| Basis of Presentation and Summary of significant 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 subsidiaries and VIE 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, 2024, or for any
other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included
in the Annual Report for the year ended June 30, 2023, which are included in Form 10-K filed with the SEC on September 14, 2023. Principles of Consolidation The unaudited condensed consolidated
financial statements include the accounts of the Company and its subsidiaries, E Marketing Solution Inc., Global Product Marketing
Inc., Global Social Media, LLC, and Anivia Limited and its subsidiaries and VIE, including Fly Elephant Limited, Dayourenzai
(Shenzhen) Technology Co., Ltd., and Daheshou (Shenzhen) Information Technology Co., Ltd. All inter-company balances and
transactions have been eliminated. Emerging Growth Company Status The company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of utilizing the emerging growth company reduced reporting requirements difficult. Use of estimates and assumptions The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures
of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during
the periods presented. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at
the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one
or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. Foreign currency translation and transactions The reporting and functional currency of
iPower and its subsidiaries is the U.S. dollar (USD). iPower’s WFOE and VIE in China uses the local currency, Renminbi
(“RMB”), as its functional currency. Assets and liabilities of the VIE are translated at the current exchange rate as
quoted by the People’s Bank of China (the “PBOC”) at the end of the period. Income and expense accounts are
translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive income (loss) in the statement of changes in
stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a
currency other than the functional currency are included in the results of operations as incurred. The balance sheet amounts of the VIE, with
the exception of equity, on September 30, 2023, were translated at 7.2948 7.2406 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, which is currently the maximum amount insured by the FDIC for interest
bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). The Company has not experienced
any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. Accounts receivable, net During the ordinary course of business, the Company
extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers.
Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required. The Company evaluates the creditworthiness of
all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable. If there
are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular
customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that
the Company develops allowance for credit losses:
· the customer fails to comply with its payment schedule;
· the customer is in serious financial difficulty;
· a significant dispute with the customer has occurred regarding job progress or other matters;
· the customer breaches any of its contractual obligations;
· the customer appears to be financially distressed due to economic or legal factors;
· the business between the customer and the Company is not active; or
· other objective evidence indicates non-collectability of the accounts receivable. Accounts receivable are recognized and carried
at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance for credit losses resulting from the
inability of its customers to make required payments based on contractual terms. The Company reviews the collectability of its receivables
on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses the potential impact of the
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. Equity method investment The Company accounts for its ownership interest
in Box Harmony, a 40 Business Combination On February 15, 2022, the Company acquired 100%
of the ordinary shares of Anivia and its subsidiaries, including the VIE. The Company applies the acquisition method of accounting for
business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired
and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability
being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including
identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities
assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred.
See Note 4 for details regarding the acquisition. Variable interest entities On February 15, 2022, the Company acquired 100%
of the ordinary shares of Anivia and its subsidiaries, including Daheshou (Shenzhen) Information Technology Co., Ltd., a company organized
under the Laws of the PRC (“DHS”). Pursuant to the terms of the Agreements, the Company does not have direct ownership in
DHS but is actively involved in DHS’s operations as the sole manager to direct the activities and significantly impact DHS’s
economic performance. DHS’s operational funding has been provided by the Company following the February 15, 2022 acquisition. During
the term of the Agreements, the Company bears all the risk of loss and has the right to receive all of the benefits from DHS. As such,
based on the determination that the Company is the primary beneficiary of DHS, in accordance with ASC 810-10-25-38A through 25-38J, DHS
is considered a VIE of the Company and the financial statements of DHS have been consolidated from the date such control existed, February
15, 2022. See Note 4 and Note 5 for details regarding the acquisition. Goodwill Goodwill represents the excess of the purchase
price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill
and Other Goodwill is not amortized but is reviewed for
potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The
Company’s review for impairment includes an assessment of qualitative factors to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying value, including goodwill. If it is determined that it is more likely than
not that the fair value of a reporting unit is less than its carrying value, including goodwill, a quantitative goodwill impairment test
is performed, which compares the fair value of the reporting unit with its carrying amounts, including goodwill. If the fair value of
the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount
of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the
total amount of goodwill allocated to that reporting unit. The Company engaged an independent third-party valuation firm in August 2022
to conduct an evaluation of goodwill impairment for the Company as a whole at the consolidated reporting unit level as of June 30, 2022,
which evaluation was conducted prior to the Company’s filing of its Annual Report on Form 10-K for the period ended June 30, 2022.
Due to the decrease in the Company’s share price subsequent to the filing of the June 30, 2022 Form 10-K and the net loss incurred
during the quarter ended September 30, 2022, the Company engaged the same valuation firm to review goodwill for impairment. Based on this
review, the Company concluded an impairment loss of $ 3,060,034 During the period ended September 30, 2023, the
Company performed a qualitative goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C and noted no goodwill impairment.
As of September 30, 2023 and 2022, the goodwill balance amounted to $ 3,034,110 3,034,110 Intangible Assets, net Finite life intangible assets at September 30,
2023 include covenant not to compete, supplier relationship, and software recognized as part of the acquisition of Anivia. Intangible
assets are recorded at the estimated fair value of these items at the date of acquisition, February 15, 2022. Intangible assets are amortized
on a straight-line basis over their estimated useful life as followings:
Schedule of estimated useful life
Useful Life
Covenant Not to Compete 10
Supplier relationship 6
Software 5 The Company reviews the recoverability of long-lived
assets, including intangible assets, when events or changes in circumstances occur that indicate the carrying value of the asset may not
be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected
future pretax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the
carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The
measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair
value determinations. As of September 30, 2023 and 2022, there were no indicators of impairment. Fair values of financial instruments ASC 825, “Disclosures about Fair Value of
Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements”
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures
about fair value measurements. The carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature. On February 15, 2022, as part of the consideration
for the acquisition of Anivia, the Company issued a two-year unsecured 6% subordinated promissory note, payable in equal semi-annual installments
commencing August 15, 2022 (the “Purchase Note”). The principal amount of the Purchase Note was $ 3.5 million 3.6 million
Schedule of assumptions for financial instruments
Corporate bond yield 3.1%
Risk-free rate 1.6%
Liquidity premium 0.4%
Discount rate 3.5% As of September 30, 2023, the outstanding
balance of the Purchase Note was $ 1,149,961 875,000 19,023 255,938 For other financial instruments to be reported
at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants
would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions
in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized
in one of the following levels: Level 1 – Inputs are unadjusted, quoted
prices in active markets for identical assets or liabilities at the measurement date; Level 2 – Inputs are observable, unadjusted
quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities
in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the related assets or liabilities; and Level 3 – Unobservable inputs that are significant
to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. The Company does not have any assets or liabilities
measured at fair value on a recurring basis. We measure certain non-financial assets on a non-recurring basis, including goodwill. As
a result of those measurements, we recognized an impairment charge of $3.1 million during the year ended June 30, 2023 as follows:
Schedule of assumptions for financial instruments
Total Fair Level 1 Level 2 Level 3 Total
Goodwill $ 3,034,110 $ – $ – $ 3,034,110 $ 3,060,034
Total $ 3,034,110 $ – $ – $ 3,034,110 $ 3,060,034 Goodwill, with a total carrying value of $6.1
million, was written down to its fair value of $3.0 million, resulting in an impairment charge of $3,060,034, which was recorded in earnings
for the year ended June 30, 2023. The fair value of goodwill was determined based on the discounted cash flow method, which is an income
approach, which required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that would be
used by a market participant, projections of revenues and cash flows with the revised projections reflecting the increase in freight and
storage costs in the current interim quarter, among others. Revenue recognition The Company recognizes revenue from product sales
revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has
been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated
to separate performance obligations and revenue is recognized upon satisfying each performance obligation. 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. Advertising costs Advertising costs are expensed as incurred. Total
advertising and promotional costs included in selling and fulfillment expenses for the three months ended September 30, 2023 and 2022
were $ 1,570,742 1,166,349 Cost of revenue Cost of revenue mainly consists of costs for purchases
of products and related inbound freight and delivery fees. Operating expenses Operating expenses, which consist of selling and fulfillment and general
and administrative expenses, are expensed as incurred. Inventory, net Inventory consists of finished goods ready for
sale and is stated at the lower of cost or market. The Company values its inventory using the weighted average costing method. The Company’s
policy is to include as a part of inventory and cost of goods sold any freight incurred to ship the product from its vendors to warehouses.
Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling and fulfillment
expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of the inventory
is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated market value. The Company also
reviews inventory for slow moving inventory and obsolescence and records allowance for obsolescence. Debt Issuance Costs Costs incurred in connection with the
issuance of debt are deferred and amortized as interest expense over the term of the related debt using the effective interest
method. To the extent that the debt is outstanding, these amounts are reflected in the unaudited condensed consolidated balance
sheets as direct deductions from the carrying amount of the outstanding borrowings. Segment reporting The Company follows ASC 280, Segment
Reporting. The Company’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results of
operations when making decisions about allocating resources and assessing the performance of the Company as a whole and, hence, the
Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal
reporting. For the three months ended September 30, 2023 and 2022, sales through Amazon to Canada and other foreign countries were
approximately 8.2 9.8 16.8 83.2 53 47 1.4
million 1.6 Leases The Company records right-of-use (“ROU”)
assets and related lease obligations on the balance sheet. ROU assets represent our right to use an underlying
asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the
Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated
rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU
asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line
basis over the lease term. Stock-based Compensation The Company applies ASC No. 718, “Compensation-Stock
Compensation,” which requires that share-based payment transactions with employees and nonemployees, upon adoption of ASU 2018-07,
be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service
period, with a corresponding addition to equity. Under this method, compensation costs related to employee share options or similar equity
instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee
is required to provide service in exchange for the award, which generally is the vesting period. In addition to the requisite service
period, the Company also evaluates the performance condition and market condition under ASC 718-10-20. For an award which contains both
a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated
into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s
vesting period if it is probable the performance condition will be met. If the performance condition is ultimately not met, compensation
costs related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied. The Company will recognize forfeitures of such
equity-based compensation as they occur. Income taxes The Company accounts for income taxes under the
asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The Company has analyzed filing positions in each
of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions.
The Company has identified the U.S. federal jurisdiction, and the states of Nevada and California, as its “major” tax jurisdictions.
However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities
until the statute of limitations closes with respect to the year in which such attributes are utilized. The Company believes that our income tax filing
positions and deductions will be sustained on audit and 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, Income Taxes. The
Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component
of income taxes. Commitments and contingencies In the ordinary course of business, the Company
is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of
matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it
is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making
these assessments including historical and specific facts and circumstances of each matter. Earnings per share Basic earnings per share 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 October 2023, the FASB issued ASU 2023-06,
Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. This ASU incorporates
certain U.S. Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification™ (“Codification”).
The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics,
allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously
subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. In SEC Release No. 33-10532,
Disclosure Update and Simplification, issued August 17, 2018, the SEC referred certain of its disclosure requirements that overlap with,
but require incremental information to, generally accepted accounting principles to the FASB for potential incorporation into the Codification.
The ASU incorporates into the Codification 14 of the 27 disclosures referred by the SEC. They modify the disclosure or presentation requirements
of a variety of Topics in the Codification. The requirements are relatively narrow in nature. Some of the amendments represent clarifications
to, or technical corrections of, the current requirements. Because of the variety of Topics amended, a broad range of entities may be
affected by one or more of those amendments. For entities subject to the SEC’s existing disclosure requirements and for entities
required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities
that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC
removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if
by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification
and not become effective for any entity. The Company does not expect the adoption of this standard to have a material impact on its consolidated
financial statements. In September 2022, FASB issued ASU 2022-04, Liabilities—Supplier
Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments in this ASU require that a company
that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program
to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period,
and potential magnitude. ASU 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after
December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective for fiscal years beginning
after December 15, 2023. Early adoption is permitted. An entity should apply ASU No. 2022-04 retrospectively to all periods in which a
balance sheet is presented, except for the obligation rollforward, which should be applied prospectively. The adoption of this standard
did not have a material impact on the Company’s consolidated financial statements. In June 2022, FASB issued ASU 2022-03, Fair
Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in
this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction
and require specific disclosures related to such an equity security. This standard is effective for fiscal years beginning after December
15, 2024. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In October 2021, the FASB issued ASU 2021-08,
Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies
that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance
with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts. The guidance is
effective for fiscal years beginning after December 15, 2023, with early application permitted. The Company does not expect the adoption
of this standard to have a material impact on its consolidated financial statements. In March 2020 and January 2021, the FASB issued
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU
No. 2021-01, Reference Rate Reform (Topic 848): Scope, respectively (collectively, “Topic 848”). Topic 848 provides optional
expedients and exceptions for apply |
