Ispire Technology Inc. (ISPR)

CIK: 0001948455. SIC: 2111 Cigarettes. Latest 10-K as of: 2025-09-15.

SIC breadcrumb: Manufacturing > SIC Major Group 21 > SIC 2111 Cigarettes

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1948455. Latest filing source: 0001213900-25-087632.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-09-15. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001948455.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001948455.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001213900-26-053368.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

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

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

Overview

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

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

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

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

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

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

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

24

Recent Developments

Malaysian Licensure

On March 17, 2026, Ispire Malaysia received full and final licensure
from the Ministry of Investment, Trade and Industry of Malaysia (“MITI”) to manufacture nicotine vapor products in the country
of Malaysia. This full and final licensure replaces Ispire Malaysia’s interim license issued in May 2025. Ispire Malaysia is the
only business in the country of Malaysia with such nicotine vapor manufacturing license, and we are now in the process of securing orders
and scheduling production for both nicotine vapor products (expected to commence production at the end of June 2026) and nicotine pouch
products.

We made the decision not to manufacture any nicotine vapor hardware
in Malaysia until the full and final license was issued. Now that such license is secured, the Ispire Malaysia and our business development
teams are fielding a backlog of customer demand for nicotine vapor production in Malaysia. We believe our production costs will be comparable
to production in China, and will continue to improve as the Ispire Malaysia business scales in volume and capacity. We will also work
to establish local supply chain partnerships, which we believe will further bring down the costs of nicotine vapor product manufacturing,
aiding in improving competitiveness and our ability to obtain increased profit margins.

The Ispire Malaysia business has also been positively impacted by policy
shifts from the Chinese government. On April 1, 2026, China cancelled the 13% export VAT rebate for nicotine-containing, non-combustion
inhalation products. This rebate cancellation caused an immediate effective price increase for exporting nicotine vapor products from
China, which we believe has directly improved the global price competitiveness for Ispire Malaysia’s nicotine vapor manufacturing
business.

Further, Chinese tobacco authorities have begun requiring nicotine
vapor manufacturers in the country to supply information on U.S. FDA PMTA Submission Tracking Numbers (“STNs”) for historical
nicotine vapor exports to the U.S. made in calendar year 2025. This development signals enhanced regulatory compliance requirements for
Chinese vapor manufacturers which previously did not exist, adding in enhanced compliance costs for shipments to the U.S. These two developments
suggest to us that there will be further tax and regulatory headwinds facing China’s domestic nicotine vapor manufacturing industry
in the coming months and years, potentially making our Malaysian nicotine vapor manufacturing business more appealing to global brands
and Chinese businesses looking to diversify their supply chain.

Management expects further
improvement in operating cash flow during 2026, driven by (i) continued quarterly operating expense reductions in U.S. operations, (ii)
revenue generation in Malaysia, (iii) continued cash generation from Hong Kong operations. Based on these initiatives, the Company expects
to achieve positive cash flow in the first half of fiscal year 2027. However, the timing and extent of such improvement remain subject
to execution and market conditions.

Ike Tech LLC Business Developments

On March 11, 2026, the U.S.
Food and Drug Administration (the “FDA”) issued draft guidance outlining evidentiary expectations for Premarket Tobacco Product
Applications (“PMTAs”) for flavored electronic nicotine delivery systems (“ENDS”), which could provide a lawful
pathway for flavored vaping products, the market for which is largely comprised of illicit products. The guidance marks the first time
the FDA has formally outlined a framework for evaluating flavored ENDS products, recognizing that device-level access technologies, or
device access restrictions (“DAR”), may factor into whether a product meets the “appropriate for the protection of public
health” standard for PMTA authorization. The draft guidance highlights DAR technologies such as biometric authentication, geofencing,
and continuous age verification as potential safeguards designed to prevent underage use of ENDS devices. The FDA also emphasized that
traditional safeguards such as local age restrictions and point-of-sale verification that do not directly prevent youth use may not, when
employed alone, sufficiently reduce youth use.

We remain an advocate for technology-driven youth prevention solutions.
As previously disclosed in our Current Report on Form 8-K filed with the SEC on April 11, 2024, on April 5, 2024, the Company, Chemular
Inc., a Michigan corporation, and Touch Point Worldwide, Inc. d/b/a/ Berify, a Delaware corporation, agreed to form Ike Tech LLC (“IKE”)
as a joint venture between the entities that would be in the business of licensing, owning and developing an industry-standard biometric,
blockchain-based, point of use age-verification solution for vapor (e-cigarette) devices in the U.S. market. We believe that the FDA guidance
is a positive development for IKE and that IKE is well positioned to capitalize on the creation of a pathway to a lawful market for flavored
vaping products.

25

Since its founding, IKE has
developed two core technology offerings: (i) NFC/RFID smart tags with unique block chain TokenIDs for embedding in packaging, providing
its customers’ packaging with a unique digital identity, and (ii) Bluetooth Low Energy (“BLE”) chips embedded in devices
such as ENDS that enable live communication with mobile applications and provide services such as continuous age verification, device
activation and control, and secure user authentication ((i) and (ii) together, the “Technology”). IKE’s Technology is
supported by a secure open ecosystem built on blockchain validation and open standards designed to enable reliable authentication across
devices and markets.

IKE exclusively licenses in the nicotine vapor field or owns 11 issued
patents related to its Technology to date, and in 2025, IKE submitted the first-ever component PMTA to the FDA for a standalone, interoperable
age-verification technology designed for integration across ENDS devices. The platform combines BLE chips, biometric authentication, and
block-chain secured identity verification to ensure that only verified adult users can activate a device. In addition to age verification,
IKE’s Technology can also support product authentication and anti-counterfeiting capabilities, helping manufacturers and regulators
identify illicit or counterfeit devices that bypass regulatory safeguards, evade taxes, and undermine consumer safety. IKE’s Technology
is currently engaged in a pilot and evaluation program operating within a test environment with a large strategic collaborator, as well
as pilot programs with several additional third-party vapor product manufacturers and brands.

Regulatory Risks

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

E-cigarette regulation

Regulation regarding e-cigarettes
varies across countries, from limited regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries.
As e-cigarettes have become more and more popular recently, many countries are considering imposing more stringent law and regulations
to regulate this market. Changes in existing law and regulations and the imposition of new laws or regulations in countries and regions
that our major customers are in may adversely affect our business. Please see the sections titled “Item 1. Business – Regulation”
and “Item 1A. Risk Factors” above for our robust discussion of this topic.

Accounts Rec

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2025-09-15. Report date: 2025-06-30.

ITEM
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion should be read in conjunction with our consolidated financial statements and the related notes contained elsewhere
in this Annual Report on Form 10-K and in our other Securities and Exchange Commission filings. The following discussion may contain
predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed
under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These risks could cause our actual results to differ
materially from any future performance suggested below.

Overview

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

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

39

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

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

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

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

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

Regulatory
Risks

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

E-cigarette
regulation

Regulation regarding e-cigarettes varies across countries, from limited
regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. As e-cigarettes have become more and
more popular recently, many countries are considering imposing more stringent law and regulations to regulate this market. Changes in
existing law and regulations and the imposition of new laws or regulations in countries and regions that our major customers are in may
adversely affect our business. Please see the sections titled “Item 1. Business – Regulation” and “Item 1A. Risk
Factors” above for our robust discussion of this topic.

Accounts
Receivable

Our business relies on the collection of accounts receivable from our
customers in a timely manner to maintain liquidity and support our ongoing operations. The balance of the allowance for credit losses
was $18.0 million and $5.9 million at June 30, 2025 and 2024, respectively.

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

40

Key
Factors that Affect Our Results of Operations

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

●

The
effect of legislation and regulations affecting non-combustable nicotine products  and
cannabis vaping products.

●

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

●

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

●

The
effects of competition.

●

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

Results
of Operations

The
following table sets forth a summary of our consolidated statements of operations and comprehensive income for the years ended June 30,
2025 and 2024 (dollars in thousands except per share amounts).

Years Ended June 30,

2025

2024

% of

Revenue

% of

Revenue

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

41

Revenue

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

For
the year ended

June 30,

2025

2024

Europe

58.1

%

43.0

%

North America (the U.S. and Canada)

25.5

%

41.5

%

Asia Pacific (excluding PRC)

9.6

%

11.6

%

Others

6.8

%

3.9

%

Total

100.0

%

100.0

%

Our revenue decreased by
$24,414,387, or 16.1%, from $151,908,691 for the year ended June 30, 2024, to $127,494,304 for the year ended June 30, 2025. The decrease
in revenue is the combined effect of (i) decreases in product sales in the United States of $30.5 million from $63.1 million for the
year ended June 30, 2024, to $32.6 million for the year ended June 30, 2025, (ii) decreases in product sales in the Asia Pacific (excluding
PRC) of $5.3 million from $17.6 million for the year ended June 30, 2024, to $12.3 million for the year ended June 30, 2025, (iii) increases
in sales of vaping products in Europe of $8.8 million from $65.3 million for the year ended June 30, 2024 to approximately $74.1 million
for the year ended June 30, 2025, and (iv) increases in sales of vaping products in Africa and South America of $2.5 million from $6.0
million for the year ended June 30, 2024 to approximately $8.5 million for the year ended June 30, 2025.

Cost
of Revenue

Cost of revenue mainly consists
of cost of purchases of vaping products, that are mostly purchased from Shenzhen Yi Jia. Cost of revenue decreased by $17,281,612, or
14.2%, from $122,126,245 for the year ended June 30, 2024, to $104,844,633 for the year ended June 30, 2025. The decrease in cost of
revenue is in line with decrease in sales.

Gross
Profit

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

Year
Ended June 30, 2025

Revenue

Cost
of

revenue

Gross

profit

Gross

profit %

$

127,494

$

104,845

$

22,649

17.8

%

Year
Ended June 30, 2024

Revenue

Cost
of

revenue

Gross

profit

Gross

profit %

$

151,909

$

122,126

$

29,782

19.6

%

Gross profit decreased by
$7,132,775, or 23.9%, from $29,782,446 for the year ended June 30, 2024, to $22,649,671 for the year ended June 30, 2025, while our gross
margin decreased from 19.6% to 17.8%.

The
decrease in gross margin was primarily due to changes in product mix with less higher margin products being sold during the year ended
June 30, 2025.

42

Operating
Expenses

Operating expenses increased by $16,822,945 or 38.5%, from $43,676,585
for the year ended June 30, 2024, to $60,499,530 for the year ended June 30, 2025.

Our
sales and marketing expenses mainly consist of employee salaries and benefits, marketing expenses, travel expenses, and other miscellaneous
expenses.

Sales and marketing expenses increased by $1,830,660, or 27.7%, from
$6,608,724 for the year ended June 30, 2024, to $8,439,384 for the year ended June 30, 2025. The increase in sales and marketing expenses
was primarily due to an increase in payroll from marketing personnel of $0.9 million, increase in brand advertising activities of $0.4
million and increase in marketing related professional service fee of $0.3 million.

Credit loss expenses increased by $16,019,060, or 266.3%, from $6,015,752
for the year ended June 30, 2024, to $22,034,812 for the year ended June 30, 2025. The increase is due to longer time in collection of
customer payments than expected and more allowance for credit losses were provided.

Our general and administrative expenses (excluding the credit loss
expenses) mainly consist of employee’s salaries and benefits, rental expense, professional fees, stock-based compensation expenses
and other administrative expenses. General and administrative expenses decreased by $1,026,775, or 3.3%, from $31,052,109 for the year
ended June 30, 2024, to $30,025,334 for the year ended June 30, 2025. The decrease was primarily due to (i) a decrease of $0.5 million
of stock-based compensation expense due to cutting headcount in streamline operations by North America, and (ii) decrease in research
and development expenses of $0.4 million by North America.

Other
(expense) income, net

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

Interest income decreased by $278,255, from $365,251 for the year ended
June 30, 2024, to $86,996 for the year ended June 30, 2025. The decrease in interest income is mainly due to decrease in interest rate
and less interest income from bank deposits.

Other (expense) income mainly consists of interest expense, loss on
equity method investment, credits from company credit card, rental income and other miscellaneous expenses. Other (expense) income decreased
by $300,494, or 265.0%, from net income of $113,405 for the year ended June 30, 2024 to net expense of $187,089 for the year ended June
30, 2025. The decrease was mainly due to increase in interest expense of $0.2 million.

Exchange
loss, net increased by $16,277, or 23.2%, from net exchange loss of $70,293 for the year ended June 30, 2024 to net exchange loss of
$86,570 for the year ended June 30, 2025.

As
a result of these factors, total other (expense) income, net decreased by $595,026, from other income, net of $408,363 for the year ended
June 30, 2024 to other expense, net of $186,663 for the year ended June 30, 2025.

Income
Taxes

We
account for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective
tax bases.

Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.

The
provisions of ASC 740-10 prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement
of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income
tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, and related disclosures. For the years ended June 30, 2025 and 2024, we did not incur any interest or
penalties related to an uncertain tax position. We do not believe that there were any uncertain tax positions as of June 30, 2025 and
2024.

Income
taxes decreased by $78,342 or 6.1%, from $1,282,046 for the year ended June 30, 2024 to $1,203,704 for the year ended June 30, 2025.
We had a consolidated net loss for both year ended June 30, 2025 and 2024, which was the combined effect of a profit by Aspire Science,
a loss by Aspire North America and Ispire Malaysia. The profit from Aspire Science resulted in a current tax expense. The increase in
valuation allowance reflects our view that the taxable income in the future will not be sufficient to utilize the carryforward loss.

43

Net
Loss

As a result of the foregoing, net loss increased by $24,472,404, from
net loss of $14,767,822, or loss of $0.27 per share (basic and diluted), for the year ended June 30, 2024 to a net loss of $39,240,226,
or loss of $0.69 per share (basic and diluted), for the year ended June 30, 2025.

Liquidity
and Capital Resources

The
following table summarizes our changes in working capital from June 30, 2024 to June 30, 2025 (dollars in thousands).

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

)%

The
following table sets forth information as to consolidated cash flow information for the years ended June 30, 2025 and 2024 (dollars in
thousands).

Year
Ended

June 30,

Increase

Consolidated
cash flow data:

2025

2024

(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 flow used in operating
activities for the year ended June 30, 2025, of $7.4 million, reflected our net loss of $39.2 million, adjusted primarily as follows:
add back of impairment of account receivable of $22.0 million, add back of share-based compensation expense of $5.6 million, add back
of right-of-use assets amortization of $1.5 million, an increase in accounts payable of $10.8 million, an increase in contract liabilities
of $2.6 million, offset by increase in accounts receivable of $9.3 million, and increase in payment made for operating lease liabilities
of $1.4 million.

Net
cash flow used in operating activities for the year ended June 30, 2024 of $18.3 million, reflected our net loss of $14.8 million, adjusted
primarily as follows: add back of impairment of account receivable of $6.0 million, add back of shared based payment expenses of $6.4
million, add back of depreciation and amortization of $0.5 million, an increase in accounts payable of $17.9 million, an increase in
accrued liabilities and other payables of $2.5 million, a decrease in inventory of $0.9 million, a decrease in prepaid expenses and other
current assets of $2.4 million, an increase in contract liabilities of $1.2 million offset by an increase in accounts receivable of $41.3
million.

Net cash flow used in investing activities for the year ended June
30, 2025, of $5.2 million reflected primarily the repayment of acquisition payable of $3.2 million, purchase of property, plant and equipment
of $1.1 million and acquisition of intangible assets of $0.9 million.

Net
cash flow generated from investing activities for the year ended June 30, 2024, of $3.0 million reflected primarily maturity of short
term investment of $9.1 million offset by purchase of cost other investment of $2.0 million, purchase of property, plant and equipment
of $2.0 million, acquisition of intangible assets of $1.2 million and purchase of equity method investment of $1.0 million.

Net
cash flow generated from financing activities for the year ended June 30, 2025, of $1.9 million reflected primarily proceeds from borrowing
of $2.1 million, offset by repayment of borrowing of $0.2 million.

Net
cash flow generated by financing activities for the year ended June 30, 2024, of $10.1 million reflected primarily proceeds from our
equity offering of $12.3 million, offset by payment of equity offering costs of $1.5 million.

44

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

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

Contractual
Obligations

As
of June 30, 2025 and 2024, we had contract liabilities of $4,861,250 and $2,218,166, respectively. These liabilities are advance deposits
received from customers after an order has been placed. We expect all of the contract liabilities to be settled in less than one year.

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

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

As of

As of

June 30,

2025

June 30,

2024

Operating lease right-of-use
assets

$

5,181,521

$

3,579,140

Impairment

(151,516

)

-

Total

$

5,030,005

$

3,579,140

Operating lease liabilities – current

$

1,838,815

$

1,207,832

Operating lease liabilities
– non-current

3,267,522

2,194,094

Total

$

5,106,337

$

3,401,926

As
of June 30, 2025, the maturities of our lease liabilities (excluding short-term leases) are as follows: 

As
of

June 30,

2025

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

As of June 30, 2025, we have a borrowing balance of $1,952,127 outstanding.
The maturities of our borrowing are as follows:

As of

June 30,

2025

July 1, 2025 to June 30, 2026

1,146,766

July 1, 2026 to June 30, 2027

805,361

Total borrowing

1,952,127

As
of June 30, 2025, we recorded an unpaid $5.8 million consideration in accrued liabilities and other payables on the consolidated balance
sheet for a committed investment of $9 million into a joint venture investment named IKE Tech LLC.

45

Trend
Information

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

Seasonality

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

Off-Balance
Sheet Arrangements

We
do not have off-balance sheet arrangements.

Critical
Accounting Estimates

Revenue
recognition

We
sell our vaping products to customers and recognize revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers.
In certain sales contracts, a right of return is offered. With a right of return, a customer is given the right to return the products
if they are not satisfied with the product, and a credit would be given. The return rate historically is low, and we recognize a sales
return reserve based on historical return rate and apply the rate on sales for the latest three months, as it is unlikely to have sales
return after the three-month period. Should there be a change in our estimate of the return rate, or a change in the periods in which
we expect return, the return reserves would be affected, and our revenue would be affected as well.

Allowance
for credit losses

We adopted Accounting Standards Update 2016-13 “Financial Instruments
– Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” on July 1, 2023, under the modified retrospective
method of adoption. In establishing the required allowance for credit losses, we consider historical collection experience, aging of the
receivables, economic environment, and the credit history and financial conditions of the customers. We review its receivables on a regular
basis to determine if the allowance is adequate and adjusts the allowance when necessary. Delinquent account balances are written off
against allowance for credit losses after management has determined that the likelihood of collection is not probable.

Recent
Accounting Pronouncements

The
discussion of the recent accounting pronouncements contained in our consolidated financial statements, “Summary of Significant
Accounting Policies,” is incorporated herein by reference.

Emerging
Growth Company

As
a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant
to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected
to take advantage of such exemptions. We could lose Emerging Growth Company status if we become a “Large Accelerated Filer.”
This would occur if we had a public float of $700 million or more, as of the last business day of our most recently completed second
fiscal quarter.