Accounts receivable, net (allowance for doubtful accounts was $15,000 at September 30, 2022 and June 30, 2022)
101,219
106,804
Prepaid and other expenses
3,161
3,258
Inventory
68,747
82,082
Total current assets
214,812
299,277
Property and equipment, net
55,963
59,976
Right-of-use asset
8,802
10,290
Total assets
$
279,577
$
369,543
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Accounts payable
$
-
$
-
Accrued compensation
11,797
25,288
Deferred revenue
94,380
58,082
Total current liabilities
106,177
83,370
Notes payable, net of current portion
-
-
Operating lease payable, net of current portion
9,250
10,817
Total long-term liabilities
9,250
10,817
Total liabilities
115,427
94,187
Commitments and Contingencies (Note 7)
-
Members' equity
Members' interest
28,511
28,511
Retained earnings
135,639
246,845
Total members' equity
164,150
275,356
Total liabilities and members' equity
$
279,577
$
369,543
See accompanying notes to financial statements.
3
INFUSIONZ LLC
UNAUDITED STATEMENT OF OPERATIONS
Three Months
Three Months
Ended
Ended
September 30, 2022
September 30, 2021
Revenue
Product sales
$
454,516
$
1,034,662
Total revenues
454,516
1,034,662
Product costs
264,772
631,893
Cost of revenues
264,772
631,893
Gross profit
189,744
402,769
Operating expenses
Selling, general and administrative expenses
114,845
324,236
114,845
324,236
Income from operations
74,899
78,533
Other expense (income), net
Interest expense (income), net
119
418
Gain on SBA PPP loan forgiveness
-
(300,995
)
Other (income) expense, net
119
(300,577
)
Net income before income tax
74,780
379,110
Income tax expense
-
-
Net income
$
74,780
$
379,110
See accompanying notes to financial statements.
4
INFUSIONZ LLC
UNAUDITED STATEMENT OF MEMBERS’ INTEREST
Total
Members'
Retained
Members'
Interest
Earnings
Equity
Balance, June 30, 2020
$
28,511
$
69,228
$
97,739
Member contribution
-
-
-
Net income
249,901
249,901
Balance, June 30, 2021
$
28,511
$
319,129
$
347,640
Member contribution
-
(1,040,515
)
(1,040,515
)
Net income
-
968,231
968,231
Balance, June 30, 2022
$
28,511
$
246,845
$
275,356
Member contribution
-
(185,986
)
(185,986
)
Net income
-
74,780
74,780
Balance, September 30, 2022
$
28,511
$
135,639
$
164,150
See accompanying notes to financial statements.
5
INFUSIONZ LLC
UNAUDITED STATEMENT OF CASH FLOW
September 30,
September 30,
2022
2021
Cash flows from operating activities
Net income
$
74,780
$
379,110
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization
4,013
4,013
Gain on forgiveness of SBA PPP loan
(300,995
)
Changes in assets and liabilities
Accounts receivable
5,585
(83,269
)
Prepaid expenses
1,585
21,924
Inventory
13,335
16,596
Accounts payable and accrued liabilities
(15,058
)
(87,005
)
Due to parent company
-
288,333
Deferred revenue
36,298
177,905
Net cash provided by operating activities
120,538
416,612
Cash flows from investing activities
Acquisition of property and equipment
-
791
Net cash used in investing activities
-
791
Cash flows from financing activities
Distribution to member
(185,986
)
-
Net cash provided by financing activities
(185,986
)
-
Net decrease in cash
(65,448
)
417,403
Cash, beginning of period
107,133
642,802
Cash, end of period
$
41,685
$
1,060,205
Supplemental cash flow disclosures
Cash paid for interest
$
-
$
-
Cash paid for income taxes
$
-
$
-
See accompanying notes to financial statements.
6
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Description of the Business
Infusionz LLC (the “Company”) incorporated in the state of Colorado in May 2016. The Company develops, manufactures and markets products based on Hemp-based Cannabidiol (“CBD”) including, but not limited to edibles, tinctures, topicals, capsules and pet products. The Company also manufactures CBD products for other businesses under their brand and specifications.
On July 1, 2020, the Company was purchased by Upexi, Inc. a Nevada corporation. Upexi, Inc. is the single member of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. However, the results of operations included in such financial statements may not necessary be indicative of annual results.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from these estimates. Significant estimates include the valuation of inventory and the allowance for doubtful accounts.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, are accounts receivable and revenue from individual customers in excess of 10%. See Note 8 for significant customer concentration disclosure.
Fair Value of Financial Instruments
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value, and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
7
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
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, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The Company has no assets or liabilities valued at fair value on a recurring basis.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers amounts held by financial institutions and short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. As of September 30, 2022, the Company had no cash equivalents.
Accounts Receivable
Generally, the Company requires payment prior to shipment. However, in certain circumstances, the Company extends credit terms of 10 to 30 days after shipment to companies located throughout the U.S. Accounts receivable consists of trade accounts arising in the normal course of business. Accounts for which no payments have been received after 30 days from product shipment are considered delinquent and customary collection efforts are initiated. Accounts receivable are carried at original invoice amount less a reserve made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis.
Management has determined the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition and credit history, and current economic conditions. As of September 30, 2022, the Company maintained an allowance for doubtful accounts related to accounts receivable in the amount of $15,000.
Inventory
Inventory is stated at lower of cost or net realizable value, with cost being determined on a weighted average cost basis. Cost includes costs directly related to manufacturing and distribution of the products. Primary costs include raw materials and packaging.
8
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
The Company performs an assessment of inventory obsolescence to measure inventory at the lower of cost or net realizable value. Factors considered in the determination of obsolescence include slow-moving or non-marketable items. There was no obsolete inventory written off during the three month period ended September 30, 2022.
Property & Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment, if applicable. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation is provided on a straight-line basis over the assets estimated useful lives, ranging from 2 to 7 years. Tenant improvements are amortized on a straight-line basis over the shorter of the useful life or the remaining life of the related lease. Maintenance or repairs are charged to expense as incurred. Upon sale or disposition, the historically recorded asset cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by comparing its carrying value to the undiscounted projected future cash flows that the asset(s) are expected to generate. If the carrying amount of an asset is not recoverable, the Company recognizes an impairment loss based on the excess of the carrying amount of the long-lived asset over its respective fair value, which is generally determined as the present value of estimated future cash flows or at the appraised value. The impairment analysis is based on significant assumptions of future results made by management, including revenue and cash flow projections. Circumstances that may lead to impairment of property and equipment include a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition and a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset including an adverse action or assessment by a regulator. As of September 30, 2022, the Company determined that long-lived assets were not impaired.
Revenue Recognition
The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” which is effective as of the annual reporting period beginning after December 15, 2017 using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. We adopted Topic 606 pursuant to the method (2) and we determined that any cumulative effect for the initial application did not require an adjustment to retained earnings at July 1, 2018.
9
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
Most of the Company's revenue contracts represent a single performance obligation related to the fulfillment of customer orders for the purchase of its CBD products. Net sales reflect the transaction prices for these contracts based on the Company's selling list price, which is then reduced by estimated costs for trade promotional programs, consumer incentives, and allowances and discounts used to incentivize sales growth and build brand awareness.
Revenue is recognized based on the following five step model:
-
Identification of the contract with a customer
-
Identification of the performance obligations in the contract
-
Determination of the transaction price
-
Allocation of the transaction price to the performance obligations in the contract
-
Recognition of revenue when, or as, the Company satisfies a performance obligation
The Company recognizes revenue at the point in time that control of the ordered product is transferred to the customer, which is typically upon shipment to the customer or other customer-designated delivery point. Taxes collected from customers that are remitted to governmental agencies are accounted for on a net basis and not included as revenue.
Sales returns from wholesale customers must be completed within 15 days from the date of purchase and are subject to a restocking fee. E-Commerce product returns must be completed within 30 days of the date of purchase. The Company does not accrue for estimated sales returns as historical sales returns have been minimal.
Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with freight are generally included in cost of revenue.
Deferred Revenue
The Company records deposits as deferred revenue when a customer pays in advance of the Company shipping the product. Once the product is shipped, the deposit is recorded as revenue and the related commissions are paid. All products related to deposits in deferred revenue were shipped in less than one year. At September 30, 2022 and June 30, 2022, there were $94,380 and $58,082 of deferred revenue, respectively.
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 the continual investment in advertising is critical to the development and sale of its CBD branded products. Advertising costs of $23,153 was expensed as incurred during the three months ended September 30, 2022.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
10
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
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.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity, which simplifies the guidance for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company expects the primary impacts of this new standard will be to increase the carrying value of its Convertible Debt and reduce its reported interest expense. In addition, the Company will be required to use the if-converted method for calculating diluted earnings per share. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future unaudited consolidated financial statements
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following:
September 30,
2022
June 30,
2022
Customer receivables
$
112,099
$
112,099
Merchant receivable from credit card payments from customers
4,120
9,705
116,219
121,804
Less – Allowance for doubtful accounts
(15,000
)
(15,000
)
$
101,219
$
106,804
11
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
4. INVENTORY
Inventory as of September 30, 2022 was comprised of the following:
September 30,
June 30,
2022
2022
Raw materials
$
68,747
$
82,082
Finished goods
-
-
$
68,747
$
82,082
The process of producing finished goods from raw materials typically takes one to two days. The work in process at September 30, 2022 and June 30, 2022 is immaterial.
5. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
September 30,
2022
June 30,
2022
Furniture and Fixtures
$
4,500
$
4,500
Computer equipment
3,495
3,495
Machinery and equipment
103,914
103,914
Automobiles
-
-
111,909
111,909
Less - Accumulated depreciation
(55,946
)
(51,933
)
$
55,963
$
59,976
Depreciation expense for the three months ended September 30, 2022 was $4,013.
6. ACCRUED LIABILITIES
Accrued expenses as of September 30, 2022 was as follows:
September 30,
June 30,
2022
2022
Accrued payroll and taxes
$
11,797
$
25,288
Other accrued liabilities
-
-
$
11,797
$
25,288
7. SIGNIFICANT CUSTOMERS
The Company had significant customers in each of the year presented. A significant customer is defined as one that makes up ten percent or more of total revenues or ten percent of outstanding accounts receivable balance as of the year end.
12
INFUSIONZ LLC
NOTES TO FINANCIAL STATEMENTS
Net revenues for the three months ended September 30, 2022 and the year ended June 30, 2022 includes revenues from significant customers as follows:
Three
months ended
September 30,
2022
Year ended
June 30,
2022
Customer A
32
%
14
%
Customer B
12
%
0
%
Accounts receivable balances as of September 30, 2022 and June 30, 2022 from significant customers are as follows:
Three
months ended
Year ended
September 30,
2022
June 30,
2022
Customer A
0
%
0
%
Customer B
0
%
0
%
Customer C
18
%
22
%
Customer D
34
%
0
%
Customer E
18
%
18
%
Customer F
10
%
10
%
Customer G
13
%
13
%
Customer H
19
%
19
%
8. SUBSEQUENT EVENTS
On October 26, 2022, Upexi, Inc. (the “Company”) entered into a membership interest purchase agreement with Bloomios, Inc., a Nevada corporation (“Bloomios”) and its wholly owned subsidiary Infused Confections LLC, a Wyoming limited liability company (together with Bloomios, the Buyers) whereby the Company sold 100% of the membership interest of Infusionz LLC, a Colorado limited liability company to the Buyers for consideration of $23,500,000, subject to adjustments. The consideration consists of $5,500,000 in cash paid at closing, a convertible secured subordinated promissory note in the original principal amount of $5,000,000, 85,000 shares of Bloomios Series D Convertible Preferred Stock with a stated value of $8,500,000, a senior secured convertible debenture with a subscription amount of $4,500,000 (with an original principal amount, after OID, of $5,294,118) and a common stock purchase warrant to purchase up to 2,853,910 shares of Bloomios common stock. The agreement provides for a two-way, post-closing working capital adjustment based on target working capital of $1,275,000.
13
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
