Full Year 2023 Upexi Inc Earnings Call

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Good evening the program will begin momentarily. Please remain on the line. Thank you.

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Good day and welcome to the party in two.

2023 fiscal year end.

Actual results conference call.

Please note that today's call is being recorded.

We will also be a brief question and answer session.

I would now like to turn the conference over to Valter Pinto managing director at K D. S. Strategic Communications. Please go ahead.

Thank you operator, good evening and welcome everyone to the pack C 2023 fiscal year end financial results Conference call.

I'm joined today by Alan Marshall, Chief Executive Officer, and enter Nordstrom, Chief Financial Officer.

Before we begin I'm going to remind everyone that statements made during today's conference call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act 1995, and actual results may differ materially due to a variety of risks uncertainties and other factors.

For a detailed discussion of some of the ongoing risks and uncertainties in the company's business I refer you to the press release issued this evening and filed with the SEC on form 8-K as long as the company's reports filed periodically with the SEC.

<unk> disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise unless otherwise required by law. In addition, during the course of the call. We may refer to non-GAAP financial measures are not prepared in accordance with accounting principles generally accepted in the United States and then may be different.

From out from now.

non-GAAP financial measures used by other companies a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Gains in our earnings release issued this evening unless otherwise noted.

Now I'd like to turn the call over keep actually CEO Alan Marshall.

Thank you and welcome to our 2023 fiscal full year financial results Conference call.

We're extremely happy with where we ended 2023.

It's proved to be a difficult environment to navigate we're able to grow despite EXPAREL exponential increases in interest rates and difficult equity market. It for growth companies we.

We successfully acquired high growth and profitable businesses, while divesting and monetizing assets.

Non core to our long term strategy as a result, we've emerged as a high growth E Commerce and re commerce retailer.

We're not just a brand on our ecosystem, our ecosystem driven by data and AI integrates popular brands robust distribution channels and first class partnerships such as Disney.

Our opinion is.

Uniquely transforming the way retailers operate it.

This business model because it isn't just well for continued margin expansion, while providing a path to further cash flow and significant revenue growth year over year.

Let me begin.

So e-commerce brands and the non discretionary sector of health wellness pet and educational choice.

Vital medical or health and wellness brand purchased in late 2021, and that's been a stable growth driver for our business since acquisition the product line has experienced organic growth.

88% since acquisition. This is a perfect example of us how about executing on our business model with vitamin Erika we successfully purchased and already growing brand optimized its sales performance and expanded its margin year over year.

We expect it we expect growth to further accelerate as we launched new complementary products like acne treatment played out this year.

We acquired Lucky tail in August of 2022 fighting us with an interest into the pet category through unique products sold via Amazon and direct to consumer.

While the existing Lucky tell product line continues to perform.

True to our model, we recently launched a complementary product line of all natural pet supplements. They are offering to use via subscription and bundles and delivering more value to our loyal pet food customers.

Launch is the first of many planned lucky tell product launches, which we expect will solidify the brand of the top source connecting pet parents with their pet care needs.

In October .

Over 2022, we acquired tightened titles, our popular children's educational toy brands. We initially launched the tightening in 1900, Walmart stores and quickly outpaced our initial sales projections. We currently are available in over 3900 Walmart stores.

With several other big box retailers currently carrying their products and push for even more in 2024.

Growth of retail, it's complemented by tightens licensing agreements with Disney and its brand, including frozen Lion King and toy story.

We will be developing and launching new product.

Branded products under this agreement we plan for these products to be launched on Amazon or direct to consumer and then to your taxi is big box retail channels, but then that's it.

Shall launch planned for 2023.

Holiday season.

You will notice commonality across each brand strategy each are uniquely positioned in high growth markets with an already existing revenue stream cash flow and customer base from an operating perspective, we have successfully incorporated synergies to manage expenses and maximize margins.

From a growth perspective, we bolt on additional distribution channels by leveraging our existing relationships to add new complementary SKU offerings to increase or a P. R. You overtime.

Now I'll turn to re commerce in April 2022, we acquired 55% interest in Cigna online are high volume re commerce provider with 200 active skus, our branded OTC products in April we acquired three meaning 45 per cent interested cigna solidifying our taxi.

Amazon recourse, we re commerce strategy for the future, while reducing the overall cost structure for the business.

Closing the deal early offered significant savings and the opportunity to purchase discount the next year's overall anticipated costs.

As part of our acquisition strategy of tightened towels branded Cobra 2022.

We acquired E Commerce, our E core technologies and Eddie but in addition to selling tightened house is also the re commerce provider of overstocked and discontinued merchandise for hundreds of retailers.

Revenues for batten for brands and re commerce in 2023 was $80 7 million, an increase of 250% year over year as compared to $23 1 million the same period in the prior year.

We remain on track for our year end guidance and have seen strength in our business to start our first.

Quarter of 2022, 24 revenues look on track to be our biggest quarter in the company's history and we are hopeful this continues in the quarters to come.

As announced we have solar interactive offers division and taken back our in house manufacturing business isn't a defaulted payments at bloomingdale's.

The sale of Io was necessary in today's market as growth capital was not available for the investments needed to recognize the future of we saw the future value we saw with IL.

The sale also eliminates the monthly losses and makes the overall company more profitable.

The default at Millennials transaction was obviously disappointing board remain committed to continuing our manufacturing business small push to monetize that business, while utilizing the low cost.

Manufacturing to drive higher margins in some of our products.

The company today is on a more focused business trajectory and we'll continue to push for growth and profitability for the future.

I will now pass the call over to Texas, CFO , Andrew North stride to discuss our financial results in more detail Andrew.

Thank you in accordance with the rules regarding the presentation of discontinued operations the assets liabilities and activities of infusions, along with certain manufacturing operations and interactive offerings have been reclassified as discontinued operations for all periods presented the reclassification of infusions and relate at all.

Operations, along with interactive.

Reduced our sales by approximately $4 million.

66020 1.520 million.

For the years 2023, and 'twenty two respectively and is excluded from the following comparison of operations. During the years ended June 30th 2023 and 2022.

Revenue increased by 57 million 611165, or 250% for the fiscal year ended June 32023, compared with the fiscal year ended June 32022.

41 million.

41341, or 71% of the increase was related to the acquisitions of the Lucky tail brands and core technologies, Inc. The 2023 acquisitions.

And approximately 33% or $18 million $848230 was related to the acquisitions of Signet online I'll see and Vita Medicare for 2022 acquisitions compared.

Compared to the prior year period. This was offset by a decline in other businesses of approximately 4%.

Cost of revenue increased by 38.922 million or 475% compared to the fiscal year ended June 30 of 2022.

$31 million 144000 of this are 88% of the increase was related to the 2023 acquisitions.

And approximately 8.640 million or 22% was related to the 2022 acquisitions.

The gross profit overall increased by $18 million $688000. The gross margin decline of approximately 22% to 42% compared to 64% in the prior year.

Was it related to the sales from the re commerce business versus the sales of branded products.

So that's the gross margin to improve as the branded product segment continues to grow as a percentage of the overall sales and we continued to gain economies of scale and our purchasing of products.

Sales and marketing expense increased by approximately $5 million, 259103% compared to the same period last year.

2.396 million of this or 46% of the increase was related to the 2023 acquisitions and approximately 1.373 million of this increase or 26% was related to the 2022 acquisitions.

There was an increase of approximately one point.

4 million.

Or 28% related to the other businesses.

The increase in sales and marketing was primarily related to the acquisitions and increased expenditures for brand and company awareness. However management is aligned the marketing expenditures with expected growth strategy to decrease the overall percentage of sales and marketing costs.

Distribution costs increased $10 million wondering if 85000 or 459000 compared to the same period last year.

Million 850000, or 18% of this increase related to the 2023 acquisitions.

And approximately 7.306 million or 72% of the increase related to the 2022 acquisitions and the rest of the business. There continues to be an increase in transportation costs and third party provide.

Provider rates management has implemented strategies to change promotions increased prices and adjust packaging overall to decrease the distribution cost of sales and is in the process of consolidating distribution centers, including including closing the California facility as of July one 2023.

General and administrative expenses increased by approximately 400000 or 4% compared to the same year. Prior year general administrative expenses increased by 2.332 million from 2023 acquisitions with the remainder of the business.

We had a decrease in general administrative expenses of approximately $1 million 928000.

Management has actively been reducing general administrative costs by consolidating administrative functions and capitalizing the overall size of the company management will continue to influence these strategies to increase the percentage of general I mean straight and expenses when compared to total sales.

Other operating expenses increased by $3 $9 million or 80% with the same periods last year.

Expenses are primarily noncash expense.

Expenses increased based on intangible assets created with the acquisitions and continued amortization of stock compensation and 1.612 million or 41% was related to the 2023 acquisitions of acquired intangible assets and 1.616 million or 41% of.

The increase was related to the 2022 acquisitions amortization of acquisition intangible assets. The remaining increase of approximately 700000 was related to increased stock based compensation and depreciation.

Other expenses increased by approximately $11 million, which is primarily.

The loss recognized on the sale of the infusion and related assets and the reserves against the amounts owed to the company by the from the buyers the impairment of interactive offers intangible assets and an increase in the interest expense both on the acquisition debt and the termination of the $15 million.

Our senior debt facility on October one 2022.

<unk> estimates the cash paid for interest for the year ended June 32024 to be approximately $1.4 million.

The loss from discontinued operations of interactive offers was 1 million Southern 29001 million 160000 for the years ended June 30th 2023, and 2022, respectively.

Loss from discontinued operations of infusions into related businesses was approximately 338000 for the year ended June 30th 2023, and income of four 9 million for the year ended June 32022, the company had net losses of approximately $16 million 930000.

Compared to net losses of approximately $2 1 million in the prior year.

The increase in net losses, primarily related to the above mentioned items, which was offset by the net loss attributed to noncontrolling interest of a consolidated subsidiary.

June 30 of 2023, the company had cash of approximately 4.4 point 4 million working capital of $5 8 million and availability on our line of credit or $6 million in on September 30th 2023. The line had over $9 8 million of availability.

At this time like to open up the call for questions operator.

Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Formation, telling them on the King Your line is in the question queue. You May press star two if you'd like to remove your question from a quote from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Okay.

Yeah.

Thank you. Our first question is from Aaron Grey with Alliance global.

With your question.

Okay.

Hi, good evening and thank you for the questions Tonight guys. So first one for me just wanted to talk a little bit about the fiscal for Q just based off of our model you know it looks like revenue was a little bit softer in a corner it looks like that was deliberate.

Profitability improved pretty meaningfully so can you just talk about some of the dynamics insignificantly to for Q.

EBIT came in well above our expectations. Despite the lower revenue. So what is there some lower margin revenue that you bypass you can kind of walk through some of the puts and takes there in the fourth quarter that would be appreciated. Thank you.

Hey, Aaron it's Alan Marshall.

You don't do a lot of things are changing you know things have been changing in the market, especially with all the changes so Amazon taking product in was much slower usually we get term product in and out of there in a week, it's been three or four five weeks, sometimes in some locations. So I think that's just a result of a lot of companies you know cutting back.

Back on what they have available available people available staff, making all those changes are so so so I think some of the revenue got pushed for the overall profitability and either is just what we've been really working on that as we talk to our time cutting costs are still going on like we cut we cut our California facility.

A lot of smaller.

Opportunities to really increase profitability here going forward so.

General we did see a little softness in in June we Didnt expect at the beginning of June , but then it really kind of picked up in July .

Which is why we're pretty comfortable.

What we projected for next quarter.

Hum.

Yeah, No that's great yourself back to the parking looks against an 8% EBIT.

EBIT margin, which is tracking and where you guys have been doing for your guidance before and it sounds like you've still got some more levers to pull in terms of the efficiency levels. There. So that's great to hear.

Yeah, we're on track on hopefully on track, but it is just you know it.

It takes a long time to kind of turn the ship around lunch or switching from that kind of growth the value.

Yeah, Yeah definitely so just in terms of the guidance with the balloon business.

So first of all being off so it sounds like youre going at least in the early days kind of continue operating the manufacturing versus intentionally not looking at other monetization options. So and can you talk about if that's the case and then secondly, if that part when is that coming back into the P&L as of what date and the contributions to.

Once your guidance that you just provided.

So I'll speak to the business part of it was you know it was I mean, the business was kind of always always ours, which were really tackling never.

Our our manufacturing business that we keep for in house as has always been maintained by us even through the Blue Hills transaction, just because of the issues with that so I mean, now we will look to to expand into new business, there and or find value of that business, but.

Because of just ongoing things between bill in the house and ourselves, we don't really talk too much about our operations on that side. If I can I can now we can turn it over to Andy here I believe I believe it was some of the revenue we ended the quarter, but I'm not I'm not sure actually I didn't actually none of it so it parcel revenue.

It will be coming into a into this current Q.

Hey, Andy if you want to give exact AIDS yeah, that's great.

One of the things that is difficult is that they're still vendors and some of the stuff that was just left open at the end of <unk>.

When basically terminated the stuff at Beaumont, So the exact numbers and how much it will impact the first quarters of ours, which as you know this next quarter July through.

September it's still a little bit up in the air because we've got to clean up all that stuff and get all the reporting back to be done, but there will be there will be some impact to the current quarter or the first quarter. There was nothing in the through June 30th but will have a slight amount and if it changes our estimates any well.

We'll let you know, but thats still kind of up in the air.

Just because of finishing out things that they left undone.

So just a matter of fact.

That $26 million to $27 million does not include any of the Bloom Y'alls revenues.

Correct. It doesn't include any blue mouse, okay. Okay, great all right that's great to hear.

Any any color you can provide on the corner I'm thinking it usually comes out in the Q, but if you can provide it now in terms of the different revenue segments you know.

What drove I know it was down sequentially.

Sequentially, so kind of what drove it between you know maybe some of the beta V like like E core or saying that.

Our family is more of the biomet, a car or otherwise kind of drove some of the sequential softness that we saw.

Okay.

I don't I don't sorry, I don't really want to call. It sequential softness just because we really haven't had all these businesses through that time like real life.

We spoke about this earlier when when people are like well maybe you could do 100, you know we're still learning.

The customer or the cadence of some of these businesses, we purchased finding finding ways to you know to normalize out revenue new product launches. So I mean, I do think a little bit with pushed out just because of the consumer and like I said it really it was really a little quiet early like late May early June like after that.

Operator: Dr. Marshall, Unknown Attendee, Valter Pinto, Allan Marshall, Andrew Norstrud, Dr. Marshall, Unknown Attendee, Valter Pinto, Allan Marshall, Andrew Norstrud, Allan Marshall, Dr. Marshall, Unknown Attendee, Valter Pinto, Allan Marshall, Andrew Norstrud, Dr. Marshall, Unknown Attendee, Valter Pinto, Allan Marshall, Andrew Norstrud, Allan Marshall, Marshall, Dr. Marshall, Dr.[inaudible] Good day and welcome to the Upexi Inc 2023 fiscal year and financial results conference call. Please note that today's call is being recorded.

Then it started to pick back up again, and then pick back up again, you know dramatically in July so I.

I I don't know if its office or if its just where were the businesses. We have right now run, but I mean, obviously our goal is to normalize and you know kind of.

Create more opportunities than just you know.

Continue to grow that so I kind of don't want to call. It.

Cautious at this point, because we're just not sure.

Yeah, No that's fair enough I mean, especially with the guidance you have for the first quarter to kind of basically jumps back to them.

What's the run rate people or at least I was expecting there yeah. Okay. So I mean, there's a lot of things going on right like it's a little early.

The consumer that the news, though the interest like it doesn't it does affect behavior like I said I really it really affected behavior. After the fed meeting and then they got really quiet and then it seemed to all I'll pass.

Mhm no no that makes sense.

Starting to gear up now for the holiday you know just touching two to four key right. So a lot of anticipation given the initiatives that you guys have on calling for that being you know a very nice quarter for you guys on the topline fright. So everything tracking in terms of you know expectation with the Disney expanded brick and mortar and initiatives you have.

Where do you feel confident you might go see you know a nice boost from those initiatives come calendar for Q your fiscal two Q.

And we you know.

Through all of our quarters, we've seen significant boosts in that you know in that quarter, even even in third and then more enforced so.

There's nothing that tells us that that's not the case right now and obviously we needed to be a.

A little bit higher than the average to make what where were.

We're shooting for for this fiscal year or so.

Historically, you know we have we do have a lot of stuff lined up and you know that's a big quarter for Titan tiles, and some of the other stuff.

It's a big consumer quarter. So I mean this is the time, where you know a consumer company like US you know have to make our money. So we're hoping that it turns out.

As good or better than we thought than we think.

Okay, Great I'll go and jump back in the queue. Thanks for the time.

Thanks.

Okay.

Thank you. This concludes our question and answer session I would like to hand, the conference back over to Alan Marshall for any closing remark.

Okay.

Well, thank everybody for joining the call today, thank our team for working hard through this this challenging year with all the changes.

And great job to everybody.

We're looking to do even even better here going forward into 2024 companies.

Really pushing for a streamlined more profitable steady growth so.

Operator: We will also be having a brief question and answer session.

Valter Pinto: I would now like to turn the conference over to Valter Pinto, manager and director at KCS a strategic communication. Please go ahead. Thank you operator.

Again, thank everybody for joining our call and have a good evening.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Valter Pinto: Good evening and welcome everyone to the Upexi 2023 fiscal year and financial results conference call.

Okay.

Valter Pinto: I'm joined today by Allan Marshall, Chief Executive Officer, and Andrew Norstrud, Chief Financial Officer.

Valter Pinto: Before we begin, I'm going to remind everyone that statements made during this conference call may be deemed forward looked at statements within the meaning of the safe harbor of the private security litigation reform act of 1995. Actual results made different materially due to a variety of risks, uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business are referred you to the press release issue this evening and filed with the SEC on CORE-MAK as well as the company's reports filed periodically with the SEC to come and explains any intention or obligations updated or revised any forward looked at statements otherwise a result of new information future events or otherwise unless otherwise required by law.

Valter Pinto: In addition, during the course of the call, we may refer to non-gap financial measures and are not prepared in accordance with accounting principles generally accepted in the United States and that may be different from non-gap financial measures used by other companies. The reconciliation of non-gap financial measures to the most directly comparable gap financial measures are contained in our earnings relief issue this evening unless otherwise noted.

Allan Marshall: I'd now like to turn the call over to you back to CEO Alan Marshall. Thank you and welcome to our 2023 fiscal full year financial result conference call. We're extremely happy with where we ended 2023 which proved to be a difficult environment to navigate. We're able to grow despite exponential increases in interest rates and a difficult equity market for growth companies. We successfully acquire high growth and profitable businesses while they invest in and monetize the assets non-core to our long-term strategy.

Allan Marshall: As a result, we have emerged as a high growth e-commerce and recomers retailer. We're not just a brand owner, our ecosystem driven by data and AI integrates popular brands, robust distribution channels, and first-class partnerships such as Disney. That in our opinion is uniquely transforming the way retail has operated. This business model doesn't just well for continued margin expansion while providing a path too further, cash flow, and significant revenue growth year-over-year.

Allan Marshall: Let me begin with our e-commerce brand in the non-discretionary sector of health, wellness, pet, and educational toys. Vitamactica, our health and wellness brand, purchased in late 2021 has been a stable growth driver for our business and acquisition. The product line has experienced organic growth of 88% since acquisition. This is a perfect example of us executing on our business model. With Vitamactica, we successfully purchased an already growing brand, optimized its sales, performance, and expanded its margin year-over-year. We expect that we expect growth to further accelerate as we launch new company products like Acne Treatment Peter.

Allan Marshall: We acquired Luckytail in August of 2022, providing us with an interest into the pet category through unique products sold via Amazon and direct to consumer. While the existing Luckytail product line continues to perform, true to our motto, we recently launched a complementing product line of all natural pet supplements. We are offering these via subscription and in bundles to bring more value to our loyal pet owner customers. This launch is the first of many planned Luckytail product launches, which we expect to solidify the brand of the top stores connecting pet parents with their pet care needs.

Allan Marshall: In October 2022, we acquired Titan tiles, our popular children's educational toy brand. We initially launched Titan in 1900 Walmart stores and quickly outpaced our initial sales projections. We currently are available in over 3900 Walmart stores with several other big bucks retailers currently carrying their products and push for even more in 2024. Growth of retail is complemented by Titan's licensing agreement with Disney and its brand, including Frozen, Lion King and Toy Story.

Allan Marshall: We will be developing and launching new product brand of products under this agreement. We plan for these products to be launched on Amazon, direct to consumer and into UPECC's big box retail channels within this initial launch plan for 2023 holiday season.

Allan Marshall: You will notice commonality across each brand's strategy. Each are uniquely positioned in high growth markets with an already existing revenue stream, cash flow and customer base. From an operating perspective, we have successfully incorporated synergies to manage expenses and maximize margins. And from a growth perspective, we both on additional distribution channels by leveraging our existing relationships at new complimentary skew offerings to increase our APRU over time.

Allan Marshall: Now turn to ReCommerce. In April 2022, we acquired 55% interest in online. Our high volume ReCommerce provided with 1200 active skews of branded OTC products.

Allan Marshall: In April, we acquired through remaining 45% in interest in Signet, solidifying our UPECC Amazon ReCommerce strategy for the future while reducing the overall cost and structure for the business. Closing the deal early offered significant savings and the opportunity to purchase Signet at discount the next year's overall anticipated costs.

Allan Marshall: As part of our acquisition strategy of TitanTiles branded October 2022, we acquired eCommerce, eCore technologies and netty. The addition to selling TitanTiles is also the ReCommerce provider overstocked and discontinued merchandise for hundreds of retailers. Revenue for brands and ReCommerce in 2023 was 80.7 million, an increase of 250% year-over-year as compared to 23.1 million for the same period in the prior year. We are man on track for our year end guidance and have seen strength in our business to start our first quarter of 2020 to 24. Revenue look on track to be our biggest quarter in the company's history and we are hopeful this continues in the quarters to come.

Allan Marshall: As announced, we have sold our interactive offers division and taken back our in-house manufacturing business through the default payments of Blue Meos and the sale of I.O, is necessary in today's market, as growth capital was not available for the investment needed to recognize the future value we saw with I.O. The sale also eliminates the monthly losses and makes the overall company more profitable in media. The default Blue Meos transaction was obviously disappointing but we remain committed to continuing our manufacturing business and we'll push to monetize that business while utilizing the low cost of our manufacturing to drive higher margin in some of our products. The company today is on a more focused business trajectory and will continue to push for growth and profitability for the future.

Andrew Norstrud: I will now pass a call over to Upexi CFO, Andrew Norstrud to discuss our financial results in more detail. Andrew, Thank you, Alan.

Andrew Norstrud: In accordance with the rules regarding the presentation of discontinued operations, the asset, flybillies and activities of infusions along with certain manufacturing operations and interactive offers have been reclassified as discontinued operations for all periods presented. The reclassification of infusions and related operations along with interactive reduced our sales by approximately $4,66,000 and $21,520,000 for the years, $2,223 and $22, respectively. And it excluded from the following comparison of operations during the years ended June 30, 2023 and 2022.

Andrew Norstrud: Revenue increased by $57,611,165 or 250% for the fiscal year ended June 30, 2023, 2023, compared with the fiscal year ended June 30, 2022. $41,341,341 or 71% of the increase was related to the acquisitions of the Luckytail Brand and E-Core technologies in the 2023 acquisitions. And approximately 33% or $18,848,230 was related to the acquisitions of Signet Online LLC and Vitamaticant, the 2022 acquisitions. Compared to the prior year period, this is offset by decline in other businesses of approximately 4%.

Andrew Norstrud: Cost of revenue increased by $38,922,475 compared to the fiscal year ended June 30, 2022. $31,144,000 of this or 88% of the increase was related to the 2023 acquisitions and approximately 8,640,000 or 22% was related to the 2022 acquisitions. The growth profit overall increased by $18,688,000. The growth margin decline of approximately 22% to 42%, compared to 64% in the prior year was related to the sales from the Recommerce business versus the sales of branded products. Management expects the growth margin to improve as the branded product segment continues to grow as a percentage of the overall sales and we continue to gain economies of scale in our purchasing of products.

Andrew Norstrud: Sales and marketing expense increased by approximately 5,259,000 or 103 percent compared to the same period last year. 2,396,000 of this or 46 percent of the increase was related to the 2023 acquisitions and approximately 1,373,000 of this increase or 26 percent was related to the 2022 acquisitions. There was an increase of approximately 1.4 million or 28 percent related to the other businesses. The increase in sales and marketing was primarily related to the acquisitions and increased expenditures for brand and company awareness. However, management has aligned the marketing spendchers with expected growth strategy to decrease the overall percentage of sales and marketing to cost.

Andrew Norstrud: The distribution cost increased 10,155,000 or 459,000 compared to the same period last year. 1,850,000 or 18 percent of this increase was related to the 2023 acquisitions and approximately 7,306,000 or 72 percent of the increase was related to the 2022 acquisitions and the rest of the business. There continues to be an increase in transportation costs and third party provider rates. Management has implemented strategies to change promotions, increase prices and adjust packaging overall to decrease the distribution cost to sales and is in the process of consolidating distribution centers, including closing the California facility as of July 1, 2023.

Andrew Norstrud: General administrative expenses increased by approximately 400,000 or 4 percent compared to the same year, the prior year. General administrative expenses increased by $2,332,000 from 2023 acquisitions, with the remainder of the business had a decrease in general administrative expenses of approximately 1,928,000. Management has actively been reducing general administrative costs by consolidating administrative functions and capitalizing the overall size of the company. Management will continue to implement these strategies to increase the percentage of general administrative expenses when compared to total sales.

Andrew Norstrud: Other operating expenses increased by $3.9 million or 80 percent with the same period as last year, using expenses are primarily non-cash, expenses increased based on intangible assets, created with the acquisitions, and continued emirization of stock compensation. 1,612,000 or 41 percent was related to the 2023 acquisitions of acquired intangible assets and 1,616,000 or 41 percent of the increase was related to the 2022 acquisitions, amrization of acquisitions and intangible assets. Their remaining increase of approximately 700,000 was related to increased stock based compensation and depreciation.

Andrew Norstrud: Other expenses increased by approximately $11 million, which is primarily the loss recognized on the sale of the inclusion and related assets, and the reserves against the amounts owed to the company from the buyers, the impairment of interactive offers intangible assets, and an increase in the interest expense, both on acquisition debt and determination of the $15 million senior debt facility on October 1, 2022. Management estimates the cash paid for interest for the year ended June 30, 2024 to be approximately 1.4 months.

Andrew Norstrud: The loss from discontinued operations of interactive offers was $1,729,000 and $160,000 for the years ended June 30, 2023 and 2022 respectively. The loss from discontinued operations of infusions in the related businesses was approximately $338,000 for the year-end of June 30, 2023 and income of $4.9 million for the year-end of June 30, 2022.

Andrew Norstrud: The company had net losses of approximately $16,930,000 compared to net losses of approximately $2.1 million in the prior year. The increase in net losses is primarily related to the above mentioned items which was offset by the net loss attributed to the non-controlling interest of our consolidated subsidiary.

Andrew Norstrud: On June 30, 2023 the company had cash of approximately $4.4 million, working capital of $5.8 million and availability on the line of credit of over $6 million and on September 30, 2023 the line had over $9.8 million of availability.

Operator: At this time, I'd like to open up the call for questions, operator. Thank you. We'll now be conducting any question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation telephone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your questions from the queue. But participants need an speaker equipment and maybe not to start to pick up your hands step before pressing the star keys. One moment, please, while we pull for questions. Thank you.

Aaron Gray: Our first question is from Aaron Gray with a line available. Please proceed with your question. Hi, good evening, and thanks for the questions tonight, guys. So first one for me, I just want to talk a little bit about the fiscal 4Q. So just based on off of our model, it looks like revenue was a little bit softer in the quarter. It looks like that was deliberate because profitability improved pretty meaningfully. So can you just talk about some of the dynamics that are specifically the 4Q even that came in well above our expectations despite the lower revenues? So was there some lower margin revenue that you bypassed to kind of walk through some of the puts and takes there in the 4th quarter that we appreciate it. Thank you.

Allan Marshall: Hey, Aaron, it's Aaron Marshall. You know, a lot of things have been changing in the market, especially with all the changes. So Amazon taking product in was much slower. Usually we could turn products in and out of there in a week. It's been three, four, five weeks sometimes in some locations. So I think that's just a result of a lot of companies, you know, cutting back on what they have available, available people, available staff, making all those changes.

Allan Marshall: So, so some of the revenue got pushed forward. The overall profitability anyway is just what we've been really working on as we talked towards on cutting costs, still going on like we cut, we cut California facility cuts, you know, a lot of smaller opportunities to really increase profitability here. Going forward. So general, we did see a little softness in June. We didn't expect to the beginning of June. But then it really kind of picked up in July, which is why we're pretty.

Allan Marshall: Dr. Wolf, Unknown Attendee, Valter Pinto, Valter Pinto Dr. Wolf, Unknown Attendee, Valter Pinto, Valter Pinto, Valter Pinto, Dr. Wolf, Unknown Attendee, Valter Pinto, Valter Pinto, Unknown Attendee, Valter Pinto,[inaudible] Valter Pinto, Valter Pinto, Valter Pinto, Valter Pinto Valter Pinto, Valter Pinto[inaudible] I don't really want to call it sequential self, just because we really haven't had all these businesses through that time, like I think we spoke with this earlier when people are like, well, maybe you could do 100 and you know, we're still learning, you know, the customer, the cadence of some of these business we've purchased, finding, finding way to, you know, to normalize that revenue, new product launches. So, I mean, I do think a little bit was pushed out just because of the consumer.

Allan Marshall: Like I said, it really was really a little quiet early, like late May, early June, like after that, but then it started to pick back up again and then pick back up again, you know, dramatically in July. So I don't know if it's office or if it's just where, where the business we have right now, run, but I mean, obviously our goal is to normalize and, you know, kind of create more opportunities and just, you know, continue to grow that.

Allan Marshall: So I kind of don't want to call it just off this at this point, because I'm just not sure. Yeah, I know it's fair enough. I mean, especially with the guidance you have for the first quarter, kind of basically jumps back to what's the run rate people, or at least how it's expecting that. Okay. So there's a lot of things going on, right? Like there's a little, you know, the consumer, the news, the interest, like it does affect behavior or like I said, it really, it really affected behavior after that said meeting like in a meeting, like got really quiet and then it seemed to all pass.

Allan Marshall: No, that makes sense. Starting to get up now for, you know, the holiday, you know, just touching to four to you, right? So a lot of anticipation given the initiative that you guys have ongoing for that being, you know, a very nice quarter for you guys on the top line front. So everything tracking in terms of, you know, expectation with the Disney expanded brick mortar, and then it should do you have to where you feel confident you might go see, you know, a nice boost from those initiatives come calendar for Q year fiscal to Q.

Allan Marshall: And we, you know, just, you know, through all our quarters, we've seen significant boosts in that, you know, in that quarter, even in third and then more and fourth. So there's nothing to tell us that's not the case right now, and obviously we need it to be, you know, a little bit higher than average to make what we're shooting for for this fiscal year. So historically, you know, we do have a lot of stuff lined up, and you know, that's a big quarter for Titan tiles or other stuff, it's a big, it's a big consumer quarter.

Allan Marshall: So, I mean, this is the time where consumer companies like us, you know, have to make our money. So we're hoping that it turns out as good or better than we thought, then we think. Okay. Great to hear. I'll go ahead and jump back in the queue. Thanks for the time. Thanks. Thank you.

Operator: This concludes our question and answer session.

Allan Marshall: I would like to hand the conference back over to Alan Marshall for an closing remark. Thank everybody for joining the call today. Thank our team for working hard through this, this challenging year with all the changes. And great job to everybody. We're looking to do even better here going forward into 2024 and the companies. You know, really pushing for streamlined, more profitable steady growth.

Allan Marshall: So again, thank everybody for joining the call, and have a good evening.

Operator: The conference has now concluded.

Operator: Thank you for attending today's presentation.

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