iPower (IPW) - 2024 Q3 - Quarterly Report

PART I. Financial Information Unaudited Condensed Consolidated Financial Statements The company presents its unaudited quarterly financial statements and notes, detailing key accounting policies and events Unaudited Condensed Consolidated Balance Sheets Total assets and liabilities decreased to $50.4 million and $31.4 million respectively, driven by lower inventory and loan balances Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $33,062,815 | $41,259,270 | | Inventories, net | $11,872,286 | $20,593,889 | | Cash and cash equivalents | $2,714,724 | $3,735,642 | | Total Assets | $50,416,673 | $60,094,287 | | Total Current Liabilities | $26,499,251 | $23,332,308 | | Total Liabilities | $31,449,053 | $39,229,546 | | Total Stockholders' Equity | $18,967,620 | $20,864,741 | Unaudited Condensed Consolidated Statements of Operations The company achieved a quarterly net income of $1.0 million, a significant turnaround from a prior-year loss of $1.5 million Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $23,308,508 | $20,225,619 | $66,617,004 | $65,502,882 | | Gross Profit | $10,948,338 | $7,791,721 | $30,025,423 | $25,746,963 | | Income (Loss) from Operations | $1,601,276 | $(1,811,198) | $(2,219,748) | $(10,487,070) | | Net Income (Loss) Attributable to iPower Inc. | $1,016,082 | $(1,530,534) | $(2,185,261) | $(9,003,349) | | Diluted EPS | $0.03 | $(0.05) | $(0.07) | $(0.30) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations was $5.2 million for the nine-month period, a decrease from $7.8 million in the prior year Cash Flow Summary for Nine Months Ended March 31 (Unaudited) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,151,956 | $7,785,832 | | Net cash used in investing activities | $0 | $(144,885) | | Net cash used in financing activities | $(6,100,000) | $(8,002,476) | | Change in Cash | $(1,020,918) | $(402,452) | | Cash and cash equivalent, end of period | $2,714,724 | $1,419,495 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail a product mix shift, high customer concentration with Amazon, and a significant subsequent legal settlement - For the nine months ended March 31, 2024, sales of hydroponic products decreased to 21.7% of total sales from 46% in the prior-year period[66] - The company performed a qualitative goodwill impairment analysis and noted no impairment for the period ended March 31, 2024, with the balance remaining at $3,034,110[46][235] - For the nine months ended March 31, 2024, Amazon accounted for 91% of total revenues, indicating significant customer concentration[157] - On April 3, 2024, the company entered into a $1.3 million settlement agreement with Boustead Securities, LLC, to resolve a FINRA arbitration case[172] Management's Discussion and Analysis of Financial Condition and Results of Operations Quarterly revenue grew 15.2% and gross margin improved to 47.0%, driving a return to operating profitability Results of Operations Q3 revenue grew 15.2% to $23.3 million and gross margin expanded to 47.0%, leading to operating income of $1.6 million Q3 Financial Performance vs. Prior Year | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Variance | | :--- | :--- | :--- | :--- | | Revenues | $23,308,508 | $20,225,619 | 15.24% | | Gross Profit | $10,948,338 | $7,791,721 | 40.51% | | Gross Profit % | 46.97% | 38.52% | N/A | | Operating Income (Loss) | $1,601,276 | $(1,811,198) | 188.41% | | Net Income (Loss) | $1,012,469 | $(1,533,772) | 166.01% | - The increase in Q3 revenue was mainly due to higher sales volume from Amazon and growth in the Company's SuperSuite supply chain offerings[195] - The increase in Q3 gross profit ratio was mainly driven by slightly increased selling prices and a decrease in freight charges[197] - The decrease in nine-month operating expenses was largely due to a $3.1 million impairment loss on goodwill recorded in the prior-year period that did not recur[209] Liquidity and Capital Resources Liquidity is supported by cash from operations and a JPM credit facility, which is currently under renewal negotiation - Cash and cash equivalents decreased by $1.0 million to $2.7 million as of March 31, 2024, from June 30, 2023[215] - The company's asset-based revolving loan with JPM, which had approximately $18 million in unused credit available, matures on November 12, 2024, and is currently being renewed[217][218] - Working capital decreased to $6.6 million as of March 31, 2024, from $17.9 million as of June 30, 2023[219] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," the company is not required to provide market risk disclosures - As a "smaller reporting company," iPower is not required to provide quantitative and qualitative disclosures about market risk[245] Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to identified material weaknesses - Management concluded that internal controls over financial reporting were not effective as of March 31, 2024[247] - Material weaknesses identified include ineffective communication in subsidiaries and inadequately designed financial closing process controls[247] - Management is implementing remediation plans, including hiring additional personnel and implementing new controls and procedures[247] PART II. Other Information Legal Proceedings The company settled a FINRA arbitration case with Boustead Securities for $1.3 million subsequent to the quarter's end - On April 3, 2024, the company settled a FINRA arbitration case with Boustead Securities, LLC (BSL) for $1.3 million[251] - The settlement resolves a dispute over the company's choice of underwriter for its IPO and is being paid in four equal installments of $325,000[251] Risk Factors The company faces a potential delisting from Nasdaq due to its failure to maintain the minimum bid price requirement - The company is at risk of being delisted from Nasdaq for failing to meet the minimum $1.00 bid price requirement[253] - Nasdaq has granted an extension until August 19, 2024, for the company to regain compliance[254] - The company is considering available options, including a potential reverse stock split, to regain compliance before the deadline[253][255] Unregistered Sale of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[256] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[257] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[258] Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter[259] Exhibits This section lists the exhibits filed with the report, including CEO/CFO certifications and XBRL data files - Lists filed exhibits, including CEO/CFO certifications (302 and 906) and XBRL data[260][262]