SEC Form 8-K Summary
Registrant: Grove, Inc. (the request metadata identifies UPEXI, Inc.; the filing itself identifies Grove, Inc.)
Reporting date: April 15, 2022; the transaction was effective April 1, 2022 and closed April 15, 2022.
Business Context and Transaction
Grove acquired 55% of the outstanding membership interests of Cygnet Online, LLC from Eric Hanig. Cygnet’s business operations and financial results are not described in detail in the filing.
| Consideration | Amount or terms |
|---|---|
| Cash | $1.5 million, less seller transaction expenses |
| Restricted common stock | $2.55 million, represented by 555,489 shares valued using the company’s five-day trailing weighted-average Nasdaq closing price |
| Convertible note | $2.0 million principal amount, convertible into restricted common stock at $6.00 per share and due February 15, 2023, to the extent not converted |
| Purchase-price adjustment | Subject to a two-way adjustment based on closing working capital |
Financial Metrics, Liquidity, and Capital Structure
- The filing does not provide revenue, profit, cash flow, margin, balance-sheet, or liquidity data for Grove or Cygnet.
- The acquisition used a combination of cash, equity issuance, and convertible debt, creating potential future dilution and a February 2023 repayment or conversion obligation.
- The filing does not state the cash balance, source of acquisition funding, or effect of the transaction on debt covenants or liquidity.
Material Changes, Outlook, and Unusual Items
- The seller may receive an earn-out of up to $700,000, calculated as 7% of Cygnet net revenue above $40 million during the earn-out period. Any earn-out is payable 50% in cash and 50% in restricted company stock.
- Grove received a call option beginning October 10, 2022 to acquire an additional 15% of Cygnet for $1.65 million in cash.
- Following completion of Cygnet’s 2023 financial statements, Grove may acquire an additional 30% for 30% of four times Cygnet’s 2023 adjusted EBITDA, with at least 50% payable in cash and the balance in restricted stock.
- The seller holds a put option, exercisable during a specified period after completion of Cygnet’s 2023 financial statements, requiring Grove to purchase the seller’s remaining interests at four times Cygnet’s 2023 adjusted EBITDA multiplied by the percentage sold. The put consideration is payable in restricted company stock.
- Eric Hanig and Melanie Hanig entered into three-year initial employment agreements with annual salaries of $200,000 and $100,000, respectively.
- The filing contains no formal revenue, earnings, or operational guidance. The principal contingencies are working-capital adjustments, the earn-out, the convertible note, and the call and put rights.
- Audited financial statements for the acquired business and pro forma financial information were not included and were expected to be filed by amendment within 71 calendar days after the filing deadline.
Key Facts for Investors to Verify
- Confirm the registrant’s corporate name and ticker, because the filing states Grove, Inc., while the request metadata states UPEXI, Inc.
- Review the subsequently filed audited Cygnet financial statements and pro forma information for revenue, profitability, assets, liabilities, and purchase-accounting adjustments.
- Verify the number and value of shares issued, the conversion terms and outstanding balance of the $2.0 million note, and any resulting dilution.
- Assess Cygnet’s actual revenue relative to the $40 million earn-out threshold and its 2023 adjusted EBITDA for potential option-related payments.
- Check whether the call or put options were exercised and whether the acquisition resulted in additional cash payments or equity issuance.
- Evaluate Grove’s liquidity and ability to fund the cash consideration, note repayment, earn-out, and potential future purchases.