What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-05-15 · 809 added, 777 removed, 730 unchanged (68% of the section changed)

1 unchanged sentence

and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of March 31, 2023 and June 30, 2022

Condensed Consolidated Balance Sheets

As of September 30, 2023 and June 30, 2023

September 30,

Current assets

2 unchanged sentences

Inventories, net

Other receivable - related party

Prepayments and other current assets

16 unchanged sentences

Advance from shareholders

Investment payable

Lease liability – current

Short-term loan payable - related party

Long-term promissory note payable – current portion

3 unchanged sentences

Long-term revolving loan payable, net

Long-term promissory note payable, net

Deferred tax liabilities

Lease liability - non-current

3 unchanged sentences

Stockholders' Equity

Preferred stock, $ 0.001

Preferred stock, $ 0.001 par value;

20,000,000 shares authorized;

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

0 shares issued and outstanding at September 30, 2023 and June 30, 2023

Common stock, $ 0.001 par value;

180,000,000 shares authorized;

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

29,710,939 and 29,710,939 shares issued and outstanding at September 30, 2023 and June 30, 2023

Additional paid in capital

(Accumulated deficits) Retained earnings

Accumulated deficits

( 9,988,957 )

( 8,702,442 )

Non-controlling interest

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total liabilities and equity

2 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Statements of

For the Three and Nine Months Ended March 31, 2023

For the Three Months Ended

For the Nine Months Ended

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2023 and 2022

For the Three Months Ended September 30,

TOTAL REVENUES

5 unchanged sentences

Total operating expenses

(LOSS) INCOME FROM OPERATIONS

LOSS FROM OPERATIONS

( 1,268,677 )

2 unchanged sentences

Interest expenses

Other financing expenses

Loss on equity method investment

Other non-operating (expense) income

Other non-operating income

Total other expenses, net

(LOSS) INCOME BEFORE INCOME TAXES

( 2,123,353 )

LOSS BEFORE INCOME TAXES

( 1,565,233 )

PROVISION FOR INCOME TAX (BENEFIT) EXPENSE

( 4,632,977 )

NET (LOSS) INCOME

PROVISION FOR INCOME TAX BENEFIT

( 1,289,351 )

1 unchanged sentence

Non-controlling interest

NET (LOSS) INCOME ATTRIBUTABLE TO IPOWER INC.

NET LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 1,286,515 )

2 unchanged sentences

Foreign currency translation adjustments

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO IPOWER INC.

COMPREHENSIVE LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 1,287,222 )

1 unchanged sentence

WEIGHTED AVERAGE NUMBER OF COMMON STOCK

(LOSSES) EARNINGS PER SHARE

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

LOSSES PER SHARE

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

and Subsidiaries

Unaudited Condensed Consolidated Statements of

Changes in Stockholders' Equity

For the Three and Nine Months Ended March 31, 2023

Common Stock *

Condensed Consolidated Statements of Changes in Stockholders' Equity

For the Three Months Ended September 30, 2023 and 2022

Additional Paid in

Retained Earnings (Accumulated

Non-controlling

Accumulated other Comprehensive income

Accumulated other Comprehensive

income (loss)

Balance, June 30, 2023

1 unchanged sentence

( 1,286,515 )

Stock-based compensation

Foreign currency translation adjustments

Balance, September 30, 2022, unaudited

( 1,289,351 )

( 3,293,274 )

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2022, unaudited

Balance, September 30, 2023, unaudited

$ ( 9,988,957 )

Balance, June 30, 2022

( 4,182,376 )

2 unchanged sentences

Foreign currency translation adjustments

Balance, March 31, 2023, unaudited

$ ( 5,740,401 )

Balance, June 30, 2021

Restricted stock units vested

Balance, September 30, 2022, unaudited

Restricted shares issued for vested RSUs

Restricted stock units vested

Balance, December 31, 2021, unaudited

Non-controlling interest

Restricted stock units vested

Shares issued for acquisition

Foreign currency translation adjustments

Balance, March 31, 2022, unaudited

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements

$ ( 919,428 )

$ ( 105,797 )

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

and Subsidiaries

Unaudited Condensed Consolidated Statements of

For the Nine Months Ended March 31, 2023 and 2022

For the Nine Months Ended March 31,

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2023 and 2022

For the Three Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 1,289,351 )

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

$ ( 4,185,181 )

Adjustments to reconcile net (loss) income to cash provided by

(used in) operating activities:

Depreciation and amortization expense

Inventory reserve

Credit loss reserve

Loss on equity method investment

6 unchanged sentences

( 1,557,682 )

( 9,437,854 )

Deferred tax assets/liabilities

( 2,485,274 )

Prepayments and other current assets

( 2,502,967 )

Non-current prepayments

1 unchanged sentence

Accounts payable

( 1,213,634 )

Credit cards payable

2 unchanged sentences

( 1,379,124 )

Income taxes payable

Net cash provided by (used in) operating activities

( 3,856,115 )

Income taxes payable

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

Cash acquired on acquisition

Investment in joint venture

Net cash (used in) provided by investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from related parties

Payments to related parties

Proceeds from short-term loans

Payments of financing fees

Payment on investment payable

Proceeds from short-term loans – related party

Payments on short-term loan – related party

( 1,000,000 )

Payments on short-term loans

( 1,781,385 )

( 1,767,061 )

Proceeds from long-term loans

12 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Shares issued for acquisition

Promissory note issued for acquisition

Investment payable for acquisition

Goodwill acquired in business acquisition

Deferred tax liabilities

Identifiable intangible assets acquired in business acquisition

Net assets acquired in business acquisition

Right of use assets acquired under new operating leases

2 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial

As of March 31, 2023 and June 30,

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

As of September 30, 2023 and June 30, 2023

and for the Three Months Ended September 30, 2023 and 2022

Note 1 - Nature of business and organization

1 unchanged sentence

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

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

consumer home, garden and pet products.

Effective on March 1, 2020, as amended and restated

pursuant to an agreement dated October 26, 2020, the Company entered into an agreement with E Marketing Solution Inc.

(“E Marketing”),

an entity incorporated in California and owned by one of the shareholders of the Company.

Pursuant to the terms of the agreement, the

Company agreed to provide technical support, management services and other services on an exclusive basis in relation to E Marketing’s

business during the term of the agreement.

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 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 the Company’s assumption of all of E Marketing’s liabilities.

E Marketing was considered

a variable interest entity (“VIE”).

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

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

On September 4, 2020, the Company entered into

an agreement with Global Product Marketing Inc.

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

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

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

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

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

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

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

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

GPM was considered a variable

interest entity (“VIE”).

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

As a result, GPM has become

the Company’s wholly owned subsidiary.

On January 13, 2022,

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

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

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.

On February 10, 2022,

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

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

and other businesses, in marketing their products.

The Company is principally engaged in the marketing and sale

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

On May 18, 2021, the Company acquired 100% of

the equity ownership of its variable interest entity, E Marketing Solution Inc.

(“E Marketing”), an entity incorporated in

California and owned by one of the minority shareholders of the Company.

As a result, E Marketing became the Company’s wholly owned

On May 18, 2021, the Company acquired 100% of

the equity ownership of its variable interest entity, Global Product Marketing Inc.

(“GPM”), an entity which was incorporated

in the State of Nevada on September 4, 2020, and was owned by Chenlong Tan, the Company’s Chairman, CEO and President, and one of

the majority shareholders of the Company.

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

On January 13, 2022, the Company entered into

a joint venture agreement and formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal

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

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 creating a social media platform in order to provide 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.

details in Note 3 below.

On February 15, 2022,

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

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

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

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

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

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

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

of Fly Elephant Limited.

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

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

and located in Shenzhen, China.

See details in Note 4 below.

at Note 3 below.

On February 15, 2022, the Company acquired 100%

of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the British Virgin Islands

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

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

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

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

Anivia owns 100% of the

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

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

Elephant Limited.

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

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

Shenzhen, China.

See details on Note 4 below.

Note 2 – Basis of Presentation and Summary

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

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

in the Annual Report for the year ended June 30, 2023, which are included in Form 10-K filed with the SEC on September 14, 2023.

Principles of Consolidation

The unaudited condensed consolidated financial

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

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

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

All inter-company balances and transactions have been eliminated.

The unaudited condensed consolidated

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

Inc., Global Social Media, LLC, and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai

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

All inter-company balances and

transactions have been eliminated.

Emerging Growth Company Status

18 unchanged sentences

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

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

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

Use of estimates and assumptions

8 unchanged sentences

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 its subsidiaries is the U.S.

dollar (USD).

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

as its functional currency.

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

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

Income and expense accounts are translated at the average translation

rates and the equity accounts are translated at historical rates.

Translation adjustments resulting from this process are included in

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

Transaction gains and losses

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

the results of operations as incurred.

The balance sheet amounts of the VIE, with the

exception of equity, on March 31, 2023, were translated at 6.8691 RMB to $1.00.

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

(“RMB”), as its functional currency.

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

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

Income and expense accounts are

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

Translation adjustments

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

stockholders’ equity.

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

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

The balance sheet amounts of the VIE, with

the exception of equity, on September 30, 2023, were translated at 7.2948

RMB to $1.00.

The equity accounts were stated at their historical rates.

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

31, 2023 was 6.933442 RMB to $1.00.

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

reported on the statement of cash flows would not necessarily agree with changes in the corresponding balances on the unaudited condensed

The average translation rates applied to statements of

operations and comprehensive income (loss) accounts for the three months ended September 30, 2023 was 7.2406

RMB to $1.00.

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

statement of cash flows would not necessarily agree with changes in the corresponding balances on the unaudited condensed

consolidated balance sheet.

3 unchanged sentences

From time to time, the Company may maintain bank

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

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

To date, the Company has not experienced any losses with respect to cash.

Management believes the Company is not exposed to any significant

credit risk with respect to its cash.

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

16 unchanged sentences

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

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

5 unchanged sentences

value of the asset.

Business Combination

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 regarding the acquisition.

Variable interest entities

On February 15, 2022, the Company acquired 100%

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

Pursuant to the terms of the Agreements

for the Company’s acquisition of Anivia and its subsidiaries, including DHS, the Company does not have direct ownership in DHS but

is actively involved in DHS’s operations as the sole manager to direct the activities and significantly impact DHS’s economic

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 acquisition.

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

As such, based

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

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

See Note 4 and Note 5 for details on acquisition.

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.

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

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

Goodwill represents the excess of the purchase

15 unchanged sentences

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

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

Due to the decrease in the Company’s

share price subsequent to the filing of the Form 10-K and the net loss incurred during the quarter ended September 30, 2022, the Company

engaged the same valuation firm to review goodwill for impairment.

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

as of September 30, 2022 was required.

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

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

The Company also considered the Market Capital Method,

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

During the three months ended March 31, 2023,

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

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

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 quarter ended

September 30, 2022.

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

goodwill is partially impaired.

During the period ended September 30, 2023, the

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

As of September 30, 2023 and 2022, the goodwill balance amounted to $ 3,034,110 and $ 3,034,110 , respectively.

Intangible Assets, net

Finite life intangible assets at March 31, 2023

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

Finite life intangible assets at September 30,

2023 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition of Anivia.

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

3 unchanged sentences

Covenant Not to Compete

Supplier relationships

Supplier relationship

The Company reviews the recoverability of long-lived

1 unchanged sentence

be recoverable.

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

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

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

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.

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 September 30, 2023 and 2022, there were no indicators of impairment.

Fair values of financial instruments

7 unchanged sentences

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:

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

3 unchanged sentences

Discount rate

As of March 31, 2023,

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

As of September 30, 2023, the outstanding

balance of the Purchase Note was $ 1,149,961 ,

including principal due of $ 875,000 , a premium of $ 19,023 ,

and $ 255,938

of accrued interest.

For other financial instruments to be reported

17 unchanged sentences

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

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

31, 2023, as follows:

Schedule of fair value on nonrecurring basis

Total Fair Value

Total Impairment Loss

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 assumptions for financial instruments

Goodwill, with a total carrying value of $6.1

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

for the nine months ended March 31, 2023.

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

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

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

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

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 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 606

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Advertising costs are expensed as incurred.

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

2022 were as following.

Schedule of advertising costs

Three Months Ended March 31,

Nine Months Ended March 31,

Advertising and promotion

advertising and promotional costs included in selling and fulfillment expenses for the three months ended September 30, 2023 and 2022

were $ 1,570,742 and $ 1,166,349 ,

respectively.

Cost of revenue

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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 inventory and costs of goods sold any freight incurred to ship the product from its vendors to warehouses.

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

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Debt Issuance Costs

Costs incurred in connection with the issuance

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

To the extent

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

of the outstanding borrowings.

Costs incurred in connection with the

issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest

To the extent that the debt is outstanding, these amounts are reflected in the unaudited condensed consolidated balance

sheets as direct deductions from the carrying amount of the outstanding borrowings.

Segment reporting

The Company follows ASC 280, Segment Reporting.

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

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

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

For the nine months ended

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

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

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

As of March 31, 2023, there were

approximately $ 2.3 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 presented.

The Company follows ASC 280, Segment

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

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

Company has only one reportable segment.

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

For the three months ended September 30, 2023 and 2022, sales through Amazon to Canada and other foreign countries were

approximately 8.2 %

of the Company’s total sales.

During the three months ended September 30, 2023, sales of hydroponic products, including

ventilation and grow light systems, was approximately 16.8 %

of the Company’s total sales and the remaining 83.2 %

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

During the three months ended September 30, 2022,

sales of hydroponic products, including ventilation and grow light systems, were approximately 53 % of the Company’s total

sales and the remaining 47 % consisted of general gardening, home goods and other products and accessories.

As of September 30, 2023

and June 30, 2023, the Company had approximately $ 1.4

million and $ 1.6 million of inventory stored in China.

The Company’s majority of long-lived assets are located in

California, United States, majority of the deferred tax assets are US related, and a majority of the Company’s revenues are

derived from within the United States.

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

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period, with a corresponding addition to equity.

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

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

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

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

In addition to requisite service period,

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

For an award which contains both a performance

and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the

fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting

period if it is probable the performance condition will be met.

If the performance condition is ultimately not met, compensation cost

related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied.

In addition to the requisite service

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

For an award which contains both

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

into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s

vesting period if it is probable the performance condition will be met.

If the performance condition is ultimately not met, compensation

costs related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied.

The Company will recognize forfeitures of such

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in the period that includes the enactment date.

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

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

Valuation allowances are recorded, when necessary,

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

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

amount expected to be realized.

The Company has analyzed filing positions in each

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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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Recently issued accounting pronouncements

In October 2023, the FASB issued ASU 2023-06,

Disclosure Improvements:

Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative.

This ASU incorporates

Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification™ (“Codification”).

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics,

allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously

subject to the requirements, and align the requirements in the Codification with the SEC’s regulations.

In SEC Release No.

Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with,

but require incremental information to, generally accepted accounting principles to the FASB for potential incorporation into the Codification.

The ASU incorporates into the Codification 14 of the 27 disclosures referred by the SEC.

They modify the disclosure or presentation requirements

of a variety of Topics in the Codification.

The requirements are relatively narrow in nature.

Some of the amendments represent clarifications

to, or technical corrections of, the current requirements.

Because of the variety of Topics amended, a broad range of entities may be

affected by one or more of those amendments.

For entities subject to the SEC’s existing disclosure requirements and for entities

required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities

that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC

removes that related disclosure from its rules.

For all other entities, the amendments will be effective two years later.

by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification

and not become effective for any entity.

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

financial statements.

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.

The adoption of this standard

did not have a material impact on the Company’s consolidated financial statements.

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

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

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

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

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

The Company does not expect

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

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

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

The Company does not

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

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

– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity

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

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

accounting conclusions.

In 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 – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s

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

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

form-over-substance-based accounting conclusions.

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

This standard is effective for the Company

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

Adoption is either a modified retrospective method or a fully retrospective

method of transition.

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

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

“Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging

(Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This ASU among other things clarifies that

a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting

under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance

with Topic 321 immediately before applying or upon discontinuing the equity method.

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,

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

The update is intended to simplify the current rules regarding

the accounting for income taxes and addresses several technical topics including accounting for franchise taxes, allocating income taxes

between a loss in continuing operations and in other categories such as discontinued operations, reporting income taxes for legal entities

that are not subject to income taxes, and interim accounting for enacted changes in tax laws.

The new standard is effective for fiscal

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

however, early adoption

is permitted.

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

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

financial statements.

This standard is

effective for the Company on July 1, 2024, including interim periods within those fiscal years.

Adoption is either a modified retrospective

method or a fully retrospective method of transition.

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

on its consolidated financial statements.

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

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The Company has adopted ASU 2017-04.

See disclosures

See the disclosures

above on Goodwill for further details.

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

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

subsequent events that required recognition or additional disclosure in the unaudited condensed consolidated financial statements are

Note 3 - Joint Ventures

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

Following entry into

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

units (“Equity Units”), as follows:

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

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

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

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

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

Following entry into the Joint Venture Agreement,

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

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

Box Harmony with the use and access to certain warehouse facilities leased by the Company (see below), and (ii) TPA received 1,200 Equity

Units in exchange for (a) $1,200 and contributing the TPA IP License referred to below, (b) its existing and future customer contracts,

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

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

Under the terms of the Box Harmony limited liability

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

As of the date of this

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

As of the date of this report, the members had

not completed the capital contributions and no receivables were recorded.

Pursuant to the terms of the Agreements, the Company

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 three and nine months ended March 31, 2023 and 2022, the impact of GSM’s activities

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

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 three months ended September 30, 2023 and 2022, the impact

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

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

Interest Entity

On February 15, 2022,

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

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

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

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

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

On February 15, 2022, the Company acquired 100%

of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the British Virgin Islands

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

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

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

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

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

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

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

of Fly Elephant Limited.

Anivia owns 100% of the

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

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

Elephant Limited.

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

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

Total fair value of the

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

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

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

(the “Purchase Note”), (ii) issued 3,083,700 restricted shares of the Company’s common stock (subject to a lock-up period

of 180 days and insider trading rules), and (iii) owed an additional $ 1,500,000 in cash, which was to be paid after closing.

JP Morgan Chase Bank,

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

In conjunction with obtaining JPM’s

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

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

On October 7, 2022, in

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

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

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

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

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

Agreement”), pursuant to which Mr.

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

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

in its sole discretion, based on Mr.

Total fair value of the consideration for the

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

at closing, the Company (i) paid $ 3,500,000 in the form of a two-year

unsecured 6% subordinated promissory note, payable in equal semi-annual installments commencing August 15, 2022 (the “Purchase Note”),

(ii) issued 3,083,700 restricted shares (subject to a lock-up period of 180 days and insider trading rules) of the Company’s common

stock, and (iii) an additional $ 1,500,000 in cash was to be paid after closing.

JP Morgan Chase Bank, the Company’s senior

secured lender (“JPM”), consented to the transaction.

In conjunction with obtaining JPM’s consent, the Company delivered

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

Anivia Limited, Fly Elephant Limited and the WFOE.

On October 7, 2022, in conjunction with the Company’s

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

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

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

The Amendment to the Subordination

Agreement was amended solely for purposes of adjusting the definition of payment conditions under Section 2 of the Subordination Agreement

such that “payment conditions” shall be deemed satisfied in connection with a permitted payment if (a) no event of default

has occurred under the credit agreement and is continuing and (b) the Company shall have Excess Availability in the 30 days prior to the

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

In addition, in conjunction with the closing of

the transaction, the WFOE entered into an employment agreement with Li Zanyu, dated February 15, 2022 (the “Employment Agreement”),

pursuant to which Mr.

Li has been appointed to serve as general manager of the WFOE for a term of 10 years (through February 14, 2032),

with annual base compensation of up to 500,000 RMB plus bonus as may be determined by the WFOE from time to time, in its sole discretion,

Li’s performance.

During such employment, Mr.

Li may not engage in other employment without

the consent of the WFOE.

The acquisition of Anivia

was accounted for as a business combination under ASC 805.

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

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

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

consisted of a covenant not to compete, supplier relationships 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 approximately $ 6.1 million of goodwill

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

Goodwill is not deductible for income

tax purposes.

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

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

The following information

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

Li may not engage in other employment without the consent of the WFOE.

The acquisition of Anivia was accounted for as

a business combination under ASC 805.

As the acquirer for accounting purposes, the Company has estimated the fair value of Anivia and

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

The Company applied

the income approach and cost approach in determining the fair value of the intangible assets, which intangible assets consisted of a covenant

not to compete, supplier relationship and software.

The fair value of the remaining assets acquired and liabilities assumed were not significantly

different from their carrying values at the acquisition 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.

Company expensed with the acquisition, certain legal and accounting costs of $ 54,702 , as general and administration expenses and $ 50,000

paid to JPM as financing fees.

The following information summarizes the purchase

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

Schedule of allocation of acquisition price

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Covenant not to compete

Supplier relationships

Supplier relationship

Current assets

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Total purchase consideration

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

The results of operations

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

Pro Forma Financial Information

The following pro forma

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

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

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

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

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

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

Schedule of Pro Forma information

Nine months ended

Total Revenues

Income from Operations

Basic and diluted income per share

In October 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 since February

16, 2022 have been included in the Company's consolidated financial statements.

Note 5 – Variable interest entity

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

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

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

As of September 30, 2023 and 2022, there was no

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

The carrying amounts of the assets, liabilities

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

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

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

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

The carrying amount of the VIE’s assets

and liabilities were as follows for the periods indicated:

Carrying amount of VIE assets and liabilities

Schedule of carrying amount of the VIE’s assets

and liabilities

September 30, 2023

June 30, 2023

Prepayments and other receivables

1 unchanged sentence

Right of use – noncurrent

Deferred tax asset

Deferred tax assets

Advance from shareholders

4 unchanged sentences

The operating results of the VIE were as follows

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

Operating results of the VIE

for the three months ended September 30, 2023:

Schedule of operating results of the VIE

September 30, 2023

Net loss after elimination of intercompany transactions

For the three months ended March 31, 2023, the

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

For the nine months ended March

The operating results of the VIE were as follows for the three months

ended September 30, 2022 :

September 30, 2022

Net loss after elimination of intercompany transactions

For the three months ended September 30, 2023, the VIE contributed

approximately $ 2.1 million of revenue and $ 0.05 million of net loss before elimination.

For the three months ended September 30, 2022,

the VIE contributed approximately $ 3.2 million of revenue and $ 0.6 million of net loss before elimination.

3 unchanged sentences

Schedule of accounts receivable

September 30, 2023

June 30, 2023

Accounts receivable

1 unchanged sentence

Total accounts receivable

The changes in allowance for credit losses on

accounts receivable are summarized below:

Schedule of allowance for credit losses

Allowance for

Credit Losses

Balance at June 30, 2022

Allowance recorded during the three months ended September 30, 2022

Balance at September 30, 2022

Balance at June 30, 2023

Allowance recorded during the three months ended September 30, 2023

Balance at September 30, 2023

Note 7 – Inventories, net

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

As of September 30, 2023 and June 30, 2023, inventories

consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 15,056,623 and $ 20,593,889 , respectively.

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

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

Note 8 – Prepayments and other current assets

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

For the three months ended September 30, 2023

and 2022, the Company recorded inventory reserve expense of $ 105,192 and $ 74,998 , respectively.

As of September 30, 2023 and June 30,

2023, allowance for obsolescence was $ 664,092 and $ 558,899 , respectively.

Note 8 – Prepayments and other current assets, net

As of September 30, 2023 and June 30, 2023, prepayments and other current

assets consisted of the following:

Schedule of prepayments and other current assets

September 30, 2023

June 30, 2023

Advance to suppliers

1 unchanged sentence

Prepaid expenses and other receivables

Allowance for credit losses

Other receivables consisted of delivery fees of

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

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

$ 58,954 and $ 165,962 and receivables from one and two unrelated parties for their use of the Company’s courier accounts at September

30, 2023 and June 30, 2023.

The changes in allowance for credit losses on

other receivables are summarized below:

Schedule of allowance for credit losses on

other receivables

Allowance for Credit Losses

Balance at June 30, 2022

Allowance recorded during the three months ended September 30, 2022

Balance at September 30, 2022

Balance at June 30, 2023

Allowance recorded during the three months ended September 30, 2023

Balance at September 30, 2023

Note 9 – Non-current prepayments

Non-current prepayments included payments

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

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

The terms of these services

are from two years to five years.

Non-current prepayments included $ 420,411 for

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

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

The terms of these services are from two years to

In addition, there was a $ 40,623 down payment on a four-year car lease.

As of March 31, 2023 and June 30,

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

$ 925,624 , respectively.

For the three and nine months ended

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

$ 323,751 amortization of

prepayments in the operating expenses, respectively.

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

$ 323,751 amortization of

prepayments in the operating expenses, respectively.

As of September 30, 2023 and June 30, 2023, total

non-current prepayments were $ 461,034 and $ 531,456 , respectively.

For the three months ended September 30, 2023 and 2022, the Company

recorded amortization expenses of $ 70,422 and $ 107,917 , respectively.

Note 10 – Intangible assets, net

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

intangible assets, net, consisted of the following:

Schedule of intangible assets

As of September 30, 2023 and June 30, 2023, intangible

assets, net, consisted of the following:

Schedule of intangible

September 30, 2023

June 30, 2023

2 unchanged sentences

Accumulated amortization

( 1,055,229 )

The intangible assets were acquired on February

15, 2022 through the acquisition of Anivia.

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

15, 2022 through acquisition of Anivia.

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

approximately 6.95 years.

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

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

At March 31, 2023,

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

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

The amortization expense for the three months ended September 30, 2023 and 2022 was $ 162,343 and $ 162,343 , respectively.

At September 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

Schedule of future amortization

2 unchanged sentences

Note 11 – Other payables and accrued liabilities

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

As of September 30, 2023 and June 30, 2023, other payables and accrued

liabilities consisted of the following:

Schedule of accounts payable and accrued liabilities

Schedule of other payables and accrued

September 30, 2023

June 30, 2023

Accrued payables for inventory in transit

5 unchanged sentences

the Company in the process of inventory procurement.

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

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

As of March 31, 2023, the outstanding balance

was paid off.

During the three months ended September 30, 2023 and 2022, the Company purchased

a total of $ 0 and $ 31,385 , respectively, in inventories from a supplier which had a payment term of 90 days with a 2% premium on the purchase

price, which was presented as financing cash flows from short term loans on the statement of cash flows.

As of September 30, 2023 and

June 30, 2023, the outstanding balance included in other payables to this supplier was $ 0 and $ 0 .

Note 12 – Loans payable

Revolving credit facility

On May 3, 2019, the Company entered into an agreement

with WFC Fund LLC (“WFC”) for a revolving loan of up to $2,000,000.

The revolving loan bore interest equal to the prime rate

plus 4.25% per annum on the outstanding amount.

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

Purchase Agreement (the “Original RPA”).

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

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

The Restated RPA bore a discount

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

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

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

Pursuant to the terms of the agreement,

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

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

of the accounts receivable for any other reason.

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

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

During the three months ended September 30, 2021,

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

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

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

Long-term loan

SBA loan payable

On April 18, 2020, the Company entered into an

agreement with the U.S.

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

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

The SBA Note bears interest at the rate of

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

Monthly installment payments, including principal and interest, will

begin twelve months from the date of the SBA Note.

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

accrued interest expense of $ 39,237 .

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

Asset-based revolving loan

On November 12, 2021, the Company entered into

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

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

On November 12, 2021, the Company entered into a

Credit Agreement with JPMorgan Chase Bank, N.A.

(“JPMorgan”), as administrative agent, issuing bank and swingline lender,

for an asset-based revolving loan (“ABL”) of up to $25 million with key terms listed as follows:

Borrowing base equal to the sum of

5 unchanged sentences

Maturity Date of November 12, 2024

In addition, the ABL includes an accordion feature

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

To secure complete payment and performance of the secured obligations,

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

collateral to the ABL.

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

paid to its financial advisor.

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

expenses, the term of the ABL.

In addition, the ABL includes an accordion

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

To secure complete payment and performance of the

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

Company’s assets as collateral to the ABL.

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

in financing fees including 2% of $25.0 million or $500,000 paid to its financial advisor.

The financing fees are recorded as debt

discount and are to be amortized over the three year term of the ABL as interest expense.

Below is a summary of the interest expense recorded

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

Schedule of interest on loans payable

Three Months Ended March 31,

Nine Months Ended March 31,

for the three months ended September 30, 2023 and 2022:

Schedule of interest expense

Accrued interest

1 unchanged sentence

Amortization of debt discount

As of March 31, 2023, the outstanding amount

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

was $ 7,653,372 .

As of June 30, 2022, the outstanding amount of the long-term revolving loan payable, net of debt discount, was $ 12,314,627 ,

including interest payable of $ 182,543 .

On October 7, 2022, the

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

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

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

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

of the original Credit Agreement.

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

order to (i) adjust the definition of “Covenant Testing Trigger Period” to increase the required cash availability from $3,000,000

to $4,000,000, or 10% of the aggregate revolving commitment for the preceding 30 days, and (ii) require that the Company will not and

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

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

it being acknowledged, however, that the Company does

not generally conduct due diligence on its individual retail customers.

On November 11, 2022,

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

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

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

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

aforementioned Existing Defaults.

As of September 30, 2023 and June 30, 2023, the

outstanding amount of the revolving loan payable, net of debt discount and including interest payable was $ 4,808,322 and $ 9,791,191 , 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.

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”).

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

As of September 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.

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 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 .

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

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

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

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

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

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

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

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

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

In August 2023, the Company paid the third installment of $ 875,000 .

For the three months ended September 30, 2023, the Company recorded accrued interest of $ 19,688 and

amortization of note premium of $ 12,579 .

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

amortization of note premium of $ 12,682 .

As of September 30, 2023, including $ 255,938 of

accrued interest and $ 19,023 of

unamortized premium, the total outstanding balance of the Purchase Note was $ 1,149,961 ,

which is presented on the unaudited condensed consolidated balance sheet as a current portion of $ 1,149,961 and

a non-current portion of $ 0 .

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 .

On July 8, 2023, the Company entered into an

agreement with White Cherry Limited (“White Cherry”), a BVI company owned by the former owner of DHS, for an on-demand,

unsecured and subordinated loan (“On-demand Loan”).

Pursuant to the agreement, White Cherry agreed to loan the Company

the amount requested.

The On-demand Loan bears interest at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1%

The On-demand Loan is due in 30 days upon receipt of White Cherry’s notice of repayment.

On July 16, 2023, the

Company borrowed $ 2

million from White Cherry and repaid $ 1

million on July 31, 2023.

For the three months ended September 30, 2023, the Company recorded accrued interest of $ 6,060 .

of September 30, 2023, including the accrued interest, the outstanding balance of the On-demand Loan was $ 1,006,060 .

Note 13 - Related party transactions

Starting March 1, 2022, the Company subleases

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

Note 1 and Note 2 above.

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

other non-operating income.

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

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 three months ended September 30, 2023 and 2022, the Company received and recorded sublease

fee of $ 0 and $ 247,500 as other non-operating income, respectively.

As of September 30, 2023 and June 30, 2023, other receivables due

from Box Harmony was $ 0 and 0 , respectively.

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

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

This amount was for capital injection pending capital

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

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

shareholders was $ 89,968 and $ 92,246 , respectively.

of advance from shareholders of DHS through acquisition of Anivia.

This amount was for capital injection pending capital inspection by

the local government in accordance with the PRC rules.

As of September 30, 2023 and June 30, 2023, the balance of advance from shareholders

was $ 84,718 and $ 85,200 , respectively.

On July 8, 2023, the Company entered into an agreement

with White Cherry for an on demand loan.

See Note 12 above for details.

Note 14 – Income taxes

For the three and nine months ended March 31,

2023, as a result of the Company’s inability to establish a reliable estimate for annual effective tax rate, the Company calculated

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

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

The income tax provision for the three and nine

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

Schedule of provision for income tax expense

Three Months Ended March 31,

Nine Months Ended March 31,

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 are 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

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

DHS is subject to the Global Intangible Low-Taxed Income (or GILTI) Tax.

DHS is subject to 5% 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 September 30, 2023 and 2022.

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

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

The income tax provision for the three months

ended September 30, 2023 and 2022 consisted of the following:

Schedule of provision for income tax

September 30, 2023

September 30, 2022

Total current income tax provision

( 1,818,222 )

Total deferred taxes

( 2,482,995 )

Total provision for income taxes

9 unchanged sentences

Schedule of reconciliation of effective income tax rate

Three Months Ended March 31,

Nine Months Ended March 31,

September 30, 2023

September 30, 2022

Statutory tax rate

State (net of federal benefit)

Foreign tax rate difference

2 unchanged sentences

Effective tax rate

As of March 31, 2023, prepaid income taxes to

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

As of September 30, 2023, prepaid income taxes

to US tax authorities and income tax payable to Chinese tax authorities was $ 41,987 and $ 275,117 , respectively.

As of June 30, 2023, prepaid

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

The tax effects of temporary differences which give rise to significant

portions of the deferred taxes are summarized as follows:

The tax effects of temporary differences which

give rise to significant portions of the deferred taxes are summarized as follows:

Schedule of deferred taxes

September 30, 2023

June 30, 2023

Deferred tax assets

3 unchanged sentences

ROU assets / liabilities

Net Operation loss

Disallowed interest expense

Stock-based compensation

Net operating loss

Valuation allowance

Total deferred tax assets

6 unchanged sentences

( 1,254,872 )

Net deferred tax assets (liabilities)

$ ( 939,115 )

Note 15 – (Losses) Earnings per share

Net deferred tax assets

For the three months ended September 30, 2023, the Company recorded

$ 64,145 of valuation allowance to reduce deferred tax assets for the losses incurred by DHS.

Note 15 – Earnings per share

The following table sets forth the computation of basic and diluted

(losses) earnings per share for the periods presented:

Schedule of computation of earnings per share

Three Months Ended March 31,

Nine Months Ended March 31,

Net (Loss) Income

Attributable to iPower, Inc.

earnings per share for the periods presented:

Schedule of computation of basic and diluted earnings per share

For the three months ended

September 30,

Net loss attributable to iPower Inc.

$ ( 1,286,515 )

1 unchanged sentence

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

(Losses) Earnings per share:

Due to the ani-dilutive effect, the computation of basic and diluted EPS did not include the shares underlying the exercise of warrants as the Company had a net loss for the three and nine months ended March 31, 2023.

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

The computation of diluted EPS did not include the underlying shares

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

For the three and nine months ended March 31, 2023, 166,661 vested but unissued shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 16) are considered issued shares and therefore are included in the computation of basic earnings (losses) per share when the shares are fully vested.

For the three and nine

months ended March 31, 2022, 107,625 vested but unissued shares of restricted stock units under the Amended and Restated 2020 Equity

Incentive Plan are considered issued shares and therefore are included in the computation of basic earnings (losses) per share as of

grant date when the shares are fully vested.

Impact of nonvested RSU is immaterial to the EPS.

Losses per share of ordinary shares - basic and diluted

Due to the ani-dilutive effect, the computation of basic

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

the three months ended September 30, 2023 and 2022.

The computation of diluted EPS did not include the shares

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

For the three months ended September 30, 2023 and 2022, 66,366 and 166,176 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 losses per share when the shares are fully vested.

Note 16 – Equity

As of September 30, 2023, the total authorized shares

of capital stock were 200,000,000 shares consisting of 180,000,000 shares of Common Stock (“Common Stock”) and 20,000,000

shares of preferred stock (the “Preferred Stock”), each with a par value of $ 0.001 per share.

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, 2023, the Company

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

On February 15, 2022, as part of the consideration

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

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

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

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

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

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

issued 138,557 shares of restricted Common Stock for RSUs vested.

On February 15, 2022, as part of the

consideration for the acquisition of Anivia and subsidiaries, as further described in Note 4, the Company issued 3,083,700

restricted shares of the Company’s common stock, valued at $ 2.27

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

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

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

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

As of September 30, 2023 and June 30, 2023, there

were 29,710,939 and 29,710,939 shares of Common Stock issued and outstanding, respectively.

Preferred Stock

The Company’s Preferred Stock was authorized

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

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

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

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

such series and the qualifications, limitations or restrictions thereof.

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

no shares of Preferred Stock issued and outstanding.

The Preferred Stock was authorized as “blank

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

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

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

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

and the qualifications, limitations or restrictions thereof.

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

of Preferred Stock issued and outstanding.

Equity Incentive Plan

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

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

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.

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 stock 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, which was subsequently amended on December 6, 2022 and September 15, 2023.

Restricted Stock Unit

Following completion of the IPO on May 11,

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

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

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

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

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

all shares issuable under the Plan.

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

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

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

the stock price on each grant date.

During the nine months ended March 31, 2022, the Company granted an additional 79,406

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

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

other employees and consultants, all of which vested over 12 months following the grant date and were subject to other restrictions

until the filing of a Registration Statement on Form S-8 registering the shares.

The fair value of the RSUs was determined based on $5.00 per share, the initial listing price of the Company’s Common Stock on the grant date.

During the three

months ended September 30, 2023, the Company granted an additional 49,600

shares of RSUs.

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

of stock-based compensation expense.

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

and $ 306,788

For the three months ended September 30, 2023 and 2022, the Company recorded $ 7,500

of stock-based compensation expense.

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

forfeiture of RSUs occurred during the three months ended September 30, 2023 and 2022.

As of September 30, 2023 and June 30, 2023,

the unvested number of RSUs was 75,462

and the unamortized expense was $ 58,152

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RSUs forfeited

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

RSUs granted, but not vested, at September 30, 2023

_____________________

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

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

40,019 shares of Common Stock were issued, and 166,661 shares were to be issued upon setup of the plan administration account.

On May 12, 2022, the Compensation Committee of

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

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

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

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

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

based entirely on the attainment of both designated operational milestones (performance conditions) and market conditions (together, the

“Designated Milestones”), assuming continued employment of the recipients through the date on which such Designated Milestones

are achieved.

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

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

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

(ii) any one of the following six operational milestones focused on revenue or any one of the six operational milestones focused on operating

income have been achieved during a given fiscal year.

The achievement status of the operational

milestones as of March 31, 2023 was as follows:

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

As of September 30, 2023, of the 244,942 vested

RSUs, 178,576 shares of Common Stock were issued, and 66,366 shares were to be issued in the near future.

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”) exercisable to

purchase (i) 3,000,000

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

shares of Common Stock 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 estimated achievement status of the

operational milestones as of September 30, 2023 was as follows:

Revenue in Fiscal Year

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(in Millions)

Achievement Status

(in Millions)

Achievement Status

The Company evaluated the performance condition

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

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

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

The Monte Carlo simulation

utilized the following inputs:

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

achieved or deemed probable of achievement and, if so, the future time when the Company expects to achieve that operational milestone.

The Monte Carlo simulation utilized the following inputs:

Stock Price - $ 1.12

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

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

to the Option Grants.

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

related to the Option Grants.

Unrecognized compensation cost related to tranches probable of vesting is approximately $1.9 million and

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

17 – Warrant liabilities

On January 27, 2021, the Company completed a

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

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

Stock issuable upon conversion of the Convertible Notes.

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

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

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

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

have no further value.

$3.2 million of which, at September 30, 2023, $2.3 million is deemed probable of vesting.

As of September 30, 2023, none of the options

For the three months ended September 30, 2023 and 2022, the Company recorded $ 110,382 and $ 110,382 of stock-based compensation

expense related to the Option Grants.

As of September 30, 2023, unrecognized compensation cost related to tranches probable of vesting

is approximately $1.6 million and will be recognized over two years to nine years, depending on the tranche.

Note 17 – Warrants

On January 27, 2021, the Company completed a private

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

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

of the Convertible Notes.

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

per share exercise price equal to the IPO.

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

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

The outstanding warrants held by the Convertible

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

Through March 31, 2023,

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

Through September 30,

2023, none of the private placement investors exercised any of their warrants.

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

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

with an average exercise price of $ 5.00

As such, as of September 30, 2023 and June 30, 2023, the

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

Note 18 - Concentration of risk

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

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

As of September 30, 2023 and June 30, 2023, $ 2,729,161

and $ 3,735,642 , respectively, were deposited with various major financial institutions in the United States and PRC.

2 unchanged sentences

The Company had approximately

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

$ 1.1 million and $ 2.7 million , respectively, in excess of the FDIC insurance limit, as of September 30, 2023 and June 30, 2023.

Accounts receivable are typically unsecured and

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Customer and vendor concentration risk

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

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

As of March 31, 2023

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

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

two suppliers accounted for 39 % ( 28 % and 11 %) and 27 % ( 17 % and 11 %) of the Company's total purchases, respectively.

As of March 31, 2023,

accounts payable to two suppliers accounted for 59 % ( 53 % and 6 %) of the Company’s total accounts payable.

As of June 30, 2022, accounts

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

For the three months ended September 30, 2023

and 2022, Amazon Vendor and Amazon Seller customers accounted for 91 % and 91 % of the Company's total revenues, respectively.

As of September

30, 2023 and June 30, 2023, accounts receivable from Amazon Vendor and Amazon Seller accounted for 93 % and 95 % of the Company’s

total accounts receivable.

For the three months ended September 30, 2023

and 2022, one supplier accounted for 15 % and 19 % of the Company's total purchases, respectively.

As of September 30, 2023 and June 30,

2023, accounts payable to one supplier accounted for 50 % and 49 % of the Company’s total accounts payable.

Note 19 - Commitments and contingencies

Lease commitments

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

1, 2018 until December 31, 2020.

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

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

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

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

The base rental fee ranges from $27,921

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

The base rental fee was $27,921 to

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

On February 15, 2022, upon completion of the acquisition

of Anivia Limited, the Company assumed an operating lease for offices located in the People’s Republic of China.

In July 2023, the

Company renewed the lease contract for its existing office plus additional office space.

The lease term is for three years expiring on

July 14, 2026.

The total base rental fee for these offices is approximately $19,406 per month.

On July 28, 2021, the Company entered into a Lease

1 unchanged sentence

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”).

The Lease Agreement does not provide for an option to renew.

In addition, the Company

will be responsible for its pro rata share of certain costs, including utility costs, insurance and common area costs, as further detailed

in the Lease Agreement.

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

The lease was not started under the original Lease

Agreement as completion of the construction was not timely completed.

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

the construction, the Company entered into an amended agreement to extend the lease term to 74 months.

The lease commencement date is

February 10, 2022, with rent payments commencing May 11, 2022 and the lease expiring on May 31, 2028.

The base rental fee ranges from

$114,249 to $140,079 per month through the expiration date of May 31, 2028.

In addition, the Company will be responsible for

its pro rata share of certain costs, including utility costs, insurance and common area costs, as further detailed in the Lease Agreement.

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

The lease was not started under the original agreement

as the construction was not completed.

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

Under the amended agreement, the lease commenced on 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, increasing gradually over time to $140,079 per month through the expiration

date of May 31, 2028.

On May 1, 2022, the Company leased another fulfillment

center in Duarte, California.

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

Total commitment for the full term of these leases

is $ 12,440,869 .

The financial statements reflected $ 8,504,929 and $ 10,453,282 , respectively, of operating lease right-of-use assets, and

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

Three Months Ended March 31, 2023 and 2022:

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

The Company’s total commitment for the

full term of these leases is $ 12,649,053 .

The financial statements reflected $ 7,763,712

and $ 7,837,345 , respectively, of

operating lease right-of-use assets, and $ 8,193,416 and

$ 8,265,220 , respectively, of operating

lease liabilities as of September 30, 2023 and June 30, 2023.

Three months Ended September 30, 2023 and 2022:

Schedule of lease cost and other information

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

Other information

Cash paid for amounts included in the measurement of lease liabilities

Remaining term in years

Average discount rate - operating leases

Nine Months Ended March 31, 2023 and 2022:

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

Operating lease cost (included in G&A in the Company's statement of operations)

Other information

4 unchanged sentences

period is as follows:

Supplemental balance sheet information related to leases

Schedule of supplemental balance sheet information related to leases

Operating leases

7 unchanged sentences

For Year ending June 30:

2028 and after

Imputed interest/present value discount

( 1,015,068 )

Present value of lease liabilities

7 unchanged sentences

or results of operations of the Company.

Pursuant to an engagement agreement, dated

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

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

underwriter for its initial public offering.

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

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

On April 15, 2021, the Company

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

On April 30, 2021, Boustead filed a statement of claim with the Financial Institute Regulatory Authority, or FINRA,

demanding to arbitrate the dispute, and is seeking, among other things, monetary damages against the Company and D.A.

(who acted as underwriter in the Company’s IPO).

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

panel during the week beginning May 22, 2023.

Pursuant to an engagement agreement, dated and

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

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

initial public offering.

On February 28, 2021, the Company informed Boustead that it was terminating the Engagement Agreement and any

continuing obligations the Company may have had under its terms.

On April 15, 2021, the Company provided formal written notice to Boustead

of its termination of the Engagement Agreement and all obligations thereunder, effective immediately.

On April 30, 2021, Boustead filed

a statement of claim with the Financial Institute Regulatory Authority, or FINRA, demanding to arbitrate the dispute, and is seeking,

among other things, monetary damages against the Company and D.A.

Davidson & Co.

(who acted as underwriter in the Company’s

This matter is presently scheduled to hold its evidentiary hearing before a FINRA arbitration panel during the first two weeks of

The Company has agreed to indemnify D.A.

Davidson & Co.

and the other underwriters

against any liability or expense they may incur or be subject to arising out of the Boustead dispute.

Additionally, Chenlong Tan,

the Company’s Chairman, President and Chief Executive Officer and a beneficial owner of more than 5% of the Company’s

Common Stock, has agreed to reimburse the Company for any judgments, fines and amounts paid or actually incurred by the Company or

an indemnitee in connection with such legal action or in connection with any settlement agreement entered into by the Company or an

indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding of such reimbursement to come from

sales of shares then owned by Mr.

The Company cannot reasonably estimate the amount of potential exposure as of the date of

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, which have been ongoing ever

since, resulting in global economic uncertainty and increased cost of various commodities.

In response to these types of events,

should they directly impact our supply chain or other operations, we may experience or be exposed to supply chain disruption which

could cause us to seek alternate sources for product supply, or suffer consequences that are unexpected and difficult to mitigate.

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

Although, it is difficult to predict the impact that these factors may have on our business in the future, they did not

have a material effect on our results of operations, financial condition, or liquidity for the three and nine months ended March 31,

In February 2022, the Russian Federation began

conducting military operations against Ukraine, and in October 2023, an armed conflict between Hamas-led Palestinian militant groups

and Israeli military forces began.

While we do not do business in those regions, the military conflict in Ukraine and in Israel has resulted

in global economic uncertainty and increased the 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 disruptions which could cause us to seek

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

Any of these risks might have

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

Although, it is difficult

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

operations, financial condition, or liquidity for the three months ended September 30, 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 which the Company issued a promissory note 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 its 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.

Company noted no material subsequent events that required recognition or additional disclosure in the consolidated financial statements

presented herein.

that occurred after the balance sheet date through the date that the unaudited condensed consolidated financial statements were available

to be issued.

Other than as set forth below, there were no material subsequent events that required recognition or additional disclosure

in the unaudited condensed consolidated financial statements presented.

On October 31, 2023, the lease agreement for

a fulfillment center in City of Industry, California expired, and the Company did not renew the lease.

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

What changed 10-Q

Item 1. Financial Statements