Ispire Technology (ISPR) - 2025 Q4 - Annual Report

PART I Cautionary Note on Forward-Looking Statements The Annual Report contains forward-looking statements subject to significant risks and uncertainties, with actual results potentially differing materially - The report contains forward-looking statements regarding strategy, future operations, financial position, revenue, costs, and market growth, which are subject to known and unknown risks and uncertainties[22] - Key areas of forward-looking statements include goals and growth strategies, market acceptance, future business development, FDA review of products, manufacturing capabilities, supplier relationships, regulatory effects, competition, market trends, supply chain issues, and the development of cannabis vaping markets[23] - Actual results or events could differ materially from expectations due to various factors, many beyond the company's control, and the company does not undertake to publicly update these statements unless required by law[24][25] Summary Risk Factors This section overviews material risks, including regulatory challenges, conflicts of interest, product defects, geopolitical events, and market volatility - Risks related to the business and industry include adverse effects from existing and new regulations on nicotine vaping, restrictions on cannabis vapor products, conflicts of interest due to the co-CEO's majority ownership in the company and its primary supplier, difficulties in marketing nicotine products in the U.S. without PMTA approvals, and potential long-term health risks associated with vaping[29] - Additional business risks involve product defects, global political events and tariffs, inherent industry uncertainties, misuse of products, significant reliance on one customer, and cybersecurity incidents or data protection failures[29] - Risks related to the common stock include potential patent expirations or challenges, inability to manage growth, dependence on key personnel, economic downturns, potential subjection to PRC laws, failure to collect accounts receivable, delisting from Nasdaq, and stock price volatility[31] Business Ispire designs, markets, and distributes vaping hardware for nicotine and cannabis globally, leveraging proprietary coil technologies and an ODM model, with manufacturing in Malaysia and a focus on age-gating innovation Overview Ispire develops superior vaping products for adult consumers in nicotine and cannabis sectors, utilizing proprietary coil technologies like BDC, BVC, DuCore™, and Ispire ONE™ for enhanced safety and experience - Ispire Technology Inc. focuses on delivering superior vaping products for adult consumers, emphasizing risk reduction and R&D in both nicotine and cannabis sectors[32][33] - The company markets nicotine products globally under the 'Aspire' brand and is expanding internationally with 'Ispire' platform products via licensing. Cannabis vaping hardware is sold in the US, Canada, and South Africa under the 'Ispire' brand, primarily on an Original Design Manufacturer (ODM) basis[34][35] - Key proprietary technologies include BDC (bottom dual coil) for enhanced flavor and vapor, BVC (bottom vertical coil) for uniform heating and coil longevity, Cleito tank for maximized airflow, and DuCore™ (Dual Coil) for cannabis vaporizers to prevent burning and leakage[36][37][38][39] - In June 2023, Ispire introduced Ispire ONE™ technology to address manufacturing issues like capping, improve consistency, eliminate leaking/overheating, and enhance consumer safety through factory-sealed devices[40] Acquisition of Our Business from a Related Party Ispire was formed in June 2022, acquiring key businesses from Aspire Global Inc. in a related-party restructuring, with co-CEO Tuanfang Liu holding majority ownership in both Ispire and its primary supplier, Shenzhen Yi Jia - Ispire Technology Inc. was formed in June 2022 and acquired Aspire North America LLC and Aspire Science and Technology Limited from Aspire Global Inc. on July 29, 2022, as part of a restructuring[45] - Tuanfang Liu, co-CEO and chairman, and his wife, Jiangyan Zhu, beneficially own a majority of Ispire's common stock (58.1% and 4.4% respectively) and Aspire Global's shares (66.5% and 5.0% respectively), establishing a related-party relationship[47] - The company primarily purchases e-cigarette and cannabis vaping hardware from Shenzhen Yi Jia, which is 95% owned by Tuanfang Liu, under agreements ensuring market prices no less favorable than those offered to other customers[48] - Intellectual property for cannabis vaping products was transferred to Aspire North America, while Aspire Science received a perpetual, royalty-free, exclusive license for tobacco vaping product IP worldwide (excluding PRC and Russia)[49][50] Matters Relating to PRC Laws Ispire operates outside mainland China, but acknowledges the risk that PRC laws could extend to its Hong Kong subsidiary, potentially impacting its financial condition - Ispire's operations are in Hong Kong, the United States, and Malaysia, with no employees, assets, or funds in mainland China. The company does not believe it is subject to PRC Laws applicable to mainland Chinese companies[51] - There is a risk that PRC laws and regulations could become applicable to its Hong Kong subsidiary, potentially leading to adverse impacts on financial condition and operations[52] Our Corporate Organization Ispire Technology Inc., a Delaware corporation, operates through various subsidiaries globally, including Aspire North America, Aspire Science, and Ispire Malaysia, engaged in R&D, manufacturing, and sales - Ispire Technology Inc. is a Delaware corporation, incorporated on June 13, 2022, with operating subsidiaries including Aspire North America, Aspire Science, Ispire International, Ispire Malaysia Sdn Bhd, Ispire Global Products LLC, Aspire AME Electronic Cigarettes Trading LLC, Magellan Trading LLC, and Ispire Products UK LTD[53][96] Company and Subsidiaries as of June 30, 2025 | 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 | | Ispire Products UK LTD | January 9, 2025 | England and Wales | 100% | Sales and Marketing | Our Strategy Ispire's growth strategy focuses on expanding sales, continuous R&D in vaporizer technology, pursuing M&A, growing OEM/ODM business, and developing age-gating innovations to prevent youth usage - The company's multi-prong growth strategy includes increasing sales to existing customers, expanding distributor networks and regions for e-cigarettes, and penetrating Canadian and European cannabis markets as legalization progresses[57][58] - Core to its strategy is continuous R&D, focusing on technology leadership in vaporizers, including medical and recreational cannabis products, and utilizing online forums for customer feedback[59][60] - Ispire plans to pursue M&A and strategic relationships to enhance technological human resources and product portfolios, and to develop manufacturing capabilities, initially focusing on assembly[61][62] - Expansion of OEM and ODM business for both cannabis and e-cigarette products is a key growth area, with OEM/ODM sales accounting for 40.2% of e-cigarette revenue in FY2025, up from 25.9% in FY2024[63] - The company is actively pursuing technological innovations to prevent youth usage, including its IKE Tech LLC joint venture for point-of-use age-gating technology for e-cigarettes[65] Our Products Ispire develops and sells branded and OEM/ODM nicotine and cannabis vaping products, featuring proprietary technologies like BDC, BVC, DuCore™, Ispire ONE™, and G-Mesh for enhanced performance and safety - Ispire develops and sells branded and OEM/ODM nicotine vaping systems and components (cartridges, batteries) globally, excluding the US, PRC, and Russia, for adult users[66] - The product lines include 'open system' devices (tanks, battery mods, refillable by consumers, e.g., Nautilus, Zestquest) and 'closed system' devices (pre-filled cartridges, rechargeable/disposable, e.g., BRKFST), with closed systems becoming dominant[67][68][69] - Proprietary technologies include BDC (bottom dual coil) for expanded heating and flavor, BVC (bottom vertical coil) for uniform heating and coil longevity, and Cleito tank for maximized airflow[70][71] - Ispire's cannabis vaping products, introduced in December 2020, utilize patented DuCore™ (Dual Coil) technology for large vapor plumes without burning oil, best-in-class airflow/taste, and leakage elimination. These are hardware-only, designed for customers to fill with cannabis oil[74] - Ispire ONE™ technology (June 2023) aims to eliminate capping issues, increase consistency, prevent leaking/overheating, and improve consumer safety through factory-sealed devices[75] - New G-Mesh technology, marketed under 'Silica Series,' uses porous glass and interlocking mesh coils for improved nicotine uptake, superior flavor, and reduced ceramic dust risk[76] Sales and Distribution Ispire distributes e-cigarettes globally through over 150 distributors and sells cannabis vapor products directly to brands on an ODM basis, with a significant portion of revenue from a single major distributor - Most e-cigarette revenue comes from sales to over 150 distributors in more than 30 countries, primarily Europe and Asia Pacific (excluding PRC). OEM/ODM sales for e-cigarettes increased to 40.2% of revenue in FY2025 from 25.9% in FY2024, with a major OEM contract secured in May 2024 expected to boost FY2026 revenue[42][44][77] - Cannabis vapor products are mainly sold directly to other cannabis vaping brands on an ODM basis, with Ispire's brand sometimes included. The company does not sell cannabis or hemp oil[77][80] - The largest distributor, Your-Buyer International Limited (UK and France), accounted for 25.7% of revenue in FY2025 and 30.0% in FY2024. No other single customer accounted for 10% or more of revenue[81] - Sales channels include wholesalers, retail outlets (grocery, convenience, tobacco stores), and online platforms operated by distributors. Ispire supports marketing through websites, social media, SEO, email campaigns, and influencer marketing, targeting adult consumers[82][83][84] Source of Supply Ispire primarily sources vaping products from related-party Shenzhen Yi Jia but is expanding its own manufacturing capabilities in Malaysia to diversify supply and enhance quality control - A majority of e-cigarette and cannabis vaping products are purchased from Shenzhen Yi Jia, a related party (95% owned by co-CEO Tuanfang Liu), under agreements ensuring market prices and warranty responsibility[88] - The company commenced manufacturing operations in Malaysia in February 2024 with 6 production lines, focusing on component assembly. Plans include expanding to up to 70 new lines at a second Malaysian facility within 12 months to diversify supply[41][89] - Quality control is a crucial part of the manufacturing process, involving supplier visits, annual inspections, and employing qualified personnel[90] Warranties Ispire passes on 90-day manufacturer warranties from its supplier to customers, with immaterial claims to date, thus no warranty liability is recognized - Ispire passes on warranties from Shenzhen Yi Jia to its customers, covering repair or replacement for manufacturer defects. Warranty periods are generally 90 days, with six months for the UK and France[91] - Customers are required to test hardware with their oils to minimize performance issues. Warranty claims have been immaterial, so no warranty liability has been deemed necessary[91] Research and Development Ispire has established its own R&D team, led by Chairman Tuanfang Liu, focusing on cannabis vaping products and developing patented dual-coil and self-sealing technologies - Historically, R&D was conducted by Shenzhen Yi Jia, but Ispire has established its own R&D team, primarily in Los Angeles, headed by Chairman Tuanfang Liu, focusing on cannabis vaping products[92][93] - Recent R&D efforts include the Ispire cannabis vaping system, patented dual-coil technology, self-sealing technology, and a closed system for e-cigarettes designed to prevent oil leakage[93] IKE Tech LLC Joint Venture Aspire North America formed IKE Tech LLC in April 2024 to develop age-verification solutions for vapor devices, with IKE submitting a 'component' PMTA for its age-gating system accepted by the FDA in May 2025 - Aspire North America LLC entered a joint venture, IKE Tech LLC, in April 2024, focused on developing, licensing, owning, and operating an industry-standard age-verification solution for vapor devices[94] - IKE plans to submit PMTA applications for age-gated e-cigarettes with characterizing flavors, geo-fencing, blockchain technology for authentication, and biometric identity platforms[94] - IKE submitted a 'component' PMTA for its age-gating system in April 2025, which was accepted by the FDA in May 2025, and is actively pursuing age-gating mandates globally[95][96] Intellectual Property Ispire holds over 200 patents, primarily utility patents for atomizer and heating coil technologies, with cannabis-related IP transferred to Aspire North America and tobacco-related IP exclusively licensed to Aspire Science - Ispire's intellectual property, primarily developed by Tuanfang Liu, includes over 200 patents in various jurisdictions. Cannabis-related IP has been transferred to Aspire North America, while tobacco-related IP is exclusively licensed to Aspire Science worldwide (excluding PRC and Russia)[97][100] - Utility patents form the core IP, focusing on atomizer, heating coil, and battery technologies for enhanced functionality and user experience. Design patents cover visual aspects of products[98][99] - Patents began expiring in 2022, with the last set to expire in 2045. The company intends to seek further patent protection for new developments[100] - Trademark registrations for 'Ispire' and other product marks (e.g., CLEITO, NAUTILUS) are held by Shenzhen Yi Jia and have been assigned or exclusively licensed to Ispire's subsidiaries[102] Competition The e-cigarette market is highly competitive with over 50 companies, while the cannabis vapor market is developing, with Ispire's success dependent on continuous innovation and anticipating consumer demand - The e-cigarette market is highly competitive with over 50 companies, including major players like Smoore International Holdings Limited. The cannabis vapor market is developing, primarily in the US, with emerging markets in Canada and Europe[106][108] - Competition is driven by technological innovation, design, and evolving consumer preferences. Ispire's success depends on its ability to anticipate market demand and develop cutting-edge products[107] Seasonality Seasonality does not materially affect the company's business or results of operations - Seasonality does not materially affect the company's business or results of operations[109] Human Capital As of September 4, 2025, Ispire had 81 employees across operations, management, sales, and R&D, maintaining good employee relations without labor unions - As of September 4, 2025, Ispire had 81 employees: 21 in operations, 46 in general management, 9 in sales and marketing, and 5 in R&D. The company values talent management, health and safety, and fair employment practices[110][111][112][113][114] - The company maintains good employee relations, with no labor unions, and uses labor contracts and IP agreements for key personnel[115] Insurance Ispire's insurance coverage aligns with industry standards, though Aspire Science lacks product liability insurance - Ispire's insurance coverage is consistent with industry standards, though Aspire Science lacks product liability insurance[116] Legal Proceedings The company is not currently involved in any legal or regulatory proceedings that would materially adversely affect its business or financial condition - The company is not currently a party to any legal or regulatory proceedings, investigations, or claims that management believes would have a material adverse effect on its business, financial condition, or results of operations[117] Regulation Ispire navigates complex and evolving regulations for ENDS and cannabis products in the US, Europe, and UK, including PMTA requirements, PACT Act restrictions, and age-gating initiatives, while also complying with Malaysian manufacturing laws and global data protection - In the United States, ENDS products require Premarket Tobacco Product Applications (PMTAs) for market authorization. Ispire filed a PMTA for its Nautilus Prime products, which are currently the only ones it can sell in the US. The PACT Act, amended in 2020, applies to all vaping products (nicotine and cannabis), imposing restrictions on mailing and requiring reporting, making sales more difficult[119][122][124] - Ispire believes its IKE age-gating technology may enable approval for ENDS products with characterizing flavors, with a 'component' PMTA accepted by the FDA in May 2025[130] - Cannabis vaping products are governed by varying state laws; federal law still prohibits non-hemp cannabis. Ispire relies on exemptions by not selling into prohibition states and limiting sales to licensed cannabis businesses[131][132][133] - European regulations (TPD) impose strict rules on e-cigarette product information, advertising, safety, and presentation. The sale of recreational cannabis vaping products is largely illegal in the EU, though a market is developing in some countries like Germany[135][136] - The UK's TRPR sets minimum standards for e-cigarettes and e-liquids, restricting tank capacity, nicotine volume/strength, and requiring child-resistant packaging and MHRA notification. Disposable e-cigarettes were banned on April 1, 2025, and the Tobacco and Vapes Bill proposes further restrictions, including a vape advertisement ban[137][138][139][145][146][147] - Ispire's Malaysian manufacturing facility must comply with local laws, including obtaining regulatory approvals and licenses for nicotine product export, with a temporary license received in May 2025[149] - The company is subject to evolving privacy and data protection laws (e.g., CCPA, GDPR) due to potential public interaction and internet sales, with non-compliance risking enforcement actions, litigation, and reputational damage[152][153][154][155] Risk Factors This section details significant risks, including substantial financial losses, stringent regulations, conflicts of interest, product liability, intense competition, growth management, key personnel retention, and global economic and cybersecurity threats - The company sustained significant net losses of $39.2 million in FY2025 and $14.8 million in FY2024, with no assurance of future profitability[162] - Existing and new regulations in the nicotine vaping industry, including PMTA requirements and flavor bans, have materially and adversely affected business operations, leading to the decision not to market nicotine products in the US until PMTA approvals are secured[163][164][176] - Cannabis vapor products face complex state and federal regulations, including the PACT Act's shipping restrictions and potential rescheduling of cannabis, which could negatively impact sales and compliance obligations[167][168][184] - A significant conflict of interest exists because co-CEO Tuanfang Liu and his wife beneficially own 62.5% of Ispire's common stock and Mr. Liu owns 95% of Shenzhen Yi Jia, the company's majority supplier, potentially influencing decisions to the detriment of minority shareholders[173][175] - The company is exposed to product liability claims and user complaints due to potential long-term health risks of vaping, product defects, and the non-uniform quality of cannabis oil, which could lead to significant costs, reputational damage, and business loss[186][188][190][193][199] - Intense competition in both nicotine and cannabis vaping markets, coupled with the need for timely product innovation and effective growth management, poses risks to market share and profitability[207][221][235] - Reliance on a single major customer (25.7% of FY2025 revenue) and a related-party supplier (91% of FY2025 purchases) creates concentration risks. Failure to collect accounts receivable, particularly from US cannabis operators facing economic headwinds, could adversely affect liquidity[219][249][106] - Other risks include global economic volatility, tariffs (e.g., 30% on Chinese imports, 19% on Malaysian imports), cybersecurity incidents, potential infringement of intellectual property, and the inability to retain key management and skilled employees[220][230][232][236] Unresolved Staff Comments There are no unresolved staff comments from the SEC Cybersecurity Ispire recognizes cybersecurity as a significant risk, with a dedicated committee and Audit Committee oversight, and no material threats reported to date - Cyberattacks pose a significant threat to Ispire's operations and confidential information, with potential for business disruption, reputational damage, financial obligations, and regulatory penalties[261][262] - The company has a Cybersecurity Committee (CFO, CLO, Controller, Head of HR) for day-to-day risk management, incident response, vendor risk oversight, and policy compliance. Cybersecurity training is planned for all employees[264][265] - The Audit Committee oversees the company's cybersecurity risk assessment and management, receiving regular updates from the Cybersecurity Committee[266] - As of the report date, Ispire is not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, strategy, results of operations, or financial condition[267] Properties Ispire leases approximately 205,391 square feet for its headquarters, offices, manufacturing, and storage in Los Angeles, Hong Kong, and Malaysia - Ispire's headquarters, offices, manufacturing, and storage facilities are leased, totaling approximately 205,391 square feet across Los Angeles, CA, Hong Kong, and Senai, Johor, Malaysia[268][269] Leased Real Property Information | Location | Square Feet | Current Annual Rent ($) | Expiration Date | | :--- | :--- | :--- | :--- | | 1410 Abbot Kinney Blvd., PH 1, Venice, CA 90291 | 4,121 | 388,000 | June 30, 2026 | | 19700 Magellan Dr, Los Angeles, CA 90502 | 37,100 | 872,719 | July 31, 2027 | | 55 King Yip Street, King Palace Plaza, Floor 31, Suite J, Kwun Tong, Hong Kong | 1,850 | 81,323 | July 14, 2027 | | No. 16, Jalan I-Park SAC 3, Taman Perindustrian I-Park SAC, 81400 Senai, Johor, Malaysia | 31,000 | 127,076 | August 17, 2026 | | Lot 210, Jalan Seelong, 81400 Senai, Johor, Malaysia | 131,320 | 594,401 | March 16, 2030 | Legal Proceedings The company is not currently involved in any legal or regulatory proceedings that would materially adversely affect its business or financial condition - Ispire is not a party to, nor aware of, any legal or regulatory proceedings, investigations, or claims likely to have a material adverse effect on its business, financial condition, or results of operations[270] Mine Safety Disclosures This item is not applicable to Ispire Technology Inc. PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Ispire's Common Stock trades on Nasdaq under 'ISPR', with 16 holders of record as of September 15, 2025, and no dividends paid, focusing on retaining earnings for growth - Ispire's Common Stock trades on the Nasdaq Stock Market under the symbol 'ISPR'. As of September 15, 2025, there were approximately 16 holders of record[273] - The company has never declared or paid cash dividends and plans to retain all available funds and future earnings to support operations and business growth[274] Securities Authorized for Issuance under Equity Compensation Plan (as of June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,438,125 | 8.15 | 11,616,039 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 1,438,125 | 8.15 | 11,616,039 | - The board approved a share repurchase program on January 20, 2025, authorizing up to $10 million of common stock repurchases over 24 months. No shares were repurchased during the three months ended June 30, 2025[278][280] Reserved This item is intentionally left blank Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Ispire's financial performance, liquidity, and capital resources, noting decreased revenue, increased net loss, reduced working capital, and ongoing regulatory risks Overview Ispire focuses on R&D, design, and distribution of nicotine and cannabis vaping hardware, having raised $36.3 million through fundraising, while facing significant regulatory risks and increased credit loss expenses - Ispire focuses on R&D, design, commercialization, sales, marketing, and distribution of branded and non-branded vaping hardware for nicotine and cannabis markets, aiming to reduce youth access and provide adult consumers with desired products[282][283] - The company sells 'Aspire' brand nicotine products globally and 'Ispire' brand cannabis vaping hardware in the US, Canada, and South Africa, with expansion plans for Europe and South America, primarily through an ODM model[284][285] - Since its April 2023 IPO, Ispire completed three fundraising rounds, raising approximately $18.3 million (IPO), $7.4 million (private placement), and $10.6 million (public offering) for manufacturing, joint ventures, and working capital[286][287] - Regulatory risks, including varying e-cigarette regulations and the legal status of cannabis products worldwide, pose significant challenges and can disrupt business operations[288][289] - The allowance for credit losses increased significantly from $5.9 million in FY2024 to $18.0 million in FY2025, reflecting longer collection times and higher estimated lifetime expected losses, partly due to economic conditions in the cannabis industry[290][291] Key Factors that Affect Our Results of Operations Key factors impacting operations include evolving regulations for nicotine and cannabis vaping, product development to meet consumer tastes, competition, and international market expansion - Key factors affecting results include legislation and regulations for non-combustible nicotine and cannabis vaping products, the ability to obtain regulatory approval for US nicotine products, developing products to meet changing consumer tastes, competition, and the development of international cannabis vaping markets[294] Results of Operations Ispire's revenue decreased by 16.1% to $127.5 million in FY2025, leading to a 23.9% drop in gross profit and a 38.5% increase in operating expenses, resulting in a net loss of $39.2 million Consolidated Statements of Operations and Comprehensive Loss (Years Ended June 30, 2025 and 2024) | Metric | 2025 (in thousands) | % of Revenue (2025) | 2024 (in thousands) | % of Revenue (2024) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $127,494 | 100.0% | $151,909 | 100.0% | | Cost of revenue | (104,845) | (82.2)% | (122,126) | (80.4)% | | Gross profit | 22,649 | 17.8% | 29,783 | 19.6% | | Operating expenses | (60,499) | (47.5)% | (43,677) | (28.8)% | | Loss from operations | (37,850) | (29.7)% | (13,894) | (9.1)% | | Other (loss) income, net | (187) | (0.1)% | 409 | 0.3% | | Loss before income taxes | (38,037) | (29.8)% | (13,486) | (8.9)% | | Income taxes | (1,204) | (0.9)% | (1,282) | (0.8)% | | Net loss | $(39,241) | (30.8)% | $(14,768) | (9.7)% | | Other comprehensive (loss) income | (167) | (0.1)% | 221 | 0.1% | | Comprehensive loss | $(39,408) | (30.9)% | $(14,546) | (9.6)% | | Net loss per ordinary share (basic and diluted) | $(0.69) | - | $(0.27) | - | | Weighted ordinary shares outstanding | 56,853,552 | - | 54,812,900 | - | - Revenue decreased by $24.4 million (16.1%) from $151.9 million in FY2024 to $127.5 million in FY2025, driven by decreases in North America ($30.5 million) and Asia Pacific ($5.3 million), partially offset by increases in Europe ($8.8 million) and other regions ($2.5 million)[296] - Cost of revenue decreased by $17.3 million (14.2%) in line with the sales decrease. Gross profit decreased by $7.1 million (23.9%), and gross margin declined from 19.6% in FY2024 to 17.8% in FY2025, primarily due to a less favorable product mix[297][299][300] - Operating expenses increased by $16.8 million (38.5%) to $60.5 million in FY2025. This was mainly due to a 266.3% increase in credit loss expenses ($16.0 million) and a 27.7% increase in sales and marketing expenses ($1.8 million), partially offset by a 3.3% decrease in general and administrative expenses ($1.0 million)[301][302][303][304] - Net loss increased by $24.5 million, from $14.8 million ($0.27 per share) in FY2024 to $39.2 million ($0.69 per share) in FY2025[313] Liquidity and Capital Resources Ispire's working capital significantly decreased by 97.8% to $0.4 million in FY2025, with net cash used in operating activities improving to $7.4 million, and future funding relying on cash flow and equity/borrowing Working Capital (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Current Assets | $72,908 | $102,572 | $(29,664) | (28.9)% | | Current Liabilities | $72,540 | $85,991 | $(13,451) | (15.6)% | | Working Capital | $368 | $16,581 | $(16,213) | (97.8)% | Consolidated Cash Flow Data (in thousands) | Cash Flow Activity | 2025 | 2024 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(7,374) | $(18,302) | $10,928 | | Net cash (used in) provided by investing activities | $(5,199) | $2,990 | $(8,189) | | Net cash provided by financing activities | $1,853 | $10,083 | $(8,230) | | Net decrease in cash | $(10,720) | $(5,229) | $(5,491) | - Net cash used in operating activities decreased from $18.3 million in FY2024 to $7.4 million in FY2025, primarily due to higher impairment of accounts receivable and stock-based compensation, offset by changes in accounts payable and contract liabilities[316][317] - Net cash used in investing activities was $5.2 million in FY2025, reflecting repayment of acquisition payable, and purchases of property, plant, and equipment, and intangible assets[318] - Net cash provided by financing activities was $1.9 million in FY2025, mainly from borrowing proceeds, compared to $10.1 million in FY2024 from equity offerings[320] - The company believes current cash, operating cash flows, and proceeds from equity offerings/borrowing will be sufficient for working capital needs for the next 12 months, but additional financing may be required for adverse conditions or accelerated growth[321] Contractual Obligations As of June 30, 2025, Ispire had $4.9 million in contract liabilities, $5.1 million in lease liabilities, $2.0 million in borrowing, and an unpaid $5.8 million joint venture investment - As of June 30, 2025, contract liabilities (advance deposits from customers) totaled $4.9 million, expected to be settled within one year[323] Maturities of Lease Liabilities (as of June 30, 2025) | Period | Amount ($) | | :--- | :--- | | July 1, 2025 to June 30, 2026 | 2,110,799 | | July 1, 2026 to June 30, 2027 | 1,583,109 | | July 1, 2027 to June 30, 2028 | 777,402 | | July 1, 2028 to June 30, 2029 | 696,727 | | July 1, 2029 to June 30, 2030 | 464,484 | | Total future lease payments | 5,632,521 | | Less: imputed interest | (526,184) | | Total lease liabilities | 5,106,337 | Maturities of Borrowing (as of June 30, 2025) | Period | Amount ($) | | :--- | :--- | | July 1, 2025 to June 30, 2026 | 1,146,766 | | July 1, 2026 to June 30, 2027 | 805,361 | | Total borrowing | 1,952,127 | - An unpaid $5.8 million consideration for a $9 million joint venture investment in IKE Tech LLC was recorded in accrued liabilities as of June 30, 2025[326] Trend Information The company is unaware of any material trends, uncertainties, demands, commitments, or events beyond those disclosed in the Form 10-K that would affect its financial performance - The company is not aware of any trends, uncertainties, demands, commitments, or events likely to materially affect its net revenues, income from operations, profitability, liquidity, or capital resources, other than those disclosed elsewhere in the Form 10-K[327] Seasonality Seasonality does not materially affect the company's business or results of operations - Seasonality does not materially affect the company's business or results of operations[328] Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[329] Critical Accounting Estimates Key accounting estimates include revenue recognition with sales return reserves and allowance for credit losses, based on historical data, economic conditions, and management judgment - Key accounting estimates include revenue recognition, particularly for sales with a right of return, where a sales return reserve is recognized based on historical rates and management judgment[330] - Allowance for credit losses is estimated using a roll rate method or aggregation of risk characteristics, considering historical collection experience, aging of receivables, economic environment, and customer creditworthiness[331] Recent Accounting Pronouncements The discussion of recent accounting pronouncements is incorporated by reference from the notes to the consolidated financial statements - The discussion of recent accounting pronouncements is incorporated by reference from the notes to the consolidated financial statements[332] Emerging Growth Company As an 'emerging growth company,' Ispire benefits from reduced reporting requirements, potentially affecting comparability with other public companies - As an 'emerging growth company' under the JOBS Act, Ispire takes advantage of reduced reporting requirements, including exemption from auditor attestation for internal controls and delayed adoption of new accounting standards, which may affect comparability with other public companies[333] Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Ispire is not required to provide this information Financial Statements and Supplementary Data This item incorporates the company's financial statements and supplementary data, starting on page F-1 - The financial statements and related notes are filed as part of this Annual Report, starting on page F-1[335] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure to report[336] Controls and Procedures Ispire's disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, including estimate evaluation, personnel, and IT general controls, with remediation efforts underway - As of June 30, 2025, Ispire's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal controls over financial reporting[337][340] - Material weaknesses identified include a lack of controls for evaluating significant estimates (inventory and credit loss reserves), insufficient personnel with appropriate accounting knowledge, and inadequate IT general controls regarding cybersecurity governance, logical access security, and service organization management[342][349] - The remediation plan involves performing scoping and risk assessment, recruiting additional finance and accounting employees and consultants, and strengthening the IT control environment with third-party expertise[344][350] - Remediation will not be considered complete until controls operate for a sufficient period and are tested effectively[345] Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1(c) or 'non-Rule 10b5-1' trading arrangement during the three months ended June 30, 2025 - No director or Section 16 officer adopted or terminated a Rule 10b5-1(c) or 'non-Rule 10b5-1' trading arrangement during the three months ended June 30, 2025[347] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Ispire Technology Inc. PART III Directors, Executive Officers and Corporate Governance This section details Ispire's leadership, corporate governance structure, including director independence, board committees, code of conduct, and risk oversight processes Directors and Executive Officers (as of September 15, 2025) | Name | Age | Position/Title | | :--- | :--- | :--- | | Tuanfang Liu | 53 | Co-Chief Executive Officer and Chairman | | Michael Wang | 62 | Co-Chief Executive Officer and President of Aspire North America | | Jie Yu | 41 | Chief Financial Officer | | Steven Przybyla | 40 | Chief Legal Officer and Secretary | | Jiangyan Zhu | 50 | Director | | Christopher Robert Burch | 58 | Independent Director | | Brent Cox | 43 | Independent Director | | John Fargis | 59 | Independent Director | - Tuanfang Liu (Co-CEO, Chairman) is responsible for daily operations and R&D, with over 14 years of experience. Michael Wang (Co-CEO, President of Aspire North America) has extensive experience in internet technology and e-commerce, particularly in the cannabis industry. Jie Yu (CFO) has a background in public accounting and audit. Steven Przybyla (Chief Legal Officer) has over 10 years of experience in regulated cannabis and nicotine/tobacco product regulation[354][355][356][357] - Tuanfang Liu and Jiangyan Zhu (director) are married. Three directors (Brent Cox, John Fargis, Christopher Robert Burch) are deemed 'independent' under Nasdaq rules. The board has established Audit, Compensation, and Nominating and Corporate Governance Committees[363][367][368] - The Audit Committee oversees financial reporting and related-party transactions, the Compensation Committee reviews executive and director compensation, and the Nominating and Corporate Governance Committee recommends director nominees and reviews corporate governance principles. Tuanfang Liu chairs the Nominating and Corporate Governance Committee as a controlled corporation[369][370][371][372][373][374] - The board actively oversees risk management, receiving regular reports from senior management on strategic, operational, financial, legal, and regulatory risks[379][380][381][382] Executive Compensation This section details executive and director compensation for FY2025 and FY2024, including salaries, bonuses, equity awards, employment agreements, the 2022 Equity Incentive Plan, and the compensation recovery policy Summary Compensation Table (Years Ended June 30, 2025 and 2024) | Name and Principal Position | Fiscal Year Ending, June 30 | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Totals ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Tuanfang Liu, Co-CEO | 2025 | 246,476 | — | — | — | — | — | — | 246,476 | | | 2024 | 245,568 | — | — | — | — | — | — | 245,568 | | Michael Wang, Co-CEO | 2025 | 597,159 | 400,000 | 1,356,936 | (5,537,903) | — | — | — | (3,183,808) | | | 2024 | 350,000 | — | 2,760,001 | 5,537,903 | — | — | — | 8,647,904 | | Tirdad Rouhani, President | 2025 | 277,778 | 100,000 | 542,773 | — | — | — | 68,333 | 988,884 | | | 2024 | 297,500 | 300,000 | 1,134,509 | 1,661,371 | — | — | — | 3,393,380 | | Steven Przybyla, Chief Legal Officer and Secretary | 2025 | 398,637 | 250,000 | 2,650,547 | — | — | — | — | 3,299,184 | | | 2024 | 216,039 | 40,000 | — | 553,790 | — | — | — | 809,829 | | Daniel Machock (CFO) | 2025 | — | — | — | — | — | — | 125,000 | 125,000 | | | 2024 | 234,936 | 20,000 | — | — | — | — | — | 254,936 | | James McCormick (CFO) | 2025 | 339,508 | 24,000 | — | — | — | — | 96,000 | 459,508 | | | 2024 | 32,500 | — | — | 819,029 | — | — | — | 851,529 | | Jie Yu (CFO) | 2025 | 201,289 | — | — | — | — | — | — | 201,289 | | | 2024 | 167,123 | — | — | 547,272 | — | — | — | 714,395 | - Employment agreements detail compensation for Tuanfang Liu (annual rate of 1,920,000 HKD), Michael Wang (annual rate of $393,447), Jie Yu (annual base salary of $200,000), and Steven Przybyla (annual base salary of $400,000)[390][391][392][393] - The 2022 Equity Incentive Plan authorizes up to 15,000,000 shares for equity awards to officers, directors, employees, and consultants. As of June 30, 2025, 1,438,125 options and 404,970 RSUs were outstanding[394][395][521] - A compensation recovery ('clawback') policy was adopted in November 2023 for erroneously awarded incentive compensation in case of accounting restatements[399] Director Compensation (Year Ended June 30, 2025) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Nonequity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Jiangyan Zhu | $161,750 | - | - | - | - | - | $161,750 | | Christopher Robert Burch | $62,500 | $59,770 | - | - | - | - | $122,270 | | Brent Cox | $55,500 | $88,098 | - | - | - | - | $143,598 | | John Fargis | $49,500 | $88,025 | - | - | - | - | $137,525 | - An updated non-employee director compensation policy, effective October 1, 2024, provides an annual cash retainer of $50,000 (plus committee fees) and fully vested common stock shares valued at $165,000 per year (plus committee fees)[409] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of Ispire's common stock as of September 15, 2025, with Tuanfang Liu and Jiangyan Zhu holding 62.4%, granting them significant control - As of September 15, 2025, there were 57,277,874 shares of Common Stock outstanding[16][411] Beneficial Ownership of Common Stock (as of September 15, 2025) | Name of Beneficial Owner | Shares | % | | :--- | :--- | :--- | | Tuanfang Liu and Jiangyan Zhu | 35,750,000 | 62.4% | | Pride Worldwide Investment Limited | 33,250,000 | 58.1% | | Michael Wang | 1,453,882 | 2.5% | | Steven Przybyla | 416,710 | * | | Christopher Robert Burch | 41,658 | * | | Brent Cox | 50,782 | * | | John Fargis | 46,599 | * | | All current executive officers and directors as a group (ten individuals) | 37,759,631 | 65.9% | - Tuanfang Liu, co-CEO and chairman, holds 58.1% of shares through Pride Worldwide Investment Limited, and his wife, Jiangyan Zhu, holds 4.4% through Honor Epic International Limited, giving them combined control of 62.4% of the company's voting power[412][413][414] Certain Relationships and Related Transactions, and Director Independence This section details Ispire's significant related party transactions, primarily with Shenzhen Yi Jia, owned by co-CEO Tuanfang Liu, and its equity method investment in IKE Tech LLC - Key related parties include Tuanfang Liu (Co-CEO, Chairman, 95% owner of Shenzhen Yi Jia), Jiangyan Zhu (Director, Liu's wife), Aspire Global (controlled by Liu), and Shenzhen Yi Jia (major supplier)[417][424] - For FY2025 and FY2024, the majority of tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia, totaling $94.7 million and $91.3 million, respectively. Accounts payable to Shenzhen Yi Jia were $52.4 million in FY2025 and $67.0 million in FY2024[419] - A $25 million balance due to Shenzhen Yi Jia as of June 30, 2025, was reclassified from accounts payable to a non-current amount due to a related party, with repayment deferred for twelve months from September 30, 2025[420] - Ispire had accounts receivable of $75,147 from IKE Tech LLC (a 40% owned joint venture) in FY2025 and recorded $109,349 in other income from IKE for administrative fees[421][424] Principal Accounting Fees and Services This section details audit and audit-related fees paid to Ispire's independent accountants for FY2025 and FY2024, noting multiple auditor changes and Audit Committee pre-approval responsibilities - Ispire engaged multiple independent accounting firms during FY2024 and FY2025 due to changes: MSPC resigned in December 2023, Marcum was engaged, then CBIZ purchased Marcum's attest business, and finally Marcum Asia was appointed in February 2025[422] Audit Fees by Firm (Years Ended June 30, 2025 and 2024) | Firm | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Marcum Asia | 504,238 | 0 | | Marcum | 170,465 | 851,600 | | CBIZ | 87,550 | 0 | | MSPC | 0 | 0 | - Audit-related fees for MSPC were $37,250 in FY2025 and $60,010 in FY2024. No tax fees or other fees were paid to any of the firms in either fiscal year[427][428][429] - The Audit Committee is responsible for reviewing and pre-approving all audit and permissible non-audit engagements with the independent registered public accounting firm[430] PART IV Exhibits and Financial Statements Schedules This section lists all consolidated financial statements, schedules, and exhibits filed as part of the Form 10-K, including auditor reports and corporate documents - The consolidated financial statements and notes are filed as part of this Annual Report, starting on page F-1[432] - All financial statement schedules are omitted as the required information is either not applicable, not material, or included in the consolidated financial statements and notes[433] - A complete list of exhibits, including corporate documents (Certificate of Incorporation, Bylaws), intellectual property agreements, employment agreements, equity incentive plans, distributorship agreements, supply agreements, and auditor consents, is provided[434][435][436][437] Form 10-K Summary This item states that a Form 10-K Summary is not applicable Financial Statements Report of Independent Registered Public Accounting Firm Marcum Asia CPAs LLP Marcum Asia CPAs LLP issued an unqualified opinion on Ispire's FY2025 consolidated financial statements, affirming fair presentation in conformity with U.S. GAAP - Marcum Asia CPAs LLP provided an unqualified opinion on Ispire's consolidated financial statements for the year ended June 30, 2025, stating they are presented fairly in all material respects in conformity with U.S. GAAP[448] - The audit was conducted in accordance with PCAOB standards, assessing risks of material misstatement, but did not include an audit or opinion on the effectiveness of the company's internal control over financial reporting[450] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Marcum LLP Marcum LLP issued an unqualified opinion on Ispire's FY2024 consolidated financial statements, confirming fair presentation in accordance with U.S. GAAP - Marcum LLP issued an unqualified opinion on Ispire's consolidated financial statements for the year ended June 30, 2024, affirming fair presentation in all material respects in conformity with U.S. GAAP[455] - The audit was performed according to PCAOB standards, assessing risks of material misstatement, but did not include an audit or opinion on the effectiveness of the company's internal control over financial reporting[457] Consolidated Balance Sheets Ispire's total assets decreased to $102.2 million in FY2025, liabilities increased to $101.6 million, and stockholders' equity significantly decreased to $0.6 million Consolidated Balance Sheets (as of June 30, 2025 and 2024) | Asset/Liability/Equity | June 30, 2025 ($) | June 30, 2024 ($) | | :--- | :--- | :--- | | Assets: | | | | Current assets | 72,908,385 | 102,571,605 | | Other assets | 29,308,746 | 20,069,361 | | Total assets | 102,217,131 | 122,640,966 | | Liabilities: | | | | Current liabilities | 72,539,554 | 85,990,532 | | Other liabilities | 29,072,883 | 2,194,094 | | Total liabilities | 101,612,437 | 88,184,626 | | Stockholders' equity: | | | | Common stock | 5,719 | 5,647 | | Treasury stock | (60,488) | - | | Additional paid-in capital | 48,833,601 | 43,217,391 | | Accumulated deficit | (48,065,267) | (8,825,041) | | Accumulated other comprehensive (loss)/income | (108,871) | 58,343 | | Total stockholders' equity | 604,694 | 34,456,340 | - Total assets decreased by $20.4 million, from $122.6 million in FY2024 to $102.2 million in FY2025, primarily due to a $29.7 million decrease in current assets, offset by a $9.2 million increase in other assets[461] - Total liabilities increased by $13.4 million, from $88.2 million in FY2024 to $101.6 million in FY2025, mainly driven by the reclassification of a $25 million related-party payable to a non-current liability[461] - Total stockholders' equity significantly decreased by $33.8 million, from $34.5 million in FY2024 to $0.6 million in FY2025, largely due to the net loss incurred during the period[461] Consolidated Statements of Operations and Comprehensive Loss Ispire reported a net loss of $39.2 million in FY2025, up from $14.8 million in FY2024, driven by a 16.1% revenue decrease, gross margin decline, and increased operating expenses Consolidated Statements of Operations and Comprehensive Loss (Years Ended June 30, 2025 and 2024) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Revenue | 127,494,304 | 151,908,691 | | Cost of revenue | 104,844,633 | 122,126,245 | | Gross profit | 22,649,671 | 29,782,446 | | Operating expenses | 60,499,530 | 43,676,585 | | Loss from operations | (37,849,859) | (13,894,139) | | Other income (expense), net | (186,663) | 408,363 | | Loss before income taxes | (38,036,522) | (13,485,776) | | Income taxes – current | (1,203,704) | (1,282,046) | | Net loss | (39,240,226) | (14,767,822) | | Other comprehensive (loss) income | (167,214) | 222,111 | | Comprehensive loss | (39,407,440) | (14,545,711) | | Net loss per share (basic and diluted) | (0.69) | (0.27) | | Weighted average shares outstanding (basic and diluted) | 56,853,552 | 54,812,900 | - Revenue decreased by 16.1% from $151.9 million in FY2024 to $127.5 million in FY2025[463] - Gross profit decreased by 23.9% from $29.8 million in FY2024 to $22.6 million in FY2025, with gross margin declining from 19.6% to 17.8%[463] - Operating expenses increased by 38.5% from $43.7 million in FY2024 to $60.5 million in FY2025, leading to a significant increase in loss from operations[463] - Net loss more than doubled, from $14.8 million in FY2024 to $39.2 million in FY2025, resulting in a basic and diluted net loss per share of $0.69 in FY2025 compared to $0.27 in FY2024[463] Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity significantly decreased from $34.5 million in FY2024 to $0.6 million in FY2025, primarily due to a $39.2 million net loss Consolidated Statements of Changes in Stockholders' Equity (Years Ended June 30, 2025 and 2024) | Metric | Balance, July 1, 2023 ($) | Net loss ($) | Issuance of common stock for a secondary offering, net of insurance cost ($) | Issuance of common stock for equity incentives ($) | Stock based compensation expenses ($) | Issuance of warrants ($) | Foreign currency translation adjustment ($) | Balance, June 30, 2024 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock | 5,422 | - | 205 | 20 | - | - | - | 5,647 | | Additional Paid-in Capital | 25,685,475 | - | 10,785,701 | 1,183,976 | 5,196,286 | 365,953 | - | 43,217,391 | | Accumulated Deficit | 5,942,781 | (14,767,822) | - | - | - | - | - | (8,825,041) | | Accumulated Other Comprehensive (Loss)/Income | (163,768) | - | - | - | - | - | 222,111 | 58,343 | | Total Stockholders' Equity | 31,469,910 | (14,767,822) | 10,785,906 | 1,183,996 | 5,196,286 | 365,953 | 222,111 | 34,456,340 | | Metric | Balance, July 1, 2024 ($) | Net loss ($) | Issuance of common stock for equity incentives ($) | Stock based compensation expenses ($) | Common stock repurchase ($) | Foreign currency translation adjustment ($) | Balance, June 30, 2025 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock | 5,647 | - | 72 | - | - | - | 5,719 | | Treasury Stock | - | - | - | - | (60,488) | - | (60,488) | | Additional Paid-in Capital | 43,217,391 | - | 1,251,256 | 4,364,954 | - | - | 48,833,601 | | Accumulated Deficit | (8,825,041) | (39,240,226) | - | - | - | - | (48,065,267) | | Accumulated Other Comprehensive (Loss)/Income | 58,343 | - | - | - | -