Cover
Cover - shares | 9 Months Ended | |
Mar. 31, 2021 | Jun. 25, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --06-30 | |
Entity File Number | 001-40391 | |
Entity Registrant Name | iPower Inc. | |
Entity Central Index Key | 0001830072 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 26,448,663 | |
Entity State Incorp | NV | |
Amendment? | false |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Current assets | ||
Cash and cash equivalent | $ 474,322 | $ 977,635 |
Accounts receivable, net | 8,092,787 | 6,067,199 |
Inventories, net | 10,015,923 | 5,743,181 |
Prepayments and other current assets | 2,923,572 | 616,231 |
Total current assets | 21,506,604 | 13,404,246 |
Right of use - non current | 1,987,363 | 262,875 |
Property and equipment, net | 59,356 | 6,252 |
Deferred tax assets | 52,947 | 0 |
Other non current assets | 99,395 | 0 |
Total assets | 23,705,665 | 13,673,373 |
Current liabilities | ||
Accounts payable | 6,985,438 | 4,220,347 |
Credit cards payable | 253,552 | 892,792 |
Customer deposit | 628,080 | 741,301 |
Due to related parties | 515,517 | 133,793 |
Other payables and accrued liabilities | 1,889,643 | 1,940,858 |
Short-term loans payable | 1,877,718 | 1,329,680 |
Lease liability - current | 715,083 | 262,875 |
Long-term loan payable - current portion | 29,244 | 0 |
Income taxes payable | 837,694 | 721,211 |
Convertible notes payable, net | 2,729,747 | 0 |
Redeemable preferred stock, $0.001 par value; 20,000,000 shares authorized; 34,500 and 0 shares issued and outstanding at March 31, 2021 and June 30, 2020 | 433,714 | 0 |
Total current liabilities | 16,895,430 | 10,242,857 |
Non current liabilities | ||
Long-term loan payable | 470,756 | 500,000 |
Warrant liabilities | 905,713 | 0 |
Lease liability - non current | 1,358,601 | 0 |
Total non current liabilities | 2,735,070 | 500,000 |
Total liabilities | 19,630,500 | 10,742,857 |
Commitments and contingency | ||
Stockholders' Equity | ||
Subscription receivable | 0 | (14,000) |
Additional paid in capital | 389,490 | 389,490 |
Retained earnings | 3,651,471 | 2,520,822 |
Total equity | 4,075,165 | 2,930,516 |
Total liabilities and equity | 23,705,665 | 13,673,373 |
Common Class A [Member] | ||
Stockholders' Equity | ||
Common stock, value | 20,204 | 20,204 |
Common Class B [Member] | ||
Stockholders' Equity | ||
Common stock, value | $ 14,000 | $ 14,000 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2021 | Jun. 30, 2020 |
Redeemable preferred stock, par value | $ 0.001 | $ 0.001 |
Redeemable preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Redeemable preferred stock, shares issued | 34,500 | 0 |
Redeemable preferred stock, shares outstanding | 34,500 | 0 |
Common Class A [Member] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 166,000,000 | 166,000,000 |
Common stock, shares issued | 20,204,496 | 20,204,496 |
Common stock, shares outstanding | 20,204,496 | 20,204,496 |
Common Class B [Member] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 14,000,000 | 14,000,000 |
Common stock, shares issued | 14,000,000 | 14,000,000 |
Common stock, shares outstanding | 14,000,000 | 14,000,000 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||||
REVENUES | $ 13,133,902 | $ 9,772,108 | $ 39,348,154 | $ 25,278,339 |
COST OF REVENUES | 7,369,127 | 6,612,596 | 23,073,000 | 16,710,953 |
GROSS PROFIT | 5,764,775 | 3,159,512 | 16,275,154 | 8,567,386 |
OPERATING EXPENSES: | ||||
Selling | 2,398,157 | 1,662,909 | 7,292,793 | 4,330,603 |
General and administrative | 2,577,884 | 1,156,418 | 6,264,148 | 3,092,393 |
Total operating expenses | 4,976,041 | 2,819,327 | 13,556,941 | 7,422,996 |
INCOME FROM OPERATIONS | 788,734 | 340,185 | 2,718,213 | 1,144,390 |
OTHER INCOME (EXPENSE) | ||||
Interest income (expenses) | (60,118) | (26,222) | (109,656) | (43,519) |
Other financing expenses | (60,692) | 0 | (98,139) | 0 |
PPP loan forgiveness | 175,500 | 0 | 175,500 | 0 |
Other non-operating income (expense) | (812,434) | (7,154) | (794,582) | 8,113 |
Total other income (expense), net | (757,744) | (33,376) | (826,877) | (35,406) |
INCOME BEFORE INCOME TAXES | 30,990 | 306,809 | 1,891,336 | 1,108,984 |
PROVISION FOR INCOME TAXES | 237,813 | 86,085 | 760,687 | 311,038 |
NET (LOSS) INCOME | $ (206,823) | $ 220,724 | $ 1,130,649 | $ 797,946 |
WEIGHTED AVERAGE NUMBER OF CLASS A COMMON STOCK* - Basic and diluted | 20,204,496 | 20,170,788 | 20,204,496 | 20,056,515 |
EARNINGS PER SHARE * - Basic and diluted | $ (0.010) | $ 0.011 | $ 0.056 | $ 0.040 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Class A Common Stock | Class B Common Stock | Subscription Receivable | Additional Paid-In Capital | Retained Earnings | Total |
Beginning balance, shares at Jun. 30, 2019 | 20,000,000 | 14,000,000 | ||||
Beginning balance, value at Jun. 30, 2019 | $ 20,000 | $ 14,000 | $ (14,000) | $ (37,316) | $ 533,860 | $ 516,544 |
Net income | 577,222 | 577,222 | ||||
Ending balance, shares at Dec. 31, 2019 | 20,000,000 | 14,000,000 | ||||
Ending balance, value at Dec. 31, 2019 | $ 20,000 | $ 14,000 | (14,000) | (37,316) | 1,111,082 | 1,093,766 |
Beginning balance, shares at Jun. 30, 2019 | 20,000,000 | 14,000,000 | ||||
Beginning balance, value at Jun. 30, 2019 | $ 20,000 | $ 14,000 | (14,000) | (37,316) | 533,860 | 516,544 |
Net income | 797,946 | |||||
Ending balance, shares at Mar. 31, 2020 | 20,204,496 | 14,000,000 | ||||
Ending balance, value at Mar. 31, 2020 | $ 20,204 | $ 14,000 | (14,000) | 389,490 | 1,331,806 | 1,741,500 |
Beginning balance, shares at Dec. 31, 2019 | 20,000,000 | 14,000,000 | ||||
Beginning balance, value at Dec. 31, 2019 | $ 20,000 | $ 14,000 | (14,000) | (37,316) | 1,111,082 | 1,093,766 |
Net income | 220,724 | 220,724 | ||||
Ending balance, shares at Mar. 31, 2020 | 20,204,496 | 14,000,000 | ||||
Ending balance, value at Mar. 31, 2020 | $ 20,204 | $ 14,000 | (14,000) | 389,490 | 1,331,806 | 1,741,500 |
Beginning balance, shares at Jun. 30, 2020 | 20,204,496 | 14,000,000 | ||||
Beginning balance, value at Jun. 30, 2020 | $ 20,204 | $ 14,000 | (14,000) | 389,490 | 2,520,822 | 2,930,516 |
Shares issued for cash, value | 14,000 | 14,000 | ||||
Net income | 1,337,472 | 1,337,472 | ||||
Ending balance, shares at Dec. 31, 2020 | 20,204,496 | 14,000,000 | ||||
Ending balance, value at Dec. 31, 2020 | $ 20,204 | $ 14,000 | 0 | 398,490 | 3,858,294 | 4,281,988 |
Beginning balance, shares at Jun. 30, 2020 | 20,204,496 | 14,000,000 | ||||
Beginning balance, value at Jun. 30, 2020 | $ 20,204 | $ 14,000 | (14,000) | 389,490 | 2,520,822 | 2,930,516 |
Net income | 1,130,649 | |||||
Ending balance, shares at Mar. 31, 2021 | 20,204,496 | 14,000,000 | ||||
Ending balance, value at Mar. 31, 2021 | $ 20,204 | $ 14,000 | 0 | 389,490 | 3,651,471 | 4,075,165 |
Beginning balance, shares at Dec. 31, 2020 | 20,204,496 | 14,000,000 | ||||
Beginning balance, value at Dec. 31, 2020 | $ 20,204 | $ 14,000 | 0 | 398,490 | 3,858,294 | 4,281,988 |
Net income | (206,823) | (206,823) | ||||
Ending balance, shares at Mar. 31, 2021 | 20,204,496 | 14,000,000 | ||||
Ending balance, value at Mar. 31, 2021 | $ 20,204 | $ 14,000 | $ 0 | $ 389,490 | $ 3,651,471 | $ 4,075,165 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 1,130,649 | $ 797,946 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Depreciation expense | 8,394 | 0 |
Non-cash operating lease expense | 86,321 | 0 |
Credit loss expenses | 189,206 | 0 |
PPP loan forgiven | (175,500) | 0 |
Preferred stock warrant expense | 8,047 | 0 |
Amortization of debt discount and non-cash financing costs | 501,562 | 0 |
Change in fair value of warrants and conversion features | 334,564 | 0 |
Change in operating assets and liabilities | ||
Accounts receivable | (2,214,794) | (1,155,185) |
Inventories | (4,272,742) | (2,129,274) |
Deferred tax assets | (52,947) | 0 |
Prepayments and other current assets | (2,307,340) | 7,713 |
Other non current assets | (99,395) | 0 |
Accounts payable | 2,765,091 | 1,886,144 |
Credit cards payable | (639,240) | 131,541 |
Customer deposit | (113,221) | 193,816 |
Other payables and accrued liabilities | (51,215) | 978,691 |
Income taxes payable | 116,483 | 64,515 |
Net cash (used in) / provided by operating activities | (4,786,077) | 775,907 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment | (61,498) | (6,252) |
Net cash used in investing activities | (61,498) | (6,252) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from related parties | 532,222 | 1,203,170 |
Payments to related parties | (150,498) | (2,476,217) |
Proceeds from short-term loans | 22,414,846 | 11,757,178 |
Payments on short-term loans | (21,691,308) | (11,275,098) |
Proceeds from convertible notes | 3,000,000 | 0 |
Payments for financing cost | (120,000) | 0 |
Shares issued | 359,000 | 427,010 |
Net cash provided by / (used in) financing activities | 4,344,262 | (363,957) |
CHANGES IN CASH | (503,313) | 405,698 |
CASH AND CASH EQUIVALENT, beginning of year | 977,635 | 471,458 |
CASH AND CASH EQUIVALENT, end of year | 474,322 | 877,156 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for income tax | 696,119 | 244,923 |
Cash paid for interest | 109,656 | 43,519 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS: | ||
Right of use assets acquired under new operating leases | $ 2,346,200 | $ 0 |
1. Nature of business and organ
1. Nature of business and organization | 9 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. Nature of business and organization | Note 1 - Nature of business and organization iPower Inc., formerly known as BZRTH Inc. (the “Company”), a Nevada corporation incorporated on April 11, 2018, is principally engaged in the marketing and sale of advanced indoor and greenhouse lighting, ventilation systems, nutrients, growing media, grow tents, trimming machines, pumps and accessories in the United States. Effective on March 1, 2020, as amended and restated pursuant to an agreement dated October 26, 2020, the Company entered into an agreement with E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. Pursuant to the terms of the agreement, the Company will provide technical support, management services and other services on an exclusive basis in relation to E Marketing’s business during the term of the agreement. The Company agrees to fund E Marketing for operational cash flow needs and bear the risk of E Marketing’s losses from operations and E Marketing agrees that iPower has rights to E Marketing’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of E Marketing or its assets subject to assumption of all of its liabilities. E Marketing is determined as a variable interest entity (“VIE”). See Note 2 and Note 3 below for details. On September 4, 2020, the Company entered into an agreement with Global Product Marketing Inc. (“GPM”), an entity incorporated in the State of Nevada on September 4, 2020. GPM is wholly owned by Chenlong Tan, the Chairman, CEO and President and one of the majority shareholders of the Company. Pursuant to the terms of the agreement, the Company will provide technical support, management services and other services on an exclusive basis in relation to GPM’s business during the term of the Agreement. The Company agrees to fund GPM for operational cash flow needs and bear the risk of GPM’s losses from operations and GPM agrees that the Company has the right to GPM’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of GPM or its assets subject to assumption of all of its liabilities. GPM is determined as a variable interest entity (“VIE”). See Note 2 and Note 3 below for details. |
2. Basis of Presentation and Su
2. Basis of Presentation and Summary of signficiant accounting policies | 9 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of signficiant accounting policies | Note 2 – Basis of Presentation and Summary of significant accounting policies Basis of presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its variable interest entities and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as its annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2021, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements for years ended June 30, 2020 and 2019 included in the prospectus filed on May 13, 2021. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its VIEs, E Marketing Solution Inc. and Global Product Marketing Inc. All inter-company balances and transactions have been eliminated. Use of estimates and assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Variable interest entities The Company entered into an agreement with E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. The Company also entered into an agreement with Global Product Marketing Inc. (“GPM”), an entity incorporated in the State of Nevada on September 4, 2020. GPM is owned by Chenlong Tan, the Chairman, CEO, President, and one of the majority shareholders of the Company. The Company does not have direct ownership in E Marketing and GPM but has been actively involved in their operations and has the power to direct the activities and significantly impact E Marketing’s and GPM’s economic performance. The Company also bears all the risk of losses and has the right to receive all of the benefits from E Marketing and GPM. As such, in accordance with ASC 810-10-25-38A through 25-38J, E Marketing and GPM are considered variable interest entities (“VIEs”) of the Company and the financial statements of E Marketing and GPM were consolidated from the date of control existed. Cash and cash equivalents Cash and cash equivalents consist of amounts held as cash on hand and bank deposits. From time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). The Company has not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. Accounts receivable During the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers. Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required. In July 2020, the Company adopted ASU 2016-13, Topics 326 - Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology, for its accounting standard for its trade accounts receivable. The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment, the Company may consider making provision for non- collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses: · the customer fails to comply with its payment schedule; · the customer is in serious financial difficulty; · a significant dispute with the customer has occurred regarding job progress or other matters; · the customer breaches any of the contractual obligations; · the customer appears to be financially distressed due to economic or legal factors; · the business between the customer and the Company is not active; and · other objective evidence indicates non-collectability of the accounts receivable. The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements. Accounts receivable are recognized and carried at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses, the potential impact of the COVID-19 pandemic on our customers businesses and their ability to pay their accounts receivable. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance for credit losses. Fair values of financial instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature. For other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. The Company used Level 3 inputs for its valuation methodology for the conversion feature and warrant liabilities in determining the fair value using the Modified Black Scholes option-pricing model. Significant increase or decrease in any of the significant unobservable inputs, such as the probability of the occurrence of an IPO, would have resulted in a significantly higher or lower fair value measurement. The redeemable preferred stock was measured based on the fixed monetary amount of the convertible share upon IPO and the probability of IPO. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no transfer into or out of Level 3 of the fair value hierarchy. The following table presents information about the Company’s redeemable preferred stock, conversion feature, and warrant liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and June 30, 2020: Level March 31, June 30, Conversion feature liabilities 3 $ 776,507 $ – Redeemable preferred stock 3 $ 433,714 $ – Warrant liabilities 3 $ 905,713 $ – Revenue recognition The Company has adopted Accounting Standards Codification (“ASC”) 606 since its inception on April 11, 2018 and recognizes revenue from product sales revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience. The Company evaluates the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross. Payments received prior to the delivery of goods to customers are recorded as customer deposits. The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction. Sales discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses. Cost of revenue Cost of revenue mainly consists of costs for purchases of products and related inbound freight and delivery fees. Inventory Inventory consists of finished goods ready for sale and is stated at the lower of cost or market. The Company values its inventory using the weighted average costing method. The Company’s policy is to include as a part of cost of goods sold any freight incurred to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling, general and administrative expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value. The Company also reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence. Segment reporting The Company follows ASC 280, Segment Reporting. The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are all located in California, United States, and substantially all of the Company’s revenues are derived from within the USA. Therefore, no geographical segments are presented. Leases On its inception date, April 11, 2018, the Company adopted ASC 842 – Leases (“ASC 842”), which requires lessees to record right-of-use (“ROU”) assets and related lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements. ROU assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Deferred offering costs The Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations and comprehensive income (loss) in the period of determination. As of March 31, 2021 and June 30, 2020, $351,882 and $0 of deferred offering costs were included in prepaid expenses and other current assets in the condensed consolidated balance sheets, respectively. Income taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company has adopted the provisions of ASC 740 since inception, April 11, 2018, and has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the states of Nevada and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. The Company believes that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. Commitments and contingencies In the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of each matter. Convertible notes and warrants On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes with a 6% interest per annum (the “Convertible Notes”) and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes. The warrants shall be exercisable for a period of three years from the IPO completion date at a per share exercise price equal to the IPO. The Convertible Notes shall be automatically converted into the Company’s Class A Common Stock upon a qualified IPO (the “Mandatory Conversion”) or repayable in cash at the option of the holders of the Convertible Notes with repayment to commence six months after January 27, 2021. The Convertible Notes convert at a price equal to the lesser of (a) a price representing a 30% discount to the public offering price per share of the Class A Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of Class A Common Stock immediately prior to the IPO, (y) the number of Class A Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number of Class A Common Stock issuable upon conversion of all outstanding Convertible Notes. In the event the Company does not receive a minimum of $15,000,000 of gross proceeds in the Offering or otherwise close on the Offering, the Convertible Notes will bear interest at a rate of 6% per annum which shall accrue from January 27, 2021 and be repayable in six equal monthly installments between July 27, 2021 and January 27, 2022. Alternatively, the Convertible Notes may be converted at the conversion price into shares of Class A Common Stock at the option of the holder prior to the maturity date (the “Conversion Option”). If the notes are converted, either on a Mandatory Conversion basis or through each holder’s exercise of the Conversion Option, any interest accrued on the Convertible Note shall be waived. In connection with the convertible note offering, the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”). The placement agent warrants shall be exercisable for a period of five years from the issuance date and are treated as a debt issuance cost. The conversion feature included in the terms of the convertible notes and the warrants creates an obligation to the Company requiring it to repay the notes for cash in January 2022, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. As such, the conversion feature was determined to be a derivative liability, which represent an embedded derivative predominately based on fixed monetary amount. The convertible note warrants and placement agent warrants were determined to be derivative liabilities, which represent free-standing derivative instruments. The Company measured the derivative liabilities at fair value at the issuance date of the convertible notes, convertible note warrants and placement agent warrants based on a Modified Black Scholes option-pricing model. The derivative liabilities were recorded with a corresponding debit to debt discount that will be amortized over the life of the notes using effective interest rate method. At time of issuance, the convertible notes and warrant liabilities were recorded on the balance sheet as liabilities. Debt issuance costs are allocated to derivative liabilities based on its fair value at issuance to total proceeds received. Debt issuance costs associated with warrant liabilities are expensed immediately and the debt issuance cost associated with the debt host are amortized over the life of the notes. Series A Convertible Preferred Stock On December 30, 2020, the Company issued a total of 34,500 shares of Series A Convertible Preferred Stock, par value $0.001 per share. Pursuant to the certificate of designations, the Series A Convertible Preferred Stock will automatically convert into shares of the Class A Common Stock (the “Conversion Shares”) at a conversion price equal to 70% of the initial price per share of the Class A Common Stock. If the IPO shall not have occurred by December 31, 2021, the Company shall redeem and repurchase for cash all of the outstanding shares of Series A Convertible Preferred Stock for a purchase price equal to (a) the product of multiplying the $10.00 Stated Value of each outstanding share of Series A Convertible Preferred Stock by the total number of outstanding shares of Series A Convertible Preferred Stock, plus (b) all accrued and unpaid Dividends at 9% per annum. In the event that the Series A Convertible Preferred Stock shall be converted into Conversion Shares, no Dividend shall accrue or be payable. The redemption feature creates an obligation to the Company requiring it to redeem the Preferred Shares for cash on December 31, 2021, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. The Series A convertible preferred stock are mandatorily redeemable and should be classified as a liability in accordance with ASC 480-10 and the Company has elected to record the Series A Convertible Preferred Stock at fair value with changes in fair value recorded through earnings under the ASC 825-10-15-4 fair value option (“FVO”) election. Series A Preferred Stock Warrant In connection with this private placement, the Company issued warrants to purchase shares of Series A Convertible Preferred Stock. The exercise price of the warrants is $10 per share. The Company accounts for its redeemable convertible preferred stock warrants as a liability, and they are recorded at their estimated fair value, because the warrants may conditionally obligate the Company to transfer assets at some point in the future. At the end of each reporting period, changes in the estimated fair value during the period are recorded in other income (expense), net in the statement of operations. The Company will continue to adjust the liability for changes in estimated fair value until the earlier of the expiration of the warrants, exercise of the warrants, or conversion of the redeemable convertible preferred stock warrants into common stock warrants upon the completion of a liquidation event, including the completion of an IPO. Earnings per share Basic earnings per share are computed by dividing net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities to issue common stock were exercised. Recently issued accounting pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for the Company on July 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company is currently assessing the impact the new guidance will have on our consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. The update is intended to simplify the current rules regarding the accounting for income taxes and addresses several technical topics including accounting for franchise taxes, allocating income taxes between a loss in continuing operations and in other categories such as discontinued operations, reporting income taxes for legal entities that are not subject to income taxes, and interim accounting for enacted changes in tax laws. The new standard is effective for fiscal years beginning after December 15, 2020; however, early adoption is permitted. The Company does not expect the adoption of this standard have a material impact on the consolidated financial statements. The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows. Subsequent events The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated combined financial statements are available to be issued. Material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented. |
3. Variable interest entity
3. Variable interest entity | 9 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable interest entity | Note 3 – Variable interest entity Effective on March 1, 2020, as amended and restated pursuant to an agreement dated Oct 26, 2020, the Company entered into an exclusive business cooperation agreement with E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. Pursuant to the terms of the agreement, the Company provides technical support, management services and other services on an exclusive basis in relation to E Marketing’s business during the term of the agreement. The Company agrees to fund E Marketing for operational cash flow needs and bear the risk of E Marketing’s losses from operations and E Marketing agrees that iPower has rights to E Marketing’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of E Marketing or its assets subject to assumption of all of its liabilities. As of March 31, 2021 and June 30, 2020, the Company had paid $60,270 and $20,600, respectively, to fund all of E Marketing’s operations under this agreement. On September 4, 2020, the Company entered into an exclusive business cooperation agreement with Global Product Marketing Inc. (“GPM”), an entity incorporated in the State of Nevada on September 4, 2020. GPM is owned by Chenlong Tan, the Chairman, CEO, President, and one of the majority shareholders of the Company. Pursuant to the terms of the agreement, the Company will provide technical support, management services and other services on an exclusive basis in relation to GPM’s business during the term of the Agreement. The Company agrees to fund GPM for operational cash flow needs and bear the risk of GPM’s losses from operations and GPM agrees that the Company has rights to GPM’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of GPM or its assets subject to assumption of all of its liabilities. As of March 31, 2021 and June 30, 2020, the Company had paid $30,875 and $0, respectively, for GPM’s operating expenses. Summary of the key terms of the exclusive business cooperation agreements (the “Agreements”) with E Marketing and GPM (“VIEs"): · iPower is the exclusive manager of the VIEs; · the VIEs shall not directly or indirectly accepts same or similar services from other parties; · the Agreements shall remain effective unless terminated by iPower; · iPower is granted an irrevocable and exclusive option to purchase all assets and business at nominal price; and · iPower agrees to fund VIEs’ operational needs and bear the risk of VIEs’ losses from operations and VIEs agree that iPower has rights to VIEs’ net profits, if any. Pursuant to the terms of the Agreements, the Company does not have direct ownership in either E Marketing and GPM but has been actively involved in their operations as the sole manager to direct the activities and significantly impact E Marketing’s and GPM’s economic performance. Each of E Marketing and GPM has only one shareholder and all operational funding was provided by the Company. The Company bears all the risk of losses and has the right to receive all of the benefits from E Marketing and GPM. As such, based on the determination that the Company is the primary beneficiary of E Marketing and GPM, in accordance with ASC 810-10-25-38A through 25-38J, E Marketing and GPM are considered variable interest entities (“VIEs”) of the Company and the financial statements of E Marketing and GPM have been consolidated from the date of control existed, March 1, 2020 and September 4, 2020, respectively. The Company did not provide financial or other support to the VIEs for the periods presented where the Company was not otherwise contractually required to provide such support. As of March 31, 2021 and June 30, 2020, there was no pledge or collateralization of the VIEs’ assets that would be used to settle obligations of the VIEs. The carrying amount of the VIEs’ assets and liabilities were as follows for the periods indicated: March 31, June 30, Cash in bank $ 110,872 $ 72,686 Receivables from iPower $ 492,384 $ – Payables to iPower $ – $ 72,686 Income tax payable $ 174,410 $ – Other payables $ 599 $ – The assets and payables were included in the consolidated balance sheets as of March 31, 2021 and June 30, 2020 and the payables to and receivables from iPower were eliminated in consolidation. The operating results of the VIEs were as follows for the nine months ended March 31, 2021: 2021 Revenue $ 1,448,464 Net income $ 448,848 |
4. Accounts receivable, net
4. Accounts receivable, net | 9 Months Ended |
Mar. 31, 2021 | |
Receivables [Abstract] | |
Accounts receivable | Note 4 - Accounts receivable, net Accounts receivable, net consisted of the following as of the dates indicated: March 31, 2021 June 30, 2020 Accounts receivable $ 8,281,993 $ 6,067,199 Less: allowance for credit losses 189,206 – Total accounts receivable, net $ 8,092,787 $ 6,067,199 Credit loss expenses were $189,206 and $0 for the nine months ended March 31, 2021 and 2020, respectively. |
5. Inventories, net
5. Inventories, net | 9 Months Ended |
Mar. 31, 2021 | |
Inventory Disclosure [Abstract] | |
Inventories | Note 5 – Inventories, net As of March 31, 2021 and June 30, 2020, inventories consisted of finished goods ready for sale, net of allowance for obsolescence, amounted to $10,015,923 and $5,743,181, respectively. As of March 31, 2021 and June 30, 2020, allowance for obsolescence was $95,574 and $95,574, respectively. |
6. Prepayments and other curren
6. Prepayments and other current assets | 9 Months Ended |
Mar. 31, 2021 | |
Notes to Financial Statements | |
Prepayments and other current assets | Note 6 – Prepayments and other current assets As of March 31, 2021 and June 30, 2020, prepayments and other current assets consisted of the followings: March 31, 2021 June 30, 2020 Advance to suppliers $ 1,768,768 $ 298,841 Prepaid expenses and Other receivables 1,154,804 317,390 Total $ 2,923,572 $ 616,231 Other receivables consisted of delivery fees of $212,266 and $132,433 and receivables from two unrelated parties for their use of the Company’s courier accounts at March 31, 2021 and June 30, 2020. As of the date of this report, the amount had been fully collected. |
7. Loans payable
7. Loans payable | 9 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Loans payable | Note 7 – Loans payable Short-term loans PPP note payable On April 13, 2020, the Company entered into an agreement with Royal Business Bank (the “Lender”) for a total amount of $175,500, pursuant to a promissory note issued by the Company to the Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Note bears interest at the rate of 1.00% per annum and may be repaid at any time without penalty. The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note. The Company accounts for the PPP loan under Topic 470 as follows: (a) Initially record the cash inflow from the PPP Note as a financial liability and accrued interest in accordance with the interest method under ASC Subtopic 835-30; (b) Not impute additional interest at a market rate; (c) Continue to record the proceeds from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released by the Lender or (2) the debtor pays off the loan; (d) Reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received. On March 22, 2021, the $175,500 PPP Note due to Royal Business Bank was fully forgiven. As of March 31, 2021 and June 30, 2020, the Company had an outstanding balance of $0 and $175,500, respectively, under the PPP Note. Revolving credit facility On May 3, 2019, the Company entered into an agreement with WFC Fund LLC (“WFC") for a revolving loan of up to $2,000,000. The revolving loan bore interest equal to the prime rate plus 4.25% per annum on the outstanding amount. On May 26, 2020, the Loan and Security Agreement was amended and restated as a Receivable Purchase Agreement (the “Original RPA”), pursuant to which WFC may, but is not obligated to, purchase accounts receivable from the Company from time to time. The credit limit of the revolving facility under the Original RPA was $2,000,000, which had a discount rate equal to the prime rate plus 4.25% per annum on the outstanding amount. This revolving credit facility is secured by all of the Company’s assets and guaranteed by Allan Huang, a former director and executive officer, and one of the Company’s major shareholders and founders. Pursuant to the Original RPA, the purchases of accounts receivable were made with full recourse to the Company, and the Company was obligated to collect the accounts receivables and to repurchase or pay back the amount drawn if the accounts receivable were not collected. In accordance with ASC 860-10-05, the revolving credit facility under the Receivable Purchase Agreement is treated as secured borrowing. On November 16, 2020, the Original RPA was further amended and restated (the “Restated RPA”) to increase the credit limit of the revolving credit facility from $2,000,000 to $3,000,000. The Restated RPA bears a discount rate of 3.055555%, subject to a rebate of 0.0277% per day. This revolving credit facility is secured by all of the Company’s assets and guaranteed by Chenlong Tan, the CEO and one of the Company’s major shareholders and founders. Pursuant to the agreement, all purchases of accounts receivable are without recourse to the Company, and WFC assumes the risk of nonpayment of the accounts receivable due to a customer’s financial inability to pay the accounts receivable or the customer’s insolvency but not the risk of non-payment of the accounts receivable for any other reason. The Company is obligated to collect the accounts receivables and to repurchase or pay back the amount drawn if the accounts receivable are not collected. As of March 31, 2021 and June 30, 2020, the outstanding balance due was $1,877,718 and $1,154,180, respectively. Loans payable During the quarter ended December 31, 2020, the Company borrowed a total amount of $300,000 from two unrelated parties for short-term cash flow needs. The loans bear interest at the rate of 8% per annum and may be repaid at any time without penalty. In February 2021, the Company had fully repaid the outstanding amount. As of March 31, 2021, the outstanding balance of the loans was $0. Long-term loan SBA loan payable On April 18, 2020, the Company entered into an agreement with the U.S. Small Business Administration (“SBA”) for a loan of $500,000 under Section 7(b) of the Small Business Act pursuant to which we issued a promissory note (the “SBA Note”) to the SBA. The SBA Note bears interest at the rate of 3.75% per annum and matures 30 years from the date of the SBA Note. Monthly Installment payments, including principal and interest, will begin twelve months from the date of the SBA Note. As of March 31, 2021, the outstanding balance of the SBA Note was $500,000, which included a current portion of $29,244 and a non-current portion of $470,756. |
8. Convertible notes
8. Convertible notes | 9 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Convertible notes | Note 8 – Convertible notes On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes with a 6% interest per annum (the “Convertible Note”) and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes. The warrants shall be exercisable for a period of three years from the IPO completion date at a per share exercise price equal to the IPO. The Convertible Notes shall be automatically converted into the Company’s Class A Common Stock upon a qualified IPO (the “Mandatory Conversion”) or repayable in cash at the option of the holders of the Convertible Notes with repayment to commence six months after January 27, 2021. The Convertible Notes convert at a price equal to the lesser of (a) a price representing a 30% discount to the public offering price per share of the Class A Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of Class A Common Stock immediately prior to the IPO, (y) the number of Class A Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number of Class A Common Stock issuable upon conversion of all outstanding Convertible Notes. Any interest accrued on the Convertible Note will be waived upon conversion. In the event the Company does not receive a minimum of $15,000,000 of gross proceeds in the Offering or otherwise close on the Offering, the Convertible Notes will bear interest at a rate of 6% per annum which shall accrue from January 27, 2021 and be repayable in six equal monthly installments between July 27, 2021 and January 27, 2022. Alternatively, the Convertible Notes may be converted at the conversion price into shares of Class A Common Stock at the option of the holder prior to the maturity date (the “Conversion Option”). If the notes are converted, either on a Mandatory Conversion basis or through each holder’s exercise of the Conversion Option, any interest accrued on the Convertible Note shall be waived. In connection with the convertible note offering, the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”). The placement agent warrants shall be exercisable for a period of five years from the issuance date and are treated as a debt issuance cost. The conversion feature included in the terms of the convertible notes creates an obligation to the Company requiring it to repay the notes for cash in January 2022, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. As such, the conversion feature was determined to be a derivative liability, which represent an embedded derivative predominately based on fixed monetary amount. The convertible note warrants and placement agent warrants were determined to be derivative liabilities, which represent free-standing derivative instruments. The Company measured the derivative liabilities at fair value at the issuance date of the convertible notes, convertible note warrants and placement agent warrants based on a Modified Black Scholes option-pricing model. The derivative liabilities were recorded with a corresponding debit to debt discount that will be amortized over the life of the notes using effective interest rate method. At time of issuance, the convertible notes and warrant liabilities were recorded on the balance sheet as liabilities. Debt issuance costs, which consisted of $120,000 in cash netted against the note proceeds and $84,849 in placement agent warrants, are allocated to derivative liabilities based on its fair value at issuance to total proceeds received. Debt issuance costs associated with warrant liabilities are expensed immediately and the debt issuance cost associated with the debt host are amortized over the life of the notes. Upon issuance, the Company allocated the total proceeds first to the stock warrants, then to the embedded conversion features and the residual to the note. The amount allocated to debt discount was $1,390,141 and the amount allocated to the note was $1,609,859, respectively. The conversion feature and warrant liabilities of $1,390,141 was recorded as a debit to debt discount that was amortized as other non-operating expense over the life of the notes using effective interest rate method. As of March 31, 2021, the Company recorded amortization of debt discount of $463,380 as other non-operating expense and the remaining unamortized debt discount was $926,761. As of March 31, 2021, the fair value of the convertible note, net of debt discount, was $2,729,747, which included fair value of the conversion feature of $776,507, and a change in fair value of $83,891 was recorded within other non-operating income (expenses). As of March 31, 2021 Expected term 0.3 year Expected volatility 35% Risk-free interest rate 0.04% Expected dividend rate 0% Probability 60% As of March 31, 2021, the fair value of the convertible note, net of debt discount, was $2,849,747, which included fair value of the conversion feature of $776,507, and a change in fair value of $83,891 was recorded within other non-operating income (expenses). For accounting on warrants issued with the convertible notes, see Note 14 below for detail. |
9. Related party transactions
9. Related party transactions | 9 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related party transactions | Note 9 - Related party transactions On December 1, 2018, the Company acquired certain assets and assumed liabilities from BizRight, LLC, an entity owned and managed by the founders and officers of the Company. The net assets received were recorded at their historical carrying amounts and the purchase price of $2,611,594 was recorded as payable due to related parties. The purchase price shall be paid based on the Company’s cash flow availability and bears an interest rate of 8% per annum on the outstanding amount. During the nine months ended March 31, 2021 and 2020, the Company recorded proceeds of $532,222 and $1,203,170 and payments of $150,498 and $2,476,217, respectively. As of March 31, 2021 and June 30, 2020, the outstanding amount due to related parties was $515,517 and $133,793, respectively. |
10. Income taxes
10. Income taxes | 9 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Note 10 – Income taxes On December 22, 2017, the U.S. President signed into law H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”). The Tax Legislation significantly revised the U.S. tax code by (i) lowering the U.S. federal statutory income tax rate from 35% to 21%, (ii) implementing a territorial tax system, (iii) imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries, (iv) requiring a current inclusion of global intangible low taxed income of certain earnings of controlled foreign corporations in U.S. federal taxable income, (v) creating the base erosion anti-abuse tax regime, (vi) implementing bonus depreciation that will allow for full expensing of qualified property, and (vii) limiting deductibility of interest and executive compensation expense, among other changes. The Company has computed its tax expenses using the new statutory rate effective on January 1, 2018 of 21%. Other provisions of the new legislation include, but are not limited to, limiting deductibility of interest and executive compensation expense. These additional items have been considered in the income tax provision for the nine months ended March 31, 2021 and 2020 and the impact was not material to the overall financial statements. For the nine months ended March 31, 2021, the Company recorded deferred tax assets of $52,947, which was resulted from allowance for credit loss of $189,206. The income tax provision for the nine months ended March 31, 2021 and 2020 consisted of the following: March 31, 2021 March 31, 2020 Current: Federal $ 555,430 $ 212,722 State 258,204 98,316 Total current income tax provision $ 813,634 $ 311,038 Deferred: Federal (36,221 ) State (16,726 ) Total deferred taxes $ (52,947 ) $ Total provision for income taxes $ 760,686 $ 311,038 The Company is subject to U.S. federal income tax as well as income tax of state tax jurisdictions. The tax years 2018 and 2019 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates: March 31, 2021 March 31, 2020 Statutory tax rate Federal 21.00% 21.00% State of California 8.84% 8.84% Net effect of state income tax deduction and other permanent differences 10.38% (1.79% ) Effective tax rate 40.22% 28.05% As of March 31, 2021 and June 30, 2020, the income taxes payable was $837,694 and $721,211, respectively. |
11. Earnings per share
11. Earnings per share | 9 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings per share | Note 11 – Earnings per share The following table sets forth the computation of basic and diluted earnings per share for the periods presented: For the nine months ended 2021 2020 Numerator: Net income $ 1,130,649 $ 797,946 Denominator: Weighted-average shares used in computing basic and diluted earnings per share* 20,204,496 20,056,515 Earnings per share of ordinary shares: -basic and diluted $ 0.056 $ 0.040 *On November 16, 2020, the Company implemented a 2-for-1 forward split of the issued and outstanding shares of Class A Common Stock of the Company. The computation of basic and diluted EPS was retroactively adjusted for all periods presented. *On October 20, 2020, the Company issued to its founders 14,000,000 shares of Class B Common Stock, which shall be eligible to convert into Class A Common Stock, on a one-for-ten basis, at any time following twelve (12) months after the Company’s completion of its initial public offering of its Class A Common Stock. The computation of basic and diluted EPS did not include the Class B Common Stock as the holders of Class B Common Stock have no dividend or liquidation right until such time as their shares of Class B Common Stock have been converted into Class A Common Stock. See Note 16 for the status of Class B Common Stock. *The computation of basic and diluted EPS did not include the underlying shares of Series A Convertible Preferred Stock, convertible notes, and warrants, as the conversion/exercise of these instruments and participation in dividends with the Company’s Common Stock was contingent on completion of an IPO. |
12. Equity
12. Equity | 9 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Equity | Note 12 – Equity The Company was incorporated in Nevada on April 11, 2018. As of March 31, 2021, the total authorized shares of capital stock were 200,000,000 shares consisting of 166,000,000 shares of Class A Common Stock (“Class A Common Stock”) and 14,000,000 shares of Class B Common Stock (“Class B Common Stock”), and 20,000,000 shares of preferred stock (the “Preferred Stock”), each with a par value of $0.001 per share. On November 16, 2020, the Company filed an amended and restated articles of incorporation in Nevada to consummate a 2-for-1 forward split of our outstanding shares of Class A Common Stock. All share numbers of Class A Common Stock are stated at post-split basis. The holders of Class A Common Stock shall be entitled to one vote per share in voting or consenting to the election of directors and for all other corporate purposes. The Company issued 20,000,000 shares to its founders at inception. On January 15, 2020, pursuant to a rescission and mutual release agreement with an unrelated company, the Company issued 204,496 shares of its Class A Common Stock as settlement payment of the $427,010 received. As of March 31, 2021 and June 30, 2020, after giving effect to a 2-for-1 forward split of the outstanding shares of Class A Common Stock, there were 20,204,496 and 20,204,496 shares of Class A Common Stock issued and outstanding, respectively. On October 20, 2020, the Company entered into stock purchase agreements with Chenlong Tan and Allan Huang (the “Founders”) pursuant to which each of the Founders received 7,000,000 shares of the Company’s Class B Common Stock, for a purchase price of $0.001 per share in cash. Based on the fact that other than the total consideration of $14,000 (total par value of the Class B Common Stock issued), the Founders did not provide additional services or other means of considerations for the issuance of these shares of Class B Common Stock, the issuance of the Class B Common Stock to the Founders was considered as a nominal issuance, in substance a recapitalization transaction. As such, in accordance with FASB ASC 260-10-55-12 and SAB Topic 4D, the Company recorded and presented the issuance retroactively as outstanding for all reporting periods. The Class B Common Stock shall be entitled to ten (10) votes per share in voting or consenting to the election of directors and for all other corporate purposes. Class B Common Stock shall be eligible to convert into Class A Common Stock, on a ten-for-one basis, at any time following twelve (12) months after the Company’s completion of the initial public offering of its Class A Common Stock. Holders of Class B Common Stock shall have no dividend or liquidation right until such time as their shares of Class B Common Stock have been converted into Class A Common Stock. As of March 31, 2021 and June 30, 2020, the outstanding shares of Class B Common Stock were retroactively stated as 14,000,000 and 14,000,000, respectively. See Note 17 for status of the Class B Common Stock. The Preferred Stock was authorized as “blank check” series of Preferred Stock, providing that the Board of Directors is expressly authorized, subject to limitations prescribed by law, by resolution or resolutions and by filing a certificate pursuant to the applicable law of the State of Nevada, to provide, out of the authorized but unissued shares of Preferred Stock, for series of Preferred Stock, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. See Note 13 below for details of Series A Convertible Preferred Stock issued on December 30, 2020. |
13. Series A Convertible Prefer
13. Series A Convertible Preferred Stock | 9 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
Series A Convertible Preferred Stock | Note 13 – Series A Convertible Preferred Stock On December 30, 2020, the Company closed a private placement and issued a total of 34,500 shares of Series A Convertible Preferred Stock, par value $0.001 per share, to a total of three accredited investors, at a purchase price of $10.00 per share, for a total purchase price of $345,000 in cash. Pursuant to the certificate of designations, the Series A Convertible Preferred Stock will automatically convert into shares of the Class A Common Stock (the “Conversion Shares”) at a conversion price equal to 70% of the initial price per share of the Class A Common Stock. If the IPO has not occurred by December 31, 2021, the Company will be obligated to redeem and repurchase for cash all of the outstanding shares of Series A Convertible Preferred Stock for a purchase price equal to (a) the product of multiplying the $10.00 Stated Value of each outstanding share of Series A Convertible Preferred Stock by the total number of outstanding shares of Series A Convertible Preferred Stock, plus (b) all accrued and unpaid Dividends at 9% per annum. In the event that the Series A Convertible Preferred Stock are converted into Conversion Shares, no Dividend shall accrue or be payable. In connection with this private placement, the Company paid $27,600 in cash and issued warrants to purchase 2,415 shares of Series A Convertible Preferred Stock to Boustead Securities, LLC (the “Placement Agent”) as compensation, which was recorded as financing expense. The exercise price of the warrants is $10 per share. The warrants were recorded as liability. See Note 14 below for detail. The redemption feature creates an obligation to the Company requiring it to redeem the Preferred Shares for cash on December 31, 2021, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. The Series A convertible preferred stock are mandatorily redeemable and should be classified as a liability in accordance with ASC 480-10 and the Company has elected to record the Series A Convertible Preferred Stock at fair value with changes in fair value recorded through earnings under the ASC 825-10-15-4 fair value option (“FVO”) election. Under the FVO election the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. As of March 31, 2021, the fair value was $433,714 which was measured based on the fixed monetary amount of the convertible share upon IPO and the probability of IPO. The change in fair value of $88,714 was recorded as other non-operating expense. As of March 31, 2021 and June 30, 2020, respectively, the Company had 34,500 and 0 shares of Preferred Stock issued and outstanding. |
14. Warrant liabilities
14. Warrant liabilities | 9 Months Ended |
Mar. 31, 2021 | |
Warrant Liabilities | |
Warrant liabilities | Note 14 – Warrant liabilities The Company’s warrant liabilities contained unobservable inputs that reflected the Company’s own assumptions in which there was little, if any, market activity for at the measurement date. Accordingly, the Company’s warrant liabilities were measured at fair value on a recurring basis using unobservable inputs and were classified as Level 3 measurements. On December 30, 2020, the Company issued warrants to purchase 2,415 shares of Series A Convertible Preferred Stock to Boustead Securities, LLC (the “Placement Agent”) as compensation, which was recorded as financing expense. The exercise price of the warrants is $10 per share and expires in five years from the issuance date. This Series A Preferred Stock warrant were valued using Black Scholes Option Pricing Model at issuance date and recorded $8,047 as financing expense and warrant liability. On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes. The convertible note warrants shall be exercisable for a period of three years from the IPO completion date at a per share exercise price equal to the IPO. In the event the Convertible Notes are repaid in cash by the Company, the convertible notes warrants will expire and have no further value. In connection with the convertible note offering, the Company also issued placement agent warrants to purchase 7.0% of the shares of Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”). The placement agent warrants shall be exercisable for a period of five years from the issuance date. On March 31, 2021, the Company remeasured the warrants to fair value using the Modified Black Scholes Option Pricing Model based on the expected fair value of the underlying stock with the following assumptions: As of March 31, 2021 Expected term 3 to 5 years Expected volatility 56% to 58% Risk-free interest rate 0.35% to 0.92% Expected dividend rate 0% Probability 60% As of March 31, 2021, the fair value of the warrant liabilities was $905,713 and the change in fair value of $161,959 was recorded within other non-operating income (expenses). |
15. Concentration of risk
15. Concentration of risk | 9 Months Ended |
Mar. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
Concentration of risk | Note 15 - Concentration of risk Credit risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of March 31, 2021 and June 30, 2020, $474,322 and $977,635, respectively, were deposited with various major financial institutions in the United States. Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposing the Company to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company maintains reserves for estimated credit losses, and such losses have generally been within expectations. Customer and vendor concentration risk For the nine months ended March 31, 2021 and 2020, Amazon Vendor and Amazon Seller customers accounted for 78% and 70% of the Company's total revenues, respectively. As of March 31, 2021 and June 30, 2020, accounts receivable from Amazon Vendor and Amazon Seller accounted for 91% and 95% of the Company’s total accounts receivable. For the nine months ended March 31, 2021 and 2020, two suppliers accounted for 28% (17% and 11%) and 44% (30% and 14%) of the Company's total purchases, respectively. As of March 31, 2021, accounts payable to two suppliers accounted for 19% and 17% of the Company’s total accounts payable. As of June 30, 2020, accounts payable to three suppliers accounted for 26%, 13% and 12%, respectively, of the Company’s total accounts payable. |
16. Commitments and contingenci
16. Commitments and contingencies | 9 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Note 16 - Commitments and contingencies Lease commitment The Company has adopted ASC842 since its inception date, April 11, 2018. The Company has entered into a lease agreement for office and warehouse space with a lease period from December 1, 2018 until December 31, 2020. On August 24, 2020, the Company negotiated for new terms to extend the lease. The lease term is amended and extended through December 31, 2023. On September 1, 2020, in addition to the primary fulfillment center, the Company leased a second fulfillment center in City of Industry, California. The base rental fee is $27,921 to $29,910 per month through October 31, 2023. Total commitment for the full term of these leases is $2,346,200. $1,987,363 and $262,875 of operating lease right-of-use assets and $2,073,684 and $262,875 of operating lease liabilities were reflected on the March 31, 2021 and June 30, 2020 financial statements, respectively. Nine Months Ended March 31, 2021 and 2020: Lease cost 3/31/2021 3/31/2020 Operating lease cost (included in G&A in the Company's statement of operations) $ 559,606 $ 275,859 Other information Cash paid for amounts included in the measurement of lease liabilities 473,285 275,859 Remaining term in years 2.5 0.75 Average discount rate - operating leases 8% 8% The supplemental balance sheet information related to leases for the period is as follows: Operating leases 3/31/2021 6/30/2020 Right of use asset - non current $ 1,987,363 $ 262,875 Lease Liability - current 715,083 262,875 Lease Liability - non current 1,358,601 – Total operating lease liabilities $ 2,073,684 $ 262,875 Maturities of the Company’s lease liabilities are as follows: Operating Lease For the period from April 1, 2021 to June 30, 2021 $ 209,762 For Year ending June 30: 2022 847,845 2023 859,881 2024 371,639 Less: Imputed interest/present value discount (215,443 ) Present value of lease liabilities $ 2,073,684 Contingencies Except as disclosed in Note 17 below, the Company is not currently a party to any material legal proceedings, investigation or claims. However, the Company may, from time to time, be involved in legal matters arising in the ordinary course of its business. While the Company is not presently subject to any material legal proceedings, there can be no assurance that such matters will not arise in the future or that any such matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not at some point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition or results of operations of the Company. In an effort to contain or slow the COVID-19 outbreak, authorities across the world have implemented various measures, some of which have been subsequently rescinded or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses. The Company anticipates that these actions and the global health crisis caused by the COVID-19 outbreak, including any resurgences, will continue to negatively impact global economic activity. While the COVID-19 outbreak has not had a material adverse impact on the Company’s operations to date, it is difficult to predict all of the positive or negative impacts the COVID-10 outbreak will have on the Company’s business. |
17. Subsequent events
17. Subsequent events | 9 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent events | Note 17 - Subsequent events Conversion of Class B Common Stock and Reclassification of Common Stock Effective April 14, 2021, the Company amended its Articles of Incorporation to allow conversion of its Class B Common Stock at any time after issuance. On the same date, the Class B Common stockholders, Chenlong Tan and Allan Huang, elected to convert all their 14,000,000 outstanding shares of the Company’s Class B Common Stock into 1,400,000 shares of Class A Common Stock. On April 23, 2021, the Company amended and restated its articles of incorporation to eliminate the Class A and Class B Common Stock designations and authorize for issuance a total of 180,000,000 shares which are solely designated as Common Stock. Termination of Agreement with Boustead Securities LLC Pursuant to an engagement agreement, dated and effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the Company engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential underwriter for its initial public offering. On February 28, 2021, the Company informed Boustead that it was terminating the Engagement Agreement and any continuing obligations the Company may have had under its terms. On April 15, 2021, the Company provided formal written notice to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective immediately. On April 30, 2021, Boustead filed a statement of claim with the Financial Institute Regulatory Authority, or FINRA, demanding to arbitrate the dispute, and is seeking, among other things, monetary damages against the Company and D.A. Davidson & Co. The Company has agreed to indemnify D.A. Davidson & Co. and the other underwriters against any liability or expense they may incur or be subject to arising out of the Boustead dispute. Additionally, Chenlong Tan, the Company’s Chairman, President and Chief Executive Officer and a beneficial owner more than 5% of the Company’s Common Stock, has agreed to reimburse the Company for any judgments, fines and amounts paid or actually incurred by the Company or an indemnitee in connection with such legal action or in connection with any settlement agreement entered into by the Company or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding of such reimbursement to come from sales of shares then owned by Mr. Tan. Initial Public Offering On May 14, 2020, the Company closed its initial public offering (“IPO”) under a registration statement effective May 11, 2021, in which it issued and sold 3,360,000 shares of its Common Stock at a purchase price of $5.00 per share. On May 21, 2021, the Company closed on the IPO’s overallotment option, selling an additional 504,000 shares of Common Stock to the IPO’s underwriters at the public offering price of $5.00 per share. The Company received net proceeds of approximately $16.5 million from the IPO after deducting underwriting discounts and offering expenses. Conversion of Preferred Stock and Convertible Notes On May 14, 2021, the Company closed on an Offering of $16.8 million in gross proceeds, following which time the Series A convertible preferred stock and Convertible Notes converted into an aggregate of 955,716 shares of the Common Stock. Exercise of Placement Agent Warrants On May 14, 2021, the Company issued 24,451 shares of Common Stock upon cashless exercise of warrants held by Boustead Securities LLC, the placement agent for the Company’s private offerings completed in December 2020 and January 2021. Acquisition of Variable Interest Entities On May 18, 2021, the Company entered into equity purchase agreements (“Equity Purchase Agreements”) with the shareholders of each of our variable interest entities, E Marketing Solution Inc. (“E Marketing”) and Global Product Marketing Inc. (“GPM”), pursuant to which we acquired 100% of the equity interests of each of E Marketing and GPM. The Company paid nominal consideration of $10.00 for the acquisition of each of E Marketing and GPM, entities that were 100% owned, respectively, by our long-time shareholder, Shanshan Huang, and our President, Chief Executive Officer and Chairman, Chenlong Tan. |
2. Basis of Presentation and _2
2. Basis of Presentation and Summary of signficiant accounting policies (Policies) | 9 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its variable interest entities and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as its annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2021, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements for years ended June 30, 2020 and 2019 included in the prospectus filed on May 13, 2021. |
Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its VIEs, E Marketing Solution Inc. and Global Product Marketing Inc. All inter-company balances and transactions have been eliminated. |
Use of estimates and assumptions | Use of estimates and assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. |
Variable interest entities [Policy Text Block] | Variable interest entities The Company entered into an agreement with E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. The Company also entered into an agreement with Global Product Marketing Inc. (“GPM”), an entity incorporated in the State of Nevada on September 4, 2020. GPM is owned by Chenlong Tan, the Chairman, CEO, President, and one of the majority shareholders of the Company. The Company does not have direct ownership in E Marketing and GPM but has been actively involved in their operations and has the power to direct the activities and significantly impact E Marketing’s and GPM’s economic performance. The Company also bears all the risk of losses and has the right to receive all of the benefits from E Marketing and GPM. As such, in accordance with ASC 810-10-25-38A through 25-38J, E Marketing and GPM are considered variable interest entities (“VIEs”) of the Company and the financial statements of E Marketing and GPM were consolidated from the date of control existed. |
Cash and cash equivalents | Cash and cash equivalents Cash and cash equivalents consist of amounts held as cash on hand and bank deposits. From time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). The Company has not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. |
Accounts receivable | Accounts receivable During the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers. Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required. In July 2020, the Company adopted ASU 2016-13, Topics 326 - Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology, for its accounting standard for its trade accounts receivable. The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment, the Company may consider making provision for non- collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses: · the customer fails to comply with its payment schedule; · the customer is in serious financial difficulty; · a significant dispute with the customer has occurred regarding job progress or other matters; · the customer breaches any of the contractual obligations; · the customer appears to be financially distressed due to economic or legal factors; · the business between the customer and the Company is not active; and · other objective evidence indicates non-collectability of the accounts receivable. The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements. Accounts receivable are recognized and carried at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses, the potential impact of the COVID-19 pandemic on our customers businesses and their ability to pay their accounts receivable. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance for credit losses. |
Fair values of financial instruments | Fair values of financial instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature. For other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. The Company used Level 3 inputs for its valuation methodology for the conversion feature and warrant liabilities in determining the fair value using the Modified Black Scholes option-pricing model. Significant increase or decrease in any of the significant unobservable inputs, such as the probability of the occurrence of an IPO, would have resulted in a significantly higher or lower fair value measurement. The redeemable preferred stock was measured based on the fixed monetary amount of the convertible share upon IPO and the probability of IPO. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There is no transfer into or out of Level 3 of the fair value hierarchy. The following table presents information about the Company’s redeemable preferred stock, conversion feature, and warrant liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and June 30, 2020: Level March 31, June 30, Conversion feature liabilities 3 $ 776,507 $ – Redeemable preferred stock 3 $ 433,714 $ – Warrant liabilities 3 $ 905,713 $ – |
Revenue recognition | Revenue recognition The Company has adopted Accounting Standards Codification (“ASC”) 606 since its inception on April 11, 2018 and recognizes revenue from product sales revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience. The Company evaluates the criteria of ASC 606 - Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross. Payments received prior to the delivery of goods to customers are recorded as customer deposits. The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction. Sales discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses. |
Cost of revenue | Cost of revenue Cost of revenue mainly consists of costs for purchases of products and related inbound freight and delivery fees. |
Inventory | Inventory Inventory consists of finished goods ready for sale and is stated at the lower of cost or market. The Company values its inventory using the weighted average costing method. The Company’s policy is to include as a part of cost of goods sold any freight incurred to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling, general and administrative expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value. The Company also reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence. |
Segment reporting | Segment reporting The Company follows ASC 280, Segment Reporting. The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are all located in California, United States, and substantially all of the Company’s revenues are derived from within the USA. Therefore, no geographical segments are presented. |
Leases | Leases On its inception date, April 11, 2018, the Company adopted ASC 842 – Leases (“ASC 842”), which requires lessees to record right-of-use (“ROU”) assets and related lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements. ROU assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. |
Deferred offering costs | Deferred offering costs The Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations and comprehensive income (loss) in the period of determination. As of March 31, 2021 and June 30, 2020, $351,882 and $0 of deferred offering costs were included in prepaid expenses and other current assets in the condensed consolidated balance sheets, respectively. |
Income taxes | Income taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company has adopted the provisions of ASC 740 since inception, April 11, 2018, and has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the states of Nevada and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. The Company believes that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. |
Commitments and contingencies | Commitments and contingencies In the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of each matter. |
Convertible notes and warrants | Convertible notes and warrants On January 27, 2021, the Company completed a private placement offering pursuant to which the Company sold to two accredited investors an aggregate of $3,000,000 in convertible notes with a 6% interest per annum (the “Convertible Notes”) and warrants to purchase shares of Class A Common Stock equaling 80% of the number of shares of Class A Common Stock issuable upon conversion of the Convertible Notes. The warrants shall be exercisable for a period of three years from the IPO completion date at a per share exercise price equal to the IPO. The Convertible Notes shall be automatically converted into the Company’s Class A Common Stock upon a qualified IPO (the “Mandatory Conversion”) or repayable in cash at the option of the holders of the Convertible Notes with repayment to commence six months after January 27, 2021. The Convertible Notes convert at a price equal to the lesser of (a) a price representing a 30% discount to the public offering price per share of the Class A Common Stock in this Offering, or (b) a price representing a 30% discount to the price per share equal to dividing $200 million by the total number of (x) outstanding shares of Class A Common Stock immediately prior to the IPO, (y) the number of Class A Common Stock issuable upon conversion of the 34,500 shares of Series A Preferred Stock, and (z) the number of Class A Common Stock issuable upon conversion of all outstanding Convertible Notes. In the event the Company does not receive a minimum of $15,000,000 of gross proceeds in the Offering or otherwise close on the Offering, the Convertible Notes will bear interest at a rate of 6% per annum which shall accrue from January 27, 2021 and be repayable in six equal monthly installments between July 27, 2021 and January 27, 2022. Alternatively, the Convertible Notes may be converted at the conversion price into shares of Class A Common Stock at the option of the holder prior to the maturity date (the “Conversion Option”). If the notes are converted, either on a Mandatory Conversion basis or through each holder’s exercise of the Conversion Option, any interest accrued on the Convertible Note shall be waived. In connection with the convertible note offering, the Company issued placement agent warrants to purchase 7.0% of the shares of Class A Common Stock underlying the Convertible Notes exercisable at the conversion price of the Convertible Note (the “Conversion Price”). The placement agent warrants shall be exercisable for a period of five years from the issuance date and are treated as a debt issuance cost. The conversion feature included in the terms of the convertible notes and the warrants creates an obligation to the Company requiring it to repay the notes for cash in January 2022, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. As such, the conversion feature was determined to be a derivative liability, which represent an embedded derivative predominately based on fixed monetary amount. The convertible note warrants and placement agent warrants were determined to be derivative liabilities, which represent free-standing derivative instruments. The Company measured the derivative liabilities at fair value at the issuance date of the convertible notes, convertible note warrants and placement agent warrants based on a Modified Black Scholes option-pricing model. The derivative liabilities were recorded with a corresponding debit to debt discount that will be amortized over the life of the notes using effective interest rate method. At time of issuance, the convertible notes and warrant liabilities were recorded on the balance sheet as liabilities. Debt issuance costs are allocated to derivative liabilities based on its fair value at issuance to total proceeds received. Debt issuance costs associated with warrant liabilities are expensed immediately and the debt issuance cost associated with the debt host are amortized over the life of the notes. |
Series A Convertible Preferred Stock | Series A Convertible Preferred Stock On December 30, 2020, the Company issued a total of 34,500 shares of Series A Convertible Preferred Stock, par value $0.001 per share. Pursuant to the certificate of designations, the Series A Convertible Preferred Stock will automatically convert into shares of the Class A Common Stock (the “Conversion Shares”) at a conversion price equal to 70% of the initial price per share of the Class A Common Stock. If the IPO shall not have occurred by December 31, 2021, the Company shall redeem and repurchase for cash all of the outstanding shares of Series A Convertible Preferred Stock for a purchase price equal to (a) the product of multiplying the $10.00 Stated Value of each outstanding share of Series A Convertible Preferred Stock by the total number of outstanding shares of Series A Convertible Preferred Stock, plus (b) all accrued and unpaid Dividends at 9% per annum. In the event that the Series A Convertible Preferred Stock shall be converted into Conversion Shares, no Dividend shall accrue or be payable. The redemption feature creates an obligation to the Company requiring it to redeem the Preferred Shares for cash on December 31, 2021, if an IPO does not occur. Upon an IPO, the Conversion Option is settleable with a variable number of the Company’s shares resulting in a fixed monetary amount known at inception in accordance with ASC 480-10-25-14a. The Series A convertible preferred stock are mandatorily redeemable and should be classified as a liability in accordance with ASC 480-10 and the Company has elected to record the Series A Convertible Preferred Stock at fair value with changes in fair value recorded through earnings under the ASC 825-10-15-4 fair value option (“FVO”) election. |
Series A Preferred Stock Warrant | Series A Preferred Stock Warrant In connection with this private placement, the Company issued warrants to purchase shares of Series A Convertible Preferred Stock. The exercise price of the warrants is $10 per share. The Company accounts for its redeemable convertible preferred stock warrants as a liability, and they are recorded at their estimated fair value, because the warrants may conditionally obligate the Company to transfer assets at some point in the future. At the end of each reporting period, changes in the estimated fair value during the period are recorded in other income (expense), net in the statement of operations. The Company will continue to adjust the liability for changes in estimated fair value until the earlier of the expiration of the warrants, exercise of the warrants, or conversion of the redeemable convertible preferred stock warrants into common stock warrants upon the completion of a liquidation event, including the completion of an IPO. |
Earnings per share | Earnings per share Basic earnings per share are computed by dividing net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities to issue common stock were exercised. |
Recently issued accounting pronouncements | Recently issued accounting pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for the Company on July 1, 2022, including interim periods within those fiscal years. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company is currently assessing the impact the new guidance will have on our consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. The update is intended to simplify the current rules regarding the accounting for income taxes and addresses several technical topics including accounting for franchise taxes, allocating income taxes between a loss in continuing operations and in other categories such as discontinued operations, reporting income taxes for legal entities that are not subject to income taxes, and interim accounting for enacted changes in tax laws. The new standard is effective for fiscal years beginning after December 15, 2020; however, early adoption is permitted. The Company does not expect the adoption of this standard have a material impact on the consolidated financial statements. The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows. |
Subsequent events | Subsequent events The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated combined financial statements are available to be issued. Material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented. |
2. Basis of Presentation and _3
2. Basis of Presentation and Summary of signficiant accounting policies (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Schedule of fair value of liabilities | The following table presents information about the Company’s redeemable preferred stock, conversion feature, and warrant liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and June 30, 2020: Level March 31, June 30, Conversion feature liabilities 3 $ 776,507 $ – Redeemable preferred stock 3 $ 433,714 $ – Warrant liabilities 3 $ 905,713 $ – |
3. Variable interest entity (Ta
3. Variable interest entity (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Carrying amount of VIE assets and liabilties | March 31, June 30, Cash in bank $ 110,872 $ 72,686 Receivables from iPower $ 492,384 $ – Payables to iPower $ – $ 72,686 Income tax payable $ 174,410 $ – Other payables $ 599 $ – The operating results of the VIEs were as follows for the nine months ended March 31, 2021: 2021 Revenue $ 1,448,464 Net income $ 448,848 |
4. Accounts receivable (Tables)
4. Accounts receivable (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Receivables [Abstract] | |
Schedule of accounts receivable | March 31, 2021 June 30, 2020 Accounts receivable $ 8,281,993 $ 6,067,199 Less: allowance for credit losses 189,206 – Total accounts receivable $ 8,092,787 $ 6,067,199 |
6. Prepayments and other curr_2
6. Prepayments and other current assets (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Notes to Financial Statements | |
Schedule of prepayments and other current assets | March 31, 2021 June 30, 2020 Advance to suppliers $ 1,768,768 $ 298,841 Prepaid expenses and Other receivables 1,154,804 317,390 Total $ 2,923,572 $ 616,231 |
8. Convertible notes (Tables)
8. Convertible notes (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Convertible Notes [Member] | |
Schedule of assumptions used | As of March 31, 2021 Expected term 0.3 year Expected volatility 35% Risk-free interest rate 0.04% Expected dividend rate 0% Probability 60% |
10. Income taxes (Tables)
10. Income taxes (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Provision for income tax expense | March 31, 2021 March 31, 2020 Current: Federal $ 555,430 $ 212,722 State 258,204 98,316 Total current income tax provision $ 813,634 $ 311,038 Deferred: Federal (36,221 ) State (16,726 ) Total deferred taxes $ (52,947 ) $ Total provision for income taxes $ 760,686 $ 311,038 |
Reconciliation of effective income tax rate | March 31, 2021 March 31, 2020 Statutory tax rate Federal 21.00% 21.00% State of California 8.84% 8.84% Net effect of state income tax deduction and other permanent differences 13.18% 1.79% Effective tax rate 43.02% 28.05% |
11. Earnings per share (Tables)
11. Earnings per share (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Compution of earnings per share | For the nine months ended 2021 2020 Numerator: Net income $ 1,130,649 $ 797,946 Denominator: Weighted-average shares used in computing basic and diluted earnings per share* 20,204,496 20,056,515 Earnings per share of ordinary shares: -basic and diluted $ 0.056 $ 0.040 |
14. Warrant liabilities (Tables
14. Warrant liabilities (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Warrant liability [Member] | |
Schedule of assumptions for warrant liabilities | As of March 31, 2021 Expected term 3 to 5 years Expected volatility 56% to 58% Risk-free interest rate 0.35% to 0.92% Expected dividend rate 0% Probability 60% |
16. Commitments and contingen_2
16. Commitments and contingencies (Tables) | 9 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease cost and other information | Lease cost 3/31/2021 3/31/2020 Operating lease cost (included in G&A in the Company's statement of operations) $ 559,606 $ 275,859 Other information Cash paid for amounts included in the measurement of lease liabilities 473,285 275,859 Remaining term in years 2.5 0.75 Average discount rate - operating leases 8% 8% The supplemental balance sheet information related to leases for the period is as follows: Operating leases 3/31/2021 6/30/2020 Right of use asset - non current $ 1,987,363 $ 262,875 Lease Liability - current 715,083 262,875 Lease Liability - non current 1,358,601 – Total operating lease liabilities $ 2,073,684 $ 262,875 |
Maturities of lease liabilities | Operating Lease For the period from April 1, 2021 to June 30, 2021 $ 209,762 For Year ending June 30: 2022 847,845 2023 859,881 2024 371,639 Less: Imputed interest/present value discount (215,443 ) Present value of lease liabilities $ 2,073,684 |
2. Basis of Presentation and _4
2. Basis of Presentation and Summary of signficiant accounting policies (Details - Fair value) - Fair Value Inputs Level 3 [Member] - Fair Value Measurements Recurring [Member] - USD ($) | Jun. 30, 2021 | Mar. 31, 2021 |
Conversion feature liabilities | $ 0 | $ 776,507 |
Redeemable preferred stock | 0 | 433,714 |
Warrant liabilities | $ 0 | $ 905,713 |
2. Basis of Presentation and _5
2. Basis of Presentation and Summary of signficiant accounting policies (Details Narrative) - USD ($) | 6 Months Ended | 7 Months Ended | ||
Dec. 30, 2020 | Jan. 27, 2021 | Mar. 31, 2021 | Jun. 30, 2020 | |
Deferred offering costs | $ 351,882 | $ 0 | ||
Series A Convertible Preferred Stock [Member] | ||||
Stock issued new, shares | 34,500 | |||
Private Placement [Member] | Series A Convertible Preferred Stock [Member] | ||||
Stock issued new, shares | 34,500 | |||
Private Placement [Member] | Two Accredited Investors [Member] | Warrants [Member] | ||||
Warrants issued, description | Warrants issued to purchase Class A Common stock equalling 80% of the Class A stocck issuable upon conversion of the notes. | |||
Warrant term | 3 years | |||
Warrant exercise price | $ 10 | |||
Private Placement [Member] | Two Accredited Investors [Member] | Convertible Notes [Member] | ||||
Debt face amount | $ 3,000,000 | |||
Debt stated interest rate | 6.00% | |||
Private Placement [Member] | Placement Agents [Member] | Placement Agent Warrants [Member] | ||||
Warrants issued, description | 7.0% of the shares of Common stock | |||
Warrant term | 5 years | |||
Warrant exercise price | $ 10 |
3. Variable interest entity (De
3. Variable interest entity (Details - Carrying amount of assets and liabilities) - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Income tax payable | $ 837,694 | $ 721,211 |
Variable Interest Entities [Member] | ||
Cash in bank | 110,872 | 72,686 |
Receivables from iPower | 492,384 | 0 |
Payables to iPower | 0 | 72,686 |
Income tax payable | 174,410 | 0 |
Other payables | $ 599 | $ 0 |
3. Variable interest entity (_2
3. Variable interest entity (Details - VIE results of operations - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue | $ 13,133,902 | $ 9,772,108 | $ 39,348,154 | $ 25,278,339 | ||
Net income | $ (206,823) | $ 220,724 | $ 1,337,472 | $ 577,222 | 1,130,649 | $ 797,946 |
Variable Interest Entities [Member] | ||||||
Revenue | 1,448,464 | |||||
Net income | $ 448,848 |
3. Variable interest entity (_3
3. Variable interest entity (Details Narrative) - Variable Interest Entities [Member] - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
E Marketing [Member] | ||
Operations expenses paid | $ 60,270 | $ 20,600 |
GPM [Member] | ||
Operations expenses paid | $ 30,875 | $ 0 |
4. Accounts receivable (Details
4. Accounts receivable (Details) - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Receivables [Abstract] | ||
Accounts receivable, gross | $ 8,281,993 | $ 6,067,199 |
Less: allowance for credit losses | 189,206 | 0 |
Accounts receivable, net | $ 8,092,787 | $ 6,067,199 |
4. Accounts receivable (Detai_2
4. Accounts receivable (Details Narrative) - USD ($) | 9 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Receivables [Abstract] | ||
Credit loss expenses | $ 189,206 | $ 0 |
5. Inventories (Details Narrati
5. Inventories (Details Narrative) - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Inventory Disclosure [Abstract] | ||
Inventories, net | $ 10,015,923 | $ 5,743,181 |
Allowance for obsolescence | $ 95,574 | $ 95,574 |
6. Prepayments and other curr_3
6. Prepayments and other current assets (Details) - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Total prepayments and other current assets | $ 2,923,572 | $ 616,231 |
Advance to Suppliers [Member] | ||
Total prepayments and other current assets | 1,768,768 | 298,841 |
Prepaid expenses and other receivables [Member] | ||
Total prepayments and other current assets | 1,154,804 | 317,390 |
Prepaid expenses and other receivables [Member] | Other receivables [Member] | ||
Total prepayments and other current assets | $ 212,266 | $ 132,433 |
7. Loans payable (Details Narra
7. Loans payable (Details Narrative) - USD ($) | 5 Months Ended | 6 Months Ended | 9 Months Ended | ||||
Nov. 16, 2020 | Dec. 31, 2020 | Mar. 31, 2021 | Mar. 22, 2021 | Apr. 13, 2020 | Mar. 31, 2020 | Jun. 30, 2020 | |
Proceeds from short term note | $ 22,414,846 | $ 11,757,178 | |||||
Repayment of short term debt | 21,691,308 | $ 11,275,098 | |||||
Loan payable - current | 29,244 | $ 0 | |||||
Loan payable - noncurrent | 470,756 | 500,000 | |||||
SBA Loan [Member] | |||||||
Loan payable | 500,000 | ||||||
Loan payable - current | 29,244 | ||||||
Loan payable - noncurrent | 470,756 | ||||||
WFC [Member] | Revolving Credit Facility [Member] | |||||||
Line of credit maximum authorized | 3,000,000 | ||||||
Line of credit interest rate | Discount rate of 3.055555% subject to a rebate of 0.0277% per day | ||||||
Line of credit amount outstanding | 1,877,718 | 1,154,180 | |||||
PPP Note [Member] | |||||||
Proceeds from short term note | $ 175,500 | ||||||
Debt stated interest rate | 0.10% | ||||||
Debt forgiven | $ 175,500 | ||||||
Debt outstanding | 0 | $ 175,500 | |||||
Two Unrelated Parties [Member] | |||||||
Proceeds from short term note | $ 300,000 | ||||||
Repayment of short term debt | $ 300,000 |
8. Convertible notes (Details -
8. Convertible notes (Details - Assumptions) - Convertible Notes [Member] - Conversion liability [Membmer] | 9 Months Ended |
Mar. 31, 2021 | |
Measurement Input Expected Term [Member] | |
Fair value measurement assumptions | 0.3 year |
Measurement Input Price Volatility [Member] | |
Fair value measurement assumptions | 35% |
Measurement Input Risk Free Interest Rate [Member] | |
Fair value measurement assumptions | 0.04% |
Measurement Input Expected Dividend Rate [Member] | |
Fair value measurement assumptions | 0% |
Measurement input probability [Member] | |
Fair value measurement assumptions | 60% |
8. Convertible notes (Details N
8. Convertible notes (Details Narrative) - USD ($) | 9 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Jan. 27, 2021 | |
Debt issuance costs | $ 120,000 | $ 0 | |
Amortization of debt discount | 501,562 | $ 0 | |
Convertible Notes [Member] | |||
Debt issuance costs | 120,000 | ||
Debt discount | 926,761 | $ 1,390,141 | |
Amortization of debt discount | 463,380 | ||
Convertible Notes [Member] | Conversion liability [Membmer] | |||
Conversion feature liabilities | 776,507 | ||
Change in fair value | 83,891 | ||
Convertible debt, net | 2,729,747 | ||
Warrants [Member] | |||
Debt issuance costs | $ 84,849 |
9. Related party transactions (
9. Related party transactions (Details Narrative) - USD ($) | 9 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Jun. 30, 2020 | Dec. 01, 2018 | |
Proceeds from related parties | $ 532,222 | $ 1,203,170 | ||
Repayments to related parties | 150,498 | 2,476,217 | ||
BizRight [Member] | ||||
Assets acquired | $ 2,611,594 | |||
BizRight [Member] | Asset acquisition [Member] | ||||
Proceeds from related parties | 532,222 | 1,303,170 | ||
Repayments to related parties | 150,498 | $ 2,476,217 | ||
Due to related parties | $ 515,517 | $ 133,793 |
10. Income taxes (Details - Pro
10. Income taxes (Details - Provision for income taxes) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Current federal tax expense | $ 555,430 | $ 212,722 | ||
Current state tax expense | 258,204 | 98,316 | ||
Total current income tax provision | 813,634 | 311,038 | ||
Federal deferred tax expense | (36,221) | 0 | ||
State deferred tax expense | (16,726) | 0 | ||
Total deferred tax assets | (52,947) | 0 | ||
Total income tax liability | $ 237,813 | $ 86,085 | $ 760,687 | $ 311,038 |
10. Income taxes (Details - Rec
10. Income taxes (Details - Reconcilation of effective income tax rate) | 9 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Federal | 21.00% | 21.00% |
Net effect of state income tax deduction and other permanent differences | 10.38% | (1.79%) |
Effective tax rate | 2.20% | 28.05% |
CALIFORNIA | ||
State | 8.84% | 8.84% |
10. Income taxes (Details Narra
10. Income taxes (Details Narrative) - USD ($) | Mar. 31, 2021 | Jun. 30, 2020 |
Income Tax Disclosure [Abstract] | ||
Income taxes payable | $ 837,694 | $ 721,211 |
Deferred tax assets | 52,947 | 0 |
Allowance for credit losses | $ 189,206 | $ 0 |
11. Earnings per share (Details
11. Earnings per share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | |
Earnings Per Share [Abstract] | ||||||
Net income | $ (206,823) | $ 220,724 | $ 1,337,472 | $ 577,222 | $ 1,130,649 | $ 797,946 |
Weighted-average shares used in computing basic and diluted earnings per share* | 20,204,496 | 20,170,788 | 20,204,496 | 20,056,515 | ||
Earnings per share of ordinary shares: -basic and diluted | $ (0.010) | $ 0.011 | $ 0.056 | $ 0.040 |
12. Equity (Details Narrative)
12. Equity (Details Narrative) - USD ($) | 4 Months Ended | 5 Months Ended | 6 Months Ended | |
Oct. 20, 2020 | Nov. 16, 2020 | Dec. 31, 2020 | Jan. 15, 2020 | |
Stock issued new, value | $ 14,000 | |||
Common Class A [Member] | ||||
Stock split | 2-for-1 forward split | |||
Stock issued for settlemtn payment, shares | 204,496 | |||
Stock issued for settlemtn payment, value | $ 427,010 | |||
Common Class B [Member] | ||||
Stock issued new, shares | 14,000,000 | |||
Stock issued new, value | $ 14,000 |
13. Series A Convertible Pref_2
13. Series A Convertible Preferred Stock (Details Narrative) - Series A Convertible Preferred Stock [Member] - USD ($) | 6 Months Ended | 9 Months Ended |
Dec. 30, 2020 | Mar. 31, 2021 | |
Stock issued new, shares | 34,500 | |
Private Placement [Member] | ||
Stock issued new, shares | 34,500 | |
Proceeds from sale of stock | $ 345,000 | |
Fair value of preferred stock | $ 433,714 | |
Change in fair value | $ (88,714) | |
Private Placement [Member] | Placement Agent [Member] | ||
Payment of stock issuance costs | $ 27,600 | |
Warrants issued | 2,415 | |
Warrant exercise price | $ 10 |
14. Warrant liabilities (Detail
14. Warrant liabilities (Details - Assumptions) - Warrant liability [Member] | 9 Months Ended |
Mar. 31, 2021 | |
Measurement Input Expected Term [Member] | |
Fair value measurement assumptions | 3 to 5 years |
Measurement Input Price Volatility [Member] | |
Fair value measurement assumptions | 56% to 58% |
Measurement Input Risk Free Interest Rate [Member] | |
Fair value measurement assumptions | 0.35% to 0.92% |
Measurement Input Expected Dividend Rate [Member] | |
Fair value measurement assumptions | 0% |
Measurement input probability [Member] | |
Fair value measurement assumptions | 60% |
14. Warrant liabilities (Deta_2
14. Warrant liabilities (Details Narrative) - USD ($) | 6 Months Ended | 9 Months Ended |
Dec. 30, 2020 | Mar. 31, 2021 | |
Warrant liability [Member] | ||
Derivative liability | $ 905,713 | |
Change in fair value | 161,959 | |
Private Placement [Member] | Series A Convertible Preferred Stock [Member] | ||
Proceeds from sale of equity | $ 345,000 | |
Change in fair value | $ (88,714) | |
Private Placement [Member] | Series A Convertible Preferred Stock [Member] | Placement Agent [Member] | ||
Warrants issued | 2,415 | |
Warrant exercise price | $ 10 | |
Warrant term | 5 years | |
Derivative liability | $ 8,047 |
15. Concentration of risk (Deta
15. Concentration of risk (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | |
Cash and cash equivalents | $ 474,322 | $ 877,156 | $ 977,635 | $ 471,458 |
Sales Revenue Net [Member] | ||||
Concentration risk percent | 78.00% | 70.00% | ||
Accounts Receivable [Member] | ||||
Concentration risk percent | 91.00% | 95.00% | ||
Cost of Sales [Member] | ||||
Concentration risk percent | 28.00% | 44.00% | ||
Cost of Sales [Member] | One Supplier [Member] | ||||
Concentration risk percent | 17.00% | 30.00% | ||
Cost of Sales [Member] | Another Supplier [Member] | ||||
Concentration risk percent | 11.00% | 14.00% | ||
Accounts Payable [Member] | One Supplier [Member] | ||||
Concentration risk percent | 19.00% | |||
Accounts Payable [Member] | Another Supplier [Member] | ||||
Concentration risk percent | 17.00% | 13.00% | ||
Accounts Payable [Member] | Another Supplier [Member] | ||||
Concentration risk percent | 12.00% |
16. Commitments and contingen_3
16. Commitments and contingencies (Details - Lease cost) - USD ($) | 9 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease cost | $ 559,606 | $ 275,859 | |
Cash paid for amounts included in the measurement of lease liabilities | $ 473,285 | $ 275,859 | |
Lease remaining term | 2 years 6 months | 9 months | |
Average discount rate - operating leases | 8.00% | 8.00% | |
Right of use asset - noncurrent | $ 1,987,363 | $ 262,875 | |
Lease liability - current | 715,083 | 262,875 | |
Lease liability - non current | $ 1,358,601 | $ 0 |
16. Commitments and contingen_4
16. Commitments and contingencies (Details - Lease maturity) | Jun. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
For the period from April 1, 2021 to June 30, 2021 | $ 209,762 |
For Year ending June 30, 2022 | 847,845 |
For Year ending June 30, 2023 | 859,881 |
For Year ending June 30, 2024 | 371,639 |
Less: Imputed interest/present value discount | (215,443) |
Present value of lease liabilities | $ 2,073,684 |
16. Commitments and contingen_5
16. Commitments and contingencies (Details Narrative) | Mar. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Lease commitment | $ 2,346,200 |