What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-14 compared with 2023-11-14 · 229 added, 154 removed, 273 unchanged (58% of the section changed)

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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.

our unaudited 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.

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 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.

Driven by technology and data,

(“iPower,” “we,” “us,” or “the Company”) is an online supplier of consumer

goods, including consumer home goods, hydroponics equipment, general gardening, furniture and pet supplies.

Through the operations of

our e-commerce platforms and channel partners, our fulfillment centers in Rancho Cucamonga and Duarte, 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

Our core strategy continues to focus on expanding our geographic reach across the United States and internationally through

organic growth, both in terms of expanding our 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 increase sales.

We are actively developing

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

more, with some of our products achieving Amazon best seller product leaders and Amazon Choice products designations, 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

for total consideration of $10.6 million, we acquired 100% of the ordinary shares of Anivia Limited (“Anivia”), a corporation

organized under the laws of the British Virgin Islands (“BVI”), in accordance with the terms of a share transfer framework

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

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

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

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

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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.

Information Technology Co., Ltd., a company organized under the laws of the People’s Republic of China, or the PRC (the “Operating

Company”) and located in Shenzhen, China.

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.

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

Pursuant to the terms of the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media,

LLC (“GSM”), for the principal purpose of providing a social media platform, 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.

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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.

The GSM 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

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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.

the Company’s facility located at 2399 Bateman Avenue, Duarte, 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

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.

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 and enhance 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 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

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

war may nonetheless increase the likelihood of supply chain disruptions and hinder our ability to find the materials we need to make our

Thus far, as a result of the general global economic disruption, we have experienced a delay in, as well as an increase in,

costs in shipping, resulting in in increased inventory levels in our warehouse facilities, thus resulting in reduced profits.

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.

Ongoing COVID-19 Pandemic 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.

pandemic has seemingly passed and we believe that the pandemic is unlikely to significantly impact our business going forward, we continue

to closely monitor its impact on our business, results of operations and financial results.

The situation surrounding the pandemic remains

fluid and the full extent of the positive or negative impact of the COVID-19 pandemic on our business will depend on certain developments

including the length of time of 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 pandemic 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 that COVID-19 may have on our business over time.

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

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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 purposes of 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 U.S.

states prohibit growing cannabis.

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

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 prohibit growing

Demand for 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 September 30,

For the three months ended December 31,

2023 and 2022

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Three Months Ended

September 30, 2023

December 31, 2023

Three Months Ended

September 30, 2022

December 31, 2022

Cost of goods sold

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Net loss attributable to iPower Inc.

Other comprehensive loss

Other comprehensive (loss) income

Comprehensive loss attributable to iPower Inc.

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Net loss % of revenues

Revenues for the three months

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.

for the three months ended December 31, 2023 decreased 12.75% to $16,800,122 as compared to $19,254,590 for the three months ended

December 31, 2022.

While pricing remained stable, the decreased revenue mainly resulted from a decrease in sales volume during the

three months ended December 31, 2023 as the Company offered less promotions and clearance activities due to lower inventory level as

compared to the three months ended December 31, 2022.

This was partially offset by growth in the Company’s SuperSuite supply

chain offerings.

Costs of Goods Sold

Costs of goods sold for the

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.

three months ended December 31, 2023 decreased 15.98% to $9,481,882 as compared to $11,285,064 for the three months ended December 31,

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

See discussions on gross profit below.

Gross profit was $7,318,240

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

for the three months ended December 31, 2023 as compared to $7,969,526 for the three months ended December 31, 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.

ratio increased to 43.56% for the three months ended December 31, 2023 from 41.39% for the three months ended December 31, 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

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Operating expenses for the

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

three months ended December 31, 2023 decreased 18.10% to $9,870,587 as compared to $12,052,092 for the three months ended December 31,

The decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $2.4 million as a result of

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

expenses of $0.2 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 $2,552,347

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.

for the three months ended December 31, 2023 as compared to $4,082,566 for the three months ended December 31, 2022.

The decrease in loss

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

Other Expenses

Other expenses for the three

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

months ended December 31, 2023 was $54,575 as compared to $258,457 for the three months ended December 31, 2022.

The decrease in other

expenses was mainly due to a decrease in interest, including amortization of debt discount on the revolving loan of $131,507 and an increase

in other non-operating income of $69,238.

Net Loss Attributable to iPower Inc.

Net loss attributable to iPower

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,

for the three months ended December 31, 2023 was $1,914,828 as compared to $3,290,439 for the three months ended December 31, 2022,

representing a decrease of net loss of $1,375,611.

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to iPower Inc.

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

for the three months ended December 31, 2023 was $2,075,083 as compared to $3,243,290 for the three months ended December

31, 2022, representing a decrease of comprehensive loss of $1,168,207.

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

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

an increase in other comprehensive loss of $207,404 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 six months ended December 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.

Six Months Ended

December 31, 2023

Six Months Ended

December 31, 2022

Cost of goods sold

Operating expenses

Operating loss

Other expenses

Loss before income taxes

Income tax benefit

Non-controlling interest

Net loss attributable to iPower Inc.

Other comprehensive (loss) income

Comprehensive loss attributable to iPower Inc.

$ (3,362,305 )

$ (7,537,141 )

Gross profit % of revenues

Operating loss % of revenues

Net loss % of revenues

for the six months ended December 31, 2023 decreased 4.35% to $43,308,496 as compared to $45,277,263 for the six months ended

December 31, 2022.

While pricing remained stable, the decreased revenue mainly resulted from a decrease in sales volume during the

six months ended December 31, 2023 as the Company offered less promotions and clearance activities due to lower inventory level as

compared to the six months ended December 31, 2022.

This was partially offset by growth in the Company’s SuperSuite supply

chain offerings.

Costs of Goods Sold

Costs of goods sold for the

six months ended December 31, 2023 decreased 11.31% to $24,231,411 as compared to $27,322,021 for the six months ended December 31, 2022.

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

See discussions on gross profit below.

Gross profit was $19,077,085

for the six months ended December 31, 2023 as compared to $17,955,242 for the six months ended December 31, 2022.

The gross profit ratio

increased to 44.05% for the six months ended December 31, 2023 from 39.66% for the six months ended December 31, 2022.

The increase 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

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

Operating Expenses

Operating expenses for the

six months ended December 31, 2023 decreased 14.02% to $22,898,109 as compared to $26,631,114 for the six months ended December 31, 2022.

The decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $0.8 million as a result of decreased

costs related to advertising, merchant fees, rental expenses and delivery fees, and a decrease of $3.1 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 six months ended December

Loss from Operations

Loss from operations was $3,821,024

for the six months ended December 31, 2023 as compared to $8,675,872 for the six months ended December 31, 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 six

months ended December 31, 2023 was $351,131 as compared to $298,128 for the six months ended December 31, 2022.

The increase in other

expenses was mainly due to a combination of a decrease in interest expenses and a decrease in other non-operating income of $209,688 resulted

from termination of sublease in January 2023.

Net Loss Attributable to iPower Inc.

Net loss attributable to iPower

for the six months ended December 31, 2023 was $3,201,343 as compared to $7,472,815 for the six months ended December 31, 2022, representing

a decrease of net loss of $4,271,472.

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

as discussed above.

Comprehensive Loss Attributable to iPower

Comprehensive loss attributable

to iPower Inc.

for the six months ended December 31, 2023 was $3,362,305 as compared to $7,537,141 for the six months ended December 31,

2022, representing a decrease of comprehensive loss of $4,174,836.

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

increase in other comprehensive loss of $96,636 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 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 $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 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.

We primarily funded our operations

with cash and cash equivalents generated from operations, including delaying payments to vendors, as well as through borrowing under our

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

We had cash and cash equivalents of $1,488,027 as of December 31, 2023, representing

a $2.2 million decrease from $3,735,642 as of June 30, 2023.

The cash decrease was due to an increase in net cash used in financing activities,

partially offset by net cash provided by operating activities.

Based on our current operating

plan, and despite the current uncertainty resulting from the ongoing COVID-19 pandemic, we believe that our existing cash and cash equivalents

and cash flows from operations will be sufficient to finance our operations during the next 12 months.

plan, and despite the current uncertainty resulting from the ongoing Ukraine-Russia and Israel-Hamas military conflicts, and the effects

of COVID-19, we believe that our existing cash and cash equivalents and cash flows from operations will be sufficient to finance our operations

during the next 12 months.

Our cash requirements consist

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

We lease all our office and warehouse facilities.

We lease all of our office and warehouse

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.

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.

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 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 on our margin profile and ability to generate cash.

Currently, we have approximately

$10 million in unused credit available 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

Working Capital

As of September 30, 2023 and

As of December 31, 2023 and

June 30, 2023, our working capital was $4.7 million and $17.9 million, respectively.

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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.

activities for the six months ended December 31, 2023 and 2022 was $5,045,730 and $7,778,208, respectively.

The decrease in cash provided

by operating activities mainly resulted from the decrease of changes in accounts payable, accounts receivable, inventories, prepayments

and other current assets, partially offset by a decrease of changes in other payable and accrued liabilities.

Investing Activities

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.

For the six months ended December

31, 2023 and 2022, net cash used in investing activities was $0 and $127,367, respectively.

The decrease in cash used in investing activities

was because the Company did not have additional purchase of equipment during the six months ended December 31, 2023.

Financing Activities

Net cash (used in) provided

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.

Net cash used in financing

activities was $7,175,000 and $5,540,436, respectively, for the six months ended December 31, 2023 and 2022.

The main reason the Company

experienced an increase in net cash used in financing activities was primarily due to our payment of $9.2 million for:

(1) $1.9 million

to pay down the note payable to White Cherry;

and (2) $7.3 million to pay down the outstanding balance of the asset-based revolving loan

facility with JPM.

OFF-BALANCE SHEET ARRANGEMENTS

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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

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

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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

During the six months 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 remaining goodwill balance amounted to $3,034,110.

Intangible Assets, net

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.

at December 31, 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.

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other fair value determinations.

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

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

Stock-based Compensation

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to the amount expected to be realized.

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

As of December 31, 2023, the Company expected that the deferred tax assets are fully realizable

so did not record any valuation allowance.

20 unchanged sentences

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.

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

2 unchanged sentences

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 2. Management’s Discussion and Analysis