iPower (IPW) - 2025 Q3 - Quarterly Report

PART I. Financial Information Item 1. Unaudited Condensed Consolidated Financial Statements The unaudited statements show decreased assets, lower revenue, and a net loss for Q3 FY2025 Unaudited Condensed Consolidated Balance Sheets Total assets and liabilities declined, driven by a significant drop in cash and repayment of loans Condensed Consolidated Balance Sheet Data (in USD) | Balance Sheet Item | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $2,192,254 | $7,377,837 | | Accounts receivable, net | $10,179,237 | $14,740,093 | | Inventories, net | $9,772,699 | $10,546,273 | | Total Assets | $40,506,481 | $51,295,857 | | Current Liabilities | | | | Accounts payable, net | $8,034,949 | $11,227,116 | | Revolving loan payable, net (current) | $– | $5,500,739 | | Total Liabilities | $19,788,534 | $28,279,824 | | Total Stockholders' Equity | $20,717,947 | $23,016,033 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Q3 FY2025 revenue fell 28.9%, resulting in a net loss of $0.34 million versus a prior-year profit Three Months Ended March 31, (in USD) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $16,569,678 | $23,308,508 | -28.9% | | Gross Profit | $7,176,974 | $10,367,109 | -30.8% | | (Loss) Income from Operations | $(269,003) | $1,601,276 | -116.8% | | Net (Loss) Income Attributable to iPower Inc. | $(339,599) | $1,016,082 | -133.4% | | Basic & Diluted EPS | $(0.01) | $0.03 | -133.3% | Nine Months Ended March 31, (in USD) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $54,650,770 | $66,617,004 | -18.0% | | Gross Profit | $24,054,757 | $29,444,194 | -18.3% | | (Loss) from Operations | $(2,331,830) | $(2,219,748) | +5.0% | | Net Loss Attributable to iPower Inc. | $(2,150,061) | $(2,185,261) | -1.6% | | Basic & Diluted EPS | $(0.07) | $(0.07) | 0.0% | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations turned negative, and total cash decreased by $5.2 million in the nine-month period Cash Flow Summary for Nine Months Ended March 31, (in USD) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(500,214) | $5,151,956 | | Net cash used in investing activities | $(1,519,928) | $– | | Net cash used in financing activities | $(3,168,925) | $(6,100,000) | | Change in Cash and Cash Equivalents | $(5,185,583) | $(1,020,918) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the VIE structure, a $1.57 million credit loss, debt amendments, a legal settlement, and high revenue concentration with Amazon - The company recorded a credit loss of $1,569,029 for the nine months ended March 31, 2025, after determining that the collectability of certain amounts withheld by sales channel partners was remote[40][92] - On November 8, 2024, the company amended its credit agreement with JPMorgan Chase, reducing the aggregate revolving commitment to $15 million and extending the maturity date to November 8, 2027[102] - The company settled a legal dispute with Boustead Securities for $1.3 million, paid in four installments, which was fully paid off as of March 31, 2025[162] - For the nine months ended March 31, 2025, sales through Amazon accounted for 85% of the company's total revenues[149] - During the quarter ended March 31, 2025, the company reassessed stock option performance conditions, resulting in a reversal of $674,720 in previously recorded stock-based compensation expense[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the revenue decline due to tariff uncertainty, decreased operating expenses, and reduced liquidity Results of Operations Q3 revenue fell 28.9% due to tariff uncertainty, leading to an operating loss, while nine-month revenue dropped 18.0% - Q3 2025 revenue decreased 28.9% YoY, primarily due to uncertainty over tariffs and a reduction in Amazon vendor orders[178] - Nine-month 2025 revenue decreased 18.0% YoY, mainly from a decrease in sales volume as the company offered fewer promotions and clearance activities[188] - Q3 2025 operating expenses decreased 15.1% YoY, mainly due to a $1.4 million decrease in G&A expenses, which included a reversal of stock-based compensation expense of $674,720[181] - Nine-month 2025 operating expenses decreased 16.7% YoY, driven by a $6.4 million reduction in selling and fulfillment expenses, partially offset by a $1.1 million increase in G&A expenses[191] Liquidity and Capital Resources Cash decreased by $5.2 million to $2.2 million, but management believes liquidity is sufficient for the next 12 months Liquidity Overview (in millions USD) | Metric | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $2.2 | $7.4 | | Working Capital | $11.9 | $11.2 | - Net cash used in operating activities for the nine months ended March 31, 2025 was $(500,214), a significant decline from $5,151,956 in cash provided by operations in the prior year period[201] - The company has approximately $11.5 million in unused credit under its revolving line of credit with JPM[198] Critical Accounting Policies and Estimates Key accounting estimates involve revenue recognition, credit loss allowances, inventory valuation, and goodwill impairment - Key critical accounting policies include: Revenue Recognition, Accounts Receivable, Inventory, Variable Interest Entities, Goodwill, Intangible Assets, Stock-based Compensation, and Income Taxes[205][206][210][213] - The company recorded an additional allowance for credit losses of $1,569,031 for the nine months ended March 31, 2025, after determining the collectability of certain amounts from sales channel partners was remote[212] - Goodwill is not amortized but is reviewed for impairment annually or when triggering events occur; no impairment was noted during the nine months ended March 31, 2025[219] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide this information - As a "smaller reporting company," iPower Inc. is not required to provide quantitative and qualitative disclosures about market risk[227] Item 4. Controls and Procedures Management concluded that internal controls over financial reporting were not effective due to a material weakness - Management concluded that as of March 31, 2025, the company's internal controls over financial reporting were not effective[229] - The identified material weakness relates to controls over the financial statement closing process, which were not adequately designed to identify material misstatements on a timely basis[229] - Remediation plans are being implemented, including hiring additional accountants and consultants[229] PART II. Other Information Item 1. Legal Proceedings The company is not currently party to any material legal proceedings - The company is not presently party to any material legal proceedings or claims[232] Item 1A. Risk Factors Key risks include potential Nasdaq delisting for low stock price and significant uncertainty from U.S.-China trade policies - The company received a notice from Nasdaq for failing to meet the minimum $1.00 bid price requirement and faces a potential delisting if compliance is not regained by July 1, 2025[234] - Changes in U.S. and international trade policies, particularly with China, pose a significant risk, as tariff volatility could adversely affect demand and financial results[237][238] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None[240] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[241] Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not Applicable[242] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[243] Item 6. Exhibits This section lists filed exhibits, including CEO/CFO certifications and Inline XBRL data - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents[248]