Ispire Technology Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2026 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission file number: 001-41680 Ispire Technology Inc. (Exact name of registrant as specified in its charter) Delaware 93-1869878 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 19700 Magellan Drive Los Angeles , California 90502 (Address of principal executive offices) (Zip Code) (310) 742-9975 (Registrant’s telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, par value $0.0001 per share ISPR The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No As of May 7, 2026, there were 57,399,396 shares of common stock outstanding. ISPIRE TECHNOLOGY INC. TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and June 30, 2025 1 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended March 31, 2026 and 2025 2 Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit)/Equity for the three and nine months ended March 31, 2026 and 2025 3 Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2026 and 2025 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk 34 Item 4. Controls and Procedures 34 PART II - 2 OTHER INFORMATION 35 Item 1. Legal Proceedings 35 Item 1A. Risk Factors 35 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36 Item 3. Defaults upon Senior Securities 36 Item 4. Mine and Safety Disclosure 36 Item 5. Other Information 37 Item 6. Exhibits 37 i FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (the “Quarterly Report”), and any documents we incorporate by reference, contain, or may contain, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve significant risks and uncertainties. All statements contained in this Quarterly Report and in any exhibits, other than statements of historical facts, are forward-looking statements including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “may,” “will,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about: ● our goals and growth strategies; ● our expectations regarding demand for and market acceptance of our brand and platforms; ● our expectations regarding continued reductions in operating expenses and our ability to achieve positive cash flows; ● our future business development, results of operations and financial condition; ● the actual timing for and results of the PMTAs described herein, and other FDA review of our products in development ● our ability to successfully operate our manufacturing facility in Malaysia; ● our ability to establish material relationships with suppliers other than Shenzhen Yi Jia Technology Co., Limited (“Shenzhen Yi Jia”); ● the effect of regulations, both positive and negative, relating to the production, export, marketing and sale of vaping and nicotine pouch products in the United States, China, Malaysia and other countries; ● our ability to maintain and improve our infrastructure necessary to operate our business; ● competition in the vaping and nicotine pouch industry; ● the expected growth of, and trends in, the markets for our products and services in the markets in which jurisdictions that we sell our products; ● the effect of supply chain issues on our ability to manufacture and our ability and the ability of our distributors to distribute product; ● the development of a market for cannabis vaping products and our ability to market cannabis products to adult users; ii ● our ability to compete successfully in selling both tobacco and cannabis vapor products, the expected growth of, and trends in, the markets for our products and services in jurisdictions that we sell or plan to sell our products; ● government policies and regulations relating to our operations, including regulations relating to the sale and distribution of our vaping products and those relating to manufacturing operations; ● our ability to develop and maintain effective disclosure controls and procedures, and internal controls over financial reporting; ● our ability to comply with the continued listing standards of the Nasdaq Capital Market; ● our ability to attract and retain qualified senior management personnel and research and development staff; ● the volatility of our operating results and financial condition and the price of our common stock; ● the prospects of our IKE Tech LLC joint venture with Touch Point Worldwide Inc. d/b/a Berify and Chemular Inc; ● general economic and business condition in China and elsewhere; ● assumptions underlying or related to any of the foregoing; and ● other risks and uncertainties, including those listed in the “Risk Factors” section of this this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the SEC on September 15, 2025. These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, so you should not place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report or, in the case of any exhibits hereto, the date of those documents. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. These forward-looking statements involve risks and uncertainties that are subject to change based on various factors (many of which are beyond our control). We have included important factors in the cautionary statements included in this Quarterly Report that could cause actual future results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. You should read this Quarterly Report and the documents that we incorporate by reference with the understanding that our actual future results may be materially different from what we expect. All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. OTHER PERTINENT INFORMATION Unless the context requires otherwise, references in this Quarterly Report to “we,” “us,” “our,” the “Company,” “Ispire,” or similar terminology refer to Ispire Technology Inc. iii PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements ISPIRE TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In $USD, except share and per share data) March 31, 2026 June 30, 2025 Assets Current assets: Cash $ 18,033,652 $ 24,351,765 Restricted cash 50,000 - Accounts receivable, net 28,651,558 39,664,145 Inventories 5,480,044 6,647,970 Prepaid expenses and other current assets 3,523,741 2,244,505 Total current assets 55,738,995 72,908,385 Non-current assets: Accounts receivable, net of current portion - 7,367,158 Property, plant and equipment, net 2,665,534 2,952,800 Intangible assets, net 2,601,408 2,232,620 Right-of-use assets – operating leases 3,855,373 5,030,005 Other investment 2,000,000 2,000,000 Equity method investment 8,839,130 9,515,546 Other non-current assets 210,617 210,617 Total non-current assets 20,172,062 29,308,746 Total assets $ 75,911,057 $ 102,217,131 Liabilities and stockholders’ (deficit)/equity Current liabilities Accounts payable $ 5,005,033 $ 4,172,476 Accounts payable – related party 38,159,288 52,420,256 Contract liabilities 3,043,470 4,861,250 Accrued liabilities and other payables 6,003,509 8,099,991 Borrowing – current portion 1,092,052 1,146,766 Operating lease liabilities – current portion 1,546,770 1,838,815 Total current liabilities 54,850,122 72,539,554 Non-current liabilities: Amount due to a related party 35,000,000 25,000,000 Borrowing – net of current portion - 805,361 Operating lease liabilities – net of current portion 2,265,347 3,267,522 Total non-current liabilities 37,265,347 29,072,883 Total liabilities 92,115,469 101,612,437 Commitments and contingencies Stockholders’ (deficit)/equity: Common stock, par value $ 0.0001 per share; 140,000,000 shares authorized; 57,399,396 and 57,193,734 shares issued and outstanding as of March 31, 2026 and June 30, 2025 5,740 5,719 Treasury stock, at cost ( 60,488 ) ( 60,488 ) Additional paid-in capital 51,541,046 48,833,601 Accumulated deficit ( 67,450,024 ) ( 48,065,267 ) Accumulated other comprehensive loss ( 240,686 ) ( 108,871 ) Total stockholders’ (deficit)/equity ( 16,204,412 ) 604,694 Total liabilities and stockholders’ (deficit)/equity $ 75,911,057 $ 102,217,131 See notes to unaudited condensed consolidated financial statements. 1 ISPIRE TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In $USD, except share and per share data) Three Months Ended March 31, Nine Months Ended March 31, 2026 2025 2026 2025 Revenue $ 18,685,501 $ 26,190,725 $ 69,322,941 $ 107,356,898 Cost of revenue 16,694,576 21,414,820 58,710,643 87,184,044 Gross profit 1,990,925 4,775,905 10,612,298 20,172,854 Operating expenses: Sales and marketing expenses 1,091,907 1,656,527 4,133,079 6,710,438 Credit loss expenses 5,564,497 6,103,688 11,537,950 13,389,767 General and administrative expenses 4,818,256 7,601,131 13,995,180 23,281,014 Total Operating expenses 11,474,660 15,361,346 29,666,209 43,381,219 Loss from operations ( 9,483,735 ) ( 10,585,441 ) ( 19,053,911 ) ( 23,208,365 ) Other income (expense): Interest income 52,971 3,480 253,365 63,321 Interest expense ( 87,215 ) ( 35,646 ) ( 299,582 ) ( 60,183 ) Exchange (loss) gain, net ( 30,294 ) 24,341 269,745 ( 103,247 ) Other income (expense), net 202,697 ( 86,239 ) 215,688 ( 47,906 ) Total Other income (expense), net 138,159 ( 94,064 ) 439,216 ( 148,015 ) Loss before income taxes ( 9,345,576 ) ( 10,679,505 ) ( 18,614,695 ) ( 23,356,380 ) Income taxes ( 177,407 ) ( 176,990 ) ( 770,062 ) ( 1,093,774 ) Net loss $ ( 9,522,983 ) $ ( 10,856,495 ) $ ( 19,384,757 ) $ ( 24,450,154 ) Other comprehensive loss Foreign currency translation adjustments ( 10,490 ) ( 2,860 ) ( 131,815 ) ( 84,327 ) Comprehensive loss $ ( 9,533,473 ) $ ( 10,859,355 ) $ ( 19,516,572 ) $ ( 24,534,481 ) Net loss per share Basic and diluted $ ( 0.17 ) $ ( 0.19 ) $ ( 0.34 ) $ ( 0.43 ) Weighted average shares outstanding: Basic and diluted 57,293,826 57,003,488 57,269,726 56,752,454 See notes to unaudited condensed consolidated financial statements. 2 ISPIRE TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT)/EQUITY (In $USD, except share and per share data) Common Stock Additional Accumulated Other Total Number of Shares Amount Treasury Stock Paid-in Capital Accumulated Deficit Comprehensive Loss Stockholders’ (Deficit)/Equity Balance, January 1, 2026 57,289,864 $ 5,729 $ ( 105,489 ) $ 50,593,580 $ ( 57,927,041 ) $ ( 230,196 ) $ ( 7,663,417 ) Net loss - - - - ( 9,522,983 ) - ( 9,522,983 ) Issuance of common stock for equity incentives 126,578 13 - 234,991 - - 235,004 Stock based compensation expenses - - - 757,474 - - 757,474 Cancellation of common stock ( 17,046 ) ( 2 ) 45,001 ( 44,999 ) - - - Foreign currency translation adjustment - - - - - ( 10,490 ) ( 10,490 ) Balance, March 31, 2026 57,399,396 $ 5,740 $ ( 60,488 ) $ 51,541,046 $ ( 67,450,024 ) $ ( 240,686 ) $ ( 16,204,412 ) Balance, January 1, 2025 56,677,982 $ 5,668 $ - $ 46,670,244 $ ( 22,418,700 ) $ ( 23,124 ) $ 24,234,088 Net loss - - - - ( 10,856,495 ) - ( 10,856,495 ) Issuance of common stock for equity incentives 458,473 46 - 126,732 - - 126,778 Stock based compensation expenses - - - 1,344,099 - - 1,344,099 Common stock repurchase - - ( 60,488 ) - - - ( 60,488 ) Foreign currency translation adjustment - - - - - ( 2,860 ) ( 2,860 ) Balance, March 31, 2025 57,136,455 $ 5,714 $ ( 60,488 ) $ 48,141,075 $ ( 33,275,195 ) $ ( 25,984 ) $ 14,785,122 Common Stock Additional Accumulated Other Total Number of Shares Amount Treasury Stock Paid-in Capital Accumulated Deficit Comprehensive (Loss)/Income Stockholders’ Equity/(Deficit) Balance, July 1, 2025 57,193,734 $ 5,719 $ ( 60,488 ) $ 48,833,601 $ ( 48,065,267 ) $ ( 108,871 ) $ 604,694 Net loss - - - - ( 19,384,757 ) - ( 19,384,757 ) Issuance of common stock for equity incentives 222,708 23 - 475,965 - - 475,988 Stock based compensation expenses - - - 2,276,479 - - 2,276,479 Common stock repurchase - - ( 45,001 ) - - - ( 45,001 ) Cancellation of common stock ( 17,046 ) ( 2 ) 45,001 ( 44,999 ) - - - Foreign currency translation adjustment - - - - - ( 131,815 ) ( 131,815 ) Balance, March 31, 2026 57,399,396 $ 5,740 $ ( 60,488 ) $ 51,541,046 $ ( 67,450,024 ) $ ( 240,686 ) $ ( 16,204,412 ) Balance, July 1, 2024 56,470,636 $ 5,647 $ - $ 43,217,391 $ ( 8,825,041 ) $ 58,343 $ 34,456,340 Net loss - - - - ( 24,450,154 ) - ( 24,450,154 ) Issuance of common stock for equity incentives 665,819 67 - 1,281,532 - - 1,281,599 Stock based compensation expenses - - - 3,642,152 - - 3,642,152 Common stock repurchase - - ( 60,488 ) - - - ( 60,488 ) Foreign currency translation adjustment - - - - - ( 84,327 ) ( 84,327 ) Balance, March 31, 2025 57,136,455 $ 5,714 $ ( 60,488 ) $ 48,141,075 $ ( 33,275,195 ) $ ( 25,984 ) $ 14,785,122 See notes to unaudited condensed consolidated financial statements. 3 ISPIRE TECHNOLOGY INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In $USD, except share and per share data) Nine Months Ended March 31, 2026 2025 Net loss $ ( 19,384,757 ) $ ( 24,450,154 ) Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: Depreciation and amortization 691,894 592,280 Credit loss expenses 11,537,950 13,389,767 Right-of-use assets amortization 1,172,118 1,001,101 Stock-based compensation expenses 2,752,467 4,923,751 Inventory impairment 2,386,751 73,692 Loss from equity method investment 676,416 407,028 Debt issuance cost amortization 96,937 - Changes in operating assets and liabilities: Accounts receivable 6,841,795 ( 14,080,837 ) Inventories ( 1,218,825 ) ( 1,485,433 ) Prepaid expenses and other current assets ( 1,332,448 ) ( 715,969 ) Accounts payable and accounts payable – related party ( 3,428,411 ) 10,962,439 Contract liabilities ( 1,817,780 ) ( 756,872 ) Accrued liabilities and other payables ( 876,774 ) ( 969,068 ) Operating lease liabilities ( 1,291,706 ) ( 961,244 ) Net cash used in operating activities ( 3,194,373 ) ( 12,069,519 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 324,225 ) ( 140,956 ) Capitalized costs for patents ( 449,191 ) ( 781,254 ) Investment in joint venture ( 1,298,311 ) ( 767,285 ) Net cash used in investing activities ( 2,071,727 ) ( 1,689,495 ) Cash flows from financing activities: Common stock repurchase ( 45,001 ) ( 60,488 ) Proceeds from long term debt - 2,339,362 Repayment of borrowing ( 957,012 ) - Net cash (used in)/provided by financing activities ( 1,002,013 ) 2,278,874 Net decrease in cash ( 6,268,113 ) ( 11,480,140 ) Cash – beginning of period 24,351,765 35,071,294 Cash and restricted cash– end of period $ 18,083,652 $ 23,591,154 Reconciliation of cash and restricted cash Cash 18,033,652 23,518,560 Restricted cash 50,000 72,594 Total cash and restricted cash $ 18,083,652 $ 23,591,154 Supplemental non-cash investing and financing activities Reclassification of accounts receivable – noncurrent to accounts receivable $ 6,934,364 $ - Reclassification of accounts payable – related party to amount due to a related party $ 10,000,000 $ - Leased assets obtained in exchange for operating lease liabilities $ - $ 2,771,082 Unpaid long term investment in accrued liabilities and other payables $ - $ 8,232,715 Supplemental disclosures Cash paid for income taxes $ 1,614,273 $ 1,413,533 Cash paid for interest $ 299,582 $ 60,183 See notes to unaudited condensed consolidated financial statements. 4 ISPIRE TECHNOLOGY INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Ispire Technology Inc. (the “Company” or “Ispire”) 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 is the chief executive officer of both companies. As of March 31, 2026, the chief executive officer and his wife, being directors of both companies, owned 66.5 % and 5.0 % of the equity of Aspire Global, respectively. As of March 31, 2026, they owned 57.9 % and 4.4 % of the equity of the Company, respectively. On July 29, 2022, Aspire Global transferred 100 % of the equity interest in Aspire North America to the Company. On the same day, Aspire Holdings transferred 100 % of the equity of Aspire Science to Ispire International. At the time of transfer of the equity in Aspire North America and Aspire Science, 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. In September 2023, the Company established a wholly-owned subsidiary, Ispire Malaysia Sdn Bhd (“Ispire Malaysia”) under the laws of the Federation of Malaysia, in order to establish manufacturing operations in Southeast Asia. Ispire Malaysia was formed by Tuanfang Liu, the Company’s Chairman and Co-Chief Executive Officer on August 2, 2023, and assigned to the Company on September 22, 2023, at a consideration of 100 Malaysian ringgits, equivalent to USD 21 . In July 2024, the Company established a wholly-owned subsidiary, Aspire AME Electronic Cigarettes Trading LLC (“Ispire UAE”) under the laws of the United Arab Emirates (“UAE”), in order to establish sales and marketing in the UAE. In October 2024, the Company established a wholly-owned subsidiary, Magellan Trading LLC (“Magellan Trading”) incorporated under the laws of the State of California to assist in operations and logistics for the Company. In January 2025, the Company established a wholly-owned subsidiary, Ispire Products UK LTD (“Ispire UK”) incorporated under the laws of England and Wales to assist in sales and marketing for the Company. Ispire UK was dissolved in October 2025. In May 2025, the Company established a wholly-owned subsidiary, Ispire Holdings LLC (“Ispire Holdings”) incorporated under the laws of the State of Delaware to assist in administration for the Company. In June 2025, the Company established a wholly-owned subsidiary, Ispire Ike Holdings LLC (“Ispire Ike Holdings”) incorporated under the laws of the State of Delaware to assist in administration for the Company. 5 The following table sets forth information concerning the Company and its subsidiaries as of March 31, 2026: 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 % Research and Development, Sales and Marketing Aspire Science December 9, 2016 Hong Kong 100 % Sales and Marketing Ispire Malaysia August 2, 2023 Malaysia 100 % Manufacturing, Sales and Marketing Ispire Global Products LLC January 19, 2024 Delaware 100 % Sales and Marketing Aspire AME Electronic Cigarettes Trading LLC July 19, 2024 UAE 100 % Sales and Marketing Magellan Trading LLC October 1, 2024 California 100 % Operations and Logistics Ispire Holdings LLC May 20, 2025 Delaware 100 % Holding Company Ispire Ike Holdings LLC June 10, 2025 Delaware 100 % Holding Company NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s consolidated financial position as of March 31, 2026 and the results of operations for the three and nine months ended March 31, 2026 and 2025. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) and accordingly do not include all of the disclosures normally made in the Company’s annual consolidated financial statements. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended June 30, 2025. The unaudited condensed consolidated balance sheet as of June 30, 2025 has been derived from the audited consolidated financial statements at such date. The results of operations for the three and nine months ended March 31, 2026 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the year ending June 30, 2026. Use of significant estimates The preparation of the unaudited condensed 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 credit losses and revenue recognition. Actual results could differ from those estimates. 6 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. 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. The carrying value of certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other receivables, accounts payable, accounts payable related party, contract liabilities, accrued liabilities and other payables and due to related parties, approximates their fair value because of their short-term maturity. Allowance for credit losses The Company adopted Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” on July 1, 2023, under the modified retrospective method of adoption. The Company uses roll rate method or evaluates the aggregation of risk characteristics of a receivable pool to develop credit losses estimate. In establishing the required allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, economic environment, and the credit history and financial conditions of the customers. Management reviews its receivables on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. 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 there is an indicator that certain inventory costs may exceed expected market value, 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. The Company records an allowance for slow moving and potentially obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and an estimate of expected sellable life of the inventory. The Company periodically reviews inventory to identify slow moving inventories and compares the forecast sales with the quantities and expected sellable life of inventory. Any inventories identified during this process are reserved for at rates based upon management’s judgment and historical rates. The quantity thresholds and reserve rates are based on management’s judgment and knowledge of current and projected demand. The reserve estimates may, therefore, be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment, impact its ability to sell potentially obsolete inventory. The write-down of inventories was $ 849,313 and zero for the three months ended March 31, 2026 and 2025, respectively. The write-down of inventories was $ 2,386,751 and $ 73,692 for the nine months ended March 31, 2026 and 2025, respectively. 7 Intangible assets, net Intangible assets refer to capitalized external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent license rights. The Company expenses costs associated with maintaining patents subsequent to their issuance in the period incurred. Capitalized patent costs are amortized on a straight-line basis over estimated useful lives of 15 – 20 years, which are based on the length of the license agreements as the Company expects to receive economic benefits over that time. The Company assesses the potential impairment to capitalized patent costs when events or changes in circumstances indicate that the carrying amount of our patent portfolio may not be recoverable. $ 156,349 and $ 0 of patent fees were capitalized during the three months ended March 31, 2026 and 2025. $ 449,191 and $ 781,254 of patent fees were capitalized during the nine months ended March 31, 2026 and 2025. The amortization of the intangible assets was $ 28,978 and $ 21,627 for the three months ended March 31, 2026 and 2025 respectively. The amortization of the intangible assets was $ 80,403 and $ 58,180 for the nine months ended March 31, 2026 and 2025 respectively. The amortization expenses were included in the general and administrative expenses. Revenue recognition The Company sells its vaping products to customers and recognizes revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers. Many customers are distributors that resell the Company’s products in various geographic regions. The performance obligations are for the Company to transfer the title and control of the goods to a customer for a determined price. Each order is considered a separate contract with a single performance obligation. 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 sales returns. These sales returns 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 Company offers different payment terms to different customers. For nicotine vaping products, the general payment term is a deposit of 30 % of sales amount upon placing order, and the payment of the remaining 70 % to be made before shipment. For cannabis vaping products, a tailored payment term is designed for each customer, based on the business relationship, order size and other considerations. All contract liabilities at the beginning of the period were recognized as revenues in the reporting period. The Company offers a thirty-day warranty. The warranty is an assurance-type warranty, and it offers replacement of products in case the products sold do not function as expected. In certain sales contracts, a right of return is offered. With a right of return, a customer is given the right to return the products if they are not satisfied with the product, and a credit would be given. The Company has a very low rate of return in history and a return reserve is accrued based on historical return rate and the management’s judgement. The Company has minimal incremental costs of obtaining a contract and are expensed when incurred. Sales taxes, which are sales and use or other similar taxes collected from the customer and remitted to the applicable taxing authority by the Company in accordance with applicable law, are excluded from revenue. Disaggregated Revenue 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 by region. The net sales disaggregated by region for the three and nine months ended March 31, 2026 and 2025, were as follows: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 Europe $ 11,801,318 $ 13,235,728 $ 47,283,903 $ 59,174,779 North America (the U.S. and Canada) 3,295,861 8,788,476 10,371,364 29,441,624 Asia Pacific (excluding PRC) 2,774,049 2,965,023 7,673,386 10,453,766 Others 814,273 1,201,498 3,994,288 8,286,729 Total $ 18,685,501 $ 26,190,725 $ 69,322,941 $ 107,356,898 8 Cost of revenue Cost of revenue for the three and nine months ended March 31, 2026 and 2025 consisted primarily of the cost of purchasing vaping products, freight-in cost, which were mostly purchased from a related party, see Note 11, and inventory impairment. Stock-based compensation The Company measures and recognizes compensation expenses for stock-based payment awards, including stock options, restricted stock granted to directors and advisors, and restricted stock units (“RSUs”) granted to employees, based on the grant date fair value of the awards. The Company engages a third-party valuer to assist in determining the fair value of stock options using the binomial option pricing model, with significant assumption of exercise multiple, expected volatility, risk-free interest rate and expected dividend yield. The fair value of RSUs is measured on the grant date based on the closing market price of the Company’s common stock. The stock-based payment awards typically include time-based vesting conditions, however, certain of the Company’s stock-based payment awards may include performance-based vesting conditions. For stock-based payment awards with time-based vesting conditions, the resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and three years for RSUs. Stock-based compensation expense is recognized on a straight-line basis over the period during which services are provided in exchange for the award. For stock-based payment awards with performance-based vesting conditions, the Company will estimate the probability that the performance condition will be met at each reporting date. Stock-based compensation expense is only recognized for stock-based payment awards that are probable of vesting. Ultimately, the cumulative stock-based compensation expense recognized by the Company is the grant date fair value of the awards where the performance conditions have been met and the awards have vested. Stock-based compensation expense is recorded in the sales and marketing expense and general and administrative expense in the unaudited condensed consolidated statements of operations. The Company recognizes forfeitures of stock-based payment awards upon occurrence. 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. Potentially dilutive shares could dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been antidilutive for the nine months ended March 31, 2026 and 2025. Potentially dilutive shares were as follows: As of March 31, As of March 31, Dilutive securities: 2026 2025 Share options 1,543,750 2,302,709 Unvested restricted stock units 582,980 669,993 Warrants 173,211 173,211 Total 2,299,941 3,145,913 9 Segment reporting Based on the criteria established by ASC 280, and ASU 2023-07 that Company adopted during the year ended June 30, 2025, the Company’s chief operating decision maker (“CODM”) has been identified as its Co-Chief Executive Officers , who review the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. Therefore, no geographical segments are presented. For the three and nine months ended March 31, 2026 and 2025, the reportable segment revenue, segment profit or loss and significant segment expenses are the same as unaudited condensed consolidated comprehensive loss statement. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODMs are Mr. Tuanfang Liu, the Co-Chief Executive Officer and Chairman, and Mr. Michael Wang, the Co-Chief Executive Officer. The Company’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but not limited to, customer base, homogeneity of products and technology. The Company’s operating segment is based on such organizational structure and information reviewed by the Company’s CODM to evaluate the operating segment results. The Company has internal reporting of revenue, cost and expenses by nature as a whole. Hence, the Company has only one operating segment. The accounting policies of the single segment are the same as described in the significant accounting policies. The CODM assesses performance for the single segment and decides how to allocate resources based on net loss that also is reported on the unaudited condensed consolidated statements of comprehensive loss as consolidated net loss. The measure of the single segment assets is reported on the unaudited condensed consolidated balance sheets as total consolidated assets. The CODM reviews revenues and expenses at the consolidated level as disclosed in the Company’s unaudited condensed consolidated statements of comprehensive loss and uses net loss to evaluate return on assets and to monitor budget versus actual results and in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis and the monitoring of budgeted versus actual results are used in assessing the segment’s performance and in establishing management’s compensation. 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 for all accounting standards described below, if applicable. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. The adoption of the amendment will occur on a prospective basis. The amendments in this ASU will be effective for public business entities on the effective date of the SEC’s removal of the related disclosures from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the amendments will not become effective for any entity. The Company is currently evaluating the impacts of the provisions of ASU 2023-06. 10 In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for public business entities for annual periods beginning after December 15, 2024, and for private entities for annual periods beginning after December 15, 2025, on a prospective basis. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), to improve the disclosures about an entity’s expenses. In January 2025, the FASB issued ASU 2025-01 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Upon adoption, the Company will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. The standard can be applied either prospectively or retrospectively. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), to address challenges encountered when applying the guidance in Topic 326, Financial Instruments—Credit Losses. The amendment provides (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The standard can be applied prospectively. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures. In May 2025, the FASB issued ASU No. 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The amendments in this update revise the Master Glossary definition of the term performance condition for share-based consideration payable to a customer. The amendments in this update permit a grantor to apply the new guidance on either a modified retrospective or a retrospective basis. The amendments in this update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). The amendments in this update include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures. 11 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. E-cigarette regulation Regulation regarding e-cigarettes 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 and regulations in countries and regions that our major customers are 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 Food and Drug Administration (“FDA”). For ENDS products that were on the U.S. market on or before August 8, 2016, a PMTA was required to be submitted to the FDA before September 9, 2020; for ENDS products that were not on the U.S. market prior to August 8, 2016, and for which a PMTA was not filed before September 9, 2020, a PMTA premarket authorization issued by FDA 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, FDA 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. The Company cannot predict what action states will take or the nature and amount of taxes they may impose. However, to 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 for products sold in Europe. The sale of cannabis vaping products is illegal in the European Union and the United Kingdom. 12 Customer and Supplier Concentration (a) Customers For the three and nine months ended March 31, 2026 and 2025, the Company’s major customers, who accounted for more than 10% of the Company’s consolidated revenue, were as follows: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 Major Customers Customer A 23 % 23 % 29 % 24 % Customer B 19 % * 17 % * Customer C 14 % * * * * Represented less than 10% of consolidated revenue. (b) Suppliers For the three months and nine ended March 31, 2026 and 2025, the Company’s suppliers, who accounted for more than 10% of the Company’s total purchases, were as follows: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 Major Suppliers Supplier D 84 % 87 % 91 % 93 % (1) Major supplier D is Shenzhen Yi Jia, a Chinese company that is 95 % owned by the Company’s co-chief executive officer and principal stockholder. See Note 11. Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and accounts receivable. The Company maintains its cash in financial institutions. Accounts at United States financial institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 . Accounts at Malaysian financial institutions are insured by the Perbadanan Insurans Deposit Malaysia (“PIDM”) up to RM 250,000 . The Hong Kong Deposit Protection Board pays compensation up to a limit of Hong Kong Dollar (“HKD”) 800,000 . The Company may carry cash balances at financial institutions in excess of the insured limits. The amount in excess of the deposit insurance as of March 31, 2026 and June 30, 2025 was $ 17,716,474 and $ 23,939,618 . The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. As of March 31, 2026 and June 30, 2025, the Company’s customers, whose accounts receivable balances accounted for more than 10% of the Company’s total accounts receivable, net, were as follows: As of March 31, As of June 30, Customers 2026 2025 E 16 % 17 % F 13 % 16 % 13 NOTE 3. CASH AND RESTRICTED CASH Below is a breakdown of the Company’s cash balances in banks as of March 31, 2026 and June 30, 2025, both by geography and by currencies (translated into U.S. dollars): As of March 31, As of June 30, By Geography: 2026 2025 Cash in HK $ 17,520,879 $ 23,336,668 Cash in U.S. 152,345 824,852 Cash in Malaysia 360,428 190,245 Total $ 18,033,652 $ 24,351,765 By Currency: USD $ 8,006,142 $ 14,675,591 RM 190,201 101,743 HKD 74,028 139,691 EUR 12,211 11,097 GBP 23,130 24,091 RMB 9,727,940 9,399,552 Total $ 18,033,652 $ 24,351,765 “HKD” refers to Hong Kong dollars, “GBP” refers to British pounds, “EUR” refers to Euros, “RM” refers to Malaysia ringgit, and “RMB” refers to Renminbi. As of March 31, 2026 and June 30, 2025, there was restricted cash totaling $ 50,000 and $0 , respectively, and was included in the U.S. in USD. These amounts are excluded from the cash and restricted cash totals presented in the table above. It represents a collateral account at a bank for standby letter of credit as required by the customs department. NOTE 4. ACCOUNTS RECEIVABLE, NET As of March 31, 2026 and June 30, 2025, accounts receivable consisted of the following: As of March 31, As of June 30, 2026 2025 Accounts receivable – gross $ 50,151,620 $ 65,002,773 Allowance for credit losses ( 21,500,062 ) ( 17,971,470 ) Accounts receivable, net $ 28,651,558 $ 47,031,303 The Company recorded $ 5,564,497 and $ 6,103,688 credit loss expenses for the three months ended March 31, 2026 and 2025, respectively. The Company recorded $ 11,537,950 and $ 13,389,767 credit loss expenses for the nine months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026 and 2025, the Company wrote off accounts receivable against allowance for credit losses of $ 4,928,756 and $ 2,823,560 , respectively. For the nine months ended March 31, 2026 and 2025, the Company wrote off accounts receivable against allowance for credit losses of $ 8,009,358 and $ 4,689,765 , respectively. As of March 31, 2026, there were $ 6,934,364 accounts receivable – noncurrent reclassified to accounts receivable as its payment term is within one year . As of June 30, 2025, there were $ 7,367,158 accounts receivable reclassified to accounts receivable – noncurrent due to payment term extension arrangements with customers. Activity in the allowance for credit losses is below: Nine Months Ended March 31, 2026 2025 Balance at July 1 $ 17,971,470 $ 5,885,238 Provision for expected losses 11,537,950 13,389,767 Write-offs charged against the allowance ( 8,009,358 ) ( 4,689,765 ) Balance at March 31 21,500,062 14,585,240 14 NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS As of March 31, 2026 and June 30, 2025, prepaid expenses and other current assets consisted of the following: As of March 31, As of June 30, 2026 2025 Prepayment for inventory purchases $ 1,195,213 $ 1,133,083 Prepayments 126,301 270,545 Other receivable 777,224 322,690 Deposits paid 256,995 194,390 Prepaid provisional tax 1,168,008 323,797 Total $ 3,523,741 $ 2,244,505 NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET As of March 31, 2026 and June 30, 2025, property, plant and equipment consisted of the following: As of March 31, As of June 30, 2026 2025 Leasehold improvements $ 816,894 $ 817,327 Office and other equipment 1,655,748 1,648,733 Furniture and fixtures 905,271 877,685 Construction-in-progress 1,184,976 894,919 4,562,889 4,238,664 Less: accumulated depreciation ( 1,897,355 ) ( 1,285,864 ) Total $ 2,665,534 $ 2,952,800 For the three months ended March 31, 2026 and 2025, depreciation expense amounted to $ 181,674 and $ 177,328 , respectively. For the nine months ended March 31, 2026 and 2025, depreciation expense amounted to $ 611,491 and $ 534,100 , respectively. Construction-in-progress refers to the office and production plant that are under construction in Malaysia, which are expected to be put into use during fiscal year 2026. NOTE 7. EQUITY METHOD INVESTMENT On April 5, 2024, Aspire North America entered into a capital contribution, subscription, and joint venture agreement with several other parties. Pursuant to joint venture agreement, the parties created a legal entity, IKE Tech LLC (“IKE”), whose business is licensing, owning, operating and developing an industry-standard age-verification solution for vapor (e-cigarette) devices in the U.S. market as the related planned submission of PMTA applications that seek FDA marketing orders for cutting-edge technologies across the U.S. e-cigarette market. Ispire contributed $ 1 million to IKE in cash for funding its operating activities and entered into a binding commitment to make an additional capital contribution to IKE in the aggregate amount of up to $ 9 million. In exchange for Ispire’s total investment of $ 10 million, IKE issued to Ispire membership interests in an aggregate amount initially equal to forty percent ( 40 %) of the membership interests in IKE. As of March 31, 2026 and June 30, 2025, the investment in joint venture accounted for under the equity method amounted to $ 8,839,130 and $ 9,515,546 , respectively. As of March 31, 2026, the Company noticed no indicator of impairment regarding the investment. For the three months ended March 31, 2026 and 2025, the Company’s share of the joint venture’s net loss was $ 290,083 and $ 230,360 , respectively. For the nine months ended March 31, 2026 and 2025, the Company’s share of the joint venture’s net loss was $ 676,416 and $ 407,028 , respectively. The loss was included in “other income (expense), net” in the unaudited condensed consolidated statements of operations and comprehensive loss. 15 The tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company: As of March 31, As of June 30, 2026 2025 Current assets $ 18,743,469 $ 20,583,827 Noncurrent assets 3,501,721 2,568,283 Current liabilities 1,062,250 278,128 Equity 21,182,940 22,873,982 Nine Months Ended March 31, 2026 2025 Net revenue $ - $ - Gross profit (loss) - - Loss from operations 1,691,041 1,017,570 Net loss 1,691,041 1,017,570 NOTE 8. CONTRACT LIABILITIES As of March 31, 2026 and June 30, 2025, the Company had total contract liabilities of $ 3,043,470 and $ 4,861,250 , respectively. These liabilities are advance deposits received from customers after an order has been placed. The decrease in the balance at March 31, 2026 was due to less orders on hand on that date. The amount of revenue recognized in the nine months ended March 31, 2026, that was included in the opening contract liability balance was $ 3,644,391 . Changes in the contract liabilities is below: Nine Months Ended March 31, 2026 2025 Balance at July 1 $ 4,861,250 $ 2,218,166 Contract liabilities recognized related to advanced deposits 32,738,937 23,052,449 Revenue recognized in current period ( 34,556,717 ) ( 23,387,872 ) Balance at March 31 3,043,470 1,882,743 NOTE 9. LEASES The Company has operating lease arrangements for office premises in Hong Kong, California and Malaysia. 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 unaudited condensed 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 and lease liabilities where the Company is the lessee are presented as follow: As of As of March 31, 2026 June 30, 2025 Operating lease right-of-use assets $ 3,855,373 $ 5,030,005 Operating lease liabilities – current $ 1,546,770 $ 1,838,815 Operating lease liabilities – non-current 2,265,347 3,267,522 Total $ 3,812,117 $ 5,106,337 The Company had no impairment of operating lease right-of-use assets during the three and nine months ended March 31, 2026 and 2025. 16 As of March 31, 2026, the maturities of our lease liabilities (excluding short-term leases) are as follows: As of March 31, 2026 April 1, 2026 to June 30, 2026 $ 497,887 July 1, 2026 to June 30, 2027 1,585,914 July 1, 2027 to June 30, 2028 779,653 July 1, 2028 to June 30, 2029 698,977 July 1, 2029 to June 30, 2030 465,985 Total future lease payments 4,028,416 Less: imputed interest ( 216,299 ) Total lease liabilities $ 3,812,117 The Company incurred lease costs, which include the payment of short-term leases, of $ 560,678 and $ 434,935 on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2026 and 2025, respectively. The Company incurred lease costs, which include the payment of short-term leases, of $ 1,661,331 and $ 1,200,668 on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss for the nine months ended March 31, 2026 and 2025, respectively. The Company made payments of $ 570,488 and $ 440,173 under the lease agreements during the three months ended March 31, 2026 and 2025, respectively. The Company made payments of $ 1,630,465 and $ 1,160,813 under the lease agreements during the nine months ended March 31, 2026 and 2025, respectively. The weighted-average remaining lease term related to the Company’s lease liabilities as of March 31, 2026 and June 30, 2025 was 3.0 years and 3.4 years, respectively. The discount rate related to the Company’s lease liabilities as of March 31, 2026 and June 30, 2025 was 6.1 % and 6.4 %, respectively. 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. NOTE 10. ACCRUED LIABILITIES AND OTHER PAYABLES As of March 31, 2026 and June 30, 2025, accrued liabilities and other payables consisted of the following: As of March 31, As of June 30, 2026 2025 Joint venture investment payable $ 4,542,863 $ 5,841,174 Other payables 132,277 502,669 Accrued salaries and related benefits 73,734 372,294 Accrued expenses 875,449 1,180,982 Reserve for product returns 378,236 201,922 Other tax payable 950 950 Total $ 6,003,509 $ 8,099,991 Joint venture investment payable refers to payable to IKE, which is a related party, please see Note 7 and Note 11 for details. 17 NOTE 11. 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 Co-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 an entity wholly owned and controlled by the Company’s Chairman. - Aspire Global is a company controlled by the Chairman of the Company. - Aspire International Hong Kong Limited is a wholly-owned subsidiary of Aspire Global. - Shenzhen Yi Jia, a Chinese company that is 95% owned by the Company’s Chairman and 5% by the Chairman’s cousin. - IKE Tech LLC, a joint venture in which the Company has a 40% membership interest. - Jin Wu Health Limited (“Jin Wu”), a joint venture in which the Company has a 49% equity interest. 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. As of March 31, 2026, Mr. Liu and Ms. Zhu beneficially own 66.5 % and 5.0 %, respectively, of the outstanding shares of Aspire Global. As of March 31, 2026, Mr. Liu and Ms. Zhu beneficially own 57.9 % and 4.4 %, respectively, of the outstanding shares of the Company. c) For the three months ended March 31, 2026 and 2025, the majority of the Company’s tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia. As of March 31, 2026 and June 30, 2025, the accounts payable – related party were $ 38,159,288 and $ 52,420,256 , respectively, which was payable to Shenzhen Yi Jia. There are no fixed payment terms regarding these balances, and they are classified as current liabilities. For the three months ended March 31, 2026 and 2025, the purchases from Shenzhen Yi Jia were $ 14,008,888 and $ 17,951,993 , respectively. For the nine months ended March 31, 2026 and 2025, the purchases from Shenzhen Yi Jia were $ 52,605,290 and $ 79,510,476 , respectively. d) The amount due to a related party (non-current) balances at March 31, 2026 and June 30, 2025 represent amounts due to Shenzhen Yi Jia of $ 35,000,000 and $ 25,000,000 , respectively. These balances were reclassified from accounts payable – related party as Shenzhen Yi Jia agreed not to seek repayment of this balance for twelve months starting from May 9, 2026. The balances are non-interest bearing and unsecured. e) As of March 31, 2026 and June 30, 2025, the Company had total accounts receivable of $ 399,182 and $ 75,147 due from IKE. For the three months ended March 31, 2026 and 2025, the Company recorded $ 166,615 and $ 33,221 in other income from IKE from charging administrative fees. For the nine months ended March 31, 2026 and 2025, the Company recorded $ 288,829 and $ 105,293 in other income from IKE from charging administrative fees. NOTE 12. INCOME TAXES For the three and nine months ended March 31, 2026 and 2025 loss before income taxes consists of: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 HK $ 1,195,873 $ 1,083,440 $ 4,978,838 $ 6,616,549 U.S. ( 9,817,528 ) ( 11,744,739 ) ( 21,653,578 ) ( 28,948,956 ) Malaysia ( 723,921 ) ( 18,206 ) ( 1,939,955 ) ( 1,023,973 ) Total $ ( 9,345,576 ) $ ( 10,679,505 ) $ ( 18,614,695 ) $ ( 23,356,380 ) 18 Income taxes recorded for the three and nine months ended March 31, 2026 and 2025 , were estimated using the discrete method. Income taxes are based on the Company’s financial results through the end of the period, as well as the related change in the valuation allowance on deferred tax assets. The Company is unable to estimate the annual effective tax rate with sufficient precision for purposes of the effective tax rate method, which requires the Company to consider a projection of full-year income and the expected change in the valuation allowance. The estimated annual effective tax rate method was not reliable due to its sensitivity to small changes to forecasted annual pre-tax earnings and the effect of the valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. As a result, the Company determined that using the discrete method is more appropriate than using the annual effective tax rate method. The Company’s effective tax rate from operations was ( 1.90 %) and ( 1.66 %) for the three months ended March 31, 2026 and 2025, respectively. The Company’s effective tax rate from operations was ( 4.14 %) and ( 4.68 %) for the nine months ended March 31, 2026 and 2025, respectively. The Company’s effective tax rate differs from the federal statutory rate of 21 % in each period primarily due to the Company’s net loss position, nondeductible expenses, and valuation allowance. Income tax expense of $ 177,407 and $ 176,990 was from income generated during the three months ended March 31, 2026 and 2025, respectively. Income tax expense of $ 770,062 and $ 1,093,774 was from income generated during the nine months ended March 31, 2026 and 2025, respectively. The Majority of income tax expenses arose from Hong Kong operations, and the remaining are state taxes from U.S. operations. NOTE 13. STOCK-BASED COMPENSATION In October 2022, the board of directors and stockholders of the Company approved the 2022 Equity Incentive Plan (as amended, the “Plan”) pursuant to which up to 15,000,000 shares of common stock may be issued pursuant to options, restricted stock or RSUs grants. The Plan is administered by the Compensation Committee of 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 the Company’s Form S-8 (File No. 333-273458) initially filed with U.S. Securities and Exchange Commission on July 26, 2023, and amended on November 15, 2024. 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. Restricted stock During the three months ended March 31, 2026 and 2025, 106,578 and 38,873 shares of common stock were issued to the Company’s board of directors and service providers in settlement of restricted stock granted under the Plan, respectively. During the nine months ended March 31, 2026 and 2025, 190,718 and 206,271 shares of common stock were issued to the Company’s board of directors and service providers in settlement of restricted stock granted under the Plan, respectively. Restricted stock granted to directors were fully vested as of March 31, 2026. The Company recognized stock-based compensation expense totaling $ 235,004 and $ 126,778 during the three months ended March 31, 2026 and 2025, respectively, and $ 475,988 and $ 320,099 for the nine months ended March 31, 2026 and 2025, respectively. These expenses were related to the restricted stock issued to the Company’s board of directors and a service provider, based on the grant date fair value of the awards, excluding performance shares. There are no unrecognized compensation expenses related to the restricted stock awards granted to one service provider as of March 31, 2026. 19 In June 2024, the Company entered into consulting agreements with two consultants which provide for the issuance of up to 150,000 shares of common stock to each consultant (a total of 300,000 shares of common stock). Under the terms of the consulting agreements, (a) 25,000 shares of common stock vested upon execution of the consulting agreements (a total of 50,000 shares of common stock), (b) 100,000 shares of common stock will vest upon the attainment of five separate sales-based targets, in 20,000 share increments (a total of 200,000 shares of common stock), and (c) 25,000 shares of common stock will vest on October 1, 2027, if the consulting agreements have not been terminated (a total of 50,000 shares of common stock). For the three and nine months ended March 31, 2026 and 2025, the Company has not issued or vested any common stock related to this consulting agreement with performance-based conditions. In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 140,000 shares of common stock to each consultant (a total of 280,000 shares of common stock). Under the terms of the consulting agreements, these 140,000 shares of common stock will vest upon the attainment of six separate sales-based targets, in 20,000 share increments, if the consulting agreements have not been terminated. In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 400,000 shares of common stock to each consultant (a total of 800,000 shares of common stock). Under the terms of the consulting agreements, (a) 75,000 shares of common stock vested upon execution of the consulting agreements, (b) 300,000 shares of common stock will vest upon the attainment of three separate sales-based targets, in 100,000 share increments (a total of 300,000 shares of common stock), and (c) 25,000 shares of common stock will vest upon the attainment of one separate sales-based target, if the consulting agreements have not been terminated. These consultant agreements were subsequently cancelled by June 30, 2025. Upon cancellation, 150,000 shares from the consultant agreements had been vested and issued, and there were 650,000 unissued and unvested shares being cancelled. During the three and nine months ended March 31,2026, the Company has not issued or vested any common stock related to this consulting agreement with performance-based conditions. During the three and nine months ended March 31, 2025, zero and 150,000 shares of common stock were issued and vested. The shares of common stock from the above discussed consulting agreements that vest upon the attainment of the sales-based targets include performance-based vesting conditions, which the Company has determined were not probable of being achieved at March 31, 2026. As such, the Company has no t recognized any compensation expense for the three and nine months ended March 31, 2026, related to the restricted common stock with performance-based vesting conditions. For the three and nine months ended March 31, 2025, the stock-based compensation expense related to the performance-based restricted common stock was $0 and $ 961,500 , respectively. Stock Options During the three months ended March 31, 2026, there were no stock options granted. During the nine months ended March 31, 2026, there were 490,000 stock options granted, and these options shall vest over three years with the initial 1/3 of the awarded options vesting on the one-year anniversary of the grant date, with the remaining 2/3 of the award vesting monthly on a 1/24 th pro-rata basis for the following 24 months thereafter for each employee. During the three months ended March 31, 2025, there were 67,500 stock options granted. During the nine months ended March 31, 2025, there were 465,000 stock options granted, and these options shall vest over four years with the initial 25 % of the awarded options vesting on the one-year anniversary of the grant date, with the remaining 75 % of the award vesting monthly on a 1/36 th pro-rata basis for the following 36 months thereafter for each employee. According to the Plan, vested stock options that are not exercised within three months after termination of employment will be expired. During the three months ended March 31, 2026 and 2025, there were 24,479 and zero stock options being expired. During the nine months ended March 31, 2026 and 2025, there were 62,604 and zero stock options being expired. 20 The following is a summary of stock option activity transactions as of and for the nine months ended March 31, 2026 and 2025: Number of options Weighted average exercise price Weighted average fair value per option Weighted average remaining contractual life in years Outstanding at July 1, 2025 1,438,125 $ 8.15 $ 4.61 8.0 Granted 490,000 $ 2.70 $ 1.62 9.5 Expired ( 62,604 ) $ 8.46 $ 4.85 7.9 Forfeiture ( 321,771 ) $ 5.81 $ 3.47 8.8 Outstanding at March 31, 2026 1,543,750 $ 6.86 $ 3.87 8.8 Exercisable at March 31, 2026 694,479 $ 8.55 $ 4.68 6.7 Number of options Weighted average exercise price Weighted average fair value per option Weighted average remaining contractual life in years Outstanding at July 1, 2024 3,255,000 $ 9.10 $ 5.13 9.1 Granted 465,000 $ 6.06 $ 3.69 9.6 Forfeiture ( 1,417,219 ) $ 9.69 $ 5.50 8.5 Outstanding at March 31, 2025 2,302,709 $ 8.12 $ 4.61 7.8 Exercisable at March 31, 2025 798,751 $ 9.07 $ 4.96 7.4 The aggregate intrinsic value of options outstanding with an exercise price less than the closing price of the Company’s common stock as of March 31, 2026 was $ 0 . Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. Total expense of options vested for the three months ended March 31, 2026 and 2025, was $ 318,857 and $ 564,680 , respectively. Total expense of options vested for the nine months ended March 31, 2026 and 2025, was $ 957,857 and $ 189,884 , respectively. The options granted during the nine months ended March 31, 2026 and 2025 were valued using the binomial option pricing model based on the following range of assumptions: Nine months ended March 31, 2026 2025 Exercise multiple 2.8 2.8 Expected volatility 60 % 60 % Risk-free interest rate 4.380 % 3.650 % - 4.540 % Expected dividend yield 0 % 0 % 21 RSUs RSUs granted to employees vest cumulatively as to one-third of the restricted stock units on each of the first three anniversaries of the date of grant based on continues service. Each vested RSU entitles the holder to receive one share of common stock upon exercise. RSUs are accounted for as equity using the fair value method, which requires measurement and recognition of compensation expense for all awards granted to employees, directors and consultants based upon the grant-date fair value. Shares Weighted average grant date fair value Unvested, July 1, 2025 404,970 $ 6.35 Granted 210,000 2.70 Vested ( 31,990 ) 6.62 Canceled and forfeited - - Unvested, March 31, 2026 582,980 $ 5.02 Shares Weighted average grant date fair value Unvested, July 1, 2024 483,606 $ 9.76 Granted 1,215,346 6.15 Vested ( 593,608 ) 7.12 Canceled and forfeited ( 435,351 ) 8.02 Unvested, March 31, 2025 669,993 $ 6.68 Total expense for the RSUs during the three months ended March 31, 2026 and 2025 was $ 438,617 and $ 779,419 , respectively. Total expense for the RSUs during the nine months ended March 31, 2026 and 2025 was $ 1,318,622 and $ 3,452,268 , respectively. During the three months ended March 31, 2026 and 2025, there were 20,000 and 419,600 shares issued as a result of employees exercising vested RSUs granted to them. During the nine months ended March 31, 2026 and 2025, there were 31,990 and 459,548 shares issued as a result of employees exercising vested RSUs granted to them. The following table summarizes the allocation of stock-based compensation in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 General and administrative expenses $ 924,138 $ 1,385,087 $ 2,437,853 $ 3,701,071 Sales and marketing expenses 68,340 85,790 314,614 1,222,680 Total $ 992,478 $ 1,470,877 $ 2,752,467 $ 4,923,751 As of March 31, 2026, the Company had approximately $ 3,484,146 in unrecognized compensation expenses related to all non-vested options and RSUs that will be recognized over the weighted-average period of 1.61 years. 22 NOTE 14. LOSS PER SHARE The following table presents a reconciliation of basic net loss per share: Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 Net loss $ ( 9,522,983 ) $ ( 10,856,495 ) $ ( 19,384,757 ) $ ( 24,450,154 ) Weighted average basic and diluted share of common stock outstanding 57,293,826 57,003,488 57,269,726 56,752,454 Net loss per basic and diluted share of common stock $ ( 0.17 ) $ ( 0.19 ) $ ( 0.34 ) $ ( 0.43 ) NOTE 15. COMMITMENTS AND CONTINGENCIES From time to time, the Company may be subject to legal or regulatory proceedings, investigations and claims incidental to the conduct of its business. The Company is not a party to, nor is the Company 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. Concurrently with the JV Agreement (see Note 7), Ispire entered into an exclusive supply agreement with Berify, whereby Ispire is obligated to purchase all Bluetooth enabled integrated circuits to be used on vape type devices to control the activation of the device that are to be sold to IKE at cost plus a 20 % mark-up. In addition, IKE entered into an exclusive supply agreement with Ispire, whereby IKE is obligated to purchase at cost plus a 5 % mark-up all products to be sold by IKE in the nicotine field. NOTE 16. SUBSEQUENT EVENT On February 18, 2026, the Company’s board of director approved the establishment of JinWu, a joint venture between Aspire Science, a wholly owned subsidiary of the Company, and Shandong Jincheng Pharmaceutical Group Co., Ltd. (“Jincheng”). A Framework Cooperation Agreement of Intent for the formation of a joint venture had been entered into between Aspire Science and Jincheng, in order to explore the opportunity of selling nicotine pouch products, with the aim of enhancing the market competitiveness of both parties. As of the date of this report, the definitive Joint Venture Agreement has not been formally executed, and both parties remain in active negotiations regarding the final terms and conditions. 23 ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this report. See “Cautionary Forward-Looking Statements.” Actual results could differ materially from those discussed below. Overview We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded and non-branded vaping hardware products in both the nicotine and cannabis spaces. Vaping refers to the practice of inhaling and exhaling the vapor produced by an electronic vaping device. These products are sold into the global nicotine and cannabis markets in the form of e-cigarettes or cartridges filled with oils by our customers, respectively. As stated in our corporate mission, we are committed to delivering superior products that challenge industry norms, with the goal of delivering an unmatched customer and adult consumer experience. In achieving this, risk reduction is central to our mission, and we aim to improve the lives of our consumers through cutting-edge research and development. Our technology platforms look to reduce youth access to vaping products, which in turn we believe will facilitate our ability to provide adult consumers with the products they desire. We sell our e-cigarette (or nicotine) products globally, in markets where we are legally permitted to do so. To date, our nicotine products are marketed under the “Aspire” brand name and are sold primarily through our expansive distribution network. However, we are expanding our international presence via the launch of nicotine products under the Ispire platform. These products have started to be launched under licensing arrangements with the owners of selected partner brands. We currently sell our cannabis vaping hardware in the United States, Canada, and South Africa. However, we are continuing to develop our sales network across Europe, South America, and other regions in preparation for legalization in these markets. Our cannabis products are sold under the Ispire brand name, primarily on an ODM basis to other cannabis vapor companies including multi and single-state operators, brand owners and co-packers. ODM generally involves the design and customization of the core products to meet each brand’s unique image and needs. Our hardware products are sold by our customers under their own brand names. We do not “touch the cannabis plant” in the production and sale of our hardware products and thus are not subject to the specific cannabis-related regulatory and taxation provisions of the industry (e.g., Internal Revenue Code Section 280E). Since our initial public offering in April 2023, we have completed three fundraising rounds. The first was executed as part of our initial public offering, from which we raised approximately $18.3 million after underwriting and other offering expenses. In June 2023, we raised net proceeds of approximately $7.4 million, after placement agent and offering expenses, from the private placement of our Common Stock to three investors. In March 2024, we raised net proceeds of approximately $10.6 million, after placement agent fees and offering expenses, through a public offering of our Common Stock priced at $6.00 per share. We used the net proceeds from this offering in connection with the establishment and operation of our manufacturing facility in Malaysia, the funding of our joint venture with Touch Point Worldwide Inc. d/b/a/ Berify and Chemular Inc. and for working capital and general corporate purposes, including research and development. 24 Recent Developments Malaysian Licensure On March 17, 2026, Ispire Malaysia received full and final licensure from the Ministry of Investment, Trade and Industry of Malaysia (“MITI”) to manufacture nicotine vapor products in the country of Malaysia. This full and final licensure replaces Ispire Malaysia’s interim license issued in May 2025. Ispire Malaysia is the only business in the country of Malaysia with such nicotine vapor manufacturing license, and we are now in the process of securing orders and scheduling production for both nicotine vapor products (expected to commence production at the end of June 2026) and nicotine pouch products. We made the decision not to manufacture any nicotine vapor hardware in Malaysia until the full and final license was issued. Now that such license is secured, the Ispire Malaysia and our business development teams are fielding a backlog of customer demand for nicotine vapor production in Malaysia. We believe our production costs will be comparable to production in China, and will continue to improve as the Ispire Malaysia business scales in volume and capacity. We will also work to establish local supply chain partnerships, which we believe will further bring down the costs of nicotine vapor product manufacturing, aiding in improving competitiveness and our ability to obtain increased profit margins. The Ispire Malaysia business has also been positively impacted by policy shifts from the Chinese government. On April 1, 2026, China cancelled the 13% export VAT rebate for nicotine-containing, non-combustion inhalation products. This rebate cancellation caused an immediate effective price increase for exporting nicotine vapor products from China, which we believe has directly improved the global price competitiveness for Ispire Malaysia’s nicotine vapor manufacturing business. Further, Chinese tobacco authorities have begun requiring nicotine vapor manufacturers in the country to supply information on U.S. FDA PMTA Submission Tracking Numbers (“STNs”) for historical nicotine vapor exports to the U.S. made in calendar year 2025. This development signals enhanced regulatory compliance requirements for Chinese vapor manufacturers which previously did not exist, adding in enhanced compliance costs for shipments to the U.S. These two developments suggest to us that there will be further tax and regulatory headwinds facing China’s domestic nicotine vapor manufacturing industry in the coming months and years, potentially making our Malaysian nicotine vapor manufacturing business more appealing to global brands and Chinese businesses looking to diversify their supply chain. Management expects further improvement in operating cash flow during 2026, driven by (i) continued quarterly operating expense reductions in U.S. operations, (ii) revenue generation in Malaysia, (iii) continued cash generation from Hong Kong operations. Based on these initiatives, the Company expects to achieve positive cash flow in the first half of fiscal year 2027. However, the timing and extent of such improvement remain subject to execution and market conditions. Ike Tech LLC Business Developments On March 11, 2026, the U.S. Food and Drug Administration (the “FDA”) issued draft guidance outlining evidentiary expectations for Premarket Tobacco Product Applications (“PMTAs”) for flavored electronic nicotine delivery systems (“ENDS”), which could provide a lawful pathway for flavored vaping products, the market for which is largely comprised of illicit products. The guidance marks the first time the FDA has formally outlined a framework for evaluating flavored ENDS products, recognizing that device-level access technologies, or device access restrictions (“DAR”), may factor into whether a product meets the “appropriate for the protection of public health” standard for PMTA authorization. The draft guidance highlights DAR technologies such as biometric authentication, geofencing, and continuous age verification as potential safeguards designed to prevent underage use of ENDS devices. The FDA also emphasized that traditional safeguards such as local age restrictions and point-of-sale verification that do not directly prevent youth use may not, when employed alone, sufficiently reduce youth use. We remain an advocate for technology-driven youth prevention solutions. As previously disclosed in our Current Report on Form 8-K filed with the SEC on April 11, 2024, on April 5, 2024, the Company, Chemular Inc., a Michigan corporation, and Touch Point Worldwide, Inc. d/b/a/ Berify, a Delaware corporation, agreed to form Ike Tech LLC (“IKE”) as a joint venture between the entities that would be in the business of licensing, owning and developing an industry-standard biometric, blockchain-based, point of use age-verification solution for vapor (e-cigarette) devices in the U.S. market. We believe that the FDA guidance is a positive development for IKE and that IKE is well positioned to capitalize on the creation of a pathway to a lawful market for flavored vaping products. 25 Since its founding, IKE has developed two core technology offerings: (i) NFC/RFID smart tags with unique block chain TokenIDs for embedding in packaging, providing its customers’ packaging with a unique digital identity, and (ii) Bluetooth Low Energy (“BLE”) chips embedded in devices such as ENDS that enable live communication with mobile applications and provide services such as continuous age verification, device activation and control, and secure user authentication ((i) and (ii) together, the “Technology”). IKE’s Technology is supported by a secure open ecosystem built on blockchain validation and open standards designed to enable reliable authentication across devices and markets. IKE exclusively licenses in the nicotine vapor field or owns 11 issued patents related to its Technology to date, and in 2025, IKE submitted the first-ever component PMTA to the FDA for a standalone, interoperable age-verification technology designed for integration across ENDS devices. The platform combines BLE chips, biometric authentication, and block-chain secured identity verification to ensure that only verified adult users can activate a device. In addition to age verification, IKE’s Technology can also support product authentication and anti-counterfeiting capabilities, helping manufacturers and regulators identify illicit or counterfeit devices that bypass regulatory safeguards, evade taxes, and undermine consumer safety. IKE’s Technology is currently engaged in a pilot and evaluation program operating within a test environment with a large strategic collaborator, as well as pilot programs with several additional third-party vapor product manufacturers and brands. Regulatory Risks The sale of nicotine and cannabis products is subject to regulations worldwide. Many countries prohibit the sale of any cannabis products, and many countries have regulations relating to nicotine products, with a particular emphasis on underage sales. We work closely with our various global distribution partners to help ensure our nicotine products comply with local regulations (e.g., packaging, ingredient disclosure, health warnings, etc.). Changes in the regulatory environment can be enacted swiftly and may lead to our products becoming non-compliant in one or more international markets. This regulatory scenario may severely disrupt our business in these markets while we resolve the deficiencies (if possible) with the current product offering. E-cigarette regulation Regulation regarding e-cigarettes varies across countries, from limited regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. 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 or regulations in countries and regions that our major customers are in may adversely affect our business. Please see the sections titled “Item 1. Business – Regulation” and “Item 1A. Risk Factors” above for our robust discussion of this topic. 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 credit losses was $21.5 million and $18.0 million at March 31, 2026 and June 30, 2025, respectively. Our 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 customer’s cash flow; (ii) our failure to implement effective collection efforts; and (iii) disputes over contract terms, product quality or delays in delivery. Due to federal status of cannabis and the uncertainty of adverse economic conditions in cannabis industry, the Company has focused more on nicotine business in the past year. 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 We believe the following key factors may affect our financial condition and results of operations: ● The effect of legislation and regulations affecting non-combustible nicotine products and cannabis vaping products. ● If we elect to market nicotine vaping products in the United States, our ability to obtain regulatory approval to market additional nicotine vaping products in the United States and the significant cost of seeking such approval. ● Our ability to develop and market nicotine and cannabis vaping products to meet the changing tastes of adult consumers. ● The effects of competition. ● The development of an international market for cannabis vaping products, which is presently primarily limited to certain states in the United States. 26 Results of Operations The following table sets forth a summary of our unaudited condensed consolidated statements of operations and comprehensive loss for the three and nine months ended March 31, 2026 and 2025 (dollars in thousands except per share amounts). Three Months Ended March 31, Nine Months Ended March 31, 2026 2025 2026 2025 $ % of Revenue $ % of Revenue $ % of Revenue $ % of Revenue Revenue $ 18,686 100.0 % $ 26,191 100.0 % $ 69,323 100.0 % $ 107,357 100.0 % Cost of revenue (16,695 ) (89.3 )% (21,415 ) (81.8 )% (58,711 ) (84.7 )% (87,184 ) (81.2 )% Gross profit 1,991 10.7 % 4,776 18.2 % 10,612 15.3 % 20,173 18.8 % Operating expenses (11,475 ) (61.4 )% (15,361 ) (58.7 )% (29,666 ) (42.8 )% (43,381 ) (40.4 )% loss from operations (9,484 ) (50.7 )% (10,585 ) (40.5 )% (19,054 ) (27.5 )% (23,208 ) (21.6 )% Other income (expense), net 138 0.7 % (94 ) (0.4 )% 439 0.6 % (148 ) (0.1 )% Loss before income taxes (9,346 ) (50.0 )% (10,679 ) (40.9 )% (18,615 ) (26.9 )% (23,356 ) (21.8 )% Income taxes (177 ) (0.9 )% (177 ) (0.7 )% (770 ) (1.1 )% (1,094 ) (1.0 )% Net loss (9,523 ) (50.9 )% (10,856 ) (41.6 )% (19,385 ) (28.0 )% (24,450 ) (22.8 )% Other comprehensive loss (10 ) (0.1 )% (3 ) 0.1 % (132 ) (0.2 )% (84 ) (0.1 )% Comprehensive loss (9,533 ) (51.0 )% (10,859 ) (41.5 )% (19,517 ) (28.2 )% (24,534 ) (22.9 )% Net loss per share Basic and diluted (0.17 ) (0.19 ) (0.34 ) (0.43 ) Weighted shares of common stock outstanding Basic and diluted 57,293,826 57,003,488 57,269,726 56,752,454 Revenue The following table sets out the breakdown of our revenue percentage by region based on information provided to us by our distributors. Three months ended March 31, Nine months ended March 31, 2026 2025 2026 2025 Europe $ 11,801,318 $ 13,235,728 $ 47,283,903 $ 59,174,779 North America (the U.S. and Canada) 3,295,861 8,788,476 10,371,364 29,441,624 Asia Pacific (excluding PRC) 2,774,049 2,965,023 7,673,386 10,453,766 Others 814,273 1,201,498 3,994,288 8,286,729 Total $ 18,685,501 $ 26,190,725 $ 69,322,941 $ 107,356,898 27 Our revenue decreased by $7,505,224, or 28.7%, from $26,190,725 for the three months ended March 31, 2025, to $18,685,501 for the three months ended March 31, 2026. The decrease in revenue is the combined effect of (i) decreases in product sales in the United States of $5.5 million from $8.8 million for the three months ended March 31, 2025, to $3.3 million for the three months ended March 31, 2026 largely due to shorter credit terms in the United States with a focus on higher quality customers, and (ii) decreases in sales of vaping products in Europe of $1.4 million from $13.2 million for the three months ended March 31, 2025 to approximately $11.8 million for the three months ended March 31, 2026 largely due to market conditions being competitive, and the timing of distribution continuing to evolve, and (iii) decreases in sales to other regions of $0.4 million from $1.2 million for the three months ended March 31, 2025 to approximately $0.8 million for the three months ended March 31, 2026 and (iv) decreases in sales of vaping products in Asia Pacific of $0.2 million from $3.0 million for the three months ended March 31, 2025 to approximately $2.8 million for the three months ended March 31, 2026. Our revenue decreased by $38,033,957, or 35.4%, from $107,356,898 for the nine months ended March 31, 2025, to $69,322,941 for the nine months ended March 31, 2026. The decrease in revenue is the combined effect of (i) decreases in sales of vaping products in North America of $19.1 million from $29.4 million for the nine months ended March 31, 2025 to approximately $10.4 million for the nine months ended March 31, 2026 largely due to shorter credit terms in the United States with a focus on higher quality customers, and (ii) decreases in product sales in Europe of $11.9 million from $59.2 million for the nine months ended March 31, 2025, to $47.3 million for the nine months ended March 31, 2026 largely due to market conditions being competitive, and the timing of distribution continuing to evolve, and (iii) decreases in sales in other regions, mainly Africa, of $4.3 million from $8.3 million for the nine months ended March 31, 2025, to $4.0 million for the nine months ended March 31, 2026, (iv) decreases in sales to Asia Pacific regions of $2.8 million from $10.5 million for the nine months ended March 31, 2025 to approximately $7.7 million for the nine months ended March 31, 2026. Cost of Revenue Cost of revenue mainly consists of cost of purchases of vaping products, that the majority of the purchase are from Shenzhen Yi Jia. Cost of revenue decreased by $4,720,244, or 22.0%, from $21,414,820 for the three months ended March 31, 2025, to $16,694,576 for the three months ended March 31, 2026. The decrease in cost of revenue is primarily attributable to the decrease in sales, partially offset by additional inventory provisions accrued. Cost of revenue decreased by $28,473,401, or 32.7%, from $87,184,044 for the nine months ended March 31, 2025, to $58,710,643 for the nine months ended March 31, 2026. The decrease in cost of revenue is in line with decrease in sales. Gross Profit The following tables show the revenue, cost of revenue and gross profit of our products (dollars in thousands). Three Months Ended March 31, 2026 Revenue Cost of revenue Gross profit Gross profit % $ 18,686 $ 16,695 $ 1,991 10.7 % Three Months Ended March 31, 2025 Revenue Cost of revenue Gross profit Gross profit % $ 26,190 $ 21,415 $ 4,775 18.2 % Nine Months Ended March 31, 2026 Revenue Cost of revenue Gross profit Gross profit % $ 69,323 $ 58,711 $ 10,612 15.3 % Nine Months Ended March 31, 2025 Revenue Cost of revenue Gross profit Gross profit % $ 107,357 $ 87,184 $ 20,173 18.8 % 28 Gross profit decreased by $2,784,980, or 58.3%, from $4,775,905 for the three months ended March 31, 2025, to $1,990,925 for the three months ended March 31, 2026, while our gross margin decreased from 18.2% to 10.7%. The decrease in gross margin was primarily due to changes in product mix with less higher margin products being sold, and additional inventory provision accrued during the three months ended March 31, 2026. Gross profit decreased by $9,560,556, or 47.4%, from $20,172,854 for the nine months ended March 31, 2025, to $10,612,298 for the nine months ended March 31, 2026, while our gross margin decreased from 18.8% to 15.3%. The decrease in gross margin was primarily due to changes in product mix with less higher margin products being sold during the nine months ended March 31, 2026. Operating Expenses Operating expenses decreased by $3,886,686 or 25.3%, from $15,361,346 for the three months ended March 31, 2025 to $11,474,660 for the three months ended March 31, 2026. Operating expenses decreased by $13,715,010 or 31.6%, from $43,381,219 for the nine months ended March 31, 2025 to $29,666,209 for the nine months ended March 31, 2026. Our sales and marketing expenses mainly consist of employee salaries and benefits, marketing expenses, travel expenses, and other miscellaneous expenses. Sales and marketing expenses decreased by $564,620, or 34.1%, from $1,656,527 for the three months ended March 31, 2025 to $1,091,907 for the three months ended March 31, 2026. The decrease in sales and marketing expenses was primarily due to decrease in brand marketing activities of $0.5 million from Aspire Science comparing the three months ended March 31, 2026 and 2025. Sales and marketing expenses decreased by $2,577,359, or 38.4%, from $6,710,438 for the nine months ended March 31, 2025 to $4,133,079 for the nine months ended March 31, 2026. The decrease in sales and marketing expenses was primarily due to a decrease in (i) stock-based compensation expense of $0.9 million comparing the nine months ended March 31, 2026 and 2025, (ii) decrease in travelling expense of $0.5 million as a result of less travelling activities during the nine months ended March 31, 2026, (iii) decrease in brand marketing activities of $0.8 million comparing the nine months ended March 31, 2026 and 2025, and (iv) decrease in trade show costs of $0.3 million comparing the nine months ended March 31, 2026 and 2025. Credit loss expenses decreased by $539,191, or 8.8%, from $6,103,688 for the three months ended March 31, 2025, to $5,564,497 for the three months ended March 31, 2026. The decrease is due to more collection of customer payments from repayment plan negotiated and thus less allowance for credit losses were provided as of March 31, 2026. Credit loss expenses decreased by $1,851,817, or 13.8%, from $13,389,767 for the nine months ended March 31, 2025, to $11,537,950 for the nine months ended March 31, 2026. The decrease is due to more collection of customer payments from repayment plan negotiated and thus less allowance for credit losses were provided as of March 31, 2026. Our general and administrative expenses consist of employees’ salaries and benefits, rental expense, professional fees, stock-based compensation expenses and other administrative expenses. General and administrative expenses decreased by $2,782,875, or 36.6%, from $7,601,131 for the three months ended March 31, 2025, to $4,818,256 for the three months ended March 31, 2026. The decrease was primarily due to (i) decrease in payroll of $1.3 million comparing the three months ended March 31, 2026 and 2025 as a result of decrease in headcount of North America, (ii) decrease in stock-based compensation expense of $0.5 million for the three months ended March 31, 2026 as a result of drop in headcount in North America and (iii) decrease in legal and professional fees of $0.6 million for the three months ended March 31, 2026 as a result of cost reduction in North America. General and administrative expenses decreased by $9,285,834, or 39.9%, from $23,281,014 for the nine months ended March 31, 2025, to $13,995,180 for the nine months ended March 31, 2026. The decrease was primarily due to (i) decrease in payroll of $4.1 million comparing the nine months ended March 31, 2026 and 2025 as a result of decrease in headcount of North America, (ii) decrease in legal and professional fees of $1.6 million for the nine months ended March 31, 2026 as a result of cost reduction in North America, (iii) decrease in stock-based compensation expense of $1.3 million for the nine months ended March 31, 2026 as a result of drop in headcount in North America, (iv) decrease of $3 million of miscellaneous administrative expenses from North America as a result of drop in headcount and cost reduction for the nine months ended March 31, 2026, offset by (v) $0.7 million increase of general administrative expenses from Ispire Malaysia from growth of operations during the nine months ended March 31, 2026. 29 Other income (expense), net Other income (expense), net includes interest income, interest expense, exchange loss (gain), net and other income (expense). Interest income increased by $49,491, from $3,480 for the three months ended March 31, 2025, to $52,971 for the three months ended March 31, 2026. Interest income increased by $190,044, from $63,321 for the nine months ended March 31, 2025, to $253,365 for the nine months ended March 31, 2026. The increase in interest income is mainly due to charging late fees from customers. Interest expense increased by $51,569, from $35,646 for the three months ended March 31, 2025, to $87,215 for the three months ended March 31, 2026. Interest expense increased by $239,399, from $60,183 for the nine months ended March 31, 2025, to $299,582 for the nine months ended March 31, 2026. The increase in interest expense is mainly due to borrowing engaged in February 2025. Exchange gain, net changes by $54,635, or 224.5%, from net exchange gain $24,341 for three months ended March 31, 2025, to net exchange loss of $30,294 for three months ended March 31, 2026. Exchange gain, net changes by $372,992, or 361.3%, from net exchange loss $103,247 for nine months ended March 31, 2025, to net exchange gain of $269,745 for nine months ended March 31, 2026. Other income, net mainly consists of loss on equity method investment, credits from company credit card, administrative fee income and other miscellaneous expenses. Other income, net changed by $288,936, or 335.0%, from net expense of $86,239 for the three months ended March 31, 2025 to net income of $202,697 for the three months ended March 31, 2026. Other income, net changed by $263,594, or 550.2%, from net income of $47,906 for the nine months ended March 31, 2025 to net income of $215,688 for the nine months ended March 31, 2026. The increase is mainly due to increasing other income from IKE for charging administrative fees. As a result of these factors, total other income (expense), net changed by $232,223, from other expense, net of $94,064 for three months ended March 31, 2025, to other income, net of $138,159 for three months ended March 31, 2026. Total other income (expense), net changed by $587,231, from other expense, net of $148,015 for nine months ended March 31, 2025, to other income, net of $ 439,216 for nine months ended March 31, 2026. Income Taxes Income taxes increased slightly by $417 or 0.2%, from $176,990 for three months ended March 31, 2025, to $ 177,407 for three months ended March 31, 2026. Income taxes decreased by $323,712 or 29.6%, from $1,093,774 for nine months ended March 31, 2025, to $770,062 for nine months ended March 31, 2026. We had a consolidated net loss for both three and nine months ended March 31, 2026 and 2025, which was the combined effect of a profit by Aspire Science, 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. Net Loss As a result of the foregoing, net loss decreased by $1,333,512, from net loss of $10,856,495, or $(0.19) per share, for the three months ended March 31, 2025, to a net loss of $9,522,983, or $(0.17) per share, for the three months ended March 31, 2026. Net loss decreased by $5,065,397, from net loss of $24,450,154, or $(0.43) per share, for the nine months ended March 31, 2025, to a net loss of $19,384,757, or $(0.34) per share, for the nine months ended March 31, 2026. 30 Liquidity and Capital Resources The following table summarizes our changes in working capital from June 30, 2025 to March 31, 2026 (dollars in thousands). March 31, 2026 June 30, 2025 Change % Change Current Assets $ 55,739 $ 72,908 $ (17,169 ) (23.5 )% Current Liabilities 54,850 72,540 (17,690 ) (24.4 )% Working Capital 889 368 521 141.7 % The following table sets forth information as to consolidated cash flow information for the nine months ended March 31, 2026 and 2025 (dollars in thousands). Nine Months Ended March 31, Increase Consolidated cash flow data: 2026 2025 (Decrease) Net cash used in operating activities $ (3,194 ) $ (12,070 ) $ 8,876 Net cash used in investing activities (2,072 ) (1,689 ) (383 ) Net cash (used in)/provided by financing activities (1,002 ) 2,279 (3,281 ) Net decrease in cash $ (6,268 ) $ (11,480 ) $ 5,212 Net cash flow used in operating activities for the nine months ended March 31, 2026, of $3.2 million, reflected our net loss of $19.4 million, adjusted primarily as follows: add back of impairment of account receivable of $11.5 million, add back of share-based compensation expense of $2.8 million, add back of inventory impairment expense of $2.4 million, a decrease in accounts receivable of $6.8 million, offset by a decrease in accounts payable and accounts payable – related party of $3.4 million, a decrease in contract liabilities of $1.8 million, an increase in prepaid expenses and other current assets of $1.3 million, an increase in inventories of $1.2 million. Net cash flow used in operating activities for the nine months ended March 31, 2025 of $12.1 million, reflected our net loss of $24.4 million, adjusted primarily as follows: an add-back of credit loss expenses of $13.4 million, an add-back of stock based compensation expense of $4.9 million, increase in accounts payable-related party of $11.0 million, offset by an increase in accounts receivable of $14.1 million, an increase in accrued liabilities and other payables of $1.0 million, and an increase in inventories of $1.5 million. Net cash flow used in investing activities for the nine months ended March 31, 2026, of $2.1 million reflected primarily investment in joint venture of $1.3 million, capitalized costs of patents of $0.5 million and purchase of property, plant and equipment of $0.3 million. Net cash flow used in investing activities for the nine months ended March 31, 2025 of $1.7 million reflected primarily purchase of property, plant and equipment of $0.1 million, acquisition of intangible assets of $0.8 million and payment made for long term investment of $0.8 million. Net cash flow used in financing activities for the nine months ended March 31, 2026, of $1.0 million reflected primarily repayment of borrowing of $1.0 million, and common stock repurchase of $45 thousand. Net cash flow provided by financing activities for the nine months ended March 31, 2025 of $2.3 million reflected primarily proceeds from long term debt of $2.3 million, offset by common stock repurchase of $60 thousand. To date, we have financed our operations primarily through cash flow from operations and working capital accounts payable 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. As of the date of this Quarterly Report, we believe that our current cash and cash flows provided by operating activities, and the net proceeds from our equity offerings and borrowing 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. 31 The cash held at a bank by our Hong Kong operating subsidiary can be freely transferred within our corporate structure without restriction. If our Hong Kong operating subsidiary were to incur additional debt on its own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors. Contractual Obligations As of March 31, 2026 and June 30, 2025, we had contract liabilities of $3,043,470 and $4,861,250, 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 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 the right-of-use assets and lease liabilities where we are the lessee are presented as follows: As of As of March 31, 2026 June 30, 2025 Operating lease right-of-use assets $ 3,855,373 $ 5,030,005 Operating lease liabilities – current $ 1,546,770 $ 1,838,815 Operating lease liabilities – non-current 2,265,347 3,267,522 Total $ 3,812,117 $ 5,106,337 The Company had no impairment of operating lease right-of-use assets during the three and nine months ended March 31, 2026 and 2025. As of March 31, 2026, the maturities of our lease liabilities (excluding short-term leases) are as follows: As of March 31, 2026 April 1, 2026 to June 30, 2026 $ 497,887 July 1, 2026 to June 30, 2027 1,585,914 July 1, 2027 to June 30, 2028 779,653 July 1, 2028 to June 30, 2029 698,977 July 1, 2029 to June 30, 2030 465,985 Total future lease payments 4,028,416 Less: imputed interest (216,299 ) Total lease liabilities $ 3,812,117 32 As of March 31, 2026, we have a borrowing balance of $1,092,052 outstanding, and the borrowing will mature within one year. As of March 31, 2026, we recorded an unpaid $4.5 million consideration in accrued liabilities and other payables on the unaudited condensed consolidated balance sheet for a committed investment of $9 million into a joint venture investment named IKE Tech LLC. Trend Information Other than as disclosed elsewhere in this Quarterly Report, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. Seasonality Seasonality does not materially affect our business or the results of our operations. Off-Balance Sheet Arrangements 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. 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. We have elected to take advantage of such exemptions. We could lose Emerging Growth Company status if we become a “Large Accelerated Filer.” This would occur if we had a public float of $700 million or more, as of the last business day of our most recently completed second fiscal quarter. 33 ITEM 3: Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. ITEM 4: Controls and Procedures Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, 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 principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2026, due to (1) the lack of controls needed to enable us to evaluate significant estimates, including (i) the sufficiency of inventory reserve for slow-moving inventories and (ii) the credit loss history and use of it to evaluate the sufficiency of credit loss reserve for accounts receivable under the Topic 326; (2) the lack of sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP, which resulted in restatements of certain unaudited/audited financial statements prior to the fiscal year ended June 30, 2025; and (3) the lack of IT general controls regarding cyber security governance, logical access security and service organization management. Changes in Internal Control over Financial Reporting During the three months ended March 31, 2026, we have continued to develop and implement internal controls over financial reporting particularly in view of the material weakness described above. Inherent Limitations of Controls Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon 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. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 34 PART II - OTHER INFORMATION Item 1. Legal Proceedings. From time to time, we may be subject to legal proceedings, investigations and claims incidental to the conduct of our business. We are not a party to, nor are we aware of, any legal 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. Item 1A. Risk Factors As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. Our current risk factors are set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the SEC on September 15, 2025. Except as set forth below, there have been no material changes to the risk factors previously disclosed in the 2025 Form 10-K. We have historically reported negative cash flows and we may not achieve positive cash flows in the future. Our company has historically experienced negative cash flows. While we currently believe that we will be able to achieve positive cash flows in the first half of our fiscal year 2027, the timing and extent of our achieving positive cash flows remain subject to a number of factors, including, but not limited to, factors outside of our control such as the impact of new policies and regulations in China regarding Chinese nicotine vapor manufacturers and the export of their products, global trade policy, our ability to successfully establish local supply chain partnerships in Malaysia, general market conditions, and many others. If we are unable to achieve positive cash flows on our current timeline, the trading price of our common stock could decrease, negatively impacting our ability to raise capital when needed, which could have a material adverse effect on our business and financial condition. We currently have invested in joint ventures with independent third parties in which we have less than a controlling interest. Our interest in the joint ventures could be further diluted through future financings. We currently hold a 40% ownership interest in IKE and a 49% ownership interest in Jin Wu, with independent third parties holding the remaining 60% and 51%, respectively. As of March 31, 2026, we had an aggregate of $8,839,130 invested in advances to IKE. Our joint ventures are currently pre-revenue and, to the extent that our joint ventures’ cash from operations remains insufficient to fund capital expenditures or continue to develop their respective products, IKE or Jin Wu may be required to incur borrowings or raise capital through public or private debt or equity offerings. Each of our joint ventures’ ability to obtain bank financing or to access the capital markets may be limited by its financial condition at the time of any such financing or offering, as well as by general economic and capital market conditions and contingencies and uncertainties that are beyond our or our joint ventures’ control. Even if our joint ventures are successful in obtaining the necessary funds, the terms of such financings could limit their ability to pay distributions to their respective equity holders, including us. In addition, incurring debt may cause our joint ventures to incur interest expense and increase their respective financial leverage, and the issuance by either IKE or Jin Wu of additional equity interests may result in significant dilution to existing equity holders of IKE or Jin Wu, including us, which could materially diminish our ownership and economic interests in the applicable joint venture. Property Ownership Through IKE or Jin Wu Could Limit Our Control of Those Investments and Reduce Our Expected Return. Joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our co-venturer might become bankrupt, that our co-venturer might at any time have different interests or goals than us and that our co-venturer may take action contrary to our instructions, requests, policies or objectives. In addition, our co-venturer could have different investment criteria that would impact the assets held by the joint venture or its interest in the joint venture, which may also reduce the carrying value of its equity investments if a loss in the carrying value of the investment is realized. These situations could have an impact on our revenues from IKE and/or Jin Wu. Other risks of our investments in IKE and Jin Wu include impasse on decisions, such as the decision to sell or finance a property or leasing decisions with anchor tenants, because neither our co-venturers nor us would have full control over the joint venture. These factors could limit the return that we receive from such investment, cause our cash flows to be lower than our estimates or lead to business conflicts or litigation. There is no limitation under our Certificate of Incorporation, or our Amended and Restated Bylaws, as to the amount of funds that we may invest in IKE or Jin Wu. In addition, our co-venturers may not have access to sufficient capital to satisfy their funding obligations to the joint venture, if any. Furthermore, if credit conditions in the capital markets deteriorate, we could be required to reduce the carrying value of our equity method investments if a loss in the carrying value of the investment is realized or considered an other than temporary decline. As of March 31, 2026, we had $8,839,130 of investment in and advances to IKE. 35 Our ability to receive cash from our joint ventures depends entirely on their respective governing body’s discretion, and there is no assurance our joint ventures will ever distribute cash to their equity holders. Payments to us by our joint ventures, if any, will be contingent upon their respective earnings and financial condition. The board of managers of IKE or the board of directors of Jin Wu may never determine the financial condition of IKE or Jin Wu, as applicable, allows for the issuance of, or would have it be otherwise advisable to issue, a dividend or make any other distribution. In addition, should any dividend be issued or other distribution be made, the equity interests of other equity holders in our joint ventures in any dividend or other distribution made by a joint venture would need to be satisfied on a proportionate basis with us. Our joint ventures may also be subject to restrictions, in their financing or other agreements, on their ability to distribute cash to us, and, as a result, we may not be able to access its cash flow, which could materially impact the value of our investment. If our joint ventures’ business plans are unsuccessful, we may lose our entire investment. Should our joint ventures be unable to achieve profitable operations or secure sufficient capital to sustain its business, it may ultimately be required to cease operations and dissolve the company. In the event of dissolution, the amount of remaining assets available for distribution to shareholders may be minimal or nonexistent. Accordingly, there is a substantial risk that we may not recover any portion of their original investment. If the IKE’s PMTA or other FDA regulatory submissions are not successful, the value of our investment in IKE could be materially adversely affected. We believe that, when equipped with the IKE age-gating technology, there is a path to gaining approval for ENDS products with characterizing flavors other than tobacco and menthol, as they will have strong technological barriers to prevent youth usage. The FDA has repeatedly indicated that the only way it will approve characterizing flavors in ENDS devices is if they are equipped with technology to prevent youth usage. We believe the technology we have access to will be desirable to the FDA. IKE met with the FDA on November 13, 2024, and submitted a “component” PMTA on this technology in April of 2025; however, there can be no guarantee that the FDA will approve our PMTA or any other PMTA submitted that contains the IKE age-gating technology. If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), including as a result of our ownership of the Operating Company, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business. Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% Test”). We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company. However, our ownership interest in our joint ventures could be considered an “investment security” for purposes of the 1940 Act, and if the value of our interest in our joint ventures were to violate the 40% Test, we may inadvertently be deemed an investment company and be forced to divest some of our ownership in our joint ventures. If it were established that we were an unregistered investment company, we could be subject to monetary penalties and injunctive relief in an action brought by the SEC, we could be unable to enforce contracts with third parties and third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company. If we were required to register as an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended March 31, 2026, the Company did not conduct any unregistered sales of equity securities. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 3. Defaults upon Senior Securities None. Item 4. Mine and Safety Disclosure Not applicable 36 Item 5. Other Information No director or Section 16 officer adopted or terminated a trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a “non-Rule 10b5-1” trading arrangement during the periods reported in this Form 10-Q. Item 6. Exhibits The following is a complete list of exhibits filed or furnished, as applicable, as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit Description 3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (File No. 333-269470) filed with the SEC on January 31, 2023) . 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on September 27, 2024). 31.1* Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Co-Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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 104* Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith. 37 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. Date: May 7, 2026 ISPIRE TECHNOLOGY INC. By: /s/ Michael Wang Michael Wang Co-Chief Executive Officer (Principal Executive Officer) By: /s/ Jie Yu Jie Yu Chief Financial Officer (Principal Financing and Accounting Officer) 38