What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-05-14 · 587 added, 708 removed, 948 unchanged (58% of the section changed)

1 unchanged sentence

and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of March 31, 2024 and June 30, 2023

Condensed Consolidated Balance Sheets

of September 30, 2024 and June 30, 2024

September 30,

Current assets

Cash and cash equivalents

Cash and cash equivalent

Accounts receivable, net

Inventories, net

Prepayments and other current

Prepayments and other current assets, net

Total current assets

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Deferred tax assets, net

Non-current prepayments

Investment in joint venture

Intangible assets, net

1 unchanged sentence

Total non-current assets

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

Credit cards payable

Customer deposit

Accounts payable, net

Other payables and accrued liabilities

Advance from shareholders

Lease liability - current

Long-term promissory note payable - current portion

Revolving loan payable

Short-term loan payable

Short-term loan payable - related party

Revolving loan payable, net

Income taxes payable

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Total liabilities

Commitments and contingencies

Commitments and contingency

Stockholders' Equity

Preferred stock, $ 0.001 par value;

20,000,000 shares

0 shares issued and outstanding at March 31, 2024 and June 30, 2023

Preferred stock, $ 0.001

shares authorized;

shares issued and outstanding at September 30, 2024 and June 30, 2024

Common stock, $ 0.001 par value;

180,000,000 shares

29,818,232 and 29,710,939 shares issued and outstanding at March 31, 2024 and June 30, 2023

180,000,000 shares authorized;

31,359,899 shares issued and outstanding at September 30, 2024 and June 30, 2024

Additional paid in capital

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Non-controlling interest

Accumulated other comprehensive

Accumulated other comprehensive loss

Total stockholders' equity

Total liabilities and stockholders’

Total liabilities and stockholders' equity

The accompanying notes are an integral part

1 unchanged sentence

and Subsidiaries

Unaudited Condensed Consolidated Statements of

For the Three and Nine Months Ended March 31, 2024

For the Three Months Ended

For the Nine Months Ended

Condensed Consolidated Statements of Operations and Comprehensive Loss

the Three Months Ended September 30, 2024 and 2023

For the Three Months Ended September 30,

Product sales revenues

Service income

Total revenues

COST OF REVENUES

Product costs

Service costs

Total cost of revenues

OPERATING EXPENSES:

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General and administrative

Impairment loss - goodwill

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

( 1,811,198 )

LOSS FROM OPERATIONS

( 2,746,434 )

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Loss on equity method investment

Other non-operating income (expense)

Total other expenses,

INCOME (LOSS) BEFORE INCOME TAXES

( 2,123,353 )

( 2,782,539 )

( 11,097,353 )

PROVISION FOR INCOME TAX EXPENSE (BENEFIT)

Other non-operating income (Loss)

Total other income (expenses), net

LOSS BEFORE INCOME TAXES

( 2,668,629 )

NET INCOME (LOSS)

( 1,565,233 )

PROVISION FOR INCOME TAX BENEFIT

( 2,032,117 )

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Non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

$ ( 1,530,534 )

NET LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 2,029,281 )

$ ( 1,286,515 )

OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustments

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPOWER

$ ( 1,512,930 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 2,084,335 )

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WEIGHTED AVERAGE NUMBER OF COMMON STOCK

EARNINGS (LOSSES) PER SHARE

Basic and diluted

LOSSES PER SHARE

Basic and diluted

The accompanying notes are an integral part

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and Subsidiaries

Unaudited Condensed Consolidated Statements of

Changes in Stockholders' Equity

For the Three and Nine Months Ended March 31, 2024

Retained Earnings (Accumulated

Condensed Consolidated Statements of Changes in Stockholders' Equity

the Three Months Ended September 30, 2024 and 2023

Non-controlling

Accumulated Other Comprehensive Income

Accumulated other Comprehensive

Balance, June 30, 2024

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( 2,029,281 )

Stock-based compensation

Foreign currency translation adjustments

Balance, September 30, 2023, unaudited

( 2,032,117 )

( 1,914,828 )

( 1,917,983 )

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2023, unaudited

$ ( 11,903,785 )

$ ( 223,096 )

Stock-based compensation

Restricted shares issued for vested RSUs

Foreign currency translation adjustments

Balance, March 31, 2024, unaudited

$ ( 10,887,703 )

$ ( 153,974 )

Balance, June 30, 2022

( 4,182,376 )

( 4,185,181 )

Stock-based compensation

Foreign currency translation adjustments

Balance, September 30, 2024, Unaudited

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$ ( 265,460 )

( 3,290,439 )

( 3,293,274 )

Stock-based compensation

Foreign currency translation adjustments

Balance, December 31, 2022, unaudited

Balance, June 30, 2023

$ ( 8,702,442 )

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Foreign currency translation adjustments

Balance, March 31, 2023, unaudited

Balance, September 30, 2023, Unaudited

$ ( 9,988,957 )

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and Subsidiaries

Unaudited Condensed Consolidated Statements of

For the Nine Months Ended March 31, 2024 and 2023

For the Nine Months Ended March 31,

Condensed Consolidated Statements of Cash Flows

the Three Months Ended September 30, 2024 and 2023

For the Three Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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$ ( 1,289,351 )

Adjustments to reconcile net loss to cash provided by operating activities:

Adjustments to reconcile net loss to cash (used in) provided by

operating activities:

Depreciation and amortization expense

Inventory reserve

Credit loss reserve

Loss on equity method investment

Impairment loss - goodwill

Stock-based compensation expense

Non-cash operating lease expense

Gain on foreign currency exchange rates

Amortization of operating lease right of use assets

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

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Accounts receivable

( 2,772,149 )

Deferred tax assets/liabilities

( 2,485,274 )

Prepayments and other current assets

Deferred tax assets

Prepayments and other current assets, net

Non-current prepayments

1 unchanged sentence

Accounts payable

Credit cards payable

Customer deposit

Other payables and accrued liabilities

( 2,874,417 )

( 1,213,634 )

Other payables and accrued liabilities

( 1,040,347 )

Operating lease liabilities

Income taxes payable

Net cash provided by operating activities

Net cash (used in) provided by operating activities

( 1,415,643 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

Prepayments for software development

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from related parties

Payments to related parties

Payments of offering cost settlement

Proceeds from short-term loans - related party

Payment on investment payable

( 1,500,000 )

Payments on short-term loans - related party

( 1,000,000 )

Payments on short-term loans

( 1,750,000 )

( 1,781,385 )

Proceeds from long-term loans

Payments on long-term loans

Payments on promissory note

Proceeds from revolving loan

Payments on revolving loan

( 4,000,000 )

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EFFECT OF EXCHANGE RATE ON CASH

CHANGES IN CASH

CHANGES IN CASH AND CASH EQUIVALENTS

( 4,800,532 )

CASH AND CASH EQUIVALENT, beginning of period

CASH AND CASH EQUIVALENT, end of period

( 1,006,481 )

CASH AND CASH EQUIVALENTS, beginning of period

CASH AND CASH EQUIVALENTS, end of period

SUPPLEMENTAL CASH FLOW INFORMATION:

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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Right of use assets derecognized due to termination of

operating leases

Right of use assets acquired under new operating leases

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Notes to Unaudited Condensed Consolidated Financial

As of March 31, 2024 and June 30, 2023 and for

the Three and Nine Months Ended March 31, 2024 and 2023

As of September 30, 2024 and June 30, 2024 and

for the Three Months Ended September 30, 2024 and 2023

Note 1 - Nature of business and organization

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

purpose of providing logistics services primarily for foreign-based manufacturers and distributors who desire to sell their products online

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.

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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.

in the People’s Republic of China (“PRC”), 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.

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These unaudited condensed consolidated financial statements have

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

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

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

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

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

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

These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2025, or for any

other interim period or for any other future year.

All intercompany balances and transactions have been eliminated in consolidation.

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

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

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

All inter-company balances and transactions have been eliminated.

Prior Period Reclassification

Certain prior period amounts in the unaudited

condensed statements of cash flows have been reclassified to conform to the current period presentation, including reclassifications made

in the presentation of cash flows from operating activities.

These reclassifications had no impact on the prior year net loss or stockholders’

Emerging Growth Company Status

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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

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

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or more future confirming events.

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

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

Foreign currency translation and transactions

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The balance sheet amounts of the VIE, with the

exception of equity, on March 31, 2024, were translated at 7.2212 RMB to $1.00.

The equity accounts were stated at their historical rates.

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

31, 2024 was 7.2000 RMB to $1.00.

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

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

consolidated balance sheet.

exception of equity, on September 30, 2024, were translated at 7.0181 RMB to $1.00.

The equity accounts were stated at their historical

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

ended September 30, 2024 was 7.1623 RMB to $1.00.

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

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

condensed consolidated balance sheet.

Cash and cash equivalents

Cash and cash equivalents consist of amounts held

as cash on hand and bank deposits.

as cash on hand and financial institution and financial service company deposits.

From time to time, the Company may maintain bank

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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.

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, which includes the amount withheld by sales channel partners and refundable to the Company.

Based on historical and

expected loss rate and status of negotiations with the sales channel partner, 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

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Accounts receivable are recognized and carried

at the carrying amount less an allowance for credit losses, if any.

The Company maintains an allowance for credit losses resulting from

the inability of its customers to make required payments based on contractual terms.

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

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

In late October 2024, the Company determined that the collectability of certain shortage claim receivables from

Amazon was remote so recorded additional allowance for credit losses of approximately $ 1.4 million for the quarter ended September 30,

Equity method investment

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value of the asset.

Business Combination

On February 15, 2022, the Company acquired 100%

of the ordinary shares of Anivia and its subsidiaries, including the VIE.

The Company applies the acquisition method of accounting for

business combinations.

Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired

and liabilities assumed at their acquisition date fair values.

Management utilizes valuation techniques appropriate for the asset or liability

being measured in determining these fair values.

Any excess of the purchase price over amounts allocated to assets acquired, including

identifiable intangible assets, and liabilities assumed is recorded as goodwill.

Where amounts allocated to assets acquired and liabilities

assumed is greater than the purchase price, a bargain purchase gain is recognized.

Acquisition-related costs are expensed as incurred.

See Note 4 for details regarding the acquisition.

Variable interest entities

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is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control existed, February

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

Goodwill represents the excess of the purchase

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

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

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

If it is determined that it is more likely than

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

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

If the fair value of

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

However, if the carrying amount

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

total amount of goodwill allocated to that reporting unit.

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

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

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

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

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

Based on this

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

The impairment amount was determined

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

September 30, 2022.

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

goodwill is partially impaired.

During the period ended March 31, 2024, the Company

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

As of March 31, 2024 and June 30, 2023, the goodwill balance amounted to $ 3,034,110 and $ 3,034,110 , respectively.

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.

During the three months ended September 30,

2024 and 2023, the Company performed a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and

noted no goodwill impairment.

As of September 30, 2024 and June 30, 2024, the goodwill balance amounted to $ 3,034,110 .

Intangible Assets, net

Finite life intangible assets at March 31, 2024

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

Intangible assets

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

Finite life intangible assets at September 30,

2024 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition of Anivia.

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

Intangible assets are amortized

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

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

Schedule of estimated useful life

Covenant Not to Compete

Supplier relationships

Supplier relationship

The Company reviews the recoverability of long-lived

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value determinations.

As of March 31, 2024 and 2023, there were no indicators of impairment.

As of September 30, 2024 and 2023, there were no indicators of impairment.

Fair values of financial instruments

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

On February 15, 2022, as part of the consideration

paid for the acquisition of Anivia, the Company issued a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual

installments commencing August 15, 2022 (the “Purchase Note”).

The principal amount of the Purchase Note was $ 3.5 million.

On February 15, 2022, the Company evaluated the fair value of the Purchase Note to be $ 3.6 million using the following inputs:

Schedule of assumptions for financial instruments

Corporate bond yield

Risk-free rate

Liquidity premium

Discount rate

As of March 31, 2024, the outstanding balance

of the Purchase Note was $ 0 .

For other financial instruments to be reported

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to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

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.

a result of those measurements, we recognized an impairment charge of $3.1 million during the year ended June 30, 2023 as follows:

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

As a result of those measurements, as of September 30, 2024 and June 30, 2024, the Company had goodwill with a carry book

value of $ 3,034,110 , which approximated its fair value:

Schedule of impairment charges

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

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Revenue recognition

The Company recognizes revenue from product sales

revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met:

a contract has

been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated

The Company recognizes revenues from service and

product sales, net of promotional discounts and return allowances, when the following revenue recognition criteria are met:

has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated

to separate performance obligations and revenue is recognized upon satisfying each performance obligation.

The Company transfers the risk

of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer.

Return allowances,

which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience.

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.

Return allowances, which reduce product revenue by the Company’s best estimate of expected

product returns, are estimated using historical experience.

The Company evaluates the criteria of ASC 606

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Generally, when the Company is primarily responsible for fulfilling the promise

to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a

customer and the Company has discretion in establishing the price, revenue is recorded at gross.

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

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price of the related transaction.

Sales discounts are recorded in the period in

which the related sale is recognized.

Sales discounts are recorded in the period in which the related sales

are recorded.

Sales return allowances are estimated based on historical amounts and are recorded upon recognizing

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Advertising costs are expensed as incurred.

Total advertising and promotional costs included

in selling and fulfillment expenses for the three and nine months ended March 31, 2024 and 2023 were as following:

Schedule of advertising costs

Three Months Ended March 31,

Nine Months Ended March 31,

Advertising and promotion

advertising and promotional costs included in selling and fulfillment expenses for the three months ended September 30, 2024 and 2023

were $ 651,125 and $ 1,570,742 , respectively.

Cost of revenue

Cost of revenue mainly consists of costs for purchases

of products and related inbound freight and delivery fees.

of products, net of purchase discounts and rebates, and related inbound freight and delivery fees.

Operating expenses

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on quality issues are recorded to offset merchant selling fees.

During the three and nine months ended March 31, 2024 and 2023, the Company

recorded vendor credit of $ 858,456 and $ 0 , respectively.

During the three months ended September 30, 2024 and 2023, the Company

did no t have any vendor credits.

Inventory, net

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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, $1,756,913 were recorded as deferred offering costs and reclassed to additional paid

in capital upon closing of the offering.

As of September 30, 2024 and June 30, 2024, there were no deferred offering costs included in

the consolidated balance sheets.

Segment reporting

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

For the nine months ended

March 31, 2024 and 2023, sales through Amazon to Canada and other foreign countries were approximately 8.5 % and 12.8 % of the Company’s

During the nine months ended March 31, 2024, sales of hydroponic products, including ventilation and grow light systems,

For the three months ended

September 30, 2024 and 2023, sales through Amazon to Canada and other foreign countries were approximately 13.4 % and 8.2 % of the Company’s

During the three months ended September 30, 2024, sales of hydroponic products, including ventilation and grow light systems,

was approximately 17.2 % of the Company’s total sales and the remaining 82.8 % consisted of general gardening, home goods, and other

products and accessories.

During the nine months ended March, 2023, sales of hydroponic products, including ventilation and grow light

systems, were approximately 46 % of the Company’s total sales and the remaining 54 % consisted of general gardening, home goods and

other products and accessories.

As of March, 2024 and June 30, 2023, the Company had approximately $ 1.9 million and $ 1.6 million of inventory

stored in China, respectively.

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

of the deferred tax assets are U.S.

related, and a majority of the Company’s revenues are derived from within the U.S.

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

light systems, were approximately 16.8 % of the Company’s total sales and the remaining 83.2 % consisted of general gardening, home

goods and other products and accessories.

As of September 30, 2024 and June 30, 2024, the Company had approximately $ 1.6 million and $ 1.9

million of inventory stored in China.

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

of the deferred tax assets are US related, and a majority of the Company’s revenues are derived from within the United States.

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

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equity-based compensation as they occur.

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 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.

A valuation allowance must be established for

deferred tax assets when it is more-likely-than-not (a probability level of more than 50%) that they will not be realized.

allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company has analyzed filing positions in each

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Earnings per share

Basic earnings per share are computed by dividing

Basic earnings per share is 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 convertible or exercisable into common stock

were issued upon conversion or exercise.

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

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.

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.

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.

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

In October 2021, the FASB issued ASU 2021-08,

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

This ASU clarifies

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

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

The guidance is

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

The Company does not expect the adoption

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

In March 2020 and January 2021, the FASB issued

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method of transition.

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

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

“Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment,” which eliminates step two

from the goodwill impairment test.

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

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

ASU 2017-04 became

effective for accelerated filing companies for annual periods or any interim goodwill impairment tests in fiscal years beginning after December

All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their

annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2022.

Early adoption is permitted for interim

or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company has adopted ASU 2017-04.

See the disclosures

above on Goodwill for further details.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The Company does not believe other recently issued

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Based on ASU 2015-02, the Company consolidates GSM into

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

For the three and nine months ended March 31,

2024 and 2023, the impact of GSM’s activities were immaterial to the Company’s unaudited condensed consolidated financial

Note 4 - Acquisition of Anivia Limited and Subsidiaries and Variable

Interest Entity

On February 15, 2022, the Company acquired 100%

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

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

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

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

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

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 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,

The contractual arrangements between the WFOE

and DHS are established through a variable interest operating entity structure, which is reflected in (i) an exclusive business cooperation

agreement, dated December 15, 2021, between the WFOE and DHS, (ii) an exclusive equity interest pledge agreement, dated December 15, 2021,

between the WFOE and DHS in which the equity of DHS was pledged to the WFOE, (iii) an exclusive option agreement, dated December 15, 2021,

between the WFOE, DHS and its equity holders, Li Zanyu and Xie Jing (the “Equity Holders), pursuant to which the Equity Holders

give the WFOE the irrevocable and exclusive right to purchase the equity interests in DHS, and (iii) a power of attorney, dated December

15, 2021, pursuant to which Li Zanyu and Xie Jing, the holders of 100% of the equity interest of DHS, granted the WFOE all voting and

other rights to their equity interest in DHS.

According to the exclusive business cooperation agreement, in consideration for the services

provided by the WFOE, DHS shall pay a service fee to the WFOE on annual basis (or at any time agreed by the Parties).

The service fees

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

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

The WFOE may provide a separate

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

or the amount of services

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

DHS is principally engaged in selling a wide range

of products and providing logistics services in the PRC.

Pursuant to the terms of the Agreements, the Company

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.

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

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

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

Total fair value of the consideration for the

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

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

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

(ii) issued 3,083,700 restricted shares of the Company’s common stock, which shares were subject to a lock-up period of 180 days

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

JP Morgan Chase Bank, the Company’s senior

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

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

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

Anivia, Fly Elephant Limited and the WFOE.

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

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

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

The Amendment to the Subordination Agreement was amended solely for purposes of adjusting the definition of payment conditions under Section

2 of the Subordination Agreement such that “payment conditions” thereafter were to be deemed satisfied in connection with

a permitted payment if (a) no event of default has occurred under the credit agreement and is continuing and (b) the Company has Excess

Availability in the 30 days prior to the payment (as defined in the Second Amendment to the Credit Agreement) of no less than $7,500,000.

In addition, in conjunction with the closing of

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

pursuant to which Mr.

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

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

Li’s performance.

During his term of employment, Mr.

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

The acquisition of Anivia was accounted for as

a business combination under ASC 805.

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

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

The Company applied

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

not to compete, supplier relationship and software.

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

different from their carrying values at the acquisition date.

In addition, pursuant to the Transfer Agreement, the Sellers made certain

representations and warranties, including that other than the items presented on the balance sheet on February 15, 2022, DHS, the operating

VIE, was not subject to any loans, debts, liabilities, guarantees or other contingent liabilities at the Closing date.

In the event of

any breach of any of the representations and warranties, the sellers will bear joint and several liability for any direct or indirect

losses suffered by the Company as a result thereof.

The Company recognized approximately $ 6.1 million of goodwill in the transaction,

which is primarily due to the subsumed assembled workforce intangible assets.

Goodwill is not deductible for income tax purposes.

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

paid to JPM as financing fees.

The following information summarizes the purchase

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

Schedule of allocation of acquisition price

Fair Value of Purchase Price:

Promissory note issued

Common stock issued

Total purchase consideration

Purchase Price Allocation:

Covenant not to compete

Supplier relationship

Current assets

Property and equipment

Deferred tax liabilities

( 1,389,113 )

Current liabilities

( 1,143,076 )

Lease liability

Total purchase consideration

In October 2022, the $1.5 million cash portion

of the consideration, which was presented as investment payable, was fully paid off.

The results of operations of Anivia since February

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

its financial statements due to its majority equity ownership and control over operations.For the three months ended September 30, 2024

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

Note 4 – Variable interest entity

1 unchanged sentence

of Anivia, the Company assumed the contractual arrangements between the WFOE and DHS through a variable interest operating entity structure.

See Note 4 for details.

On September 26, 2024, Mr.

Zanyu Li, the equity owner of DHS transferred his shares to Ms.

Liu has become the Manager

and Legal Representative of DHS and assumed all responsibilities and obligations of Mr.

The transfer of equity ownership did

not change the control the Company had on the VIE, therefore there was no impact on the Company’s financial statements.

The Company did not provide financial or other

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

As of March 31, 2024 and June 30, 2023, there

As of September 30, 2024 and June 30, 2024, there

was no pledge or collateralization of the VIE assets that would be used to settle obligations of the VIE.

4 unchanged sentences

and liabilities were as follows for the periods indicated:

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

March 31, 2024

Schedule of VIE’s assets

and liabilities

September 30, 2024

June 30, 2024

2 unchanged sentences

Right of use – noncurrent

Deferred tax assets

Advance from shareholders

Accounts payable

3 unchanged sentences

The operating results of the VIE were as follows

for the three and nine months ended March 31, 2024:

for the three months ended September 30, 2024:

Schedule of operating results of the VIE

Net income (loss) after elimination of intercompany transactions

$ ( 327,984 )

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

nine months ended March 31, 2023:

Net income (loss) after elimination of intercompany transactions

For the three and nine months ended March 31,

2024, the VIE contributed approximately $ 1.6 million and $ 5.5 million of revenue and $ 0.1 million and $ 0.3 million of net loss before

elimination, respectively.

For the three and nine months ended March 31, 2023, the VIE contributed approximately $ 0.7 million and $ 5 .0

million of revenue and $ 0.1 million and $ 0.7 million of net loss before elimination, respectively.

September 30, 2024

Net loss after elimination of intercompany transactions

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

ended September 30, 2023 :

September 30, 2023

Net loss after elimination of intercompany transactions

For the three months ended September 30, 2024,

the VIE contributed approximately $ 1.4 million of revenue and $ 0.2 million of net loss before elimination.

For the three months ended

September 30, 2023, the VIE contributed approximately $ 2.1 million of revenue and $ 0.05 million of net loss before elimination.

Note 5 – Accounts receivable, net

2 unchanged sentences

Schedule of accounts receivable

March 31, 2024

September 30, 2024

June 30, 2024

1 unchanged sentence

allowance for credit losses

( 1,830,980 )

Total accounts receivable

During the three and nine months ended March 31,

2024 and 2023, there were no changes in allowance for credit losses on accounts receivable.

The changes in allowance for credit losses on

accounts receivable are summarized below:

Schedule of changes in allowance for credit losses on

accounts receivable

Allowance for

Credit Losses

Balance at June 30, 2023

Allowance recorded during the three months ended September 30, 2023

Balance at September 30, 2023

Balance at June 30, 2024

Allowance recorded during the three months ended September 30, 2024

Balance at September 30, 2024

Note 6 – Inventories, net

As of March 31, 2024 and June 30, 2023, inventories

As of September 30, 2024 and June 30, 2024, inventories

consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 8,668,497 and $ 10,546,273 , respectively.

For the three and nine months ended March 31,

2024, the Company recorded inventory reserve expense of $ 0 and $ 222,755 , respectively.

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

the Company recorded inventory reserve expense of $ 163,901 and $ 238,899 , respectively.

As of March 31, 2024 and June 30, 2023, allowance

for obsolescence was $ 781,655 and $ 558,899 , respectively.

For the three months ended September 30, 2024

and 2023, the Company recorded inventory reserve expense of $ 288,474 and $ 105,192 , respectively.

As of September 30, 2024 and June 30,

2024, allowance for obsolescence was $ 936,299 and $ 647,825 , respectively.

Note 7 – Prepayments and other current assets, net

As of March 31, 2024 and June 30, 2023, prepayments and other current

As of September 30, 2024 and June 30, 2024, prepayments and other current

assets consisted of the following:

Schedule of prepayments and other current

March 31, 2024

September 30, 2024

June 30, 2024

3 unchanged sentences

Allowance for credit losses

Other receivables consisted of delivery fees of

$ 6,619 and $ 165,962 from one and two unrelated parties for their use of the Company’s courier accounts at March 31, 2024 and June

During the three and nine months ended March 31, 2024 and 2023, there

were no changes in allowance for credit losses on other receivables.

Note 9 – Non-current prepayments

Non-current prepayments included $ 292,071 for

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

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

The terms of these services are from two years to

In addition, there was a $ 28,119 down payment on a four-year car lease.

As of March 31, 2024 and June 30, 2023, total non-current

prepayments were $ 320,190 and $ 531,456 , respectively.

For the three and nine months ended March 31, 2024, the Company recorded $ 70,422

and $ 211,266 amortization of prepayments in the operating expenses, respectively.

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

the Company recorded $ 107,917 and $ 323,751 amortization of prepayments in the operating expenses, respectively.

Other receivables consisted of delivery fees

of $ 2,786 and $ 3,995

from a third party for using the Company’s courier accounts at September

30, 2024 and June 30, 2024.

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, 2023

Allowance recorded during the three months ended September 30, 2023

Balance at September 30, 2023

Balance at June 30, 2024

Allowance recorded during the three months ended September 30, 2024

Balance at September 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

Note 8 – Intangible assets, net

As of March 31, 2024 and June 30, 2023, intangible

As of September 30, 2024 and June 30, 2024, intangible

assets, net, consisted of the following:

Schedule of intangible

March 31, 2024

September 30, 2024

June 30, 2024

3 unchanged sentences

( 1,704,560 )

( 1,542,257 )

The intangible assets were acquired on February

15, 2022 through acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at March 31, 2024 was approximately

The amortization expense for the three and nine months ended March 31, 2024 was $ 162,343 and $ 487,028 , respectively.

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

At March 31, 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:

The weighted average remaining life for finite-lived intangible assets at September 30, 2024 was

approximately 5.95 years.

The amortization expense for the three months ended September 30, 2024 and 2023 was $ 162,343 and $ 162,343 , respectively.

At September 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

Schedule of amortization expense

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Intangible assets, net

Note 11 – Other payables and accrued

As of March 31, 2024 and June 30, 2023, other payables and accrued

Note 9 – Other payables and accrued liabilities

As of September 30, 2024 and June 30, 2024, other payables and accrued

liabilities consisted of the following:

Schedule of other payables and accrued

March 31, 2024

September 30, 2024

June 30, 2024

Accrued payables for inventory in transit

Credit cards payable

Customer deposit

Accrued Amazon fees

1 unchanged sentence

Payroll liabilities

Settlement payable

Other accrued liabilities and payables

The Company’s controlled VIE, DHS, facilitates

the Company in the process of inventory procurement.

During the nine months ended March 31, 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, which was presented as financing cash flows from short term loans on the statement of cash flows.

As of March 31, 2024 and June

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

Note 10 – Loans payable

2 unchanged sentences

On November 12, 2021, the Company entered into

a Credit Agreement with JPM, 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:

a Credit Agreement with JPMorgan Chase Bank, N.A.

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

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

Borrowing base equal to the sum of

15 unchanged sentences

Below is a summary of the interest expense recorded

for the three and nine months ended March 31, 2024 and 2023:

for the three months ended September 30, 2024 and 2023:

Schedule of interest expense

Three Months Ended March 31,

Nine Months Ended March 31,

Accrued interest

1 unchanged sentence

Amortization of debt discount

As of March 31, 2024 and June 30, 2023, the outstanding

amount of the revolving loan payable, net of debt discount and including interest payable was $ 6,011,860 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 JPM.

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 JPM

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 JPM accurately reflecting the Excess Availability (together, the “Existing Defaults”).

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

As of March 31, 2024, the Company was in compliance with the ABL covenants.

As disclosed in Note 18, the maturity date of

the ABL has been extended to November 8, 2027.

As of September 30, 2024, the outstanding amount of the ABL, which was classified as long-term

revolving loan payable, net of debt discount and including interest payable, was $ 3,131,955 .

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 .

On October 7, 2022, the Company entered into

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

dated November 12, 2021, as amended, with JPMorgan.

The Company entered into the Second Amendment to the Credit Agreement primarily

for the purpose of changing the interest rate repayment calculations from LIBOR to the Secured Overnight Financing Rate, or SOFR,

which adjustment had originally been anticipated under the terms of the original Credit Agreement.

In addition, two of the negative

covenants set forth in the original Credit Agreement were amended in order to (i) adjust the definition of “Covenant Testing

Trigger Period” to increase the required cash availability from $3,000,000 to $4,000,000, or 10% of the aggregate revolving

commitment for the preceding 30 days, and (ii) require that the Company will not and will not permit any of its subsidiaries, after

reasonable due diligence and due inquiry, to knowingly sell their products, inventory or services directly to any commercial

businesses that grow or cultivate cannabis;

it being acknowledged, however, that the Company does not generally conduct due

diligence on its individual retail customers.

As of September 30, 2024, the Company was in compliance with the ABL covenants.

Promissory note payable

3 unchanged sentences

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 .

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 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 three months ended March 31, 2024, the Company recorded interest of $ 6,617

and amortization of note premium of $ 6,445 .

For the nine months ended March 31, 2024, the Company recorded 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 interest was fully paid

As of March 31, 2024, the total outstanding balance of the Purchase Note was $ 0 .

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

of accrued interest and $ 31,602

of unamortized premium, the total outstanding balance of the Purchase Note was $ 2,017,852 ,

which is presented on the consolidated balance sheet as a current portion of $ 2,017,852

and a non-current portion of $ 0 .

For the three months ended

September 30, 2024, the Company recorded accrued interest of $ 0 and amortization of note premium of $ 0 .

For the three months ended

September 30, 2023, the Company recorded accrued interest of $ 19,688 and amortization of note premium of $ 12,579 .

For the 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 September 30, 2024 and June 30, 2024, the total outstanding balance of the Purchase Note was $ 0 .

Short-term loan payable

6 unchanged sentences

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 three and nine months ended March 31, 2024, the

Company recorded interest of $ 723 and $ 32,911 , respectively.

As of March 31, 2024, the outstanding balance of the On-demand Loan was $ 0 .

On July 16, 2023, the Company borrowed $ 2 million from White

Cherry and repaid $ 1 million on July 31, 2023 and $ 1 million on January 31, 2024.

For the three months ended September 30, 2024 and 2023,

the Company recorded accrued interest of $ 0 and $ 6,060 .

As of September 30, 2024, the outstanding balance of the On-demand Loan was fully

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

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 three months ended September 30, 2024, the Company recorded interest expense of $ 3,733 .

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 September

30, 2024, 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.

RP Loan bears no interest and is due upon receipt of request of repayment.

As of September 30, 2024 and June 30, 2024, the outstanding

balance of the RP Loan was $ 350,000 and $ 350,000 , respectively.

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 three and nine months ended March 31, 2024, the Company received and recorded sublease fee

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

For the three and nine months ended March 31, 2023, the Company recorded a sublease

fee of $ 0 and $ 387,750 as other non-operating income.

During the period ended March 31, 2024, the Company

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.

During the year ended June 30, 2024, the Company

started selling products through MII Strategy Inc.

1 unchanged sentence

Chenlong Tan.

As of March 31, 2024, the total amount due from MII was $ 59,901 .

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.

As of March 31, 2024 and June 30, 2023, the balance of advance from shareholders

was $ 85,581 and $ 85,200 , respectively.

As of September 30, 2024 and June 30, 2024, the total amount due from MII was $ 56,406 .

As of the date of this report, the outstanding balance was fully paid off.

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

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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 PRC.

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

2024 and 2023.

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

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

Therefore, DHS is subject to the

Global Intangible Low-Taxed Income (or GILTI) Tax.

DHS is subject to 5% tax rate in PRC.

The Company made an election to apply the GILTI

high-tax exclusion for DHS under the Final Regulations (T.D.

As the result of the election, no GILTI tax was recorded as of March

31, 2024 and 2023.

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.

For the three and nine months ended March 31,

2024, as a result of the Company’s inability to establish a reliable estimate for annual effective tax rate, the Company calculated

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

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

The income tax provision for the three and nine

months ended March 31, 2024 and 2023 consisted of the following:

Schedule of provision for income tax

Three Months Ended March 31,

Nine Months Ended March 31,

In addition to corporate income taxes in the

United States, upon completion of the acquisition of Anivia in February 2022, the Company is subject to corporate income taxes in People’s

Republic of China (“PRC”).

Anivia and its subsidiaries are subject to BVI or Hong Kong income taxes but did not have any

operations for the year ended June 30, 2022 in those jurisdictions.

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 Global Intangible Low-Taxed Income (or GILTI) Tax.

DHS is subject to 5% tax

rate in PRC until December 31, 2027.

Since DHS had losses during the three months ended September 30, 2024 and 2023 and the year ended

June 30, 2024, no GILTI tax was recorded as of September 30, 2024 and June 30, 2024.

The Company is not eligible for the GILTI high-tax exclusion.

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

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

For the three months ended September 30, 2024,

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

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

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

The income tax provision for the three months

ended September 30, 2024 and 2023 consisted of the following:

Schedule of income tax provision

September 30, 2024

September 30, 2023

Total current income tax provision

( 1,818,222 )

Total deferred taxes

( 2,482,995 )

Total provision for income taxes

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$ ( 275,882 )

$ ( 2,085,126 )

The Company is subject to U.S.

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tax at the calculated statutory rates:

Schedule of reconciliation of effective income

Three Months Ended March 31,

Nine Months Ended March 31,

Schedule of reconciliation of effective income tax expenses

September 30, 2024

September 30, 2023

Statutory tax rate

State (net of federal benefit)

Foreign tax rate difference

Impairment loss on goodwill -permanent difference

Net effect of state income tax deduction and other permanent differences

Effective tax rate

As of March 31, 2024, prepaid income taxes to

US tax authorities and income tax payable to Chinese tax authorities was $ 31,496 and $ 277,921 , respectively.

As of September 30, 2024, prepaid income taxes

to US tax authorities and income tax payable to Chinese tax authorities was $ 16,687 and $ 285,964 , respectively.

As of June 30, 2024, prepaid

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Schedule of deferred taxes

March 31, 2024

September 30, 2024

June 30, 2024

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ROU assets / liabilities

Net Operation loss

Net operating loss

Disallowed interest expense

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Valuation allowance

Allowance for credit loss

Total deferred tax assets

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Intangible assets acquired

( 1,020,285 )

( 1,149,549 )

Total deferred tax liabilities

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Net deferred tax assets

For the nine months ended March 31, 2024, the Company recorded $ 64,990

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

For the three months ended September 30, 2024 and 2023, the Company

recorded $ 20,157 and $ 64,145 of valuation allowance to reduce deferred tax assets for the losses incurred by DHS.

Note 13 – Earnings per share

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earnings per share

Three Months Ended March 31,

Nine Months Ended March 31,

Net income (loss) attributable to iPower Inc.

$ ( 1,530,534 )

For the three months ended

September 30,

Net loss attributable to iPower Inc.

$ ( 2,029,281 )

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

Earnings (losses) per share of ordinary shares - basic and diluted

Due to the anti-dilutive effect, the computation of basic and diluted EPS did not include the shares underlying the exercise of warrants as the Company had a net loss and/or the warrants were out of the money (the exercise price is higher than the market price) for the three and nine months ended March 31, 2024 and 2023.

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 March 31, 2024 and 2023.

For the three and nine months ended March 31, 2024, 25,331

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

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

For the three and nine months ended March 31, 2023, 12,400

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

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

Losses per share of ordinary shares - basic and diluted

Due to the anti-dilutive effect, the computation of basic and diluted EPS did not

include the shares underlying the exercise of warrants, options, and unvested RSUs as the Company had a net loss for the three months

ended September 30, 2024 and 2023.

For the three months ended September 30, 2024 and 2023, 71,343 and 66,366 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 losses per share when the shares are fully vested.

Note 14 – Equity

As of March 31, 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

As of September 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.

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“Board of Directors”) may determine.

In the event of a liquidation or dissolution of the Company, subject to the express terms

In the event of 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.

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, 2024, the Company

issued 107,293 shares of restricted Common Stock for RSUs vested.

On February 15, 2022, as part of the consideration

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

Company’s common stock, valued at $ 2.27 per share, which was the closing price of the Company’s Common Stock as traded on

Nasdaq on February 15, 2022.

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

The fair value

of the shares was $ 5,528,373 , calculated with a discount of lack of marketability of 21%, which was determined using the Black Scholes

During the quarter ended March 31, 2024, the Company

issued 107,293 shares of restricted Common Stock for RSUs vested.

As of March 31, 2024 and June 30, 2023,

there were 29,818,232 and 29,710,939 shares of Common Stock issued and outstanding, respectively.

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

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

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 - $ 2.00

Exercise Price - $ 2.40

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

As of September 30, 2024 and June 30, 2024, there

were 31,359,899 shares of Common Stock

issued and outstanding.

Preferred Stock

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and the qualifications, limitations or restrictions thereof.

As of March 31, 2024 and June 30, 2023, respectively, there were no shares

As of September 30, 2024 and June 30, 2024, respectively, there were no shares

of Preferred Stock issued and outstanding.

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On November 16, 2021 and December 6, 2022, the Company filed a registration statement

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

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

and November 22, 2023.

Restricted Stock Unit

Following completion of the Company’s IPO

on May 11, 2021, pursuant to their letter agreements, the Company awarded 46,546 restricted stock units (“RSUs”) under the

Plan to its independent directors, its Chief Financial Officer, and certain other employees and consultants, all of which vested over

12 months following the grant date and were subject to other restrictions until the filing of a Registration Statement on Form S-8 registering

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

Stock on the grant date.

During the nine months ended March 31, 2024, the Company granted an additional 62,600 shares of RSUs.

three and nine months ended March 31, 2024, the Company recorded $ 20,075 and $ 58,438 of stock-based compensation expense.

forfeiture of RSUs occurred during the nine months ended March 31, 2024 and 2023.

As of March 31, 2024 and June 30, 2023, the unvested

number of RSUs was 18,900 and 38,793 and the unamortized expense was $ 14,364 and $ 22,500 , respectively.

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 vested over 12 months following the

grant date and were subject to other restrictions until the filing of a Registration Statement on Form S-8 registering the shares.

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

During the three months ended September 30, 2024, the Company granted an additional 71,427 shares of RSUs.

For the three months

ended September 30, 2024 and 2023, the Company recorded $ 31,788 and $ 7,500 of stock-based compensation expense.

There was no forfeiture

of RSUs occurred during the three months ended September 30, 2024 and 2023.

As of September 30, 2024 and June 30, 2024, the unvested number

of RSUs was 47,619 and 3,250 and the unamortized expense was $ 60,000 and $ 1,788 , respectively.

Information relating to RSU grants is summarized

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Total RSUs Issued

Market Value of

RSUs Issued as Compensation (1)

Total Fair Market Value of RSUs Issued as Compensation (1)

RSUs granted, but not vested, at June 30, 2024

RSUs forfeited

RSUs granted, but not vested, at March 31, 2024

RSUs granted, but not vested, at September 30, 2024

_____________________

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

As of March 31, 2024, of the 314,504 vested RSUs,

285,869 shares, including 107,293 shares issued during the current quarter, of Common Stock were issued, and 28,635 shares were to be issued in the near future.

As of September 30, 2024, of the 357,212 vested

RSUs, 285,869 shares of Common Stock were issued, and 71,343 shares were to be issued in the near future.

On May 12, 2022, the Compensation Committee of

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

Grants, which were issued on May 13, 2022, have an exercise price of $ 1.12 per share, a contractual term of 10 years, and consist of six

vesting tranches with a vesting schedule based entirely on the attainment of both 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.

Grants, which were issued on May 13, 2022, have an exercise price of $ 1.12 , a contractual term of 10 years, and consist of six vesting

tranches with a vesting schedule based entirely on the attainment of both operational milestones (performance conditions) and market conditions,

assuming continued employment of the recipients through each vesting date.

Each of the six vesting tranches of the Option Grants will

vest when both (i) the market capitalization milestone for such tranche, which begins at $150 million for the first tranche and increases

by increments of $50 million through the fourth tranche and $100 million thereafter (based on achieving such market capitalization for

five consecutive trading days), has been achieved, and (ii) any one of the following six operational milestones focused on revenue or

any one of the six operational milestones focused on operating income have been achieved during a given fiscal year.

The estimated achievement status of the operational

milestones as of March 31, 2024 was as follows:

milestones as of September 30, 2024 was as follows:

Revenue in Fiscal Year

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The total fair value of the Option Grants was

$3.2 million of which, at March 31, 2024, $2.3 million is deemed probable of vesting.

As of March 31, 2024, none of the options had vested.

For the three and nine months ended March 31, 2024, the Company recorded $ 110,382 and $ 331,146 of stock-based compensation expense related

to the Option Grants.

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

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

As of September 30, 2024, none of the options

For the three months ended September 30, 2024 and 2023, the Company recorded $ 110,382 and $ 110,382 of stock-based compensation

expense related to the Option Grants.

As of March 31, 2024, unrecognized compensation cost related to tranches probable of vesting is

approximately $1.4 million and will be recognized over two years to nine years, depending on the tranche.

Note 17 – Warrants

As of September 30, 2024, unrecognized compensation cost related to tranches probable of vesting

is approximately $1.2 million and will be recognized over two years to nine years, depending on the tranche.

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

stock options (the “2024 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

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 2024 Stock

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 2024 Stock Options have a term of 10

years and will vest as follows:

2024 Stock Options vested on the grant date (August 29, 2024), and 32,500

2024 Stock Options will vest on the first day of each month from September 1, 2024, to August 1, 2027.

On the grant date, a Black-Scholes Model was used

to determine the fair value of the 2024 Stock Options with the following inputs:

Stock Price - $ 1.30

Exercise Price - $ 1.43

Volatility – 101 %

Expected Term – 5.71 years

Risk Free Rate of Return – 3.66 %

Dividend Yield – 0 %

The total fair value of the 2024 Stock

Options was $1.22 million as of the grant date.

For the three months ended September 30, 2024, 62,500 stock

options were vested and the Company recorded $ 63,790 as

stock compensation expense.

As of September 30, 2024, the unrecognized compensation cost of the 2024 Stock Options was approximately

$1.16 million and will be recognized monthly through August 1, 2027.

Note 15 – Warrant liabilities

On January 27, 2021, the Company completed a private

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

Through March 31, 2024,

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

As such, as of March 31, 2024 and June 30, 2023, the number of

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

Through September 30,

2023, none of the private placement investors exercised any of their warrants and the warrants expired in May 2024.

As such, there were no warrants outstanding as of September 30, 2024

and June 30, 2024.

Note 16 - Concentration of risk

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

As of March 31, 2024 and June 30, 2023, $ 2,714,724

As of September 30, 2024 and June 30, 2024, $ 2,577,305

and $ 7,377,837 , respectively, were deposited with various major financial institutions in the United States and PRC.

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The Company had approximately

$ 1.1 million and $ 2.7 million , respectively, in excess of the FDIC insurance limit, as of March 31, 2024 and June 30, 2023.

$ 1.4 million and $ 5.8 million , respectively, in excess of the FDIC insurance limit, as of September 30, 2024 and June 30, 2024.

Accounts receivable are typically unsecured and

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Customer and vendor concentration risk

For the nine months ended March 31, 2024 and 2023,

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

As of March 31, 2024

and June 30, 2023, accounts receivable from Amazon Vendor and Amazon Seller accounted for 91 % and 95 % of the Company’s total accounts

receivable, respectively.

For the nine months ended March 31, 2024 and 2023,

two suppliers accounted for 19 % ( 10 % and 9 %) and 39 % ( 28 % and 11 %) of the Company's total purchases, respectively.

As of March 31, 2024

and June 30, 2023, accounts payable to two suppliers accounted for 45 % ( 36 % and 9 %) and 55 % ( 49 % and 6 %) of the Company’s total

accounts payable, respectively.

For the three months ended September 30, 2024

and 2023, Amazon Vendor and Amazon Seller customers accounted for 89 % and 91% of the Company's total revenues, respectively.

As of September

30, 2024 and June 30, 2024, accounts receivable from Amazon Vendor and Amazon Seller accounted for 87 % and 91 % of the Company’s

total accounts receivable.

For the three months ended September 30, 2024

and 2023, one supplier accounted for 11 % and 15 % of the Company's total purchases, respectively.

As of September 30, 2024 and June 30,

2024, accounts payable to one supplier accounted for 20 % and 36 % of the Company’s total accounts payable.

Note 17 - Commitments and contingencies

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On February 15, 2022, upon completion of the acquisition

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

In July 2023, the Company renewed the lease

contract for its existing office plus additional office space.

The lease term is for three years expiring on July 14, 2026.

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

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.

In September 2024, the Company terminated the lease contract of the office space.

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

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

The lease was not started under the original agreement

The lease did not start under the original agreement

as the construction was not completed.

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center in Duarte, California.

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

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

In September 2024, DHS entered into a sublease

agreement with a third-party entity for office space in Shenzhen.

The lease term is for one year from October 1, 2024 to September 30,

The lease is treated as short-term lease and the base rental fee is approximately $10,000 per month.

The Company’s total commitment for the full

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The financial statements reflected $ 5,226,888 and $ 6,124,163 , respectively, of operating lease right-of-use

assets, and $ 7,056,669 and $ 8,265,220 , respectively, of operating lease liabilities as of March 31, 2024 and June 30, 2023.

Three months Ended March 31, 2024 and 2023:

assets, and $ 5,632,824 and $ 6,549,110 , respectively, of operating lease liabilities as of September 30, 2024 and June 30, 2024.

Three months Ended September 30, 2024 and 2023:

Schedule of lease cost and other information

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

Other information

Cash paid for amounts included in the measurement of lease liabilities

Remaining term in years

Average discount rate - operating leases

Nine Months Ended March 31, 2024 and 2023:

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

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

Other information

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or results of operations of the Company.

Pursuant to an engagement

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

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

for its initial public offering.

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

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

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

to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective 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,

Pursuant to an engagement agreement, dated and

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

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

initial public offering.

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

continuing obligations the Company may have had under its terms.

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

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

On April 30, 2021, Boustead filed

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

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

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(who acted as underwriter in the Company’s

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

The Company has agreed to indemnify D.A.

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

On April 3, 2024, the

Company and the underwriter of its initial public offering, D.A.

Davidson & Co (“D.A.

Davidson”), entered into a settlement

agreement and mutual release (the “Settlement Agreement”) with Boustead Securities, LLC (“BSL”) 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 BSL.

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 BSL against the

Company and D.A.

Davidson after the Company opted not to complete its initial public offering with BSL but instead engaged and completed

its initial public offering with D.A.

In entering into 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, with the April and

May payments having been completed on or about April 3 and May 3, 2024.

Within five days of its receipt of the final payment, or by July

8, 2024, BSL 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 BSL.

As of March 31, 2024, the Company did not

accrue any expenses in connection with the settlement agreement.

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.

As of September 30, 2023, the Company cannot reasonably

estimate the amount of potential exposure.

On April 3, 2024, the Company and D.A.

& 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”)

The Settlement Agreement was entered into for purposes of settling in full the FINRA Arbitration (FINRA Case No.

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.

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 September 30, 2024, 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.

In an effort to contain or slow the COVID-19 outbreak,

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

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

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

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

In addition, in February 2022, the Russian Federation

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

and Israeli military forces began, both of which have since escalated into prolonged wars.

While we do not do business in those regions,

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

On June 18, 2024, calculating the shares at $ 2.40 ,

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 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

9 unchanged sentences

On April 13, 2020, the Company entered into an

agreement with Royal Business Bank (the “Lender”) for a total amount of $175,500, pursuant to which the Company issued a promissory

note to the Lender (the “PPP Note”).

The loan was made pursuant to the Payroll Protection Program established as part of the

Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

On March 22, 2021, the $175,500 PPP Note due to Royal

Business Bank was fully forgiven by the SBA.

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

2 unchanged sentences

and reject all or some of the Company’s judgments pertaining to satisfying PPP loan eligibility or forgiveness conditions, the Company

may be required to adjust previously reported amounts and disclosures in its consolidated financial statements.

may be required to adjust previously reported amounts and disclosures in the consolidated financial statements.

Note 18 - Subsequent events

2 unchanged sentences

to be issued.

Other than as disclosed in Note 19 above, no material subsequent events that required recognition or additional disclosure

in the consolidated financial statements are presented.

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

in the unaudited condensed consolidated financial statements presented.

On November 8, 2024, the Company entered into

a third amendment (the “Third Amendment”) to that certain credit agreement, initially entered into by and among the Company

and its subsidiaries and JPMorgan Chase Bank, N.A., as administrative agent for the Lender and a lender (the “Administrative Agent”

or “Lender”), on November 12, 2021 (the “Credit Agreement”).

The Third Amendment to the Credit Agreement amended,

among other things, (i) the defined term “Aggregate Revolving Commitment” to mean $15,000,000, and (ii) extended the maturity

date to “November 8, 2027 or any earlier date on which the Revolving Commitments are reduced to zero or otherwise terminated pursuant

to the terms hereof.” The borrowing rate is SOFR plus 2.25% to 2.50% depending on utilization of the borrowing availability.

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

What changed 10-Q

Item 1. Financial Statements