What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-05-14 · 313 added, 422 removed, 87 unchanged (89% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s

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

Driven by technology and data,

(“iPower,” “we,” “us,” or “the Company”) is an online retailer and supplier

of consumer goods, including consumer home, pet and garden products, as well

as a provider of value-added ecommerce services for third-party products and brands.

Our capabilities include a full spectrum of online

channels, robust fulfillment capacity, a network of warehouses serving the US, competitive last mile delivery partners and a differentiated

business intelligence platform.

With these capabilities, iPower efficiently moves a diverse catalog of SKUs from its supply chain partners

to end consumers every day, providing the best value to customers in US and other countries.

iPower has developed a set

of methodologies driven by proprietary data formulas to effectively bring products to market and increase sales.

Products on iPower's

SuperSuite platform consistently achieve Amazon Best Seller status and Amazon Choice designation.

We are actively developing

supply chain partners with strong products and brands.

Acquisitions and Joint Ventures

On February 15, 2022, in exchange

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

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

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

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

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

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

Co., Ltd., a corporation located in the PRC and which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited.

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

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

Company”) and located in Shenzhen, China.

The Operating Company is principally engaged in selling a wide range of products and providing

logistic services in the PRC.

On February 10, 2022, we entered

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

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

LLC (“GSM”), for the principal purpose of providing a social media platform, content and services to assist businesses, including

the Company and other businesses, in the marketing of their products.

Following entry into the GSM Joint Venture Agreement, GSM issued

10,000 certificated units of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity

Units and Bro Angel was issued 4,000 GSM Equity Units.

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

Under the terms of the GSM

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

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

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

for the purpose of furthering the proposed business of GSM.

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

and certain other actions unless approved in advance by the Company.

Pursuant to the GSM Joint

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

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

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

It was contemplated that only approximately 300-400 square

feet would initially be used by GSM.

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

the fiscal year ended June 30, 2023.

Trends and Expectations

by tech and data, iPower Inc.

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

consumer home goods.

Through the operations of our e-commerce platforms and channel partners, our combined 121,000 square foot fulfillment

centers in Rancho Cucamonga and Los Angeles, California, we believe we are one of the leading marketers, distributors and retailers in

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

Our core strategy continues to focus on expanding

our geographic reach across the United States and internationally through organic growth, both in terms of expanding customer base as

well as brand and product development.

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

bring products to market and sales.

are actively developing our in-house branded products and through supply chain partners, which to date include the iPower and Simple

Deluxe brands and more, some of which have been designated as Amazon best seller product leaders and Amazon Choice products,

among others.

and Expectations

Product and Brand Development

We plan to increase our investments

in product and brand development.

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

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

plan to increase investments in product and brand development.

We actively evaluate potential acquisition opportunities of companies and

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

Global Economic Disruption

While at present the majority

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

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

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

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

supply chain disruptions may put upward pressure on our costs and increase the risk that we may be unable to acquire the materials and

services we need to continue to make certain products.

Ongoing COVID-19 Pandemic and Related Disruptions

While it appears the COVID-19

pandemic has largely passed and we believe that any aftereffects of the pandemic are unlikely to significantly impact our business going

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

The situation surrounding

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

on certain developments including the length of time of any regional outbreaks, the impact on consumer activity and behaviors, and the

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

While the COVID-19

pandemic has not had a material adverse impact on our operations to date and we believe the long-term opportunity that we see for shopping

online remains unchanged, it is difficult to predict all of the positive or negative impacts that the pandemic, or any future pandemics,

may have on our business over time.

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

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

employees, suppliers, stockholders and communities.

Regulatory Environment

In addition to general consumer

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

for purposes of growing of cannabis.

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

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

interpretations, and consumer perceptions.

at present the majority of our products are sourced either in the United States or China, the military conflicts between Russia and Ukraine

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

we need to make our products.

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

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

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

In addition, supply chain disruptions

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

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

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

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

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

consumer perceptions.

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

states plus the District of Columbia

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

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

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

states prohibit growing

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

states plus the District of Columbia have adopted frameworks

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

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

Controlled Substances Act and the laws of U.S.

states prohibit growing cannabis.

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

June 18, 2024, we closed on the registered direct offering (the “Offering”) of 2,083,334 shares of common stock (the “Shares”)

and a concurrent private placement (the “Private Placement”) of warrants (“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 on September 29, 2023.

The Warrants, which were

issued pursuant to an exemption from registration under Section 4(a)(2) or Regulation D of the Securities Act of 1933, as amended (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 purchasers named on the signature page of a certain securities purchase agreement, dated June 16, 2024, between the Company and

the purchaser (the “Purchase Agreement”).

Roth Capital Partners, LLC acted as the placement agent, pursuant to a placement

agency agreement.

The Company paid compensation to the placement agent consisting of a cash fee equal to 6.5% of the gross proceeds of

the Offering plus reimbursement of certain expenses and legal fees.

July 9, 2024, as required by the Purchase Agreement, we filed a resale registration statement on Form S-1 with the SEC (the "Resale

Upon filing an amendment on July 23, 2024, the Resale Form S-1 was declared effective by the SEC on July 26, 2024.

RESULTS OF OPERATIONS

For the three months ended March 31, 2024

For the three months ended September 30,

2024 and 2023

The following table presents

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Three Months Ended

March 31, 2024

September 30, 2024

Three Months Ended

March 31, 2023

Cost of goods sold

Operating expenses

Operating income (loss)

Other expenses

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Non-controlling interest

Net income (loss) attributable to iPower Inc.

Other comprehensive income

Comprehensive income (loss) attributable to iPower Inc.

$ (1,512,930 )

Gross profit % of revenues

Operating income (loss) % of revenues

Net income (loss) % of revenues

for the three months ended March 31, 2024 increased 15.24% to $23,308,508 as compared to $20,225,619 for the three months ended March

With slightly increased selling price due to inflation and sales of new products, the increased revenue mainly resulted from

an increase in sales volume during the three months ended March 31, 2024 as we got more orders from Amazon as compared to the three months

ended March 31, 2023.

This was further enhanced by growth in the Company’s SuperSuite supply chain offerings.

Costs of Goods Sold

Costs of goods sold for the

three months ended March 31, 2024 decreased 0.59% to $12,360,170 as compared to $12,433,898 for the three months ended March 31, 2023.

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

See the discussion on gross profit below.

Gross profit was $10,948,338

for the three months ended March 31, 2024 as compared to $7,791,721 for the three months ended March 31, 2023.

The gross profit ratio

increased to 46.97% for the three months ended March 31, 2024 from 38.52% for the three months ended March 31, 2023.

The increase in the

gross profit ratio was mainly driven by the slightly increased selling price and the decrease in costs of goods sold as a result of decreased

freight charges during the current period.

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

Operating Expenses

Operating expenses for the

three months ended March 31, 2024 decreased 6.28% to $9,347,062 as compared to $9,602,919 for the three months ended March 31, 2023.

decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $0.5 million as a result of vendor credits

of $858,456 recorded during the quarter ended March 31, 2024, which was partially offset by increased costs related to advertising, merchant

fees, rental expenses and delivery fees, and an increase in general and administrative expenses of $0.3 million, which included payroll

expenses, stock-based compensation expense, insurance expenses, legal and other operating expenses.

Income (Loss) from Operations

Income (loss) from operations

was $1,601,276 for the three months ended March 31, 2024 as compared to $(1,811,198) for the three months ended March 31, 2023.

in income resulted from an increase in the gross profit ratio, driven by the slightly increased selling price and the decrease in costs

of goods sold as a result in an overall decrease in freight charges, and a decrease in operating expenses, as discussed above.

Other Expenses

Other expenses for the

three months ended March 31, 2024 was $211,660 as compared to $312,155 for the three months ended March 31, 2023.

The decrease in

other expenses was mainly due to a decrease in interest, including amortization of debt discount on the revolving loan of $57,424

and other non-operating expenses of $42,566.

Net Income (Loss) Attributable to iPower

Net income (loss) attributable

to iPower Inc.

for the three months ended March 31, 2024 was $1,016,082 as compared to $(1,530,534) for the three months ended March 31,

2023, representing an increase in net income of $2,546,616.

The increase was primarily due to the increase in gross profit, decrease in

other non-operating expenses, and a decrease in operating expenses, as discussed above.

Comprehensive Income (Loss) Attributable

to iPower Inc.

Comprehensive income (loss)

attributable to iPower Inc.

for the three months ended March 31, 2024 was $1,085,204 as compared to $(1,512,930) for the three months

ended March 31, 2023, representing an increase of comprehensive income of $2,598,134.

The increase was due to the reasons discussed above,

along with an increase in other comprehensive income of $51,518 as a result of foreign currency translation adjustments resulting from

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

For the nine months ended March 31, 2024

The following table presents

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

period to period.

Nine Months Ended

March 31, 2024

Nine Months Ended

March 31, 2023

Cost of goods sold

September 30, 2023

Revenues – product sales

Revenues – service income

Cost of revenues – product costs

Cost of revenues – service costs

Operating expenses

Operating loss

(10,487,070 )

Other income (expenses)

Loss before income taxes

(11,097,353 )

Income tax benefit

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$ (1,287,222 )

Gross profit % of revenues

Gross profit % of revenues – product sales

Gross profit % of revenues – service income

Operating loss % of revenues

Net loss % of revenues

for the nine months ended March 31, 2024 increased 1.70% to $66,617,004 as compared to $65,502,882 for the nine months ended March 31,

The slightly increased revenue mainly resulted from an increase in selling price and sales volume from growth in the Company’s

SuperSuite supply chain offerings during the nine months ended March 31, 2024 as compared to the nine months ended March 31, 2023.

for the three months ended September 30, 2024 decreased 28.3% to $19,008,521 as compared to $26,508,374 for the three months ended September

While pricing remained stable and with the additional logistics service income, the decrease was mainly due to the combination

of decreased orders from Amazon and temporary disruption of product supply during the quarter ended September 30, 2024 and the increased

sales generated from promotional activities in the same quarter in 2023.

Costs of Goods Sold

Costs of goods sold for the

nine months ended March 31, 2024 decreased 7.96% to $36,591,581 as compared to $39,755,919 for the nine months ended March 31, 2023.

decrease was primarily due to a decrease in product and freight costs.

See the discussion on gross profit below.

three months ended September 30, 2024 decreased 28.7% to $10,520,624 as compared to $14,749,529 for the three months ended September 30,

The decrease was primarily due to a combination of the costs related to the logistics service income and the decrease in sales,

freight costs, and lowered product costs resulted from management’s efforts on supply chain management.

Gross profit was $8,487,897

for the nine months ended March 31, 2024 as compared to $25,746,963 for the nine months ended March 31, 2023.

The gross profit ratio increased

to 45.07% for the nine months ended March 31, 2024 from 39.31% for the nine months ended March 31, 2023.

The increase in the gross profit

ratio was mainly driven by the slightly increased selling price and the decrease in costs of goods sold as a result of decreased freight

charges during the current period.

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

for the three months ended September 30, 2024 as compared to $11,758,845 for the three months ended September 30, 2023.

The gross profit

ratio of the product sales revenues increased to 45.7% for the three months ended September 30, 2024 from 44.4% for the three months ended

September 30, 2023.

The increase in the gross profit ratio was mainly driven by the decrease in costs of goods sold during the three months

ended September 30, 2024, as discussed above.

Operating Expenses

Operating expenses for the

nine months ended March 31, 2024 decreased 11.01% to $32,245,171 as compared to $36,234,033 for the nine months ended March 31, 2023.

The decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $1.27 million, including vendor credits

of $858,456 recorded during the quarter ended March 31, 2024 and decreased costs related to advertising, merchant fees, rental expenses

and delivery fees, an increase in general and administrative expense of $0.3 million, and a decrease of $3.1 million of impairment loss

on goodwill triggered by a decrease in the Company’s share price of its common stock and the net loss incurred during the nine months

ended March 31, 2023.

three months ended September 30, 2024 decreased 13.8% to $11,234,331 as compared to $13,027,522 for the three months ended September 30,

The decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $4.1 million as a result of

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

expenses of $2.4 million, which included payroll expenses, stock-based compensation expense, insurance expenses, allowance for credit

losses, travel expenses and other operating expenses.

The increase in general and administrative expenses was mainly due

to the expansion of our vendor network and development of the SuperSuite platform and an increased allowance for credit loss and inventory

reserves of $1.76 million.

Loss from Operations

Loss from operations was $2,746,434

for the nine months ended March 31, 2024 as compared to $10,487,070 for the nine months ended March 31, 2023.

The decrease in loss from

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

Other Expenses

Other expenses for the nine

months ended March 31, 2024 was $562,791 as compared to $610,283 for the nine months ended March 31, 2023.

The slightly decreased other

expenses was mainly due to a decrease in interest expenses of $208,607, which was partially offset by a decrease in other non-operating

income of $167,122.

for the three months ended September 30, 2024 as compared to $1,268,677 for the three months ended September 30, 2023.

The increase in

loss resulted from the decrease in sales being greater than the decrease in operating expenses and the increase in gross profit ratio.

Other Income (Expenses)

Other income (expenses) consist

of interest expense and other non-operating income (expenses).

Other income (expenses) for the three months ended September 30, 2024 was

$77,805 as compared to $(296,556) for the three months ended September 30, 2023.

The increase in other income (expenses) was mainly due

to the combination of an increase in other non-operating income of $285,852, and a decrease in interest, including amortization of debt

discount, on the revolving loan of $88,403 during the three months ended September 30, 2024 resulted from the decreasing loan balance.

Net Loss Attributable to iPower Inc.

Net loss attributable to iPower

for the nine months ended March 31, 2024 was $2,185,261 as compared to $9,003,349 for the nine months ended March 31, 2023, representing

a decrease of net loss of $6,818,088.

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

as discussed above.

for the three months ended September 30, 2024 was $2,029,281 as compared to $1,286,515 for the three months ended September 30, 2023,

representing an increase in net loss of $742,766.

The increase was primarily due to the decrease in sales being greater than the decrease

in operating expenses and the increase in gross profit ratio as discussed above.

Comprehensive Loss Attributable to iPower

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to iPower Inc.

for the nine months ended March 31, 2024 was $2,277,101 as compared to $9,050,071 for the nine months ended March 31, 2023,

representing a decrease of comprehensive loss of $6,772,970.

The decrease was due to the reasons discussed above, partially offset by

for the three months ended September 30, 2024 was $2,084,335 as compared to $1,287,222 for the three months ended September

30, 2023, representing an increase in comprehensive loss of $797,113.

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

an increase in other comprehensive loss of $54,347 as a result of foreign currency translation adjustments resulting from the translation

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LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

We primarily funded our operations

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

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

We had cash and cash equivalents of $2,714,724 as of March 31, 2024, representing

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

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

partially offset by net cash provided by operating activities.

Based on our current operating

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

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

our operations during the next 12 months.

Our cash requirements consist

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

We lease all of our office and warehouse

the three months ended September 30, 2024, we primarily funded our operations with cash and cash equivalents generated from operations,

as well as through borrowing under our credit facility from JPMorgan Chase Bank (“JPM”).

Additionally, on June 18, 2024,

we closed on the registered direct offering of 2,083,334 Shares and a concurrent Private Placement of Warrants to purchase up to 2,083,334

Warrant Shares, which Shares and Warrants were sold for gross aggregate proceeds of $5,000,002.

As of September 30, 2024, we had cash

and cash equivalents of $2,577,305, representing a $4,800,532 decrease from $7,377,837 in cash as of June 30, 2024.

The cash decrease

was primarily due to the result of cash used in operating activities and financing activities resulting

from our payments to pay down the short-term loans - related party and the JPM revolving line of credit.

on our current operating plans, we believe that our existing cash and cash equivalents and cash flows from operations will be sufficient

to finance our operations during the next 12 months.

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

We lease all our

office and warehouse facilities.

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

We have credit terms in place with

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

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

Beyond the next

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

are bringing online transition to credit terms more favorable to us.

We have credit

terms in place with our major suppliers, however as we bring on new suppliers, we are often required to prepay our inventory purchases

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

Beyond the next 12 months we believe that our cash flow from operations should improve as supply chain operations normalize and new suppliers

we are bringing online transition to credit terms more favorable to us.

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

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

While we have approximately

$18 million in unused credit available under the revolving line with JPM, the JPM revolving loan has a maturity date of November 12, 2024.

Currently we are working on renewal of the revolving line with JPM.

Nonetheless, given our current working capital position and available funding from our revolving credit line, which we will seek to refinance

between now and the JPM maturity date, we believe we will be able to manage through the current challenges by managing payment terms with

customers and vendors.

Working Capital

As of March 31, 2024 and June

30, 2023, our working capital was $6.6 million and $17.9 million, respectively.

The historical seasonality in our business during the

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

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

Currently, we have approximately

$11.0 million in unused credit under the revolving line with JPM.

Given our current working capital position and available funding from

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

our current working capital position and available funding from our revolving credit line and proceeds from our June Registered Direct

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

of September 30, 2024 and June 30, 2024, our working capital was $12.2 million and $11.2 million, respectively.

The historical

seasonality in our business during the year can cause cash and cash equivalents, inventory and accounts payable to fluctuate,

resulting in changes in our working capital.

We anticipate that past historical trends to remain in place through the balance of the

fiscal year with working capital remaining near this level for the foreseeable future.

Operating Activities

Net cash provided by operating

activities for the nine months ended March 31, 2024 and 2023 was $5,151,956 and $7,785,832, respectively.

The decrease in cash provided

by operating activities was mainly resulted from the decrease of changes in accounts receivable, inventories, prepayments and other current

assets, and accounts payable, partially offset by an increase of changes in deferred tax assets/liabilities, other payables and accrued

liabilities and a decrease in net loss.

Investing Activities

For the nine months ended

March 31, 2024 and 2023, net cash used in investing activities was $0 and $144,885, respectively.

The decrease in cash used in investing

activities was because the Company did not purchase any additional equipment during the nine months ended March 31, 2024, whereas such

equipment had been purchased in the same period during 2023.

largest source of cash provided by operations is from sales of products.

Our primary uses of cash from operating activities include payments

to suppliers for products, to employees for compensation, and other general expenses.

Net cash (used in) provided by operating activities

for the three months ended September 30, 2024 and 2023 was $(1,415,643) and $4,052,341, respectively.

The decrease in cash provided by

operating activities mainly resulted from a decrease in cash received from customers and an increase in cash paid for cost of revenues

and operating expenses.

cash used in investing activities for the three months ended September 30, 2024 and 2023 was $202,140 and $0, respectively.

was due to the prepayments made for software developments during the quarter ended September 30, 2024.

Financing Activities

Net cash used in financing

activities was $6,100,000 and $8,002,476, respectively, for the nine months ended March 31, 2024 and 2023.

The main reason the Company

experienced a decrease in net cash used in financing activities was primarily due to a combination of increase in proceeds from loans

and our payment of $11.1 million for:

(1) $3.8 million to pay off the notes payable to White Cherry;

and (2) $7.3 million to pay down

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

cash used in financing activities was $3,308,599 and $5,075,000, respectively, for the three months ended September 30, 2024 and 2023.

The decrease in net cash used in financing activities was primarily due to a decrease in payments on the revolving loan.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance

sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material

effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our consolidated

financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, and pursuant to the rules

and regulations of the Securities Exchange Commission (“SEC”).

The preparation of consolidated financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements

and accompanying notes.

do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have

a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures

or capital resources.

CRITICAL ACCOUNTING POLICIES

AND ESTIMATES

prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP,

and pursuant to the rules and regulations of the SEC.

The preparation of consolidated financial statements in conformity with GAAP requires

management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying

Actual results could differ from those estimates.

In some cases, changes in the accounting estimates are reasonably

likely to occur from period to period.

In some cases, changes in the accounting estimates are reasonably likely to occur

from period to period.

Accordingly, actual results could differ materially from our estimates.

To the extent that there

are material differences between these estimates and actual results, our financial condition and results of operations will be affected.

We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these

estimates on an ongoing basis.

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

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

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

in the preparation of our unaudited condensed consolidated financial statements.

Revenue reco g nition

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

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.

The Company evaluates the

criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross

amount of product sales and related costs or the net amount earned as commissions.

Generally, when the Company is primarily responsible

for fulfilling the promise to provide a specified good or service, 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.

Payments received prior to

the shipment of goods to customers are recorded as customer deposits.

The Company periodically provides

incentive offers to its customers to encourage purchases.

Such offers include current discount offers, such as percentage discounts off

current purchases and other similar offers.

Current discount offers, when accepted by the Company’s customers, are treated as a

reduction to the purchase price of the related transaction.

Sales discounts are recorded

in the period in which the related sale is recognized.

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

upon recognizing the related sales.

To the extent that there are material differences

between these estimates and actual results, our financial condition and results of operations will be affected.

We base our estimates

on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing

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

While our significant

accounting policies are more fully described in Note 2 to our unaudited condensed consolidated financial statements, we believe that

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

unaudited condensed consolidated financial statements.

Company recognizes revenues from service and product sales, net of promotional discounts and return allowances, when the following revenue

recognition criteria are met:

a contract has been identified, separate performance obligations are identified, the transaction price is

determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance

The Company transfers the risk of loss or damage upon shipment or completion of service, therefore, revenue from product sales

is recognized when it is shipped to the customer and the revenue from services is recognized upon completion of services.

Return allowances, which reduce product revenue

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

Company evaluates the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate

to record the gross amount of product sales and related costs or the net amount earned as commissions.

Generally, when the Company is

primarily responsible for fulfilling the promise to provide a specified good or service and the Company has discretion in establishing

the price, revenue is recorded at gross.

received prior to the delivery of goods to customers are recorded as customer deposits.

Company periodically provides incentive offers to its customers to encourage purchases.

Such offers include current discount offers, such

as percentage discounts off current purchases and other similar offers.

Current discount offers, when accepted by the Company’s

customers, are treated as a reduction to the purchase price of the related transaction.

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 the related sales.

Shipping and handling costs are recorded as selling expenses.

Inventory, net

Inventory consists of finished

goods ready for sale and is stated at the lower of cost or market.

The Company values its inventory using the weighted average costing

The Company’s policy is to include as a part of inventory and costs of goods sold any freight incurred to ship the product

from its vendors to warehouses.

Outbound freight costs related to shipping costs to customers are considered period costs and reflected

in selling, fulfillment, general and administrative expenses.

The Company regularly reviews inventory and considers forecasts of future

demand, market conditions and product obsolescence.

If the estimated realizable

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

Accounts receivable,

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

an 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.

Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability

of accounts receivable.

If there are any indicators that a customer may not make payment, the Company may consider making provision for

non-collectability for that particular customer.

At the same time, the Company may cease further sales or services to such customer.

following are some of the factors that the Company develops allowance for credit losses:

the customer fails to comply with its payment schedule;

the customer is in serious financial difficulty;

a significant dispute with the customer has occurred regarding job progress or other matters;

the customer breaches any of its contractual obligations;

the customer appears to be financially distressed due to economic or legal factors;

the business between the customer and the Company is not active;

other objective evidence indicates non-collectability of the accounts receivable.

receivable are recognized and carried at carrying amount less an allowance for credit losses, if any.

The Company maintains an allowance

for credit losses resulting from the inability of its customers to make required payments based on contractual terms.

The Company reviews

the collectability of its receivables on a regular and ongoing basis.

The Company has also included in calculation of allowance for credit

losses the potential impact of the COVID-19 pandemic on our customers’ businesses and their ability to pay their accounts receivable.

After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

The Company also considers

external factors to the specific customer, including current conditions and forecasts of economic conditions, including the potential

impact of the COVID-19 pandemic.

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

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

so the Company recorded additional allowance for credit losses of approximately $1.5 million for the quarter ended September 30, 2024.

consists of finished goods ready for sale and is stated at the lower of cost or market.

The Company values its inventory using the weighted

average costing method.

The Company’s policy is to include as a part of inventory and cost of goods sold any freight incurred to

ship the product from its vendors to warehouses.

Outbound freight costs related to shipping costs to customers are considered period costs

and reflected in selling and fulfillment expenses.

The Company regularly review inventory and consider forecasts of future demand, market

conditions and product obsolescence.

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

to its estimated market value.

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

Variable interest entities

On February 15, 2022, the

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

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

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

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

impact DHS’s economic performance.

DHS’s operational funding has been provided by the Company following the February 15, 2022

During the term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits

As such, based on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A

through 25-38J, DHS is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control

existed, February 15, 2022.

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

Goodwill represents the excess

of the purchase price over the fair value of assets acquired and liabilities assumed.

The Company accounts for goodwill under ASC Topic

350, Intangibles-Goodwill and Other .

Goodwill is not amortized

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

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 shall be recognized in an amount equal to that excess, limited

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

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

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

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

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

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

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

The impairment amount was

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

quarter ended September 30, 2022.

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

the Company’s goodwill is partially impaired.

During the 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.

Intangible Assets, net

Finite life intangible assets

at March 31, 2024 include a covenant not to compete, supplier relationship and software recognized as part of the acquisition of Anivia.

interest entities

February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information

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

Pursuant to the terms of the agreements, the

Company does not have direct ownership in DHS but is actively involved in DHS’s operations as the sole manager to direct the activities

and significantly impact DHS’s economic performance.

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

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

risk of loss and has the right to receive all of the benefits from DHS.

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

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

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

represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed.

The Company accounts for goodwill

under ASC Topic 350, Intangibles-Goodwill and Other .

is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment,

at the reporting unit level.

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

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

If it is determined

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

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

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

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 and quantitative 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 2023, the

goodwill balance amounted to $3,034,110 and $3,034,110, respectively.

life intangible assets at September 30, 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

Intangible assets

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

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

Covenant Not to Compete

Supplier relationship

The Company reviews the recoverability

of long-lived assets, including intangible assets, when events or changes in circumstances occur that indicate the carrying value of the

asset may not be recoverable.

The assessment of possible impairment is based on the ability to recover the carrying value of the asset

from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations.

If these cash flows

are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying

The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as

other fair value determinations.

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

Stock-based Compensation

The Company applies ASC No.

718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees

upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense

over the requisite service period, with a corresponding addition to equity.

Under this method, compensation cost related to employee share

options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period

during which an employee is required to provide service in exchange for the award, which generally is the vesting period.

to the requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20.

award that contains both a performance and a market condition, and where both conditions must be satisfied in order for the award to vest,

the market condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite

service period or nonemployee’s vesting period if it is probable that the performance condition will be met.

If the performance

condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting

condition in the award has not been satisfied.

The Company will recognize

forfeitures of such equity-based compensation as they occur.

Company reviews the recoverability of long-lived assets, including intangible assets, when events or changes in circumstances occur that

indicate the carrying value of the asset may not be recoverable.

The assessment of possible impairment is based on the ability to recover

the carrying value of the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related

If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between

estimated fair value and carrying value.

The measurement of impairment requires management to make estimates of these cash flows related

to long-lived assets, as well as other fair value determinations.

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

Company applies ASC No.

718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with

employees and nonemployees upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized

as compensation expense over the requisite service period, with a corresponding addition to equity.

Under this method, compensation cost

related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and

is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the

vesting period.

In addition to the requisite service period, the Company also evaluates the performance condition and market condition

under ASC 718-10-20.

For an award that contains both a performance and a market condition, and where both conditions must be satisfied

in order for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized

over the employee’s requisite service period or nonemployee’s vesting period if it is probable that the performance condition

If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should

be reversed) because the vesting condition in the award has not been satisfied.

Company will recognize forfeitures of such equity-based compensation as they occur.

The Company accounts for income

8 unchanged sentences

to the amount expected to be realized.

As of March 31, 2024, the Company expected that the deferred tax assets are fully realizable so

did not record any valuation allowance.

As a result of the implementation

of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty

in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and

measurement related to accounting for income taxes.

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

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

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

The Company has analyzed filing

positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax

years in such jurisdictions.

The Company has identified the U.S.

federal jurisdiction and the

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

However, the Company has certain tax attribute carryforwards

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

to the year in which such attributes are utilized.

federal jurisdiction, and the states of Nevada and California, as its

“major” tax jurisdictions.

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

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

are utilized.

The Company believes that

our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a

material change to its financial position.

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC

The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as

a component of income taxes.

Recently issued accounting pronouncements

Other than as set forth under

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

Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material

our income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in

a material change to its financial position.

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to

ASC 740, Income Taxes.

The Company’s policy for recording interest and penalties associated with income-based tax audits is to record

such items as a component of income taxes.

issued accounting pronouncements

than as set forth under Note 2 to the unaudited condensed consolidated financial statements under “Recently issued accounting pronouncements,”

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

effect on the consolidated financial position, statements of operations and cash flows.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis