What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-14 compared with 2022-11-14 · 347 added, 298 removed, 231 unchanged (74% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following

Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included

elsewhere herein.

This Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements that involve

risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.

Any statements that are not statements

of historical fact are forward-looking statements.

When used, the words “believe,” “plan,” “intend,”

“anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional

constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify

certain of these forward-looking statements.

These forward-looking statements are subject to risks and uncertainties that could cause

actual results or events to differ materially from those expressed or implied by the forward-looking statements in this form.

results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several

Historical results

may not indicate future performance.

Our forward-looking statements reflect our current views about future events, are based on assumptions

and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s

Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein.

This Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements that involve risks and uncertainties,

such as statements of our plans, objectives, expectations and intentions.

Any statements that are not statements of historical fact are

forward-looking statements.

When used, the words “believe,” “plan,” “intend,” “anticipate,”

“target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,”

“may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking

These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ

materially from those expressed or implied by the forward-looking statements in this form.

Our actual results and the timing of events

could differ materially from those anticipated in these forward-looking statements as a result of several factors.

Historical results may not

indicate future performance.

Our forward-looking statements reflect our current views about future events, are based on assumptions and

are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated

by these statements.

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we cannot guarantee future results, events, levels of activity, performance, or achievements.

is an online hydroponic

home and garden equipment supplier based in the United States.

Through the operations of our e-commerce platform, www.Zenhydro.com, our

combined 121,000 square foot fulfillment centers in Los Angeles, California, as well as our 99,000 square foot fulfillment center in Rancho

Cucamonga, California, we believe we are one of the leading marketers, distributors and retailers of grow-light systems, ventilation systems,

activated carbon filters, nutrients, growing media, hydroponic water-resistant grow tents, trimming machines, pumps, shelving and accessories

for hydroponic gardening, based on management’s estimates.

is a U.S.-based

online retailer and supplier of consumer home, garden and pet products.

Through the operations of our e-commerce platform, www.simpledeluxe.com

and www.Zenhydro.com, our combined 121,000 square foot fulfillment centers in Los Angeles, California, as well as our 99,000 square foot

fulfillment center in Rancho Cucamonga, California, we believe we are one of the leading marketers, distributors and retailers of home

fans, shelving, gaming chairs, grow-light systems, ventilation systems, activated carbon filters, nutrients, hydroponic water-resistant

grow tents, trimming machines, pumps, accessories for hydroponic gardening and certain pet products, based on management’s estimates.

We have a diverse customer base that includes commercial users and individuals.

Our core strategy continues to focus on expanding our geographic reach across the United States through organic growth, both in terms

of expanding customer base as well as brand and product development.

Our core strategy continues to focus on expanding our

geographic reach across the United States through organic growth, both in terms of expanding customer base as well as brand and product

We are actively developing

and acquiring our in-house branded products, which to date include the iPower and Simple Deluxe brands and

consist of more than 4,000 SKUs of products such as home goods, grow-light systems, ventilation systems, activated carbon filters, nutrients,

growing media, hydroponic water-resistant grow tents, trimming machines, pumps and many more hydroponic-related items;

some of which have

been designated as Amazon best seller product leaders, among others.

For the quarter ended September 30, 2022, our top five product segments

accounted for 78% of total sales.

While we continue to focus on our top product categories, we are working to expand our product catalog

to include new and adjacent categories.

Recent Acquisitions and Joint Ventures

February 15, 2022, in exchange for total consideration of $12 million, we acquired 100% of the ordinary shares of Anivia Limited

(the “Target Company”), 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”), the Target Company, Fly Elephant Limited, a Hong Kong

company, Dayou Renzai (Shenzhen) Technology Company Limited, and Daheshou (Shenzhen) Information Technology Limited.

Company owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayou Renzai (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 a series of contractual arrangements summarized

below, the business, revenues and profits of Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the

Laws of the PRC (the “Operating Company”) and located in Shenzhen, China.

The Operating Company is principally engaged

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

The Operating Company has been iPower’s

sole source of supplies and logistics support for products purchased from the PRC since iPower’s inception.

In 2021, iPower

purchased more than 60% of its products and supplies from or through the Operating Company.

February 10, 2022, we entered into a joint venture agreement with Bro Angel, LLC, Ji Shin and Bing Luo (the “GSM Joint Venture Agreement”).

Pursuant to the terms of the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media,

LLC (“GSM”), for the principal purpose of providing a social media platform, contents and services to assist businesses, including

the Company and other businesses, in the marketing of their products.

Following entry into the JSM Joint Venture Agreement, GSM issued

10,000 certificated units of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity

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

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

the terms of the GSM limited liability operating agreement (the “GSM LLC Agreement”), the Company contributed $100,000 to

the capital of GSM and Bro Angel granted GSM, pursuant to the terms of an intellectual property licensing agreement, dated February 10,

2022 (the “IP License Agreement”), an exclusive worldwide paid up right and license to use all intellectual property of Bro

Angel and its members for the purpose of furthering the proposed business of GSM.

The LLC Agreement prohibits the issuance of additional

GSM Equity Units and certain other actions unless approved in advance by the Company.

to the GSM Joint Venture Agreement, the Company and GSM also intend to enter into an occupancy management agreement pursuant to which

the Company will grant to GSM the right to have access to and use of up to approximately 4,000 square feet of office space along with

internet access at the Company’s facility located at 2399 Bateman Avenue, Irwindale, CA 91010.

It is contemplated that only approximately

300-400 square feet will be initially used by GSM.

January 13, 2020 we entered into a joint venture agreement with Titanium Plus Autoparts, Inc.

(“TPA”), Tony Chiu, and Bin

Xiao (the “TPA Joint Venture Agreement”).

Pursuant to the terms of the TPA Joint Venture Agreement, the parties formed a Nevada

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

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

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

Following entry into the TPA Joint Venture Agreement,

Box Harmony issued a total of 6,000 certificated units of membership interest, designated as Class A voting units (“Equity Units”),

(i) we agreed to contribute $50,000 in cash and agreed to provide Box Harmony with the use and access to certain warehouse

facilities leased by the Company in exchange for 2,400 Equity Units in Box Harmony, 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) Bin Xiao received 2,400 Equity

Units in exchange for $2,400 and his agreement to manage the day to day operations of Box Harmony.

We also entered into a sublease with

Box Harmony pursuant to which we sublease a portion of our leased warehouse space in Los Angeles to Box Harmony in exchange for their

payment of a pro rata portion of our rental expenses related to such facility.

the terms of the Box Harmony limited liability operating agreement, TPA and Bin Xiao each granted to us an unconditional and irrevocable

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

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

If such option is

fully exercised, we would own 3,600 Equity Units or 60% of the total outstanding Equity Units.

The Box Harmony LLC Agreement prohibits

the issuance of additional Equity Units and certain other actions unless approved in advance by us.

and acquiring our in-house branded products, which to date include the iPower, Simple Deluxe and other brands and consist

of products such as home goods, fans, pet products, grow-light systems, ventilation systems, activated carbon filters, nutrients, hydroponic

water-resistant grow tents, trimming machines, pumps and many more hydroponic-related items;

some of which have been designated as Amazon

best seller product leaders, among others.

For the six months ended December 31, 2022, our top five product segments accounted for 78%

of total sales.

While we continue to focus on our top product categories, we are working to expand our product catalog to include new

and adjacent categories.

Trends and Expectations

Product and Brand Development

plan to increase our investments in product and brand development.

We actively evaluate potential acquisition opportunities of

companies and product brand names that can complement our product catalog and improve on existing products and supply chain

efficiencies.

We plan to increase our investments

in product and brand development.

We actively evaluate potential acquisition opportunities of companies and product brand names that can

complement our product catalog and improve on existing products and supply chain efficiencies.

Global Economic Disruption

While at present the majority

of our products are sourced either in the United States or China, the military conflict between Russia and Ukraine may nonetheless increase

the likelihood of supply chain disruptions or otherwise hinder our ability to find the materials we need to make our products.

supply chain disruptions may make it harder for us to find favorable pricing and reliable sources for the materials we need, putting upward

pressure on our costs and increasing the risk that we may be unable to acquire the materials and services we need to continue to make

certain products.

Ongoing COVID-19 Outbreak and Related Disruptions

of our products are sourced either in the United States or Mainland China, the military conflict between Russia and Ukraine may nonetheless

increase the likelihood of supply chain disruptions or otherwise hinder our ability to find the materials we need to make our products.

In addition, supply chain disruptions may make it harder for us to find favorable pricing and reliable sources for the materials we need,

putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials and services we need to continue

to make certain products.

Ongoing COVID-19 Epidemic and Related Disruptions

We are continuing to closely

monitor the impact of the ongoing COVID-19 outbreak on our business, results of operations and financial results.

monitor the impact of the ongoing COVID-19 epidemic on our business, results of operations and financial results.

The situation surrounding

the COVID-19 outbreak remains fluid and the full extent of the positive or negative impact of the COVID-19 outbreak on our business will

depend on certain developments including the length of time that the outbreak continues, the impact on consumer activity and behaviors

the COVID-19 epidemic remains fluid and the full extent of the positive or negative impact of the COVID-19 outbreak on our business will

depend on certain developments including the length of time that the epidemic continues, the impact on consumer activity and behaviors

and the effect on our customers, employees, suppliers and stockholders, all of which are uncertain and cannot be predicted.

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emergency paid time off and targeted hourly pay increases as well as developing no contact delivery methods.

to contain or slow the COVID-19 outbreak, authorities across the world have implemented various measures, some of which have been subsequently

rescinded or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses.

We anticipate that these actions

and the global health crisis caused by the COVID-19 outbreak, including any resurgences, will continue to negatively impact global economic

While the COVID-19 outbreak has not had a material adverse impact on our operations to date and we believe the long-term opportunity

that we see for shopping online remains unchanged, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak

In an effort to contain or

slow the COVID-19 epidemic, authorities across the world have implemented various measures, some of which have been subsequently rescinded

or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses.

We anticipate that these actions and the

global health crisis caused by the COVID-19 epidemic, including any resurgences, will continue to negatively impact global economic activity.

While the COVID-19 epidemic has not had a material adverse impact on our operations to date and we believe the long-term opportunity that

we see for shopping online remains unchanged, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak

will have on our business.

In the short term,

we have continued to see increased sales and order activity in the market since the COVID-19 outbreak.

In the short term, we have

continued to see increased sales and order activity in the market since the COVID-19 outbreak.

In order to keep up with the increased

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Regulatory Environment

We sell hydroponic

gardening products to end users that may use such products in new and emerging industries or segments, including the growing of cannabis.

The demand for hydroponic gardening products depends on the uncertain growth of these industries or segments due to varying, inconsistent

and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions.

For example, certain countries and a total of 44 U.S.

states plus the District of Columbia have adopted frameworks that authorize, regulate

and tax the cultivation, processing, sale and use of cannabis for medicinal and/or non-medicinal use, including legalization of hemp and

CBD, while the U.S.

Controlled Substances Act and the laws of U.S.

We sell hydroponic gardening

products to end users that may use such products in new and emerging industries or segments, including the growing of cannabis.

for hydroponic gardening products depends on the uncertain growth of these industries or segments due to varying, inconsistent and rapidly

changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions.

certain countries and a total of 44 U.S.

states plus the District of Columbia have adopted frameworks that authorize, regulate and tax

the cultivation, processing, sale and use of cannabis for medicinal and/or non-medicinal use, including legalization of hemp and CBD,

while the U.S.

Controlled Substances Act and the laws of certain U.S.

states prohibit growing cannabis.

Demand for our products could be

impacted by changes in the regulatory environment with respect to such industries and segments.

Demand for our products could

be impacted by changes in the regulatory environment with respect to such industries and segments.

RESULTS OF OPERATIONS

For the three months ended September 30, 2022

For the three months ended December 31,

2022 and 2021

The following table presents

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Three Months Ended

September 30, 2022

December 31, 2022

Three Months Ended

September 30, 2021

December 31, 2021

Cost of goods sold

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Revenues for the three months

ended September 30, 2022 increased 49.8% to $26,022,673 as compared to $17,366,765 for the three months ended September 30, 2021.

ended December 31, 2022 increased 12.43% to $19,254,590 as compared to $17,125,663 for the three months ended December 31, 2021.

pricing remained stable, the increased revenue mainly resulted from an increase in sales volume and expansion of sales to other regions,

such as Canada, Europe and Asia.

In addition to our organic growth, which we achieved as a result of improved products and more effective

online marketing and merchandising efforts, the increase in sales was attributable to more people shopping online and pursuing gardening

and growing projects during the COVID-19 pandemic.

However, while the revenues for the current quarter remained consistent with last quarter

of the fiscal year ended June 30, 2022, we cannot assure that this trend will continue, and our business may be adversely affected by

poor overall economic conditions and shipping delays caused by the ongoing COVID-19 pandemic.

In addition to our organic growth and diversified product mix, which we achieved as a result of improved

products and more effective online marketing and merchandising efforts, the increase in sales was attributable to more people shopping

online and pursuing gardening and growing projects during the COVID-19 pandemic.

Costs of Goods Sold

Costs of goods sold for the

three months ended September 30, 2022 increased 59.5% to $16,036,957 as compared to $10,053,063 for the three months ended September 30,

The increase was due to an increase in sales, as discussed above.

In addition, we experienced an increase in cost of goods sold

as a percentage of revenue as a result of an increase in import duty and freight charges.

Costs of goods sold for the three

months ended December 31, 2022 increased 17.95% to $11,285,064 as compared to $9,568,051 for the three months ended December 31, 2021.

The increase was due to an increase in sales, which resulted in increased accompanying costs.

See discussions on gross profit below.

seen decreasing freight charges since September 2022 but could not assure that this trend will continue.

have seen decreasing freight charges since September 2022 but cannot be assured that this trend will continue.

Gross profit was $7,969,526

for the three months ended September 30, 2022 as compared to $7,313,702 for the three months ended September 30, 2021.

for the three months ended December 31, 2022 as compared to $7,557,612 for the three months ended December 31, 2021.

The gross profit

ratio decreased to 38.4% for the three months ended September 30, 2022 from 42.1% for the three months ended September 30, 2021.

in gross profit ratio was mainly due to a combination of an increase in sales, as discussed above, and an increase of cost of goods sold

resulting from increase in import duties and freight charges.

ratio decreased to 41.39% for the three months ended December 31, 2022 from 44.13% for the three months ended December 31, 2021.

in the gross profit ratio was mainly driven by the increase in cost of goods sold as a result of increased freight charges as well as

channel and product category mix.

Operating Expenses

Operating expenses for the three months ended September 30, 2022 increased

142.0% to $14,579,022 as compared to $6,023,387 for the three months ended September 30, 2021.

The increase was mainly due to an increase

in selling and fulfillment expenses of $4.7 million resulted from increase in advertising, storage costs and fulfillment workforce, general

and administrative expenses of $0.7 million, which included payroll expenses, stock-based compensation expense, insurance expenses and

other operating expenses including expenses associated with being a publicly traded company, and $3.1 million of impairment loss on goodwill

triggered by the decrease in the Company’s share price and the net loss incurred during the quarter ended September 30, 2022.

Operating expenses for the

three months ended December 31, 2022 increased 87.66% to $12,052,092 as compared to $6,422,327 for the three months ended December 31,

The increase was mainly due to the combination of an increase in selling and fulfillment expenses of $5.7 million as a result of

increased costs related to advertising, merchant fees, and delivery fees, and a decrease in general and administrative expenses of $0.07

million, which included payroll expenses, stock-based compensation expense, insurance expenses and other operating expenses including

expenses associated with being a publicly traded company.

(Loss) Income from Operations

(Loss) Income from operations was ($4,593,306) for the three months

ended September 30, 2022 as compared to $1,290,315 for the three ended September 30, 2021.

The decrease was due to a combination of an

increase in sales, costs of goods sold and operating expenses as discussed above.

Other Expense

(Loss) Income from operations

was ($4,082,566) for the three months ended December 31, 2022 as compared to $1,135,285 for the three ended December 31, 2021.

in income was resulted from the increase in operating expenses being greater than the increase in gross profit received, as discussed

Other Expenses

Other expenses for the three

months ended September 30, 2022 was $39,671 as compared to $59,812 for the three months ended September 30, 2021.

The slight decrease

in other expenses was a combined result of an increase in other non-operating income of $212,572, an increase in interest, including

amortization of debt discount on the revolving loan, and financing expenses of $189,041 during the period ended September 30, 2022, and

an increase in loss on investment of $3,390.

months ended December 31, 2022 was $258,457 as compared to $14,709 for the three months ended December 31, 2021.

The increase in other

expenses was mainly due to an increase in interest, including amortization of debt discount on the revolving loan of $239,007 during the

period ended December 31, 2022.

Net (Loss) Income Attributable to iPower

Net loss attributable to iPower Inc.

for the three months ended September

30, 2022 was $4,182,376 as compared to net income of $887,528 for the three months ended September 30, 2021, representing a decrease of

Net loss attributable to iPower

for the three months ended December 31, 2022 was ($3,290,439) as compared to net income of $797,861 for the three months ended December

31, 2021, representing a decrease of $4,088,300.

The decrease was primarily due to the increase in operating expenses as discussed above.

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to iPower Inc.

Comprehensive loss attributable to iPower Inc.

for the three months

ended September 30, 2022 was $4,293,851 as compared to comprehensive income of $887,528 for the three months ended September 30, 2021,

Comprehensive loss attributable

to iPower Inc.

for the three months ended December 31, 2022 was ($3,243,290) as compared to comprehensive income of $797,861 for the three

months ended December 31, 2021, representing a decrease of $4,041,151.

The decrease was due to the reasons discussed above, along with

the other comprehensive income of $47,149 as a result of foreign currency translation adjustments resulting from the translation of RMB,

the functional currency of our VIE in PRC, to USD, the reporting currency of the Company.

For the six months ended December 31, 2022

The following table presents

certain unaudited condensed consolidated statement of operations information and presentation of that data as a percentage of change from

period to period.

Six Months Ended

December 31, 2022

Six Months Ended

December 31, 2021

Cost of goods sold

Operating expenses

Operating (loss) income

Other (expenses)

(Loss) Income before income taxes

Income tax (benefit) expense

Net (loss) income

Non-controlling interest

Net (loss) income attributable to iPower Inc.

Other comprehensive loss

Comprehensive (loss) income attributable to iPower Inc.

Gross profit % of revenues

Operating (loss) income % of revenues

Net (loss) income % of revenues

Revenues for the six months

ended December 31, 2022 increased 31.27% to $45,277,263 as compared to $34,492,428 for the six months ended December 31, 2021.

While pricing

remained stable, the increased revenue mainly resulted from an increase in sales volume and expansion of sales to other regions, such

as Canada, Europe and Asia.

In addition to our organic growth and diversified product mix, which we achieved as a result of improved products

and more effective online marketing and merchandising efforts, the increase in sales was attributable to more people shopping online and

pursuing gardening and growing projects during the COVID-19 pandemic.

Costs of Goods Sold

Costs of goods sold for the

six months ended December 31, 2022 increased 39.25% to $27,322,021 as compared to $19,621,114 for the six months ended December 31, 2021.

The increase was due to an increase in sales, as discussed above.

In addition, we experienced an increase in costs of goods sold as a

percentage of revenue as a result of the increased freight charges during the six months ended December 31, 2022.

However, the freight

costs have been decreasing since September 2022, causing the increase in costs of goods sold for the six months was more significant comparing

to the increase in the three months ended December 31, 2022.

See discussions on gross profit below.

We have seen decreasing freight charges

since September 2022 but could not be assured that this trend will continue.

Gross profit was $17,955,242

for the six months ended December 31, 2022 as compared to $14,871,314 for the six months ended December 31, 2021.

The gross profit ratio

slightly decreased to 39.66% for the six months ended December 31, 2022 from 43.11% for the six months ended December 31, 2021.

in gross profit ratio was mainly driven by an increase in freight charges during the six months ended December 31, 2022 as well as channel

and product category mix.

Operating Expenses

Operating expenses for the

six months ended December 31, 2022 increased 113.98% to $26,631,114 as compared to $12,445,714 for the six months ended December 31, 2021.

The increase was mainly due to the combination of an increase in selling and fulfillment expenses of $10.4 million as a result of increased

advertising, merchant fees, delivery fees, storage costs and fulfillment workforce, general and administrative expenses of $0.7 million,

which included payroll expenses, stock-based compensation expense, insurance expenses and other operating expenses including expenses

associated with being a publicly traded company, and $3.1 million of impairment loss on goodwill triggered by a decrease in the Company’s

share price of its common stock and the net loss incurred during the quarter ended September 30, 2022.

(Loss) Income from Operations

(Loss) Income from operations was

($8,675,872) for the six months ended December 31, 2022 as compared to $2,425,600 for the six months ended December 31, 2021.

was due to the increase in operating expenses was greater than the increase in gross profit as discussed above.

Other Expenses

Other expenses for the six

months ended December 31, 2022 was $298,128 as compared to $74,521 for the six months ended December 31, 2021.

The increase in other expenses

was mainly due to a combined result of an increase in other non-operating income of $261,770, and an increase in interest, including amortization

of debt discount on the revolving loan of $487,048 during the period ended December 31, 2022.

Net (Loss) Income Attributable to iPower

Net loss attributable to iPower

for the six months ended December 31, 2022 was ($7,472,815) as compared to net income of $1,685,389 for the six months ended December

31, 2021, representing a decrease of $9,158,204.

The decrease was due to the reasons discussed above and the other comprehensive loss of $111,475,

in relation to the foreign currency translation adjustments resulting from the translation of RMB, the functional currency of our VIE

in PRC, to USD, the reporting currency of the Company.

The decrease was primarily due to the increase in operating expenses as discussed above.

Comprehensive (Loss) Income Attributable

to iPower Inc.

Comprehensive loss

attributable to iPower Inc.

for the six months ended December 31, 2022 was ($7,537,141) as compared to comprehensive income of

$1,685,389 for the six months ended December 31, 2021, representing a decrease of $9,222,530.

The decrease was due to the reasons

discussed above, along with other comprehensive loss of $64,326 as a result of foreign currency translation adjustments resulting

from the translation of RMB, the functional currency of our VIE in PRC, to USD, the reporting currency of the Company.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

During the nine months ended

September 30, 2022 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through completion

of two private placements in 2020 and 2021, completion of our initial public offering in May of 2021, and borrowing under our credit facility

and loans from the Small Business Administration and JPMorgan Chase Bank.

We had cash and cash equivalents of $4,842,146 as of September

30, 2022, representing a $3.0 million increase from $1,821,947 of cash as of June 30, 2022.

The cash increase was primarily the result

of the increase in net cash provided by operating activities and proceeds from the long term revolving line.

During the six months ended

December 31, 2022 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through the

completion of two private placements in 2020 and 2021, completion of our initial public offering in May of 2021, and borrowing under our

credit facility and loans from the Small Business Administration and JPMorgan Chase Bank ("JPM”).

We had cash and cash equivalents

of $3,997,125 as of December 31, 2022, representing a $2.2 million increase from $1,821,947 of cash as of June 30, 2022.

The cash increase

was primarily the result of the increase in net cash provided by operating activities.

Based on our current operating

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Beyond the next 12 months we

believe that our cash flow from operations should improve as supply chains begin to return to normal and new suppliers we are bringing

online transition to credit terms more favorable to us.

In addition, we plan to increase the size of our in-house product catalog, which

will have a net beneficial impact to our margin profile and ability to generate cash.

In addition, we have approximately $9.0 million

unused credit under the revolving line with JPM as of September 30, 2022.

Given our current working capital position an available funding

from our revolving credit line, we believe we will be able to manage through the current challenges by managing payment terms with customers

believe that our cash flows from operations should improve as supply chains begin to return to normal and new suppliers that we bring online

transition to credit terms more favorable to us.

In addition, we plan to increase the size of our in-house product catalog, which will

have a net beneficial impact to our margin profile and ability to generate cash.

In addition, we have approximately $9.0 million in unused

credit under our revolving line of credit with JPM as of December 31, 2022.

Given our current working capital position and available funding

from our revolving credit line, we believe we will be able to manage through the current challenges by managing payment terms with our

customers and vendors.

Working Capital

As of September 30, 2022 and June 30, 2022, our working capital was

$32.8 million and $32.3 million, respectively.

The historical seasonality in our business during the year can cause cash and cash equivalents,

inventory and accounts payable to fluctuate, resulting in changes in our working capital.

We anticipate that past historical trends will

remain in place through the balance of the fiscal year with working capital remaining near this level for the foreseeable future.

As of December 31, 2022 and June

30, 2022, our working capital was $22.96 million and $32.3 million, respectively.

The historical seasonality in our business during the

year can cause cash and cash equivalents, inventory and accounts payable to fluctuate, resulting in changes in our working capital.

anticipate that past historical trends will remain in place through the balance of the fiscal year with working capital remaining near

this level for the foreseeable future.

Operating Activities

Net cash provided by (used

in) operating activities for the three months ended September 30, 2022 and September 30, 2021 was $379,025 and $(5,209,185), respectively.

The increase in cash provided by operating activities was mainly resulted from decreased prepayments and other current assets and increased

accounts payable.

Net cash provided by (used in)

operating activities for the six months ended December 31, 2022 and December 31, 2021 was $7,778,208 and ($12,243,043), respectively.

The increase in cash provided by operating activities mainly resulted from decreased accounts receivable, inventories, prepayments and

other current assets and increased accounts payable.

Investing Activities

For the three months ended

September 30, 2022 and September 30, 2021, net cash used in investing activities was $57,989 and $50,423, respectively.

The slight increase

in cash used in investing activities was because the Company made additional purchase of equipment during the quarter ended September

For the six months ended

December 31, 2022 and December 31, 2021, net cash used in investing activities was $127,367 and $56,424, respectively.

in cash used in investing activities was because the Company made additional purchase of equipment during the six months ended

December 31, 2022.

Financing Activities

Net cash provided by (used

in) financing activities was $2,760,614 and ($172,517), respectively, for the three months ended September 30, 2022 and September 30,

The main reason the Company experienced an increase in net cash provided by financing activities was primarily due to receiving

$2.8 million in proceeds from the draw-down of a $25 million asset-based revolving loan facility with JPMorgan Chase Bank.

Net cash (used in) provided by

financing activities was ($5,540,436) and $6,739,520, respectively, for the six months ended December 31, 2022 and December 31, 2021.

The main reason the Company experienced a decrease in net cash provided by financing activities was primarily due to our payment of $8.6

1) $1.5 million to pay off investment payable;

2) $0.88 million to pay down note payable;

and 3) $6.2 million to pay down

the outstanding balance of the asset-based revolving loan facility with JPMorgan Chase Bank.

OFF-BALANCE SHEET ARRANGEMENTS

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We refer to accounting estimates of this type as critical accounting policies, which we discuss further

While our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements,

we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation

of our audited consolidated financial statements.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe

that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of

our audited consolidated financial statements.

Revenue reco g nition

The Company recognizes

revenue from product sales revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria

The Company recognizes revenue

from product sales revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met:

a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction

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historical experience.

The Company evaluates

the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross

amount of product sales and related costs or the net amount earned as commissions.

Generally, when the Company is primarily responsible

for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service

has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross.

Payments received prior to the shipment of goods to

customers are recorded as customer deposits.

The Company periodically

provides incentive offers to its customers to encourage purchases.

Such offers include current discount offers, such as percentage discounts

off current purchases and other similar offers.

Current discount offers, when accepted by the Company’s customers, are treated as

a reduction to the purchase price of the related transaction.

Sales discounts are

recorded in the period in which the related sale is recognized.

Sales return allowances are estimated based on historical amounts and

are recorded upon recognizing the related sales.

The Company evaluates the criteria

of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of

product sales and related costs or the net amount earned as commissions.

Generally, when the Company is primarily responsible for fulfilling

the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred

to a customer and the Company has discretion in establishing the price, revenue is recorded at gross.

Payments received prior to

the shipment of goods to customers are recorded as customer deposits.

The Company periodically provides

incentive offers to its customers to encourage purchases.

Such offers include current discount offers, such as percentage discounts off

current purchases and other similar offers.

Current discount offers, when accepted by the Company’s customers, are treated as a

reduction to the purchase price of the related transaction.

Sales discounts are recorded

in the period in which the related sale is recognized.

Sales return allowances are estimated based on historical amounts and are recorded

upon recognizing the related sales.

Shipping and handling costs are recorded as selling expenses.

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The Company values its inventory using the weighted average costing

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

to warehouses.

Outbound freight costs related to shipping costs to customers are considered period costs and reflected in selling, fulfillment,

general and administrative expenses.

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

and product obsolescence.

The Company’s policy is to include as a part of 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 period costs and reflected

in selling, fulfillment, general and administrative expenses.

The Company regularly reviews inventory and considers forecasts of future

demand, market conditions and product obsolescence.

If the estimated realizable

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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.

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

the carrying amount of the reporting unit exceeds its fair value, an impairment loss shall

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.

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 shall 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.

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

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

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

the acquisition of Anivia Limited.

Intangible assets are recorded at the estimated fair value of these items at the date of

acquisition, February 15, 2022.

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

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

acquisition of Anivia Limited.

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

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

Covenant Not to Compete

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other fair value determinations.

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

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

Stock-based Compensation

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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.

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 of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty

in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and

measurement related to accounting for income taxes.

The Company has adopted the provisions of ASC 740 since inception, April 11, 2018,

and has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns,

as well as open tax years in such jurisdictions.

The Company has identified the U.S.

federal jurisdiction, and the states of Nevada and

California, as its “major” tax jurisdictions.

However, the Company has certain tax attribute carryforwards which will remain

subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which

such attributes are utilized.

The Company believes that

our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a

material change to its financial position.

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC

The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as

a component of income taxes.

Recently issued accounting pronouncements

In June 2022, FASB

issued ASU 2022-03, Fair Value Measurement (Topic 82):

Fair Value Measurement of Equity Securities Subject to Contractual

Sale Restrictions.

The amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security

that is subject to a contractual sale restriction and require specific disclosures related to such an equity security.

This standard

is effective for fiscal years beginning after December 15, 2024.

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

material impact on the consolidated financial statements.

In June 2022, FASB issued ASU

2022-03, Fair Value Measurement (Topic 82):

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

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

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

This standard is effective for fiscal years beginning

after December 15, 2024.

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

In October 2021, the FASB

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

with Customers.

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

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

had originated the contracts.

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

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

a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) as if the entity had originated

the contracts.

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

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

In March 2020 and January 2021, the FASB issued

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

In March 2020 and January

2021, the FASB issued ASU No.

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and

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.

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

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

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

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

In August 2020, the FASB issued

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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.

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 15, 2019.

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.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing

dates after January 1, 2017.

The Company has adopted ASU 2017-04.

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financial position, statements of operations and cash flows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

As a “smaller reporting company,” we are

not required to provide the information required by this Item.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting

company,” we are not required to provide the information required by this Item.

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 2. Management’s Discussion and Analysis