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What changed in iPower Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of iPower Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+269 added−259 removedSource: 10-K (2024-09-20) vs 10-K (2023-09-15)

Top changes in iPower Inc.'s 2024 10-K

269 paragraphs added · 259 removed · 182 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCustomers and Suppliers We have a diverse customer base, with residential gardeners and home goods consumers constituting a significant portion of our customer base and thus the largest portion of our total sales. We sell to both commercial and home cultivators growing specialty crops, as well as in the home goods category.
Biggest changeWe plan to increase our investments in R&D relating to the improvement of existing products and the development and addition of new product lines. 1 Customers and Suppliers We have a diverse customer base, with residential gardeners and home goods consumers constituting a significant portion of our customer base and thus the largest portion of our total sales.
We believe that we have the following core competitive advantages over our competitors: · In addition to our in-house branded products, we distribute products from hundreds of third-party brands, ensuring that whatever a customer’s particular need may be, they need look no further than iPower for their product needs. · Our knowledgeable and experienced sales team can provide guidance and insights, whether dealing with a seasoned commercial entity or a first-time purchaser looking to get their grow operations off the ground. · The convenience of our e-commerce platform allows customers to shop from the comfort of their own home and have their purchases shipped directly to them. · We believe that our prominent position as a supplier to Amazon means that our products are prominently featured on the world’s most important retailer · We view ourselves as an industry leader, offering products and new technologies from the largest and most trusted names in the business, as well as our own in-house branded products.
We believe that we have the following core competitive advantages over our competitors: · In addition to our in-house branded products, we distribute products from third-party brands, ensuring that whatever a customer’s particular need may be, they need look no further than iPower for their product needs. · Our knowledgeable and experienced sales team can provide guidance and insights, whether dealing with a seasoned commercial entity or a first-time purchaser looking to get their grow operations off the ground. · The convenience of our e-commerce platform allows customers to shop from the comfort of their own home and have their purchases shipped directly to them. · We believe that our prominent position as a supplier to Amazon means that our products are prominently featured on the world’s most important retailer · We view ourselves as an industry leader, offering products and new technologies from the largest and most trusted names in the business, as well as our own in-house branded products.
Our principal offices are located at 8798 9th Street, Rancho Cucamonga, CA 91730, and our phone number is (626) 863-7344. Our business website is www.meetipower.com and our e-commerce websites are www.Zenhydro.com and www.simpledeluxe.com. Information contained on our websites should not be deemed incorporated by reference and is not a part of this report.
Our principal offices are located at 8798 9th Street, Rancho Cucamonga, CA 91730, and our phone number is (626) 863-7344. Our business website is www.meetipower.com and our e-commerce websites are www.Zenhydro.com and www.simpledeluxe.com. Information contained on our websites should not be deemed incorporated by reference and is not a part of this Annual Report.
Further, we believe our dedication to providing consumers with innovative and cutting-edge products tailored to their individual needs, combined with our industry knowledge and customer service, has positioned iPower to take advantage of the domestic and international growth anticipated for hydroponic products. 4 Corporate Structure We have been conducting business as iPower Inc.
Further, we believe our dedication to providing consumers with innovative and cutting-edge products tailored to their individual needs, combined with our industry knowledge and customer service, has positioned iPower to take advantage of the domestic and international growth anticipated for hydroponic products. Corporate Structure We have been conducting business as iPower Inc.
On May 18, 2021, the Company entered into equity purchase agreements with the shareholders of E Marketing and GPM, pursuant to which we acquired 100% of the equity interests of each of E Marketing and GPM for nominal consideration and E Marketing and GPM became our wholly owned subsidiaries. On February 15, 2022, the Company acquired Anivia Limited (“Anivia”).
On May 18, 2021, the Company entered into equity purchase agreements with the shareholders of E Marketing and GPM, pursuant to which we acquired 100% of the equity interests of each of E Marketing and GPM for nominal consideration and E Marketing and GPM became our wholly owned subsidiaries. 4 On February 15, 2022, the Company acquired Anivia Limited (“Anivia”).
Moreover, we expect that as we continue to grow our business, we will achieve an economy of scale and, as such, will be able to further optimize supply chains, which will enable us to continue to maintain competitive pricing options and deliver the array of items that our customers require.
Moreover, we expect that as we continue to grow our business, we will achieve an economy of scale and, as such, will be able to further optimize and expand supply chains, which will enable us to continue to maintain competitive pricing options and deliver the array of items that our customers require.
Google advertising, social media advertising and email list marketing, in addition to auto-ship functionality, are the primary mechanisms we employ to drive traffic to our e-commerce platforms and the other portals through which we make our products available for sale, including Amazon.com, eBay and Walmart. At present, more than 90% of our total sales occur through Amazon.com.
Google advertising, social media advertising and email list marketing, in addition to auto-ship functionality, are the primary mechanisms we employ to drive traffic to our e-commerce platforms and the other portals through which we make our products available for sale, including Amazon.com, Tiktok, Temu, eBay and Walmart. At present, more than 90% of our total sales occur through Amazon.com.
Our key competitors include many local and national vendors of home and gardening supplies, local product resellers of hydroponic and other specialty growing equipment, as well as other online product resellers on large online marketplaces such as Amazon.com and eBay. We compete with companies that have greater capital resources, facilities, and diversity of product lines.
Our key competitors include many local and national vendors of home and gardening supplies, local product resellers of hydroponic and other specialty growing equipment, as well as other online product resellers on large online marketplaces such as Amazon.com and Walmart.com. We compete with companies that have greater capital resources, facilities, and diversity of product lines.
We believe these has allowed us to gain share from other suppliers in our various channels. 2 E-Commerce Strategy The Company continues to grow and develop its e-commerce platforms, including zenhydro.com and simpledeluxe.com, where we sell our in house and third party products.
We believe these has allowed us to gain share from other suppliers in our various channels. 2 E-Commerce Strategy The Company continues to grow and develop its e-commerce platforms, including simpledeluxe.com and more, where we sell our in house and third party products.
Online shoppers can have the ability to peruse our various product categories such as hydroponics equipment, home fans and furnishing, shelving, outdoor lifestyle products, and pet products, providing consumers with an easy and quick method to find the exact products they need.
Online shoppers can have the ability to peruse our various product categories such as gardening equipment, home fans and furnishing, shelving, outdoor lifestyle products, and pet products, providing consumers with an easy and quick method to find the exact products they need.
In addition to our websites, we offer products to consumers through established e-commerce channels such as Amazon, eBay, and Walmart. Through these portals we offer various consumer products for sale.
In addition to our websites, we offer products to consumers through established e-commerce channels such as Amazon, eBay, Tiktok, Temu and Walmart. Through these portals we offer various consumer products for sale.
Our non-hydroponics product lines are also seeing strong demand as the categories we participate in are primarily in large markets with a fragmented supply base. We also believe that our expertise in product development has created a catalog well suited to gaining market share in these categories.
Our non-hydroponics product lines are also seeing strong demand as the categories we participate in are primarily in large markets with a fragmented supply base. We also believe that our expertise in product development and supply chain management has created a catalog well suited to gaining market share in these categories.
For the year ended June 30, 2023, our top five product categories accounted for 72% of total sales. While we continue to focus on our top product categories, we are working to expand our product catalog to include new and adjacent categories through in-house products and our supply chain partners driven by market data analytics.
For the fiscal year ended June 30, 2024, our top five product categories accounted for 68% of total sales. While we continue to focus on our top product categories, we are working to expand our product catalog to include new and adjacent categories through in-house products and our supply chain partners driven by market data analytics.
Grandview Research estimated that the size of the home goods market in the US was $740 billion in 2020 and should reach close to $1,040 billion by 2024, with a CAGR of 7.4%. 1 Research and Development The Company has not incurred any significant research and development (“R&D”) expenses during the fiscal year ended June 30, 2023.
Grandview Research estimated that the size of the home goods market in the US was $740 billion in 2020 and should reach close to $1,037 billion by 2025, with a CAGR of 6. 6 %. Research and Development The Company has not incurred any significant research and development (“R&D”) expenses during the fiscal year ended June 30, 2024.
Orders are then routed to the applicable distribution center and packed for shipments. Most of our customer orders are shipped within one business day of order receipt. Competition The markets in which we sell our products are highly competitive and fragmented.
We receive daily customer orders via our business-to-business e-commerce platform. Orders are then routed to the applicable distribution center and packed for shipments. Most of our customer orders are shipped within one business day of order receipt. Competition The markets in which we sell our products are highly competitive and fragmented.
General gardening supplies generally include environmental sensors and controls and nutrients among others. Home goods supplies currently include commercial fans, floor and wall fans, storage and shelving units, and chairs among others. The home goods industry has become a significant category we sell into.
Home goods supplies currently include commercial fans, floor and wall fans, storage and shelving units, and chairs among others. The home goods industry has become a significant category we sell into.
Our experienced internal sourcing team is charged with maintaining strong relationships with current suppliers, while also constantly tracking current and future market trends and reviewing offerings of new suppliers. We do not have exclusive purchase agreements with many of our suppliers.
For distributed products that are sourced from third-party suppliers, our experienced internal sourcing team is charged with maintaining strong relationships with current suppliers, while also constantly tracking current and future market trends and reviewing offerings of new suppliers. We do not have exclusive purchase agreements with many of our suppliers.
Our primary subcategories include consumer hydroponics equipment and supplies, consumer general gardening supplies, and consumer home and pet goods. Hydroponics supplies generally include grow light systems; advanced heating, ventilation and air conditioning (“HVAC”) systems; water pumps, heaters, chillers and filters; nutrient and fertilizer delivery systems; and various growing media typically made from soil, rock wool or coconut fiber, among others.
Hydroponics supplies generally include grow light systems; advanced heating, ventilation and air conditioning (“HVAC”) systems; water pumps, heaters, chillers and filters; nutrient and fertilizer delivery systems; and various growing media typically made from soil, rock wool or coconut fiber, among others. General gardening supplies generally include environmental sensors and controls and nutrients among others.
We are actively developing and acquiring our in-house branded products, which to date include iPower, Simple Deluxe and other brands and consist of products such as home goods, fans, pet products and hydroponics equipment, some of which have been designated as Amazon Choice products and category best sellers, among others.
We are actively developing in-house branded products and through supply chain partners, which to date include iPower, Simple Deluxe and other brands and consist of products such as home goods, fans, pet products, outdoor, gardening and consumer electronics, some of which have been designated as Amazon Choice products and category best sellers, among others.
Employees As of September 14, 2023, we have a total of 70 full-time and five part-time employees and consultants. None or our employees are subject to collective bargaining agreements. 5
Employees As of September 20, 2024, we have a total of 60 full-time and four part-time employees and consultants. None or our employees are subject to collective bargaining agreements.
Large Established Distribution Infrastructure We have a fully developed distribution network through our distribution centers in California. We work with a network of third-party common carrier trucking/freight companies that service our customers throughout the U.S., Canada and across the globe. We receive daily customer orders via our business-to-business e-commerce platform.
Large Established Distribution Infrastructure We have worked to develop a highly developed distribution network through our distribution centers in California as well as partner fulfillment centers across the United States. We work with a network of third-party common carrier trucking/freight companies that service our customers throughout the U.S., Canada and across the globe.
For the years ended June 30, 2023 and 2022, one supplier accounted for 27% and 18% of the Company's total purchases, respectively. We do not have any long-term supply agreements. Manufacturers We obtain both our branded proprietary products and distributed products from third party suppliers.
We purchase our products from many different suppliers, including manufacturers and distributors in the U.S. and Southeast Asia. For the years ended June 30, 2024 and 2023, one supplier accounted for 10% and 27% of the Company's total purchases, respectively. We do not have any long-term supply agreements.
Our core strategy continues to focus on expanding our geographic reach across the United States and internationally through organic growth, both in terms of expanding customer base as well as brand and product development. iPower has developed a set of methodologies driven by proprietary data formulas to effectively bring products to market and increase sales.
We anticipate continuing to expand our reach across the United States and internationally through organic growth. iPower has developed a set of methodologies driven by proprietary data formulas to effectively bring products to market and increase sales.
While the company offers products from hundreds of third-party brands, the Company has also established its own in-house branded products which are made available for purchase through our various sales channels.
Products iPower offers essential products in the home, pet, outdoor, gardening, and consumer electronics categories. The Company has established its own in-house branded products as well as third-party brands from supply chain partners which are made available for purchase through our various sales channels.
Quality control is a critical priority for our team charged with ensuring the supply of the products from our suppliers, specifically those coming from China. We seek to ensure the highest level of quality control for our products through routine factory visits, spot testing and continual, ongoing supplier due diligence. Our distributed products are sourced from more than 150 suppliers.
We seek to ensure the highest level of quality control for our products through routine factory visits, spot testing and continual, ongoing supplier due diligence.
We do most of our development work in conjunction with our manufacturing partners, where we co-engineer designs with their development teams. We plan to increase our investments in R&D relating to the improvement of existing products and the development and addition of new product lines.
We do most of our development work in conjunction with our supply chain partners and our manufacturing partners, where we co-engineer designs with their development teams.
Our in-house branded products, marketed under the iPower™ and Simple Deluxe™ brands, include hydroponic-related items, fans, shelving, pet supplies and outdoor lifestyle products, some of which have been designated as Amazon best seller product leaders, and for which numerous products have been designated “Amazon’s Choice” and “#1 Best Seller.” We currently offer consumers more than 4,000 products from our proprietary, in-house branded products.
These products range from hydroponic-related items, fans, shelving, pet supplies, outdoor lifestyle products and consumer electronics, some of which have been designated as Amazon best seller product leaders, and for which numerous products have been designated “Amazon’s Choice” and “#1 Best Seller.” This year, we expanded our in-house catalog to include more general home goods products, with home goods making up our largest meta category.
At present, sales to customers through Amazon and other third-party online platforms accounts for approximately 98% of our annual sales. We do not manufacture any of the products we sell through our distribution channels. We purchase our products from more than 150 suppliers, including manufacturers and distributors in the U.S. and China.
We sell to both commercial and home cultivators growing specialty crops, as well as in the home goods category. At present, sales to customers through Amazon and other third-party online platforms accounts for almost all of our annual sales. We do not manufacture any of the products we sell through our distribution channels.
ITEM 1. DESCRIPTION OF BUSINESS Our Business iPower Inc. (formerly BZRTH, Inc.), a California-based corporation, was formed in Nevada in April 2018. Driven by tech and data, iPower Inc. is a U.S.-based online retailer and supplier of consumer home, garden and pet products.
ITEM 1. DESCRIPTION OF BUSINESS Our Business iPower Inc. (formerly BZRTH, Inc.), a California-based corporation, was formed in Nevada in April 2018 (“iPower,” “we,” or “us”).
This year, we expanded our in-house catalog to include more general home goods products, with home goods making up our largest meta category. Our Industry is Large and Rapidly Growing Our principal industry opportunity is in the retail sale and distribution of consumer goods.
Our Industry is Large and Rapidly Growing Our principal industry opportunity is in the retail sale and distribution of consumer goods. Our primary subcategories include consumer home, pet, hydroponics and gardening products, outdoor and consumer electronics.
Removed
Through the operations of our e-commerce platforms, www.simpledeluxe.com and www.Zenhydro.com, as well as Amazon, Walmart and eBay, our combined 121,000 square foot fulfillment centers in Los Angeles, California, and our 99,000 square foot fulfillment center in Rancho Cucamonga, California, we believe we are one of the leading online marketers, distributors and retailers in our product categories, based on management’s estimates.
Added
Driven by tech and data, iPower is an online retailer and supplier of consumer home, pet, garden products, outdoor and consumer electronics, as well as a provider of value-added ecommerce services for third-party products and brands. iPower's capabilities include a full spectrum of online channels, robust fulfillment capacity, a network of warehouses serving the U.S., competitive last mile delivery partners and a differentiated business intelligence platform.
Removed
Approximately 95% of our sales revenue during the year ended June 30, 2023 were derived from sales through Amazon, eBay and Walmart, where we experienced approximately 14% revenue growth in the fiscal year ended June 30, 2023 as compared to the prior fiscal year. Products iPower offers essential products in the hydroponic, gardening, home and pet goods categories.
Added
With these capabilities, iPower efficiently moves a diverse catalog of SKUs from its supply chain partners to end consumers every day, providing the best value to customers in the U.S. and other countries.
Removed
For our hydroponic category, most of the products purchased and resold, whether our proprietary products or third-party products sold through our platform, are applicable to indoor and outdoor growing for organics, greens and plant-based products. Our products are sourced from more than 150 different suppliers and manufacturers, with approximately 90% sourced from China.
Added
Our sales channels currently include Amazon Vendor, Amazon 3P, Walmart.com, Tiktok, Temu, and other market places as well as our e-commerce websites such as simpledeluxe.com and more, We are expanding our categories through product development, our SuperSuite supply chain partner and future acquisitions.
Removed
Consumer interest in hydroponics as a hobby and lifestyle choice a surge in interest driven by the stay-at-home necessities of the Covid-19 pandemic. This is in contrast to the weak demand environment for commercial hydroponics suppliers who are suffering from growing over capacity in the commercial sector.
Added
Manufacturers We obtain both our branded proprietary products and distributed products from third party suppliers. Our products are sourced from well diversified suppliers and manufacturers, with approximately 90% sourced from China. Quality control is a critical priority for our team charged with ensuring the supply of the products from our suppliers, specifically those coming from China.
Added
Consumer interest in hydroponics for in home gardening as a hobby and lifestyle choice surged in interest during the Covid-19 pandemic and the current employer work-from-home policies have allowed consumers to continue to expand upon their interests in at home gardening.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the more significant challenges we face include: · Our Company’s founders own approximately 53.98% of our common stock, which effectively gives our founders full control over the board of directors and management of the Company for the foreseeable future. · The Company faces intense competition in the hydroponics marketplace which could prohibit us from developing or increasing our customer base beyond present levels. · Our ability to ensure consistency in the quality of our products and supply chain. · Approximately 98% of our current revenues are derived from sales of our products through online third-party platforms, including Amazon.com, Walmart and eBay; any disruption to these business channels could be detrimental to our business. · Potential disruption of our business and supply chain that may be caused by any conflicts, trade wars or currency fluctuations or tariffs between China and the U.S. · The ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, results from operations, or the businesses of our suppliers, vendors and logistics partners. · The ongoing COVID-19 epidemic, and any resurgence in related infections, whether in the U.S., China or elsewhere, along with any efforts to mitigate its impact could have an adverse effect on our business, liquidity, operations, financial condition, the business of our suppliers, vendors and logistic partners, and the price of our securities. · In the event we require additional capital resources to fund our enterprise, we may not be able to obtain sufficient capital and may be forced to limit the expansion of our operations. · Certain of our products may be purchased for use in new and emerging industries or segments, such as cannabis, and may be subject to varying, inconsistent and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions. · Our business depends significantly on the continuing efforts of our management team and our business may be impacted if we should lose their services. · Certain relationships, acquisitions, strategic alliances and investments could result in operating issues, dilutions and other harmful or unintended consequences which may adversely impact our business and the results of our operations. · Our continued investment and development in our in-house branded products is inherently risky and could disrupt our ongoing business. · If the Company is unable to maintain and continue to develop our e-commerce platform, our reputation and operating results may be materially harmed. · As the bulk of our sales are carried out through e-commerce, we are subject to certain cyber security risks, including hacking and stealing of customer and confidential data. · If we fail to comply with the continued listing requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the market price and liquidity of our securities and could have other adverse effects. · There are a myriad of risks, including stock market volatility, inherent in owning our securities. 6 Risks Related to Our Business and Products We sell proprietary brand offerings, as well as third party brands, which could expose us to various risks.
Biggest changeSome of the more significant challenges we face include: · Our founders, officers and directors may control, and may continue to control, our company for the foreseeable future, including the outcome of matters requiring stockholder approval. · The Company faces intense competition in the hydroponics marketplace which could prohibit us from developing or increasing our customer base beyond present levels. · Our ability to ensure consistency in the quality of our products and supply chain. · Approximately 99% of our current revenues are derived from sales of our products through online third-party platforms, including Amazon.com, Tiktok, Temu, Walmart, and eBay; any disruption to these business channels could be detrimental to our business. 5 · Potential disruption of our business and supply chain that may be caused by any conflicts, trade wars or currency fluctuations or tariffs between China and the U.S. · The availability and cost of transportation for our products is vital to our success, and the loss of availability or increase in the cost of transportation or freight costs could have an unfavorable impact on our business, results of operations, financial condition, and cash flows. · The ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, results from operations, or the businesses of our suppliers, vendors and logistics partners. · The occurrence of any epidemic, including the COVID-19 pandemic or any pandemic alike, and any resurgence in related infections, whether in the U.S., China or elsewhere, along with any efforts to mitigate their impact could have an adverse effect on our business, liquidity, operations, financial condition, the business of our suppliers, vendors and logistic partners, and the price of our securities. · In the event we require additional capital resources to fund our enterprise, we may not be able to obtain sufficient capital and may be forced to limit the expansion of our operations. · Certain of our products may be purchased for use in new and emerging industries or segments, such as cannabis, and may be subject to varying, inconsistent and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions. · Our business depends significantly on the continuing efforts of our management team and our business may be impacted if we should lose their services. · Certain relationships, acquisitions, strategic alliances and investments could result in operating issues, dilutions and other harmful or unintended consequences which may adversely impact our business and the results of our operations. · Our continued investment and development in our in-house branded products are inherently risky and could disrupt our ongoing business. · If the Company is unable to maintain and continue to develop our e-commerce platform, our reputation and operating results may be materially harmed. · As the bulk of our sales are carried out through e-commerce, we are subject to certain cyber security risks, including hacking and stealing of customer and confidential data. · If we fail to comply with the continued listing requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the market price and liquidity of our securities and could have other adverse effects. · There is a myriad of risks, including stock market volatility, inherent in owning our securities.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived from such activities. In addition to sales through our own platforms, www.Zenhydro.com and www.simpledeluxe.com, we sell our products through third-party retailers and resellers.
Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived from such activities. 21 In addition to sales through our own platforms, www.Zenhydro.com and www.simpledeluxe.com, we sell our products through third-party retailers and resellers.
If the difficulties experienced by our suppliers continues, we cannot guarantee that we will be able to locate alternative sources of supply for our merchandise on acceptable terms, or at all. If we are unable to purchase appropriate amounts of inventory, our business and results of operations may be materially and adversely affected.
If the difficulties experienced by our suppliers and us continues, we cannot guarantee that we will be able to locate alternative sources of supply for our merchandise on acceptable terms, or at all. If we are unable to purchase appropriate amounts of inventory, our business and results of operations may be materially and adversely affected.
Failure of third parties to meet their contractual, regulatory and other obligations may have a material adverse effect on our business, financial condition and results of operations. 22 The sizes of the markets for our current and future products have not been established with precision and may be smaller than we estimate.
Failure of third parties to meet their contractual, regulatory and other obligations may have a material adverse effect on our business, financial condition and results of operations. The sizes of the markets for our current and future products have not been established with precision and may be smaller than we estimate.
Investors in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn a return on their investment. 26 We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
Investors in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn a return on their investment. We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
Moreover, the federal government’s tactics may change or have unforeseen effects, which could be detrimental to our business. 14 Acquisitions, other strategic alliances, and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.
Moreover, the federal government’s tactics may change or have unforeseen effects, which could be detrimental to our business. Acquisitions, other strategic alliances, and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.
A successful claim of intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition, and results of operations. 18 We may not be able to develop, license or acquire new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements, or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business, financial condition, and results of operations.
A successful claim of intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition, and results of operations. 17 We may not be able to develop, license or acquire new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements, or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business, financial condition, and results of operations.
In September 2019, the United States House of Representatives passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, but the Senate has not taken up the SAFE Banking Act or other similar legislation. 25 Risks Related to Our Common Stock If we fail to comply with the continued listing requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the market price and liquidity of our securities and could have other adverse effects.
In September 2019, the United States House of Representatives passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, but the Senate has not taken up the SAFE Banking Act or other similar legislation. 23 Risks Related to Our Common Stock If we fail to comply with the continued listing requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the market price and liquidity of our securities and could have other adverse effects.
We cannot predict the nature of such developments or the effect, if any, that such developments could have on our business. 24 Our indirect involvement in the cannabis industry could affect the public’s perception of us and be detrimental to our reputation.
We cannot predict the nature of such developments or the effect, if any, that such developments could have on our business. Our indirect involvement in the cannabis industry could affect the public’s perception of us and be detrimental to our reputation.
Any disruption in our sales or accessibility to Amazon, or any negative action taken by Amazon related to our sales, could negatively affect our business. Our reliance on third-party manufacturers could harm our business. We rely on third parties to manufacture certain of our products.
Any disruption in our sales or accessibility to Amazon, or any negative action taken by Amazon related to our sales, could negatively affect our business. 14 Our reliance on third-party manufacturers could harm our business. We rely on third parties to manufacture certain of our products.
We could be an “emerging growth company” for up to five years following the effectiveness of this registration statement, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period. 27 Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
We could be an “emerging growth company” for up to five years following the effectiveness of this registration statement, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period. 26 Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
Our future financial performance and our ability to continue to grow our operation and effectively compete in the hydroponics industry will depend in part on our ability to effectively manage any future growth. 13 Certain of our products may be purchased for use in the cannabis industry and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.
Our future financial performance and our ability to continue to grow our operation and effectively compete in the hydroponics industry will depend in part on our ability to effectively manage any future growth. 12 Certain of our products may be purchased for use in the cannabis industry and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions.
The losses incurred from a breach of data security and operational failures as well as the precautionary measures required to address this evolving risk may adversely impact our financial condition, results of operations and cash flows. 17 We collect, process, store, use, and share information collected from or about purchasers and users of our website and products.
The losses incurred from a breach of data security and operational failures as well as the precautionary measures required to address this evolving risk may adversely impact our financial condition, results of operations and cash flows. 16 We collect, process, store, use, and share information collected from or about purchasers and users of our website and products.
There can be no assurance that we will have available assets to pay to the holders of common stock, or any amounts, upon such a liquidation, dissolution or winding-up of our Company. In this event, stockholders could lose some or all of their investment. 28 ITEM 1B. Unresolved Staff Comments. None.
There can be no assurance that we will have available assets to pay to the holders of common stock, or any amounts, upon such a liquidation, dissolution or winding-up of our Company. In this event, stockholders could lose some or all of their investment. 27 ITEM 1B. Unresolved Staff Comments. None.
Any such reduction may materially and adversely affect our sales and our business. 11 Our China-based subsidiaries, Dayourenzi (Shenzhen) Technology Co., Ltd. and Daheshou (Shenzhen) Information Technology Co., Ltd., through which we procure the majority of our inventory and overseas logistical support, are owned through contractual agreements, as required by the laws of the PRC.
Any such reduction may materially and adversely affect our sales and our business. 10 Our China-based subsidiaries, Dayourenzi (Shenzhen) Technology Co., Ltd. and Daheshou (Shenzhen) Information Technology Co., Ltd., through which we procure the majority of our inventory and overseas logistical support, are owned through contractual agreements, as required by the laws of the PRC.
As a result, such individuals will, for the foreseeable future, have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws.
As a result, such individuals may, for the foreseeable future, have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws.
In addition, increased competition may lead to reduced prices and/or margins for products we sell. 12 If we need additional capital to fund the expansion of our operations, we may not be able to obtain sufficient capital on terms favorable to us and may be forced to limit the expansion of our operations.
In addition, increased competition may lead to reduced prices and/or margins for products we sell. 11 If we need additional capital to fund the expansion of our operations, we may not be able to obtain sufficient capital on terms favorable to us and may be forced to limit the expansion of our operations.
Our reliance on a limited base of suppliers for certain products, such as light ballasts, may result in disruptions to our business and adversely affect our financial results. We rely on a limited number of suppliers for certain of our hydroponic products and other supplies.
Our reliance on a limited base of suppliers for certain products, such as light ballasts, may result in disruptions to our business and adversely affect our financial results. We rely on a limited number of suppliers for certain of our products and supplies.
As we do not have any long-term supply agreements, in the event we are unable to maintain supplier arrangements and relationships, if we are unable to contract with suppliers at the quantity and quality levels needed for our business, if any of our key suppliers becomes insolvent or experience other financial distress or if any of our key suppliers is negatively impacted by COVID-19, including with respect to staffing and shipping of products, we could experience disruptions in our supply chain, which could have a material adverse effect on our financial condition, results of operations and cash flows.
As we do not have any long-term supply agreements, in the event we are unable to maintain supplier arrangements and relationships, if we are unable to contract with suppliers at the quantity and quality levels needed for our business, if any of our key suppliers becomes insolvent or experience other financial distress including with respect to staffing and shipping of products, we could experience disruptions in our supply chain, which could have a material adverse effect on our financial condition, results of operations and cash flows.
If we encounter difficulties with our garden and distribution centers, or if any garden and distribution centers shut down for any reason, including as a result of fire or other natural disaster, or pursuant to expanded stay-at-home orders or other restrictions due to the current COVID-19 pandemic, we could face shortages of inventory, which would result in our inability to properly our online store.
If we encounter difficulties with our garden and distribution centers, or if any garden and distribution centers shut down for any reason, including as a result of fire or other natural disaster, or pursuant to expanded stay-at-home orders or other restrictions due to any potential pandemic, we could face shortages of inventory, which would result in our inability to properly our online store.
We are required, pursuant to Section 404 of t he Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on the effectiveness of our internal control over financial reporting for the fiscal year ending June 30, 2023.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on the effectiveness of our internal control over financial reporting for the fiscal year ending June 30, 2024.
For the years ended June 30, 2023 and 2022, one supplier accounted for 27% and 18% of the Company's total purchases, respectively. Such reliance on a limited number of suppliers may increase our risk of experiencing disruptions in our business.
For the years ended June 30, 2024 and 2023, one supplier accounted for 10% and 27% of the Company's total purchases, respectively. Such reliance on a limited number of suppliers may increase our risk of experiencing disruptions in our business.
Nonetheless, should there be any further disruption caused by the pandemic, it may negatively affect our inventory and delay our ability to timely deliver merchandise to our stores and customers, which in turn will adversely affect our revenues and results of operations.
Nonetheless, should there be any further disruption, it may negatively affect our inventory and delay our ability to timely deliver merchandise to our stores and customers, which in turn will adversely affect our revenues and results of operations.
Our business should be viewed in light of these risks, challenges and uncertainties. 9 An estimated 98% of our sales are carried out through third-party platforms, including Amazon.com, Walmart and eBay; any disruption in our selling efforts on such third party platforms could substantially disrupt our business.
Our business should be viewed in light of these risks, challenges and uncertainties. 8 An estimated 99% of our sales are carried out through third-party platforms, including Amazon.com, Tiktok, Walmart and eBay; any disruption in our selling efforts on such third party platforms could substantially disrupt our business.
Summary Risk Factors The risks described under the heading “Risk Factors” beginning on page 6 of this Annual Report on Form 10-K may cause us to be unable to realize the full benefits of our strengths and/or may cause us to be unable to successfully execute all or part of our strategy.
Summary Risk Factors The risks described under the heading “ Risk Factors ” beginning on page 5 of this Annual Report on Form 10-K may cause us to be unable to realize the full benefits of our strengths and/or may cause us to be unable to successfully execute all or part of our strategy.
While we maintain our own websites, Zenhydro.com and simpledeluxe.com , as well as our offline wholesale department, which together account for approximately 2% of our sales, the bulk of our overall sales, or approximately 98%, occurred on third party platforms such as Amazon.com, Walmart eBay and other platforms .
While we maintain our own websites, Zenhydro.com and simpledeluxe.com , as well as our offline wholesale department, which together account for approximately 1% of our sales, the bulk of our overall sales, or approximately 99%, occurred on third party platforms such as Amazon.com, Tiktok, Walmart eBay and other platforms.
Our competitors and potential competitors may develop products and technologies that are more effective or commercially attractive than our products. Our products compete against national and regional products and in-house branded products produced by various suppliers, many of which are established companies that provide products that perform functions similar to our products.
Our products compete against national and regional products and in-house branded products produced by various suppliers, many of which are established companies that provide products that perform functions similar to our products. Our competitors may develop or market products that are more effective or commercially attractive than our current or future products.
This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Our management has conducted an evaluation of the effectiveness of our internal controls over financial reporting and concluded that our internal controls over financial reporting were not effective because, among other things, (i) we lack effective communication and reconciliation procedures in our controlled subsidiaries, and (ii) our controls related to the financial statements closing process were not adequately designed or appropriately implemented to identify material misstatements in our financial reporting on a timely basis. 19 Management has evaluated remediation plans for the deficiency and has implemented changes to address the material weakness identified, including hiring additional accountants and consultants and implementing controls and procedures over financial reporting process.
Our management has conducted an evaluation of the effectiveness of our internal controls over financial reporting and concluded that our internal controls over financial reporting were not effective because, among other things, our controls related to the financial statements closing process were not adequately designed or appropriately implemented to identify material misstatements in our financial reporting on a timely basis. 18 Management has evaluated remediation plans for the deficiency and has implemented changes to address the material weakness identified, including hiring additional accountants and consultants and implementing controls and procedures over financial reporting process.
In addition, several products that we offer for sale may require lengthy order lead times, and additional supplies or materials may not be available when required on terms that are acceptable to us, or at all, and our third-party manufacturers and suppliers may not be able to allocate sufficient capacity in order to meet our increased requirements, any of which could have an adverse effect on our ability to meet customer demand for our products and our business, financial condition and results of operations.
In addition, several products that we offer for sale may require lengthy order lead times, and additional supplies or materials may not be available when required on terms that are acceptable to us, or at all, and our third-party manufacturers and suppliers may not be able to allocate sufficient capacity in order to meet our increased requirements, any of which could have an adverse effect on our ability to meet customer demand for our products and our business, financial condition and results of operations. 20 The failure of third parties to meet their contractual, regulatory, and other obligations could adversely affect our business.
We are heavily reliant on manufacturers in China to produce many of the goods we sell. Approximately 90% of the products we purchased for resale during the fiscal year ending June 30, 2023 were manufactured in and imported from China. At present, we have 13 suppliers in the U.S. and more than 140 suppliers in China.
We are heavily reliant on manufacturers in China to produce many of the goods we sell. Approximately 90% of the products we purchased for resale during the fiscal year ended June 30, 2024 were manufactured in and imported from China. At present, we have 11 suppliers in the U.S. and more than 130 suppliers in China.
If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results and financial condition.
Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results and financial condition.
For the years ended June 30, 2023 and 2022, Amazon Vendor and Amazon Seller customers accounted for 91% and 88% of the Company's total revenues, respectively, and as of June 30, 2023 and 2022, accounts receivable from Amazon Vendor and Amazon Seller accounted for 95% and 94% of the Company’s total accounts receivable, respectively.
For the years ended June 30, 2024 and 2023, Amazon Vendor and Amazon Seller customers accounted for 90% and 91% of the Company's total revenues, respectively, and as of June 30, 2024 and 2023, accounts receivable from Amazon Vendor and Amazon Seller accounted for 91% and 95% of the Company’s total accounts receivable, respectively.
For example, some manufacturing plants have closed and work at other plants has been curtailed in many places where we source our products. Some of our suppliers have had to temporarily close a facility for disinfecting after employees tested positive for COVID-19, and others have faced staffing shortages from employees who are sick or apprehensive about coming to work.
For example, during the COVID-19 pandemic, some manufacturing plants closed and work at other plants was curtailed in many places where we sourced our products and some of our suppliers had to temporarily close a facility for disinfecting after employees tested positive for COVID-19, and others faced staffing shortages from employees who were sick or apprehensive about coming to work during the pandemic.
As a result, the laws governing the cultivation and use of cannabis may be subject to change. Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products and may impact our current and planned future operations.
Any new laws and regulations limiting the use or cultivation of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products and may impact our current and planned future operations.
As a result, litigation may adversely affect our business, financial condition, and results of operations. Since inception, aside from a dispute with the placement agent of our 2020-2021 pre-IPO private placements, the Company has not been a party to any material litigation. See “Item 3. Legal Proceedings” for additional information.
As a result, litigation may adversely affect our business, financial condition, and results of operations. Since inception, aside from a dispute with the placement agent of our 2020-2021 pre-IPO private placements, which dispute has been settled as of the date of this Annual Report, the Company has not been a party to any material litigation. See “Item 3.
During the COVID-19 pandemic, some of the effects of which are still ongoing, there have been ongoing negative global economic trends, such as decreased consumer and business spending, higher than normal unemployment levels and declining consumer and business confidence. All of these issues have posed challenges to our business and could result in declining revenues, profitability and cash flow.
There have been ongoing negative global economic trends, such as decreased consumer and business spending, higher than normal unemployment levels and declining consumer and business confidence. All of these issues have posed challenges to our business and could result in declining revenues, profitability and cash flow.
Regardless of the merits or eventual outcome, liability claims may result in: · decreased demand for products that we may offer for sale; · injury to our reputation; · costs to defend the related litigation; · a diversion of management’s time and our resources; · substantial monetary awards to trial participants or patients; · product recalls, withdrawals or labeling, marketing or promotional restrictions; and · a decline in the value of our stock.
Regardless of the merits or eventual outcome, liability claims may result in: · decreased demand for products that we may offer for sale; · injury to our reputation; · costs to defend the related litigation; · a diversion of management’s time and our resources; · substantial monetary awards to trial participants or patients; · product recalls, withdrawals or labeling, marketing or promotional restrictions; and · a decline in the value of our stock. 19 Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop.
Our most price-sensitive customers may trade down to lower priced products during challenging economic times or if current economic conditions worsen, while other customers may reduce discretionary spending during periods of economic uncertainty, which could reduce sales volumes of our products in favor of our competitors’ products or result in a shift in our product mix from higher margin to lower margin products. 10 Heightened inflation, increased interest rates and other economic conditions including potential recession and credit market disruptions could negatively impact our business.
Our most price-sensitive customers may trade down to lower priced products during challenging economic times or if current economic conditions worsen, while other customers may reduce discretionary spending during periods of economic uncertainty, which could reduce sales volumes of our products in favor of our competitors’ products or result in a shift in our product mix from higher margin to lower margin products.
A significant interruption in the operation of our or our suppliers’ facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer and liquid products, could significantly impact our capacity to sell products and service our customers in a timely manner, which could have a material adverse effect on our customer relationships, revenues, earnings, and financial position. 16 If our suppliers are unable to source raw materials in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed.
A significant interruption in the operation of our or our suppliers’ facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer and liquid products, could significantly impact our capacity to sell products and service our customers in a timely manner, which could have a material adverse effect on our customer relationships, revenues, earnings, and financial position.
However, regulation of the cannabis industry does impact those that we believe represent many end-users for our products and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have a material adverse effect on us. 23 Legislation and regulations pertaining to the use and cultivation of cannabis are enacted on both the state and federal government level within the United States.
However, regulation of the cannabis industry does impact those that we believe represent many end-users for our products and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous enforcement by federal authorities will not have a material adverse effect on us.
As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our Company and, as a result, the value of our common stock.
As a newly public company, we are unable to predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs. 25 As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our Company and, as a result, the value of our common stock.
Experiencing any of these issues could have a material adverse effect on our business and harm our reputation. 15 A substantial proportion of our sales occur on Amazon and, as such, should our Company experience any negative actions by Amazon, our sales could be significantly affected. A significant proportion of our sales occur on the Amazon.com platform.
A substantial proportion of our sales occur on Amazon and, as such, should our Company experience any negative actions by Amazon, our sales could be significantly affected. A significant proportion of our sales occur on the Amazon.com platform.
It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations and could increase the frequency and severity of cyber-based attacks against our information technology systems.
For example, the war has been accompanied by cyberattacks against the Ukrainian government and other countries in the region. It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations and could increase the frequency and severity of cyber-based attacks against our information technology systems.
If we fail to remedy any material weakness, our financial statements may be inaccurate, our access to the capital markets may be restricted and the trading price of our common stock may suffer.
If we fail to remedy any material weakness, our financial statements may be inaccurate, our access to the capital markets may be restricted and the trading price of our common stock may suffer. General Risk Factors Related to Our Business Litigation may adversely affect our business, financial condition, and results of operations.
These difficulties have primarily related to difficulties associated with ramping up production of newly introduced products and may result in increased delivery lead-times and increased costs of manufacturing these products.
We have in the past, and may in the future, experience difficulties in manufacturing our products on a timely basis and in sufficient quantities. These difficulties have primarily related to difficulties associated with ramping up production of newly introduced products and may result in increased delivery lead-times and increased costs of manufacturing these products.
Thus, the difficulties experienced by our suppliers have resulted in longer purchase lead times, increased inventory build up as a result of shipping delays, along with increased ocean freight and storage costs.
All of these factors caused an increase in shipping costs and affected the availability of inventories to meet our sales demand during those times. Thus, the difficulties experienced by our suppliers have resulted in longer purchase lead times, increased inventory build up as a result of shipping delays, along with increased ocean freight and storage costs.
The need to obtain such approval or registration could delay the launch of new products or product innovations that contain ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations. The ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, or results of operations .
The need to obtain such approval or registration could delay the launch of new products or product innovations that contain ingredients or otherwise prevent us from developing and manufacturing certain products and product innovations.
Customer demand for our products may be influenced by heightened inflation, increased interest rates and other weak economic conditions including recessionary conditions and credit market disruptions and volatility. Continued weak economic conditions may cause a decrease in demand for our products from our customers.
Heightened inflation, increased interest rates and other economic conditions including potential recession and credit market disruptions could negatively impact our business. Customer demand for our products may be influenced by heightened inflation, increased interest rates and other weak economic conditions including recessionary conditions and credit market disruptions and volatility.
Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize medical or adult cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult-use of cannabis where it is now legal, thereby limiting the Cannabis Industry Participants.
Among other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize medical or adult cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult-use of cannabis where it is now legal, thereby limiting the Cannabis Industry Participants. 22 Demand for our products may be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions develop.
Any disruption in our supply chain, including an increase in shipping and/or storage costs, and the consistency and availability of our supply chain, could negatively affect our revenues and overall business strategy. The measures being taken to combat the pandemic are impacting our suppliers and may have a destabilizing affect on our supply chain.
Any disruption in our supply chain, including an increase in shipping and/or storage costs, and the consistency and availability of our supply chain, could negatively affect our revenues and overall business strategy.
Such a situation could cause us to incur significantly higher costs and lead to longer lead times associated with distributing products to our customers, which could cause us to lose customers.
Such a situation could cause us to incur significantly higher costs and lead to longer lead times associated with distributing products to our customers, which could cause us to lose customers. Experiencing any of these issues could have a material adverse effect on our business and harm our reputation.
We insure ourselves against many types of risks; however, while this insurance may mitigate certain of the risks associated with the ongoing war, our level of insurance may not cover all losses we could incur.
We insure ourselves against many types of risks; however, while this insurance may mitigate certain of the risks associated with the ongoing war, our level of insurance may not cover all losses we could incur. The potential effects of these conditions could have a material adverse effect on our business, results of operations and financial condition.
The failure of third parties to meet their contractual, regulatory, and other obligations could adversely affect our business. We rely on suppliers, vendors, outsourcing partners, consultants, alliance partners and other third parties to research, develop, manufacture and commercialize our products.
We rely on suppliers, vendors, outsourcing partners, consultants, alliance partners and other third parties to research, develop, manufacture and commercialize our products.
We rely on different intellectual property rights, including trade secrets and trademarks and the strength of our proprietary brands, which we consider important to our business.
Risks Related to Our Business and Products We sell proprietary brand offerings, as well as third party brands, which could expose us to various risks. We rely on different intellectual property rights, including trade secrets and trademarks and the strength of our proprietary brands, which we consider important to our business.
Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.
Our failure to address these risks or other problems encountered in connection with our acquisitions could cause us to fail to realize the anticipated benefits of such acquisitions, investments or alliances, incur unanticipated liabilities, and harm our business generally. 13 Our acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of operations and cash flows.
In the event there are significant changes in federal or state tax law provisions, or in the event there is new and additional tax legislation adopted, we could be exposed to additional tax liabilities. Such additional tax liabilities could have an effect on our net income and profit margins.
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows. In the event there are significant changes in federal or state tax law provisions, or in the event there is new and additional tax legislation adopted, we could be exposed to additional tax liabilities.
Certain of our products sell on a seasonal basis, resulting in fluctuations in our cash flow, inventory, and accounts payable.
Such additional tax liabilities could have an effect on our net income and profit margins. Certain of our products sell on a seasonal basis, resulting in fluctuations in our cash flow, inventory, and accounts payable.
General Risk Factors Related to our Common Stock There are risks, including stock market volatility, inherent in owning our common stock. The market price and volume of our common stock have been, and may continue to be, subject to significant fluctuations.
The market price and volume of our common stock have been, and may continue to be, subject to significant fluctuations.
Our failure to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased warranty costs or other problems that could harm our business and prospects.
Our failure to achieve and maintain the required high manufacturing standards could result in further delays or failures in product testing or delivery, cost overruns, product recalls or withdrawals, increased warranty costs or other problems that could harm our business and prospects. 15 In determining the required quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on historical experience, inventory levels, current market trends and other related factors.
Our future success depends, in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer needs.
We may not be able to successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles. Our future success depends, in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer needs.
In addition, these economic conditions may adversely impact certain customers, suppliers and other vendors who are highly leveraged. Accordingly, in an environment of heightened inflation, increased interest rates or other recessionary pressures, our business, financial condition and results of operation may be adversely impacted.
Accordingly, in an environment of heightened inflation, increased interest rates or other recessionary pressures, our business, financial condition and results of operation may be adversely impacted. 9 Volatile or weakened economic conditions in the U.S. and globally may adversely affect our business and operating results.
The manufacture of some of our products is complex and requires precise high-quality manufacturing that is difficult to achieve. We have in the past, and may in the future, experience difficulties in manufacturing our products on a timely basis and in sufficient quantities.
If our suppliers are unable to source raw materials in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed. The manufacture of some of our products is complex and requires precise high-quality manufacturing that is difficult to achieve.
Due to this competition, there is no assurance that we will not encounter difficulties in generating or increasing revenues and capturing market share. In addition, increased competition may lead to reduced prices and/or margins for products we sell.
In addition, if demand for our specialty indoor gardening supplies and products continues to grow, we may face competition from new entrants into our field. Due to this competition, there is no assurance that we will not encounter difficulties in generating or increasing revenues and capturing market share.
If product liability lawsuits are brought against us, we may incur substantial liabilities. We face a potential risk of product liability resulting from the sale of our products. For example, we may be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale.
For example, we may be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale.
The ongoing pandemic involving the novel strain of coronavirus, or COVID-19, and the measures taken to combat it, may have certain and adverse effects on our business. Public health authorities and governments at local, national and international levels have announced various measures to respond to this pandemic.
The emergence of any epidemic or pandemic, and the measures taken to combat such health crises by public health authorities and governments at local, national, and international levels, may have significant adverse effects on our business.
The failure to obtain and maintain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations. 21 Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows.
It is also not possible to obtain insurance to protect against all operational risks and liabilities. The failure to obtain and maintain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations.
Further, the ability of our suppliers to ship their goods to us has become difficult as transportation networks and distribution facilities have had reduced capacity and have been dealing with changes in the types of goods being shipped, all of which have caused an increase in shipping costs and affected the availability of inventories to meet our sales demand.
Additionally, we have experienced that the ability of our suppliers to ship their goods to us became difficult as transportation networks and distribution facilities had reduced capacity and were dealing with changes in the types of goods being shipped.
We continue to monitor the reactions of our investors, employees, customers and other stakeholders and, as of the date of this report, have neither experienced any material adverse financial impacts nor suffered from the loss of key customers or employees.
We continue to monitor the reactions of our investors, employees, customers and other stakeholders and, as of the date of this report, have neither experienced any material adverse financial impacts nor suffered from the loss of key customers or employees. 7 In addition, the risk of cybersecurity incidents has increased in connection with the ongoing war, driven by justifications such as retaliation for the sanctions imposed in conjunction with the war, or in response to certain companies’ continued operations in Russia.
We intend to continue to make investments to support our business, which may require us to engage in equity or debt financing to secure additional funds. Additional financing may not be available on terms favorable to us, if at all.
We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financing to secure additional funds.
We will continue to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement. Our founders, officers and directors control, and will continue to control, our company for the foreseeable future, including the outcome of matters requiring stockholder approval.
Our founders, officers and directors may control, and may continue to control, our company for the foreseeable future, including the outcome of matters requiring stockholder approval. Our founders, officers and directors collectively will beneficially own approximately 50% of our outstanding shares of common stock.
Moreover, some of these competitors may offer a broader array of products and sell their products at prices lower than ours and may have greater name recognition. In addition, if demand for our specialty indoor gardening supplies and products continues to grow, we may face competition from new entrants into our field.
Some of our competitors have substantially greater financial, operational, marketing, and technical resources than we do. Moreover, some of these competitors may offer a broader array of products and sell their products at prices lower than ours and may have greater name recognition.
An increase in sales of our proprietary brands may also adversely affect our sales of the products of certain of our vendors which may, in turn, adversely affect our relationship with such vendors. Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.
An increase in sales of our proprietary brands may also adversely affect our sales of the products of certain of our vendors which may, in turn, adversely affect our relationship with such vendors.
We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution, or support capabilities to compete successfully in the future. 7 We may not be able to successfully develop new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.
In addition, increased competition may lead to reduced prices and/or margins for products we sell. We may not have the financial resources, relationships with key suppliers, technical expertise or marketing, distribution, or support capabilities to compete successfully in the future.
Poor economic conditions could adversely affect our business. Uncertain global economic conditions, particularly in light of the COVID-19 pandemic, could adversely affect our business.
Poor economic conditions could adversely affect our business. Uncertain global economic conditions could adversely affect our business. Although the impact of the COVID-19 pandemic has waned, we nonetheless still experience some follow on effects, which are ongoing.
On February 24, 2022, Russia initiated a military offensive in Ukraine.
The ongoing conflict between Russia and Ukraine may adversely affect our business, financial condition, or results of operations . On February 24, 2022, Russia initiated a military offensive in Ukraine.
Some measures that directly or indirectly impact our business include: · voluntary or mandatory quarantines; · restrictions on travel; and · limiting gatherings of people in public places.
These measures, which may directly or indirectly impact our operations, include but are not limited to: · Voluntary or mandatory quarantines; · Restrictions on travel; · Limitations on gatherings in public places; · Temporary closures of non-essential businesses; · Supply chain disruptions; and · Changes in consumer behavior and spending patterns.
While Nasdaq’s notice to the Company of noncompliance has no immediate effect on the listing of our common stock and our common stock will continue to be listed on The Nasdaq Capital Market under the symbol “IPW,” there can be no assurance that we will regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other Nasdaq continued listing requirements.
Our common stock is currently listed on the Nasdaq Capital Market. Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards. Although we believe we currently meet all of the Nasdaq continued listing requirements, there can be no assurance that we will be able to comply with the applicable listing standards in the future.
Our competitors may develop or market products that are more effective or commercially attractive than our current or future products. Some of our competitors have substantially greater financial, operational, marketing, and technical resources than we do.
Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition. 6 Our competitors and potential competitors may develop products and technologies that are more effective or commercially attractive than our products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also entered into a lease agreement for 2399 Bateman Avenue, Duarte, CA 91010, which property is approximately 48,867 square feet and we lease at the rate of approximately $42,000 per month. This property previously served as both our principal offices as well as our primary fulfillment center.
Biggest changeWe previously leased 48,867 square feet of property at 2399 Bateman Avenue, Duarte, CA 91010, which was leased at the rate of approximately $42,000 per month. This property previously served as both our principal offices as well as our primary fulfillment center.
Nelson Avenue, Unit #I, Industry City, CA 91744, which we have leased at the rate of approximately $28,000 per month since September 2020. This lease expires on October 31, 2023 and we do not plan to renew it. On February 15, 2022, upon completion of the acquisition of Anivia, the Company assumed an operating lease of offices in the PRC.
Nelson Avenue, Unit #I, Industry City, CA 91744, which we had leased at the rate of approximately $28,000 per month since September 2020. This lease expired on October 31, 2023 and we did not renew it. On February 15, 2022, upon completion of the acquisition of Anivia, the Company assumed an operating lease of offices in the PRC.
This lease expires on December 31, 2023 and we do not currently plan to renew it. In addition to our primary fulfillment centers in Rancho Cucamonga and Duarte, we maintain a 22,700 square foot fulfillment center located at 14750 E.
This lease expired on December 31, 2023 and we did not renew it. 28 In addition to our primary fulfillment centers in Rancho Cucamonga and Duarte, we maintained a 22,700 square foot fulfillment center located at 14750 E.
The term of the Rancho Cucamonga lease is for 74 months. The lease commencement date is February 10, 2022, the rent commencement date is May 11, 2022 and the expiration date is May 31, 2028. The base rental fee is $114,249 to $140,079 per month through the expiration date, May 31, 2028.
The term of the Rancho Cucamonga lease is for 74 months. The lease commenced on February 10, 2022, with rent payments commencing after the first three months, and the expiration date is May 31, 2028. The base rental fee is $114,249 to $140,079 per month through the expiration date, May 31, 2028.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeTan. Other than the above, we are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. ITEM 4.
Biggest changeOther than the above settlement, we are not presently a party to any pending or other threatened legal proceedings or claims against us that we believe will have a material adverse effect on our business, financial condition, or operating results. Nonetheless, we may from time to time become involved in legal proceedings in the ordinary course of business.
Removed
ITEM 3. LEGAL PROCEEDINGS Legal Proceedings Our former placement agent, Boustead Securities LLC ("Boustead”), has brought a legal action against us following our communication to Boustead to unilaterally terminate an engagement agreement under which we and Boustead had originally intended for Boustead to be engaged to act as an exclusive underwriter in our initial public offering.
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ITEM 3. LEGAL PROCEEDINGS Legal Proceedings On April 3, 2024, the Company and the underwriter of our initial public offering, D.A. Davidson & Co (“D.A.
Removed
To date, we have been unable to reach a settlement with Boustead. On April 30, 2021, Boustead filed a statement of claim with FINRA demanding to arbitrate the dispute, and is seeking, among other things, monetary damages against the Company and D.A. Davidson & Co.
Added
Davidson”), entered into a settlement agreement and mutual release (the “Settlement Agreement”) with Boustead Securities, LLC (“Boustead”) and its current and former employees, officers, directors, partners, agents and affiliates, pursuant to which all parties agreed to release all claims in exchange for the Company’s payment of $1.3 million (the “Settlement Amount”) to Boustead.
Removed
The matter is presently scheduled to have a pre-hearing conference before a FINRA arbitration panel on September 26, 2023. The actual FINRA arbitration, however, has been postponed and, as a result, a date for the FINRA arbitration hearing has not yet been set. The Company and its special litigation counsel are in the process of preparing for the hearing.
Added
The Settlement Agreement was entered into for purposes of settling in full the FINRA Arbitration (FINRA Case No. 22-01133) which had been brought by Boustead against the Company and D.A. Davidson after the Company opted not to complete its initial public offering with Boustead but instead engaged and completed its initial public offering with D.A. Davidson.
Removed
We believe that we have meritorious defenses to any claims that Boustead may assert, and we do not believe that such claims will have a material adverse effect on our business, financial condition, or operating results. However, we have agreed to indemnify D.A.
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In entering into the Settlement Agreement, the Company paid the Settlement Amount in four equal installments of $325,000 on each of April 3, 2024, May 3, 2024, June 3, 2024 and July 3, 2024.
Removed
Davidson & Co. and the other underwriters who participated in our initial public offering against any liability or expense they may incur or be subject to arising out of the Boustead dispute.
Added
As of the date of this Annual Report, the parties have formally withdrawn all of the complaints that were before FINRA, with prejudice, and the matter is settled in full. In addition, effective June 18, 2024, and pursuant to the agreement between our co-founder and chairman, Chenlong Tan and D.A. Davidson, Mr.
Removed
In addition, Chenlong Tan, our Chairman, President, and Chief Executive Officer and a beneficial owner of more than 5% of our common stock, has agreed to reimburse us for any judgments, fines and amounts paid or actually incurred by us or an indemnitee in connection with such legal action or in connection with any settlement agreement entered into by us or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding for such reimbursement to come from sales of shares then owned by Mr.
Added
Tan and co-founder, Allan Huang, returned a total of 541,667 shares (the “Cancelled Shares”) to the Company, all of which were cancelled following their return. The Cancelled Shares, valued at $2.40 per share on the date of cancellation, served to cover the full value of the Settlement Amount.
Removed
MINE SAFETY DISCLOSURES Not applicable. 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAlso included is the consideration received by us for such securities, if any, and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
Biggest changeAlso included is the consideration received by us for such securities, if any, and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed. 30 On June 18, 2024, we closed on the Registered Direct offering of 2,083,334 Shares and a concurrent Private Placement of Warrants to purchase 2,083,334 Warrant Shares, which were sold for gross aggregate proceeds of $5,000,002.
On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes with a 6% interest per annum (the “Convertible Note”) and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes.
On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes with a 6% interest per annum (the “Convertible Note”) and warrants to purchase shares of Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes.
At the time of our IPO, pursuant to their terms, the Convertible Notes converted at a price equal to the lesser of (a) a price representing a 30% discount to the public offering price per share of the Class A Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of Class A Common Stock immediately prior to the IPO, (y) the number of Class A Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number of Class A Common Stock issuable upon conversion of all outstanding Convertible Notes.
At the time of our IPO, pursuant to their terms, the Convertible Notes converted at a price equal to the lesser of (a) a price representing a 30% discount to the public offering price per share of the Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of Common Stock immediately prior to the IPO, (y) the number of Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number of Common Stock issuable upon conversion of all outstanding Convertible Notes.
Equity Compensation Plans 2020 Amended Equity Incentive Plan The total number of underlying shares of the Company’s common stock available for grant to directors, officers, key employees and consultants of the Company or a subsidiary of the Company under the Company’s Amended and Restated 2020 Equity Inventive Plan (the “2020 Amended Equity Incentive Plan”) was 5,000,000 shares.
Equity Compensation Plans 2020 Amended Equity Incentive Plan The total number of underlying shares of the Company’s common stock available for grant to directors, officers, key employees and consultants of the Company or a subsidiary of the Company under the Company’s Amended and Restated 2020 Equity Inventive Plan (the “2020 Amended Equity Incentive Plan”) was 10,000,000 shares.
Grants made under the 2020 Amended Equity Incentive Plan must be approved by the Company’s board of directors. The following table provides information as of June 30, 2023 about our equity compensation plans and arrangements.
Grants made under the 2020 Amended Equity Incentive Plan must be approved by the Company’s board of directors. The following table provides information as of June 30, 2024 about our equity compensation plans and arrangements.
In connection with the Convertible Note offering, the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”).
In connection with the Convertible Note offering, the Company issued placement agent warrants to purchase 7.0% of the shares of Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”).
The placement agent warrants were exercisable for a period of five years from the issuance date and are treated as a debt issuance cost. Issuer Purchases of Equity Securities None. Use of Proceeds None. ITEM 6. [Reserved]
The placement agent warrants were exercisable for a period of five years from the issuance date and are treated as a debt issuance cost. Issuer Purchases of Equity Securities None. Use of Proceeds None.
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 3,600,802 $ 1.12 1,399,198 Equity compensation plans not approved by security holders (1) – – – Total 3, 600,802 $ 1.12 1,399,198 30 Recent Sales of Unregistered Securities Set forth below is information regarding all securities issued by us within the past three years.
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 3,663,402 $ 1.12 6,336,598 Equity compensation plans not approved by security holders – – – Total 3,663,402 $ 1.12 6,336,598 Recent Sales of Unregistered Securities Set forth below is information regarding all securities issued by us within the past three years.
Prior to that time, our common stock was not traded on any exchange or quoted on any over the counter market. Holders As of September 14, 2023, we had 21 holders of record of our common stock and 29,764,374 shares of common stock outstanding. Dividends We have never paid cash dividends on our common stock.
Prior to that time, our common stock was not traded on any exchange or quoted on any over the counter market. Holders As of September 20, 2024, we had 22 holders of record of our common stock and 31,425,290 shares of common stock outstanding. Dividends We have never paid cash dividends on our common stock.
Added
The Shares were sold pursuant to a prospectus supplement, filed on June 18, 2024, to the Registration Statement on Form S-3, originally filed on September 25, 2023, with the SEC (File No. 333-274665), and declared effective by the SEC on September 29, 2023.
Added
The Warrants, which were issued pursuant to an exemption from registration under Section 4(a)(2) or Regulation D of the Securities Act, have a term of five years and are immediately exercisable at $2.40 per share.
Added
The Shares and Warrants were sold to a purchaser pursuant to a securities purchase agreement, dated June 16, 2024, between the Company and the purchaser (the "Purchase Agreement"). Roth Capital Partners, LLC acted as placement agent (the "Placement Agent"), pursuant to a placement agency agreement between the Company and the Placement Agent dated June 16, 2024 (the "Placement Agency Agreement").
Added
The Company paid the Placement Agent as compensation a cash fee equal to 6.5% of the gross proceeds of the Offering plus reimbursement of certain expenses and legal fees.
Added
On July 9, 2024, as required by the Purchase Agreement, we filed a resale registration statement on Form S-1 with the SEC for purposes of registering the Warrant Shares (the "Resale Form S-1"). Upon filing an amendment on July 23, 2024, the Resale Form S-1 was declared effective by the SEC on July 26, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe main reason the Company experienced a decrease in net cash provided by financing activities was primarily due to our payment of $11.9 million for: (1) $1.5 million to pay off investment payable; (2) $1.8 million to pay down note payable; and (3) $8.6 million to pay down the outstanding balance of the asset-based revolving loan facility with JPM.
Biggest changeThe decrease in net cash used in financing activities was primarily due to a combination of increase in proceeds from our registered offering and loans and our payment of approximately $16.8 million for: (1) $3.8 million to pay off the notes payable to White Cherry; (2) $12 million to pay down the outstanding balance of the asset-based revolving loan facility with JPM; and (3) $1.0 million of offering cost settlement payment to Boustead.
(“JPM”), as administrative agent, issuing bank and swingline lender, for an asset-based revolving loan (“ABL”) of up to $25 million with key terms listed as follows: · Borrowing base equal to the sum of Ø Up to 90% of eligible credit card receivables Ø Up to 85% of eligible trade accounts receivable Ø Up to the lesser of (i) 65% of cost of eligible inventory or (ii) 85% of net orderly liquidation value of eligible inventory · Interest rates of between LIBOR plus 2% and LIBOR plus 2.25% depending on utilization · Undrawn fee of between 0.25% and 0.375% depending on utilization · Maturity Date of November 12, 2024 40 In addition, the ABL includes an accordion feature that allows the Company to borrow up to an additional $25 million.
(“JPM”), as administrative agent, issuing bank and swingline lender, for an asset-based revolving loan (“ABL”) of up to $25 million with key terms listed as follows: · Borrowing base equal to the sum of Ø Up to 90% of eligible credit card receivables Ø Up to 85% of eligible trade accounts receivable Ø Up to the lesser of (i) 65% of cost of eligible inventory or (ii) 85% of net orderly liquidation value of eligible inventory · Interest rates of between LIBOR plus 2% and LIBOR plus 2.25% depending on utilization · Undrawn fee of between 0.25% and 0.375% depending on utilization · Maturity Date of November 12, 2024 In addition, the ABL includes an accordion feature that allows the Company to borrow up to an additional $25 million.
However, our liquidity and our ability to meet our obligations and fund our capital requirements are dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control, such as rising inflation and potential recession, and our anticipated funding requirements could increase. See the “Risk Factors” section in this report.
However, our liquidity and our ability to meet our obligations and fund our capital requirements are dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control, such as rising inflation and potential recession, and our anticipated funding requirements could increase. See the “Risk Factors” section in this Annual Report.
If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied. The Company will recognize forfeitures of such equity-based compensation as they occur. Income taxes The Company accounts for income taxes under the asset and liability method.
If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied. The Company will recognize forfeitures of such equity-based compensation as they occur. 39 Income taxes The Company accounts for income taxes under the asset and liability method.
Revenue recognition The Company recognizes revenue from product sales revenues, 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.
Revenue recognition The Company recognizes revenue from service and product sales revenues, 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.
These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.
These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.
Through the operations of our e-commerce platforms and channel partners, our 99,000 square foot fulfillment center in Rancho Cucamonga, California, and our combined 121,000 square foot fulfillment centers in Los Angeles, California, we believe we are one of the leading marketers, distributors and retailers in the consumer gardening and home goods categories, based on management’s estimates.
Through the operations of our e-commerce platforms and channel partners, our combined 121,000 square foot fulfillment centers in Rancho Cucamonga and Los Angeles, California, we believe we are one of the leading marketers, distributors and retailers in the consumer gardening and home goods categories, based on management’s estimates.
LIQUIDITY AND CAPITAL RESOURCES Sources of Liquidity During the fiscal year ended June 30, 2023 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through borrowing under our credit facility from JPMorgan Chase Bank (“JPM”).
LIQUIDITY AND CAPITAL RESOURCES Sources of Liquidity During the fiscal year ended June 30, 2024 we primarily funded our operations with cash and cash equivalents generated from operations, as well as through borrowing under our credit facility from JPMorgan Chase Bank (“JPM”).
Under the terms of the Waiver Letter, JPM agreed to waive the right to enforce an event of default based on the aforementioned Existing Defaults. As of June 30, 2023, the Company was in compliance with the ABL covenants.
Under the terms of the Waiver Letter, JPM agreed to waive the right to enforce an event of default based on the aforementioned Existing Defaults. As of June 30, 2024 and 2023, the Company was in compliance with the ABL covenants.
The decrease was due to the reasons discussed above, along with other comprehensive loss of $(67,812) as a result of foreign currency translation adjustments resulting from the translation of RMB, the functional currency of our VIE in the PRC, to USD, the reporting currency of the Company.
The decrease was due to the reasons discussed above, along with other comprehensive loss of $148,272 as a result of foreign currency translation adjustments resulting from the translation of RMB, the functional currency of our VIE in the PRC, to USD, the reporting currency of the Company.
The principal amount of the Purchase Note was $3.5 million with a fair value of $3.6 million as of February 15, 2022. In October 2022, the Company paid the first installment of $875,000, and in February 2023, the Company paid the second installment of $875,000.
The principal amount of the Purchase Note was $3.5 million with a fair value of $3.6 million as of February 15, 2022, the issuance date. In October 2022, the Company paid the first installment of $875,000, and in February 2023, the Company paid the second installment of $875,000. In August 2023, the Company paid the third installment of $875,000.
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 variable interest entity (“VIE”) of the Company and the financial statements of DHS have been consolidated from the date such control existed, February 15, 2022.
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 variable interest entity (“VIE”) of the Company and the financial statements of DHS have been consolidated from the date such control existed, February 15, 2022. See Note 4 for details on acquisition.
An entity should apply ASU No. 2022-04 retrospectively to all periods in which a balance sheet is presented, except for the obligation rollforward, which should be applied prospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
An entity should apply ASU No. 2022-04 retrospectively to all periods in which a balance sheet is presented, except for the obligation rollforward, which should be applied prospectively. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP and pursuant to the rules and regulations of the SEC.
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 period costs and reflected in selling and fulfillment expenses.
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 period costs and reflected in selling and fulfillment expenses.
Beyond the next 12 months we believe that our cash flow from operations should improve as supply chains begin to return to normal and new suppliers we are bringing online transition to credit terms more favorable to us.
Beyond the next 12 months we believe that our cash flow from operations should improve as supply chain operations normalize and new suppliers we are bringing online transition to credit terms more favorable to us.
In addition, we plan to increase the size of our in-house product catalog, which will have a net beneficial impact to our margin profile and ability to generate cash. Currently, we have approximately $18.0 million in unused credit under the revolving line with JPM.
In addition, we plan to increase the size of our in-house product catalog, which will have a net beneficial impact to our margin profile and ability to generate cash. Currently, we have approximately $18.0 million in unused credit under the revolving line with JPM, which will be expired and we are in negotiations on a renewal in November 2024.
As of June 30, 2023 and 2022, the goodwill balance amounted to $3,034,110 and $6,094,144, respectively. 37 Intangible Assets, net Finite life intangible assets at June 30, 2023 include a covenant not to compete, supplier relationship and software recognized as part of the acquisition of Anivia.
As of June 30, 2024 and 2023, the goodwill balance amounted to $3,034,110 and $3,034,110, respectively. 38 Intangible Assets, net Finite life intangible assets at June 30, 2024 include a covenant not to compete, supplier relationship and software recognized as part of the acquisition of Anivia.
As of June 30, 2023, there were no indicators of impairment.
As of June 30, 2024, there were no indicators of impairment.
We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.
We are actively developing and acquiring our in-house branded products, which to date include the iPower and Simple Deluxe brands and more, some of which have been designated as Amazon best seller product leaders and Amazon Choice products, among others.
We are actively developing our in-house branded products and through supply chain partners, which to date include the iPower and Simple Deluxe brands and more, some of which have been designated as Amazon best seller product leaders and Amazon Choice products, among others. Trends and Expectations Product and Brand Development We plan to increase investments in product and brand development.
The increase was mainly due to the combination of an increase in selling and fulfillment expenses of $13.2 million as a result of increased advertising, merchant fees, delivery fees, rental expenses, storage costs and fulfillment workforce, general and administrative expenses of $1.08 million, which included payroll expenses, stock-based compensation expense, insurance expenses, legal fees related to the Boustead case, and other operating expenses including expenses associated with being a publicly traded company, and $3.06 million of impairment loss on goodwill triggered by a decrease in the Company’s share price of its common stock and the net loss incurred during the quarter ended September 30, 2022.
The decrease was mainly due to the combination of a decrease in selling and fulfillment expenses of $4.33 million, including vendor warranty credits for prior year purchases of $2.48 million recorded during the year ended June 30, 2024 and decreased costs related to advertising, merchant fees, delivery fees, rental expenses, storage costs and fulfillment workforce, a decrease in general and administrative expenses of $0.67 million, which included payroll expenses, stock-based compensation expense, insurance expenses, legal fees related to the Boustead case, and other operating expenses including expenses associated with being a publicly traded company, and a decrease of $3.06 million of impairment loss on goodwill triggered by a decrease in the Company’s share price of its common stock and the net loss incurred during the quarter ended September 30, 2022.
Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross. 36 Payments received prior to the delivery of goods to customers are recorded as customer deposits.
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.
We actively evaluate potential acquisition opportunities of companies and product brand names that can complement our product catalog and improve on existing products and supply chain efficiencies. 32 Global Economic Disruption While at present the majority of our products are sourced either in the United States or China, the military conflict between Russia and Ukraine may nonetheless increase the likelihood of supply chain interruptions and hinder our ability to find the materials we need to make our products.
Global Economic Disruption While at present the majority of our products are sourced either in the United States or China, the military conflict between Russia and Ukraine may nonetheless increase the likelihood of supply chain interruptions and hinder our ability to find the materials we need to make our products.
Net (loss) attributable to iPower Inc. for the year ended June 30, 2023 was ($11,965,390) as compared to net income of $1,517,875 for the year ended June 30, 2022, representing a decrease of $13,483,265. The decrease was primarily due to a decrease in gross profit and an increase in operating expenses as discussed above.
Net loss attributable to iPower Inc. for the year ended June 30, 2024 was $1,528,159 as compared to $11,965,390 for the year ended June 30, 2023, representing a decrease of net loss of $10,437,231. The decrease was primarily due to the increase in gross profit and decrease in operating expenses as discussed above. 34 Comprehensive loss Attributable to iPower Inc.
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.
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 sale is recognized.
In addition, supply chain disruptions may make it harder for us to find favorable pricing and reliable sources for the materials we need, putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials and services we need to continue to make certain products.
In addition, supply chain disruptions may make it harder for us to find favorable pricing and reliable sources for the materials we need, putting upward pressure on our costs and increasing the risk that we may be unable to acquire the materials and services we need to continue to make certain products. 32 Regulatory Environment We sell hydroponic gardening products to end users that may use such products in new and emerging industries or segments, including the growing of cannabis.
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.
Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience. 36 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.
Given our current working capital position and available funding from our revolving credit line, we believe we will be able to manage through the current challenges by managing payment terms with customers and vendors. Working Capital As of June 30, 2023 and 2022, our working capital was $17.9 million and $32.3 million, respectively.
Given our current working capital position and available funding from our revolving credit line and proceeds from our June Registered Direct offering, we believe we will be able to manage through the current challenges by managing payment terms with customers and vendors.
In March 2020 and January 2021, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, respectively (collectively, “Topic 848”).
The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. 41 In March 2020 and January 2021, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, respectively (collectively, “Topic 848”).
As of June 30, 2023, the Company expected that the deferred tax assets are fully realizable so did not record any valuation allowance. 38 As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes.
As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes.
Comprehensive (loss) Income Attributable to iPower Inc. Comprehensive (loss) attributable to iPower Inc. for the year ended June 30, 2023 was ($12,033,202) as compared to comprehensive income of $1,523,553 for the year ended June 30, 2022, representing a decrease of $13,556,755.
Comprehensive loss attributable to iPower Inc. for the year ended June 30, 2024 was $1,676,431 as compared to $12,033,202 for the year ended June 30, 2023, representing a decrease of comprehensive loss of $10,356,771.
Upon closing of the ABL, the Company paid $796,035 financing fees including 2% of $25.0 million or $500,000 paid to its financial advisor. The financing fees are recorded as debt discount and to be amortized over three years as financing expenses, the term of the ABL.
Upon closing of the ABL, the Company paid $796,035 financing fees including 2% of $25.0 million or $500,000 paid to its financial advisor.
The 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. Recently issued accounting pronouncements In September 2022, FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.
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. Recently issued accounting pronouncements In December 2023, The FASB issued ASU 2023-09, Improvements to Income Tax Disclosures.
Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. 31 Overview Driven by tech and data, iPower Inc. is an online supplier of consumer goods, including hydroponics equipment, general gardening supplies, and consumer home goods.
Overview Driven by tech and data, iPower Inc. is an online supplier of consumer goods, including hydroponics equipment, general gardening supplies, and consumer home goods.
The historical seasonality in our business during the year can cause cash and cash equivalents, inventory and accounts payable to fluctuate, resulting in changes in our working capital.
Working Capital As of June 30, 2024 and 2023, our working capital was $11.2 million and $17.9 million, respectively. The historical seasonality in our business during the year can cause cash and cash equivalents, inventory and accounts payable to fluctuate, resulting in changes in our working capital.
For the year ended June 30, 2023, the Company recorded accrued interest of $157,500 and amortization of note premium of $50,418.
In February 2024, the Company paid the fourth installment of $875,000. For the year ended June 30, 2024, the Company recorded accrued interest of $39,429 and amortization of note premium of $31,602. For the year ended June 30, 2023, the Company recorded accrued interest of $157,500 and amortization of note premium of $50,418.
Demand for our products could be impacted by changes in the regulatory environment with respect to such industries and segments. RESULTS OF OPERATIONS For the fiscal years ended June, 2023 and 2022 The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from period to period.
RESULTS OF OPERATIONS For the fiscal years ended June, 2024 and 2023 The following table presents certain consolidated statement of operations information and presentation of that data as a percentage of change from period to period.
The decrease in gross profit ratio was mainly driven by an increase in costs of goods sold during the year ended June 30, 2023, as discussed above. Operating Expenses Operating expenses for the year ended June 30, 2023 increased 56.31% to $48,281,004 as compared to $30,887,856 for the year ended June 30, 2022.
The gross profit ratio increased to 45.61% for the year ended June 30, 2024 from 39.14% for the year ended June 30, 2023. The increase in gross profit ratio was mainly driven by the decrease in costs of goods sold during the year ended June 30, 2024, as discussed above.
The increase in other expenses was mainly due to a combined result of decrease in other non-operating income of $404,115, and an increase in interest, including amortization of debt discount, on the revolving loan of $608,121 during the year ended June 30, 2023. 34 Net (Loss) Income Attributable to iPower Inc.
The decrease in other expenses was mainly due to decrease in other non-operating loss of $71,761, and in interest, including amortization of debt discount, on the revolving loan of $277,855 during the year ended June 30, 2024 resulted from the decreasing loan balance. Net Loss Attributable to iPower Inc.
Below is a summary of the interest expense recorded for the years ended June 30, 2023 and 2022: 2023 2022 Accrued interest $ 670,924 $ 159,256 Credit utilization fees 43,931 23,287 Amortization of debt discount 265,218 176,812 Total $ 980,073 $ 359,355 As of June 30, 2023 and 2022, the outstanding amount of the JPM revolving loan payable, net of debt discount and including interest, was $9,791,191 and $12,314,627, respectively.
The financing fees are recorded as debt discount and to be amortized over three years as financing expenses, the term of the ABL. 42 Below is a summary of the interest expense recorded for the years ended June 30, 2024 and 2023: 2024 2023 Accrued interest $ 402,675 $ 670,924 Credit utilization fees 71,332 43,931 Amortization of debt discount 265,219 265,218 Total $ 739,226 $ 980,073 As of June 30, 2024 and 2023, the outstanding amount of the JPM revolving loan payable, net of debt discount and including interest, was $5,500,739 and $9,791,191, respectively.
Other (Expense) Other (expenses) consist of interest expense, financing fees and other non-operating income (expenses). Other expenses for the year ended June 30, 2023 were $1,184,030 as compared to $248,419 for the year ended June 30, 2022.
The decrease was due to combination of the decrease in operating expenses and the increase in gross profit as discussed above. Other Expenses Other expenses consist of interest expense and other non-operating income (expenses). Other expenses for the year ended June 30, 2024 were $829,921 as compared to $1,184,030 for the year ended June 30, 2023.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates step two from the goodwill impairment test.
The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates step two from the goodwill impairment test.
We anticipate that past historical trends to remain in place through the balance of the fiscal year with working capital remaining near this level for the foreseeable future. 35 Cash Flows Operating Activities Net cash provided by (used in) operating activities for the years ended June 30, 2023 and 2022 was $9,211,269 and ($16,603,005), respectively.
We anticipate that past historical trends to remain in place through the balance of the fiscal year with working capital remaining near this level for the foreseeable future. 35 Cash Flows Operating Activities Our largest source of cash provided by operations is from sales of products.
As of June 30, 2023, including $236,250 of accrued interest and $31,602 of unamortized premium, the total outstanding balance of the Purchase Note was $2,017,852, which is presented on the consolidated balance sheet as a current portion of $2,017,852 and a non-current portion of $0.
As of June 30, 2023, including $236,250 of accrued interest and $31,602 of unamortized premium, the total outstanding balance of the Purchase Note was $2,017,852, which is presented on the consolidated balance sheet as a current portion of $2,017,852 and a non-current portion of $0. 43 Short-term loans payable On July 8, 2023, the Company entered into an agreement with White Cherry Limited (“White Cherry”), a BVI company owned by the former owner of DHS, for an on-demand, unsecured and subordinated loan (“On-demand Loan”).
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.
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 increase in cash used in investing activities was because the Company made additional purchase of equipment during the year ended June 30, 2023. Financing Activities Net cash (used in) provided by financing activities was ($7,153,620) and $11,911,916, respectively, for the years ended June 30, 2023 and 2022.
The decrease in cash used in investing activities was because the Company did not purchase any additional equipment during the year ended June 30, 2024, whereas such equipment had been purchased in the same period during 2023. Financing Activities Net cash used in financing activities was $2,397,801 and $7,153,620, respectively, for the years ended June 30, 2024 and 2023.
The increase in cash provided by operating activities mainly resulted from decreased accounts receivable, inventories, prepayments and other current assets and increased accounts payable. Investing Activities For the years ended June 30, 2023 and 2022, net cash used in investing activities was $140,813 and $139,386, respectively.
The decrease in cash provided by operating activities mainly resulted from a decrease in cash received from customers and an increase in cash paid for cost of revenues and operating expenses. Investing Activities For the years ended June 30, 2024 and 2023, net cash used in investing activities was $0 and $140,813, respectively.
(11,965,390 ) 1,517,875 (888.30% ) Other comprehensive (loss) income (67,812 ) 5,678 (1294.27% ) Comprehensive (loss) income attributable to iPower Inc. $ (12,033,202 ) $ 1,523,553 (889.81% ) Gross profit % of revenues 39.14% 41.80% Operating (loss) income % of revenues (15.17% ) 2.91% Net (loss) income attributable to iPower Inc. % of revenues (13.46% ) 1.91% 33 Revenues Revenues for the year ended June 30, 2023 increased 11.94% to $88,902,048 as compared to $79,418,473 for the year ended June 30, 2022.
(1,528,159 ) (11,965,390 ) (86.61% ) Other comprehensive loss (148,272 ) (67,812 ) 118.65% Comprehensive loss attributable to iPower Inc. $ (1,676,431 ) $ (12,033,202 ) (86.07% ) Gross profit % of revenues 45.61% 39.14% 16.51% Operating loss % of revenues (1.12% ) (15.17% ) (92.62% ) Net loss attributable to iPower Inc. % of revenues (1.78% ) (13.46% ) (86.81% ) 33 Revenues Revenues for the year ended June 30, 2024 decreased 3.18% to $86,071,485 as compared to $88,902,048 for the year ended June 30, 2023.
The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.
The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In September 2022, FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.
Year Ended June 30, 2023 Year Ended June 30, 2022 Variance Revenues $ 88,902,048 $ 79,418,473 11.94% Cost of goods sold 54,104,587 46,218,580 17.06% Gross profit 34,797,461 33,199,893 4.81% Operating expenses 48,281,004 30,887,856 56.31% (Loss) Income from operations (13,483,543 ) 2,312,037 (683.19% ) Other (expenses) (1,184,030 ) (248,419 ) 376.63% (Loss) Income before income taxes (14,667,573 ) 2,063,618 (810.77% ) Income tax (benefit) expenses (2,690,500 ) 558,975 (581.33% ) Net (loss) income (11,977,073 ) 1,504,643 (896.01% ) Non-controlling interest (11,683 ) (13,232 ) (11.70% ) Net (loss) income attributable to iPower Inc.
Year Ended June 30, 2024 Year Ended June 30, 2023 Variance Revenues $ 86,071,485 $ 88,902,048 (3.18% ) Cost of goods sold 46,818,232 54,104,587 (13.47% ) Gross profit 39,253,253 34,797,461 12.80% Operating expenses 40,216,145 48,281,004 (16.70% ) Loss from operations (962,892 ) (13,483,543 ) (92.86% ) Other expenses (829,921 ) (1,184,030 ) (29.91% ) Loss before income taxes (1,792,813 ) (14,667,573 ) (87.78% ) Income tax benefit (251,365 ) (2,690,500 ) (90.66% ) Net loss (1,541,448 ) (11,977,073 ) (87.13% ) Non-controlling interest (13,289 ) (11,683 ) 13.75% Net loss attributable to iPower Inc.
We had cash and cash equivalents of $3,735,642 as of June 30, 2023, representing a $1,913,695 increase from $1,821,947 in cash as of June 30, 2022. The cash increase was primarily the result of the increase in net cash provided by operating activities, including decreased inventory and accounts receivable and increased accounts payable.
We had cash and cash equivalents of $7,377,837 as of June 30, 2024, representing a $3,642,195 increase from $3,735,642 in cash as of June 30, 2023. The cash increase was primarily the result of the cash we received in the Registered Direct in June 2024.
The Company transfers the risk of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience.
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. For the years ended June 30, 2024 and 2023, the revenues from services were immaterial.
Sales discounts are recorded in the period in which the related sale is recognized. 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. Inventory, net Inventory consists of finished goods ready for sale and is stated at the lower of cost or market.
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. 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.
Costs of Goods Sold Costs of goods sold for the year ended June 30, 2023 increased 17.06% to $54,104,587 as compared to $46,218,580 for the year ended June 30, 2022. The increase was due to an increase in sales, as discussed above.
While pricing remained stable, the decreased revenue mainly resulted from a slight decrease in sales volume. Costs of Goods Sold Costs of goods sold for the year ended June 30, 2024 decreased 13.47% to $46,818,232 as compared to $54,104,587 for the year ended June 30, 2023.
Gross Profit Gross profit was $34,797,461 for the year ended June 30, 2023 as compared to $33,199,893 for the year ended June 30, 2022. The gross profit ratio decreased to 39.14% for the year ended June 30, 2023 from 41.80% for the year ended June 30, 2022.
The decrease was mainly due to the decrease in sales, freight costs, and lowered product costs resulted from management’s efforts on supply chain management. Gross Profit Gross profit was $ 39,253,253 for the year ended June 30, 2024 as compared to $34,797,461 for the year ended June 30, 2023.
(Loss) Income from Operations (Loss) income from operations was ($13,483,543) for the year ended June 30, 2023 as compared to $2,312,037 for the year ended June 30, 2022. The decrease was due to the increase in operating expenses was greater than the increase in gross profit as discussed above.
We have seen decreased operating expenses during the year ended June 30, 2024; however, we can provide no assurance that this trend will continue. Loss from Operations Loss from operations was 962,892 for the year ended June 30, 2024 as compared to $13,483,543 for the year ended June 30, 2023.
Removed
Recent Acquisitions and Joint Ventures On February 15, 2022, in exchange for total consideration with a fair value of $10.6 million, we acquired 100% of the ordinary shares of 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.
Added
We actively evaluate potential acquisition opportunities of companies and product brand names that can complement our product catalog and improve on existing products and supply chain efficiencies.
Removed
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 PRC and which is a wholly foreign-owned enterprise (“WFOE”) of Fly Elephant Limited.
Added
Demand for our products could be impacted by changes in the regulatory environment with respect to such industries and segments. Recent Developments On June 18, 2024, we closed on the Registered Direct offering of 2,083,334 Shares and a concurrent Private Placement of Warrants to purchase 2,083,334 Warrant Shares, which were sold for gross aggregate proceeds of $5,000,002.
Removed
The WFOE controls, through a series of contractual arrangements summarized below, the business, revenues and profits of Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized under the Laws of the PRC (the “Operating Company”) and located in Shenzhen, China.
Added
The Shares were sold pursuant to a prospectus supplement, filed on June 18, 2024, to the Registration Statement on Form S-3, originally filed on September 25, 2023, with the SEC (File No. 333-274665), and declared effective by the SEC on September 29, 2023.
Removed
The Operating Company is principally engaged in selling of a wide range of products and providing logistic services in the PRC. On February 10, 2022, we entered into a joint venture agreement with Bro Angel, LLC, Ji Shin, and Bing Luo (the “GSM Joint Venture Agreement”).
Added
The Warrants, which were issued pursuant to an exemption from registration under Section 4(a)(2) or Regulation D of the Securities Act, have a term of five years and are immediately exercisable at $2.40 per share. The Shares and Warrants were sold to a Purchase Agreement to a securities purchase agreement, dated June 16, 2024, between the Company and the purchaser.
Removed
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 the marketing of their products.
Added
Roth Capital Partners, LLC acted as Placement Agent, pursuant to a Placement Agency Agreement. The Company paid the Placement Agent as compensation a cash fee equal to 6.5% of the gross proceeds of the Offering plus reimbursement of certain expenses and legal fees.
Removed
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.
Added
On July 9, 2024, as required by the Purchase Agreement, we filed a resale registration statement on Form S-1 with the SEC (the "Resale Form S-1"). Upon filing an amendment on July 23, 2024, the Resale Form S-1 was declared effective by the SEC on July 26, 2024.
Removed
Under the terms of the GSM limited liability operating agreement (the “GSM LLC Agreement”), the Company will contribute $100,000 to the capital of GSM and Bro Angel granted GSM, pursuant to the terms of an intellectual property licensing agreement, dated February 10, 2022 (the “IP License Agreement”), an exclusive worldwide paid up right and license to use all intellectual property of Bro Angel and its members for the purpose of furthering the proposed business of GSM.
Added
Operating Expenses Operating expenses for the year ended June 30, 2024 decreased 16.70% to $40,216,145 as compared to $48,281,004 for the year ended June 30, 2023.
Removed
The LLC Agreement prohibits the issuance of additional GSM Equity Units and certain other actions unless approved in advance by the Company.
Added
Additionally, on June 18, 2024, we closed on the Registered Direct offering of 2,083,334 Shares and a concurrent Private Placement of Warrants to purchase 2,083,334 Warrant Shares, which were sold for gross aggregate proceeds of $5,000,002.
Removed
Pursuant to the GSM Joint Venture Agreement, the Company and GSM also intend to enter into an occupancy management agreement pursuant to which the Company will grant to GSM the right to have access to and use of up to approximately 4,000 square feet of office space along with internet access at the Company’s facility located at 2399 Bateman Avenue, Irwindale, CA 91010.
Added
Our primary uses of cash from operating activities include payments to suppliers for products, to employees for compensation, and other general expenses. Net cash provided by operating activities for the years ended June 30, 2024 and 2023 was $6,164,076 and $9,211,269, respectively.
Removed
It was contemplated that only approximately 300-400 square feet will be initially used by GSM. However, since the space was never utilized by GSM, iPower resumed using the contemplated space during the fiscal year ended June 30, 2023. Trends and Expectations Product and Brand Development We plan to increase investments in product and brand development.
Added
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.
Removed
Ongoing COVID-19 Outbreak and Related Disruptions While the worst of the COVID-19 pandemic has seemingly passed, we are continuing to closely monitor its impact on our business, results of operations and financial results.
Added
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.
Removed
The situation surrounding the COVID-19 outbreak remains fluid and the full extent of the positive or negative impact of the COVID-19 outbreak on our business will depend on certain developments including the length of time any regional outbreaks, the impact on consumer activity and behaviors and the effect on our customers, employees, suppliers, and stockholders, all of which are uncertain and cannot be predicted.

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