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

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Paragraph-level year-over-year comparison of Ispire Technology 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.

+309 added−340 removedSource: 10-K (2024-09-27) vs 10-K (2023-09-19)

Top changes in Ispire Technology Inc.'s 2024 10-K

309 paragraphs added · 340 removed · 214 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

114 edited+29 added−42 removed97 unchanged
Biggest changeWe intend to form a subsidiary in Southeast Asia, if we are able to identify a suitable location if we are able to commence manufacturing operations in Southeast Asia, we would have to comply with laws and regulations relating to manufacturing operations, including regulatory approval for us to establish manufacturing operations, including satisfying the applicable government authority that we have sufficient capital to cover all of our planned activities.
Biggest changeAs such, we must comply with laws and regulations relating to manufacturing operations, including regulatory approval, as applicable, including satisfying the applicable government authority that we have sufficient capital to cover all of our planned activities. We are also subject to wage and hour laws and laws relating to employee health and safety and environmental laws and regulations.
We will continue to expand our technology leadership and invest in vaporizer and similar technology research and development. Our present products are designed for adult recreational use. Our research and development activities will be oriented to focus on both medical and recreational usages of cannabis products. We recognize that industry trends can change rapidly.
We will continue to expand our technology leadership and invest in vaporizer and similar technology research and development. Our present products are designed for adult use. Our research and development activities will be oriented to focus on both medical and recreational usages of cannabis products. We recognize that industry trends can change rapidly.
This new technology, which Aspire Global introduced in 2014, enables the coil to last longer while still giving users what we believe is the purest and cleanest taste from e-liquids. The BVC coils are still very popular for MTL (mouth to lung) vapors today. We believe that our Cleito tank brings new and innovative technological advancement to the vaping industry.
This technology, which Aspire Global introduced in 2014, enables the coil to last longer while still giving users what we believe is the purest and cleanest taste from e-liquids. The BVC coils are still very popular for MTL (mouth to lung) vapors today. We believe that our Cleito tank brings new and innovative technological advancement to the vaping industry.
Most of our revenue from cannabis products is from ODM sales to other cannabis vaping brands, and we work with the customer to design the product, which is sold under the customer’s brand name and for some customers, the Ispire brand is also on the product.
Most of our revenue from cannabis products is from ODM sales to other cannabis vaping brands, and we work with the customer to design the product, which is sold under the customer’s brand name. For some customers, the Ispire brand is also on the product.
The warranty offers refund or replacement of products for manufacturer defective items, dead on arrival items and items that do not appear the same as listed on our website, and exclude damaged goods caused by misuse or unauthorized repair.
The warranty offers the refund or replacement of products for manufacturer defective items, dead on arrival items and items that do not appear the same as listed on our website, and exclude damaged goods caused by misuse or unauthorized repair.
Many manufacturers are now providing full-spectrum vaping devices, including closed system vaping devices, open system vaping devices and other kinds of vaping devices, so as to be more competitive in the market. In the next few years, with the technology becoming more mature, we anticipate that more differentiated vaping devices will continuously emerge to draw consumers’ attention.
Many manufacturers are now providing full-spectrum vaping devices, including closed system vaping devices, open system vaping devices and other kinds of vaping devices, so as to be more competitive in the market. In the next few years, with the technology becoming more mature, we anticipate that more differentiated vaping devices will continuously emerge to draw adult consumers’ attention.
The Cleito uses a revolutionary new coil design that replaces the standard chimney and, we believe, delivers maximized airflow. This design frees up even more restriction in the airflow by eliminating the need for a static chimney within the tank itself, which results in an expanded flavor profile and increased vapor production.
The Cleito uses a revolutionary coil design that replaces the standard chimney and, we believe, delivers maximized airflow. This design frees up even more restriction in the airflow by eliminating the need for a static chimney within the tank itself, which results in an expanded flavor profile and increased vapor production.
The sale of cannabis vaping products for recreational (as contrasted with medical) use is illegal in the European Union, although we believe that a market is developing, particularly in Germany, where the new coalition government stated clearly that it is introducing the controlled supply of recreational cannabis to adults in licensed shops.
The sale of cannabis vaping products for recreational (as contrasted with medical) use is illegal in most of the European Union, although we believe that a market is developing, particularly in Germany, where the new coalition government stated clearly that it is introducing the controlled supply of recreational cannabis to adults in licensed shops.
Our Corporate Organization We are a Delaware corporation, incorporated on June 13, 2022. Aspire North America, a California limited liability company was formed on February 22, 2020, and 100% of its ownership was transferred to Aspire Global on September 23, 2020 and was transferred by Aspire Global to Ispire Technology on July 29, 2022.
Our Corporate Organization We are a Delaware corporation, incorporated on June 13, 2022. Aspire North America, LLC, a California limited liability company, was formed on February 22, 2020, and 100% of its ownership was transferred to Aspire Global on September 23, 2020, and was transferred by Aspire Global to Ispire Technology on July 29, 2022.
This market is currently largely in the United States and we plan to be in the forefront as other markets develop. Through our global sales network, we have a strong understanding of all of the markets in which our products are sold.
Currently, this market is largely in the United States and we plan to be at the forefront as other markets develop. Through our global sales network, we have a strong understanding of all of the markets in which our products are sold.
We believe that the utility patents form the core intellectual property for our electronic cigarette and vaporizer products. The utility patents primarily relate to atomizer, heating coil, and battery technologies, which we believe provide enhanced functionality and an improved smoking experience to users of our products.
We believe that the utility patents form the core intellectual property for our cigarette-cigarette and vaporizer products. The utility patents primarily relate to atomizer, heating coil, and battery technologies, which we believe provide enhanced functionality and an improved smoking experience to users of our products.
The CCPA also permits class action lawsuits. To the extent that we sell products to consumers through our website or otherwise on the Internet, we may be subject to the CCPA as well as other consumer protection laws.
The CCPA also permits class action lawsuits. To the extent that we sell products to adult consumers through our website or otherwise on the Internet, we may be subject to the CCPA as well as other consumer protection laws.
To the extent that we conduct manufacturing operations in California we will be subject to federal and California state laws and regulations applicable to manufacturing operations generally, including employee health and safety and environmental laws and regulations. 16 Europe The European Commission issued the Tobacco Products Directive (the “TPD’’), which has been entered into force on May 19, 2014 and became applicable in the EU Member States on May 20, 2016.
To the extent that we conduct manufacturing operations in California we will be subject to federal and California state laws and regulations applicable to manufacturing operations generally, including employee health and safety and environmental laws and regulations. 16 Europe The European Commission issued the Tobacco Products Directive (the “TPD’’), which entered into force on May 19, 2014, and became applicable in the EU Member States on May 20, 2016.
We will use forum and community groups as a means to increase engagement and collect feedback for future improvements in product research and development.
We will use online forum and community groups as a means to increase engagement and collect feedback for future improvements in product research and development.
Our design patents also extend to the ornamental appearance of certain electronic cigarette components, including certain aspects of our atomizers and heating coils. The patents are primarily based on inventions developed by our chairman, Tuanfang Liu, who has received more than 200 patents in China, the United States, the European Union and other countries.
Our design patents also extend to the ornamental appearance of certain e-cigarette components, including certain aspects of our atomizers and heating coils. The patents are primarily based on inventions developed by our chairman, Tuanfang Liu, who has received more than 200 patents in China, the United States, the European Union and other countries.
The requirements: ● restrict e-cigarette tanks to a capacity of no more than 2ml ● restrict the maximum volume of nicotine-containing e-liquid for sale in one refill container to 10ml ● restrict e-liquids to a nicotine strength of no more than 20mg/ml ● require nicotine-containing products or their packaging to be child-resistant and tamper evident ● ban certain ingredients including colorant, stimulants and any carcinogenic, mutanegenic or reprotoxic elements ● include new labelling requirements and warnings in line with the Classification, Labelling & Packaging regulations of the European Union ● require all e-cigarettes and e-liquids be notified to the MHRA before they can be sold. 17 The Tobacco Products and Nicotine Inhaling Products (Amendment) (EU Exit) Regulations 2020 explains the changes from a policy perspective: The 2020 Regulations sets out the requirements for new products to be notified from January 1, 2021.
The requirements: ● restrict e-cigarette tanks to a capacity of no more than 2ml ● restrict the maximum volume of nicotine-containing e-liquid for sale in one refill container to 10ml ● restrict e-liquids to a nicotine strength of no more than 20mg/ml ● require nicotine-containing products or their packaging to be child-resistant and tamper evident ● ban certain ingredients including colorant, stimulants and any carcinogenic, mutanegenic or reprotoxic elements ● include new labelling requirements and warnings in line with the Classification, Labelling & Packaging regulations of the European Union ● require all e-cigarettes and e-liquids be notified to the MHRA before they can be sold. 17 The Tobacco Products and Nicotine Inhaling Products (Amendment) (EU Exit) Regulations 2020 (the “2020 Regulations”) explains the changes from a policy perspective: The 2020 Regulations set out the requirements for new products to be notified from January 1, 2021.
Combined with a Clapton kanthal coil for maximum flavor, the Cleito tank delivers a rush of intense flavor and huge vapor with a broad profile. The simple top-fill design makes filling very easy and use more convenient and enjoyable. Our Ispire cannabis vapor products use our patented DuCore™ (Dual Coil) technology for cannabis vaporizers.
Combined with a Clapton kanthal coil for maximum flavor, the Cleito tank delivers a rush of intense flavor and huge vapor with a broad profile. The simple top-fill design makes filling the device very easy and more convenient and enjoyable to use. Our Ispire cannabis vapor products use our patented DuCore™ (Dual Coil) technology for cannabis vaporizers.
As we establish manufacturing facilities, we expect that the cost of such compliance will be included in our capital budget for any facilities we establish. 19
As we establish manufacturing facilities, we expect that the cost of such compliance will be included in our capital budget for any facilities we establish.
We sell the Aspire brand of tobacco vaporizer technology products in more than 30 countries through our global network of more than 150 distributors. The primary markets for our tobacco products are Europe and the Asia Pacific region, which does not include the PRC.
We sell the Aspire brand of tobacco vaporizer technology products in more than 30 countries through our global network of more than 150 distributors. The primary markets for our e-cigarette products are Europe and the Asia Pacific region, which does not include the PRC.
No other distributor or customer accounted for 10% or more of our revenues for either the year ended June 30, 2022 or 2023. Typically, our distributors sell our products to wholesalers who in turn sell to retail distributors although distributors may sell products directly to retail outlets.
No other distributor or customer accounted for 10% or more of our revenues for either the year ended June 30, 2023 or 2024. Typically, our distributors sell our products to wholesalers who in turn sell to retail distributors, although distributors may sell products directly to retail outlets.
As Aspire Global continued to innovate in the last decade and the Aspire brand has become recognized as a leading innovator in the vaping industry, Aspire Science has been sought after by other brands for OEM and ODM work. We believe that OEM and ODM for our tobacco products will represent a key growth area for us in the future.
As Aspire Global continued to innovate in the last decade and the Aspire brand has become recognized as a leading innovator in the vaping industry, Aspire Science has been sought after by other brands for OEM and ODM work. We believe that OEM and ODM for our e-cigarette products will represent a key growth area for us in the future.
The distributors are responsible for complying with the laws of the countries in which they sell our products. We previously sold tobacco vaping products to a distributor for Russia, and we no longer sell to that distributor.
The distributors are responsible for complying with the laws of the countries in which they sell our products. We previously sold tobacco vaping products to a distributor for Russia; however, we no longer sell to that distributor.
United Kingdom The Medicines and Healthcare Products Regulatory Agency (“MHRA”) is the authority for a notification scheme for e-cigarettes and refill containers in Great Britain and Northern Ireland and is responsible for implementing the majority of provisions under Part 6 of the Tobacco and related Products Regulations (TRPR) and the Tobacco Products and Nicotine Inhaling Products (Amendment) (EU Exit) Regulations 2020.
United Kingdom The Medicines and Healthcare Products Regulatory Agency (“MHRA”) is the authority for a regulatory scheme for e-cigarettes and refill containers in Great Britain and Northern Ireland and is responsible for implementing the majority of provisions under Part 6 of the Tobacco and related Products Regulations (“TRPR”) and the Tobacco Products and Nicotine Inhaling Products (Amendment) (EU Exit) Regulations 2020.
The worldwide market for tobacco vaping products is highly competitive, with more than 50 companies selling products which compete with our products. In terms of volume of product sold, by far the largest worldwide producer of tobacco vapor products is Juul Labs, Inc. British American Tobacco Plc is also a major producer of tobacco vapor products.
The worldwide market for e-cigarette products is highly competitive, with more than 50 companies selling products which compete with our products. In terms of volume of product sold, by far the largest worldwide producer of tobacco vapor products is Juul Labs, Inc. British American Tobacco Plc is also a major producer of tobacco vapor products.
Our BVC (bottom vertical coil) coil represents a significant technological breakthrough for us in coil technology utilizing a vertical heating wire surrounded by cotton. This design can enable the coil heating to provide uniform temperature from the tank, together with more efficient wicking.
We believe that our BVC (bottom vertical coil) coil represents a significant technological breakthrough for us in coil technology utilizing a vertical heating wire surrounded by cotton. This design can enable the coil heating to provide uniform temperature from the tank, together with more efficient wicking.
In June 2023, we introduced our proprietary Ispire ONE TM technology and products.
In June 2023, we introduced our proprietary Ispire ONE™ technology and products.
This is beneficial to the consumers because one cartridge could be designed for terpenes (which has a very low evaporation temperature, typically 100-120 degree Fahrenheit), and the other can be for cannabis oil (which has a evaporating temperature in the range of 400-430 degree Fahrenheit).
This is beneficial to the consumers because one cartridge could be designed for terpenes (which has a very low evaporation temperature, typically 100-120 degrees Fahrenheit), and the other can be for cannabis oil (which has an evaporating temperature in the range of 400-430 degrees Fahrenheit).
Any non-identical replacement part, particularly one that alters the consumer safety profile of a product (for example by changing its refill capacity), would require a separate notification. The Conformitè Europëenne (CE) Mark is defined as the EU’s mandatory conformity marking for regulating the goods sold within the European Economic Area (EEA) since 1985.
Any non-identical replacement part, particularly one that alters the consumer safety profile of a product (for example by changing its refill capacity), would require a separate notification. The Conformitè Europëenne (“CE”) Mark is defined as the EU’s mandatory conformity marking for regulating the goods sold within the European Economic Area (“EEA”) since 1985.
Our BVC (bottom vertical coil) coil represents a big technological breakthrough for us in coil technology with a vertical heating wire surrounded by cotton. This design can enable the coil heating to provide uniform temperature from the tank, together with more efficient wicking.
Our BVC (bottom vertical coil) coil represents a major technological breakthrough for us in coil technology with a vertical heating wire surrounded by cotton. This design can enable the coil heating to provide uniform temperature to the tank, together with more efficient wicking.
Ispire ONE TM is designed to eliminate capping issues in the manufacturing/co-packing process; increase consistency and quality of the filled devices; eliminate leaking, spitting, or overheating for cartridges, disposables, and PODs; and improve consumer safety, as the devices are sealed in a sterilized factory environment to eliminate risk of contamination during filling process by Ispire’s customers. 8 Sales and Distribution Most of our revenue from tobacco products comes from sales to our distributors.
Ispire ONE TM is designed to eliminate capping issues in the manufacturing/co-packing process, increase consistency and quality of filled devices, eliminate leaking, spitting, or overheating for cartridges, disposables, and PODs, and improve consumer safety., The devices are sealed in a sterilized factory environment to eliminate risk of contamination during the filling process by our customers. 8 Sales and Distribution Most of our revenue from our e-cigarette products comes from sales to our distributors.
Pursuant to agreements dated January 27, 2023, between Aspire North America and Shenzhen Yi Jia and between Aspire Science and Shenzhen Yi Jia, we purchase our cannabis and tobacco vaping products form Shenzhen Yi Jia at market prices, provided that the price, delivery, warranty and other terms are no less favorable to us that the price, delivery, warranty and other terms that are provided to any other customer of Shenzhen Yi Jia.
Pursuant to agreements dated January 27, 2023, between Aspire North America and Shenzhen Yi Jia and between Aspire Science and Shenzhen Yi Jia, we purchase our cannabis and e-cigarette vaping products form Shenzhen Yi Jia at market prices, provided that the price, delivery, warranty and other terms are no less favorable to us than the price, delivery, warranty and other terms that are provided to any other customer of Shenzhen Yi Jia.
In seeking to introduce new products, we will, at least initially, rely upon our chairman, Tuanfang Liu, who has been largely responsible for the development of the technology underlying our tobacco and cannabis vaping products.
In seeking to introduce new products, we will, at least initially, rely upon our chairman, Tuanfang Liu, who has been largely responsible for the development of the technology underlying our e-cigarette and cannabis vaping products.
Starting on February 6, 2020, the FDA has prioritized for immediate enforcement against: (i) flavored, cartridge-based ENDS products (other than tobacco- or menthol-flavored ENDS products), and (ii) any flavored ENDS products (including tobacco and menthol flavors) that are targeted at minors.
Starting on February 6, 2020, the FDA prioritized enforcement against: (i) flavored, cartridge-based ENDS products (other than tobacco- or menthol-flavored ENDS products), and (ii) any flavored ENDS products (including tobacco and menthol flavors) that are targeted at minors.
The vast majority of sales of all classes of smokeless tobacco is sold in stores, primarily grocery stores, convenience stores and tobacco stores, which generally purchase product from wholesale distributors. Our products are also available from our distributors on the internet, including both websites and services such as Amazon. These internet distribution channels are operated by our distributors.
The vast majority of sales of all classes of e-cigarettes are sold in stores, primarily grocery stores, convenience stores and tobacco stores, which generally purchase product from wholesale distributors. Our products are also available from our distributors on the internet, including both websites and services such as Amazon. These internet distribution channels are operated by our distributors.
Our ability to be successful in this market is dependent upon our ability to develop vaping systems that attracts and retains consumer interest and the regulatory environment in the United States. Our cannabis vaping products compete with other forms of legal and illegal cannabis, marijuana cigarettes, CBD oil and other CBD products, food products and other vaping products.
Our ability to be successful in these markets is dependent upon our ability to develop vaping systems that attracts and retains consumer interest and the regulatory environment in the United States. Our cannabis vaping products compete with other forms of legal and illegal cannabis, marijuana cigarettes, CBD oil and other CBD products, food products and other vaping products.
The PMTA pathway remains open for us to add further products, but we (and anyone else) cannot now bring new tobacco products to the U.S. market without actual premarket authorizations. The PMTA process is expensive, time-consuming, and uncertain.
The PMTA pathway remains open for us to add further products, but now neither we, nor anyone else, can bring new tobacco products to the U.S. market without actual premarket authorizations. The PMTA process is expensive, time-consuming, and uncertain.
We believe that the use of our dual-coil technology enhances the flavor performance of e-liquid, and the hidden wick cotton with special designed wick holes can both extend the tank e-liquid capacity and improve the speed of wicking to increase the coil life.
We believe that the use of our dual-coil technology enhances the flavor performance of e-liquid, and the hidden wick cotton with specially designed wick holes can both expand the tank e-liquid capacity and improve the speed of wicking to increase the coil life.
We anticipate that the market for vaping products will evolve, with technological innovation, changing standards and changes in needs and preferences of adult vapor users. Vaping devices are more than an alternative to traditional cigarettes.
We anticipate that the market for vaping products will evolve, with technological innovation, changing standards and changes in needs and preferences of adult vapor users. Vaping devices are more than a reduced-risk alternative to traditional cigarettes.
Liu have transferred to our subsidiary, Aspire North America, all their intellectual property, including patents, trademarks, brand names, know-how and know-how documentation that relate directly or indirectly to cannabis and hemp vaping products, and the patents and trademarks, all of which are United States patents, trademarks and patent and trademark application, have been transferred to Aspire North America.
Liu have transferred to our subsidiary, Aspire North America, all their intellectual property, including patents, trademarks, brand names, know-how and know-how documentation that relate directly or indirectly to cannabis and hemp vaping products, and the patents and trademarks, trademarks and patent and trademark application, have been transferred to Aspire North America.
Pursuant to the Intellectual Property Transfer Agreement, Aspire North America, Aspire Global, Shenzhen Yi Jia and Mr.
Pursuant to the Intellectual Property Transfer Agreement, Aspire Global, Shenzhen Yi Jia and Mr.
To the extent any of these trademarks were held by our chairman, Tuanfang Liu or Shenzhen Yi Jia, those trademarks have been assigned to Aspire North America with respect to cannabis products pursuant to the Intellectual Property Transfer Agreement and licensed on an exclusive license (to the exclusion of Aspire Global, Shenzhen Yi Jia and Mr.
To the extent any of these trademarks were held by our chairman, Tuanfang Liu or Shenzhen Yi Jia, the trademarks related to cannabis products have been assigned to Aspire North America pursuant to the Intellectual Property Transfer Agreement, and all other trademarks have been licensed on an exclusive license (to the exclusion of Aspire Global, Shenzhen Yi Jia and Mr.
We also provide distributors with discounts and other sales incentives. From time to time, based on our sales or marketing strategy for a specific region or product, we will give distributors discounts. Although our distributors do not have sales quotas, they have sales goals and, from time to time, we may reward distributors for exceeding their sales targets.
From time to time, based on our sales or marketing strategy for a specific region or product, we will give distributors discounts. Although our distributors do not have sales quotas, they have sales goals and, from time to time, we may reward distributors for exceeding their sales targets.
Since the transfer of Aspire North America and Aspire Science to us in July 2022, we have established our research and development group independent of Aspire Global and Shenzhen Yi Jia, and the Shenzhen Yi Jia research and development activities relating to both cannabis and tobacco product are being transitioned to us.
Since the transfer of Aspire North America and Aspire Science to us in July 2022, we have established our research and development group independent of Aspire Global and Shenzhen Yi Jia, and the Shenzhen Yi Jia research and development activities relating to both cannabis and e-cigarette product have transitioned to us.
We enter into labor contracts and standard confidentiality and intellectual property agreements with our key employees. We believe that maintaining good working relationships with our employees is essential, and we have not experienced any labor disputes except for the matter set forth below.
We enter into labor contracts and standard confidentiality and intellectual property agreements with our key employees. We believe that maintaining good working relationships with our employees is essential, and we have not experienced any labor disputes except for the matter set forth below. None of our employees are represented by labor unions.
Liu is chairman of Shenzhen Yi Jia, and the services he provides in mainland China are performed in his capacity as chairman of Shenzhen Yi Jia. Our employees are largely in the United States, with 62 employees based in the United States and where our research and development activities are conducted, and seven employees in Hong Kong.
Liu is chairman of Shenzhen Yi Jia, and the services he provides in mainland China are performed in his capacity as chairman of Shenzhen Yi Jia. Our employees are largely in the United States, with 67 employees based in the United States and where our research and development activities are conducted, 37 in Malaysia, and 10 employees in Hong Kong.
The notifier will need to be satisfied as to the standards of any testing carried out as they have to submit a declaration that they bear full responsibility for the quality and safety of the product when placed on the market and used under normal or reasonably foreseeable conditions. The sale of cannabis products is illegal in the United Kingdom.
The notifier will need to be satisfied as to the standards of any testing carried out as they have to submit a declaration that they bear full responsibility for the quality and safety of the product when placed on the market and used under normal or reasonably foreseeable conditions.
We estimate the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of June 30, 2022 and 2023, products returned for repair or replacement have been immaterial.
We estimate the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of June 30, 2023 and 2024, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.
Competition Vaping products for both tobacco and cannabis compete with tobacco and marijuana cigarettes and a wide range of other tobacco and legal and illegal cannabis products. In each case, vaping products seek to provide the user with pleasure that the user derives without the disadvantages.
Competition Vaping products for both e-cigarette and cannabis compete with tobacco and marijuana cigarettes and a wide range of other tobacco, nicotine and legal and illegal cannabis products. In each case, vaping products seek to provide the user with pleasure that the user derives from consuming nicotine or cannabis without the disadvantages of other mediums.
If we are able to establish manufacturing operations in California and in Southeast Asia, we will be required to comply with applicable environmental laws and regulations. We cannot estimate the ongoing costs of such compliance.
If we are able to establish manufacturing operations in California, and as part of our current manufacturing Malaysia, we will be required to comply with applicable environmental laws and regulations. We cannot estimate the ongoing costs of such compliance.
Aspire Science, a Hong Kong corporation, was formed on December 9, 2016 and 100% of its equity was transferred to us on July 29, 2022. Ispire International was organized on July 6, 2022. Aspire North America and Aspire Science are our operating companies.
Aspire Science, a Hong Kong corporation, was formed on December 9, 2016, as a subsidiary of Aspire Global, and 100% of its equity was transferred to our subsidiary, Ispire International, on July 29, 2022. Ispire International was organized on July 6, 2022.
Other requirements for e-cigarettes Replacement e-cigarette parts that could contain nicotine only require notification if they have not already been notified as part of a device or e-cigarette kit in the United Kingdom or European Union (EU).
We have structured our operations to comply with applicable laws and regulations in Malaysia. Other requirements for e-cigarettes Replacement e-cigarette parts that could contain nicotine only require notification if they have not already been notified as part of a device or e-cigarette kit in the United Kingdom or European Union (EU).
In addition to increasing sales to our existing customers, we plan to increase sales of our e-cigarette vaporizer technology products by increasing the number of distributors and regions where our products are sold.
Our Strategy We are implementing a multi-prong growth strategy directed at increasing the sales of our e-cigarette and cannabis vaporizer technology products. In addition to increasing sales to our existing customers, we plan to increase sales of our e-cigarette vaporizer technology products by increasing the number of distributors and regions where our products are sold.
OEM and ODM sales accounted for approximately $0.7 million and $4.5 million, or 1.0% and 6.0%, of total revenue of tobacco products in the years ended June 30, 2022 and 2023, respectively.
OEM and ODM sales accounted for approximately $4.5 million and $22.1 million, or 6.0% and 25.9%, of total revenue of e-cigarette products in the years ended June 30, 2023 and 2024, respectively.
Our products use our BDC (bottom dual coil) coil technology which uses bottom dual coils to provide much higher temperature and an expanded heating that achieves much greater flavor and vapor production.
Some of our products use our BDC (bottom dual coil) coil technology which uses bottom dual coils to provide much higher temperature and an expanded heating which we believe achieves much greater flavor and vapor production than other available technologies.
We are looking to increase our OEM and ODM sales of tobacco products, which accounted for 1.0% and 4.5% of our tobacco revenue for the years ended June 30, 2022 and 2023, respectively.
We are looking to increase our OEM and ODM sales of e-cigarette products, which accounted for 4.5% and 25.9% of our e-cigarette revenue for the years ended June 30, 2023 and 2024, respectively.
This new technology, which Aspire Global introduced in 2014, enables the coil to last longer while still giving users what we believe is the purest and cleanest taste from e-liquids. The BVC coils are still very popular for MTL (mouth to lung) vapors today. Our Cleito tank brings new and innovative technological advancement to the vaping industry.
This technology, which was originally introduced by Aspire Global in 2014, enables the coil to last longer while still giving users what we believe is the purest and cleanest taste from e-liquids. We believe that our Cleito tank brings new and innovative technological advancement to the vaping industry.
Hong Kong was established as a special administrative region of the PRC in accordance with Article 31 of the Constitution of the PRC.
We have two operating subsidiaries established in California and Hong Kong. Hong Kong was established as a special administrative region of the PRC in accordance with Article 31 of the Constitution of the PRC.
Ispire ONE TM is designed to eliminate capping issues in the manufacturing/co-packing process; increase consistency and quality of the filled devices; eliminate leaking, spitting, or overheating for cartridges, disposables, and PODs; and improve consumer safety, as the devices are sealed in a sterilized factory environment to eliminate risk of contamination during filling process by Ispire’s customers. 1 Our products are manufactured and supplied by Shenzhen Yi Jia, which is 95% owned by our co-chief executive officer and controlling stockholder, Tuanfang Liu.
Ispire ONE™ is designed to eliminate capping issues in the manufacturing/co-packing process; increase consistency and quality of the filled devices; eliminate leaking, spitting, or overheating for cartridges, disposables, and PODs; and improve consumer safety, as the devices are sealed in a sterilized factory environment to eliminate risk of contamination during filling process by Ispire’s customers.
The following table sets forth our tobacco revenue and percentage for tobacco products by region for the years ended June 30, 2022 and 2023 based on information provided to us by our distributors (dollars in thousands).
The following table sets out the breakdown of our revenue and percentage by region for the years ended June 30, 2023 and 2024 based on information provided to us by our distributors (dollars in thousands) and from the company’s sales.
There are generally two types of vaping systems – open system and closed system. The term open system generally refers to vaping devices consisting of tanks, which include heating coils, and mods, which include the battery packs. Open system vaping devices allow end consumers to refill the tanks with their own liquid by themselves.
Initially, all of our products were “open system” vaping devices. The term “open system” generally refers to vaping devices consisting of tanks, which include heating coils, and battery mods, which include the battery packs. Open system vaping devices allow end consumers to refill the tanks with their own liquid by themselves.
The cartridges of closed system vaping devices are consumable products that need to be frequently replaced. 6 Our products use our BDC (bottom dual coil) coil technology which uses bottom dual coils to provide double temperature and expand the heating area and achieve double flavor and vapor production.
The cartridges of closed system vaping devices are consumable products that need to be frequently replaced. 6 Some of our products use our BDC (bottom dual coil) coil technology which uses bottom dual coils to provide expanded heating area and achieve double flavor and vapor production. This technology allows for two separate oil tanks/cartridges to be integrated into one product/design.
As of the date of this annual report, we do not believe we are subject to PRC Laws applicable to those Chinese companies established in mainland China, based on advice from Han Kun Law Offices. We have two operating subsidiaries established in California and Hong Kong.
We do not have any variable interest entities arrangements or any similar agreements in mainland China. As of the date of this Annual Report, we do not believe we are subject to PRC Laws applicable to those Chinese companies established in mainland China, based on advice from Han Kun Law Offices.
Liu, Aspire Global and Shenzhen Yi Jia which relates to cannabis vaping products. The patents, all of which are United States patents and patent applications, have been transferred to Aspire North America. Pursuant to the Intellectual Property License Agreement, Mr.
Liu, Aspire Global and Shenzhen Yi Jia which relates to cannabis vaping products. The patents have been transferred to Aspire North America for nil consideration. Pursuant to the Intellectual Property License Agreement (the “License Agreement”), Mr.
Our Products Tobacco Products We develop and sell both branded and, to a significantly lesser extent, OEM and ODM tobacco vaping systems and components (cartridges and batteries) to meet the needs of adult users worldwide, excluding the United States, the PRC and Russia. Such battery-powered systems and components are commonly used in tobacco (e-liquid).
Our Products E-Cigarette Products We develop and sell both branded and, to a significantly lesser extent, OEM and ODM nicotine vaping systems and components (cartridges and batteries) to meet the needs of adult users worldwide, excluding the United States, the PRC and Russia. There are generally two types of vaping systems – open systems and closed systems.
All of these patents are being or have been assigned, licensed, or otherwise transferred to Shenzhen Yi Jia, which, in turn is either transferring to Aspire North America, with respect to intellectual property relating to cannabis products, and licensing on a sole and exclusive basis in the territory, to Aspire Science, with respect to tobacco products.
All of these patents have been assigned, licensed, or otherwise transferred to Shenzhen Yi Jia, which, has transferred to Aspire North America, with respect to intellectual property relating to cannabis products, and licensing on a sole and exclusive basis globally other than the PRC and Russia, to Aspire Science, with respect to e-cigarette products.
ITEM 1. Business Overview We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded e-cigarettes and cannabis vaping products. We sell our tobacco products worldwide except for the PRC, the United States, and Russia. Our tobacco products are marketed under the Aspire brand name and are sold primarily through our distribution network.
ITEM 1. Business Overview We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded e-cigarettes and cannabis vaping products. We sell our e-cigarette products worldwide except for the People’s Republic of China (the “PRC”), the United States, and Russia.
Our open system vaping devices are sold under our own brands, including “Nautilus,” and “Zestquest.” The term closed system generally refers to vaping devices that consist of cartridges, which include a heating core (sometimes referred to as atomizers) and is filled with e-liquid, and batteries, which power the cartridges.
The term “closed system” generally refers to vaping devices that consist of cartridges, which include a heating core (sometimes referred to as atomizers) and is filled with e-liquid, and batteries, which power the cartridges. The closed system vaping devices include rechargeable and disposable vaping devices.
We may use social media to promote our products and we market to consumers through our websites and Instagram. We use social media to educate on current and new products and offers as well as to provide real-time support to customers. Our social media strategies aim to convert and nurture leads, to increase brand awareness.
We use social media to educate on current and new products and offers as well as to provide real-time support to customers. Our social media strategies aim to convert and nurture leads, to increase brand awareness among adult consumers. We also provide distributors with discounts and other sales incentives.
Prior to the transfer of the equity of Aspire North America and Aspire Science to us, the research and development activities were conducted by Shenzhen Yi Jia. As discussed under “Business – Intellectual Property” we have rights to intellectual property generated by the research and development efforts of Shenzhen Yi Jia and Mr. Liu.
As discussed under “Business – Intellectual Property” we have rights to intellectual property generated by the research and development efforts of Shenzhen Yi Jia and Mr.
As of July 31, 2023, we had a total of 69 employees, of which 29 are operations personnel, 4 are general management personnel, 25 are in sales and marketing, and 11, including Tuanfang Liu, our co-chief executive officer, are in research and development relating to cannabis products.
As of September 24, 2024, we had a total of 98 employees, of which 40 are operations personnel, 24 are general management personnel, 19 are in sales and marketing, and 15, including Tuanfang Liu, our co-chief executive officer, are in research and development relating to our products.
Sales of our cannabis products to date are largely sales to cannabis brands on an ODM basis, and we anticipate that our cannabis sales will continue to be primarily ODM sales for the near future. It is the responsibility of our customers, which are cannabis brands, to manufacture the cannabis oil and load the oil into our vaping hardware product.
Sales of our cannabis products to date are largely sales to cannabis brands on an ODM basis, and, while some hardware products are sold to end users, we anticipate that our cannabis product sales will continue to be primarily ODM sales for the near future.
Our facilities are located primarily in the United States, where we lease more than 41,221 square feet of office, manufacturing and storage space and where our research and development activities are conducted, as compared with 1,850 square feet of office space in Hong Kong. We do not have any variable interest entities arrangements or any similar agreements.
Our facilities are located primarily in the United States, where we lease more than 41,221 square feet of office, manufacturing and storage space and where our research and development activities are conducted, as compared with 1,850 square feet of office space in Hong Kong. We are also leasing approximately 31,000 square feet for our manufacturing facility in Malaysia.
When selecting suppliers, we will have our quality control and procurement team visit potential suppliers. We will need to conduct annual inspections of the factories and we will also visit the factory if any quality issues arise. In connection with the establishment of any manufacturing facilities we will have to employ qualified manufacturing, supervisory and administrative personnel.
We will need to include quality control checks and balances throughout our supply chain and manufacturing process. When selecting suppliers, we will have our quality control and procurement team visit potential suppliers. We will need to conduct annual inspections of the factories and we will also visit the factory if any quality issues arise.
Accordingly, a warranty liability has not been deemed necessary. 10 Research and Development We believe that design and attention to detail are at the heart of our business. Historically, research and development relating to our existing products were conducted primarily by Shenzhen Yi Jia.
Research and Development We believe that design and attention to detail are at the heart of our business. Historically, research and development relating to our existing products were conducted primarily by Shenzhen Yi Jia. We have commenced research and development activities independent of Shenzhen Yi Jia, which has related primarily to cannabis vaping products.
To a lesser extent we sell heating devices directly to consumers as internet sales. Source of Supply We purchase all of our current tobacco and cannabis vaping products from Shenzhen Yi Jia.
Pursuant to our agreements with our ODM customers, we design and sell these atomizers pursuant to purchase orders by the customers. To a lesser extent we sell heating devices directly to consumers as internet sales. Source of Supply We purchase a majority of our current e-cigarette and cannabis vaping products from Shenzhen Yi Jia.
Our vaping components include cartridges, lithium batteries, metal parts such as coils, plastic parts that are molded, circuit boards (printed circuit board assembly) and liquid cartridges for our products.
We believe that the market for closed system vaping devices is increasing rapidly and is becoming the dominant form of tobacco vaping. Our vaping components include cartridges, lithium batteries, metal parts such as coils, plastic parts that are molded, circuit boards (printed circuit board assembly) and liquid cartridges for our products.
For ODM, technology, performance and uniqueness are often more important, with cost generally being a secondary consideration. Historically, for our tobacco products, we have focused on building and growing our own branded business, with OEM and ODM sales accounting for a minor portion of our revenue.
Historically, for our e-cigarette products, we have focused on building and growing our own branded business, with OEM and ODM sales accounting for a minor portion of our revenue.
We offer these warranties for all major products, including all types of E-vapor kits, atomizers, replacement coils and mods, but no warranty for accessories such as spare parts or packaging consumables.
These warranties are of an assurance-type, come standard with all of products we purchase from Shenzhen Yi Jia, and cover repair or replacement should product not perform as expected. We offer these warranties for all major products, including all types of E-vapor kits, atomizers, replacement coils and mods, but no warranty for accessories such as spare parts or packaging consumables.
We decided not to market in the United States as a result of the effect of changes in regulations in the United States because Aspire North America would currently be able to sell one product line in the United States and that product line did not generate sufficient revenue to justify the marketing and regulatory expenses.
Aspire North America would currently only be able to sell one product line in the United States and that product line does not generate sufficient revenue to justify the marketing and regulatory expenses at this time.
We have commenced research and development activities independent of Shenzhen Yi Jia, which has related primarily to cannabis vaping products. This research and development effort, which is headed by our chairman, Tuanfang Liu, has eleven members, who are based in Los Angeles.
This research and development effort, which is headed by our chairman, Tuanfang Liu, has eleven members, who are primarily based in Los Angeles. Prior to the transfer of the equity of Aspire North America and Aspire Science to us, the research and development activities were conducted by Shenzhen Yi Jia.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough inflation has not materially affected our business or the results of our operations through the years ended June 30, 2022 and 2023, in view of the global inflationary trends, we may incur increased costs of manufacture and delivery which we may not be able to pass on to our customers as a result of competitive pressure which would impact the results of our operations. 31 We face competition from companies in the vaping industry as well as other sources of nicotine and cannabis, and we may fail to compete effectively.
Biggest changeForeign currency fluctuations have adversely affected and could continue to have an adverse effect on our results of operations and financial condition. 31 We face competition from companies in the vaping industry as well as other sources of nicotine and cannabis, and we may fail to compete effectively.
If the end user uses cannabis oil that is too viscous for or product and does not have the desired experience from the product, our client may reject an order, cancel an order or seek a refund of the payment made to us and/or discontinue purchasing our products.
If the end user uses cannabis oil that is too viscous for our product and does not have the desired experience from the product, our client may reject an order, cancel an order or seek a refund of the payment made to us and/or discontinue purchasing our products.
Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape, medical discovery and market acceptance of vaping devices.
Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape, medical discovery and market acceptance of vaping devices.
Liu are located in the PRC, we cannot assure you that we will be able to enforce any action or any judgment we may receive from a U.S. court in a Chinese court. 34 As the patents we own or are licensed may expire and may not be extended, our patent applications may not be granted and our patent rights may be contested, circumvented, invalidated or limited in scope, our patent rights and license may not protect us.
Liu are located in the PRC, we cannot assure you that we will be able to enforce any action or any judgment we may receive from a U.S. court in a Chinese court. 34 As the patents we own or are licensed to us may expire and may not be extended, our patent applications may not be granted and our patent rights may be contested, circumvented, invalidated or limited in scope, our patent rights and license may not protect us.
To the extent that the carriers that we currently use change their policies and refuse to ship or are prohibited from shipping vaping products and we are not able to find other carriers that are PACT Act compliant, our business and prospects will be materially impaired, and we may not be able to continue in the cannabis vaping business. 24 We are exposed to risks relating to our relationship with a related party, and we may not be able to successfully establish and operate manufacturing operations.
To the extent that the carriers that we currently use change their policies and refuse to ship or are prohibited from shipping vaping products and we are not able to find other carriers that are PACT Act compliant, our business and prospects will be materially impaired, and we may not be able to continue in the cannabis vaping business. 24 We are exposed to risks relating to our relationship with a related party, and we may not be able to successfully operate manufacturing operations.
We are an emerging growth company until the earliest of: ● the last day of the fiscal year during which we have total annual gross revenues of $1.235 billion or more; ● the last day of the fiscal year following the fifth anniversary of our initial public offering, which was on April 3, 2023; ● the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or ● the date on which we are deemed a “large accelerated filer” as defined under the federal securities laws. 40 For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of this our initial public offering.
We are an emerging growth company until the earliest of: ● the last day of the fiscal year during which we have total annual gross revenues of $1.235 billion or more; ● the last day of the fiscal year following the fifth anniversary of our initial public offering, which was on April 3, 2023; ● the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or ● the date on which we are deemed a “large accelerated filer” as defined under the federal securities laws. 41 For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of this our initial public offering.
Although we are a Delaware corporation, two of our directors, -- who are Tuanfang Liu, our co-chief executive officer, director and controlling stockholder and his wife, Jiangyan Zhu, who is also a director – live in mainland China. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States.
Although we are a Delaware corporation, two of our directors, -- who are Tuanfang Liu, our co-chief executive officer, chairman and controlling stockholder, and his wife, Jiangyan Zhu, who is also a director – live in mainland China. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States.
There is a risk in relying on any third-party supplier in that we are dependent on the supplier’s ability to product a product which meets our quality standards and delivery requirements as well as being dependent upon the supplier’s priorities. These risks are present when the supplier is controlled by Tuanfang Liu, our co-chief executive officer.
There is a risk in relying on any third-party supplier in that we are dependent on the supplier’s ability to produce a product which meets our quality standards and delivery requirements as well as being dependent upon the supplier’s priorities. These risks are present when the supplier is controlled by Tuanfang Liu, our co-chief executive officer.
Our by-laws also provide that the exclusive forum provisions do not apply to actions arising under the Securities Act. There is uncertainty as to whether a court would enforce these provisions, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. 41 ITEM 1B. Unresolved Staff Comments Not Applicable
Our by-laws also provide that the exclusive forum provisions do not apply to actions arising under the Securities Act. There is uncertainty as to whether a court would enforce these provisions, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. ITEM 1B. Unresolved Staff Comments Not Applicable
Additionally, vapor market development is subject to the uncertainty of overall regulatory landscape for such products, which may have a material impact on the market development of vaping products, particularly in Western Europe. There can be no assurance that the regulatory regime will be favorable to nicotine or cannabis vaping products in general and us.
Additionally, vapor market development is subject to the uncertainty of overall regulatory landscape for such products, which may have a material impact on the market development of vaping products, particularly in Western Europe. There can be no assurance that the regulatory regime will be favorable to us or nicotine or cannabis vaping products in general.
Outbreaks of communicable diseases, natural disasters or other events, such as the COVID-19 pandemic, have materially and adversely affected, and in the future, may materially and adversely affect our business, results of operations and financial condition. Our business could be adversely affected by the effects of communicable diseases, pandemics and epidemics, such a COVID-19.
Outbreaks of communicable diseases, natural disasters or other events, such as the COVID-19 pandemic, have materially and adversely affected, and in the future, may materially and adversely affect our business, results of operations and financial condition. Our business could be adversely affected by the effects of communicable diseases, pandemics and epidemics, such as COVID-19.
At present, our products are manufactured by Shenzhen Yi Jia, a Chinese company of which Tuanfang Liu, our co-chief executive officer is a 95% owner.
At present, a majority of our products are manufactured by Shenzhen Yi Jia, a Chinese company of which Tuanfang Liu, our co-chief executive officer is a 95% owner.
Vaping products for both tobacco and cannabis compete with tobacco and marijuana cigarettes and a wide range of other tobacco and legal and illegal cannabis products. The vaping industry worldwide is intensely competitive.
Vaping products for both nicotine and cannabis compete with tobacco and marijuana cigarettes and a wide range of other tobacco and legal and illegal cannabis products. The vaping industry worldwide is intensely competitive.
In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. 38 The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law.
In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. 39 The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law.
The impact of a potential downgrade to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect economic conditions, as well as our business, financial condition and operating results. Our need to restate our unaudited financial statements reflects a material weakness in our internal controls over financial reporting .
The impact of a potential downgrade to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect economic conditions, as well as our business, financial condition and operating results. Our need to restate our unaudited financial statements reflected a material weakness in our internal controls over financial reporting .
We cannot assure you that we will be able to operate profitably in the future. Existing laws, regulations and policies and the issuance of new or more stringent laws, regulations, policies and any other restrictions or limitations in relation to the tobacco vaping industry have and can materially and adversely affect our business operations.
We cannot assure you that we will be able to operate profitably in the future. Existing laws, regulations and policies and the issuance of new or more stringent laws, regulations, policies and any other restrictions or limitations in relation to the nicotine vaping industry have and can materially and adversely affect our business operations.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares. 39 The trading price of our common stock may be volatile, which could result in substantial losses to investors.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore stockholders may have difficulty selling their shares. 40 The trading price of our Common Stock may be volatile, which could result in substantial losses to investors.
In addition, we do not have any business disruption insurance. Any business disruption event could result in substantial costs to us and a diversion of our resources. 37 The occurrence of natural disasters may adversely affect our business, financial condition and results of operations.
In addition, we do not have any business disruption insurance. Any business disruption event could result in substantial costs to us and a diversion of our resources. 38 The occurrence of natural disasters may adversely affect our business, financial condition and results of operations.
Our ability to expand our marketing of cannabis products in the European market is dependent upon whether recreational cannabis will become legal in Western Europe, and we cannot give any assurance that we will be able to sell products in Western Europe.
Our ability to expand our marketing of cannabis products in the European market is dependent upon whether recreational cannabis will become legal in other Western European countries, and we cannot give any assurance that we will be able to sell products in Western Europe.
To optimize adult smokers’ experience, we must introduce new products and upgrade our existing products to meet our users’ evolving preferences and to incorporate the latest technological developments. It is difficult to predict the preferences of users or a specific segment of users.
To optimize adult vapers’ experience, we must introduce new products and upgrade our existing products to meet our users’ evolving preferences and to incorporate the latest technological developments. It is difficult to predict the preferences of users or a specific segment of users.
As a result of our restatement of our unaudited financial statements as described in the preceding risk factor, our internal controls over financial reporting are not effective, which could have a significant and adverse effect on our business and reputation.
As a result of our restatement of our unaudited financial statements as described in the preceding risk factor, our internal controls over financial reporting were not effective, which could have a significant and adverse effect on our business and reputation.
Most of our revenue is derived from sales to distributors for our tobacco products and other cannabis brands for our cannabis products, and we do not sell online. As a result, in the normal course of business we do not collect, store and process personal, transactional, statistical and behavioral data, including certain personal and other sensitive data from our users.
Most of our revenue is derived from sales to distributors for our e-cigarette products and other cannabis brands for our cannabis products, and we do not sell online. As a result, in the normal course of business we do not collect, store and process personal, transactional, statistical and behavioral data, including certain personal and other sensitive data from our users.
The growth rate for tobacco vapor products decreased in 2021 and 2022, in part, we believe, because of the steps taken by governments worldwide to address the COVID-19 pandemic, which negatively affected our revenue and industry sales in general. The growth of cannabis vaping products is largely confined to those states in the United States where recreational cannabis is legal.
The growth rate for e-cigarette products decreased in 2021 and 2022, in part, we believe, because of the steps taken by governments worldwide to address the COVID-19 pandemic, which negatively affected our revenue and industry sales in general. The growth of cannabis vaping products is largely confined to those states in the United States where recreational cannabis is legal.
Currently, we primarily sell our tobacco products to our distributors, who then supply our products to wholesale companies that in turn sell to retail outlets, and we sell our cannabis products primarily to other cannabis brands on an ODM basis, and the customers sell the products through their own distribution networks.
Currently, we primarily sell our e-cigarette products to our distributors, who then supply our products to wholesale companies that in turn sell to retail outlets, and we sell our cannabis products primarily to other cannabis brands on an ODM basis, and the customers sell the products through their own distribution networks.
FDA authorization to introduce a “new tobacco product” (or to continue marketing a “new tobacco product” covered by the current compliance policy for Deemed Tobacco Products that were on the U.S. market on August 8, 2016) could be obtained via any of the following three authorization pathways: (1) submission of a premarket tobacco product application (“PMTA”) and receipt of a marketing authorization order; (2) submission of a substantial equivalence report and receipt of a substantial equivalence order; or (3) submission of a request for an exemption from substantial equivalence requirements and receipt of a substantial equivalence exemption determination.
FDA authorization to introduce a “new tobacco product” (or to continue marketing a “new tobacco product” covered by the current compliance policy for Deemed Tobacco Products that were on the U.S. market on August 8, 2016) could be obtained via any of the following three authorization pathways: (1) submission of a PMTA and receipt of a marketing authorization order; (2) submission of a substantial equivalence report and receipt of a substantial equivalence order; or (3) submission of a request for an exemption from substantial equivalence requirements and receipt of a substantial equivalence exemption determination.
Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that we will file with the SEC under Section 404 of the Sarbanes-Oxley Act.
Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that we will file with the SEC under Section 404 of the Sarbanes-Oxley Act when the company is subject to Section 404(b).
The tobacco vaping market worldwide has experienced rapid growth through 2019 and the cannabis market is developing, with the United States accounting for the overwhelming majority of sales.
The e-cigarette vaping market worldwide has experienced rapid growth through 2019 and the cannabis market is developing, with the United States accounting for the overwhelming majority of sales.
We may also face regulatory or enforcement action from the FDA for certain of our products that remained distributed in the United States between September 9, 2020, and April 30, 2021, and for which we did not file a PMTA by the September 9, 2020, deadline.
Though it is highly unlikely, we may also face regulatory or enforcement action from the FDA for certain of our products that remained distributed in the United States between September 9, 2020, and April 30, 2021, and for which we did not file a PMTA by the September 9, 2020, deadline.
Liu’s conflict of interest, there is a risk that any actions he may take may have an adverse effect upon the success and development of our business and the price of our common stock. As a result of the voting power of Mr. Liu and his wife, Ms.
Liu’s interests may be different from our interests. Because of Mr. Liu’s conflict of interest, there is a risk that any actions he may take may have an adverse effect upon the success and development of our business and the price of our Common Stock. As a result of the voting power of Mr. Liu and his wife, Ms.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against two of our directors, o who are Tuanfang Liu, our co-chief executive officer and his wife Jiangyan Zhu, who are based in China based on foreign laws.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against two of our directors, Tuanfang Liu, our co-chief executive officer and chairman, and his wife Jiangyan Zhu, who are both based in China.
Although we have more than 150 distributors, our largest distributor, who is a non-exclusive distributor for the United Kingdom and France, accounted for approximately 38.6% and 32.4% of our revenue for the years ended June 30, 2022 and 2023, respectively.
Although we have more than 150 distributors, our largest distributor, who is a non-exclusive distributor for the United Kingdom and France, accounted for approximately 32.4% and 30.0% of our revenue for the years ended June 30, 2023 and 2024, respectively.
Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Liu taking actions that are in our best interests, and we run the risk that he may not do so. 22 The recent implementation of regulations relating to e-cigarettes has resulted in our decision not to market nicotine products in the United States.
Liu taking actions that are in our best interests, and we run the risk that he may not do so. 22 The recent implementation of regulations relating to e-cigarettes has resulted in our decision not to market nicotine products in the United States until we secure PMTA approvals on our ENDS devices.
Our business relies on the collection of accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations. We recorded an allowance for doubtful accounts of approximately $0 for the year ended June 30, 2022 and approximately $1.5 million for the year ended June 30, 2023.
Our business relies on the collection of accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations. We recorded an allowance for credit losses of approximately $1.5 million for the year ended June 30, 2023, and approximately $5.9 million for the year ended June 30, 2024.
All of our products are presently manufactured by Shenzhen Yi Jia, a related party.
The majority of our products are presently manufactured by Shenzhen Yi Jia, a related party.
Risks Related to Our Business and Industry We sustained losses of approximately $2.0 million for the year ended June 30, 2022 and $6.1 million for the year ended June 30, 2023, and we cannot assure you that we can or will operate profitably in the future.
Risks Related to Our Business and Industry We sustained losses of approximately $6.0 million for the year ended June 30, 2023 (as restated) and $14.8 million for the year ended June 30, 2024, and we cannot assure you that we can or will operate profitably in the future.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the issuing company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Similar changes affected our unaudited financial statements for the periods noted above. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the issuing company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We sustained a loss of approximately $2.0 million, or $0.04 per share (basic and diluted) in the year ended June 30, 2022 and a loss of approximately $6.1 million, or $0.12 per share (basic and diluted) for the year ended June 30, 2023. The losses resulted primarily because of increased operating expenses for both periods.
We sustained a loss of approximately $6.0 million, or $0.12 per share (basic and diluted) in the year ended June 30, 2023 (as restated), and a loss of approximately $14.8 million, or $0.27 per share (basic and diluted) for the year ended June 30, 2024. The losses resulted primarily because of increased operating expenses for both periods.
On January 1, 2021, we signed a distributorship agreement with this distributor in our standard form, which does not provide any special terms or prices. No other customer accounted for 10% or more of our revenue during either year or nine-month period. The loss of this distributor could have a material adverse effect upon our business.
On January 1, 2021, we signed a distributorship agreement with this distributor in our standard form, which does not provide any special terms or prices. No other customer accounted for 10% or more of our revenue during either year.
Liu also own 95% of the equity in Shenzhen Yi Jia, which is currently our sole supplier. Mr. Liu is chairman of Shenzhen Yi Jia and his wife, Jiangyan Zhu, is its vice president of finance. The price and other terms at which Shenzhen Yi Jia sells product to us have been largely determined by Mr. Liu.
Mr. Liu is chairman of Shenzhen Yi Jia and his wife, Jiangyan Zhu, is its vice president of finance. The price and other terms at which Shenzhen Yi Jia sells product to us have been largely determined by Mr. Liu. In addition, as our co-chief executive officer, Mr.
We are required to manage a large volume of inventory effectively for our business. We depend on our forecasts for the anticipated demand for our products to make procurement plans and manage our inventory.
Failure to manage inventory at optimal levels could adversely affect our business, financial condition, and results of operations. We are required to manage a large volume of inventory effectively for our business. We depend on our forecasts for the anticipated demand for our products to make procurement plans and manage our inventory.
Competition for highly skilled employees is intense, and we may not be able to attract and retain the highly skilled employees needed to support our business. As we continue to experience growth, we believe our success depends on the efforts and talents of our employees, including management team and financial personnel.
As we continue to experience growth, we believe our success depends on the efforts and talents of our employees, including management team and financial personnel. Our future success depends on our continued ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly skilled personnel is extremely intense.
These refunds and the cost of cancellation of orders are reflected as sales return, the amount for both the years ended June 30, 2022 and 2023 was not material.
These refunds and the cost of cancellation of orders are reflected as sales return, The amount of sales return for the years ended June 30, 2023 and 2024 was $1,932,280 and $4,764,434.
If any of our key research and development personnel were to leave us, we cannot assure you that we can secure equally competent research and development personnel in a timely manner, or at all.
If any of our key research and development personnel were to leave us, we cannot assure you that we can secure equally competent research and development personnel in a timely manner, or at all. Competition for highly skilled employees is intense, and we may not be able to attract and retain the highly skilled employees needed to support our business.
Liu owns 95% of the equity of our sole supplier, Mr. Liu has a conflict of interest. Because our co-chief executive officer, Tuanfang Liu, and his wife own 65.2%, of our common stock, they have the power to elect all of our directors and to approve any matter which is subject to stockholder approval. Mr.
Because our co-chief executive officer, Tuanfang Liu, and his wife own 63.1%, of our Common Stock as of September 24, 2024, they have the power to elect all of our directors and to approve any matter which is subject to stockholder approval. Mr. Liu also own 95% of the equity in Shenzhen Yi Jia, which is currently our major supplier.
The CDC also reconfirmed that (i) Vitamin E acetate, which was found in some cannabis-derived vaping cartridges that were mostly obtained illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) cannabis-derived vaping products from illicit sources were linked to most cases of severe respiratory illnesses.
The CDC also reconfirmed that (i) Vitamin E acetate, which was found in some cannabis-derived vaping cartridges that were mostly obtained illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) cannabis-derived vaping products from illicit sources were linked to most cases of severe respiratory illnesses. 25 If vaping product usage is determined or perceived to pose long-term health risks or to be linked to illnesses, the usage of vaping products may significantly decline, which would have a material adverse effect on our business, financial condition and results of operations.
See “Regulations.” We have stopped marketing tobacco vapor products in the United States because our sales volume in the United States did not justify the marketing and regulatory compliance costs. 23 Further, although we are not marketing tobacco vapor products in the United States market, and we can contractually prohibit our distributors from selling our tobacco vaping products in the United States market, in the event that those products are sold in the United States market, we cannot assure you that we will not be subject to regulatory or enforcement action as a result of such products’ being sold in the United States.
We believe the technology we have access to will be desirable to the FDA and IKE Tech LLC has a meeting with the FDA on November 13, 2024, to discuss this technology. 23 Further, although we are not marketing e-cigarette products in the United States market, and we can contractually prohibit our distributors from selling our e-cigarette vaping products in the United States market, in the event that those products are sold in the United States market, we cannot assure you that we will not be subject to regulatory or enforcement action as a result of such products’ being sold in the United States.
The unaudited financial statements for the six months ended December 31, 2021 were included in our final prospectus dated April 3, 2023 relating to our initial public offering.
Our need to restate our financial statements for the periods noted above reflects certain material weaknesses in our internal control over financial reporting. We are taking steps to address these material weaknesses. The unaudited financial statements for the six months ended December 31, 2021, were included in our final prospectus dated April 3, 2023, relating to our initial public offering.
Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them.
In addition, changes in cannabis laws or interpretations of such laws are difficult to predict and are subject to change, which could significantly affect our business. Because Tuanfang Liu, our co-chief executive officer, who is also director, and his wife, Jiangyan Zhu, who is also a director, beneficially own 65.2% of our common stock and Mr.
In addition, changes in cannabis laws or interpretations of such laws are difficult to predict and are subject to change, which could significantly affect our business.
He has also historically been responsible for our product development and our present products have been the result of his research and development efforts. Mr. Liu’s interests may be different from our interests. Because of Mr.
Liu has significant authority in the implementation of our business plan, including the expected commencement of our manufacturing operations in California and the opening of additional manufacturing operations in Malaysia. He has also historically been responsible for our product development and our present products have been the result of his research and development efforts. Mr.
If the DEA accepts HHS’s recommendation and reschedules cannabis, there may be new regulatory compliance obligations placed upon cannabis operators in the U.S.. Under the FD&C Act, Schedule 3 drugs must be dispensed with a prescription and the safety and efficacy of such products would be governed by FDA regulation under the FD&C Act.
Under the FD&C Act, Schedule 3 drugs must be dispensed with a prescription and the safety and efficacy of such products would be governed by FDA regulation under the FD&C Act. It is unclear how this would impact state-legal cannabis programs (both medical and adult use), if at all.
However, the Federal Controlled Substances Act includes an exemption for “any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items.” No country in Western Europe has yet legalized recreational cannabis, but the region has some of the most developed cannabis cultures in the world, such as in the Netherlands and Spain.
However, the Federal Controlled Substances Act includes an exemption for “any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items.” On April 1, 2024, Germany legalized recreational cannabis use and is likely to accelerate the cannabis debate within the EU and promote the development of the industry at a regional level.
Similar changes affected our financial statements at December 31, 2022 and for the six months ended December 31, 2022.
Similar changes affected our financial statements at December 31, 2022 and for the six months ended December 31, 2022. 36 During the preparation of our financial statements for the year ended June 30, 2024, we determined that we needed to restate our audited financial statements for the year ended June 30, 2023, as well as our unaudited financial statements as of and for the periods ended September 30, 2023, December 31, 2023, March 31, 2024.
However, great differences persist among consumers, with older generations typically being more reluctant to allow cannabis use.
However, no other countries in Western Europe have legalized recreational cannabis, but the region has some of the most developed cannabis cultures in the world, such as in the Netherlands and Spain. However, great differences persist among consumers, with older generations typically being more reluctant to allow cannabis use.
Our future success depends on our continued ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure.
We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.
Any controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future.
We have implemented new controls in order that we can be confident that we maintain books are records such that we are able to generate financial statements that are prepared in accordance with GAAP. Any controls that we develop may become inadequate because of changes in conditions in our business.
Removed
Clear generational and social gaps still exist that make legalization and development of the market a slow process, although the potential legalization of adult-use cannabis in Germany is likely to accelerate the cannabis debate within the EU and promote the development of the industry at a regional level.
Added
The DEA is currently going through a public comment period on the potential rescheduling. If the DEA accepts HHS’s recommendation and reschedules cannabis, there may be new regulatory compliance obligations placed upon cannabis operators in the U.S.
Removed
It is unclear how this would impact state-legal cannabis programs (both medical and adult use), if at all.
Added
Because Tuanfang Liu, our co-chief executive officer, who is also director, and his wife, Jiangyan Zhu, who is also a director, beneficially own 63.1% of our Common Stock as of September 24, 2024 and Mr. Liu owns 95% of the equity of our majority supplier, Mr. Liu has a conflict of interest.
Removed
In addition, as our co-chief executive officer, Mr. Liu has significant authority in the implementation of our business plan, including the expected commencement of our manufacturing operations in California and the proposed search for a location for additional manufacturing operations in Southeast Asia.
Added
On September 6, 2024, we filed a PMTA for a disposable ENDS device with a variety of characterizing flavors. We believe that, when equipped with our IKE Tech LLC Joint Venture age-gating technology, there is a path to getting an approval for these products, as they will have strong technological barriers to prevent youth usage.
Removed
The PMTA application process is very expensive, and we did not submit a PMTA for any other product. The Nautilus Prime System is an enhancement of an earlier developed Nautilus line, for which we did not submit a PMTA.
Added
The FDA has repeatedly indicated that the only way it will approve characterizing flavors in ENDS devices is if they are equipped with technology to prevent youth usage.
Removed
Our tobacco vaping sales in the United States were $0.9 million for the year ended June 30, 2022 and approximately $0.9 million for the year ended June 30, 2023, largely as a result of our inability to sell products that we sold in prior years.
Added
The loss of this distributor or a significant reduction in our sales to this distributor could have a material adverse effect upon our business.
Removed
We cannot assure you that our pending PMTA (or any other PMTA filed in the future) will ultimately result in the FDA’s timely issuance of marketing orders for the Nautilus Prime product line (or other products).
Added
See “Business – Sales and Distribution.” Economic factors beyond our control, and changes in the global economic environment, including fluctuations in inflation and currency exchange rates, could result in lower revenues, higher costs and decreased margins and earnings A majority of our products are manufactured and sold outside of the United States which creates exposure to the volatility of global economic conditions, including fluctuations in inflation and foreign currency exchange rates.
Removed
In the year ended June 30, 2022, we suffered a loss of potential sales orders of approximately $2 million, around 2.3% of our total sales, which caused a decline of $0.3 million in our gross profit, resulting from delay in supply chain.
Added
Central banks deploy various strategies to combat inflation, including increasing interest rates, which impact our borrowing costs. Government shutdowns or the risk of government shutdowns, as well as the impact or expected impact of elections, both in the United States and in other countries around the world, may also increase volatility.
Removed
Furthermore, there have been recent claims that users of vaping products may suffer a greater risk of more serious COVID-19 complications. However, it remained unclear whether the exposure to toxic chemicals through vaping product usage will increase the risk of COVID-19. 25 Research regarding the actual causes of these illnesses is still ongoing.
Added
Additionally, there has been, and may continue to be, volatility in currency exchange rates that impact the U.S. Dollar value relative to other international currencies. Our international revenues and expenses generally are derived from sales and operations in foreign countries, and these revenues and expenses are affected by currency fluctuations.
Removed
If vaping product usage is determined or perceived to pose long-term health risks or to be linked to illnesses, the usage of vaping products may significantly decline, which would have a material adverse effect on our business, financial condition and results of operations.
Added
Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials more expensive and more difficult to finance.
Removed
On January 30, 2020, the World Health Organization (“WHO”) declared the outbreak a public health event of international concern, and on March 11, 2020, the WHO declared the COVID-19 outbreak a pandemic.
Added
The restatement was to correct identified errors related to (i) the incorrect statement of cash flows presentation for right-of-use assets and lease liabilities (and related activity), (ii) the omitted disclosure of supplement non-cash activities related to the acquisition of right-of-use assets in exchange for operating lease liabilities, (iii) the incorrect statement of operations presentation of shipping and handling costs as sales and marketing expenses and not cost of revenue, and (iv) the incorrect calculation of right-of-use assets and lease liabilities at inception for the Company’s operating leases, as well as the incorrect recognition of rent expense.
Removed
The World Health Organization ended the global emergency status for COVID-19 on May 5, 2023, and the United States Department of Health and Human Services declared that the public health emergency from COVID-19 expired at the end of the day on May 11, 2023.
Added
As a result of the restatement, and as of June 30, 2023, the Company’s total assets decreased from $90,693,349 to $90,395,744, total liabilities decreased from $59,318,416 to $58,925,834 and stockholders’ equity increased from $31,374,933 to $31,469,910.
Removed
Despite these declarations, the lasting impacts of COVID-19 on the United States and broader global economy, including, in particular, China, including supply chain disruption, may have a significant continuing negative effect on the Company and may continue to materially impact the Company. The extent to which COVID-19 impacts our operations on an ongoing basis is highly uncertain.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth information as to the real property leased by us: Location Square Feet Current Annual Rent Expiration Date 1410 Abbot Kinney Blvd., PH 1, Venice, CA 90291 4,121 $ 276,000 June 30, 2026 19700 Magellan Dr, Los Angeles, CA 90502 37,100 (1) $ 734,580 July 31, 2027 55 King Yip Street, King Palace Plaza, Floor 31, Suite J, Kwun Tong, Hong Kong 1,850 $ 81,507 July 14, 2025 (1) The number in the table reflects the square feet of building that we occupy.
Biggest changeThe following table sets forth information as to the real property leased by us: Location Square Feet Current Annual Rent Expiration Date 1410 Abbot Kinney Blvd., PH 1, Venice, CA 90291 4,121 $ 388,000 June 30, 2026 19700 Magellan Dr, Los Angeles, CA 90502 37,100 (1) $ 872,719 July 31, 2027 55 King Yip Street, King Palace Plaza, Floor 31, Suite J, Kwun Tong, Hong Kong 1,850 $ 81,323 July 14, 2025 No. 16, Jalan I-Park SAC 3, Taman Perindustrian I-Park SAC, 81400 Senai, Johor, Malaysia 31,000 $ 127,076 August 17, 2026 (1) The number in the table reflects the square feet of building that we occupy.
ITEM 2. Properties Our headquarters are located at 19700 Magellan Dr, Los Angeles, CA 90502 and we maintain offices, manufacturing and storage facilities at the same location. We do not own any real property, and we leased an aggregate of approximately 85,483 square feet of real property.
ITEM 2. Properties Our headquarters are located at 19700 Magellan Dr, Los Angeles, CA 90502 and we maintain offices, manufacturing and storage facilities at the same location. We do not own any real property, and we leased an aggregate of approximately 74,071 square feet of real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther than disclosed above, we are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.
Biggest changeWe are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations. ITEM 4. Mine and Safety Disclosure Not applicable. 43 PART II
Removed
On March 17, 2021, the FDA sent a letter to Aspire North America requesting that Aspire North America submit documents relating to its marketing practices for Aspire products. Specifically, the FDA requested documents related to youth exposure to Aspire North America’s social media marketing of Aspire as well as Aspire North America’s use of influencers in social media marketing.
Removed
This request applied to all of Aspire electronic nicotine delivery system (ENDS) products and their components or parts. The FDA requested these documents based on the epidemic of youth ENDS use and based on Aspire North America’s marketing of Aspire products on social media platforms (e.g., Facebook, YouTube, and Instagram).
Removed
The FDA requested that Aspire North America respond within 60 days but granted a 30-day extension. On June 15, 2021, Aspire North America provided the required information to the FDA. To date, the FDA has not substantively responded or taken any further action in the matter.
Removed
However, we cannot assure you that the FDA will consider the response adequate and will not initiate regulatory or enforcement action based on an alleged failure to comply with the request or that the FDA will not initiate regulatory or enforcement action on other grounds based on the contents of the documents produced in the response.
Removed
Either result could materially and adversely affect our business, financial condition, and results of operations. ITEM 4. Mine and Safety Disclosure Not applicable. 42 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options Weighted-average exercise price of outstanding options Number of granted restricted stock unit awards outstanding Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders - $ - - 15,000,000 Equity compensation plans not approved by security holders - - - - - $ - - 15,000,000 Dividend Policy We have never declared or paid any cash dividends on our capital stock.
Biggest changeNumber 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 (excluding securities reflected in column (a)) Plan Category (a) (1) (b) (1) (c) Equity compensation plans approved by security holders 3,255,000 $ 9.11 10,063,178 Equity compensation plans not approved by security holders - - - Total 3,255,000 $ 9.11 10,063,178 (1) Excludes 1,681,822 shares of Common Stock reserved under the 2022 Equity Incentive Plan, subject to the issuance of restricted stock units (“RSUs”) and performance stock units (“PSUs”).
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Stock Market under the symbol “ISPR.” Holders of Record As of August 30, 2023, we had approximately 18 holders of record of our common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock trades on the Nasdaq Stock Market under the symbol “ISPR.” Holders of Record As of September 24, 2024, we had approximately 19 holders of record of our Common Stock.
Because most of our shares of common stock held by persons other than our original stockholders are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders who beneficially own our stock.
Because most of our shares of Common Stock held by persons other than our original stockholders are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders who beneficially own our stock. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
One of our subsidiaries declared a dividend payable to its then sole stockholder, Tuanfang Liu, our co-chief executive officer. See Item 13.
One of our subsidiaries declared a dividend payable to its then sole stockholder, Tuanfang Liu, our co-chief executive officer. See Item 13. Certain Relationships and Related Transactions, and Director Independence Securities Authorized for Issuance under Equity Compensation Plan The following table sets forth information concerning securities authorized under equity compensation plans as of June 30, 2024.
Removed
Securities Authorized for Issuance under Equity Compensation Plan The following table sets forth information concerning securities authorized under equity compensation plans as of June 30, 2023.
Added
Recent Sales of Unregistered Securities There were no unregistered securities to report which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K. ITEM 6. [Reserved] 44
Removed
Certain Relationships and Related Transactions, and Director Independence Recent Sales of Unregistered Securities During the period covered by this annual report, we did not issue any securities that were not registered pursuant to the Securities Act that were not previously reported in our SEC filings.
Removed
We did not repurchase any of our equity securities during the years ended June 30, 2022 or 2023

Item 7. Management's Discussion & Analysis

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

36 edited+48 added−52 removed8 unchanged
Biggest changeYear Ended June 30, Increase Consolidated cash flow data: 2022 2023 (Decrease) Net cash used in operating activities $ (7,558 ) $ (7,582 ) $ (24 ) Net cash used in investing activities (122 ) (10,154 ) (10,032 ) Net cash used in financing activities (3,089 ) (16,444 ) (13,355 ) Net decrease in cash and cash equivalents and restricted cash (10,769 ) (34,180 ) (23,411 ) Net cash flow used in operating activities for the year ended June 30, 2022 of $7.6 million, reflected our net loss of $1.9 million, adjusted primarily as follows: an increase in accounts payable of $8.9 million offset by an increase in inventories of $11.5 million, and an increase in accounts receivable of $4.0 million. 49 Net cash flow used in operating activities for the year ended June 30, 2023 of $7.6 million, reflected our net loss of $6.1million, adjusted primarily as follows: add back of impairment of account receivable of $3.3 million, an increase in accounts payable of $10.6 million, a decrease in inventory of $7.1 million, offset by an increase in accounts receivable of $19.6 million, and an increase in prepaid expenses and other current assets of $3.1 million.
Biggest changeYear Ended June 30, Consolidated cash flow data: 2023 (Restated) 2024 Increase (Decrease) Net cash used in operating activities $ (8,456 ) $ (18,302 ) $ (9,846 ) Net cash (used in) provided by investing activities (10,154 ) 2,990 13,144 Net cash (used in) provided by financing activities (15,570 ) 10,083 25,653 Net decrease in cash $ (34,180 ) $ (5,229 ) $ 28,951 Net cash flow used in operating activities for the year ended June 30, 2023 (as restated), of $8.5 million, reflected our net loss of $6.0 million, adjusted primarily as follows: add back of impairment of account receivable of $3.3 million, an increase in accounts payable of $10.6 million, a decrease in inventories of $7.1 million, offset by an increase in accounts receivable of $19.6 million, an increase in prepaid expenses and other current assets of $3.1 million and payment made for operating lease liabilities of $1.4 million. 51 Net cash flow used in operating activities for the year ended June 30, 2024 of $18.3 million, reflected our net loss of $14.8 million, adjusted primarily as follows: add back of impairment of account receivable of $6.0 million, add back of shared based payment expenses of $6.4 million, add back of depreciation and amortization of $0.5 million, an increase in accounts payable of $17.9 million, an increase in accrued liabilities and other payables of $2.5 million, a decrease in inventory of $0.9 million, a decrease in prepaid expenses and other current assets of $2.4 million, an increase in contract liabilities of $1.2 million offset by an increase in accounts receivable of $41.3 million.
As a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
Emerging Growth Company As a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
The cash at bank held by our Hong Kong operating subsidiary can be freely transferred within our corporate structure without restriction. If our Hong Kong operating subsidiary were to incur additional debt on its own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors.
The cash held at a bank by our Hong Kong operating subsidiary can be freely transferred within our corporate structure without restriction. If our Hong Kong operating subsidiary were to incur additional debt on its own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors.
This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. For the years ended June 30, 2023 and 2022, we did not incur any interest or penalties related to an uncertain tax position.
This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. For the years ended June 30, 2023 and 2024, we did not incur any interest or penalties related to an uncertain tax position.
We had a consolidated net loss for both year ended June 30, 2022 and 2023, which was the combined effect of a profit by Aspire Science and a loss by Aspire North America. The profit from Aspire Science resulted in a current tax expense.
We had a consolidated net loss for both year ended June 30, 2023 and 2024, which was the combined effect of a profit by Aspire Science and a loss by Aspire North America. The profit from Aspire Science resulted in a current tax expense.
Our failure or inability to collect accounts receivable when due results from a number of factors, including (i) our customer’s failure to pay as a result of adverse economic conditions affecting the customers; (ii) our failure to accurately assess the creditworthiness of our customers; (iii) our failure to implement effective collection efforts; and (iv) disputes over contract terms, product quality or delays in delivery.
Our failure or inability to collect accounts receivable when due results from a number of factors, including (i) our customer’s failure to pay as a result of adverse economic conditions affecting the customer’s cash flow; (ii) our failure to implement effective collection efforts; and (iii) disputes over contract terms, product quality or delays in delivery.
Net cash flow used in investing activities for the year ended June 30, 2023 of $10.1 million reflected primarily purchase of short term investments of $9.1 million, and purchase of property, plant and equipment of $1.0 million.
Net cash flow used in investing activities for the year ended June 30, 2023 (as restated), of $10.2 million reflected primarily the purchase of short term investment of $9.1 million and purchase of property, plant and equipment of $1.0 million.
Gross Profit The following tables show the revenue, cost of revenue and gross profit of our tobacco and cannabis vaping products (dollars in thousands).
Gross Profit The following tables show the revenue, cost of revenue and gross profit of our products (dollars in thousands).
Net cash flow used in financing activities for the year ended June 30, 2023 of $16.4 million reflected primarily proceeds from initial public offering of $21.7 million, and proceeds from private placement of $8.0 million, offset by repayment of advances to related parties of $37.9 million, payment of initial public offering costs of $3.5 million and dividend payment of $3.4 million.
Net cash flow used in financing activities for the year ended June 30, 2023 (as restated), of $15.6 million reflected primarily proceeds from our initial public offering of $21.7 million, and proceeds from equity offering of $8.0 million, offset by repayment of advances to related parties of $37.9 million, payment of initial public offering costs of $3.5 million and dividend payment of $3.4 million.
Liquidity and Capital Resources The following table summarizes our changes in working capital from June 30, 2022 to June 30, 2023 (dollars in thousands).
Liquidity and Capital Resources The following table summarizes our changes in working capital from June 30, 2023 (as restated) to June 30, 2024 (dollars in thousands).
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provisions of ASC 740-10 prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return.
The provisions of ASC 740-10 prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return.
We believe that our current cash and cash flows provided by operating activities, and the net proceeds from our initial public offering of $18.3 million will be sufficient to meet our working capital needs in the next 12 months.
As of the date of this Annual Report, we believe that our current cash and cash flows provided by operating activities, and the net proceeds from our equity offerings will be sufficient to meet our working capital needs in the next 12 months.
Trend Information Other than as disclosed elsewhere in this registration statement, particularly with respect to government regulations relating to nicotine and cannabis, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
Contractual Obligations We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 52 Trend Information Other than as disclosed elsewhere in this Form 10-K, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
In April 2023, we completed our initial public offering, from which we raised net proceeds, after underwriting expenses and other offering expenses, of approximately $18.3 million. In June 2023, we raised net proceeds of approximately $7.4 million, after placement agent fees and offering expenses, from the private placement of our common stock to three investors.
In June 2023, we raised net proceeds of approximately $7.4 million, after placement agent and offering expenses, from the private placement of our Common Stock to three investors. In March 2024, we raised net proceeds of approximately $10.6 million, after placement agent fees and offering expenses, through a public offering of our Common Stock priced at $6.00 per share.
Key Factors that Affect Our Results of Operations We believe the following key factors may affect our financial condition and results of operations: ● The effect of legislation and regulations affecting the tobacco and cannabis vaping products. ● If we elect to market tobacco vaping products in the United States, our ability to obtain regulatory approval to market additional tobacco vaping products in the United States and the cost of seeking such approval. ● Our ability to develop and market tobacco and cannabis vaping products to meet the changing tastes of users. ● The effects of competition. ● The development of an international market for cannabis vaping products, which is presently primarily limited to certain states in the United States. ● The effect of both the outbreak any other pandemic or other disease outbreak results in restrictions imposed by governments which may impact our ability to purchase or assemble products as well as the ability of end users to purchase our products. 45 Results of Operations The following table sets forth a summary of our consolidated statements of operations and comprehensive income for the years ended June 30, 2022 and 2023 (dollars in thousands except per share amounts).
Although we may implement strategies to mitigate these risks, there can be no assurance that such measures will be entirely effective, and we may continue to incur write-offs of accounts receivable, which may impair our ability to operate profitably. 47 Key Factors that Affect Our Results of Operations We believe the following key factors may aff ect our financial condition and results of operations: ● The effect of legislation and regulations affecting tobacco and cannabis vaping products. ● If we elect to market tobacco vaping products in the United States, our ability to obtain regulatory approval to market additional tobacco vaping products in the United States and the significant cost of seeking such approval. ● Our ability to develop and market tobacco and cannabis vaping products to meet the changing tastes of adult consumers. ● The effects of competition. ● The development of an international market for cannabis vaping products, which is presently primarily limited to certain states in the United States. ● The effect of both the outbreak any other pandemic or other disease outbreak results in restrictions imposed by governments which may impact our ability to purchase or assemble products as well as the ability of end users to purchase our products.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 50 Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Net Loss As a result of the foregoing, net loss increased by $4,224,450, from net loss of $1,874,153, or $(0.04) per share (basic and diluted) for the year ended June 30, 2022 to a net loss of $6,098,603, or $(0.12) per share (basic and diluted), for the year ended June 30, 2023.
Net Loss As a result of the foregoing, net loss increased by $8,764,196, from net loss of $6,003,626, or $(0.12) per share (basic and diluted) for the year ended June 30, 2023 (as restated) to a net loss of $14,767,822, or $(0.27) per share (basic and diluted), for the year ended June 30, 2024.
Because the volume of sales did not justify the marketing and regulatory costs, we have ceased marketing tobacco vaping products in the United States.
Because of tighter government regulations, we have stopped marketing tobacco vaping products in the United States, as the volume of sales from the one tobacco vaping product which we may sell in the United States does not justify the marketing and regulatory costs involved.
Exchange gain (loss), net decreased by $382,368, or 657.6%, from net exchange gain of $58,143 for the year ended June 30, 2022 to net exchange loss of $324,225 for the year ended June 30, 2023.
Exchange loss, net decreased by $253,932, or 78.3%, from net exchange loss of $324,225 for the year ended June 30, 2023 to net exchange loss of $70,293 for the year ended June 30, 2024.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Years ended June 30, 2022 2023 Europe 58.9 % 50.8 % Asia Pacific (excluding China) 15.0 % 12.9 % North America 25.9 % 36.0 % Others 0.2 % 0.3 % Total 100.0 % 100.0 % Our revenue increased by $27,510,118, or 31.2%, from $88,095,418 for the year ended June 30, 2022, to $115,605,536 for the year ended June 30, 2023.
For the year ended June 30, 2023 2024 Europe 50.8 % 43.0 % North America (the U.S. and Canada) 36.0 % 41.5 % Asia Pacific (excluding PRC) 12.9 % 11.6 % Others 0.3 % 3.9 % Total 100.0 % 100.0 % Our revenue increased by $36,303,155, or 31.4%, from $115,605,536 for the year ended June 30, 2023, to $151,908,691 for the year ended June 30, 2024.
Year Ended June 30, 2022 2023 % of Revenue % of Revenue Revenue $ 88,095 100.0 % $ 115,606 100.0 % Cost of revenue (74,789 ) (84.9 )% (94,530 ) (81.8 )% Gross profit 13,306 15.1 % 21,076 18.2 % Operating expenses (14,295 ) (16.2 )% (25,645 ) (22.2 )% Loss from operations (989 ) (1.1 )% (4,569 ) (4.0 )% Other income(loss), net 186 0.2 % (285 ) (0.2 )% Loss before income taxes (803 ) (0.9 )% (4,854 ) (4.2 )% Income taxes (1,071 ) (1.2 )% (1,245 ) (1.1 )% Net loss (1,874 ) (2.1 )% (6,099 ) (5.3 )% Other comprehensive (loss)income (117 ) (0.1 )% 21 (0.1 )% Comprehensive loss (1,991 ) (2.3 )% (6,078 ) (5.3 )% Net loss per ordinary share (basic and diluted) $ (0.04 ) $ (0.12 ) Weighted ordinary shares outstanding 50,000,000 50,725,814 Years Ended June 30, 2023 and 2022 Revenue The following table sets out the breakdown of our revenue percentage by region based on information provided to us by our distributors.
Years Ended June 30, 2023 (Restated) 2024 % of Revenue % of Revenue Revenue $ 115,606 100.0 % $ 151,909 100.0 % Cost of revenue (94,828 ) (82.0 )% (122,126 ) (80.4 )% Gross profit 20,777 18.0 % 29,783 19.6 % Operating expenses (25,251 ) (21.8 )% (43,677 ) (28.8 )% Loss from operations (4,474 ) (3.9 )% (13,894 ) (9.1 )% Other (loss) income, net (285 ) (0.2 )% 409 0.3 % Loss before income taxes (4,758 ) (4.1 )% (13,486 ) (8.9 )% Income taxes (1,245 ) (1.1 )% (1,282 ) (0.8 )% Net loss (6,004 ) (5.2 )% (14,768 ) (9.7 )% Other comprehensive (loss) income 21 (0.0 )% 221 0.1 % Comprehensive loss (5,983 ) (5.2 )% (14,546 ) (9.6 )% Net loss per ordinary share (basic and diluted) $ (0.12 ) $ (0.27 ) Weighted ordinary shares outstanding 50,725,814 54,812,900 48 Revenue The following table sets out the breakdown of our revenue percentage by region based on information provided to us by our distributors.
Seasonality Seasonality does not materially affect our business or the results of our operations. 50 Off-Balance Sheet Arrangements We do not have off-balance sheet arrangements. Critical Accounting Policies and Estimates Estimates The preparation of the consolidated financial statements in conformity with U.S.
Seasonality Seasonality does not materially affect our business or the results of our operations. Off-Balance Sheet Arrangements We do not have off-balance sheet arrangements. Critical Accounting Estimates Revenue recognition We sell our vaping products to customers and recognize revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers.
Net cash flow used in investing activities for the year ended June 30, 2022 of $0.1 million reflected primarily the purchase of property, plant and equipment of $0.1 million.
Net cash flow generated from investing activities for the year ended June 30, 2024, of $3.0 million reflected primarily maturity of short term investment of $9.1 million offset by purchase of cost other investment of $2.0 million, purchase of property, plant and equipment of $2.0 million, acquisition of intangible assets of $1.2 million and purchase of equity method investment of $1.0 million.
The increase was primarily due to (i) an increase of $3.7 million for payroll and contract worker expenses as more employees were hired and contract workers were engaged by us for expansion of our cannabis business and building our proposed manufacturing plant, (ii) bad debt expense as an allowance for doubtful accounts of $2.4 million was recorded by Aspire North America on accounts under dispute due to delayed shipment, and a direct write off of doubtful accounts of $0.9 million, (iii) an increase of patent expenses of $0.9 million incurred by the transferred patents from Tuanfang Liu, Aspire Global and Shenzhen Yi Jia at zero cost in September 2022, (iv) an increase in rental and warehouse expenses of $2.0 million incurred by us in connection with our plan to establish a manufacturing facility in Los Angeles, (v) an increase in professional fees of $1.5 million incurred for expansion of cannabis business, (vi) an increase in insurance expenses incurred by cannabis business of $0.4 million, and (vii) an increase in other miscellaneous expenses totaling approximately $0.3 million.
The increase was primarily due to (i) stock-based compensation expense of $5.9 million incurred in 2024, as compensation and incentive for management, employees and service providers, (ii) an increase of $4.8 million for payroll and contract worker expenses as more employees were hired and contract workers were engaged by us for expansion of our cannabis business and building our manufacturing plant, (iii) increase in bad debt expense as an allowance for credit losses of $2.7 million from accounts that are under dispute due to delayed shipment, (iv) an increase in professional fees of $2.3 million incurred for expansion of cannabis business.
The increase in revenue is the combined effect of (i) increases in sales of cannabis vaping products in the United States of $20.0 million from $20.0 million for the year ended June 30, 2022 to $40.0 million for the year ended June 30, 2023 and (ii) increases in sales of tobacco vaping products in Europe of $6.9 million from $51.9 million for the year ended June 30, 2022 to approximately $58.8 million for the year ended June 30, 2023. 46 Cost of Revenue Cost of revenue mainly consists of cost of purchases of vaping products, that are mostly purchased from Shenzhen Yi Jia.
The increase in revenue is the combined effect of (i) increases in product sales in the United States of $21.5 million from $41.6 million for the year ended June 30, 2023, to $63.1 million for the year ended June 30, 2024, (ii) increases in sales of vaping products in Europe of $6.5 million from $58.8 million for the year ended June 30, 2023 to approximately $65.3 million for the year ended June 30, 2024, and (iii) increases in sales of vaping products in others of $5.7 million from $0.3 million for the year ended June 30, 2023 to approximately $6.0 million for the year ended June 30, 2024, mainly contributed by increase in sales to South Africa of $5.2 million.
ODM generally involves the design and customization of the core products to meet each brand’s unique image and needs, and our products are sold by our customers under their own brand names although they may also include our brand name on the products.
Our cannabis products are sold under the Ispire brand name, primarily on an ODM basis to other cannabis vapor companies including multi and single-state operators, brand owners and co-packers. ODM generally involves the design and customization of the core products to meet each brand’s unique image and needs.
As a result of these factors, total other income (expense) decreased by $469,781, from other income of $185,615 for the year ended June 30, 2022 to other expense of $284,166 for the year ended June 30, 2023 Income Taxes Income taxes increased by $174,206 or 16.3%, from $1,071,097 for the year ended June 30, 2022 to $1,245,303 for the year ended June 30, 2023.
As a result of these factors, total other (expense) income increased by $692,529, from other expense of $284,166 for the year ended June 30, 2023 to other expenses of $408,363 for the year ended June 30, 2024. Income Taxes We account for income taxes under ASC 740.
June 30, 2022 June 30, 2023 Change % Change Current Assets $ 99,449 $ 84,811 $ (14,638 ) (14.7 )% Current Liabilities 88,968 55,962 (33,006 ) (37.1 )% Working Capital 10,481 28,849 18,368 175.3 % The following table sets forth information as to consolidated cash flow information for the years ended June 30, 2022 and 2023 (dollars in thousands).
June 30, 2023 (Restated) June 30, 2024 Change % Change Current Assets $ 84,811 $ 102,572 $ 17,761 20.9 % Current Liabilities 55,855 85,991 30,136 54.0 % Working Capital 28,956 16,581 (12,375 ) (42.7 )% The following table sets forth information as to consolidated cash flow information for the years ended June 30, 2023 and 2024 (dollars in thousands).
Accounts Receivables Our business relies on the collection of accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations. We recorded an allowance for doubtful accounts of $0 for the year ended June 30, 2022 and approximately $1.5 million for the year ended June 30, 2023.
The sale of cannabis vaping products is illegal in the European Union, save for Germany, and the United Kingdom. Accounts Receivable Our business relies on the collection of accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations.
Regulatory Risks The sale of tobacco and cannabis products is subject to regulations worldwide. Many countries prohibit the sale of any cannabis products, and many countries have regulations relating to tobacco products, with a particular emphasis on underage sales.
Many countries prohibit the sale of any cannabis products, and many countries have regulations relating to nicotine products, with a particular emphasis on underage sales. We work closely with our various global distribution partners to help ensure our nicotine products comply with local regulations (e.g., packaging, ingredient disclosure, health warnings, etc.).
Our sales and marketing expenses mainly consist of employees’ salaries and benefits, marketing expense, travel expenses and others. Sales and marketing expenses decreased by $788,707, or 14.3%, from $5,503,630 for the year ended June 30, 2022 to $4,714,923 for the year ended June 30, 2023.
Our sales and marketing expenses mainly consist of employee salaries and benefits, marketing expenses, travel expenses, and other miscellaneous expenses. Sales and marketing expenses increased by $2,192,504, or 49.6%, from $4,416,220 for the year ended June 30, 2023 (as restated), to $6,608,724 for the year ended June 30, 2024.
Other income (expense) mainly consists of interest expense, mold charge income and other miscellaneous expenses. decreased by $277,544, or 226.8%, from income of $122,394 for the year ended June 30, 2022 to expense of $155,150 for the year ended June 30, 2023.
Other (expense) income increased by $268,555, or 173.1%, from net expense of $155,150 for the year ended June 30, 2023 to net income of $113,405 for the year ended June 30, 2024.
Interest income increased $190,131, from $5,078 for the year ended June 30, 2022, to $195,209 for the year ended June 30, 2023. The increase in interest income is mainly due to increase in interest rate and more interest income from bank deposits.
Other (expense) income, net Other income, net includes interest income, interest expense, exchange gain (loss), net and other income (expense). Interest income increased $170,042, from $195,209 for the year ended June 30, 2023, to $365,251 for the year ended June 30, 2024.
As a result of regulations in the United States, we are able to sell only one tobacco vaping product line, the Nautilus Prime, in the United States. Our tobacco vaping sales in the United States were approximately $0.9 million and $0.9 million for the years ended June 30, 2022 and 2023, respectively.
Our tobacco vaping sales related to this line in the U.S. were approximately $0.6 million and $0.2 million for the twelve months ended June 30, 2023, and 2024, respectively. Because the volume of sales did not justify the marketing and regulatory costs, we have ceased marketing tobacco vaping products in the U.S.
Net cash flow used in financing activities for the year ended June 30, 2022 of $3.0 million reflected primarily payments of previously declared dividends of $0.5 million and $2.4 million of repayment of advances to related parties.
Net cash flow generated by financing activities for the year ended June 30, 2024, of $10.1 million reflected primarily proceeds from our equity offering of $12.3 million, offset by payment of equity offering costs of $1.5 million.
Removed
Overview We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded e-cigarettes and cannabis vaping products. We sell our tobacco products worldwide except for the PRC and Russia. Our tobacco products are marketed under the Aspire brand name and are sold primarily through our distribution network.
Added
Overview As stated in our corporate mission, we are committed to delivering superior products that challenge industry norms, with the goal of delivering an unmatched customer and adult consumer experience. In achieving this, risk reduction is central to our mission, and we aim to improve the lives of our consumers through cutting-edge research and development.
Removed
We currently sell our cannabis vaping hardware only in the United States, and we have recently commenced marketing activities in Canada and Europe, primarily in the European Union. All of our products are vaping hardware.
Added
Our technology platforms look to reduce youth access to vaping products, which in turn, will facilitate our ability to provide adult consumers with the products they desire. We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded and non-branded vaping hardware products in both the nicotine and cannabis spaces.
Removed
Vaping refers to the practice of inhaling and exhaling the vapor produced by an electronic vaping device, and includes dabbing, which is the recreational inhalation of concentrated tetrahydrocannabinol, the main psychotropic cannabinoid derived from the Cannabis Sativa L. plant, commonly known as marijuana.
Added
Vaping refers to the practice of inhaling and exhaling the vapor produced by an electronic vaping device. These products are sold into the global nicotine and cannabis markets in the form of e-cigarettes or cartridges filled with oils by our customers, respectively. We sell our e-cigarette (or nicotine) products globally, in markets where we are legally permitted to do so.
Removed
Our cannabis products are marketed under the Ispire brand name, primarily on an ODM basis to other cannabis vapor companies.
Added
To date, our nicotine products are marketed under the “Aspire” brand name and are sold primarily through our expansive distribution network. However, we are currently preparing to expand our international presence via the launch of nicotine products under the Ispire platform. These products will be launched under licensing arrangements with the owner(s) of selected partner brand(s).
Removed
We plan to use the proceeds from both of our initial public offering and the private placement for working capital and general corporate purposes, which may include, but not be limited to, the development of manufacturing operations in Southeast Asia, completion of establishing manufacturing operations in California, research and development activities and continued marketing and promotion.
Added
We currently sell our cannabis vaping hardware in the United States, Canada, South Africa, and Germany. However, we are continuing to develop our sales network across Europe, South America, and other regions in preparation for legalization in these markets.
Removed
Restatement of Unaudited Financial Statements We were required to restate our unaudited financial statements at December 31, 2022 and for the six months then ended and at March 31, 2023 and for the three and nine months then ended.
Added
Our hardware products are sold by our customers under their own brand names. We do not “touch the cannabis plant” in the production and sale of our hardware products and thus are not subject to the specific cannabis-related regulatory and taxation provisions of the industry(e.g., IRS Code Section 280E).
Removed
The unaudited financial statements have been restated to correct the amount at which intangible assets consisting of intellectual property rights which were transferred to us by a controlling shareholder was recorded. Under GAAP, assets transferred by a controlling stockholder should be recorded at the transferor’s book value.
Added
Since our initial public offering in April 2023, we have completed three fundraising rounds. The first was executed as part of our initial public offering, from which we raised approximately $18.3 million after underwriting and other offering expenses.
Removed
Our unaudited financial statements recorded the intangible assets that were transferred by the controlling stockholder at $74,259,915, which represents a third party evaluation of the assets. We determined that the intangible assets were incorrectly recorded in our unaudited financial statements, which were restated to record the acquired intangible assets at the transferor’s book value, which was nil.
Added
We used the net proceeds from this offering in connection with the establishment and operation of our manufacturing facility in Malaysia, the funding of our joint venture with Touch Point Worldwide Inc. d/b/a/ Berify and Chemular Inc. and for working capital and general corporate purposes, including research and development. 45 Regulatory Risks The sale of nicotine and cannabis products is subject to regulations worldwide.
Removed
Accordingly, the unaudited financial statements have been restated to reverse the intangible assets, related amortization and contributed capital.
Added
Changes in the regulatory environment can be enacted swiftly and may lead to our products becoming non-compliant in one or more international markets. This regulatory scenario may severely disrupt our business in these markets while we resolve the deficiencies (if possible) with the current product offering.
Removed
As a result of the restatement, our net loss for the six months ended December 31, 2022 decreased from $2,950,921, or $0.06 per share (basic and diluted), to $2,178,290, or $0.04 per share (basic and diluted), and our net loss for the nine months ended March 31, 2023 decreased from $6,057,776, or $0.12 per share (basic and diluted), to $4,512,513, or $0.09 per share (basic and diluted), and a decline in stockholders’ equity at December 31, 2022 from $83,218,167 to $ 9,730,883, and at March 31, 2023 from $79,953,608 to $7,238,957.
Added
E-cigarette regulation Regulation regarding e-cigarettes varies across countries, from limited regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. As e-cigarettes have become more and more popular recently, many countries are considering imposing more stringent law and regulations to regulate this market.
Removed
If any similar regulations are adopted with respect to cannabis products, our business will be severely impacted since all of our cannabis revenue for the year ended June 30, 2022 and 2023 was generated from sales in the United States.
Added
Changes in existing law and regulations and the imposition of new laws or regulations in countries and regions that our major customers are in may adversely affect our business. In many markets e-cigarettes and other nicotine products are subject to an excise tax.
Removed
See “Regulations.” Effects of COVID-19 Pandemic In December 2019, coronavirus disease 2019 (COVID-19) was first reported to have surfaced in Wuhan, China. During 2020, the disease spread to many parts of the world.
Added
The amount of excise tax on our products is a key determining factor in our pricing and the value proposition to our adult consumer target market. The structure (i.e., ad valorem vs. specific) and tax burden can vary significantly from market to market. According to a 2023 study by Dauchy E, Fuss C.
Removed
The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in much of the world, most of which are no longer in effect.
Added
Global Taxation of Electronic Nicotine and Non-Nicotine Delivery Systems , the tax burden on nicotine vape products in Norway is 81.2% while the tax burden on the same products in Paraguay is 2.9%. The tax burden and resulting retail sales price is a key factor in determining how competitive our products are compared to illicit vaping products.
Removed
The World Health Organization ended the global emergency status for COVID-19 on May 5, 2023, and the United States Department of Health and Human Services declared that the public health emergency from COVID-19 expired at the end of the day on May 11, 2023. The extent to which COVID-19 impacts our operations on an ongoing basis is highly uncertain.
Added
The greater the price gap between legal and illicit vaping products the greater the incentive for adult consumers to buy illicit products. These illicit vaping products are not subject to the same quality standards as our products and undermine the efforts of legal operators seeking to help adult consumers switch from combustible tobacco products to vaping alternatives.
Removed
Since our products are presently manufactured in the PRC by a related party, any changes in the outbreak in the PRC and any changes in the PRC government’s policy may affect our supplier’s operations which could affect its ability to manufacture and deliver product in a timely manner. 44 Supply Chain Risks One of the effects of the COVID-19 has been delays resulting from supply chain issues, which relate to the difficulty that companies have in having their products manufactured, shipped to the country of destination, and delivered from the port of entry to the customer’s location.
Added
United States E-Cigarette Market In the United States, the Federal Food, Drug, and Cosmetic Act requires all Electronic Nicotine Delivery Systems (“ENDS”) product manufacturers that market products in the United States to submit Premarket Tobacco Product Applications (“PMTAs”) to the FDA.
Removed
As the port delays have significantly decreased, we do not believe that the supply chain issues that affected our operations are currently affecting us. We cannot assure you that delays will not affect our business in the future.
Added
For ENDS products that were on the U.S. market on or before August 8, 2016, a PMTA was required to be submitted to the FDA before September 9, 2020.
Removed
In 2021, Shenzhen Yi Jia suffered a chip shortage resulting in a slowdown in delivery of its products to the Company from April to August 2021. To secure the supply of chips, Shenzhen Yi Jia changed the payment terms to chip suppliers from 30 days after delivery in the past to prepayment, and it engaged two new chip suppliers.
Added
For ENDS products that were not on the U.S. market prior to August 8, 2016, and for which a PMTA was not filed before September 9, 2020, a PMTA premarket authorization issued by FDA is required before the subject product may enter the U.S. market.
Removed
Since September 2021, Shenzhen Yi Jia has advised us that it obtained a supply of chips to meet its production needs and the chip shortage no longer affects its production.
Added
We have submitted a PMTA filing for one ENDS product, and, under apparent FDA policies, the agency will not enforce the premarket review requirements for that product pending review of its PMTA.
Removed
In 2022, a slowdown in the delivery of components to Shenzhen Yi Jia resulting from supply chain slowdowns as a result of the effects of the PRC’s COVID policy resulted in an increase in cost of revenue during the period.
Added
However, even with submission of the PMTA application, the FDA may reject our application and may prevent our ENDS products from being sold in U.S., which will adversely affect our business. As a result of ENDS regulation noted above, we can sell only one tobacco vaping product line, the Nautilus Prime, in the U.S.
Removed
We cannot assure you that we will not suffer from a chip shortage or that the effects of COVID or the PRC’s COVID policy will not affect Shenzhen Yi Jia’s ability or the ability of its suppliers to delivery products in a timely manner.
Added
On September 6, 2024, we submitted a PMTA application for a disposable ENDS product with 4 flavors. This is an important milestone for us, as it signals our re-entry into the US ENDS market.
Removed
Although we may implement strategies to mitigate these risks, but there can be no assurance that such measures will be entirely effective, and we may continue to incur write-offs of accounts receivable, which may impair our ability to operate profitably.
Added
It is our intention to amend or resubmit this application in the coming months, once we have finalized the age-gating technology solution with our IKE Tech LLC joint venture.
Removed
Cost of revenue increased by $19,740,391, or 26.4%, from $74,789,378 for the year ended June 30, 2022 to $94,529,769 for the year ended June 30, 2023.
Added
We have further plans to submit additional PMTA applications for pod-based ENDS systems, which will include age-gating technology, in the future as well. 46 Amendments to the Prevent All Cigarette Trafficking (“PACT”) Act, which became law in 2021, extend the PACT Act to include e-cigarettes and all vaping products, and place significant burdens on sellers of vaping products in the United States which may make it difficult to operate profitably in the United States.

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