iPower Inc. 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 001-40391

iPower Inc.

(Exact name of registrant as specified in its charter)

Nevada		82-5144171
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

8798 9^th Street

Rancho Cucamonga, CA 91730

(Address of principal executive offices) (Zip Code)

(626) 863-7344

(Registrant’s telephone number, including area code)

N/A

(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		IPW		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 ☒

The number of shares outstanding of the registrant’s common stock on February 13, 2025 was 31,449,098.

iPower Inc.

TABLE OF CONTENTS

		Page No.

	PART I. Financial Information

Item 1.	Unaudited Condensed Consolidated Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2024 and June 30, 2024	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended December 31, 2024 and 2023	4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended December 31, 2024 and 2023	5

	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2024 and 2023	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

	PART II. Other Information

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	48

Item 6.	Exhibits	48

	Signatures	49

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

iPower Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of December 31, 2024 and June 30, 2024


	December 31,			June 30,
	2024			2024
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalent	$	2,877,457		$	7,377,837
Accounts receivable, net		13,926,432			14,740,093
Inventories, net		9,183,631			10,546,273
Prepayments and other current assets, net		2,292,744			2,346,534
Total current assets		28,280,264			35,010,737

Non-current assets
Right of use - non-current		4,757,429			6,124,163
Property and equipment, net		303,059			370,887
Deferred tax assets, net		3,001,517			2,445,605
Goodwill		3,034,110			3,034,110
Intangible assets, net		3,306,014			3,630,700
Other non-current assets		1,187,179			679,655
Total non-current assets		15,589,308			16,285,120

Total assets	$	43,869,572		$	51,295,857

LIABILITIES AND EQUITY
Current liabilities
Accounts payable, net	$	8,853,320		$	11,227,116
Other payables and accrued liabilities		3,491,596			3,885,487
Lease liability - current		1,540,624			2,039,301
Short-term loan payable		–			491,214
Short-term loan payable - related party		350,000			350,000
Revolving loan payable, net		–			5,500,739
Income taxes payable		274,947			276,158
Total current liabilities		14,510,487			23,770,015

Non-current liabilities
Long-term revolving loan payable		4,042,400			–
Lease liability - non-current		3,612,756			4,509,809

Total non-current liabilities		7,655,156			4,509,809

Total liabilities		22,165,643			28,279,824

Commitments and contingency		–			–

Stockholders' Equity
Preferred stock, $0.001 par value; 20,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2024 and June 30, 2024		–			–
Common stock, $0.001 par value; 180,000,000 shares authorized; 31,359,899 and 31,359,899 shares issued and outstanding at December 31, 2024 and June 30, 2024		31,361			31,361
Additional paid in capital		33,867,156			33,463,883
Accumulated deficits		(12,041,063	)		(10,230,601	)
Non-controlling interest		(44,195	)		(38,204	)
Accumulated other comprehensive loss		(109,330	)		(210,406	)
Total stockholders' equity		21,703,929			23,016,033

Total liabilities and stockholders' equity	$	43,869,572		$	51,295,857

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

iPower Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three and Six Months Ended December 31, 2024 and 2023


	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2024			2023			2024			2023
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES
Product sales	$	17,606,889		$	16,800,122		$	35,882,301		$	43,308,496
Service income		1,465,682			–			2,198,791			–
Total revenues		19,072,571			16,800,122			38,081,092			43,308,496

COST OF REVENUES
Product costs		9,461,119			9,481,882			19,378,567			24,231,411
Service costs		1,221,566			–			1,824,742			–
Total cost of revenues		10,682,685			9,481,882			21,203,309			24,231,411

GROSS PROFIT		8,389,886			7,318,240			16,877,783			19,077,085

OPERATING EXPENSES:
Selling and fulfillment		4,628,914			6,936,980			10,543,722			17,000,451
General and administrative		3,077,365			2,933,607			8,396,888			5,897,658
Total operating expenses		7,706,279			9,870,587			18,940,610			22,898,109

INCOME (LOSS) FROM OPERATIONS		683,607			(2,552,347	)		(2,062,827	)		(3,821,024	)

OTHER INCOME (EXPENSE)
Interest expenses		(140,672	)		(182,612	)		(280,634	)		(410,977	)
Loss on equity method investment		(802	)		(801	)		(1,721	)		(1,826	)
Other non-operating income (expenses)		(205,958	)		128,838			12,728			61,672
Total other expenses, net		(347,432	)		(54,575	)		(269,627	)		(351,131	)

INCOME (LOSS) BEFORE INCOME TAXES		336,175			(2,606,922	)		(2,332,454	)		(4,172,155	)

PROVISION FOR INCOME TAX EXPENSE (BENEFIT)		120,511			(688,939	)		(516,001	)		(964,821	)
NET INCOME (LOSS)		215,664			(1,917,983	)		(1,816,453	)		(3,207,334	)

Non-controlling interest		(3,155	)		(3,155	)		(5,991	)		(5,991	)

NET INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.	$	218,819		$	(1,914,828	)	$	(1,810,462	)	$	(3,201,343	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments		156,130			(160,255	)		101,076			(160,962	)

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO IPOWER INC.	$	374,949		$	(2,075,083	)	$	(1,709,386	)	$	(3,362,305	)

WEIGHTED AVERAGE NUMBER OF COMMON STOCK
Basic		31,437,517			29,790,242			31,427,360			29,777,378

Diluted		31,437,517			29,790,242			31,427,360			29,777,378

EARNINGS (LOSSES) PER SHARE
Basic	$	0.01		$	(0.06	)	$	(0.06	)	$	(0.11	)

Diluted	$	0.01		$	(0.06	)	$	(0.06	)	$	(0.11	)

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

iPower Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

For the Three and Six Months Ended December 31 , 2024 and 2023


	Common Stock				Additional		Retained Earnings (Accumulated			Non-controlling			Accumulated other Comprehensive
	Shares		Amount		Paid in Capital		Deficit)			interest			income (loss)			Total
Balance, June 30, 2024		31,359,899	$	31,361	$	33,463,883	$	(10,230,601	)	$	(38,204	)	$	(210,406	)	$	23,016,033
Net loss		–		–		–		(2,029,281	)		(2,836	)		–			(2,032,117	)
Stock-based compensation		–		–		205,960		–			–			–			205,960
Foreign currency translation adjustments		–		–		–		–			–			(55,054	)		(55,054	)
Balance, September 30, 2024, unaudited		31,359,899	$	31,361	$	33,669,843	$	(12,259,882	)	$	(41,040	)	$	(265,460	)	$	21,134,822
Net income (loss)		–		–		–		218,819			(3,155	)		–			215,664
Stock-based compensation		–		–		197,313		–			–			–			197,313
Foreign currency translation adjustments		–		–		–		–			–			156,130			156,129
Balance, December 31, 2024, unaudited		31,359,899	$	31,361	$	33,867,156	$	(12,041,063	)	$	(44,195	)	$	(109,330	)	$	21,703,929



Balance, June 30, 2023		29,710,939	$	29,712	$	29,624,520	$	(8,702,442	)	$	(24,915	)	$	(62,134	)		20,864,741
Net loss		–		–		–		(1,286,515	)		(2,836	)		–			(1,289,351	)
Stock-based compensation		–		–		117,882		–			–			–			117,882
Foreign currency translation adjustments		–		–		–		–			–			(707	)		(707	)
Balance, September 30, 2023, unaudited		29,710,939	$	29,712	$	29,742,402	$	(9,988,957	)	$	(27,751	)	$	(62,841	)	$	19,692,565
Net loss		–		–		–		(1,914,828	)		(3,155	)		–			(1,917,983	)
Stock-based compensation		–		–		141,245		–			–			–			141,245
Foreign currency translation adjustments		–		–		–		–			–			(160,255	)		(160,255	)
Balance, December 31, 2023, unaudited		29,710,939	$	29,712	$	29,883,647	$	(11,903,785	)	$	(30,906	)	$	(223,096	)	$	17,755,572

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

iPower Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

For the Six Months Ended December 31 , 2024 and 2023


	For the Six Months Ended December 31,
	2024			2023
	(Unaudited)			(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,816,453	)	$	(3,207,334	)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:
Depreciation and amortization expense		392,568			402,342
Inventory reserve		288,474			222,755
Credit loss reserve		1,516,940			–
Loss on equity method investment		1,721			1,826
Stock-based compensation expense		403,273			259,127
Amortization of operating lease right of use assets		932,701			695,712
Amortization of debt premium / discount and non-cash financing costs		125,906			107,452
Change in operating assets and liabilities
Accounts receivable		(703,279	)		2,305,710
Inventories		1,074,168			4,588,812
Deferred tax assets		(555,912	)		(967,113	)
Prepayments and other current assets		53,790			1,278,027
Non-current prepayments		–			140,844
Other non-current assets		156,842			7,965
Accounts payable		(2,373,796	)		686,843
Other payables and accrued liabilities		69,014			(884,355	)
Operating lease liabilities		(952,672	)		(696,678	)
Income taxes payable		(1,211	)		103,796
Net cash (used in) provided by operating activities		(1,387,926	)		5,045,731

CASH FLOWS FROM INVESTING ACTIVITIES:
Prepayments for software development		(664,366	)		–
Net cash used in investing activities		(664,366	)		–

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of offering cost settlement		(325,000	)		–
Payments on Short-term loan - related parties		–			(1,000,000	)
Proceeds from short-term loans -related party		–			2,000,000
Payments on short-term loans - related party		(483,599	)		–
Payments on promissory note		–			(875,000	)
Proceeds from revolving loan		3,650,210			–
Payments on revolving loan		(5,400,000	)		(7,300,000	)
Net cash used in financing activities		(2,558,389	)		(7,175,000	)

EFFECT OF EXCHANGE RATE ON CASH		110,301			(118,346	)

CHANGES IN CASH AND CASH EQUIVALENT		(4,500,380	)		(2,247,615	)

CASH AND CASH EQUIVALENT, beginning of period		7,377,837			3,735,642

CASH AND CASH EQUIVALENT, end of period	$	2,877,457		$	1,488,027

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	–		$	–
Cash paid for interest	$	121,754		$	–


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Right of use assets derecognized due to termination of operating leases	$	434,033		$	–
Right of use assets acquired under new operating leases	$	–		$	632,732

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

iPower Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of December 31, 2024 and June 30, 2024 and for the Three and Six Months Ended December 31, 2024 and 2023

Note 1 - Nature of business and organization

iPower Inc., formerly known as BZRTH Inc., a Nevada corporation (the “Company”), was incorporated on April 11, 2018. The Company is principally engaged in the marketing and sale of consumer home, garden and other products and accessories mainly in the North America.

On May 18, 2021, the Company acquired 100% of the equity ownership of its variable interest entity, E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the minority shareholders of the Company. As a result, E Marketing became the Company’s wholly-owned subsidiary.

On May 18, 2021, the Company acquired 100% of the equity ownership of its variable interest entity, Global Product Marketing Inc. (“GPM”), an entity which was incorporated in the State of Nevada on September 4, 2020, and was owned by Chenlong Tan, the Company’s Chairman, CEO and President, and one of the majority shareholders of the Company. As a result, GPM became the Company’s wholly-owned subsidiary.

On January 13, 2022, the Company entered into a joint venture agreement and formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal purpose of providing logistics services primarily for foreign-based manufacturers or distributors who desire to sell their products online in the United States, with such logistics services to include, without limitation, receiving, storing and transporting such products. The Company owns 40% of the equity interest in Box Harmony, retaining significant influence while not owning a majority equity interest in or otherwise controlling Box Harmony. See details at Note 3 below.

On February 10, 2022, the Company entered into another joint venture agreement and formed a Nevada limited liability company, Global Social Media, LLC (“GSM”), for the principal purpose of creating a social media platform in order to provide content and services to assist businesses, including the Company and other businesses, in marketing their products. The Company owns 60% of the equity interest in GSM and controls its operations. See details at Note 3 below.

On February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia Limited (“Anivia”), a corporation organized under the laws of the British Virgin Islands (“BVI”), in accordance with the terms of a share transfer framework agreement (the “Transfer Agreement”), dated February 15, 2022, by and between the Company, White Cherry Limited, a BVI company (“White Cherry”), White Cherry’s equity holders, Li Zanyu and Xie Jing (together with White Cherry, the “Sellers”), Anivia, Fly Elephant Limited, a Hong Kong company, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou (Shenzhen) Information Technology Co., Ltd. Anivia owns 100% of the equity of Fly Elephant Limited, which in turn owns 100% of the equity of Dayourenzai (Shenzhen) Technology Co., Ltd., a corporation located in the People’s Republic of China (“PRC”), which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited. The WFOE controls, through contractual arrangements summarized in Note 4 below, the business, revenues and profits of Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”) and located in Shenzhen, China. See details on Note 4 below.

Note 2 – Basis of Presentation and Summary of significant accounting policies

Basis of presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries and variable interest entity and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as its annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2025, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended June 30, 2024, which was filed with the SEC on September 20, 2024.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, E Marketing Solution Inc., Global Product Marketing Inc., Global Social Media, LLC, and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai (Shenzhen) Technology Co., Ltd., and Daheshou (Shenzhen) Information Technology Co., Ltd. All inter-company balances and transactions have been eliminated.

Prior Period Reclassification

Certain prior period amounts in the unaudited condensed statements of cash flows have been reclassified to conform to the current period presentation, including reclassifications made in the presentation of cash flows from operating activities. These reclassifications had no impact on the prior year net loss or stockholders’ equity.

Emerging Growth Company Status

The company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of utilizing the emerging growth company reduced reporting requirements difficult.

Use of estimates and assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Foreign currency translation and transactions

The reporting and functional currency of iPower and its subsidiaries is the U.S. dollar (USD). iPower’s WFOE and VIE in China uses the local currency, Renminbi (“RMB”), as its functional currency. Assets and liabilities of the VIE are translated at the current exchange rate as quoted by the People’s Bank of China (the “PBOC”) at the end of the period. Income and expense accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the statement of changes in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

The balance sheet amounts of the VIE, with the exception of equity, on December 31, 2024, were translated at 7.2993 RMB to $1.00. The equity accounts were stated at their historical rates. The average translation rates applied to statements of operations and comprehensive income (loss) accounts for the six months ended December 31, 2024 was 7.1764 RMB to $1.00. Cash flows were also translated at average translation rates for the period and, therefore, amounts reported on the statement of cash flows would not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheet.

Cash and cash equivalents

Cash and cash equivalents consist of amounts held as cash on hand and financial institution and financial service company deposits.

From time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $250,000, which is currently the maximum amount insured by the FDIC for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). The Company has not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash.

Accounts receivable, net

During the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers, which includes the amount withheld by sales channel partners and refundable to the Company. Based on historical and expected loss rate and status of negotiations with the sales channel partner, management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required.

The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses:

	·	the customer fails to comply with its payment schedule;

	·	the customer is in serious financial difficulty;

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

	·	the customer breaches any of its contractual obligations;

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

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

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

Accounts receivable are recognized and carried at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses the potential impact of the overall economic conditions on our customers’ industry and businesses and their ability to pay our accounts receivable. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance for credit losses. In late October 2024, the Company determined that the collectability of certain refundable amount withheld by sales channel partners was remote so recorded additional allowance for credit losses of $41,346 and $1,516,940 for the three and six months ended December 31, 2024.

Equity method investment

The Company accounts for its ownership interest in Box Harmony, a 40% owned joint venture, following the equity method of accounting, in accordance with ASC 323, Investments — Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at cost and then increased or decreased by recording its percentage of gain or loss in Box Harmony’s statement of operations and a corresponding charge or credit to the carrying value of the asset.

Variable interest entities

On February 15, 2022, the Company acquired 100% of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (“DHS”). Pursuant to the terms of the Agreements, the Company does not have direct ownership in DHS but is actively involved in DHS’s operations as the sole manager to direct the activities and significantly impact DHS’s economic performance. DHS’s operational funding has been provided by the Company following the February 15, 2022 acquisition. During the term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits from DHS. As such, based on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control existed, February 15, 2022.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other.

Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The Company’s review for impairment includes an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative goodwill impairment test is performed, which compares the fair value of the reporting unit with its carrying amounts, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

During the six months ended December 31, 2024 and 2023, the Company performed a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and noted no goodwill impairment. As of December 31, 2024 and June 30, 2024, the goodwill balance amounted to $3,034,110.

Intangible Assets, net

Finite life intangible assets at December 31, 2024 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition of Anivia. Intangible assets are recorded at the estimated fair value of these items at the date of acquisition, February 15, 2022. Intangible assets are amortized on a straight-line basis over their estimated useful life as follows:

Schedule of estimated useful life
		Useful Life
Covenant Not to Compete		10 years
Supplier relationship		6 years
Software		5 years

The Company reviews the recoverability of long-lived assets, including intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations. As of December 31, 2024 and 2023, there were no indicators of impairment.

Fair value of financial instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature.

For other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company does not have any assets or liabilities measured at fair value on a recurring basis. We measure certain non-financial assets on a non-recurring basis, including goodwill.

Revenue recognition

The Company recognizes revenues from service and product sales, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon shipment or completion of service, therefore, revenue from product sales is recognized when it is shipped to the customer and the revenue from services is recognized upon completion of services. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience.

The Company evaluates the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service and the Company has discretion in establishing the price, revenue is recorded at gross.

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

The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction.

Sales discounts are recorded in the period in which the related sales are recorded. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses.

Advertising costs

Advertising costs are expensed as incurred. Total advertising and promotional costs included in selling and fulfillment expenses for the three and six months ended December 31, 2024 and 2023 were as following.

Schedule of advertising costs
		Three Months Ended December 31,				Six Months Ended December 31,
		2024		2023		2024		2023
Advertising and promotion	$	630,956	$	1,139,239	$	1,282,080	$	2,709,981

Cost of revenue

Cost of revenue mainly consists of costs for purchases of products, net of purchase discounts and rebates, and related inbound freight and delivery fees.

Operating expenses

Operating expenses, which consist of selling and fulfillment and general and administrative expenses, are expensed as incurred. Vendor warranty credits resulting from refund of returns on quality issues are recorded to offset merchant selling fees. During the six months ended December 31, 2024 and 2023, the Company recorded vendor credits of $48,582 and $0, respectively.

Inventory, net

Inventory consists of finished goods ready for sale and is stated at the lower of cost or market. The Company values its inventory using the weighted average costing method. The Company’s policy is to include as a part of inventory and cost of goods sold any freight incurred to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling and fulfillment expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence.

If the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value. The Company also reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence.

Debt Issuance Costs

Costs incurred in connection with the issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest method. To the extent that the debt is outstanding, these amounts are reflected in the unaudited condensed consolidated balance sheets as direct deductions from the carrying amount of the outstanding borrowings.

Equity offering costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result of the offering. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations and comprehensive income (loss) in the period of determination. For the year ended June 30, 2024, $1,756,913 was recorded as deferred offering costs and reclassified to additional paid in capital upon closing of the offering on June 18, 2024. As of December 31, 2024 and June 30, 2024, there were no deferred offering costs included in the Company’s consolidated balance sheets.

Segment reporting

The Company follows ASC 280, Segment Reporting. The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company as a whole and, hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. For the six months ended December 31, 2024 and 2023, sales through Amazon to Canada and other foreign countries were approximately 6.9% and 9.8% of the Company’s total sales, respectively. During the six months ended December 31, 2024, sales of hydroponic products, including ventilation and grow light systems, was approximately 16.8% of the Company’s total sales and the remaining 83.2% consisted of general gardening, home goods, and other products and accessories. During the six months ended December 31, 2023, sales of hydroponic products, including ventilation and grow light systems, were approximately 19.3% of the Company’s total sales and the remaining 80.7% consisted of general gardening, home goods and other products and accessories. As of December 31, 2024 and June 30, 2024, the Company had approximately $1.4 million and $1.9 million of inventory stored in China. The Company’s majority of long-lived assets are located in California, United States, majority of the deferred tax assets are US related, and a majority of the Company’s revenues are derived from within the United States.

Leases

The Company records right-of-use (“ROU”) assets and related lease obligations on the balance sheet.

ROU assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Stock-based Compensation

The Company applies ASC No. 718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees, upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation costs related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. In addition to the requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20. For an award which contains both a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting period if it is probable the performance condition will be met. If the performance condition is ultimately not met, compensation costs related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied. The Company also revisits the anticipated timing for meeting the performance conditions. As per ASC 718-10-55-78, if the expected number of awards to vest and the fair value remain the same under the new estimates, with the adjustment solely impacting the timing of recognition, the Company will apply the prospective approach to record the adjustment.

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

Income taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance must be established for deferred tax assets when it is more-likely-than-not (a probability level of more than 50%) that they will not be realized. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the states of Nevada and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.

The Company believes that our income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740, Income Taxes. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.

Commitments and contingencies

In the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of each matter.

Earnings per share

Basic earnings per share is computed by dividing net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities to issue common stock were exercised.

Recently issued accounting pronouncements

In November 2024, The FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company plans to adopt this pronouncement for its fiscal year beginning July 1, 2027, and is in the process of analyzing the impact on its consolidated financial statements.

In December 2023, The FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. Under this ASU, public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).” This ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Entities are permitted to early adopt the standard “for annual financial statements that have not yet been issued or made available for issuance.” The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In November 2023, The FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments apply to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The key amendments: 1. Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss. 2. Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss. 3. Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB Accounting Standards Codification® Topic 280, Segment Reporting, in interim periods. 4. Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements. 5. Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. 6. Require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. This ASU incorporates certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification™ (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. In SEC Release No. 33-10532, Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with, but require incremental information to, generally accepted accounting principles to the FASB for potential incorporation into the Codification. The ASU incorporates into the Codification 14 of the 27 disclosures referred by the SEC. They modify the disclosure or presentation requirements of a variety of Topics in the Codification. The requirements are relatively narrow in nature. Some of the amendments represent clarifications to, or technical corrections of, the current requirements. Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and require specific disclosures related to such an equity security. This standard is effective for fiscal years beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

Subsequent events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued. Material subsequent events that required recognition or additional disclosure in the unaudited condensed consolidated financial statements are presented.

Note 3 - Joint Ventures

Box Harmony, LLC

On January 13, 2022, the Company entered into a joint venture agreement (the “Joint Venture Agreement”) with Titanium Plus Autoparts, Inc., a California corporation (“TPA”), Tony Chiu (“Chiu”) and Bin Xiao (“Xiao”). Pursuant to the terms of the Joint Venture Agreement, the parties formed a Nevada limited liability company, Box Harmony, LLC (“Box Harmony”), for the principal purpose of providing logistic services primarily for foreign-based manufacturers or distributors who desire to sell their products online in the United States, with such logistic services to include, without limitation, receiving, storing and transporting such products.

Following entry into the Joint Venture Agreement, Box Harmony issued a total of 6,000 certificated units of membership interest, designated as Class A voting units (“Equity Units”), as follows: (i) the Company agreed to contribute $50,000 in cash in exchange for 2,400 Equity Units in Box Harmony and agreed to provide Box Harmony with the use and access to certain warehouse facilities leased by the Company (see below), and (ii) TPA received 1,200 Equity Units in exchange for (a) $1,200 and contributing the TPA IP License referred to below, (b) its existing and future customer contracts, and (c) granting Box Harmony the use of shipping accounts (FedEx and UPS) and all other TPA carrier contracts, and (iii) Xiao received 2,400 Equity Units in exchange for $2,400 and his agreement to manage the day to day operations of Box Harmony.

Under the terms of the Box Harmony limited liability operating agreement (the “LLC Agreement”), TPA and Xiao each granted to the Company an unconditional and irrevocable right and option to purchase from Xiao and TPA at any time within the first 18 months following January 13, 2022, up to 1,200 Class A voting units, at an exercise price of $550 per Class A voting unit, for a total exercise price of up to $660,000. If such option is fully exercised, the Company would own 3,600 Equity Units or 60% of the total outstanding Equity Units. As of the date of this report, the Company had not exercised the option to purchase additional voting units from Xiao and TPA. The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by the Company, that a noncontrolling right that would not be substantive to overcome the majority voting interests held by TPA and Xiao. In January 2023, TPA and Xiao transferred their 60% equity units to a third party without consideration as the LLC was still in development stage and did not have significant operations. The transfer of equity did not have any impact on the LLC’s financial statements.

As a result, the Company owns 40% of the equity interest in Box Harmony with significant influence but does not own a majority equity interest or otherwise control of Box Harmony. The Company accounts for its ownership interest in Box Harmony following the equity method of accounting, in accordance with ASC 323, Investments —Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at cost and then increased or decreased by recording its percentage of gain or loss in its statement of operations and a corresponding charge or credit to the carrying value of the asset.

Global Social Media, LLC

On February 10, 2022, the Company entered into a joint venture agreement with Bro Angel, LLC, Ji Shin and Bing Luo (the “GSM Joint Venture Agreement”). Pursuant to the terms of the GSM Joint Venture Agreement, the parties formed a Nevada limited liability company, Global Social Media, LLC (“GSM”), for the principal purpose of providing a social media platform, contents and services to assist businesses, including the Company and other businesses, in marketing their products.

Following entry into the GSM Joint Venture Agreement, GSM issued 10,000 certificated units of membership interest (the “GSM Equity Units”), of which the Company was issued 6,000 GSM Equity Units and Bro Angel was issued 4,000 GSM Equity Units. Messrs. Shin and Luo are the owners of 100% of the equity of Bro Angel. The LLC Agreement prohibits the issuance of additional Equity Units and certain other actions unless approved in advance by Bro Angel, creating a noncontrolling right that would not be substantive to overcome the majority voting interests held by the Company.

As of the date of this report, the members had not completed the capital contributions and no receivables were recorded.

Pursuant to the terms of the Agreements, the Company owns 60% of the equity interest in GSM and control of GSM’s operations. Based on ASU 2015-02, the Company consolidates GSM into its financial statements due to its majority equity ownership and control over operations. For the six months ended December 31, 2024 and 2023, the impact of GSM’s activities were immaterial to the Company’s unaudited condensed consolidated financial statements.

Note 4 – Variable interest entity

Effective February 15, 2022, upon acquisition of Anivia, the Company assumed the contractual arrangements between the WFOE and DHS through a variable interest operating entity structure. On September 26, 2024, Mr. Zanyu Li, the equity owner of DHS transferred his shares to Ms. Xiaoyun Liu. Ms. Liu has become the Manager and Legal Representative of DHS and assumed all responsibilities and obligations of Mr. Zanyu Li. The transfer of equity ownership did not change the control the Company had on the VIE, therefore there was no impact on the Company’s financial statements.

The Company did not provide financial or other support to the VIE for the periods presented where the Company was not otherwise contractually required to provide such support.

As of December 31, 2024 and June 30, 2024, there was no pledge or collateralization of the VIE assets that would be used to settle obligations of the VIE.

The carrying amounts of the assets, liabilities and the results of operations of the VIE included in the Company’s unaudited condensed consolidated balance sheets and statements of operations and comprehensive income after the elimination of intercompany balances and transactions with the VIE are as follows:

The carrying amount of the VIE’s assets and liabilities were as follows for the periods indicated:


	December 31, 2024		June 30, 2024
Cash in bank	$	209,313	$	222,648
Prepayments and other receivables	$	7,124	$	202,904
Rent deposit	$	9,590	$	72,281
Office equipment, net	$	5,849	$	12,205
Right of use – noncurrent	$	–	$	434,034
Accounts payable	$	185,307	$	381,013
Lease liability	$	–	$	443,059
Income tax payable	$	274,947	$	276,158
Other payables and accrued liabilities	$	550,763	$	514,285

The operating results of the VIE were as follows for the three and six months ended December 31, 2024:


	Three Months			Six Months
Revenue	$	–		$	–
Net loss after elimination of intercompany transactions		(45,288	)		(184,218	)

The operating results of the VIE were as follows for the three and six months ended December 31, 2023:


	Three Months		Six Months
Revenue	$	–	$	–
Net income (loss) after elimination of intercompany transactions	$	27,461		(391,882	)

For the three and six months ended December 31, 2024, the VIE contributed approximately $0.8 million and $2.2 million of revenue and $0.3 million and $0.5 million of net loss before elimination. For the three and six months ended December 31, 2023, the VIE contributed approximately $1.8 million and $3.9 million of revenue and $0.15 million and $0.2 million of net loss before elimination, respectively.

Note 5 – Accounts receivable, net

Accounts receivable for the Company consisted of the following as of the dates indicated below:

Schedule of accounts receivable
	December 31, 2024			June 30, 2024
Accounts receivable	$	15,798,758		$	15,095,479
Less: allowance for credit losses		(1,872,326	)		(355,386	)
Total accounts receivable	$	13,926,432		$	14,740,093

The changes in allowance for credit losses on accounts receivable are summarized below:


	Allowance for Credit Losses
Balance at June 30, 2023	$	70,000
Allowance recorded during the three months ended September 30, 2023		–
Balance at September 30, 2023	$	70,000
Allowance recorded during the three months ended December 31, 2023		–
Balance at December 31, 2023	$	70,000

Balance at June 30, 2024	$	355,386
Allowance recorded during the three months ended September 30, 2024		1,475,594
Balance at September 30, 2024	$	1,830,980
Allowance recorded during the three months ended December 31, 2024		41,346
Balance at December 31, 2024	$	1,872,326

Note 6 – Inventories, net

As of December 31, 2024 and June 30, 2024, inventories consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $9,183,631 and $10,546,273, respectively.

For the three and six months ended December 31, 2024, the Company recorded inventory reserve expense of $0 and $288,474, respectively. For the three and six months ended December 31, 2023, the Company recorded inventory reserve expense of $117,563 and $222,755, respectively. As of December 31, 2024 and June 30, 2024, allowance for obsolescence was $936,299 and $647,825, respectively.

Note 7 – Prepayments and other current assets, net

As of December 31, 2024 and June 30, 2024, prepayments and other current assets consisted of the following:


	December 31, 2024		June 30, 2024
Advance to suppliers	$	1,832,378	$	1,567,528
Prepaid income taxes		16,687		31,496
Prepaid expenses and other receivables		443,679		747,510
Less: Allowance for credit losses		–		–

Total	$	2,292,744	$	2,346,534

Other receivables consisted of delivery fees of $64 and $3,995 from a third party for using the Company’s courier accounts at December 31, 2024 and June 30, 2024.

The changes in allowance for credit losses on other receivables are summarized below:


	Allowance for Credit Losses
Balance at June 30, 2023	$	249,128
Allowance recorded during the three months ended September 30, 2023		–
Balance at September 30, 2023	$	249,128
Allowance recorded during the three months ended December 31, 2023		–
Balance at December 31, 2023	$	249,128

Balance at June 30, 2024	$	–
Allowance recorded during the three months ended September 30, 2024		–
Balance at September 30, 2024		–
Allowance recorded during the three months ended December 31, 2024	$	–
Balance at December 31, 2024	$	–

During the year ended June 30, 2024, the Company collected $249,128 of aged other receivables and recorded a reduction of bad debts expense as a reversal of the allowance of credit loss.

Note 8 – Intangible assets, net

As of December 31, 2024 and June 30, 2024, intangible assets, net, consisted of the following:

Schedule of intangible assets, net
	December 31, 2024		June 30, 2024
Covenant not to compete	$	3,459,120	$	3,459,120
Supplier relationships		1,179,246		1,179,246
Software

SEC Form 10-Q filed by iPower Inc.