Core Insights - Ispire Technology Inc. announced that its joint venture IKE Tech LLC will showcase its technology at the 7th Annual U.S. Next Generation Nicotine Delivery Systems Conference on June 4-5 in Miami, following the submission of a PMTA application for a blockchain-driven age verification system to the FDA [1][2] - IKE Tech has achieved a significant milestone by submitting a PMTA and a Tobacco Product Master File (TPMF) for its Bluetooth Low Energy (BLE) system chip, which has received an acceptance letter from the FDA, confirming that the PMTA application meets acceptance standards and has entered the review stage [1] Group 1 - This is the first independent, compatible blockchain-driven age verification component submitted as a standalone PMTA application, providing continuous and real-time identity verification, which offers unprecedented security against underage usage [2] - IKE Tech has formally requested the FDA to expedite the review process, emphasizing the potential public health benefits of this technology [2] Group 2 - John Patterson, Senior Vice President of International Nicotine at Ispire Technology and President of IKE Tech, will participate in a panel discussion titled "Technologies to End Youth Use of Electronic Nicotine Delivery Systems" at the conference [2] - Patterson will address challenges related to youth vaping, gaps in current regulatory pathways, and the unintended impacts on adult users, as well as propose continuous age verification as a direct solution to prevent underage access [2]

Core Points - Ispire Technology Inc. has received an interim license from the Malaysian Government for the manufacturing of nicotine products, marking a significant milestone for the company [1][2] - This license is the first and only nicotine manufacturing license in Malaysia, allowing Ispire to begin manufacturing and marketing nicotine products immediately [1][2] - The Malaysian facility is set to expand from six production lines to 80, enhancing production capacity significantly [2] Company Overview - Ispire Technology Inc. specializes in the research, development, design, commercialization, sales, marketing, and distribution of branded e-cigarettes and cannabis vaping products [3] - The company holds over 200 patents globally and markets its tobacco products under the Aspire brand, while cannabis products are marketed under the Ispire brand [3] - Ispire's products are sold worldwide, excluding the U.S., People's Republic of China, and Russia, primarily through a global distribution network [3]

Core Insights - Ispire Technology Inc. has appointed Jie "Jay" Yu as the new Chief Financial Officer, effective immediately, following the departure of the former CFO Jim McCormick [1][3] - The company is implementing significant cost-cutting measures, including a reduction of $3.6 million in annual payroll and an additional $6.6 million in operating expenses, totaling an estimated annualized expense reduction of $10.2 million for fiscal year 2025 [1][3] Company Overview - Ispire is engaged in the research, development, design, commercialization, sales, marketing, and distribution of branded e-cigarettes and cannabis vaping products, owning or licensing over 400 patents globally [4] - The company's tobacco products are marketed under the Aspire brand and sold worldwide, while cannabis products are marketed under the Ispire brand primarily on an ODM basis [4] Leadership and Strategy - Michael Wang, Co-CEO, expressed confidence in Jay Yu's capabilities, highlighting his strong track record and knowledge of the company's financial structure [3] - The company aims to become a global provider of precision dosing vaping technology, focusing on trimming expenses, increasing margins, and achieving profitability [3]

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, total revenue decreased to approximately $26,200,000, representing a decline of 12.7% or $3,800,000 compared to $30,000,000 in the same period last year [17] - Gross profit for Q3 was approximately $4,800,000, down from approximately $6,100,000 for the same period last year, with gross margins decreasing to 18.2% from 20.4% [19] - The net loss for Q3 was $10,900,000 or $0.19 per share, compared to a net loss of $5,900,000 or $0.11 per share for the same period last year [21] - As of March 31, 2025, cash and cash equivalents were $23,500,000, a reduction of $10,900,000 compared to the previous quarter [21] Business Line Data and Key Metrics Changes - Revenue from North America decreased by $3,600,000 or 28.9% to approximately $8,800,000, largely due to new tariffs on Chinese products and the transition of manufacturing to Malaysia [18] - European revenues slightly declined by $300,000 or 2.9% to approximately $13,200,000 [18] - Asia Pacific revenues decreased by $800,000 or 21.4% to approximately $3,000,000, primarily due to reduced demand in South Korea [18] Market Data and Key Metrics Changes - The company is experiencing a shift in market dynamics due to pending increases in tariffs on Chinese-made goods, impacting product pricing [9] - The black market for vaping products in the U.S. is estimated to be between $5.5 billion to $70 billion, significantly larger than the legal market [29] Company Strategy and Development Direction - The company aims to become a leading manufacturer of precision dosing technology for global nicotine companies, focusing on managing accounts receivable and enhancing financial stability [6][7] - The interim nicotine product manufacturing license secured in Malaysia is a key part of the global business strategy, allowing for expanded manufacturing capacity and reduced geopolitical risks [10] - The company is shifting its pricing strategy from landed pricing to FOB factory pricing to enhance flexibility and strengthen market position [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about converting consumers from black market products to compliant products with the new age gating technology [29] - The company anticipates that the benefits of its North American restructuring will begin to be realized in fiscal Q4 2025 [21] - Management is focused on driving a more profitable business model through Malaysian operations and high-quality customer engagement [16] Other Important Information - The company has filed a PMPA for its blockchain-based age gating system with the FDA, which is a necessary step towards regulation in the industry [11] - The Malaysian facility will feature 80 production lines, significantly expanding manufacturing capacity [10] Q&A Session Summary Question: What could the FDA's focus on port shopping mean for illicit vape supply in the U.S.? - Management believes the new technology will convert many consumers from gray or black market products to compliant products, with the black market estimated to be significantly larger than the legal market [29][30] Question: Are there specific countries in the EU market that the company is excited about? - Management indicated that the UK and EU's move to ban disposables will benefit the company, as it has a strong brand presence in pod systems [34] Question: How are customer reactions to new hardware devices in the U.S.? - Management highlighted the launch of the SPROUT and VOLT platforms, which are designed to set new safety and performance standards in the industry [41][44] Question: What alternatives do customers have regarding tariffs? - Management noted that most U.S. cannabis customers have agreed to switch to FOB factory pricing, which helps mitigate tariff risks [48]

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, total revenue decreased to approximately $26,200,000, representing a decline of 12.7% or $3,800,000 compared to $30,000,000 in the same period last year [17][21] - Gross profit for Q3 was approximately $4,800,000, down from approximately $6,100,000 for the same period last year, with gross margins decreasing to 18.2% from 20.4% [19][21] - The net loss for Q3 was $10,900,000 or $0.19 per share, compared to a net loss of $5,900,000 or $0.11 per share for the same period last year [21] Business Line Data and Key Metrics Changes - Revenue from North America decreased by approximately $3,600,000 or 28.9% to $8,800,000, largely due to new tariffs on Chinese products and the transition of manufacturing to Malaysia [18] - European revenues slightly declined by $300,000 or 2.9% to approximately $13,200,000 [18] - Asia Pacific revenues decreased by $800,000 or 21.4% to approximately $3,000,000, primarily due to reduced demand in South Korea [18] Market Data and Key Metrics Changes - The company reported a focus on higher quality customers, which has impacted revenue collection and overall performance [19] - The pending increase in tariffs on Chinese-made goods has affected product pricing dynamics, but the company expects to be less impacted due to manufacturing in Malaysia [10] Company Strategy and Development Direction - The company aims to become a leading manufacturer of precision dosing technology for global nicotine companies, with significant progress made in the third quarter [7] - The interim nicotine product manufacturing license secured in Malaysia is a central part of the global business strategy [10] - The company is shifting its pricing strategy from landed pricing to FOB factory pricing to enhance flexibility and strengthen market position [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about converting consumers from the black market to compliant products with the new age gating technology [28] - The company anticipates that the Malaysian facility will significantly expand manufacturing capacity and reduce geopolitical risks [11] - Management highlighted ongoing discussions with global nicotine providers and the potential for significant market opportunities [24] Other Important Information - The company has filed a PMPA for its blockchain-based age gating system with the FDA, which is seen as a necessary step towards regulation in the industry [12] - The launch of the Sprout device, developed in partnership with Raw Garden, emphasizes the company's commitment to safety and performance in the cannabis market [15] Q&A Session Summary Question: What does the FDA's focus on port shopping mean for illicit vape supply in the U.S.? - Management believes the new technology will convert consumers from the black market to compliant products, with estimates suggesting the black market could be worth between $5.5 billion to $70 billion [28] Question: Are there specific countries in the EU market that the company is excited about? - Management indicated that the UK and EU's move to ban disposables will benefit the company, as it has a strong brand presence in pod systems [32] Question: How are customer reactions to new hardware devices in the U.S.? - Management noted positive reactions to the new Sprout and Vault platforms, which aim to set new safety and performance standards in the industry [41][44] Question: What alternatives do customers have regarding tariffs? - Management discussed successful renegotiations with U.S. cannabis customers to switch to FOB factory pricing, which helps mitigate tariff impacts [48]

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, total revenue decreased to approximately $26,200,000, representing a decline of 12.7% or $3,800,000 compared to $30,000,000 in the same period last year [17][21] - Gross profit for Q3 was approximately $4,800,000, down from approximately $6,100,000 for the same period last year, with gross margins decreasing to 18.2% from 20.4% [19][21] - The net loss for Q3 was $10,900,000 or $0.19 per share, compared to a net loss of $5,900,000 or $0.11 per share for the same period last year [21] Business Line Data and Key Metrics Changes - Revenue from North America decreased by $3,600,000 or 28.9% to approximately $8,800,000, largely due to new tariffs on Chinese products and the transition of manufacturing to Malaysia [18] - European revenues slightly declined by $300,000 or 2.9% to approximately $13,200,000 [18] - Asia Pacific revenues decreased by $800,000 or 21.4% to approximately $3,000,000, primarily due to reduced demand in South Korea [18] Market Data and Key Metrics Changes - The company reported a focus on higher quality customers, which has impacted revenue but is expected to improve accounts receivable collection [19] - The pending increase in tariffs on Chinese-made goods has affected product pricing dynamics, but the company anticipates less impact due to manufacturing in Malaysia [8][18] Company Strategy and Development Direction - The company aims to become a leading manufacturer of precision dosing technology for global nicotine companies, with significant progress made in securing manufacturing licenses and optimizing pricing strategies [6][10] - The interim nicotine product manufacturing license in Malaysia is a key part of the global business strategy, allowing the company to market its capabilities externally [9][10] - The company is transitioning to FOB factory pricing to enhance flexibility and strengthen market position [8][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about converting consumers from the black market to compliant products with the approval of new technology [28] - The company is focused on innovation, regulatory compliance, and financial stability to capitalize on market opportunities [24] - Management acknowledged the challenges posed by tariffs but highlighted successful renegotiations with customers to mitigate risks [47] Other Important Information - The company has launched new products, including the Sprout device for cannabis and the Vault platform for vaping, aimed at setting new industry standards [13][40] - The Malaysian facility is expected to feature 80 production lines, significantly expanding manufacturing capacity [10][34] Q&A Session Summary Question: Impact of FDA regulations on illicit vape supply in the U.S. - Management believes the new technology will convert consumers from the black market to compliant products, with estimates suggesting the black market could be worth between $5.5 billion to $70 billion [28] Question: EU disposable vape bans and supply constraints - Management is optimistic about benefiting from the EU's shift away from disposable products and does not foresee supply chain constraints due to the new manufacturing capabilities in Malaysia [32][33] Question: Customer reactions to new hardware devices and tariff alternatives - Management reported positive reactions to the new Sprout and Vault products, emphasizing their focus on safety and performance [40][43] - The company has successfully renegotiated contracts to FOB factory pricing to help customers manage tariff impacts [47]

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) The company reported decreased revenue and increased net loss in Q3 FY2025, alongside strategic operational advancements in cost reduction and product innovation Financial Performance Summary | Financial Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Revenue | $26.2 million | $30.0 million | | Gross Profit | $4.8 million | $6.1 million | | Gross Margin | 18.2% | 20.4% | | Total Operating Expenses | $15.4 million | $11.8 million | | Net Loss | ($10.9) million | ($5.9) million | - Accounts Receivable decreased from **$67.7 million** in the prior year's quarter to **$60.4 million**, marking a first-time reduction and improving the company's financial position by focusing on higher quality customers[1](index=1&type=chunk)[3](index=3&type=chunk)[5](index=5&type=chunk) - The company is transitioning manufacturing to Malaysia, a move expected to reduce annual operating expenses by **$8 million**[3](index=3&type=chunk) - Post-quarter, IKE Tech, a joint venture, filed a component Premarket Tobacco Product Application (PMTA) with the FDA for its blockchain-based, point-of-use age-gating technology[1](index=1&type=chunk)[3](index=3&type=chunk) - Launched 'Sprout,' an advanced all-in-one cannabis vapor device, in collaboration with Raw Garden[1](index=1&type=chunk)[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized strategic execution, including de-risking production and improving financial stability, to drive long-term growth and shareholder value - Co-CEO Michael Wang stated the company is delivering on its strategic priorities, including transitioning manufacturing to Malaysia to de-risk production and reduce operating expenses by an anticipated **$8 million** annually[3](index=3&type=chunk) - The company received an interim license for manufacturing nicotine products in Malaysia and anticipates receiving the final federal license soon, which would be a first in the country[3](index=3&type=chunk) - CFO Jim McCormick highlighted the successful reduction in accounts receivable to **$60.4 million** from **$67.7 million** year-over-year, achieved by focusing on larger, higher-quality customers[5](index=5&type=chunk) [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) The company reported a revenue decline for both the quarter and nine-month periods, with increased operating expenses leading to a significant rise in net loss, despite some gross margin improvements [Three-Month Period Ended March 31, 2025 (Q3 FY2025)](index=2&type=section&id=Three-Month%20Period%20Ended%20March%2031%2C%202025) Q3 FY2025 saw a 12.7% revenue decline to $26.2 million, a contracted gross margin of 18.2%, and a nearly doubled net loss of $10.9 million due to increased operating expenses | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $26.2M | $30.0M | -12.7% | | Gross Profit | $4.8M | $6.1M | -21.3% | | Net Loss | ($10.9M) | ($5.9M) | +84.7% | | EPS (Diluted) | ($0.19) | ($0.11) | +72.7% | [Nine-Month Period Ended March 31, 2025](index=2&type=section&id=Nine-Month%20Period%20Ended%20March%2031%2C%202025) For the nine months ended March 31, 2025, revenue decreased by 6.3% to $107.4 million, while gross margin improved to 18.8%, yet a significant rise in operating expenses led to a doubled net loss of $24.5 million | Metric | Nine Months FY2025 | Nine Months FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $107.4M | $114.6M | -6.3% | | Gross Profit | $20.2M | $19.2M | +5.2% | | Gross Margin | 18.8% | 16.8% | +2.0 p.p. | | Net Loss | ($24.5M) | ($11.3M) | +116.8% | | EPS (Diluted) | ($0.43) | ($0.21) | +104.8% | [Financial Statements](index=5&type=section&id=Financial%20Statements) The unaudited condensed consolidated financial statements detail the company's financial position as of March 31, 2025, highlighting changes in cash, accounts payable, and accumulated deficit [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, the balance sheet shows a decrease in cash to $23.5 million, a rise in related party accounts payable to $77.1 million, and a working capital deficit of ($2.1) million | Balance Sheet Item | March 31, 2025 (USD) | June 30, 2024 (USD) | | :--- | :--- | :--- | | Cash | $23,518,560 | $35,071,294 | | Accounts receivable, net | $60,425,835 | $59,734,765 | | Total current assets | $94,026,657 | $102,571,605 | | Accounts payable – related party | $77,121,850 | $67,046,472 | | Total liabilities | $100,942,604 | $88,184,626 | | Total stockholders' equity | $14,785,122 | $34,456,340 | - As of March 31, 2025, the company had cash and cash equivalents of **$23.5 million** and working capital of **($2.1) million**[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations details the net loss for both the three and nine-month periods, driven by increased general and administrative expenses despite revenue and gross profit figures Income Statement Item (Q3 FY2025) | Income Statement Item (Q3 FY2025) | Amount (USD) | | :--- | :--- | | Revenue | $26,190,725 | | Gross profit | $4,775,905 | | General and administrative expenses | $13,704,819 | | Loss from operations | ($10,585,441) | | Net loss | ($10,856,495) | Income Statement Item (Nine Months FY2025) | Income Statement Item (Nine Months FY2025) | Amount (USD) | | :--- | :--- | | Revenue | $107,356,898 | | Gross profit | $20,172,854 | | General and administrative expenses | $36,670,781 | | Loss from operations | ($23,208,365) | | Net loss | ($24,450,154) | [About Ispire Technology Inc.](index=3&type=section&id=About%20Ispire%20Technology%20Inc.) Ispire Technology develops and distributes branded e-cigarettes and cannabis vaping products globally, leveraging an extensive intellectual property portfolio of over 200 patents - The company develops and distributes branded e-cigarettes and cannabis vaping products[15](index=15&type=chunk) - Tobacco products are marketed under the 'Aspire' brand and sold worldwide, excluding the U.S., China, and Russia[15](index=15&type=chunk) - Cannabis products are marketed under the 'Ispire' brand, primarily as an ODM in the U.S., with recent marketing activities starting in Canada and Europe[15](index=15&type=chunk) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) The company will host a conference call and Q&A session on Monday, May 12, 2025, at 8:00 am ET, with details for live access and replay availability - A conference call is scheduled for Monday, May 12, 2025, at 8:00 am ET[13](index=13&type=chunk)[17](index=17&type=chunk) - Dial-in numbers are 888-880-3330 (North America) or +1 646-357-8766 (International)[17](index=17&type=chunk) - A live webcast is available, and a replay can be accessed by dialing 800-770-2030 with passcode 9733287 until May 15, 2025[13](index=13&type=chunk)[14](index=14&type=chunk)

Group 1: Earnings Performance - Ispire Technology Inc. reported a quarterly loss of $0.19 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.12, and compared to a loss of $0.11 per share a year ago, indicating an earnings surprise of -58.33% [1] - The company posted revenues of $26.19 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 17.64%, and down from $30.02 million in the same quarter last year [2] - Over the last four quarters, Ispire Technology has surpassed consensus EPS estimates only once [2] Group 2: Stock Performance and Outlook - Ispire Technology shares have declined approximately 42.4% since the beginning of the year, contrasting with the S&P 500's decline of -3.7% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.08 on revenues of $45.2 million, and for the current fiscal year, it is -$0.44 on revenues of $158.2 million [7] - The estimate revisions trend for Ispire Technology is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Group 3: Industry Context - The Technology Services industry, to which Ispire Technology belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

PART I - FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company reported increased net losses and a decline in assets and equity, with significant cash used in operations [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased while liabilities increased, resulting in a significant decline in stockholders' equity Condensed Consolidated Balance Sheet Data (in USD) | Balance Sheet Item | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $23,518,560 | $35,071,294 | | Accounts receivable, net | $60,425,835 | $59,734,765 | | Total current assets | $94,026,657 | $102,571,605 | | Total assets | $115,727,726 | $122,640,966 | | **Liabilities & Equity** | | | | Accounts payable – related party | $77,121,850 | $67,046,472 | | Total current liabilities | $96,176,082 | $85,990,532 | | Total liabilities | $100,942,604 | $88,184,626 | | Total stockholders' equity | $14,785,122 | $34,456,340 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenue declined and net loss widened significantly for both periods due to lower gross profit and higher operating expenses Statement of Operations Highlights (in USD) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26,190,725 | $30,015,036 | $107,356,898 | $114,565,244 | | Gross Profit | $4,775,905 | $6,121,953 | $20,172,854 | $19,219,699 | | Loss from Operations | $(10,585,441) | $(5,655,295) | $(23,208,365) | $(10,453,764) | | Net Loss | $(10,856,495) | $(5,925,123) | $(24,450,154) | $(11,258,622) | | Net Loss Per Share (Basic & Diluted) | $(0.19) | $(0.11) | $(0.43) | $(0.21) | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity significantly declined due to net loss, partially offset by stock-based compensation and equity issuance - For the nine months ended March 31, 2025, stockholders' equity decreased from **$34,456,340** to **$14,785,122**[22](index=22&type=chunk)[23](index=23&type=chunk) - The main factors reducing equity were a net loss of **$24,450,154** and a common stock repurchase of **$60,488**[22](index=22&type=chunk) - Positive contributions to equity included stock-based compensation of **$3,642,152** and issuance of common stock for equity incentives worth **$1,281,599**[22](index=22&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations improved, but overall cash decreased by $11.5 million due to shifts in investing and reduced financing activities Consolidated Cash Flow Data (in USD) | Cash Flow Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,069,519) | $(16,878,126) | | Net cash (used in) provided by investing activities | $(1,689,495) | $5,948,696 | | Net cash provided by financing activities | $2,278,874 | $10,082,584 | | **Net decrease in cash** | **$(11,480,140)** | **$(846,846)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's vaping business, significant customer/supplier concentration, increased credit loss allowance, and a subsequent preference share issuance - The company is engaged in the R&D, design, commercialization, and distribution of branded e-cigarettes and cannabis vaping products, with recent expansion through new subsidiaries in the UAE, California, and the UK[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - For the nine months ended March 31, 2025, one customer (Customer A) accounted for **24%** of consolidated revenue, and one supplier (Supplier C, a related party) accounted for **93%** of total purchases[55](index=55&type=chunk)[56](index=56&type=chunk) - The allowance for credit losses on accounts receivable increased to **$14.6 million** as of March 31, 2025, from **$5.9 million** as of June 30, 2024[62](index=62&type=chunk)[64](index=64&type=chunk) - The company has a **40%** membership interest in a joint venture, IKE Tech LLC, focused on developing age-verification solutions for vapor devices[66](index=66&type=chunk) - Subsequent to the quarter end, on April 24, 2025, the company's Malaysian subsidiary issued a preference share to its government affairs firm, entitling the holder to a **5%** annual dividend of the subsidiary's net profit after tax[98](index=98&type=chunk)[99](index=99&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue decline, widened net loss from increased expenses, significant regulatory and tariff risks, and tightened liquidity [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Nine-month revenue decreased, gross margin improved, but operating expenses surged, leading to a significantly increased net loss Revenue by Region (in USD) | Region | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Europe | $59,174,779 | $49,144,807 | +20.4% | | North America | $29,441,624 | $50,191,212 | -41.3% | | Asia Pacific | $10,453,766 | $14,831,769 | -29.5% | | Africa | $5,840,041 | $261,113 | +2136.4% | | South America | $2,446,688 | $136,343 | +1694.6% | | **Total** | **$107,356,898** | **$114,565,244** | **-6.3%** | - Gross margin for the nine months ended March 31, 2025, increased to **18.8%** from **16.8%** in the prior year, due to a more favorable product mix with higher-margin products[133](index=133&type=chunk) - General and administrative expenses for the nine months increased by **$11.2 million** (**43.8%**), primarily due to a **$10.1 million** increase in credit loss expense[138](index=138&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity significantly deteriorated with negative working capital and decreased cash, though management expects sufficiency for 12 months Working Capital (in thousands USD) | | March 31, 2025 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Current Assets | $94,027 | $102,572 | $(8,545) | | Current Liabilities | $96,176 | $85,991 | $10,185 | | **Working Capital** | **$(2,149)** | **$16,581** | **$(18,730)** | - Net cash used in operating activities for the nine months ended March 31, 2025 was **$12.1 million**, primarily reflecting a net loss of **$24.5 million**, offset by non-cash charges like a **$13.4 million** credit loss expense and a **$4.9 million** stock-based compensation expense[148](index=148&type=chunk) - The company has an outstanding bank loan of **$2.3 million** and a committed but unpaid investment of **$8.2 million** for its IKE Tech LLC joint venture as of March 31, 2025[158](index=158&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is not required to provide this information as it qualifies as a "smaller reporting company" - As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the company is not required to provide information for this item[163](index=163&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses in asset recording, estimate evaluation, policies, and personnel expertise - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[164](index=164&type=chunk) - Identified material weaknesses include: - Lack of controls for recording assets acquired from a controlling stockholder - Lack of controls for evaluating significant estimates (inventory reserve, credit loss) - Lack of a comprehensive accounting policies and procedures manual - Lack of sufficient personnel with appropriate technical expertise[164](index=164&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or results of operations - The company is not a party to, nor aware of, any legal proceedings, investigations or claims likely to have a material adverse effect on its business[168](index=168&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company highlights significant risks from global political events and tariffs, especially new U.S. tariffs on Chinese and Malaysian goods - The company highlights the risk of geopolitical events, specifically tariffs; as of May 5, 2025, tariffs on most Chinese-made products entering the U.S. are **145%**[170](index=170&type=chunk) - A U.S. executive order instituted a **24%** tariff on Malaysian goods and **54%** on Chinese goods, which was later paused for 90 days (except for China) and replaced with a blanket **10%** tariff for non-China imports[170](index=170&type=chunk) - Since the company purchases the majority of its products from Shenzhen Yi Jia in China, these tariffs could significantly increase its cost of revenue and adversely affect financial results[170](index=170&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales but initiated a $10 million share repurchase program, buying back 14,600 shares Issuer Purchases of Equity Securities (March 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Dollar Value that May Yet Be Purchased Under the Programs | | :--- | :--- | :--- | :--- | :--- | | March 2025 | 14,600 | $4.14 | 14,600 | $9,939,556 | - On January 20, 2025, the Board of Directors authorized a share repurchase program for up to **$10 million** of the company's common stock over a 24-month period[173](index=173&type=chunk)[175](index=175&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) During the reported quarter, no director or Section 16 officer adopted or terminated a trading arrangement under Rule 10b5-1(c) or any other non-Rule 10b5-1 trading arrangement - No director or Section 16 officer adopted or terminated a Rule 10b5-1(c) trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter[177](index=177&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) The report includes various exhibits filed with the Form 10-Q, such as loan and consulting agreements, officer certifications, and interactive data files - Key exhibits filed include agreements with Avon River Ventures LLC (Master Loan and Security Agreement, Promissory Note, Master Consulting Agreement) and required CEO/CFO certifications (302 and 906)[179](index=179&type=chunk)

Company Overview - Ispire Technology Inc. is an innovator in the development and commercialization of vaporization technology and precise dosing [1][2] - The company has over 200 patents for inventions/designs, either owned or licensed from affiliates, and sells products under the Aspire brand globally [2] Financial Performance - Ispire Technology Inc. will hold a performance conference call on May 12, 2025, to discuss its financial results for the third quarter of the fiscal year ending March 31, 2025 [1] Market Presence - The company's vaporization products are primarily sold through an ODM model under the Ispire brand to other vaporization companies [2] - Ispire Technology has recently initiated marketing activities in Canada and Europe, expanding its sales efforts beyond the United States [2]