Filing summary
Important identification and period mismatch: The supplied filing is Grove, Inc.’s Form 10-K for the fiscal year ended June 30, 2021—not a UPEXI, Inc. filing or a 2020 Q4 report. Grove’s common stock is identified in the filing as trading under GRVI. The summary below describes the filing provided; it should not be attributed to UPEXI.
Business context and reporting period
Grove develops, manufactures, markets, and sells hemp-derived CBD products, including branded, white-label, and customer-formulated products, and operates the CBD.IO industry trade show. Its fiscal 2021 results include Infusionz, acquired July 1, 2020. The November 2020 trade show was canceled because of COVID-19. After year-end, Grove acquired substantially all assets of VitaMedica, an online seller of supplements and wellness products, on August 1, 2021.
Financial performance and liquidity
| Metric | FY ended June 30, 2021 | FY ended June 30, 2020 |
|---|---|---|
| Revenue | $24.10 million | $7.41 million |
| Gross profit | $11.90 million | $2.57 million |
| Gross margin | 49.4% | 34.7% |
| Operating income (loss) | $1.43 million | $(4.84) million |
| Net income (loss), consolidated | $2.98 million | $(5.38) million |
| Net cash from (used in) operations | $2.94 million | $(4.16) million |
| Cash at year-end | $14.53 million | $0.89 million |
| Working capital | $12.47 million | $(0.87) million |
- Revenue increased 225%, with $4.13 million attributed to Infusionz and the remaining increase primarily linked to CBD product sales, especially gummies. Trade-show revenue fell by $1.25 million to zero.
- Gross margin rose about 14.7 percentage points based on reported revenue and cost of revenue. Management attributed improvement to higher sales and purchasing raw materials in larger quantities at lower prices.
- Operating expenses rose 41% to $10.47 million, including acquisition-related costs and added resources to support growth. Adjusted EBITDA, a non-GAAP measure, was $3.20 million versus a loss of $3.85 million.
- Operating cash flow improved to $2.94 million. Investing used $1.28 million, including $1.42 million for equipment; financing provided $11.99 million, mainly reflecting $10.95 million of net common-stock proceeds.
- At June 30, 2021, current assets were $18.29 million and current liabilities $5.82 million. Notes payable were $447,100, all classified current; operating lease liabilities totaled about $416,962. The balance sheet also showed a $1.76 million acquisition payable.
Material changes, outlook, and risks
- Grove raised $12.65 million gross in its June 2021 public offering and reported $10.95 million net proceeds. Convertible notes and accrued interest converted into common shares during the year.
- The company reported a $403,277 gain from forgiveness of its PPP loan and a $387,860 gain on settlement of a canceled lease. A $1.28 million deferred-tax valuation-allowance release contributed materially to reported net income. These items mean earnings included significant non-operating or tax-related benefits.
- Management described plans to expand direct-to-consumer sales, branded products, white-label manufacturing, the CBD.IO marketplace and trade-show business, and pursue acquisitions. It anticipated opening a Florida distribution center and expected the CBD.IO show to resume in late 2021; these were expectations, not guaranteed outcomes. The filing gives no specific financial guidance.
- VitaMedica’s post-year-end purchase consideration was described as $2 million cash, $500,000 of common stock, a $500,000 promissory note, and a $500,000 convertible note. The acquisition’s funding and integration are relevant to subsequent liquidity and dilution.
- Key risks include uncertain FDA and state regulation of CBD—particularly CBD in foods and dietary supplements—intense competition and pricing pressure, raw-material supply and cost volatility, COVID-19 impacts, and dependence on two customers representing 27% of FY2021 revenue (15% and 12%). Neither customer had a future-purchase commitment.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing material weaknesses in segregation of duties and levels of supervision and review. Management planned remediation, but had not yet remediated the weaknesses. The auditor gave an opinion on the financial statements, not on internal-control effectiveness.
- The filing reports no pending legal proceeding expected to have a material adverse effect. It identifies no material off-balance-sheet arrangements.
Most important facts to verify
- Confirm the intended issuer and reporting period: this document is Grove, Inc. FY2021, not UPEXI, Inc. or 2020 Q4.
- Reconcile reported net income: the statements show $2.98 million consolidated net income and $2.93 million attributable to Grove; some MD&A and non-GAAP tables use different figures, including a 2020 net-loss discrepancy.
- Verify customer concentration, continued orders, receivable collectability, and any changes in customer relationships or payment terms.
- Check the status and cash or share settlement of the Infusionz acquisition payable, subsequent PPP forgiveness and SBA-loan repayment, and VitaMedica consideration and integration.
- Assess whether control weaknesses were remediated and whether CBD regulatory developments affect product legality, labeling, sales channels, or market access.