any actions or investigations initiated against the Company by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
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The shifting regulatory environment necessitates building and maintaining robust systems to achieve and maintain compliance in multiple jurisdictions and increases the possibility that we may violate one or more of the legal requirements applicable to our business and products. If our operations are found to be in violation of any applicable laws or regulations, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, injunctions, or product withdrawals, recalls or seizures, any of which could adversely affect our ability to operate our business, our financial condition and results of operations.
Uncertainty caused by potential changes to legal regulations could impact the use and acceptance of CBD products.
There is substantial uncertainty and differing interpretations and opinions 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 and the Controlled Substances Act. These different opinions include, but are not limited to, the regulation of cannabinoids by the 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 existing uncertainties in the CBD regulatory landscape in the United States cannot be resolved without further federal, and perhaps state-level, legislation and regulation or a definitive judicial interpretation of existing laws and regulations. If these uncertainties are not resolved in the near future or are resolved in the manner inconsistent with our business plan, such uncertainties may have an adverse effect upon our plan of operations and the introduction of our CBD-based products in different markets.
If we fail to obtain necessary permits, licenses and approvals under applicable laws and regulations, our business and plan of operations may be adversely impacted.
We may be required to obtain and maintain certain permits, licenses and regulatory approvals in the jurisdictions where we sell or plan to sell our products. There can be no assurance that we will be able to obtain or maintain any necessary licenses, permits or approvals. Any material delay in obtaining, or inability to obtain, such licenses, permits and approvals is likely to delay and/or inhibit our ability to carry out our plan of operations and could have a material adverse effect on our business, financial condition and results of operations.
Potential future international expansion of our business could expose us to additional regulatory risks and compliance costs.
Although we have no plans to expand internationally for at least two or more years, if the Company intends to expand internationally or engage in the international sale of its products, it will become subject to the laws and regulations of the foreign jurisdictions in which it operates, or in which it imports or exports products or materials, including, but not limited to, customs regulations in the importing and exporting countries. The varying laws and rapidly changing regulations may impact the Company’s operations and ability to ensure compliance. In addition, the Company may avail itself of proposed legislative changes in certain jurisdictions to expand its product portfolio, which expansion may include unknown business and regulatory compliance risks. Failure by the Company to comply with the evolving regulatory framework in any jurisdiction could have a material adverse effect on the Company’s business, financial condition and results of operations.
The market for health and wellness products is highly competitive. If we are unable to compete effectively in the market, our business and operating results could be materially and adversely affected.
The market for CBD products is a competitive and rapidly evolving market. There are numerous competitors in the industry, some of whom are more well-established with longer operating histories and greater financial resources than the Company. We expect competition to continue to intensify following the recent passage of the Farm Bill. We believe the Company will be able to compete effectively because of the quality of our products and customer service. However, there can be no assurance that the Company will effectively compete with existing or future competitors. Increased competition may also drive the prices of our products down, which may have a material adverse effect on our results of operations in future periods.
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Given the rapid changes affecting the global, national and regional economies generally, the Company may experience difficulties in establishing and maintaining a competitive advantage in the marketplace. The Company’s success will depend on our ability to keep pace with any changes in such markets, especially legal and regulatory changes. Our success will depend on our ability to respond to, among other things, changes in the economy, market conditions and competitive pressures. Any failure to anticipate or respond adequately to such changes could have a material adverse effect on the Company’s business, financial condition and results of operations.
Furthermore, sales of a substantial number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.
Risks Relating to Investing in Solana
The launch of central bank digital currencies (“CBDCs”) may adversely impact our business.
The introduction of a government-issued digital currency could eliminate or reduce the need or demand for private-sector issued cryptocurrencies, or significantly limit their utility. National governments around the world could introduce CBDCs, which could in turn limit the size of the market opportunity for cryptocurrencies, including Solana.
Absent federal regulations, there is a possibility that Solana may be classified as a “security.” Any classification of Solana as a “security” would subject us to additional regulation and could materially impact the operation of our business.
We believe that Solana is not a security but neither the SEC nor any other U.S. federal or state regulator publicly stated whether they agree with our assessment. Despite the Trump Administration’s Executive Order titled “Strengthening American Leadership in Digital Financial Technology” which includes as an objective, “protecting and promoting the ability of individual citizens and private sector entities alike to access and … to maintain self-custody of digital assets,” Solana has not yet been classified with respect to U.S. federal securities laws. Therefore, while (for the reasons discussed below) we have concluded that Solana is not a “security” within the meaning of the U.S. federal securities laws, and registration of the Company under The Investment Company Act of 1940, as amended (the “1940 Act”) is therefore not required under the applicable securities laws, we acknowledge that a regulatory body or federal court may determine otherwise. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on such a finding that Solana is a “security” which would require us to register as an investment company under the 1940 Act.
We have also adapted our process for analyzing the U.S. federal securities law status of Solana and other cryptocurrencies over time, as guidance and case law have evolved. As part of our U.S. federal securities law analytical process, we take into account a number of factors, including the various definitions of “security” under U.S. federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases, as well as court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be a security for purposes of U.S. federal securities laws. Our position that Solana is not a “security” is premised, among other reasons, on our conclusion Solana does not meet the elements of the Howey test. Among the reasons for our conclusion that Solana is not a security is that holders of Solana do not have a reasonable expectation of profits from our efforts in respect of their holding of Solana. Also, Solana ownership does not convey the right to receive any interest, rewards, or other returns
We acknowledge, however, that the SEC, a federal court or another relevant entity could take a different view. The regulatory treatment of Solana is such that it has drawn significant attention from legislative and regulatory bodies, in particular the SEC which has previously stated it deemed Solana a security. Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that Solana, or any other digital asset we might hold is a “security.” As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if Solana was determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations, financial condition, and prospects.
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If we were deemed to be an investment company under the 1940 Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the 1940 Act generally provides that notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of the 1940 Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the 1940 Act.
Since our formation, we have been a brand owner specializing in the development, manufacturing and distribution of consumer products. Recently, we have begun focusing on pursuing opportunities to expand our portfolio into coins, digital assets and M&A in the fintech space. With respect to Section 3(a)(1)(A), an amount in excess of 40% of our total assets holds Solana. Since we believe Solana is not an investment security, we do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the 1940 Act.
With respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the 1940 Act because, on a consolidated basis with respect to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of the Company’s total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company, and securities issued by qualifying companies that are controlled primarily by the Company.
Solana and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the 1940 Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the 1940 Act, which would increase the percentage of securities held by us for 1940 Act purposes. The SEC has requested information from a number of participants in the digital assets ecosystem, regarding the potential application of the 1940 Act to their businesses. For example, in an action unrelated to the Company, in February 2022, the SEC issued a cease-and-desist order under the 1940 Act to BlockFi Lending LLC, in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of digital assets made by BlockFi to institutional borrowers.
If we were deemed to be an investment company, Rule 3a-2 under the 1940 Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, the grace period may not be available at the time that we seek to rely on Rule 3a-2; however, Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the 1940 Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations. If we were to be deemed an investment company in the future, restrictions imposed by the 1940 Act—including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons—likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
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We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As Solana and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of Solana. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Solana or the ability of individuals or institutions such as us to own or transfer Solana.
If Solana is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of Solana and in turn adversely affect the market price of our common stock. Moreover, the risks of us engaging in a Solana treasury strategy have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
Our Management relies upon the advice of an asset manager through an asset management agreement to assist in building a narrowly focused investment strategy and the execution of the Company’s strategy and may not yield the desired return.
Our management and GSR Strategies, LLC, the asset manager, will have broad discretion in the application of the net proceeds from any offering by the Company and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure to apply these funds effectively could result in financial losses that could cause the price of our common stock to decline.
We may use the net proceeds from any offering by the Company to purchase additional Solana, the price of which has been, and will likely continue to be, highly volatile.
We may use the net proceeds from any offering by the Company to purchase additional Solana. Solana is a highly volatile asset. Solana does not pay interest, but if management determines to stake the Solana tokens in treasury, rewards can be earned on Solana. The ability to generate a return on investment from the net proceeds from any offering by the Company will depend on whether there is appreciation in the value of Solana following our purchases of Solana with the net proceeds from any offering by the Company. Future fluctuations in Solana’s trading prices may result in our converting Solana purchased with the net proceeds from any offering into cash with a value substantially below the net proceeds from such an offering.
Momentum pricing.
The value of a single unit of SOL, as represented by various exchanges, may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the value of the Shares. Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation in value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices and leads to increased volatility. As a result, SOL may be more likely to fluctuate in value due to changing investor confidence in future appreciation or depreciation in prices, which could adversely affect the price of SOL, and, in turn, our stock price.
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The trading prices of many digital assets, including SOL, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including declines in the trading prices of SOL, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
The trading prices of many digital assets, including SOL, have experienced extreme volatility throughout their existence, including in recent periods and may continue to do so. For instance, following significant increases throughout the majority of 2020, digital asset prices, including SOL, experienced significant volatility throughout 2021 and 2022. This volatility became extreme in November 2022 when FTX Trading Ltd. (“FTX”) halted customer withdrawals. Developments during the last cryptocurrency bear market led to extreme volatility and disruption in digital asset markets, a loss of confidence in participants of the digital asset ecosystem, significant negative publicity surrounding digital assets broadly and market-wide declines in liquidity. Digital asset prices, including SOL, have continued to fluctuate widely. For example, according to Bloomberg, Solana’s 90-day realized volatility has generally ranged from 70-100% over the last several months.
Extreme volatility in the future, including declines in the trading prices of SOL, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value. Furthermore, negative perception, a lack of stability and standardized regulation in the digital asset economy may reduce confidence in the digital asset economy and may result in greater volatility in the price of SOL and other digital assets, including a depreciation in value.
Currently, we do not hedge against SOL volatility, as our goal is to benefit shareholders through long-term value appreciation rather than short-term hedging. While we may consider hedging strategies for our treasury or acquisitions in the future, there is no guarantee they will significantly reduce digital asset volatility or increase the treasury’s value.
Furthermore, changes in U.S. political leadership and economic policies may create uncertainty that materially affects the price of SOL and the Company’s Share Price. For example, on March 6, 2025, President Trump signed an Executive Order to establish a Strategic Bitcoin Reserve and a United States Digital Asset Stockpile. Pursuant to this Executive Order, the Strategic Bitcoin Reserve will be capitalized with Bitcoin owned by the Department of Treasury that was forfeited as part of criminal or civil asset forfeiture proceedings, and the Secretaries of Treasury and Commerce are authorized to develop budget-neutral strategies for acquiring additional Bitcoin, provided that those strategies impose no incremental costs on American taxpayers.
There are numerous companies announcing their intention to build a digital asset treasury and specifically SOL treasury. This concentration of SOL holdings within a few treasury companies could cause the price of SOL to rapidly decline based on one or more of these treasury companies liquidating their position and could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
There are currently a number of public companies that have announced intentions to accumulate Solana tokens, in addition to certain public companies that have already amassed Solana tokens as part of digital asset treasury strategies. This pool of buyers or potential buyers can significantly affect volume of transactions that would not otherwise exist and lead to concentrations of Solana tokens. The potential effect of such scale is a concentration of holdings that may lead to a wide range of price movements, whether that be increases to the upside or decreases to the downside. We cannot assure stability of prices of Solana tokens and to the extent the market price of our common stock moves in alignment with the price of Solana, we cannot assure stability with respect to the market price of our common stock.
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Our Solana holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the crypto markets have been characterized by: significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets; relative anonymity; a developing regulatory landscape; potential susceptibility to market abuse and manipulation; compliance and internal control failures at exchanges; and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our Solana at favorable prices or at all. Further, Solana which we hold with our custodians does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, pursuant to the asset management agreement we entered into with the asset manager, we are currently and may generally be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered Solana or otherwise generate funds using our Solana holdings, including in particular during times of market instability or when the price of Solana has declined significantly. If we are unable to sell our Solana, enter into additional capital raising transactions using Solana as collateral, or otherwise generate funds using our Solana holdings, or if we are forced to sell our Solana at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, exchange-traded funds and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our Treasury Reserve Policy or our Solana strategy, our use of leverage, the manner in which our Solana is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Consequently, our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our Solana holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding Solana.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our Solana, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our Solana and our financial condition and results of operations could be materially adversely affected.
Substantially all of the Solana we own is held in custody accounts at U.S.-based institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our Solana. Solana and other blockchain-based cryptocurrencies and the entities that provide services to participants in the Solana ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
| • | a partial or total loss of our Solana in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our Solana; |
| • | harm to our reputation and brand; |
| • | improper disclosure of data and violations of applicable data privacy and other laws; or |
| • | significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure. |
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Solana ecosystem or in the use of the Solana network to conduct financial transactions, which could negatively impact us.
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Attacks upon systems across a variety of industries, including industries related to Solana, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the Solana industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
We have limited history in generating staking revenues from Solana, which could adversely affect our business, financial condition and operating results.
Until recently, our business focus was as a brand owner specializing in the development, manufacturing, and distribution of consumer products. We reach consumers through our direct-to-consumer network, wholesale partnerships, and major third-party platforms like Amazon.
We have recently shifted the focus of our operations to a treasury policy under which the principal holding in its treasury reserve on the balance sheet will be allocated to digital assets, and specifically long term strategy of holding Solana (“SOL”) by applying a proven public-market treasury model to an asset that we believe is earlier in its lifecycle, structurally reflexive, and vastly underexposed.
We have a limited operating history with the current scale of our business, which makes it difficult to forecast our prospects and future results of operations. You should take into account the risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our recent revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including unexpected government regulation, any reduction in the value of cryptocurrency generally or Solana specifically, demand for our platform, increased competition, contraction of our overall market, our inability to accurately forecast demand for our platform and plan for capacity constraints or our failure, for any reason, to capitalize on growth opportunities. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks successfully, our business would be harmed.
If the digital asset award or transaction fees for recording transactions on the Solana network are not sufficiently high to incentivize validators may demand high transaction fees, which could negatively impact the value of SOL and the value of the Shares.
If the digital asset awards for validating blocks or the transaction fees for recording transactions on the Solana network are not sufficiently high to incentivize validators, or if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expending validating power to validate blocks and confirmations of transactions on the SOL blockchain could be slowed. For example, the realization of one or more of the following risks could materially adversely affect the value of the Shares:
| · | Over the past several years, digital asset validating operations have evolved from individual users validating with computer processors, graphics processing units and first-generation application specific integrated circuit machines to “professionalized” validating operations using proprietary hardware or sophisticated machines. If the profit margins of digital asset validating operations are not sufficiently high, digital asset validators are more likely to immediately sell digital assets earned by validating, resulting in an increase in liquid supply of that digital asset, which would generally tend to reduce that digital asset’s market price.. |
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| · | A reduction in the digital assets staked by validators on the Solana network could increase the likelihood of a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtaining control. |
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| · | Validators have historically accepted relatively low transaction confirmation fees on most digital asset networks. If validators demand higher transaction fees for recording transactions in the Solana blockchain or a software upgrade automatically charges fees for all transactions on the Solana network, the cost of using SOL may increase and the marketplace may be reluctant to accept SOL as a means of payment. Alternatively, validators could collude in an anti-competitive manner to reject low transaction fees on the Solana network and force users to pay higher fees, thus reducing the attractiveness of the Solana network. Higher transaction confirmation fees resulting through collusion or otherwise may adversely affect the attractiveness of the Solana network, the value of SOL and the value of the Shares. |
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| · | To the extent that any validators cease to record transactions that do not include the payment of a transaction fee in blocks or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Solana blockchain until a block is validated by a validator who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays or disruptions in the recording of transactions could result in a loss of confidence in the Solana network and could prevent the Company from completing transactions associated with the day-to-day operations of the treasury. |
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| · | During the course of the block validation processes, validators exercise the discretion to select bundles of transactions within a block. Beyond the standard block reward and transaction fees, validators have the ability to extract what is known as Maximal Extractable Value (“MEV”) by strategically selecting bundles of transactions during block production to prioritize transactions associated with higher transaction fees and MEV capture. In blockchain networks that facilitate DeFi protocols in particular, such as the Solana network, users may attempt to gain an advantage over other users by offering additional fees to validators for effecting the order or inclusions of transactions within a block. Certain software solutions, such as Jito, have been developed which facilitate validators and other parties in the ecosystem in capturing MEV. The presence of MEV may incentivize associated practices such as sandwich attacks or front-running that can have negative repercussions on DeFi users. A “sandwich attack” involves placing two transactions—one before and one after—a large, detected trade to exploit the resulting price movement. Unlike Ethereum, Solana lacks a public mempool, making it harder to detect pending user transactions. However, validators can choose to run clients like Jito or Paladin, which support MEV strategies that may enable sandwich attacks. For instance, searchers can submit bundles of transactions with precise ordering, allowing them to surround a vulnerable trade if detected. In the context of MEV, “front-running” is said to occur when a user spots an unexecuted transaction and awaiting validation, and then pays a high transaction fee to a validator to have their transaction executed on a priority basis in a manner designed to profit from the pending but unexecuted transaction. Since Solana doesn’t have a public mempool (memory pool), validators and bots have limited visibility to unexecuted, or pending, transactions. Combined with Solana’s fast block times and parallel execution model, this makes it hard to detect and exploit user trades in real time. However, that doesn’t mean front- running is impossible. If a validator colludes with a bot, for example, it could potentially observe and front-run transactions. By running Jito or similar clients, validators have access to structure MEV systems where searchers submit bundles of ordered transactions to validators through an auction system. Validators select the most profitable bundles (based on transaction fees and MEV capture). Considering searchers determine the ordering through their bundles, front-running is possible. As of 2025, up to five transactions can be in a bundle for Jito. The transactions in a bundle must be executed atomically and in sequence, meaning if one transaction fails, the entire bundle does not get processed. Note, these MEV technologies, in this case Jito, can also offer user protections like front-running flags and protected order flow to mitigate risks. MEV may also compromise the predictability of transaction execution, which may deter usage of the network as a whole. Any potential perception of MEV as unfair manipulation may also discourage users and other stakeholders from engaging with DeFi protocols or the Solana network in general. In addition, it’s possible regulators or legislators could enact rules that restrict practices associated with MEV, which could diminish the popularity of the Solana network among users and validators. Any of these or other outcomes related to MEV may adversely affect the value of SOL and the value of the Shares. |
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Our trading orders may not be timely executed.
Our investment and trading strategies depend on the ability to establish and maintain an overall market position in a combination of financial instruments. Our trading orders may not be executed in a timely and efficient manner because of various circumstances, including, for example, trading volume surges or systems failures attributable to us or our counterparties, brokers, dealers, agents or other service providers. In such an event, we might only be able to acquire or dispose of some, but not all, of the components of our positions, or if the overall positions were to need adjustments, we might not be able to make such adjustments. As a result, we would not be able to achieve our desired market position, which may result in a loss. In addition, we can be expected to rely heavily on electronic execution systems (and may rely on new systems and technology in the future), which may be subject to certain systemic limitations or mistakes, causing the interruption of trading orders made by us.
Competition from other companies staking and utilizing Solana in their treasury plans.
We expect to contend with other companies also focused on developing digital asset staking operations. Market participants with sufficient knowledge and capital have the ability to acquire tokens on the open market and start staking, which would increase competition.
Competition from central bank digital currencies (“CBDCs”) and emerging payments initiatives involving financial institutions could adversely affect the price of SOL and other digital assets.
Central banks in various countries have introduced digital forms of legal tender (“CBDCs”). China’s CBDC project, known as Digital Currency Electronic Payment, has reportedly been tested in a live pilot program conducted in multiple cities in China. Central banks representing at least 130 countries have published retail or wholesale CBDC work ranging from research to pilot projects. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replace, SOL and other cryptocurrencies as a medium of exchange or store of value. Central banks and other governmental entities have also announced cooperative initiatives and consortia with private sector entities, with the goal of leveraging blockchain and other technology to reduce friction in cross-border and interbank payments and settlement, and commercial banks and other financial institutions have also recently announced a number of initiatives of their own to incorporate new technologies, including blockchain and similar technologies, into their payments and settlement activities, which could compete with, or reduce the demand for, SOL. As a result of any of the foregoing factors, the price of SOL could decrease, which could adversely affect the value of the Company’s Stock Price.
Competition from the emergence or expansion of other digital assets may negatively influence the price of SOL and have an adverse impact on the value of the Shares.
As of June 30, 2025, SOL ranked as the sixth largest digital asset by market capitalization, according to CoinMarketCap.com. SOL encounters competition from a broad spectrum of digital assets, including Bitcoin and Ether. Additionally, numerous consortiums and financial institutions are investing in private or permissioned blockchain platforms rather than open networks such as the Solana Network. SOL is currently supported by fewer trading platforms compared to more established digital assets like Bitcoin and Ether, which may affect its liquidity. The Solana Network also competes directly with other smart contract platforms, including Ethereum, Polkadot, Avalanche, and Cardano. The emergence or growth of alternative digital assets or other smart contract platforms may diminish demand for, and the price of, SOL, thereby adversely affecting the value of the Shares.
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Investors have the option to gain exposure to SOL through mechanisms other than the Company’s Shares, such as direct investment in SOL or through other financial vehicles, including securities or products backed by or linked to SOL. Specifically, the Company faces competition from other exchange-traded spot SOL products and similar digital asset vehicles, several of which have pending applications before the SEC or have already secured SEC approval. The Company’s ability to maintain its scale and achieve its intended competitive positioning may depend on various factors, such as its timing relative to competing products and its ability to raise additional capital.
Furthermore, if other financial vehicles tracking SOL constitute a significant portion of overall demand, substantial transactions involving these vehicles or private funds holding SOL could adversely affect the Index Price, NAV, NAV per Share, value of the Shares, Principal Market NAV, and Principal Market NAV per Share. Therefore, there can be no assurance that the Company will be able to preserve its scale or attain its intended competitive position relative to peers, which could negatively affect both the performance of the Company and the value of the Shares.
We may fail to develop and execute successful investment or trading strategies.
The success of our investment and trading activities will depend on the ability of our investment team and Asset Manager to identify overvalued and undervalued investment opportunities and to exploit price discrepancies. This process involves a high degree of uncertainty. No assurance can be given that we will be able to identify suitable or profitable investment opportunities in which to deploy our capital. The success of the trading activities also depends on our ability to remain competitive with other over-the-counter traders and liquidity providers. Competition in trading is based on price, offerings, level of service, technology, relationships and market intelligence. The success of investment activities depends on our ability to source deals and obtain favorable terms. Competition in investment activities is based on relationships. The barrier to entry in each of these businesses is very low and competitors can easily and will likely provide similar services in the near future. The success of our venture investments and trading business could suffer if we are not able to remain competitive.
We may make, or otherwise be subject to, trade errors.
Errors may occur with respect to trades executed on our behalf. Trade errors can result from a variety of situations, including, for example, when the wrong investment is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, we may seek to recover any losses associated with the error, although there may be contractual limitations on any third party’s liability with respect to such error.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity risks are
The Company has established processes to assess, identify, and manage material risks from cybersecurity threats as part of its overall enterprise risk management system. Its cybersecurity processes include security monitoring and detection through third-party vendors. The processes also extend to oversight and identification of risks associated with vendors and customers if their computer systems interface with the Company’s information systems. Upon detection of a potentially material cybersecurity incident, the Company initiates its cyber incident procedure to investigate, contain, and remediate the incident.
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The Company has
Storage of Our Digital Assets in our SOL Treasury
The Custodians
The Custodians are responsible for safekeeping all of the SOL owned by the Company. We maintain multiple Custodians to reduce the risk of a single failure and we plan to expand to additional custodians as our Treasury grows. The Custodian accounts are all opened by the Company, this segregates our assets into an individual custodian account owned by the Company and access is monitored and controlled by the Company. Our Asset Management Company is given access to the Custodian accounts with established controls to ensure transactions require consensus of a minimum of two individuals when assets are being transferred between wallets and additional controls if an asset of the Treasury is moved out of the Custodians control. The assets go through the Custodians Trust Company, which maintains its own insurance and is regulated by their respective state where the trust is incorporated in.
Our primary custodian is currently BitGo Trust Company, Inc. a South Dakota corporation (“BitGo”) and is regulated by the state of South Dakota. On May 1, 2025, we entered into a Custodial Services Agreement with BitGo (the “BitGo Agreement”) to hold our digital currency. The term of the BitGo Agreement is for one year with successive one-year renewals unless prior notice of non-renewal is given by either party. The Company pays BitGo a monthly digital asset storage fee based upon the market value of the assets in storage, plus $500. The BitGo Agreement is terminable by either the Company or BitGo on thirty days’ notice as a result of a breach of the Agreement and may be suspended by BitGo if the Company violates the intended use of the account or due to a change in the applicable law, litigation or bankruptcy.
Our secondary custodian is Coinbase Inc., a subsidiary of Coinbase Global, Inc., a Delaware corporation, which is primarily used for the acquisition of digital assets. On May 5, 2025, the Company entered into an Institutional Client Agreement with Coinbase (the “Coinbase Agreement”). The Coinbase Agreement is terminable at will by either the Company or Coinbase. The Company pays Coinbase its regularly scheduled fees based on the dollar trading volume over a thirty-day period. The Coinbase Agreement is terminable by either the Company or Coinbase on ten days’ notice as a result of a breach of the Agreement and may be suspended by Coinbase if the Company violates the intended use of the account or due to a change in the applicable law, governmental proceeding, litigation or bankruptcy. Coinbase may also close the Company’s account if it has been inactive for more than one year.
BitGo maintains a $250,000,000 policy against loss, theft and misuse. Currently we have approximately $253,000,000 of treasury value at Bitgo, based on the SOL price of $202.51 per token. Coinbase has an insurance policy for any cash held in the account of $250,000. We currently have less than $250,000 of cash held at Coinbase and less than $6,000,000 in SOL value, based on the SOL price of $202.51 per token. At the current price of SOL as of the date of this report, these policies are not adequate to fully cover the full loss of our SOL.
Solana, as with all digital assets, can be highly volatile. Management reviews the account balances and the total value held with a custodians to allocate the Company’s holdings between multiple accounts and custodians to mitigate risk. We do not use self-storage for any of the SOL treasury assets.
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Private keys are generated by the Custodian in key generation ceremonies at secure locations using offline devices that have never been connected to a network. Private keys are generated according to detailed procedures using specialized offline devices and within these secure facilities to mitigate risk of hacks, errors, or other unintended external exposure. Key ceremony processes are highly controlled, require segregation of duties across multiple parties and are reviewed and witnessed by designated oversight personnel. Thorough validations and signoffs are performed to verify the integrity and security of key generation ceremonies.
The Custodians hold a majority of SOL in cold storage and provides a user interface for the Company to manage the allocation of SOL between cold and hot storage for the wallets. The Company maintains more than 98% of its SOL treasury in cold wallets.
The Custodians have multiple, redundant cold storage sites, which are geographically distributed including sites within the United States. Cold storage locations of the Custodian are monitored by 24x7 on-site security, video surveillance and alarms, hardened room structures, and access to these facilities is controlled by multi-person controls, multi-team access rules, and multi-factor authentication. The locations of the cold storage sites may change at the discretion of the Custodian and are kept confidential by the Custodian for security purposes. Transactions from cold to hot storage require physical access, according to the above controls, to one or more cold storage facilities, as well as systematically enforced approvals and integrity verifications, before the secure device can be used to cryptographically complete the transaction. At no point during this process is the private key removed from the secure device(s) nor the cold storage facility. Once these security processes have been completed, a transfer on the Solana network can be executed, as signed using the private keys held offline in cold storage.
The Custodians also maintain geographically dispersed backups of private keys, which are cryptographically generated into shards and stored in separate locations; multiple locations must be accessed to reconstruct a single key. The storage facilities are highly secured, and include 24x7 on-premises security presence, video surveillance, and alarms for unexpected entry. Access to facilities is controlled by multi-person controls, multi- team access rules, and multi-factor authentication.
All of our Custodians have SOC type 2 reports that the Company has reviewed and we get regular bridge reports from our Custodians to help ensure the controls are being maintained. Our Custodians maintain their own insurance policies to cover our loss, which is in addition to the policies that we maintain ourselves. We currently have two qualified Custodians that we have approved for our treasury use and we are in the process of onboarding a third as part of our risk management process.
The Company is charged for storage fees, staking fees and transaction fees for services specifically requested by the Company or the Asset Management Company. Except as set forth above, the contract terms of the agreements are typically for one to three years and can be terminated upon 30 day notice and payment of all fees due and one month of additional fees.
Item 2. Properties
Our executive and corporate offices, approximately 5,752 square feet, are located at 3030 North Rocky Point Drive, Suite 420, Tampa, Florida 33607, are leased on a 61-month term set to expire September 1, 2028. We also maintain a warehouse located at 5626 West Linebaugh Avenue, Units 101-102, Tampa, Florida 33624, approximately 20,351 square feet under a 38-month lease, set to expire June 1, 2026 and a manufacturing facility at 2510 Merchant Ave, Odessa, Florida 33556, approximately 10,200 square feet, under a five year lease set to expire on April 1, 2029. The Company leases this facility from the owner our CEO, Allan Marshall.
Item 3. Legal Proceedings
From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. The Company is not involved in any pending legal proceeding or litigation, and, to the best of its knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties are subject, which would reasonably be likely to have a material adverse effect on the Company, other than the following:
| · | On March 14, 2024, Get Fit Fast Supplements, LLC, filed for arbitration against Cygnet Online, LLC, and Eric Hanig. The case is presently in active arbitration and is styled Get Fit Fast Supplements, LLC v. Cygnet Online, LLC, et al., American Arbitration Association Case No. 01-24-0003-1085. The foregoing action, and related actions that have been combined in the same arbitration, are principally a series of breach of contract and fraud cases related to the rights and obligations of the parties under the various transaction documents associated with the acquisition by the Company of Cygnet Online, LLC, and the acquisition, prior thereto, by Cygnet Online, LLC of Get Fit Fast Supplements, LLC. The parties are seeking monetary damages in their various claims and counterclaims against one another. The Company, on behalf of Cygnet, is vigorously defending all claims made against Cygnet in the arbitration. The Company is not a party to this arbitration. |
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| · | On September 6, 2024, Eric Hanig filed suit against the Company and Cygnet Online, LLC in state court in Nevada for an alleged failure to pay $300,000 pursuant to a Letter Agreement. The Company denies all claims and filed counterclaims against Eric Hanig for fraudulently inducing it to enter into the Letter Agreement and for absconding with the balance of Cygnet Online, LLC’s bank account. |
|
|
|
| · | On December 20, 2024 MVW Holdings filed a lawsuit against E-Core Technology, Inc., an entity formerly owned by the Company, and also named the Company as a defendant. The lawsuit alleges trade dress infringement for certain packaging used by E-Core for a limited number of products. The Company denies all liability for the alleged conduct and no longer owns E-Core. |
|
|
|
| · | On or about April 7, 2025, Bloomios, Inc., Infused Confections, LLC and Infusionz, LLC (collectively, the “Plaintiffs”), filed an action against the Company and each of its executive officers and directors, and Grove, Inc., which is the Company’s prior name. The action stems from Bloomios’ acquisition of Infusionz from the Company in October 2022. The Plaintiffs’ claims allege fraud, misrepresentation, and breach of contract, among other claims, and are seeking damages in an unspecified amount, plus punitive damages, and unspecified declaratory relief. The Company considers the action baseless. The Company was successful in obtaining the dismissal of individual Board members from this action and filed counterclaims for the approximately $19.5 million the Plaintiffs owe the Company from the transaction. The Company intends to seek reimbursement of all attorneys’ fees as a result of the false statements made by the Plaintiffs in the complaint. |
Other than the foregoing, the Company is not involved in any pending legal proceeding or litigation, and, to the best of its knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of its properties is subject, which would reasonably be likely to have a material adverse effect on the Company.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The Company’s common stock is listed on the NASDAQ Stock Market LLC and is traded under the symbol “UPXI.” The Company’s common stock started trading on June 24, 2021.
We consider our common stock to be thinly traded and, accordingly, reported sales prices or quotations may not be a true market-based valuation of our common stock.
Holders of Record
There were approximately 185 holders of record of the Company’s common stock on June 30, 2025.
Dividend Policy
We currently intend to retain our future earnings, if any, to finance the development and expansion of our businesses and, therefore, do not intend to pay cash dividends on our Common Stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments, and such other factors as our board of directors deems relevant in its sole discretion. Accordingly, you may need to sell your shares of our Common Stock to realize a return on your investment; however, you may not be able to sell your shares at or above the price you paid for them.
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Securities Authorized for Issuance under Equity Compensation Plans
The Company established the 2019 Equity Incentive Plan, as amended (the “2019 Plan”). The plan grants incentives to select persons who can make, are making and continuing 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 restricted stock. The 2019 Plan is administered by the Compensation Committee or such other committee (the “Committee”) as is appointed by the Board of Directors pursuant to the 2019 Plan. 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 September 18, 2024, the Company filed a Certificate of Change with the Nevada Secretary of State to effect a reverse stock split of its common stock at a rate of 1-for-20 (the “Reverse Stock Split”), which became effective as of October 3, 2024 (the “Effective Date”). The Reverse Stock Split was approved by the Board of Directors in accordance with Nevada law. Concurrently, the Company’s shareholders consented to, and the Board of Directors approved, an amendment of the 2019 Plan to increase the maximum number of Shares that may be issued thereunder to 500,000 Shares, as adjusted for the 1 for 20 reverse stock split. On June 16, 2025, the shareholders approved an amendment to, the 2019 Plan to increase the number of shares issuable pursuant to awards granted under the 2019 Plan from 500,000 shares to 10,000,000 shares.
The following table summarizes information, as of June 30, 2025, relating to compensation plans under which equity securities are authorized for issuance.
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights* |
|
| Weighted-average exercise price of outstanding options, warrants and rights |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) ** |
| |||
|
|
|
|
|
|
|
|
|
| |||
Equity compensation plans approved by security holders |
|
| 843,270 |
|
| $ | 3.39 |
|
|
| 9,027,903 |
|
Equity compensation plans not approved by security holders |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 843,270 |
|
| $ | 3.39 |
|
|
| 9,027,903 |
|
*Consists of 621,353 options outstanding and 221,917 RSUs outstanding.
** There have been 10,919 shares issued for the exercise of stock options and 117,908 shares issued for vested RSUs.
On August 19, 2025, subsequent to the year ended June 30, 2025, the shareholders approved an amendment to the 2019 Plan to increase the number of shares issuable pursuant to awards granted under the 2019 Plan from 10,000,000 shares to 25,000,000 shares.
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Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On July 16, 2025, the Company issued secured convertible notes in the aggregate, principal amount of approximately $151.2 million, convertible into 35,569,224 shares of Common Stock at $4.25 per share.
On July 11, 2025, the Company issued 12,457,186 shares of Common Stock, at an offering price of $4.00 per share and $4.94 per share for certain members of the Company’s management and members of the board of directors.
On April 24, 2025, the Company issued: (i) 35,970,383 shares of Common Stock, at an offering price of $2.28 per share, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 7,889,266 shares of Common Stock (the “Pre-Funded Warrant Shares”) at an offering price of $2.279 per Pre-Funded Warrant. Each of the Pre-Funded Warrants is exercisable for one share of Common Stock at the exercise price of $0.001 per Pre-Funded Warrant Share, are immediately exercisable, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
On April 24, 2025, the Company issued 241,228 shares of common stock as repayment of $550,000 of the Company’s debt. The shares were valued at $550,000 or $2.28 per share.
In February of 2025, the Company issued 125,000 shares of common stock to two different investors for the repayment of $250,000 of outstanding debt. The average share price for the repayment of debt was approximately $2.00 per common share issued.
In January of 2025, the Company issued 260,000 shares of common stock to two different investors for the repayment of $600,000 of outstanding debt. The weighted average share price for the repayment of debt was approximately $2.31 per common share issued.
All of the securities issued by the Company as described above were issued pursuant to the exemption for transactions by an issuer not involved in any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder and corresponding state securities laws.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The last day of our fiscal year is June 30. Our fiscal quarters end on September 30, December 31, March 31 and June 30. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report on Form 10-K. See also “Cautionary Note Regarding Forward-Looking Statements” above.
Overview
We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens. We continue to be a brand owner specializing in the development, manufacturing, and distribution of consumer products.
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Our Solana Treasury Strategy
Early in 2025, we updated and modified our cash management and treasury strategy to include holding digital currency assets directly on our balance sheet. This was a shift from before when we held excess cash primarily in FDIC-insured interest-bearing accounts. The change to adopt this strategy results from our intention to obtain the highest yield on excess cash. Under our new approach, our treasury policy focuses primarily on Solana (“SOL”). The approach involves applying a public-market treasury model to an asset that is considered earlier in its lifecycle than, with respect to both development and usage, as well as institutional adoption, Bitcoin. Management will focus its resources to this digital asset strategy and a significant portion of the balance sheet will be allocated to holding Solana in the Company’s digital asset treasury.
Key Factors Affecting Operating Results
Cyclicality and Seasonality
Our business is typically unaffected by seasonality.
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
Year Ended June 30, 2025, as compared to June 30, 2024:
The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the years ended June 30, 2025, and 2024, which are included herein.
|
| June, |
|
|
|
| ||||||
|
| 2025 |
|
| 2024 |
|
| Change |
| |||
Revenue |
| $ | 14,826,336 |
|
| $ | 26,000,652 |
|
| $ | (11,174,316 | ) |
Digital asset revenue |
| $ | 985,009 |
|
| $ | - |
|
| $ | 985,009 |
|
Product costs |
| $ | 4,943,305 |
|
| $ | 13,176,073 |
|
| $ | (8,232,768 | ) |
Distribution costs |
| $ | 4,691,964 |
|
| $ | 8,611,702 |
|
| $ | (3,919,738 | ) |
Sales and marketing expenses |
| $ | 4,001,094 |
|
| $ | 5,989,727 |
|
| $ | (1,988,633 | ) |
General and administrative expenses |
| $ | 11,935,582 |
|
| $ | 6,771,937 |
|
| $ | 5,163,645 |
|
Unrealized and realized (gain) loss on digital assets |
| $ | (105,474 | ) |
| $ | - |
|
| $ | (105,474 | ) |
Other operating expenses |
| $ | 3,114,620 |
|
| $ | 4,848,629 |
|
| $ | (1,734,009 | ) |
Other (expense) |
| $ | (1,184,457 | ) |
| $ | (3,141,166 | ) |
| $ | 1,956,709 |
|
Impairment of intangible assets and goodwill |
| $ | - |
|
| $ | 7,869,425 |
|
| $ | (7,869,425 | ) |
Lease (gain on sale) impairment |
| $ | (269,994 | ) |
| $ | 289,969 |
|
| $ | (559,963 | ) |
(Gain) on the sale of assets and businesses |
| $ | - |
|
| $ | (448,882 | ) |
| $ | 448,882 |
|
Income from discontinued operations |
| $ | - |
|
| $ | 1,164,184 |
|
| $ | (1,164,184 | ) |
Net loss attributable to Upexi, Inc. |
| $ | (13,684,209 | ) |
| $ | (23,658,438 | ) |
| $ | 9,974,229 |
|
Revenues decreased by $11,174,316, or 43%, for the fiscal year ended June 30, 2025, compared with the fiscal year ended June 30, 2024. The Company divested from the recommerce business to focus primarily on brands that are owned or products that the Company produces as white label products for the brand owner. The elimination of the recommerce business decreased sales by approximately $9,787,000, or 85%, of the decline in sales compared to the prior year. The Company had revenue of approximately $985,000 from the newly implemented treasury strategy. This digital asset treasury was established in May of 2025 and management expects the revenue generated from the treasury to significantly increase in fiscal year 2026.
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Product costs decreased by $8,232,768, or 62%, compared with the fiscal year ended June 30, 2024. The two primary reasons for the decrease in products costs were the overall lower sales and the elimination of the lower margin recommerce business. In addition, in the prior year there were significant inventory write offs and other non-cash expenses in the product costs that decreased the overall gross profit compared to the current year’s gross profit.
Gross profit decreased by approximately $2,942,000, or approximately 22.9% compared with the prior year, excluding the increase in gross profit related to the $985,000 of digital asset revenue. The profit margin increased to approximately 67% of revenue compared to 49% of revenue in the prior year, excluding the digital asset revenue. Management’s focus in fiscal year 2026 is on improving the overall gross profit and the profit margin of the business and increasing the revenue from our digital asset treasury.
Sales and marketing expenses decreased by approximately $1,988,000, or 33%, compared with the same period last year. We have decreased the number of fixed costs in our marketing budget and focused our advertising expenditures. The percentage of sales and marketing to the total sales will increase based on our elimination of the recommerce business, however with the elimination of many fixed expenditures, the changes should align with the overall total sales.
Distribution costs decreased by approximately $3,920,000 or 46%, compared with the fiscal year ended June 30, 2024. The strategic change and divesture of the two businesses in 2024, along with the consolidation of operations to Florida reduced the Amazon fees by approximately $2,668,000, reduced the facility expenses by approximately $255,000 and the labor costs by approximately $743,000. The remaining product sales do not rely on the Amazon distribution network and are distributed from one facility in Florida.
General and administrative expenses increased by approximately $5,163,645, or 76%, compared with the same period last year. Over 75% of the increase was related to these three factors: 1) approximately $2,668,000 of additional expense in corporate compensation; 2) approximately $576,000 in additional professional services fees, including legal, audit and tax services; and 3) approximately $686,000 of additional public company expenses. Our overall general and administrative expenses are expected to increase over the next year and then stabilize as we implement this overall treasury and business strategy. Our continuous capital raising efforts and professional and public company expenses necessary to drive this strategy is significantly more than what the Company has required in the past.
Other operating expenses decreased by approximately $1,734,000, or 36%, compared with the same period last year. These expenses are primarily non-cash expense for amortization of stock compensation, amortization of acquired intangible assets and depreciation. The decrease in the amortization of acquired intangible assets was approximately $2,334,000 as approximately $7,869,000 was impaired in the prior year. Depreciation expense declined by approximately $587,000. These expenses were partially offset by approximately $1,187,000 of additional share-based compensation expense.
Our realized and unrealized gains was approximately $105,474 with none in the same period last year. The price of Solana on June 30, 2025 was $154.74, as quoted on coinmarketcap.com and is the approximate cost basis of our Solana treasury at June 30, 2025.
Other expense decreased by approximately $1,957,000 or 63%, as compared with the same period last year, which primarily relates to the continued decrease in interest expense from payoffs of debts.
The Company recognized an impairment $289,969 on the Delray Beach warehouse during the year ended June 30, 2024 as part of closing the warehouse and the Company exiting the recommerce business. This liability was settled in January of 2025 and resulted in a gain on the lease impairment of approximately $270,000.
In the prior year, the Company recognized a gain on the sale of assets and businesses of approximately $449,000. This gain was from approximately $1,948,538 gain on the sale of VitaMedica, the gain of approximately $238,000 on the sale of Infusionz and CBD related assets, which recorded an approximate loss of $2,186,000 in the prior year. This gain was offset by the loss of approximately $1,737,326 on the sale of E-Core.
The income and loss on discontinued operations was as follows:
|
| June 30, 2025 |
|
| June 30, 2024 |
| ||
Interactive Offers |
| $ | - |
|
| $ | (187,003 | ) |
Infusionz |
|
| - |
|
|
| 71,976 |
|
E-Core |
|
| - |
|
|
| 1,065,575 |
|
VitaMedica |
|
| - |
|
|
| 213,636 |
|
|
|
|
|
|
|
|
|
|
|
| $ | - |
|
| $ | 1,164,184 |
|
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| Table of Contents |
The Company had a net loss of approximately $13,684,000 compared to a net loss of approximately $23,658,000 in the prior year. The decrease in the net losses primarily related to the above-mentioned changes.
Liquidity, Capital Resources and Cash Requirements
Working Capital
|
| As of June 30, 2025 |
|
| As of June 30, 2024 |
| ||
Current assets |
| $ | 56,778,043 |
|
| $ | 11,419,918 |
|
Current liabilities |
| $ | 32,563,906 |
|
| $ | 12,655,152 |
|
Working capital |
| $ | 24,214,137 |
|
| $ | (1,235,234 | ) |
Cash Flows
|
| Years Ended June 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Cash flows (used in) operating activities – continuing operations |
| $ | (8,423,042 | ) |
| $ | (4,894,751 | ) |
Cash flows (used in) provided by investing activities – continuing operations |
|
| (99,293,083 | ) |
|
| 831,112 |
|
Cash flows provided by (used in) financing activities – continuing operations |
|
| 110,029,860 |
|
|
| (353,789 | ) |
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities – discontinued operations |
|
| - |
|
|
| 4,793,374 |
|
Cash flows used by investing activities – discontinued operations |
|
| - |
|
|
| (4,206,823 | ) |
Cash flows used by financing activities – discontinued operations |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash during the period |
| $ | 2,313,735 |
|
| $ | (3,830,877 | ) |
On June 30, 2025, the Company had cash of $2,975,150, or an increase of approximately $2,314,000, from June 30, 2024. The increase in cash was due to significant capital raised during the period and offset by the net loss from operations and capital investments in Solana for the digital asset treasury. The significant increase in working capital is a result of the liquid SOL held by the Company in its digital asset treasury.
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The net cash used by continuing operating activities was approximately $8,423,000. The net loss of approximately $13,684,000 was offset by the non-cash expenses of approximately $758,000 for depreciation and amortization, $2,357,000 for stock-based compensation and issuance of common stock for services rendered by consultants, and the write off of inventory and credit losses relating to Amazon of approximately $1,682,824. The change in operating assets and liabilities provided cash of approximately $1,931,000. The digital asset revenue and unrealized gains and losses from the digital asset treasury is non-cash as the value was from staking revenue paid in additional Solana and the increase in market value over the purchase price for the Solana held in the digital asset treasury.
Net cash used in investing activities for the years ended June 30, 2025 and 2024 was approximately $99,293,000 and use of $3,376,000, respectively. The most significant use of cash in investing activities was the purchase of Solana for the Company’s digital asset treasury. This was offset by the collection of the purchase price in the sale of E-core and the proceeds from the sale of the building.
Net cash flows provided by financing activities for the year ended June 30, 2025 was approximately $110,030,000 compared to approximately $354,000 used during the year ended June 30, 2024. During the year ended June 30, 2025, the Company raised approximately $92,556,000 from the sale of the Company’s common stock and obtained a short-term loan of $20,000,000 that is collateralized by certain assets of the digital asset treasury. This was offset by the payment of debt and other common stock issued for the exercise of warrants or the issuance of convertible debt that was subsequently converted into common stock.
On April 1, 2024, the Company entered into a lease agreement with MFA 2510 Merchant LLC. The lease is for approximately 10,000 square feet of warehouse and office space, located in Odessa, Florida for $20,060 per month on a triple net basis. The initial term is five years. The estimated cost of this facility is a reduction of overall facility costs of approximately $240,000 in rent and approximately $138,000 per year in utilities, repairs and maintenance.
On May 28, 2024, the Company entered into an agreement to sell its Clearwater, Florida warehouse for a sale price of $4,300,000. The sale of the building was completed on July 8, 2024 and provided $1,370,978 of working capital.
On June 13, 2024, the Company sold all of the issued and outstanding equity of VitaMedica, Inc. to three investors. One of the minority interest buyers is Allan Marshall, the Company’s Chief Executive Officers. The purchase price for the stock was $6,000,000, subject to certain customary post-closing adjustments. The net cash provided from the sale was $2,100,000, reduced liabilities of $1,900,000, a loan for $1,000,000 and a final $1,000,000 payment subject to certain inventory and working capital adjustments.
On August 1, 2024, the Company sold all of outstanding stock of E-Core Technology, Inc., a Florida corporation (d/b/a New England Technology, Inc.) (“E-core”), to E-Core Holdings, LLC, a Florida limited liability company pursuant to the terms of an Agreement to Unwind Securities Purchase Agreement dated July 31, 2024 and effective June 30, 2024. The principals of the Buyer are the three individuals from whom the Company acquired E-core in October 2022. The purchase price in the transaction was $2,000,000 paid by the Buyer to the Company at closing and will be used for working capital.
On March 7, 2025 the Company closed on $350,000 of convertible debt with a term of two years and an interest rate of 3%. The debt was convertible into 116,118 shares of the Company’s common stock or $3.00 per share and was converted in June of 2025. The convertible debt included warrants to purchase up to 116,118 shares of the Company’s common stock at a per share price of $3.00 per common share or for $350,000. Warrants for $250,000 or 83,334 shares of common stock were exercised. The Company received approximately $600,000 during the year related to the convertible debt and the exercised warrants.
On April 24, 2025 the Company closed on a private placement offering to sell 35,970,383 shares of the Company’s common stock at an offering price of $2.28 per share and pre-funded warrants to purchase 7,889,266 shares of common stock at an offering price of $2.279 per share of the Company’s common stock that may be exercised at a per share price of $0.0001. The Company received approximately $92,556,000, net of broker fees, legal fees and other expenses incurred for the private placement. Since June 30, 2025, all of the pre-funded warrants have been exercised and the 7,889,266 shares of common stock issued.
On May 23, 2023, The Company entered into a credit facility with BitGo Prime, LLC (“BitGo”). Pursuant to a Master Loan Agreement (the “Agreement”) the Company may borrow up to $20,000,000 of Digital Currency or United States Dollars with interest at the rate of 11.5% per year. The term of the credit facility is for one year and is renewable for successive one year options. Each individual loan under the facility is negotiable as to the amount, term prepayment or recall (payment demand). The loans shall be collateralized by the Company’s treasury assets, already held at BitGo, the initial availability is based on 260% collateral level and a margin call level of 175%. There are no requirements or fees for non-use of the credit facility and the facility can be increased in the future based on the value of the assets BitGo is the custodian of for the Company. At June 30,2025, the outstanding balance of the credit facility was $20,000,000. Subsequent to June 30, 2025 the credit facility increased to $50,000,000. The $50,000,000 credit facility is outstanding as of the date of this report and was used for the purchase of Solana.
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Liquidity of SOL Management
The Company purchases Locked Solana that cannot be purchased or sold on the normal market exchanges and is purchased and sold through negotiations directly with the owner of the Locked Solana or their agent. The Locked Solana is unlocked through a schedule that will continue through January of 2028 and once unlocked is the same as any other liquid Solana in the Company’s treasury. Since this Locked Solana could create significant delays if the Company needed liquidity, management monitors the overall percentage of the digital assets that are locked or do not have the normal liquidity as other digital assets.
The Company has 421,451 tokens that are considered locked at June 30, 2025. The following table summarizes the unlocking schedule of Solana tokens currently locked as of June 30, 2025, valued at $133.07 or a 14% discount to the closing price of $154.74:
June 30, 2026 |
| $ | 21,430,177 |
|
|
| 161,041 |
|
June 30, 2027 |
|
| 20,819,592 |
|
|
| 156,453 |
|
June 30, 2028 |
|
| 13,833,756 |
|
|
| 103,957 |
|
|
| $ | 56,083,525 |
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| 421,451 |
|
The Company’s Staking Program involves the temporary loss of the ability to transfer, assign a new validator or otherwise dispose of the SOL. Under normal conditions, the Company will regain complete control over its unstaked SOL within two days of initiating the unstaking. However, there can be no guarantee that such process will result in the Company regaining complete control of its SOL in time to satisfy its current obligations. We maintain a certain amount of liquid SOL in the treasury and a certain amount of cash to ensure that the Company is able to satisfy its current obligations.
Subsequent to June 30, 2025
On July 11, 2025 the Company closed on a private placement offering to sell 12,457,186 shares of the Company’s common stock at an offering price of $4.00 per share. The Company received approximately $37,077,000, net of broker fees, the fees on the convertible debt offering completed on July 16, 2025, legal fees, filing fees and other expenses incurred for the private placement.
We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these consolidated financial statements and meet all of our debt obligations.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies and Estimates
Preparation of financial statements requires the application of accounting policies, judgments, assumptions and estimates that can significantly affect the reported results of operations, cash flows or the amounts of assets and liabilities recognized in the financial statements. Judgments made include those related to accounting for revenue recognition and realizability of deferred tax assets.
Management discusses these policies, estimates and assumptions with senior members of management on a regular basis and provides periodic updates on management decisions to the Audit Committee. Management believes the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods.
| 46 |
| Table of Contents |
For further information, see Note 2 to the Consolidated Financial Statements, “Significant Accounting Policies.”
Revenue Recognition - In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon the distributors’ resale of the products.
Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with inbound freight, are generally included in cost of revenue.
Our business is subject to contingencies related to customer orders, including:
Right of Return:
A large portion of our revenue comes from the sale of consumable products, which are sold in high-volume and low quantities, and are generally maintained at stock levels of less than ninety days in our facility. Customer returns have historically represented a very small percentage of sales on an annual basis. Other product sales relate to some pet products, including small mechanical devices.
Warranties:
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 accrues an allowance for refunds, returned deposits and discounts given by customer services post shipment of the product based on historical experience and management’s estimate of future expenses, including replacement, freight charges and other fulfilment expenses.
Staking Revenue:
The recognition of staking revenue from delegated digital assets represents a critical accounting estimate due to the complexity and evolving nature of blockchain protocols and regulatory guidance. As a delegator, the Company earns staking rewards by participating in proof-of-stake networks through third-party validators, without directly operating the nodes. Revenue is recognized when control of the staking rewards is obtained, typically upon receipt into the Company’s wallet, and measured at fair value using quoted market prices at the time of receipt. Management must assess the reliability of validator performance, the timing and frequency of reward distributions, and potential slashing risks that could impact future earnings. Additionally, the Company evaluates whether staking rewards meet the criteria for revenue recognition under applicable accounting standards, including considerations of principal versus agent relationships. Changes in protocol rules, validator reliability, or regulatory developments may materially affect the timing and amount of staking revenue recognized.
Income taxes - The assessment of the realizability of deferred tax assets is a critical accounting estimate that requires significant judgment and evaluation of both positive and negative evidence. Deferred tax assets arise primarily from temporary differences, net operating losses, and tax credit carryforwards, and their recoverability depends on the Company’s ability to generate sufficient future taxable income. Management must consider all available information, including historical earnings, projected future income, tax planning strategies, and the expiration dates of carryforwards. If it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is recorded to reduce the asset to the amount expected to be recoverable. Changes in assumptions or actual results that differ from expectations may result in significant adjustments to the valuation allowance and income tax expense.
| 47 |
| Table of Contents |
Recent Accounting Pronouncements
Refer to Note 2 – Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of this date of this Annual Report on Form 10-K.
Reverse Stock Split
On September 18, 2024, we filed a Certificate of Change with the Nevada Secretary of State to effect a reverse stock split of our common stock at a rate of 1-for-20 (the “Reverse Stock Split”), which became effective as of October 3, 2024 (the “Effective Date”). The Reverse Stock Split was approved by the board of directors in accordance with Nevada law. The Reverse Stock Split did not have any impact on the par value of common stock.
On the Effective Date, every twenty shares of Common Stock issued and outstanding were automatically combined into one share of Common Stock, without any change in the par value per share. As the per-share par value did not change, we reclassified $19,860 from Common Stock to Additional Paid-in-Capital on the Effective Date. The exercise prices and the number of shares issuable upon exercise of outstanding stock options, equity awards and warrants, and the number of shares available for future issuance under the equity incentive plans were adjusted in accordance with their respective terms. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in our Common Stock. We did not issue any fractional shares in connection with the Reverse Stock Split. Instead, fractional shares were initially rounded up to the next largest whole number, resulting in the issuance of 8 shares on October 3, 2024 the Effective Date and an additional issuance of 38 shares on October 8, 2024. On October 10, 2024, the transfer agent received additional requests to issue a total of 202,183 shares of common stock for round up of fractional shares. These shares were issued on October 23, 2024 and on October 30, 2024 we were notified that the shares were returned to the Company’s transfer agent. Although the Company did receive the common stock back after issuance, the potential dilution remains a risk, and is the subject of a complaint filed by the Company in the United States District Court for the District of Nevada with the purpose of eliminating any said risk. The Reverse Stock Split did not modify the relative rights or preferences of the Common Stock.
Unless otherwise indicated, all issued and outstanding shares of common stock and all outstanding securities entitling their holders to purchase shares of our common stock or acquire shares of our common stock, including stock options, restricted stock units, and warrants per share data, share prices and exercise prices, as required by the terms of those securities, have been adjusted retroactively to reflect the Reverse Stock Split.
On October 17, 2024, Company received written notice (the “Compliance Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it had regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Stock Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from October 3, 2024 to October 16, 2024, the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company”, the Company is not required to provide the information required by this Item.
| 48 |
| Table of Contents |
Item 8. Consolidated Financial Statements and Supplementary Data.
UPEXI INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2025 AND 2024
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Report of Independent Registered Public Accounting Firm PCAOB ID |
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Consolidated Financial Statements |
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| 49 |
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Board of Directors and Shareholders
Upexi, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Upexi, Inc. (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2024.
September 24, 2025
| F-1 |
| Table of Contents |
| UPEXI, INC. |
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| CONSOLIDATED BALANCE SHEETS |
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| June 30, |
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| ASSETS |
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| Current assets |
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Cash |
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Accounts receivable, net |
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Inventory, net |
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Due from VitaMedica transition |
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Prepaid expenses and other receivables |
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Current digital assets at fair value |
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Assets available for sale - Building |
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Purchase price receivable - VitaMedica |
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Purchase price receivable - E-core |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Deferred tax asset |
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Digital assets at fair value, net of current |
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Other assets |
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Right-of-use asset, net |
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Total other assets |
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Total assets |
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| LIABILITIES AND STOCKHOLDERS' EQUITY |
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| Current liabilities |
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Accounts payable |
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Accrued compensation |
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Deferred revenue |
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Accrued liabilities |
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Accrued interest |
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Acquisition payable |
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Related party advances, net |
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Current portion of note payable |
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Short-term treasury debt |
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Current portion of Cygnet subsidiary notes payable |
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Note payable on building for sale |
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Current portion of operating lease payable |
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Total current liabilities |
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Operating lease payable, net of current portion |
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Related party note payable |
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Note payable |
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Convertible notes payable |
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Total long-term liabilities |
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| Commitments and contingencies |
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| Stockholders' equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders' equity attributable to Upexi, Inc. |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of Contents |
UPEXI, INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
Year Ended June 30, | ||||||||
2025 | 2024 | |||||||
Revenue | ||||||||
Revenue | $ | $ | ||||||
Digital asset revenue | ||||||||
Total revenue | ||||||||
Cost of revenue | ||||||||
Gross profit | ||||||||
Operating expenses | ||||||||
Sales and marketing | ||||||||
Distribution costs | ||||||||
General and administrative expenses | ||||||||
Realized and unrealized (gain) loss on digital assets | ( | ) | ||||||
Share-based compensation | ||||||||
Amortization of acquired intangible assets | ||||||||
Depreciation | ||||||||
Impairment of long-lived asset - building | ||||||||
Loss on the sale / abandonment of assets in relocation | ||||||||
Impairment of intangible assets and goodwill | ||||||||
Lease impairment (gain on settlement), Delray Beach facility | ( | ) | ||||||
Loss from operations | ( | ) | ( | ) | ||||
Other income (expense), net | ||||||||
Other | ( | ) | ( | ) | ||||
Interest (expense) income, net | ( | ) | ( | ) | ||||
Other income (expense), net | ( | ) | ( | ) | ||||
Loss on operations before income tax | ( | ) | ( | ) | ||||
Income tax benefit (expense) | ||||||||
Net loss from continuing operations | ( | ) | ( | ) | ||||
Gain (loss) from the sale of: | ||||||||
Interactive Offers | ||||||||
VitaMedica | ||||||||
E-Core | ( | ) | ||||||
Income (loss) on discontinued operations | ||||||||
Infusionz | ||||||||
Interactive offers | ( | ) | ||||||
VitaMedica | ||||||||
E-core | ||||||||
Income (loss) income from discontinued operations | ||||||||
Net income (loss) attributable to Upexi, Inc. | $ | ( | ) | ( | ) | |||
Basic income (loss) per share: | ||||||||
Income (loss) per share from continuing operations | $ | ( | ) | $ | ( | ) | ||
(Loss) income per share from discontinued operations | $ | $ | ||||||
Total income (loss) per share attributable to Upexi shareholders | $ | ( | ) | $ | ( | ) | ||
Diluted income (loss) per share: | ||||||||
Income (loss) per share from continuing operations | $ | ( | ) | $ | ( | ) | ||
(Loss) income per share from discontinued operations | $ | $ | ||||||
Total income (loss) per share attributable to Upexi shareholders | $ | ( | ) | $ | ( | ) | ||
Basic weighted average shares outstanding | ||||||||
Fully diluted weighted average shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
UPEXI, INC. |
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
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| Total |
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| Preferred Stock |
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| Preferred Stock |
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| Common Stock |
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| Common Stock |
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| Additional Paid |
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| Accumulated |
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| Non-controlling |
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| Stockholders' |
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| Shares* |
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| Par* ** |
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| Par* ** |
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| In Capital |
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| Deficit |
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| Interest |
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| Equity |
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2024 |
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Balance, June 30, 2023 |
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| $ |
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| $ |
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| $ | ( | ) |
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| $ |
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Stock based compensation, restricted stock grant |
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| - |
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Stock based compensation, amortization of stock options |
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| - |
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| - |
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| - |
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| - |
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| - |
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Issuance of stock and equity for purchase of Cygnet |
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| - |
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Issuance of stock for conversion of debt |
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Net loss |
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Balance, June 30, 2024 |
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| $ |
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| $ |
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Stock based compensation, restricted stock grant |
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| - |
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Issuance of preferred series A stock |
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Issuance of stock for the conversion of debt |
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Capitalized interest related to convertible debt |
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Issuance of stock for the exercise of warrant on convertible debt |
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| - |
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Issuance of stock for the cashless exercise of options |
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| - |
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| - |
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Issuance of stock for vested restricted stock grants |
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| - |
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Issuance of stock for services |
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Issuance of stock for the exercise of cashless warrants |
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| - |
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Issuance of common stock |
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Net loss |
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| - |
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Balance, June 30, 2025 |
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| $ |
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* Common stock has been restated to reflect the 1 for 20 reverse split
** Common stock par value has been adjusted to $0.00001
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
UPEXI, INC. |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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| Year ended June 30, |
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| 2025 |
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| 2024 |
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Cash flows from operating activities |
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Net loss from operations |
| $ | ( | ) |
| $ | ( | ) |
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Adjustments to reconcile net loss from continuing operations to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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Unrealized (gain) loss on digital assets |
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Digital asset revenue |
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| ( | ) |
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Gain on the sale of VitaMedica and income from discontinued operations |
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Loss on the sale of New England Technology |
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Amortization of loan costs |
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Amortization of consideration discount |
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Impairment of goodwill and intangible assets |
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Inventory write-off |
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Loss on impairment of building |
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Loss on sale of assets related to relocation of facility |
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Gain on sale of interactive offers |
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Loss on the disposal of assets |
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Bad debt reserve for Amazon receivable |
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Reduction of acquisition payable |
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Issuance of stock for services |
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Lease impairment (gain on settlement) |
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Change in deferred tax asset |
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Stock based compensation |
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Changes in assets and liabilities, net of acquired amounts |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other assets |
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Operating lease payable |
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Accounts payable and accrued liabilities |
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Deferred revenue |
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| ( | ) |
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Net cash provided by operating activities - Continuing Operations |
|
| ( | ) |
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| ( | ) |
Net cash provided by (used in) operating activities - Discontinued Operations |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Proceeds from the sale of the building, net |
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Proceeds from the sale of VitaMedica, Inc. |
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Proceeds from the sale of E-core |
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Proceeds from the sale of Interactive Offers, net of liabilities paid |
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Acquisition and sale of digital assets, net |
|
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| |
Acquisition of Cygnet Online LLC, net |
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| ( | ) | |
Acquisition of property and equipment |
|
| ( | ) |
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| ( | ) |
Net cash provided by (used in) investing activities - Continuing Operations |
|
| ( | ) |
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Net cash (used in) provided by investing activities - Discontinued Operations |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities |
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Payment on acquisition notes payable |
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| ( | ) |
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| ( | ) |
Payment on convertible note |
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Proceeds from issuance of short-term debt |
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Proceeds from warrant exercise |
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Proceeds from issuance of stock |
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Issuance of preferred stock series A |
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Repayment of related party advance |
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Proceeds from related party advance |
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Proceeds from issuance of convertible notes |
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Repayment of related party note payable |
|
| ( | ) |
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| |
Repayment on note payable on building |
|
| ( | ) |
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| ( | ) |
Net cash used in financing activities - Continuing Operations |
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| ( | ) | |
Net cash (used in) provided by financing activities - Discontinued Operations |
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| ||
Net cash used in financing activities |
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| ( | ) | |
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Net increase (decrease) in cash - Continuing Operations |
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Net (decrease) increase in cash - Discontinued Operations |
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| ||
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Cash, beginning of period |
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| ||
Cash, end of period |
| $ |
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| $ |
| ||
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Supplemental Cash Flow Disclosures |
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Interest paid |
| $ |
|
| $ |
| ||
Income tax paid |
| $ |
|
| $ |
| ||
Non-cash Investing and Financing Activities |
|
|
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|
Issuance of common stock for acquisition of Cygnet |
| $ |
|
| $ |
| ||
Non-cash proceeds in the sale of VitaMedica |
| $ |
|
| $ |
| ||
Issuance of common stock for the repayment of convertible notes payable |
| $ |
|
| $ |
| ||
Issuance of debt for acquisition of Cygnet |
| $ |
|
| $ |
| ||
Bloomios non-cash payment of receivables, net |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
Upexi, Inc.
Notes to the Consolidated financial statements
June 30, 2025 and 2024
Note 1. Basis of Presentation
Nature of Operations
Upexi, Inc., a Delaware corporation, originally formed as a Nevada corporation in September of 2018. The Company has seven active subsidiaries that are part of the Company. We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens. We continue to be a brand owner specializing in the development, manufacturing, and distribution of consumer products.
Solana Treasury Strategy. We have recently diversified into the cryptocurrency industry and cash management of assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens. Early in 2025, we updated and modified our cash management and treasury strategy to include holding digital currency assets directly on our balance sheet. This was a shift from before when we held excess cash primarily in FDIC-insured interest-bearing accounts. The change to adopt this strategy results from our intention to obtain the highest yield on excess cash. Under our new approach, our treasury policy focuses primarily on Solana (“SOL”). The approach involves applying a public-market treasury model to an asset that is considered earlier in its lifecycle, with respect to both development and usage, as well as institutional adoption, than Bitcoin. Management will focus its resources to this digital asset strategy and a significant portion of the balance sheet will be allocated to holding Solana in the Company’s digital asset treasury. Currently our treasury is exclusively dedicated to the SOL digital asset and currently we do not intend to dedicate any of the treasury allocated capital to other digital assets.
Our products are distributed in the United States of America and internationally through multiple entities and managed through our locations in Florida.
Upexi operates from our corporate location in Tampa, Florida, where direct to consumer, wholesale and Amazon sales are driven by on-site and remote teams for all brands. The Tampa, Florida location also supports all the other locations with accounting, corporate oversight, day-to-day finances, business development and operational management operating from this location.
MW Products operates from our corporate headquarters and our Tampa, Florida warehouse, managing direct to consumer, wholesale and Amazon sales for multiple brands and develops new products through our research and development team in Henderson, Nevada and Odessa, Florida.
Lucky Tail operates from our Tampa, Florida warehouse with sales and marketing driven by on-site and remote teams that operate the Amazon sales strategy and daily business operations.
HAVZ, LLC, d/b/a/ Steam Wholesale operates manufacturing and/or distribution centers in Odessa, Florida, 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.
Upexi Distribution operates from our Tampa, Florida warehouse providing warehousing, distribution and other services in support of our product sales.
Basis of Presentation
The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
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 year ended June 30, 2024.
All intercompany accounts and transactions have been eliminated as a result of the consolidation.
| F-6 |
| Table of Contents |
Note 2. Significant Accounting Policies
The significant accounting policies followed are:
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates underlying the Company’s reported financial position and results of operations include the allowance for credit losses, 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.
Cash - The Company considers all highly liquid investment instruments with a maturity of three months or less to be cash equivalents. Cash is 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 - Amounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within a specified time from the invoice date. The trade terms vary based on the customer and typically range from prepaid to 45 days from the invoice date. Interest is not charged by the Company on past due accounts. The carrying amount of receivables is reduced by an allowance for expected credit losses, as necessary, that reflects management’s best estimate of the amount that will not be collected. This estimation takes into consideration historical experience, current conditions and as applicable, reasonable supportable forecasts. Actual results could vary from the estimate. Accounts are charged against the allowance when management deems them to be uncollectible. The net accounts receivable balances at June 30, 2025, 2024 and 2023 were $
Inventory - The Company reviews the inventory level of all products and raw materials quarterly. For most products that have been in the market for one year or more, we consider inventory levels of greater than one year’s sales to be excess or other items that show slower than projected sales. Due to limited market penetration for our products, we have decided to write down 50% of the cost against certain raw materials and finished products. Products that are no longer part of the current product offering are considered obsolete. The potential for re-sale of slow-moving and obsolete inventories is based upon our assumptions about future demand and market conditions. The recorded cost of obsolete inventories is then reduced to zero. The slow-moving and obsolete inventory is written off and recorded as charges to cost of goods sold. All adjustments for obsolete inventory establish a new cost basis for that inventory as we believe such reductions are permanent declines in the market price of our products. Generally, obsolete inventory is sold to companies that specialize in the liquidation, while we continue to market slow-moving inventories until they are sold or become obsolete.
Inventory consists of raw materials and finished goods and is stated at the lower of cost or net realizable value. Cost is determined by the weighted average moving cost inventory method. Net realizable value is determined, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors. On June 30, 2025, the Company had $
| F-7 |
| Table of Contents |
Digital Assets – Pursuant to ASU 2023-08, Intangibles — Goodwill and Other — Crypto Assets: Accounting for and Disclosure of Crypto Assets, codified into ASC subtopic 350-60, in-scope crypto assets are required to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard.
The Company adopted this guidance effective April 1, 2025 as this was the start of the Company first holding digital assets. SOL tokens are measured using Level 1 inputs under ASC 820, based on quoted prices from principal market. ASC 820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective of the reporting entity. The digital assets held by the Company are traded on a number of active markets globally. The Company determines CoinMarketCap as its principal market, as it is one of the earliest and the most trusted sources by users, institutions, and media for comparing thousands of crypto assets and selected by the U.S. government. The Company recognizes revenue by utilizing daily close prices obtained from CoinMarketCap.
Property and Equipment - Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from
Goodwill - The Company evaluates its goodwill for possible impairment, simplifying the test for goodwill impairment at least annually and when one or more triggering events or circumstances indicate that the goodwill might be impaired. Under this guidance, annual or interim goodwill impairment testing is performed by comparing the estimated fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill.
The Company performed its annual test as of June 30, 2025 and 2024, respectively. There was no impairment as of June 30, 2025.
It was determined by management that the goodwill related to Cygnet was completely impaired at June 30, 2024 based on the strategic decision to exit the recommerce business. An impairment of goodwill in the amount of $
Impairment of Long-lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. The Company recognized an impairment on its building of $
Revenue Recognition - In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.
| F-8 |
| Table of Contents |
The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon the distributors’ resale of the products.
Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with inbound freight, are generally included in cost of revenue.
Our business is subject to contingencies related to customer orders, including:
Right of Return:
A large portion of our revenue comes from the sale of consumable products, which are sold in high-volume and low quantities, and are generally maintained at stock levels of less than ninety days in our facility. Customer returns have historically represented a very small percentage of sales on an annual basis. Other product sales relate to some pet products, including small mechanical devices.
Warranties:
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 accrues an allowance for refunds, returned deposits and discounts given by customer services post shipment of the product based on historical experience and management’s estimate of future expenses, including replacement, freight charges and other fulfilment expenses.
Conditions of Acceptance:
Sales of our consumable products and pet products, generally do not have customer acceptance terms.
Revenue by Geography and Product Source:
The following table, which excludes digital asset revenue, discloses disaggregated revenue for the year ended:
|
| June 30, 2025 |
|
| June 30, 2024 |
| ||
Primary geographical markets |
|
|
|
|
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| ||
|
|
|
|
|
|
| ||
United States of America |
| $ |
|
| $ |
| ||
Other |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
|
|
|
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Product source |
|
|
|
|
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Internally manufactured |
| $ |
|
| $ |
| ||
Contract manufactured |
|
|
|
|
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| ||
Purchased as finished good |
|
|
|
|
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| ||
Total |
| $ |
|
| $ |
| ||
| F-9 |
| Table of Contents |
Deferred Revenue - The 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.
The following table discloses the deferred revenue:
|
| June 30, 2025 |
|
| June 30, 2024 |
| ||
Deferred revenue |
| $ |
|
| $ |
| ||
Deferred revenue, also referred to as funded backlog, was $
Digital Assets Revenue, Realized and Unrealized Gains and Losses
Acquisition of Solana tokens
We acquire liquid Solana tokens through purchases. In the case of liquid bulk purchases, we recognize for cost basis the actual price paid. In the case of liquid VWAP (volume-weighted average price) or TWAP (time-weighted average price) over multiple hour or days, we recognize for cost basis the average price paid for all tokens purchases.
The Company is able to acquire Solana tokens that are locked through direct negotiations with the owner or a third part at a discounted price from the Solana market value price. These locked tokens will unlock over a period of time and once unlocked can be sold on several Solana exchanges. With the purchase of locked Solana, we recognize the cost basis as the actual price paid. While the tokens remain locked, the Solana is marketed to fair value based on a 14% discount to the end of the period market price and the unrealized gain or loss is recognized. The unlocking of the purchased Solana occurs over a series of dates as prescribed by the purchase agreement. At the time of unlocking, tokens can remain in the original wallet or be transferred into the wallet at our custodian or sold on an open exchange. Once the Solana is unlocked, the fair value is measured at the end of the period at the market value without a discount.
Per ASC 350-60-45-2, gains and losses from the remeasurement of crypto assets shall be included in net income and presented separately from changes in the carrying value of other intangible assets. Pursuant to this guidance, changes in fair value are reflected on the income statement in the line item “Realized and unrealized (gain) loss on digital assets” in the operating expense section of the consolidated statements of operations. We measure changes in fair value as the difference between the cost basis and the prevailing market price of the digital asset at the date of measurement, multiplied by the quantity held of the digital asset. Our policy on prevailing market price is the last trading price prior to midnight.
Remeasurement on a recurring basis
Subsequent to the acquisitions of Solana tokens, remeasurement of change in value fair is done by taking the spot price from coinmarketcap.com at the end of a month. Our tokens are bifurcated between liquid and locked tokens. In the case of liquid tokens, the aggregate fair value is computed by taking the number of liquid tokens and multiplying by the month-end spot price. In the case of locked tokens, the aggregate fair value is computed by taking the number of locked tokens, discounted by 14%, and multiplying by the month-end spot price. As locked tokens become unlocked over time, they will be added to the count of liquid tokens and accordingly, make up less of that discount percentage over time when computing aggregate fair value on locked tokens. The discount used by management is based on the historical purchases of locked Solana management has made on behalf of the Company. Management monitors this discount percentage and adjusts when appropriate. Per ASC 350-60-45-2, gains and losses from the remeasurement of crypto assets shall be included in net income and presented separately from changes in the carrying value of other intangible assets. Pursuant to this guidance, changes in fair value are reflected on the income statement in the line item “Realized and unrealized (gain) loss on digital assets” in the operating expense section of the consolidated statements of operations.
| F-10 |
| Table of Contents |
Staking revenue
We earn staking rewards by delegating our digital assets to third-party validators on proof-of-stake blockchain networks. These tokens remain under the Company’s control and are not derecognized, as the delegation does not constitute a transfer of control under ASC 610-20 or ASC 350-60. Rewards are recognized as income when the Company obtains control of the new tokens, typically upon receipt into its wallet. While there is no explicit guidance under U.S. GAAP for staking activities, the Company applies the principles of ASC 606, Revenue from Contracts with Customers, by analogy. Management evaluates whether a contract exists, identifies the performance obligations, and determines whether the Company acts as a principal or agent in the transaction. The transaction price is measured at the fair value of the digital assets received at the time control is obtained. Due to the evolving nature of blockchain protocols and limited regulatory guidance, management exercises significant judgment in evaluating validator reliability and the risk of slashing or forfeiture. Changes in protocol rules or accounting interpretations may materially impact how staking revenue is recognized and measured. Solana tokens held by the Company, whether liquid or locked, are eligible for staking. Staking revenue is calculated based on the number of tokens earned and the month-end spot price. This revenue is reported on the Statements of Operations under the line item “Digital Asset Revenue.” Changes in fair market value of the staking revenue after the initial Digital Asset Revenue is recognized are reflected on the income statement as “Realized and unrealized (gain) loss on digital assets”.
Realized sales of the digital assets
To the extent such digital assets may be sold, unrealized gain (or loss) shall reverse and realized gain (or loss) shall be recorded for the difference between price at which the digital asset sold and cost basis.
Advertising - The Company supports its products with advertising to build brand awareness of the Company’s various products in addition to other marketing programs executed by the Company’s marketing team. The Company believes continual investment in advertising is critical to the development and sale of its branded products. Advertising costs of $
Stock Based Compensation - The Company recognizes all share-based payments to employees, including grants of employee stock options and grants of restricted shares as compensation expense in the consolidated financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period) or immediately if the share-based payments vest immediately.
Non-employee Stock-based Payments - The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of Accounting Standards Codification (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’s own operations by issuing share-based payment awards. Stock-based payments related to non-employees are 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’s 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.
Fair Value Measurements - The Company accounts for financial instruments in accordance with FASB ASC 820 “Fair Value Measurement and Disclosures” (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’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
| F-11 |
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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:
| · | 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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| · | 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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| · | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
The estimated fair value of certain financial instruments, including cash, 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.
Leases - The Company determines if a contract contains a lease at inception. A contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed. Leases with an initial term of 12 months or less are not recognized within the accompanying consolidated balance sheets. GAAP requires that the Company’s 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 the Company’s real estate leases are classified as operating leases.
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’s 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.
The Company’s 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.
Income Taxes - Income taxes are provided for the tax effects of transactions reported in the consolidated 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. A $
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.
| F-12 |
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The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” 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’s consolidated 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.
ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s consolidated 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 were no material uncertain tax positions at June 30, 2025 or June 30, 2024.
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).
Reverse Stock Split
On September 18, 2024, we filed a Certificate of Change with the Nevada Secretary of State to effect a reverse stock split of our common stock at a rate of
On the Effective Date, every twenty shares of Common Stock issued and outstanding were automatically combined into one share of Common Stock, without any change in the par value per share. As the per-share par value did not change, we reclassified $
Unless otherwise indicated, all issued and outstanding shares of common stock and all outstanding securities entitling their holders to purchase shares of our common stock or acquire shares of our common stock, including stock options, restricted stock units, and warrants per share data, share prices and exercise prices, as required by the terms of those securities, have been adjusted retroactively to reflect the Reverse Stock Split.
On October 17, 2024, Company received written notice (the “Compliance Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Stock Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from October 3, 2024 to October 16, 2024, the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.
| F-13 |
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Earnings (loss) per Share - 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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Warrants |
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Prefunded warrants |
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Convertible debt |
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Restricted stock grants |
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Total potential dilutive weighted average shares outstanding |
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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’s common stock can result in a greater dilutive effect from potentially dilutive securities. During the year ended June 30, 2025 and 2024, the Company reported a net loss, so the potential effect is not reflected in the consolidated financial statements.
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’s 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 - In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in consolidated financial statements”. 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’s 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. During the year ended June 30, 2024, the purchase of all remaining ownership of Cygnet resulted in no remaining non-controlling interests in the consolidated financial statements.
Recent Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (“FASB”), or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are applicable and not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption. What follows below are accounting pronouncements adopted or issued but not yet adopted.
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments expand income tax disclosure requirements by requiring an entity to disclose (i) specific categories in the rate reconciliation, (ii) additional information for reconciling items that meet a quantitative threshold, and (iii) the amount of taxes paid disaggregated by jurisdiction. The standard is effective for annual reporting periods beginning after December 15, 2024. The Company will adopt this guidance effective for the annual reporting period beginning July 1, 2025 (fiscal year ended June 30, 2026). The adoption of ASU 2023-09 will impact the Company’s disclosures but will not impact financial position nor results of operations.
| F-14 |
| Table of Contents |
In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which establishes accounting guidance for crypto assets meeting certain criteria. Solana meets these criteria. The amendments require crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income each reporting period. Upon adoption, a cumulative-effect adjustment was made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The Company elected to early adopt ASU 2023-08 for the year ended June 30, 2025, effective as of July 1, 2024. As a result of the adoption, the Company did not have a cumulative-effect adjustment as the Company did not have any Crypto Assets prior to January 1, 2025. In the current year ended and date as of June 30, 2025, SOL, the token of Solana blockchain, is recognized at fair value.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures.” The ASU requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: (1) disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (“DD&A”) (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e), (2) include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements, (3) disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and (4) disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. The ASU is effective for annual periods beginning after December 15, 2026, and interim report periods beginning after December 15, 2027. Early application of the amendment is permitted. The ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the effect that ASU 2024-03 will have on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, which provides for all entities with the option to elect a practical expedient that assumes that current conditions as of the balance sheet do not change for the remaining life of an asset, with respect to estimates of expected credit losses. This guidance is effective for annual reporting periods beginning after December 15, 2025 and interim periods within those annual reporting periods, with early adoption permitted and application of guidance prospectively. We are currently evaluating the effect of this pronouncement.
Note 3. Digital Assets
The following table summarizes the Company’s digital asset holdings as of:
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Approximate number of Solana Tokens held |
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| F-15 |
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The following table summarizes the Company’s digital asset purchases, losses (gains) on digital assets, and revenue from staking for the year ended June 30, 2025 and 2024:
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Approximate number of Solana Tokens purchased |
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Cost basis is reflected in the above table as “Digital asset purchases”.
The following table summarizes the composition of Solana tokens held broken out by liquid and locked as of:
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Approximate number of Solana Tokens liquid |
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Approximate number of Solana Tokens locked |
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The Company has approximately 95% of its Solana treasury staked at June 30, 2025. The Company maintains control over the delegated SOL tokens throughout the staking period. Although the tokens undergo a bonding process with validators, the Company retains the ability to initiate unbonding at any time. Upon notification to the validator, the unbonding process begins, which typically takes up to two days. During this period, the tokens remain unavailable for transfer or sale on the open market. Validators do not gain control over the tokens in a manner that meets derecognition criteria. They cannot sell, pledge, or otherwise dispose of the tokens. As such, the Company continues to recognize the delegated SOL tokens as part of its digital asset holdings.
The Company has 421,451 tokens that are considered locked at June 30, 2025. The following table summarizes the unlocking schedule of Solana tokens currently locked as of June 30, 2025:
June 30, 2026 |
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The Company did not sell any of its Solana in its Digital Asset Treasury during the year ended June 30, 2025 or 2024. The Company valued the Solana treasury at $
Note 4. Inventory
Inventory consisted of the following:
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The Company writes off the value of inventory deemed excessive or obsolete. During the years ended June 30, 2025 and 2024, the Company wrote off inventory valued at $
| F-16 |
| Table of Contents |
Note 5. Property and Equipment
Property and equipment consist of the following:
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Depreciation expense for the years ended June 30, 2025 and 2024 was $
Note 6. Intangible Assets
Intangible assets as of June 30, 2025:
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For the years ended June 30, 2025 and 2024, the Company amortized approximately $
| F-17 |
| Table of Contents |
Intangible assets as of June 30, 2024:
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Future amortization of intangible assets at June 30, 2025 is set forth below:
June 30, 2026 |
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Note 7. Prepaid Expense and Other Current Assets
Prepaid and other receivables consist of the following:
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All prepaid expenses will be expensed during the following 12 months.
Note 8. Operating Leases
We have entered into various non-cancellable operating and finance lease agreements for certain of our offices, manufacturing, technology, and equipment. We determine if an arrangement is a lease, or contains a lease, at inception, and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.
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. The operating lease expired during the year ended June 30, 2023 and the Company continued to occupy the facility and pays rent on a month-to-month basis. During the year ended June 30, 2025 there were no expenses incurred for this facility and for the year ended June 30, 2024 the Company used the facility for ongoing operations and recognized approximately $
| F-18 |
| Table of Contents |
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. The minimum lease payments were $
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 expenses were $
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
On March 15, 2023, the
On July 25, 2023,
On April 1, 2024,
Operating leases are included in operating ROU assets, current and non-current operating lease liabilities, and finance leases are included in property, plant and equipment, accrued expenses and other current liabilities, and other liabilities on the Consolidated Balance Sheets. As of June 30, 2025, our finance leases are not material.
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, 2025:
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Less: Imputed interest |
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Present value of operating lease obligation |
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| F-19 |
| Table of Contents |
The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2025 are:
Weighted average remaining lease term |
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Weighted average incremental borrowing rate |
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The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2024 are:
Weighted average remaining lease term |
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Weighted average incremental borrowing rate |
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For the years ended June 30, 2025 and 2024, the components of lease expense, included general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:
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Operating lease expense: |
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Amortization of ROU assets |
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Total lease cost |
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Note 9. Accrued Liabilities and Acquisition Payable
Accrued liabilities consist of the following:
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Acquisition Payable consists of the following:
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Payable accrued related to the acquisition of Cygnet |
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|
| $ |
| ||
|
| $ |
|
| $ |
| ||
| F-20 |
| Table of Contents |
These payables are amounts estimated by management that are due to the sellers of the acquisition and include the original purchase price installment payments not represented with a debt, equity, or other instrument, estimates of excess or deficiencies in working capital and estimates of future earnout payments.
Note 10. Convertible Promissory Notes, Notes Payable, and Related Party Note Payable
Convertible promissory notes, notes payable, and related party note payable outstanding as of June 30, 2025 and 2024 are summarized below:
|
| Maturity |
| June 30, |
|
| June 30, |
| ||
|
| Date |
| 2025 |
|
| 2024 |
| ||
Convertible Notes: |
|
|
|
|
|
|
|
| ||
Promissory Note, 21- month term, as amended, 18.11% interest payable with common stock and subordinate to the Convertible Notes. This note was amended as of November 15, 2023, extending the note to June 1, 2026 and adjusted the interest rate to 12%, paid in cash monthly. |
|
| $ |
|
| $ |
| |||
2025 Convertible Notes, 24 month term, 3% interest and is convertible into the Company’s common stock at a per share price of $3.00 per common share. No payment of interest or principal is due until the end of the two year term if the loan is not converted. The loan also included a detachable warrant to purchase 116,668 shares of the Company’s common stock at a per share price of $3.00. These notes were converted into 116,668 shares of common stock in June of 2025. |
|
| $ |
|
|
|
| |||
Unamortized discount on convertible note |
|
|
| $ |
|
|
|
|
| |
Less current portion of notes payable |
|
|
|
|
|
|
|
| ||
Notes payable, net of current portion |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Notes payable, Cygnet subsidiary: |
|
|
|
|
|
|
|
|
|
|
SBA note payable, 30-year term note, 6% interest rate and collateralized with all assets of the Company |
|
| $ |
|
| $ |
| |||
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 |
|
|
|
|
|
|
| |||
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 |
|
|
|
|
|
|
| |||
Total |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Notes payable, Cygnet subsidiary, current |
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Notes payable, Cygnet subsidiary, net of current |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Notes Payable on Building for sale: |
|
|
|
|
|
|
|
|
|
|
Mortgage Loan, 10-year term note, 4.8% interest, collateralized by land and warehouse building |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
|
|
Note Payable: |
|
|
|
|
|
|
|
|
|
|
Promissory Note, 21-month term note, 10% cash interest and subordinate to the Convertible Notes. This note was amended as of November 15, 2023, extending the note to June 1, 2026 and adjusted the interest rate to 12%, paid in cash monthly. |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
|
|
Notes payable, current |
|
|
|
|
|
|
|
| ||
Discount on notes payable, current |
|
|
|
|
|
|
|
| ||
Notes payable, current net of discount |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Notes payable, long-term |
|
|
|
|
|
|
|
| ||
Discount on notes payable, long-term |
|
|
|
|
|
|
| ( | ) | |
Notes payable, long-term, net |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Related Notes Payable: |
|
|
|
|
|
|
|
|
|
|
Marshall Loan, 2-year term note, 12% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes. November of 2023 extended to June 1, 2026 and interest was adjusted to 12% cash interest, paid monthly |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
|
|
Discount on related party note payable, current |
|
|
| $ |
|
| $ |
| ||
Notes payable, current, net of discount |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Discount on related party note payable, long term |
|
|
| $ |
|
| $ |
| ||
Notes payable, long term, net |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable, notes payable and related party note payable |
|
|
| $ |
|
| $ |
| ||
| F-21 |
| Table of Contents |
Future payments on notes payable are set forth below:
For the year ended June 30: |
|
|
|
|
|
| ||||||
|
| Note Payable |
|
| Cygnet Subsidiary Notes Payable |
|
| Total |
| |||
2026 |
| $ |
|
| $ |
|
| $ |
| |||
In June 2022, the Company executed a promissory note with Allan Marshall, the Company’s Chief Executive Officer, in the original principal amount of $
On October 19, 2022, Upexi, Inc. (the “Company”) and its indirect wholly owned subsidiary, Upexi 17129 Florida, LLC entered into a loan agreement, promissory note and related agreements with Professional Bank, a Florida state-chartered bank, providing for a mortgage on the Company’s principal office in N. Clearwater, Florida. The Company received $
On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $
On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $
On March 7, 2025, the Company executed a convertible note with two investors, in the original principal amount of $350,000.
In accordance with ASC 470-20, the Company allocated the proceeds between the debt, beneficial conversion feature (BCF) and the warrants based on their relative fair values. The fair value of the BCF and the warrants were calculated using the Black-Scholes option pricing model and had the following assumptions: expected volatility of
As of June 30, 2025, the two convertible notes have been converted into
Short-term Treasury Debt
The Company entered into a credit facility with BitGo Prime, LLC (“BitGo”). Pursuant to a Master Loan Agreement (the “Agreement”) the Company may borrow up to $
| F-22 |
| Table of Contents |
Note 11. Related Party Transactions
In March 2025, Allan Marshall purchased
In June 2024, Allan Marshall, the Company’s CEO advanced the Company $
On April 1, 2024, the Company entered into a lease agreement with MFA 2510 Merchant LLC, which is owned by our CEO, Allan Marshall. The lease is for approximately
On June 13, 2024, the Company entered into a Stock Purchase Agreement (“SPA”) pursuant to which the Company sold one hundred percent (100%) of the issued and outstanding equity (the “Interests”) of its wholly owned subsidiary VitaMedica, Inc. to three investors (the “Buyers”). One of the minority interest buyers is Allan Marshall, the Company’s CEO. The purchase price for the stock was Six Million Dollars ($
In June 2022, the Company entered into a promissory note with a member of management. The loan was for $
On April 23, 2025, the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with GSR Strategies LLC (the “Asset Manager”), pursuant to which the Asset Manager shall provide discretionary investment management services with respect to the Company’s cryptocurrency treasury (the “Account Assets”). The Company shall pay the Asset Manager an asset-based fee (the “Asset-based Fee”) equal to 1.75% per annum, of the assets under the Asset Manager’s management, which shall be calculated and paid in advance as of the first business day of each calendar month, as determined by the Asset Manager in a commercially reasonable manner. The Company issued warrants (the “GSR Warrants”) to
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.
| F-23 |
| Table of Contents |
Note 12. Equity Transactions
Convertible Preferred Stock
The Company has
Common Stock
During the year ended June 30, 2025:
On April 24, 2025, the Company issued: (i)
The Company issued
| · | In June of 2025, the Company issued |
|
|
|
| · | In April of 2025, the Company issued |
|
|
|
| · | In February of 2025, the Company issued |
|
|
|
| · | In January of 2025, the Company issued |
The Company issued
The Company issued
The Company issued
The Company issued
During the year ended June 30, 2024:
In September of 2023, the Company issued
On January 18, 2024, the Company issued
On March 18, 2024, the Company issued
The Company effectuated a reverse stock split, at a rate of
| F-24 |
| Table of Contents |
Note 13. Stock Based Compensation
The Company has established a Company an incentive plan, 2019 Equity Incentive Plan (the “2019 Plan”). 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 “Committee”). 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
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
The following table reflects the activity of stock options for the years ended June 30, 2025 and 2024:
A summary of stock option activity is as follows:
|
|
|
|
| Weighted |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregated |
| ||||
|
| Options |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
|
| Outstanding |
|
| Price |
|
| Life (Years) |
|
| Value |
| ||||
Outstanding at June 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
| - |
|
|
|
| |||
Forfeited or Cancelled |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
| ||
Outstanding at June 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
| - |
|
|
|
| |||
Forfeited or Cancelled |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
| ||
Exercised |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
| ||
Outstanding at June 30, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Options exercisable at June 30, 2025 (vested) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Options exercisable at June 30, 2024 (vested) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The average fair value of stock options granted was estimated to be $
| F-25 |
| Table of Contents |
The average fair value of stock options granted was estimated to be $
Stock-based compensation expense attributable to stock options was approximately $
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, 2025 and 2024:
|
| June 30, 2025 |
|
| June 30, 2024 |
| ||
Dividend rate |
|
|
|
|
|
| ||
Risk free interest rate |
| % |
| % | ||||
Expected term |
|
|
|
|
| |||
Expected volatility |
| % |
| % | ||||
Grant date stock price |
| $ | |
|
| $ | |
|
The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s 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’s historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in the Company’s stock prices.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at
There were
Restricted Stock Units
Stock-based compensation from RSUs was approximately $
Pursuant to the 2019 Plan, restricted stock units may be granted. As of June 30, 2025, there was approximately $
|
| Shares |
|
| Weighted-Average Grant Date Fair Value |
| ||
Outstanding as of June 30, 2023 |
|
| - |
|
|
|
| |
Granted |
|
|
|
| $ |
| ||
Cancelled or Forfeited |
|
| - |
|
|
|
| |
Vested |
|
| ( | ) |
| $ |
| |
Outstanding as of June 30, 2024 |
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
| ||
Cancelled or Forfeited |
|
| ( | ) |
|
|
| |
Issued |
|
| ( | ) |
|
|
| |
Outstanding as of June 30, 2025 |
|
|
|
| $ |
| ||
| F-26 |
| Table of Contents |
At June 30, 2025, there were approximately
The components of the stock compensation are as follows:
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Stock option amortization |
| $ |
|
| $ |
| ||
Restricted stock units amortization |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total stock based compensation |
| $ |
|
| $ |
| ||
14. Income Taxes
The components of the provision for income taxes are as follows:
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Current tax provision |
| $ |
|
| $ |
| ||
Deferred tax provision |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Provision for income taxes (benefit) |
| $ |
|
| $ | ( | ) | |
The differences between income taxes calculated at the statutory US federal income tax rate and the Company’s provision for income taxes are as follows:
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Income tax provision at statutory federal and state tax rate |
|
| % |
|
| % | ||
State taxes, net of federal benefit |
|
| % |
|
| % | ||
Nondeductible expense |
|
| ( | )% |
|
| ( | )% |
Tax return to provision |
|
| % |
|
| % | ||
State tax rate change |
|
| % |
|
| % | ||
Other, net |
|
| % |
|
| % | ||
Valuation allowance |
|
| % |
|
| ( | )% | |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| % |
|
| % | ||
| F-27 |
| Table of Contents |
The net deferred income tax asset balance related to the following:
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Net operating losses carry forward |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Right of use assets |
|
| ( | ) |
|
|
| |
Inventory write off |
|
|
|
|
|
| ||
Impairment loss |
|
| ( | ) |
|
|
| |
Intangible assets |
|
|
|
|
|
| ||
Stock options |
|
|
|
|
|
| ||
Capital loss |
|
|
|
|
|
| ||
Fixed assets |
|
|
|
|
|
| ||
Allowance for doubtful accounts |
|
|
|
|
|
| ||
Accrued compensation |
|
|
|
|
|
| ||
Deferred revenue |
|
|
|
|
|
| ||
Other, net |
|
|
|
|
|
| ||
Valuation allowances |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Deferred tax asset |
| $ |
|
| $ |
| ||
There were approximately $
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, 2025 and 2024, 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. During the years ended June 30, 2025 and June 30, 2024 the federal net operating loss increased significantly and management recorded a valuation reserve of $
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.
Note 15. Risks and Uncertainties
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.
| F-28 |
| Table of Contents |
Note 16. Discontinued Operations – Sale of Interactive Offers
On August 31, 2023, the Company sold Interactive Offers, LLC (“Interactive”) to Amplifyir Inc. (the “Buyer”). The purchase price was $
Summary of discontinued operations:
|
| Years ended June 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Discontinued Operations |
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of sales |
| $ |
|
| $ |
| ||
Sales, general and administrative expenses |
| $ |
|
| $ |
| ||
Depreciation and amortization |
| $ |
|
| $ |
| ||
Loss from discontinued operations |
| $ |
|
| $ | ( | ) | |
Accounts receivable net of allowance for doubtful accounts |
| $ |
|
| $ |
| ||
Fixed assets, net of accumulated depreciation |
| $ |
|
| $ |
| ||
Total assets |
| $ |
|
| $ |
| ||
Total liabilities |
| $ |
|
| $ |
| ||
Note 17. Discontinued Operations – Sale of VitaMedica
On June 13, 2024, the Company sold VitaMedica, Inc. to three investors and had an effective day of June 1, 2024. One of the minority interest investors is Allan Marshall, the Company’s Chief Executive Officer. The purchase price for the stock was $
Summary of discontinued operations:
|
| Years ended June 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Discontinued Operations |
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of sales |
| $ |
|
| $ |
| ||
Sales, general and administrative expenses |
| $ |
|
| $ |
| ||
Depreciation and amortization |
| $ |
|
| $ |
| ||
Other expenses |
| $ |
|
| $ | ( | ) | |
Income (loss) from discontinued operations |
| $ |
|
| $ |
| ||
Accounts receivable net of allowance for doubtful accounts |
| $ |
|
| $ |
| ||
Fixed assets, net of accumulated depreciation |
| $ |
|
| $ |
| ||
Total assets |
| $ |
|
| $ |
| ||
Total liabilities |
| $ |
|
| $ |
| ||
| F-29 |
| Table of Contents |
Fair value of consideration the Company was paid:
Cash |
| $ |
| |
Reduction of liabilities |
|
|
| |
Note payable |
|
|
| |
Working capital payment |
|
|
| |
|
| $ |
| |
|
|
|
|
|
Recognized amounts of identifiable assets, liabilities and intangible assets transferred: |
|
|
|
|
|
|
|
|
|
Cash |
| $ |
| |
Accounts receivable |
|
|
| |
Inventory |
|
|
| |
Prepaid expenses |
|
|
| |
Fixed assets |
|
|
| |
Other assets |
|
|
| |
Liabilities |
|
| ( | ) |
Total identifiable assets |
|
|
| |
Total goodwill and intangible assets |
|
|
| |
Total assets transferred |
|
|
| |
Purchase price |
| $ |
| |
Gain on sale of VitaMedica |
| $ |
|
Note 18. Discontinued Operations – Sale of E-Core
On August 1, 2024, the Company closed a sale transaction in which, effective as of June 30, 2024, it sold
Summary of discontinued operations:
|
| Years ended June 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Discontinued Operations |
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of sales |
| $ |
|
| $ |
| ||
Sales, general and administrative expenses |
| $ |
|
| $ |
| ||
Depreciation and amortization |
| $ |
|
| $ |
| ||
Other expenses |
| $ |
|
| $ |
| ||
Income from discontinued operations |
| $ |
|
| $ |
| ||
Accounts receivable net of allowance for doubtful accounts |
| $ |
|
| $ |
| ||
Fixed assets, net of accumulated depreciation |
| $ |
|
| $ |
| ||
Total assets |
| $ |
|
| $ |
| ||
Total liabilities |
| $ |
|
| $ |
| ||
| F-30 |
| Table of Contents |
Fair value of consideration the Company was paid:
Acquisition payable, paid August 5, 2024 |
| $ |
| |
Assumption of debt and accrued interest |
|
|
| |
|
| $ |
| |
|
|
|
|
|
Recognized amounts of identifiable assets, liabilities and intangible assets transferred: |
|
|
|
|
|
|
|
|
|
Cash |
| $ |
| |
Accounts receivable |
|
|
| |
Inventory |
|
|
| |
Prepaid expenses |
|
|
| |
Fixed assets |
|
|
| |
Liabilities |
|
| ( | ) |
Total identifiable assets |
|
|
| |
Total goodwill and intangible assets |
|
|
| |
Total assets transferred |
|
|
| |
Purchase price |
| $ |
| |
Loss on sale of E-core |
| $ |
|
Note 19. Subsequent Events
On July 11, 2025 the Company closed on a private placement offering to sell
On July 16, 2025, the Company closed on a private placement offering a secured convertible note in exchange for locked and liquid Solana with an original principal amount of $
| F-31 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Management’s Report on 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 the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial 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 chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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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 Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial 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 chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our management, with the participation of our principal executive officer and principal financial officer have conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2025. The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses, which are indicative of many small companies with small staff:
| (i) | inadequate segregation of duties consistent with control objectives; and |
|
|
|
| (ii) | lack of multiple levels of supervision and review. |
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.
Management’s Remediation Plan
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.
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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 annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the current fiscal year as resources allow:
| (i) | We have added additional qualified personnel to address inadequate segregation of duties and are in the process of implementing modifications to our financial controls through our newly implemented ERP that will enforce these controls systematically and enable tracking of the multiple review process; and |
| (ii) | We will add several workflow review processes with the new ERP and we expect to finalize these efforts by the end of the 2026 fiscal year. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. |
Management believes that despite our material weaknesses set forth above, our consolidated financial statements for the year ended June 30, 2025 are fairly stated, in all material respects, in accordance with U.S. GAAP.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2025, 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.
Attestation Report of the Independent Registered Public Accounting Firm
Not applicable for an emerging growth company.
Item 9B. Other Information
During the three months ended June 30,2025, none of our directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
All directors of our Company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our Company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
Name |
|
Position Held with the Company |
|
Age |
|
Date First Elected or Appointed |
Allan Marshall |
| Chief Executive Officer, Chairman of the Board |
| 58 |
| May 17, 2019 |
|
|
|
|
|
|
|
Andrew J. Norstrud |
| Chief Financial Officer, Director |
| 51 |
| April 1, 2020 |
|
|
|
|
|
|
|
Brian Rudick |
| Chief Strategy Officer |
| 43 |
| May 22, 2025 |
|
|
|
|
|
|
|
Gene Salkind |
| Director |
| 71 |
| January 1, 2021 |
|
|
|
|
|
|
|
Thomas C. Williams |
| Director |
| 65 |
| January 1, 2021 |
|
|
|
|
|
|
|
Lawrence H. Dugan |
| Director |
| 58 |
| January 1, 2021 |
____________
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our Company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Allan Marshall, 58, Chief Executive Officer, Director. Mr. Marshall joined the Company as CEO in May of 2019 and was previously retired prior to joining the Company working as a serial entrepreneur with a focus on development stage companies in hyper growth industries, with the past several years focusing on the technology and cannabis industries. Mr. Marshall is often the driving force behind the organization for its initial growth and funding strategies. Mr. Marshall began his career in the transportation and logistics industry. Mr. Marshall founded Segmentz, Inc. in November of 2000 and served as the Chief Executive Officer, successfully acquiring five distinct logistic companies, raised more than $25,000,000 of capital, creating the infrastructure and business foundation that is now XPO Logistics, Inc. (NYSE: XPO) with revenues in excess of $17 billion. Prior to Segmentz, Mr. Marshall founded U.S. Transportation Services, Inc. (“UST”) in 1995, whose main focus was third party logistics. UST was sold to Professional Transportation Group, Inc. in January 2000 and Professional Transportation Group ceased business in November 2000. Prior to 1995, Mr. Marshall served as Vice President of U.S. Traffic Ltd, a Canadian company, where he founded their United States logistics division and had previously founded a successful driver leasing company in Toronto, Ontario, Canada.
Andrew J. Norstrud, 51, Chief Financial Officer, Director. Mr. Norstrud joined Upexi, Inc. in July of 2019 as a consultant and became the Chief Financial Officer in April of 2020 and a Director as of January 2020. Prior to joining Upexi, Inc., Mr. Norstrud worked as a consultant through his own consulting firm. Mr. Norstrud served as the Chief Financial Officer for Gee Group Inc. from March 2013 until June 2018. Mr. Norstrud also served Gee Group as CEO from March 7, 2014 until April 1, 2015. Mr. Norstrud served as a director of GEE Group Inc. from March 7, 2014 until August 16, 2017. Prior to GEE Group Inc., Mr. Norstrud was a consultant with Norco Accounting and Consulting from October 2011 until March 2013. From October 2005 to October 2011, Mr. Norstrud served as the Chief Financial Officer for Jagged Peak. Prior to his role at Jagged Peak, Mr. Norstrud was the Chief Financial Officer of Segmentz, Inc. (XPO Logistics), and played an instrumental role in the company achieving its strategic goals by pursuing and attaining growth initiatives, building a financial team, completing and integrating strategic acquisitions and implementing the structure required of public companies. Previously, Mr. Norstrud worked for Grant Thornton LLP and PricewaterhouseCoopers LLP and has extensive experience with young, rapid growth public companies. Mr. Norstrud earned a BA in Business and Accounting from Western State College and a Master of Accounting with a systems emphasis from the University of Florida. Mr. Norstrud is a Florida licensed Certified Public Accountant.
Brian Rudick CFA, 43, Chief Strategy Officer. Mr Rudick joined Upexi, Inc. in May 2025 and brings deep expertise and connectivity in both traditional finance and crypto alike. Most recently, Mr. Rudick served as Head of Research for GSR, the largest digital asset market maker, where he demonstrated thought leadership externally and led internal business initiatives, including GSR’s lead investment into Upexi’s $100 million private placement. Prior to GSR, Mr. Rudick spent over a decade on Wall Street, primarily managing a long-short portfolio of bank stocks as a key member of financials-focused teams at Citadel, Balyasny, and Millennium. Mr. Rudick started his career at the Federal Reserve, where he conducted research as part of the monetary policy process. He holds a BSc from Duke University, an MBA from The University of Chicago, and is a CFA Charter holder.
Gene Salkind, 71, Director. Gene Salkind, M.D. has been a practicing neurosurgeon for more than 35 years outside of Philadelphia, PA. He graduated from the University of Pennsylvania in 1974 with a B.A., Cum Laude, and received his medical degree from the Lewis Katz School of Medicine in 1979. He returned to the University of Pennsylvania for his neurosurgical residency and in 1985 was selected as the Chief Resident in Neurosurgery at the Hospital of the University of Pennsylvania. Since that time, he has been in a university affiliated practice of general neurological surgery. He has served as the Chief of Neurosurgery at Holy Redeemer Hospital, Albert Einstein Medical Center, and Jeanes Hospital in Philadelphia. He has authored numerous peer reviewed journal articles and has given lectures throughout the country on various neurosurgical topics. He has held professorships at the University of Pennsylvania, the Allegheny Health Education and Research Foundation, and currently at the Lewis Katz School of Medicine.
Dr. Salkind is a prominent investor in the pharmaceutical arena. Past investments include Intuitive Surgical, Pharmacyclics, which grew from less than $1 per share to subsequently being acquired by Abbvie for $250 per share, and Centocor, one of the nation’s largest biotechnology companies, which was acquired by Johnson & Johnson for $4.9 billion in stock. Dr. Salkind currently sits on the boards of Cure Pharmaceuticals, a leader in the biotechnology field through its continual pursuit of redefining traditional drug delivery, and Mobiquity Technologies, Inc., a digital engagement provider. Mobiquity owns and operates a national location based mobile advertising network. The company’s suite of technologies allows clients to execute personalized and relevant experiences, driving brand awareness and incremental revenue. He was previously a board member of Derm Tech International, a global leader in non-invasive dermatological molecular diagnostics.
Dr. Salkind in 2019 joined the Strategic Advisory Board of Bio Symetrics, a company that has built data services tools for automated pre-processing, integrated analytics, and predictive modeling to make machine learning accessible to scientists and providers. Their technology serves health and hospital systems, biopharma, drug discovery and precision medicine. Dr. Salkind, a member of our audit committee, currently owns greater than ten percent (10%) of the outstanding voting securities of the Company.
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Thomas Williams, 65, has over 40 years of experience in the insurance industry. He has served in multiple roles in both originations and the administration side of operations. Mr. Williams has a specialization in providing securitization mechanisms of illiquid insurance assets. He was also with Smith Barney for his training in the capital markets and insurance industries.
Mr. Williams is currently an officer and director in several Ireland based holding companies with a focus in the insurance industry. He is an active member of the Risk Committee of Wyndham, a large Bermuda based captive. He has extensive experience in the Offshore and European Union insurance markets in both developing the structures and implementing corporate governance. His current role includes providing risk management services to a Section 110 Investment platform in both Luxembourg and Ireland for CSM Securities. Mr. Williams was the intermediary in the sale of Associate Industries of Florida, one of the largest insurance companies in workers’ compensation. He facilitated the sale to Am Trust, a New York publicly traded company in 2009.
Mr. Williams has served on the board of directors of two public companies:
| · | GEE Group, an American Stock Exchange company from 2008 to 2018. At this company, he chaired the nominating committee and was a member of the Corporate Governance Committee and Audit Committee. |
|
|
|
| · | Two Rivers Water and Farming from 2019 to 2020. |
Mr. Williams completed a training program at Northwestern’s Kellogg Business School for Corporate Governance in Public Companies in 2013.
Lawrence H Dugan, 58, Director. Mr. Dugan is a partner with the accounting firm Dorra & Dugan and has been since 1996. Mr. Dugan graduated from the University of Central Florida in 1989. Mr. Dugan is a Florida licensed Certified Public Accountant.
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| 1. | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
|
|
|
| 2. | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
| 3. | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
|
|
|
| 4.
| been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
|
|
| 5.
| been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
|
|
| 6.
| been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of our common stock, to file reports of ownership and changes in ownership of such equity securities with the SEC. Executive officers, directors, and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the forms furnished to the Company and written representations provided to the Company from the individuals required to file the reports, the Company believes that during the fiscal year ended June 30, 2025, each of its executive officers and directors has complied with Section 16(a) filing requirements except for:
| · | Allan Marshall filed a late Form 4 on April 25, 2025 for transactions that had occurred on April 17, 2025 and March 12, 2025 |
| · | Andrew Norstrud filed a late Form on April 25, 2025 for transactions that had occurred on April 17, 2025 |
| · | Gene Salkin filed a late Form 4 on April 25, 2025 for transactions that occurred on April 17, 2025 and January 17, 2025 |
| · | Lawrence Dugan filed a late Form 4 on April 25, 2025 for a transaction that had occurred on January 17, 2025 |
| · | Thomas Williams filed a late Form 4 on April 25, 2025 for a transaction that had occurred on January 17, 2025 |
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics, which is filed as Exhibit 14.1 to this Form 10-K. We have adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers, employees and all persons performing similar functions. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed in our public filings with the Commission.
Term of Office of Directors
Our directors are elected at each annual meeting of stockholders and serve until the next annual meeting of stockholders or until their successor has been duly elected and qualified, or until their earlier death, resignation or removal.
Audit Committee and Financial Expert
On January 27, 2021, our Board established an audit committee that operates under a written charter as approved by our Board. The members of our audit committee are Dr. Gene Salkind, Mr. Thomas Williams, and Mr. Lawrence Dugan. Mr. Dugan serves as chairman of the audit committee and our Board has determined that he is an “audit committee financial expert” as defined by applicable SEC rules. The Board has determined that Dr. Salkind, Mr. Williams and Mr. Dugan are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and has determined that Dr. Salkind, Mr. Williams and Mr. Dugan as audit committee members meet the more stringent requirements under Rule 5605(c)(2) of the Nasdaq Listing Rules.
Our audit committee is responsible for: (1) the integrity of the Company’s consolidated financial statements, (2) the effectiveness of the Company’s internal control over financial reporting, (3) the Company’s compliance with legal and regulatory requirements, (4) the independent registered public accounting firm’s qualifications and independence, (5) and the performance of the Company’s independent registered public accountants and (6) preparation of the audit committee report as required to be included in the Company’s annual proxy statement. The Audit Committee Charter is filed as Exhibit 10.11 hereto.
The audit committee met five times during the years ended June 30, 2025.
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Compensation Committee
On January 27, 2021, our Board established a compensation committee that operates under a written charter as approved by our Board. The members of our compensation committee are Dr. Gene Salkind, Mr. Thomas Williams, and Mr. Lawrence Dugan. Dr. Salkind serves as chairman of the compensation committee.
Our compensation committee is responsible for the oversight of, and the annual and ongoing review of, the Chief Executive Officer, the compensation of the senior management team, and the bonus programs in place for employees, which includes: (1) reviewing the performance of the Chief Executive Officer and other senior officers, and determining the bonus entitlement for such officer or officers on an annual basis, (2) determining and approving proposed annual compensation and incentive opportunity level of executive officers for each fiscal year, and recommending such compensation to the Board, (3) administration of determination of proposed grants of stock options to directors, employees, consultants and advisors with the Chief Executive Officer, (4) reviewing and recommending to the Board the compensation of the Board and committee members, (5) administering and approving any general benefit plans in place for employees, (6) engaging and setting the compensation for independent counsel and other advisors and consultants, (7) preparing any reports on director and officer compensation to be included in the Company’s proxy statements, (8) assessing the Company’s competitive positions for each component of officer compensation and making recommendations to the Board regarding such positions and (9) reviewing and assessing the adequacy of its charter and submitting any recommended changes to our Board for its consideration and approval. The Compensation Committee Charter is filed as Exhibit 10.12 hereto.
The compensation committee met three times during the year ended June 30, 2025.
Nomination and Governance Committee
On January 27, 2021, our Board established a nomination and governance committee that operates under a written charter as approved by our Board. The members of our nomination committee are Dr. Gene Salkind, Mr. Thomas Williams, and Mr. Lawrence Dugan. Mr. Williams serves as chairman of the nomination and governance committee.
Our nomination and corporate governance committee is responsible for assisting the Board in (1) proposing a slate of qualified nominees for election to the Board by the shareholders or in the event of a Board vacancy, (2) evaluating the suitability of potential nominees for membership on the Board, (3) determining the composition of the Board and its committees, (4) monitoring a process to assess Board, committee and management effectiveness, (5) aiding and monitoring management succession planning and (6) developing, recommending to the Board, implementing and monitoring policies and processes related to the Company’s corporate governance guidelines. The Compensation Committee Charter is filed as Exhibit 10.13 hereto.
The nomination committee met twice during the year ended June 30, 2025.
Nominations to the Board of Directors
We do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our Board believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to the Board. The Board, with the help of its nomination and corporate governance committee, will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
Stockholder Communications
We do not have a formal policy regarding stockholder communications with our Board. A shareholder who wishes to communicate with our Board may do so by directing a written request addressed to our Chief Executive Officer, at the address appearing on the first page of this filing.
Insider Trading Policies and Procedures
We have insider trading policies and procedures that govern the purchase, sale, and/or other disposition of the Company’s securities by our directors, officers and employees, and the Company itself, that we believe are reasonably designed to promote compliance by the Company and our directors, officers, and employees with insider trading laws, rules and regulations and the listing standards of Nasdaq. A copy of our Insider Trading Policy is filed with this Annual Report on Form 10-K as Exhibit 19.1.
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Item 11. Executive Compensation
The particulars of the compensation paid to the following persons:
| (a) | our principal executive officers; |
EXECUTIVE COMPENSATION
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers (the “named executive officers” or “NEOs”) paid by us during the years ended June 30, 2025 and 2024.
Name and Principal Position |
| Year |
|
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($)(4) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||||||
Allan Marshall, CEO, and Director (1) |
| 2025 |
|
|
| 840,000 |
|
|
| 399,231 |
|
|
| 171,000 |
|
|
| 1,091,963 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,502,194 |
| |
2024 |
|
| 840,000 |
|
|
| 250,769 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,090,769 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Norstrud, Chief Financial Officer (2) |
| 2025 |
|
|
| 266,385 |
|
|
| 350,000 |
|
|
| 228,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 844,385 |
| |
2024 |
|
| 250,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 250,000 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Rudick, Chief Strategy Officer (3) |
| 2025 |
|
|
| 25,385 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 25,385 |
| |
_____________
| (1) | At June 30, 2025, Allan Marshall had an accrued and unpaid bonus of $2,500,000 not included in this compensation table. |
| (2) | At June 30, 2025, Andrew Norstrud had an accrued and unpaid bonus of $350,000 not included in this compensation table. |
| (3) | Brian Rudick was newly appointed as Chief Strategy Officer on May 22, 2025. At June 30, 2025, Brian Rudick had an accrued and unpaid bonus of $350,000 not included in this compensation table. |
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There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors. The value of the option awards is based on the intrinsic value at date of grant.
| (4) | Represents equity-based compensation expense calculated in accordance with the provisions of Accounting Standards Codification Section 718 – Compensation – Stock Compensation, using the Black-Scholes option pricing model. |
Employment Agreements
On September 23, 2025, the Company entered an amended and restated employment agreement that superseded all previous agreements with Allan Marshall, Chairman and Chief Executive Officer (the “Marshall Employment Agreement”), effective July 1, 2025. The Marshall Employment Agreement provides for a three-year term ending on April 24, 2028, unless employment is earlier terminated in accordance with the provisions thereof and after the initial term has a standard 1-year automatic extension clause if there is no notice by the Company of termination. Mr. Marshall received a starting base salary at the rate of $840,000 per year which can be adjusted by the Compensation Committee. Mr. Marshall has performance bonuses that Mr. Marshall can earn based on the increase of shareholder value, the increase of the Company’s market cap / treasury growth and other criteria determined by the compensation committee. The Marshall Employment Agreement contains standard termination, change of control, non-compete and confidentiality provisions.
Mr. Marshall was granted an option to purchase up to 500,000 shares of common stock at a per share price of $2.28 with a term of five years and was awarded a restricted stock grant of 75,000 shares that cliff vests after six months of continued employment.
On April 24, 2025, the Company entered an employment agreement with Andrew Norstrud, Chief Financial Officer (the “Norstrud Employment Agreement”). The Norstrud Employment Agreement provides for a three-year term ending on April 24, 2028, unless employment is earlier terminated in accordance with the provisions thereof and after the initial term has a standard 1-year automatic extension clause if there is no notice by the Company of termination. Mr. Norstrud received a starting base salary at the rate of $350,000 per year which can be adjusted by the Compensation Committee. Mr. Norstrud was awarded a restricted stock grant of 100,000 shares that vests 10% per month for 10 months of continued employment. Mr. Norstrud will be paid a quarterly bonus of between 30% and 100% of his salary as determined by the Chief Executive Officer. Mr. Norstrud is entitled to receive an annual bonus based on criteria to be agreed to by Mr. Norstrud and the Chief Executive Officer and the Compensation Committee. The Norstrud Employment Agreement contains standard termination, change of control, non-compete and confidentiality provisions.
On May 22, 2025, the Company entered an employment agreement with Brian Rudick, Chief Strategy Officer (the “Rudick Employment Agreement”). Pursuant to the employment terms, Mr. Rudick will be paid an annual salary of $300,000 and additional cash and equity performance bonuses per year. In addition, Mr. Rudick will be paid $950,000 in structured cash payments through December 31, 2025 and will be granted 400,000 shares of restricted stock that will vest during his first year of employment. The initial term of employment is one year, that will automatically renew for one year if not terminated by Mr. Rudick or the Company.
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| Table of Contents |
Outstanding Equity Awards at Fiscal Year- End Table
The following table summarizes equity awards granted to Named Executive Officers and directors that were outstanding as of June 30, 2025:
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||||||||||
Name |
| Number of Securities Underlying Unexercised Options: # Exercisable |
|
| Number of Securities Underlying Unexercised Options: # Unexercisable |
|
| Equity Incentive Plan Awards: Number of Securities Underlying Unearned and Unexercisable Options: |
|
| Option Exercise Price $ |
|
| Option Expiration Date |
|
| # of Shares or Units of Stock That Have Not Vested # |
|
| Market Value of Shares or Units of Stock That Have Not Vested $ |
|
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested # |
|
| Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Allan Marshall, CEO, and Director |
|
| 500,000 |
|
|
| - |
|
|
| - |
|
| $ | 2.28 |
|
| 4/17/2030 |
|
|
| - |
|
|
| - |
|
|
| 75,000 |
|
|
| 223,500 |
| |
Andrew Norstrud, Chief Financial Officer and Director |
|
| - |
|
|
| - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 80,000 |
|
|
| 238,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene Salkind, Director |
|
| 25,000 |
|
|
| - |
|
|
| - |
|
| $ | 3.46 |
|
| 1/17/2035 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |
|
|
| - |
|
|
| - |
|
|
| 35,000 |
|
| $ | 2.28 |
|
| 4/17/2035 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |
Tomas C. Williams, Director |
|
| 25,000 |
|
|
| - |
|
|
| - |
|
| $ | 3.46 |
|
| 1/17/2035 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |
Lawrence H Dugan, Director |
|
| 25,000 |
|
|
| - |
|
|
| - |
|
| $ | 3.46 |
|
| 1/17/2035 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| |
As of June 30, 2025, Mr. Norstrud had 20,000 shares that had vested, but had not yet issued.
As of June 30, 2025, Mr. Rudick did not have outstanding option or stock awards granted out of the Company’s equity incentive plan.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
| 59 |
| Table of Contents |
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our Company during the last two fiscal years, is or has been indebted to our Company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
Directors Compensation
Our directors also receive cash compensation of $5,000 per quarterly board meeting and receive $5,000 up to $7,000 per year for being committee chair.
The table below summarizes the compensation we paid to our non-employee directors for the year ending June 30, 2025.
Name |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($) |
|
| Option Awards ($)(1)(2) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||||
Lawrence H. Dugan |
| $ | 27,000 |
|
|
| - |
|
| $ | 85,232 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 112,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene Salkind (3) |
| $ | 25,000 |
|
|
| - |
|
| $ | 163,846 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 188,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Williams |
| $ | 25,000 |
|
|
| - |
|
| $ | 85,232 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| $ | 110,232 |
|
_____________
| (1) | The amounts in this column reflect the aggregate grant date fair values of the stock options granted in fiscal year 2025 to the directors, in each case, calculated in accordance with FASB ASC Topic 718. The actual value the director will realize is a function of the underlying shares if and when these awards are exercised and sold |
| (2) | Options outstanding as of June 30, 2025 for Lawrence H. Dugan was 25,000, for Gene Salkind was 60,000 (including 35,000 that were unvested), and for Thomas Williams was 25,000. |
| (3) | Options granted to Mr. Salkind include 35,000 granted for participation in a special advisory committee to the Company. This award was granted outside of his compensation for his normal duties as Board member. |
TRANSACTIONS WITH RELATED PERSONS
We have a written policy requiring that our Audit Committee review and approve related person transactions that involve us and are of the type that are required to be disclosed in our proxy statement by SEC rules. A transaction may be a related person transaction if it’s a transaction between us and any of our directors, executive officers, owners of more than 5% of our common stock, or their immediate family (“related persons”) where the related persons have a material interest in the transaction. The policy authorizes the Audit Committee to approve a related person transaction upon discussing with management the business rationale for the transaction.
On April 23, 2025, the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with GSR Strategies LLC (the “Asset Manager”), pursuant to which the Asset Manager shall provide discretionary investment management services with respect to the Company’s cryptocurrency treasury (the “Account Assets”). The Company shall pay the Asset Manager an asset-based fee (the “Asset-based Fee”) equal to 1.75% per annum, of the assets under the Asset Manager’s management, which shall be calculated and paid in advance as of the first business day of each calendar month, as determined by the Asset Manager in a commercially reasonable manner. The Company issued warrants (the “GSR Warrants”) to the Asset Manager ( to purchase 2,192,982 shares of Common Stock at various prices per share of common stock as follows: (i) 877,193 shares of Common Stock at an exercise price of $2.28 per share of Common Stock; (ii) 438,596 shares of Common Stock at an exercise price of $3.42 per share of Common Stock; (iii) 438,596 shares of Common Stock at an exercise price of $4.56 per share of Common Stock; (iv) 438,597 shares of Common Stock at an exercise price of $5.70 per share of Common Stock. The Asset Management Agreement will, unless early terminated in accordance with its terms, continue in effect until the twentieth (20th) anniversary of April 23, 2025. The Asset Management Agreement may be terminated by the Company without cause solely upon a two-thirds majority vote of the Company’s common stockholders. If the Company terminates the Asset Management Agreement for any other reason other than for cause, the Company shall pay the Asset Manager an early termination fee (the “Termination Fee) in the amount equal or greater of (i) five (5) times the aggregate amount of the management fees paid by the Company to the Asset Manager over the prior ten (10) year period, or (ii) $15 million. The Asset Management Agreement may be terminated for Cause (i) by the Company upon at least thirty (30) days prior written notice to the Asset Manager and (ii) by the Asset Manager upon at least sixty (60) days prior written notice to the Company. GSR Growth Investments LP, a related party of the Asset Manager, holds shared voting power over 4,006,210 shares of common stock, or approximately 7.45%, of the Company’s outstanding common stock.
| 60 |
| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership, as of June 30, 2025, of our Common Stock by each of our directors, by all of our executive officers and directors as a group and by each person known to us who is the beneficial owner of more than 5% of any class of our securities. As of June 30, 2025, there were 38,266,066 shares of our Common Stock issued and outstanding. All persons named have sole or shared voting and investment control with respect to the shares, except as otherwise noted. The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of June 30, 2025. Unless otherwise indicated, the address for each beneficial owner is c/o Upexi, Inc., 3030 North Rocky Point Drive Suite 420, Tampa, Florida 33607.
Name |
| Number of Shares Beneficially Owned |
|
| Percentage of Class(1) |
| ||
Allan Marshall |
|
| 1,466,957 | (2) |
|
| 3.83 | % |
Gene Salkind |
|
| 390,127 | (3) |
|
| 1.02 | % |
Andrew Norstrud |
|
| 99,138 | (4) |
|
| 0.26 | %* |
Brian Rudick |
|
| 493,422 | (5) |
|
| 1.29 | % |
Lawrence Dugan |
|
| 26,389 | (6) |
|
| 0.07 | %* |
Thomas Williams |
|
| 25,000 | (7) |
|
| 0.07 | %* |
Directors and Executive Officers as a Group |
|
| 2,501,033 |
|
|
| 6.54 | % |
__________
* | Represents less than 1% of the number of shares of our Common Stock outstanding |
(1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of June 30, 2025. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of Common Stock actually outstanding on June 30, 2025. As of June 30, 2025, there were 38,266,066 shares of our Company’s Common Stock issued and outstanding. |
|
|
(2) | Represents (i) 151,423 shares of Common Stock, (ii) 138,889 shares issuable upon the conversion of preferred stock, (iii) 18,750 shares issuable upon the exercise of warrant, (iv), 657,895 shares acquired through a PIPE transaction in April 2025, and (v) 500,000 options granted in April 2025. |
|
|
(3) | Represents (i) 365,127 shares of Common Stock and (ii) 25,000 shares issuable upon the exercise of stock option that are exercisable within 60 days. |
|
|
(4) | Represents (i) 79,138 shares of Common Stock and (ii) 20,000 shares issuable upon vesting of restricted stock within 60 days. |
|
|
(5) | Represents (i) 438,597 shares of Common Stock and (ii) 54,825 shares issuable upon the exercises of warrants. |
|
|
(6) | Represents (i) 1,389 shares of Common Stock and (ii) 25,000 shares issuable upon the exercise of stock option that are exercisable within 60 days. |
(7) | Represents 25,000 shares issuable upon the exercise of stock option that are exercisable within 60 days. |
More than 5% Beneficial Holders: | ||||||||
Name |
| Number of Shares Beneficially Owned |
|
| Percentage |
| ||
Attestor Value Master Fund LP (7) |
|
| 3,419,461 |
|
|
| 8.94 | % |
GSR Growth Investments LP (8) |
|
| 2,306,060 |
|
|
| 6.03 | % |
Michael Novogratz (9) |
|
| 2,192,983 |
|
|
| 5.74 | % |
(7) | Reported shares are based on a Schedule 13G filed by Attestor Value Master Fund LP with the SEC on July 11, 2025 disclosing that it held shared voting power over 3,419,461 shares and shared dispositive power over 3,419,461 shares, beneficially owning in the aggregate 3,419,461 shares. As indicated on the aforementioned Schedule 13G, the address for this Attestor Value Master Fund LP is PO Box 309 Grand Cayman E9. |
|
|
(8) | Reported shares are based on a Schedule 13G filed by GSR Growth Investments LP with the SEC on April 30, 2025 disclosing that it held shared voting power over 2,306,060 shares and shared dispositive power over 2,306,060 shares, beneficially owning in the aggregate 2,306,060 shares. As indicated on the aforementioned Schedule 13G, the address for GSR Growth Investments LP is 65 Curzon Street London, United Kingdom W1J8PE. |
|
|
(9) | Reported shares are based on a Schedule 13G filed by Michael Novogratz with the SEC on May 1, 2025 disclosing that he held sole voting power over 2,192,983 shares and sole dispositive power over 2,192,983 shares, beneficially owning in the aggregate 2,192,983 shares. As indicated on the aforementioned Schedule 13G, the address for this reporting person is C/O Galaxy Group Investments 107 Grand St New York, NY 10013. |
| 61 |
| Table of Contents |
Securities Authorized for Issuance under Equity Compensation Plans
The Company has established an incentive plan, the 2019 Equity Incentive Plan as amended (the “2019 Plan”). 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 restricted stock. The 2019 Plan is administered by the Compensation Committee or such other committee (the “Committee”) as is appointed by the Board of Directors pursuant to the 2019 Plan. 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 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 222,223 shares to 500,000 shares, as adjusted for the 1 for 20 reverse stock split. In June 2025, the 2019 Plan was further amended to increase the number of shares for issuance to 10,000,000.
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, as well as restricted stock. The options are exercisable for a period of up to 10 years from the date of the grant.
The following table summarizes information, as of June 30, 2025, relating to compensation plans under which equity securities are authorized for issuance.
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights* |
|
| Weighted-average exercise price of outstanding options, warrants and rights |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)** |
| |||
|
|
|
|
|
|
|
|
|
| |||
Equity compensation plans approved by security holders |
|
| 843,270 |
|
| $ | 3.39 |
|
|
| 9,027,903 |
|
Equity compensation plans not approved by security holders |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 843,270 |
|
| $ | 3.39 |
|
|
| 9,027,903 |
|
* Consists of 621,353 options outstanding and 221,917 RSUs outstanding.
**There have been 10,919 shares issued for the exercise of stock options and 117,908 shares issued for the vested RSUs.
On August 19, 2025, subsequent to the year ended June 30, 2025, the shareholders approved an amendment to the 2019 Plan to increase the number of shares issuable pursuant to awards granted under the 2019 Plan from 10,000,000 shares to 25,000,000 shares.
| 62 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
On April 1, 2024, the Company entered into a lease agreement with MFA 2510 Merchant LLC, which is owned by our CEO, Allan Marshall. The lease is for approximately 10,000 square feet of warehouse and office space, located in Odessa, Florida for $20,060 per month on a triple net basis. The initial term of the lease is five years. The Company spent $611,768 in leasehold improvements to prepare the facility for product manufacturing, which will be amortized over the five year lease term. At June 30, 2024 there was $100,004 accrued for the deposit and 2 months’ rent, this was paid in June 2024 and is now kept current. Product manufacturing was at full capacity and fully moved from the Nevada facility as of August 1, 2024.
On June 13, 2024, (the Company entered into a Stock Purchase Agreement (“SPA”) pursuant to which the Company sold one hundred percent (100%) of the issued and outstanding equity (the “Interests”) of its wholly owned subsidiary VitaMedica, Inc. to three investors (the “Buyers”). One of the minority Interest Buyers is Allan Marshall, the Company’s Chief Executive Officer. The purchase price for the stock was Six Million Dollars ($6,000,000), subject to certain customary post-closing adjustments. The proceeds of the transaction will be used for working capital, the reduction of debt and the reduction of other liabilities currently outstanding.
Except as disclosed above, no director, executive officer, shareholder holding at least 5% of shares of our Common Stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction during the year ended June 30, 2025 and June 30, 2024, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.
Director Independence
The Board of Directors has determined that Gene Salkind, Lawrence Dugan and Thomas Williams are independent directors under the listing standards.
Item 14. Principal Accountant Fees and Services
The aggregate fees billed for the most recently completed fiscal year ended June 30, 2025, and 2024 for professional services rendered by the principal accountant for the audit of our annual consolidated financial statements and review of the consolidated financial statements and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
|
| Year Ended |
| |||||
|
| June 30, 2025 |
|
| June 30, 2024 |
| ||
Audit Fees |
| $ | 245,500 |
|
| $ | 402,000 |
|
Audit Related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
Total |
| $ | 245,500 |
|
| $ | 402,000 |
|
Our Board of Directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the Board of Directors either before or after the respective services were rendered.
Our Board of Directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
| 63 |
| Table of Contents |
PART IV
Item 15. Exhibits and Financial Statement Schedules.
| (a) | Consolidated financial statements |
| (1) | Consolidated financial statements for our Company are listed in the index under Part II, Item 8 of this Annual Report on Form 10-K. |
|
|
|
| (2) | All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the consolidated financial statements or notes thereto. |
| (b) | Exhibits |
Exhibit Index | ||||||||||||
|
|
|
|
|
|
| Filed or | |||||
|
|
| Incorporation by Reference |
|
|
| Furnished | |||||
Exhibit No. |
| Description |
| Form |
| File No. |
| Exhibit |
| Filing Date | Herewith | |
|
| S-1 |
| 333-255266 |
| 3.1 |
| 4/15/21 |
| |||
|
| 8-K |
| 001-40535 |
| 3.1 |
| 8/17/22 |
| |||
|
| 8-K |
| 001-30535 |
| 3.1 |
| 9/27/24 |
|
| ||
|
| 8-K |
| 001-30535 |
| 3.2 |
| 9/27/24 |
|
| ||
|
| S-1/A |
| 333-288822 |
| 3.1 |
| 8/29/25 |
|
| ||
|
| S-1 |
| 333-255266 |
| 3.2 |
| 4/15/21 |
| |||
|
| S-1/A |
| 333-288822 |
| 3.2 |
| 8/29/25 |
|
| ||
|
| S-1 |
| 333-255266 |
| 4.6 |
| 4/15/21 |
| |||
|
|
|
|
|
|
|
|
|
| x | ||
| Upexi, Inc. 2019 Incentive Stock Plan (Amended and Restated as of August 19, 2025) |
|
|
|
|
|
|
|
|
| x | |
|
| S-1 |
| 333-255266 |
| 10.2 |
| 4/15/21 |
| |||
|
| 8-K |
| 001-40535 |
| 10.1 |
| 6/17/24 |
|
| ||
| Agreement to Unwind Securities Purchase Agreement, dated July 31, 2024 |
| 8-K |
| 001-40535 |
| 10.1 |
| 8/5/24 |
|
| |
| Employment Agreement, dated April 24, 2025, between Registrant and Allan Marshall |
|
|
|
|
|
|
|
| x | ||
| Employment Agreement, dated April 24, 2025, between Registrant and Andrew J. Norstrud |
| 8-K |
| 001-40535 |
| 10.2 |
| 4/25/25 |
| ||
| Employment Agreement, dated May 23, 2025 between the Company and Brian Rudick |
| 8-K |
| 001-40535 |
| 99.2 |
| 5/23/25 |
| ||
| Equity Interest Purchase Agreement, dated August 31, 2023, between Registrant and Amplifyir Inc. |
| 8-K |
| 001-40535 |
| 2 |
| 9/6/23 |
|
| |
|
| 10-K | 001-40535 |
| 10.23 |
| 10/3/23 |
| ||||
| Upexi, Inc. 2019 Amended and Restated Stock Incentive Plan, effective May 24, 2022 |
| S-8 |
| 333-273859 |
| 4.7 |
| 8/9/23 |
|
| |
|
| 10-K | 001-40535 |
| 10.25 |
| 10/3/23 |
| ||||
|
| 10-K | 001-40535 |
| 10.26 |
| 10/3/23 |
| ||||
|
| 10-K | 001-40535 |
| 10.27 |
| 10/3/23 |
| ||||
|
| 8-K |
|
|
| 10.1 |
| 4/24/25 |
|
| ||
|
| 8-K |
|
|
| 10.2 |
| 4/24/25 |
|
| ||
|
| 8-K |
|
|
| 10.3 |
| 4/24/25 |
|
| ||
| Asset Management Agreement, dated April 23, 2025, between Upexi, Inc. and GSR Strategies LLC |
| 8-K |
|
|
|
|
|
|
|
| |
|
| 8-K |
|
|
| 10.1 |
| 7/16/25 |
|
| ||
|
| 8-K |
|
|
| 10.2 |
| 7/16/25 |
|
| ||
|
| 8-K |
|
|
| 10.3 |
| 7/16/25 |
|
| ||
|
| 8-K |
|
|
| 4.1 |
| 7/18/25 |
|
| ||
|
| 8-K |
|
|
| 10.1 |
| 7/18/25 |
|
| ||
| Form of Security Agreement, dated as of July 2025, between Upexi, Inc. and Seller |
| 8-K |
|
|
| 10.2 |
| 7/18/25 |
|
| |
|
| 8-K |
|
|
| 10.4 |
| 7/18/25 |
|
| ||
|
| 8-K |
|
|
| 10.1 |
| 7/25/25 |
|
| ||
|
| 8-K |
|
|
| 10.2 |
| 7/25/25 |
|
| ||
| Waiver and Amendment to that certain Securities Purchase Agreement, dated as of July 11, 2025 |
| 8-K |
|
|
| 10.1 |
| 8/26/25 |
|
| |
|
| 8-K |
|
|
| 10.2 |
| 8/26/25 |
|
| ||
|
| S-1 |
| 333-255266 |
| 10.25 |
| 9/15/25 |
|
| ||
|
| S-1 |
| 333-255266 |
| 10.26 |
| 9/15/25 |
|
| ||
|
| S-1 |
| 333-255266 |
| 10.30 |
| 9/15/25 |
|
| ||
|
|
|
|
|
|
|
|
|
| x | ||
|
| 10-K | 001-40535 |
| 14.1 |
| 10/3/23 |
| ||||
|
| 10-K | 001-40535 |
| 14.2 |
| 10/3/23 |
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| 10-K/A |
| 001-40535 |
| 97.1 |
| 4/22/25 |
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101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
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_______
* These exhibits are furnished with this Annual Report on Form 10-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Upexi, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.
+ Indicates a management contract or compensatory plan or arrangement.
† Confidential portions of this exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K, and the Registrant agrees to furnish to the SEC a copy of any omitted schedule and/or exhibit upon request.
Item 16. Form 10-K Summary.
None.
| 64 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
|
| UPEXI INC. |
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| (Registrant) |
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Dated: September 24, 2025 |
| /s/ Allan Marshall |
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| Allan Marshall |
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| President, Chief Executive Officer and Director |
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| (Principal Executive Officer) |
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Dated: September 24, 2025 |
| /s/ Andrew J. Norstrud |
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| Andrew J. Norstrud |
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| Chief Financial Officer |
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| (Principal Financial Officer and Principal Accounting Officer) |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: September 24, 2025 |
| /s/ Allan Marshall |
|
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| Allan Marshall |
|
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| President, Chief Executive Officer and Director |
|
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| (Principal Executive Officer) |
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Dated: September 24, 2025 |
| /s/ Andrew J. Norstrud |
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| Andrew J. Norstrud |
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| Chief Financial Officer |
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| (Principal Financial Officer and Principal Accounting Officer) |
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Dated: September 24, 2025 |
| /s/ Gene Salkind |
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| Gene Salkind |
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| Director |
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Dated: September 24, 2025 |
| /s/ Thomas C. Williams |
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| Thomas C. Williams |
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| Director |
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Dated: September 24, 2025 |
| /s/ Laurence H. Dugan |
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| Laurence H. Dugan |
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| Director |
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| 65 |