What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2023-02-14 · 633 added, 644 removed, 874 unchanged (59% of the section changed)

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and Subsidiaries

Condensed Consolidated Balance Sheets

of December 31, 2022 and June 30, 2022

Unaudited Condensed Consolidated Balance Sheets

As of March 31, 2023 and June 30, 2022

Current assets

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Stockholders' Equity

Preferred stock, $ 0.001 par value;

Preferred stock, $ 0.001

shares authorized;

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

shares issued and outstanding at March 31, 2023 and June 30, 2022

Common stock, $ 0.001 par value;

180,000,000 shares authorized;

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

29,572,382 and 29,572,382 shares issued and outstanding at March 31, 2023 and June 30, 2022

Additional paid in capital

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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

Unaudited Condensed Consolidated Statements of Operations

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

Unaudited Condensed Consolidated Statements of

For the Three and Nine Months Ended March 31, 2023

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

TOTAL REVENUES

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Loss on equity method investment

Other non-operating income

Other non-operating (expense) income

Total other expenses, net

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( 2,085,126 )

( 1,495,545 )

NET (LOSS) INCOME

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(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 and Six Months Ended December 31, 2022 and 2021

Unaudited Condensed Consolidated Statements of

Changes in Stockholders' Equity

For the Three and Nine Months Ended March 31, 2023

Common Stock *

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( 4,209,867 )

( 1,530,534 )

( 1,533,772 )

Stock-based compensation

Foreign currency translation adjustments

Balance, March 31, 2023, unaudited

$ ( 5,740,401 )

Balance, June 30, 2021

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Balance, December 31, 2021, unaudited

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

Non-controlling interest

Restricted stock units vested

Shares issued for acquisition

Foreign currency translation adjustments

Balance, March 31, 2022, 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 Six Months Ended December 31, 2022 and 2021

For the Six Months Ended December 31,

Unaudited Condensed Consolidated Statements of

For the Nine Months Ended March 31, 2023 and 2022

For the Nine Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Purchase of equipment

Net cash used in investing activities

Cash acquired on acquisition

Investment in joint venture

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

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Payment on investment payable

( 1,500,000 )

Payments on short-term loans

( 1,781,385 )

( 1,767,061 )

Proceeds from long-term loans

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Cash paid for interest

The accompanying notes are an integral part of these unaudited condensed

consolidated financial statements.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Shares issued for acquisition

Promissory note issued for acquisition

Investment payable for acquisition

Goodwill acquired in business acquisition

Deferred tax liabilities

Identifiable intangible assets acquired in business acquisition

Net assets acquired in business acquisition

Right of use assets acquired under new operating leases

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Notes to Unaudited Condensed Consolidated Financial

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

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

As of March 31, 2023 and June 30,

2022 and for the Three and Nine Months Ended March 31, 2023 and 2022

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 a U.S.-based online seller and

supplier of consumer home, garden and pet products.

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

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

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

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

of E Marketing or its assets subject to the Company’s assumption of all of E Marketing’s liabilities.

E Marketing was considered

a variable interest entity (“VIE”).

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

agreement with Global Product Marketing Inc.

a result, E Marketing has become the Company’s wholly owned subsidiary.

On September 4, 2020, the Company entered into

an agreement with Global Product Marketing Inc.

(“GPM”), an entity incorporated in the State of Nevada on September 4, 2020.

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

to the terms of the agreement, the Company was to provide technical support, management services and other services on an exclusive basis

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

In addition, the Company agreed to fund GPM for operational cash

flow needs and bear the risk of GPM’s losses from operations and GPM agreed that the Company has the right to GPM’s net profits,

At that time, GPM was then wholly owned by Chenlong Tan, the Chairman, CEO and President and one of the majority shareholders of the Company.

Pursuant to the terms of the agreement with GPM, the Company was to provide technical support, management services and other services

on an exclusive basis, to GPM during the term of the Agreement.

In addition, the Company agreed to fund GPM’s operational cash flow

needs and bear the risk of GPM’s losses from operations and GPM agreed that the Company has the right to GPM’s net profits,

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

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

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

the equity of GPM or its assets subject to the Company’s assumption of all of GPM’s liabilities.

GPM was considered a variable

interest entity (“VIE”).

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”),

As a result, GPM has become

the Company’s wholly owned subsidiary.

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 logistics services primarily for foreign-based manufacturers or distributors who desire to sell

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See details on Note 3 below.

On February 10, 2022, the

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

On February 10, 2022,

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

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

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

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”)

details in 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”)

and located in Shenzhen, China.

See details on Note 4 below.

See details in Note 4 below.

Note 2 – Basis of Presentation and Summary

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Basis of Presentation

The unaudited condensed consolidated financial statements

include the accounts of the Company and its subsidiaries and VIE and have been prepared in accordance with accounting principles generally

accepted in the United States of America (“U.S.

The unaudited condensed consolidated financial

statements include the accounts of the Company and its subsidiaries and VIE and have been prepared in accordance with accounting principles

generally accepted in the United States of America (“U.S.

GAAP”) and the requirements of the U.S.

Securities and Exchange Commission

(“SEC”) for interim reporting.

As permitted under those rules, certain footnotes or other financial information that are normally

required by U.S.

Securities and Exchange

Commission (“SEC”) for interim reporting.

As permitted under those rules, certain footnotes or other financial information

that are normally required by U.S.

GAAP can be condensed or omitted.

These unaudited condensed consolidated financial statements have been prepared on the

same basis as its annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only

of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information.

These interim

results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2023, or for any other interim

period or for any other future year.

These unaudited condensed consolidated financial statements have

been prepared on the same basis as its annual consolidated financial statements and, in the opinion of management, reflect all adjustments,

consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information.

These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2023, or for any

other interim period or for any other future year.

All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements

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

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

These unaudited condensed consolidated financial

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

in the Company’s Annual Report on Form10-K for the year ended June 30, 2022, filed with the SEC on September 28, 2022.

Principles of Consolidation

The unaudited condensed consolidated financial statements

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

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

Daheshou (Shenzhen) Information Technology Co., Ltd.

The unaudited condensed consolidated financial

statements include the accounts of the Company and its subsidiaries, E Marketing Solution Inc., Global Product Marketing Inc., Global

Social Media, LLC, and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai (Shenzhen) Technology

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

All inter-company balances and transactions have been eliminated.

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Foreign currency translation and transactions

The reporting and functional currency of iPower and

subsidiaries is the U.S.

The reporting and functional currency of iPower

and subsidiaries is the U.S.

dollar (USD).

iPower’s WFOE and VIE in China uses the local currency, Renminbi (“RMB”), as

its functional currency.

iPower’s WFOE and VIE in China uses the local currency, Renminbi (“RMB”),

as its functional currency.

Assets and liabilities of the VIE are translated at the current exchange rate as quoted by the People’s

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the results of operations as incurred.

The balance sheet amounts of the VIE, with the exception

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

The balance sheet amounts of the VIE, with the

exception of equity, on March 31, 2023, were translated at 6.8691 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 six months ended December

The average translation rates applied to statements of operations and comprehensive income (loss) accounts for the nine months ended March

31, 2023 was 6.933442 RMB to $1.00.

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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.

balances in interest bearing accounts in excess of $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

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Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required.

In July 2020, the Company adopted ASU 2016-13, Topics

326 - Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected

loss methodology that is referred to as the current expected credit loss (CECL) methodology, for its accounting standard for its trade

accounts receivable.

The Company evaluates the creditworthiness of all

of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable.

any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular

The Company evaluates the creditworthiness of

all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable.

are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular

At the same time, the Company may cease further sales or services to such customer.

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other objective evidence indicates non-collectability of the accounts receivable.

The adoption of the credit loss accounting standard

has no material impact on the Company’s consolidated financial statements.

Accounts receivable are recognized and carried at carrying

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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”),

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

The Company applies the acquisition method of accounting for business combinations.

Under the acquisition method, the acquiring entity

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

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

Any excess of the

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

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

gain is recognized.

Acquisition-related costs are expensed as incurred.

See Note 4 for details on acquisition.

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.

Variable interest entities

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.

DHS’s operational funding has been provided by the Company following the February 15, 2022

During the term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits

As such, based on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A

through 25-38J, DHS is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control

existed, February 15, 2022.

On February 15, 2022, the Company acquired 100%

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

Pursuant 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 impact DHS’s economic

DHS’s operational funding has been provided by the Company following the February 15, 2022 acquisition.

term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits from DHS.

As such, based

on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered

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

See Note 4 and Note 5 for details on acquisition.

Goodwill represents the excess of the purchase price

over the fair value of assets acquired and liabilities assumed.

Goodwill represents the excess of the purchase

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

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

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 .

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.

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 March 31, 2023,

the Company performed a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and noted no goodwill

As of March 31, 2023, the remaining goodwill balance amounted to $ 3,034,110 .

Intangible Assets, net

Finite life intangible assets at December 31, 2022

Finite life intangible assets at March 31, 2023

included a covenant not to compete, supplier relationships, and software recognized as part of the acquisition of Anivia Limited.

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as well as other fair value determinations.

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

As of March 31, 2023, there were no indicators of impairment.

Fair values of financial instruments

ASC 825, “Disclosures about Fair Value of Financial

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

ASC 825, “Disclosures about Fair Value of

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

ASC 820, “Fair Value Measurements”

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installments commencing August 15, 2022 (the “Purchase Note”).

The principal amount of the Purchase Note was $ 3.5 million .

On February 15, 2022, the Company evaluated the fair value of the Purchase Note to be $ 3.6 million using the following inputs:

Schedule of assumptions

The principal amount of the Purchase Note was $ 3.5

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

million using the following inputs:

Schedule of assumptions for financial instruments

Corporate bond yield

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Discount rate

As of December 31, 2022,

As of March 31, 2023,

the outstanding balance of the Purchase Note was $ 2,004,181 , including a premium of $ 44,181 and $ 210,000 of accrued interest.

For other financial instruments to be reported at

fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable

For other financial instruments to be reported

at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable

inputs to the extent possible.

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in one of the following levels:

Level 1 – Inputs are unadjusted, quoted prices

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

Level 1 – Inputs are unadjusted, quoted

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

Level 2 – Inputs are observable, unadjusted

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

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

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

31, 2023, as follows:

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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 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

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 nine months ended March 31, 2023.

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

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Revenue recognition

The Company has adopted Accounting Standards Codification

(“ASC”) 606 since its inception on April 11, 2018 and recognizes revenue from product sales revenues, net of promotional discounts

The Company recognizes revenue from product sales revenues, net of promotional discounts

and return allowances, when the following revenue recognition criteria are met:

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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.

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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Advertising costs are expensed as incurred.

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

advertising and promotional costs included in selling and fulfillment expenses for the three and nine months ended March 31, 2023 and

2022 were as following.

Schedule of advertising costs

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Advertising and promotion

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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.

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

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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

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

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

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

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.

For the nine months ended

March 31, 2023, sales through Amazon to Canada and other foreign countries were approximately 12.8 % of the Company’s total sales.

Sales of hydroponic products, including ventilation and grow light systems, were approximately 46 % of the Company’s total sales

and the remaining 54 % consisted of general gardening, home goods and other products and accessories.

As of December 31, 2022, there were

As of March 31, 2023, there were

approximately $ 2.3 million of inventory stored in China.

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are presented.

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

adopted ASC 842 – Leases (“ASC 842”), which requires lessees to record right-of-use (“ROU”) assets and related

lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements.

The Company records right-of-use (“ROU”)

assets and related lease obligations on the balance sheet.

ROU assets represent our right to use an underlying

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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 will recognize forfeitures of such

equity-based compensation as they occur.

The Company accounts for income taxes under the

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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 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

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 740.

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.

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.

Commitments and contingencies

In the ordinary course of business, the Company is

subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters,

such as government investigations and tax matters.

The Company recognizes a liability for such contingency if it determines it is probable

that a loss has occurred and a reasonable estimate of the loss can be made.

The Company may consider many factors in making these assessments

including historical and specific facts and circumstances of each matter.

In the ordinary course of business, the Company

is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of

matters, such as government investigations and tax matters.

The Company recognizes a liability for such contingency if it determines it

is probable that a loss has occurred and a reasonable estimate of the loss can be made.

The Company may consider many factors in making

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

Earnings per share

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Recently issued accounting pronouncements

In June 2022, FASB issued ASU 2022-03, Fair Value

Measurement (Topic 820):

In June 2022, FASB issued ASU 2022-03, Fair

Value Measurement (Topic 820):

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

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

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

In October 2021, the FASB issued ASU 2021-08, Business

Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with 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.

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 ASU

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

In October 2021, the FASB issued ASU 2021-08,

Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

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

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

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

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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.

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prospectively at the beginning of the interim period that includes the adoption date.

The adoption of ASU 2020-01 did not have material

impact on the Company's consolidated financial statements.

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

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

The Company adopted ASU 2020-01 on July 1, 2022.

The adoption of ASU 2020-01 did not have material impact on the Company's consolidated financial statements.

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

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

The update is intended to simplify the current rules regarding

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is permitted.

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 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

The Company adopted ASU 2019-12 on July 1, 2022.

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 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.

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.

See disclosures

above on Goodwill for further details.

The Company does not believe other recently issued

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Box Harmony, LLC

On January 13, 2022, the Company entered into a joint

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

On January 13, 2022, the Company entered into

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

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

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

Following entry into the

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

(“Equity Units”), as follows:

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

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

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

Following entry into

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

units (“Equity Units”), as follows:

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

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

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

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

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

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

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

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

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

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

—Equity Method and Joint Ventures.

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Global Social Media, LLC

On February 10, 2022, the Company entered into a joint

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

Pursuant to the terms of

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

On February 10, 2022, the Company entered into

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

Pursuant to the terms

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

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

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

As of the date of this report,

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

As of the date of this

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

Pursuant to the terms of the Agreements, the Company

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equity ownership and control over operations.

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.

For the three and nine months ended March 31, 2023 and 2022, 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

Interest Entity

On February 15, 2022, the

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

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

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

equity holders, Li Zanyu and Xie Jing (together with White Cherry, the “Sellers”), Anivia, Fly Elephant Limited, a Hong Kong

company, Dayourenzai (Shenzhen) Technology Co., Ltd.

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.

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

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

of Fly Elephant Limited.

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

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

The contractual arrangements between the WFOE and

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

The contractual arrangements between the WFOE

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

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

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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.

JP Morgan Chase Bank, the

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

In conjunction with obtaining JPM’s consent,

the Company delivered an amendment to the pledge and security agreement with JPM, pursuant to which the Company pledged to JPM 65% of

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

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.

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

In conjunction with obtaining JPM’s

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

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

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

In addition, in conjunction

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Deferred tax liabilities

( 1,389,113 )

Current liabilities

( 1,143,076 )

Lease liability

Total purchase consideration

In October 2022,

2022, the $1.5 million cash portion of the consideration, which was presented as investment payable, had been fully paid off.

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of Anivia since February 16, 2022 have been included in the Company's consolidated financial statements.

Pro Forma Financial Information

The following pro forma

information presents a summary of the Company’s combined operating results for the nine months ended March 31, 2022 for comparative

purposes, as if the acquisition had occurred on July 1, 2021 The following pro forma financial information is not necessarily indicative

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

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

used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies,

potential synergies, and the impact of incremental costs incurred in integrating the businesses.

Schedule of Pro Forma information

Nine months ended

Total Revenues

Income from Operations

Basic and diluted income per share

Note 5 – Variable interest entity

Effective February 15, 2022, upon acquisition of Anivia,

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

Note 4 for details.

The Company did not provide financial or other support

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

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

Effective February 15, 2022, upon acquisition

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

See Note 4 for details.

The Company did not provide financial or other

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

As of March 31, 2023 and 2022, there was no pledge

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

The carrying amounts of the assets, liabilities and

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

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

The carrying amount of the VIE’s assets and

liabilities were as follows for the periods indicated:

The carrying amounts of the assets, liabilities

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

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

The carrying amount of the VIE’s assets

and liabilities were as follows for the periods indicated:

Carrying amount of VIE assets and liabilities

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The operating results of the VIE were as follows

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

for the three and nine months ended March 31, 2023:

Operating results of the VIE

Net loss after elimination of intercompany transactions

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

For the three months ended March 31, 2023, the

VIE contributed approximately $ 0.7 million of revenue and $ 0.1 million of net loss before elimination.

For the nine months ended March

31, 2023, the VIE contributed approximately $ 5.0 million of revenue and $ 0.7 million of net loss before elimination.

Note 6 – Accounts receivable, net

Accounts receivable for the Company consisted of the

following as of the dates indicated below:

Accounts receivable for the Company consisted

of the following as of the dates indicated below:

Schedule of accounts receivable

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Note 7 – Inventories, net

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

As of March 31, 2023 and June 30, 2022, inventories

consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 19,646,934 and $ 30,433,766 , respectively.

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

As of March 31, 2023 and June 30, 2022, allowance

for obsolescence was $ 558,899 and $ 320,000 , respectively.

Note 8 – Prepayments and other current assets

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

As of March 31, 2023 and June 30, 2022, prepayments and other current

assets consisted of the following:

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Other receivables consisted of delivery fees of

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.

$ 146,840 and $ 56,884 from two unrelated parties for their use of the Company’s courier accounts at March 31, 2023 and June 30, 2022.

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

Note 9 – Non-current prepayments

Non-current prepayments included $ 650,415 for product

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

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

The terms of these services are from two years to five

Non-current prepayments included payments

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

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

The terms of these services

are from two years to five years.

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

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

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

As of March 31, 2023 and June 30,

2022, total non-current prepayments were $ 601,873 and

$ 925,624 , respectively.

For the three and nine months ended

March 31, 2023, the Company recorded $ 107,917 and

$ 323,751 amortization of

prepayments in the operating expenses, respectively.

For the three and nine months ended March 31, 2022, the Company recorded $ 107,917 and

$ 323,751 amortization of

prepayments in the operating expenses, respectively.

Note 10 – Intangible assets, net

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

of the following:

As of March 31, 2023 and June 30, 2022,

intangible assets, net, consisted of the following:

Schedule of intangible assets

December 31 ,

June 30, 2022

Covenant not to compete

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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:

The weighted average remaining life for finite-lived intangible assets at March 31, 2023 was

approximately 7.45 years.

The amortization expense for the three and nine months ended March 31, 2023 was $ 162,343 and $ 487,028 , respectively.

The amortization expense for the three and nine months ended March 31, 2022 was $ 81,171 and $ 81,171 , respectively.

At March 31, 2023,

finite-lived intangible assets are expected to be amortized over their estimated useful lives, which ranges from a period of five to 10

years, and the estimated remaining amortization expense for each of the five succeeding years thereafter is as follows:

Schedule of future amortization

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Note 11 – Other payables and accrued liabilities

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

consisted of the following:

As of March 31, 2023 and June 30, 2022, other payables and accrued

liabilities consisted of the following:

Schedule of accounts payable and accrued liabilities

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Other accrued liabilities and payables

The Company’s controlled VIE, DHS,

facilitates the Company in the process of inventory procurement.

Through this process, the Company purchased a total of $31,385 in

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

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

The Company’s controlled VIE, DHS, facilitates

the Company in the process of inventory procurement.

Through this process, the Company purchased a total of $31,385 in inventories from

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

As of March 31, 2023, the outstanding balance

was paid off.

Note 12 – Loans payable

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

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

As of March 31, 2023 and June 30, 2022, the outstanding

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

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SBA loan payable

On April 18, 2020, the Company entered into an agreement

with the U.S.

Small Business Administration (“SBA”) for a loan of $500,000 under Section 7(b) of the Small Business Act pursuant

to which we issued a promissory note (the “SBA Note”) to the SBA.

The SBA Note bears interest at the rate of 3.75% per annum

and matures 30 years from the date of the SBA Note.

Monthly installment payments, including principal and interest, will begin twelve

months from the date of the SBA Note.

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

expense of $ 39,237 .

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

On April 18, 2020, the Company entered into an

agreement with the U.S.

Small Business Administration (“SBA”) for a loan of $500,000 under Section 7(b) of the Small Business

Act pursuant to which we issued a promissory note (the “SBA Note”) to the SBA.

The SBA Note bears interest at the rate of

3.75% per annum and matures 30 years from the date of the SBA Note.

Monthly installment payments, including principal and interest, will

begin twelve months from the date of the SBA Note.

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

accrued interest expense of $ 39,237 .

As of March 31, 2023 and June 30, 2022, the outstanding balance of the SBA Note was $ 0 and $ 0 , respectively.

Asset-based revolving loan

On November 12, 2021, the Company entered into a Credit

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

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

On November 12, 2021, the Company entered into

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

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

Borrowing base equal to the sum of

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Maturity Date of November 12, 2024

In addition, the ABL includes an accordion

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

To secure complete payment and performance of the

secured obligations, the Company granted a security interest in all of its right, title and interest in, to and under all of the

Company’s assets as collateral to the ABL.

Upon closing of the ABL, the Company paid $ 796,035

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 are to be amortized over three years as financing expenses, the term of 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 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 and six months ended December 31, 2022 and 2021:

for the three and nine months ended March 31, 2023 and 2022:

Schedule of interest on loans payable

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Accrued interest

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Amortization of debt discount

As of December 31, 2022, the outstanding amount

As of March 31, 2023, the outstanding amount

of the revolving loan payable, net of debt discount and including interest payable of $ 529,382 ,

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including interest payable of $ 182,543 .

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

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 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

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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 .

February 2023, the Company paid the second installment of $ 875,000 .

For the three months ended March 31, 2023, the Company recorded accrued

interest of $ 32,813 and amortization of note premium of $ 12,579 .

For the nine months ended March 31, 2023, the Company recorded accrued

interest of $ 131,250 and amortization of note premium of $ 37,839 .

As of March 31, 2023, including $ 210,000 of accrued interest and $ 44,181

of unamortized premium, the total outstanding balance of the Purchase Note was $ 2,004,181 , which is presented on the consolidated balance

sheet as a current portion of $ 2,004,181 and a non-current portion of $ 0 .

Note 13 - Related party transactions

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

respectively.

Starting March 1, 2022, the Company subleases

up to 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 nine months ended March 31, 2023, the Company recorded a sublease fee of $ 0 and $ 387,750 as

other non-operating income.

As of March 31, 2023 and June 30, 2022, other receivables due from Box Harmony was $ 39,853 and $ 51,762 , respectively.

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

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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.

As of March 31, 2023 and June 30, 2022, the balance of advance from

shareholders was $ 89,968 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:

For the three and nine months ended March 31,

2023, 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 nine

months ended March 31, 2023 and 2022 consisted of the following:

Schedule of provision for income tax expense

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Total current income tax provision

( 1,818,222 )

( 1,259,785 )

Total deferred taxes

( 2,482,995 )

( 1,786,125 )

Total provision for income taxes

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The Company is subject to U.S.

federal income tax

as well as state income tax in certain jurisdictions.

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

to which the Company is subject.

The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated

statutory rates:

federal income

tax as well as state income tax in certain jurisdictions.

The tax years 2018 to 2021 remain open to examination by the major taxing

jurisdictions to which the Company is subject.

The following is a reconciliation of income tax expenses at the effective rate to income

tax at the calculated statutory rates:

Schedule of reconciliation of effective income tax rate

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Statutory tax rate

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Effective tax rate

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 March 31, 2023, prepaid income taxes to

US tax authorities and income tax payable to Chinese tax authorities was $ 44,218 and $ 292,166 , respectively.

As of June 30, 2022, prepaid

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Intangible assets acquired

( 1,193,092 )

( 1,323,720 )

Total deferred tax liabilities

Net deferred tax assets

(liabilities)

( 1,304,806 )

( 1,409,974 )

Net deferred tax assets (liabilities)

$ ( 939,115 )

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:

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

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Net (Loss) Income

Attributable to iPower, Inc.

$ ( 1,530,534 )

2 unchanged sentences

(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 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.

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 and nine months ended March 31, 2023.

The computation of diluted EPS did not include the underlying shares of warrants calculated using treasury method for the three and nine months ended March 31, 2022 as the exercise price was greater than the market price of the shares.

The computation of diluted EPS did not include the underlying shares

of the stock options granted in May 2022 for the three and nine months ended March 31, 2023 as none of the options were vested as of March

For the three and nine months ended March 31, 2023, 166,661 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 vested.

For the three and nine

months ended March 31, 2022, 107,625 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

During the year ended June 30, 2022, the Company issued

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

During the year ended June 30, 2022, the Company

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

On February 15, 2022, as part of the consideration

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

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.

As of March 31, 2023 and June 30, 2022, there

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

Preferred Stock

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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.

As of March 31, 2023 and June 30, 2022, respectively, there were

no shares of Preferred Stock issued and outstanding.

Equity Incentive Plan

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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.

On November 16, 2021 and December 6, 2022, 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 six months ended December 31, 2022, the Company granted an additional

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 the IPO date was based on

the stock price on each grant date.

During the nine months ended March 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

For the three and nine months ended March 31, 2023, the Company recorded $ 7,192

of stock-based compensation expense.

For the three and nine months ended March 31, 2022, the Company recorded $ 149,299

and $ 306,788

of stock-based compensation expense.

As of March 31, 2023 and June 30, 2022, the unvested number of RSUs was 12,400

and the unamortized expense was $ 7,192

and $ 15,000 ,

respectively.

Information relating to RSU grants is summarized as

Information relating to RSU grants is summarized

Schedule of RSU activity

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RSUs forfeited

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

RSUs granted, but not vested, at March 31, 2023

_____________________

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

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

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

As of March 31, 2023, of the 206,680 vested RSUs,

40,019 shares of Common Stock were issued, and 166,661 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

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

shares to Mr.

The Option Grants, which were issued on May 13, 2022, have an exercise price of $ 1.12

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 December 31, 2022 was as follows:

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 shares to Mr.

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

have an exercise price of $ 1.12 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 March 31, 2023 was as follows:

Revenue in Fiscal Year

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Achievement Status

The Company evaluated the performance condition and

market condition under ASC 718-10-20.

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

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

The market condition is

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

The Company evaluated the performance condition

and market condition under ASC 718-10-20.

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

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

The market condition

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

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

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

On the grant date, a Monte Carlo simulation was used

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

for such tranche was expected to be achieved.

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

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

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

The Monte Carlo simulation utilized the

following inputs:

On the grant date, a Monte Carlo simulation was

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

milestone for such tranche was expected to be achieved.

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

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

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

The Monte Carlo simulation

utilized the following inputs:

Stock Price - $ 1.12

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

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

As of March 31, 2023, none of the options had vested.

For the three and nine months ended March 31, 2023, the Company recorded $ 110,382 and $ 331,146 of stock-based compensation expense related

to the Option Grants.

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

For the three and nine months ended March 31, 2022, the Company did no t record any stock-based compensation expense

related to the Option Grants.

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will be recognized over 2.25 years to 9.25 years, depending on the tranche.

Note 17 – Warrant liabilities

The Company’s warrant liabilities contained

unobservable inputs that reflected the Company’s own assumptions in which there was little, if any, market activity as of the measurement

Accordingly, the Company’s warrant liabilities were measured at fair value on a recurring basis using unobservable inputs

and were classified as Level 3 measurements.

On December 30, 2020, the Company issued warrants

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

which was recorded as financing expense.

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

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.

On January 27, 2021, the Company completed a private

placement offering pursuant to which the Company sold to two accredited investors an aggregate of $ 3,000,000 in Convertible Notes and

warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion

of the Convertible Notes.

The convertible note warrants shall be exercisable for a period of three years from the IPO completion date

at a per share exercise price equal to the IPO.

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

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

In connection with the Convertible Note offering,

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

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

The placement agent warrants had an exercise period

of five years from the issuance date.

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

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

stock with the following assumptions:

Schedule of assumptions for warrant liabilities

As of May 14, 2021

Expected term

1 day to 3 years

Expected volatility

Risk-free interest rate

0.35% to 0.92%

Expected dividend rate

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

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

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

The increase in fair value immediately before the IPO was $ 617,593 , which was reported

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

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

Agent exercised its warrants in full to purchase a total of 24,451 shares of the Company’s Common Stock and, as such, there were

no placement agent warrants outstanding as of June 30, 2021.

At the same time, the outstanding warrants held by the Convertible Note investors

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

Through December 31, 2022, none of the

private placement investors exercised any of their warrants.

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.

17 – Warrant liabilities

On January 27, 2021, the Company completed a

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

in Convertible Notes and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common

Stock issuable upon conversion of the Convertible Notes.

The convertible note warrants shall be exercisable for a period of three years

from the IPO completion date at a per share exercise price equal to the IPO.

In accordance with the terms of the warrants, in the event

the Convertible Notes are repaid in cash by the Company, the warrants issued in conjunction with the Convertible Notes will expire and

have no further value.

The outstanding warrants held by the Convertible

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

Through March 31, 2023,

none of the private placement investors exercised any of their warrants.

As such, as of March 31, 2023 and June 30, 2022, the number

of shares issuable under the outstanding warrants was 685,715 ,

with an average exercise price of $ 5.00

Note 18 - Concentration of risk

Financial instruments that potentially subject the

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

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

Financial instruments that potentially subject

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

As of March 31, 2023 and June 30, 2022, $ 1,419,495

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

$ 3.1 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

from revenue earned from customers, thereby exposing the Company to credit risk.

The risk is mitigated by the Company’s assessment

of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

The Company maintains reserves for estimated

credit losses, and such losses have generally been within expectations.

The business of DHS, the Company’s VIE, may

be impacted by Chinese economic conditions, changes in regulations and laws, and other uncertainties.

$ 0.4 million and $ 0.5 million , respectively, in excess of the FDIC insurance limit, as of March 31, 2023 and June 30, 2022.

Accounts receivable are typically unsecured and

derived from revenue earned from customers, thereby exposing the Company to credit risk.

The risk is mitigated by the Company’s

assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

The Company maintains reserves

for estimated credit losses, and such losses have generally been within expectations.

The business of DHS, the Company’s VIE,

may be impacted by Chinese economic conditions, changes in regulations and laws, and other uncertainties.

Customer and vendor concentration risk

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

For the nine months ended March 31, 2023 and 2022,

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,

As of March 31, 2023

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

For the nine months ended March 31, 2023 and 2022,

two suppliers accounted for 39 % ( 28 % and 11 %) and 27 % ( 17 % and 11 %) 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,

As of March 31, 2023,

accounts payable to two suppliers accounted for 59 % ( 53 % and 6 %) 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

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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 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

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The financial statements reflected $ 8,504,929 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:

$ 8,927,949 and $ 10,848,544 , respectively, of operating lease liabilities as of March 31, 2023 and June 30, 2022.

Three Months Ended March 31, 2023 and 2022:

Schedule of lease cost and other information

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Average discount rate - operating leases

Six Months Ended December 31, 2022 and 2021:

Nine Months Ended March 31, 2023 and 2022:

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

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Average discount rate - operating leases

The supplemental balance sheet information related to leases for the period

is as follows:

The supplemental balance sheet information related to leases for the

period is as follows:

Supplemental balance sheet information related to leases

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Imputed interest/present value discount

( 1,015,068 )

Present value of lease liabilities

Contingencies

Except as disclosed below, the Company is not currently

a party to any material legal proceedings, investigation or claims.

As the Company may, from time to time, be involved in legal matters

arising in the ordinary course of its business, there can be no assurance that such matters will not arise in the future or that any such

matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not at some

point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition or results

of operations of the Company.

Pursuant to an engagement agreement, dated and effective

August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the Company engaged Boustead

to act as its exclusive placement agent for private placements of its securities and as a potential underwriter for its initial public

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.

Except as disclosed below, the Company is not

currently a party to any material legal proceedings, investigation or claims.

As the Company may, from time to time, be involved in legal

matters arising in the ordinary course of its business, there can be no assurance that such matters will not arise in the future or that

any such matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not

at some point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition

or results of operations of the Company.

Pursuant to an engagement agreement, dated

and effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the

Company engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential

underwriter for its initial public offering.

On February 28, 2021, the Company informed Boustead that it was terminating the

Engagement Agreement and any continuing obligations the Company may have had under its terms.

On April 15, 2021, the Company

provided formal written notice to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective

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.

(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.

has agreed to indemnify D.A.

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

panel during the week beginning May 22, 2023.

The Company 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.

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 of 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

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

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

February 2022, the Russian Federation began conducting military operations against Ukraine, 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,

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.

Any of these risks might have a materially adverse impact on our business operations and our financial position or results of

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 nine months ended March 31,

Note 20 - Subsequent events

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

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

financial statements presented herein.

Company noted 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