Ispire Technology Inc. 10-K

ITEM 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Co-Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial and accounting officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including the Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective, due to the lack of controls needed to enable us to record assets acquired from a controlling stockholder in accordance with GAAP. Our failure to have such controls is place resulted in the need for us to restate our unaudited financial statements for the six months ended December 31, 2022 and the three and nine months ended March 31, 2023. As a result of the restatement, our net loss for the six months ended December 31, 2022 decreased from $2,950,921, or $0.06 per share (basic and diluted), to $2,178,290, or $0.04 per share (basic and diluted) and our net loss for the nine months ended March 31, 2023 decreased from $6,057,776, or $0.12 per share (basic and diluted), to $4,512,513, or $0.09 per share (basic and diluted), and a decline in stockholders’ equity at December 31, 2022 from $83,218,167 to $9,730,883, and at March 31, 2023 from $79,953,608 to $7,238,957. Management believes that the financial statements included in this annual report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented in accordance with GAAP. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management’s Annual Report on Internal Controls over Financial Reporting As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, 53 (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the issuing company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our need to restate our unaudited financial statements for the six months ended December 31, 2022 and the nine months ended March 31, 2023 reflects a material weakness. Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of June 30, 2023, due to the previously discussed material weaknesses in our internal control over financial reporting Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This Report does not include an attestation report of our internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act. Changes in Internal Control over Financial Reporting At June 30, 2022, as a privately owned company, we were not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies with respect to the establishment of internal controls over financial reporting. During the year ended June 30, 2023, we developed and commenced the implementation of internal controls over financial reporting, and we are continuing to develop and implement internal controls over financial reporting particularly in view of the material weakness described above. In this connection, subsequent to June 30, 2023, we appointed a new chief financial officer and a vice president of finance, as part of our program to develop and implement effective internal controls over financial reporting. Item 9B. Other Information Not Applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not Applicable. 54 PART III ITEM 10. Directors, Executive Officers and Corporate Governance Listed below are the names of the directors and executive officers of the Company, their ages as of the date of this Annual Report, their positions held and the year they commenced service with the Company. Name Age Position/Title Tuanfang Liu 3 50 Co-Chief Executive Officer and Chairman Michael Wang 60 Co-Chief Executive Officer and President of Aspire North America Daniel J. Machock 48 Chief Financial Officer Tirdad Rouhani 40 Chief Operating Officer Jiangyan Zhu 47 Director Christopher Robert Burch 1,2,3 55 Independent Director Brent Cox 1,2 40 Independent Director John Fargis 1,2,3 57 Independent Director 1 Member of the Audit Committee 2 Member of the Compensation Committee 3 Member Nominating and Corporate Governance Committee. Tuanfang Liu has been serving as our chairman of the board of directors and chief executive officer since our organization and co-chief executive officer since August 7, 2023. Mr. Liu has also served as chairman of the board and chief executive officer of Aspire Global, a position he has held since its organization. Mr. Liu also serves as chairman of Shenzhen Yi Jia since he founded the company in June 2010. He is responsible for our daily operations and research and development of the e-cigarette and cannabis vaporizer technology products. Mr. Liu has served as the vice-chairman of the European Union E-cigarette Association since 2019, vice-chairman and founding member of the Canada E-cigarettes Association since 2019, vice chairman of the China Electronics Chamber of Commerce since 2017, and executive vice-chairman and founder of the Shenzhen E-Vapor Industry Association since October 2017. He received “Shenzhen High-level Professionals” award in 2019. Mr. Liu holds doctorate degrees in business management from Victoria University School of Management in Switzerland and EuroPort Business School in the Netherlands, respectively. He has more than 14 years of experience in research and development of the e-cigarette products and quality control management. Mr. Liu is the spouse of Jiangyan Zhu. Michael Wang has been serving as co-chief executive officer since August 7, 2023, having served as our chief financial officer from our organization until August 7, 2023, and he has served as president of Aspire North America since its organization in 2020. Mr. Wang served chief financial officer of Aspire Global from August 2020 until his resignation in September 2022. Mr. Wang is an experienced chief executive officer, chief operating officer and president of various companies with leadership skills in profit and loss management, finance, human resources, products, technology, sales and operations. Mr. Wang has approximately 12 years of internet technology and e-commerce experience. From September 2018 through August 2020, he was the president, chief operating officer and co-chief executive officer of The Pharm/Sunday Goods (located in California and Arizona), a vertically integrated leader in the cannabis cultivation, processing, manufacturing, distribution, wholesale, and retail industry. Mr. Wang managed and transformed the cultivation, manufacturing and wholesale divisions. Mr. Wang was with Onestop Commerce, a leading e-commerce technology and service company, as president and chief operating officer from February 2013 to July 2015 and as chief executive officer from July 2015 to June 2018. Onestop Commerce managed omni-channel-commerce for major lifestyle brands and retailers. From May 2005 through June 2010, he was the chief operating and fulfillment officer and an investor in Zazzle, a leader in online customization and personalization service. He started his career in 1992 at Honeywell and also worked at Technicolor, ESS Technology and Vitec Group. Mr. Wang received bachelor of science and master of science degrees in aerospace engineering in 1983 and 1985 respectively, from the Beijing University of Aeronautics & Astronautics also known as Beihang University. In 1987, he received a master of science degree in systems engineering from Oakland University in Rochester, Michigan. In 1992, Mr. Wang received an MBA in Finance and General Management from the University of Chicago’s Booth School of Business. Daniel J. Machock has been our chief financial officer since August 7, 2023. Mr. Machock has 25 years of experience overseeing the financial strategy and performance for a number of companies. From January 2017 to October 2021, Mr. Machock was the chief financial officer at Appetize Technologies, a point-of sale hardware and software company. Prior to that, he was chief financial officer at Chrome River (2016-2017), chief financial officer at PostSMSCo (2010-2016), and vice president- finance and controller at Business.com (2004-2010). Early in his career, he worked in public accounting at Ernst and Young. Mr. Machock received his bachelor’s degree in accounting and finance from Indiana University. Tirdad Rouhani has been the chief operating officer since July 2022. In the prior four years, Mr. Rouhani has been deeply entrenched in the cannabis industry. He held the role of chief operating officer at Touchstone (one of the largest cannabis extraction lab and co-packing businesses in California) before taking on the role of chief executive officer for Napalm Brands in March 2020. Mr. Rouhani co-founded two tech companies before converging on the cannabis industry. Between 2008 and 2015, he was a business process consultant at Live Nation. Mr. Rouhani received his undergraduate and graduate degrees from the University of Arizona where he studied business. He started his career in audit and consulting with Deloitte, expanding into tech and finance, evolving into operating roles. 55 Jiangyan Zhu has been serving as our director since inception. Ms. Zhu is one of the founders of Aspire Global and is a director of Aspire Global, and, since 2013, she has served as vice president of finance of Shenzhen Yi Jia, where she is responsible for financial management, assisting in human resources management and establishing and improving the automated office system. Ms. Zhu holds a bachelor’s degree in business management from Jiangxi University of Technology. She also holds a Business Management certificate from the College of Continuing Education Graduate School of Shenzhen Tsinghua University. Ms. Zhu is the spouse of Mr. Tuanfang Liu. Christopher Robert Burch has been serving as a director since July 2023. He has worked in the finance and venture capital industries for more than 15 years. Currently, Mr. Burch is consulting for Bioglobal Inc., a biopesticides company. From September 2020 to May 2022, Mr. Burch served as Chief Financial Officer at Braun Bio-Technology (Shan Dong) Co. Ltd. in China where he was responsible for fundraising and corporate strategies. Prior to that, from January 2020 to September 2020, Mr. Burch served as Chief Financial Officer at Waton Corporation Limited where he was responsible for fundraising, financial planning, cash flow management, investor relations, banking relations, securities licensing, and strategy direction. From July 2019 to November 2019, Mr. Burch worked at Zhejiang Panshi Information Technology Co. Ltd. as a Vice President responsible for corporate strategic investment. From March 2017 to July 2019, Mr. Burch served as a Managing Director at Feiyang Group Co. Ltd. in Hong Kong and China where he was responsible for fundraising and providing advisory services to the sector. Prior to joining the Company, from October 2008 to October 2014 Mr. Burch served on the board of directors of KeenHigh Technologies Limited, listed on Taiwan’s Emerging Stock Market (TW:3651). In 2006, Mr. Burch received a Master of Business Administration with a focus on technology management from Tsinghua University. In 1993, Mr. Burch received a bachelor’s degree in business administration with concentration in decision sciences from Georgia State University. In 1991, Mr. Burch received a bachelor’s degree in business administration with concentration in finance from University of Georgia. We believe that Mr. Burch is well qualified to serve as a member of our board of directors because of his experience in finance, operations of public companies and corporate fundraising and strategy. Brent Cox has been serving as a director since April 2023. He also serves as the co-founder and managing partner of The Inception Companies, a private investment firm, a position he has held since 2016. From September 2008 to April 2016, he served as a principal investor of the Yucaipa Companies, a Los Angeles, California based private equity firm where he was responsible for sourcing, analyzing and executing investment opportunities, structuring financing for investments and monitoring the performance and strategic initiatives of its portfolio companies. From 2006 to 2008, Mr. Cox served as an investment banking analyst in the Leveraged Finance Group of Jefferies & Co. a multinational independent investment bank and financial services company. Mr. Cox received a bachelor of science degree from the University of Southern California. Mr. Cox previously served on the boards of Medmen Enterprises Inc. (OTC: MMNFF), The Pharm, LLC, Pacific Dutch Group, LLC, and has also served as a board observer for Soho House & Co Inc. (NYSE: SHCO), Americold Realty Trust (NYSE: COLD), Versacold International Corp, Stephen Webster Limited, Garrard & Co. Limited, and Eimskipafélag Íslands hf. (IC: EIM). We believe Mr. Cox is well-qualified to serve as a member of our board of directors due to his experience in investment banking and prior corporate governance experience having served on corporate boards of directors. John Fargis has been serving as a director since April 2023. He is the co-founder and principal of BYG Advantage since June 2014, a Beijing-based platform that outsources business development, sales acceleration bridging best in class technology into the Asia Pacific region. Clients include Hashicorp, Trustonic, Tomorrow.io, and EF. Its services include market analysis, market entry, market acceleration, government relations and special vehicle creation across the region. Mr. Fargis founded and runs Dustybrine LLC, a market entry consulting firm in New York State. Mr. Fargis has been serving as the professor of management, strategy, and emerging markets at Hult International Business School since February 2014, where he teaches courses including strategy, management, emerging markets, leadership, operations and big data. Mr. Fargis has been also serving as the Adjunct Professor of Strategy and China History since January 2014 in Shanghai, China. Mr. Fargis has been serving as the principal Asia-Pacific of Hortonworks since 2014. From March 2010 to December 2013, Mr. Fargis served as the executive vice president and general manager at Kaseya where he incorporated, staffed and ran offices for Kaseya in Beijing, Seoul, Tokyo and Hong Kong. The company was purchased by Insight Venture Partners in June 2013. From 2007 to April 2010, Mr. Fargis served as the vice president sales and general manager of Asia of On2 Technologies which was purchased by Google in February 2010. From August 2005 to October 2007, Mr. Fargis served as the general manager Asia Pacific of Global IP Solutions (GIPS), where he oversaw sales and business development strategy for Global IP Sound (GIPS) in Asia. GIPS provides premiere quality speech processing technology for Voice Over IP (VOIP) networks, and its software enables numerous clients including application providers such as Skype, Google, AOL, Tencent, etc. From January 2004 to July 2005, Mr. Fargis served as the chief executive officer of SiMa Systems, where he oversaw funding and alliance strategy and general management for this digital clipboard solutions company. In 1998, Mr. Fargis received his master of arts in law and diplomacy degree in international consulting at The Fletcher School of Law and Diplomacy. In 1992, Mr. Fargis received his master’s degree in special education at Hunter College. In 1988, Mr. Fargis received his bachelor’s degree in medieval studies at Wesleyan University. We believe Mr. Fargis is well-qualified to serve as a member of our board of directors due to his experience in business strategy, emerging markets, and his contacts and relationships. 56 Family Relationships Tuanfang Liu, our chairman and chief executive officer, and Jiangyan Zhu, one of our directors, are married. Other than this relationship, there are no other direct family relationships among any of our directors or executive officers. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors, executive officers and ten percent stockholders to file initial reports of ownership and reports of changes in ownership of our common stock with the Commission. Directors, executive officers and ten percent stockholders are also required to furnish us with copies of all Section 16(a) forms that they file. All of our officers, directors and 10% stockholders have filed the required ownership reports. Director Independence The Nasdaq Marketplace Rules require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2) of the Nasdaq Marketplace Rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 of the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. Our board of directors has reviewed the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that each of Brent Cox, John Fargis and Christopher Robert Burch is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Because we are a controlled corporation, we have included our chief executive officer, who is not an independent director, as a member and chair of the nominating and corporate governance committee. Board Committees Our board of directors has established three standing committees-audit, compensation, and nominating and corporate governance-each of which operates under a charter that has been approved by our board of directors. Copies of each committee’s charter are posted on the Investors section of our website, which is located at ispiretechnology.com. Each committee has the composition and responsibilities described below. Our board of directors may from time to time establish other committees. 57 Audit Committee Our audit committee consists of Brent Cox, John Fargis and Christopher Robert Burch, with Mr. Cox as chair. We have determined that each of these three directors satisfies the “independence” requirements of the Nasdaq Listing Rules and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Brent Cox and Christopher Robert Burch qualify as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and ● reporting regularly to the board. Our audit committee reviews all proposed related party transactions on an ongoing basis and any such transactions must be approved by the audit committee. The audit committee also approves certain pricing matters pursuant to our supply agreements with Shenzhen Yi Jia. In determining whether to approve a related party transaction, the audit committee considers, among other factors, the following factors to the extent relevant to the related party transaction: ● whether the terms of the related party transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party; ● whether there are business reasons for us to enter into the related party transaction; ● whether the related party transaction would impair the independence of an outside director; ● whether the related party transaction or the approval of the related party transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the overall financial position of the director, executive officer or the related party, the direct or indirect nature of the director’s, executive officer’s or the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the audit committee deems relevant; and ● any pre-existing contractual obligations. 58 Compensation Committee Our compensation committee consists of Christopher Robert Burch, Brent Cox and John Fargis, with Brent Cox as chair. We have determined that each of these directors satisfies the “independence” requirements of the Nasdaq Listing Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers. Tuanfang Liu,our co-chief executive officer may not be present at any committee meeting during which his compensation is deliberated upon. The compensation committee is responsible for, among other things: ● reviewing and approving, or recommending to the board for its approval, the compensation for our co-chief executive officers and other executive officers; ● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; ● reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; and ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Tuanfang Liu, Brent Cox and John Fargis, with Tuanfang Liu as chair. We have determined that Mr. Cox and Mr. Fargis satisfy the “independence” requirements of the Nasdaq Listing Rules. Because we are a controlled corporation, we have included Tuanfang Liu, our co-chief executive officer, who is not an independent director, as a member and chair of the nominating and corporate governance committee. The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us; ● selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; ● developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and ● evaluating the performance and effectiveness of the board as a whole. Meetings of the Board and Committees Our independent directors were appointed, and the committees were formed, at the time of our initial public offering in April 2023. During the period from our initial public offering until June 30, 2023, our board of directors met telephonically one time and also acted by unanimous written consent. During this period, the audit committee met one time, the nominating and corporate governance committee met once and the compensation committee did not meet. Code of Conduct Our board of directors has adopted a written code of conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted on our website a current copy of the code and all disclosures that are required by law or Nasdaq Marketplace Rules concerning any amendments to, or waivers from, any provision of the code. Board Leadership Structure Our board of directors has the ability to select the chairman of the board of directors and a chief executive officer in a manner that it considers to be in the best interests of our company at the time of selection. Currently, Tuanfang Liu and Michael Wang serve as our Co-Chief Executive Officers and and Mr. Liu serves as chairman of the board of directors. We currently believe that this leadership structure is in our best interests. Additionally, three of our five members of our board of directors have been deemed to be “independent” by the board of directors, which we believe provides sufficient independent oversight of our management. 59 Our board of directors, as a whole and also at the committee level, plays an active role overseeing the overall management of our risks. Our Audit Committee reviews risks related to financial and operational items with our management and our independent registered public accounting firm. Our board of directors is in regular contact with our co-chief executive officers, who report directly to our board of directors and who supervises day-to-day risk management. Role of Board in Risk Oversight Process Our board of directors believes that risk management is an important part of establishing, updating and executing on our business strategy. Our board of directors has oversight responsibility relating to risks that could affect the corporate strategy, business objectives, compliance, operations, and the financial condition and performance of our company. Our board of directors focuses its oversight on the most significant risks facing us and on our processes to identify, prioritize, assess, manage and mitigate those risks. Our board of directors receives regular reports from members of our senior management on areas of material risk to us, including strategic, operational, financial, legal and regulatory risks. While our board of directors has an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes and controls to mitigate their effects on us. ITEM 11. Executive Compensation The following table sets forth information regarding the compensation awarded to, earned by, or paid during the years ended June 30, 2023 and 2022, to our chief executive officer and the two most highly paid executive officers other than the chief executive officer who were serving as executive officers at June 30, 2023. These three officers are referred to as our “Named Executive Officers.” Name and Principal Position Year Ended June 30, Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Nonequity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Tuanfang Liu 2023 206,720 - - - - - - 206,720 CEO (2)(3) 2022 153,757 153,757 Michael Wang 2023 393,447 - - - - - 393,447 CFO (3) 2022 350,000 350,000 Tirdad Rouhani 2023 233,493 25,000 - - - - 258,493 COO (4) (1) The compensation in the table for the year ended June 30, 2022 reflects compensation paid by Aspire North America and/or Aspire Science prior to the date these entities were transferred to us and does not include any dividends received or accrued by Mr. Liu as a 95% stockholder in Shenzhen Yi Jia. (2) Mr. Liu’s compensation is paid in Hong Kong dollars, which are converted into U.S. dollars at the average exchange rates during the period, which was 7.8045 Hong Kong dollars to $1.00 for the year ended June 30, 2022 and 7.8367 Hong Kong dollars to $1.00 for the year ended June 30, 2023. (3) Mr. Liu and Mr. Wang are currently co-chief executive officers. (4) Mr. Rouhani was appointed as chief operating officer on July 1, 2022. 60 Employment Agreements We have employment agreements dated January 31, 2023, with Tuanfang Liu, our co-chief executive officer, and Michael Wang, our co-chief executive officer who formerly was our chief financial officer. Tuanfang Liu The employment agreement with Mr. Liu has a term of five years and continues on year-to-year basis unless terminated by either us or Mr. Liu on notice given not later than 60 days prior to the expiration of the initial five-year term or any one-year extension. Mr. Liu receives compensation from us at the annual rate of 1,920,000 Hong Kong dollars. Any increase in his annual compensation and any bonus compensation are subject to the discretion of the Compensation Committee and Mr. Liu is also eligible for such options or other equity-based compensation, if any, as may be determined by the Compensation Committee. Mr. Liu will perform his services at such location as he may determine, and we anticipate that he will perform his services in the PRC. The agreement acknowledges that Mr. Liu is also chairman, chief executive officer and a director of Aspire Global and the chief executive officer and 95% owner of Shenzhen Yi Jia. The agreement has customary non-competition and non-solicitation provisions. Mr. Liu has agreed that we have title to all rights to any intellectual property rights which may be developed by Mr. Liu that relate to cannabis or cannabis related vaping or other products during the term of the employment agreement and he will execute such documents as may be necessary to effect our ownership of such intellectual property, including, but not limited to assignment of patents and trademarks. With respect to any intellectual property relating to tobacco vaping and other nicotine products, we shall have an exclusive license in the territory, which is worldwide except for the PRC and Russia, with respect to such intellectual property. We acknowledge the Mr. Liu is also employed as chief executive officer of Aspire Global and Shenzhen Yi Jia. Both Aspire Global and Shenzhen Yi Jia agreed to the provisions of Mr. Liu’s employment agreement relating to intellectual property developed by Mr. Liu. Although Mr. Liu does not receive any compensation from Aspire Global or Shenzhen Yi Jia, for his services as its chief executive officer of Aspire Global, as the 95% owner of Shenzhen Yi Jia, he receives dividends from Shenzhen Yi Jia. Michael Wang The employment agreement with Mr. Wang has a term of three years and continues on a quarter-to-quarter basis unless terminated by either us or Mr. Wang on notice given not later than 30 days prior to the expiration of the initial three-year term or any quarterly extension. Mr. Wang receives annual compensation at the rate of $393,447. Any increase in his annual compensation and any bonus compensation are subject to the discretion of the Compensation Committee and Mr. Wang is also eligible for such options or other equity-based compensation, if any, as may be determined by the Compensation Committee. The agreement has customary assignment of invention provisions. In connection with our organization, we issued to Peak Group LLC, a limited liability company owned by Mr. Wang a 2% interest in Aspire Global for services rendered which, when our common stock was issued to the holders of the Aspire Global capital stock, resulted in the issuance to Mr. Wang of 1,000,000 shares of common stock, which were valued at $473,235. The issuance of these shares is treated as compensation for services rendered by Mr. Wang to Aspire Global, the then parent of Aspire North America and Aspire Science, as its chief financial officer. Daniel J. Machock We have agreed to pay Daniel J. Machock, our chief financial officer, an initial annual base salary of $300,000 and an annual discretionary performance bonus target of 50% of base salary. In addition, we have granted Mr. Machock an option to purchase 200,000 shares of common stock at an exercise price of $9.22 per share. The option vests over a period of four years. 61 Employee Benefit Plans 2022 Equity Incentive Plan In October 2022, our directors and stockholders approved the 2022 Equity Incentive Plan (the “Plan”) pursuant to which up to 15,000,000 shares of common stock may be issued pursuant to options or restricted stock grants. The Plan is administered by the Board of Directors. Awards under the Plan may be granted to officers, directors, employees and those consultants who qualify as a consultant or advisor under the instructions to Form S-8. The Compensation Committee has broad discretion in making awards; provided that any options shall be exercisable at the fair market value on the date of grant. Outstanding Equity Awards On June 30, 2023, there were no outstanding equity awards under the Plan. On August 3, 2023, the board of directors (i) authorized the issuance of a total of 4,483 shares of common stock to Brent Cox, John Fargis and Joel Paritz who were our independent directors on the date of our initial public offering as described below under Director Compensation. On September 4, 2023, the board of directors, as the administrator of the Plan, granted options to purchase a total of 2,605,000 shares of common stock at an exercise price of $9.76 per share being the closing price on the common stock on the trading day before the date of grant (which was a legal holiday). The options become exercisable cumulatively as to 25% of the shares subject to the option on the first four anniversaries of the date of grant. On September 4, 2023, the board of directors also issued 587,235 restricted stock units which vest cumulatively as to one-third of the restricted stock units on each of the first three anniversaries of the date of grant. The following table sets forth the options and restricted stock grants issued to our executive officers and all other employees as a group. Name Shares subject to Options Restricted Stock Grants Michael Wang 1,000,000 282,787 Tirdad Rouhani 300,000 84,837 Daniel J. Machock 200,000 40,000 Others 1,105,000 179,611 Total 2,605,000 587,235 In granting the options and restricted stock grants, the board agreed to accelerate the vesting of the options and the restricted stock grants to Mr. Wang, Mr. Rouhani and Mr. Machock and four other option holders and three other restricted stock grantees in the event of a change of control. Limitation of Liability and Indemnification Matters Our certificate of incorporation limits the liability of our directors for monetary damages for breach of their fiduciary duties, except for liability that cannot be eliminated under the DGCL. Consequently, our directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following: ● any breach of their duty of loyalty to us or our stockholders; ● acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; ● unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or ● any transaction from which the director derived an improper personal benefit. Our certificate of incorporation and bylaws also provide that we will indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity, regardless of whether our bylaws would permit indemnification. We have obtained directors’ and officers’ liability insurance. 62 The above description of the Indemnification provisions of our bylaws and is qualified in its entirety by reference to these documents, each of which is filed as an exhibit to this annual report. The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and may be unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer. Director Compensation The following table shows the compensation paid to our directors who are not Named Executive Officers during the year ended June 30, 3023. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Nonequity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Jiangyan Zhu (1) $ 91,875 $ 91,875 Joel Paritz (2) 15,000 15,000 Brent Cox 12,000 12,000 John Fargis 12,000 12,000 (1) Ms. Zhu’s compensation is paid in Hong Kong dollars, which are converted into U.S. dollars at the average exchange rates during the period, which was 7.8367 Hong Kong dollars to $1.00 for the year ended June 30, 2023. (2) Mr. Paritz resigned as a director on July 1, 2023. 63 We have an agreement with Ms. Zhu pursuant to which we pay her annual compensation of 720,000 Hong Kong dollars. Ms. Zhu is also a director of Aspire Global, and she does not receive compensation from Aspire Global. On August 3, 2023, the board of directors (i) authorized the issuance of a total of 4,483 shares of common stock to Brent Cox, John Fargis and Joel Paritz who were our independent directors on the date of our initial public offering as described below, and (ii) adopted the non-employee director compensation policy. Pursuant to the non-employee director compensation policy: ● Each outside director (a director who is not also serving as an employee of us or any of our subsidiaries) shall receive an annual cash retainer of $48,000 for his or her service on the Board, and each outside director who serves as chair of the Audit Committee will be paid an additional annual cash retainer of $12,000. The payment is made in four equal quarterly installments. The retainer is pro rated if the outside director is not an outside director for the entire quarter. ● Each outside director automatically will be granted fully vested shares of the common stock equal in value to such outside director’s retainer for the calendar quarter. The number of shares granted shall be equal to: (A) the retainer earned by the outside director for such calendar quarter, divided by (B) the volume-weighted average price, generally known as VWAP, of our common stock on the principal trading market on which our common stock trades during each trading day of the preceding calendar quarter, rounded down to the nearest whole share. To be eligible for a quarterly share grant an outside director must be serving as an outside director on the last day of the calendar quarter. The shares shall be granted pursuant to our 2022 Equity Incentive Plan or any successor plan. The compensation policy is effective commencing with the quarter beginning July 1, 2023. In August 2023, we issued, pursuant to the Plan, 1,601 shares of common stock to each of Brent Cox, a director, and Joel Paritz, a former director, and 1,281 shares of common stock to John Fargis, a director, for service as a director and, in the case of Mr. Cox and Mr. Paritz, for service as audit committee chair. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information regarding the beneficial ownership of our shares of common stock as of September 15, 2023 by: ● Each holder of 5% or more of our common stock; ● Each member of our board of directors; ● Each Named Executive Officer; and ● All directors and executive officers as a group For purposes of the following table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or sole or shared investment power with respect to a security, or any combination thereof, and the right to acquire such power (for example, through the exercise of warrants granted by us) within 60 days of September 15, 2023. Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws. Unless otherwise noted, the mailing address of each listed beneficial owner is 19700 Magellan Dr, Los Angeles, CA 90502 Name of Beneficial Owners (1) Number Percentage Tuanfang Liu and Jiangyan Zhu (2)(3)(4) 35,750,000 65.2 Pride Worldwide Investment Limited (2)(3) 33,250,000 60.6 Michael Wang (5) 1,425,644 2.6 Tirdad Rouhani 84.,837 * Daniel J. Machock 40,000 * Christopher Robert Burch 0 0.0 % Brent Cox 1,601 * John Fargis 1,281 * All directors and officers as a group (six individuals owning stock) (2)(3)(5) 37,303,363 68.0 % * Less than 1%. (1) The percentage of ownership is based on 54,856,231 shares of common stock outstanding on September 15, 2023. 64 (2) The business address of Pride Worldwide Investment Limited is 14 Jian’an Road, Tangwei Fuyong Town, Bao’an District, Shenzhen, Guangdong Province, China. (3) The shares beneficially owned by Tuanfang Liu, our co-chief executive officer, are held by Pride Worldwide Investment Limited. Mr. Liu is the sole stockholder and holds the voting and dispositive power over the common stock held by such entity. Mr. Liu disclaims beneficial interest in shares beneficially owned by his wife, Jiangyan Zhu. (4) The shares beneficially owned Jiangyan Zhu, our director and spouse of Tuanfang Liu, are held by Honor Epic International Limited. Ms. Zhu is the sole stockholder and holds the voting and dispositive power over the common stock held by such entity. Ms. Zhu disclaims beneficial interest in shares beneficially owned by her husband. (5) The shares beneficially owned by Michael Wang are held by Peak Group LLC. Mr. Wang has sole voting and dispositive powers over the shares of common stock owned by Peak Group LLC. * Represents beneficial ownership of less than 1%. ITEM 13. Certain Relationships and Related Transactions, and Director Independence The following are transactions from July 1, 2021 through June 30, 2023 between us, and enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, (a) us, (b) our directors; (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual’s family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling our activities of the Company, including senior management of companies and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. The following are forth the major related parties and their relationships with us: Name of related parties and relationship with the Company - Tuanfang Liu is the chief executive officer and chairman of the Company. - Jiangyan Zhu is the wife of Tuanfang Liu and a director of the Company. - Eigate (Hong Kong) Technology Co., Limited (“Eigate”) is a company wholly owned and controlled by our chief executive officer. - Aspire Global is a company controlled by the chief executive officer of the Company. - Shenzhen Yi Jia is 95% owned by the Company’s chief executive officer and 5% by the chief executive officer’s cousin. Tuanfang Liu is also Aspire Global’s chief executive officer and a director of both us and Aspire Global, and his wife, Jiangyan Zhu, is also a director of both companies. Mr. Liu and Ms. Zhu beneficially own 66.5% and 5.0%, respectively, of our outstanding common stock and of the outstanding shares of Aspire Global. Michael Wang, our chief financial officer, was chief financial officer of Aspire Global from August 2020 until September 2022. 65 In connection with our organization in July 2022, we issued a total 50,000,000 shares to the holders of capital stock of Aspire Global in the same proportion as their share ownership in Aspire Global. Prior to the transfer of Aspire North America and Aspire Science to us, Aspire Global issued a 2% equity interest to an entity owned by Michael Wang, our co-chief executive officer, who was Aspire Global’s and our chief financial officer, and a 1.1% interest in Aspire Global to an entity owned by a consultant, in each case for services rendered to Aspire Global and its subsidiaries. When we issued 50,000,000 shares of common stock to the holders of Aspire Global capital stock, these issuances resulted in the entities owned by Mr. Wang and the consultant of 1,000,000 shares and 537,500 shares, respectively. Because the transfer of the equity interest in Aspire North America and Aspire Science from Aspire Global and its wholly-owned subsidiary was made for no consideration to a corporation that had identical stockholders as Aspire Global, these shares are deemed to be outstanding since July 1, 2020. In connection with the restructure of Aspire Global, on July 29, 2022, for no consideration: ● Aspire Global transferred 100% of the equity interest in Aspire North America to us. ● Aspire Holdings transferred 100% of the equity of Aspire Science to our subsidiary, Ispire International. In the year ended June 30 , 2020, Aspire Science, declared a dividend of $3,832,272, which is payable to Tuanfang Liu, who, at the date the dividend was declared, was the sole stockholder of Aspire Science. The dividend was declared prior to the transfer of the equity interest in Aspire Science by Mr. Liu to a subsidiary of Aspire Global, which subsequently transferred the equity interest to Ispire International. During the year ended June 30, 2022, Aspire Science paid $469,633 to Mr. Liu, and the balance due to Mr. Liu was $3,362,639 and $3,384,678 at December 31, 2022, which was paid on February 2, 2023. For the years ended June 30, 2022 and 2023, substantially all of the Company’s tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia. As of June 30, 2022 and 2023, the accounts payable - related party was $41,982,373 and $51,698,588, respectively, which was payable to Shenzhen Yi Jia. For the years ended June 30, 2022 and 2023, the purchases from Shenzhen Yi Jia were $74,787,679 and $83,060,957, respectively. As of June 30, 2022, Aspire Science had a balance due to Eigate of $40,672,768, and as at June 30, 2023 the amount due to related party represents $710,910 due to Shenzhen Yi Jia. The balance was all non-interest bearing, unsecured, have no due date and are repayable on demand. Prior to 2020, both Aspire Science and Eigate were owned by Mr. Liu, and Eigate lent money to Aspire Science for working capital. On February 2, 2023, we made the payments to Mr. Liu and Eigate. Although Aspire Science had the funds to make this payment and the dividend payable to Mr. Liu, payment was delayed because, as a result of the size of the transfer, in order to for Aspire Science to wire the money it was necessary for an authorized person to personally go to the bank to wire the funds. This was not possible because of COVID-19 restrictions which required Mr. Liu, who is based in mainland China, to go to the bank in Hong Kong and be subject to quarantine when he returns to mainland China. Since January 8, 2023, no centralized quarantine or mass PCR testing will be undertaken on travelers entering mainland China. Travelers to mainland China are only required to take PCR test 48 hours prior to their departure and report the PCR test findings on their customs health declaration form. Only those whose test results are positive prior to departure will have to postpone their travel until the PCR results turn negative. As a result of these changes, Mr. Liu was able to travel to Hong Kong to make the payments without being subject to quarantine upon his return. At June 30, 2022 and June 30, 2023, we had the following balance due from related parties: As of June 30, 2022 2023 Shenzhen Yi Jia $ 1,872,035 $ - Tuanfang Liu 62,820 - Total $ 1,934,855 $ - The balances are payment made by Aspire Science on behalf of these related parties. These balances were all non-interest bearing, unsecured, have no due date and are repayable on demand, and were paid in full on November 28. 2022. Our audit committee reviews and approves all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act. The audit committee will not approve any loan or extension of credit in the form of personal loans to or for the benefit of any director or executive officer. 66 On July 29, 2022, for no consideration: ● Aspire Global transferred 100% of the equity interest in Aspire North America to the Company, and ● Aspire Holdings transferred 100% of the equity of Aspire Science to Ispire International. These transfers were made in connection with a restructure by Aspire Global pursuant to which the equity in Aspire North America and Aspire Science was transferred to us. At the time of the transfer, we had the same stockholders as Aspire Global and the stockholders held the same percentage equity interest in both us and Aspire Global. Pursuant to the Intellectual Property Transfer Agreement, Mr. Liu, Aspire Global and Shenzhen Yi Jia agreed to transfer to Aspire North America all patent and other intellectual property rights, including trademarks, Know-how and Know-how Documentation, as defined in the agreement, relating to the cannabis vaping products, and to transfer to us any new intellectual property developed or acquired by Mr. Liu, Aspire Global and Shenzhen Yi Jia which relates to cannabis vaping products. The patents and patent applications, all of which are United States patents and applications, have been transferred to Aspire North America. Pursuant to the Intellectual Property License Agreement, Mr. Liu, Aspire Global and Shenzhen Yi Jia granted Aspire Science a perpetual royalty free sole and exclusive right and license to use and practice all of the Licensed Technology worldwide except for the PRC and Russia. The Licensed Technology includes all patents, know-how, know-how documentation and trademarks, whether now existing or hereafter developed or acquired by, or for, Mr. Liu, Aspire Global and/or Shenzhen Yi Jia that relate, directly or indirectly, to the tobacco vaping market. Pursuant to the License Agreement, neither Mr. Liu, Aspire Global nor Shenzhen Yi Jia has any right to market or sell or grant distributors the right to market or sell tobacco vaping products in the world other than in the PRC and Russia. In January 2023, Aspire North America and Aspire Science entered into supply agreements with Shenzhen Yi Jia pursuant to which: ● Shenzhen Yi Jia agreed to sell products to us at the most favorable market price that it sells similar products to third parties and such prices must be commercially reasonable in order to enable us to generate a gross margin based on purchase prices or a purchase price structure acceptable to our audit committee. ● Shenzhen Yi Jia is to provide us with quality products and services in a timely manner, to provide to our customers the same warrant that we provide to our customer and to honor the warranty. ● Shenzhen Yi Jia is to give us first priority to the manufacture of our products over any other manufacturing obligations it has. ● We need to provide Shenzhen Yi Jia with periodic forecasts and place orders consistent with the forecasts. ● Any intellectual property developed in connection with the manufacture of the cannabis products will be assigned, and the patents and patent applications have been assigned, to Aspire North America pursuant to the Intellectual Property Transfer Agreement and any intellectual property developed in connection with the manufacture of tobacco products will be licensed to Aspire Science pursuant to the Intellectual Property License Agreement. The agreement has an initial term of ten years, and automatically renews for two-year periods unless terminated by either party on not less than six months’ notice prior to the expiration of the initial term or any two-year extension. 67 ITEM 14. Principal Accounting Fees and Services The following table sets forth the fees billed by our independent accountants, MSPC Certified Public Accountants and Advisors, A Professional Corporation (“MSPC”) for the years ended June 30, 2022 and 2023. Year Ended June 30, 2022 2023 Audit fees $ 226,205 $ 643,235 Audit-related fees $ - $ - Tax fees $ - $ - All other fees $ - $ - Audit Fees Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by MSPC in connection with regulatory filings. The aggregate fees of MSPC for professional services rendered for the audit of our annual financial statements, review of the financial information include in our Forms 10-Q for the respective periods and other required filings with the SEC for the years ended June 30, 2022 and 2023 totaled approximately $226,205 and $643,235, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings. Approximately 70% of the engagement hours were contributed by an affiliated firm. Audit-Related Fees Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay MSPC for consultations concerning financial accounting and reporting standards for the years ended June 30, 2022 and 2023. Tax Fees We did not pay MSPC for tax services, planning or advice for the years ended June 30, 2022 and 2023. All Other Fees We did not pay MSPC for any other services for the years ended June 30, 2022 and 2023. All Other Fees. None. Procedures For Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor Our audit committee is ultimately responsible for reviewing and approving, in advance, any audit and any permissible non-audit engagement or relationship between us and our independent registered public accounting firm. Our engagement of MSPC to conduct all audit and permissible non-audit related activities incurred during fiscal years 2023 and 2022 were approved by our audit committee in accordance with these procedures. 68 PART IV ITEM 15. Exhibits and Financial Statements Schedules 1. Consolidated Financial Statements Our financial statements and the notes thereto, together with the report of our independent registered public accounting firm on those financial statements, are hereby filed as part of this report beginning on page F-1. 2. Financial Statement Schedules All financial statement schedules have been omitted since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. 3. Exhibits The following is a complete list of exhibits filed as part of this Form 10-K. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit Number Description 3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 4.1 Form of Underwriters’ Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1/A (No. 333-269470) filed on February 28, 2023). 10.1 Intellectual Property Transfer Agreement dated September 30, 2022, by and among Aspire Global Inc., Shenzhen Yi Jia, Tuanfang Liu, Aspire North America LLC and Ispire Technology Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 10.2 Intellectual Property License Agreement dated September 30, 2022, by and among Aspire Global Inc., Shenzhen Yi Jia, Tuanfang Liu, Aspire Science and Technology Limited and Ispire Technology Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 10.3 Employment agreement dated January 31, 2023, between the Company and Tuanfang Liu (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1/A (No. 333-269470) filed on February 16, 2023). 10.4 Employment agreement dated January 31, 2023, between the Company and Michael Wang (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A (No. 333-269470) filed on February 16, 2023). 10.5 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 10.6 Form of independent director agreement with Brent Cox (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1/A (No. 333-269470) filed on February 28, 2023). 10.7 Form of independent director agreement with John Fargis (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1/A (No. 333-269470) filed on February 28, 2023). 10.9 Distributorship Agreement dated January 1, 2021, between Aspire Science and Technology Limited and Your-Buyer International Limited (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1(No. 333-269470) filed on January 31, 2023. 10.10 Supply agreement dated January 27, 2023 by and between Aspire North America LLC and Shenzhen Yi Jia.(incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023. 10.11 Supply agreement dated January 27, 2023 by and between Aspire Science and Technology Limited and Shenzhen Yi Jia (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023. 21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 of the Registrant’s Registration Statement on Form S-1 (No. 333-269470) filed on January 31, 2023). 23.1* Consent of MSPC Certified Public Accountants and Advisors, A Professional Corporation 31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Sarbanes-Oxley Act. 32** Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act** 101.INS Inline XBRL Instance Document* 101.SCH Inline XBRL Taxonomy Extension Schema Document* 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document* 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document* * Filed herewith. ** Furnished and not filed herewith. ITEM 16. Form 10-K Summary Not applicable 69 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 19 th day of September. 2023. ISPIRE TECHNOLOGY INC. By: /s/ Michael Wang Michael Wang Co-Chief Executive Officer (Principal Executive Officer) By: /s/ Daniel J. Machock Daniel J. Machock Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date /s/ Tuanfang Liu Co-Chief executive officer and director September 19, 2023 Tuanfang Liu (principal executive officer) /s/ Michael Wang Co-Chief executive officer September 19, 2023 Michael Wang (principal executive officer) /s/ Daniel J. Machock Chief financial officer September 19, 2023 Daniel J. Machock Principal financial and accounting officer /s/ Jiangyan Zhu Director September 19, 2023 Jiangyan Zhu /s/ Christopher Robert Burch Director September 19, 2023 Christopher Robert Burch /s/ Brent Cox Director September 19, 2023 Brent Cox /s/ John Fargis Director September 19, 2023 John Fargis 70 ISPIRE TECHNOLOGY INC. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm PCAOB ID# 717 F-2 Consolidated Balance Sheets as of June 30, 2022 and 2023 F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended June 30, 2022 and 2023 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 30, 2022 and 2023 F-5 Consolidated Statements of Cash Flows for the Years Ended June 30, 2022 and 2023 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Ispire Technology Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Ispire Technology Inc. and Subsidiaries (the Company) as of June 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the years in the two-year period ended June 30, 2023, and the related notes (collectively referred to as the 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ MS PC MS PC Certified Public Accountants and Advisors, A Professional Corporation We have served as the Company's auditor since 2022. New York, New York September 19, 2023 www.mspc.cpa An independent firm associated with Moore Global Network Limited 340 North Avenue, Cranford, NJ 07016-2496 546 5 th Avenue, 6 th Floor, New York, NY 10036-5000 908 272-7000 212 682-1234 F- 2 ISPIRE TECHNOLOGY INC. CONSOLIDATED BALANCE SHEETS June 30, 2022 2023 Assets Current assets: Cash and cash equivalents $ 74,480,651 $ 40,300,573 Accounts receivable, net 8,260,574 24,526,262 Inventories, net 14,580,557 7,472,108 Prepaid expenses and other current assets 192,499 3,378,617 Due from related parties 1,934,855 - Held-to-maturity investment - 9,133,707 Total current assets 99,449,136 84,811,267 Other assets: Property, plant and equipment, net 114,025 1,088,131 Rental deposit 876,100 732,334 Right-of-use assets – operating leases 295,804 4,061,617 Total other assets 1,285,929 5,882,082 Total assets $ 100,735,065 $ 90,693,349 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 290,541 $ 1,274,391 Accounts payable – related party 41,982,373 51,698,588 Contract liabilities 1,672,051 988,556 Dividends payable 3,362,639 - Accrued liabilities and other payables 159,296 281,361 Due to related parties 40,672,768 710,910 Income tax payable - current 481,113 63,853 Operating lease liabilities – current portion 347,541 944,525 Total current liabilities 88,968,322 55,962,184 Other liabilities: Operating lease liabilities – net of current portion - 3,356,232 Total liabilities $ 88,968,322 $ 59,318,416 Stockholders’ equity: Common stock, par value $ 0.0001 per share; 140,000,000 shares authorized; 50,000,000 and 54,222,420 shares issued and outstanding as of June 30, 2022 and June 30, 2023 5,000 5,422 Preferred stock, par value $ 0.0001 per share, 10,000,000 shares authorized, no shares issued at June 30, 2022 and 2023 - - Additional paid-in capital - 25,685,475 Accumulated other comprehensive loss ( 184,664 ) ( 163,768 ) Retained earnings 11,946,407 5,847,804 Total stockholders’ equity 11,766,743 31,374,933 Total liabilities and stockholders’ equity $ 100,735,065 $ 90,693,349 See notes to consolidated financial statements. F- 3 ISPIRE TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Years ended June 30, 2022 2023 Revenue $ 88,095,418 $ 115,605,536 Cost of revenue 74,789,378 94,529,769 Gross profit 13,306,040 21,075,767 Operating expenses: Sales and marketing expenses 5,503,630 4,714,923 General and administrative expenses 8,791,081 20,929,978 Total operating expenses 14,294,711 25,644,901 Loss from operations ( 988,671 ) ( 4,569,134 ) Other income (expense): Interest income 5,078 195,209 Exchange gain(loss), net 58,143 ( 324,225 ) Other income(expense), net 122,394 ( 155,150 ) Total other income(expense), net 185,615 ( 284,166 ) Loss before income taxes ( 803,056 ) ( 4,853,300 ) Income taxes - current ( 1,071,097 ) ( 1,245,303 ) Net loss $ ( 1,874,153 ) $ ( 6,098,603 ) Other comprehensive (loss) income Foreign currency translation adjustments ( 117,085 ) 20,896 Comprehensive loss ( 1,991,238 ) ( 6,077,707 ) Net loss per share Basic and diluted $ ( 0.04 ) $ ( 0.12 ) Weighted average shares outstanding: Basic and diluted 50,000,000 50,725,814 See notes to consolidated financial statements. F- 4 ISPIRE TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Ordinary shares Preferred shares Additional Accumulated Other Total Number of Shares Amount Number of Shares Amount Paid-in Capital Retained Earnings Comprehensive (Loss)/Income Shareholders’ Equity Balance, July 1, 2021 50,000,000 $ 5,000 - $ - $ - $ 13,820,560 $ ( 67,579 ) $ 13,757,981 Net loss - - - - - ( 1,874,153 ) - ( 1,874,153 ) Foreign currency translation adjustment - - - - - - ( 117,085 ) ( 117,085 ) Balance, June 30, 2022 50,000,000 $ 5,000 - $ - $ - $ 11,946,407 $ ( 184,664 ) $ 11,766,743 Net loss - - - - - ( 6,098,603 ) - ( 6,098,603 ) Issuance of common stock 4,222,420 422 - - 25,685,475 - - 25,685,897 Foreign currency translation adjustment - - - - - - 20,896 20,896 Balance, June 30, 2023 54,222,420 $ 5,422 - $ - $ 25,685,475 $ 5,847,804 $ ( 163,768 ) $ 31,374,933 See notes to consolidated financial statements. F- 5 ISPIRE TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended June 30, 2022 2023 Cash flows from operating activities: Net loss: $ ( 1,874,153 ) $ ( 6,098,603 ) Adjustments to reconcile net loss from operations to net cash provided by operating activities: Depreciation and amortization 10,402 46,662 Depreciation of right-of-use assets 135,141 1,061,442 Accounts receivable impairment - 3,332,825 Changes in operating assets and liabilities: Accounts receivable ( 3,950,508 ) ( 19,579,339 ) Inventories ( 11,525,561 ) 7,108,449 Prepaid expenses and other current assets 29,007 ( 3,088,466 ) Accounts payable 8,875,590 10,574,989 Contract liabilities 543,890 ( 690,637 ) Accrued liabilities and other payables ( 282,487 ) 168,179 Income tax payable 481,113 ( 417,260 ) Net cash used in operating activities $ ( 7,557,566 ) $ ( 7,581,759 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 121,516 ) ( 1,020,768 ) Purchase of short term investment - ( 9,133,707 ) Net cash used in investing activities $ ( 121,516 ) $ ( 10,154,475 ) Cash flows from financing activities: Net proceeds from initial public offering - 21,735,000 Payment of initial public offering costs - ( 3,475,171 ) Proceeds from private placement - 7,969,221 Payment of private placement costs - ( 543,153 ) Payment of dividends of subsidiary ( 469,633 ) ( 3,362,639 ) Repayment to related parties ( 2,498,689 ) ( 37,893,063 ) Principal portion of lease payment ( 120,942 ) ( 874,039 ) Net cash used in financing activities $ ( 3,089,264 ) $ ( 16,443,844 ) Net decrease in cash and cash equivalents ( 10,768,346 ) ( 34,180,078 ) Cash and cash equivalents – beginning of year 85,248,997 74,480,651 Cash and cash equivalents – end of year $ 74,480,651 $ 40,300,573 Supplemental disclosure of cash flow information: Cash (refund) paid for income taxes $ ( 69,647 ) $ 1,663,240 Cash paid for interest $ - $ - See notes to consolidated financial statements. F- 6 ISPIRE TECHNOLOGY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Ispire Technology Inc. (the “Company”) was incorporated under the laws of the State of Delaware on June 13, 2022. Through its subsidiaries, the Company is engaged in the research and development, design, commercialization, sales, marketing and distribution of branded e-cigarettes and cannabis vaping products. Ispire owns a 100 % equity interest in Ispire International Limited, a business company incorporated under the laws of the British Virgin Islands (“BVI”) (“Ispire International”) on July 6, 2022. Prior to July 29, 2022, all of the equity of Aspire North America LLC, a California limited liability company (“Aspire North America”), was owned by Aspire Global Inc. (“Aspire Global”), and all of the equity of Aspire Science and Technology Limited, a Hong Kong corporation (“Aspire Science”), was owned by Aspire Global Holdings Limited (“Aspire Holdings”), a wholly-owned subsidiary of Aspire Global. Aspire Global and the Company are related parties since the same individual was the chief executive officer of both companies, the chief executive officer and his wife are directors of both companies and, prior to the transfer of equity described below, owned 66.5 % and 5.0 %, respectively, of the equity of both Aspire Global and the Company. At the time of the transfer, the Company had the same stockholders as Aspire Global and the Company’s stockholders held the same percentage interest in the Company as they had in Aspire Global. Because the transfer of the equity in Aspire North America and Aspire Science is a transfer between related parties, the historical financial information of the subsidiaries is carried forward as the historical financial information of the Company and the 50,000,000 shares that were issued at or about the time of the Company’s organization are treated as being outstanding on July 1, 2020. On July 29, 2022: ● Aspire Global transferred 100 % of the equity interest in Aspire North America to the Company ● Aspire Holdings transferred 100 % of the equity of Aspire Science to Ispire International. The following table sets forth information concerning the Company and its subsidiaries as of June 30, 2023: Name of Entity Date of Organization Place of Organization % of Ownership Principal Activities Ispire Technology Inc. June 13, 2022 Delaware Parent Company Holding Company Ispire International July 6, 2022 BVI 100% Holding Company Aspire North America February 22, 2020 California 100% Sales and Marketing Aspire Science December 9, 2016 Hong Kong 100% Sales and Marketing Ispire is a holding company and does not engage in any active operations. Its business is conducted by its two operating subsidiaries, Aspire North America, which is engaged in the development, marketing and sales of cannabis vapor products, which were introduced in mid-2020, and Aspire Science, which is engaged in the development, marketing and sales of tobacco vaping products. F- 7 In October 2022, the directors and stockholders of the Company approved the 2022 Equity Incentive Plan (the “Plan”) pursuant to which up to 15,000,000 shares of common stock may be issued pursuant to options or restricted stock grants. The Plan will be administered by the Compensation Committee. Awards under the Plan may be granted to officers, directors, employees and those consultants who qualify as a consultant or advisor under the instructions to Form S-8. Awards are made at the discretion of the Board of Directors; provided that any options shall be exercisable at the fair market value on the date of grant. As of June 30, 2023, no awards had been granted since the Plan was approved. Impact of COVID-19 In December 2019, coronavirus disease 2019 (COVID-19) was first reported to have surfaced in Wuhan, China. During 2020, the disease spread to many parts of the world. The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in much of the world, most of which are no longer in effect. The World Health Organization ended the global emergency status for COVID-19 on May 5, 2023, and the United States Department of Health and Human Services declared that the public health emergency from COVID-19 expired at the end of the day on May 11, 2023. The extent to which COVID-19 impacts the Company’s operations on an ongoing basis is highly uncertain. Since the Company’s products are presently manufactured in China by a related party, any changes in the outbreak in China and any changes in the Chinese government’s policy may affect the Company’s supplier’s operations which could affect its ability to manufacture and deliver product in a timely manner. Supply Chain Risks One of effects of the COVID-19 has been delays resulting from supply chain issues, which relate to the difficulty that companies have in having their products manufactured, shipped to the country of destination, and delivered from the port of entry to the customer’s location. As the port delays have significantly decreased, the Company does not believe that the supply chain issues that affected its operations are currently affecting the Company. The Company cannot assure you that delays will not affect its business in the future. In 2021, Shenzhen Yi Jia, the Company’s principal supplier of products, suffered a chip shortage resulting in a slowdown in delivery of its products to the Company from April to August 2021. To secure the supply of chips, Shenzhen Yi Jia has advised the Company that it has obtained a supply of chips to meet its production needs and the chip shortage no longer affects its production. In 2022, a slowdown in the delivery of components to Shenzhen Yi Jia resulting from supply chain slowdowns as a result of the effects of mainland China’s COVID policy resulted in an increase in cost of revenue during the period. The Company cannot assure you that it will not suffer from a chip shortage or that the effects of China’s COVID policy will not affect Shenzhen Yi Jia’s ability or the ability of its suppliers to delivery products in a timely manner. Market and Economic Conditions In recent years, the United States and other markets have experienced cyclical or episodic downturns, and worldwide economic conditions remain uncertain, including, as a result of the COVID-19 pandemic, supply chain disruptions, the Russian invasion of Ukraine, instability in the U.S. and global banking systems, rising fuel prices, increasing interest rates or foreign exchange rates and increased inflation and the possibility of a recession. A significant downturn in economic conditions may affect the market for the Company’s products and its supplier’s ability to provide products on acceptable terms. The Company cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. If the conditions in the general economy and the markets in which the Company operates worsen from present levels, its business, financial condition, operating results could be adversely affected. F- 8 E-cigarette regulation Regulation regarding e-cigarette varies across countries, from no regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. But as e-cigarettes have become more and more popular recently, many countries are considering imposing more stringent law and regulations to regulate this market. Changes in existing law and regulations and the imposition of new laws, regulation in countries and regions that our major customers located in may adversely affect the Company’s business. The Federal Food, Drug, and Cosmetic Act requires all Electronic Nicotine Delivery Systems (“ENDS”) product manufacturers that market products in the United States to submit Premarket Tobacco Product Applications (“PMTAs”) to the FDA. For ENDS products that were on the U.S. market on August 8, 2016, a PMTA was required to be submitted to the FDA by September 9, 2020; for ENDS products that were not on the U.S. market prior on August 8, 2016, and for which a PMTA was not filed by September 9, 2020, a PMTA a premarket authorization issued in response to a PMTA is required before the subject product may enter the U.S. market. The Company has submitted a PMTA filing for one ENDS product, and, under apparent FDA policies, the agency will not enforce the premarket review requirements for that product pending review of its PMTA. However, even with submission of the PMTA application, the FDA may reject the Company’s application and may prevent the Company’s ENDS products from being sold in U.S., which will adversely affect the Company’s business. Amendments to the Prevent All Cigarette Trafficking (“PACT”) Act, which became law in 2021, extend the PACT Act to include e-cigarette and all vaping products, and place significant burdens on sellers of vaping products in the United States which may make it difficult to operate profitably in the United States. Because of tighter government regulations, the Company has stopped marketing tobacco vaping products in the United States, as the volume of sales from the one tobacco vaping product which the Company may sell in the United States does not justify the marketing and regulatory costs involved. In the United States, cannabis vaping products are governed by state laws, which vary from state to state. Most states do not permit the adult recreational use of cannabis, and no states permit the sale of recreational cannabis products to minors. As a result of the reduced revenue to states resulting from the effects of the COVID 19 pandemic, states may seek to raise revenue by permitting and taxing the use of cannabis products. The Company cannot predict what action states will take or the nature and amount of taxes they may impose. However, the extent the PACT Act applies to cannabis products that aerosolize liquids, it may be more difficult to sell our products in states that permit the sale of cannabis. However, cannabis and its derivatives containing more than 0.3 % delta-9 tetrahydrocannabinol on a dry weight basis remain Schedule I controlled substances under U.S. federal law, meaning that federal law generally prohibits their manufacture and distribution. United States federal law also deems it unlawful to sell, offer for sale, transport in interstate commerce, import, or export “drug paraphernalia,” which includes “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance” the possession of which federal law prohibits, including Schedule I “marijuana.” Limited exemptions exist, most notably when state or local law authorizes these items’ manufacture, possession, or distribution. The European Commission issued the Tobacco Products Directive (the “TPD”), which became effective on May 19, 2014 and became applicable in the European Union member states on May 20, 2016. The TPD regulates e-cigarettes on the packaging, labelling and ingredients of the products on the European Union market, the creation of smoke-free environments, tax measures and activities against illegal trade and anti-smoke campaigns. Member states of the European Union are required to ensure that advertisements for any tobacco related product are prohibited, and no promotion shall be made as to those devices with an intention to promote e-cigarettes. For the e-cigarettes released after May 20, 2016, TPD requires e-cigarette manufacturers to submit product sales applications to the regulatory market six months in advance, and ensure their products can meet the TPD requirements before they can be released. The Company has complied with TPD requirement that for all its tobacco products sold in Europe. The sale of cannabis vaping products is illegal in the European Union and the United Kingdom. F- 9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain items for June 30, 2022 have been reclassified to conform to the June 30, 2023 presentation. Emerging growth company The Company is an “emerging growth company,” as defined in Section 2(a) of 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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 stockholder 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 an emerging growth 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 an 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 that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries as if the subsidiaries were acquired by the Company as of July 1, 2020. All inter-company transactions and balances have been eliminated upon consolidation. Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include allowance for doubtful accounts, the useful lives of property and equipment and intangible asset, impairment of long-lived assets, and deferred cost. Actual results could differ from those estimates. Cash and cash equivalents Cash includes currency on hand, deposits held by banks that can be added or withdrawn without limitation and highly liquid investments with maturities of three months or less when purchased. Fair value measurement The Company applies ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands financial statement disclosure requirements for fair value measurements. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. F- 10 ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows: ● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. ● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Accounts receivable Accounts receivable are recognized and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted and the potential for recovery is considered remote. The Company have different payment terms for different businesses. For tobacco vaping business, the Company requires a deposit of 30 % of sales amount upon placing order, and the payment of remaining 70 % to be made before shipment. For cannabis vaping business, tailored payment term are designed for each customer, based on business relationship, order size and other considerations. The Company maintains an allowance for potential credit losses on accounts receivable. The Company reviews accounts receivable on a periodic basis. For tobacco vaping business, the Company makes provisions of 80 % for accounts receivable aged between 1.5 years to 2 years, and 100 % for balances aged over 2 years. For cannabis business, the Company makes provisions of 10 % for accounts receivable aged over 3 months. Additionally, specific provisions are made when there is doubt as to collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, the customer’s current credit-worthiness and current economic trends. The Company write-off accounts receivable against the provision when they are deemed uncollectible. Investment The investment represents a certificate of deposit that the Company holds in HSBC bank. The entire balance of the investment presented on the balance sheet as of June 30, 2023 is $ 9,133,707 and it matures on February 8, 2024 . F- 11 Inventories Inventories mainly consist of finished goods purchased from suppliers. Inventories are stated at the lower of cost or net realizable value. The cost of an inventory item is determined using the weighted average method. When management determines that certain inventories may not be saleable, or when inventory costs exceed expected market value due to obsolescence or damage, the Company will record the difference between the cost and the net realizable value as a write down of inventories. The net realizable value is determined based on the estimated selling price, in the ordinary course of business, less estimated costs necessary to make the sale. These writedowns are recorded based on estimates. The Company did not write down any inventory during the years ended June 30, 2022 and 2023. When there is an indicator, the Company evaluates the ability to realize the value of inventories based on a combination of factors such as forecasted sales, estimated current and future market value. Property, plant and equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and depreciated on a straight-line basis over the estimated useful lives of the assets from the time the assets are placed in service. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income/loss in the year of disposition. Estimated useful lives are as follows: Estimated Useful Life Office and other equipment 3 - 5 years Furniture & fixtures 7 years Leasehold improvements Shorter of the term of the lease or the estimated useful life of the assets Leases A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. All leases with an initial term of more than 12 months are recognized as assets representing the right-of-use of the underlying asset and liabilities representing the obligation to make lease payments. Both the assets and the liabilities are initially measured as present value of the discounted lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date to determine the discount rate. Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any re-measurement of the lease liabilities. Right-of-use assets are depreciated on a straight-line basis over the shorter of the useful lives of the assets or the lease terms. Lease liabilities are initially measured at the present value of the lease payments to be made under the lease terms and subsequently adjusted by the effect of the interest on and the settlement of the lease liabilities, and the re-measurement arising from any reassessment of the lease liabilities or lease modifications. Lease payments on leases with an initial term of twelve months or less and leases of low-value assets are recognized as an expense on a straight-line basis over the lease term and are not treated as right of use assets. Accounts payable Accounts payable represents payables to suppliers. The Company’s major supplier is a related party to the Company. See Note 13. F- 12 Contract liabilities Contract liabilities represent advanced deposits received from customers after an order has been placed but before a product has been shipped. The Company’s normal policy is to require a customer deposit in the range of 25 % to 30 % of the purchase price upon placement of a sales order, although the Company exempts certain customers from this requirement. Contract liabilities are realized as revenue when the conditions to revenue recognition are met, primarily when control of goods has transferred to customers. Impairment of long-lived assets In accordance with ASC Topic 360-10, Impairment and Disposal of Long-Lived Assets, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charge for the years ended June 30, 2022 and 2023. Revenue recognition The Company sells its products to customers around the world and recognizes revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of goods has transferred to customers. For the majority of the Company’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered to the pickup location specified by the customer or a forwarder appointed by the customer, as that is generally when legal title, physical possession and risks and rewards of goods transfer to the customer. Revenue is recognized at the transaction price based on the purchase order as adjusted for the anticipated rebates, discounts and other sales incentives. When determining the transaction price, management estimates variable consideration applying the portfolio approach practical expedient under ASC 606. The main sources of variable consideration for the Company are customer rebates, trade promotion funds, and cash discounts. These sales incentives are recorded as a reduction of revenue at the time of the initial sale using the most-likely amount estimation method. The most-likely amount method is based on the single most likely outcome from a range of possible consideration outcomes. The range of possible consideration outcomes is primarily derived from the following inputs: sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. Because the Company serves numerous markets, the sales incentive programs offered vary across businesses, but the most common incentive relates to amounts paid or credited to customers for achieving defined volume levels or growth objectives. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Product returns are recorded as a reduction of revenue based on anticipated sales returns that occur in the normal course of business. The Company has elected to present revenue net of sales taxes and other similar taxes. The Company’s warranties are of an assurance-type and come standard with all Company products to cover repair or replacement should a product not perform as expected by a reasonable customer. The Company offers warranty for all major products, including all types of E-vapor kits, atomizers, replacement coils and mods, but no warranty for accessories such as spare parts or packaging consumables. The Company generally offers a 90 day warranty period from date of purchase for products sold to all regions, but from May 2019, the Company offers a six month warranty period from date of purchase for products sold in the UK and France. The Company offers refund or replacement of products for defects in manufacture, dead on arrival items and items that do not appear the same as listed on the Company’s or distributors’ website, and excludes damaged goods caused by misuse or unauthorized repair. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of June 30, 2022 and 2023, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary. F- 13 Disaggregated Revenue In accordance with ASC 606-10-50-5, the Company has taken into consideration the nature, amount, timing, and uncertainty of revenue and cash flows, and has determined to disaggregate its net sales of tobacco vaping products and cannabis vaping products. The net sales disaggregated by products for the years ended June 30, 2022 and 2023 were as follows: Years ended June 30, Net sales by products branded 2022 2023 Tobacco vaping products $ 68,116,810 $ 75,562,711 Cannabis vaping products 19,978,608 40,042,825 Total $ 88,095,418 $ 115,605,536 Cost of revenue Cost of revenue for the years ended June 30, 2022 and 2023 consisted primarily of the cost of purchasing vaping products, which were purchased from a related party. See Note 13. Shipping and handling costs Shipping and handling costs for the years ended June 30, 2022 and 2023 are $ 335,677 and $ 298,703 , respectively. They are included in the sales and marketing expenses. Interest income For the years ended June 30, 2022 and 2023, interest income related to interest on bank deposits. Income taxes The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provisions of ASC 740-10 prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company classifies the interest and penalties, if any, as a component of income tax expense. For the years ended June 30, 2022 and 2023, the Company did not incur any interest or penalties related to an uncertain tax position. The Company does not believe that there was any uncertain tax positions as of June 30, 2022 and 2023. Foreign currency translation The reporting currency of the Company is the U.S. dollar (“USD”). The functional currency of Aspire Science, which is located in Hong Kong, is the Hong Kong Dollar (“HKD”). For the entities whose functional currency is the HKD, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into USD are included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currencies at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the results of operations as incurred. F- 14 Translations of amounts from HKD into USD were made at the following exchange rates for the respective dates and periods: At June 30, 2022 2023 Consolidated balance sheets: HKD to $ 1.00 7.8478 7.8373 Consolidated statements of operations and comprehensive loss: HKD to $ 1.00 7.8045 7.8367 Earnings per share The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (for example, convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. The Company has no dilutive securities as of and for the years ended June 30, 2022 and 2023. Comprehensive loss Comprehensive loss consists of two components, net loss and other comprehensive (loss) income. The foreign currency translation gain or loss resulting from translation of the financial statements expressed in USD is reported in other comprehensive (loss) income in the consolidated statements of income and comprehensive loss. Commitments and contingencies In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, is disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Segment reporting The Company uses the management approach to determine operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources, and assessing performance. The Company’s CODM has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The Company’s CODM reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Company as a whole and has determined that the Company has only one reportable segment. Notwithstanding that the Company has customers located around the world and the Company’s Hong Kong subsidiary serves as one of the sales and marketing centers, the Company’s long-lived assets and management are located substantially in the U.S. and management operates its business as a single segment. F- 15 Related parties Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, immediate family members of principal owners of the Company and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions in Note 13. Recent accounting pronouncements As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period. Accounting pronouncements adopted during the year ended June 30, 2023 In November 2018, the Financial Accounting Standards Boards (“FASB”) issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies that elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606. The amendments require the application of existing guidance to determine the units of account in collaborative arrangement for purposes of identifying transactions with customers. For transactions outside the scope of ASC 606, companies can apply elements of ASC 606 or other relevant guidance by analogy, or apply a reasonable accounting policy if there is no appropriate analogy. ASU 2018-18 is effective retrospectively for us for the year ended June 30, 2023. The adoption of this guidance had no material impact on our financial position, results of operations and cash flows. In March 2020, the FASB issued ASU 2020 - 04, Reference Rate Reform (Topic 848 ): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ASU 2020 - 04 , which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Specifically, to the extent the Company’s debt agreements are modified to replace LIBOR with another interest rate index, ASU 2020 - 04 will permit the Company to account for the modification as a continuation of the existing contract without additional analysis. Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. The Company did not elect retrospective application. The adoption of this update had no material impact on the Company’s consolidated financial statements. Accounting pronouncements not yet effective As the Company is an emerging growth company, the effective dates of the pronouncements applicable to us are the same as those applicable to private companies. In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. For public business entities that meet the definition of a U.S. Securities and Exchange Commission (“SEC”) filer (“SEC filer”), excluding entities eligible to be smaller reporting companies as defined by the SEC, ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, including smaller reporting companies, ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period. The Company is in the process of evaluating the impact that this guidance will have on its consolidated financial statements. F- 16 On September 29, 2022, FASB issued ASU 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. This update requires that a buyer in a supplier finance program disclose additional information about the program to allow financial statement users to better understand the effect of the programs on an entity’s working capital, liquidity, and cash flows. This update will be effective for the Company for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company does not expect this standard will have a material effect on its consolidated financial statements. Concentration and risks Risks and Uncertainties The Company’s business, financial condition and results of operations may be negatively impacted by risks related to government regulations, natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations. Customer and Supplier Concentration (a) Customers For the years ended June 30, 2022 and 2023, the Company’s major customers, who accounted for more than 10 % of the Company’s consolidated revenue, were as follow: Year Ended June 30, 2022 2023 Major Customers A 39 % 32 % (b) Suppliers For the years ended June 30, 2022 and 2023, the Company’s suppliers, who accounted for more than 10 % of the Company’s total purchases, were as follows: Year Ended June 30, 2022 2023 Major Suppliers B (1) 99 % 92 % (1) Major supplier B is Shenzhen Yi Jia, a Chinese company that is 95 % owned by the Company’s chief executive officer and principal stockholder. See Note 13. F- 17 Credit Risk The Company is subject to credit risk from cash and cash equivalents, account receivables, financial assets included in prepayments and deposits and amounts due from related parties. All the Company’s cash and cash equivalents are held in major financial institutions located in Hong Kong and the United States, which management believes are of high credit quality. At June 30, 2022 and 2023, the Company had credit risk exposure of uninsured cash in banks of $ 74,000,991 and $ 39,792,081 , respectively. The Company has policies in place to evaluate credit risk when accepting new business and to limit its credit exposure to individual customers. The management considers the Company does not have a significant concentration of credit risk. The Company does not require collateral to support financial instruments that are subject to credit risk. 3. CASH AND CASH EQUIVALENTS Below is a breakdown of the Company’s cash balances in banks for both years, both by geography and by currencies (translated into U.S. dollars): As of June 30, By Geography: 2022 2023 Cash in HK $ 71,221,649 $ 25,841,880 Cash in U.S. 3,259,002 14,458,693 Total $ 74,480,651 $ 40,300,573 By Currency: USD $ 64,187,756 $ 39,835,636 HKD 415,930 363,416 EUR 4,097 59,702 GBP 24,680 22,143 RMB 9,848,188 19,676 Total $ 74,480,651 $ 40,300,573 “HKD” refers to Hong Kong dollars, “GBP” refers to British pounds, and “EUR” refers to Euros. 4. FAIR VALUE MEASUREMENT As of June 30, 2022 and 2023, information about inputs into the fair value measurement of the Company’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: Cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, due from related parties and held-to-maturity investment are financial assets with carrying values that approximate fair value due to their short-term nature. Accounts payable, account payable – related party, contract liabilities, accrued liabilities and other payables and due to related parties are financial liabilities with carrying values that approximate fair value due to their short-term nature. 5. ACCOUNTS RECEIVABLE, NET As of June 30, 2022 and 2023, accounts receivable consisted of the following: As of June 30, 2022 2023 Accounts receivable – gross $ 8,260,574 $ 26,025,068 Allowance for doubtful accounts - ( 1,498,806 ) Accounts receivable, net $ 8,260,574 $ 24,526,262 The Company recorded bad debt expense of nil and $ 3,332,825 for years ended June 30, 2022 and 2023 respectively. F- 18 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS As of June 30, 2022 and 2023, prepaid expenses and other current assets consisted of the following: As of June 30, 2022 2023 Prepaid inventories $ - $ 3,209,413 Other receivable 127,423 127,595 Prepayment 50,460 26,974 Deposit paid 14,616 14,635 Total $ 192,499 $ 3,378,617 Prepayments primarily consist of prepayment for raw materials and consulting services provided by suppliers. 7. PROPERTY, PLANT AND EQUIPMENT, NET As of June 30, 2022 and 2023, property, equipment and leasehold improvement consisted of the following: As of June 30, 2022 2023 Leasehold improvement $ 433 $ 518,854 Office and other equipment 146,798 339,155 Furniture and fixture - 309,990 147,231 1,167,999 Less: accumulated depreciation ( 33,206 ) ( 79,868 ) Total $ 114,025 $ 1,088,131 For the years ended June 30, 2022 and 2023, depreciation expense amounted to $ 11,437 and $ 46,629 , respectively. F- 19 8. INTANGIBLE ASSETS On September 30, 2022, an intellectual property transfer agreement and an exclusive license agreement was signed such that all patents, trademarks, Know-how and Know-how Documentation related to cannabis vaping products and tobacco vaping products were transferred from Tuanfang Liu, Aspire Global and Shenzhen Yi Jia to Aspire North America and Aspire Science. As the intangible assets were transferred from Tuanfang Liu, the controlling stockholder, the Company recorded the assets at his cost, which is $ 0 , in accordance with ASC 805-50-30-5 and SEC Staff Accounting Bulletin Topic 5. The Company engaged a third party firm to perform a valuation on the fair values of the intangible assets on the date of transfer and the estimated fair values were $ 74,259,915 , in accordance with ASC 350. 9. CONTRACT LIABILITIES As of June 30, 2022 and 2023, the Company had total contract liabilities of $ 1,672,051 and $ 988,556 , respectively. These liabilities are advance deposits received from customers after an order has been placed. The balance of $ 1,672,051 as of June 30, 2022 was recognized as revenue during 2023. As of June 30 2023, the Company expects all of the contract liabilities to be settled in less than one year. The decrease in balance at June 30, 2023 was due to less orders on hand on that date. 10. LEASES The Company has operating lease arrangements for office premises for HK and California. These leases typically have terms of two to five years . Leases with an initial term of 12 months or less are not presented as right-of-use assets on the consolidated balance sheet and are expensed over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. The balances for the right-of-use assets where the Company is the lessee are presented as follow: As of June 30, 2022 2023 Right-of-use assets $ 295,804 $ 4,061,617 Lease liabilities - current $ 347,541 $ 944,525 Lease liabilities – non-current - 3,356,232 Total $ 347,541 $ 4,300,757 As of June 30, 2023, the maturities of our lease liabilities (excluding short-term leases) are as follows: As of June 30, 2023 Year Ended June 30, 2024 1,260,719 2025 1,338,878 2026 1,383,636 2027 968,111 2028 80,676 Total future lease payments 5,032,020 Less: imputed interest ( 731,263 ) Total lease liabilities 4,300,757 The Company incurred lease costs, which includes the amortization of the right-of-use assets and the payment of short-term leases, of $ 667,712 and $ 1,237,868 on the Company’s consolidated statements of operations and comprehensive loss for the years ended June 30, 2022 and 2023, respectively. F- 20 The Company made payments of $ 304,291 and $ 1,141,142 under the lease agreements during the years ended June 30, 2022 and 2023, respectively. The weighted-average remaining lease term related to the Company’s lease liabilities as of June 30, 2022 and 2023 was 1 and 3.8 years, respectively. The discount rate related to the Company’s lease liabilities as of both June 30, 2022 and June 30, 2023 was 5.8 % and 8.1 %. The discount rates are generally based on estimates of the Company’s incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined. As of June 30, 2023, the Company had $ 0.2 million of future payments under additional leases, primarily for office, which had not yet commenced. This lease, which has a two-year term, will commence in July 2023. 11. ACCRUED LIABILITIES AND OTHER PAYABLES As of June 30, 2022 and 2023, accrued liabilities and other payables consisted of the following: As of June 30, 2022 2023 Accrued salaries and related benefits $ 43,487 $ 97,314 Other payables 81,226 148,197 Accrued expenses 34,583 35,850 Total $ 159,296 $ 281,361 12. DIVIDENDS PAYABLE Dividends payable represent a dividend declared by the Company’s HK subsidiary, Aspire Science, in the year ended June 30, 2020, which was payable to Aspire Science’s then sole stockholder, who was the Company’s chief executive officer and is co-chief executive officer. The dividend was declared prior to the transfer of the equity interest in Aspire Science to Aspire Holdings , which subsequently transferred the equity interest to Ispire International. Set forth below is the information relating to the dividend payable at June 30, 2022 and 2023. As of June 30, 2022 2023 At the beginning of the year $ 3,832,272 $ 3,362,639 Dividends declared - - Dividends paid ( 469,633 ) ( 3,362,639 ) At the end of the year $ 3,362,639 $ - F- 21 13. RELATED PARTY TRANSACTIONS a) The table below sets forth the major related parties and their relationships with the Company: Name of related parties and Relationship with the Company -Tuanfang Liu is the Chairman of the Company. -Jiangyan Zhu is the wife of Tuanfang Liu and a director of the Company. -Eigate (Hong Kong) Technology Co., Limited (“Eigate”) is a wholly-owned subsidiary of Aspire Global. -Aspire Global is a company controlled by the Chairman of the Company. -Shenzhen Yi Jia, a Chinese company that is 95% owned by the Company’s chairman and 5% by the chairman’s cousin. b) Tuanfang Liu is also Aspire Global’s chief executive officer and a director of both the Company and Aspire Global, and his wife, Jiangyan Zhu, is also a director of both companies. At June 30, 2023, Mr. Liu and Ms. Zhu beneficially owned 66.5 % and 5.0 %, 61.3 % and 4.6 %, respectively, of the outstanding shares of both Aspire Global and the Company. See Note 15. c) The Company had the following balances due from related parties: As of June 30, 2022 2023 Shenzhen Yi Jia $ 1,872,035 $ - Tuanfang Liu 62,820 - Total $ 1,934,855 $ - The balances represent payment on behalf of these related parties, such as freight and tariff charges and others. These balances as of June 30, 2022 were all non-interest bearing, unsecured, have no due date and are repayable on demand and the balances were fully settled in November 2022. d) The balances in due to related parties at June 30, 2022 and 2023 represent amount due to Eigate of $ 40,672,768 and amount due to Shenzhen Yi Jia of $ 710,910 , respectively. These balances were all non-interest bearing, unsecured, have no due date and are repayable on demand. e) For the years ended June 30, 2022 and 2023, substantially all of the Company’s tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia. As of June 30, 2022 and 2023, the accounts payable - related party was $ 41,982,373 and $ 55,769,526 , respectively, which was payable to Shenzhen Yi Jia. For the years ended June 30, 2022 and 2023, the purchases from Shenzhen Yi Jia were $ 74,787,679 and $ 83,060,957 , respectively. 14. INCOME TAXES British Virgin Islands (“BVI”) Under the current laws of the BVI, the Company’s BVI subsidiary, Ispire International, is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the BVI. Hong Kong Under the two-tiered profits tax rates regime for Hong Kong, the first 2 million HKD of profits of the qualifying entity will be taxed at 8.25 %, and profits above HKD 2 million will be taxed at 16.5 %. United States The Company and Aspire North America LLC are each subject to the federal income tax rate if in a taxable position. For the years ended June 30, 2022 and 2023, loss before income taxes consists of: Years ended June 30, 2022 2023 HK $ 6,679,431 $ 7,444,203 U.S. ( 7,482,487 ) ( 12,297,503 ) Total $ ( 803,056 ) $ ( 4,853,300 ) F- 22 The reconciliation of the actual income taxes to the amount of tax computed by applying the aforementioned statutory tax rate to pre-tax income is as follows: Years ended June 30, 2022 2023 Expected taxation at HK statutory rate $ ( 132,504 ) $ ( 800,795 ) Tax effect of two-tiered profits tax regime ( 21,142 ) ( 21,055 ) Effect of income tax rate difference in other jurisdictions ( 336,712 ) ( 553,388 ) Non-deductible expenses 116,287 61,208 Non-taxable income ( 10,764 ) ( 22,378 ) Change in valuation allowance 1,455,390 2,574,664 Others 542 ( 7,047 ) Income tax expense $ 1,071,097 $ 1,245,303 For the years ended June 30, 2022 and 2023, there are net operating losses of $ 8,519,617 and $ 14,584,702 that arose from Aspire North America LLC, which can be carried forward indefinitely to offset up to 80 % of each year’s taxable income, until fully utilized. At June 30, 2022 and 2023, these net operating loss carryforwards may result in future income tax benefits of $ 1,789,120 and $ 3,062,787 , respectively. Valuation allowances provided against the deferred tax assets are related to the net operating loss carryforwards, as the Company’s management does not believe that sufficient positive evidence exists to conclude that the benefits of such deferred tax assets are more likely than not to be realized in full. The amount of the valuation allowance as of June 30, 2022 and 2023 was $ 1,925,780 and $ 4,500,444 , respectively. Deferred tax assets and liabilities represent the future effects on income taxes that result from temporary differences and carryforwards that exist at the balance sheet date, and are measured using enacted rates and provisions of the tax law. Deferred tax assets are recognized for deductible temporary differences as well as tax attributes. Significant components of the Company’s deferred tax liabilities and assets as of June 30, 2022 and 2023 are as follows: Years ended June 30, Deferred tax assets: 2022 2023 Net operating loss carryforward $ 1,789,120 $ 3,062,787 Foreign payables 160,009 981,956 Accounts receivable impairment - 508,980 Property, plant and equipment ( 23,349 ) ( 53,279 ) Total deferred tax assets 1,925,780 4,500,444 Less: Valuation allowance ( 1,925,780 ) ( 4,500,444 ) Net deferred tax asset $ - $ - Movement of valuation allowance: Years ended June 30, 2022 2023 At the beginning of the year $ 375,307 $ 1,925,780 Current year addition 1,550,473 2,574,664 At the end of the year $ 1,925,780 $ 4,500,444 The Company is subject to income taxes in the U.S. federal, state, and various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. All of the Company’s tax years will remain open for examination by the US federal and state tax authorities from the date the returns are filed or are due, whichever is later. The Company does not have any tax audits or other issues pending. F- 23 15. STOCKHOLDERS’ EQUITY On April 6, 2023, the Company completed the public offering of 2,700,000 shares of common stock at a public offering price of $ 7.00 per share, par value $ 0.0001 per share, with option for underwriters to purchase up to an additional 405,000 at the initial public offering price as over-allotment. On April 25, 2023, the underwriters fully exercised their over-allotment option, and 405,000 shares were issued at public offering price of $ 7.00 per share, par value $ 0.0001 per share. These two transactions altogether generated proceeds of $ 21,735,000 , offset by offering costs of $ 3,475,171 , which contributed an increase of share capital of $ 311 and additional paid in capital of $ 18,259,518 . On June 26, 2023, pursuant to purchase agreements dated June 26, 2023, the Company sold to three investors in a private placement an aggregate of 1,117,420 shares of common stock, at a purchase price of $ 7.1318 per share. This private replacement generated proceeds of $ 7,969,221 , offset by offering cost of $ 543,153 , which contributed an increase of share capital of $ 111 and additional paid in capital of $ 7,425,957 . 16. EARNINGS PER SHARE The following table presents a reconciliation of basic net loss per share: Years ended June 30, 2022 2023 Net loss $ ( 1,874,153 ) $ ( 6,098,603 ) Weighted average basic and diluted ordinary shares outstanding 50,000,000 50,725,814 Net loss per basic and diluted share of common stock $ ( 0.04 ) $ ( 0.12 ) 17. LEGAL PROCEEDINGS From time to time, we may be subject to legal or regulatory proceedings, investigations and claims incidental to the conduct of our business. Other than disclosed below, we are not a party to, nor are we aware of, any legal or regulatory proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations. On March 17, 2021, the FDA sent a letter to Aspire North America requesting that Aspire North America submit documents relating to its marketing practices for Aspire products. Specifically, the FDA requested documents related to youth exposure to Aspire North America’s social media marketing of Aspire as well as Aspire North America’s use of influencers in social media marketing. This request applied to all of Aspire electronic nicotine delivery system (ENDS) products and their components or parts. The FDA requested these documents based on the epidemic of youth ENDS use and based on Aspire North America’s marketing of Aspire products on social media platforms (e.g., Facebook, YouTube, and Instagram). The FDA requested that Aspire North America respond within 60 days but granted a 30-day extension. On June 15, 2021, Aspire North America provided the required information to the FDA. To date, the FDA has not substantively responded or taken any further action in the matter. However, we cannot assure you that the FDA will consider the response adequate and will not initiate regulatory or enforcement action based on an alleged failure to comply with the request or that the FDA will not initiate regulatory or enforcement action on other grounds based on the contents of the documents produced in the response. Either result could materially and adversely affect our business, financial condition, and results of operations. 18. SUBSEQUENT EVENTS In July 2023, the Company registered the grant of up to 15,000,000 shares of common stock, par value $ 0.0001 per share, to certain employees of and consultants to the Company either as stock grants, stock options or other equity-based incentives, and the subsequent exercise of any stock options pursuant to the 2022 Equity Incentive plan (the “Plan”). On September 4, 2023, the Board, as administrator of the Plan, granted pursuant to the Plan non-qualified stock options to its executive officers, and other employees to purchase an aggregate of 2,605,000 shares of common stock, at exercise price of $ 9.76 per share, being the fair market value on the date of grant. These options shall vest cumulative as to 25 % of the shares subject to the options over four years on the annual anniversary of date of grant. On September 4, 2023, the Board also issued 587,235 restricted stock units to its executive officers, and other employees, pursuant to the Plan. The restricted stock units vest cumulatively as to one-third of the restricted stock units over three years on the annual anniversary of the date of grant. F-24