What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-05-15 · 233 added, 359 removed, 194 unchanged (75% of the section changed)

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The following Management’s

Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A) should be read in conjunction with our

financial statements and the related notes thereto included elsewhere herein.

This MD&A contains forward-looking statements that involve

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

Any statements that are not statements

of historical fact are forward-looking statements.

Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) should be read in conjunction with

our financial statements and the related notes thereto included elsewhere herein.

This MD&A contains forward-looking statements that

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

Any statements that are not

statements of historical fact are forward-looking statements.

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

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

is a U.S.-based

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

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

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

and our 99,000 square foot fulfillment center in Rancho Cucamonga, California, we believe we are one of the leading online marketers,

distributors and retailers of home fans, shelving, gaming chairs, grow-light systems, ventilation systems, activated carbon filters, nutrients,

hydroponic water-resistant grow tents, trimming machines, pumps, accessories for hydroponic gardening and certain pet products, based

on management’s estimates.

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

Driven by tech and data, iPower

is an online supplier of consumer goods, including hydroponics equipment, general gardening supplies and consumer home goods.

the operations of our e-commerce platforms and channel partners, our 99,000 square foot fulfillment center in Rancho Cucamonga, California,

and our combined 98,360 square foot fulfillment centers in Los Angeles, California, we believe we are one of the leading marketers, distributors

and retailers in the consumer gardening and home goods categories, based on management’s estimates.

Our core strategy continues

to focus on expanding our geographic reach across the United States through organic growth, both in terms of expanding customer base as

well as brand and product development.

We are actively developing

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

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

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

some of which have been designated as Amazon

best seller product leaders, among others.

For the nine months ended March 31, 2023, our top five product segments accounted for 74% of

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

adjacent categories.

to focus on expanding our geographic reach across the United States and internationally through organic growth, both in terms of expanding

customer base as well as brand and product development.

iPower has developed a set of methodologies driven by proprietary data formulas

to effectively bring products to market and sales.

We are actively

developing and acquiring our in-house branded products, which to date include the

iPower and Simple Deluxe brands and more, some of which have been designated as

Amazon best seller product leaders and Amazon Choice products, among others.

Acquisitions and Joint Ventures

On February 15, 2022, in exchange

for total consideration with a fair value of $10.6 million, we acquired 100% of the ordinary shares of 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

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 PRC and which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited.

The WFOE controls, through a series of contractual arrangements summarized below, the business, revenues and profits of Daheshou (Shenzhen)

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

The Operating Company is principally engaged in selling a wide range of products and providing logistic services in the PRC.

On February 10, 2022, we entered

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

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

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

businesses, in the marketing of their products.

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

of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity Units and Bro Angel was

issued 4,000 GSM Equity Units.

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

Under the terms of the GSM

limited liability operating agreement (the “GSM LLC Agreement”), the Company will contribute $100,000 to the capital of GSM

and Bro Angel granted GSM, pursuant to the terms of an intellectual property licensing agreement, dated February 10, 2022 (the “IP

License Agreement”), an exclusive worldwide paid up right and license to use all intellectual property of Bro Angel and its members

for the purpose of furthering the proposed business of GSM.

The LLC Agreement prohibits the issuance of additional GSM Equity Units and

certain other actions unless approved in advance by the Company.

Pursuant to the GSM Joint

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

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

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

It was contemplated that only approximately 300-400

square feet would initially be used by GSM.

However, since the space was never utilized by GSM, iPower resumed using the contemplated

space during the fiscal year ended June 30, 2023.

Trends and Expectations

Product and Brand Development

We plan to increase our investments

in product and brand development.

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

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

plan to increase investments in product and brand development.

We actively evaluate potential acquisition opportunities of companies

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

Global Economic Disruption

While at present the majority

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

increase the likelihood that we may experience supply chain disruptions or otherwise hinder our ability to find the materials we need

to make our products.

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

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

services we need to continue to make certain products.

Ongoing COVID-19 Epidemic and Related Disruptions

We are continuing to closely

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

The situation surrounding

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

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

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

remains on promoting the health, safety and financial security of our employees and serving our customers.

As a result, we have taken

a number of precautionary measures, including implementing social distancing and enhanced cleaning measures in our facilities, providing

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

While the COVID-19 epidemic

has not had a material adverse impact on our operations to date and we believe the long-term opportunity for shopping online remains unchanged,

it is difficult to predict all of the positive or negative impacts the COVID-19 epidemic will have on our business.

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

between Israel-Palestinian may nonetheless increase the likelihood of supply chain disruptions and hinder our ability to find the materials

we need to make our products.

Thus far, as a result of the general global economic disruption, we have experienced a decrease in the speed

with which we are able to purchase new inventory, as well as an increase in costs due to delays in shipping, resulting increase in time

with which products remain in our warehouse facilities, thus resulting in reduced profits.

In addition, supply chain disruptions may make

it harder for us to find favorable pricing and reliable sources for the materials we need, putting upward pressure on our costs and increasing

the risk that we may be unable to acquire the materials and services we need to continue to make certain products.

Ongoing COVID-19 Outbreak and Related Disruptions

While the worst of the COVID-19

pandemic has seemingly passed, we are continuing to closely monitor its impact on our business, results of operations and financial results.

The situation surrounding the COVID-19 outbreak remains fluid and the full extent of the positive or negative impact of the COVID-19 outbreak

on our business will depend on certain developments including the length of time any regional outbreaks, the impact on consumer activity

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

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

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

will have on our business.

We will continue to actively monitor the situation and may take further actions that alter our business operations

as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our customers, employees,

suppliers, stockholders, and communities.

Regulatory Environment

We sell hydroponic gardening

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

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

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

In additional to general consumer

goods, we sell hydroponic gardening products to end users that may use such products in new and emerging industries or segments, including

the growing of cannabis.

The demand for hydroponic gardening products depends on the uncertain growth of these industries or segments

due to varying, inconsistent and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations,

and consumer perceptions.

For example, certain countries and a total of 46 U.S.

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

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

CBD, while the U.S.

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

states plus the District of Columbia have adopted frameworks

that authorize, regulate and tax the cultivation, processing, sale and use of cannabis for medicinal and/or non-medicinal use, including

legalization of hemp and CBD, while the U.S.

Controlled Substances Act and the laws of U.S.

states prohibit growing cannabis.

Demand for our products could

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

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

RESULTS OF OPERATIONS

For the three months ended March 31, 2023

For the three months ended September 30,

2023 and 2022

The following table presents

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Three Months Ended

March 31, 2023

September 30, 2023

Three Months Ended

March 31, 2022

September 30, 2022

Cost of goods sold

Operating expenses

Operating (loss) income

Operating loss

Other (expenses)

(Loss) Income before income taxes

Income tax (benefit) expense

Net (loss) income

Loss before income taxes

Income tax benefit

Non-controlling interest

Net (loss) income attributable to iPower Inc.

Net loss attributable to iPower Inc.

Other comprehensive loss

Comprehensive (loss) income attributable to iPower Inc.

Comprehensive loss attributable to iPower Inc.

$ (1,287,222 )

$ (4,293,851 )

Gross profit % of revenues

Operating (loss) income % of revenues

Net (loss) income % of revenues

Operating loss % of revenues

Net loss % of revenues

Revenues for the three months

ended March 31, 2023 decreased 11.32% to $20,225,619 as compared to $22,808,214 for the three months ended March 31, 2022.

While pricing

remained stable, the decreased revenue mainly resulted from a decrease in sales of the third-party brands we carry.

ended September 30, 2023 increased 1.9% to $26,508,374 as compared to $26,022,673 for the three months ended September 30, 2022.

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

regions, such as Canada, Europe and Asia.

However, while the revenues for the current period improved over last year, we cannot be assured

that this trend will continue.

Costs of Goods Sold

Costs of goods sold for the

three months ended March 31, 2023 decreased 8.56% to $12,433,898 as compared to $13,598,563 for the three months ended March 31, 2022.

The decrease was due to a decrease in sales, which resulted in decreased accompanying costs.

three months ended September 30, 2023 decreased 8.0% to $14,749,529 as compared to $16,036,957 for the three months ended September 30,

The decrease was primarily due to a decrease in freight costs.

See discussions on gross profit below.

Gross profit was $11,758,845

for the three months ended March 31, 2023 as compared to $9,209,651 for the three months ended March 31, 2022.

The gross profit ratio

decreased to 38.52% for the three months ended March 31, 2023 from 40.38% for the three months ended March 31, 2022.

The decrease in the

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

channel and product category mix.

for the three months ended September 30, 2023 as compared to $9,985,716 for the three months ended September 30, 2022.

The gross profit

ratio increased to 44.4% for the three months ended September 30, 2023 from 38.4% for the three months ended September 30, 2022.

in the gross profit ratio was mainly driven by the decrease in costs of goods sold as a result of decreased freight charges during the

current period.

However, we cannot be assured that this trend will continue.

Operating Expenses

Operating expenses for the

three months ended March 31, 2023 increased 22.60% to $9,602,919 as compared to $7,832,662 for the three months ended March 31, 2022.

The increase was mainly due to the combination of an increase in selling and fulfillment expenses of $1.4 million as a result of increased

costs related to advertising, merchant fees, rental expenses, and delivery fees, and an increase in general and administrative expenses

of $0.4 million, which included payroll expenses, stock-based compensation expense, insurance expenses and other operating expenses.

(Loss) Income from Operations

(Loss) Income from operations

was ($1,811,198) for the three months ended March 31, 2023 as compared to $1,376,989 for the three months ended March 31, 2022.

in income was resulted from the increase in operating expenses and the decrease in gross profit, as discussed above.

three months ended September 30, 2023 decreased 10.6% to $13,027,522 as compared to $14,579,022 for the three months ended September 30,

The decrease was mainly due to the combination of an increase in selling and fulfillment expenses of $1.6 million as a result of

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

expenses of $0.1 million, which included payroll expenses, stock-based compensation expense, insurance expenses and other operating expenses,

and a decrease of $3.06 million of impairment loss on goodwill triggered by a decrease in the Company’s share price of its common

stock and the net loss incurred during the quarter ended September 30, 2022.

Loss from Operations

Loss from operations was $1,268,677

for the three months ended September 30, 2023 as compared to $4,593,306 for the three months ended September 30, 2022.

The decrease in

loss was resulted from the decrease in operating expenses and the increase in gross profit, as discussed above.

Other Expenses

Other expenses for the three

months ended March 31, 2023 was ($312,155) as compared to ($159,447) for the three months ended March 31, 2022.

months ended September 30, 2023 was $296,556 as compared to $39,671 for the three months ended September 30, 2022.

The increase in other

expenses was mainly due to an increase in interest, including amortization of debt discount on the revolving loan and other non-operating

expenses during the period ended March 31, 2023.

Net (Loss) Income Attributable to iPower

Net loss attributable to iPower

for the three months ended March 31, 2023 was ($1,530,534) as compared to net income of $1,181,757 for the three months ended March

31, 2022, representing a decrease of ($2,712,291 ).

The decrease was primarily due to the decrease in gross profit and increase in operating

expenses as discussed above.

Comprehensive (Loss) Income Attributable

to iPower Inc.

Comprehensive loss attributable

to iPower Inc.

for the three months ended March 31, 2023 was ($1,512,930) as compared to comprehensive income of $1,178,531 for the three

months ended March 31, 2022, representing a decrease of ($2,691,461).

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

the other comprehensive income of $17,604 as a result of foreign currency translation adjustments resulting from the translation of RMB,

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

For the nine months ended March 31, 2023

The following table presents

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

period to period.

Nine Months Ended

March 31, 2023

Nine Months Ended

March 31, 2022

Cost of goods sold

Operating expenses

Operating (loss) income

(10,487,070 )

Other (expenses)

(Loss) Income before income taxes

(11,097,353 )

Income tax (benefit) expense

Net (loss) income

Non-controlling interest

Net (loss) income attributable to iPower Inc.

Other comprehensive loss

Comprehensive (loss) income attributable to iPower Inc.

$ (9,050,071 )

Gross profit % of revenues

Operating (loss) income % of revenues

Net (loss) income % of revenues

Revenues for the nine months ended March 31, 2023 increased 14.31%

to $65,502,882 as compared to $57,300,642 for the nine months ended March 31, 2022.

While pricing remained stable, the increased revenue

mainly resulted from an increase in sales volume and expansion of sales to other regions, such as Canada, Europe, and Asia.

to our organic growth and diversified product mix, which we achieved as a result of improved products and more effective online marketing

and merchandising efforts.

However, while the revenues for the current nine months ended March 31, 2023 improved over the same period

last year, we cannot assure that this trend will continue.

Costs of Goods Sold

Costs of goods sold for the

nine months ended March 31, 2023 increased 19.68% to $39,755,919 as compared to $33,219,677 for the nine months ended March 31, 2022.

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

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

percentage of revenue as a result of the increased freight charges during the nine months ended March 31, 2023.

See discussions on gross

profit below.

We have seen decreasing freight charges since September 2022 but can give no assurance that this trend will continue.

Gross profit was $25,746,963

for the nine months ended March 31, 2023 as compared to $24,080,965 for the nine months ended March 31, 2022.

The gross profit ratio decreased

to 39.31% for the nine months ended March 31, 2023 from 42.03% for the nine months ended March 31, 2022.

The decrease in gross profit

ratio was mainly driven by an increase in freight charges during the nine months ended March 31, 2023 as well as channel and product category

Operating Expenses

Operating expenses for the

nine months ended March 31, 2023 increased 78.68% to $36,234,033 as compared to $20,278,376 for the nine months ended March 31, 2022.

The increase was mainly due to the combination of an increase in selling and fulfillment expenses of $11.9 million as a result of increased

advertising, merchant fees, delivery fees, rental expenses, storage costs and fulfillment workforce, general and administrative expenses

of $1.04 million, which included payroll expenses, stock-based compensation expense, insurance expenses and other operating expenses including

expenses associated with being a publicly traded company, and $3.06 million of impairment loss on goodwill triggered by a decrease in

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

(Loss) Income from Operations

(Loss) Income from operations

was ($10,487,070) for the nine months ended March 31, 2023 as compared to $3,802,589 for the nine months ended March 31, 2022.

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

Other Expenses

Other expenses for the nine

months ended March 31, 2023 was ($610,283) as compared to ($233,968) for the nine months ended March 31, 2022.

The increase in other expenses

was mainly due to a combined result of an increase in other non-operating income of $ 113,652 , and an increase in interest, including

amortization of debt discount on the revolving loan of $ 573,641 during the period ended March 31, 2023.

Net (Loss) Income Attributable to iPower

expenses was mainly due to a decrease in other non-operating income of $278,926 resulted from termination of sublease in January 2023.

Net Loss Attributable to iPower Inc.

Net loss attributable to iPower

for the nine months ended March 31, 2023 was ($9,003,349) as compared to net income of $2,867,146 for the nine months ended March

31, 2022, representing a decrease of ($11,870,495).

The decrease was primarily due to a decrease in gross profit and an increase in operating

for the three months ended September 30, 2023 was $1,286,515 as compared to $4,182,376 for the three months ended September 30, 2022,

representing a decrease of net loss of $2,895,861.

The decrease was primarily due to the increase in gross profit and decrease in operating

expenses as discussed above.

Comprehensive (Loss) Income Attributable

to iPower Inc.

Comprehensive Loss Attributable to iPower

Comprehensive loss attributable

to iPower Inc.

for the nine months ended March 31, 2023 was ($9,050,071) as compared to comprehensive income of $2,863,920 for the nine

months ended March 31, 2022, representing a decrease of ($11,913,991).

for the three months ended September 30, 2023 was $1,287,222 as compared to $4,293,851 for the three months ended September

30, 2022, representing a decrease of comprehensive loss of $3,006,629.

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

other comprehensive loss of $ (46,722) as a result of foreign currency translation adjustments resulting from the translation of RMB,

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

a decrease in other comprehensive loss of $110,768 as a result of foreign currency translation adjustments resulting from the translation

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

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

During the nine months ended

March 31, 2023 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through borrowing

During the three months ended

September 30, 2023 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through borrowing

under our credit facility from JPMorgan Chase Bank ("JPM”).

We had cash and cash equivalents of $1,419,495 as of March 31,

We had cash and cash equivalents of $2,729,161 as of September

30, 2023, representing a $1.0 million decrease from $3,735,642 of cash as of June 30, 2023.

The cash decrease was primarily the result of

the decrease in net cash provided by financing activities resulting from our payments to pay down the note payable and the JPM revolving

The cash decrease was primarily the combined

result of the increased cash provided by operating activities and a decrease in net cash provided by financing activities resulting from

our payments to pay down the note payable and the JPM revolving line.

Based on our current operating

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primarily of day-to-day operating expenses and obligations with respect to warehouse leases.

We lease all of our office and warehouse

We lease all our office and warehouse facilities.

We expect to make future payments on existing leases from cash generated from operations.

We have credit terms in place with

our major suppliers, however, as we bring on new suppliers, we are often required to prepay our inventory purchases from them.

consistent with our historical operating model which allowed us to operate using only cash generated by the business.

Beyond the next

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

we bring online transition to credit terms more favorable to us.

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

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

In addition, we have approximately $10.0 million

in unused credit under our revolving line of credit with JPM as of March 31, 2023.

Given our current working capital position and available

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

with our customers and vendors.

We have credit terms in place with our major

suppliers, however as we bring on new suppliers, we are often required to prepay our inventory purchases from them.

This is consistent

with our historical operating model which allowed us to operate using only cash generated by the business.

Beyond the next 12 months we

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

online transition to credit terms more favorable to us.

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

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

Currently, we have approximately $20 million in

unused credit under the revolving line with JPM.

Given our current working capital position and available funding from our revolving credit

line, we believe we will be able to manage through the current challenges by managing payment terms with customers and vendors.

Working Capital

As of March 31, 2023 and June

30, 2022, our working capital was $18.8 million and $32.3 million, respectively.

The historical seasonality in our business during the

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

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

this current level for the foreseeable future.

As of September 30, 2023 and

June 30, 2023, our working capital was $11.8 million and $17.9 million, respectively.

The historical seasonality in our business during

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

Operating Activities

Net cash provided by (used

in) operating activities for the nine months ended March 31, 2023 and 2022 was $8,446,447 and ($14,760,269), respectively.

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

assets and increased accounts payable.

Net cash provided by operating

activities for the three months ended September 30, 2023 and 2022 was $4,052,341 and $379,025, respectively.

The increase in cash provided

by operating activities mainly resulted from the decrease of accounts receivable, inventories, prepayments and other current assets, partially

offset by a decrease of accounts payable.

Investing Activities

For the nine months ended March

31, 2023 and 2022, net cash (used in) provided by investing activities was ($144,885) and $177,408, respectively.

The increase in cash

used in investing activities was because the Company made additional purchase of equipment during the nine months ended March 31, 2023.

For the three months ended

September 30, 2023 and 2022, net cash used in investing activities was $0 and $57,989, respectively.

The decrease in cash used in investing

activities was because the Company did not have additional purchase of equipment during the three months ended September 30, 2023.

Financing Activities

Net cash (used in) provided

by financing activities was ($8,663,091) and $10,598,447, respectively, for the nine months ended March 31, 2023 and 2022.

The main reason

the Company experienced a decrease in net cash provided by financing activities was primarily due to our payment of $11.9 million for:

1] $1.5 million to pay off investment payable;

2] $1.8 million to pay down note payable;

and 3] $8.6 million to pay down the outstanding

balance of the asset-based revolving loan facility with JPM.

by financing activities was $(5,075,000) and $2,760,614, respectively, for the three months ended September 30, 2023 and 2022.

reason the Company experienced an increase in net cash used in financing activities was primarily due to our payment of $7.1 million for:

(1) $1.9 million to pay down the note payable to White Cherry;

and (2) $5.2 million to pay down the outstanding balance of the asset-based

revolving loan facility with JPM.

OFF-BALANCE SHEET ARRANGEMENTS

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

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

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

our audited consolidated financial statements.

While our significant accounting policies are more fully described in Note 2 to our unaudited condensed consolidated financial

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

in the preparation of our unaudited condensed consolidated financial statements.

Revenue reco g nition

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If the estimated realizable

value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market

value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value.

The Company also reviews inventory for slow moving and obsolescence and records allowance for obsolescence.

Variable interest entities

February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”) and its subsidiaries, including

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.

During the term of the Agreements, the Company bears

all of 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 into the Company’s financial statements following the date such control existed,

February 15, 2022.

See Note 4 and Note 5 for details on acquisition.

On February 15, 2022, the

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

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

Pursuant to the terms of the agreements, the Company does not

have direct ownership in DHS but is actively involved in DHS’s operations as the sole manager to direct the activities and significantly

impact DHS’s economic performance.

DHS’s operational funding is provided by the Company after February 15, 2022.

term of the agreements, which run for a term of 10 years from February 2022 to February 2032, the Company bears all the risk of loss and

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

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

of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered a variable interest entity (“VIE”) of the Company

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

See Note 4 and Note

5 for details on acquisition.

Goodwill represents the excess

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However, if the carrying

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

in an amount equal to that excess, limited to the total

amount of goodwill allocated to that reporting unit.

The Company engaged an independent third-party

valuation firm in August of 2022 to conduct an evaluation of goodwill impairment for the Company as a whole at the consolidated reporting

unit level as of June 30, 2022, which evaluation was conducted prior to the Company’s filing of its Annual Report on Form 10-K.

Due to the decrease in the Company’s share price subsequent to the filing of the Form 10-K and the net loss incurred during the

quarter ended September 30, 2022, the Company engaged the same valuation firm to review goodwill for impairment.

Based on this review,

the Company concluded an impairment loss of $3,060,034 as of September 30, 2022 was required.

The impairment amount was determined based

on the discounted cash flows with the revised projections reflecting the increase in freight and storage costs in the current interim

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 impairment.

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

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

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

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

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

2022, which evaluation was conducted prior to the Company’s filing of its Annual Report on Form 10-K for the period ended June 30,

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.

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 three months

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 remaining goodwill balance amounted to

Intangible Assets, net

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

the acquisition of Anivia Limited.

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

February 15, 2022.

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

Finite life intangible assets

at September 30, 2023 include a covenant not to compete, supplier relationship and software recognized as part of the acquisition of Anivia.

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

Intangible assets

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

Covenant Not to Compete

Supplier relationships

Supplier relationship

The Company reviews the recoverability

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other fair value determinations.

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

As of September 30, 2023, there were no indicators of impairment.

Stock-based Compensation

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in income in the period that includes the enactment date.

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

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

Valuation allowances are recorded, when

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

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

to the amount expected to be realized.

As of September 30, 2023, the Company expected that the deferred tax assets are fully realizable

so did not record any valuation allowance.

As a result of the implementation

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measurement related to accounting for income taxes.

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

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

as well as open tax years in such jurisdictions.

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

2018, and has subsequently analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file

income tax returns, as well as open tax years in such jurisdictions.

The Company has identified the U.S.

federal jurisdiction, and the states of Nevada and

California, as its “major” tax jurisdictions.

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

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

such attributes are utilized.

federal jurisdiction and the

states of Nevada and California as its “major” tax jurisdictions.

However, the Company has certain tax attribute carryforwards

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

to the year in which such attributes are utilized.

The Company believes that

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Recently issued accounting pronouncements

In June 2022, FASB issued ASU

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

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

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

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

This standard is effective for fiscal years beginning

after December 15, 2024.

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

In October 2021, the FASB

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

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

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

the contracts.

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

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

In March 2020 and January

2021, the FASB issued ASU No.

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

Facilitation of the Effects of Reference Rate Reform on

Financial Reporting and ASU No.

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

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

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

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

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

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

In August 2020, the FASB issued

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 statements.

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.

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;

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.

In January 2017, the FASB

issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,” which

eliminates step two from the goodwill impairment test.

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

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

ASU 2017-04 became effective for accelerated filing companies for annual periods or any interim goodwill impairment tests in

fiscal years beginning after December 15, 2019.

All other entities, including not-for-profit entities, that are adopting the amendments

in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

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

dates after January 1, 2017.

The Company has adopted ASU 2017-04.

See disclosures

above on Goodwill for further details.

The Company does not believe

other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated

financial position, statements of operations and cash flows.

Other than as set forth under

Note 2 to the unaudited condensed consolidated financial statements under “Recently issued accounting pronouncements,” the Company does

not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the

consolidated financial position, statements of operations and cash flows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis