UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2024

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission file number: 001-41680

Ispire Technology Inc.

(Exact name of registrant as specified in its charter)

Delaware		93-1869878
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

19700 Magellan Drive

Los Angeles, California

90502

(Address of principal executive offices)

(Zip Code)

(310) 742-9975

(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share		ISPR		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 7, 2025, there were 57,090,972 shares of common stock outstanding.

ISPIRE TECHNOLOGY INC.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2024 and June 30, 2024	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended December 31, 2024 and 2023	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended December 31, 2024 and 2023	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2024 and 2023	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

	PART II - OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults upon Senior Securities	29
Item 4.	Mine and Safety Disclosure	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended June 30, 2024, as well as the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the U.S. Securities and Exchange Commission (the “SEC”). You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, “Company,” “we,” “us,” “our” and similar terms refer to Ispire Technology Inc. and its subsidiaries, unless the context indicates otherwise.

PART I - FINANCIAL INFORMATION

ITEM 1 - Financial Statements

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In $USD, except share and per share data)

	December 31, 2024			June 30, 2024
Assets
Current assets:
Cash	$	34,372,851		$	35,071,294
Restricted cash		22,535			-
Accounts receivable, net		67,700,463			59,734,765
Inventories, net		7,900,110			6,365,394
Prepaid expenses and other current assets		2,324,245			1,400,152
Total current assets		112,320,204			102,571,605
Non-current assets:
Property, plant and equipment, net		2,365,115			2,582,457
Intangible assets, net		2,120,367			1,375,666
Right-of-use assets – operating leases		2,949,756			3,579,140
Other investment		2,000,000			2,000,000
Equity method investment		10,071,380			10,248,048
Other non-current assets		215,612			284,050
Total non-current assets		19,722,230			20,069,361
Total assets	$	132,042,434		$	122,640,966
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	5,156,302		$	3,779,723
Accounts payable – related party		86,375,645			67,046,472
Contract liabilities		1,882,743			2,218,166
Accrued liabilities and other payables		11,576,021			11,738,339
Operating lease liabilities – current portion		1,245,061			1,207,832
Total current liabilities		106,235,772			85,990,532

Non-current liabilities:
Operating lease liabilities – net of current portion		1,572,574			2,194,094
Total liabilities		107,808,346			88,184,626

Commitments and contingencies

Stockholders’ equity:
Common stock, par value $0.0001 per share; 140,000,000 shares authorized; 56,677,982 and 56,470,636 shares issued and outstanding as of December 31, 2024 and June 30, 2024		5,668			5,647
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued at December 31, 2024 and June 30, 2024		-			-
Additional paid-in capital		46,670,244			43,217,391
Accumulated deficit		(22,418,700	)		(8,825,041	)
Accumulated other comprehensive (loss) income		(23,124	)		58,343
Total stockholders’ equity		24,234,088			34,456,340
Total liabilities and stockholders’ equity	$	132,042,434		$	122,640,966

See notes to unaudited condensed consolidated financial statements.

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In $USD, except share and per share data)

	Three Months Ended December 31,						Six Months Ended December 31,
	2024			2023			2024			2023

Revenue	$	41,827,860		$	41,685,561		$	81,166,173		$	84,550,208

Cost of revenue		34,105,289			35,432,663			65,769,224			71,452,462

Gross profit		7,722,571			6,252,898			15,396,949			13,097,746

Operating expenses:
Sales and marketing expenses		2,061,664			1,394,407			5,053,911			2,419,626
General and administrative expenses		13,020,962			8,778,715			22,965,962			15,476,589

Total Operating expenses		15,082,626			10,173,122			28,019,873			17,896,215

Loss from operations		(7,360,055	)		(3,920,224	)		(12,622,924	)		(4,798,469	)

Other income (expense):
Interest income, net		59,755			203,101			59,841			275,347
Exchange gain (loss), net		(245,173	)		30,856			(127,588	)		34,517
Other income (expense), net		6,861			46,535			13,796			3,331

Total Other income (expense), net		(178,557	)		280,492			(53,951	)		313,195

Loss before income taxes		(7,538,612	)		(3,639,732	)		(12,676,875	)		(4,485,274	)

Income taxes - current		(460,031	)		(352,180	)		(916,784	)		(848,225	)

Net loss	$	(7,998,643	)	$	(3,991,912	)	$	(13,593,659	)	$	(5,333,499	)

Other comprehensive loss
Foreign currency translation adjustments		73,470			114,327			(81,467	)		158,790
Comprehensive income (loss)	$	(7,925,173	)	$	(3,877,585	)	$	(13,675,126	)	$	(5,174,709	)

Net loss per share
Basic and diluted	$	(0.14	)	$	(0.07	)	$	(0.24	)	$	(0.10	)

Weighted average shares outstanding:
Basic and diluted		56,658,012			54,270,236			56,629,666			54,258,224

See notes to unaudited condensed consolidated financial statements.

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In $USD, except share and per share data)

							Retained			Accumulated
	Common stock				Additional		Earnings/			Other			Total
	Number of				Paid-in		(Accumulated			Comprehensive			Shareholders’
	Shares		Amount		Capital		deficit)			(Loss)/Income			Equity
Balance, October 1, 2024		56,641,041	$	5,664	$	45,224,962	$	(14,420,057	)	$	(96,594	)	$	30,713,975

Net loss		-		-		-		(7,998,643	)		-			(7,998,643	)

Issuance of common stock for equity incentives		36,941		4		35,706		-			-			35,710

Share based compensation expenses		-		-		1,409,576		-			-			1,409,576

Foreign currency translation adjustment		-		-		-		-			73,470			73,470

Balance, December 31, 2024		56,677,982	$	5,668	$	46,670,244	$	(22,418,700	)	$	(23,124	)	$	24,234,088

Balance, October 1, 2023		54,268,992	$	5,427	$	26,653,029	$	4,601,194		$	(119,305	)	$	31,140,345

Net loss		-		-		-		(3,991,912	)		-			(3,991,912	)

Issuance of common stock for equity incentives		10,404		1		213,445		-			-			213,446

Share based compensation expenses		-		-		1,669,475		-			-			1,669,475

Foreign currency translation adjustment		-		-		-		-			114,327			114,327
Balance, December 31, 2023		54,279,396	$	5,428	$	28,535,949	$	609,282		$	(4,978	)	$	29,145,681

							Retained			Accumulated
	Common stock				Additional		Earnings/			Other			Total
	Number of				Paid-in		(Accumulated			Comprehensive			Shareholders’
	Shares		Amount		Capital		deficit)			(Loss)/Income			Equity
Balance, July 1, 2024		56,470,636	$	5,647	$	43,217,391	$	(8,825,041	)	$	58,343		$	34,456,340

Net loss		-		-		-		(13,593,659	)		-			(13,593,659	)

Issuance of common stock for equity incentives		207,346		21		1,154,800		-			-			1,154,821

Share based compensation expenses		-		-		2,298,053		-			-			2,298,053

Foreign currency translation adjustment		-		-		-		-			(81,467	)		(81,467	)

Balance, December 31, 2024		56,677,982	$	5,668	$	46,670,244	$	(22,418,700	)	$	(23,124	)	$	24,234,088

Balance, July 1, 2023		54,222,420	$	5,422		25,685,475	$	5,942,781		$	(163,768	)	$	31,469,910

Net loss		-		-		-		(5,333,499	)		-			(5,333,499	)

Issuance of common stock for equity incentives		56,976		6		539,056		-			-			539,062

Share based compensation expenses		-		-		2,311,418		-			-			2,311,418

Foreign currency translation adjustment		-		-		-		-			158,790			158,790
Balance, December 31, 2023		54,279,396	$	5,428	$	28,535,949	$	609,282		$	(4,978	)	$	29,145,681

See notes to unaudited condensed consolidated financial statements.

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In $USD, except share and per share data)

	Six Months ended December 31,
	2024			2023

Net loss	$	(13,593,659	)	$	(5,333,499	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		393,325			75,160
Credit loss expenses		7,286,079			2,126,284
Right-of-use assets amortization		629,384			582,201
Stock-based compensation expenses		3,452,874			2,850,480
Inventory reserve		73,692			130,452
Loss from equity investment		176,668			-
Changes in operating assets and liabilities:
Accounts receivable		(15,251,777	)		(22,762,155	)
Inventories		(1,666,508	)		(206,430	)
Prepaid expenses and other current assets		(855,655	)		138,755
Accounts payable and accounts payable – related party		20,705,752			1,759,301
Contract liabilities		(206,880	)		629,430
Accrued liabilities and other payables		(130,894	)		322,353
Operating lease liabilities		(584,291	)		(63,853	)
Income tax payable		-			(480,528	)
Net cash provided by (used in) operating activities		428,110			(20,232,049	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(322,764	)		(1,130,620	)
Acquisition of intangible assets		(781,254	)		(731,593	)
Net cash used in investing activities		(1,104,018	)		(1,862,213	)

Cash flows from financing activities:
Repayments of advances from a related party		-			(703,322	)
Net cash used in financing activities		-			(703,322	)

Net decrease in cash		(675,908	)		(22,797,584	)
Cash, restricted cash and equivalents - beginning of period		35,071,294			40,300,573
Cash, restricted cash and equivalents - end of period	$	34,395,386		$	17,502,989
Reconciliation of cash, restricted cash and equivalents
Cash and cash equivalents	$	34,372,851		$	17,502,989
Restricted cash		22,535			-
Total cash, restricted cash and equivalents	$	34,395,386		$	17,502,989

Supplemental non-cash investing and financing activities
Leased assets obtained in exchange for operating lease liabilities	$	-		$	537,307
Supplemental cash flow disclosure
Cash paid for income taxes	$	1,413,533		$	1,357,265
Cash paid for interest	$	24,537		$	4,482

See notes to unaudited condensed consolidated financial statements.

ISPIRE TECHNOLOGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Ispire Technology Inc. (the “Company” or “Ispire”) was incorporated under the laws of the State of Delaware on June 13, 2022. Through its subsidiaries, the Company is engaged in the research and development, design, commercialization, sales, marketing and distribution of branded e-cigarettes and cannabis vaping products.

Ispire Technology Inc. is a holding company and does not engage in any active operations. Its business is mainly conducted by its two operating subsidiaries, Aspire North America, which is engaged in the development, marketing and sales of cannabis vapor products, which were introduced in mid-2020, and Aspire Science, which is engaged in the marketing and sales of nicotine vaping products, and the products are mainly sold in Europe and Asia Pacific (excluding the People’s Republic of China (“PRC”).

In July 2024, the Company established a wholly-owned subsidiary, Aspire AME Electronic Cigarettes Trading LLC (“Ispire UAE”) under the laws of the United Arab Emirates (“UAE”), in order to establish sales and marketing in the UAE.

In October 2024, the Company established a wholly-owned subsidiary, Magellan Trading LLC (Magellan Trading) incorporated under the laws of the State of California to assist in operations and logistics for the Company.

The following table sets forth information concerning the Company and its subsidiaries as of December 31, 2024:

Name of Entity	Date of Organization	Place of Organization	% of Ownership	Principal Activities
Ispire Technology Inc.	June 13, 2022	Delaware	Parent Company	Holding Company
Ispire International	July 6, 2022	BVI	100%	Holding Company
Aspire North America	February 22, 2020	California	100%	Research and Development, Sales and Marketing
Aspire Science	December 9, 2016	Hong Kong	100%	Sales and Marketing
Ispire Malaysia	August 2, 2023	Malaysia	100%	Manufacturing, Sales and Marketing
Ispire Global Products LLC	January 19, 2024	Delaware	100%	Sales and Marketing
Aspire AME Electronic Cigarettes Trading LLC	July 19, 2024	UAE	100%	Sales and Marketing
Magellan Trading LLC	October 1, 2024	California	100%	Operations and Logistics

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s consolidated financial position as of December 31, 2024 and the results of operations for the three and six months ended December 31, 2024 and 2023. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the United States Securities and Exchange Commission ("SEC") and accordingly do not include all of the disclosures normally made in the Company’s annual consolidated financial statements. Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended June 30, 2024.

The unaudited condensed consolidated balance sheet as of June 30, 2024 has been derived from the audited consolidated financial statements at such date. The results of operations for the three and six months ended December 31, 2024 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the year ending June 30, 2025.

Use of significant estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include allowance for credit losses, revenue recognition, fair value of equity instruments, inventory reserve, incremental borrowing rate, and determination of the valuation allowances for deferred taxes. Actual results could differ from those estimates.

Fair value measurement

The Company applies ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands financial statement disclosure requirements for fair value measurements.

ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

●

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The carrying value of certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other receivables, accounts payable, accounts payable related party, contract liabilities, accrued liabilities and other payables and due to related parties, approximates their fair value because of their short-term maturity.

Allowance for credit losses

The Company adopted Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” on July 1, 2023, under the modified retrospective method of adoption. The Company estimates its allowance for current expected credit losses based on an expected loss model, compared to prior periods which were estimated using an incurred loss model which did not require the consideration of forward-looking economic variables and conditions in the reserve calculation across the portfolio. The impact related to adopting the new standard was not material.

Based on the current expected credit loss model, the Company consider many factors, including age of balance, past events, any historical default, current information available about the customers, current economic conditions and certain forward-looking information, including reasonable and supportable forecasts.

Inventories

Inventories mainly consist of finished goods purchased from suppliers. Inventories are stated at the lower of cost or net realizable value. The cost of an inventory item is determined using the weighted average method.

When management determines that certain inventories may not be saleable, or there is an indicator that certain inventory costs may exceed expected market value, the Company will record the difference between the cost and the net realizable value as a write down of inventories. The net realizable value is determined based on the estimated selling price, in the ordinary course of business, less estimated costs necessary to make the sale. The Company records an allowance for slow moving and potentially obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and an estimate of expected sellable life of the inventory. The Company periodically reviews inventory to identify slow moving inventories and compares the forecast sales with the quantities and expected sellable life of inventory. Any inventories identified during this process are reserved for at rates based upon management’s judgment and historical rates. The quantity thresholds and reserve rates are based on management’s judgment and knowledge of current and projected demand. The reserve estimates may, therefore, be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment, impact its ability to sell potentially obsolete inventory. As of December 31, 2024 and June 30, 2024, the Company recorded inventory reserves of $279,286 and $205,594, respectively.

Intangible assets

Intangible assets refer to capitalized external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent license rights. The Company expenses costs associated with maintaining patents subsequent to their issuance in the period incurred. Capitalized patent costs are amortized on a straight-line basis over estimated useful lives of 15 – 20 years, which are based on the length of the license agreements as the Company expects to receive economic benefits over that time. The Company assesses the potential impairment to capitalized patent costs when events or changes in circumstances indicate that the carrying amount of our patent portfolio may not be recoverable. $124,832 and $255,650 of patent fees were capitalized during the three months ended December 31, 2024 and 2023 respectively. $781,254 and $731,593 of patent fees were capitalized during the six months ended December 31, 2024 and 2023, respectively. The amortization of the intangible assets was $20,270 and $4,615 for the three months ended December 31, 2024 and 2023, respectively. The amortization of the intangible assets was $36,553 and $4,615 for the six months ended December 31, 2024 and 2023, respectively. The amortization expenses were included in the general and administrative expenses.

Revenue recognition

The Company sells its vaping products to customers and recognizes revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers. Many customers are distributors that resell the Company’s products in various geographic regions. The performance obligations are for the Company to transfer the title and control of the goods to a customer for a determined price. Each order is considered a separate contract with a single performance obligation. Revenue is recognized when control of goods has transferred to customers. For the majority of the Company’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered to the pickup location specified by the customer or a forwarder appointed by the customer, as that is generally when legal title, physical possession and risks and rewards of goods transfer to the customer.

Revenue is recognized at the transaction price based on the purchase order as adjusted for the anticipated rebates, discounts and other sales incentives. When determining the transaction price, management estimates variable consideration applying the portfolio approach practical expedient under ASC 606. The main sources of variable consideration for the Company are trade promotion funds and cash discounts. These sales incentives are recorded as a reduction of revenue at the time of the initial sale using the most-likely amount estimation method. The most-likely amount method is based on the single most likely outcome from a range of possible consideration outcomes.

The Company offers different payment terms to different customers. For nicotine vaping products, the general payment term is a deposit of 30% of sales amount upon placing order, and the payment of the remaining 70% to be made before shipment. For cannabis vaping products, a tailored payment term is designed for each customer, based on the business relationship, order size and other considerations. All contract liabilities at the beginning of the period were recognized as revenues in the reporting period. The Company offers a thirty-day warranty. The warranty is an assurance-type warranty, and it offers replacement of products in case the products sold do not function as expected. In certain sales contracts, a right of return is offered. With a right of return, a customer is given the right to return the products if they are not satisfied with the product, and a credit would be given. The Company has a very low rate of return in history and a return reserve is accrued based on historical return rate and the management’s judgement. The Company has minimal incremental costs of obtaining a contract and are expensed when incurred. Sales taxes, which are sales and use or other similar taxes collected from the customer and remitted to the applicable taxing authority by the Company in accordance with applicable law, are excluded from revenue.

Disaggregated Revenue

The Company has taken into consideration the nature, amount, timing, and uncertainty of revenue and cash flows, and has determined to disaggregate its net sales by region. The net sales disaggregated by region for the three and six months ended December 31, 2024 and 2023, were as follows:

	Three months ended December 31,				Six months ended December 31,
	2024		2023		2024		2023
Europe	$	23,987,678	$	15,653,902	$	45,939,051	$	35,516,154
North America (the U.S. and Canada)		10,916,260		19,962,607		20,653,148		37,829,972
Asia Pacific (excluding PRC)		3,613,359		5,983,356		7,488,743		11,060,664
Africa		2,674,155		85,696		5,722,066		143,418
South America		636,408		-		1,363,165		-
Total	$	41,827,860	$	41,685,561	$	81,166,173	$	84,550,208

Cost of revenue

Cost of revenue for the three and six months ended December 31, 2024 and 2023 consisted primarily of the cost of purchasing vaping products, freight-in cost and inventory impairment, which were mostly purchased from a related party. See Note 10.

Stock-based compensation

The Company measures and recognizes compensation expenses for stock-based payment awards, including stock options, restricted stock granted to directors and advisors, and restricted stock units (“RSUs”) granted to employees, based on the grant date fair value of the awards. The Company engages a third-party valuer to assist in determining the fair value of stock options using the binomial option pricing model, with significant assumption of exercise multiple, expected volatility, risk-free interest rate and expected dividend yield. The fair value of RSUs is measured on the grant date based on the closing market price of the Company’s common stock. The stock-based payment awards typically include time-based vesting conditions, however, certain of the Company’s stock-based payment awards may include performance-based vesting conditions.

For stock-based payment awards with time-based vesting conditions, the resulting cost is recognized over the period during which an employee or service provider is required to provide service in exchange for the awards, usually the vesting period. For stock-based payment awards with performance-based vesting conditions, the Company will estimate the probability that the performance condition will be met at each reporting date. Stock-based compensation expense is only recognized for stock-based payment awards that are probable of vesting.

Stock-based compensation expense is recorded in the general and administrative expense in the consolidated statements of operations. The Company recognizes forfeitures of stock-based payment awards upon occurrence.

Recent accounting pronouncements

As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period for all accounting standards described below, if applicable.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. ASU 2023-07 will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on our segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for public business entities for annual periods beginning after December 15, 2024, and for private entities for annual periods beginning after December 15, 2025, on a prospective basis. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

Customer and Supplier Concentration

For the three and six months ended December 31, 2024 and 2023, the Company’s major customers, who accounted for more than 10% of the Company’s consolidated revenue, were as follows:

	Three months ended December 31,						Six months ended December 31,
	2024			2023			2024			2023
Major Customers
Customer A		28	%		26	%		24	%		30	%
Customer B		*			13	%		*			*

*	Represented less than 10% of consolidated revenue.

For the three and six months ended December 31, 2024 and 2023, the Company’s suppliers, who accounted for more than 10% of the Company’s total purchases, were as follows:

	Three months ended December 31,						Six months ended December 31,
	2024			2023			2024			2023
Major Suppliers
Supplier C		93	%		71	%		93	%		73	%

⁽¹⁾	Major Supplier C is Shenzhen Yi Jia, a Chinese company that is 95% owned by the Company’s co-chief executive officer and principal stockholder. See Note 10.

Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and accounts receivable. The Company maintains its cash in financial institutions. Accounts at United States financial institutions are insured by the Federal Deposit Insurance Corporation(“FDIC”) up to $250,000. Accounts at Malaysian financial institutions are insured by the Perbadanan Insurans Deposit Malaysia (“PIDM”) up to RM 250,000. The Hong Kong Deposit Protection Board pays compensation up to a limit of Hong Kong Dollar (“HKD”) 800,000. The Company may carry cash balances at financial institutions in excess of the insured limits. The amount in excess of the deposit insurance as of December 31, 2024 and June 30, 2024 was $33,986,484 and $34,698,647. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

As of December 31, 2024 and June 30, 2024, the Company’s customers, whose accounts receivable balances accounted for more than 10% of the Company’s total accounts receivable, were as follows:

	As of December 31,			As of June 30,
Customers	2024			2024
D		14	%		16	%
E		10	%		*

3. CASH AND CASH EQUIVALENTS, RESTRICTED CASH

Below is a breakdown of the Company’s cash balances in banks as of December 31, 2024 and June 30, 2024, both by geography and by currencies (translated into U.S. dollars):

	As of December 31,		As of June 30,
By Geography:	2024		2024
Cash in HK	$	32,897,783	$	32,667,486
Cash in U.S.		1,193,782		2,240,874
Cash in Malaysia		281,286		162,934
Total	$	34,372,851	$	35,071,294

By Currency:
USD	$	24,677,891	$	25,399,331
RM		182,527		88,598
HKD		132,210		121,628
EUR		9,340		13,056
GBP		22,138		22,233
RMB		9,348,745		9,426,448
Total	$	34,372,851	$	35,071,294

“HKD” refers to Hong Kong dollars, “GBP” refers to British pounds, “EUR” refers to Euros and “RM” refers to Malaysia ringgit.

As of December 31, 2024 and June 30, 2024, restricted cash totaled $22,535 and $0, and is included in Malaysia in RM. It represents a bank guarantee with the customs department in Malaysia. This amount will be reviewed annually and may increase depending on the Company’s Malaysian import and export forecasts for the coming year.

4. ACCOUNTS RECEIVABLE, NET

As of December 31, 2024 and June 30, 2024, accounts receivable consisted of the following:

	As of December 31,			As of June 30,
	2024			2024
Accounts receivable – gross	$	79,005,575		$	65,620,003
Allowance for credit losses		(11,305,112	)		(5,885,238	)
Accounts receivable, net	$	67,700,463		$	59,734,765

The Company recorded $4,183,998 and $1,900,797 bad debt expense for the three months ended December 31, 2024 and 2023, respectively. The Company recorded $7,286,079 and $2,126,284 bad debt expense for the six months ended December 31, 2024 and 2023, respectively. For the three months ended December 31, 2024 and 2023, the Company wrote off accounts receivable against allowance for credit losses of $257,488 and $311,379, respectively. For the six months ended December 31, 2024 and 2023, the Company wrote off accounts receivable against allowance for credit losses of $1,866,205 and $706,160, respectively.

Activity in the allowance for credit losses is below:

	For the six months ended December 31,
	2024			2023
Balance at July 1	$	5,885,238		$	1,498,806
Current period provision for expected losses		7,286,079			2,126,284
Write-offs charged against the allowance		(1,866,205	)		(706,160	)
Balance at December 31		11,305,112			2,918,930

5. PROPERTY, PLANT AND EQUIPMENT, NET

As of December 31, 2024 and June 30, 2024, property, plant and equipment consisted of the following:

	As of December 31,			As of June 30,
	2024			2024
Leasehold improvements	$	1,325,830		$	1,363,654
Office and other equipment		1,587,501			1,466,840
Furniture and fixtures		345,785			270,983
Construction-in-progress		18,274			36,483
		3,277,390			3,137,960
Less: accumulated depreciation		(912,275	)		(555,503	)
Total	$	2,365,115		$	2,582,457

For the three months ended December 31, 2024 and 2023, depreciation expense amounted to $168,248 and $41,848, respectively. For the six months ended December 31, 2024 and 2023, depreciation expense amounted to $356,772 and $70,545, respectively.

6. EQUITY METHOD INVESTMENT

On April 5, 2024, Aspire North America entered into a capital contribution, subscription, and joint venture agreement with several other parties. Pursuant to joint venture agreement, the parties created a legal entity, IKE Tek LLC (“IKE”), whose business will be licensing, owning, operating and developing an industry-standard age-verification solution for vapor (e-cigarette) devices in the U.S. market as the related planned submission of PMTA applications that seek FDA marketing orders for cutting-edge technologies across the U.S. e-cigarette market. Ispire contributed $1 million to IKE in cash for funding its operating activities and entered into a binding commitment to make an additional capital contribution to IKE in the aggregate amount of up to $9 million. In exchange for Ispire’s total investment of $10 million, IKE issued to Ispire membership interests in an aggregate amount initially equal to forty percent (40%) of the membership interests in IKE.

As of December 31, 2024, the investment in joint venture accounted for under the equity method amounted to $10,071,380. As of December 31, 2024, the Company noticed no indicator of impairment regarding the investment.

For the three months ended December 31, 2024, the Company’s share of the joint venture’s net loss was $100,618. For the six months ended December 31, 2024, the Company’s share of the joint venture’s net loss was $176,668. The loss was included in “other (expense) income, net” in the consolidated statements of operations and comprehensive loss.

For the three months ended December 31, 2024 and 2023, the Company recorded $32,479 and $0 in other income from IKE from charging administrative fees. For the six months ended December 31, 2024 and 2023, the Company recorded $72,072 and $0 in other income from IKE from charging administrative fees. As of December 31, 2024 and June 30, 2024, the Company had total accounts receivable of $40,976 and $17,280 due from IKE.

The tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:

	Three months ended December 31,		Six months ended December 31,
	2024		2024
Net revenue	$	-	$	-
Gross profit (loss)		-		-
Loss from operations		251,545		441,671
Net loss		251,545		441,671

7. CONTRACT LIABILITIES

These liabilities are advance deposits received from customers after an order has been placed. As of December 31, 2024, the Company expects all of the contract liabilities to be settled in less than one year. The decrease in the balance at December 31, 2024 was due to less orders on hand on that date. The amount of revenue recognized in the six months ended December 31, 2024, that was included in the opening contract liability balance was $1,924,847.

Changes in the contract liabilities is below:

	For the six months ended December 31,
	2024			2023
Balance at July 1	$	2,218,166		$	988,556
Contract liabilities recognized related to advanced deposits		23,052,449			17,290,984
Revenue recognized in current period		(23,387,872	)		(16,574,369	)
Balance at December 31		1,882,743			1,705,171

8. LEASES

The Company has operating lease arrangements for office premises in Hong Kong, California and Malaysia. These leases typically have terms of two to five years.

Leases with an initial term of 12 months or less are not presented as right-of-use assets on the consolidated balance sheet and are expensed over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

The balances for the right-of-use assets and lease liabilities where the Company is the lessee are presented as follow:

	As of December 31, 2024		As of June 30, 2024
Operating lease right-of-use assets	$	2,949,756	$	3,579,140

Operating lease liabilities – current	$	1,245,061	$	1,207,832
Operating lease liabilities – non-current		1,572,574		2,194,094
Total	$	2,817,635	$	3,401,926

As of December 31, 2024, the maturities of our lease liabilities (excluding short-term leases) are as follows:

	As of December 31, 2024
January 1, 2025 to June 30, 2025		716,165
July 1, 2025 to June 30, 2026		1,395,767
July 1, 2026 to June 30, 2027		857,144
July 1, 2027 to June 30, 2028		80,676
Total future lease payments		3,049,752
Less: imputed interest		(232,117	)
Total lease liabilities		2,817,635

The Company incurred lease costs, which include the payment of short-term leases, of $383,174 and $335,678 on the Company’s consolidated statements of operations and comprehensive loss for the three months ended December 31, 2024 and 2023, respectively. The Company incurred lease costs, which include the payment of short-term leases, of $765,733 and $734,991 on the Company’s consolidated statements of operations and comprehensive loss for the six months ended December 31, 2024 and 2023, respectively.

The Company made payments of $330,020 and $379,600 under the lease agreements during three months ended December 31, 2024 and 2023, respectively. The Company made payments of $720,640 and $712,421 under the lease agreements during six months ended December 31, 2024 and 2023, respectively.

The weighted-average remaining lease term related to the Company’s lease liabilities as of December 31, 2024 and June 30, 2024 was 2.2 years and 2.7 years, respectively.

The discount rate related to the Company’s lease liabilities as of December 31, 2024 and June 30, 2024 was 7.9% and 7.9%, respectively. The discount rates are generally based on estimates of the Company’s incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

9. ACCRUED LIABILITIES AND OTHER PAYABLES

As of December 31, 2024 and June 30, 2024, accrued liabilities and other payables consisted of the following:

	As of December 31,		As of June 30,
	2024		2024
Joint venture investment payable	$	8,750,000	$	9,000,000
Other payables		783,705		575,115
Accrued salaries and related benefits		66,596		432,863
Accrued expenses		1,179,081		1,012,353
Reserve for product returns		795,689		717,058
Other tax payable		950		950
Total	$	11,576,021	$	11,738,339

10. RELATED PARTY TRANSACTIONS

a)	The table below sets forth the major related parties and their relationships with the Company:

Name of related parties and Relationship with the Company

- Tuanfang Liu is the Co-Chief Executive Officer and Chairman of the Company.

- Jiangyan Zhu is the wife of Tuanfang Liu and a director of the Company.

- Eigate (Hong Kong) Technology Co., Limited (“Eigate”) is a wholly-owned and controlled by the Company’s Chairman.

- Aspire Global is a company controlled by the Chairman of the Company.

- Aspire International Hong Kong Limited is a wholly-owned subsidiary of Aspire Global.

- Shenzhen Yi Jia, a Chinese company that is 95% owned by the Company’s Chairman and 5% by the Chairman’s cousin.

- IKE Tek LLC, a join venture that the Company has 40% membership interests in

Tuanfang Liu is also Aspire Global’s chief executive officer and a director of both the Company and Aspire Global, and his wife, Jiangyan Zhu, is also a director of both companies. As of December 31, 2024, Mr. Liu and Ms. Zhu beneficially own 66.5% and 5.0%, respectively, of the outstanding shares of Aspire Global. As of December 31, 2024, Mr. Liu and Ms. Zhu beneficially own 58.7% and 4.4%, respectively, of the outstanding shares of the Company.

For the three and six months ended December 31, 2024 and 2023, the majority of the Company’s nicotine and cannabis vaping products were purchased from Shenzhen Yi Jia. As of December 31, 2024 and June 30, 2024, the accounts payable–related party was $86,375,645 and $67,046,472, respectively, which was payable to Shenzhen Yi Jia. Pricing for products purchased from Shenzhen Yi Jia is determined by the volume of products ordered and shall be the most favorable market price offered by Shenzhen Yi Jia in negotiations. There are no fixed payment terms regarding these balances and they are classified as current liabilities. The relationship between the related parties, including the payment terms, is reviewed on a quarterly basis. As long as strategic objectives are met, the Company expects the relationship will continue without significant modification. For the three months ended December 31, 2024 and 2023, the purchases from Shenzhen Yi Jia were $30,975,378 and $25,464,800, respectively. For the six months ended December 31, 2024 and 2023, the purchases from Shenzhen Yi Jia were $61,558,483 and $48,983,213, respectively.

11. INCOME TAXES

For the three and six months ended December 31, 2024 and 2023 loss before income taxes consists of:

	Three months ended December 31,						Six months ended December 31,
	2024			2023			2024			2023
HK	$	2,601,917		$	2,538,994		$	5,533,109		$	5,691,070
U.S.		(9,427,325	)		(5,963,668	)		(17,204,217	)		(9,872,671	)
Malaysia		(713,204	)		(215,058	)		(1,005,767	)		(303,673	)
Total	$	(7,538,612	)	$	(3,639,732	)	$	(12,676,875	)	$	(4,485,274	)

Income taxes recorded for the three and six months ended December 31, 2024 and 2023, were estimated using the discrete method. Income taxes are based on the Company’s financial results through the end of the period, as well as the related change in the valuation allowance on deferred tax assets. The Company is unable to estimate the annual effective tax rate with sufficient precision for purposes of the effective tax rate method, which requires the Company to consider a projection of full-year income and the expected change in the valuation allowance. The estimated annual effective tax rate method was not reliable due to its sensitivity to small changes to forecasted annual pre-tax earnings and the effect of the valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. As a result, the Company determined that using the discrete method is more appropriate than using the annual effective tax rate method.

The Company’s effective tax rate from operations was (6.10%) and (9.68%) for the three months ended December 31, 2024 and 2023, respectively. The Company’s effective tax rate from operations was (7.23%) and (18.91%) for the six months ended December 31, 2024 and 2023, respectively. The Company’s effective tax rate differs from the federal statutory rate of 21% in each period primarily due to the Company’s net loss position, nondeductible expenses, and valuation allowance.

As of December 31, 2024, income tax expense of $460,031 and $916,784 was from income generated during the three and six months ended December 31, 2024. At December 31, 2023, income tax expense of $352,180 and $848,225 was from income generated during the three and six months ended December 31, 2023. All income tax expenses arose solely from Hong Kong operation.

12. STOCK-BASED COMPENSATION

In October 2022, the board of directors and stockholders of the Company approved the 2022 Equity Incentive Plan (as amended, the “Plan”) pursuant to which up to 15,000,000 shares of common stock may be issued pursuant to options, restricted stock or RSUs grants. The Plan is administered by the Compensation Committee of the Board of Directors. Awards under the Plan may be granted to officers, directors, employees and those consultants who qualify as a consultant or advisor under the instructions to the Company’s Form S-8 (File No. 333-273458) initially filed with U.S. Securities and Exchange Commission on July 26, 2023. The Compensation Committee has broad discretion in making awards, provided that any options shall be exercisable at the fair market value on the date of grant.

Restricted stock

During the three and six months ended December 31, 2024, 36,941 and 57,346 shares of common stock were issued to the Company’s board of directors and employees in settlement of restricted stock granted under the Plan, respectively. Restricted stock granted to directors vests over three months and was fully vested as of December 31, 2024. The Company recognized share-based compensation expense totaling $35,710 related to the restricted stock issued to the Company’s board of directors, based the grant date fair value of the awards. There are no unrecognized compensation expenses related to these restricted stock awards as of December 31, 2024.

The Company entered into consulting agreements with two consultants in June 2024, which provide for the issuance of up to 150,000 shares of common stock to each consultant (a total of 300,000 shares of common stock). Under the terms of the consulting agreements, (a) 25,000 shares of common stock vested upon execution of the consulting agreements (a total of 50,000 shares of common stock, issued during the year ended June 30, 2024), (b) 100,000 shares of common stock will vest upon the attainment of five separate sales-based targets, in 20,000 share increments (a total of 200,000 shares of common stock), and (c) 25,000 shares of common stock will vest on October 1, 2027, if the consulting agreements have not been terminated (a total of 50,000 shares of common stock). The Company estimated the grant date fair value of the shares issuable under the consulting agreements to be $7.14 per share.

In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 140,000 shares of common stock to each consultant (a total of 280,000 shares of common stock). Under the terms of the consulting agreements, these 140,000 shares of common stock will vest upon the attainment of six separate sales-based targets, in 20,000 share increments, if the consulting agreements have not been terminated.

In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 400,000 shares of common stock to each consultant (a total of 800,000 shares of common stock). Under the terms of the consulting agreements, (a) 75,000 shares of common stock vested upon execution of the consulting agreements (a total of 150,000 shares of common stock issued during the three months ended September 30, 2024), (b) 300,000 shares of common stock will vest upon the attainment of three separate sales-based targets, in 100,000 share increments (a total of 300,000 shares of common stock), and (c) 25,000 shares of common stock will vest upon the attainment of one separate sales-based target, if the consulting agreements have not been terminated.

The shares of common stock that vest upon the attainment of the sales-based targets include performance-based vesting conditions, which the Company has determined were not probable of being achieved at December 31, 2024. As such, the Company has not recognized any compensation expense as of December 31, 2024, related to the restricted common stock with performance-based vesting conditions. The shares of common stock that vest on October 1, 2027, include time-based vesting criteria. For these shares, the Company recognizes stock-based compensation expense based on the grant date fair value on a straight-line basis over the required service period. For the quarter ended December 31, 2024, the stock-based compensation expense related to the restricted common stock with time-based vesting conditions was not material.

Stock Options

The following is a summary of stock option activity transactions as of and for the six months ended December 31, 2024:

	Number Of options			Weighted average exercise price		Weighted average fair value per option		Weighted average remaining contractual life in years
Outstanding at June 30, 2024		3,255,000		$	9.10	$	5.13		9.1
Granted		312,500		$	7.36	$	4.48		9.6
Exercised		-		$	-	$	-		-
Expired		-		$	-	$	-		-
Forfeiture		(1,395,416	)	$	9.71	$	5.51		8.7
Outstanding at December 31, 2024		2,172,084		$	8.45	$	4.79		8.6
Exercisable at December 31, 2024		535,695		$	9.21	$	4.93		7.1

The aggregate intrinsic value of options outstanding with an exercise price less than the closing price of the Company’s common stock as of December 31, 2024 was $0. Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable.

Total expense of options vested for the three months ended December 31, 2024 and 2023, was $(942,397) and $1,201,114, respectively. Total expense of options vested for the six months ended December 31, 2024 and 2023, was $(374,796) and $1,707,093, respectively. The options granted during the six months ended December 31, 2024 and 2023 were valued using the binomial option pricing model based on the following range of assumptions:

	Six months ended December 31, 2024			Six months ended December 31, 2023
Exercise multiple		2.8			2.8
Expected volatility		60	%		50	%
Risk-free interest rate		3.650% - 4.390	%		4.197	%
Expected dividend yield		0	%		0	%

RSUs

RSUs granted to employees vest cumulatively as to one-third of the restricted stock units on each of the first three anniversaries of the date of grant based on continues service. Each vested RSU entitles holder to receive one share of common stock upon exercise. RSUs are accounted for as equity using the fair value method, which requires measurement and recognition of compensation expense for all awards granted to employees, directors and consultants based upon the grant-date fair value.

	Shares			Weighted average grant date fair value
Unvested, June 30, 2024		483,606		$	9.76
Granted		1,130,346			6.26
Vested		(553,608	)		7.29
Canceled and forfeited		(431,465	)		8.00
Unvested, December 31, 2024		628,879		$	6.85

Total expense for the RSUs during the three months ended December 31, 2024 and 2023 was $2,351,973 and $468,361. Total expense for the RSUs during the six months ended December 31, 2024 and 2023 was $2,672,849 and $604,325.

The following table summarizes the allocation of stock-based compensation in the accompanying consolidated statements of operations and comprehensive loss:

	Three months ended December 31,				Six months ended December 31,
	2024		2023		2024		2023
General and administrative expenses	$	1,357,591	$	1,850,380	$	2,315,984	$	2,802,033
Sales and marketing expenses		87,695		32,541		1,136,890		48,447
Total	$	1,445,286	$	1,882,921	$	3,452,874	$	2,850,480

As of December 31, 2024, the Company had approximately $10,680,495 in unrecognized compensation expenses related to all non-vested options and RSUs that will be recognized over the weighted-average period of 2.7 years.

13. LOSS PER SHARE

The following table presents a reconciliation of basic net loss per share:

	Three months ended December 31,						Six months ended December 31,
	2024			2023			2024			2023
Net loss	$	(7,998,643	)	$	(3,991,912	)	$	(13,593,659	)	$	(5,333,499	)
Weighted average basic and diluted share of common stock outstanding		56,658,012			54,270,236			56,629,666			54,258,224
Net loss per basic and diluted share of common stock	$	(0.14	)	$	(0.07	)	$	(0.24	)	$	(0.10	)

The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (for example, convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potentially dilutive shares could dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been antidilutive for the six months ended December 31, 2024 and 2023. Potentially dilutive shares were as follows:

	For the six months ended December 31,
	2024		2023
Share options		2,172,084		2,845,000
Unvested restricted stock units		628,879		574,140
Warrants		173,211		-
Total		2,974,174		3,419,140

14. COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to legal or regulatory proceedings, investigations and claims incidental to the conduct of its business. The Company is not a party to, nor is the Company aware of, any legal or regulatory proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.

Concurrently with the joint venture agreement (see Note 6), Ispire entered into an exclusive supply agreement with Berify, whereby Ispire is obligated to purchase all Bluetooth enabled integrated circuits to be used on vape type devices to control the activation of the device that are to be sold to IKE at cost plus a 20% mark-up.

15. SUBSEQUENT EVENT

In February 2025, Ispire executed a cost reduction initiative. The initiative was part of a larger effort to optimize costs and leverage the Company’s global resources more effectively. It is a proactive measure to improve the Company’s operating efficiency and profitability. The Company expects savings in salary and benefits over $4,000,000 annually, and additional savings in other operating expenses.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed financial statements and the related notes appearing elsewhere in this report. See “Cautionary Forward-Looking Statements.” Actual results could differ materially from those discussed below.

Overview

We are committed to delivering superior products that challenge industry norms, with the goal of delivering an unmatched customer and adult consumer experience. In achieving this, risk reduction is central to our mission, and we aim to improve the lives of our consumers through cutting-edge research and development. Our technology platforms look to reduce youth access to vaping products, which in turn, will facilitate our ability to provide adult consumers with the products they desire.

We are engaged in the research and development, design, commercialization, sales, marketing and distribution of branded and non-branded vaping hardware products in both the nicotine and cannabis spaces. Vaping refers to the practice of inhaling and exhaling the vapor produced by an electronic vaping device. These products are sold into the global nicotine and cannabis markets in the form of e-cigarettes or cartridges filled with oils by our customers, respectively.

We sell our e-cigarette (or nicotine) products globally, in markets where we are legally permitted to do so. To date, our nicotine products are marketed under the “Aspire” brand name and are sold primarily through our expansive distribution network. However, we are currently preparing to expand our international presence via the launch of nicotine products under the Ispire platform. These products will be launched under licensing arrangements with the owner(s) of selected partner brand(s).

We currently sell our cannabis vaping hardware in the United States, Canada, South Africa, and Germany. However, we are continuing to develop our sales network across Europe, South America, and other regions in preparation for legalization in these markets. Our cannabis products are sold under the Ispire brand name, primarily on an ODM basis to other cannabis vapor companies including multi and single-state operators, brand owners and co-packers. ODM generally involves the design and customization of the core products to meet each brand’s unique image and needs. Our hardware products are sold by our customers under their own brand names. We do not “touch the cannabis plant” in the production and sale of our hardware products and thus are not subject to the specific cannabis-related regulatory and taxation provisions of the industry (e.g., IRS Code Section 280E).

Since our initial public offering in April 2023, we have completed three fundraising rounds. The first was executed as part of our initial public offering, from which we raised approximately $18.3 million after underwriting and other offering expenses.

In June 2023, we raised net proceeds of approximately $7.4 million, after placement agent and offering expenses, from the private placement of our Common Stock to three investors.

In March 2024, we raised net proceeds of approximately $10.6 million, after placement agent fees and offering expenses, through a public offering of our Common Stock priced at $6.00 per share. We used the net proceeds from this offering in connection with the establishment and operation of our manufacturing facility in Malaysia, the funding of our joint venture with Touch Point Worldwide Inc. d/b/a/ Berify and Chemular Inc. and for working capital and general corporate purposes, including research and development.

Regulatory Risks

The sale of nicotine and cannabis products is subject to regulations worldwide. Many countries prohibit the sale of any cannabis products, and many countries have regulations relating to nicotine products, with a particular emphasis on underage sales. We work closely with our various global distribution partners to help ensure our nicotine products comply with local regulations (e.g., packaging, ingredient disclosure, health warnings, etc.). Changes in the regulatory environment can be enacted swiftly and may lead to our products becoming non-compliant in one or more international markets. This regulatory scenario may severely disrupt our business in these markets while we resolve the deficiencies (if possible) with the current product offering.

E-cigarette regulation

Regulation regarding e-cigarettes varies across countries, from limited regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. As e-cigarettes have become more and more popular recently, many countries are considering imposing more stringent law and regulations to regulate this market. Changes in existing law and regulations and the imposition of new laws or regulations in countries and regions that our major customers are in may adversely affect our business.

In many markets e-cigarettes and other nicotine products are subject to an excise tax. The amount of excise tax on our products is a key determining factor in our pricing and the value proposition to our adult consumer target market. The structure (i.e., ad valorem vs. specific) and tax burden can vary significantly from market to market. According to a 2023 study by Dauchy E, Fuss C. Global Taxation of Electronic Nicotine and Non-Nicotine Delivery Systems, the tax burden on nicotine vape products in Norway is 81.2% while the tax burden on the same products in Paraguay is 2.9%. The tax burden and resulting retail sales price is a key factor in determining how competitive our products are compared to illicit vaping products. The greater the price gap between legal and illicit vaping products the greater the incentive for adult consumers to buy illicit products. These illicit vaping products are not subject to the same quality standards as our products and undermine the efforts of legal operators seeking to help adult consumers switch from combustible tobacco products to vaping alternatives.

United States E-Cigarette Market

In the United States, the Federal Food, Drug, and Cosmetic Act requires all Electronic Nicotine Delivery Systems (“ENDS”) product manufacturers that market products in the United States to submit Premarket Tobacco Product Applications (“PMTAs”) to the FDA. For ENDS products that were on the U.S. market on or before August 8, 2016, a PMTA was required to be submitted to the FDA before September 9, 2020. For ENDS products that were not on the U.S. market prior to August 8, 2016, and for which a PMTA was not filed before September 9, 2020, a PMTA premarket authorization issued by FDA is required before the subject product may enter the U.S. market. We have submitted a PMTA filing for one ENDS product, and, under apparent FDA policies, the agency will not enforce the premarket review requirements for that product pending review of its PMTA. However, even with submission of the PMTA application, the FDA may reject our application and may prevent our ENDS products from being sold in U.S., which will adversely affect our business.

As a result of ENDS regulation noted above, we can sell only one tobacco vaping product line, the Nautilus Prime, in the U.S. Our tobacco vaping sales related to this line in the U.S. were approximately $0.2 million and $0.6 million for the twelve months ended June 30, 2024, and 2023, respectively. Because the volume of sales did not justify the marketing and regulatory costs, we have ceased marketing tobacco vaping products in the U.S.

On September 6, 2024, we submitted a PMTA application for a disposable ENDS product with 4 flavors. This is an important milestone for us, as it signals our re-entry into the US ENDS market. It is our intention to amend or resubmit this application in the coming months, once we have finalized the age-gating technology solution with our IKE Tech LLC joint venture. We have further plans to submit additional PMTA applications for pod-based ENDS systems, which will include age-gating technology, in the future as well.

Amendments to the Prevent All Cigarette Trafficking (“PACT”) Act, which became law in 2021, extend the PACT Act to include e-cigarettes and all vaping products, and place significant burdens on sellers of vaping products in the United States which may make it difficult to operate profitably in the United States. Because of tighter government regulations, we have stopped marketing tobacco vaping products in the United States, as the volume of sales from the one tobacco vaping product which we may sell in the United States does not justify the marketing and regulatory costs involved.

In the United States, cannabis vaping products are governed by state laws, which vary from state to state. Most states do not permit the adult recreational use of cannabis, and no states permit the sale of recreational cannabis products to minors. Further, States may be more willing to permit recreational cannabis use in the future given the DEA’s intention to reschedule cannabis as a Schedule III controlled substance allowing for medicinal use. We cannot predict what action states will take or the nature and amount of taxes they may impose. However, to the extent the PACT Act applies to cannabis products that aerosolize liquids, it may be more difficult to sell our products in states that permit the sale of cannabis.

However, cannabis and its derivatives containing more than 0.3% delta-9 tetrahydrocannabinol on a dry weight basis remain Schedule I controlled substances under U.S. federal law, meaning that federal law generally prohibits their manufacture and distribution. United States federal law also deems it unlawful to sell, offer for sale, transport in interstate commerce, import, or export “drug paraphernalia,” which includes “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance” the possession of which federal law prohibits, including Schedule I “marijuana.” Limited exemptions exist, most notably when state or local law authorizes these items’ manufacture, possession, or distribution.

European Market

The European Commission issued the Tobacco Products Directive (the “TPD”), which became effective on May 19, 2014, and became applicable in the European Union member states on May 20, 2016. The TPD regulates e-cigarettes on the packaging, labelling and ingredients of the products on the European Union market, the creation of smoke-free environments, tax measures and activities against illegal trade and anti-smoke campaigns. Member states of the European Union are required to ensure that advertisements for any tobacco-related product are prohibited, and no promotion shall be made as to those devices with an intention to promote e-cigarettes. For the e-cigarettes released after May 20, 2016, TPD requires e-cigarette manufacturers to submit product sales applications to the regulatory market six months in advance and ensure their products can meet the TPD requirements before they can be released. We have complied with TPD requirements for all our tobacco products sold in Europe.

The sale of cannabis vaping products is illegal in the European Union, save for Germany, and the United Kingdom.

Accounts Receivable

Our business relies on the collection of accounts receivable from our customers in a timely manner to maintain liquidity and support our ongoing operations. The balance of the allowance for credit losses was $11.3 million and $5.9 million at December 31, 2024 and June 30, 2024, respectively. Receivables are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. The increase is due to write offs after collection efforts, and then general rise in receivables balance and estimate losses.

Our failure or inability to collect accounts receivable when due results from a number of factors, including (i) our customer’s failure to pay as a result of adverse economic conditions affecting the customer’s cash flow; (ii) our failure to implement effective collection efforts; and (iii) disputes over contract terms, product quality or delays in delivery. Although we may implement strategies to mitigate these risks, there can be no assurance that such measures will be entirely effective, and we may continue to incur write-offs of accounts receivable, which may impair our ability to operate profitably.

Key Factors that Affect Our Results of Operations

We believe the following key factors may affect our financial condition and results of operations:

●

The effect of legislation and regulations affecting tobacco and cannabis vaping products.

●

If we elect to market tobacco vaping products in the United States, our ability to obtain regulatory approval to market additional tobacco vaping products in the United States and the significant cost of seeking such approval.

●

Our ability to develop and market tobacco and cannabis vaping products to meet the changing tastes of adult consumers.

●

The effects of competition.

●

The development of an international market for cannabis vaping products, which is presently primarily limited to certain states in the United States.

●

The effect of both the outbreak any other pandemic or other disease outbreak results in restrictions imposed by governments which may impact our ability to purchase or assemble products as well as the ability of end users to purchase our products.

Results of Operations

Three and Six Months Ended December 31, 2024 and 2023

The following table sets forth a summary of our consolidated statements of operations and comprehensive income for the three and six months ended December 31, 2024 and 2023 (dollars in thousands except per share amounts).

	Three Months Ended December 31,												Six Months Ended December 31,
	2024						2023						2024						2023
	$			% of Revenue			$			% of Revenue			$			% of Revenue			$			% of Revenue
Revenue	$	41,828			100.0	%	$	41,686			100.0	%	$	81,166			100.0	%	$	84,550			100.0	%
Cost of revenue		(34,105	)		(81.5	)%		(35,433	)		(85.0	)%		(65,769	)		(81.0	)%		(71.452	)		(84.5	)%
Gross profit		7,723			18.5	%		6,253			15.0	%		15,397			19.0	%		13,098			15.5	%
Operating expenses		(15,083	)		(36.1	)%		(10,173	)		(24.4	)%		(28,020	)		(34.5	)%		(17,896	)		(21.2	)%
loss from operations		(7,360	)		(17.6	)%		(3,920	)		(9.4	)%		(12,623	)		(15.6	)%		(4,798	)		(5.7	)%
Other income (expense), net		(179	)		(0.4	)%		281			0.7	%		(54	)		(0.1	)%		314			0.4	%
Income (loss) before income taxes		(7,539	)		(18.0	)%		(3,640	)		(8.7	)%		(12,677	)		(15.6	)%		(4,485	)		(5.3	)%
Income taxes		(460	)		(1.1	)%		(352	)		(0.8	)%		(917	)		(1.1	)%		(848	)		(1.0	)%
Net loss		(7,999	)		(19.1	)%		(3,992	)		(9.6	)%		(13,594	)		(16.7	)%		(5,333	)		(6.3	)%
Other comprehensive income		74			0.2	%		114			0.3	%		(81	)		(0.1	)%		159			0.2	%
Comprehensive income (loss)		(7,925	)		(18.9	)%		(3,878	)		(9.3	)%		(13,675	)		(16.8	)%		(5,174	)		(6.1	)%
Net loss per share Basic and diluted		(0.14	)					(0.07	)					(0.24	)					(0.10	)
Weighted shares of common stock outstanding Basic and diluted		56,658,012						54,270,236						56,629,666						54,258,224

Revenue

The following tables set out the breakdown of our revenue percentage by region based on information provided to us by our distributors.

	Three months ended December 31,				Six months ended December 31,
	2024		2023		2024		2023
Europe	$	23,987,678	$	15,653,902	$	45,939,051	$	35,516,154
North America (the U.S. and Canada)		10,916,260		19,962,607		20,653,148		37,829,972
Asia Pacific (excluding PRC)		3,613,359		5,983,356		7,488,743		11,060,664
Africa		2,674,155		85,696		5,722,066		143,418
South America		636,408		-		1,363,165		-
Total	$	41,827,860	$	41,685,561	$	81,166,173	$	84,550,208

Our revenue increased by $142,299, or 0.3%, from $41,685,561 for the three months ended December 31, 2023, to $41,827,860 for the three months ended December 31, 2024. The increase in revenue is the combined effect of (i) increases in product sales in the Europe of $8.3 million from $15.7 million for the three months ended December 31, 2023, to $24.0 million for the three months ended December 31, 2024, increases in sales in Africa, mainly South Africa, of $2.6 million from $0.1 million for the three months ended December 31, 2023, to $2.7 million for the three months ended December 31, 2024 and increases in sales in South America of $0.6 million from $0 for the three months ended December 31, 2023, to $0.6 million for the three months ended December 31, 2024,offset by (ii) decreases in sales of vaping products in North America of $9.1 million from $20.0 million for the three months ended December 31, 2023 to approximately $10.9 million for the three months ended December 31, 2024, and (iii) decreases in sales to Asia Pacific regions of $2.4 million from $6.0 million for the three months ended December 31, 2023 to approximately $3.6 million for the three months ended December 31, 2024.

Our revenue decreased by $3,384,035, or 4.0%, from $84,550,208 for the six months ended December 31, 2023, to $81,166,173 for the six months ended December 31, 2024. The decrease in revenue is the combined effect of (i) decreases in sales of vaping products in North America of $17.1 million from $37.8 million for the six months ended December 31, 2023 to approximately $20.7 million for the six months ended December 31, 2024, and (ii) decreases in sales to Asia Pacific regions of $3.6 million from $11.1 million for the six months ended December 31, 2023 to approximately $7.5 million for the six months ended December 31, 2024, offset by (iii) increases in product sales in Europe of $10.4 million from $35.5 million for the six months ended December 31, 2023, to $45.9 million for the six months ended December 31, 2024, increases in sales in Africa, mainly South Africa, of $5.6 million from $0.1 million for the six months ended December 31, 2023, to $5.7 million for the six months ended December 31, 2024 and increases in sales in South America of $1.4 million from $0 for the six months ended December 31, 2023, to $1.4 million for the six months ended December 31, 2024.

Cost of Revenue

Cost of revenue mainly consists of cost of purchases of vaping products, of which the majority of the purchase are from Shenzhen Yi Jia. Cost of revenue decreased by $1,327,374, or 3.7%, from $35,432,663 for the three months ended December 31, 2023, to $34,105,289 for the three months ended December 31, 2024. The decrease in cost of revenue is due to changes in product mix with more higher margin products being sold. Cost of revenue decreased by $5,683,238, or 8.0%, from $71,452,462 for the six months ended December 31, 2023, to $65,769,224 for the six months ended December 31, 2024.

The decrease in cost of revenue is due to changes in product mix with more higher margin products being sold.

Gross Profit

The following tables show the revenue, cost of revenue and gross profit of our products (dollars in thousands).

Three Months Ended December 31, 2024
Revenue		Cost of revenue		Gross profit		Gross profit %
$	41,828	$	34,105	$	7,723		18.5	%

Three Months Ended December 31, 2023
Revenue		Cost of revenue		Gross profit		Gross profit %
$	41,686	$	35,433	$	6,253		15.0	%

Six Months Ended December 31, 2024
Revenue		Cost of revenue		Gross profit		Gross profit %
$	81,166	$	65,769	$	15,397		19.0	%

Six Months Ended December 31, 2023
Revenue		Cost of revenue		Gross profit		Gross profit %
$	84,550	$	71,452	$	13,098		15.5	%

Gross profit increased by $1,469,673, or 23.5%, from $6,252,898 for the three months ended December 31, 2023, to $7,722,571 for the three months ended December 31, 2024, while our gross margin increased from 15.0% to 18.5%. The increase in gross margin was primarily due to changes in product mix with more higher margin products being sold during the three months ended December 31, 2024.

Gross profit increased by $2,299,203, or 17.6%, from $13,097,746 for the six months ended December 31, 2023, to $15,396,949 for the six months ended December 31, 2024, while our gross margin increased from 15.5% to 19.0%. The increase in gross margin was primarily due to changes in product mix with more higher margin products being sold during the six months ended December 31, 2024.

Operating Expenses

Operating expenses increased $4,909,504 or 48.3%, from $10,173,122 for the three months ended December 31, 2023 to $15,082,626 for the three months ended December 31, 2024. Operating expenses increased $10,123,658 or 56.6%, from $17,896,215 for the six months ended December 31, 2023 to $28,019,873 for the six months ended December 31, 2024.

Our sales and marketing expenses mainly consist of employees’ salaries and benefits, marketing expense, travel expenses and others.

Sales and marketing expenses increased by $667,257, or 47.9%, from $1,394,407 for the three months ended December 31, 2023 to $2,061,664 for the three months ended December 31, 2024. The increase in sales and marketing expenses was primarily due to an increase in our marketing activities, marketing campaign and trade shows of $0.6 million.

Sales and marketing expenses increased by $2,634,285, or 108.9%, from $2,419,626 for the six months ended December 31, 2023 to $5,053,911 for the six months ended December 31, 2024. The increase in sales and marketing expenses was primarily due to an increase in (i) our marketing activities, marketing campaign and trade shows of $1.3 million, (ii) stock-based compensation expense related to selling personnels of $1.1 million for the three months ended December 31, 2024 and (iii) headcount and payroll expense for Aspire Science of $0.1 million.

Our general and administrative expenses mainly consist of employee’s salaries and benefits, rental expense, professional fees, share based payment expenses and other administrative expenses. General and administrative expenses increased by $4,242,247, or 48.3%, from $8,778,715 for the three months ended December 31, 2023 to $13,020,962 for the three months ended December 31, 2024. The increase was primarily due to (i) increase in bad debt expense as an allowance for credit losses of $2.3 million from accounts resulted from management’s assessment on Company’s account receivables balances, (ii) increase of $0.9 million for payroll expenses and (iii) an increase in professional fees of $0.7 million incurred for cannabis business.

General and administrative expenses increased by $7,489,373, or 48.4%, from $15,476,589 for the six months ended December 31, 2023 to $22,965,962 for the three months ended December 31, 2024. The increase was primarily due to (i) increase in stock-based compensation expense of $0.6 million for the three months ended December 31, 2024, as compensation and incentive for management, employees and service providers, (ii) increase in bad debt expense as an allowance for credit losses of $4.2 million from accounts resulted from management’s assessment on Company’s account receivables balances, (iii) increase of $1.2 million for payroll expenses and (iv) an increase in professional fees of $0.9 million incurred for cannabis business.

Other expense (income), net

Other income, net includes interest income, interest expense, exchange gain (loss), net and other income (expense).

Interest income decreased by $143,346, or 70.6%, from $203,101 for the three months ended December 31, 2023 to $59,755 for the three months ended December 31, 2024. Interest income decreased by $215,506, or 78.3%, from $275,347 for the six months ended December 31, 2023 to $59,841 for the six months ended December 31, 2024.

Other expense (income) mainly consists of interest expense, loss on equity method investment, credits from company credit card and other miscellaneous expenses. Other expense (income) decreased by $39,674, or 85.3%, from net income of $46,535 for the three months ended December 31, 2023 to net income of $6,861 for the three months ended December 31, 2024. Other expense (income) increased by $10,465, or 314.17%, from net income of $3,331 for the six months ended December 31, 2023 to net income of $13,796 for the six months ended December 31, 2024.

Exchange loss (gain) changes by $276,029, or 894.6%, from net exchange gain of $30,856 for the three months ended December 31, 2023 to net exchange loss of $245,173 for three months ended December 31, 2024. Exchange loss(gain) changes by $162,105, or 469.6%, from net exchange gain of $34,517 for the six months ended December 31, 2023 to net exchange loss of $127,588 for six months ended December 31, 2024.

As a result of these factors, other expense (income), net decreased by $459,049, from other income, net of $280,492 for the three months ended December 31, 2023 to other expense, net of $178,557 for three months ended December 31, 2024. Other expense (income), net decreased by $367,146, from other income, net of $313,195 for the six months ended December 31, 2023 to other expense, net of $53,951 for six months ended December 31, 2024.

Income Taxes

Income taxes increased by $107,851, or 30.6%, from $352,180 for the three months ended December 31, 2023 to $460,031 for the three months ended December 31, 2024. Income taxes increased by $68,559, or 8.1%, from $848,225 for the three months ended December 31, 2023 to $916,784 for the three months ended December 31, 2024. We had a consolidated net loss for both three and six month periods ended December 31, 2024 and 2023, which was the combined effect of a profit by Aspire Science and a loss by Aspire North America and Ispire Malaysia. The profit from Aspire Science resulted in a current tax expense. The increase in valuation allowance reflects our view that the taxable income in the future will not be sufficient to utilize the carryforward loss.

Net Loss

As a result of the foregoing, net loss increased by $4,006,731, from net loss of $3,991,912, or $(0.07) per share (basic and diluted) for the three months ended December 31, 2023 to a net loss of $7,998,643, or $(0.14) per share, for the three months ended December 31, 2024. Net loss increased by $8,260,160, from net loss of $5,333,499, or $(0.10) per share (basic and diluted) for the six months ended December 31, 2023 to a net loss of $13,593,659, or $(0.24) per share, for the six months ended December 31, 2024.

Liquidity and Capital Resources

The following table summarizes our changes in working capital from June 30, 2024 to December 31, 2024 (dollars in thousands).

	December 31, 2024		June 30, 2024		Change			% Change
Current Assets	$	112,320	$	102,572	$	9,748			9.5	%
Current Liabilities		106,236		85,991		20,245			23.5	%
Working Capital		6,084		16,581		(10,497	)		(63.3	)%

The following table sets forth information as to consolidated cash flow information for the six months ended December 31, 2024 and 2023 (dollars in thousands).

	Six Months Ended December 31,						Increase
Consolidated cash flow data:	2024			2023			(Decrease)
Net cash provided by (used in) operating activities	$	428		$	(20,232	)	$	20,660
Net cash used in investing activities		(1,104	)		(1,862	)		758
Net cash used in financing activities		-			(703	)		703
Net decrease in cash and cash equivalents		(676	)		(22,797	)		22,121

Net cash flow provided by operating activities for the six months ended December 31, 2024 of $0.4 million, reflected our net loss of $13.6 million, adjusted primarily as follows: an add-back of credit loss expenses of $7.3 million, an add-back of stock based compensation expense of $3.5 million, an added-back of right-of-use assets amortization of $0.6 million and increase in accounts payable – related party of $20.7 million, offset by an increase in accounts receivable of $15.3 million, an increase in inventories, net of $1.7 million, and an increase in prepaid expenses and other current assets of $0.9 million.

Net cash flow used in operating activities for the six months ended December 31, 2023 of $20.2 million, reflected our net loss of $5.3 million, adjusted primarily as follows: an add-back of stock-based compensation expenses of $2.9 million, an add-back of credit loss expenses of $2.1 million, a increase in accounts payable – related party of $1.8 million, an increase in contract liabilities of $0.6 million, offset by an increase in accounts receivable of $22.8 million.

Net cash flow used in investing activities for the six months ended December 31, 2024 of $1.1 million reflected primarily purchase of property, plant and equipment of $0.3 million and acquisition of intangible assets of 0.8 million.

Net cash flow used in investing activities for the six months ended December 31, 2023 of $1.8 million reflected primarily purchase of property, plant and equipment of $1.1 million and acquisition of intangible assets of $0.7 million.

Net cash flow used in financing activities for the six months ended December 31, 2023 of $0.7 million reflected primarily repayments to related parties of $0.7 million.

To date, we have financed our operations primarily through cash flow from operations and working capital accounts payable from our major stockholders, who are our co-chief executive officer and his wife, when necessary. We plan to support our future operations primarily from cash generated from our operations and cash on hand. We believe that our current cash and future cash flows provided by operating activities, and the net proceeds from our initial public offering of $18.3 million will be sufficient to meet our working capital needs in the next 12 months. If we experience an adverse operating environment or incur unanticipated capital expenditure requirements, or if we decide to accelerate our growth, then additional financing may be required. We cannot give any assurance that additional financing will not be required or, if required, would be available on favorable terms if at all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in dilution to our stockholders which may be substantial.

The cash at bank held by our Hong Kong operating subsidiary can be freely transferred within our corporate structure without restriction. If our Hong Kong operating subsidiary were to incur additional debt on its own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to transfer cash to our U.S. investors.

Contractual Obligations

As of December 31, 2024, and June 30, 2023, we had contract liabilities of $1,882,743 and $2,218,166, respectively. These liabilities are advance deposits received from customers after an order has been placed. We expect all of the contract liabilities to be settled in less than one year.

We have operating lease arrangements for office and factory premises for Hong Kong, California and Malaysia, which are treated as right-of-use assets. These leases typically have terms of two to five years. Leases with an initial term of 12 months or less are not presented as right-of-use assets and are expensed over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

The balances for the right-of-use assets and lease liabilities where we are the lessee are presented as follow:

	As of December 31, 2024		As of June 30, 2024
Operating lease right-of-use assets	$	2,949,756	$	3,579,140

Operating lease liabilities – current	$	1,245,061	$	1,207,832
Operating lease liabilities – non-current		1,572,574		2,194,094
Total	$	2,817,635	$	3,401,926

As of December 31, 2024, the maturities of our lease liabilities (excluding short-term leases) are as follows:

	As of December 31, 2024
January 1, 2025 to June 30, 2025		716,165
July 1, 2025 to June 30, 2026		1,395,767
July 1, 2026 to June 30, 2027		857,144
July 1, 2027 to June 30, 2028		80,676
Total future lease payments		3,049,752
Less: imputed interest		(232,117	)
Total lease liabilities		2,817,635

As of December 31, 2024, we recorded an unpaid $8.8 million consideration in accrued liabilities and other payables on the consolidated balance sheet for a committed investment of $9 million into a joint venture investment named IKE.

Trend Information

Other than as disclosed elsewhere in this this Form 10-Q, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Seasonality

Seasonality does not materially affect our business or the results of our operations.

Off-Balance Sheet Arrangements

We do not have off-balance sheet arrangements.

As a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected to take advantage of such exemptions.

ITEM 3: Quantitative and Qualitative Disclosure About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 4: Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2024, due to (1) the lack of controls to enable us to record assets acquired from a controlling stockholder in accordance with GAAP, (2) the lack of controls to enable us to evaluate significant estimates, including (i) the sufficiency of inventory reserve for slow-moving inventories and (ii) the credit loss history and use it to evaluate the sufficiency of credit loss reserve for accounts receivable under the Topic 326, (3) the lack of comprehensive accounting policies and procedures manual in accordance with U.S. GAAP and SEC reporting, including IT general controls, and a financial risk assessment to evaluate controls, and (4) the lack of a sufficient complement of personnel with appropriate technical expertise to evaluate complex accounting matters.

Changes in Internal Control over Financial Reporting

During the three months ended December 31, 2024, we have continued to develop and implement internal controls over financial reporting particularly in view of the material weakness described above.

Inherent Limitations of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be subject to legal proceedings, investigations and claims incidental to the conduct of our business.

We are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. Our current risk factors are set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on September 27, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine and Safety Disclosure

Not applicable

Item 5. Other Information

No director or Section 16 officer adopted or terminated a trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a “non-Rule 10b5-1” trading arrangement during the periods reported in this Form 10-Q.

Item 6. Exhibits

The following is a complete list of exhibits filed or furnished, as applicable, as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

Exhibit		Description
3.1		Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 (File No. 333-269470) filed with the SEC on January 31, 2023).
3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on September 27, 2024).
31.1*		Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Co-Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 7, 2025	ISPIRE TECHNOLOGY INC.

	By:	/s/ Michael Wang
		Michael Wang
		Co-Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ James Patrick McCormick
		James Patrick McCormick
		Chief Financial Officer
		(Principal Financing and Accounting Officer)

SEC Form 10-Q filed by Ispire Technology Inc.