What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-09-15 compared with 2022-09-28 · 700 added, 697 removed, 921 unchanged (60% of the section changed)

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Index to Financial Statements

Independent Registered Public Accounting Firm PCAOB ID ( 1195 )

Report of Independent Registered Public Accounting Firm PCAOB ID ( 1195 )

Consolidated Balance Sheets as of June 30, 2023 and 2022

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

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2023 and 2022

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Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of iPower,

(f/k/a BZRTH, Inc.) and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying

consolidated balance sheets of iPower, Inc.

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

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

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

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

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

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and Stockholders of iPower, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of iPower,

and its subsidiaries (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of operations

and other comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period

ended June 30, 2023 and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and

the results of their operations and their cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

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

We conducted our audits in accordance with

the standards of the PCAOB.

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

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

The Company is not required to have, nor were

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

As part of our audits, we are required to obtain

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

of the Company’s internal control over financial reporting.

These consolidated financial statements are the responsibility of the

Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

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

We conducted our audits in accordance with the standards of the PCAOB.

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

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

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

an audit of its internal control over financial reporting.

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

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

control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for

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

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Other receivable - related party

Prepayments and other current

Prepayments and other current assets, net

Total current assets

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Property and equipment, net

Deferred tax assets

Non-current prepayments

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Advance from shareholders

Short-term loans payable

Investment payable

Lease liability - current

Long-term loan payable - current portion

Long-term promissory note payable - current portion

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Non-current liabilities

Long-term loan payable

Long-term revolving loan payable, net

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Stockholders' Equity

Preferred stock, $ 0.001

Preferred stock, $ 0.001 par value;

20,000,000 shares authorized;

shares issued and outstanding at June 30, 2022 and 2021

Common stock, $ 0.001

0 shares issued and outstanding at

June 30, 2023 and 2022

Common stock, $ 0.001 par value;

180,000,000 shares authorized;

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Additional paid in capital

Retained earnings

(Accumulated deficits) Retained earnings

( 8,702,442 )

Non-controlling interest

Accumulated other comprehensive

income (loss)

Accumulated other comprehensive income (loss)

Total liabilities and equity

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

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

Except shares authorized, all references to number

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

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

shares of the Company’s Class B Common Stock.

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

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

The accompanying notes are

an integral part of these consolidated financial statements.

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

and Subsidiaries

Statements of Operations and Comprehensive Income (Loss)

For the Years Ended June

30, 2022 and 2021

Consolidated Statements of Operations

For the Years Ended June 30, 2023 and 2022

For the Years Ended June 30,

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General and administrative

Impairment loss - goodwill

Total operating expenses

INCOME FROM OPERATIONS

(LOSS) INCOME FROM OPERATIONS

( 13,483,543 )

OTHER INCOME (EXPENSE)

Interest income (expenses)

Other financing expenses

PPP loan forgiveness

Gain (Loss) on equity method investment

Other non-operating income (expense)

Interest expenses

( 1,066,280 )

Other financing expenses

Loss on equity method investment

Other non-operating income

Total other expenses, net

( 1,184,030 )

INCOME (LOSS) BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET INCOME (LOSS)

(LOSS) INCOME BEFORE INCOME TAXES

( 14,667,573 )

PROVISION FOR INCOME TAX (BENEFIT) EXPENSE

( 2,690,500 )

NET (LOSS) INCOME

( 11,977,073 )

Non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

NET (LOSS) INCOME ATTRIBUTABLE TO iPOWER INC.

$ ( 11,965,390 )

OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustments

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO iPOWER

$ ( 12,033,202 )

WEIGHTED AVERAGE NUMBER OF COMMON STOCK

EARNINGS (LOSSES) PER SHARE

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

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

Except shares authorized, all references to number

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

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

shares of the Company’s Class B Common Stock.

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

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

(LOSSES) EARNINGS PER SHARE

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

and Subsidiaries

Consolidated Statements

of Changes in Stockholders' Equity

Statements of Changes in Stockholders' Equity

For the Years Ended June 30, 2023 and 2022

Common Stock *

Retained Earnings (Accumulated

Non-controlling

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Balance, June 30, 2022

Cash for Class B common stock

Conversion of Class B common stock

( 11,965,390 )

Shares issued for cash upon IPO

Shares issued upon conversions of debts

Shares issued upon exercise of warrants

Restricted stock units vested

( 11,977,073 )

Stock-based compensation

Restricted shares issued for vested RSUs

Foreign currency translation adjustments

Balance, June 30, 2023

$ ( 8,702,442 )

Balance, June 30, 2021

Non-controlling interest

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Balance, June 30, 2022

*On November 16, 2020,

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

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

financial statements have been retroactively adjusted.

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

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

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

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 11,977,073 )

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

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

Depreciation and amortization expense

Inventory reserve

Credit loss reserve

PPP loan forgiven

Credit loss reserve for accounts receivable and other receivables

Loss on equity method investment

Impairment loss - goodwill

Stock-based compensation expense

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

Change in fair value of warrants and conversion features

Change in operating assets and liabilities

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( 17,592,451 )

( 7,322,560 )

Deferred tax assets/liabilities

Prepayments and other current assets

( 3,094,365 )

Prepayments and other current assets

Non-current prepayments

( 1,357,292 )

Other non-current assets

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Other payables and accrued liabilities

Income taxes prepaid/payable

Net cash used in operating activities

( 16,603,005 )

Income taxes payable

Net cash provided by (used in) operating activities

( 16,603,005 )

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Payments of financing fees

Payment on investment payable

( 1,500,000 )

Payments on short-term loans

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( 1,767,061 )

Proceeds from convertible notes

Proceeds from long-term loans

Payments on long-term loans

Shares issued for cash

Gross proceeds from IPO

IPO offering costs in cash

( 8,600,000 )

Net cash provided by financing activities

Net cash (used in ) provided by financing activities

( 7,153,620 )

EFFECT OF EXCHANGE RATE ON CASH

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( 4,829,758 )

CASH AND CASH EQUIVALENT, beginning of year

CASH AND CASH EQUIVALENT, end of year

CASH AND CASH EQUIVALENT, beginning of period

CASH AND CASH EQUIVALENT, end of period

SUPPLEMENTAL CASH FLOW INFORMATION:

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Identifiable intangible assets acquired in business acquisition

Other net assets/(liabilities) acquired in business acquisition

Net assets acquired in business acquisition

$ ( 638,101 )

Right of use assets acquired under new operating leases

Reclassification of warrant liability to additional paid in capital

Conversion of debts to common stock

Exercise of warrants

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

Notes to Consolidated Financial Statements

Notes to Consolidated Financial

As of June 30, 2023 and 2022 and for the Years

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The Company is principally engaged in the marketing and sale

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

products and accessories mainly in the North America.

of consumer home, garden and other products and accessories mainly in the North America.

Effective on March 1, 2020, as amended and restated

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

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

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

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

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 iPower’s assumption of all of its liabilities.

At that time, E Marketing was considered

a variable interest entity (“VIE”).

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

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

owned subsidiary.

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

On September 4, 2020, the Company entered into

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

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

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

At that time, GPM was considered a VIE.

On May 18, 2021,

the Company acquired 100% equity ownership of GPM.

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

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

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

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

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

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

such products.

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

equity interest or otherwise control of Box Harmony.

See details on Note 3 below.

equity interest in or otherwise control Box Harmony.

See details at Note 3 below.

On February 10, 2022,

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

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

other businesses, in marketing their products.

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

businesses, in marketing their products.

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

on Note 3 below.

See details at

Note 3 below.

On February 15, 2022,

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

company which has opted out of.

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

Use of estimates and assumptions

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the periods presented.

Actual results could differ from these estimates.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at

the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one

or more future confirming events.

Accordingly, the actual results could differ significantly from those estimates.

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.

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

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

Income and expense accounts are

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

Translation adjustments

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

stockholders’ equity.

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

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

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

as its functional currency.

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

Bank of China (the “PBOC”) at the end of the period.

Income and expense accounts are translated at the average translation

rates and the equity accounts are translated at historical rates.

Translation adjustments resulting from this process are included in

accumulated other comprehensive income (loss) in the statement of changes in stockholders’ equity.

Transaction gains and losses

that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in

the results of operations as incurred.

The balance sheet amounts of the VIE, with the

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as cash on hand and bank deposits.

From time to time, the Company may maintain

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

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

bearing accounts).

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

Management believes our Company is not exposed

to any significant credit risk with respect to its cash.

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 FDIC for interest

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

The Company has not experienced

any losses with respect to cash.

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

Accounts receivable, net

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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

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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

amount less an allowance for credit losses, if any.

The Company maintains an allowance for credit losses resulting from the inability

of its customers to make required payments based on contractual terms.

The Company reviews the collectability of its receivables on a

regular and ongoing basis.

The Company has also included in calculation of allowance for credit losses the potential impact of the COVID-19

pandemic on our customers’ businesses and their ability to pay their accounts receivable.

After all attempts to collect a receivable

have failed, the receivable is written off against the allowance.

The Company also considers external factors to the specific customer,

including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic.

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

Accounts receivable are recognized and carried

at carrying amount less an allowance for credit losses, if any.

The Company maintains an allowance for credit losses resulting from the

inability of its customers to make required payments based on contractual terms.

The Company reviews the collectability of its receivables

on a regular and ongoing basis.

The Company has also included in calculation of allowance for credit losses the potential impact of the

COVID-19 pandemic on our customers’ businesses and their ability to pay their accounts receivable.

After all attempts to collect

a receivable have failed, the receivable is written off against the allowance.

The Company also considers external factors to the specific

customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic.

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

Equity method investment

The Company accounts for its ownership

interest in Box Harmony, a 40 %

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

Joint Ventures.

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

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

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 the VIE.

Company applies the acquisition method of accounting for business combinations.

Under the acquisition method, the acquiring entity in

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

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

Any excess of the

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

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

gain is recognized.

On February 15, 2022, the Company acquired 100%

of the ordinary shares of Anivia and its subsidiaries, including the VIE.

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.

Management utilizes valuation techniques appropriate for the asset or liability

being measured in determining these fair values.

Any excess of the purchase price over amounts allocated to assets acquired, including

identifiable intangible assets, and liabilities assumed is recorded as goodwill.

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.

See Note 4 for details regarding the acquisition.

Variable interest entities

On February 15, 2022,

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

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

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

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

DHS’s operational funding

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

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

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

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

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

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

February 15, 2022.

See Note 4 and Note 5 for details on acquisition.

the Company acquired 100% of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information Technology

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

Pursuant to the terms of the Agreements, the Company does

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

impact DHS’s economic performance.

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.

See Note 4 and Note 5 for details regarding the acquisition.

Goodwill represents the excess of the purchase

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

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

at the reporting unit level.

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

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

If it is determined

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

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

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

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

That additional procedure

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

An impairment loss is

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

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 for the period ended June 30, 2022.

Due to the decrease in the Company’s share price subsequent to the filing of the June 30, 2022 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

The Company also considered the Market Capital Method, which is an alternative market approach, suggested the Company’s

goodwill is partially impaired.

Subsequent to the quarter ended September

30, 2022, during the period ended June 30, 2023, the Company performed a qualitative and quantitative goodwill impairment analysis

following the steps laid out in ASC 350-20-35-3C and noted no goodwill impairment.

As of June 30, 2023 and 2022, the goodwill

balance amounted to $ 3,034,110 and

$ 6,094,144 , respectively.

Intangible Assets, net

intangible assets at June 30, 2023 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition

of Anivia Limited.

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

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

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

Schedule of estimated useful life

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The Company reviews the recoverability of long-lived

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

may not be recoverable.

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

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

If these cash flows are

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

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

as other fair value determinations.

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

not be recoverable.

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

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

If these cash flows are less

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

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

fair value determinations.

As of June 30, 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.

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

principles, and expands disclosures about fair value measurements.

ASC 825, “Disclosures about Fair Value of

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

ASC 820, “Fair Value Measurements”

defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures

about fair value measurements.

The carrying amounts of cash and cash equivalents,

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

On February 15, 2022,

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

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

The principal amount of the Purchase Note was $ 3.5

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

million using the following inputs:

Schedule of assumptions

On February 15, 2022, as part of the consideration

for the acquisition of Anivia, the Company issued a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual installments

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

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

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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As of June 30, 2023,

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

the outstanding principal balance of the Purchase Note was $ 2,017,852 , including a premium of $ 31,602 and $ 236,250 of accrued interest.

For other financial instruments to be reported

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

The Company does not have any assets or liabilities

measured at fair value on a recurring basis.

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

a result of those measurements, we recognized an impairment charge of $3.1 million during the year ended June 30, 2023 as follows:

Schedule of fair value on nonrecurring basis

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 year ended June 30, 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 freight and

storage costs in the current interim quarter, among others.

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

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

a contract has been identified, separate performance obligations

are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue

is recognized upon satisfying each performance obligation.

The Company transfers the risk of loss or damage upon shipment, therefore,

revenue from product sales is recognized when it is shipped to the customer.

Return allowances, which reduce product revenue by the Company’s

best estimate of expected product returns, are estimated using historical experience.

The Company recognizes revenue from product sales

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

a contract has

been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated

to separate performance obligations and revenue is recognized upon satisfying each performance obligation.

The Company transfers the risk

of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer.

Return allowances,

which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience.

The Company evaluates the criteria of ASC

Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales

and related costs or the net amount earned as commissions.

Generally, when the Company is primarily responsible for fulfilling the promise

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

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

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

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

Generally, when the Company is primarily responsible for

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

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

Payments received prior to the delivery of goods to customers are recorded

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and administrative expenses, are expensed as incurred.

Inventory, net

Inventory consists of finished goods ready for

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The Company’s

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

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

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

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

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

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Segment reporting

The Company follows ASC 280, Segment

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

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

Company has only one reportable segment.

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

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

of the Company’s total sales.

The Company follows ASC 280, Segment Reporting.

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

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

one reportable segment.

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

For the years

ended June 30, 2023 and 2022, sales through Amazon to Canada and other foreign countries were approximately 10 %

and 7.2 % of the Company’s total sales.

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

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

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

of the Company’s total sales and the remaining 77 %

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

As of June 30, 2023, the Company had approximately $ 1.6

million of inventory stored in China.

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

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

Therefore, no geographical segments are

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

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.

majority of the deferred tax assets are US related, and a majority of the Company’s revenues are derived from within the United

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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amount expected to be realized.

As a result of the implementation of certain provisions

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

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

for income taxes.

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

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

such jurisdictions.

As of June 30, 2023, the Company expected that the deferred tax assets are fully realizable so did no t

record any valuation allowance.

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.

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

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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.

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740, Income Taxes.

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

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

issued accounting pronouncements

In June 2022, FASB issued ASU 2022-03,

Fair Value Measurement (Topic 820):

Recently issued accounting pronouncements

In September 2022, FASB issued ASU 2022-04,

Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

The amendments in this

ASU require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient

information about the program to allow a user of financial statements to understand the program’s nature, activity during the period,

changes from period to period, and potential magnitude.

ASU 2022-04 is effective for fiscal years, including interim periods within those

fiscal years, beginning after December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective

for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

An entity should apply ASU No.

2022-04 retrospectively

to all periods in which a balance sheet is presented, except for the obligation rollforward, which should be applied prospectively.

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

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

Value Measurement (Topic 820):

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

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

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

This standard is effective for

fiscal years beginning after December 15, 2024.

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

on the consolidated financial statements.

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 its consolidated financial statements.

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

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

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

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

if the entity had originated the contracts.

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

application permitted.

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

financial statements.

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 its 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

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.

In December 2022,

the FASB issued ASU 2022-06, Reference Rate reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which deferred the sunset date

of Topic 848, Reference Rate Reform to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic

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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method of transition.

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

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

In January 2020, the FASB issued ASU 2020-01,

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

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

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

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

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

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

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

value option.

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

beginning after December 15, 2021.

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

includes the adoption date.

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

Financial Statements.

“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.

ASU 2020-01 is effective for public business entities

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

An entity should apply ASU 2020-01

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

The 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,

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is permitted.

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

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

- Goodwill and Other (Topic 350):

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

goodwill impairment test.

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

The adoption of this standard did not have material impact on its consolidated

financial statements.

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

“Intangibles - Goodwill and Other (Topic 350):

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

from the goodwill impairment test.

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

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

All other entities,

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

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

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

material impact on the Company's Consolidated Financial Statements.

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.

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.

disclosures above on Goodwill for further details.

The Company does not believe other recently issued

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

In January 2023, TPA and Xiao transferred their 60% equity units to a

third party without consideration as the LLC was still in development stage and did not have significant operations.

The transfer of equity

did not have any impact on the LLC’s financial statements.

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

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other businesses, in marketing their products.

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

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

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

Following entry into the GSM Joint Venture Agreement,

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

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

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

The LLC Agreement

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

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

The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by Bro Angel,

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

As of the date of this

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Pursuant to the terms of the Agreements, the Company

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

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

equity ownership and control over operations.

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

to the Company’s consolidated financial statements.

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

Based on ASU 2015-02, the Company consolidates GSM into

its financial statements due to its majority equity ownership and control over operations.

For the years ended June 30, 2023 and 2022,

the impact of GSM’s activities were immaterial to the Company’s consolidated financial statements.

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

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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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the consent of the WFOE.

The acquisition of

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

As the acquirer for accounting purposes, the Company has estimated

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

accounting policies.

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

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

The fair value of the

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

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

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

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

In the event of any breach of any of the

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

Company as a result thereof.

The Company recognized an approximately $ 6.1

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

not deductible for income tax purposes.

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

as general and administration expenses and $ 50,000

paid to JPM as financing fees.

The acquisition of Anivia

was accounted for as a business combination under ASC 805.

As the acquirer for accounting purposes, the Company has estimated the fair

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

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

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

The fair value of the remaining assets acquired and liabilities

assumed were not significantly different from their carrying values at the acquisition date.

In addition, pursuant to the Transfer Agreement,

the Sellers made certain representations and warranties, including that other than the items presented on the balance sheet on February

15, 2022, DHS, the operating VIE, was not subject to any loans, debts, liabilities, guarantees or other contingent liabilities at the

Closing date.

In the event of any breach of any of the representations and warranties, the sellers shall bear joint and several liability

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

The Company recognized an approximately $ 6.1 million of

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

Goodwill is not deductible

for income tax purposes.

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

expenses and $ 50,000 paid to JPM as financing fees.

The following information

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Total purchase consideration

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

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

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

The results of operations

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

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

See Note 5 for details.

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 years ended June 30, 2022 and 2021, as if the

acquisition had occurred on July 1, 2020.

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

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

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

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

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

Schedule of Business Acquisition, Pro Forma Information

Years ended June 30,

information presents a summary of the Company’s combined operating results for the year ended June 30, 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

For the Year Ended

June 30, 2022

Total Revenues

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and liabilities were as follows for the years indicated:

Carrying amount of VIE assets and liabilities

Schedule of carrying amount of VIE assets and liabilities

June 30, 2023

June 30, 2022

Prepayments and other receivables

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Right of use – noncurrent

Deferred tax assets

Advance from shareholders

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The operating results of the VIE were as follows

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

Operating results of the VIE

for the year ended June 30, 2023:

Schedule of operating results of the VIE

Net loss after elimination of intercompany transactions

The operating results of the VIE were as follows for the period from

February 15, 2022 to June 30, 2022:

June 30, 2022

Net loss after elimination of intercompany transactions

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

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

6 – Accounts receivable, net

For the year ended June 30, 2023, the VIE contributed approximately

million of revenue and $ 1.4

million of net loss before elimination.

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

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

Note 6 – Accounts receivable, net

Accounts receivable for the Company consisted

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Total accounts receivable

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

The changes in allowance for credit losses on

accounts receivable are summarized below:

Schedule of changes in allowance for credit losses

Allowance for Credit Losses

Balance at June 30, 2021

Allowance recorded during the year ended June 30, 2022

Balance at June 30, 2022

Allowance recorded during the year ended June 30, 2023

Balance at June 30, 2023

Note 7 – Inventories, net

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of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 20,593,889 and $ 30,433,766 , respectively.

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

was $ 320,000 and $ 95,574 , respectively.

Note 8 – Prepayments and other current assets

For the years ended June 30, 2023 and 2022, the Company recorded inventory

reserve expense of $ 238,899 and $ 224,426 ,

respectively.

As of June 30, 2023 and 2022, allowance for obsolescence was $ 558,899

and $ 320,000 , respectively.

8 – Prepayments and other current assets, net

As of June 30, 2023 and 2022, prepayments and other current assets

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Schedule of prepayments and other current assets

June 30, 2023

June 30, 2022

Advance to suppliers

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Prepaid expenses and other receivables

Other receivables consisted of delivery fees

of $ 56,884 and $ 178,581

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

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

Allowance for credit losses

Other receivables consisted of delivery fees of

$ 165,962 and $ 56,884 and receivables from one and two unrelated parties for their use of the Company’s courier accounts at June

30, 2023 and 2022.

The changes in allowance for credit losses on

other receivables are summarized below:

Schedule of credit losses on other receivables

Allowance for Credit Losses

Balance at June 30, 2021

Allowance recorded during the year ended June 30, 2022

Balance at June 30, 2022

Allowance recorded during the year ended June 30, 2023

Balance at June 30, 2023

Note 9 – Non-current prepayments

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Note 10 – Intangible assets, net

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

of the following:

As of June 30, 2023 and 2022, intangible assets,

net, consisted of the following:

Schedule of intangible assets

June 30, 2023

June 30, 2022

Covenant not to compete

Supplier relationship

Supplier relationships

Accumulated amortization

The intangible assets were acquired on February

15, 2022 through acquisition of Anivia.

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

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

At June 30, 2022, finite-lived intangible assets

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

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

The intangible assets were acquired on

February 15, 2022 through acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at June 30, 2023

was approximately 7.2

The amortization expense for the years ended June 30, 2023 and 2022 was $ 649,371

and $ 243,515 , respectively.

At June 30, 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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consisted of the following:

Schedule of other payables and accrued liabilities

Schedule of accounts payable and accrued liabilities

June 30, 2023

June 30, 2022

Accrued payables for inventory in transit

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Other accrued liabilities and payables

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

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

premium on the purchase price.

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

As of June 30,

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

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

As of the date of this report, the amount had

been paid off.

The Company’s controlled VIE, DHS, facilitates

the Company in the process of inventory procurement.

During the years ended June 30, 2023 and 2022, the Company purchased a total of $ 31,385

and $ 378,385 , respectively, in inventories from a supplier which had a payment term of 90 days with a 2% premium on the purchase price.

As of June 30, 2023 and 2022, the outstanding balance included in other payables to this supplier was $ 0 and $ 378,385 , which was presented as financing cash flows from short term loans on

the statement of cash flows.

Note 12 – Loans payable

Short-term loans

Revolving credit facility

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of the accounts receivable for any other reason.

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

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

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

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accrued interest expense of $ 39,237 .

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

and $ 487,815 ,

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

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

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

Asset-based revolving loan

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to its financial advisor.

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

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

the term of the ABL.

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

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

Below is a summary of the interest expense recorded

for the years ended June 30, 2023 and 2022:

Schedule of interest on loans payable

Accrued interest

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Amortization of debt discount

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

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

As of June 30, 2023, the outstanding amount of

the revolving loan payable, net of debt discount and including interest payable was $ 9,791,191

and $ 12,314,627 ,

respectively.

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 in the Credit Agreement, and deliver a

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

Under the terms

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

As of June 30, 2023, the Company was in compliance with the ABL covenants.

Promissory note payable

On February 15, 2022, as part of the

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

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

The principal amount of the Purchase

Note was $ 3.5

million with a fair value of $ 3.6

million as of February 15, 2022.

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

and amortization of note premium of $ 18,609 .

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

of accrued interest and $ 82,020

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

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

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

On February 15, 2022, as part of the consideration

for acquisition of Anivia, the Company issued a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual installments

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

The principal amount of the Purchase Note was $ 3.5 million with a fair value

of $ 3.6 million as of February 15, 2022.

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

And in February 2023, the

Company paid the second installment of $ 875,000 .

For the year ended June 30, 2023, the Company recorded accrued interest of $ 157,500 and

amortization of note premium of $ 50,418 .

As of June 30, 2023, including $ 236,250 of accrued interest and $ 31,602 of unamortized premium,

the total outstanding balance of the Purchase Note was $ 2,017,852 , which is presented on the consolidated balance sheet as a current portion

of $ 2,017,852 and a non-current portion of $ 0 .

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

amortization of note premium of $ 18,609 .

As of June 30, 2022, including $ 78,750 of accrued interest and $ 82,020 of unamortized premium,

the total outstanding balance of the Purchase Note was $ 3,660,770 , which was presented on the consolidated balance sheet as a current

portion of $ 1,879,065 and a non-current portion of $ 1,781,705 .

Note 13 - Related party transactions

On December 1, 2018, the Company acquired certain

assets and assumed liabilities from BizRight, LLC, an entity owned and managed by the founders and officers of the Company.

The net assets

received were recorded at their historical carrying amounts and the purchase price of $2,611,594 was recorded as payable due to related

The purchase price shall be paid based on the Company’s cash flow availability and bears an interest rate of 8% per annum

on the outstanding amount.

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

Starting from March 2022 to January 2023, the

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

as disclosed in Note 1 and Note 2 above.

For the year ended June 30, 2023 and 2022, the Company received and recorded sublease fee

of $ 359,373 and

$ 330,000 as other

non-operating income, respectively.

As of June 30, 2023 and 2022, other receivables due from Box Harmony was $ 0

respectively.

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

Starting March 1, 2022, the Company

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

disclosed on Note 1 and Note 2 above.

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

as other non-operating income.

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

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

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the local government in accordance with the PRC rules.

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

14 – Income taxes

On December 22, 2017, the President of the United

States signed into law H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”).

The Tax Legislation significantly

revised the U.S.

tax code by (i) lowering the U.S.

federal statutory income tax rate from 35% to 21%, (ii) implementing

a territorial tax system, (iii) imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries, (iv) requiring

a current inclusion of global intangible low taxed income of certain earnings of controlled foreign corporations in U.S.

federal taxable

income, (v) creating the base erosion anti-abuse tax regime, (vi) implementing bonus depreciation that will allow for full expensing of

qualified property, and (vii) limiting deductibility of interest and executive compensation expense, among other changes.

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

In addition, upon completion of the acquisition

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

Anivia and its subsidiaries

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

DHS, the operating VIE

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

957(a) since the Company indirectly owns more than

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

As of June 30, 2023 and 2022, the balance of advance from shareholders was $ 85,200

and $ 92,246 , respectively.

Note 14 – Income taxes

In addition to corporate income taxes in the

United States, upon completion of the acquisition of Anivia in February 2022, the Company is subject to corporate income taxes in

People’s Republic of China (“PRC”).

Anivia and its subsidiaries were subject to BVI or Hong Kong income taxes but

did not have any operations for the year ended June 30, 2022.

DHS, the operating VIE of Anivia, is considered a Controlled Foreign

Corporation (CFC) defined under IRC Sec.

957(a) since the Company indirectly owns more than 50% voting control of DHS as a result of

the Transfer Agreement.

Therefore, DHS is subject to the GILTI Tax.

DHS is subject to 25% tax

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

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

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

a $ 6,094,144 of goodwill.

DHS is subject to 25% tax rate in PRC.

The Company made an

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

As the result of the election, no

GILTI tax was recorded as of June 30, 2023 and 2022.

In addition, as a result of the acquisition, the Company booked a $ 6,094,144

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

Other provisions of the new legislation include,

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

These additional items have been considered

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

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

tax liabilities of $ 939,115 resulting from

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

For the year ended June 30, 2021, the Company

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

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

consisted of the following:

The income tax provision for the years ended June

30, 2023 and 2022 consisted of the following:

Schedule of provision for income tax expense

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Total current income tax provision

( 2,462,699 )

Total deferred taxes

( 3,097,149 )

Total provision for income taxes

$ ( 2,690,500 )

The Company is subject to U.S.

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Foreign tax rate difference

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

( 8,931.93 % )

Impairment loss on goodwill – permanent difference

Net effect of state income tax deduction and other permanent differences

Effective tax rate

( 8,531.35 % )

As of June 30, 2023, prepaid income taxes to US tax authorities and

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

and $ 299,563 ,

respectively.

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

income tax payable to Chinese tax authorities was $ 45,718 and $ 276,683 , respectively.

As of June 30, 2022, prepaid income taxes to US

tax authorities and income tax payable to Chinese tax authorities was $ 375,087 and $ 299,563 , respectively.

The tax effects of temporary differences which give rise to significant

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ROU assets / liabilities

Net Operation loss

Disallowed interest expense

Stock-based compensation

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( 1,149,549 )

( 1,323,720 )

Total deferred tax liabilities

( 1,254,872 )

Net deferred tax liabilities

( 1,409,974 )

Net deferred tax assets (liabilities)

$ ( 939,115 )

Note 15 – Earnings per share

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

Earnings per share of ordinary shares:

-basic and diluted

*On November 16, 2020, the Company implemented

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

The computation of basic and diluted

EPS was retroactively adjusted for all periods presented.

*On October 20, 2020, the Company issued to its

founders 14,000,000 shares of Class B Common Stock, which shall be eligible to convert into Class A Common Stock, on a one-for-ten basis,

at any time following twelve (12) months after the Company’s completion of its initial public offering of its Class A Common Stock.

The computation of basic and diluted EPS did not include the Class B Common Stock as the holders of Class B Common Stock have no dividend

or liquidation right until such time as their shares of Class B Common Stock have been converted into Class A Common Stock.

for the status of Class B Common Stock.

Earnings per share of ordinary shares - basic and diluted

*Due to the ani-dilutive effect, the computation

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year ended June 30, 2023.

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

*The computation of diluted EPS did not include

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*The computation of diluted EPS did not include

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

considered issuable.

* For the years ended June 30, 2022 and

2021, 133,066 and 22,137

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

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

the shares underlying the exercise of options granted as none of the options were vested as June 30, 2023 and 2022.

* For the year ended June 30, 2023, 53,435 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 year ended June 30, 2022, 133,066 vested

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

are included in the computation of basic earnings (loss) per share when the shares are fully vested.

Note 16 – Equity

The Company was incorporated in Nevada on April

As of June 30, 2023, the total authorized shares of capital stock were 200,000,000 shares consisting of 180,000,000 shares of

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value of $0.001 per share.

On November 16, 2020, the Company filed an amended

and restated articles of incorporation in Nevada to consummate a 2-for-1 forward split of our outstanding shares of Class A Common Stock.

All share numbers of Class A Common Stock are stated at a post-split basis.

The holders of Class A Common Stock shall be entitled

to one vote per share in voting or consenting to the election of directors and for all other corporate purposes.

The Company issued 20,000,000

shares to its founders at inception.

On January 15, 2020, pursuant to a rescission

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

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

On October 20, 2020, the Company entered into

stock purchase agreements with Chenlong Tan and Allan Huang (the “Founders”) pursuant to which each of the Founders received

7,000,000 shares of the Company’s Class B Common Stock, for a purchase price of $ 0.001 per share in cash.

Based on the fact that

other than the total consideration of $ 14,000 (total par value of the Class B Common Stock issued), the Founders did not provide additional

services or other means of considerations for the issuance of these shares of Class B Common Stock, the issuance of the Class B Common

Stock to the Founders was considered as a nominal issuance, in substance a recapitalization transaction.

As such, in accordance with FASB

ASC 260-10-55-12 and SAB Topic 4D, the Company recorded and presented the issuance retroactively as outstanding for all reporting periods.

The Class B Common Stock was entitled to ten (10)

votes per share in voting or consenting to the election of directors and for all other corporate purposes.

In accordance with the Company’s

amended and restated articles of incorporation, the Class B Common Stock was eligible to convert into shares of Class A Common Stock,

on a ten-for-one basis, at any time following twelve (12) months after the Company’s completion of the initial public offering of

its Class A Common Stock.

Holders of Class B Common Stock had no dividend or liquidation rights until such time as their shares of Class

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

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

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

Effective April 14, 2021, the Company amended

its articles of incorporation to allow conversion of its Class B Common Stock at any time after issuance.

On that same date, the Class

B Common stockholders, Chenlong Tan and Allan Huang, elected to convert all of their 14,000,000 outstanding shares of the Company’s

Class B Common Stock into 1,400,000 shares of Class A Common Stock.

On April 23, 2021, the Company further amended and restated its articles

of incorporation to eliminate the Class A and Class B Common Stock designations and authorize for issuance a total of 180,000,000 shares

which are solely designated as Common Stock.

On May 14, 2020, the Company closed its initial

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

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

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

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

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

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

IPO, the Series A convertible preferred stock and Convertible Notes were converted into an aggregate of 955,716 shares of the Company’s

Common Stock.

On May 14, 2021, the Company issued 24,451 shares

of Common Stock upon cashless exercise of warrants held by Boustead Securities LLC, the placement agent for the Company’s private

placement offerings completed in December 2020 and January 2021.

The holders of Common Stock shall be entitled

to one vote per share in voting to the election of directors and all other corporate purposes.

Subject to the express terms of any outstanding

series of Preferred Stock, dividends may be paid in cash or otherwise with respect to the holders of Common Stock out of the assets of

the Company legally available therefor, upon the terms, and subject to the limitations, as the Board of Directors of the Company (the

“Board of Directors”) may determine.

In the event of a liquidation or dissolution of the Company, subject to the express terms

of any outstanding series of Preferred Stock, the holders of Common Stock shall be entitled to share in the distribution of any remaining

assets available for distribution to the holders of Common Stock ratably in proportion to the total number of shares of Common Stock then

issued and outstanding.

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, 2023, the Company

issued 138,557 shares of restricted common stock for RSUs vested.

On February 15, 2022, as part of the consideration

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As of June 30, 2023 and 2022, respectively, there were no shares of Preferred

Stock was issued and outstanding.

Stock issued and outstanding.

Equity Incentive Plan

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

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

Amended and Restated 2020 Equity Incentive Plan (the

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

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

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

The general purpose of the Plan is to provide an incentive to

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

Company’s business.

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

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

Amended and Restated 2020 Equity Incentive Plan (the “Plan”).

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

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

The general purpose of the

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

in the future growth of the Company’s business.

On November 16, 2021 and December 6, 2022, the Company filed a registration statement

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

Restricted Stock Unit

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

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

directors, its 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.

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

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

respectively.

30, 2023 and 2022.

As of June 30, 2023 and 2022, the unvested number of RSUs was 38,793 and 6,608 and the unamortized expense was $ 22,500

and $ 15,000 , respectively.

Information relating to RSU grants is summarized

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As of June 30, 2023, of the 232,011 vested RSUs,

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

On May 12, 2022, the Compensation Committee of

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

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

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

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

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

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

recipients through each vesting date.

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

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

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

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

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

178,576 shares of Common Stock were issued, and 53,435 shares were to be issued in the next fiscal year.

On May 12, 2022, the Compensation Committee

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

bonus of $ 60,000

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

60,000(i) 3,000,000

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

shares to Mr.

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

a contractual term of 10 years and consist of six vesting tranches with a vesting schedule based entirely on the attainment of both

operational milestones (performance conditions) and market conditions, assuming continued employment of the recipients through each

vesting date.

Each of the six vesting tranches of the Option Grants will vest when both (i) the market capitalization milestone for

such tranche, which begins at $150 million for the first tranche and increases by increments of $50 million through the

fourth tranche and $100 million thereafter (based on achieving such market capitalization for five consecutive trading days), has

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

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

The achievement status of the operational

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(in Millions)

Achievement Status

(in Millions)

Achievement Status

The Company evaluated the performance condition

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

Carlo simulation utilized the following inputs:

The Monte Carlo simulation

utilized the following inputs:

Stock Price - $ 1.12

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Dividend Yield – 0 %

The total fair value of the Option Grants was

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

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

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

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

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

The total fair value of the Option Grants

million of which, at June 30, 2023 and 2022, $2.3 million is deemed probable of vesting.

As of June 30, 2023 and 2022, none

of the options had vested.

For the year ended June 30, 2023 and 2022, the Company recorded $ 441,528

of stock-based compensation expense related to the Option Grants.

Unrecognized compensation cost related to tranches probable of

vesting is approximately $ 1.8

million and will be recognized over 2

years to 9 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 were valued using Black Scholes Option Pricing Model at issuance date and recorded $ 8,047

as financing expense and warrant liability.

On January 27, 2021, the Company completed a private

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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.

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

became fixed upon closing of the IPO.

Through June 30, 2022, none of the private placement investors exercised any of their

As such, as of June 30, 2022 and 2021, the number of shares issuable under the outstanding warrants was 685,715 , with an

average exercise price of $ 5.00 per share.

The outstanding warrants held by the Convertible

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

Through June 30, 2023,

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

As such, as of June 30, 2023 and 2022, the number of shares issuable

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

Note 18 - Concentration of risk

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

Accounts at each institution in the

United States are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

The Company had approximately $ 0.5 million

and $ 5.4 million, respectively, in excess of the FDIC insurance limit, as of June 30, 2022 and 2021.

Accounts at each institution

in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.

The Company had approximately

$ 2.7 million and $ 0.5 million , respectively, in excess of the FDIC insurance limit, as of June 30, 2023 and 2022.

Accounts receivable are typically unsecured and

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Customer and vendor concentration risk

For years ended June 30, 2022 and 2021, Amazon

Vendor and Amazon Seller customers accounted for 88 %

of the Company's total revenues, respectively.

As of June 30, 2022 and 2021, accounts receivable from Amazon Vendor and Amazon Seller

accounted for 9 4%

of the Company’s total accounts receivable.

For the years ended June 30, 2023 and 2022, Amazon

Vendor and Amazon Seller customers accounted for 91 % and 88 % of the Company's total revenues, respectively.

As of June 30, 2023 and 2022,

accounts receivable from Amazon Vendor and Amazon Seller accounted for 95 % and 94 % of the Company’s total accounts receivable.

For the years ended June 30, 2023 and 2022, one

supplier accounted for 18% and three suppliers accounted for 38 %

of the Company's total purchases, respectively.

As of June 30, 2022, accounts payable to two suppliers accounted for 34 %

of the Company’s total accounts payable.

supplier accounted for 27 % and 18 % of the Company's total purchases, respectively.

As of June 30, 2023, accounts payable to one supplier

accounted for 49 % of the Company’s total accounts payable.

As of June 30, 2022, accounts payable to two suppliers accounted for

respectively, of the Company’s total accounts payable.

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 for office and warehouse space with a lease period

from December 1, 2018 until December 31, 2020.

On August 24, 2020, the Company negotiated for new terms to extend the lease through

December 21, 2023 at the rate of approximately $42,000 per month.

The Company has entered into a lease agreement for office and warehouse space with a lease period from December

1, 2018 until December 31, 2020.

On August 24, 2020, the Company negotiated for new terms to extend the lease through December 21, 2023

at the rate of approximately $42,000 per month.

On September 1, 2020, in addition to the primary

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to lease from the Landlord approximately 99,347 square feet of space located at 8798 9th Street, Rancho Cucamonga, California (the “Premises”).

The term of the Lease Agreement was for 62 months, commencing on the date on which the Landlord completes certain prescribed improvements

The term of the Lease Agreement is for 62 months, commencing on the date on which the Landlord completes certain prescribed improvements

on the property (the “Rent Commencement Date”).

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

The lease was not started under the original

agreement as the construction was not completed.

On February 23, 2022, the Company entered into an amended agreement to extend the

lease term to 74 months.

The lease commencement date is February 10, 2022, with rent payments commencing May 11, 2022 and the lease

expiring on May 31, 2028.

The base rental fee is $ 114,249

to $ 140,079 per month

through the expiration date of May 31, 2028.

The lease was not started under the original agreement

as the construction was not completed.

On February 23, 2022, the Company entered into an amended agreement to extend the lease term to

The lease commencement date is February 10, 2022, with rent payments commencing May 11, 2022 and the lease expiring on May

The base rental fee is $114,249 to $140,079 per month through the expiration date of May 31, 2028.

On May 1, 2022, the Company leased another fulfillment

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is $ 12,440,869 .

and $ 1,819,421 of operating

lease right-of-use assets and $ 10,848,544

and $ 1,901,496 of operating lease liabilities were reflected

on the June 30, 2022 and 2021 financial statements, respectively.

The financial statements reflected $ 7,837,345 and $ 10,453,282 , respectively, of operating lease right-of-use assets, and

$ 8,265,220 and $ 10,848,544 , respectively, of operating lease liabilities as of June 30, 2023 and 2022.

Years Ended June 30, 2023 and 2022:

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period is as follows:

Supplemental balance sheet information related to leases

Schedule of supplemental balance sheet information related to leases

Operating leases

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For Year ending June 30:

2028 and after

Imputed interest/present value discount

( 1,403,200 )

Present value of lease liabilities

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(who acted as underwriter in the Company’s

We are presently waiting for the FINRA panel to schedule a hearing date for the matter.

The matter is presently scheduled to have a pre-hearing conference before a FINRA arbitration panel on September

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

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

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

or be subject to arising out of the Boustead dispute.

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

Officer and a beneficial owner more than 5% of the Company’s Common Stock, has agreed to reimburse the Company for any judgments,

fines and amounts paid or actually incurred by the Company or an indemnitee in connection with such legal action or in connection with

any settlement agreement entered into by the Company or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole

source of funding of such reimbursement to come from sales of shares then owned by Mr.

The Company cannot reasonably estimate the

amount of potential exposure as of the date of this report.

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

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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, resulting in global economic

uncertainty and increased cost of various commodities.

In response to these types of events, should they directly impact our supply

chain or other operations, we may experience or be exposed to supply chain disruption which could cause us to seek alternate sources

for product supply, or suffer consequences that are unexpected and difficult to mitigate.

Any of these risks might have a materially

adverse impact on our business operations and our financial position or results of operations.

Although, it is difficult to predict

the impact that these factors may have on our business in the future, they did not have a material effect on our results of

operations, financial condition, or liquidity for the year ended June 30, 2022.

- Subsequent events

2022, the Russian Federation began conducting military operations against Ukraine, resulting in global economic uncertainty and increased

cost of various commodities.

In response to these types of events, should they directly impact our supply chain or other operations, we

may experience or be exposed to supply chain disruption which could cause us to seek alternate sources for product supply, or suffer consequences

that are unexpected and difficult to mitigate.

Any of these risks might have a materially adverse impact on our business operations and

our financial position or results of operations.

Although, it is difficult to predict the impact that these factors may have on our business

in the future, they did not have a material effect on our results of operations, financial condition, or liquidity for the year ended

June 30, 2023 and 2022.

On April 13, 2020, the Company entered into an agreement with Royal

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

(the “PPP Note”).

The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid,

Relief and Economic Security Act (the “CARES Act”).

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

fully forgiven by the SBA.

The Company is required to retain PPP loan documentation through 2026

and permit authorized representatives of the SBA to access such files upon request.

Should the SBA conduct such a review and reject all

or some of the Company’s judgments pertaining to satisfying PPP loan eligibility or forgiveness conditions, the Company may be

required to adjust previously reported amounts and disclosures in the consolidated financial statements.

Note 20 - Subsequent events

The Company evaluated subsequent events and transactions

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

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

than as set forth below, no material subsequent events that required recognition or additional disclosure in the consolidated financial

statements are presented.

On August 24, 2023, we received a letter from

the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business

day period between July 13, 2023 to August 23, 2023 the Company’s common stock had failed to maintain a minimum closing bid price

of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum

Bid Price Requirement”).

To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00

per share for a minimum of 10 consecutive trading days, unless such period is extended by Nasdaq.

Following receipt of Nasdaq’s

deficiency notification, the Company has 180 days, or until February 20, 2024, to regain compliance with the Bid Price Requirement and

may seek an additional 180-day extension thereafter.

During that time, the Company will evaluate what actions it needs to take should

the Company determine that it is unlikely that it will regain compliance within the requisite time period.

While the Company needs to

remain mindful of the timing in which it needs to regain compliance, the deficiency notification has no immediate effect on the Company’s

Nasdaq listing and the Company’s common stock will continue to trade on Nasdaq under the ticker symbol “IPW.”

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data