iPower Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements Page Report of Independent Registered Public Accounting Firm PCAOB ID ( 1195 ) F-1 Consolidated Balance Sheets as of June 30, 2024 and 2023 F-2 Consolidated Statements of Operations and Comprehensive Loss for the years ended June 30, 2024 and 2023 F-3 Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2024 and 2023 F-4 Consolidated Statements of Cash Flows for the years ended June 30, 2024 and 2023 F-5 Notes to Consolidated Financial Statements F-6 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of iPower, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of iPower, Inc. and its subsidiaries (the “Company”) as of June 30, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2024 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of their operations and their cash flows for each of the years in the two-year period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ UHY LLP We have served as the Company’s auditor since 2020. Irvine, California September 20, 2024 F- 1 iPower Inc. and Subsidiaries Consolidated Balance Sheets As of June 30, 2024 and 2023 June 30, June 30, 2024 2023 ASSETS Current assets Cash and cash equivalent $ 7,377,837 $ 3,735,642 Accounts receivable, net 14,740,093 14,071,543 Inventories, net 10,546,273 20,593,889 Prepayments and other current assets, net 2,346,534 2,858,196 Total current assets 35,010,737 41,259,270 Non-current assets Right of use - non-current 6,124,163 7,837,345 Property and equipment, net 370,887 536,418 Deferred tax assets, net 2,445,605 2,155,250 Goodwill 3,034,110 3,034,110 Intangible assets, net 3,630,700 4,280,071 Other non-current assets 679,655 991,823 Total non-current assets 16,285,120 18,835,017 Total assets $ 51,295,857 $ 60,094,287 LIABILITIES AND EQUITY Current liabilities Accounts payable, net $ 11,227,116 $ 13,244,957 Other payables and accrued liabilities 3,885,487 5,548,443 Advance from shareholders – 85,200 Lease liability - current 2,039,301 2,159,173 Short-term loan payable 491,214 – Short-term loan payable - related party 350,000 – Long-term promissory note payable - current portion – 2,017,852 Revolving loan payable, net 5,500,739 – Income taxes payable 276,158 276,683 Total current liabilities 23,770,015 23,332,308 Non-current liabilities Long-term revolving loan payable, net – 9,791,191 Lease liability - non-current 4,509,809 6,106,047 Total non-current liabilities 4,509,809 15,897,238 Total liabilities 28,279,824 39,229,546 Commitments and contingency – – Stockholders' Equity Preferred stock, $ 0.001 par value; 20,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2024 and 2023 – – Common stock, $ 0.001 par value; 180,000,000 shares authorized; 31,359,899 and 29,710,939 shares issued and outstanding at June 30, 2024 and 2023 31,361 29,712 Additional paid in capital 33,463,883 29,624,520 Accumulated deficits ( 10,230,601 ) ( 8,702,442 ) Non-controlling interest ( 38,204 ) ( 24,915 ) Accumulated other comprehensive loss ( 210,406 ) ( 62,134 ) Total stockholders' equity 23,016,033 20,864,741 Total liabilities and stockholders' equity $ 51,295,857 $ 60,094,287 The accompanying notes are an integral part of these consolidated financial statements. F- 2 iPower Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss For the Years Ended June 30, 2024 and 2023 For the Years Ended June 30, 2024 2023 REVENUES $ 86,071,485 $ 88,902,048 TOTAL REVENUES 86,071,485 88,902,048 COST OF REVENUES 46,818,232 54,104,587 GROSS PROFIT 39,253,253 34,797,461 OPERATING EXPENSES: Selling and fulfillment 28,095,176 32,427,972 General and administrative 12,120,969 12,792,998 Impairment loss - goodwill – 3,060,034 Total operating expenses 40,216,145 48,281,004 LOSS FROM OPERATIONS ( 962,892 ) ( 13,483,543 ) OTHER INCOME (EXPENSE) Interest expenses ( 788,425 ) ( 1,066,280 ) Loss on equity method investment ( 5,508 ) ( 10,001 ) Other non-operating income (loss) ( 35,988 ) ( 107,749 ) Total other expenses, net ( 829,921 ) ( 1,184,030 ) LOSS BEFORE INCOME TAXES ( 1,792,813 ) ( 14,667,573 ) PROVISION FOR INCOME TAX BENEFIT ( 251,365 ) ( 2,690,500 ) NET LOSS ( 1,541,448 ) ( 11,977,073 ) Non-controlling interest ( 13,289 ) ( 11,683 ) NET LOSS ATTRIBUTABLE TO iPOWER INC. $ ( 1,528,159 ) $ ( 11,965,390 ) OTHER COMPREHENSIVE LOSS Foreign currency translation adjustments ( 148,272 ) ( 67,812 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO iPOWER INC. $ ( 1,676,431 ) $ ( 12,033,202 ) WEIGHTED AVERAGE NUMBER OF COMMON STOCK Basic 29,878,196 29,713,354 Diluted 29,878,196 29,713,354 LOSSES PER SHARE Basic $ ( 0.05 ) $ ( 0.40 ) Diluted $ ( 0.05 ) $ ( 0.40 ) The accompanying notes are an integral part of these consolidated financial statements. F- 3 iPower Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity For the Years Ended June 30, 2024 and 2023 Common Stock Additional Paid in Retained Earnings (Accumulated Non- controlling Accumulated other Comprehensive income Shares Amount Capital Deficit) interest (loss) Total Balance, June 30, 2023 29,710,939 $ 29,712 $ 29,624,520 $ ( 8,702,442 ) $ ( 24,915 ) $ ( 62,134 ) $ 20,864,741 Net loss – – – ( 1,528,159 ) ( 13,289 ) – ( 1,541,448 ) Stock-based compensation – – 512,542 – – – 512,542 Restricted shares issued for vested RSUs 107,293 107 ( 107 ) – – – – Common stock issued for cash, net of issuance costs 2,083,334 2,084 4,541,005 – – – 4,543,089 Capital injection to DHS – – 85,381 – – – 85,381 Settled offering cost (See Note 17) – – ( 1,300,000 ) – – – ( 1,300,000 ) Returned and cancelled shares ( 541,667 ) ( 542 ) 542 – – – – Foreign currency translation adjustments – – – – – ( 148,272 ) ( 148,272 ) Balance, June 30, 2024 31,359,899 $ 31,361 $ 33,463,883 $ ( 10,230,601 ) $ ( 38,204 ) $ ( 210,406 ) $ 23,016,033   Balance, June 30, 2022 29,572,382 29,573 29,111,863 3,262,948 ( 13,232 ) 5,678 32,396,830 Net loss – – – ( 11,965,390 ) ( 11,683 ) – ( 11,977,073 ) Stock-based compensation – – 512,796 – – – 512,796 Restricted shares issued for vested RSUs 138,557 139 ( 139 ) – – – – Foreign currency translation adjustments – – – – – ( 67,812 ) ( 67,812 ) Balance, June 30, 2023 29,710,939 $ 29,712 $ 29,624,520 $ ( 8,702,442 ) $ ( 24,915 ) $ ( 62,134 ) $ 20,864,741 The accompanying notes are an integral part of these consolidated financial statements. F- 4 iPower Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended June 30, 2024 and 2023 For the Years Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,541,448 ) $ ( 11,977,073 ) Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities: Depreciation and amortization expense 796,225 796,375 Inventory reserve 88,926 238,899 Credit loss reserve 285,386 249,128 Loss on equity method investment 5,508 10,001 Impairment loss - goodwill – 3,060,034 Stock-based compensation expense 512,542 512,796 Amortization of operating lease right of use assets 1,713,182 2,615,937 Amortization of debt premium / discount and non-cash financing costs 233,617 214,800 Change in operating assets and liabilities Accounts receivable ( 953,936 ) 3,333,936 Inventories 9,958,690 9,600,978 Deferred tax assets ( 290,355 ) ( 3,094,365 ) Prepayments and other current assets 511,663 2,380,563 Other non-current assets 306,660 373,646 Accounts payable ( 2,017,841 ) 4,121,315 Other payables and accrued liabilities ( 1,728,632 ) ( 619,497 ) Operating lease liabilities ( 1,716,110 ) ( 2,583,324 ) Income taxes payable – ( 22,880 ) Net cash provided by operating activities 6,164,076 9,211,269 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment – ( 140,813 ) Net cash used in investing activities – ( 140,813 ) CASH FLOWS FROM FINANCING ACTIVITIES: Capital injection 85,711 – Advance from shareholders ( 85,200 ) – Payments of offering cost settlement (See Note 17) ( 975,000 ) – Net proceeds from sale of common stock (See Note 14) 4,543,089 – Proceeds from related parties – 134,262 Payments to related parties – ( 82,500 ) Proceeds from short-term loans - related party 2,350,000 31,385 Proceeds from short-term loans 483,599 – Payment on investment payable – ( 1,500,000 ) Payments on short-term loans - related party ( 2,000,000 ) – Payments on promissory note ( 1,750,000 ) ( 2,159,767 ) Proceeds from revolving loan 6,950,000 5,023,000 Payments on revolving loan ( 12,000,000 ) ( 8,600,000 ) Net cash used in financing activities ( 2,397,801 ) ( 7,153,620 ) EFFECT OF EXCHANGE RATE ON CASH ( 124,080 ) ( 3,141 ) CHANGES IN CASH 3,642,195 1,913,695 CASH AND CASH EQUIVALENT, beginning of period 3,735,642 1,821,947 CASH AND CASH EQUIVALENT, end of period $ 7,377,837 $ 3,735,642 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income tax $ – $ 55,000 Cash paid for interest $ 308,590 $ – SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS: Shares returned and cancelled (See Note 17) $ 1,300,000 $ – Right of use assets acquired under new operating leases 632,732 – The accompanying notes are an integral part of these consolidated financial statements. F- 5 iPower Inc. Notes to Consolidated Financial Statements As of June 30, 2024 and 2023 and for the Years Ended June 30, 2024 and 2023 Note 1 – Nature of business and organization iPower Inc., formerly known as BZRTH Inc., a Nevada corporation (the “Company”), was incorporated on April 11, 2018. The Company is principally engaged in the marketing and sale of consumer home, garden and other products and accessories mainly in the North America. On May 18, 2021, the Company acquired 100% of the equity ownership of its variable interest entity, Global Product Marketing Inc. (“GPM”), an entity which was incorporated in the State of Nevada on September 4, 2020, and was owned by Chenlong Tan, the Company’s Chairman, CEO and President, and one of the majority shareholders of the Company. As a result, GPM became the Company’s wholly owned subsidiary. On May 18, 2021, the Company acquired 100% of the equity ownership of its variable interest entity, E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. As a result, E Marketing became the Company’s wholly owned subsidiary. On January 13, 2022, the Company entered into a joint venture agreement and formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal purpose of providing logistics services primarily for foreign-based manufacturers or distributors who desire to sell their products online in the United States, with such logistics services to include, without limitation, receiving, storing and transporting such products. The Company owns 40% of the equity interest in Box Harmony, retaining significant influence, but does not own a majority equity interest in or otherwise control Box Harmony. See details at Note 3 below. On February 10, 2022, the Company entered into another joint venture agreement and formed a Nevada limited liability company, Global Social Media, LLC (“GSM”), for the principal purpose of providing a social media platform, content and services to assist businesses, including the Company and other businesses, in marketing their products. The Company owns 60% of the equity interest in GSM and controls its operations. See details at Note 3 below. On February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the British Virgin Islands (“BVI”), in accordance with the terms of a share transfer framework agreement (the “Transfer Agreement”), dated February 15, 2022, by and between the Company, White Cherry Limited, a BVI company (“White Cherry”), White Cherry’s equity holders, Li Zanyu and Xie Jing (together with White Cherry, the “Sellers”), Anivia, Fly Elephant Limited, a Hong Kong company, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou (Shenzhen) Information Technology Co., Ltd. Anivia owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayourenzai (Shenzhen) Technology Co., Ltd., a corporation located in the People’s Republic of China (“PRC”) and which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited. The WFOE controls, through contractual arrangements summarized in Note 4 below, the business, revenues and profits of Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”) and located in Shenzhen, China. See details on Note 4 below. Note 2 – Basis of Presentation and Summary of significant accounting policies Basis of presentation The accompanying financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The Company’s fiscal year end date is June 30. Principles of Consolidation The 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. F- 6 Prior Period Reclassification Certain prior year amounts in the consolidated balance sheets and statements of cash flows have been reclassified to conform to the current year presentation, including reclassifications made in the presentation of non-current assets, current liabilities, and cash flows from operating activities. These reclassifications had no impact on the prior year net loss or stockholders’ equity. Emerging Growth Company Status The company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of utilizing the emerging growth company reduced reporting requirements difficult. Use of estimates and assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. Foreign currency translation and transactions The reporting and functional currency of iPower and subsidiaries is the U.S. 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 June 30, 2024, were translated at 7.2673 RMB to $1.00. The equity accounts were stated at their historical rates. The average translation rates applied to statements of operations and comprehensive loss accounts for the year ended June 30, 2024 was 7.2103 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 consolidated balance sheet. F- 7 Cash and cash equivalents Cash and cash equivalents consist of amounts held as cash on hand and financial institution and financial service company deposits. From time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $250,000, which is currently the maximum amount insured by the FDIC for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). The Company has not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. Accounts receivable, net During the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers. Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required. The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses: · the customer fails to comply with its payment schedule; · the customer is in serious financial difficulty; · a significant dispute with the customer has occurred regarding job progress or other matters; · the customer breaches any of its contractual obligations; · the customer appears to be financially distressed due to economic or legal factors; · the business between the customer and the Company is not active; and · 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. Equity method investment The Company accounts for its ownership interest in Box Harmony, a 40 % owned joint venture, following the equity method of accounting, in accordance with ASC 323, Investments — Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at cost and then increased or decreased by recording its percentage of gain or loss in Box Harmony’s statement of operations and a corresponding charge or credit to the carrying value of the asset. F- 8 Variable interest entities On February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”). Pursuant to the terms of the Agreements, the Company does not have direct ownership in DHS but is actively involved in DHS’s operations as the sole manager to direct the activities and significantly impact DHS’s economic performance. DHS’s operational funding has been provided by the Company following the February 15, 2022 acquisition. During the term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits from DHS. As such, based on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control existed, February 15, 2022. See Note 4 for details regarding the acquisition. Goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other . Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The Company’s review for impairment includes an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative goodwill impairment test is performed, which compares the fair value of the reporting unit with its carrying amounts, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company engaged an independent third-party valuation firm in August 2022 to conduct an evaluation of goodwill impairment for the Company as a whole at the consolidated reporting unit level as of June 30, 2022, which evaluation was conducted prior to the Company’s filing of its Annual Report on Form 10-K for the period ended June 30, 2022. Due to the decrease in the Company’s share price subsequent to the filing of the June 30, 2022 Form 10-K and the net loss incurred during the quarter ended September 30, 2022, the Company engaged the same valuation firm to review goodwill for impairment. Based on this review, the Company concluded an impairment loss of $ 3,060,034 as of September 30, 2022 was required. The impairment amount was determined based on the discounted cash flows with the revised projections reflecting the increase in freight and storage costs in the current interim quarter. The Company also considered the Market Capital Method, which is an alternative market approach, suggested the Company’s goodwill is partially impaired. During the period ended June 30, 2024, the Company performed a qualitative and quantitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and noted no goodwill impairment. As of June 30, 2024 and 2023, the goodwill balance amounted to $ 3,034,110 and $ 3,034,110 , respectively. F- 9 Intangible Assets, net Finite life intangible assets at June 30, 2024 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition of Anivia. Intangible assets are recorded at the estimated fair value of these items at the date of acquisition, February 15, 2022. Intangible assets are amortized on a straight-line basis over their estimated useful life as follows: Schedule of estimated useful life Useful Life Covenant Not to Compete 10 years Supplier relationship 6 years Software 5 years The Company reviews the recoverability of long-lived assets, including the intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations. As of June 30, 2024 and 2023, there were no indicators of impairment. Fair values of financial instruments ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature. For other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. F- 10 The Company does not have any assets or liabilities measured at fair value on a recurring basis. We measure certain non-financial assets on a non-recurring basis, including goodwill. As a result of those measurements, we recognized an impairment charge of $3.1 million during the year ended June 30, 2023 as follows: Schedule of fair value of financial assets and liabilities Total Fair Value Level 1 Level 2 Level 3 Total Impairment Loss Goodwill $ 3,034,110 $ – $ – $ 3,034,110 $ 3,060,034 Total $ 3,034,110 $ – $ – $ 3,034,110 $ 3,060,034 Goodwill, with a total carrying value of $6.1 million, was written down to its fair value of $3.0 million, resulting in an impairment charge of $3,060,034, which was recorded in earnings for the year ended June 30, 2023. The fair value of goodwill was determined based on the discounted cash flow method, which is an income approach, which required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that would be used by a market participant, projections of revenues and cash flows with the revised projections reflecting the increase in freight and storage costs in the current interim quarter, among others. Revenue recognition The Company recognizes revenue from service and product sales, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon shipment or completion of service, therefore, revenue from product sales is recognized when it is shipped to the customer and the revenue from services is recognized upon completion of services. For the years ended June 30, 2024 and 2023, the revenues from services were immaterial. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience. The Company evaluates the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service and the Company has discretion in establishing the price, revenue is recorded at gross. Payments received prior to the delivery of goods to customers are recorded as customer deposits. The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction. Sales discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses. F- 11 Advertising costs Advertising costs are expensed as incurred. Total advertising and promotional costs included in selling and fulfillment expenses for the years ended June 30, 2024 and 2023 were $ 4,271,311 and $ 5,331,152 , respectively. Cost of revenue Cost of revenue mainly consists of costs for purchases of products, net of purchase discounts and rebates, and related inbound freight and delivery fees. Operating expenses Operating expenses, which consist of selling and fulfillment and general and administrative expenses, are expensed as incurred. Vendor warranty credits resulting from refund of returns on quality issues are recorded to offset merchant selling fees. During the years ended June 30, 2024 and 2023, the Company recorded vendor credit of $ 2.48 million and $ 0 , respectively. Inventory, net Inventory consists of finished goods ready for sale and is stated at the lower of cost or market. The Company values its inventory using the weighted average costing method. The Company’s policy is to include as a part of inventory and cost of goods sold any freight incurred to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling and fulfillment expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value. The Company also reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence. Debt Issuance Costs Costs incurred in connection with the issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method. To the extent that the debt is outstanding, these amounts are reflected in the consolidated balance sheets as direct deductions from the carrying amount of the outstanding borrowings. Equity offering costs The Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result of the offering. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations and comprehensive income (loss) in the period of determination. For the years ended June 30, 2024 and 2023, $ 1,756,913 and $ 0 were recorded as deferred offering costs and reclassed to additional paid in capital upon closing of the offering. As of June 30, 2024 and 2023, $ 0 and $ 0 of deferred offering costs were included in the consolidated balance sheets, respectively. Segment reporting The Company follows ASC 280, Segment Reporting. The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company as a whole and, hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. For the years ended June 30, 2024 and 2023, sales through Amazon to Canada and other foreign countries were approximately 9.2 % and 10 % of the Company’s total sales. During the year ended June 30, 2024, sales of hydroponic products, including ventilation and grow light systems, was approximately 22 % of the Company’s total sales and the remaining 78 % consisted of general gardening, home goods, and other products and accessories. During the year ended June 30, 2023, sales of hydroponic products, including ventilation and grow light systems, was approximately 23 % of the Company’s total sales and the remaining 77 % consisted of general gardening, home goods, and other products and accessories. As of June 30, 2024 and 2023, the Company had approximately $ 1.9 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. F- 12 Leases The Company records right-of-use (“ROU”) assets and related lease obligations on the balance sheet. ROU assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Stock-based Compensation The Company applies ASC No. 718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. In addition to requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20. For an award which contains both a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting period if it is probable the performance condition will be met. If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied. The Company will recognize forfeitures of such equity-based compensation as they occur. Income taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the states of Nevada and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. 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 financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740, Income Taxes. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. Commitments and contingencies In the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of each matter. F- 13 Earnings per share Basic earnings per share are computed by dividing 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. 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 280): 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: 1. 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. 2. 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. 3. 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. 4. 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. 5. Require that 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. 6. 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 15, 2024. 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. F- 14 In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification™ (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. In SEC Release No. 33-10532, Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles to the FASB for potential incorporation into the Codification. The ASU incorporates into the Codification 14 of the 27 disclosures referred by the SEC. They modify the disclosure or presentation requirements of a variety of Topics in the Codification. The requirements are relatively narrow in nature. Some of the amendments represent clarifications to, or technical corrections of, the current requirements. Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In September 2022, FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments in this ASU require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. An entity should apply ASU No. 2022-04 retrospectively to all periods in which a balance sheet is presented, except for the obligation rollforward, which should be applied prospectively. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and require specific disclosures related to such an equity security. This standard is effective for fiscal years beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for the Company on July 1, 2024, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. F- 15 In March 2020 and January 2021, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, respectively (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by Topic 848 are effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate reform (Topic 848): Deferral of the Sunset Date of Topic 848, which deferred the sunset date of Topic 848, Reference Rate Reform to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements. Subsequent events The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued. Material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented therein. Note 3 - Joint Ventures Box Harmony, LLC On January 13, 2022, the Company entered into a joint venture agreement (the “Joint Venture Agreement”) with Titanium Plus Autoparts, Inc., a California corporation (“TPA”), Tony Chiu (“Chiu”) and Bin Xiao (“Xiao”). Pursuant to the terms of the Joint Venture Agreement, the parties formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal purpose of providing logistic services primarily for foreign-based manufacturers or distributors who desire to sell their products online in the United States, with such logistic services to include, without limitation, receiving, storing and transporting such products. Following entry into the Joint Venture Agreement, Box Harmony issued a total of 6,000 certificated units of membership interest, designated as Class A voting units (“Equity Units”), as follows: (i) the Company agreed to contribute $50,000 in cash in exchange for 2,400 Equity Units in Box Harmony and agreed to provide Box Harmony with the use and access to certain warehouse facilities leased by the Company (see below), and (ii) TPA received 1,200 Equity Units in exchange for (a) $1,200 and contributing the TPA IP License referred to below, (b) its existing and future customer contracts, and (c) granting Box Harmony the use of shipping accounts (FedEx and UPS) and all other TPA carrier contracts, and (iii) Xiao received 2,400 Equity Units in exchange for $2,400 and his agreement to manage the day to day operations of Box Harmony. F- 16 Under the terms of the Box Harmony limited liability operating agreement (the “LLC Agreement”), TPA and Xiao each granted to the Company an unconditional and irrevocable right and option to purchase from Xiao and TPA at any time within the first 18 months following January 13, 2022, up to 1,200 Class A voting units, at an exercise price of $550 per Class A voting unit, for a total exercise price of up to $660,000. If such option is fully exercised, the Company would own 3,600 Equity Units or 60% of the total outstanding Equity Units. As of the date of this report, the Company had not exercised the option to purchase additional voting units from Xiao and TPA. The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by the Company, that a noncontrolling right that would not be substantive to overcome the majority voting interests held by TPA and Xiao. In January 2023, TPA and Xiao transferred their 60% equity units to a third party without consideration as the LLC was still in development stage and did not have significant operations. The transfer of equity did not have any impact on the LLC’s financial statements. As a result, the Company owns 40 % of the equity interest in Box Harmony with significant influence but does not own a majority equity interest or otherwise control of Box Harmony. The Company accounts for its ownership interest in Box Harmony following the equity method of accounting, in accordance with ASC 323, Investments —Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at cost and then increased or decreased by recording its percentage of gain or loss in its statement of operations and a corresponding charge or credit to the carrying value of the asset. Global Social Media, LLC On February 10, 2022, the Company entered into a joint venture agreement with Bro Angel, LLC, 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, contents and services to assist businesses, including the Company and other businesses, in marketing their products. Following entry into the GSM Joint Venture Agreement, GSM issued 10,000 certificated units of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity Units and Bro Angel was issued 4,000 GSM Equity Units. Messrs. Shin and Luo are the owners of 100% of the equity of Bro Angel. The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by Bro Angel, creating a noncontrolling right that would not be substantive to overcome the majority voting interests held by the Company. As of the date of this report, the members have not completed the capital contributions and no receivables were recorded. Pursuant to the terms of the Agreements, the Company owns 60 % of the equity interest in GSM and control of GSM’s operations. Based on ASU 2015-02, the Company consolidates GSM into its financial statements due to its majority equity ownership and control over operations. For the years ended June 30, 2024 and 2023, the impact of GSM’s activities were immaterial to the Company’s consolidated financial statements. Note 4 – Variable interest entity Effective February 15, 2022, upon acquisition of Anivia, the Company assumed the contractual arrangements between the WFOE and DHS through a variable interest operating entity structure. As of June 30, 2024 and 2023, there was no pledge or collateralization of the VIE assets that would be used to settle obligations of the VIE. The carrying amounts of the assets, liabilities and the results of operations of the VIE included in the Company’s consolidated balance sheets and statements of operations and comprehensive income after the elimination of intercompany balances and transactions with the VIE are as follows: F- 17 The carrying amount of the VIE’s assets and liabilities were as follows for the years indicated: Schedule of carrying amount of the VIE’s assets and liabilities June 30, 2024 June 30, 2023 Cash in bank $ 222,648 $ 341,774 Prepayments and other receivables $ 202,904 $ 664,886 Rent deposit $ 72,281 $ 81,624 Office equipment, net $ 12,205 $ 33,774 Right of use – noncurrent $ 434,034 $ 6,104 Deferred tax assets $ – $ 64,510 Advance from shareholders $ – $ 85,200 Accounts payable $ 381,013 $ 6,278 Lease liability $ 443,059 $ 4,758 Income tax payable $ 276,158 $ 276,683 Other payables and accrued liabilities $ 514,285 $ 344,735 The operating results of the VIE were as follows for the year ended June 30, 2024: Schedule of operating results of the VIE June 30, 2024 Revenue $ – Net loss after elimination of intercompany transactions $ 4,340,968 The operating results of the VIE were as follows for the year ended June 30, 2023: June 30, 2023 Revenue $ – Net loss after elimination of intercompany transactions $ 2,056,556 For the year ended June 30, 2024, the VIE contributed approximately $ 7.1 million of revenue and $ 0.5 million of net loss before elimination. For the year ended June 30, 2023, the VIE contributed approximately $ 7 .0 million of revenue and $ 1.4 million of net loss before elimination. Note 5 – Accounts receivable, net Accounts receivable for the Company consisted of the following as of the dates indicated below: Schedule of accounts receivable June 30, 2024 June 30, 2023 Accounts receivable $ 15,095,479 $ 14,141,543 Less: allowance for credit losses ( 355,386 ) ( 70,000 ) Total accounts receivable $ 14,740,093 $ 14,071,543 The changes in allowance for credit losses on accounts receivable are summarized below: Schedule of changes in allowance for credit losses Allowance for Credit Losses Balance at June 30, 2022 $ 70,000 Allowance recorded during the year ended June 30, 2023 – Balance at June 30, 2023 $ 70,000 Allowance recorded during the year ended June 30, 2024 285,386 Balance at June 30, 2024 $ 355,386 Note 6 – Inventories, net As of June 30, 2024 and 2023, inventories consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 10,546,273 and $ 20,593,889 , respectively. For the years ended June 30, 2024 and 2023, the Company recorded inventory reserve expense of $ 88,926 and $ 238,899 , respectively. As of June 30, 2024 and 2023, allowance for obsolescence was $ 647,825 and $ 558,899 , respectively. F- 18 Note 7 – Prepayments and other current assets, net As of June 30, 2024 and 2023, prepayments and other current assets consisted of the following: Schedule of prepayments and other current assets June 30, 2024 June 30, 2023 Advance to suppliers $ 1,567,528 $ 1,668,173 Prepaid income taxes 31,496 45,718 Prepaid expenses and other receivables 747,510 1,393,433 Less: Allowance for credit losses – ( 249,128 ) Total $ 2,346,534 $ 2,858,196 Other receivables consisted of delivery fees of $ 3,995 and $ 165,962 and receivables from one and two unrelated parties for their use of the Company’s courier accounts at June 30, 2024 and 2023. The changes in allowance for credit losses on other receivables are summarized below: Schedule of changes in allowance for credit losses on other receivables Allowance for Credit Losses Balance at June 30, 2022 $ – Allowance recorded during the year ended June 30, 2023 249,128 Balance at June 30, 2023 249,128 Allowance reversed during the year ended June 30, 2024 ( 249,128 ) Balance at June 30, 2024 $ – During the year ended June 30,2024, the Company collected $ 249,128 of aged other receivables and recorded a reduction of bad debts expense as a reversal of the allowance of credit loss. Note 8 – Intangible assets, net As of June 30, 2024 and 2023, intangible assets, net, consisted of the following: Schedule of intangible assets, net June 30, 2024 June 30, 2023 Covenant not to compete $ 3,459,120 $ 3,459,120 Supplier relationships 1,179,246 1,179,246 Software 534,591 534,591 Accumulated amortization ( 1,542,257 ) ( 892,886 ) Total $ 3,630,700 $ 4,280,071 The intangible assets were acquired on February 15, 2022 through acquisition of Anivia. The weighted average remaining life for finite-lived intangible assets at June 30, 2024 was approximately 6.2 years. The amortization expense for the years ended June 30, 2024 and 2023 was $ 649,371 and $ 649,371 , respectively. At June 30, 2024, 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 estimated remaining amortization expense Year Ending June 30, Amount 2025 $ 649,371 2026 649,371 2027 609,277 2028 468,750 2029 345,912 Thereafter 908,019 Intangible assets, net $ 3,630,700 F- 19 Note 9 – Other payables and accrued liabilities As of June 30, 2024 and 2023, other payables and accrued liabilities consisted of the following: Schedule of other payables and accrued liabilities June 30, 2024 June 30, 2023 Accrued payables for inventory in transit $ 1,405,780 $ 2,948,551 Credit cards payable 231,243 366,781 Customer deposit 313,358 350,595 Accrued Amazon fees 530,456 915,319 Sales taxes payable 442,889 448,433 Payroll liabilities 204,137 222,962 Settlement payable 325,000 – Other payables 432,624 295,802 Total $ 3,885,487 $ 5,548,443 The Company’s controlled VIE, DHS, facilitates the Company in the process of inventory procurement. During the years ended June 30, 2024 and 2023, 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. As of June 30, 2024 and 2023, the outstanding balance included in other payables to this supplier was $ 0 and $ 0 , which was presented as financing cash flows from short term loans on the statement of cash flows. Note 10 – Loans payable Long-term loan Asset-based revolving loan On November 12, 2021, the Company entered to a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, for an asset-based revolving loan (“ABL”) of up to $25 million with key terms listed as follows: · Borrowing base equal to the sum of Ø Up to 90% of eligible credit card receivables Ø Up to 85% of eligible trade accounts receivable Ø Up to the lesser of (i) 65% of cost of eligible inventory or (ii) 85% of net orderly liquidation value of eligible inventory · Interest rates of between LIBOR plus 2% and LIBOR plus 2.25% depending on utilization · Undrawn fee of between 0.25% and 0.375% depending on utilization · 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 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 to be amortized over three years as interest expenses, the term of the ABL. Below is a summary of the interest expense recorded for the years ended June 30, 2024 and 2023: Schedule of interest expense 2024 2023 Accrued interest $ 402,675 $ 670,924 Credit utilization fees 71,332 43,932 Amortization of debt discount 265,219 265,219 Total $ 739,226 $ 980,075 F- 20 As of June 30, 2024, the outstanding amount of the revolving loan payable, net of debt discount and including interest payable was $ 5,500,739 and $ 9,791,191 , respectively. On October 7, 2022, the Company entered into a second amendment to the credit agreement and consent (the “Second Amendment to the Credit Agreement”), originally dated November 12, 2021, as amended, with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”). The Company entered into the Second Amendment to the Credit Agreement primarily for the purpose of changing the interest rate repayment calculations from LIBOR to the Secured Overnight Financing Rate, or SOFR, which adjustment had originally been anticipated under the terms of the original Credit Agreement. In addition, two of the negative covenants set forth in the original credit agreement were amended in order to (i) adjust the definition of “Covenant Testing Trigger Period” to increase the required cash availability from $3,000,000 to $4,000,000, or 10% of the aggregate revolving commitment for the preceding 30 days, and (ii) require that the Company will not and will not permit any of its subsidiaries, after reasonable due diligence and due inquiry, to knowingly sell their products, inventory or services directly to any commercial businesses that grow or cultivate cannabis; it being acknowledged, however, that the Company does not generally conduct due diligence on its individual retail customers. On November 11, 2022, the Company and JPMorgan entered into a default waiver and consent agreement (the “Waiver Letter”) pursuant to which the parties recognized that the Company was in default on its failure to satisfy the minimum Excess Availability requirement of $7,500,000, as defined in the Credit Agreement, and deliver a certificate to JPMorgan accurately reflecting the Excess Availability (together, the “Existing Defaults”). Under the terms of the Waiver Letter, JPMorgan agreed to waive the right to enforce an event of default based on the aforementioned Existing Defaults. As of June 30, 2024 and 2023, the Company was in compliance with the ABL covenants. Promissory note payable On February 15, 2022, as part of the consideration for acquisition of Anivia, the Company issued a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual installments commencing August 15, 2022 (the “Purchase Note”). The principal amount of the Purchase Note was $ 3.5 million with a fair value of $ 3.6 million as of February 15, 2022. In October 2022, the Company paid the first installment of $ 875,000 . And in February 2023, the Company paid the second installment of $ 875,000 . In August 2023, the Company paid the third installment of $ 875,000 . In February 2024, the Company paid the fourth installment of $ 875,000 . For the year ended June 30, 2024, the Company recorded accrued interest of $ 39,429 and amortization of note premium of $ 31,602 . In February 2024, the note premium was fully amortized, and the outstanding balance of the principal and accrued interest of $ 275,679 was fully paid off. As of June 30, 2024, the total outstanding balance of the Purchase Note was $ 0 . For the year ended June 30, 2023, the Company recorded accrued interest of $ 157,500 and amortization of note premium of $ 50,418 . As of June 30, 2023, including $ 236,250 of accrued interest and $ 31,602 of unamortized premium, the total outstanding balance of the Purchase Note was $ 2,017,852 , which was presented on the consolidated balance sheet as a current portion of $ 2,017,852 and a non-current portion of $ 0 . Short-term loans payable On July 8, 2023, the Company entered into an agreement with White Cherry Limited (“White Cherry”), a BVI company owned by the former owner of DHS, for an on-demand, unsecured and subordinated loan (“On-demand Loan”). Pursuant to the agreement, White Cherry agreed to loan the Company the amount requested. The On-demand Loan bears interest at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1% per annum. 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 $ 2,000,000 from White Cherry, repaid $ 1 million on July 31, 2023 and $ 1 million on January 31, 2024. For the year ended June 30, 2024, the Company recorded interest of $ 32,911 . As of June 30, 2024, the outstanding balance of the On-demand Loan was fully paid off. On April 8, 2024, the Company entered into an agreement with an unrelated accredited investor (the “Investor”) for an on-demand, unsecured and subordinated loan (“On-demand Loan 2”). Pursuant to the agreement, the Investor agreed to loan the Company the amount requested. The On-demand Loan 2 bears interest at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1.5% per annum. The On-demand Loan 2 is due in 30 days upon receipt of the Investor’s notice of repayment. For the year ended June 30, 2024, the Company borrowed $ 483,599 and recorded interest expense of $ 7,615 . As of June 30, 2024, the outstanding balance of the On-demand Loan 2, including accrued interest of $ 7,615 , was $ 491,214 . As of the date of this report, the On-demand Loan 2 had been fully paid off. On April 1, 2024, the Company borrowed $ 350,000 short-term loan (“RP Loan”) from an entity owned by Mr. Allan Huang, one of the majority shareholders of the Company. The RP Loan bears no interest and is due upon receipt of request of repayment. As of June 30, 2024, the outstanding balance of the RP Loan was $ 350,000 . F- 21 Note 11 - Related party transactions Starting from March 2022 to January 2023, the Company subleased 50,000 square feet of its warehouse space to Box Harmony, LLC, which is a 40% owned joint venture of the Company as disclosed in Note 1 and Note 2 above. For the year ended June 30, 2024 and 2023, the Company received and recorded sublease fee of $ 0 and $ 359,373 as other non-operating income, respectively. As of June 30, 2024 and 2023, other receivables due from Box Harmony was $ 0 and 0 , respectively. During the period ended June 30, 2024, the Company started selling products through MII Strategy Inc. (“MII”), a company owned by the Company’s CEO, Mr. Chenlong Tan. For the year ended June 30, 2024, the amount sold through MII was $ 95,376 . As of June 30, 2024, the total amount due from MII was $ 56,406 . On February 15, 2022, the Company assumed $ 92,246 of advance from shareholders of DHS through acquisition of Anivia. This amount was for capital injection pending capital inspection by the local government in accordance with the PRC rules. During the quarter ended June 30, 2024, DHS had completed and fulfilled the capital injection requirement. As of June 30, 2024 and 2023, the balance of advance from shareholders was $ 0 and $ 85,200 , respectively. On July 8, 2023, the Company entered into an agreement with White Cherry for an on-demand loan. See Note 10 above for details. On April 1, 2024, the Company borrowed $ 350,000 short-term loan from an entity owned by Mr. Allan Huang, one of the majority shareholders of the Company. See Note 10 above for details. Note 12 – Income taxes In addition to corporate income taxes in the United States, upon completion of the acquisition of Anivia in February 2022, the Company is subject to corporate income taxes in People’s Republic of China (“PRC”). Anivia and its subsidiaries were subject to BVI or Hong Kong income taxes but did not have any operations for the year ended June 30, 2024 and 2023. DHS, the operating VIE of Anivia, is considered a Controlled Foreign Corporation (CFC) defined under IRC Sec. 957(a) since the Company indirectly owns more than 50% voting control of DHS as a result of the Transfer Agreement. Therefore, DHS is subject to the GILTI Tax. DHS is subject to 5% tax rate in PRC until December 31, 2027. Since DHS had tested losses during the year ended June 30, 2024 and 2023 and no GILTI tax was recorded for as of June 30, 2024 and 2023, the Company is not eligible for the GILTI high-tax exclusion. 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 years ended June 30, 2024 and 2023 consisted of the following: Schedule of provision for income tax June 30, 2024 June 30, 2023 Current: Federal $ – $ 395,053 State 40,739 11,596 Foreign – – Total current income tax provision 40,739 406,649 Deferred: Federal ( 317,134 ) ( 2,462,699 ) State ( 47,305 ) ( 571,730 ) Foreign 72,335 ( 62,720 ) Total deferred taxes ( 292,104 ) ( 3,097,149 ) Total provision for income taxes $ ( 251,365 ) $ ( 2,690,500 ) F- 22 The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2019 to 2023 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates: Schedule of reconciliation of effective income tax rate June 30, 2024 June 30, 2023 Statutory tax rate Federal 21.00 % 21.00 % State (net of federal benefit) 5.54 % 5.82 % Foreign tax ( 4.94 )% 0.44 % Impairment loss on goodwill – permanent difference – % ( 5.63 )% Prior year adjustment and permanent differences ( 2.66 )% – % Others ( 4.92 )% ( 3.29 )% Effective tax rate 14.02 % 18.34 % As of June 30, 2024, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $ 31,496 and $ 276,158 , respectively. As of June 30, 2023, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $ 45,718 and $ 276,683 , respectively. The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows: Schedule of deferred tax assets June 30, 2024 2023 Deferred tax assets 263A calculation $ 291,354 $ 239,142 Inventory reserve 171,942 149,907 State taxes 4,840 2,435 Accrued expenses 155,860 273,589 ROU assets / liabilities 110,391 115,125 Net Operation loss 2,190,589 2,173,221 Disallowed interest expense 258,352 163,381 Stock-based compensation 341,591 207,726 Valuation allowance ( 64,897 ) – Others 40,067 85,596 Total deferred tax assets 3,500,089 3,410,122 Deferred tax liabilities Depreciation ( 77,287 ) ( 105,323 ) Intangible assets acquired ( 977,197 ) ( 1,149,549 ) Total deferred tax liabilities ( 1,054,484 ) ( 1,254,872 ) Net deferred tax assets $ 2,445,605 $ 2,155,250 F- 23 Note 13– Earnings per share The following table sets forth the computation of basic and diluted earnings per share for the years presented: Schedule of computation of basic and diluted earnings per share For the year ended June 30, 2024 2023 Numerator: Net income (loss) attributable to iPower Inc. $ ( 1,528,159 ) $ ( 11,965,390 ) Denominator: Weighted-average shares used in computing basic and diluted earnings per share* $ 29,878,196 $ 29,713,354 Earnings per share of ordinary shares - basic and diluted $ ( 0.05 ) $ ( 0.40 ) * Due to the ani-dilutive effect, the computation of basic and diluted EPS did not include the shares underlying the exercise of warrants and RSUs as the Company had a net loss for the year ended June 30, 2024. * The computation of diluted EPS did not include the shares underlying the exercise of options granted as none of the options were vested and the exercise price of the options was higher than the market price as of June 30, 2024 and 2023. * For the year ended June 30, 2024, 44,285 vested but unissued shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 14) are considered issued shares and therefore are included in the computation of basic earnings (losses) per share when the shares are fully vested. * For the year ended June 30, 2023, 53,435 vested shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 14) are considered issued shares and therefore are included in the computation of basic earnings (loss) per share when the shares are fully vested. Note 14 – Equity Common Stock As of June 30, 2024, the total authorized shares of capital stock were 200,000,000 shares consisting of 180,000,000 shares of Common Stock (“Common Stock”) and 20,000,000 shares of preferred stock (the “Preferred Stock”), each with a par value of $ 0.001 per share. The holders of Common Stock shall be entitled to one vote per share in voting to the election of directors and all other corporate purposes. Subject to the express terms of any outstanding series of Preferred Stock, dividends may be paid in cash or otherwise with respect to the holders of Common Stock out of the assets of the Company legally available therefor, upon the terms, and subject to the limitations, as the Board of Directors of the Company (the “Board of Directors”) may determine. In the event of a liquidation or dissolution of the Company, subject to the express terms of any outstanding series of Preferred Stock, the holders of Common Stock shall be entitled to share in the distribution of any remaining assets available for distribution to the holders of Common Stock ratably in proportion to the total number of shares of Common Stock then issued and outstanding. During the year ended June 30, 2023, the Company issued 138,557 shares of restricted common stock for RSUs vested. During the year ended June 30, 2024, the Company issued 107,293 shares of restricted common stock for RSUs vested. F- 24 On June 18, 2024, the Company closed on a registered direct offering (the “Registered Direct”) of 2,083,334 shares of common stock (the “Shares”) and a concurrent private placement (“Private Placement,” and together with the Registered Direct, the “Offering”) of warrants (the “Warrants”) to purchase 2,083,334 shares of common stock (the “Warrant Shares”), which were sold for gross aggregate proceeds of $ 5,000,002 . The Shares were sold pursuant to a prospectus supplement, filed on June 18, 2024, to the Registration Statement on Form S-3, originally filed on September 25, 2023, with the SEC (File No. 333-274665) and declared effective by the SEC on September 29, 2023. The Warrants, which were issued pursuant to an exemption from registration pursuant to Section 4(a)(2) or Regulation D on the Securities Act, have a term of five years and are immediately exercisable at $ 2.40 per share. The Shares and Warrants were sold to a purchaser pursuant to a securities purchase agreement, dated June 16, 2024, between the Company and the purchaser (the “Purchase Agreement”). Roth Capital Partners, LLC (the “Placement Agent”) acted as placement agent, pursuant to a placement agency agreement between the Company and the Placement Agent dated June 16, 2024 (the “Placement Agency Agreement”). The Company paid the Placement Agent as compensation a cash fee equal to 6.5 % of the gross proceeds of the Offering plus reimbursement of certain expenses and legal fees. The net proceeds of the Offering, after deducting $ 456,913 , the Placement Agent’s fees and expenses and other direct offering costs paid by the Company, was $ 4,543,089 . The Company calculated the fair value of the Warrants at $ 3.1 million , with a relative fair value of $ 1.7 million after allocation of the fair value of the Shares, using the Black-Scholes Model with the following variables: · Stock Price - $ 2.0 · Exercise Price - $ 2.4 · Volatility – 104 % · Term – 5 years · Risk Free Rate of Return – 4.24 % Pursuant to the Warrant agreement, except for some fundamental transactions within the Company’s control, in no event shall the Company be required to net cash settle the Warrants. The Company considered and followed the rules and guidelines under ASC 480-10 and ASC 815 and concluded that the Warrants should be classified and recorded as equity. Further, as the warrants were issued as part of the Offering, the relative fair value of the Warrants was included in the gross proceeds and recorded as additional paid-in capital. On June 18, 2024, as disclosed in Note 17 below, in order to recoup the settlement payment made to Boustead Securities, LLC, the Company’s Chief Executive Officer and co-founder, Lawrence Tan, along with co-founder Allan Huang, returned a total of 541,667 shares to the Company for cancellation (the “Share Cancellation”). The Share Cancellation was completed in June 2024 and the par value of $ 542 was reduced against additional paid-in capital. As of June 30, 2024 and 2023, there were 31,359,899 and 29,710,939 shares of Common Stock issued and outstanding, respectively. Preferred Stock The Preferred Stock was authorized as “blank check” series of Preferred Stock, providing that the Board of Directors is expressly authorized, subject to limitations prescribed by law, by resolution or resolutions and by filing a certificate pursuant to the applicable law of the State of Nevada, to provide, out of the authorized but unissued shares of Preferred Stock, for series of Preferred Stock, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. As of June 30, 2024 and 2023, respectively, there were no shares of Preferred Stock issued and outstanding. Equity Incentive Plan On May 5, 2021, the Company’s Board of Directors adopted, and its stockholders approved and ratified, the iPower Inc. Amended and Restated 2020 Equity Incentive Plan (the “Plan”). The Plan allows for the issuance of up to 10,000,000 shares of Common Stock, whether in the form of options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares and other stock or cash awards. The general purpose of the Plan is to provide an incentive to the Company’s directors, officers, employees, consultants and advisors by enabling them to share in the future growth of the Company’s business. On November 16, 2021 and December 6, 2022, the Company filed a registration statement on Form S-8 registering all shares issuable under the Plan, 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 restricted stock units (“RSUs”) under the Plan to its independent directors, its Chief Financial Officer, and certain other employees and consultants, all of which are subject to certain vesting conditions in the next 12 months and restrictions until filing of a Form S-8 for registration of the shares. The fair value of the RSUs was determined to be based on $5.00 per share, the initial listing price of the Company’s common stock on the grant date. During the year ended June 30, 2024, the Company granted additional 62,600 shares of RSUs. For the year ended June 30, 2024 and 2023, the Company recorded $ 71,014 and $ 71,268 of stock-based compensation expense. There was no forfeiture of RSUs occurred during the year ended June 30, 2024 and 2023. As of June 30, 2024 and 2023, the unvested number of RSUs was 3,250 and 38,793 and the unamortized expense was $ 1,788 and $ 22,500 , respectively. F- 25 Information relating to RSU grants is summarized as follows: Schedule of RSU activity Total RSUs Issued Total Fair Market Value of RSUs Issued as Compensation (1) RSUs granted, but not vested, at June 30, 2022 6,608 RSUs granted 131,130 $ 78,768 RSUs forfeited – RSUs vested ( 98,945 ) RSUs granted, but not vested, at June 30, 2023 38,793 RSUs granted 62,600 $ 50,302 RSUs forfeited – RSUs vested ( 98,143 ) RSUs granted, but not vested, at June 30, 2024 3,250 _____________________ (1) The total fair value was based on the current stock price on the grant date. As of June 30, 2024, of the 330,154 vested RSUs, 285,869 shares, including 107,293 shares issued during the current year, of Common Stock were issued, and 44,285 shares were to be issued in the next fiscal year. Stock Option On May 12, 2022, the Compensation Committee of the Board of Directors approved an incentive plan for the Company’s executive officers consisting of a cash performance bonus of (i) a $ 60,000 to be awarded to Kevin Vassily, CFO of the Company, and (ii) grants of stock options (the “Option Grants”) in the amount of (a) 3,000,000 shares to Chenlong Tan, CEO and (b) 330,000 shares to Mr. Vassily. The Option Grants, which were issued on May 13, 2022, have an exercise price of $ 1.12 , a contractual term of 10 years and consist of six vesting tranches with a vesting schedule based entirely on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment of the recipients through each vesting date. Each of the six vesting tranches of the Option Grants will vest when both (i) the market capitalization milestone for such tranche, which begins at $150 million for the first tranche and increases by increments of $50 million through the fourth tranche and $100 million thereafter (based on achieving such market capitalization for five consecutive trading days), has been achieved, and (ii) any one of the following six operational milestones focused on revenue or any one of the six operational milestones focused on operating income have been achieved during a given fiscal year. The achievement status of the operational milestones as of June 30, 2024 was as follows: Revenue in Fiscal Year Operating Income in Fiscal Year Milestone (in Millions) Achievement Status Milestone (in Millions) Achievement Status $ 90 Probable $ 6 Probable $ 100 Probable $ 8 Probable $ 125 Probable $ 10 Probable $ 150 Probable $ 12 Probable $ 200 Probable $ 16 – $ 250 – $ 20 – F- 26 The Company evaluated the performance condition and market condition under ASC 718-10-20. The Option Grants are considered an award containing a performance and a market condition and both conditions (in this case at least one of the performance conditions) must be satisfied for the award to vest. The market condition is incorporated into the fair value of the award, and that fair value is recognized over the longer of the implied service period or requisite service period if it is probable that one of the performance conditions will be met. In relation to the five awards deemed probable to vest, the recognition period ranges from 2.93 years to 9.64 years. If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed to the extent any expense has been recognized related to such tranche) because the vesting condition in the award would not have been satisfied. On the grant date, a Monte Carlo simulation was used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization milestone for such tranche was expected to be achieved. Separately, based on a subjective assessment of our future financial performance, each quarter we determine whether it is probable that we will achieve each operational milestone that has not previously been achieved or deemed probable of achievement and if so, the future time when we expect to achieve that operational milestone. The Monte Carlo simulation utilized the following inputs: · Stock Price - $ 1.12 · Volatility – 95.65 % · Term – 10 years · Risk Free Rate of Return – 2.93 % · Dividend Yield – 0 % The total fair value of the Option Grants was $3.2 million of which, at June 30, 2024 and 2023, $2.3 million is deemed probable of vesting. As of June 30, 2024 and 2023, none of the options had vested. For the year ended June 30, 2024 and 2023, the Company recorded $ 441,528 and $ 441,528 of stock-based compensation expense related to the Option Grants. Unrecognized compensation cost related to tranches probable of vesting is approximately $1.3 million and will be recognized over two years to nine years, depending on the tranche. Note 15 – Warrant liabilities On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in Convertible Notes and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes. The convertible note warrants are exercisable for a period of three years from the IPO completion date at a per share exercise price equal to the IPO. In accordance with the terms of the warrants, in the event the Convertible Notes are repaid in cash by the Company, the warrants issued in conjunction with the Convertible Notes will expire and have no further value. The outstanding warrants held by the Convertible Note investors were reclassified to additional paid in capital as the terms became fixed upon closing of the IPO. Through June 30, 2024, none of the private placement investors exercised any of their warrants and the warrants were expired in May 2024. As such, as of June 30, 2024 and 2023, the number of shares issuable under the outstanding convertible note warrants was 0 and 685,715 , with an average exercise price of $ 5.00 per share. Note 16 - Concentration of risk Credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of June 30, 2024 and 2023, $ 7,377,837 and $ 3,735,642 , respectively, were deposited with various major financial institutions and financial services companies 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 $ 5.8 million and $ 2.7 million, respectively, in excess of the FDIC insurance limit, as of June 30, 2024 and 2023. F- 27 Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposing the Company to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses, and such losses have generally been within expectations. The business of DHS, the Company’s VIE, may be impacted by Chinese economic conditions, changes in regulations and laws, and other uncertainties. Customer and vendor concentration risk For the years ended June 30, 2024 and 2023, Amazon Vendor and Amazon Seller customers accounted for 90 % and 91 % of the Company's total revenues, respectively. As of June 30, 2024 and 2023, accounts receivable from Amazon Vendor and Amazon Seller accounted for 91 % and 95 % of the Company’s total accounts receivable. For the years ended June 30, 2024 and 2023, one supplier accounted for 10 % and 27 % of the Company's total purchases, respectively. As of June 30, 2024 and 2023, accounts payable to one supplier accounted for 36 % and 49 % of the Company’s total accounts payable, net of credits of $1.7 million, respectively. Note 17 - Commitments and contingencies Lease commitments The Company has entered into a lease agreement for office and warehouse space with a lease period from December 1, 2018 until December 31, 2020. On August 24, 2020, the Company negotiated for new terms to extend the lease through December 21, 2023 at the rate of approximately $42,000 per month. On December 21, 2023, the lease expired without renewal. On September 1, 2020, in addition to the primary fulfillment center, the Company leased a second fulfillment center in City of Industry, California. The base rental fee is $27,921 to $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. On July 28, 2021, the Company entered into a Lease agreement (the “Lease Agreement”) with 9th & Vineyard, LLC, a Delaware limited liability company (the “Landlord”), to lease from the Landlord approximately 99,347 square feet of space located at 8798 9th Street, Rancho Cucamonga, California (the “Premises”). The term of the Lease Agreement is for 62 months, commencing on the date on which the Landlord completes certain prescribed improvements on the property (the “Rent Commencement Date”). The Lease Agreement does not provide for an option to renew. 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 abated. The lease was not started under the original agreement as the construction was not completed. On February 23, 2022, the Company entered into an amended agreement to extend the lease term to 74 months. The lease commencement date is February 10, 2022, with rent payments commencing May 11, 2022 and the lease expiring on May 31, 2028. The base rental fee is $114,249, increasing gradually over time to $140,079 per month through the expiration date of May 31, 2028. On May 1, 2022, the Company leased another fulfillment center in Duarte, California. The base rental fee is $56,000 to $59,410 per month through April 30, 2025. F- 28 Total commitment for the full term of these leases is $ 12,651,376 . The financial statements reflected $ 6,124,163 and $ 7,837,345 , respectively, of operating lease right-of-use assets, and $ 6,549,110 and $ 8,265,220 , respectively, of operating lease liabilities as of June 30, 2024 and 2023. Years Ended June 30, 2024 and 2023: Schedule of lease cost and other information Lease cost 6/30/2024 6/30/2023 Operating lease cost (included in G&A in the Company's statement of operations) $ 2,716,705 $ 3,107,513 Other information Cash paid for amounts included in the measurement of lease liabilities $ 2,644,838 $ 3,074,909 Remaining term in years 0.08 – 3.92 0.08 – 4.92 Average discount rate - operating leases 5 - 8% 5 - 8% The supplemental balance sheet information related to leases for the period is as follows: Schedule of supplemental balance sheet information related to leases Operating leases 6/30/2024 6/30/2023 Right of use asset - non-current $ 6,124,163 $ 7,837,345 Lease Liability – current 2,039,301 2,159,173 Lease Liability - non-current 4,509,809 6,106,047 Total operating lease liabilities $ 6,549,110 $ 8,265,220 Maturities of the Company’s lease liabilities are as follows: Schedule of maturities of lease liabilities Operating Lease For Year ending June 30: 2025 $ 2,314,092 2026 1,767,679 2027 1,596,313 2028 1,459,409 Less: Imputed interest/present value discount ( 588,383 ) Present value of lease liabilities $ 6,549,110 Contingencies Except as disclosed below, the Company is not currently a party to any material legal proceedings, investigation or claims. As the Company may, from time to time, be involved in legal matters arising in the ordinary course of its business, there can be no assurance that such matters will not arise in the future or that any such matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not at some point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition or results of operations of the Company. F- 29 Pursuant to an engagement agreement, dated and effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the Company engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential underwriter for its initial public offering. On February 28, 2021, the Company informed Boustead that it was terminating the Engagement Agreement and any continuing obligations the Company may have had under its terms. On April 15, 2021, the Company provided formal written notice to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective immediately. On April 30, 2021, Boustead filed a statement of claim with the Financial Institute Regulatory Authority, or FINRA, demanding to arbitrate the dispute, and seeking, among other things, monetary damages against the Company and D.A. Davidson & Co. (who acted as underwriter in the Company’s IPO). As part of the IPO closing, the Company 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, 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. Tan. As of June 30, 2023, the Company was not able to reasonably estimate the amount of potential exposure. On April 3, 2024, the Company and D.A. Davidson & Co entered into a settlement agreement and mutual release (the “Settlement Agreement”) with Boustead Securities, LLC (“Boustead”) and its current and former employees, officers, directors, partners, agents and affiliates, pursuant to which all parties agreed to release all claims in exchange for the Company’s payment of $ 1.3 million (the “Settlement Amount”) to Boustead. The Settlement Agreement was entered into for purposes of settling in full the FINRA Arbitration (FINRA Case No. 22-01133) which had been brought by Boustead against the Company and D.A. Davidson after the Company opted not to complete its initial public offering with Boustead but instead engaged and completed its initial public offering with D.A. Davidson. Pursuant to the terms of the Settlement Agreement, the Company is required to pay the Settlement Amount in four equal installments of $325,000 on each of April 3, 2024, May 3, 2024, June 3, 2024 and July 3, 2024. Within five days of its receipt of the final payment, or by July 8, 2024, Boustead will be obligated to dismiss the FINRA Arbitration against the Company, with prejudice, after which time the Company will be required to dismiss, with prejudice, all counterclaims brought by the Company against Boustead. For the year ended June 30, 2024, the Company considered and concluded that the Settlement Amount of $ 1.3 million was incremental costs directly associated with the IPO under ASC 340-10-S99-1 and so recorded as offering costs against additional paid-in capital. As of June 30, 2024, the outstanding balance of the Settlement Amount was $ 325,000 . As of the date of this report, the Settlement Amount had been paid off and the parties have formally withdrawn all of the complaints that were before FINRA, with prejudice, and the matter is settled in full. In conjunction with entry into the Settlement Agreement, the Company’s CEO and co-founder, Chenlong Tan, and Allan Huang, also a co-founder of the Company, entered into a pledge agreement (the “Pledge Agreement”) with the Company pursuant to which they each pledged 1,300,000 shares of their iPower common stock, for a total of 2,600,000 shares (the “Pledged Shares”), in order that the Company may, from time to time, sell such Pledged Shares into the market on behalf of Messrs. Tan and Huang in order to recoup the Settlement Amount. On June 18, 2024, calculating the shares at $ 2.40 , Messrs. Tan and Huang returned a total of 541,667 shares as indemnification payment to the Company for cancellation (the “Share Cancellation”). The Share Cancellation was completed in June 2024. 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 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, 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. F- 30 On April 13, 2020, the Company entered into an agreement with Royal Business Bank (the “Lender”) for a total amount of $175,500, pursuant to a promissory note issued by the Company to the Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). On March 22, 2021, the $175,500 PPP Note due to Royal Business Bank was fully forgiven by the Small Business Administration (“SBA”). The Company is required to retain PPP loan documentation through 2026 and permit authorized representatives of the SBA to access such files upon request. Should the SBA conduct such a review and reject all or some of the Company’s judgments pertaining to satisfying PPP loan eligibility or forgiveness conditions, the Company may be required to adjust previously reported amounts and disclosures in the consolidated financial statements. Note 18 - Subsequent events The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued. Other than the material subsequent events disclosed above in the notes to financial statements, no other material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented. On August 29, 2024, the board of directors (the “Board”) of the Company, based on the recommendation of the compensation committee of the Board, approved a grant of 1,200,000 stock options (the “Stock Options”) issuable to Chenlong Tan, the Company’s Chief Executive Officer, pursuant to the terms of the iPower Inc. Amended and Restated 2020 Equity Incentive Plan (the “Plan”). Following the Board’s approval, Mr. Tan and the Company entered into a stock option award agreement (the "Stock Option Award Agreement"). According to the Stock Option Award Agreement, and subject to the terms and conditions of the Stock Option Award Agreement and the Plan, upon vesting of the Stock Options, Mr. Tan will have the option to purchase common stock, par value $0.001 per share of the Company, at an exercise price of $1.43 per share (which is 110% of the Fair Market Value of the stock on the grant date). The Stock Options have a term of five years and will vest as follows: 30,000 Stock Options vested on the grant date (August 29, 2024), and 32,500 Stock Options will vest on the first day of each month from September 1, 2024, to August 1, 2027. F- 31 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.