What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-05-15 · 167 added, 311 removed, 130 unchanged (79% of the section changed)

14 unchanged sentences

recently commenced marketing activities in Canada and Europe, primarily in the European Union.

All of our products are vaping hardware.

Most of our products are vaping hardware.

Vaping refers to the practice of inhaling and exhaling the vapor produced by an electronic vaping device, and includes dabbing, which

3 unchanged sentences

are sold by our customers under their own brand names although they may also include our brand name on the products.

Initial Public Offering

In April 2023, we completed the public offering

of 3,105,000 shares of common stock at a public offering price of $7.00 per share, which includes 405,000 shares issued upon the exercise

by the underwriters of their over-allotment option.

Gross proceeds were approximately $21.7 million, less underwriting discounts and non-accountable

expense allowance of approximately $1.7 million, and other expenses of approximately $1.5 million, resulting in net proceeds of $18.5

US Tiger Securities, Inc.

acted as sole book-running manager for the offering, and TFI Securities and Futures Limited and Prime

Number Capital, LLC acted as underwriters.

Regulatory Risks

6 unchanged sentences

Our tobacco vaping sales in the United States were approximately

$0.9 million for the year ended June 30, 2022.

Because the volume of sales did not justify the marketing and regulatory costs, we have

ceased marketing tobacco vaping products in the United States and did not have any sales of tobacco vaping products in the United States

in the nine months ended March 31, 2023.

If any similar regulations are adopted with respect to cannabis products, our business will be

severely impacted since all of our cannabis revenue for the three months and nine months ended March 31, 2023 was generated from sales

in the United States.

$0.4 million and $0.1 million for the three months ended September 30, 2022 and 2023, respectively.

Because the volume of sales did not

justify the marketing and regulatory costs, we have ceased marketing tobacco vaping products in the United States.

If any similar regulations

are adopted with respect to cannabis products, our business will be severely impacted since all of our cannabis revenue for the three

months ended September 30, 2022 and 2023 was generated from sales in the United States

Effects of COVID-19 Pandemic

12 unchanged sentences

Supply Chain Risks

One of effects of the COVID-19 has been delays

One of the 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 a result of the COVID-19 pandemic,

during 2021 and early 2022 there were fewer longshoremen unloading ships and fewer truckers to deliver the products to market, which has

resulted in significant delays in the delivery of products to markets.

Since the port delays have significantly decreased, we do not believe

that the supply chain issues that previously affected our operations are currently affecting us.

As the port delays have significantly

decreased, we do not believe that the supply chain issues that affected our operations are currently affecting us.

We cannot assure you

that delays will not affect our business in the future.

In 2021, Shenzhen Yi Jia suffered a chip shortage

resulting in a slowdown in delivery of its products to us from April to August 2021.

To secure the supply of chips, Shenzhen Yi Jia changed

the payment terms to chip supplier from 30 days after delivery in the past to prepayment, and it engaged two new chip suppliers.

September 2021, Shenzhen Yi Jia has obtained a supply of chips to meet its production need and a chip shortage no longer affects its

However, we cannot assure you that we will not suffer from a chip shortage affecting Shenzhen Yi Jia or any other supplier.

The delay in shipment and chip shortage had a

negative impact on our results of operation in the three months and nine months ended March 31, 2022 and 2023.

Although mainland China’s

COVID policy changed in early January 2023 from its zero COVID policy, many people were infected following the termination of the zero-COVID

policy which affected the supply chain in the three months ended March 31, 2023.

We believe delays in supply chain may continue to affect

In order to mitigate the possible supply chain disruptions and to have more control of our manufacturing operations, we are using

a portion of the net proceeds from our initial public offering to take the initial steps toward the development of manufacturing operations

in Vietnam and in California.

If we can establish our own production facilities, we will have better control of the manufacturing process

and shipment of our products to customers, as well as diversifying risks of any production shutdown.

However, we do not have any experience

in manufacturing operations, and in order to establish manufacturing operations, we will have to hire personnel with experience in setting

up and operating manufacturing operations.

With respect to operations in Vietnam, we will need to engage personnel who have experience

in managing operations in Vietnam.

Further, to the extent that our Vietnam or California operations rely on Chinese suppliers for any

components, we will be subject to any shortages and delays as a result of any lockdowns pursuant to China’s COVID policies.

assure you that if our suppliers are impacted by China’s COVID policy, we will be able to obtain products or components from suppliers

outside of China.

We are planning to establish manufacturing facilities

in California and Vietnam as part of our efforts to reduce the effects of inflation because of the lower cost structure in Vietnam, and

to reduce the potential impact of China’s COVID policy.

We are not experienced in operating manufacturing facilities and we will

need to hire key employees in Vietnam who understand the applicable laws and regulations, as well as local customs, in order to operate

our proposed facilities.

We cannot assure you that we will be able to operate efficiently in compliance with all applicable construction,

environmental and other laws and regulations affecting the manufacture of our products in Vietnam.

While our proposed facilities in California

may provide protection from the effect of China COVID policy, it may not reduce the impact of inflation.

In addition, our California facilities

may be subject to unplanned expenses and delays as a result of compliance with local rules and regulations relating to construction.

we cannot assure you that we will be able to commence manufacturing options in either location in the near future or that we will be able

to reduce our costs as a result of operating our own facilities.

Until we have established our own facilities, we anticipate that we will

continue to rely on Shenzhen Yi Jia for our products.

Through March 31, 2023, inflation in PRC has not

materially impacted our cost of revenue.

According to the National Bureau of Statistics of China, the year-over-year percent changes in

the consumer price index for three months ended March 31, 2022 and 2023 were increases of 1.1% and 1.3%, respectively, and for the nine

months ended March 31, 2022 and 2023 were increases of 1.2% and 1.9%, respectively.

Although we have not in the past been materially affected

by inflation, we can provide no assurance that we will not be affected in the future by higher rates of inflation in PRC.

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 our products and our supplier’s ability to provide products to us on acceptable

We 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 we operate worsen from present levels, our business, financial condition, operating results could be adversely affected.

For example, in January 2023, the outstanding national debt of the U.S.

government reached its statutory limit.

Department of

the Treasury has announced that, since then, it has been using extraordinary measures to prevent the U.S.

government’s default on

its payment obligations, and to extend the time that the U.S.

government has to raise its statutory debt limit or otherwise resolve its

funding situation.

The failure by Congress to raise the federal debt ceiling could have severe repercussions within the U.S.

and to global

credit and financial markets.

If Congress does not raise the debt ceiling and if the U.S.

government defaults on its payment obligations

or experiences delays in making payments when due, such payment default or delay by the U.S.

government, as well as continued uncertainty

surrounding the U.S.

debt ceiling or the U.S.

Government’s ability to pay debts, could result in a variety of adverse effects for

financial markets, market participants and U.S.

and global economic conditions.

In addition, U.S.

debt ceiling and budget deficit concerns

have increased the possibility a downgrade in the credit rating of the U.S.

government and could result in economic slowdowns or a recession

in the United States.

Although U.S.

lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, ratings

agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States as a result of disputes over the

debt ceiling.

The impact of a potential downgrade to the U.S.

government’s sovereign credit rating or its perceived creditworthiness

could adversely affect economic conditions, as well as our business, financial condition and operating results.

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 changed the payment terms to chip suppliers from 30 days after delivery in the past to prepayment, and it engaged two new chip

Since September 2021, Shenzhen Yi Jia has advised us that it 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 the PRC’s COVID policy resulted in an increase in cost of revenue during the period.

We cannot assure you that we will not suffer from a chip shortage or that the effects of COVID or the PRC’s COVID policy will not

affect Shenzhen Yi Jia’s ability or the ability of its suppliers to delivery products in a timely manner.

Accounts Receivable

Our business relies on the collection of

accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations.

The balance of

the allowance for doubtful accounts was $0 and $1.1 million at September 30, 2022 and 2023, respectively.

failure or inability to collect accounts receivable when due results from a number of factors, including (i) our customer’s

failure to pay as a result of adverse economic conditions affecting the customers;

(ii) our failure to accurately assess the

creditworthiness of our customers;

(iii) our failure to implement effective collection efforts;

and (iv) disputes over contract

terms, product quality or delays in delivery.

Although we may implement strategies to mitigate these risks, there can be no

assurance that such measures will be entirely effective, and we may continue to incur write-offs of accounts receivable, which may

impair our ability to operate profitably.

Key Factors that Affect Our Results of Operations

6 unchanged sentences

The development of an international market for cannabis vaping products, which is presently primarily limited to certain states in the United States.

The effect of the outbreak of another pandemic or other disease that results in restrictions imposed by governments which may impact our ability to purchase or assemble products as well as the ability of end users to purchase our products.

Results of Operations

Three Months and Nine Months Ended March 31, 2022 and 2023

Three Months Ended September 30, 2022 and 2023

The following table sets forth a summary of our

consolidated statements of operations and comprehensive income for the three months ended March 31, 2022 and 2023, and nine months ended

March 31, 2022 and 2023 (dollars in thousands except per share amounts).

Three Months Ended March 31,

Nine Months Ended March 31,

consolidated statements of operations and comprehensive income for the three months ended September 30, 2022 and 2023 (dollars in thousands

except per share amounts).

Three Months ended September 30,

Cost of revenue

Operating expenses

(Loss)Income from operations

Other income, net

(Loss)Income before income taxes

Net (loss)income

Other comprehensive loss

Comprehensive (loss)income

Net loss per share (basic and diluted)

Weighted shares of common stock outstanding

Loss from operations

Other income(loss), net

Loss before income taxes

Other comprehensive (loss)income

Comprehensive loss

Net loss per ordinary share (basic and diluted)

Weighted ordinary shares outstanding

The following tables set out the breakdown of our revenue percentage

by region based on information provided to us by our distributors.

For the Three Months

ended March 31,

For the Three Months ended

September 31,

North America

1 unchanged sentence

Our revenue increased by $15,921,597, or 59.1%,

from $19,014,149 for the three months ended March 31, 2022, to $24,136,297 for the three months ended March 31, 2023.

All sales of cannabis

vaping products are from United States, which were included in sales in North America.

Sales in North America also include sales of tobacco

vaping products in Canada.

from $26,943,050 for the three months ended September 30, 2022, to $42,864,647 for the three months ended September 30, 2023.

of cannabis vaping products are from United States, which were included in sales in North America.

Sales in North America also include

sales of tobacco vaping products in Canada.

Sales to regions other than North America are from tobacco vaping products.

The increase in revenue is the

combined effect of (i) increases in sales of tobacco vaping products in Europe of $3.7 million from $8.9 million for the three months

ended March 31, 2022 to approximately $12.6 million for the three months ended March 31, 2023, (ii) increases in sales of tobacco vaping

products in Asia Pacific (excluding PRC) of $1.6 million from $1.8 million for the three months ended March 31, 2022 to approximately

$3.4 million for the three months ended March 31, 2023.

For the Nine Months ended

North America

Asia Pacific (excluding PRC)

Our revenue increased by $16,729,239, or 25.3%,

from $66,247,507 for the nine months ended March 31, 2022, to $82,976,746 for the nine months ended March 31, 2023.

The increase in revenue

is the combined effect of (i) increases in sales of tobacco vaping products in Europe of $7.1 million from $38.9 million for the nine

months ended March 31, 2022 to approximately $46.0 million for the nine months ended March 31, 2023 and (ii) increases in sales of cannabis

vaping products in the United States of $7.5 million from $15.9 million for the nine months ended March 31, 2022 to $23.4 million for

the nine months ended March 31, 2023.

The increase in

revenue is the combined effect of (i) increases in sales of cannabis vaping products of $9.3 million from $8.0 million for the three months

ended September 30, 2022 to approximately $17.3 million for the three months ended September 30, 2023, (ii) increases in sales of tobacco

vaping products in Europe of $4.7 million from $15.1 million for the three months ended September 30, 2022 to approximately $19.9 million

for the three months ended September 30, 2023, (iii) increases in sales of tobacco vaping products in Asia Pacific (excluding PRC) of

$2.2 million from $2.9 million for the three months ended September 30, 2022 to approximately $5.1 million for the three months ended

September 30, 2023.

Cost of Revenue

1 unchanged sentence

of vaping products, which we purchased from Shenzhen Yi Jia.

Cost of revenue increased by $3,577,673, or 22.3%, from $16,038,425 for the

three months ended March 31, 2022 to $19,616,098 for the three months ended March 31, 2023.

The increase in cost of revenue reflects the

increase in period-to-period unit sales and the effects of 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 which impacted both nine-month periods.

mainland China’s COVID policy changed in early January 2023 from its zero COVID policy, many people were infected following the

termination of the zero-COVID policy which affected the supply chain in the three months ended March 31, 2023.

Cost of revenue increased by $12,565,907, or 22.5%,

from $55,959,959 for the nine months ended March 31, 2022 to $68,525,866 for the nine months ended March 31, 2023.

The increase in cost

of revenue reflects both the increase in period-to-period unit sales and the effects of 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 which impacted both nine-month

The following tables show the revenue, cost of revenue and gross profit

of our tobacco and cannabis vaping products (dollars in thousands).

Cost of revenue increased by $13,825,408, or 62.4%, from $22,150,947 for

the three months ended September 30, 2022 to $35,976,355 for the three months ended September 30, 2023.

The increase in cost of revenue

reflects the increase in period-to-period unit sales.

The following tables show the revenue, cost of

revenue and gross profit of our tobacco and cannabis vaping products (dollars in thousands).

For the Three Months Ended

March 31, 2022

September 30, 2022

Tobacco vaping products

1 unchanged sentence

For the Three Months Ended

March 31, 2023

September 30, 2023

Tobacco vaping products

1 unchanged sentence

Gross profit increased by $2,096,189, or 43.7%,

from $2,975,724 for the three months ended March 31, 2022 to $4,520,199 for the three months ended March 31, 2023, while our gross margin

increased from 15.7% to 18.7%.

from $4,792,103 for the three months ended September 30, 2022 to $6,888,292 for the three months ended September 30, 2023, while our gross

margin decreased from 17.8% to 16.1%.

The gross margin for tobacco vaping products remained constant.

The increase in gross margin for cannabis

vaping products was primarily due to (i) a change in product mix with more higher margin products being sold during the three months ended

March 31, 2023, and (ii) increase in sales volume that led to economies of scale.

For the Nine Months Ended March 31, 2022

Tobacco vaping products

Cannabis vaping products

For the Nine Months Ended March 31, 2023

Tobacco vaping products

Cannabis vaping products

Gross profit increased by $4,163,332, or 40.5%,

from $10,287,548 for the nine months ended March 31, 2022 to $14,450,880 for the nine months ended March 31, 2023, while our gross margin

increased from 15.5% to 17.4%.

The gross margin for tobacco vaping products remains constant.

The increase in gross margin for cannabis

vaping products was primarily due to (i) a lower margin on cannabis vaping products in the nine months ended March 31, 2022 as a result

of greater discounts in price offered as we commenced the cannabis business in late 2021 and our primary focus was on capturing market

of cannabis vaping products;

(ii) a change in product mix with more higher margin products being sold during the nine months ended March

31, 2023, and (iii) an increase in sales volume that led to economies of scale.

Operating Expenses

Operating expenses increased $4,110,857, or 106.2%,

from $3,871,403 for the three months ended March 31, 2022 to $7,982,260 for the three months ended March 31, 2023.

The decrease in gross margin for

cannabis vaping products was primarily due to (i) a new model of cannabis vaping product was launched in July 2023, that Aspire North

America offered discounts to clear the inventories of the older model that led to a drop in gross margin, and (ii) a change in product

mix with more lower margin products being sold during the three months ended September 30, 2023.

Operating Expenses

increased $10,191,154, or 108.4%, from $9,399,443 for the nine months ended March 31, 2022 to $19,590,597 for the nine months ended March

Operating expenses increased $1,792,594 or 29.8%, from $6,006,971 for

the three months ended September 30, 2022 to $7,799,565 for the three months ended September 30, 2023.

Our sales and marketing expenses mainly consist

1 unchanged sentence

Sales and marketing expenses decreased by $432,493,

or 28.4%, from $1,325,024 for the three months ended March 31, 2022 to $948,302 for the three months ended March 31, 2023.

Sales and marketing

expenses decreased by $425,353, or 11.2%, from $3,781,183 for the nine months ended March 31, 2022 to $3,355,830 for the nine months ended

March 31, 2023.

The decrease in sales and marketing expenses for both the three-month and nine-month periods ended March 31, 2023 was

primarily due to a reduction in our marketing campaign and trade shows for our cannabis vaping products.

Our general and administrative expenses mainly

consist of compensation and benefits, rental expense, professional fees and other administrative expenses.

General and administrative

expenses increased by $4,487,579, or 176.2%, from $2,546,379 for the three months ended March 31, 2022 to $7,033,958 for the three months

ended March 31, 2023.

The increase was primarily due to (i) an increase of $1.0 million for payroll and contract worker expenses as more

employees were hired and contract workers were engaged by us for expansion of our cannabis business and building our proposed manufacturing

plant, (ii) bad debt expense as allowance for doubtful accounts of $1.3 million recorded by Aspire North America on accounts under dispute

due to delayed shipment, and a direct write-off of doubtful accounts of $0.5 million, (iii) an increase in amortization expense of $0.8

million of intellectual properties transferred to us in September 2022, (iv) an increase in professional fees of $0.5 million incurred

for initial public offering purpose and (v) an increase in rental and warehouse expenses of $0.4 million incurred by us in connection

with the development of our proposed manufacturing facility in Los Angeles.

The increase in our expenses is not the result of inflation.

or 28.8%, from $1,501,156 for the three months ended September 30, 2022 to $1,068,663 for the three months ended September 30, 2023.

decrease in sales and marketing expenses for the three-month periods ended September 30, 2023 was primarily due to a reduction in our

marketing campaign and trade shows for our cannabis vaping products.

Our general and administrative expenses mainly consist of compensation

and benefits, rental expense, professional fees and other administrative expenses.

General and administrative expenses increased by $2,225,087,

or 49.4%, from $4,505,815 for the three months ended September 30, 2022 to $6,730,902 for the three months ended September 30, 2023.

increase was primarily due to (i) an increase of $0.9 million for payroll expenses as more employees were hired by us for expansion of

our cannabis business and building a manufacturing plant in Malaysia, (ii) an increase in professional fees of $0.9 million for expenses

incurred being a public company for the three months ended September 30, 2023, (iii) stock-based compensation expense of $1.0 million

incurred in the three months ended September 30, 2023 as compensation for management, employees and service providers, offset by a decrease

in sample expenses of $0.4 million as less samples were distributed during the three months ended September 30, 2023, a decrease in failed

units expenses of $0.4 million as there were no failed units during the three months ended September 30, 2023 and the increase in our

expenses is not the result of inflation.

Inflation in Hong Kong, where Aspire Science is located, was relatively stable.

General and administrative expenses increased

by $10,616,507, or 189.0%, from $5,618,260 for the nine months ended March 31, 2022 to $16,234,767 for the nine months ended March 31,

The increase was primarily due to (i) an increase of $3.0 million for payroll and contract worker expenses as more employees were

hired and contract workers were engaged by us for expansion of our cannabis business and building our proposed manufacturing plant, (ii)

bad debt expense as allowance for doubtful accounts of $1.3 million recorded by Aspire North America on accounts under dispute due to

delayed shipment, and a direct written off of doubtful accounts of $0.9 million, (iii) an increase in amortization expense of $1.5 million

of intellectual properties transferred to us in September 2022, (iv) an increase in rental and warehouse expenses of $1.1 million incurred

by us in connection with our plan to establish a manufacturing facility in Los Angeles, and (v) an increase in professional fees of $0.9

million incurred for initial public offering purpose.

The increase in our expenses in both the three-month and nine-month periods is not

the result of inflation.

Inflation in Hong Kong, was relatively stable.

The increase in expenses for our United States business results

from the growth of our business.

The cannabis vapor business commenced in late calendar 2021, and the increase in expenses resulted from

our growth relating to this increase in business.

However, inflationary pressures may affect our operations in the future.

of our public offering, we anticipate that our general and administrative expenses will significantly increase as a result of our being

a public corporation, including additional legal, audit and insurance expenses as well as expenses in maintaining our disclosure controls

and internal control over financial reporting.

Professional fees relating to our initial public offering were included in general and

administrative expenses during the three and nine months ended March 31, 2023 since the offering had not been completed by March 31, 2023.

The offering was completed in April 2023, and the financial statements for the year ending June 30, 2023 will treat these professional

fees of $0.9 million as a reduction of the proceeds of the offering and, accordingly, will be charged to additional paid-in capital.

Other income, net

Other expense(income), net

Other income, net includes interest income, interest

1 unchanged sentence

Interest income was $510 for the three months

ended March 31, 2022 and $978 for the three months ended March 31, 2023.

Interest income was $2,083 for the nine months ended March 31,

2022 and $77,789 for the nine months ended March 31, 2023.

Exchange gain, net increased by $592,340, or 865.7%,

from net exchange gain of $68,420 for the three months ended March 31, 2022 to net exchange gain of $660,760 for three months ended March

The increase in exchange gain was from Aspire Science, primarily resulting from the change in the exchange rate of the Hong

Kong Dollar to the U.S.

dollar from 7.7862 for the three months ended March 31, 2022 to 7.8388 for the three months ended March 31, 2022.

Exchange gain, net increased by $46,276, or 33.8%, from net exchange gain of $136,902 for the nine months ended March 31, 2022 to net

exchange gain of $183,178 for nine months ended March 31, 2023.

As a result of these factors, other income increased

by $529,321, from other income of $63,877 for the three months ended March 31, 2022 to other income of $593,198 for three months ended

March 31, 2023.

Other income decreased by $36,427, from other income of $188,367 for the nine months ended March 31, 2022 to other income

of $151,940 for nine months ended March 31, 2023.

Income taxes increased by $79,237, or 49.9%, from

$158,755 for the three months ended March 31, 2022 to $237,992 for the three months ended March 31, 2023.

Income taxes increased by $281,651

or 35.7%, from $788,348 for the nine months ended March 31, 2022 to $1,069,999 for the nine months ended March 31, 2023.

ended September 30, 2022 and $72,246 for the three months ended September 30, 2023.

Exchange loss(gain) changes by $504,455, or 100.7%,

from net exchange loss of $500,794 for the three months ended September 30, 2022 to net exchange gain of $3,661 for three months ended

September 30, 2023.

As a result of these factors, other expense(income),

net increased by $552,188, from other expense, net of $519,485 for the three months ended September 30, 2022 to other income, net of $32,703

for three months ended September 30, 2023.

Income taxes increased by $228,644, or 85.5%,

from $267,401 for the three months ended September 30, 2022 to $496,045 for the three months ended September 30, 2023.

We had a consolidated

net loss for both three months and nine months ended March 31, 2022 and 2023, which was the combined effect of a profit by Aspire Science

and a loss by Aspire North America.

net loss for both three month periods ended September 30, 2022 and 2023, which was the combined effect of a profit by Aspire Science and

a loss by Aspire North America and Ispire Malaysia.

The profit from Aspire Science resulted in a current tax expense.

The increase in valuation allowance

reflects our view that the taxable income in the future will not be sufficient to utilize the carryforward loss.

As a result of the foregoing, net loss increased

by $2,116,298, from net loss of $990,557, or $(0.02) per share (basic and diluted) for the three months ended March 31, 2022 to a net

loss of $3,106,855, or $(0.06) per share, for the three months ended March 31, 2023.

The results of our operations changed from net income

of $288,124, or $0.01 per share (basic and diluted) for the nine months ended March 31, 2022 to a net loss of $6,057,776, or $(0.12) per

share, for the nine months ended March 31, 2023.

The increase in

valuation allowance reflects our view that the taxable income in the future will not be sufficient to utilize the carryforward loss.

As a result of the foregoing, net loss decreased by $627,139, from

net loss of $2,001,754, or $(0.04) per share (basic and diluted) for the three months ended September 30, 2022 to a net loss of $1,374,615,

or $(0.03) per share, for the three months ended September 30, 2023.

Liquidity and Capital Resources

The following table summarizes our changes in

working capital from June 30, 2022 to March 31, 2023 (dollars in thousands).

working capital from June 30, 2023 to September 30, 2023 (dollars in thousands).

September 30,

Current Assets

2 unchanged sentences

The following table sets forth information as

to consolidated cash flow information for the nine months ended March 31, 2022 and 2023 (dollars in thousands).

Nine Months Ended

to consolidated cash flow information for the three months ended September 30, 2022 and 2023 (dollars in thousands).

Three Months Ended

September 30,

Consolidated cash flow data:

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash used in financing activities

Net decrease in cash and cash equivalents and restricted cash

Net cash flow used in operating activities for

the nine months ended March 31, 2022 of $24.0 million, reflected our income of $0.3 million, adjusted primarily by a decrease in accounts

payable of $13.3 million, an increase in inventories of $6.9 million and an increase in account receivable of $5.3 million.

Net increase (decrease) in cash and cash equivalents

Net cash flow provided by operating activities

for the nine months ended March 31, 2023 of $2.2 million, reflected our net loss of $6.1 million, adjusted primarily as follows:

receivable impairment of $2.2 million, a depreciation and amortization expense of $1.6 million, and an increase in accounts payable of

$13.7 million offset by an increase in accounts receivable of $9.3 million.

for the three months ended September 30, 2022 of $2.2 million, reflected our net loss of $2.0 million, adjusted primarily as follows:

an add-back of depreciation of right-of-use assets of $0.3 million, increase in accounts payable of $15.4 million, offset by an increase

in accounts receivable of $5.9 million, an increase in inventories of $4.8 million and a decrease in contract liabilities of $1.0 million.

Net cash flow used in operating activities for the three months ended

September 30, 2023 of $12.9 million, reflected our net loss of $1.4 million, adjusted primarily as follows:

an add-back of depreciation

of right-of-use assets of $0.3 million, an add-back of stock-based compensation expenses of $1.0 million, an add-back of accounts receivable

impairment of $0.2 million, a decrease in inventories of $1.9 million, a decrease of prepaid expenses and other current assets of $1.6

million, an increase in income tax payable of $0.5 million, offset by an increase in accounts receivable of $14.7 million and a decrease

in accounts payable of $2.5 million.

Net cash flow used in investing activities for

the nine months ended March 31, 2022 of $0.1 million reflected primarily the purchase of property, plant and equipment of $0.1 million.

the three months ended September 30, 2022 of $0.3 million reflected primarily purchase of property, plant and equipment of $0.3 million.

Net cash flow used in investing activities for

the nine months ended March 31, 2023 of $10.1 million reflected primarily purchase of short term investments of $9.6 million.

the three months ended September 30, 2023 of $0.8 million reflected primarily purchase of property, plant and equipment of $0.5 million

and acquisition of intangible assets of $0.3 million.

Net cash flow used in financing activities for

the nine months ended March 31, 2022 of $0.7 million reflected primarily advances from related parties of $1.7 million, offset by payment

to related parties of $1.8 million and payment made for dividends of $0.4 million.

the three months ended September 30, 2022 of $0.3 million reflected primarily advances to related parties of $0.1 million, and principal

portion of lease payment of $0.2 million.

Net cash flow used in financing activities for

the nine months ended March 31, 2023 of $42.6 million reflected primarily $40.5 million of repayment to related parties, $3.4 million

of payments made for dividend, offset by payment to related parties of $1.9 million.

To date, we have financed our operations primarily through cash flow

from operations and working capital loans from our major stockholders, who are our chief executive officer and his wife, when necessary.

the three months ended September 30, 2023 of $0.9 million reflected primarily advances to related parties of $0.7 million, and principal

portion of lease payment of $0.2 million.

To date, we have financed our operations primarily

through cash flow from operations and working capital loans from our major stockholders, who are our co-chief executive officer and his

wife, when necessary.

We plan to support our future operations primarily from cash generated from our operations and cash on hand.

We believe that our current

cash and cash flows provided by operating activities, and the net proceeds from our initial public offering of $18.5 million will be sufficient

to meet our working capital needs in the next 12 months.

If we experience an adverse operating environment or incur unanticipated capital

expenditure requirements, or if we decide to accelerate our growth, then additional financing may be required.

We cannot give any assurance

that additional financing will not be required or, if required, would be available on favorable terms if at all.

Such financing may include

the use of additional debt or the sale of additional equity securities.

Any financing which involves the sale of equity securities or

instruments that are convertible into equity securities could result in dilution to our stockholders which may be substantial.

believe that our current cash and cash flows provided by operating activities, and the net proceeds from our initial public offering of

$18.3 million will be sufficient to meet our working capital needs in the next 12 months.

If we experience an adverse operating environment

or incur unanticipated capital expenditure requirements, or if we decide to accelerate our growth, then additional financing may be required.

We cannot give any assurance that additional financing will not be required or, if required, would be available on favorable terms if

Such financing may include the use of additional debt or the sale of additional equity securities.

Any financing which involves

the sale of equity securities or instruments that are convertible into equity securities could result in dilution to our stockholders

which may be substantial.

The cash at bank held by our Hong Kong operating

4 unchanged sentences

Contractual Obligations

As of June 30 2022 and March 31 2023, we had contract

liabilities of $1,672,051 and $742,247, respectively.

These liabilities are advance deposits received from customers after an order has

As of June 30 2023 and September 30 2023, we had

contract liabilities of $988,556 and $1,290,061, respectively.

These liabilities are advance deposits received from customers after an

order has been placed.

We expect all of the contract liabilities to be settled in less than one year.

We have operating lease arrangements for office

premises for Hong Kong and California which are treated as right-of-use assets.

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 and are expensed over the lease term.

lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

and factory premises for Hong Kong, California and Malaysia, which are treated as right-of-use assets.

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 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 our right-of-use assets where

we are the lessee are presented as follow:

September 30,

Right-of-use assets

1 unchanged sentence

Lease liabilities – non-current

As of March 31, 2023, the maturities of our lease

liabilities (excluding short-term leases) are as follows:

As of September 30, 2023, the maturities of our

lease liabilities (excluding short-term leases) are as follows:

September 30,

Total future lease payments

10 unchanged sentences

We do not have off-balance sheet arrangements.

As a company with less than $1.235 billion in revenue for

our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act.

An emerging growth company may

take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.

provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the

assessment of the emerging growth company’s internal control over financial reporting.

As a company with less than $1.235 billion

in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act.

An emerging growth

company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.

These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in

the assessment of the emerging growth company’s internal control over financial reporting.

The JOBS Act also provides that an emerging

growth company does not need to comply with any new or revised financial accounting standards until such date that a private company

is otherwise required to comply with such new or revised accounting standards.

growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is

otherwise required to comply with such new or revised accounting standards.

We have elected to take advantage of such exemptions.

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis