What changed in this filing

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Item 1. Financial Statements

2024-02-14 compared with 2023-11-14 · 601 added, 458 removed, 1081 unchanged (49% of the section changed)

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2023 and June 30, 2023

September 30,

Unaudited Condensed

Consolidated Balance Sheets

As of December 31, 2023

and June 30, 2023

Current assets

Cash and cash equivalent

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepayments and other current assets

Prepayments and other current

Total current assets

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Total non-current assets

LIABILITIES AND EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

7 unchanged sentences

Long-term promissory note payable - current portion

Revolving loan payable, net

Income taxes payable

8 unchanged sentences

Preferred stock, $ 0.001 par value;

20,000,000 shares authorized;

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

20,000,000 shares

0 shares issued and outstanding at December 31, 2023 and June 30, 2023

Common stock, $ 0.001 par value;

180,000,000 shares authorized;

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

180,000,000 shares

29,710,939 and 29,710,939 shares issued and outstanding at December 31, 2023 and June 30, 2023

Additional paid in capital

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Non-controlling interest

Accumulated other comprehensive loss

Total liabilities and equity

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

Accumulated other comprehensive

Total stockholders’

Total liabilities and

stockholders’ equity

The accompanying notes

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

and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2023 and 2022

For the Three Months Ended September 30,

For the Three and Six Months Ended December 31, 2023 and 2022

For the Three Months Ended

For the Six Months Ended

TOTAL REVENUES

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( 4,082,566 )

( 3,821,024 )

( 8,675,872 )

OTHER INCOME (EXPENSE)

6 unchanged sentences

( 4,341,023 )

( 4,172,155 )

( 8,974,000 )

PROVISION FOR INCOME TAX BENEFIT

1 unchanged sentence

( 1,495,545 )

( 1,917,983 )

( 3,293,274 )

( 3,207,334 )

( 7,478,455 )

Non-controlling interest

2 unchanged sentences

$ ( 3,290,439 )

$ ( 3,201,343 )

$ ( 7,472,815 )

OTHER COMPREHENSIVE LOSS

3 unchanged sentences

$ ( 3,243,290 )

$ ( 3,362,305 )

$ ( 7,537,141 )

WEIGHTED AVERAGE NUMBER OF COMMON STOCK

LOSSES PER SHARE

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

The accompanying notes

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

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity

For the Three Months Ended September 30, 2023 and 2022

Additional Paid in

Retained Earnings (Accumulated

Unaudited Condensed

Consolidated Statements of Changes in Stockholders' Equity

For the Three and Six Months Ended December 31, 2023 and 2022

Retained Earnings

Non-controlling

Accumulated other Comprehensive

Accumulated other

Comprehensive

Paid in Capital

income (loss)

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$ ( 9,988,957 )

( 1,914,828 )

( 1,917,983 )

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2023, unaudited

$ ( 11,903,785 )

$ ( 223,096 )

Balance, June 30, 2022

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$ ( 105,797 )

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

( 3,290,439 )

( 3,293,274 )

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2022, unaudited

$ ( 4,209,867 )

The accompanying notes

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

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2023 and 2022

For the Three Months Ended September 30,

Unaudited Condensed

Consolidated Statements of Cash Flows

For the Six Months Ended December 31, 2023 and 2022

For the Six Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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$ ( 7,478,455 )

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

(used in) operating activities:

Adjustments to reconcile net loss

to cash provided by operating activities:

Depreciation and amortization expense

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Non-cash operating lease expense

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

Amortization of debt premium / discount and non-cash

financing costs

Change in operating assets and liabilities

Accounts receivable

( 1,557,682 )

Deferred tax assets / liabilities

( 1,788,694 )

Prepayments and other current assets

2 unchanged sentences

Accounts payable

( 1,213,634 )

Credit cards payable

2 unchanged sentences

( 3,844,758 )

( 3,856,115 )

Income taxes payable

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Proceeds from related parties

Payments to related parties

Proceeds from short-term loans - related party

Payments on short-term loan – related party

Payment on investment payable

( 1,500,000 )

Payments on short-term loans - related party

( 1,000,000 )

Payments on short-term loans

2 unchanged sentences

( 7,300,000 )

Net cash (used in ) provided by financing activities

( 6,200,000 )

Net cash used in financing activities

( 7,175,000 )

( 5,540,436 )

EFFECT OF EXCHANGE RATE ON CASH

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Right of use assets acquired under new operating leases

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes

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

Notes to Unaudited Condensed Consolidated Financial

As of September 30, 2023 and June 30, 2023

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

As of December 31, 2023 and June 30, 2023 and

for the Three and Six Months Ended December 31, 2023 and 2022

Note 1 - Nature of business and organization

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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

purpose of providing logistics services primarily for foreign-based manufacturers and 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.

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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.

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.

at Note 3 below.

See details at

Note 3 below.

On February 15, 2022, the Company acquired 100%

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These unaudited condensed consolidated financial statements have

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

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

These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2024, or for any

other interim period or for any other future year.

been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect

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

These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2024,

or for any other interim period or for any other future year.

All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial

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

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

These unaudited condensed consolidated

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

thereto included in the 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

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

All inter-company balances and transactions have been eliminated.

Emerging Growth Company Status

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or more future confirming events.

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

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

Foreign currency translation and transactions

The reporting and functional currency of

iPower and its 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 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 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.

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 December 31, 2023, were translated at 7.0786 RMB to $1.00.

The equity accounts were stated at their historical

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

December 31, 2023 was 7.2201 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.

Cash and cash equivalents

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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.

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

Accounts receivable are recognized and

carried at the 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

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

Goodwill is not amortized but is reviewed for

potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level.

Company’s review for impairment includes an assessment of qualitative factors to determine whether it is more likely than not that

the fair value of a reporting unit is less than its carrying value, including goodwill.

If it is determined that it is more likely than

not that the fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative goodwill impairment test

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

If the fair value of

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

However, if the carrying amount

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

total amount of goodwill allocated to that reporting unit.

The Company engaged an independent third-party valuation firm in August 2022

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

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

Due to the decrease in the Company’s share price subsequent to the filing of the June 30, 2022 Form 10-K and the net loss incurred

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

Based on this

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

The impairment amount was determined

based on the discounted cash flows with the revised projections reflecting the increase in freight and storage costs in the 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.

Goodwill is not amortized but is reviewed

for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit

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

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

If it is determined

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

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

including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is

considered not impaired.

However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be

recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

engaged an independent third-party valuation firm in August 2022 to conduct an evaluation of goodwill impairment for the Company as

a whole at the consolidated reporting unit level as of June 30, 2022, which evaluation was conducted prior to the Company’s

filing of its Annual Report on Form 10-K for the period ended June 30, 2022.

Due to the decrease in the Company’s share price

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

Company engaged the same valuation firm to review goodwill for impairment.

Based on this review, the Company concluded an impairment

loss of $ 3,060,034

as of September 30, 2022 was required.

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

projections reflecting the increase in freight and storage costs in the quarter ended September 30, 2022.

The Company also

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

partially impaired.

During the period ended December 31, 2023,

in addition to a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C, the Company also

performed a quantitative analysis using the Discounted Cash Flow and Market Capital Method and noted no goodwill impairment.

December 31, 2023 and 2022, the goodwill balance amounted to $ 3,034,110

and $ 3,034,110 , respectively.

Intangible Assets, net

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.

Intangible assets are amortized

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

Finite life intangible assets at December

31, 2023 include a covenant not to compete, supplier relationships 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.

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

Schedule of estimated useful life

Covenant Not to Compete

Supplier relationship

Supplier relationships

The Company reviews the recoverability of long-lived

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value determinations.

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

As of December 31, 2023 and 2022, there were no indicators of impairment.

Fair values of financial instruments

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

On February 15, 2022, as part of the consideration

for the acquisition of Anivia, 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:

On February 15, 2022, as part of the

consideration paid 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

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

million using the following inputs:

Schedule of assumptions for financial instruments

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Discount rate

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.

As of December 31, 2023, the outstanding balance

of the Purchase Note was $ 1,150,508 , including principal due of $ 875,000 , a premium of $ 6,445 , and $ 269,063 of accrued interest.

For other financial instruments to be reported

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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

Schedule of impairment charges

Goodwill, with a total carrying value of $6.1

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Advertising costs are expensed as incurred.

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.

Total advertising and promotional costs included

in selling and fulfillment expenses for the three and six months ended December 31, 2023 and 2022 were as following:

Schedule of advertising costs

Three Months Ended December 31,

Six Months Ended December 31,

Advertising and promotion

Cost of revenue

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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

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.

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 unaudited condensed consolidated balance sheets as direct deductions

from the carrying amount of the outstanding borrowings.

Segment reporting

The Company follows ASC 280, Segment

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

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

Company has only one reportable segment.

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

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

approximately 8.2 %

The Company follows ASC 280, Segment Reporting.

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

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

one reportable segment.

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

months ended December 31, 2023 and 2022, sales through Amazon to Canada and other foreign countries were approximately 9.8 %

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 %

During the six months ended December 31, 2023, sales of hydroponic products, including ventilation

and grow light systems, was approximately 19.3 %

of the Company’s total sales and the remaining 80.7 %

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.

During the six months ended December 31, 2022, sales

of hydroponic products, including ventilation and grow light systems, were approximately 47 %

of the Company’s total sales and the remaining 53 %

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

As of December 31, 2023 and June 30, 2023, the Company

had approximately $ 2.1

million and $ 1.6

million of inventory stored in China, respectively.

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

United States, a majority of the deferred tax assets are U.S.

related, and a majority of the Company’s revenues are derived from

within the U.S.

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

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The Company believes that our income tax filing

positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to its

positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its

financial position.

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net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the year.

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

Diluted earnings per share reflect the potential dilution that could occur if securities convertible or exercisable into common stock

were issued upon conversion or exercise.

Recently issued accounting pronouncements

In December 2023, The FASB issued ASU 2023-09, Improvements

to Income Tax Disclosures.

Under this ASU, public business entities must annually “(1) disclose specific categories in the rate

reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those

reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable

statutory income tax rate).” This ASU’s amendments are effective for public business entities for annual periods beginning

after December 15, 2024.

For entities other than public business entities, the amendments are effective for annual periods beginning after

December 15, 2025.

Entities are permitted to early adopt the standard “for annual financial statements that have not yet been issued

or made available for issuance.” The amendments should be applied on a prospective basis.

Retrospective application is permitted.

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

In November 2023, The FASB issued ASU 2023-07, Segment Reporting (Topic

Improvements to Reportable Segment Disclosures.

The amendments apply to all public entities that are required to report segment

information in accordance with Topic 280, Segment Reporting.

The amendments in this ASU are intended to improve reportable segment disclosure

requirements primarily through enhanced disclosures about significant segment expenses.

The key amendments:

Require that a public entity

disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker

(CODM) and included within each reported measure of segment profit or loss.

Require that a public entity disclose, on an annual and

interim basis, an amount for other segment items by reportable segment and a description of its composition.

The other segment items category

is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss.

Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently

required by FASB Accounting Standards Codification® Topic 280, Segment Reporting, in interim periods.

Clarify that if the CODM

uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources,

a public entity may report one or more of those additional measures of segment profit.

However, at least one of the reported segment profit

or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement

principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements.

a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment

profit or loss in assessing segment performance and deciding how to allocate resources.

Require that a public entity that has a single

reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December

Early adoption is permitted.

A public entity should apply the amendments retrospectively to all prior periods presented in the

financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the

significant segment expense categories identified and disclosed in the period of adoption.

The Company does not expect the adoption of

this standard to have a material impact on its consolidated financial statements.

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

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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 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 its 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

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

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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.

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

For the three and six months ended December

31, 2023 and 2022, the impact of GSM’s activities were immaterial to the Company’s unaudited condensed consolidated financial

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

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The service fees

for each year (or for any other period agreed to by the Parties) shall consist of a management fee and a fee for services provided, which

shall be reasonably determined by the WFOE based on the nature, complexity, time, and other market and operation factors.

provide a separate confirmation letter and/or invoice to DHS to indicate the amount of service fees due for each service period;

amount of services fees may be as set forth in the relevant contracts separately executed by the Parties.

DHS is principally engaged in

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

for each year (or for any other period agreed to by the Parties) consist of a management fee and a fee for services provided, as reasonably

determined by the WFOE based on the nature, complexity, time, and other market and operation factors.

The WFOE may provide a separate

confirmation letter and/or invoice to DHS to indicate the amount of service fees due for each service period;

or the amount of services

fees may be as set forth in the relevant contracts separately executed by the Parties.

DHS is principally engaged in selling a wide range

of products and providing logistics services in the PRC.

Pursuant to the terms of the Agreements, the Company

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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 (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.

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, which shares were subject to a lock-up period of 180 days and remain subject

to insider trading rules, and (iii) an additional $ 1,500,000

in cash which was to be paid after closing.

JP Morgan Chase Bank, the Company’s senior

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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.

Anivia, 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.

entry into the Second Amendment to the Credit Agreement, the Company’s promissory note holder, 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” thereafter were to 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 has 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

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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 was 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

Li’s performance.

During such employment, Mr.

During his term of 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 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

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.

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 will bear joint and several liability for any direct or indirect losses suffered by the Company as a result thereof.

Company recognized approximately $ 6.1

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

not deductible for income tax purposes.

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

as general and administration expenses and $ 50,000

paid to JPM as financing fees.

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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 September 30, 2023 and 2022, there was no

As of December 31, 2023 and 2022, there was no

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

4 unchanged sentences

and liabilities were as follows for the periods indicated:

Schedule of carrying amount of the VIE’s assets

and liabilities

September 30, 2023

Schedule of carrying amount of the VIE’s assets and liabilities

December 31, 2023

June 30, 2023

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The operating results of the VIE were as follows

for the three months ended September 30, 2023:

for the three and six months ended December 31, 2023:

Schedule of operating results of the VIE

September 30, 2023

Net loss after elimination of intercompany transactions

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.

Net income (loss) after elimination of intercompany transactions

$ ( 391,882 )

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

six months ended December 31, 2022:

Net income (loss) after elimination of intercompany transactions

$ ( 177,947 )

$ ( 911,564 )

For the three and six months ended December 31, 2023, the VIE contributed

approximately $ 1.8 million and $ 3.9 million of revenue and $ 0.15 million and $ 0.2 million of net loss before elimination, respectively.

For the three and six months ended December 31, 2022, the VIE contributed approximately $ 1.1 million and $ 4.3 million of revenue and $ 0.1

million and $ 0.6 million of net loss before elimination, respectively.

Note 6 – Accounts receivable, net

2 unchanged sentences

Schedule of accounts receivable

September 30, 2023

December 31, 2023

June 30, 2023

4 unchanged sentences

accounts receivable are summarized below:

Schedule of allowance for credit losses

Schedule of allowance for credit losses on

accounts receivable

Allowance for

3 unchanged sentences

Balance at September 30, 2022

Allowance recorded during the three months ended December 31, 2022

Balance at December 31, 2022

Balance at June 30, 2023

1 unchanged sentence

Balance at September 30, 2023

Allowance recorded during the three months ended December 31, 2023

Balance at December 31, 2023

Note 7 – Inventories, net

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

As of December 31, 2023 and June 30, 2023, inventories

consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 15,782,322 and $ 20,593,889 , respectively.

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,

For the three and six months ended December 31,

2023, the Company recorded inventory reserve expense of $ 117,563 and $ 222,755 , respectively.

For the three and six months ended December

31, 2022, the Company recorded inventory reserve expense of $ 74,998 and $ 74,998 , respectively.

As of December 31, 2023 and June 30, 2023,

allowance for obsolescence was $ 781,655 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

As of December 31, 2023 and June 30, 2023, prepayments and other current

assets consisted of the following:

Schedule of prepayments and other current assets

September 30, 2023

December 31, 2023

June 30, 2023

4 unchanged sentences

Other receivables consisted of delivery fees of

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

$ 64,831 and $ 165,962 and receivables from one and two unrelated parties for their use of the Company’s courier accounts at December

31, 2023 and June 30, 2023.

1 unchanged sentence

other receivables are summarized below:

Schedule of allowance for credit losses on

other receivables

Allowance for Credit Losses

Schedule of allowance for credit losses on other receivables

Credit Losses

Balance at June 30, 2022

1 unchanged sentence

Balance at September 30, 2022

Allowance recorded during the three months ended December 31, 2022

Balance at December 31, 2022

Balance at June 30, 2023

1 unchanged sentence

Balance at September 30, 2023

Allowance recorded during the three months ended December 31, 2023

Balance at December 31, 2023

Note 9 – Non-current prepayments

4 unchanged sentences

In addition, there was a $ 34,371 down payment on a four-year car lease.

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.

As of December 31, 2023 and June 30, 2023, total non-current

prepayments were $ 390,612 and $ 531,456 , respectively.

For the three and six months ended December 31, 2023, the Company recorded $ 70,422

and $ 140,844 amortization of prepayments in the operating expenses, respectively.

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

the Company recorded $ 107,917 and $ 215,834 amortization of prepayments in the operating expenses, respectively.

Note 10 – Intangible assets, net

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

As of December 31, 2023 and June 30, 2023, intangible

assets, net, consisted of the following:

Schedule of intangible

September 30, 2023

Schedule of intangible assets, net

December 31, 2023

June 30, 2023

5 unchanged sentences

15, 2022 through acquisition of Anivia.

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

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

approximately 6.7 years.

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

The amortization expense for the three and six months ended December 31, 2023 and 2022 was $ 162,343 and $ 324,686 ,

respectively.

The amortization expense for the three and six months ended December 31, 2022 was $ 162,343 and $ 324,686 , respectively.

December 31, 2023, finite-lived intangible assets are expected to be amortized over their estimated useful lives, which ranges from a

period of five to 10 years, and the estimated remaining amortization expense for each of the five succeeding years thereafter is as follows:

Schedule of amortization expense

Year Ending June 30,

1 unchanged sentence

Note 11 – Other payables and accrued liabilities

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

As of December 31, 2023 and June 30, 2023, other payables and accrued

liabilities consisted of the following:

Schedule of other payables and accrued

September 30, 2023

Schedule of other payables and accrued liabilities

December 31, 2023

June 30, 2023

6 unchanged sentences

the Company in the process of inventory procurement.

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

During the six months ended December 31, 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 .

As of December 31, 2023 and June

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

Note 12 – Loans payable

1 unchanged sentence

Asset-based revolving loan

On November 12, 2021, the Company entered into a

Credit Agreement with JPMorgan Chase Bank, N.A.

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,

7 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 the three year term of the ABL as interest expense.

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 months ended September 30, 2023 and 2022:

for the three and six months ended December 31, 2023 and 2022:

Schedule of interest expense

Three Months Ended December 31,

Six Months Ended December 31,

Accrued interest

1 unchanged sentence

Amortization of debt discount

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

As of December 31, 2023 and June 30, 2023, the

outstanding amount of the revolving loan payable, net of debt discount and including interest payable was $ 2,862,857 and $ 9,791,191 , respectively.

17 unchanged sentences

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.

As of December 31, 2023, the Company was in compliance with the ABL covenants.

Promissory note payable

9 unchanged sentences

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 .

For the three months ended December 31, 2023, the Company recorded accrued interest of $ 13,125

and amortization of note premium of $ 12,579 .

For the six months ended December 31, 2023, the Company recorded accrued interest of $ 32,813

and amortization of note premium of $ 25,157 .

As of December 31, 2023, including $ 269,063

of accrued interest and $ 6,445

of unamortized premium, the total outstanding balance of the Purchase Note was $ 1,150,508 ,

which is presented on the unaudited condensed consolidated balance sheet as a current portion of $ 1,150,508

and a non-current portion of $ 0 .

As of June 30, 2023, including $ 236,250

3 unchanged sentences

and a non-current portion of $ 0 .

Short-term loan payable

On July 8, 2023, the Company entered into an

3 unchanged sentences

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 bears interest at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1% per

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 .

On July 16, 2023, the Company

borrowed $ 2,000,000

from White Cherry and repaid $ 1 million

on July 31, 2023.

For the three and six months ended December 31, 2023, the Company recorded accrued interest of $ 26,128

and $ 32,189 ,

respectively.

As of December 31, 2023, including the accrued interest, the outstanding balance of the On-demand Loan was $ 1,032,189 .

Note 13 - Related party transactions

2 unchanged sentences

disclosed in Note 1 and Note 2 above.

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

For the three and six months ended December 31, 2023, the Company received and recorded sublease

fee of $ 0 and $ 0 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.

For the three and six months ended December 31, 2022, the Company recorded

a sublease fee of $ 140,000 and $ 387,750 as other non-operating income.

During the period ended December 31, 2023,

the Company started selling products through MII Strategy Inc.

(“MII”), a company owned by the Company’s CEO, Mr.

Chenlong Tan.

As of December 31, 2023, the total amount due from MII was $ 47,566 .

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

2 unchanged sentences

the local government in accordance with the PRC rules.

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

As of December 31, 2023 and June 30, 2023, the balance of advance from shareholders

was $ 87,305 and $ 85,200 , respectively.

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

with White Cherry for an on demand loan.

On July 8, 2023, the Company entered into an

agreement with White Cherry for an on-demand loan.

See Note 12 above for details.

1 unchanged sentence

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.

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

and its subsidiaries are subject to BVI or Hong Kong income taxes but did not have any operations for the six months ended December 31,

2023 and 2022.

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

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

Therefore, 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.

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 December

31, 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:

Since the acquisition was

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

For the three and six months ended December 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 six

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

Schedule of provision for income tax

September 30, 2023

September 30, 2022

Three Months Ended December 31,

Six Months Ended December 31,

Total current income tax provision

( 1,090,318 )

( 1,259,785 )

Total deferred taxes

( 1,328,407 )

( 1,786,125 )

Total provision for income taxes

1 unchanged sentence

$ ( 1,047,749 )

$ ( 964,821 )

$ ( 1,495,545 )

The Company is subject to U.S.

6 unchanged sentences

Schedule of reconciliation of effective income tax rate

September 30, 2023

September 30, 2022

Three Months Ended December 31,

Six Months Ended December 31,

Statutory tax rate

State (net of federal benefit)

Foreign tax rate difference

2 unchanged sentences

Effective tax rate

As of September 30, 2023, prepaid income taxes

As of December 31, 2023, prepaid income taxes

to US tax authorities and income tax payable to Chinese tax authorities was $ 41,987 and $ 283,519 , respectively.

4 unchanged sentences

Schedule of deferred taxes

September 30, 2023

December 31, 2023

June 30, 2023

17 unchanged sentences

Net deferred tax assets

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

For the six months ended December 31, 2023, the Company recorded $ 66,104

of valuation allowance to reduce deferred tax assets for the losses incurred by DHS.

3 unchanged sentences

Schedule of computation of basic and diluted earnings per share

For the three months ended

September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Net loss attributable to iPower Inc.

1 unchanged sentence

$ ( 3,290,439 )

$ ( 3,201,343 )

$ ( 7,472,815 )

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

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.

Due to the anti-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 and six months ended December 31, 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 December 31, 2023 and 2022.

For the three and six months ended December 31,

2023, 40,981 and 107,347 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.

For the three and six months ended December 31,

2022, 154,261 vested but unissued shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 16) are

considered issued shares and therefore are included in the computation of basic earnings (losses) per share when the shares are fully

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

As of December 31, 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.

5 unchanged sentences

“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.

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 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

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.

These shares 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

As of December 31, 2023 and June 30, 2023, there

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

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and the qualifications, limitations or restrictions thereof.

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

As of December 31, 2023 and June 30, 2023, respectively, there were no shares

of Preferred Stock issued and outstanding.

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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,

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.

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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.

registering all shares issuable under the Plan, which Form S-8 was subsequently amended on December 6, 2022, September 15, 2023 and

November 22, 2023.

Restricted Stock Unit

Following completion of the IPO on May 11,

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

Following completion of the Company’s

IPO on May 11, 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

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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

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 six months ended

December 31, 2023, the Company granted an additional 62,600

shares of RSUs.

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

For the three and six months ended December 31, 2023, the Company recorded $ 30,863

of stock-based compensation expense.

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

forfeiture of RSUs occurred during the six months ended December 31, 2023 and 2022.

As of December 31, 2023 and June 30, 2023, the

unvested number of RSUs was 47,481

and the unamortized expense was $ 34,439

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RSUs forfeited

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

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

_____________________

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

As of December 31, 2023, of the 285,923 vested

RSUs, 178,576 shares of Common Stock were issued, and 107,347 shares were to be issued in the near future.

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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

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 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

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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

Operating Income in Fiscal Year

(in Millions)

The estimated achievement status of the operational

milestones as of December 31, 2023 was as follows:

in Fiscal Year

Income in Fiscal Year

The Company evaluated the performance condition

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The total fair value of the Option Grants was

$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

$3.2 million of which, at December 31, 2023, $2.3 million is deemed probable of vesting.

As of December 31, 2023, none of the options

For the three and six months ended December 31, 2023, the Company recorded $ 110,382 and $ 220,764 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.

For the three and six months ended December 31, 2022, the Company recorded $ 110,382 and $ 220,764

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

As of December 31, 2023, unrecognized compensation cost related to tranches

probable of vesting is approximately $1.5 million and will be recognized over two years to nine years, depending on the tranche.

Note 17 – Warrants

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

Through September 30,

Through December 31,

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

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

As such, as of December 31, 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.

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

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.

Accounts at each

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

As of December 31, 2023 and June 30, 2023, $ 1,488,027

and $ 3,735,642 , respectively,

were deposited with various major financial institutions in the United States and PRC.

Accounts at each institution in the United States

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

The Company had approximately $ 0.2

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

million and $ 2.7 million , respectively, in

excess of the FDIC insurance limit, as of December 31, 2023 and June 30, 2023.

Accounts receivable are typically unsecured and

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Customer and vendor concentration risk

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

For the six months ended December 31, 2023 and

2022, Amazon Vendor and Amazon Seller customers accounted for 95 % and 91 % of the Company's total revenues, respectively.

As of December

31, 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.

For the six months ended December 31, 2023 and

2022, two suppliers accounted for 20 % ( 11 % and 9 %) and 41 % ( 31 % and 10 %) of the Company's total purchases, respectively.

As of December

31, 2023 and June 30, 2023, accounts payable to two suppliers accounted for 54 % ( 42 % and 12 %) and 55 % ( 49 % and 6 %) of the Company’s

total accounts payable.

Note 19 - Commitments and contingencies

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for new terms to extend the lease through December 21, 2023 at the rate of approximately $42,000 per month.

On December 21, 2023, the

lease expired without renewal.

On September 1, 2020, in addition to the primary

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

On October 31, 2023, the lease expired without renewal.

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.

of Anivia Limited, the Company assumed an operating lease for offices located in the PRC.

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.

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

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

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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 will be abated.

Under the Lease

Agreement, the Company is responsible for its pro rata share of certain costs, including utility costs, insurance and common area costs,

as further detailed in the Lease Agreement.

In addition, following the Rent Commencement Date, the first two months of the Base Rent were

The lease was not started under the original agreement

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center in Duarte, California.

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:

The base rental fee for the Duarte fulfillment center is $56,000 to $59,410 per month through April 30,

The Company’s total commitment for the full

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

The financial statements reflected $ 7,141,633 and $ 7,837,345 , respectively, of operating lease right-of-use

assets, and $ 7,568,542 and $ 8,265,220 , respectively, of operating lease liabilities as of December 31, 2023 and June 30, 2023.

Three months Ended December 31, 2023 and 2022:

Schedule of lease cost and other information

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Average discount rate - operating leases

Six Months Ended December 31, 2022 and 2021:

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

The supplemental balance sheet information related to leases for the

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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.

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

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

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

The Company has agreed to indemnify D.A.

Davidson & Co.

and the other underwriters against any liability or expense they

may incur or be subject to arising out of the Boustead dispute.

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

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

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

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

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

The Company cannot reasonably

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

and the other underwriters against any liability or expense they may

incur or be subject to arising out of the Boustead dispute.

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

Executive Officer and a beneficial owner 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,

authorities across the world have implemented various measures, some of which have been subsequently rescinded or modified, including

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

The Company anticipates that these actions and the global health

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

the COVID-19 outbreak has not had a material adverse impact on the Company’s operations to date, it is difficult to predict all

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

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.

authorities across the world implemented various measures, including travel bans, stay-at-home orders and shutdowns of certain businesses.

While most of these measures have since been rescinded or modified and much of the effects related to COVID-19 have dissipated as COVID-19

has become endemic, the Company nonetheless anticipates that these actions and the global health crisis caused by the COVID-19 outbreak,

including any resurgences, may continue to negatively impact global economic activity.

In addition, 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, both of which have since escalated into prolonged wars.

While we do not do business in those

regions, the military conflicts in Ukraine and in Israel have resulted in global economic uncertainty and increased the cost of various

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, we have experienced a delay in, as well as an increase in costs in shipping, and the resulting inventory level increase

in our warehouse facilities, thus resulting in reduced profits.

In addition, supply chain disruptions may put upward pressure on our costs

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

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

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to be issued.

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

The Company did not have any 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