What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-14 compared with 2022-11-14 · 540 added, 538 removed, 978 unchanged (52% of the section changed)

FINANCIAL STATEMENTS

and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of September 30, 2022 and June 30, 2022

September 30,

Condensed Consolidated Balance Sheets

of December 31, 2022 and June 30, 2022

Current assets

8 unchanged sentences

Property and equipment, net

Deferred tax assets

Non-current prepayments

24 unchanged sentences

Stockholders' Equity

Preferred stock, $ 0.001

Preferred stock, $ 0.001 par value;

20,000,000 shares authorized;

shares issued and outstanding at September 30, 2022 and June 30, 2022

0 shares issued and outstanding at December 31, 2022 and 2021

Common stock, $ 0.001 par value;

180,000,000 shares authorized;

29,572,382 and 29,572,382 shares issued and outstanding at September 30, 2022 and June 30, 2022

29,572,382 and 29,572,382 shares issued and outstanding at December 31, 2022 and June 30, 2022

Additional paid in capital

(Accumulated deficit) Retained earnings

(Accumulated deficits) Retained earnings

( 4,209,867 )

Non-controlling interest

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income (loss)

Total liabilities and equity

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended September 30, 2022 and 2021

For the Three Months Ended September 30,

Unaudited Condensed Consolidated Statements of Operations

For the Three and Six Months Ended December 31, 2022 and 2021

For the Three Months Ended

For the Six Months Ended

TOTAL REVENUES

7 unchanged sentences

( 4,082,566 )

( 8,675,872 )

OTHER INCOME (EXPENSE)

2 unchanged sentences

Loss on equity method investment

Other non-operating income (expense)

Other non-operating income

Total other expenses, net

1 unchanged sentence

( 4,341,023 )

( 8,974,000 )

PROVISION FOR INCOME TAX (BENEFIT) EXPENSE

( 1,047,749 )

( 1,495,545 )

NET (LOSS) INCOME

( 3,293,274 )

( 7,478,455 )

Non-controlling interest

1 unchanged sentence

$ ( 3,290,439 )

$ ( 7,472,815 )

OTHER COMPREHENSIVE LOSS

2 unchanged sentences

$ ( 3,243,290 )

$ ( 7,537,141 )

WEIGHTED AVERAGE NUMBER OF COMMON STOCK

(LOSSES) EARNINGS PER SHARE

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

and Subsidiaries

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

For the Three Months Ended September 30, 2022 and 2021

Retained Earnings

For the Three and Six Months Ended December 31, 2022 and 2021

Common Stock *

Retained Earnings (Accumulated

Non-controlling

Accumulated Other

Comprehensive

Balance, June 30, 2021

Restricted stock units vested

Balance, September 30, 2021, unaudited

Accumulated other Comprehensive income

Balance, June 30, 2022

6 unchanged sentences

( 3,293,274 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2022, unaudited

$ ( 4,209,867 )

Balance, June 30, 2021

Restricted stock units vested

Balance, September 30, 2021, unaudited

Restricted shares issued for vested RSUs

Restricted stock units vested

Balance, December 31, 2021, unaudited

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2022 and 2021

For the Three Months Ended September 30,

For the Six Months Ended December 31, 2022 and 2021

For the Six Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

$ ( 7,478,455 )

Adjustments to reconcile net income to cash provided by (used in) operating

Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:

Depreciation and amortization expense

Inventory reserve

Credit loss reserve

Loss on equity method investment

7 unchanged sentences

( 6,898,717 )

Deferred tax assets/liabilities

( 1,788,694 )

Deferred tax liabilities

Prepayments and other current assets

14 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in receivable from related parties

Proceeds from related parties

Payments to related parties

Proceeds from short-term loans

Payments of financing fees

Payment on investment payable

Payments on short-term loans

2 unchanged sentences

Payments on long-term loans

Net cash provided by (used in) financing activities

( 6,200,000 )

Net cash (used in) provided by financing activities

( 5,540,436 )

EFFECT OF EXCHANGE RATE ON CASH

6 unchanged sentences

Cash paid for interest

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

Notes to Unaudited Condensed Consolidated Financial

As of September 30, 2022 and June 30, 2022

and for the Three Months Ended September 30, 2022 and 2021

As of December 31, 2022 and June 30, 2022 and for

the Three and Six Months Ended December 31, 2022 and 2021

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, home

goods and other products and accessories mainly in the North America.

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

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

The Company is a U.S.-based online seller and

supplier of consumer home, garden and pet products.

Effective on March 1, 2020, as amended and restated

6 unchanged sentences

The Company also agreed to fund E Marketing for operational cash flow needs and bear the risk

of E Marketing’s losses from operations and E Marketing agrees that iPower has rights to E Marketing’s net profits, if any.

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

1 unchanged sentence

E Marketing was considered a variable interest entity (“VIE”).

On May 18, 2021, the Company acquired 100% equity ownership of E Marketing.

As a result, E Marketing has become the Company’s wholly

owned subsidiary.

On May 18, 2021, the Company acquired 100% of the equity ownership of E Marketing.

As a result, E Marketing has become the Company’s

wholly owned subsidiary.

On September 4, 2020, the Company entered into an

9 unchanged sentences

GPM was considered a variable interest entity (“VIE”).

On May 18, 2021, the Company acquired 100 % equity ownership of GPM.

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

On May 18, 2021, the Company acquired 100% of the equity ownership of GPM.

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

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

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

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

such products.

4 unchanged sentences

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.

for the principal purpose of providing a social media platform, with 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” or “VIE”)

details 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.

Anivia 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” or “VIE”)

and located in Shenzhen, China.

21 unchanged sentences

should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the

Annual Report for the year ended June 30, 2022, which are included in Form 10-K filed on September 28, 2022.

Company’s Annual Report for the year ended June 30, 2022, which are included in the Form 10-K filed with the SEC on September

Principles of Consolidation

24 unchanged sentences

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.

company which has opted out of utilizing the emerging growth company reduced reporting requirements.

Use of estimates and assumptions

23 unchanged sentences

The balance sheet amounts of the VIE, with the exception

of equity, on September 30, 2022, were translated at 7.116 RMB to $1.00.

of equity, on December 31, 2022, were translated at 6.8979 RMB to $1.00.

The equity accounts were stated at their historical rates.

average translation rates applied to statements of operations and comprehensive income (loss) accounts for the three months ended September

average translation rates applied to statements of operations and comprehensive income (loss) accounts for the six months ended December

31, 2022 was 6.978613 RMB to $1.00.

5 unchanged sentences

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 , 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).

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.

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).

To date, the Company has not experienced any losses with

respect to cash.

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

Accounts receivable, net

36 unchanged sentences

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

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 asset.

Business Combination

On February 15, 2022, the Company acquired 100 %

of the ordinary shares of Anivia Limited (“Anivia”) and its subsidiaries, including its variable interest entity (“VIE”),

On February 15, 2022, the Company acquired 100 % of

the ordinary shares of Anivia Limited (“Anivia”) and its subsidiaries, including its variable interest entity (“VIE”),

Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the laws of the People’s Republic of China (“DHS”).

10 unchanged sentences

Variable interest entities

On February 15, 2022,

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

to the terms of the Agreements for the Company’s acquisition of Anivia and its subsidiaries, including DHS, 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

On February 15, 2022, the

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

the terms of the Agreements for the Company’s acquisition of Anivia and its subsidiaries, including DHS, 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.

8 unchanged sentences

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

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.

However, if the carrying

amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited

to the total amount of goodwill allocated to that reporting unit.

The Company engaged an independent third-party valuation firm in August

2022 to conduct an evaluation of goodwill impairment for the Company as a whole at the consolidated reporting unit level as of June 30,

2022, which evaluation was conducted prior to the Company’s filing of its Annual Report on Form 10-K.

Due to the decrease in the

Company’s share price subsequent to the filing of the Form 10-K and the net loss incurred during the quarter ended September 30,

2022, the Company engaged the same valuation firm to review goodwill for impairment.

Based on this review , the Company concluded an

impairment loss of $ 3,060,034 as

of September 30, 2022 was required.

The impairment amount was determined based on the discounted cash flows with the revised projections

reflecting the increase in freight and storage costs in the current interim quarter.

The Company also considered the Market Capital Method,

which is an alternative market approach, suggested the Company’s goodwill is partially impaired.

As of September 30, 2022, the

remaining goodwill balance amounted to $ 3,034,110 .

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.

However, if the carrying amount of the reporting

unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill

allocated to that reporting unit.

The Company engaged an independent third-party valuation firm in August 2022 to conduct an evaluation

of goodwill impairment for the Company as a whole at the consolidated reporting unit level as of June 30, 2022, which evaluation was conducted

prior to the Company’s filing of its Annual Report on Form 10-K.

Due to the decrease in the Company’s share price subsequent

to the filing of the Form 10-K and the net loss incurred during the quarter ended September 30, 2022, the Company engaged the same valuation

firm to review goodwill for impairment.

Based on this review, the Company concluded an impairment loss of $ 3,060,034 as of September

30, 2022 was required.

The impairment amount was determined based on the discounted cash flows with the revised projections reflecting

the increase in freight and storage costs in the current interim quarter.

The Company also considered the Market Capital Method, which

is an alternative market approach, suggested the Company’s goodwill is partially impaired.

During the three months ended December 31, 2022,

the Company performed a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and

noted no goodwill impairment.

As of December 31, 2022, the remaining goodwill balance amounted to $ 3,034,110 .

Intangible Assets, net

Finite life intangible assets at September 30,

Finite life intangible assets at December 31, 2022

included a covenant not to compete, supplier relationships, 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, 2022.

Intangible assets

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

assets are recorded at the estimated fair value of these items at the date of acquisition, February 15, 2022.

Intangible assets are amortized

on a straight-line basis over their estimated useful life as followings:

Schedule of estimated useful life

4 unchanged sentences

be recoverable.

The assessment of possible impairment on assets group level is based on the ability to recover the carrying value of the

The assessment of possible impairment on asset group level 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.

4 unchanged sentences

as well as other fair value determinations.

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

As of December 31, 2022, there were no indicators of impairment.

Fair values of financial instruments

16 unchanged sentences

Discount rate

As of September 30,

2022, the outstanding balance of the Purchase Note was $ 3,700,588 ,

including a premium of $ 69,338

and $ 131,250

of accrued interest.

As of December 31, 2022,

the outstanding balance of the Purchase Note was $ 2,858,947 , including a premium of $ 56,759 and $ 177,188 of accrued interest.

For other financial instruments to be reported at

17 unchanged sentences

We measure certain non-financial assets on a non-recurring basis, including goodwill.

a result of those measurements, we recognized an impairment charge of $3.1 million during the three months ended September 30, 2022,

a result of those measurements, we recognized an impairment charge of $0 and $3.1 million during the three and six months ended December

31, 2022, as follows:

Schedule of fair value on nonrecurring basis

1 unchanged sentence

Total Impairment Loss

Goodwill, with a total carrying value of $6.1

million was written down to its fair value of $3.0 million, resulting in an impairment charge of $3,060,034, which was recorded in earnings

for the three months ended September 30, 2022.

The fair value of goodwill was determined based on the discounted cash flow method, which

is an income approach, which required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate

that would be used by a market participant, projections of revenues and cash flows with the revised projections reflecting the increase

in freight and storage costs in the current interim quarter, among others.

Goodwill, with a total carrying value of $6.1 million

was written down to its fair value of $3.0 million, resulting in an impairment charge of $3,060,034, which was recorded in earnings for

the six months ended December 31, 2022.

The fair value of goodwill was determined based on the discounted cash flow method, which is an

income approach, which required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that

would be used by a market participant, projections of revenues and cash flows with the revised projections reflecting the increase in

freight and storage costs in the current interim quarter, among others.

Revenue recognition

30 unchanged sentences

Advertising costs are expensed as incurred.

advertising and promotional costs included in selling and fulfillment expenses for three months ended September 30, 2022 and 2021 were

$ 1,166,349 and $ 633,416 , respectively.

advertising and promotional costs included in selling and fulfillment expenses for the three and six months ended December 31, 2022 and

2021 were as following.

Schedule of advertising costs

Three Months Ended December 31,

Six Months Ended December 31,

Advertising and promotion

Cost of revenue

4 unchanged sentences

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.

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.

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

policy is to include as a part of inventory and costs 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

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

4 unchanged sentences

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 borrowings.

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 borrowings.

Segment reporting

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 three months ended September 30, 2022, sales through Amazon to Canada and other foreign countries were

approximately 9.8 %

of the Company’s total sales.

Sales of hydroponic products, including ventilation and grow light systems, were approximately 53 %

of the Company’s total sales and the remaining 47 %

consisted of general gardening, home goods and other products and accessories.

As of September 30, 2022, there were approximately

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.

The Company follows ASC 280, Segment Reporting.

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.

For the six months ended

December 31, 2022, sales through Amazon to Canada and other foreign countries were approximately 13.5 % of the Company’s total sales.

Sales of hydroponic products, including ventilation and grow light systems, were approximately 47 % of the Company’s total sales

and the remaining 53 % consisted of general gardening, home goods and other products and accessories.

As of December 31, 2022, there were

approximately $ 3.0 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

15 unchanged sentences

The Company applies ASC No.

718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees

upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense

over the requisite service period, with a corresponding addition to equity.

Under this method, compensation cost related to employee share

options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period

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

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.

718, “Compensation-Stock

Compensation,” which requires that share-based payment transactions with employees and nonemployees upon adoption of ASU 2018-07,

be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service

period, with a corresponding addition to equity.

Under this method, compensation cost related to employee share options or similar equity

instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee

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

In addition to requisite service period,

the Company also evaluates the performance condition and market condition under ASC 718-10-20.

For an award 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 asset

and liability method.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between

the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases.

Deferred tax assets and liabilities

are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected

to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the

period that includes the enactment date.

Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount

expected to be realized.

The Company accounts for income taxes under the

asset and liability method.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences

between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases.

Deferred tax assets

and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences

are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income

in the period that includes the enactment date.

Deferred income tax assets are recognized only to the extent that management determines

that it is more-likely-than-not that the deferred income tax assets will be realized.

Valuation allowances are recorded, when necessary,

to reduce deferred tax assets to the amount expected to be realized.

As a result of the implementation of certain provisions

45 unchanged sentences

of this standard to have a material impact on the consolidated financial statements.

In March 2020 and January 2021, the FASB

issued ASU No.

In March 2020 and January 2021, the FASB issued ASU

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial

Reporting and ASU No.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No.

2021-01, Reference Rate Reform (Topic 848):

Scope, respectively (collectively, “Topic 848”).

Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions

that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because

of reference rate reform.

The expedients and exceptions provided by Topic 848 are effective for all entities as of March 12, 2020

through December 31, 2022.

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

consolidated financial statements.

Topic 848 provides optional expedients

and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered

Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

The expedients and

exceptions provided by Topic 848 are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company does not expect

the adoption of this standard to have a material impact on the Company's consolidated financial statements.

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

9 unchanged sentences

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.

The 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

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.

The 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.

5 unchanged sentences

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.

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

7 unchanged sentences

The adoption of this standard did not have 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

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 Company has adopted ASU 2017-04.

See disclosures

above on Goodwill for further details.

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.

ASU 2017-04 became effective for

accelerated filing companies for annual periods or any interim goodwill impairment tests in fiscal years beginning after December

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, 2022.

adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

Company has adopted ASU 2017-04.

See disclosures above on Goodwill for further details.

The Company does not believe other recently issued

19 unchanged sentences

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.

(ii) TPA received 1,200 Equity Units in exchange for (a) $1,200 and contributing the TPA IP License, (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

35 unchanged sentences

equity ownership and control over operations.

For the three months ended September 30, 2022 and 2021, the impact of GSM’s activities

were immaterial to the Company’s unaudited condensed consolidated financial statements.

For the three and six months ended December 31, 2022 and 2021, the impact of GSM’s

activities were immaterial to the Company’s unaudited condensed consolidated financial statements.

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

36 unchanged sentences

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 of the Company’s common stock (subject to a lock-up period of 180 days and insider trading rules), and (iii)

owed an additional $ 1,500,000

in cash, which was to be paid after closing.

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 of the Company’s common stock (subject to a lock-up period of 180 days and

insider trading rules), and (iii) owed an additional $ 1,500,000 in cash, which was to be paid after closing.

JP Morgan Chase Bank, the

3 unchanged sentences

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

On October 7, 2022, in

conjunction with the Company’s entry into the Second Amendment to the Credit Agreement, the Company’s promissory note holder,

White Cherry Limited, an exempted company incorporated under the laws of the British Virgin Islands (“White Cherry”), entered

into an amendment (the “Amendment”) to the subordination agreement, originally dated March 9, 2022 (the “Subordination

The Amendment to the Subordination Agreement was amended solely for purposes of adjusting the definition of payment

conditions under Section 2 of the Subordination Agreement such that “payment conditions” shall be deemed satisfied in connection

with a permitted payment if (a) no event of default has occurred under the credit agreement and is continuing and (b) the Company shall

have Excess Availability in the 30 days prior to the payment (as defined in the Second Amendment to the Credit Agreement) of no less than

On October 7, 2022, in conjunction

with the Company’s entry into the Second Amendment to the Credit Agreement, the Company’s promissory note holder, White Cherry

Limited, an exempted company incorporated under the laws of the British Virgin Islands (“White Cherry”), entered into an amendment

(the “Amendment”) to the subordination agreement, originally dated March 9, 2022 (the “Subordination Agreement”).

The Amendment to the Subordination Agreement was amended solely for purposes of adjusting the definition of payment conditions under Section

2 of the Subordination Agreement such that “payment conditions” shall be deemed satisfied in connection with a permitted payment

if (a) no event of default has occurred under the credit agreement and is continuing and (b) the Company shall have Excess Availability

in the 30 days prior to the payment (as defined in the Second Amendment to the Credit Agreement) of no less than $7,500,000.

In addition, in conjunction

22 unchanged sentences

for any direct or indirect losses suffered by the Company as a result thereof.

The Company recognized approximately $ 6.1

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

is 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 Company recognized approximately $ 6.1 million of goodwill

in the transaction, which was primarily due to the subsumed assembled workforce intangible assets.

Goodwill is 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

11 unchanged sentences

Deferred tax liabilities

( 1,389,113 )

Current liabilities

( 1,143,076 )

Lease liability

Total purchase consideration

In October 2022,

the $1.5 million cash portion of the consideration, which was presented as investment payable, had been fully paid off.

7 unchanged sentences

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

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

As of December 31, 2022 and 2021, there was no pledge

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

5 unchanged sentences

Carrying amount of VIE assets and liabilities

September 30,

Prepayments and other receivables

7 unchanged sentences

Other payables and accrued liabilities

The operating results of the VIE were as follows for

the three months ended September 30, 2022:

The operating results of the VIE were as follows

for the three and six months ended December 31, 2022:

Operating results of the VIE

September 30, 2022

Net loss after elimination of intercompany transactions

For the three months ended September 30, 2022, the VIE contributed approximately

$ 3.2 million of revenue and $ 0.6 million of net loss before elimination.

For the three months ended December 31, 2022, the VIE contributed

approximately $ 1.1 million of revenue and $ 0.1 million of net loss before elimination.

For the six months ended December 31, 2022, the

VIE contributed approximately $ 4.3 million of revenue and $ 0.6 million of net loss before elimination.

Note 6 – Accounts receivable, net

2 unchanged sentences

Schedule of accounts receivable

September 30,

Accounts receivable

2 unchanged sentences

Note 7 – Inventories, net

As of September 30, 2022 and June 30, 2022, inventories consisted

of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 30,313,684 and $ 30,433,766 , respectively.

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

was $ 394,998 and $ 320,000 , respectively.

As of December 31, 2022 and June 30, 2022, inventories

consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 23,258,161 and $ 30,433,766 , respectively.

As of December 31, 2022 and June 30, 2022, allowance

for obsolescence was $ 394,998 and $ 320,000 , respectively.

Note 8 – Prepayments and other current assets

As of September 30, 2022 and June 30, 2022, prepayments and other current assets consisted

of the following:

As of December 31, 2022 and June 30, 2022, prepayments and other current

assets consisted of the following:

Schedule of prepayments and other current assets

September 30,

Advance to suppliers

2 unchanged sentences

Other receivables consisted of delivery fees of $ 118,170

and $ 56,884 and receivables from one and two unrelated parties for their use of the Company’s courier accounts at September 30,

2022 and June 30, 2022.

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

and $ 56,884 from two unrelated parties for their use of the Company’s courier accounts at December 31, 2022 and June 30, 2022.

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

Note 9 – Non-current prepayments

4 unchanged sentences

In addition, there was a $ 59,375 down payment on a four-year car lease.

As of September 30, 2022 and June 30, 2022, total non-current

As of December 31, 2022 and June 30, 2022, total non-current

prepayments were $ 709,790 and $ 925,624 , respectively.

For the three months ended September 30, 2022 and 2021, the Company recorded amortization

expenses of $ 107,917 and $ 107,917 , respectively.

For the three and six months ended December 31, 2022, the Company recorded $ 107,917

and $ 215,834 amortization of prepayments in the operating expenses, respectively.

For the three and six months ended December 31, 2021,

the Company recorded $ 107,917 and $ 215,834 amortization of prepayments in the operating expenses, respectively.

Note 10 – Intangible assets, net

As of September 30, 2022, intangible assets, net,

consisted of the following:

As of December 31, 2022, intangible assets, net, consisted

of the following:

Schedule of intangible assets

September 30,

December 31 ,

Covenant not to compete

1 unchanged sentence

Accumulated amortization

The intangible assets were acquired on

February 15, 2022 through the acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at

September 30, 2022 was approximately 8.07

years, and the amortization expense for the three months ended September 30, 2022 was $ 162,343 .

At September 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

The intangible assets were acquired on February 15,

2022 through the acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at December 31, 2022 was

approximately 7.82 years, and the amortization expense for the three and six months ended December 31, 2022 was $ 162,343 and $ 324,686 ,

respectively.

At December 31, 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:

3 unchanged sentences

Note 11 – Other payables and accrued liabilities

As of September 30, 2022 and June 30, 2022, other payables and accrued

liabilities consisted of the following:

As of December 31, 2022 and June 30, 2022, other payables and accrued liabilities

consisted of the following:

Schedule of accounts payable and accrued liabilities

September 30,

Accrued payables for inventory in transit

7 unchanged sentences

inventories from a supplier which had a payment term of 90 days with a 2% premium on the purchase price.

This supplier purchased

the inventory from DHS with payments made upon delivery.

As of September 30, 2022, the Company included an outstanding amount of

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

date of this report, the amount had been paid off.

As of December 31, 2022, the outstanding balance was paid off.

Note 12 – Loans payable

Short-term loans

Revolving credit facility

7 unchanged sentences

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.

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 receivable 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 September 30, 2022 and June 30, 2022, the outstanding

As of December 31, 2022 and June 30, 2022, the outstanding

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

11 unchanged sentences

expense of $ 39,237 .

As of September 30, 2022 and June 30, 2022, the outstanding balance of the SBA Note was $ 0 and $ 0 , respectively.

As of December 31, 2022 and June 30, 2022, the outstanding balance of the SBA Note was $ 0 and $ 0 , respectively.

Asset-based revolving loan

9 unchanged sentences

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.

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

in 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 three months ended September 30,

2022, the Company recorded the following as interest expense:

of amortization of debt discount and $ 163,017

of interest expense and credit utilization fees.

The financing fees are recorded as debt

discount and are to be amortized over three years as financing expenses, the term of the ABL.

Below is a summary of the interest expense recorded

for the three months ended September 30, 2022 and 2021:

for the three and six months ended December 31, 2022 and 2021:

Schedule of interest on loans payable

Three Months Ended December 31,

Six Months Ended December 31,

Accrued interest

1 unchanged sentence

Amortization of debt discount

As of September 30, 2022, the outstanding

amount of the long-term revolving loan payable, net of debt discount, was $ 15,192,660 ,

As of December 31, 2022, the outstanding amount

of the revolving loan payable, net of debt discount and including interest payable of $ 377,133 ,

was $ 9,334,819 .

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 .

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 .

On October 7, 2022,

the Company entered into a second amendment to the credit agreement and consent (the “Second Amendment to the Credit Agreement”),

originally dated November 12, 2021, as amended, with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”).

The Company entered in the Second Amendment to the Credit Agreement primarily for the purpose of changing the interest rate repayment

calculations from LIBOR to the Secured Overnight Financing Rate, or SOFR, which adjustment had originally been anticipated under the

terms of the original Credit Agreement.

In addition, two of the negative covenants set forth in the original credit agreement were amended

in order to (i) adjust the definition of “Covenant Testing Trigger Period” to increase the required cash availability from

$3,000,000 to $4,000,000, or 10% of the aggregate revolving commitment for the preceding 30 days, and (ii) require that the Company will

not and will not permit any of its subsidiaries, after reasonable due diligence and due inquiry, to knowingly sell their products, inventory

or services directly to any commercial businesses that grow or cultivate cannabis;

it being acknowledged, however, that the Company does

not generally conduct due diligence on its individual retail customers.

On November 11, 2022, the Company and JPMorgan entered into a default

waiver and consent agreement (the “Waiver Letter”) pursuant to which the parties recognized that the Company was in default

on its failure to satisfy the minimum Excess Availability requirement of $7,500,000, as defined in the Credit Agreement, and deliver a

certificate to JPMorgan accurately reflecting the Excess Availability (together, the “Existing Defaults”).

Under the terms

of the Waiver Letter, JPMorgan agreed to waive the right to enforce an event of default based on the aforementioned Existing Defaults.

During the period from January 1, 2023 to the date of this report,

the Company made a total payment of $2,400,000 to pay down the outstanding balance of the long-term revolving loan payable.

On October 7, 2022, the Company

entered into a second amendment to the credit agreement and consent (the “Second Amendment to the Credit Agreement”), originally

dated November 12, 2021, as amended, with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”).

Company entered into the Second Amendment to the Credit Agreement primarily for the purpose of changing the interest rate repayment calculations

from LIBOR to the Secured Overnight Financing Rate, or SOFR, which adjustment had originally been anticipated under the terms of the original

Credit Agreement.

In addition, two of the negative covenants set forth in the original credit agreement were amended in order to (i) adjust

the definition of “Covenant Testing Trigger Period” to increase the required cash availability from $3,000,000 to $4,000,000,

or 10% of the aggregate revolving commitment for the preceding 30 days, and (ii) require that the Company will not and will not permit

any of its subsidiaries, after reasonable due diligence and due inquiry, to knowingly sell their products, inventory or services directly

to any commercial businesses that grow or cultivate cannabis;

it being acknowledged, however, that the Company does not generally conduct

due diligence on its individual retail customers.

On November 11, 2022, the

Company and JPMorgan entered into a default waiver and consent agreement (the “Waiver Letter”) pursuant to which the parties

recognized that the Company was in default on its failure to satisfy the minimum Excess Availability requirement of $7,500,000, as defined

in the Credit Agreement, and deliver a certificate to JPMorgan accurately reflecting the Excess Availability (together, the “Existing

Under the terms of the Waiver Letter, JPMorgan agreed to waive the right to enforce an event of default based on the

aforementioned Existing Defaults.

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 three months ended September 30, 2022, the Company recorded accrued interest of $ 52,500

and amortization of note premium of $ 12,682 .

As of September 30, 2022, including $ 131,250

of accrued interest and $ 69,338

of unamortized premium, the total outstanding balance of the Purchase Note was $ 3,700,588 ,

which was presented on the consolidated balance sheet as a current portion of $ 2,806,565

and a non-current portion of $ 894,023 .

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.

In October 2022, the Company paid the first installment of $875,000.

three months ended December 31, 2022, the Company recorded accrued interest of $ 45,938 and amortization of note premium of $ 12,579 .

the six months ended December 31, 2022, the Company recorded accrued interest of $ 98,438 and amortization of note premium of $ 25,261 .

As of December 31, 2022, including $ 177,188 of accrued interest and $ 56,759 of unamortized premium, the total outstanding balance of the

Purchase Note was $ 2,858,947 , which is presented on the consolidated balance sheet as a current portion of $ 1,977,502 and a non-current

portion of $ 881,445 .

Note 13 - Related party transactions

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 three months ended September 30, 2022, the Company recorded a sublease fee of $ 247,500

Starting March 1, 2022, the Company subleases upto

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 three and six months ended December 31, 2022, the Company recorded a sublease fee of $ 140,000 and $ 387,750

as other non-operating income.

As of September 30, 2022 and June 30, 2022, other receivables due from Box Harmony was $ 134,262

and $ 51,762 ,

As of December 31, 2022 and June 30, 2022, other receivables due from Box Harmony was $ 39,853 and $ 51,762 ,

respectively.

1 unchanged sentence

(RMB618,000) of advance from shareholders of DHS through the acquisition of Anivia.

This amount was for capital injection pending

capital inspection by the local government in accordance with the PRC rules.

As of September 30, 2022 and June 30, 2022, the balance

of advance from shareholders was $ 86,847

and $ 92,246 ,

respectively.

– Income taxes

For the three months ended September 30,

2022, as a result of the Company’s inability to establish a reliable estimate for annual effective tax rate, the

Company calculated income tax expense using the actual effective tax rate year to date, as opposed to the estimated annual effective

tax rate, as provided in Accounting Standards Codification (ASC) 740-270-30-18.

The income tax provision for the three months

ended September 30, 2022 and 2021 consisted of the following:

This amount was for capital injection pending capital

inspection by the local government in accordance with the PRC rules.

As of December 31, 2022 and June 30, 2022, the balance of advance

from shareholders was $ 89,592 and $ 92,246 , respectively.

Note 14 – Income taxes

For the three and six months ended December 31, 2022,

as a result of the Company’s inability to establish a reliable estimate for annual effective tax rate, the Company calculated income

tax expense using the actual effective tax rate year to date, as opposed to the estimated annual effective tax rate, as provided in Accounting

Standards Codification (ASC) 740-270-30-18.

The income tax provision for the three and six months

ended December 31, 2022 and 2021 consisted of the following:

Schedule of provision for income tax expense

September 30, 2022

September 30, 2021

Three Months Ended December 31,

Six Months Ended December 31,

Total current income tax provision

( 1,090,318 )

( 1,259,785 )

Total deferred taxes

( 1,328,407 )

( 1,786,125 )

Total provision for income taxes

$ ( 1,047,749 )

$ ( 1,495,545 )

The Company is subject to U.S.

6 unchanged sentences

Schedule of reconciliation of effective income tax rate

September 30, 2022

September 30, 2021

Three Months Ended December 31,

Six Months Ended December 31,

Statutory tax rate

State (net of federal benefit)

Foreign tax rate difference

2 unchanged sentences

Effective tax rate

As of September 30, 2022, prepaid income taxes

to US tax authorities and income tax payable to Chinese tax authorities was $ 214,818

and $ 282,029 ,

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 December 31, 2022, prepaid income taxes to US

tax authorities and income tax payable to Chinese tax authorities was $ 151,506 and $ 290,946 , 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.

The tax effects of temporary differences which give rise to significant

1 unchanged sentence

Schedule of deferred taxes

September 30,

Deferred tax assets

8 unchanged sentences

Intangible assets acquired

( 1,280,127 )

( 1,323,720 )

Total deferred tax liabilities

( 1,398,703 )

( 1,409,974 )

Net deferred tax liabilities

$ ( 271,040 )

$ ( 939,115 )

15 – (Loss) Earnings per share

The following table sets forth the computation of basic and diluted

Net deferred tax assets

(liabilities)

Note 15 – (Losses) Earnings per share

The following table sets forth the computation of basic and diluted (losses)

earnings per share for the periods presented:

Schedule of computation of earnings per share

For the three months ended

September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Net (Loss) Income

$ ( 3,290,439 )

$ ( 7,472,815 )

Weighted-average shares used in computing basic and diluted earnings per share*

(Loss) Earnings per share - Basic

(Losses) Earnings per share:

Due to the ani-dilutive effect, the computation

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

ended September 30, 2022.

* For the three months ended September 30, 2021, the

computation of basic and diluted EPS included the vested RSUs.

* The computation of diluted EPS included the

underlying 10,892 shares of warrants calculated using treasury method for the three months ended September 30, 2021.

* For the three months ended September 30, 2022

and 2021, 166,176 and 40,019 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 when the shares are fully vested.

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

six months ended December 31, 2022.

The computation of diluted EPS did not include the underlying shares of warrants calculated using treasury method for the three and six months ended December 31, 2021 as the exercise price was greater than the market price of the shares.

For the three and six months ended December 31,

2022, 154,261 vested but unissued 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 (losses) per share when the shares are fully

For the three and six months ended December 31, 2021, 10,886 vested but unissued shares of restricted stock units under the Amended and Restated 2020 Equity Incentive Plan are considered issued shares and therefore are included in the computation of basic earnings (losses) per share as of grant date when the shares are fully vested.

Impact of nonvested RSU is immaterial to the EPS.

Note 16 – Equity

7 unchanged sentences

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

As of September 30, 2022 and June 30, 2022, there

were 29,572,382 and 29,572,382 shares of Common Stock issued and outstanding, respectively.

As of December 31, 2022 and June 30, 2022, there were

29,572,382 and 29,572,382 shares of Common Stock issued and outstanding, respectively.

Preferred Stock

The Company’s Preferred Stock was

authorized as “blank check” series of Preferred Stock, providing that the Board of Directors is expressly authorized,

subject to limitations prescribed by law, by resolution or resolutions and by filing a certificate pursuant to the applicable law of

the State of Nevada, to provide, out of the authorized but unissued shares of Preferred Stock, for series of Preferred Stock, and to

establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences

and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

As of September 30, 2022

and June 30, 2022, respectively, there were no shares of Preferred Stock issued and outstanding.

The Company’s Preferred Stock was authorized

as “blank check” series of Preferred Stock, providing that the Board of Directors is expressly authorized, subject to limitations

prescribed by law, by resolution or resolutions and by filing a certificate pursuant to the applicable law of the State of Nevada, to

provide, out of the authorized but unissued shares of Preferred Stock, for series of Preferred Stock, and to establish from time to time

the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each

such series and the qualifications, limitations or restrictions thereof.

As of December 31, 2022 and June 30, 2022, respectively, there

were no shares of Preferred Stock issued and outstanding.

Equity Incentive Plan

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

Directors 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 “Plan”).

The Plan allows for the issuance of up to 5,000,000

shares of Common Stock, whether in the form of options, restricted stock, restricted stock units, stock appreciation rights, performance

units, performance shares and other stock or cash awards.

The general purpose of the Plan is to provide an incentive to the Company’s

directors, officers, employees, consultants and advisors by enabling them to share in the future growth of the Company’s business.

On November 16, 2021, we filed a registration statement on Form S-8 registering all shares issuable under the Plan.

The Plan allows for the issuance of up to 5,000,000 shares of Common Stock, whether in the form of options, restricted stock, restricted

stock units, stock appreciation rights, performance units, performance shares and other stock or cash awards.

The general purpose of the

Plan is to provide an incentive to the Company’s directors, officers, employees, consultants and advisors by enabling them to share

in the future growth of the Company’s business.

On November 16, 2021, the Company filed a registration statement on Form S-8 registering

all shares issuable under the Plan.

Restricted Stock Unit

Following completion of the IPO on May 11,

2021, pursuant to their letter agreements, the Company awarded a total of 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.

On November 16, 2021, we filed a registration statement on Form S-8 registering all shares

issuable under the Plan.

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.

The fair value of RSUs issued subsequent to IPO date was based on the stock price on

each grant date.

During the three months ended September 30, 2022, the Company granted an additional 29,806 shares

For the three months ended September 30, 2022 and 2021, the Company recorded $ 27,500 and

stock-based compensation expense.

As of September 30, 2022 and June 30, 2022, the unvested number of RSUs was 3,304 and 6,608 and

the unamortized expense was $ 7,500 and

Following completion of the IPO on May 11, 2021, pursuant

to their letter agreements, the Company awarded a total of 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.

On November 16, 2021, we filed a registration

statement on Form S-8 registering all shares issuable under the Plan.

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.

The fair value of RSUs issued subsequent to IPO

date was based on the stock price on each grant date.

During the six months ended December 31, 2022, the Company granted an additional

79,406 shares of RSUs.

For the three and six months ended December 31, 2022, the Company recorded $ 21,884 and $ 49,384 of stock-based compensation

For the three and six months ended December 31, 2021, the Company recorded $ 54,435 and $ 157,489 of stock-based compensation expense.

As of December 31, 2022 and June 30, 2022, the unvested number of RSUs was 24,800 and 6,608 and the unamortized expense was $ 14,384 and

$ 15,000 , respectively.

5 unchanged sentences

RSUs forfeited

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

RSUs granted, but not vested, at December 31, 2022

_____________________

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

As of September 30, 2022, of the 166,176 vested RSUs,

As of December 31, 2022, of the 194,280 vested RSUs,

40,019 shares of Common Stock were issued, and 154,261 shares were to be issued upon setup of the plan administration account.

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 stock option grants (the “Option Grants”) in the amount of (i) 3,000,000

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 stock option grants (the “Option Grants”) in the amount of (i) 3,000,000

shares to Chenlong Tan, CEO and (ii) 330,000

1 unchanged sentence

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

designated operational milestones (performance conditions) and market conditions (together, the “Designated Milestones”),

which are set forth in six vesting tranches, assuming continued employment of the recipients through the date on which such Designated

Milestones are achieved.

Each of the six vesting tranches for 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.

per share , a contractual term of 10 years and consist of six vesting tranches with a vesting schedule based entirely on the

attainment of both designated operational milestones (performance conditions) and market conditions (together, the “Designated

Milestones”), assuming continued employment of the recipients through the date on

which such Designated Milestones are achieved.

Each of the six vesting tranches for 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 September 30, 2022 was as follows:

as of December 31, 2022 was as follows:

Revenue in Fiscal Year

31 unchanged sentences

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

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

For the three months ended September 30, 2022 and 2021, the Company recorded $ 110,382 and $ 0 of stock-based compensation expense related

As of December 31, 2022, none of the options had vested.

For the three and six months ended December 31, 2022, the Company recorded $ 110,382 and $ 220,764 of stock-based compensation expense related

to the Option Grants.

Unrecognized compensation cost related to tranches probable of vesting is approximately $2.1 million and will

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

For the three and six months ended December 31, 2021, the Company did no t record any stock-based compensation expense

related to the Option Grants.

Unrecognized compensation cost related to tranches probable of vesting is approximately $2.0 million and

will be recognized over 2.5 years to 9.5 years, depending on the tranche.

Note 17 – Warrant liabilities

7 unchanged sentences

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

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

as financing expense and warrant liability.

33 unchanged sentences

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

Through September 30, 2022, none of the

Through December 31, 2022, none of the

private placement investors exercised any of their warrants.

As such, as of September 30, 2022 and June 30, 2022, the number of shares

As such, as of December 31, 2022 and June 30, 2022, the number of shares

issuable under the outstanding warrants was 685,715 , with an average exercise price of $ 5.00 per share.

2 unchanged sentences

Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

As of September 30, 2022 and June 30, 2022, $ 4,842,146

As of December 31, 2022 and June 30, 2022, $ 3,997,125

and $ 1,821,947 , respectively, were deposited with various major financial institutions in the United States and PRC.

2 unchanged sentences

The Company had approximately

$ 3.9 million and $ 0.5 million, respectively, in excess of the FDIC insurance limit, as of September 30, 2022 and June 30, 2022.

$ 3.1 million and $ 0.5 million , respectively, in excess of the FDIC insurance limit, as of December 31, 2022 and June 30, 2022.

Accounts receivable are typically unsecured and derived

7 unchanged sentences

Customer and vendor concentration risk

For the three months ended September 30, 2022

and 2021, Amazon Vendor and Amazon Seller customers accounted for 91 %

of the Company's total revenues, respectively.

As of September 30, 2022 and June 30, 2022, accounts receivable from Amazon Vendor

and Amazon Seller accounted for 94 %

of the Company’s total accounts receivable.

For the three months ended September 30, 2022 and

2021, one supplier accounted for 19% and two suppliers accounted for 47 % ( 36 % and 11 %) of the Company's total purchases, respectively.

As of September 30, 2022, accounts payable to two suppliers accounted for 48 % and 11 % of the Company’s total accounts payable.

of June 30, 2022, accounts payable to two suppliers accounted for 34 % and 10 %, respectively, of the Company’s total accounts payable.

For the six months ended December 31, 2022 and 2021,

Amazon Vendor and Amazon Seller customers accounted for 91 % and 89 % of the Company's total revenues, respectively.

As of December 31,

2022 and June 30, 2022, accounts receivable from Amazon Vendor and Amazon Seller accounted for 89 % and 94 % of the Company’s total

accounts receivable.

For the six months ended December 31, 2022 and 2021,

two suppliers accounted for 41 % ( 31 % and 10 %) and 29 % ( 22 % and 7 %) of the Company's total purchases, respectively.

As of December 31,

2022, accounts payable to two suppliers accounted for 65 % ( 57 % and 8 %) of the Company’s total accounts payable.

As of June 30, 2022,

accounts payable to two suppliers accounted for 44 % ( 34 % and 10 %) of the Company’s total accounts payable.

Note 19 - Commitments and contingencies

Lease commitments

The Company has adopted ASC842 since its

inception date, April 11, 2018.

The Company has entered into a lease agreement to rent 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

fulfillment center, the Company leased a second fulfillment center in City of Industry, California.

The base rental fee ranges from $27,921

to $29,910 per month through October 31, 2023.

The Company has adopted ASC842 since its inception

date, April 11, 2018.

The Company has entered into a lease agreement to rent 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 fulfillment

center, the Company leased a second fulfillment center in City of Industry, California.

The base rental fee ranges from $27,921 to $29,910

per month through October 31, 2023.

On February 15, 2022, upon completion of the acquisition

10 unchanged sentences

Following the Rent Commencement Date, the first two months of the Base Rent were to be abated.

The lease was not started under the original

Lease Agreement as completion of the construction was not timely completed.

On February 23, 2022, as a result of the delay in completion

of the construction, 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 lease was not started under the original Lease

Agreement as completion of the construction was not timely completed.

On February 23, 2022, as a result of the delay in completion of

the construction, 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 ranges from

$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.

base rental fee ranges from $56,000 to $59,410 per month through April 30, 2025.

Total commitment for the full term of these

leases is $ 12,440,869 .

The financial statements reflected $ 9,805,484

and $ 10,453,282 ,

respectively, of operating lease right-of-use assets, and $ 10,210,581

and $ 10,848,544 ,

respectively, of operating lease liabilities as of September 30, 2022 and June 30, 2022.

Three Months Ended September 30, 2022 and 2021:

On May 1, 2022, the Company leased another fulfillment

center in Duarte, California.

The base rental fee ranges from $56,000 to $59,410 per month through April 30, 2025.

Total commitment for the full term of these leases

is $ 12,440,869 .

The financial statements reflected $9,161,840 and $ 10,453,282 , respectively, of operating lease right-of-use assets, and

$ 9,586,788 and $ 10,848,544 , respectively, of operating lease liabilities as of December 31, 2022 and June 30, 2022.

Three Months Ended December 31, 2022 and 2021:

Schedule of lease cost and other information

Operating lease cost (included in

selling and fulfillment in the Company's statement of operations)

Operating lease cost (included in selling and fulfillment in the Company's statement of operations)

Other information

2 unchanged sentences

Average discount rate - operating leases

Six Months Ended December 31, 2022 and 2021:

Operating lease cost (included in selling and fulfillment in the Company's statement of operations)

Other information

Cash paid for amounts included in the measurement of lease liabilities

Remaining term in years

Average discount rate - operating leases

The supplemental balance sheet information related to leases for the period

21 unchanged sentences

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.

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

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 IPO).

Presently, the matter is scheduled to be heard before a FINRA arbitration

appeal over six non-consecutive days during the months of April and May 2023.

The Company has agreed to indemnify D.A.

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 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 this report.

Presently, the matter is

scheduled to be heard before a FINRA arbitration appeal over six non-consecutive days during the months of April and May 2023.

has agreed to indemnify D.A.

Davidson & Co.

and the other underwriters against any liability or expense they may incur or be subject

to arising out of the Boustead dispute.

Additionally, Chenlong Tan, the Company’s Chairman, President and Chief Executive Officer

and a beneficial owner more than 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 this report.

In an effort to contain or slow the COVID-19 outbreak,

5 unchanged sentences

of the positive or negative impacts the COVID-19 outbreak may have on the Company’s business in the future.

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 three months

ended September 30, 2022.

February 2022, the Russian Federation began conducting military operations against Ukraine, which have been ongoing ever since,

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.

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 three and six months ended December 31,

Note 20 - Subsequent events

1 unchanged sentence

that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued.

than as set forth below and as disclosed in Note 4 and Note 12 above, no material subsequent events that required recognition or additional

disclosure in the consolidated financial statements are presented.

On November 9, 2022, the Company received a deficiency letter from

the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, for the preceding

30 consecutive business days, the closing bid price for the Company’s common stock was trading below the minimum $1.00 per share

requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5405(a)(1) (the “Bid Price Requirement”).

In order to regain compliance with the Bid Price Requirement, the Company’s stock must trade at $1.00 or above for a period of 10

consecutive trading days.

Following receipt of Nasdaq’s deficiency notification, the Company has 180 days, or until May 8, 2023,

to regain compliance with the Bid Price Requirement and may seek an additional 180-day extension thereafter.

During that time, the Company

will evaluate what actions it needs to take should the Company determine that it is unlikely that it will regain compliance within the

requisite time period.

While the Company needs to remain mindful of the timing in which it needs to regain compliance, the deficiency

notification has no immediate effect on the Company’s Nasdaq listing and the Company’s common stock will continue to trade

on Nasdaq under the ticker symbol “IPW.”

than as disclosed in Note 12 above, no material subsequent events that required recognition or additional disclosure in the consolidated

financial statements presented herein.

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-Q

Item 1. Financial Statements