What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-10-02 compared with 2025-10-09 · 1380 added, 1013 removed, 698 unchanged (77% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID 7000 )

Report of Independent Registered Public Accounting Firm PCAOB ID ( 1195 )

Consolidated Balance Sheets as of June 30, 2026 and 2025

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Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheet of iPower, Inc.

and its subsidiaries (the “Company”) as of June 30, 2025, and the related consolidated statements

of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for year ended June 30, 2025 and the related

notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of the Company as of June 30, 2025, and the results of their operations and their

cash flows for the year ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

/s/ HTL International, LLC

We have served as the Company’s auditor

Houston, Texas

October 9, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

Opinion on the Consolidated Financial Statements

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of iPower, Inc.

and its subsidiaries (the “Company”) as of June 30, 2024, and the related consolidated statements

of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for year ended June 30, 2024 and the related

notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of the Company as of June 30, 2024, and the results of their operations and their

cash flows for the year ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

balance sheets of iPower Inc.

and its subsidiaries (the Company) as of June 30, 2026 and 2025, and the related consolidated statements

of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two-year period

ended June 30, 2026, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2026 and 2025, and

the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2026, in conformity with

accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

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the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

We conducted our audits in accordance with the

standards of the PCAOB.

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engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

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Accordingly, we express no such opinion.

Our audit included performing procedures to assess

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

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consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

We believe that our audits provide

a reasonable basis for our opinion.

We have served as the Company’s auditor

since 2020 until June 2025.

Irvine, California

September 20, 2024

/s/ HTL International, LLC

We have served as the Company’s auditor since 2025.

Houston, Texas

October 2, 2026

and Subsidiaries

Consolidated Balance

As of June 30, 2025 and June 30, 2024

As of June 30, 2026 and

Current assets

Cash and cash equivalent

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Restricted cash - BitGo

Prepayments and other current assets, net

Current assets held for sale

Total current assets

Non-current assets

Right of use - non-current

Operating lease right-of-use assets, net

Property and equipment, net

Deferred tax assets, net

Software under development

Investment in joint venture

Note receivable

Intangible assets, net

Digital assets

Other non-current assets

Non-current assets held for sale

Total non-current assets

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Current liabilities

Accounts payable, net

Accounts payable

Accounts payable – related parties

Other payables and accrued liabilities

Lease liability - current

Short-term loan payable

Short-term loan payable - related party

Operating lease liability - current

Revolving loan payable, net

Income taxes payable

Current liabilities held for sale

Total current liabilities

Non-current liabilities

Lease liability - non-current

Convertible notes payable

Derivative liability - Conversion option

Operating lease liability - non-current

Total non-current liabilities

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Stockholders’ Equity

Preferred stock, $ 0.001 par value;

Preferred stock, $ 0.001

shares authorized;

0 shares issued and outstanding at June 30, 2025 and June 30, 2024

Common stock, $ 0.001 par value;

shares issued and outstanding at June 30, 2026 and 2025

** Common stock, $ 0.001

shares authorized;

31,359,899 and 31,359,899 shares issued and outstanding at June 30, 2025 and 2024

shares issued and outstanding at June 30, 2026 and 2025

Additional paid in capital

Treasury stock, at cost 1,346 and 0 shares held at June 30, 2026 and 2025

Accumulated deficits

( 15,198,889 )

( 10,230,601 )

Non-controlling interest

Accumulated other comprehensive loss

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial

Unless otherwise indicated, all shares of common stock and per share numbers in the consolidated financial statements and notes below have been adjusted retroactively to reflect the reverse stock splits effected on October 27, 2025, May 22, 2026, and August 7, 2026, for all periods presented (see Note 17 for details).

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

and Subsidiaries

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General and administrative

Impairment loss - goodwill

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

LOSS FROM OPERATIONS

( 14,428,282 )

( 6,330,002 )

OTHER INCOME (EXPENSE)

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Loss on equity method investment

Other non-operating income (expenses)

Loss on deconsolidation of VIE

Unrealized loss on digital assets

Change in fair value of derivative liability

Loss on extinguishment of convertible notes

( 2,324,402 )

Other non-operating income, net

Total other expenses, net

INCOME (LOSS) BEFORE INCOME TAXES

( 2,060,571 )

LOSS BEFORE INCOME TAXES

( 16,488,853 )

PROVISION FOR INCOME TAX EXPENSE (BENEFIT)

( 6,697,441 )

NET INCOME (LOSS)

PROVISION FOR INCOME TAX BENEFIT

( 3,079,172 )

( 1,348,313 )

NET LOSS FROM CONTINUING OPERATIONS

( 13,409,681 )

( 5,349,128 )

DISCONTINUED OPERATIONS, NET OF TAX

( 11,622,562 )

( 4,977,546 )

Non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

NET LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 11,622,242 )

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Foreign currency translation adjustments

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.

COMPREHENSIVE LOSS ATTRIBUTABLE TO IPOWER INC.

$ ( 11,624,028 )

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EARNINGS (LOSSES) PER SHARE

The accompanying notes are an integral part of these consolidated financial

Basic - continuing operations

Basic - discontinued operations

Total basic losses per share

Diluted - continuing operations

Diluted - discontinued operations

Total diluted losses per share

The accompanying notes are

an integral part of these consolidated financial statements.

and Subsidiaries

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For the Years Ended June 30, 2026 and 2025.

** Common Stock

Treasury Stock

Additional Paid in

Retained Earnings (Accumulated

Non-controlling

Accumulated other Comprehensive

Paid in Capital

income (loss)

Accumulated Other Comprehensive Income

Balance, June 30, 2025

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( 11,622,562 )

( 4,977,546 )

Stock-based compensation

Shares issued for consulting services

Restricted shares issued for vested

Common stock issued for conversions

of note payable

Reverse-Split round up shares

Repurchase of common stock, at

Foreign currency translation adjustments

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( 4,968,288 )

Stock-based compensation

Restricted shares issued for vested RSUs

Common stock issued for cash, net of issuance costs

Capital injection to DHS

Settled offering cost

( 4,977,546 )

( 1,300,000 )

Returned and cancelled shares

Stock-based compensation

Foreign currency translation adjustments

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$ ( 15,198,889 )

$ ( 210,406 )

The accompanying notes are an integral part of these consolidated financial

The accompanying notes are

an integral part of these consolidated financial statements.

and Subsidiaries

2 unchanged sentences

For the Years Ended June 30, 2026 and 2025

For the Years Ended June 30

For the Year Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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$ ( 4,977,546 )

Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:

Adjustments to reconcile net (loss)

income to cash provided by (used in) operating activities:

Depreciation and amortization expense

Inventory reserve

Reversal of inventory reserve

Credit loss reserve

Loss on equity method investment

Stock-based compensation expense

Stock-based compensation expense (reversal)

Shares issued for consulting services

Loss on deconsolidation of VIE

Gain on disposition of subsidiaries

( 1,613,936 )

Amortization of operating lease right of use assets

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

Change in FV of Derivative Liability

Unrealized gain/loss on digital assets

Loss on extinguishment of convertible notes

Gain on sale of vehicle

Impairment loss -goodwill

Discount on note receivable

Amortization of debt premium / discount and non-cash

financing costs

Change in operating assets and liabilities

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( 2,424,494 )

( 1,278,857 )

Prepayments and other current assets, net

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( 4,640,051 )

Accounts payable – related parties

Other payables and accrued liabilities

( 1,684,961 )

( 1,728,632 )

Operating lease liabilities

2 unchanged sentences

Income taxes payable

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Discontinued operations -cash sold

Deconsolidation of VIE

Proceeds from sale of fixed assets

Purchase of equipment

Disposal of equipment

Investment in joint venture

Purchase of digital assets held in Bitgo account

( 3,210,500 )

Prepayments for software development

( 1,118,280 )

( 1,519,928 )

Net cash used in investing activities

( 4,681,625 )

( 2,042,250 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Capital injection

Advance from shareholders

Payments of offering cost settlement

Net proceeds from sale of common stock

Treasury stock acquired

Proceeds from short-term loans -related party

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( 1,050,000 )

Payments on promissory note

Payments on short-term loans

( 1,500,000 )

Net proceeds from convertible note

Proceeds from revolving loan

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( 10,200,000 )

Net cash used in financing activities

( 2,999,362 )

Net cash provided by (used in) financing activities

( 2,999,362 )

EFFECT OF EXCHANGE RATE ON CASH

CHANGES IN CASH AND CASH EQUIVALENT

CHANGES IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

( 5,369,947 )

CASH AND CASH EQUIVALENT, beginning of period

CASH AND CASH EQUIVALENT, end of period

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning

of period (1)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end

of period (1)

SUPPLEMENTAL CASH FLOW INFORMATION:

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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Shares returned and cancelled

Termination of operating leases

Right of use assets acquired under new operating leases

The accompanying notes are an integral part of these consolidated

financial statements.

Derivative liability - conversion option

Common stock issued for conversions of note payable

Right of use assets derecognized due to termination

of operating leases

Note receivable from sale of subsidiaries

Transfer of inventories in exchange of assumption of

accounts payable

Software under development transferred from GPM

Credits against note receivable

Discount on note receivable

Common stock issued for services

Includes $330,011 cash

presented in current assets held for sale on the consolidated balance sheet as of June 30, 2025.

The accompanying notes are

an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

As of June 30, 2025 and 2024 and for the Years

Ended June 30, 2025 and 2024

As of June 30, 2026 and 2025 and for the Years Ended

June 30, 2026 and 2025

Note 1 - Nature of business and organization

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The Company is principally engaged in the marketing and sale

of consumer home, garden and other products and accessories mainly in the North America.

of consumer home, garden and other products and accessories mainly in North America.

On May 18, 2021, the Company acquired 100% of the

equity ownership of its variable interest entity, E Marketing Solution Inc.

(“E Marketing”), an entity incorporated in California

and owned by one of the minority shareholders of the Company.

As a result, E Marketing became the Company’s wholly owned subsidiary.

On May 18, 2021, the Company acquired 100% of

1 unchanged sentence

(“GPM”), an entity which was incorporated

in the State of Nevada on September 4, 2020, and was owned by Chenlong Tan, the Company’s Chairman, CEO and President, and one of

the majority shareholders of the Company.

in the State of Nevada on September 4, 2020, and was owned by Chenlong Tan, the Company’s Chairman, CEO, President and Interim CFO,

and one of the shareholders of the Company.

As a result, GPM became the Company’s wholly owned subsidiary.

On May 18, 2021, the Company acquired 100% of

the equity ownership of its variable interest entity, E Marketing Solution Inc.

(“E Marketing”), an entity incorporated in

California and owned by one of the shareholders of the Company.

As a result, E Marketing became the Company’s wholly owned subsidiary.

On January 13, 2022, the Company entered into

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

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

in the United States, with such logistics services to include, without limitation, receiving, storing and transporting such products.

The Company owns 40% of the equity interest in Box Harmony, retaining significant influence, but does not own a majority equity interest

in or otherwise control Box Harmony.

On January 13, 2022, the Company entered into a joint

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

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

the United States, with such logistics services to include, without limitation, receiving, storing and transporting such products.

Company owns 40% of the equity interest in Box Harmony, retaining significant influence, but does not own a majority equity interest in

or otherwise control Box Harmony.

See details at Note 3 below.

On February 10, 2022, the Company entered into

another joint venture agreement and formed a Nevada limited liability company, Global Social Media, LLC (“GSM”), for the principal

purpose of providing a social media platform, content and services to assist businesses, including the Company and other businesses, in

marketing their products.

On February 10, 2022, the Company entered into another

joint venture agreement and formed a Nevada limited liability company, Global Social Media, LLC (“GSM”), for the principal

purpose of creating a social media platform in order to provide content and services to assist businesses, including the Company and other

businesses, in marketing their products.

The Company owns 60% of the equity interest in GSM and controls its operations.

See details at Note 3 below.

On February 15, 2022, the Company acquired 100%

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

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

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

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

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

Anivia owns 100% of the

equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayourenzai (Shenzhen) Technology Co., Ltd., a corporation located

in the People’s Republic of China (“PRC”) and which is a wholly foreign-owned enterprise (“WFOE”) of Fly

Elephant Limited.

The WFOE controls, through contractual arrangements summarized in Note 4 below, the business, revenues and profits of

Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”) and located in

Shenzhen, China.

See details at

Note 3 below.

On February 15, 2022, the Company acquired 100% of

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

in accordance with the terms of a share transfer framework agreement (the “Transfer Agreement”), dated February 15, 2022,

by and between the Company, White Cherry Limited, a BVI company (“White Cherry”), White Cherry’s equity holders, Li

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

(Shenzhen) Technology Co., Ltd.

(“DYRZ”), and Daheshou (Shenzhen) Information Technology Co., Ltd.

owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of DYRZ, a corporation located in the People’s

Republic of China (“PRC”), which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited.

controls, through contractual arrangements summarized in Note 4 below, the business, revenues and profits of DHS, a company organized

under the Laws of the PRC and located in Shenzhen, China.

See details on Note 4 below.

On August 4, 2025, the Company, through its wholly-owned subsidiary,

DYRZ, entered into an agreement (the “VIE Contract Termination Agreement”) with the Company’s variable interest entity,

DHS and its registered shareholders.

DHS had previously been consolidated into the Company’s financial statements as a variable

interest entity pursuant to certain contractual arrangements (the “VIE Agreements”), which allowed DYRZ to exercise effective

control over DHS.

Following entry into the VIE Contract Termination Agreement, DYRZ no longer owns, operates or controls DHS and Company-related

services and activities previously conducted by DHS will now be performed by iPower and other contractors, as needed, as part of an effort

to streamline operations and improve structural efficiency.

See details on Note 4 below.

On June 3, 2025, the Company entered into a joint

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Package, retaining significant influence, but does not own a majority equity interest in or otherwise control United Package.

at Note 3 below.

on Note 3 below.

On October 15, 2025, the Company executed an agreement

(the “Restructuring Agreement”) with its subsidiaries to modify its corporate structure so that the Company’s consumer

goods and logistics business be operated out of GPM.

Pursuant to the Restructuring Agreement, the Company transferred its ownership in

E Marketing and United Package to GPM.

Execution of the Restructuring Agreement does not have any impact on the consolidated financial

statements of the Company.

On October 23, 2025, the Company formed iPower

Smart LLC, a Delaware limited liability company (’Smart LLC”).

Smart LLC is wholly owned by the Company and principally engaged

in digital treasury activities.

On January 29, 2026, the Company formed iPower

Nexus Inc., a Nevada corporation (‘Nexus”).

Nexus is wholly owned by the Company and principally engaged in supply chain management

On February 1, 2026, the Company entered into

a stock purchase agreement (the “SPA”) with ETTS AI Investment LLC, a Nevada limited liability company (“ETTS AI”),

pursuant to which the Company sold its equity interest in GPM and its underlying entities to ETTS AI in exchange for a $ 2.3 million promissory

note (the “Promissory Note”).

As a result of the transaction, GPM and its underlying entities ceased to be subsidiaries of

the Company as of February 1, 2026.

See details on Note 5 below.

Note 2 – Basis of Presentation and Summary

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Principles of Consolidation

The consolidated financial statements include

the accounts of the Company and its subsidiaries, E Marketing Solution Inc., Global Product Marketing Inc., Global Social Media, LLC,

and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou

(Shenzhen) Information Technology Co., Ltd.

All inter-company balances and transactions have been eliminated.

Prior Period Reclassification

Certain prior period amounts in the consolidated

balance sheets and statements of operations have been reclassified to conform to the current period presentation, including reclassifications

made in the presentation of investment in joint ventures, service income and costs.

These reclassifications had no impact on the prior

year’s financial statements as a whole.

Emerging Growth Company Status

The company is an “emerging growth company,”

as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart

our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting

requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being

required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations

regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding

advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts

emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that

is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered

under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company

can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but

any such election to opt out is irrevocable.

The company has elected not to opt out of such extended transition period which means that

when a standard is issued or revised and it has different application dates for public or private companies, the company, as an emerging

growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison

of the company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth

company which has opted out of utilizing the emerging growth company reduced reporting requirements difficult.

The consolidated financial statements include the

accounts of the Company and its subsidiaries, GSM, Smart LLC, Nexus, and Anivia Limited.

All inter-company balances and transactions have

been eliminated.

Smaller Reporting Company Status

The Company is a “smaller reporting company,”

as defined in Rule 12b-2 under the Exchange Act.

As such, the Company is eligible to use certain reduced disclosure requirements applicable

to smaller reporting companies.

As a smaller reporting company, the Company may take advantage of certain scaled disclosure requirements,

including reduced disclosure obligations regarding executive compensation and the ability to provide only two years of audited financial

In addition, the Company may elect to use some or all of these accommodations for so long as it remains eligible to do so.

The Company’s reliance on these accommodations may make it more difficult for investors to compare our disclosures with those of

companies that do not qualify as smaller reporting companies.

Use of estimates and assumptions

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The reporting and functional currency of iPower

and subsidiaries is the U.S.

and its subsidiaries is the U.S.

dollar (USD).

iPower’s WFOE and VIE in China uses the local currency, Renminbi (“RMB”),

iPower’s WFOE and VIE in China each uses the local currency, Renminbi (“RMB”),

as its functional currency.

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the results of operations as incurred.

The balance sheet amounts of the VIE, with the

exception of equity, on June 30, 2025, were translated at 7.1636 RMB to $1.00.

The balance sheet amounts of the WFOE, with the exception

of equity, on June 30, 2026, were translated at 6.7940 RMB to $1.00.

The equity accounts were stated at their historical rates.

The average translation rates applied to statements of operations and comprehensive loss accounts for the year ended June 30, 2025 was

translation rates applied to statements of operations and comprehensive income (loss) accounts for the year ended June 30, 2026 was 6.9951

RMB to $1.00.

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

statement of cash flows would not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

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

of cash flows would not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

Going Concern

The Company evaluates its ability to continue

as a going concern in accordance with ASC 205-40, Presentation of Financial Statements—Going Concern .

Management evaluates

whether conditions and events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a

going concern within one year after the date the consolidated financial statements are issued.

In performing this evaluation, management considers,

among other factors, the Company’s current financial condition, liquidity and available sources of financing, obligations due or

anticipated within the assessment period, historical and expected operating results and cash flows, and other relevant conditions and

When substantial doubt is raised, management evaluates whether its plans that are intended to mitigate those conditions and events,

when implemented, will alleviate the substantial doubt.

Such plans are considered only to the extent that it is probable that they will

be effectively implemented and, if implemented, will mitigate the conditions and events giving rise to substantial doubt.

As of June 30, 2026, the Company had cash and

cash equivalents of $ 478,042 and

a working capital of $ 3.4 million.

the Company’s liquidity requirements for the twelve months following the issuance of these consolidated financial statements,

management considered the Company’s expected cash flows from operations, available financing sources, and significant

contractual obligations.

The Company has approximately $ 4.7

million of financing proceeds raised subsequent to June 30, 2026, as well as approximately $15.0 million of remaining optional

financing capacity under its existing financing arrangement, subject to the investors’ election and the satisfaction or waiver

of applicable closing conditions.

The Company’s significant cash requirements include approximately $5.8 million of

convertible notes outstanding, which do not mature until December 2027 through September 2028, although the notes require monthly

interest payments and may be converted into common stock in accordance with their terms, and approximately $0.8 million of net lease

payments expected during fiscal 2027.

Although the Company incurred a net loss of approximately $ 11.6

million and negative operating cash flows during the year ended June 30, 2026, management expects its future cash requirements to be

reduced as a result of the cost reductions and other completed restructuring actions.

Based on the Company’s current operating plan,

cash and cash equivalents, expected cash flows from operations, financing proceeds received subsequent to year-end, and expected cash

requirements, management believes that the Company will have sufficient liquidity to meet its obligations and fund its operations for

at least the next twelve months.

However, the Company’s liquidity and ability to meet its obligations and fund its capital requirements

are dependent on its future financial performance, which is subject to general economic, financial and other factors beyond its control,

including inflation and a potential recession.

Given the Company’s current working capital

position, management believes it will be able to manage through the current challenges by managing payment terms with customers and vendors.

Cash and cash equivalents

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

From time to time, the Company may maintain bank

balances in interest bearing accounts in excess of the $250,000, which is currently the maximum amount insured by the FDIC for interest

bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts).

The Company has not experienced

any losses with respect to cash.

Management believes our Company is not exposed to any significant credit risk with respect to its cash.

As of June 30, 2025, the Company’s restricted

cash balance included approximately $ 19,151 frozen by governmental authorities in connection with a lawsuit in China.

Such funds are not

available for the Company’s general use until the restrictions are released.

See Note 17 below for details.

Accounts receivable, net

From time to time, the Company may maintain cash balances at financial

institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000 per depositor, per

insured bank, for each account ownership category.

The Company has not experienced any losses with respect to such accounts.

believes the Company is not exposed to any significant credit risk with respect to its cash deposits.

Restricted Cash

Restricted cash consists of cash that is subject

to contractual restrictions on withdrawal or use.

The Company’s restricted cash primarily represents cash held in a controlled account

and pledged as collateral pursuant to the Company’s financing arrangements.

Such amounts are restricted as to withdrawal and use

in accordance with the terms of the applicable agreements.

For purposes of the consolidated statements of

cash flows, the Company includes restricted cash together with cash and cash equivalents when reconciling the beginning-of-period and

end-of-period amounts.

Transfers between cash and cash equivalents and restricted cash are not presented as operating, investing, or financing

activities in the consolidated statements of cash flows.

The following table provides a reconciliation

of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheet that sums to the total of such amounts shown

in the Consolidated Statement of Cash Flows:

Schedule of restricted cash

June 30, 2026

June 30, 2025

Cash and cash equivalents

Cash and cash equivalents included in current assets held for sale

Restricted cash

Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows

Accounts receivable

During the ordinary course of business, the Company

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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 losses is required.

The Company evaluates the creditworthiness of

all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable.

are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular

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 all

of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable.

any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular

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

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

During the year ended June 30, 2025, the Company determined that the collectability of certain refundable amounts withheld by sales channel

partners was remote so we recorded additional allowance for credit losses.

For the year ended June 30, 2025 and 2024, the credit losses

was $ 1,569,031 and $ 285,386 , respectively.

Equity method investment

The Company accounts for its ownership interest

in Box Harmony, a 40 % owned joint venture, and United Package NV LLC, a 44 % owned joint venture, following the equity method of accounting,

The Company accounts for its ownership interest in

Box Harmony, a 40 % owned joint venture, and United Package NV LLC, a 44% owned joint venture, following the equity method of accounting,

in accordance with ASC 323, Investments — Equity Method and Joint Ventures.

Under this method, the carrying cost is initially recorded

at cost and then increased or decreased by recording its percentage of gain or loss in joint ventures’ statement of operations and

a corresponding charge or credit to the carrying value of the asset.

at cost and then increased or decreased by recording its percentage of gain or loss in the joint ventures’ statement of operations

and a corresponding charge or credit to the carrying value of the asset.

Digital Assets

The Company accounts for its digital assets,

which, as of June 30, 2026, consisted of Bitcoin (“BTC”), Ethereum (“ETH”), and sUSDai, in accordance with

Accounting Standards Codification (“ASC”) Topic 350-60, “Intangibles—Goodwill and Other—Crypto

Assets.” The Company has ownership of and control over its digital assets and may use third-party custodial services to secure

Digital assets are initially recognized at cost and subsequently measured at fair value at each reporting date, with changes

in fair value recognized in net income.

The Company determines the fair value of its digital

assets on a recurring basis in accordance with ASC Topic 820, “Fair Value Measurement,” based on quoted prices on the active

exchange that the Company has determined is its principal market for such digital assets (Level 1 inputs).

The Company determines the

cost basis of digital assets using the specific identification of each unit received.

Realized and unrealized gains and losses from changes

in the fair value of digital assets are recognized in the statement of operations.

Variable interest entities

On February 15, 2022, the Company acquired 100 %

of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized

under the Laws of the PRC (“DHS”).

Pursuant to the terms of the Agreements, the Company does not have direct ownership in

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

economic performance.

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

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

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

See Note 4 for details regarding the acquisition.

Goodwill represents the excess of the purchase

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

On February 15, 2022, the Company acquired 100% of

the ordinary shares of Anivia and its subsidiaries, including 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.

On August 4, 2025, the Company entered into a Variable

Interest Entity (“VIE”) Contract Termination Agreement with the VIE, pursuant to which all VIE agreements were terminated.

As a result, the Company no longer has a controlling financial interest in the VIE.

In accordance with ASC 810-10-40, Consolidation

— Deconsolidation of a Subsidiary or Derecognition of a Group of Assets , the Company deconsolidated the VIE as of the termination

Upon deconsolidation, the Company derecognized all

assets and liabilities of the VIE from its consolidated balance sheet.

Because the Company retains no ownership interest or continuing

involvement in the VIE following the termination of the agreements, no retained interest was recognized.

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

Goodwill is not amortized but is reviewed for

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

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

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

If it is determined that it is more likely than

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

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

If the fair value of

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

However, if the carrying amount

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

total amount of goodwill allocated to that reporting unit.

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

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

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

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

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

Based on this

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

The impairment amount was determined

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

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

goodwill is partially impaired.

During the years ended June 30, 2025 and 2024,

the Company engaged an independent third-party valuation firm to perform a qualitative and quantitative goodwill impairment analysis following

the steps laid out in ASC 350-20-35-3C and noted no goodwill impairment.

As of June 30, 2025 and 2024, the goodwill balance amounted to

$ 3,034,110 and $ 3,034,110 , respectively.

Intangible Assets, net

Finite life intangible assets at June 30, 2025

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

Goodwill is not amortized but is reviewed for potential

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

The Company’s

review for impairment includes an assessment of qualitative factors to determine whether it is more likely than not that the fair value

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

If it is determined that it is more likely than not that the

fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative goodwill impairment test is performed,

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

If the fair value of the reporting

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

However, if the carrying amount of the reporting

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

allocated to that reporting unit.

During the year ended June 30, 2026, the Company

performed a goodwill impairment analysis following the steps laid out in ASC 350 and concluded that the carrying value of goodwill was

impaired, primarily due to a sustained decline in the Company’s share price and market capitalization.

Accordingly, the Company

recognized a full goodwill impairment charge during the period.

As of June 30, 2026 and 2025, the goodwill balance amounted to $ 0 and

$ 3,034,110 , respectively.

Intangible assets

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

Intangible assets are amortized

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

Finite life intangible assets at June 30, 2026 included

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

Intangible assets are

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

Intangible assets are amortized on

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

Schedule of estimated useful life

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The Company reviews the recoverability of long-lived

assets, including the intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may

not be recoverable.

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

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

If these cash flows are less

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

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

fair value determinations.

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 value.

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

value determinations.

The Company did no t record any impairment charge for the years ended June 30, 2026 and 2025.

Software development

The Company accounts for costs incurred to develop

or obtain software for internal use in accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software .

Costs incurred during the preliminary project stage are expensed as incurred.

Costs incurred during the application development stage

are capitalized when the preliminary project stage has been completed, management has authorized and committed to funding the project,

and it is probable that the project will be completed and the software will be used to perform the function intended.

Capitalizable costs

include amounts paid to third-party developers and other costs directly associated with the development and implementation of the software.

Costs incurred for training, data conversion,

maintenance, and other post-implementation activities are expensed as incurred.

Capitalization ceases when the software is substantially

complete and ready for its intended use.

Capitalized internal-use software costs are amortized on a straight-line basis over their estimated

useful lives beginning when the software is ready for its intended use.

The Company evaluates capitalized internal-use software for impairment

when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Embedded derivative liability

The Company evaluates the embedded features of its

financial instruments, including its convertible notes payable in accordance with ASC Topic 480, “ Distinguishing Liabilities

from Equity ,” and ASC Topic 815 “ Derivatives and Hedging .” Certain conversion options and redemption features

are required to be bifurcated from their host instrument and accounted for as free-standing derivative financial instruments should certain

criteria be met.

The Company applies significant judgment to identify and evaluate complex terms and conditions for its financial instruments

to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives.

Embedded derivatives must

be separately measured from the host contract if all the requirements for bifurcation are met.

The assessment of the conditions surrounding

the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives.

Bifurcated embedded

derivatives are recognized at fair value.

The following table provides a roll-forward of changes

for financial instruments measured at fair value on a recurring basis for the year ended June 30, 2026:

Schedule of roll forward of

changes for financial instruments measured at fair value

Derivative Liability

Balance as of June 30, 2025

Initial fair value upon issuance of convertible notes

Extinguishment of derivative liability upon conversion of convertible notes

( 1,285,400 )

Gain on change in fair value of derivative liability

Balance as of June 30, 2026

Treasury stock

The Company accounts for treasury stock under the

cost method in accordance with ASC 505-30, Equity — Treasury Stock .

Shares of the Company’s common stock repurchased

in the open market are recorded at cost and presented as a reduction of stockholders’ equity.

Changes in the market value of treasury

shares subsequent to repurchase are not recognized in the consolidated financial statements.

Fair values of financial instruments

ASC 825, “Disclosures about Fair Value of

Financial Instruments,” requires disclosure of fair value information about financial instruments.

ASC 825, “Disclosures about Fair Value of Financial

Instruments,” requires disclosure of fair value information about financial instruments.

ASC 820, “Fair Value Measurements”

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

For other financial instruments to be reported

at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable

For other financial instruments to be reported at

fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable

inputs to the extent possible.

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in one of the following levels:

Level 1 – Inputs are unadjusted, quoted

prices in active markets for identical assets or liabilities at the measurement date;

Level 1 – Inputs are unadjusted, quoted prices

in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted

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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.

of June 30, 2025 and 2024, the Company had goodwill of $3,034,110 as follows:

Schedule of fair value of financial assets and liabilities

The fair value of goodwill was determined based

on the discounted cash flow method, which is an income approach, which required the use of inputs that were unobservable in the marketplace

(Level 3), including a discount rate that would be used by a market participant, projections of revenues and cash flows, among others.

The Company measures certain non-financial assets

on a non-recurring basis, including goodwill.

As a result of those measurements, as of June 30, 2026 and 2025, the Company had goodwill

with a carry book value of $ 0 and $ 3,034,110 , respectively.

The fair value of goodwill was determined based on

a combination of the market approach and the discounted cash flow method, which is an income approach, which required the use of inputs

that were unobservable in the marketplace (Level 3), including a discount rate that would be used by a market participant, projections

of revenues and cash flows,

among others.

The fair value of financial instruments measured on

a recurring basis as of June 30, 2026 consisted of the following:

Schedule of fair value of financial derivative liability

Fair Value Measurements as of June 30, 2026

Digital assets

Derivative liability

$ ( 606,700 )

Total recurring fair value measurements

$ ( 606,700 )

Revenue recognition

The Company recognizes revenue from service and

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

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 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 obligation.

The Company transfers the risk

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

The Company evaluates the criteria of ASC 606

- Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales

and related costs or the net amount earned as commissions.

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

to provide a specified good or service and the Company has discretion in establishing the price, revenue is recorded at gross.

Payments received prior to the delivery of goods to customers are

recorded as customer deposits.

The Company evaluates the criteria of ASC 606 - Revenue

Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related

costs or the net amount earned as commissions.

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

a specified good or service and the Company has discretion in establishing the price, revenue is recorded at gross.

Payments received prior to the delivery of goods to customers are recorded

as customer deposits.

The Company periodically provides incentive offers

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price of the related transaction.

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

the related sales.

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 the

related sales.

Shipping and handling costs are recorded as selling expenses.

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Vendor warranty credits resulting

from refund of returns on quality issues are recorded to offset selling and fulfillment expenses.

During the years ended June 30, 2025

and 2024, the Company recorded vendor credit of $0 million and $2.48 million, respectively.

from refund of returns on quality issues are recorded to offset merchant selling fees.

During the years ended June 30, 2026 and 2025,

the Company recorded vendor credit of $ 0 and $ 48,903 , respectively.

Outbound freight costs related to shipping costs to customers are

considered periodic costs and are reflected in selling and fulfillment expenses.

Advertising costs are expensed as incurred.

advertising and promotional costs included in selling and fulfillment expenses for the years ended June 30, 2025 and 2024 were $ 3,351,814

and $ 4,271,311 , respectively.

Inventory, net

advertising and promotional costs included in selling and fulfillment expenses for the years ended June 30, 2026 and 2025 were as following.

Schedule of advertising costs

Advertising and promotion

Inventory consists of finished goods ready for

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Debt issuance costs

Costs incurred in connection with the issuance

of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method.

Costs incurred in connection with the issuance of

debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method.

To the extent

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of determination.

For the years ended June 30, 2025 and 2024, $ 0 and $ 1,756,913 were recorded as deferred offering costs and reclassed

to additional paid in capital upon closing of the offering.

As of June 30, 2025 and June 30, 2024, there were no deferred offering costs

included in the Company’s consolidated balance sheets.

As of June 30, 2026 and 2025, there were no deferred offering costs included in the consolidated balance sheets.

Segment reporting

The Company follows ASC Topic 280, Segment Reporting.

The Company’s Chief Executive Officer, who serves as the Chief Operating Decision Maker (“CODM”), reviews the consolidated

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

the Company has only one reportable segment.

Significant expense categories regularly provided to and reviewed by the CODMs are those

presented in the consolidated statements of comprehensive income.

The Company does not distinguish between markets or segments for the

purpose of internal reporting.

For the years ended June 30, 2025 and 2024, sales through Amazon to Canada and other foreign countries

were approximately 7.2 % and 9.2 % of the Company’s total sales.

During the year ended June 30, 2025, sales of hydroponic products,

including ventilation and grow light systems, was approximately 19 % of the Company’s total sales and the remaining 81 % consisted

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

During the year ended June 30, 2024, sales of hydroponic products,

including ventilation and grow light systems, was approximately 22 % of the Company’s total sales and the remaining 78 % consisted

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

As of June 30, 2025 and 2024, the Company had approximately $ 1 .0

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

The Company follows ASC 280, Segment

The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, reviews the consolidated results of

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

Company has only one

reportable segment.

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

The CODM uses consolidated net income (loss),

as reported in the consolidated statements of operations, as the measure of segment profit or loss in assessing segment performance and

allocating resources.

The significant expense categories and amounts regularly provided to the CODM are the consolidated expense categories

presented in the Company’s consolidated statements of operations.

Accordingly, the Company has not separately duplicated such information

in this note and refers to the consolidated statements of operations for the significant segment expense information.

For the years ended June

30, 2026 and 2025, sales through Amazon to Canada and other foreign countries were approximately 6.8 % and 7.2 % of the Company’s

total sales, respectively.

During the year ended June 30, 2026, sales of hydroponic products, including ventilation and grow light systems,

were approximately 10.0 % of the Company’s total sales and the remaining 90.0 % consisted of general gardening, home goods, and other

products and accessories.

During the year ended June 30, 2025, sales of hydroponic products, including ventilation and grow light systems,

were approximately 19 % of the Company’s total sales and the remaining 81% consisted of general gardening, home goods, and other

products and accessories.

As of June 30, 2026 and 2025, the Company had approximately $ 0 and $ 1 .0 million of inventory stored in China,

respectively.

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

assets and related lease obligations on the balance sheet.

assets and related lease obligations on our balance sheet.

ROU assets represent our right to use an underlying

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period, with a corresponding addition to equity.

Under this method, compensation cost related to employee share options or similar equity

Under this method, compensation costs related to employee share options or similar equity

instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee

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

In addition to requisite service period,

the Company also evaluates the performance condition and market condition under ASC 718-10-20.

For an award which contains both a performance

and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the

fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting

period if it is probable the performance condition will be met.

If the performance condition is ultimately not met, compensation cost

related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied.

The Company will recognize forfeitures of such

equity-based compensation as they occur.

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 which contains both

a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated

into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s

vesting period if it is probable the performance condition will be met.

If the performance condition is ultimately not met, compensation

costs 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.

The Company accounts for income taxes under the

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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.

between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets

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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.

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.

Valuation allowances are recorded, when necessary, to reduce deferred

tax assets to the amount expected to be realized.

The Company has analyzed filing positions in each

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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.

The Company believes that 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

Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740, Income Taxes.

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.

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

Employee Retention Credit

The Company accounts for refundable Employee Retention

Credits (“ERC”) as government assistance.

ERC amounts are recognized when the Company has reasonable assurance that it has

complied with the applicable eligibility requirements and conditions of the program and that the credits are received and retained.

recognized are based on the credits received and are presented as other income in the consolidated statements of operations.

Commitments and contingencies

In the ordinary course of business, the Company

is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of

matters, such as government investigations and tax matters.

The Company recognizes a liability for such contingency if it determines it

is probable that a loss has occurred and a reasonable estimate of the loss can be made.

The Company may consider many factors in making

these assessments including historical and specific facts and circumstances of each matter.

In the ordinary course of business, the Company is

subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters,

such as government investigations and tax matters.

The Company recognizes a liability for such contingency if it determines it is probable

that a loss has occurred and a reasonable estimate of the loss can be made.

The Company may consider many factors in making these assessments

including historical and specific facts and circumstances of each matter.

Earnings per share

Basic earnings per share are computed by dividing

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

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

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 give effect to potentially dilutive securities outstanding during the period using the treasury stock method or if-converted method,

as applicable, except when their effect would be antidilutive.

Recently issued accounting pronouncements

In December 2025, the FASB issued ASU 2025-12,

Codification Improvements , which makes technical corrections, clarifications and other incremental improvements to various Topics

in the Accounting Standards Codification.

The amendments include, among other matters, clarifications related to diluted earnings per

share and treasury stock.

The amendments are generally effective for annual reporting periods beginning after December 15, 2026, and

interim reporting periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the

impact of adopting the amendments on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06,

Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use

Software , which modernizes the accounting for costs incurred to develop software for internal use.

Among other changes, the amendments

remove references to software development project stages and revise the guidance for determining when capitalization of software development

costs should begin.

The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim reporting

periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting

the amendments on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial

Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

The ASU provides

a practical expedient and accounting policy election for measuring expected credit losses on certain trade receivables and contract assets

arising under ASC 606.

The amendments are effective for fiscal years beginning after December 15, 2025, and interim periods within those

fiscal years, with early adoption permitted.

The Company is currently evaluating the impact of this ASU on its measurement of expected

credit losses.

In November 2024, the FASB issued ASU 2024-03,

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of

Income Statement Expenses , which requires public business entities to provide additional disclosures about certain expenses included

in the income statement.

The amendments require disclosure of specified expense categories included within relevant expense captions,

including purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, as well as certain

other qualitative and quantitative information.

In January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03

for entities with non-calendar fiscal years.

The amendments are effective for annual reporting periods beginning after December 15, 2026,

and interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

is currently evaluating the impact of adopting the amendments on its consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09,

Improvements to Income Tax Disclosures.

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Retrospective application is permitted.

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

In November 2023, The FASB issued ASU 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The amendments apply to all public entities that are required

to report segment information in accordance with Topic 280, Segment Reporting.

The amendments in this ASU are intended to improve reportable

segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The key amendments:

that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating

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

Require that a public entity disclose, on

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

The other segment

items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment

profit or loss.

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

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

Clarify that if

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

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

However, at least one of the reported

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

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

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

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

Require that a public entity that

has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures

in Topic 280.

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

after December 15, 2024.

Early adoption is permitted.

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

presented in the financial statements.

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

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

The adoption of this standard

did not have a material impact on its consolidated financial statements.

The adoption of this standard did not have a material impact on its consolidated financial statements but resulted in additional income tax disclosures.

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

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Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

ASU incorporates certain U.S.

This ASU incorporates

Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification™

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

In September 2022, FASB issued ASU 2022-04, Liabilities—Supplier

Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

The amendments in this ASU require that a company

that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program

to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period,

and potential magnitude.

ASU 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after

December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective for fiscal years beginning

after December 15, 2023.

Early adoption is permitted.

An entity should apply ASU No.

2022-04 retrospectively to all periods in which a

balance sheet is presented, except for the obligation rollforward, which should be applied prospectively.

The adoption of this standard

did not have a material impact on the Company’s consolidated financial statements.

In June 2022, FASB issued ASU 2022-03, Fair

Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

The amendments in

this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction

and require specific disclosures related to such an equity security.

This standard is effective for fiscal years beginning after December

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

In August 2020, the FASB issued ASU 2020-06, “Debt

– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity

(Subtopic 815-40).” This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred

stock, as well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based

accounting conclusions.

In addition, this ASU improves and amends the related EPS guidance.

This standard is effective for the Company

on July 1, 2024, including interim periods within those fiscal years.

Adoption is either a modified retrospective method or a fully retrospective

method of transition.

The adoption of this standard did not have a material impact on its consolidated financial statements.

In March 2020 and January 2021, the FASB issued

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU

2021-01, Reference Rate Reform (Topic 848):

Scope, respectively (collectively, “Topic 848”).

Topic 848 provides optional

expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank

Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

The expedients

and exceptions provided by Topic 848 are effective for all entities as of March 12, 2020 through December 31, 2022.

In December 2022,

the FASB issued ASU 2022-06, Reference Rate reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which deferred the sunset date

of Topic 848, Reference Rate Reform to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic

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

but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position,

statements of operations and cash flows.

Note 3 - Joint Ventures

Box Harmony, LLC

On January 13, 2022, the Company entered into

a joint venture agreement (the “Joint Venture Agreement”) with Titanium Plus Autoparts, Inc., a California corporation (“TPA”),

On January 13, 2022, the Company entered into a joint

venture agreement (the “Joint Venture Agreement”) with Titanium Plus Autoparts, Inc., a California corporation (“TPA”),

Tony Chiu (“Chiu”) and Bin Xiao (“Xiao”).

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operating agreement (the “LLC Agreement”), TPA and Xiao each granted to the Company an unconditional and irrevocable right

and option to purchase from Xiao and TPA at any time within the first 18 months following January 13, 2022, up to 1,200 Class A voting

units, at an exercise price of $550 per Class A voting unit, for a total exercise price of up to $660,000.

If such option is fully exercised,

the Company would own 3,600 Equity Units or 60% of the total outstanding Equity Units.

As of the date of this report, the option right

had been expired and the Company had not exercised the option to purchase additional voting units from Xiao and TPA.

The LLC Agreement

prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by the Company, that a noncontrolling

right that would not be substantive to overcome the majority voting interests held by TPA and Xiao.

In January 2023, TPA and Xiao transferred

their 60% equity units to a third party without consideration as the LLC was still in development stage and did not have significant operations.

The transfer of equity did not have any impact on the LLC’s financial statements.

As a result, the Company owns 40 % of the equity

interest in Box Harmony with significant influence but does not own a majority equity interest or otherwise control of Box Harmony.

Company accounts for its ownership interest in Box Harmony following the equity method of accounting, in accordance with ASC 323, Investments

and option to purchase (“Purchase Option”) from Xiao and TPA at any time within the first 18 months following January 13,

2022, up to 1,200 Class A voting units, at an exercise price of $550 per Class A voting unit, for a total exercise price of up to $660,000.

If such option is fully exercised, the Company would own 3,600 Equity Units or 60% of the total outstanding Equity Units.

As of the date

of this report, the Purchase Option had expired, and the Company had not exercised its option to purchase additional voting units from

Xiao and TPA.

The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance

by the Company.

In January 2023, TPA and Xiao transferred their 60% equity units to a third party without consideration as the LLC was

still in the development stage and did not have significant operations.

The transfer of equity did not have any impact on the LLC’s

financial statements.

As a result, the Company owns 40 % of the equity interest

in Box Harmony with significant influence but does not own a majority equity interest or otherwise control of Box Harmony.

accounts for its ownership interest in Box Harmony following the equity method of accounting, in accordance with ASC 323, Investments

—Equity Method and Joint Ventures.

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of the asset.

As of June 30, 2025 and 2024, the carrying value of the investment in Box Harmony was $ 13,264 and $ 27,605 .

As of June 30, 2026 and 2025, the carrying value of the investment in Box Harmony was $ 12,773 and $ 13,264 , respectively.

Global Social Media, LLC

On February 10, 2022, the Company entered into

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

Pursuant to the terms

of the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media, LLC (“GSM”),

On February 10, 2022, the Company entered into a joint

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

Pursuant to the terms of

the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media, LLC (“GSM”),

for the principal purpose of providing a social media platform, contents and services to assist businesses, including the Company and

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creating a noncontrolling right that would not be substantive to overcome the majority voting interests held by the Company.

As of the date of this report, the members have

not completed the capital contributions and no receivables were recorded.

As of the date of this report, the members had

not completed the capital contributions and no receivables have been recorded.

Pursuant to the terms of the Agreements, the Company

owns 60 % of the equity interest in GSM and control of GSM’s operations.

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

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

In accordance with ASC 810, Consolidation , the Company consolidates

GSM in its consolidated financial statements based on its controlling financial interest in GSM.

For the years ended June 30, 2026 and

the impact of GSM’s activities were immaterial to the Company’s consolidated financial statements.

2025, the impact of GSM’s activities was immaterial to the Company’s consolidated financial statements.

United Package NV, LLC

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agreement (the “Operating Agreement”) of United Package NV, LLC, a Nevada limited liability corporation (“United Package”).

United Package will focus on the domestic production

United Package focuses on the domestic production

of packaging materials to serve the rapidly growing demands of U.S.

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A Voting Units (as defined in the Operating Agreement) of United Package in consideration for the Company’s contribution of equipment

and facility, Yang owns 1,140 Class A Voting Units of the Joint Venture in consideration for Yang’s commitment to manage the business

and facility, Yang owns 1,140 Class A Voting Units of United Package in consideration for Yang’s commitment to manage the business

of United Package and CCF owns 1,710 Class A Voting Units of United Package in consideration for CCF’s contribution of its marketing

expertise, existing sales channel and customer list.

As a result, the Company owns approximately 44 %

As a result of the above, the Company owns

approximately 44 %

of the equity interest in United Package with significant influence but does not own a majority equity interest or otherwise control

of United Package.

The Company accounts for its ownership interest in United Package following the equity method of accounting, in accordance

with ASC 323, Investments —Equity Method and Joint Ventures.

Under this method, the carrying cost is initially recorded at cost

and then increased or decreased by recording its percentage of gain or loss in its statement of operations and a corresponding charge

or credit to the carrying value of the asset.

As of June 30, 2025, the Company had invested total amount of $ 371,917

to United Package.

The Company accounts for its ownership interest in United Package following the equity method of accounting, in

accordance with ASC 323, Investments —Equity Method and Joint Ventures.

Under this method, the carrying cost is initially

recorded at cost and then increased or decreased by recording its percentage of gain or loss in its statement of operations and a

corresponding charge or credit to the carrying value of the asset.

During the years ended June 30, 2026 and 2025, the Company

invested $ 293,526

and $ 371,916 ,

respectively.

On October 15, 2025, pursuant to the Restructuring Agreement, the Company transferred its ownership in United Package

to GPM and recorded a loss on investment of $ 665,443 .

On February 1, 2026, the Company sold its equity interest in GPM and its underlying entities, including United Package, to

See details on Note 5 below.

Note 4 – Variable Interest Entity

Effective February 15, 2022, upon acquisition

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

As of June 30, 2025 and 2024, there was no pledge

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

The carrying amounts of the assets, liabilities

and the results of operations of the VIE included in the Company’s consolidated balance sheets and statements of operations and

comprehensive income after the elimination of intercompany balances and transactions with the VIE are as follows:

The carrying amount of the VIE’s assets

and liabilities were as follows for the years indicated:

Effective February 15, 2022, upon acquisition of Anivia,

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

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.

On August 4, 2025, the Company entered into a VIE

Contract Termination Agreement with the VIE, pursuant to which all VIE agreements were terminated.

As a result, the Company no longer

has a controlling financial interest in the VIE.

In accordance with ASC 810-10-40, Consolidation — Deconsolidation of a Subsidiary

or Derecognition of a Group of Assets , the Company deconsolidated the VIE as of the termination date.

Upon deconsolidation, the Company derecognized all

assets and liabilities of the VIE from its consolidated balance sheet.

Because the Company retains no ownership interest or continuing

involvement in the VIE following the termination of the agreements, no retained interest was recognized.

Comparative information for the prior period has not

been adjusted, as the deconsolidation does not represent a discontinued operation under ASC 205-20.

As of June 30, 2025, there was no pledge or collateralization

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

The following table summarizes the carrying amounts

of the VIE’s assets and liabilities derecognized as of August 4, 2025 and the carrying amount of the VIE’s assets and liabilities

as of June 30, 2025:

Schedule of VIE’s assets and liabilities

June 30, 2025

Deconsolidation

June 30, 2025

1 unchanged sentence

Office equipment, net

Right of use – noncurrent

Accounts payable

Lease liability

Income tax payable

Other payables and accrued liabilities

The operating results of the VIE were as follows

for the year ended June 30, 2025:

The Company recorded a $ 41,519 loss on deconsolidation of VIE for the

year ended June 30, 2026.

The operating results of the VIE were as follows for

the year ended June 30, 2026 and 2025:

Schedule of operating results of the VIE

June 30, 2025

Net loss after elimination of intercompany transactions

The operating results of the VIE were as follows for the year ended

June 30, 2024:

June 30, 2024

Net loss after elimination of intercompany transactions

For the year ended June 30, 2025, the VIE contributed

approximately $ 2.8

million of revenue and $ 0.9

million of net loss before elimination.

For the year ended June 30, 2024, the VIE contributed approximately $ 7.1

million of revenue and $ 0.5

million of net loss before elimination.

Note 5 – Accounts receivable, net

Accounts receivable for the Company consisted

of the following as of the dates indicated below:

Net income (loss) after elimination of intercompany transactions

Note 5 – Discontinued Operation

On February 1, 2026, the Company entered into a software asset transfer

agreement (the “Software Asset Transfer Agreement”) with its then-wholly owned subsidiary, Global Product Marketing, Inc.,

a Nevada corporation (“GPM”), pursuant to which GPM assigned, transferred and conveyed to the Company all of GPM’s right,

title and interest in its Software Assets (as defined in the agreement), and the Company assumed all outstanding vendor payables related

to the Software Assets.

In addition, the Software Asset Transfer Agreement granted GPM a non-exclusive worldwide, perpetual, irrevocable

and royalty free license to use, reproduce and modify the licensed software, thus allowing the Company and GPM to collaborate in the software

development on a going forward basis.

Further, in the event GPM resells the Original Software code (as defined in the agreement), GPM

shall pay the Company 50% of the proceeds received in relation to such sale.

Thereafter, on February 1, 2026, the Company

entered into a stock purchase agreement (the “SPA”) with a third party, ETTS AI Investment LLC, a Nevada limited

liability company (“ETTS AI”), pursuant to which the Company sold its equity interest in GPM and its underlying entities

to ETTS AI in exchange for a $ 2.3

million promissory note (the “Promissory Note”).

The Promissory Note is repayable in full in seven years, may be prepaid

at any time, and repayment may be credited from time to time by purchase orders (as described below) made under a supply and

distribution agreement, dated February 1, 2026 (the “Supply and Distribution Agreement”), between the Company, GPM and

Under the Supply and Distribution Agreement, the

Company and GPM agreed that the Company will act as exclusive supplier in the United States, Canada and Mexico for all existing SKUs that

have historically been distributed from the Company to GPM, thus allowing the Company to continue in its role of supplier to GPM while

divesting of the cost center associated with GPM’s sales function.

As supplier, the Company will charge GPM, as distributor, a price

mutually agreed on for each product and has the right to add up to 15% margin on top of the net cost.

In addition, GPM will charge the

Company a cooperative marketing fee, which will be defined in a subsequent agreement between the parties.

Under the Supply and Distribution

Agreement, payment on all purchase orders are due within seven days of GPM’s receipt of payment from its customers and amounts identified

as “Margin” (i.e., the Company’s cost x margin on the SKUs purchased by GPM) may be applied on a dollar-for-dollar as

a credit/offset against the outstanding amounts owed under the Promissory Note.

The Supply and Distribution Agreement has a term of five

years and automatically renews thereafter for subsequent two-year terms, unless 90 days’ notice is provided prior to the expiration

of such term.

In addition, the Supply and Distribution Agreement contains standard limitation on liability, indemnification and other

provisions standard for an agreement of this nature.

The sale of GPM represents a strategic shift that

will have a major effect on the Company’s operations and financial results.

Due to this shift, for all periods presented, the consolidated

financial statements reflect GPM’s financial results as discontinued operations in the consolidated statements of operations.

The following table summarizes the carrying amounts

of GPM’s assets and liabilities and loss on disposal as of February 1, 2026:

Schedule of VIE’s assets and liabilities

Total liabilities

Net assets disposed

Total consideration

Gain on disposal

The following table presents components of discontinued

operations, net of tax for the years ended June 30, 2026 and 2025:

Schedule of discontinued operations

Income from discontinued operations

Gain on disposition of subsidiaries

Income tax expenses

Total discontinued operations, net of tax

The following table presents items from discontinued

operations for the years ended June 30, 2026 and 2025 included within the consolidated statements of cash flows, including adjustments

to reconcile net earnings to cash provided by (used in) operating activities:

Schedule of income from discontinued operations

Income from discontinued operations

Gain on disposition of subsidiaries

Cash flows related to discontinued operations included $83,545 of cash

used in investing activities for the year ended June 30, 2026.

In addition, as part of the consideration received in connection with the

disposition of the subsidiaries, the Company received a $2.3 million promissory note, which represents a non-cash investing activity.

There were no financing activities related to discontinued operations for the years ended June 30, 2026 and 2025.

Note 6 – Accounts Receivable

Accounts receivable for the Company consisted of the

following as of the dates indicated below:

Schedule of accounts receivable

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( 2,735,696 )

( 1,924,417 )

Total accounts receivable

The changes in allowance for credit losses on

accounts receivable are summarized below:

The changes in allowance for credit losses on accounts

receivable are summarized below:

Schedule of changes in allowance for credit losses on accounts receivable

4 unchanged sentences

Balance at June 30, 2026

Allowance recorded during the year ended June 30, 2025

Balance at June 30, 2025

Note 6 – Inventories, net

As of June 30, 2025 and 2024, inventories consisted

of finished goods ready for sale, net of allowance for obsolescence, amounted to $ 8,131,203 and $ 10,546,273 , respectively.

For the years ended June 30, 2025 and 2024, the

Company recorded inventory reserve expense of $ ( 335,358 ) and $ 88,926 , respectively.

As of June 30, 2025 and 2024, allowance for obsolescence

was $ 312,468 and $ 647,825 , respectively.

Note 7 – Prepayments and other current assets, net

As of June 30, 2025 and 2024, prepayments and other current assets

consisted of the following:

Note 7 – Inventories

As of June 30, 2026 and 2025, inventories consisting

of finished goods ready for sale were as follows:

Schedule of inventory

June 30, 2026

June 30, 2025

Finished goods

Allowance for obsolescence

On June 30, 2026, the Company entered into an

agreement with GPM to transfer $2,007,367 of inventories in exchange for assumption of the same amount of accounts payable.

For the year ended June 30, 2026 and 2025, the

Company recorded inventory reserve expense of $ ( 28,210 )

and $ ( 335,358 ),

respectively.

As of June 30, 2026 and 2025, allowance for obsolescence was $ 284,258

and $ 312,468 ,

respectively.

Note 8 – Prepayments and Other Current Assets

As of June 30, 2026 and 2025, prepayments and other current assets consisted

of the following:

Schedule of prepayments and other current assets

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Prepaid income taxes

Receivables – fulfillment fees

Prepaid expenses and other receivables

Allowance for credit losses

Other receivables consisted of delivery fees of

$ 18,699 and $ 3,995 and receivables from unrelated parties for their use of the Company’s courier accounts at June 30, 2025 and 2024,

respectively.

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 reversed during the year ended June 30, 2024

Balance at June 30, 2024

Allowance recorded during the year ended June 30, 2025

Balance at June 30, 2025

During the year ended June 30, 2024, the

Company collected $ 249,128

of aged other receivables and recorded a reduction of bad debts expense as a reversal of the allowance of credit losses.

Note 8 – Intangible assets, net

As of June 30, 2025 and 2024, intangible assets,

net, consisted of the following:

Note 9 - Digital Assets

On December 27, 2025, the Company purchased (1) 15.12

Bitcoin (BTC) at an average price of $87,686.33 per BTC, for a total amount of approximately $ 1,325,400 and (2) 301.09 Ethereum (ETH)

at an average price of $2,934.67 per ETH, for a total amount of approximately $ 883,600 .

Pursuant to a Security and Pledge Agreement (the

“Security Agreement”) by and among the Company, each of the direct and indirect Subsidiaries (as defined in the Security Agreement)

of the Company (the “Guarantors”), and an entity that is an affiliate of the Convertible Note Investor, the Company granted

to the Investor, for the ratable benefit of the Investor, a valid, perfected and enforceable first priority security interest in the cryptocurrency

assets of the Company and the Guarantors, including without limitation all Crypto Collateral (as defined in the Security Agreement) and

related assets.

The Security Agreement and restrictions on related collateral assets expire upon full repayment or conversion

of related convertible notes and maturity of the SPA described in Note 13 below.

The following table provides a roll-forward of digital

assets measured at fair value on a recurring basis for the year ended June 30, 2026:

Schedule of digital assets measured at fair value on a recurring basis

Balance as of June 30, 2025

Purchase of BTC

Purchase of ETH

Purchase of sUSDai

Sales of sUSDai

Change in fair value of BTC

Change in fair value of ETH

Change in fair value of sUSDai

Balance as of June 30, 2026

During the years ended June 30, 2026 and 2025, the

Company recognized a net unrealized loss of $ 853,856 and $ 0 , respectively, on its digital asset holdings.

Digital assets consisted of the following at June

Schedule of digital assets

June 30, 2026

Digital assets held:

Note 10 – Intangible Assets

As of June 30, 2026 and 2025, intangible assets, net,

consisted of the following:

Schedule of intangible assets, net

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The intangible assets were acquired on February 15,

15, 2022 through acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at June 30, 2025 was approximately

The amortization expense for the years ended June 30, 2025 and 2024 was $ 649,371 and $ 649,371 , respectively.

At June 30, 2025,

finite-lived intangible assets are expected to be amortized over their estimated useful lives, which ranges from a period of 5 to

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

2022 through the Company’s acquisition of Anivia.

The weighted average remaining life for finite-lived intangible assets at June

30, 2026 was approximately 4.2 years.

The amortization expense for years ended June 30, 2026 and 2025 was $ 649,371 and $ 649,371 , respectively.

At June 30, 2026, finite-lived intangible assets are expected to be amortized over their estimated useful lives, which ranges from a period

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

Schedule of amortization expense

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Intangible assets, net

During the year ended June 30, 2025, the Company entered into software

development agreements with a third-party developer.

In connection with these agreements, the Company made payments of $ 1.5 million for

development fees.

As of June 30, 2025, such payments were recorded as a non-current prepayment and are included in Other non-current assets

in the accompanying consolidated balance sheet.

The related amounts will be reclassified from prepaid assets to intangible assets upon

completion and acceptance of the developed software.

During the years ended June 30, 2026 and

2025, the Company made cash prepayments of $ 1,118,280

and $ 1,519,928 ,

respectively, for software development.

The June 30, 2025 balance included $ 460,807 that was classified as held

for sale on the consolidated balance sheet.

As of June 30, 2026, software under

development amounted to $ 2,638,208 , including $ 460,807 acquired from GPM (See Note 5 above for additional information).

As of June 30, 2025, software under development amounted to $ 1,519,928 ,

of which $ 460,807 was classified as held for sale.

Note 11 – Promissory Note Receivable

On February 1, 2026, the Company entered into

a stock purchase agreement (the “SPA”) with ETTS AI Investment LLC, a Nevada limited liability company (“ETTS AI”),

pursuant to which the Company sold its equity interest in GPM and its underlying entities to ETTS AI in exchange for a $ 2.3 million promissory

note (the “Promissory Note”).

The Promissory Note is non-interest bearing and payable in full in seven years, may be prepaid

at any time, and repayment may be credited from time to time by purchase orders made under a supply and distribution agreement, dated

February 1, 2026 (the “Supply and Distribution Agreement”), between the Company, GPM and ETTS AI.

Because the Promissory Note does not bear stated

interest and was initially expected to be repaid through credits arising from purchase orders under the Supply and Distribution Agreement,

the Company initially recorded the Promissory Note at its face amount.

On June 30, 2026, the Company amended the Supply and Distribution

Agreement with GPM and, as a result of the amended arrangement, determined that the Promissory Note was expected to be settled in cash

within its original contractual term.

Accordingly, the Promissory Note was discounted using an annual interest rate of 4.01 % over its

remaining contractual term of approximately 6.58 years, resulting in a carrying amount of approximately $ 1.69 million and a discount of

approximately $ 0.5 million.

The discount will be accreted to interest income over the remaining term of the Promissory Note using the

effective interest method.

Because the discount was recognized as of June 30, 2026, no related interest income was recognized during the

year ended June 30, 2026.

The Promissory Note is carried at amortized cost and is subject to

the current expected credit loss model under ASC 326, Financial Instruments—Credit Losses.

The Company evaluates the collectibility

of the Promissory Note at each reporting date based on relevant available information, including the debtor’s financial condition,

payment history, expected future cash flows, the remaining contractual term of the Promissory Note, and current and reasonably supportable

forecasts of economic conditions.

As of June 30, 2026, management evaluated the expected credit losses associated with the Promissory

Note and concluded that no allowance for credit losses was required based on its assessment of the debtor’s ability and intent to

repay the Promissory Note in accordance with its contractual terms.

During the year ended June 30, 2026, pursuant

to the Supply and Distribution Agreement, the Company received a principal repayment of $ 110,847 under the Promissory Note.

As of June 30, 2026, the Promissory Note had a

face amount of $ 2,189,153 , an unamortized discount of $ 499,016 , and a net carrying amount of $ 1,690,137 .

Note 12 – Other Payables and Accrued Liabilities

As of June 30, 2025 and 2024, other payables and accrued liabilities

consisted of the following:

As of June 30, 2026 and 2025, other payables and accrued liabilities consisted

of the following:

Schedule of other payables and accrued liabilities

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Credit cards payable

Customer deposit

Customer deposits

Accrued Amazon fees

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Accrued payroll and related expenses

Settlement payable

Other payables

Other accrued liabilities and payables

Note 13 – Loans Payable

Long-term Convertible Notes

On December 22, 2025, the Company entered into a

securities purchase agreement (the “SPA”) with an accredited investor (the “Investor”) providing for a convertible

note facility in the aggregate original principal amount of up to $ 30,000,000

(the “Convertible Note Facility”).

At the initial closing on December 23, 2025, the Investor purchased (i) a Series A Senior

Secured Convertible Promissory Note in the original principal amount of $ 5,184,024

(the “Series A Note”), issued in a private placement under Rule 506(b) of Regulation D, and (ii) a Series B Senior Secured

Convertible Promissory Note in the original principal amount of $ 1,815,976

(the “Series B Note,” together with the Series A Note, the “Convertible Notes”), issued in a registered direct

offering pursuant to the Company’s effective shelf registration statement on Form S-3.

The total original principal amount of the

Convertible Notes issued at the initial closing was $ 7,000,000 .

The Notes were issued at a 6% original issue discount

(“OID”), resulting in gross cash proceeds to the Company of $ 6,580,000 .

After deducting placement agent fees of $ 394,800 and

legal and other transaction expenses of $ 150,000 , the Company received net proceeds of $ 6,035,200 .

The Convertible Notes bear interest at a rate of 10 %

per annum (increasing to 17% per annum upon the occurrence and during the continuance of an Event of Default), with interest payable monthly

on the first Trading Day of each calendar month commencing January 1, 2026, in shares valued at the Alternate Conversion Price or, at

the Company’s election, in cash.

The Convertible Notes mature on December 23, 2027 .

The Convertible Notes are convertible into shares

of Common Stock at a fixed Conversion Price of $1274.40 per share, subject to adjustment.

The holder may elect to convert at an Alternate

Conversion Price equal to the lower of (i) the Conversion Price or (ii) the greater of the Floor Price or 95% of the lowest daily VWAP

during the seven consecutive Trading Days preceding conversion.

During an Event of Default, the Alternate Conversion Price becomes the

lower of (i) the Conversion Price or (ii) the greater of the Floor Price or 90% of the lowest daily VWAP during the ten consecutive Trading

Days preceding conversion.

The Floor Price is $163.44 per share, subject to downward adjustment every six months to the lower of the then-current

Floor Price or 20% of the trading price.

On March 23, 2026, the Conversion Price automatically resets to $1,019.52 if then above such

The holder is subject to a 4.99% Beneficial Ownership Cap on outstanding Common Stock, which may be increased to 9.99% upon 61

days’ notice.

The Convertible Notes contain the following redemption

(i) upon an Event of Default, the holder may require redemption at 115% of the outstanding Conversion Amount;

(ii) upon a Change

of Control, the holder may require redemption at 110% of the Conversion Amount;

(iii) upon a subsequent equity financing, the holder may

require redemption of up to 20% of net proceeds at 110%;

(iv) upon certain asset sales (only if Crypto Collateral Value falls below 150%

of outstanding principal), the holder may require redemption of up to 20% of net proceeds at 110%;

and (v) the Company may optionally

redeem at 110% of the Conversion Amount (or 115% during an Event of Default period).

The Convertible Notes also contain a modified full-ratchet

anti-dilution provision whereby if the Company issues shares below the then-effective Conversion Price (other than Excluded Securities),

the Conversion Price is automatically reduced to 115% of the new issuance price.

The Convertible Notes are senior secured obligations

of the Company, collateralized by all cryptocurrency digital assets of the Company and certain of its subsidiaries pursuant to a Security

and Pledge Agreement.

The Convertible Notes are guaranteed by all subsidiaries of the Company.

In connection with the issuance of the Convertible

Notes, the Company entered into (i) a Security and Pledge Agreement, dated December 22, 2025, granting the Investor a first priority security

interest in the cryptocurrency digital assets of the Company and its subsidiaries;

(ii) a Guaranty, dated December 23, 2025, pursuant

to which all subsidiaries of the Company jointly and severally guarantee the Company’s obligations under the Convertible Notes;

and (iii) a Registration Rights Agreement, dated December 23, 2025, requiring the Company to file a registration statement within 30 days

of issuance to register the resale of Series A Conversion Shares and cause such registration statement to be declared effective within

60 days, with liquidated damages of 1.5% of the holder’s original principal amount payable upon failure to meet these deadlines.

Pursuant to the SPA, on February 9, 2026, the Company

delivered an Additional Mandatory Closing Notice (as defined in the Purchase Agreement) to the Investor and, on February 10, 2026, consummated

the Additional Mandatory Closing in accordance with the Purchase Agreement, receiving $ 1,880,000 in exchange for issuing a $ 2,000,000

aggregate principal amount of the Additional Mandatory Series A Note to the Investor after satisfaction of all applicable closing conditions,

including the effectiveness of the resale registration statement and the absence of any event of default.

On May 19, 2026, the Company consummated an Additional

Optional Closing in accordance with the Purchase Agreement, receiving $ 2,820,000 in exchange for issuing a $ 3,000,000 aggregate principal

amount of the Additional Optional Series A Note to the Investor after satisfaction of all applicable closing conditions, including the

effectiveness of the resale registration statement and the absence of any event of default.

Accounting and Fair Value Measurement for

Embedded Derivative Liability

The Company evaluated the embedded features within

the convertible note in accordance with ASC Topic 480 and ASC Topic 815.

The Company determined that the following embedded features constitute

a compound derivative liability requiring bifurcation from the debt host:

(i) the Conversion Option, which includes multiple pricing mechanisms

(fixed conversion prices, Alternate Conversion Price based on 95% of lowest 7-day VWAP, Event of Default Conversion Price based on 90%

of lowest 10-day VWAP, the Floor Price, the price resets, and anti-dilution adjustments);

(ii) Interest Payment in Shares at the Alternate

Conversion Price;

and (iii) cash-settled put options arising from various redemption features (Event of Default at 115% premium, Change

of Control at 110% premium, Subsequent Placement at 110% premium, and Asset Sale at 110% premium).

These features are not clearly and closely related

to the debt host, meet the definition of a derivative, and do not qualify for the derivative accounting exemptions.

Accordingly, the embedded

features were bifurcated as a single compound derivative liability measured at fair value, with subsequent changes in fair value recognized

in the consolidated statements of operations.

The initial fair value of the compound embedded

derivative liability was determined using a Monte Carlo Simulation valuation model, considering various potential outcomes and

The model used the following assumptions:

(i) dividend yield of 0%;

(ii) expected volatility of 128% to 141%;

risk-free interest rate of approximately 3.5% to 4.1%;

(iv) term of 2.0 years;

(v) fair value of the common shares of $4.4 to $10.46

(on pre-split basis) per share;

and (vi) various probability assumptions.

At June 30, 2026, the Company remeasured the

derivative liability using updated assumptions:

(i) dividend yield of 0%;

(ii) expected volatility of 116% to 124%;

(iii) risk-free

interest rate of approximately 4.1%;

(iv) remaining term of 1.5 to 1.9 years;

(v) fair value of the common shares of $2.14 per share

(on pre-split basis);

and (vi) various probability assumptions.

Subsequent changes in fair value are recognized

in the statement of operations for each reporting period.

The issuance costs for the Convertible Notes, along with the fair value of the

bifurcated embedded derivative liability, were collectively treated as a debt discount.

Upon initial recognition, the total debt discount

was $ 4,317,367 , consisting of the fair value of the bifurcated derivative liability of $ 2,574,200 , the original issue discount of $ 720,000 ,

and debt issuance costs of $ 1,023,167 .

The debt discount is being amortized to interest expense over the two-year term using the effective

interest method at an effective rate of approximately 6% to 23%.

During the year ended June 30, 2026, the holder

converted Convertible Notes with an aggregate fair value of $ 9,150,119 , including $ 8,013,397 of principal plus underlying interest, into

148,234 shares of Common Stock (on a post-reverse split basis).

The conversions were effected at the Alternate Conversion Price on the

respective conversion dates.

The Company accounted for each conversion as a partial extinguishment of the debt host and related embedded

derivative liability, resulting in a loss on extinguishment of $ 2,324,402 , representing the excess of the fair value of shares issued

over the carrying amounts derecognized.

As of June 30, 2026, the remaining outstanding

principal balance of the Convertible Notes was $ 3,986,603 and an unamortized debt discount of $ 1,243,766 , resulting in a net carrying

amount of $ 2,742,837 .

Interest expense, including amortization of debt discount, recognized on the Convertible Notes during the year ended

June 30, 2026, was $ 690,444 .

Long-term loan

Asset-based revolving loan

On November 12, 2021, the Company entered to a

Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, for an asset-based revolving

loan (“ABL”) of up to $25 million with key terms listed as follows:

On November 12, 2021, the Company entered into a Credit

Agreement with JPMorgan Chase Bank, N.A.

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

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Maturity Date of November 12, 2024

In addition, the ABL includes an accordion feature

In addition, the ABL included an accordion feature

that allows the Company to borrow up to an additional $25.0 million.

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collateral to the ABL.

Upon closing of the ABL, the Company paid $ 796,035 financing fees including 2% of $25.0 million or $500,000 paid

to its financial advisor.

The financing fees are recorded as debt discount and to be amortized over three years as interest expenses,

the term of the ABL.

Upon closing of the ABL, the Company paid $796,035 in financing fees including 2% of $25.0 million or $500,000

paid to its financial advisor.

The financing fees are recorded as debt discount and are to be amortized over the three-year term of the

ABL as interest expense.

Below is a summary of the interest expense recorded

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Amortization of debt discount

As of June 30, 2025, the outstanding amount of

the ABL, which was classified as current revolving loan payable, including interest payable, was $ 3,737,602 .

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 February 16, 2022, in connection with the acquisition

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65% of its ownership interest in Anivia Limited and its subsidiaries.

On October 7, 2022, the Company entered into a

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

12, 2021, as amended, with JPMorgan Chase Bank, N.A., as administrative agent and lender (“JPMorgan”).

The Company entered

into the Second Amendment to the Credit Agreement primarily for the purpose of changing the interest rate repayment calculations from

LIBOR to the Secured Overnight Financing Rate, or SOFR, which adjustment had originally been anticipated under the terms of the original

Credit Agreement.

In addition, two of the negative covenants set forth in the original credit agreement were amended in order to (i) adjust

the definition of “Covenant Testing Trigger Period” to increase the required cash availability from $3,000,000 to $4,000,000,

or 10% of the aggregate revolving commitment for the preceding 30 days, and (ii) require that the Company will not and will not permit

any of its subsidiaries, after reasonable due diligence and due inquiry, to knowingly sell their products, inventory or services directly

to any commercial businesses that grow or cultivate cannabis;

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

due diligence on its individual retail customers.

On November 11, 2022, the Company and JPMorgan

entered into a default waiver and consent agreement (the “Waiver Letter”) pursuant to which the parties recognized that the

Company was in default on its failure to satisfy the minimum Excess Availability requirement of $7,500,000, as defined in the Credit

Agreement, and deliver a certificate to JPMorgan accurately reflecting the Excess Availability (together, the “Existing Defaults”).

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

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

However, as of June 30, 2025, the Company was in

default as a result of covenant violations under the ABL facility.

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”

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 grows or cultivates cannabis;

it being acknowledged,

however, that the Company does not generally conduct due diligence on its individual retail customers.

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”).

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

Promissory note payable

On February 15, 2022, as part of the consideration

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

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

The principal amount of the Purchase Note was $ 3.5 million with a fair value

of $ 3.6 million as of February 15, 2022.

In October 2022, the Company paid the first installment of $ 875,000 .

And in February 2023, the

Company paid the second installment of $ 875,000 .

In August 2023, the Company paid the third installment of $ 875,000 .

In February 2024,

the Company paid the fourth installment of $ 875,000 .

For the year ended June 30, 2024, the Company recorded accrued interest of $ 39,429

and amortization of note premium of $ 31,602 .

In February 2024, the note premium was fully amortized, and the outstanding balance of the

principal and accrued interest of $ 275,679 was fully paid off.

As of June 30, 2025 and 2024, the total outstanding balance of the Purchase

Note was $ 0 .

Short-term loans payable

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

with White Cherry Limited (“White Cherry”), a BVI company owned by the former owner of DHS, for an on-demand, unsecured and

subordinated loan (“On-demand Loan”).

Pursuant to the agreement, White Cherry agreed to loan the Company the amount requested.

The On-demand Loan bears interest at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1% per annum.

The On-demand Loan

is due in 30 days upon receipt of White Cherry’s notice of repayment.

On July 16, 2023, the Company borrowed $ 2,000,000 from White

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

For the year ended June 30, 2025 and 2024, the Company

recorded interest of $ 0 and $ 32,911 , respectively.

As of June 30, 2025, the outstanding balance of the On-demand Loan was fully paid off.

On April 8, 2024, the Company entered into an

agreement with an unrelated accredited investor (the “Investor”) for an on-demand, unsecured and subordinated loan (“On-demand

On December 7, 2025, the Company repaid in full the

outstanding amount resulting in the termination of the ABL.

As of June 30, 2026 and 2025, the outstanding amount

of the ABL, which was classified as current revolving loan payable, including interest payable, was $ 0 and $ 3,737,602 , respectively.

Short-term loan payable

On April 8, 2024, the Company

entered into an agreement with an unrelated accredited investor (the “Investor”) for an on-demand, unsecured and subordinated

loan (“On-demand Loan 2”).

Pursuant to the agreement, the Investor agreed to loan the Company the amount requested.

The On-demand Loan 2 bears interest

at the rate of the Secured Overnight Financing Rate, or SOFR, plus 1.5% per annum.

The On-demand Loan 2 is due in 30 days upon receipt

of the Investor’s notice of repayment.

For the year ended June 30, 2024, the Company borrowed $ 483,599 and recorded interest expense

As of June 30, 2024, the outstanding balance of the On-demand Loan 2, including accrued interest of $ 7,615 , was $ 491,214 .

of June 30, 2025, 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 June 30, 2025 and 2024, the outstanding balance of the

RP Loan was $ 0 and $ 350,000 .

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 years ended June 30, 2026 and 2025, the Company recorded interest

expense of $ 0 and $ 3,733 , respectively.

As of June 30, 2026 and 2025, the On-demand Loan 2 had been fully paid off.

On July 9, 2025, the Company borrowed $500,000 as

a short-term loan (“RP Loan 2”) from an entity owned by Mr.

Allan Huang, one of the shareholders of the Company.

The RP Loan 2 bears no interest and is due upon receipt of request of repayment.

As of June 30, 2026, The RP Loan 2 had been fully paid

On November 24, 2025, the Company issued three

promissory notes totaling $ 2 .0 million (the “Promissory Notes”) in exchange for gross proceeds of $ 2 .0 million.

The Promissory

Notes were entered into with certain investors and related parties, including an entity controlled by the Company’s CEO, Chenlong

The Promissory Notes bear 6.5% interest per annum and are repayable upon the earlier of 90 days or the Company’s entry into

new financing arrangements.

The funds received in connection with the Company’s issuance of the Promissory Notes was used to pay

off the Company’s existing ABL with JPMorgan Chase Bank, N.A.

(“JPMorgan”).

For year ended June 30, 2026, the Company

recorded interest expense of $ 29,250 , respectively.

As of June 30, 2026, the Promissory Notes had been fully paid off.

On November 28, 2025, the Company borrowed $ 50,000 from an entity controlled

by the Company’s CEO, Chenlong Tan, for short-term liquidity needs.

The borrowing was non-interest-bearing and repayable on demand.

As of June 30, 2026, the borrowing had been fully repaid.

Note 14 - Related Party Transactions

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.

On July 9, 2025, the Company borrowed $ 500,000

as a short-term loan from an entity owned by Mr.

Allan Huang, one of the shareholders of the Company.

See Note 13 above for details.

During the year ended June 30, 2024, the Company

started selling products through MII Strategy Inc.

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

Chenlong Tan.

As of June 30, 2025 and June 30, 2024, the total amount due from MII was $ 0 and $ 56,406 .

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

with White Cherry for an on demand loan.

On November 24, 2025, the Company issued a Promissory

Note in exchange for gross proceeds of $ 500,000 to an entity controlled by the Company’s CEO, Chenlong Tan.

See Note 13 above for

On November 28, 2025, the Company borrowed $ 50,000

from an entity controlled by the Company’s CEO, Chenlong Tan, for short-term liquidity needs.

See Note 13 above for details.

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In addition, Ms.

Yang’s entity,

(“Pacelor”), manages a warehouse and provide fulfillment services for the Company and receives a monthly

service fee, which fluctuates from month to month, of approximately $200,000.

Yang’s entity, Pacelor

(“Pacelor”), manages a warehouse and provides fulfillment services for the Company and receives a monthly service fee,

which fluctuates from month to month.

Yang is the Founder and Chief Executive Officer of Pacelor.

For the year ended June 30, 2025, the Company received $ 202,922

service from Pacelor after it became the related party of Pacelor on June 6, 2025 and the accounts payable to Pacelor as of June 30,

2025 was 78,831 .

Yang’s another entity, Pacelor NV Inc.

As a result, Pacelor has become

a related party of the Company since June 6, 2025.

For the years ended June 30, 2026 and 2025, the Company received $ 3,394,399 and $ 202,922 ,

respectively, in services from Pacelor.

As of June 30, 2026 and 2025, the accounts payable to Pacelor was $ 240,425 and $ 78,831 , respectively.

Yang’s other entity, Pacelor NV Inc.

(“Pacelor NV”) also provides marketing services for the Company.

June 30, 2025, the outstanding accounts payable to Pacelor NV was $ 315,019 .

year ended June 30, 2026, the Company recorded $ 100,470 of selling expense.

As of June 30, 2026 and 2025, the outstanding accounts payable

to Pacelor NV was $ 415,489 and $ 315,019 , respectively.

Note 15 – 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 the People’s

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

Republic of China (“PRC”).

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

operations for the year ended June 30, 2025 and 2024.

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

Therefore, DHS is subject to the Global Intangible Low-Taxed Income Tax (“GILTI”).

DHS is subject to 5% tax rate

in PRC until December 31, 2027.

Since DHS had tested losses during the year ended June 30, 2025 and 2024 and no GILTI tax was recorded

for as of June 30, 2025 and 2024, the Company is not eligible for the GILTI high-tax exclusion.

In addition, as a result of the acquisition,

the Company booked a $ 6,094,144 of goodwill.

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

The income tax provision for the years ended June

30, 2025 and 2024 consisted of the following:

Schedule of income tax provision

June 30, 2025

June 30, 2024

Total current income tax provision

( 1,023,623 )

Total deferred taxes

( 1,278,856 )

Total provision for income taxes

$ ( 1,254,489 )

$ ( 251,365 )

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

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

The Company’s subsidiary in China, Dayourenzai (Shenzhen) Technology Co.,

(“WFOE”), is subject to the Global Intangible Low-Taxed Income (or GILTI) Tax.

WFOE is subject to 5% tax rate in PRC

until December 31, 2027.

Since WFOE had losses during the years ended June 30, 2026 and 2025, no GILTI tax was recorded as of June 30,

2026 and 2025.

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

For the years ended June 30, 2026 and 2025, the Company

had income tax benefit of $ 3,079,172 and $ 1,348,313 , respectively.

The Company is subject to U.S.

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tax at the calculated statutory rates:

Schedule of reconciliation of effective income

June 30, 2025

June 30, 2024

Schedule of income tax reconciliation

For the Year Ended June 30,

Statutory tax rate

State (net of federal benefit)

Prior year adjustment and permanent differences

Permanent differences

Effective tax rate

As of June 30, 2025, prepaid income taxes to US

tax authorities and income tax payable to Chinese tax authorities was $ 19,073 and $ 280,155 , respectively.

As of June 30, 2024, prepaid

income taxes to US tax authorities and income tax payable to Chinese tax authorities was $ 31,496 and $ 276,158 , respectively.

The tax effects of temporary differences which

give rise to significant portions of the deferred taxes are summarized as follows:

As of June 30, 2026, prepaid income taxes to US tax

authorities was $ 99,954 .

As of June 30, 2025, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities

was $ 19,073 and $ 280,155 , respectively.

The tax effects of temporary differences which give

rise to significant portions of the deferred taxes are summarized as follows:

Schedule of deferred taxes

June 30, 2026

June 30, 2025

Deferred tax assets

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ROU assets / liabilities

Net Operation loss

Net operating loss

Disallowed interest expense

Stock-based compensation

Valuation allowance

Unrealized gain/loss

Allowance for credit loss

Discount on note receivable

Total deferred tax assets

2 unchanged sentences

Total deferred tax liabilities

( 1,054,484 )

Net deferred tax assets

The Company assesses the realizability of deferred tax assets based on

all available positive and negative evidence, including historical results of operations, projected future taxable income, reversal of

existing temporary differences, and available tax planning strategies.

Based on its assessment, the Company determined that it is more

likely than not that the deferred tax assets will be realized and, accordingly, no valuation allowance was recorded as of June 30, 2026

Note 16 – Earnings Per Share

The following table sets forth the computation of basic and diluted

earnings per share for the years presented:

The following table sets forth the computation of basic and diluted earnings

per share for the periods presented:

Schedule of computation of basic and diluted earnings per share

For the year ended

Net income (loss) attributable to iPower Inc.

Year Ended June 30,

Net loss attributable to iPower Inc.

$ ( 11,622,242 )

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

Earnings per share of ordinary shares - basic and diluted

Due to the ani-dilutive effect, the computation of basic and diluted EPS did not include the shares underlying the exercise of warrants and RSUs as the Company had a net loss for the year ended June 30, 2025 and 2024.

The computation of diluted

EPS did not include the shares underlying the exercise of options granted as none of the options were vested and the exercise price

of the options was higher than the market price as of June 30, 2025 and 2024.

For the year ended June 30, 2025, 77,454 vested but unissued shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 14) are considered issued shares and therefore are included in the computation of basic earnings (losses) per share when the shares are fully vested.

For the year ended June 30, 2024, 44,285 vested but unissued shares of restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 14) are considered issued shares and therefore are included in the computation of basic earnings (loss) per share when the shares are fully vested.

Losses per share of ordinary shares from continuing operations - basic and diluted

Losses per share of ordinary shares from discontinued operations - basic and diluted

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, options, and unvested RSUs as the Company had a net loss for the years ended June 30, 2026 and 2025.

For the year ended June 30, 2025, 36 vested but unissued shares of

restricted stock units under the 2020 Equity Incentive Plan (as discussed in Note 17) are considered issued shares and therefore

included in the computation of basic earnings (losses) per share when the shares are fully vested.

Note 17 – Equity

As of June 30, 2025, the total authorized shares

of capital stock were 200,000,000 shares consisting of 180,000,000 shares of Common Stock (“Common Stock”) and 20,000,000

shares of preferred stock (the “Preferred Stock”), each with a par value of $ 0.001 per share.

The holders of Common Stock shall be entitled

to one vote per share in voting to the election of directors and all other corporate purposes.

As of June 30, 2026, the total authorized shares of

capital stock were 1,000,000,000 shares consisting of 980,000,000 shares of Common Stock (“Common Stock”) and 20,000,000 shares

of preferred stock (the “Preferred Stock”), each with a par value of $ 0.001 per share.

The holders of Common Stock shall be entitled to one

vote per share in voting to the election of directors and all other corporate purposes.

Subject to the express terms of any outstanding

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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

1 unchanged sentence

issued and outstanding.

During the year ended June 30, 2025 and 2024,

the Company issued 0 and 107,293 shares of restricted common stock for RSUs vested, respectively.

On October 27, 2025, May 22, 2026, and August 7, 2026,

the Company effectuated the 1-for-30, 1-for-8, and 1-for-9 Reverse Stock Splits, respectively.

When the Reverse Stock Splits became effective,

the Company’s issued and outstanding Common Stock immediately prior to the Effective Time automatically reclassified into one (1)

share of Common Stock, without any change in the par value per share.

The Reverse Stock Splits did not change the total number of authorized

shares of Common Stock or preferred stock.

As a result, unless otherwise indicated, all references to common stock, restricted stock units,

warrants and options to purchase common stock, share data, per-share data, and related information have been retroactively adjusted, where

applicable in the consolidated financial statements and notes, to reflect the reverse stock splits of the Company’s common stock

as if the splits had occurred at the beginning of the earliest period presented.

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.

direct offering (the “Registered Direct”) of 965 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 965 shares of common stock (the “Warrant Shares”), which were sold for gross aggregate proceeds of $ 5,000,002 .

The Shares were sold pursuant to a prospectus supplement, filed on June 18, 2024, to the Registration Statement on Form S-3, originally

filed on September 25, 2023, with the SEC (File No.

333-274665) and declared effective by the SEC on September 29, 2023.

The Warrants, which were issued pursuant to an exemption from registration pursuant to Section 4(a)(2) or Regulation D on the

Securities Act, have a term of five years and are immediately exercisable at $ 2.40 per share.

The Shares and Warrants were sold to a purchaser

pursuant to a securities purchase agreement, dated June 16, 2024, between the Company and the purchaser (the “Purchase Agreement”).

Roth Capital Partners, LLC (the “Placement Agent”) acted as placement agent, pursuant to a placement agency agreement between

the Company and the Placement Agent dated June 16, 2024 (the “Placement Agency Agreement”).

The Company paid the Placement

Agent as compensation a cash fee equal to 6.5% of the gross proceeds of the Offering plus reimbursement of certain expenses and legal

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 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 $ 5,184.0 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”).

Capital Partners, LLC (the “Placement Agent”) acted as placement agent, pursuant to a placement agency agreement between the

Company and the Placement Agent dated June 16, 2024 (the “Placement Agency Agreement”).

The Company paid the Placement Agent

as compensation a cash fee equal to 6.5% of the gross proceeds of the Offering plus reimbursement of certain expenses and legal fees.

The net proceeds of the Offering, after deducting $ 456,913 , the Placement Agent’s fees and expenses and other direct offering costs

paid by the Company, was $ 4,543,089 .

The Company calculated the fair value of the Warrants

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Stock Price - $ 2.00

(pre-reverse-split price;

equivalent to $ 4,320.00 on a post-reverse-split basis)

Exercise Price - $ 2.40

(pre-reverse-split price;

equivalent to $ 5,184.00 on a post-reverse-split basis)

Volatility – 104 %

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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.

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

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in the gross proceeds and recorded as additional paid-in capital.

As of June 30, 2025, none of the warrants had been exercised.

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 June 30, 2026 and 2025, none of the warrants had been exercised.

On June 18, 2024, in order to recoup the settlement

payment made to Boustead Securities, LLC, the Company’s Chief Executive Officer and co-founder, Chenlong Tan, along with co-founder

Allan Huang, returned a total of 18,056 shares to the Company for cancellation (the “Share Cancellation”).

The Share Cancellation

was completed in June 2024 and the par value of $ 542 was reduced against additional paid-in capital.

On December 21, 2025, holders of a majority of the

Company’s outstanding voting power (53.1%) approved (1) the Convertible Note Facility, (2) the issuance of in excess of 20% of the

Company’s outstanding common stock at a price less than the “Minimum Price” under Nasdaq Listing Rule 5635(d), (3) an

increase in authorized shares from 200,000,000 to 1,000,000,000, (4) authorization for the Board to approve one or more reverse stock

splits in the range of 1-for-250 shares, and (5) authorization for the Board to adopt a mirror preferred stock.

During the year ended June 30, 2026, the Company issued

the following common stock of the Company:

· 554 shares for vested RSUs;

148,234 shares in connection with the conversion of $ 9,150,119 in aggregate fair value of convertible notes at a weighted-average conversion price of $ 61.73 per share;

5,231 shares for services to consultants;

5 shares were issued as round-up shares in connection with the reverse stock split that became effective on October 27, 2025 and May 22, 2026.

As of June 30, 2026 and 2025, there were 168,542

shares of Common Stock issued, respectively, and 167,196

shares of common stock issued and outstanding, respectively.

During the year ended June 30, 2026, the Company

repurchased an aggregate of 1,346 shares of its common stock for approximately $ 41,755 in open-market transactions.

As of June 30, 2026, the Company held 1,346 shares

of common stock in treasury at an aggregate cost of $ 41,755 .

The treasury shares are presented as a reduction of stockholders’

equity in the accompanying consolidated balance sheet.

Preferred Stock

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and the qualifications, limitations or restrictions thereof.

As of June 30, 2025 and 2024, respectively, there were no shares of Preferred

Stock issued and outstanding.

As of June 30, 2026 and 2025, there were no shares of Preferred Stock issued

and outstanding.

Equity Incentive Plan

On May 5, 2021, the Company’s Board of Directors

adopted, and its stockholders approved and ratified, the iPower Inc.

Amended and Restated 2020 Equity Incentive Plan (the “Plan”).

The Plan allows for the issuance of up to 10,000,000 shares of Common Stock, whether in the form of options, restricted stock, restricted

stock units, stock appreciation rights, performance units, performance shares and other stock or cash awards.

The general purpose of the

Plan is to provide an incentive to the Company’s directors, officers, employees, consultants and advisors by enabling them to share

in the future growth of the Company’s business.

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

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

2023 and November 22, 2023.

Restricted Stock Unit

Following completion of the IPO on May 11, 2021,

pursuant to their letter agreements, the Company awarded 46,546 restricted stock units (“RSUs”) under the Plan to its independent

directors, its Chief Financial Officer, and certain other employees and consultants, all of which are subject to certain vesting conditions

in the next 12 months and restrictions until filing of a Form S-8 for registration of the shares.

The fair value of the RSUs was determined

to be based on $5.00 per share, the initial listing price of the Company’s common stock on the grant date.

During the year ended

June 30, 2025 and 2024, the Company granted additional 88,094 and 62,600 shares of RSUs, respectively.

For the year ended June 30, 2025

and 2024, the Company recorded $ 93,455 and $ 71,014 of stock-based compensation expense.

There was no forfeiture of RSUs occurred during

the year ended June 30, 2025 and 2024.

As of June 30, 2025 and 2024, the unvested number of RSUs was 13,890 and 3,250 and the unamortized

expense was $ 8,333 and $ 1,788 , respectively.

Information relating to RSU grants is summarized

On May 5, 2021, the Company’s Board of

Directors adopted, and its stockholders approved and ratified, the iPower Inc.

Amended and Restated 2020 Equity Incentive Plan (the

The Plan allows for the issuance of up to 50,000,000

shares of Common Stock (627,315 shares on a post reverse split basis, taking into account the May 22, 2026 and August 7, 2026

reverse stock splits), whether in the form of stock options, restricted stock, restricted stock units, stock appreciation rights,

performance units, performance shares and other stock or cash awards.

The general purpose of the Plan is to provide an incentive to

the Company’s directors, officers, employees, consultants and advisors by enabling them to share in the future growth of the

Company’s business.

On November 16, 2021 and December 6, 2022, the Company filed a registration statement on Form S-8

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

22, 2023, and April 17, 2026.

Restricted Stock Units

On November 12, 2025, the Company granted $ 800,000

in RSUs as bonus to Chenlong Tan, the CEO of the Company.

As a result, 1,127 RSUs, calculated based on the closing price, $ 709.85 , on

the grant date, were issued to Mr.

The RSUs vested immediately but contained a deferred settlement provision.

As a result, settlement

of the vested RSUs shall occur on the earliest of the following Code Section 409A-permitted payment events:

(1) change of control of the

Company that qualifies as a “change in control event” as defined under Code Section 409A;

(2) Reporting Person’s separation

from service (subject to any required delay under the Amended and Restated 2020 Equity Incentive Plan;

(3) upon the Reporting Person’s

death or disability, or (4) in the event of an “unforeseeable financial emergency,” as defined under Code Section 409A.

During the years ended June 30, 2026 and 2025, the

Company granted an additional 2,480 and 41 shares of RSUs to the Company’s employees and directors, respectively.

For the years ended June 30, 2026 and 2025, the Company

recorded stock-based compensation expense of $ 866,667 and $ 93,455 , respectively, related to the vesting of RSUs.

As of June 30, 2026 and

2025, the unvested number of RSUs was 868 and 7 and the unamortized expense was $ 33,333 and $ 8,333 , respectively.

Information relating to RSU grants is summarized as

For year ended June 30, 2026:

Schedule of RSU activity

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RSUs granted, but not vested, at June 30, 2026

RSUs forfeited

RSUs granted, but not vested, at June 30, 2025

_____________________

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

As of June 30, 2025, of the 407,608 vested RSUs,

285,869 shares of Common Stock were issued (no shares were issued during the current year), and 121,739 shares were to be issued in the

As of June 30, 2024, of the 330,154 vested RSUs, 285,869 shares, including 107,293 shares issued during the current year,

of Common Stock were issued, and 44,285 shares were to be issued.

On May 12, 2022, the Compensation Committee of

the Board of Directors approved an incentive plan for the Company’s executive officers consisting of a cash performance bonus of

(i) a $ 60,000 to be awarded to Kevin Vassily, CFO of the Company, and (ii) grants of stock options (the “Option Grants”) in

the amount of (a) 3,000,000 shares to Chenlong Tan, CEO and (b) 330,000 shares to Mr.

The Option Grants, which were issued on

May 13, 2022, have an exercise price of $ 1.12 , a contractual term of 10 years and consist of six vesting tranches with a vesting schedule

based entirely on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment

of the recipients through each vesting date.

Each of the six vesting tranches of the Option Grants will vest when both (i) the market

capitalization milestone for such tranche, which begins at $150 million for the first tranche and increases by increments of $50 million

through the fourth tranche and $100 million thereafter (based on achieving such market capitalization for five consecutive trading days),

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

focused on operating income have been achieved during a given fiscal year.

The achievement status of the operational

milestones as of June 30, 2025 was as follows:

As of June 30, 2025, of the 189 vested RSUs, 132 shares

of Common Stock were issued, and 57 shares were issued during the year ended June 30, 2026.

On May 12, 2022, the Compensation Committee of the

Board of Directors approved an incentive plan for the Company’s executive officers consisting of a cash performance bonus of $ 60,000

to be awarded to Kevin Vassily, CFO of the Company, and grants of stock option (the “Option Grants”) exercisable to purchase

(i) 1,389 shares of Common Stock to Chenlong Tan, CEO and (ii) 153 shares of Common Stock to Mr.

The Option Grants, which were

issued on May 13, 2022, have an exercise price of $ 2,419.2 , 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 June

30, 2026 was as follows:

Revenue in Fiscal Year

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(in Millions)

The Company evaluated the performance condition

and market condition under ASC 718-10-20.

The Option Grants are considered an award containing a performance and a market condition and

both conditions (in this case at least one of the performance conditions) must be satisfied for the award to vest.

The market condition

is incorporated into the fair value of the award, and that fair value is recognized over the longer of the implied service period or requisite

service period if it is probable that one of the performance conditions will be met.

In relation to the four awards deemed probable to

vest, the recognition period ranges from five to six years.

If the performance condition is ultimately not met, compensation cost related

to the award should not be recognized (or should be reversed to the extent any expense has been recognized related to such tranche) because

the vesting conditions in the award would not have been satisfied.

On the grant date, a Monte Carlo simulation was

used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization

milestone for such tranche was expected to be achieved.

Separately, based on a subjective assessment of our future financial performance,

each quarter we determine whether it is probable that we will achieve each operational milestone that has not previously been achieved

or deemed probable of achievement and if so, the future time when we expect to achieve that operational milestone.

The Monte Carlo simulation

utilized the following inputs:

The Company evaluated the performance condition and

market condition under ASC 718-10-20.

The Option Grants are considered an award containing a performance and a market condition and both

conditions (in this case at least one of the performance conditions) must be satisfied for the award to vest.

The market condition is

incorporated into the fair value of the award, and compensation cost is recognized over the requisite service period, which is based on

the implied service period derived from valuation model and one of the performance conditions probable achievement.

If the performance

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

any expense has been recognized related to such tranche) because the vesting condition in the award would not have been satisfied.

On the grant date, a Monte Carlo simulation was used

to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization milestone

for such tranche was expected to be achieved.

Separately, based on a subjective assessment of our future financial performance, each quarter

we determine whether it is probable that the Company will achieve each operational milestone that has not previously been achieved or

deemed probable of achievement and, if so, the future time when the Company expects to achieve that operational milestone.

The Monte Carlo

simulation utilized the following inputs:

Stock Price - $ 1.12

(pre-reverse-split price;

equivalent to $ 2,419.20 on a post-reverse-split basis)

Volatility – 95.65 %

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The total fair value of the Option Grants was

$3.2 million of which, at June 30, 2025, $1.0 million is deemed probable of vesting.

During the year ended June 30, 2025, the Company

reassessed the expected timing of meeting the performance conditions.

$3.2 million.

During the year ended June 30, 2026, the Company reassessed the expected timing of meeting the performance conditions and

concluded that none of the milestones was deemed probable of vesting.

According to ASC 718-10-55-78, since the number of awards expected

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on tranches expected to be vested in future periods.

As of June 30, 2025 and 2024, none of the options had vested.

For the year ended

June 30, 2025 and 2024, the Company recorded $(468,778) and $441,528 of stock-based compensation expense related to the Option Grants.

As of June 30, 2025, unrecognized compensation cost related to tranches probable of vesting is approximately $1,032,737 and will be recognized

over five years to six 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 of 1,200,000

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”).

As of June 30, 2026, none of the options had vested.

For the years ended June 30,

2026 and 2025, the Company recorded $( 472,343 ) and $( 468,778 ), respectively, of stock-based compensation expense related to the Option

As of June 30, 2026, unrecognized compensation cost related to tranches probable of vesting was $ 0 .

On August 29, 2024, the board of directors (the “Board”)

of the Company, based on the recommendation of the compensation committee of the Board, approved a grant of 556 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 “2020 Equity Incentive Plan”).

Following the Board’s approval,

Tan and the Company entered into a stock option award agreement (the “Stock Option Award Agreement”).

According to the Stock Option Award Agreement,

and subject to the terms and conditions of the Stock Option Award Agreement and the Plan, upon vesting of the 2024 Stock Options, Mr.

Tan will have the option to purchase common stock, par value $ 0.001 per share of the Company, at an exercise price of $ 1.43 per share

(which is 110% of the Fair Market Value of the stock on the grant date).

The 2024 Stock Options have a term of 10 years and will vest

30,000 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.

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 Options, Mr.

will have the option to purchase the Company’s Common Stock at an exercise price of $ 3,088.8 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:

14 shares vested

on the grant date (August 29, 2024), and 15 shares 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

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Stock Price - $ 1.30

(pre-reverse-split price;

equivalent to $ 2,808.00 on a post-reverse-split basis)

Exercise Price - $ 1.43

(pre-reverse-split price;

equivalent to $ 3,088.80 on a post-reverse-split basis)

Volatility – 101 %

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Dividend Yield – 0 %

The total fair value of the 2024 Stock Options

was $1.22 million as of the grant date.

For the year ended June 30, 2025, 355,000 stock options were vested and the Company recorded $ 362,325

as stock compensation expense.

As of June 30, 2025, the unrecognized compensation cost of the 2024 Stock Options was approximately $0.86

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

Note 15 – Warrant liabilities

On January 27, 2021, the Company completed a private

placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in Convertible Notes and

warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion

of the Convertible Notes.

The convertible note warrants are exercisable for a period of three years from the IPO completion date at a

per share exercise price equal to the IPO.

In accordance with the terms of the warrants, in the event the Convertible Notes are repaid

in cash by the Company, the warrants issued in conjunction with the Convertible Notes will expire and have no further value.

The outstanding warrants held by the Convertible

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

Through the term of

the warrants, 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 June 30, 2025 and 2024.

The total fair value of the 2024 Stock Options was

$ 1.22 million as of the grant date.

For the years ended June 30, 2026 and 2025, 180 and 165 stock options, respectively, were vested and

the Company recorded $ 398,047 and $ 362,325 as stock compensation expense, respectively.

As of June 30, 2026, the unrecognized compensation

cost of the 2024 Stock Options was approximately $ 0.5 million and will be recognized monthly through August 1, 2027.

Note 18 - Concentration of Risk

Financial instruments that potentially subject

the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts

the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, digital assets,

and accounts receivable.

As of June 30, 2026 and 2025, $ 478,042 and $ 1,677,879 ,

$ 7,219,296 , respectively, were deposited with various financial institutions and financial services companies in the United States and

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

The Company had approximately $ 1.4 million and $ 5.8 million , respectively, in excess of the FDIC insurance limit, as of June 30, 2025

respectively, were deposited with various financial institutions and financial services companies in the United States and PRC.

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

had approximately $ 0.05 million and $ 1.4 million, respectively, in excess of the FDIC insurance limit, as of June 30, 2026 and 2025.

As of June 30, 2026, the Company had approximately

$ 3.25 million of restricted cash and $ 2.36 million of digital assets held with a single custodian, BitGo Trust Company.

These assets are

not insured by the FDIC or the Securities Investor Protection Corporation (“SIPC”) and are subject to the control of the Collateral

Agent pursuant to the Company’s financing arrangements.

Accordingly, the Company is exposed to concentration and custodial risk

associated with these assets.

Accounts receivable are typically unsecured and

2 unchanged sentences

assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

The Company maintains reserves

for estimated credit losses, and such losses have generally been within expectations.

The business of DHS, the Company’s VIE,

may be impacted by Chinese economic conditions, changes in regulations and laws, and other uncertainties.

and vendor concentration risk

For the years ended June 30, 2025 and 2024, Amazon

Vendor and Amazon Seller customers accounted for 82 % and 90 % of the Company's total revenues, respectively.

As of June 30, 2025 and 2024,

accounts receivable from Amazon Vendor and Amazon Seller accounted for 72 % and 91 % of the Company’s total accounts receivable.

For the year ended June 30, 2025, two suppliers

accounted for 14 % and 11 % of the Company's total purchases, respectively.

For the year ended June 30, 2024, one supplier accounted for

The Company maintains an allowance

for estimated credit losses based on its assessment of collectibility.

Customer and vendor concentration risk

For years ended June 30, 2026 and 2025,

Amazon Vendor and Amazon Seller customers accounted for 38 %

of the Company’s total revenues, respectively.

For the year ended June 30, 2026, GPM accounted for approximately 37 %

of the Company’s total revenues.

As of June 30, 2026 and 2025, accounts receivable from Amazon Vendor and Amazon Seller

accounted for 62 % and 72 % of the Company’s total accounts receivable.

As of June 30, 2026, accounts receivable from GPM accounted for approximately 34 % of the Company’s total

accounts receivable.

For the year ended June 30, 2026, one supplier

accounted for 60.8 % of the Company’s total purchases.

For the year ended June 30, 2025, two suppliers accounted for 14 % and 11 %

of the Company’s total purchases, respectively.

As of June 30, 2025 and 2024, accounts payable to one supplier accounted for 10 % and

36 % of the Company’s total accounts payable, respectively.

As of June 30, 2026, accounts payable to three suppliers accounted for 26.3 %, 16.5 %, and

12.5 % of the Company’s total accounts payable.

As of June 30, 2025, accounts payable to one supplier accounted for 10 % of the Company’s

total accounts payable.

Note 19 - Leases

The Company has entered into a lease agreement

for office and warehouse space with a lease period from December 1, 2018 until December 31, 2020.

On August 24, 2020, the Company negotiated

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

On December 21, 2023, the

lease expired without renewal.

On September 1, 2020, in addition to the primary

fulfillment center, the Company leased a second fulfillment center in City of Industry, California.

The base rental fee is $27,921 to

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

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

On February 15, 2022, upon completion of the acquisition

of Anivia Limited, the Company assumed an operating lease for offices located in the People’s Republic of China.

In July 2023, the

Company renewed the lease contract for its existing office plus additional office space.

The lease term is for three years expiring on

July 14, 2026.

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

In September 2024, the Company terminated

the lease of office space in Shenzhen China and incurred termination costs of approximately $ 143,000 , which was recorded as rental expense

for the year ended June 30, 2025.

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.

On February 23, 2022, the Company entered into an amended agreement to extend the lease term to

The lease commencement date is February 10, 2022, with rent payments commencing May 11, 2022 and the lease expiring on May

The base rental fee is $114,249, increasing gradually over time to $140,079 per month through the expiration date of May 31,

Under the amended agreement, the lease commenced on February 10, 2022, with rent payments commencing May 11, 2022 and the

lease expiring on May 31, 2028.

The base rental fee is $114,249, increasing gradually over time to $140,079 per month through the expiration

date of May 31, 2028.

On April 13, 2026, we entered into a sublease agreement (the “Sublease Agreement”) to sublease part

of the warehouse for a term of 25 months, commencing May 1, 2026 and ending May 31, 2028.

Pursuant to the Sublease Agreement, the sublessee

will pay Base Rent of $62,500 to $112,710, calculated based on space used, to the Company monthly.

For the year ended June 30, 2026,

the Company recognized $168,750 of sublease income in other income.

On May 1, 2022, the Company leased another fulfillment

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

As of June 30, 2025, the lease

had been terminated.

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

The operating lease right-of-use assets and operating

lease liabilities as of June 30, 2025 and 2024 were as follows:

Years Ended June 30, 2025 and 2024:

The lease had been expired

without renewal since May 1, 2025.

Schedule of lease cost and other information

For the Years Ended June 30,

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

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Average discount rate - operating leases

The supplemental balance sheet information related to leases for the

period is as follows:

The supplemental balance sheet information related to leases for the years

is as follows:

Schedule of supplemental balance sheet information related to leases

Operating leases

Right of use asset - non-current

Lease Liability – current

Lease Liability - non-current

June 30, 2026

June 30, 2025

Right of use asset

Lease Liabilities – current

Lease Liabilities - non-current

Total operating lease liabilities

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Note 20 - Commitments and Contingencies

Except as disclosed below, the Company is not

The Company is not

currently a party to any material legal proceedings, investigation or claims.

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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, among

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

Davidson & Co.

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

As part of the IPO closing, the Company agreed to indemnify D.A.

Davidson & Co.

and the other underwriters against any liability or

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

Additionally, Chenlong Tan, the Company’s Chairman,

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

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

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

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

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 the date of this report, the Settlement Amount had been paid off and the parties have formally withdrawn all of the complaints that

were before FINRA, with prejudice, and the matter is settled in full.

In conjunction with entry into the Settlement

Agreement, the Company’s CEO and co-founder, Chenlong Tan, and Allan Huang, also a co-founder of the Company, entered into a pledge

agreement (the “Pledge Agreement”) with the Company pursuant to which they each pledged 1,300,000 shares of their iPower common

stock, for a total of 2,600,000 shares (the “Pledged Shares”), in order that the Company may, from time to time, sell such

Pledged Shares into the market on behalf of Messrs.

Tan and Huang in order to recoup the Settlement Amount.

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

Tan and Huang returned a total of 541,667 shares as indemnification payment to the Company for cancellation (the “Share

Cancellation”).

The Share Cancellation was completed in June 2024.

In addition, in February 2022, the Russian Federation

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

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

While we do not do business in those regions,

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

In response to these types of events, should they directly impact our supply chain or other operations, we may experience or be exposed

to supply chain disruptions which could cause us to seek alternate sources for product supply or suffer consequences that are unexpected

and difficult to mitigate.

Any of these risks might have a materially adverse impact on our business operations and our financial position

or results of operations.

Although, it is difficult to predict the impact that these factors may have on our business in the future, we

have experienced a delay in, as well as an increase in costs in shipping, thus resulting in reduced profits.

In addition, supply chain

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

need to continue to make certain products.

In connection with the issuance of the Convertible Notes, the Company

entered into a Registration Rights Agreement with the investors.

Pursuant to the agreement, the Company is required to file and maintain

the effectiveness of a registration statement covering the resale of certain shares of common stock issuable under the financing.

agreement provides for liquidated damages upon the occurrence of certain registration-related events, generally at a rate of 1.5% of the

applicable principal amount, subject to the terms and limitations set forth in the agreement.

In addition, the Convertible Notes contain

certain redemption provisions, including redemption premiums, and the related financing documents provide for a 6% placement-agent commission

on future closings.

On April 13, 2020, the Company entered into an

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The Company evaluated subsequent events and transactions

that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued.

than the material subsequent events disclosed above in the notes to financial statements and below, no other material subsequent events

that required recognition or additional disclosure in the consolidated financial statements are presented.

On August 4, 2025, the Company, through its wholly-owned

subsidiary, Dayourenzai (Shenzhen) Technology Co, Ltd.

(“DYRZ”), a company organized under the laws of the People’s

Republic of China (“PRC”), entered into an agreement (the “VIE Contract Termination Agreement”) with the Company’s

variable interest entity, Daheshou (Shenzhen) Information Technology Co., Ltd.

(“DHS”), a company organized under the laws

of the PRC, and its registered shareholders.

DHS had previously been consolidated into the Company’s financial statements as a variable

interest entity pursuant to certain contractual arrangements (the “VIE Agreements”), which allowed DYRZ to exercise effective

control over DHS.

Following entry into the VIE Contract Termination Agreement, DYRZ no longer owns, operates or controls DHS and Company-related

services and activities previously conducted by DHS will now be performed by the Company and other contractors, as needed, as part of

an effort to streamline operations and improve structural efficiency.

Historically, DHS has been principally engaged

in effectuating part of the Company’s PRC sales, supply chain, merchandizing and distribution services.

However, in recent years

the Company has improved efficiency and gradually transitioned much of the services performed by DHS to the Company and other contractors.

As such, the termination of the VIE structure reflects a strategic move toward operational simplification and is not expected to have

a material effect on the Company’s business and/or revenue streams being generated out of the PRC.

through the date the consolidated financial statements are issued.

Other than as set forth below, there were no material subsequent events

that required recognition or additional disclosure in the consolidated financial statements presented.

On July 6, 2026, the Company and the Investor

entered into an amendment to the Purchase Agreement for purposes of (i) increasing funds available under the facility by an additional

original principal amount of $2,000,000 and (ii) removing restrictions on the use of proceeds for any additional funds obtained through

the facility.

On July 6, 2026 and September 15, 2026, pursuant

to the Securities Purchase Agreement dated December 22, 2025 (the “Purchase Agreement”) with an institutional investor (the

“Investor”), the Company and Investor consummated Additional Optional Closings.

At the Additional Optional Closings, the Company

received $4,700,000, excluding fees and expenses, in exchange for issuing a total of $5,000,000 aggregate principal amount of Series A

Notes to the Investor after satisfaction of all applicable closing conditions, including the effectiveness of the resale registration

statement and the absence of any Event of Default.

The Series A Notes issued at the Additional Optional Closings were issued pursuant

to an exemption from registration in accordance with Regulation D of the Securities Act.

On July 15, 2026, the Company formed two wholly-owned

subsidiaries:

IPW Commerce LLC, a Delaware limited liability company, and iPower AI LLC, a Delaware limited liability company (collectively,

the “New Subsidiaries”).

The New Subsidiaries were formed to separate the Company’s e-commerce and artificial intelligence

operations from the remainder of the Company’s business, and the formation of the New Subsidiaries did not result in any change

to the Company’s management or capital structure.

Pursuant to the Purchase Agreement and the Series

A Notes, certain subsidiaries of the Company are required to enter into a guaranty in favor of the Investor.

One such subsidiary, iPower

Smart LLC, entered into a guaranty in favor of the Investor dated December 23, 2025 (the “Guaranty”).

In connection with the

Company’s recent formation of iPower AI LLC, the Company has joined iPower AI LLC to the Guaranty pursuant to a Joinder to Guaranty

dated July 21, 2026.

Pursuant to authority granted by the Company’s

stockholders, on July 16, 2026, the Board approved a reverse split of between one-for-two (1:2) and one-for-10 (1:10) (the “Reverse

Stock Split”) of the Common Stock, with the final split ratio to be set at the discretion of Company management.

Thereafter, Company

management determined to set a Reverse Stock Split Ratio of one-for-nine (1:9) and on August 5, 2026, the Company filed a certificate

of amendment to amend the Sixth Amended and Restated Articles of Incorporation of the Company (the “Certificate of Amendment”)

with the Secretary of State of the State of Nevada, with an effective date of August 7, 2026 (the “Effective Date”),

to effect a 1:9 Reverse Stock Split.

The Reverse Stock Split became effective at the start of trading on August 7, 2026 (the “Effective

When the Reverse Stock Split became effective, every nine (9) shares of the Company’s issued and outstanding Common

Stock immediately prior to the Effective Time were automatically reclassified into one (1) share of Common Stock, without any change in

the par value per share.

The Reverse Stock Split reduced the number of shares of Common Stock issuable upon the exercise or vesting of

the Company’s outstanding stock options and warrants in proportion to the ratio of the Reverse Stock Split, causing a proportionate

increase in the exercise prices of such stock options and warrants.

Restricted stock units and other equity incentive plan grants were

also adjusted to reflect the reduced number of underlying shares.

The Reverse Stock Split did not change the Company’s total number

of authorized shares of Common Stock or preferred stock.

On August 14, 2026, the Company sold all sUSDai

for approximately $1,002,381 and all Ethereum for approximately $563,391.

On September 21, 2026, the Company’ shareholder

approved a Third Amended and Restated 2020 Equity Incentive Plan to (i) adjust the total number of the Company’s shares reserved

for issuance under the plan to 50,000,000 shares and (ii) adopt an evergreen provision providing for a 5% automatic annual increase in

the shares of common stock available for issuance under the plan over a period of ten years.

During the period from July 1, 2026 to the

date of this report, the Company issued total of 386,785 shares of common stock to consultants for services and 707,214 shares upon conversion

of the convertible notes.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data