Ispire Technology Inc

Previous wording

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 $7.4 million and $5.9 million at September 30, 2024 and June 30, 2024, respectively. Receivables are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. The increase is due to write offs after collection efforts, and then general rise in receivables balance and estimate losses.

Current wording

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 $11.3 million and $5.9 million at December 31, 2024 and June 30, 2024, respectively. Receivables are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. The increase is due to write offs after collection efforts, and then general rise in receivables balance and estimate losses.

Previous wording

The following table sets forth a summary of our consolidated statements of operations and comprehensive income for the three months ended September 30, 2024 and 2023 (dollars in thousands except per share amounts).

Current wording

The following table sets forth a summary of our consolidated statements of operations and comprehensive income for the three and six months ended December 31, 2024 and 2023 (dollars in thousands except per share amounts).

Previous wording

Our revenue decreased by $3,526,334, or 8.2%, from $42,864,647 for the three months ended September 30, 2023, to $39,338,313 for the three months ended September 30, 2024. The decrease in revenue is the combined effect of (i) decreases in product sales in the United States of $8.1 million from $17.8 million for the three months ended September 30, 2023, to $9.7 million for the three months ended September 30, 2024, offset by (ii) increases in sales of vaping products in Europe of $2.1 million from $19.9 million for the three months ended September 30, 2023 to approximately $22.0 million for the three months ended September 30, 2024, and (iii) increases in sales to other regions of $3.7 million from $0.06 million for the three months ended September 30, 2023 to approximately $3.8 million for the three months ended September 30, 2024, mainly contributed by increase in sales to South Africa of $2.9 million.

Current wording

Our revenue increased by $142,299, or 0.3%, from $41,685,561 for the three months ended December 31, 2023, to $41,827,860 for the three months ended December 31, 2024. The increase in revenue is the combined effect of (i) increases in product sales in the Europe of $8.3 million from $15.7 million for the three months ended December 31, 2023, to $24.0 million for the three months ended December 31, 2024, increases in sales in Africa, mainly South Africa, of $2.6 million from $0.1 million for the three months ended December 31, 2023, to $2.7 million for the three months ended December 31, 2024 and increases in sales in South America of $0.6 million from $0 for the three months ended December 31, 2023, to $0.6 million for the three months ended December 31, 2024,offset by (ii) decreases in sales of vaping products in North America of $9.1 million from $20.0 million for the three months ended December 31, 2023 to approximately $10.9 million for the three months ended December 31, 2024, and (iii) decreases in sales to Asia Pacific regions of $2.4 million from $6.0 million for the three months ended December 31, 2023 to approximately $3.6 million for the three months ended December 31, 2024.

Previous wording

Cost of revenue mainly consists of cost of purchases of vaping products, that the majority of the purchase are from Shenzhen Yi Jia though there has been decreased reliance on this factory in 2024 vs 2023. Cost of revenue decreased by $4,355,864, or 12.1%, from $36,019,799 for the three months ended September 30, 2023, to $31,663,935 for the year ended September 30, 2024. The decrease in cost of revenue is in line with decrease in sales.

Current wording

Cost of revenue mainly consists of cost of purchases of vaping products, of which the majority of the purchase are from Shenzhen Yi Jia. Cost of revenue decreased by $1,327,374, or 3.7%, from $35,432,663 for the three months ended December 31, 2023, to $34,105,289 for the three months ended December 31, 2024. The decrease in cost of revenue is due to changes in product mix with more higher margin products being sold. Cost of revenue decreased by $5,683,238, or 8.0%, from $71,452,462 for the six months ended December 31, 2023, to $65,769,224 for the six months ended December 31, 2024.

Previous wording

Gross profit increased by $829,530, or 12.1%, from $6,844,848 for the three months ended September 30, 2023, to $7,674,378 for the three months ended September 30, 2024, while our gross margin increased from 16.0% to 19.5%. The increase in gross margin was primarily due to changes in product mix with more higher margin products being sold during the three months ended September 30, 2024.

Current wording

Gross profit increased by $1,469,673, or 23.5%, from $6,252,898 for the three months ended December 31, 2023, to $7,722,571 for the three months ended December 31, 2024, while our gross margin increased from 15.0% to 18.5%. The increase in gross margin was primarily due to changes in product mix with more higher margin products being sold during the three months ended December 31, 2024.

Previous wording

Sales and marketing expenses increased by $1,967,028, or 191.9%, from $1,025,219 for the three months ended September 30, 2023 to $2,992,247 for the three months ended September 30, 2024. The increase in sales and marketing expenses was primarily due to an increase in (i) our marketing activities, marketing campaign and trade shows of $0.7 million, (ii) stock-based compensation expense related to selling personnels of $1.0 million for the three months ended September 30, 2024 and (iii) headcount and payroll expense for Aspire Science of $0.1 million.

Current wording

Sales and marketing expenses increased by $2,634,285, or 108.9%, from $2,419,626 for the six months ended December 31, 2023 to $5,053,911 for the six months ended December 31, 2024. The increase in sales and marketing expenses was primarily due to an increase in (i) our marketing activities, marketing campaign and trade shows of $1.3 million, (ii) stock-based compensation expense related to selling personnels of $1.1 million for the three months ended December 31, 2024 and (iii) headcount and payroll expense for Aspire Science of $0.1 million.

Previous wording

Our general and administrative expenses mainly consist of employee’s salaries and benefits, rental expense, professional fees, share based payment expenses and other administrative expenses. General and administrative expenses increased by $3,247,126, or 48.5%, from $6,697,874 for the three months ended September 30, 2023 to $9,945,000 for the three months ended September 30, 2024. The increase was primarily due to (i) increase in stock-based compensation expense of $1.0 million for the three months ended September 30, 2024, as compensation and incentive for management, employees and service providers, (ii) increase in bad debt expense as an allowance for credit losses of $1.9 million from accounts resulted from management’s assessment on Company’s account receivables balances.

Current wording

Our general and administrative expenses mainly consist of employee’s salaries and benefits, rental expense, professional fees, share based payment expenses and other administrative expenses. General and administrative expenses increased by $4,242,247, or 48.3%, from $8,778,715 for the three months ended December 31, 2023 to $13,020,962 for the three months ended December 31, 2024. The increase was primarily due to (i) increase in bad debt expense as an allowance for credit losses of $2.3 million from accounts resulted from management’s assessment on Company’s account receivables balances, (ii) increase of $0.9 million for payroll expenses and (iii) an increase in professional fees of $0.7 million incurred for cannabis business.

Previous wording

Other expense(income) mainly consists of interest expense, loss on equity method investment, credits from company credit card and other miscellaneous expenses. Other expense(income) increased by $61,603, or 142.6%, from net expense of $43,204 for the three months ended September 30, 2023 to net income of $18,399 for the three months ended September 30, 2024.

Current wording

Other expense (income) mainly consists of interest expense, loss on equity method investment, credits from company credit card and other miscellaneous expenses. Other expense (income) decreased by $39,674, or 85.3%, from net income of $46,535 for the three months ended December 31, 2023 to net income of $6,861 for the three months ended December 31, 2024. Other expense (income) increased by $10,465, or 314.17%, from net income of $3,331 for the six months ended December 31, 2023 to net income of $13,796 for the six months ended December 31, 2024.

Previous wording

Exchange loss(gain) changes by $113,924, or 3111.8%, from net exchange gain of $3,661 for the three months ended September 30, 2023 to net exchange gain of $117,585 for three months ended September 30, 2024.

Current wording

Exchange loss (gain) changes by $276,029, or 894.6%, from net exchange gain of $30,856 for the three months ended December 31, 2023 to net exchange loss of $245,173 for three months ended December 31, 2024. Exchange loss(gain) changes by $162,105, or 469.6%, from net exchange gain of $34,517 for the six months ended December 31, 2023 to net exchange loss of $127,588 for six months ended December 31, 2024.

Previous wording

As a result of these factors, other expense(income), net increased by $91,903, from other income, net of $32,703 for the three months ended September 30, 2023 to other income, net of $124,606 for three months ended September 30, 2024.

Current wording

As a result of these factors, other expense (income), net decreased by $459,049, from other income, net of $280,492 for the three months ended December 31, 2023 to other expense, net of $178,557 for three months ended December 31, 2024. Other expense (income), net decreased by $367,146, from other income, net of $313,195 for the six months ended December 31, 2023 to other expense, net of $53,951 for six months ended December 31, 2024.

Previous wording

Income taxes decreased by $39,292, or 0.2%, from $496,045 for the three months ended September 30, 2023 to $456,753 for the three months ended September 30, 2024. We had a consolidated net loss for both three month periods ended September 30, 2024 and 2023, which was the combined effect of a profit by Aspire Science and 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.

Current wording

Income taxes increased by $107,851, or 30.6%, from $352,180 for the three months ended December 31, 2023 to $460,031 for the three months ended December 31, 2024. Income taxes increased by $68,559, or 8.1%, from $848,225 for the three months ended December 31, 2023 to $916,784 for the three months ended December 31, 2024. We had a consolidated net loss for both three and six month periods ended December 31, 2024 and 2023, which was the combined effect of a profit by Aspire Science and 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.

Previous wording

As a result of the foregoing, net loss increased by $4,253,429, from net loss of $1,341,587, or $(0.02) per share (basic and diluted) for the three months ended September 30, 2023 to a net loss of $5,595,016, or $(0.10) per share, for the three months ended September 30, 2024.

Current wording

As a result of the foregoing, net loss increased by $4,006,731, from net loss of $3,991,912, or $(0.07) per share (basic and diluted) for the three months ended December 31, 2023 to a net loss of $7,998,643, or $(0.14) per share, for the three months ended December 31, 2024. Net loss increased by $8,260,160, from net loss of $5,333,499, or $(0.10) per share (basic and diluted) for the six months ended December 31, 2023 to a net loss of $13,593,659, or $(0.24) per share, for the six months ended December 31, 2024.

Previous wording

The following table sets forth information as to consolidated cash flow information for the three months ended September 30, 2024 and 2023 (dollars in thousands).

Current wording

The following table sets forth information as to consolidated cash flow information for the six months ended December 31, 2024 and 2023 (dollars in thousands).

Previous wording

Net cash flow used in operating activities for the three months ended September 30, 2023 of $13.1 million, reflected our net loss of $1.3 million, adjusted primarily as follows: an add-back of depreciation of right-of-use assets of $0.4 million, an add-back of stock-based compensation expenses of $1.0 million, an add-back of credit loss expenses of $0.2 million, a decrease in inventories of $1.9 million, a decrease of prepaid expenses and other current assets of $1.6 million, an increase in income tax payable of $0.5 million, offset by an increase in accounts receivable of $14.7 million and a decrease in accounts payable of $2.5 million.

Current wording

Net cash flow provided by operating activities for the six months ended December 31, 2024 of $0.4 million, reflected our net loss of $13.6 million, adjusted primarily as follows: an add-back of credit loss expenses of $7.3 million, an add-back of stock based compensation expense of $3.5 million, an added-back of right-of-use assets amortization of $0.6 million and increase in accounts payable – related party of $20.7 million, offset by an increase in accounts receivable of $15.3 million, an increase in inventories, net of $1.7 million, and an increase in prepaid expenses and other current assets of $0.9 million.

Previous wording

Net cash flow provided by operating activities for the three months ended September 30, 2024 of $3.6 million, reflected our net loss of $5.6 million, adjusted primarily as follows: an add-back of credit loss expenses of $3.1 million, an add-back of stock based compensation expense of $2.0 million, increase in accounts payable of $9.5 million, offset by an increase in accounts receivable of $5.7 million.

Current wording

Net cash flow used in operating activities for the six months ended December 31, 2023 of $20.2 million, reflected our net loss of $5.3 million, adjusted primarily as follows: an add-back of stock-based compensation expenses of $2.9 million, an add-back of credit loss expenses of $2.1 million, a increase in accounts payable – related party of $1.8 million, an increase in contract liabilities of $0.6 million, offset by an increase in accounts receivable of $22.8 million.

Previous wording

Net cash flow used in investing activities for the three months ended September 30, 2024 of $0.9 million reflected primarily purchase of property, plant and equipment of $0.3 million and acquisition of intangible assets of 0.6 million.

Current wording

Net cash flow used in investing activities for the six months ended December 31, 2024 of $1.1 million reflected primarily purchase of property, plant and equipment of $0.3 million and acquisition of intangible assets of 0.8 million.

Previous wording

Net cash flow used in investing activities for the three months ended September 30, 2023 of $0.8 million reflected primarily purchase of property, plant and equipment of $0.5 million and acquisition of intangible assets of $0.3 million.

Current wording

Net cash flow used in investing activities for the six months ended December 31, 2023 of $1.8 million reflected primarily purchase of property, plant and equipment of $1.1 million and acquisition of intangible assets of $0.7 million.

Previous wording

Net cash flow used in financing activities for the three months ended September 30, 2023 of $0.7 million reflected primarily repayments to related parties of $0.7 million.

Current wording

Net cash flow used in financing activities for the six months ended December 31, 2023 of $0.7 million reflected primarily repayments to related parties of $0.7 million.

Previous wording

As of September 30, 2024, and June 30, 2023, we had contract liabilities of $2,245,505 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.

Current wording

As of December 31, 2024, and June 30, 2023, we had contract liabilities of $1,882,743 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.

Previous wording

As of September 30, 2024, we recorded an unpaid $9 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.

Current wording

As of December 31, 2024, we recorded an unpaid $8.8 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.