Convertible Promissory Notes and Notes Payable

3 Months Ended

Sep. 30, 2023

Convertible Promissory Notes and Notes Payable

Convertible Promissory Notes and Notes Payable

Note 9. Convertible Promissory Notes and Notes Payable

Convertible promissory notes and notes payable outstanding as of September 30, 2023 and June 30, 2023 are summarized below:

	Maturity	September 30,			June 30,
	Date	2023			2023
Convertible Notes:
Promissory Note, 21- month term note, 18.11% interest payable with common stock and subordinate to the Convertible Notes	June 1, 2026	$	2,150,000		$	2,150,000
Less current portion of notes payable			-			1,254,167
Notes payable, net of current portion		$	2,150,000		$	895,833
Acquisition Notes:
Convertible Notes, 36-month term notes, 0% cash interest, collateralized with all the assets of the Company	October 31, 2025		3,500,000			3,500,000
Subordinated Promissory Notes, 24-month term notes, 4% cash interest, collateralized with all the assets of the Company	October 31, 2024		5,750,000			5,750,000
Subordinated Promissory Notes, 12-month term notes, 4% cash interest, collateralized with all the assets of the Company	October 31, 2023		5,750,000			5,750,000
Total		$	15,000,000		$	15,000,000
Discount on acquisition notes payable, current			(93,380	)		(93,380	)
Acquisition notes payable, current			5,750,000			5,750,000
Acquisition notes payable, current net		$	5,656,620		$	5,656,620
Discount on acquisition notes payable, long-term			(1,281,503	)		(1,644,915	)
Acquisition notes payable, long-term			9,250,000			9,250,000
Acquisition notes payable, long-term net		$	7,968,497		$	7,605,085
Notes Payable:
Mortgage Loan, 10-year term note, 4.8% interest, collateralized by land and warehouse building	September 26, 2032	$	2,781,193		$	2,841,566
Promissory Note, 21-month term note, 10% cash interest and subordinate to the Convertible Notes	November 22, 2024		560,000			560,000
SBA note payable, 30-year term note, 6% interest rate and collateralized with all assets of the Company	October 6, 2021		3,728,970			3,910,767
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	June 30, 2027		1,015,819			1,099,592
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	November 7, 2026		683,968			683,968
Total notes payable			8,769,950			9,095,893
Discount on notes payable, current			(15,620	)		(24,191	)
Notes payable, current			4,270,977			2,580,379
Notes payable, current net		$	4,255,357		$	2,556,188
Discount on notes payable, long-term			(23,522	)		(23,522	)
Notes payable, long-term			4,498,973			7,769,679
Notes payable, long-term, net		$	4,475,451		$	7,746,157
Related Notes Payable:
Marshall Loan, 2-year term note, 8.5% cash interest, 3.5% PIK interest and subordinate to the Convertible Notes	June 28, 2024		1,500,000			1,500,000
Discount on related party note payable, long term			(55,507	)		(70,644	)
Notes payable, long term			1,500,000			1,500,000
Notes payable, long term net		$	1,444,493		$	1,429,356
Total convertible notes payable, acquisition notes payable, notes payable and related party note payable		$	25,950,418		$	25,889,239

Future payments on notes payable are as follows:

For the year ended June 30:

	Notes Payable			Convertible Notes		Acquisition Notes Payable			Related Party Note Payable			Total
2024	$	4,270,977		$		$	5,750,000		$			$	10,020,977
2025		734,529					5,750,000						6,484,529
2026		1,306,040			2,150,000		3,500,000			1,500,000			8,456,040
2027		627,277											627,277
2028		313,045											313,045
Thereafter		1,518,082											1,518,082
	$	8,769,950		$	2,150,000	$	15,000,000			1,500,000		$	27,419,950
Note original discount		(39,142	)		-		(1,374,883	)		(55,507	)		(1,469,532	)
	$	8,730,808		$	2,150,000	$	13,625,117		$	1,444,493		$	25,950,418

Convertible Notes Payable:

In June 2022, the Company entered into a securities purchase agreement with two accredited investors pursuant to which the Company could receive up to $15,000,000 during the following twelve months of the agreement. The Company received $6,678,506 for Convertible Notes in the original principal amount of $7,500,000 (the “Convertible Notes”), representing the original purchase amount, less fees, costs and a $500,000 holdback by the investors. In addition to the Convertible Notes, the investors received Common Stock Purchase Warrants (the “Warrants”) to acquire an aggregate of 56,250 shares of common stock. The Warrants were exercisable for five years at an exercise price of $4.44 per share, provide customary anti-dilution protection, and an investor put right to require the Company to redeem the Warrants for a total of $250,000.  There was a loss of $1,770 for the change in the derivative liability for the period ended March 31, 2023.  On October 31, 2022, the Company entered into a letter agreement with the accredited investors in which all amounts owed were paid in full and the related convertible notes and all security interests were cancelled. Additionally, the Company terminated the related Form S-3 registration statement.

On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $2,150,000 together with the issuance of 134,000 restricted shares (the “PIK shares”) of the Company’s common stock at a price of $4.53 per share. The promissory note has a 21-month term and bears interest at 18.11% payable with the PIK shares. The promissory note provides for 12 monthly payments of principal beginning on December 22, 2023, and PIK interest of restricted shares on the Effective Date of the promissory note. The Company shall have the right at any time to convert all or any part of the outstanding and unpaid principal into fully paid and non-assessable shares of common stock, or any shares of capital stock or other securities, together with the PIK shares at a price per conversion share equal to $5.00.

Acquisition Notes Payable:

On August 1, 2021, the Company entered into a non-negotiable convertible promissory note related to the purchase of VitaMedica in the original principal amount of $500,000 (“VitaMedica Note”), convertible at $5.00 per share for a total of 100,000 shares of Company Common Stock. The Company repaid the note in full during August of 2022.

On April 15, 2022, the Company entered into a non-negotiable convertible promissory note in the original principal amount of $1,050,000, as adjusted, (“Cygnet Note”) which can be converted into common stock of the Company at a price of $6.00 per share and is payable in full, to the extent not previously converted, on April 15, 2023. The Company repaid the note in full plus all outstanding accrued interest during April 2023.

The Company and its wholly owned subsidiary, Upexi Enterprises, LLC entered into a securities purchase agreement with E-Core Technology, Inc. d/b/a New England Technology, Inc., a Florida corporation, and its three principals. The Company entered into a series of promissory notes with the principal parties: (a) promissory notes in the total original principal amount of $5,750,000 payable upon maturity with a term of 12 months at an interest rate of 4%, $600,000 of which shall be satisfied through the cancellation of an equal amount owed by one of the principals to the Company; (b) promissory notes in the total original principal amount of $5,750,000 payable upon maturity with a term of 24 months at an interest rate of 4%; and (c) promissory notes in the original principal amounts of $3,500,000 with a term of 36 months at an interest rate of 0%. The principals may convert the notes into shares of the Company’s restricted common stock at a conversion price equal to $4.81. If the principals do not exercise their conversion rights, the principal balance of the notes will be paid in 12 equal monthly payments commencing on the two-year anniversary of the issuance of the notes, subject to adjustments based on the Company’s EBITDA over the term of the notes.

Notes Payable:

In June 2022, the Company executed a promissory note with Allan Marshall, the Company’s Chief Executive Officer, in the original principal amount of $1,500,000 (“Marshall Loan”). The promissory note has a 2-year term and bears cash interest at the rate of 8.5% per annum with an additional PIK of 3.5% per annum. The promissory note provides for monthly payments of principal, on an even line 36-month basis, plus cash interest, with a balloon payment of all outstanding principal, cash interest, and PIK interest at maturity. The Company received and deposited the principal amount on July 31, 2022.

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 $3,000,000 in connection with the transaction. The principal is to be repaid to Professional Bank over a term of ten years. The proceeds of the loan were utilized by the Company to pay down its loan facility with Acorn Capital, LLC in the amount of $2,780,200.

On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $560,000. The promissory note has a 21-month term and bears cash interest at the rate of 10% per annum. The promissory note provides for monthly payments of interest beginning on March 22, 2023 and 12 monthly payments of principal beginning on December 22, 2023.

Cygnet Online had certain loans outstanding prior to the acquisition, which continued to be outstanding post acquisition.   

· Cygnet Online, entered into a loan for $4,436,900 with the Small Business Administration. The promissory note has a scheduled payment commencing on November 6, 2021, consisting of principal and interest. The interest rate is adjustable of prime plus 2.5% and is currently at 10.25%. The balance of the principal and interest will be payable ten years from the date of the promissory note.

· Cygnet Online, entered into a 60-month inventory consignment note with the first payment due June 30, 2022. The note bears interest at 3.5% per annum.

· Cygnet Online, executed a promissory note in the amount of $850,000 payable in six annual installments of principal and interest, the final payment due December 1, 2027. The note bears interest at 3.5% per annum.

Line of Credit:

The Company through its wholly owned subsidiary, New England Technology, Inc., maintains a $10,000,000 inventory and accounts receivable line of credit, interest rate of prime minus ½% payable monthly. The outstanding balance at September 30, 2023 was $118,001 and $882,845 at June 30, 2023. The availability under the line of credit at September 30, 2023 was $6,220,013.