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Item 8. Financial Statements and Supplementary Data

2022-09-28 compared with 2021-09-28 · 1024 added, 706 removed, 594 unchanged (74% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Independent Registered Public Accounting Firm PCAOB ID ( 1195 )

Consolidated Balance Sheets as of June 30, 2022 and 2021

Consolidated Statements of Operations for the years ended June 30, 2021 and 2020

Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2022 and 2021

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of iPower,

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Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of iPower, Inc.

(f/k/a BZRTH, Inc.) and subsidiaries (the “Company”) as of June 30, 2021 and 2020, and the

related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the two years then ended and

the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of their

operations and their cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United

States of America.

We have audited the accompanying

consolidated balance sheets of iPower, Inc.

(f/k/a BZRTH, Inc.) and subsidiaries (the “Company”) as of June 30, 2022 and

2021, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash

flows for the two years then ended and the related notes (collectively referred to as the consolidated financial statements).

opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of

June 30, 2022 and 2021, and the results of their operations and their cash flows for the two years then ended, in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

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the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free

of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit

of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control

over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control

over financial reporting.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain

an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness

of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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We have served as the Company’s auditor since 2020.

New York, New York

Irvine, California

September 28, 2022

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Cash and cash equivalent

Accounts receivable

Accounts receivable, net

Inventories, net

Prepayments and other current assets

Other receivable - related party

Prepayments and other current

Total current assets

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Non-current prepayments

Investment in joint venture

Intangible assets, net

Other non-current assets

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Customer deposit

Due to related parties

Other payables and accrued liabilities

Advance from shareholders

Short-term loans payable

Investment payable

Lease liability - current

Long-term loan payable - current portion

Long-term promissory note payable - current portion

Income taxes payable

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Long-term loan payable

Long-term revolving loan payable, net

Long-term promissory note payable, net

Deferred tax liabilities

Lease liability - non-current

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Stockholders' Equity

Common stock, $ 0.001 par value;

Preferred stock, $ 0.001

shares authorized;

26,448,663 and 20,204,496 shares issued and outstanding at June 30, 2021 and June 30, 2020 *

Class B common stock, $ 0.001 par value;

0 and 14,000,000 shares authorized;

0 and 14,000,000 shares issued and outstanding at June 30, 2021 and June 30, 2020 *

Subscription receivable

shares issued and outstanding at June 30, 2022 and 2021

Common stock, $ 0.001

shares authorized;

and 26,448,663

shares issued and outstanding at June 30, 2022 and 2021*

Additional paid in capital

Retained earnings

Non-controlling interest

Accumulated other comprehensive

income (loss)

Total liabilities and equity

*On November 16, 2020, the Company implemented a 2-for-1 forward split

of the issued and outstanding shares of Common Stock of the Company.

Except for shares authorized, all references to number of shares

and to per share information in the consolidated financial statements have been retroactively adjusted.

*On October 20, 2020, the

Company issued to its Founders 14,000,000 shares of the Company’s Class B Common Stock.

The issuance was considered as a nominal

issuance, in substance a recapitalization transaction, which was recorded and presented retroactively as outstanding for all reporting

The accompanying notes are an integral part of

these consolidated financial statements.

*On November 16, 2020, the Company implemented a 2-for-1 forward

split of the issued and outstanding shares of Class A Common Stock of the Company.

Except shares authorized, all references to number

of shares, and to per share information in the consolidated and combined financial statements have been retroactively adjusted.

*On October 20, 2020, the Company issued to its Founders 14,000,000

shares of the Company’s Class B Common Stock.

The issuance was considered as a nominal issuance, in substance a recapitalization

transaction, which was recorded and presented retroactively as outstanding for all reporting periods.

The accompanying notes are

an integral part of these consolidated financial statements.

and Subsidiaries

Statements of Operations

Statements of Operations and Comprehensive Income (Loss)

For the Years Ended June

30, 2022 and 2021

For the Years Ended

June 30, 2021

June 30, 2020

For the Years Ended June 30,

TOTAL REVENUES

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PPP loan forgiveness

Gain (Loss) on equity method investment

Other non-operating income (expense)

( 2,843,127 )

Total other income (expense), net

Total other (expenses), net

( 2,969,551 )

(LOSS) INCOME BEFORE INCOME TAXES

INCOME (LOSS) BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET (LOSS) INCOME

NET INCOME (LOSS)

Non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

$ ( 775,749 )

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustments

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

$ ( 775,749 )

WEIGHTED AVERAGE NUMBER OF COMMON STOCK

Basic and diluted

(LOSS) EARNINGS PER SHARE *

Basic and diluted

*On November 16, 2020,

the Company implemented a 2-for-1 forward split of the issued and outstanding shares of Common Stock of the Company.

computation of basic and diluted EPS was retroactively adjusted for all periods presented.

EARNINGS (LOSSES) PER SHARE

*On November 16, 2020, the Company implemented a 2-for-1 forward

split of the issued and outstanding shares of Class A Common Stock of the Company.

Except shares authorized, all references to number

of shares, and to per share information in the consolidated and combined financial statements have been retroactively adjusted.

*On October 20, 2020, the Company issued to its Founders 14,000,000

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transaction, which was recorded and presented retroactively as outstanding for all reporting periods.

The computation of basic and diluted

EPS did not include the Class B Common Stock as the holders of Class B Common Stock had no dividend or liquidation rights until such time

as their shares of Class B Common Stock were converted into Class A Common Stock.

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

and Subsidiaries

Statements of Changes in Stockholders' Equity

For the Years Ended June

30, 2021 and 2020

Consolidated Statements

of Changes in Stockholders' Equity

For the Years Ended June 30, 2022 and 2021

Common Stock *

Class B Common Stock *

Additional Paid in

Balance, June 30, 2019

Shares issued for cash

Common Stock *

Non-controlling

Accumulated other Comprehensive

income (loss)

Balance, June 30, 2020

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Shares issued for cash upon IPO

Shares issued upon conversions of

Shares issued upon conversions of debts

Shares issued upon exercise of warrants

Issuance of restricted stock units

Restricted stock units vested

Balance, June 30, 2021

*On November 16, 2020, the Company implemented a 2-for-1 forward split

of the issued and outstanding shares of Class A Common Stock of the Company.

Except shares authorized, all references to number of shares

and to per share information in the consolidated financial statements have been retroactively adjusted.

*On October 20, 2020, the Company issued to its Founders 14,000,000

shares of the Company’s Class B Common Stock.

The issuance was considered as a nominal issuance, in substance a recapitalization

transaction, which was recorded and presented retroactively as outstanding for all reporting periods.

The accompanying notes are an integral part of

these consolidated financial statements.

Non-controlling interest

Restricted shares issued for vested RSUs

Stock-based compensation

Shares issued for acquisition

Foreign currency translation adjustments

Balance June 30, 2022

*On November 16, 2020,

the Company implemented a 2-for-1 forward split of the issued and outstanding shares of Class A Common Stock of the

Except shares authorized, all references to number of shares, and to per share information in the consolidated and combined

financial statements have been retroactively adjusted.

*On October 20, 2020, the Company issued to its Founders 14,000,000 shares of the Company’s Class B Common Stock.

The issuance was considered as a nominal issuance, in substance a recapitalization transaction, which was recorded and presented retroactively as outstanding for all reporting periods.

The accompanying notes are an integral part of these consolidated financial statements.

and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended June

30, 2021 and 2020

Consolidated Statements

of Cash Flows

For the Years Ended June 30, 2022 and 2021

For the Years Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 775,749 )

Adjustments to reconcile net income to cash provided by operating activities:

Inventory obsolescence reserve

Depreciation expense

Stock-based compensation expense

Adjustments to reconcile net income to cash used in operating activities:

Depreciation and amortization expense

Inventory reserve

Credit loss reserve

PPP loan forgiven

Loss on equity method investment

Stock-based compensation expense

Non-cash operating lease expense

Amortization of debt discount and non-cash financing costs

Amortization of debt premium/discount and non-cash financing costs

Change in fair value of warrants and conversion features

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( 7,322,560 )

Deferred tax assets/liabilities

Prepayments and other current assets

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Other payables and accrued liabilities

Income taxes payable

Net cash (used in) / provided by operating activities

Income taxes prepaid/payable

Net cash used in operating activities

( 16,603,005 )

( 12,756,949 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

Cash acquired on acquisition

Investment in joint venture

Net cash used in investing activities

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Payments to related parties

( 3,267,801 )

Proceeds from short-term loans

Payments of financing fees

Payments on short-term loans

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Proceeds from convertible notes

Payments for financing cost

Proceeds from long-term loans

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( 2,753,595 )

Net cash provided by / (used in) financing activities

Net cash provided by financing activities

EFFECT OF EXCHANGE RATE ON CASH

CHANGES IN CASH

( 4,829,758 )

CASH AND CASH EQUIVALENT, beginning of year

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Cash paid for interest

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Shares issued for acquisition

Promissory note issued for acquisition

Investment payable for acquisition

Goodwill acquired in business acquisition

Identifiable intangible assets acquired in business acquisition

Other net assets/(liabilities) acquired in business acquisition

Right of use assets acquired under new operating leases

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Conversion of debts to common stock

Exercise of placement agent warrants

The accompanying notes are an integral part of

these consolidated financial statements.

Exercise of warrants

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

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Note 1 - Nature of business and organization

iPower Inc., formerly known as BZRTH Inc., a

Nevada corporation (the “Company”), was incorporated on April 11, 2018.

The Company is principally engaged in the

marketing and sale of advanced indoor and greenhouse lighting, ventilation systems, nutrients, growing media, grow tents, trimming

machines, pumps and accessories in the United States.

iPower Inc., formerly known as BZRTH Inc., a Nevada

corporation (the “Company”), was incorporated on April 11, 2018.

The Company is principally engaged in the marketing and sale

of advanced indoor and greenhouse lighting, ventilation systems, nutrients, growing media, grow tents, trimming machines, pumps and other

products and accessories mainly in the North America.

Effective on March 1, 2020, as amended and restated

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owned subsidiary.

See Note 3 below for details.

On September 4, 2020, the Company entered into

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As a result, GPM has become the Company’s wholly owned subsidiary.

See Note 3 below for details.

On January 13, 2022,

the Company entered into a joint venture agreement and formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”),

for the principal purpose of providing logistic services primarily for foreign-based manufacturers or distributors who desire to sell

their products online in the United States, with such logistic services to include, without limitation, receiving, storing and transporting

such products.

The Company owns 40% of the equity interest in Box Harmony, retaining significant influence, but does not own a majority

equity interest or otherwise control of Box Harmony.

See details on Note 3 below.

On February 10, 2022,

the Company entered into another joint venture agreement and formed a Nevada limited liability company, Global Social Media, LLC (“GSM”),

for the principal purpose of providing a social media platform, contents and services to assist businesses, including the Company and

other businesses, in marketing their products.

The Company owns 60% of the equity interest in GSM and controls its operations.

on Note 3 below.

On February 15, 2022,

the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the

British Virgin Islands (“BVI”), in accordance with the terms of a share transfer framework agreement (the “Transfer

Agreement”), dated February 15, 2022, by and between the Company, White Cherry Limited, a BVI company (“White Cherry”),

White Cherry’s equity holders, Li Zanyu and Xie Jing (together with White Cherry, the “Sellers”), Anivia, Fly Elephant

Limited, a Hong Kong company, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou (Shenzhen) Information Technology Co., Ltd.

owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayourenzai (Shenzhen) Technology Co., Ltd.,

a corporation located in the People’s Republic of China (“PRC”) and which is a wholly foreign-owned enterprise (“WFOE”)

of Fly Elephant Limited.

The WFOE controls, through contractual arrangements summarized in Note 4 below, the business, revenues and profits

of Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”) and located

in Shenzhen, China.

See details on Note 4 below.

Note 2 – Basis of Presentation and Summary

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The consolidated financial statements include

the accounts of the Company and its subsidiaries, E Marketing Solution Inc.

and Global Product Marketing Inc.

All inter-company balances

and transactions have been eliminated.

Prior period reclassification

Certain prior period expense accounts have been

reclassified in conformity with current period presentation including reclassification of $1.37 million from general administrative expenses

to selling and fulfillment expenses.

The reclassification had no effect to the company’s consolidated statements of operations,

statements of cash flow or statements of changes in stockholders’ equity.

the accounts of the Company and its subsidiaries, E Marketing Solution Inc., Global Product Marketing Inc., Global Social Media, LLC,

and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou

(Shenzhen) Information Technology Co., Ltd.

All inter-company balances and transactions have been eliminated.

Emerging Growth Company Status

The company is an “emerging growth company,”

as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart

our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting

requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being

required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations

regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding

advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts

emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that

is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered

under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company

can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but

any such election to opt out is irrevocable.

The company has elected not to opt out of such extended transition period which means that

when a standard is issued or revised and it has different application dates for public or private companies, the company, as an emerging

growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison

of the company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth

company which has opted out of.

Use of estimates and assumptions

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Actual results could differ from these estimates.

Foreign currency translation and transactions

The reporting and functional currency of

iPower and subsidiaries is the U.S.

dollar (USD).

iPower’s WFOE and VIE in China uses the local currency, Renminbi

(“RMB”), as its functional currency.

Assets and liabilities of the VIE are translated at the current exchange rate as

quoted by the People’s Bank of China (the “PBOC”) at the end of the period.

Income and expense accounts are

translated at the average translation rates and the equity accounts are translated at historical rates.

Translation adjustments

resulting from this process are included in accumulated other comprehensive income (loss) in the statement of changes in

stockholders’ equity.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a

currency other than the functional currency are included in the results of operations as incurred.

The balance sheet amounts of the VIE, with the

exception of equity, on June 30, 2022, were translated at 6.6995 RMB to $1.00.

The equity accounts were stated at their historical rates.

The average translation rates applied to statements of operations and comprehensive income (loss) accounts for the year ended June 30,

2022 was 6.5222 RMB to $1.00.

Cash flows were also translated at average translation rates for the period and, therefore, amounts reported

on the statement of cash flows would not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

Cash and cash equivalents

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as cash on hand and bank deposits.

From time to time, the Company may maintain bank

balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest

bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts).

The Company has not experienced

any losses with respect to cash.

Management believes our Company is not exposed to any significant credit risk with respect to its cash.

Accounts receivable

From time to time, the Company may maintain

bank balances in interest bearing accounts in excess of the $250,000, which is currently the maximum amount insured by the Federal

Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest

bearing accounts).

The Company has not experienced any losses with respect to cash.

Management believes our Company is not exposed

to any significant credit risk with respect to its cash.

Accounts receivable, net

During the ordinary course of business, the Company

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we recover amounts previously written off, we will reduce the specific allowance for credit losses.

Equity method investment

The Company accounts for its ownership

interest in Box Harmony, a 40 %

owned joint venture, following the equity method of accounting, in accordance with ASC 323, Investments —Equity Method and

Joint Ventures.

Under this method, the carrying cost is initially recorded at cost and then increased or decreased by recording its

percentage of gain or loss in Box Harmony’s statement of operations and a corresponding charge or credit to the carrying value of the

Business Combination

On February 15, 2022,

the Company acquired 100 % of the ordinary shares of Anivia Limited (“Anivia”) and its subsidiaries, including the VIE.

Company applies the acquisition method of accounting for business combinations.

Under the acquisition method, the acquiring entity in

a business combination recognizes 100% of the assets acquired and liabilities assumed at their acquisition date fair values.

utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values.

Any excess of the

purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded

Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase

gain is recognized.

Acquisition-related costs are expensed as incurred.

See Note 4 for details on acquisition.

Variable interest entities

On February 15,

2022, the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”) and its subsidiaries, including

Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”).

the terms of the Agreements, the Company does not have direct ownership in DHS but is actively involved in DHS’s operations as

the sole manager to direct the activities and significantly impact DHS’s economic performance.

DHS’s operational funding

has been provided by the Company following the February 15, 2022 acquisition.

During the term of the agreements, the Company bears all the risk

of loss and has the right to receive all of the benefits from DHS.

As such, based on the determination that the Company is the

primary beneficiary of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered a variable interest entity

(“VIE”) of the Company and the financial statements of DHS have been consolidated from the date such control existed,

February 15, 2022.

See Note 4 and Note 5 for details on acquisition.

Goodwill represents the excess of the purchase

price over the fair value of assets acquired and liabilities assumed.

The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill

is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment,

at the reporting unit level.

The Company’s review for impairment includes an assessment of qualitative factors to determine whether

it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill.

If it is determined

that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative

goodwill impairment test is performed, which compares the fair value of the reporting unit with its carrying amounts, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

if the carrying amount of the reporting unit exceeds its fair value, additional procedures must be performed.

That additional procedure

compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

An impairment loss is

recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.

Intangible Assets, net

intangible assets at June 30, 2022 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition

of Anivia Limited.

Intangible assets are recorded at the estimated fair value of these items at the date of acquisition, February 15,

Intangible assets are amortized on a straight-line basis over their estimated useful life as followings:

Schedule of estimated useful life

Covenant Not to Compete

Supplier relationship

The Company reviews the recoverability of long-lived

assets, including the intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset

may not be recoverable.

The assessment of possible impairment is based on the ability to recover the carrying value of the asset from

the expected future pretax cash flows (undiscounted and without interest charges) of the related operations.

If these cash flows are

less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying

The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well

as other fair value determinations.

As of June 30, 2022, there were no indicators of impairment.

Fair values of financial instruments

ASC 825, “Disclosures

about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments.

“Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting

principles, and expands disclosures about fair value measurements.

The carrying amounts of cash and cash equivalents,

accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature.

On February 15, 2022,

as part of the consideration for the acquisition of Anivia Limited, the Company issued a two-year unsecured 6 %

subordinated promissory note, payable in equal semi-annual installments commencing August 15, 2022 (the “Purchase Note”).

The principal amount of the Purchase Note was $ 3.5

On February 15, 2022, the Company evaluated the fair value of the Purchase Note to be $ 3.6

million using the following inputs:

Schedule of assumptions

Corporate bond yield

Risk-free rate

Liquidity premium

Discount rate

As of June 30, 2022,

the outstanding principal balance of the Purchase Note was $ 3,660,770 , including premium of $ 82,020 and $ 78,750 of accrued interest.

For other financial instruments to be reported

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in one of the following levels:

Level 1 – Inputs are unadjusted,

quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable,

unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets

or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for

substantially the full term of the related assets or liabilities;

Level 3 – Unobservable inputs

that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company used Level 3 inputs for its valuation

methodology for the conversion feature and warrant liabilities in determining the fair value using the Modified Black Scholes option-pricing

Significant increase or decrease in any of the significant unobservable inputs, such as the probability of the occurrence of an

IPO, would have resulted in a significantly higher or lower fair value measurement.

The redeemable preferred stock was measured based

on the fixed monetary amount of the convertible share upon IPO and the probability of IPO.

Accounting guidance establishes a fair value hierarchy

that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant

to the fair value measurement.

There is no transfer into or out of Level 3 of the fair value hierarchy.

Level 1 – Inputs are unadjusted, quoted

prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted

quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities

in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially

the full term of the related assets or liabilities;

Level 3 – Unobservable inputs that are significant

to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Revenue recognition

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advertising and promotional costs included in selling and fulfillment expenses for the years ended June 30, 2022 and 2021 were $ 2,718,082

$ 1,783,573 and $ 606,730 ,

respectively.

and $ 1,783,573 , respectively.

Cost of revenue

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of products and related inbound freight and delivery fees.

Inventory consists of finished goods ready

for sale and is stated at the lower of cost or market.

Operating expenses

Operating expenses, which consist of selling and fulfillment and general

and administrative expenses, are expensed as incurred.

Inventory consists of finished goods ready for

sale and is stated at the lower of cost or market.

The Company values its inventory using the weighted average costing method.

The Company’s policy is to include as a part of cost of goods sold any freight incurred to ship the product from its vendors

to warehouses.

Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in

selling and fulfillment expenses.

The Company regularly reviews inventory and considers forecasts of

future demand, market conditions and product obsolescence.

The Company’s

policy is to include as a part of cost of goods sold any freight incurred to ship the product from its vendors to warehouses.

freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling and fulfillment expenses.

The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence.

If the estimated realizable value of the inventory

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reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence.

Debt Issuance Costs

Costs incurred in connection with the issuance of debt are deferred

and amortized as interest expense over the term of the related debt using the effective interest method.

To the extent that the debt is

outstanding, these amounts are reflected in the consolidated balance sheets as direct deductions from the carrying amount of the outstanding

Segment reporting

The Company follows ASC 280, Segment Reporting.

The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of operations when making

decisions about allocating resources and assessing the performance of the Company as a whole and, hence, the Company has only one reportable

The Company does not distinguish between markets or segments for the purpose of internal reporting.

The Company’s long-lived

assets are all located in California, United States, and substantially all of the Company’s revenues are derived from within the

United States.

Therefore, no geographical segments are presented.

The Company follows ASC 280, Segment

The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of

operations when making decisions about allocating resources and assessing the performance of the Company as a whole and, hence, the

Company has only one reportable segment.

The Company does not distinguish between markets or segments for the purpose of internal

For the year ended June 30, 2022, sales through Amazon to Canada and other foreign countries were approximately 7.2 %

of the Company’s total sales.

Sales of hydroponic products, including ventilation and grow light systems, was approximately

50% of the Company’s total sales and the remaining 50% consisted of general gardening, home goods, and other products and

As of June 30, 2022, there were approximately $ 1.8

million of inventory stored in China.

The Company’s majority of long-lived assets are located in California, United States,

and majority of the Company’s revenues are derived from within the United States.

Therefore, no geographical segments are

On its inception date, April 11, 2018, the Company

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basis over the lease term.

Deferred offering costs

The Company capitalizes certain legal, accounting

and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing

is consummated.

After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result

of the financing.

Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are

immediately written off to operating expenses in the consolidated statements of operations and comprehensive income (loss) in the period

of determination.

For the years ended June 30, 2021 and 2020, $ 693,538 and $ 0 were recorded as deferred offering costs and reclassed

to additional paid in capital.

As of June 30, 2021 and June 30, 2020, $ 0 and $ 0 of deferred offering costs were included in prepaid expenses

and other current assets in the consolidated balance sheets, respectively.

Stock-based Compensation

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during which an employee is required to provide service in exchange for the award, which generally is the vesting period.

Following completion of the IPO, pursuant to their

letter agreements, the Company awarded 46,546 restricted stock units (“RSUs”) under the Plan to its independent directors,

Chief Financial Officer, and certain other employees and consultants, all of which are subject to certain vesting conditions.

fair value of the RSUs was determined based on $5.0 per share, the initial public offering price of the Company’s common stock on

the grant date.

As of June 30, 2021, the Company had granted total of 46,546 RSUs, of which 22,137 were fully vested and 24,409 remained subject to certain vesting

For the year ended June 30, 2021, the Company recorded $ 110,683 of stock-based compensation expense.

The Company will recognize

forfeitures as they occur.

to requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20.

which contains both a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market

condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite service

period or nonemployee’s vesting period if it is probable the performance condition will be met.

If the performance condition is

ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting condition

in the award has not been satisfied.

The Company will recognize forfeitures of such

equity-based compensation as they occur.

The Company accounts for income taxes under the

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amount expected to be realized.

As a result of the implementation of certain provisions of ASC 740,

Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740

seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for

income taxes.

The Company has adopted the provisions of ASC 740 since inception, April 11, 2018, and has analyzed filing positions in

each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such

jurisdictions.

As a result of the implementation of certain provisions

of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined,

ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting

for income taxes.

The Company has adopted the provisions of ASC 740 since inception, April 11, 2018, and has analyzed filing positions

in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in

such jurisdictions.

The Company has identified the U.S.

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these assessments including historical and specific facts and circumstances of each matter.

Convertible notes and warrants

On January 27, 2021, the Company completed a

private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $ 3,000,000

in convertible notes with a 6 %

interest per annum (the “Convertible Notes”) and warrants to purchase shares of Class A Common Stock equaling 80% of the

number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes.

The warrants shall be exercisable for a

period of 3 three years from the IPO completion date at a per share exercise price equal to the IPO.

The Convertible Notes shall be

automatically converted into the Company’s Class A Common Stock upon a qualified IPO (the “Mandatory Conversion”)

or repayable in cash at the option of the holders of the Convertible Notes with repayment to commence six months after January 27,

The Convertible Notes convert at a price equal to the lesser of (a) a price representing a 30% discount to the public offering

price per share of the Class A Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share

equal to dividing $200 million by the total number of (x) outstanding shares of Class A Common Stock immediately prior to the IPO,

(y) the number of Class A Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number

of Class A Common Stock issuable upon conversion of all outstanding Convertible Notes.

In the event the Company does not receive a

minimum of $15,000,000 of gross proceeds in the Offering or otherwise close on the Offering, the Convertible Notes will bear

interest at a rate of 6% per annum which shall accrue from January 27, 2021 and be repayable in six equal monthly installments

between July 27, 2021 and January 27, 2022.

Alternatively, the Convertible Notes may be converted at the conversion price into

shares of Class A Common Stock at the option of the holder prior to the maturity date (the “Conversion Option”).

notes are converted, either on a Mandatory Conversion basis or through each holder’s exercise of the Conversion Option, any

interest accrued on the Convertible Note shall be waived.

In connection with the Convertible Note offering,

the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable

at the conversion price of the Convertible Note (the “Conversion Price”).

The placement agent warrants are exercisable

for a period of 5 five years from the issuance date and are treated as a debt issuance cost.

The conversion feature included in the terms of

the Convertible Notes creates an obligation to the Company requiring it to repay the notes for cash in January 2022 if an IPO does not

Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary

amount known at inception in accordance with ASC 480-10-25-14a.

As such, the conversion feature was determined to be a derivative liability,

which represent an embedded derivative predominately based on fixed monetary amount.

The Convertible Note warrants and placement agent

warrants were determined to be derivative liabilities, which represent free-standing derivative instruments.

The Company measured the

derivative liabilities at fair value at the issuance date of the Convertible Notes, Convertible Note warrants and placement agent warrants

based on a Modified Black Scholes option-pricing model.

The derivative liabilities were recorded with a corresponding debit to debt discount

that will be amortized over the life of the notes using effective interest rate method.

At time of issuance, the convertible notes and

warrant liabilities were recorded on the balance sheet as liabilities.

Debt issuance costs resulting from placement agent warrants are

allocated to derivative liabilities based on its fair value at issuance to total proceeds received.

Debt issuance costs associated with

warrant liabilities are expensed immediately and the debt issuance cost associated with the debt host are amortized over the life of the

Upon conversion on May 14, 2021, the Company measured

the conversion liability and placement agent warrant liability to fair value using the Modified Black Scholes Option Pricing Model, a

level 3 valuation method, based on the expected fair value of the underlying stock.

Change in fair value was recorded in other-operating

On May 14, 2021, the fair value of the outstanding

warrants held by the Convertible Note investors were also remeasured with change in fair value recorded in other-operating expenses.

the fair value was reclassed to additional paid in capital as the terms became fixed upon closing of the IPO.

Series A Convertible Preferred Stock

On December 30, 2020, the Company issued a total

of 34,500 shares of Series A Convertible Preferred Stock, par value $ 0.001 per share.

Pursuant to the certificate of designations, the

Series A Convertible Preferred Stock will automatically convert into shares of the Class A Common Stock (the “Conversion Shares”)

at a conversion price equal to 70% of the initial price per share of the Class A Common Stock.

If the IPO shall not have occurred by December

31, 2021, the Company shall redeem and repurchase for cash all of the outstanding shares of Series A Convertible Preferred Stock for a

purchase price equal to (a) the product of multiplying the $10.00 Stated Value of each outstanding share of Series A Convertible Preferred

Stock by the total number of outstanding shares of Series A Convertible Preferred Stock, plus (b) all accrued and unpaid Dividends at

9% per annum.

In the event that the Series A Convertible Preferred Stock are converted into Conversion Shares, no Dividend shall

accrue or be payable.

The redemption feature creates an obligation to

the Company requiring it to redeem the Preferred Shares for cash on December 31, 2021, if an IPO does not occur.

Upon an IPO, the Conversion

Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance

with ASC 480-10-25-14a.

The Series A convertible preferred stock are mandatorily redeemable and should be classified as a liability in

accordance with ASC 480-10 and the Company has elected to record the Series A Convertible Preferred Stock at fair value with changes in

fair value recorded through earnings under the ASC 825-10-15-4 fair value option (“FVO”) election.

Upon conversion on May 14, 2021, the fair value

of the Series A Convertible Preferred Stock was measured based on the fixed monetary amount of the convertible share upon IPO.

in fair value was recorded as other non-operating expense.

Series A Preferred Stock Warrant

In connection with this private placement, the

Company issued warrants to purchase shares of Series A Convertible Preferred Stock.

The exercise price of the warrants is $10 per share.

The Company accounts for its redeemable convertible preferred stock warrants as a liability, and they are recorded at their estimated

fair value because the warrants may conditionally obligate the Company to transfer assets at some point in the future.

At the end of

each reporting period, changes in the estimated fair value during the period are recorded in other income (expense), net in the statement

of operations.

The Company will continue to adjust the liability for changes in estimated fair value until the earlier of the expiration

of the warrants, exercise of the warrants, or conversion of the redeemable convertible preferred stock warrants into common stock warrants

upon the completion of a liquidation event, including the completion of an IPO.

On May 14, 2021, the fair value of the outstanding

Series A Preferred Stock warrant held by the placement agent were remeasured with change in fair value recorded in other-operating expenses.

Earnings per share

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Diluted earnings per share reflect the potential dilution that could occur if securities to issue common stock were exercised.

Recently issued accounting pronouncements

issued accounting pronouncements

In June 2022, FASB issued ASU 2022-03,

Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a

contractual sale restriction and require specific disclosures related to such an equity security.

This standard is effective for

fiscal years beginning after December 15, 2024.

The Company does not expect the adoption of this standard to have a material impact

on the consolidated financial statements.

In October 2021, the FASB issued ASU

2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with

This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract

liabilities in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) as

if the entity had originated the contracts.

The guidance is effective for fiscal years beginning after December 15, 2023, with early

application permitted.

The Company does not expect the adoption of this standard to have a material impact on the consolidated

financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt

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(Subtopic 815-40).” This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred

As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce

form-over-substance-based accounting conclusions.

stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based

accounting conclusions.

In addition, this ASU improves and amends the related EPS guidance.

This standard

becomes effective for the Company on July 1, 2022, including interim periods within those fiscal years.

Adoption is either a modified

retrospective method or a fully retrospective method of transition.

The Company is currently assessing the impact the new guidance will

have on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income

Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.

This standard is effective for the Company

on July 1, 2024, including interim periods within those fiscal years.

Adoption is either a modified retrospective method or a fully retrospective

method of transition.

The Company does not expect the adoption of this standard to have a material impact on the consolidated financial

In January 2020, the FASB issued ASU

2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and

Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This ASU among

other things clarifies that a company should consider observable transactions that require a company to either apply or discontinue

the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying

the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

new ASU clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not

consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair

value option.

ASU 2020-01 is effective For public business entities for fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2021.

An entity should apply ASU 2020-01 prospectively at the beginning of the interim period that

includes the adoption date.

The adoption of ASU 2020-01 is not expected to have material impact on the Company's Consolidated

Financial Statements.

In December 2019, the FASB issued ASU 2019-12,

Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.

The update is intended to simplify the current rules regarding

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The new standard is effective for fiscal

years beginning after December 15, 2020;

however, early adoption is permitted.

The Company does not expect the adoption of this standard

have a material impact on the consolidated financial statements.

years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022;

however, early adoption

is permitted.

The Company does not expect the adoption of this standard have a material impact on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles

- Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,” which eliminates step two from the

goodwill impairment test.

Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying

amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.

All other entities,

including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim

goodwill impairment tests in fiscal years beginning after December 15, 2021.

The adoption of ASU 2017-04 is not expected to have

material impact on the Company's Consolidated Financial Statements.

The Company does not believe other recently issued

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subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented.

Note 3 – Acquisition of Variable interest entities

Effective March 1, 2020, as amended and restated

pursuant to an agreement dated Oct 26, 2020, the Company entered into an exclusive business cooperation agreement with E Marketing Solution

(“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company.

the terms of the agreement, the Company provided technical support, management services and other services on an exclusive basis in relation

to E Marketing’s business during the term of the agreement.

In addition, the Company agreed to fund E Marketing for operational

cash flow needs and bear the risk of E Marketing’s losses from operations and E Marketing agreed that iPower has rights to E Marketing’s

net profits, if any.

Under the terms of the agreement, the Company may, at any time at its option, acquire for nominal consideration 100%

of either the equity of E Marketing or its assets subject to assumption of all of its liabilities.

On September 4, 2020, the Company entered into

an exclusive business cooperation agreement with Global Product Marketing Inc.

(“GPM”), an entity incorporated in the State

of Nevada on September 4, 2020.

GPM was owned by Chenlong Tan, the Chairman, CEO, President and one of the majority shareholders of the

Pursuant to the terms of the agreement, the Company provided technical support, management services and other services on an

exclusive basis in relation to GPM’s business during the term of the Agreement.

In addition, the Company agreed to fund GPM for

operational cash flow needs and bear the risk of GPM’s losses from operations and GPM agreed that the Company has rights to GPM’s

net profits, if any.

Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100%

of either the equity of GPM or its assets subject to assumption of all of its liabilities.

Below is a summary of the key terms of the exclusive

business cooperation agreements (the “Agreements”) with E Marketing and GPM (“VIEs"):

iPower is the exclusive manager of the VIEs;

the VIEs shall not directly or indirectly

accept the same or similar services from other parties;

the agreements shall remain effective unless terminated by iPower;

iPower is granted an irrevocable and exclusive option to purchase all assets and business at nominal price;

iPower agrees to fund each VIE’s operational needs and bear the risk

of each VIE’s losses from operations and VIEs agree that iPower has rights to VIEs’ net profits, if any.

Pursuant to the terms of the Agreements, the

Company did not have direct ownership in either E Marketing and GPM but was actively involved in their operations as the sole manager

to direct the activities and significantly impact E Marketing’s and GPM’s economic performance.

Each of E Marketing and GPM

had only one shareholder and all operational funding was provided by the Company.

During the term of the agreements, the Company bore

all the risk of loss and had the right to receive all of the benefits from E Marketing and GPM.

As such, based on the determination that

the Company was the primary beneficiary of E Marketing and GPM, in accordance with ASC 810-10-25-38A through 25-38J, E Marketing and

GPM were considered variable interest entities (“VIEs”) of the Company and the financial statements of E Marketing and GPM

have been consolidated from the date such control existed, March 1, 2020 and September 4, 2020, respectively.

On May 18, 2021, the Company entered into equity purchase agreements

(“Equity Purchase Agreements”) with the shareholders of each of our VIEs, E Marketing and GPM, pursuant to which we acquired

100% of the equity interests of each of E Marketing and GPM.

The Company paid nominal consideration of $10.00 for the acquisition of each

of E Marketing and GPM, which then became the Company’s wholly owned subsidiaries (the “Subsidiaries”).

As of June 30, 2021 and, 2020, the carrying amount

of the subsidiaries’ assets and liabilities were as follows for the periods indicated:

Note 3 - Joint Ventures

Box Harmony, LLC

On January 13, 2022, the Company entered into

a joint venture agreement (the “Joint Venture Agreement”) with Titanium Plus Autoparts, Inc., a California corporation (“TPA”),

Tony Chiu (“Chiu”) and Bin Xiao (“Xiao”).

Pursuant to the terms of the Joint Venture Agreement, the parties formed

a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal purpose of providing logistic services

primarily for foreign-based manufacturers or distributors who desire to sell their products online in the United States, with such logistic

services to include, without limitation, receiving, storing and transporting such products.

Following entry into

the Joint Venture Agreement, Box Harmony issued a total of 6,000 certificated units of membership interest, designated as Class A voting

units (“Equity Units”), as follows:

(i) the Company agreed to contribute $50,000 in cash in exchange for 2,400 Equity Units

in Box Harmony and agreed to provide Box Harmony with the use and access to certain warehouse facilities leased by the Company (see below),

and (ii) TPA received 1,200 Equity Units in exchange for (a) $1,200 and contributing the TPA IP License referred to below, (b) its existing

and future customer contracts, and (c) granting Box Harmony the use of shipping accounts (FedEx and UPS) and all other TPA carrier contracts,

and (iii) Xiao received 2,400 Equity Units in exchange for $2,400 and his agreement to manage the day to day operations of Box Harmony.

Under the terms of the Box Harmony limited liability

operating agreement (the “LLC Agreement”), TPA and Xiao each granted to the Company an unconditional and irrevocable right

and option to purchase from Xiao and TPA at any time within the first 18 months following January 13, 2022, up to 1,200 Class A voting

units, at an exercise price of $550 per Class A voting unit, for a total exercise price of up to $660,000.

If such option is fully exercised,

the Company would own 3,600 Equity Units or 60% of the total outstanding Equity Units.

As of the date of this report, the Company had

not exercised the option to purchase additional voting units from Xiao and TPA.

The LLC Agreement prohibits the issuance of additional

Equity Units and certain other actions unless approved in advance by the Company, that a noncontrolling right that would not be substantive

to overcome the majority voting interests held by TPA and Xiao.

As a result, the Company owns 40 % of the equity

interest in Box Harmony with significant influence but does not own a majority equity interest or otherwise control of Box Harmony.

Company accounts for its ownership interest in Box Harmony following the equity method of accounting, in accordance with ASC 323, Investments

—Equity Method and Joint Ventures.

Under this method, the carrying cost is initially recorded at cost and then increased or decreased

by recording its percentage of gain or loss in its statement of operations and a corresponding charge or credit to the carrying value

of the asset.

Global Social Media, LLC

On February 10, 2022, the Company entered into

a joint venture agreement with Bro Angel, LLC, Ji Shin and Bing Luo (the “GSM Joint Venture Agreement”).

Pursuant to the terms

of the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media, LLC (“GSM”),

for the principal purpose of providing a social media platform, contents and services to assist businesses, including the Company and

other businesses, in marketing their products.

Following entry into the GSM Joint Venture Agreement, GSM issued 10,000

certificated units of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity Units

and Bro Angel was issued 4,000 GSM Equity Units.

Shin and Luo are the owners of 100% of the equity of Bro Angel.

The LLC Agreement

prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by Bro Angel, creating a noncontrolling

right that would not be substantive to overcome the majority voting interests held by the Company.

As of the date of this

report, the members had not completed the capital contributions and no receivables were recorded.

Pursuant to the terms of the Agreements, the Company

owns 60 % of the equity interest in GSM and control of the operations.

Based on ASU 2015-02, the Company consolidate GSM due to its majority

equity ownership and control over operations.

For the years ended June 30, 2022 and 2021, the impact of GSM’s activities were immaterial

to the Company’s consolidated financial statements.

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

Interest Entity

On February 15, 2022,

the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the

British Virgin Islands (“BVI”), in accordance with the terms of a share transfer framework agreement (the “Transfer

Agreement”), dated February 15, 2022, by and between the Company, White Cherry Limited, a BVI company (“White Cherry”),

White Cherry’s equity holders, Li Zanyu and Xie Jing (together with White Cherry, the “Sellers”), Anivia, Fly Elephant

Limited, a Hong Kong company, Dayourenzai (Shenzhen) Technology Co., Ltd.

and Daheshou (Shenzhen) Information Technology Co., Ltd.

owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayourenzai (Shenzhen) Technology Co., Ltd.,

a corporation located in the People’s Republic of China (“PRC”) and which is a wholly foreign-owned enterprise (“WFOE”)

of Fly Elephant Limited.

The WFOE controls, through contractual arrangements summarized below, the business, revenues and profits of Daheshou

(Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”) and located in Shenzhen,

The contractual arrangements between the WFOE

and DHS are established through a variable interest operating entity structure, which is reflected in (i) an exclusive business cooperation

agreement, dated December 15, 2021, between the WFOE and DHS, (ii) an exclusive equity interest pledge agreement, dated December 15, 2021,

between the WFOE and DHS in which the equity of DHS was pledged to the WFOE, (iii) an exclusive option agreement, dated December 15, 2021,

between the WFOE, DHS and its equity holders, Li Zanyu and Xie Jing (the “Equity Holders), pursuant to which the Equity Holders

give the WFOE the irrevocable and exclusive right to purchase the equity interests in DHS, and (iii) a power of attorney, dated December

15, 2021, pursuant to which Li Zanyu and Xie Jing, the holders of 100% of the equity interest of DHS, granted the WFOE all voting and

other rights to their equity interest in DHS.

According to the exclusive business cooperation agreement, in consideration for the services

provided by the WFOE, DHS shall pay a service fee to the WFOE on annual basis (or at any time agreed by the Parties).

The service fees

for each year (or for any other period agreed to by the Parties) shall consist of a management fee and a fee for services provided, which

shall be reasonably determined by the WFOE based on the nature, complexity, time, and other market and operation factors.

provide a separate confirmation letter and/or invoice to DHS to indicate the amount of service fees due for each service period;

amount of services fees may be as set forth in the relevant contracts separately executed by the Parties.

DHS is principally engaged in

selling a wide range of products and providing logistic services in the PRC.

Pursuant to the terms of the Agreements, the Company

does not have direct ownership in DHS but is actively involved in DHS’s operations as the sole manager to direct the activities

and significantly impact DHS’s economic performance.

As such, based on the determination that the Company is the primary beneficiary

of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered a variable interest entity (“VIE”) of the Company

and the financial statements of DHS have been consolidated from the date such control existed, February 15, 2022.

Total fair value of the

consideration for the transaction was $ 10,629,000 , which was paid to White Cherry as follows:

at closing, the Company (i) paid $ 3,500,000

in the form of a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual installments commencing August 15, 2022

(the “Purchase Note”), (ii) issued 3,083,700 restricted shares (subject to a lock-up period of 180 days and insider trading

rules) of the Company’s common stock, and (iii) an additional $ 1,500,000 in cash was to be paid after closing.

JP Morgan Chase Bank,

the Company’s senior secured lender (“JPM”), consented to the transaction.

In conjunction with obtaining JPM’s

consent, the Company delivered an amendment to the pledge and security agreement with JPM, pursuant to which the Company pledged to JPM

65% of the equity interest of Anivia Limited, Fly Elephant Limited and the WFOE.

In addition, in conjunction

with the closing of the transaction, the WFOE entered into an employment agreement with Li Zanyu, dated February 15, 2022 (the “Employment

Agreement”), pursuant to which Mr.

Li has been appointed to serve as general manager of the WFOE for a term of 10 years (through

February 14, 2032), with annual base compensation of up to 500,000 RMB plus bonus as may be determined by the WFOE from time to time,

in its sole discretion, based on Mr.

Li’s performance.

During such employment, Mr.

Li may not engage in other employment without

the consent of the WFOE.

The acquisition of

Anivia was accounted for as a business combination under ASC 805.

As the acquirer for accounting purposes, the Company has estimated

the fair value of Anivia and its subsidiaries’ assets acquired and conformed the accounting policies of Anivia to its own

accounting policies.

The Company applied the income approach and cost approach in determining the fair value of the intangible

assets, which intangible assets consisted of a covenant not to compete, supplier relationship and software.

The fair value of the

remaining assets acquired and liabilities assumed were not significantly different from their carrying values at the acquisition

In addition, pursuant to the Transfer Agreement, the Sellers made certain representations and warranties, including that other

than the items presented on the balance sheet on February 15, 2022, DHS, the operating VIE, was not subject to any loans, debts,

liabilities, guarantees or other contingent liabilities at the Closing date.

In the event of any breach of any of the

representations and warranties, the sellers shall bear joint and several liability for any direct or indirect losses suffered by the

Company as a result thereof.

The Company recognized an approximately $ 6.1

million of goodwill in the transaction, which is primarily due to the subsumed assembled workforce intangible assets.

not deductible for income tax purposes.

The Company expensed with the acquisition, certain legal and accounting costs of $ 54,702 ,

as general and administration expenses and $ 50,000

paid to JPM as financing fees.

The following information

summarizes the purchase consideration and allocation of the fair values assigned to the assets at the purchase date, February 15, 2022:

Schedule of allocation of acquisition price

Fair Value of Purchase Price:

Promissory note issued

Common stock issued

Total purchase consideration

Purchase Price Allocation:

Covenant not to compete

Supplier relationship

Current assets

Property and equipment

Deferred tax liabilities

( 1,389,113 )

Current liabilities

( 1,143,076 )

Lease liability

Total purchase consideration

date of this report, the $1.5 million cash portion of the consideration, which was presented as investment payable, had not been paid

as the seller’s bank account was still not opened due to the delay caused by the COVID-19 conditions in Hong Kong and China.

The results of operations

of Anivia for the period from February 16, 2022 through June 30, 2022 were included in the Company's consolidated financial statements

as of and for the year ended June 30, 2022.

See Note 5 for details.

Pro Forma Financial Information

The following pro forma

information presents a summary of the Company’s combined operating results for the years ended June 30, 2022 and 2021, as if the

acquisition had occurred on July 1, 2020.

The following pro forma financial information is not necessarily indicative of the Company’s

operating results as they would have been had the acquisition been effected on the assumed date, nor is it necessarily an indication of

trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the

pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies,

and the impact of incremental costs incurred in integrating the businesses.

Schedule of Business Acquisition, Pro Forma Information

Years ended June 30,

Total Revenues

Income from Operations

Basic and diluted income per share

Note 5 – Variable interest entity

Effective February 15, 2022, upon acquisition

of Anivia, the Company assumed the contractual arrangements between the WFOE and DHS through a variable interest operating entity structure.

See Note 4 for details.

The Company did not provide financial or other

support to the VIE for the periods presented where the Company was not otherwise contractually required to provide such support.

As of June 30, 2022 and 2021, there was no pledge

or collateralization of the VIE assets that would be used to settle obligations of the VIE.

The carrying amounts of the assets, liabilities

and the results of operations of the VIE included in the Company’s consolidated balance sheets and statements of operations and

comprehensive income after the elimination of intercompany balances and transactions with the VIE are as follows:

The carrying amount of the VIE’s assets

and liabilities were as follows for the years indicated:

Carrying amount of VIE assets and liabilities

Accounts receivable

Payables to iPower

Prepayments and other receivables

Office equipment, net

Right of use - noncurrent

Advance from shareholders

Accounts payable

Lease liability

Income tax payable

Other payables

The assets and payables were included in the consolidated

balance sheets as of June 30, 2021 and 2020 and the payables to iPower were eliminated in consolidation.

The operating results of the Subsidiaries for the year ended June 30,

2021 and 2020 were as follows:

Schedule of results of Operation

Note 4 - Accounts receivable

Other payables and accrued liabilities

The operating results of the VIE were as follows

for the period from February 15, 2022 to June 30, 2022:

Operating results of the VIE

June 30, 2022

Net loss after elimination of intercompany transactions

For the period from February 16, 2022 to June 30, 2022, the VIE contributed

approximately $ 4.8 million of revenue and $ 0.9 million of net income before elimination.

6 – Accounts receivable, net

Accounts receivable for the Company consisted

4 unchanged sentences

Total accounts receivable

There was no credit loss for the years ended June 30, 2021 and 2020.

There was no credit loss for the year ended June 30, 2021.

Note 7 – Inventories, net

As of June 30, 2022 and 2021, inventories consisted

of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 13,065,741 and $ 5,743,181 ,

respectively.

of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 30,433,766 and $ 13,065,741 , respectively.

As of June 30, 2022 and 2021, allowance for obsolescence

5 unchanged sentences

Advance to suppliers

Prepaid income taxes

Prepaid expenses and other receivables

1 unchanged sentence

of $ 56,884 and $ 178,581

and receivables from two unrelated parties for their use of the Company’s courier accounts at June 30, 2021 and 2020.

of the date of this report, the amount had been fully collected.

and receivables from one and two unrelated parties for their use of the Company’s courier accounts at June 30, 2022 and 2021.

As of the date of this report, the amount had been fully collected.

Note 9 – Non-current prepayments

Non-current prepayments included $ 1.26

million for product sourcing, marketing research and promotion, and other management advisory and consulting services to companies

owned by an employee and minority shareholder and by relatives of a minority shareholder of the Company.

The terms of these services

are two years to five years.

In addition, $ 96,875

was down payment for lease of a car for four years.

As of June 30, 2021, total non-current prepayments were $ 1,357,292 .

Non-current prepayments included $ 853,749 for

product sourcing, marketing research and promotion, and other management advisory and consulting services to companies owned by an employee

and minority shareholder and by relatives of a minority shareholder of the Company.

The terms of these services are from two years to

In addition, there was a $ 71,875 down payment on a four-year car lease.

As of June 30, 2022 and 2021, total non-current prepayments

were $ 925,624 and $ 1,357,292 , respectively.

For the years ended June 30, 2022 and 2021, the Company recorded amortization expenses of

$ 431,668 and $ 53,959 , respectively.

Note 10 – Intangible assets, net

As of June 30, 2022, intangible assets, net, consisted

of the following:

Schedule of intangible assets

June 30, 2022

Covenant Not to Compete

Supplier relationship

Accumulated amortization

The intangible assets were acquired on February

15, 2022 through acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at June 30, 2022 was approximately

8.32 years, and the amortization expense for the year ended June 30, 2022 was $ 243,515 .

At June 30, 2022, finite-lived intangible assets

are expected to be amortized over their estimated useful lives, which ranges from a period of five to 10 years, and the estimated remaining

amortization expense for each of the five succeeding years thereafter is as follows:

Schedule of future amortization

Year Ending June 30,

Intangible assets, net

Note 11 – Other payables and accrued liabilities

As of June 30, 2022 and 2021, other payables and accrued liabilities

consisted of the following:

Schedule of other payables and accrued liabilities

Accrued payables for inventory in transit

Accrued Amazon fees

Sales taxes payable

Payroll liabilities

Other accrued liabilities and payables

The Company’s controlled VIE, DHS, facilitated in the process of inventory

The Company purchased a total of $378,385 inventories from a supplier which had a payment term of 90 days with a 2%

premium on the purchase price.

This supplier has purchased the inventory from DHS with payments made upon delivery.

As of June 30,

2022, the Company included an outstanding amount of $ 378,385 in

other payables and presented as financing cash inflow in proceeds from short term loans on the statement of cash flows.

As of the date of this report, the amount had

been paid off.

Note 12 – Loans payable

Short-term loans

PPP note payable

On April 13, 2020, the Company entered into an

agreement with Royal Business Bank (the “Lender”) for a total amount of $175,500, pursuant to a promissory note issued by

the Company to the Lender (the “PPP Note”).

The loan was made pursuant to the Payroll Protection Program established as part

of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

The PPP Note bears interest at the rate of 1.00 %

per annum and may be repaid at any time without penalty.

The PPP Note contains customary events of default relating to, among other things,

payment defaults, breach of representations and warranties, or provisions of the promissory note.

The occurrence of an event of default

may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note.

The Company accounts for the PPP loan under Topic

470 as follows:

(a) Initially record the cash inflow from the PPP Note as a financial liability and accrued interest in accordance with

the interest method under ASC Subtopic 835-30;

(b) Not impute additional interest at a market rate;

from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released by the Lender

or (2) the debtor pays off the loan;

(d) Reduce the liability by the amount forgiven and record a gain on extinguishment once the loan

is partly or wholly forgiven and legal release is received.

On March 22, 2021, the $ 175,500 PPP Note due to Royal Business Bank was fully

As of June 30, 2021 and 2020, the Company had an outstanding balance of $ 0 and $ 175,500 , respectively, under the PPP Note.

Revolving credit facility

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On May 26, 2020, the Loan and Security Agreement was amended and restated as a Receivable

Purchase Agreement (the “Original RPA”), pursuant to which WFC may, but is not obligated to, purchase accounts receivable

from the Company from time to time.

The credit limit of the revolving facility under the Original RPA was $2,000,000, which had a discount

rate equal to the prime rate plus 4.25% per annum on the outstanding amount.

This revolving credit facility is secured by all of the

Company’s assets and guaranteed by Allan Huang, who is a former director and executive officer of the Company and one of the Company’s

major shareholders and founders.

Pursuant to the Original RPA, the purchases of accounts receivable were made with full recourse to the

Company, and the Company was obligated to collect the accounts receivables and to repurchase or pay back the amount drawn if the accounts

receivable were not collected.

In accordance with ASC 860-10-05, the revolving credit facility under the Receivable Purchase Agreement

is treated as secured borrowing.

On November 16, 2020, the Original RPA was further

amended and restated (the “Restated RPA”) to increase the credit limit of the revolving credit facility from $2,000,000 to

The Restated RPA bears a discount rate of 3.055555%, subject to a rebate of 0.0277% per day .

This revolving credit facility

is secured by all of the Company’s assets and guaranteed by Chenlong Tan, the CEO and one of the Company’s major shareholders

and founders.

Pursuant to the agreement, all purchases of accounts receivable are without recourse to the Company, and WFC assumes the

risk of nonpayment of the accounts receivable due to a customer’s financial inability to pay the accounts receivable or the customer’s

insolvency but not the risk of non-payment of the accounts receivable for any other reason.

The Company is obligated to collect the accounts

receivables and to repurchase or pay back the amount drawn if the accounts receivable are not collected.

As of June 30, 2021 and 2020, the

outstanding balance due under the RPA was $ 162,769

and $ 1,154,180 ,

respectively.

Loans payable

During the quarter ended December 31, 2020, the

Company borrowed a total of $ 300,000

from two unrelated parties for short-term cash flow needs.

The loans bear interest at the rate of 8% per annum and may be repaid

at any time without penalty.

The Company had fully repaid the outstanding amount in February 2021.

As of June 30, 2021, the outstanding

balance of the loans was $ 0 .

Purchase Agreement (the “Original RPA”).

On November 16, 2020, the Original RPA was further amended and restated (the “Restated

RPA”) to increase the credit limit of the revolving credit facility from $2,000,000 to $ 3,000,000 .

The Restated RPA bore a discount

rate of 3.055555%, subject to a rebate of 0.0277% per day.

This revolving credit facility was secured by all of the Company’s assets

and guaranteed by Chenlong Tan, the CEO and one of the Company’s major shareholders and founders.

Pursuant to the terms of the agreement,

all purchases of accounts receivable were without recourse to the Company, and WFC assumed the risk of nonpayment of the accounts receivable

due to a customer’s financial inability to pay the accounts receivable or the customer’s insolvency but not the risk of non-payment

of the accounts receivable for any other reason.

The Company was obligated to collect the accounts receivables and to repurchase or pay

back the amount drawn down if the accounts receivable were not collected.

During the three months ended September 30, 2021,

the Company terminated the Restated RPA and paid off the balance due to WFC.

As of June 30, 2022 and 2021, the outstanding

balance due under the RPA was $ 0 and $ 162,769 , respectively.

Long-term loan

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begin twelve months from the date of the SBA Note.

As of June 30, 2021, the outstanding balance of the SBA Note was $ 487,815 , which included

a current portion of $ 29,244 and a non-current portion of $ 458,571 .

Note 9 – Convertible notes

On January 27, 2021, the Company completed a

private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $ 3,000,000

in convertible notes with a 6 %

interest per annum (the “Convertible Note”) and warrants to purchase shares of Class A Common Stock equaling 80% of the

number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes.

The warrants shall be exercisable for a

period of three years from the IPO completion date at a per share exercise price equal to the $5.00 per share, the IPO purchase price.

The Convertible Notes shall be automatically converted into the Company’s Class A Common Stock upon a qualified IPO (the

“Mandatory Conversion”) or repayable in cash at the option of the holders of the Convertible Notes with repayment to

commence six months after January 27, 2021.

The Convertible Notes convert at a price equal to the lesser of (a) a price representing

a 30% discount to the public offering price per share of the Class A Common Stock in this Offering, or (b) a price

representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of

Class A Common Stock immediately prior to the IPO, (y) the number of Class A Common Stock issuable upon conversion of the 34,500

shares of Series A Preferred Stock, and (z) the number of Class A Common Stock issuable upon conversion of all outstanding

Convertible Notes.

Any interest accrued on the Convertible Note will be waived upon conversion.

In the event the Company does not

receive a minimum of $15,000,000 of gross proceeds in the Offering or otherwise close on the Offering, the Convertible Notes will

bear interest at a rate of 6% per annum which shall accrue from January 27, 2021 and be repayable in six equal monthly installments

between July 27, 2021 and January 27, 2022.

Alternatively, the Convertible Notes may be converted at the conversion price into

shares of Class A Common Stock at the option of the holder prior to the maturity date (the “Conversion Option”).

notes are converted, either on a Mandatory Conversion basis or through each holder’s exercise of the Conversion Option, any

interest accrued on the Convertible Note shall be waived.

In connection with the convertible note offering,

the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable

at the conversion price of the Convertible Note (the “Conversion Price”).

The placement agent warrants are exercisable for

a period of five years from the issuance date and are treated as a debt issuance cost.

The conversion feature included in the terms of

the Convertible Notes creates an obligation to the Company requiring it to repay the notes for cash in January 2022, if an IPO does not

Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary

amount known at inception in accordance with ASC 480-10-25-14a.

As such, the conversion feature was determined to be a derivative liability,

which represents an embedded derivative predominately based on a fixed monetary amount.

The Convertible Note warrants and placement agent

warrants were determined to be derivative liabilities, which represent free-standing derivative instruments.

The Company measured the

derivative liabilities at fair value at the issuance date of the Convertible Notes, Convertible Note warrants and placement agent warrants

based on a Modified Black Scholes option-pricing model.

The derivative liabilities were recorded with a corresponding debit to debt discount

that will be amortized over the life of the notes using effective interest rate method.

At time of issuance, the Convertible Notes and

warrant liabilities were recorded on the balance sheet as liabilities.

Debt issuance costs, which consisted of $ 120,000 in cash netted

against the note proceeds and $ 84,849 in placement agent warrants, are allocated to derivative liabilities based on its fair value at

issuance to total proceeds received.

Debt issuance costs associated with warrant liabilities are expensed immediately and the debt issuance

cost associated with the debt host are amortized over the life of the notes.

Upon issuance, the Company allocated the total

proceeds first to the stock warrants, then to the embedded conversion features and the residual to the note.

The amount allocated to debt

discount was $ 1,390,141 and the amount allocated to the note was $1,609,859, respectively.

The conversion feature and warrant liabilities

of $1,390,141 was recorded as a debit to debt discount that was amortized as other non-operating expense over the life of the notes using

effective interest rate method.

On May 14, 2021, the Company closed on an

initial public offering of $ 16.8

million in gross proceeds, following which time the Convertible Notes were fully converted into an aggregate of 857,144

shares of the Company’s Common Stock.

Upon conversion, the Company measured the conversion

liability to fair value using the Modified Black Scholes Option Pricing Model, a level 3 valuation method, based on the expected fair

value of the underlying stock with the following assumptions:

Schedule of assumptions used

of May 14, 2021

Expected term

Expected volatility

Risk-free interest rate

Expected dividend rate

As of May 14, 2021, the fair value immediately

before the conversion of the Convertible Note, net of debt discount, was $ 1,714,281 , which included fair value of the conversion feature

of $ 1,285,719 , and an increase in fair value of $ 593,103 was included in other non-operating expenses for the year ended June 30, 2021.

As a result of the full conversion, there was no outstanding convertible notes and conversion liability as of June 30, 2021.

14 below for the stock warrants issued in connection with the convertible notes.

During the quarter ended June 30, 2022, the Company paid off the SBA Note, including

accrued interest expense of $ 39,237 .

As of June 30, 2022 and 2021, the outstanding balance of the SBA Note was $ 0

and $ 487,815 ,

respectively, with the latter amount including a current portion of $ 29,244

and a non-current portion of $ 458,571 .

Asset-based revolving loan

On November 12, 2021, the Company entered to a

Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, for an asset-based revolving

loan (“ABL”) of up to $ 25 million with key terms listed as follows:

Borrowing base equal to the sum of

Up to 90% of eligible credit card receivables

Up to 85% of eligible trade accounts receivable

Up to the lesser of (i) 65% of cost of eligible inventory or (ii) 85% of net orderly liquidation value of eligible inventory

Interest rates of between LIBOR plus 2% and LIBOR plus 2.25% depending on utilization

Undrawn fee of between 0.25% and 0.375% depending on utilization

Maturity Date of November 12, 2024

In addition, the ABL includes an accordion feature

that allows the Company to borrow up to an additional $25.0 million.

To secure complete payment and performance of the secured obligations,

the Company granted a security interest in all of its right, title and interest in, to and under all of the Company’s assets as

collateral to the ABL.

Upon closing of the ABL, the Company paid $ 796,035 financing fees including 2% of $25.0 million or $500,000 paid

to its financial advisor.

The financing fees are recorded as debt discount and to be amortized over three years as financing expenses,

the term of the ABL.

For the year ended June 30, 2022, the Company recorded in interest expense – $ 176,812 of amortization of debt

discount and $ 182,543 of interest expense and credit utilization fees.

Below is a summary of the interest expense recorded

for the years ended June 30, 2022 and 2021:

Accrued interest

Credit utilization fees

Amortization of debt discount

As of June 30, 2022, the outstanding amount of the long-term revolving

loan payable, net of debt discount, was $ 12,314,627 , including interest payable of $ 182,543 .

Promissory note payable

On February 15, 2022, as part of the

consideration for acquisition of Anivia Limited, the Company issued a two-year unsecured 6% subordinated promissory note, payable in

equal semi-annual installments commencing August 15, 2022 (the “Purchase Note”).

The principal amount of the Purchase

Note was $ 3.5

million with a fair value of $ 3.6

million as of February 15, 2022.

For the year ended June 30, 2022, the Company recorded accrued interest of $ 78,750

and amortization of note premium of $ 18,609 .

As of June 30, 2022, including $ 78,750

of accrued interest and $ 82,020

of unamortized premium, the total outstanding balance of the Purchase Note was $ 3,660,770 ,

which was presented on the consolidated balance sheet as a current portion of $ 1,879,065

and a non-current portion of $ 1,781,705 .

Note 13 - Related party transactions

5 unchanged sentences

on the outstanding amount.

During the years ended June 30, 2021 and 2020, the Company recorded proceeds of $ 571,824 and $ 632,286 and payments

of $ 705,617 and $ 3,267,801 , respectively.

As of June 30, 2021 and 2020, the outstanding amount due to related parties was $ 0 and $ 133,793 ,

During the years ended June 30, 2021, the Company recorded proceeds of $571,824 and payments of $705,617,

respectively.

Note 11 – Income taxes

As of June 30, 2022 and 2021, the outstanding amount due to BizRight was $0 and $0, respectively.

Starting March 1, 2022, the Company

subleases 50,000 square feet of its warehouse space to Box Harmony, LLC, which is a 40% owned joint venture of the Company as

disclosed on Note 1 and Note 2 above.

For the year ended June 30, 2022, the Company received and recorded sublease fee of $ 330,000

as other non-operating income.

As of June 30, 2022, other receivables due from Box Harmony was 51,762 .

On February 15, 2022, the Company assumed $92,246

of advance from shareholders of DHS through acquisition of Anivia.

This amount was for capital injection pending capital inspection by

the local government in accordance with the PRC rules.

As of June 30, 2022, the balance of advance from shareholders was $ 92,246 .

14 – Income taxes

On December 22, 2017, the President of the United

10 unchanged sentences

has computed its tax expenses using the new statutory rate effective on January 1, 2018 of 21%.

Other provisions of the new legislation

include, but are not limited to, limiting deductibility of interest and executive compensation expense.

These additional items have

been considered in the income tax provision for the year ended June 30, 2020 and the impact was not material to the overall

financial statements.

For the year ended June 30, 2021, the Company incurred non-deductible expense related to issuance of

convertible notes and preferred stock of $2.87 million.

In addition, upon completion of the acquisition

of Anivia, the Company is subject to corporate income taxes in People’s Republic of China (“PRC”).

Anivia and its subsidiaries

were subject to BVI or Hong Kong income taxes but did not have any operations for the year ended June 30, 2022.

DHS, the operating VIE

of Anivia, is considered a Controlled Foreign Corporation (CFC) defined under IRC Sec.

957(a) since the Company indirectly owns more than

50% voting control of DHS as a result of the Transfer Agreement.

Therefore, DHS is subject to the GILTI Tax.

DHS is subject to 25% tax

The Company made an election to apply the GILTI high-tax exclusion for DHS under the Final Regulations (T.D.

result of the election, no GILTI tax was recorded as of June 30, 2022.

In addition, as a result of the acquisition the Company booked

a $ 6,094,144 of goodwill.

Since the acquisition was a stock acquisition, the Goodwill is not deductible for tax purposes.

Other provisions of the new legislation include,

but are not limited to, limiting deductibility of interest and executive compensation expense.

These additional items have been considered

in the income tax provision for the years ended June 30, 2022 and 2021.

For the year ended June 30, 2022, the Company recorded net deferred

tax liabilities of $ 939,115 resulting from

intangible assets acquired, and other temporary differences, including stock compensation expense, depreciation expenses, lease expenses,

For the year ended June 30, 2021, the Company

incurred non-deductible expense related to issuance of convertible notes and preferred stock of $ 2.87 million.

The income tax provision for the years ended June 30, 2022 and 2021

consisted of the following:

Provision for income tax expense

Schedule of provision for income tax expense

June 30, 2022

6 unchanged sentences

tax as well as state income tax in certain jurisdictions.

The tax years 2018 and 2019 remain open to examination by the major taxing

The tax years 2018 to 2020 remain open to examination by the major taxing

jurisdictions to which the Company is subject.

1 unchanged sentence

tax at the calculated statutory rates:

Reconciliation of effective income tax rate

Schedule of reconciliation of effective income tax rate

June 30, 2022

1 unchanged sentence

Statutory tax rate

State of California

State (net of federal benefit)

Foreign tax rate difference

Debt discount and change in fair value of warrants and conversion features

3 unchanged sentences

( 8,531.35 % )

As of June 30, 2021 and 2020, the income taxes payable was $ 790,823

and $ 721,211 , respectively.

As of June 30, 2022, prepaid income taxes to US tax authorities and

income tax payable to Chinese tax authorities was $ 375,087

and $ 299,563 ,

respectively.

As of June 30, 2021, income tax payable to tax authorities $ 790,823.

The tax effects of temporary differences which give rise to significant

portions of the deferred taxes are summarized as follows:

Schedule of deferred taxes

Deferred tax assets

263A calculation

Inventory reserve

Accrued expenses

ROU assets / liabilities

Stock-based compensation

Total deferred tax assets

Deferred tax liabilities

Intangible assets acquired

( 1,323,720 )

Total deferred tax liabilities

( 1,409,974 )

Net deferred tax liabilities

$ ( 939,115 )

Note 15 – Earnings per share

The following table sets forth the computation of basic and diluted

earnings per share for the periods presented:

Computation of earnings per share

For the years ended

Net (loss) income

earnings per share for the years presented:

Schedule of computation of earnings per share

For the year ended

Net income (loss) attributable to iPower Inc.

$ ( 775,749 )

13 unchanged sentences

*Due to the ani-dilutive effect, the computation

of basic and diluted EPS did not include the underlying shares of warrants and RSUs as the Company had a net loss for the year ended June

* For the year ended June 30, 2021, the 22,137 vested shares of restricted

stock units under the 2020 Equity Incentive Plan (as discussed in Note 13) are considered issued shares and therefore are included in

the computation of basic earnings (loss) per share as of grant date when the shares are fully vested.

of basic and diluted EPS did not include the shares underlying the exercise of warrants and RSUs as the Company had a net loss for the

year ended June 30, 2021.

For the year ended June 30, 2022, the computation of basic and diluted EPS included the vested RSUs.

*The computation of diluted EPS did not include

the shares underlying the exercise of warrants, which would have been calculated using treasury method for the year ended June 30, 2022,

as the exercise price was greater than the market price of the shares.

*The computation of diluted EPS did not include

the shares underlying the exercise of options granted as none of the market and performance conditions had been met so no shares were

considered issuable.

* For the years ended June 30, 2022 and

2021, 133,066 and 22,137

vested shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 16) are considered issued shares

and therefore are included in the computation of basic earnings (loss) per share as of grant date when the shares are fully

Note 16 – Equity

10 unchanged sentences

shares to its founders at inception.

On January 15, 2020, pursuant to a

rescission and mutual release agreement with an unrelated company, the Company issued 204,496

shares of its Class A Common Stock as settlement for a payment of $ 427,010

received by the Company.

On January 15, 2020, pursuant to a rescission

and mutual release agreement with an unrelated company, the Company issued 204,496 shares of its Class A Common Stock as settlement for

a payment of $ 427,010 received by the Company.

On October 20, 2020, the Company entered into

15 unchanged sentences

B Common Stock were converted into shares of Class A Common Stock.

As of June 30, 2020, the outstanding shares of Class

B Common Stock were retroactively stated as 14,000,000 and 14,000,000, respectively.

As of June 30, 2020, the outstanding shares of Class B Common Stock

were retroactively stated as 14,000,000 and 14,000,000, respectively.

Effective April 14, 2021, the Company amended

6 unchanged sentences

which are solely designated as Common Stock.

On May 14, 2020, the Company closed its

initial public offering (“IPO”) under a registration statement effective May 11, 2021, in which it issued and sold

3,360,000 shares of its Common Stock at a purchase price of $5.00 per share.

On May 21, 2021, the Company closed on

the IPO’s overallotment option, selling an additional 504,000 shares of Common Stock to the IPO’s underwriters at the

public offering price of $5.00 per share.

The Company received net proceeds of approximately $ 16.6 million from the IPO after

deducting underwriting discounts and offering expenses.

On May 14, 2020, the Company closed its initial

public offering (“IPO”) under a registration statement effective May 11, 2021, in which it issued and sold 3,360,000 shares

of its Common Stock at a purchase price of $5.00 per share.

On May 21, 2021, the Company closed on the IPO’s overallotment option,

selling an additional 504,000 shares of Common Stock to the IPO’s underwriters at the public offering price of $5.00 per share.

The Company received net proceeds of approximately $ 16.6 million from the IPO after deducting underwriting discounts and offering expenses.

On May 14, 2021, upon closing on the Company’s

4 unchanged sentences

placement offerings completed in December 2020 and January 2021.

During the year ended June 30, 2022, the Company

issued 40,019 shares of restricted common stock for RSUs vested in the quarter ended September 30, 2021.

On February 15, 2022, as part of the consideration

for the acquisition of Anivia and subsidiaries, the Company issued 3,083,700 restricted shares of the Company’s common stock, valued

at $ 2.27 per share, which was the closing price of the Company’s Common Stock as traded on Nasdaq on February 15, 2022.

have a lock-up period of 180 days and are subject to insider trading restrictions.

The fair value of the shares was $ 5,528,373 , calculated

with a discount of lack of marketability of 21%, which is determined using the Black Scholes Model.

As of June 30, 2022 and 2021, there were

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and the qualifications, limitations or restrictions thereof.

See Note 13 below for details of Series A Convertible Preferred Stock issued

on December 30, 2020.

As of June 30, 2022 and 2021, respectively, there were no shares of Preferred

Stock was issued and outstanding.

Equity Incentive Plan

On May 5, 2021, the Company’s Board

adopted, and its stockholders approved and ratified, the iPower Inc.

On May 5, 2021, the Company’s Board of

Directors adopted, and its stockholders approved and ratified, the iPower Inc.

Amended and Restated 2020 Equity Incentive Plan (the

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Company’s business.

Restricted Stock Unit

Following completion of the IPO on May 11, 2021,

2021, pursuant to their letter agreements, the Company awarded 46,546

restricted stock units (“RSUs”) under the Plan to its independent directors, Chief Financial Officer, and certain other

employees and consultants, all of which are subject to certain vesting conditions in the next 12 months and restrictions until

filing of a Form S-8 for registration of the shares.

The fair value of the RSUs was determined to be based on $5.00 per share, the

initial listing price of the Company’s common stock on the grant date.

As of June 30, 2021, the Company had granted total of 46,546

RSUs, of which 22,137

were fully vested upon issuance and 24,409

remain subject to certain vesting conditions.

For the year ended June 30, 2021, the Company recorded $ 110,683

of stock-based compensation expense.

There was no forfeiture occurred during the year ended June 30, 2021.

As of June 30, 2021, the

unvested number of RSUs was 24,409 and the unamortized expense was $ 122,045 .

Note 14 – Series A Convertible Preferred Stock

On December 30, 2020, the Company closed a private

placement and issued a total of 34,500 shares of Series A Convertible Preferred Stock, par value $0.001 per share, to a total of three

accredited investors, at a purchase price of $10.00 per share, for a total purchase price of $ 345,000 in cash.

Pursuant to the certificate

of designations, the Series A Convertible Preferred Stock automatically converts into shares of the Class A Common Stock (the “Conversion

Shares”) at a conversion price equal to 70% of the initial price per share of the Class A Common Stock.

If the IPO has not occurred

by December 31, 2021, the Company would be obligated to redeem and repurchase for cash all of the outstanding shares of Series A Convertible

Preferred Stock for a purchase price equal to (a) the product of multiplying the $10.00 Stated Value of each outstanding share of Series

A Convertible Preferred Stock by the total number of outstanding shares of Series A Convertible Preferred Stock, plus (b) all accrued

and unpaid Dividends at 9% per annum.

In the event that the Series A Convertible Preferred Stock are converted into Conversion Shares,

no Dividend shall accrue or be payable.

In connection with this private placement, the

Company paid $ 27,600 in cash and issued warrants to purchase 2,415 shares of Series A Convertible Preferred Stock to Boustead Securities,

LLC (the “Placement Agent”) as compensation, which was recorded as financing expense.

The exercise price of the warrants was

$ 10 per share.

The warrants were recorded as liability.

See Note 14 below for detail.

The redemption feature creates an obligation to

the Company requiring it to redeem the Preferred Shares for cash on December 31, 2021, if an IPO does not occur.

Upon an IPO, the Conversion

Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance

with ASC 480-10-25-14a.

The Series A convertible preferred stock are mandatorily redeemable and should be classified as a liability in

accordance with ASC 480-10 and the Company has elected to record the Series A Convertible Preferred Stock at fair value with changes in

fair value recorded through earnings under the ASC 825-10-15-4 fair value option (“FVO”) election.

Under the FVO election the financial instrument

is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis

at each reporting period date.

As of May 14, 2021, the closing date of the IPO, the fair value was $ 492,860 which was measured based on

the fixed monetary amount of the convertible share upon IPO and the probability of IPO.

The change in fair value of $ 147,860 was recorded

as other non-operating expense.

On May 14, 2021, upon closing on the Company’s

IPO, all outstanding shares of Series A convertible preferred stock were converted into an aggregate of 98,572 shares of the Company’s

Common Stock.

As of June 30, 2021 and 2020, respectively, the Company had 0 shares of Preferred Stock issued and outstanding.

pursuant to their letter agreements, the Company awarded 46,546 restricted stock units (“RSUs”) under the Plan to its independent

directors, Chief Financial Officer, and certain other employees and consultants, all of which are subject to certain vesting conditions

in the next 12 months and restrictions until filing of a Form S-8 for registration of the shares.

The fair value of the RSUs was determined

to be based on $5.00 per share, the initial listing price of the Company’s common stock on the grant date.

During the year ended

June 30, 2022, the Company granted additional 97,128 shares of RSUs.

For the year ended June 30, 2022 and 2021, the Company recorded $ 314,287

and $ 110,683 of stock-based compensation expense.

There was forfeiture of 4,000 and 0 RSUs occurred during the year ended June 30, 2022

As of June 30, 2022 and 2021, the unvested number of RSUs was 6,608 and 24,409 and the unamortized expense was $ 15,000 and $ 122,045 ,

respectively.

Information relating to RSU grants is summarized

Schedule of RSU activity

Total RSUs Issued

Total Fair Market Value of RSUs Issued as Compensation (1)

RSUs granted, but not vested, at June 30, 2020

RSUs forfeited

RSUs granted, but not vested, at June 30, 2021

RSUs forfeited

RSUs granted, but not vested, at June 30, 2022

_____________________

The total fair value was based on the current stock price on the grant date.

As of June 30, 2022, of the 133,066 vested RSUs,

40,019 shares of Common Stock were issued, and 93,047 shares were to be issued in the next fiscal year upon setup of the plan administration

On May 12, 2022, the Compensation Committee of

the Board of Directors approved an incentive plan for the Company’s executive officers consisting of a cash performance bonus of

$ 60,000 to be awarded to Kevin Vassily, CFO of the Company, and grants of stock option (the “Option Grants”) in the amount

of (i) 3,000,000 shares to Chenlong Tan, CEO and (ii) 330,000 shares to Mr.

The Option Grants, which were issued on May 13, 2022,

have an exercise price of $ 1.12 , a contractual term of 10 years and consist of six vesting tranches with a vesting schedule based entirely

on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment of the

recipients through each vesting date.

Each of the 6 vesting tranches of the Option Grants will vest when both

(i) the market capitalization milestone for such tranche, which begins at $150 million for the first tranche and increases by increments

of $50 million through the fourth tranche and $100 million thereafter (based on achieving such market capitalization for five consecutive

trading days), has been achieved, and (ii) any one of the following six operational milestones focused on revenue or any one

of the six operational milestones focused on operating income have been achieved during a given fiscal year.

The achievement status of the operational

milestones as of June 30, 2022 was as follows:

Revenue in Fiscal Year

Operating Income in Fiscal Year

(in Millions)

Achievement Status

(in Millions)

Achievement Status

The Company evaluated the performance condition

and market condition under ASC 718-10-20.

The Option Grants are considered an award containing a performance and a market condition and

both conditions (in this case at least one of the performance conditions) must be satisfied for the award to vest.

The market condition

is incorporated into the fair value of the award, and that fair value is recognized over the longer of the implied service period or requisite

service period if it is probable that one of the performance conditions will be met.

In relation to the five awards deemed probable to

vest, the recognition period ranges from 2.93 years to 9.64 years.

If the performance condition is ultimately not met, compensation cost

related to the award should not be recognized (or should be reversed to the extent any expense has been recognized related to such tranche)

because the vesting condition in the award would not have been satisfied.

On the grant date, a Monte Carlo simulation was

used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization

milestone for such tranche was expected to be achieved.

Separately, based on a subjective assessment of our future financial performance,

each quarter we determine whether it is probable that we will achieve each operational milestone that has not previously been achieved

or deemed probable of achievement and if so, the future time when we expect to achieve that operational milestone.

Carlo simulation utilized the following inputs:

· Stock Price - $ 1.12

· Volatility – 95.65 %

· Term – 10 years

· Risk Free Rate of Return – 2.93 %

· Dividend Yield – 0 %

The total fair value of the Option Grants was

$3.2 million of which, at June 30, 2022, $2.3 million is deemed probable of vesting.

As of June 30, 2022, none of the options had vested.

For the year ended June 30, 2022 and 2021, the Company recorded $ 58,064 and $ 0 of stock-based compensation expense related to the Option

Unrecognized compensation cost related to tranches probable of vesting is approximately $2.2 million and will be recognized

over 2.8 years to 9.5 years, depending on the tranche.

Note 17 – Warrant liabilities

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and were classified as Level 3 measurements.

On December 30, 2020, the Company issued

warrants to purchase 2,415

shares of Series A Convertible Preferred Stock to Boustead Securities, LLC (the “Placement Agent”) as compensation,

On December 30, 2020, the Company issued warrants

to purchase 2,415 shares of Series A Convertible Preferred Stock to Boustead Securities, LLC (the “Placement Agent”) as compensation,

which was recorded as financing expense.

The exercise price of the warrants is $ 10

per share and expires in five years from the issuance date.

This Series A Preferred Stock warrant were valued using Black Scholes

Option Pricing Model at issuance date and recorded $ 8,047 as financing expense and warrant liability.

The exercise price of the warrants is $ 10 per share and expires in five years from the issuance

This Series A Preferred Stock warrant were valued using Black Scholes Option Pricing Model at issuance date and recorded $ 8,047

as financing expense and warrant liability.

On January 27, 2021, the Company completed a private

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at a per share exercise price equal to the IPO.

In accordance with the terms of the warrants, in the event the Convertible Notes are repaid in cash by the Company, the warrants issued in conjunction with the Convertible

Notes will expire and have no further value.

In accordance with the terms of the warrants, in the event the Convertible Notes are repaid

in cash by the Company, the warrants issued in conjunction with the Convertible Notes will expire and have no further value.

In connection with the Convertible Note offering,

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On May 14, 2021, upon closing of its IPO, the

Company remeasured the warrants to fair value using the Modified Black Scholes Option Pricing Model, based on the expected

fair value of the underlying stock with the following assumptions:

Company remeasured the warrants to fair value using the Modified Black Scholes Option Pricing Model, based on the expected fair value

of the underlying stock with the following assumptions:

Schedule of assumptions for warrant liabilities

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Expected dividend rate

As of May 14, 2021, the fair value of the

warrant liabilities was $1,361,347, which includes $4,610 preferred stock warrant, $ 1,324,668

warrants issued to the Convertible Note investors and $32,069 warrants issued to the placement agent.

The increase in fair value

immediately before the IPO was $ 617,593 ,

which was reported in other non-operating expenses for the year ended June 30, 2021.

Upon closing the IPO on May 14, 2021, the Placement

Agent exercised its warrants in full to purchase a total of 24,451

shares of the Company’s Common Stock and, as such, there were no placement agent warrants outstanding as of June 30, 2021.

At the same time, the outstanding warrants held by the Convertible Note investors were reclassed to additional paid in capital as the

terms became fixed upon closing of the IPO.

Through June 30, 2021, none of the private placement investors exercised any

of their warrants.

As of May 14, 2021, the fair value of the warrant

liabilities was $ 1,361,347 , which includes $ 4,610 preferred stock warrant, $ 1,324,668 warrants issued to the Convertible Note investors

and $ 32,069 warrants issued to the placement agent.

The increase in fair value immediately before the IPO was $ 617,593 , which was reported

in other non-operating expenses for the year ended June 30, 2021.

Upon closing the IPO on May 14, 2021, the

Placement Agent exercised its warrants in full to purchase a total of 24,451 shares

of the Company’s Common Stock and, as such, there were no placement agent warrants outstanding as of June 30, 2021.

same time, the outstanding warrants held by the Convertible Note investors were reclassed to additional paid in capital as the terms

became fixed upon closing of the IPO.

Through June 30, 2022, none of the private placement investors exercised any of their

As such, as of June 30, 2022 and 2021, the number of shares issuable under the outstanding warrants was 685,715 , with an

average exercise price of $ 5.00 per share.

Note 18 - Concentration of risk

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the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

As of June 30, 2021 and 2020, $ 6,651,705

and $ 977,635 ,

respectively, were deposited with various major financial institutions in the United States.

Accounts at each institution are

insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

The Company had approximately $ 5.4

million and $ 0.5 million, respectively, in

excess of the FDIC insurance limit, as of June 30, 2021 and 2020.

As of June 30, 2022 and 2020, $ 1,821,947 and $ 6,651,705 ,

respectively, were deposited with various major financial institutions in the United States and PRC.

Accounts at each institution in the

United States are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

The Company had approximately $ 0.5 million

and $ 5.4 million, respectively, in excess of the FDIC insurance limit, as of June 30, 2022 and 2021.

Accounts receivable are typically unsecured and

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for estimated credit losses, and such losses have generally been within expectations.

The business of DHS, the Company’s VIE,

may be impacted by Chinese economic conditions, changes in regulations and laws, and other uncertainties.

Customer and vendor concentration risk

For years ended June 30, 2022 and 2021, Amazon

Vendor and Amazon Seller customers accounted for 80 % and 71 % of the Company's total revenues, respectively.

As of June 30, 2021 and 2020,

accounts receivable from Amazon Vendor and Amazon Seller accounted for 98 % and 95 % of the Company’s total accounts receivable.

For the years ended June 30, 2021 and 2020,

three suppliers accounted for 38 %

and two suppliers accounted for 38.5 %

Vendor and Amazon Seller customers accounted for 88 %

of the Company's total revenues, respectively.

As of June 30, 2022 and 2021, accounts receivable from Amazon Vendor and Amazon Seller

accounted for 9 4%

of the Company’s total accounts receivable.

For the years ended June 30, 2022 and 2021, one

supplier accounted for 18% and three suppliers accounted for 38 %

of the Company's total purchases, respectively.

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of the Company’s total accounts payable.

As of June 30, 2020, accounts payable to three suppliers accounted for 26 %, 13 %

As of June 30, 2021, accounts payable to two suppliers accounted for 11 %

respectively, of the Company’s total accounts payable.

Note 19 - Commitments and contingencies

Lease commitment

The Company has adopted ASC842 since its inception

date, April 11, 2018.

The Company has entered into a lease agreement for office and warehouse space with a lease period from December

1, 2018 until December 31, 2020.

On August 24, 2020, the Company negotiated for new terms to extend the lease.

As a result, the lease

term was amended and extended through December 31, 2023.

Lease commitments

The Company has adopted ASC842 since its

inception date, April 11, 2018.

The Company has entered into a lease agreement for office and warehouse space with a lease period

from December 1, 2018 until December 31, 2020.

On August 24, 2020, the Company negotiated for new terms to extend the lease through

December 21, 2023 at the rate of approximately $42,000 per month.

On September 1, 2020, in addition to the primary

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$29,910 per month through October 31, 2023.

On February 15, 2022, upon completion of the acquisition

of Anivia Limited, the Company assumed an operating lease for offices located in the People’s Republic of China.

On July 28, 2021, the Company entered into a Lease

agreement (the “Lease Agreement”) with 9th & Vineyard, LLC, a Delaware limited liability company (the “Landlord”),

to lease from the Landlord approximately 99,347 square feet of space located at 8798 9th Street, Rancho Cucamonga, California (the “Premises”).

The term of the Lease Agreement was for 62 months, commencing on the date on which the Landlord completes certain prescribed improvements

on the property (the “Rent Commencement Date”).

The Lease Agreement does not provide for an option to renew.

In addition, the Company

will be responsible for its pro rata share of certain costs, including utility costs, insurance and common area costs, as further detailed

in the Lease Agreement.

Following the Rent Commencement Date, the first two months of the Base Rent will be abated.

The lease was not started under the original

agreement as the construction was not completed.

On February 23, 2022, the Company entered into an amended agreement to extend the

lease term to 74 months.

The lease commencement date is February 10, 2022, with rent payments commencing May 11, 2022 and the lease

expiring on May 31, 2028.

The base rental fee is $ 114,249

to $ 140,079 per month

through the expiration date of May 31, 2028.

On May 1, 2022, the Company leased another fulfillment

center in Duarte, California.

The base rental fee is $56,000 to $59,410 per month through April 30, 2025.

Total commitment for the full term of these leases

is $ 12,440,869 , $ 10,453,282

$ 1,819,421 and $ 262,875 of operating lease right-of-use assets and $ 1,901,496 and $ 262,875 of operating lease liabilities

were reflected on the June 30, 2021 and 2020 financial statements, respectively.

and $ 1,819,421 of operating

lease right-of-use assets and $ 10,848,544

and $ 1,901,496 of operating lease liabilities were reflected

on the June 30, 2022 and 2021 financial statements, respectively.

Years Ended June 30, 2022 and 2021:

Lease cost and other information

Schedule of lease cost and other information

Operating lease cost (included in G&A in the Company's statement of operations)

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period is as follows:

Supplemental balance sheet information related to leases

Operating leases

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are as follows:

Maturities of lease liabilities

Schedule of maturities of lease liabilities

For Year ending June 30:

2028 and after

Imputed interest/present value discount

( 1,403,200 )

Present value of lease liabilities

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currently a party to any material legal proceedings, investigation or claims.

However, the Company may, from time to time, be involved

in legal matters arising in the ordinary course of its business.

While the Company is not presently subject to any material legal proceedings,

there can be no assurance that such matters will not arise in the future or that any such matters in which the Company is involved, or

which may arise in the ordinary course of the Company’s business, will not at some point proceed to litigation or that such litigation

will not have a material adverse effect on the business, financial condition or results of operations of the Company.

Pursuant to an engagement agreement, dated

and effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the

Company engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential

underwriter for its initial public offering.

On February 28, 2021, the Company informed Boustead that it was terminating the

Engagement Agreement and any continuing obligations the Company may have had under its terms.

On April 15, 2021, the Company

provided formal written notice to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective

On April 30, 2021, Boustead filed a statement of claim with the Financial Institute Regulatory Authority, or FINRA,

demanding to arbitrate the dispute, and is seeking, among other things, monetary damages against the Company and D.A.

The FINRA arbitration has been scheduled for June 20, 2022.

As the Company may, from time to time, be involved in legal

matters arising in the ordinary course of its business, there can be no assurance that such matters will not arise in the future or that

any such matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not

at some point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition

or results of operations of the Company.

Pursuant to an engagement agreement, dated and

effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the Company

engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential underwriter for its

initial public offering.

On February 28, 2021, the Company informed Boustead that it was terminating the Engagement Agreement and any

continuing obligations the Company may have had under its terms.

On April 15, 2021, the Company provided formal written notice to Boustead

of its termination of the Engagement Agreement and all obligations thereunder, effective immediately.

On April 30, 2021, Boustead filed

a statement of claim with the Financial Institute Regulatory Authority, or FINRA, demanding to arbitrate the dispute, and is seeking,

among other things, monetary damages against the Company and D.A.

Davidson & Co.

(who acted as underwriter in the Company’s

We are presently waiting for the FINRA panel to schedule a hearing date for the matter.

The Company has agreed to indemnify D.A.

Davidson & Co.

other underwriters against any liability or expense they may incur or be subject to arising out of the Boustead dispute.

and the other underwriters against any liability or expense they may incur or be subject to arising out of the Boustead

Additionally, Chenlong Tan, the Company’s Chairman, President and Chief Executive Officer and a beneficial owner more than

of the Company’s Common Stock, has agreed to reimburse the Company for any judgments, fines and amounts paid or actually

incurred by the Company or an indemnitee in connection with such legal action or in connection with any settlement agreement entered

into by the Company or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding of such

reimbursement to come from sales of shares then owned by Mr.

5% of the Company’s Common Stock, has agreed to reimburse the Company for any judgments, fines and amounts paid or actually incurred

by the Company or an indemnitee in connection with such legal action or in connection with any settlement agreement entered into by the

Company or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding of such reimbursement to come

from sales of shares then owned by Mr.

The Company cannot reasonably estimate the amount of potential exposure as of the date of

In an effort to contain or slow the COVID-19 outbreak,

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the COVID-19 outbreak has not had a material adverse impact on the Company’s operations to date, it is difficult to predict all

of the positive or negative impacts the COVID-19 outbreak will have on the Company’s business.

Note 18 - Subsequent events

Lease of Property

On July 28, 2021, the

Company entered into a Lease agreement (the “Lease Agreement”) with 9th & Vineyard, LLC, a Delaware limited liability

company (the “Landlord”), to lease from the Landlord approximately 99,347 square feet of space located at 8798 9th Street,

Rancho Cucamonga, California (the “Premises”).

The Company expects to use the Premises for the storage and distribution of

hydroponic equipment, lighting and garden accessories, home products, pet products, other consumer products and other ancillary uses.

The term of the Lease Agreement is for 62 months, commencing on the date on which the Landlord completes certain proscribed improvements

on the property (the “Rent Commencement Date”).

The Lease Agreement does not provide for an option to renew.

Under the terms of the

Lease Agreement, the Company paid an initial security deposit of $228,498.10 and, upon the Rent Commencement Date (which shall be the

date on which the Premises shall be delivered to the Company following completion of certain improvements to be made by the Landlord,

with such delivery to be on or before November 15, 2021), the Company’s initial monthly base rent (the “Base Rent”)

will be approximately $114,249.05 and will increase on each anniversary of the Rent Commencement Date as follows:

Square Foot of the Premises Per Month

Monthly Base Rent

$1.15 per square foot per month

$1.19 per square foot per month

$1.23 per square foot per month

$1.27 per square foot per month

$1.31 per square foot per month

$1.36 per square foot per month

In addition, the Company

will be responsible for its pro rata share of certain costs, including utility costs, insurance and common area costs, as further detailed

in the Lease Agreement.

Following the Rent Commencement Date, the first two months of the Base Rent will be abated.

of the positive or negative impacts the COVID-19 outbreak may have on the Company’s business in the future.

February 2022, the Russian Federation began conducting military operations against Ukraine, resulting in global economic

uncertainty and increased cost of various commodities.

In response to these types of events, should they directly impact our supply

chain or other operations, we may experience or be exposed to supply chain disruption which could cause us to seek alternate sources

for product supply, or suffer consequences that are unexpected and difficult to mitigate.

Any of these risks might have a materially

adverse impact on our business operations and our financial position or results of operations.

Although, it is difficult to predict

the impact that these factors may have on our business in the future, they did not have a material effect on our results of

operations, financial condition, or liquidity for the year ended June 30, 2022.

- Subsequent events

The Company evaluated subsequent events and transactions

that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued.

material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data