ISPR 10-Q
Ispire Technology Inc. (ISPR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to _________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☒ | |
| Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
As of February 6, 2026, there were
ISPIRE TECHNOLOGY INC.
TABLE OF CONTENTS
i
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”), and any documents we incorporate by reference, contain, or may contain, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve significant risks and uncertainties. All statements contained in this Quarterly Report and in any exhibits, other than statements of historical facts, are forward-looking statements including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
The words “may,” “will,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:
| ● | our goals and growth strategies; |
| ● | our expectations regarding demand for and market acceptance of our brand and platforms; |
| ● | our future business development, results of operations and financial condition; |
| ● | the actual timing for and results of the PMTAs described herein, and other FDA review of the our products in development |
| ● | our ability to successfully operate our manufacturing facility in Malaysia; |
| ● | our ability to establish material relationships with suppliers other than Shenzhen Yi Jia Technology Co., Limited (“Shenzhen Yi Jia”); |
| ● | the effect of regulations relating to the marketing and sale of vaping products in the United States and other countries; |
| ● | our ability to maintain and improve our infrastructure necessary to operate our business; |
| ● | competition in the vaping industry; |
| ● | the expected growth of, and trends in, the markets for our products and services in the markets in which jurisdictions that we sell our products; |
| ● | the development of a market for cannabis vaping products outside of the United States, including the legalization of cannabis in certain European countries; |
| ● | the expected growth of, and trends in, the markets for our products and services in the markets in which jurisdictions that we sell our products; |
| ● | the effect of supply chain issues on our ability to manufacture and our ability and the ability of our distributors to distribute product; |
| ● | the development of a market for cannabis vaping products and our ability to market cannabis products to adult users; |
ii
| ● | our ability to compete successfully in selling both tobacco and cannabis vapor products, the expected growth of, and trends in, the markets for our products and services in jurisdictions that we sell or plan to sell our products; |
| ● | government policies and regulations relating to our operations, including regulations relating to the sale and distribution of our vaping products and those relating to manufacturing operations; |
| ● | our ability to develop and maintain effective disclosure controls and procedures, and internal controls over financial reporting; |
| ● | our ability to comply with the continued listing standards of the Nasdaq Capital Market; |
| ● | our ability to attract and retain qualified senior management personnel and research and development staff; |
| ● | the volatility of our operating results and financial condition and the price of our common stock; |
| ● | the prospects of our joint venture with Touch Point Worldwide Inc. d/b/a Berify and Chemular Inc; |
| ● | general economic and business condition in China and elsewhere; |
| ● | assumptions underlying or related to any of the foregoing; and |
| ● | other risks and uncertainties, including those listed in the “Risk Factors” section of this this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the SEC on September 15, 2025. |
These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, so you should not place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report or, in the case of any exhibits hereto, the date of those documents. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. These forward-looking statements involve risks and uncertainties that are subject to change based on various factors (many of which are beyond our control). We have included important factors in the cautionary statements included in this Quarterly Report that could cause actual future results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Quarterly Report and the documents that we incorporate by reference with the understanding that our actual future results may be materially different from what we expect. All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
OTHER PERTINENT INFORMATION
Unless the context requires otherwise, references in this Quarterly Report to “we,” “us,” “our,” the “Company,” “Ispire,” or similar terminology refer to Ispire Technology Inc.
iii
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
ISPIRE TECHNOLOGY INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In $USD, except share and per share data)
| December 31, 2025 | June 30, 2025 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Accounts receivable, net of current portion | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets – operating leases | ||||||||
| Other investment | ||||||||
| Equity method investment | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related party | ||||||||
| Contract liabilities | ||||||||
| Accrued liabilities and other payables | ||||||||
| Income tax payable | ||||||||
| Borrowing – current portion | ||||||||
| Operating lease liabilities – current portion | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Amount due to a related party | ||||||||
| Borrowing – net of current portion | ||||||||
| Operating lease liabilities – net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (deficit)/equity: | ||||||||
| Common stock, par value $ | ||||||||
| Treasury stock, at cost | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ (deficit)/equity | ( | ) | ||||||
| Total liabilities and stockholders’ (deficit)/equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
1
ISPIRE TECHNOLOGY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE LOSS
(In $USD, except share and per share data)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| Credit loss expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Exchange gain (loss), net | ( | ) | ( | ) | ||||||||||||
| Other income, net | ||||||||||||||||
| Total Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
2
ISPIRE TECHNOLOGY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT)/EQUITY
(In $USD, except share and per share data)
| Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Amount | Treasury Stock | Paid-in Capital | Accumulated Deficit | Comprehensive (Loss)/Income | Stockholders’ (Deficit)/Equity | ||||||||||||||||||||||
| Balance, October 1, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Stock based compensation expenses | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Balance, October 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of common stock for equity incentives | ||||||||||||||||||||||||||||
| Stock based compensation expenses | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Amount | Treasury Stock | Paid-in Capital | Accumulated Deficit | Comprehensive (Loss)/Income | Stockholders’ Equity/(Deficit) | ||||||||||||||||||||||
| Balance, July 1, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of common stock for equity incentives | ||||||||||||||||||||||||||||
| Stock based compensation expenses | - | |||||||||||||||||||||||||||
| Common stock repurchase | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Balance, July 1, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of common stock for equity incentives | ||||||||||||||||||||||||||||
| Stock based compensation expenses | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | - | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
See notes to unaudited condensed consolidated financial statements.
3
ISPIRE TECHNOLOGY INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In $USD, except share and per share data)
| Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Credit loss expenses | ||||||||
| Right-of-use assets amortization | ||||||||
| Stock-based compensation expenses | ||||||||
| Inventory impairment | ||||||||
| Loss from equity method investment | ||||||||
| Debt issuance cost amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accounts payable – related party | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Accrued liabilities and other payables | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income tax payable | ||||||||
| Net cash (used in)/provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Capitalized costs for patents | ( | ) | ( | ) | ||||
| Investment in joint venture | ( | ) | - | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Common stock repurchase | ( | ) | - | |||||
| Repayment of borrowing | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash – beginning of period | ||||||||
| Cash and restricted cash– end of period | $ | $ | ||||||
| Reconciliation of cash and restricted cash | ||||||||
| Cash | ||||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
| Supplemental non-cash investing and financing activities | ||||||||
Reclassification of accounts receivable – noncurrent to accounts receivable | $ | $ | ||||||
| Reclassification of accounts payable – related party to amount due to a related party | $ | $ | ||||||
| Supplemental disclosures | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
4
ISPIRE TECHNOLOGY INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Ispire Technology Inc. (the
“Company” or “Ispire”) was incorporated under the laws of the State of Delaware on
Ispire owns a
Prior to July 29, 2022, all of the equity of Aspire North America LLC, a California limited liability company (“Aspire North America”), was owned by Aspire Global Inc. (“Aspire Global”), and all of the equity of Aspire Science and Technology Limited, a Hong Kong corporation (“Aspire Science”), was owned by Aspire Global Holdings Limited (“Aspire Holdings”), a wholly-owned subsidiary of Aspire Global.
Aspire Global and the Company
are related parties since the same individual is the chief executive officer of both companies. As of December 31, 2025, the chief executive
officer and his wife, being directors of both companies, owned
In September 2023, the Company
established a wholly-owned subsidiary, Ispire Malaysia Sdn Bhd (“Ispire Malaysia”) under the laws of the Federation of Malaysia,
in order to establish manufacturing operations in Southeast Asia. Ispire Malaysia was formed by Tuanfang Liu, the Company’s Chairman
and Co-Chief Executive Officer on August 2, 2023, and assigned to the Company on September 22, 2023, at a consideration of
In July 2024, the Company established a wholly-owned subsidiary, Aspire AME Electronic Cigarettes Trading LLC (“Ispire UAE”) under the laws of the United Arab Emirates (“UAE”), in order to establish sales and marketing in the UAE.
In October 2024, the Company established a wholly-owned subsidiary, Magellan Trading LLC (“Magellan Trading”) incorporated under the laws of the State of California to assist in operations and logistics for the Company.
In January 2025, the Company established a wholly-owned subsidiary, Ispire Products UK LTD (“Ispire UK”) incorporated under the laws of England and Wales to assist in sales and marketing for the Company. Ispire UK was dissolved in October 2025.
In May 2025, the Company established a wholly-owned subsidiary, Ispire Holdings LLC (“Ispire Holdings”) incorporated under the laws of the State of Delaware to assist in administration for the Company.
In June 2025, the Company established a wholly-owned subsidiary, Ispire Ike Holdings LLC (“Ispire Ike Holdings”) incorporated under the laws of the State of Delaware to assist in administration for the Company.
5
The following table sets forth information concerning the Company and its subsidiaries as of December 31, 2025:
| Name of Entity | Date of Organization | Place of Organization | % of Ownership | Principal Activities | ||||
| Ispire Technology Inc. | ||||||||
| Ispire International | ||||||||
| Aspire North America | ||||||||
| Aspire Science | ||||||||
| Ispire Malaysia | ||||||||
| Ispire Global Products LLC | ||||||||
| Aspire AME Electronic Cigarettes Trading LLC | ||||||||
| Magellan Trading LLC | ||||||||
| Ispire Holdings LLC | ||||||||
| Ispire Ike Holdings LLC |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s consolidated financial position as of December 31, 2025 and the results of operations for the three and six months ended December 31, 2025 and 2024. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) and accordingly do not include all of the disclosures normally made in the Company’s annual consolidated financial statements. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended June 30, 2025.
The unaudited condensed consolidated balance sheet as of June 30, 2025 has been derived from the audited consolidated financial statements at such date. The results of operations for the three and six months ended December 31, 2025 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the year ending June 30, 2026.
Use of significant estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include allowance for credit losses and revenue recognition. Actual results could differ from those estimates.
6
Fair value measurement
The Company applies ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands financial statement disclosure requirements for fair value measurements.
ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.
ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
The carrying value of certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other receivables, accounts payable, accounts payable related party, contract liabilities, accrued liabilities and other payables and due to related parties, approximates their fair value because of their short-term maturity.
Allowance for credit losses
The Company 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. The Company uses roll rate method or evaluates the aggregation of risk characteristics of a receivable pool to develop credit losses estimate. In establishing the required allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, economic environment, and the credit history and financial conditions of the customers. Management reviews 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 doubtful accounts after management has determined that the likelihood of collection is not probable.
Inventories
Inventories mainly consist of finished goods purchased from suppliers. Inventories are stated at the lower of cost or net realizable value. The cost of an inventory item is determined using the weighted average method.
When management determines
that certain inventories may not be saleable, or there is an indicator that certain inventory costs may exceed expected market value,
the Company will record the difference between the cost and the net realizable value as a write down of inventories. The net realizable
value is determined based on the estimated selling price, in the ordinary course of business, less estimated costs necessary to make the
sale. The Company records an allowance for slow moving and potentially obsolete inventory based upon recent sales history, the quantity
of inventory on-hand, and an estimate of expected sellable life of the inventory. The Company periodically reviews inventory to identify
slow moving inventories and compares the forecast sales with the quantities and expected sellable life of inventory. Any inventories identified
during this process are reserved for at rates based upon management’s judgment and historical rates. The quantity thresholds and
reserve rates are based on management’s judgment and knowledge of current and projected demand. The reserve estimates may, therefore,
be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment,
impact its ability to sell potentially obsolete inventory. The write-down of inventories was $
7
Intangible assets, net
Intangible assets refer to
capitalized external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent license rights.
The Company expenses costs associated with maintaining patents subsequent to their issuance in the period incurred. Capitalized patent
costs are amortized on a straight-line basis over estimated useful lives of
Revenue recognition
The Company sells its vaping products to customers and recognizes revenue in accordance with the guidance of ASC 606, Revenue from Contracts with Customers. Many customers are distributors that resell the Company’s products in various geographic regions. The performance obligations are for the Company to transfer the title and control of the goods to a customer for a determined price. Each order is considered a separate contract with a single performance obligation. Revenue is recognized when control of goods has transferred to customers. For the majority of the Company’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered to the pickup location specified by the customer or a forwarder appointed by the customer, as that is generally when legal title, physical possession and risks and rewards of goods transfer to the customer.
Revenue is recognized at the transaction price based on the purchase order as adjusted for the anticipated rebates, discounts and other sales incentives. When determining the transaction price, management estimates variable consideration applying the portfolio approach practical expedient under ASC 606. The main sources of variable consideration for the Company are sales returns. These sales returns are recorded as a reduction of revenue at the time of the initial sale using the most-likely amount estimation method. The most-likely amount method is based on the single most likely outcome from a range of possible consideration outcomes.
The Company offers different
payment terms to different customers. For nicotine vaping products, the general payment term is a deposit of
Disaggregated Revenue
The Company has taken into
consideration the nature, amount, timing, and uncertainty of revenue and cash flows, and has determined to disaggregate its net sales
by region.
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Europe | $ | $ | $ | $ | ||||||||||||
| North America (the U.S. and Canada) | ||||||||||||||||
| Asia Pacific (excluding PRC) | ||||||||||||||||
| Others | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
8
Cost of revenue
Cost of revenue for the three and six months ended December 31, 2025 and 2024 consisted primarily of the cost of purchasing vaping products, freight-in cost, which were mostly purchased from a related party, see Note 11, and inventory impairment.
Stock-based compensation
The Company measures and recognizes compensation expenses for stock-based payment awards, including stock options, restricted stock granted to directors and advisors, and restricted stock units (“RSUs”) granted to employees, based on the grant date fair value of the awards. The Company engages a third-party valuer to assist in determining the fair value of stock options using the binomial option pricing model, with significant assumption of exercise multiple, expected volatility, risk-free interest rate and expected dividend yield. The fair value of RSUs is measured on the grant date based on the closing market price of the Company’s common stock. The stock-based payment awards typically include time-based vesting conditions, however, certain of the Company’s stock-based payment awards may include performance-based vesting conditions.
For stock-based payment awards with time-based vesting conditions, the resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and three years for RSUs. Stock-based compensation expense is recognized on a straight-line basis over the period during which services are provided in exchange for the award. For stock-based payment awards with performance-based vesting conditions, the Company will estimate the probability that the performance condition will be met at each reporting date. Stock-based compensation expense is only recognized for stock-based payment awards that are probable of vesting. Ultimately, the cumulative stock-based compensation expense recognized by the Company is the grant date fair value of the awards where the performance conditions have been met and the awards have vested.
Stock-based compensation expense is recorded in the sales and marketing expense and general and administrative expense in the unaudited condensed consolidated statements of operations. The Company recognizes forfeitures of stock-based payment awards upon occurrence.
Earnings per share
The Company computes earnings
per share (“EPS”) in accordance with ASC 260, Earnings per Share. ASC 260 requires companies with complex capital structures
to present basic and diluted EPS. Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the
period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (for example,
convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date,
if later.
| As of December 31, | As of December 31, | |||||||
| Dilutive securities: | 2025 | 2024 | ||||||
| Share options | ||||||||
| Unvested restricted stock units | ||||||||
| Warrants | ||||||||
| Total | ||||||||
9
Segment reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODMs are Mr. Tuanfang Liu, the Co-Chief Executive Officer and Chairman, and Mr. Michael Wang, the Co-Chief Executive Officer.
The Company’s organizational
structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but not
limited to, customer base, homogeneity of products and technology. The Company’s operating segment is based on such organizational
structure and information reviewed by the Company’s CODM to evaluate the operating segment results. The Company has internal reporting
of revenue, cost and expenses by nature as a whole. Hence, the Company has only
The accounting policies of the single segment are the same as described in the significant accounting policies. The CODM assesses performance for the single segment and decides how to allocate resources based on net loss that also is reported on the unaudited condensed consolidated statements of comprehensive loss as consolidated net loss. The measure of the single segment assets is reported on the unaudited condensed consolidated balance sheets as total consolidated assets.
The CODM reviews revenues and expenses at the consolidated level as disclosed in the Company’s unaudited condensed consolidated statements of comprehensive loss and uses net loss to evaluate return on assets and to monitor budget versus actual results and in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis and the monitoring of budgeted versus actual results are used in assessing the segment’s performance and in establishing management’s compensation.
Recent accounting pronouncements
As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period for all accounting standards described below, if applicable.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. The adoption of the amendment will occur on a prospective basis. The amendments in this ASU will be effective for public business entities on the effective date of the SEC’s removal of the related disclosures from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the amendments will not become effective for any entity. The Company is currently evaluating the impacts of the provisions of ASU 2023-06.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for public business entities for annual periods beginning after December 15, 2024, and for private entities for annual periods beginning after December 15, 2025, on a prospective basis. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
10
In November 2024, the FASB issued ASU 2024-03, Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), to improve the disclosures about an entity’s expenses. In January 2025, the FASB issued ASU 2025-01 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Upon adoption, the Company will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. The standard can be applied either prospectively or retrospectively. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), to address challenges encountered when applying the guidance in Topic 326, Financial Instruments—Credit Losses. The amendment provides (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The standard can be applied prospectively. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
In May 2025, the FASB issued ASU No. 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The amendments in this update revise the Master Glossary definition of the term performance condition for share-based consideration payable to a customer. The amendments in this update permit a grantor to apply the new guidance on either a modified retrospective or a retrospective basis. The amendments in this update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date; or follow a modified transition approach that is based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is permitted. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326)—Credit Losses (Topic 326). The amendments in this update expand the population of acquired financial assets subject to the gross-up approach in Topic 326. In accordance with the amendments in this update, loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” (defined below) are purchased seasoned loans and accounted for using the gross-up approach at acquisition. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). The amendments in this update include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently assessing adoption timing and the effect that the updated standard will have on our financial statement disclosures.
Concentration and risks
Risks and Uncertainties
The Company’s business, financial condition and results of operations may be negatively impacted by risks related to government regulations, natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.
E-cigarette regulation
Regulation regarding e-cigarettes varies across countries, from no regulation to a total ban. The legal status of e-cigarettes is currently pending in many countries. But 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 and regulations in countries and regions that our major customers are located in may adversely affect the Company’s business.
11
The Federal Food, Drug, and Cosmetic Act requires all Electronic Nicotine Delivery Systems (“ENDS”) product manufacturers that market products in the United States to submit Premarket Tobacco Product Applications (“PMTAs”) to the Food and Drug Administration (“FDA”). For ENDS products that were on the U.S. market on or before August 8, 2016, a PMTA was required to be submitted to the FDA before September 9, 2020; for ENDS products that were not on the U.S. market prior to August 8, 2016, and for which a PMTA was not filed before September 9, 2020, a PMTA premarket authorization issued by FDA is required before the subject product may enter the U.S. market. The Company has submitted a PMTA filing for one ENDS product, and, under apparent FDA policies, FDA will not enforce the premarket review requirements for that product pending review of its PMTA. However, even with submission of the PMTA application, the FDA may reject the Company’s application and may prevent the Company’s ENDS products from being sold in U.S., which will adversely affect the Company’s business.
Amendments to the Prevent All Cigarette Trafficking (“PACT”) Act, which became law in 2021, extend the PACT Act to include e-cigarette and all vaping products, and place significant burdens on sellers of vaping products in the United States which may make it difficult to operate profitably in the United States. Because of tighter government regulations, the Company has stopped marketing tobacco vaping products in the United States, as the volume of sales from the one tobacco vaping product which the Company may sell in the United States does not justify the marketing and regulatory costs involved.
In the United States, cannabis vaping products are governed by state laws, which vary from state to state. Most states do not permit the adult recreational use of cannabis, and no states permit the sale of recreational cannabis products to minors. The Company cannot predict what action states will take or the nature and amount of taxes they may impose. However, to the extent the PACT Act applies to cannabis products that aerosolize liquids, it may be more difficult to sell our products in states that permit the sale of cannabis.
However, cannabis and its
derivatives containing more than
The European Commission issued the Tobacco Products Directive (the “TPD”), which became effective on May 19, 2014, and became applicable in the European Union member states on May 20, 2016. The TPD regulates e-cigarettes on the packaging, labelling and ingredients of the products on the European Union market, the creation of smoke-free environments, tax measures and activities against illegal trade and anti-smoke campaigns. Member states of the European Union are required to ensure that advertisements for any tobacco related product are prohibited, and no promotion shall be made as to those devices with an intention to promote e-cigarettes. For the e-cigarettes released after May 20, 2016, TPD requires e-cigarette manufacturers to submit product sales applications to the regulatory market six months in advance, and ensure their products can meet the TPD requirements before they can be released. The Company has complied with TPD requirement for products sold in Europe.
The sale of cannabis vaping products is illegal in the European Union and the United Kingdom.
Customer and Supplier Concentration
(a) Customers
For the three and six months ended December 31, 2025 and 2024, the Company’s major customers, who accounted for more than 10% of the Company’s consolidated revenue, were as follows:
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Major Customers | ||||||||||||||||
| Customer A | % | % | % | % | ||||||||||||
| Customer B | % | % | % | |||||||||||||
| * |
12
(b) Suppliers
For the three months and six ended December 31, 2025 and 2024, the Company’s suppliers, who accounted for more than 10% of the Company’s total purchases, were as follows:
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Major Suppliers | ||||||||||||||||
| Supplier C | % | % | % | % | ||||||||||||
| (1) | Major supplier C is Shenzhen Yi Jia, a Chinese company that is |
Credit Risk
Financial instruments that
potentially subject the Company to a concentration of credit risk consist of cash and accounts receivable. The Company maintains its cash
in financial institutions. Accounts at United States financial institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $
As of December 31, 2025 and June 30, 2025, the Company’s customers, whose accounts receivable balances accounted for more than 10% of the Company’s total accounts receivable, net, were as follows:
| As of December 31, | As of June 30, | |||||||
| Customers | 2025 | 2025 | ||||||
| D | % | % | ||||||
| E | % | % | ||||||
NOTE 3. CASH AND RESTRICTED CASH
Below is a breakdown of the Company’s cash balances in banks as of December 31, 2025 and June 30, 2025, both by geography and by currencies (translated into U.S. dollars):
| As of December 31, | As of June 30, | |||||||
| By Geography: | 2025 | 2025 | ||||||
| Cash in HK | $ | $ | ||||||
| Cash in U.S. | ||||||||
| Cash in Malaysia | ||||||||
| Total | $ | $ | ||||||
| By Currency: | ||||||||
| USD | $ | $ | ||||||
| RM | ||||||||
| HKD | ||||||||
| EUR | ||||||||
| GBP | ||||||||
| RMB | ||||||||
| Total | $ | $ | ||||||
“HKD” refers to Hong Kong dollars, “GBP” refers to British pounds, “EUR” refers to Euros, “RM” refers to Malaysia ringgit, and “RMB” refers to Renminbi.
As of December 31, 2025 and
June 30, 2025, there was restricted cash totaling $
13
NOTE 4. ACCOUNTS RECEIVABLE, NET
As of December 31, 2025 and June 30, 2025, accounts receivable consisted of the following:
| As of December 31, | As of June 30, | |||||||
| 2025 | 2025 | |||||||
| Accounts receivable – gross | $ | $ | ||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The Company recorded $
Activity in the allowance for credit losses is below:
| Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at July 1 | $ | $ | ||||||
| Provision for expected losses | ||||||||
| Write-offs charged against the allowance | ( | ) | ( | ) | ||||
| Balance at December 31 | ||||||||
NOTE 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of December 31, 2025 and June 30, 2025, prepaid expenses and other current assets consisted of the following:
| As of December 31, | As of June 30, | |||||||
| 2025 | 2025 | |||||||
| Prepayment for inventory purchases | $ | $ | ||||||
| Prepayments | ||||||||
| Other receivable | ||||||||
| Prepaid provisional tax | ||||||||
| Total | $ | $ | ||||||
14
NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET
As of December 31, 2025 and June 30, 2025, property, plant and equipment consisted of the following:
| As of December 31, | As of June 30, | |||||||
| 2025 | 2025 | |||||||
| Leasehold improvements | $ | $ | ||||||
| Office and other equipment | ||||||||
| Furniture and fixtures | ||||||||
| Construction-in-progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
For the three months ended
December 31, 2025 and 2024, depreciation expense amounted to $
Construction-in-progress refers to the office and production plant that are under construction in Malaysia, which are expected to be put into use during fiscal year 2026.
NOTE 7. EQUITY METHOD INVESTMENT
On April 5, 2024, Aspire North
America entered into a capital contribution, subscription, and joint venture agreement with several other parties. Pursuant to joint venture
agreement, the parties created a legal entity, IKE Tech LLC (“IKE”), whose business is licensing, owning, operating and developing
an industry-standard age-verification solution for vapor (e-cigarette) devices in the U.S. market as the related planned submission of
PMTA applications that seek FDA marketing orders for cutting-edge technologies across the U.S. e-cigarette market. Ispire contributed
$
As of December 31, 2025 and
June 30, 2025, the investment in joint venture accounted for under the equity method amounted to $
For the three months ended December 31, 2025 and 2024, the Company’s
share of the joint venture’s net loss was $
15
The tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:
| As of December 31, | As of June 30, | |||||||
| 2025 | 2025 | |||||||
| Current assets | $ | $ | ||||||
| Noncurrent assets | ||||||||
| Current liabilities | ||||||||
| Equity | ||||||||
| Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenue | $ | $ | ||||||
| Gross profit (loss) | ||||||||
| Loss from operations | ||||||||
| Net loss | ||||||||
NOTE 8. CONTRACT LIABILITIES
As of December 31, 2025
and June 30, 2025, the Company had total contract liabilities of $
Changes in the contract liabilities is below:
| Six Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at July 1 | $ | $ | ||||||
| Contract liabilities recognized related to advanced deposits | ||||||||
| Revenue recognized in current period | ( | ) | ( | ) | ||||
| Balance at December 31 | ||||||||
NOTE 9. LEASES
The Company has operating
lease arrangements for office premises in Hong Kong, California and Malaysia. These leases typically have terms of
Leases with an initial term
of
The balances for the right-of-use assets and lease liabilities where the Company is the lessee are presented as follow:
| As of | As of | |||||||
| December 31, 2025 | June 30, 2025 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | ||||||||
| Total | $ | $ | ||||||
16
The Company had impairment of operating lease right-of-use assets during the three and six months ended December 31, 2025 and 2024.
As of December 31, 2025, the maturities of our lease liabilities (excluding short-term leases) are as follows:
| As of December 31, 2025 | ||||
| January 1, 2026 to June 30, 2026 | $ | |||
| July 1, 2026 to June 30, 2027 | ||||
| July 1, 2027 to June 30, 2028 | ||||
| July 1, 2028 to June 30, 2029 | ||||
| July 1, 2029 to June 30, 2030 | ||||
| Total future lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | $ | |||
The Company incurred lease
costs, which include the payment of short-term leases, of $
The Company made payments
of $
The weighted-average remaining lease term related to the Company’s
lease liabilities as of December 31, 2025 and June 30, 2025 was
The discount rate related to the Company’s lease liabilities
as of December 31, 2025 and June 30, 2025 was
NOTE 10. ACCRUED LIABILITIES AND OTHER PAYABLES
As of December 31, 2025 and June 30, 2025, accrued liabilities and other payables consisted of the following:
| As of December31, | As of June 30, | |||||||
| 2025 | 2025 | |||||||
| Joint venture investment payable | $ | $ | ||||||
| Other payables | ||||||||
| Accrued salaries and related benefits | ||||||||
| Accrued expenses | ||||||||
| Reserve for product returns | ||||||||
| Other tax payable | ||||||||
| Total | $ | $ | ||||||
Joint venture investment payable refers to payable to IKE, which is a related party, please see Note 7 and Note 11 for details.
17
NOTE 11. RELATED PARTY TRANSACTIONS
| a) |
| Name of related parties and Relationship with the Company |
| b) | Tuanfang Liu is also Aspire Global’s chief executive officer and a director of both the Company and Aspire Global, and his wife, Jiangyan Zhu, is also a director of both companies. As of December 31, 2025, Mr. Liu and Ms. Zhu beneficially own |
| c) | For the three months ended December 31, 2025 and 2024, the majority
of the Company’s tobacco and cannabis vaping products were purchased from Shenzhen Yi Jia. As of December 31, 2025 and June
30, 2025, the accounts payable – related party were $ |
| d) | The balances due to a related party at December 31, 2025 and June 30, 2025 represent amounts due to Shenzhen Yi Jia of $ |
| e) | As of December 31, 2025 and June 30, 2025, the Company had
total accounts receivable of $ |
NOTE 12. INCOME TAXES
For the three and six months ended December 31, 2025 and 2024 loss before income taxes consists of:
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| HK | $ | $ | $ | $ | ||||||||||||
| U.S. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Malaysia | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
18
Income taxes recorded for the three and six months ended December 31, 2025 and 2024, were estimated using the discrete method. Income taxes are based on the Company’s financial results through the end of the period, as well as the related change in the valuation allowance on deferred tax assets. The Company is unable to estimate the annual effective tax rate with sufficient precision for purposes of the effective tax rate method, which requires the Company to consider a projection of full-year income and the expected change in the valuation allowance. The estimated annual effective tax rate method was not reliable due to its sensitivity to small changes to forecasted annual pre-tax earnings and the effect of the valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. As a result, the Company determined that using the discrete method is more appropriate than using the annual effective tax rate method.
The Company’s effective
tax rate from operations was (
Income tax expense of $
NOTE 13. STOCK-BASED COMPENSATION
In October 2022, the board
of directors and stockholders of the Company approved the 2022 Equity Incentive Plan (as amended, the “Plan”) pursuant to
which up to
Restricted stock
During the three months
ended December 31, 2025 and 2024,
In June 2024, the Company
entered into consulting agreements with two consultants which provide for the issuance of up to
19
In July 2024, the Company
entered into consulting agreements with two consultants, which provide for the issuance of up to
In July 2024, the Company
entered into consulting agreements with two consultants, which provide for the issuance of up to
The shares of common stock from the above discussed consulting agreements
that vest upon the attainment of the sales-based targets include performance-based vesting conditions, which the Company has determined
were not probable of being achieved at December 31, 2025. As such, the Company has not recognized any compensation expense for the three
and six months ended December 31, 2025, related to the restricted common stock with performance-based vesting conditions. For the three
and six months ended December 31, 2024, the stock-based compensation expense related to the performance-based restricted common stock
was and $
Stock Options
During the three months ended
December 31, 2025, there were no stock options granted. During the six months ended December 31, 2025, there were
According to the Plan, vested
stock options that are not exercised within three months after termination of employment will be expired. During the three months ended
December 31, 2025 and 2024, there were
20
The following is a summary of stock option activity transactions as of and for the six months ended December 31, 2025 and 2024:
| Number of options | Weighted average exercise price | Weighted average fair value per option | Weighted average remaining contractual life in years | |||||||||||||
| Outstanding at June 30, 2025 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Expired | ( | ) | $ | $ | ||||||||||||
| Forfeiture | ( | ) | $ | $ | ||||||||||||
| Outstanding at December 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2025 | $ | $ | ||||||||||||||
| Number of options | Weighted average exercise price | Weighted average fair value per option | Weighted average remaining contractual life in years | |||||||||||||
| Outstanding at June 30, 2024 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Forfeiture | ( | ) | $ | $ | ||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2024 | $ | $ | ||||||||||||||
The aggregate intrinsic value
of options outstanding with an exercise price less than the closing price of the Company’s common stock as of December 31, 2025
was $
Total expense of options vested
for the three months ended December 31, 2025 and 2024, was $
| Six months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Exercise multiple | ||||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
RSUs
RSUs granted to employees
vest cumulatively as to one-third of the restricted stock units on each of the first three anniversaries of the date of grant based on
continues service. Each vested RSU entitles the holder to receive one share of common stock upon exercise.
| Shares | Weighted average grant date fair value |
|||||||
| Unvested, June 30, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( |
) | ||||||
| Canceled and forfeited | ||||||||
| Unvested, December 31, 2025 | $ | |||||||
21
| Shares | Weighted average grant date fair value | |||||||
| Unvested, June 30, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Canceled and forfeited | ( | ) | ||||||
| Unvested, December 31, 2024 | $ | |||||||
Total expense for the RSUs during the three months ended December 31,
2025 and 2024 was $
The following table summarizes the allocation of stock-based compensation in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss:
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of December 31, 2025, the
Company had approximately $
NOTE 14. LOSS PER SHARE
The following table presents a reconciliation of basic net loss per share:
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average basic and diluted share of common stock outstanding | ||||||||||||||||
| Net loss per basic and diluted share of common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
NOTE 15. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be subject to legal or regulatory proceedings, investigations and claims incidental to the conduct of its business. The Company is not a party to, nor is the Company aware of, any legal or regulatory proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.
Concurrently with the JV
Agreement (see Note 7), Ispire entered into an exclusive supply agreement with Berify, whereby Ispire is obligated to purchase all Bluetooth
enabled integrated circuits to be used on vape type devices to control the activation of the device that are to be sold to IKE at cost
plus a
22
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.
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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 $20.9 million and $18.0 million at December 31, 2025 and June 30, 2025, 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.
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-combustible 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. |
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Results of Operations
The following table sets forth a summary of our unaudited condensed consolidated statements of operations and comprehensive income for the three months ended December 31, 2025 and 2024 (dollars in thousands except per share amounts).
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| $ | % of Revenue | $ | % of Revenue | $ | % of Revenue | $ | % of Revenue | |||||||||||||||||||||||||
| Revenue | $ | 20,287 | 100.0 | % | $ | 41,828 | 100.0 | % | $ | 50,637 | 100.0 | % | $ | 81,166 | 100.0 | % | ||||||||||||||||
| Cost of revenue | (16,812 | ) | (82.9 | )% | (34,105 | ) | (81.5 | )% | (42,016 | ) | (83.0 | )% | (65,769 | ) | (81.0 | )% | ||||||||||||||||
| Gross profit | 3,475 | 17.1 | % | 7,723 | 18.5 | % | 8,621 | 17.1 | % | 15,397 | 19.0 | % | ||||||||||||||||||||
| Operating expenses | (10,349 | ) | (50.1 | )% | (15,083 | ) | (36.1 | )% | (18,191 | ) | (35.9 | )% | (28,020 | ) | (34.5 | )% | ||||||||||||||||
| loss from operations | (6,874 | ) | (33.9 | )% | (7,360 | ) | (17.6 | )% | (9,570 | ) | (18.9 | )% | (12,623 | ) | (15.6 | )% | ||||||||||||||||
| Other income (expense), net | 379 | 1.9 | % | (179 | ) | (0.4 | )% | 301 | 0.6 | % | (54 | ) | (0.1 | )% | ||||||||||||||||||
| Loss before income taxes | (6,495 | ) | (32.0 | )% | (7,539 | ) | (18.0 | )% | (9,269 | ) | (18.3 | )% | (12,677 | ) | (15.6 | )% | ||||||||||||||||
| Income taxes | (107 | ) | (0.5 | )% | (460 | ) | (1.1 | )% | (593 | ) | (1.2 | )% | (917 | ) | (1.1 | )% | ||||||||||||||||
| Net loss | (6,602 | ) | (32.5 | )% | (7,999 | ) | (19.1 | )% | (9,862 | ) | (19.5 | )% | (13,594 | ) | (16.7 | )% | ||||||||||||||||
| Other comprehensive (loss)income | (113 | ) | (0.6 | )% | 74 | 0.2 | % | (121 | ) | (0.2 | )% | (81 | ) | (0.1 | )% | |||||||||||||||||
| Comprehensive loss | (6,715 | ) | (33.1 | )% | (7,925 | ) | (18.9 | )% | (9,983 | ) | (19.7 | )% | (13,675 | ) | (16.8 | )% | ||||||||||||||||
| Net loss per share Basic and diluted | (0.12 | ) | (0.14 | ) | (0.17 | ) | (0.24 | ) | ||||||||||||||||||||||||
| Weighted shares of common stock outstanding Basic and diluted | 57,258,218 | 56,658,012 | 57,257,938 | 56,629,666 | ||||||||||||||||||||||||||||
Revenue
The following table sets out the breakdown of our revenue percentage by region based on information provided to us by our distributors.
| Three months ended December 31, | Six months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Europe | $ | 14,783,941 | $ | 23,987,678 | $ | 35,482,585 | $ | 45,939,051 | ||||||||
| North America (the U.S. and Canada) | 1,606,444 | 10,916,260 | 7,075,503 | 20,653,148 | ||||||||||||
| Asia Pacific (excluding PRC) | 2,525,694 | 3,613,359 | 4,899,337 | 7,488,743 | ||||||||||||
| Others | 1,370,477 | 3,310,563 | 3,180,015 | 7,085,231 | ||||||||||||
| Total | $ | 20,286,556 | $ | 41,827,860 | $ | 50,637,440 | $ | 81,166,173 | ||||||||
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Our revenue decreased by $21,541,304, or 51.5%, from $41,827,860 for the three months ended December 31, 2024, to $20,286,556 for the three months ended December 31, 2025. The decrease in revenue is the combined effect of (i) decreases in product sales in the United States of $9.3 million from $10.9 million for the three months ended December 31, 2024, to $1.6 million for the three months ended December 31, 2025 largely due to shorter credit terms in the United States with a focus on higher quality customers, and (ii) decreases in sales of vaping products in Europe of $9.2 million from $24.0 million for the three months ended December 31, 2024 to approximately $14.8 million for the three months ended December 31, 2025 largely due to market conditions being competitive, and the timing of distribution continuing to evolve, and (iii) decreases in sales to other regions of $1.9 million from $3.3 million for the three months ended December 31, 2024 to approximately $1.4 million for the three months ended December 31, 2025 and (iv) decreases in sales of vaping products in Asia Pacific of $1.1 million from $3.6 million for the three months ended December 31, 2024 to approximately $2.5 million for the three months ended December 31, 2025.
Our revenue decreased by $30,528,733, or 37.6%, from $81,166,173 for the six months ended December 31, 2024, to $50,637,440 for the six months ended December 31, 2025. The decrease in revenue is the combined effect of (i) decreases in sales of vaping products in North America of $13.6 million from $20.7 million for the six months ended December 31, 2024 to approximately $7.1 million for the six months ended December 31, 2025 largely due to shorter credit terms in the United States with a focus on higher quality customers, and (ii) decreases in product sales in Europe of $10.4 million from $45.9 million for the six months ended December 31, 2024, to $35.5 million for the six months ended December 31, 2025 largely due to market conditions being competitive, and the timing of distribution continuing to evolve, and (iii) decreases in sales in other regions, mainly Africa, of $3.9 million from $7.1 million for the six months ended December 31, 2024, to $3.2 million for the six months ended December 31, 2025, (iv) decreases in sales to Asia Pacific regions of $2.6 million from $7.5 million for the six months ended December 31, 2024 to approximately $4.9 million for the six months ended December 31, 2025.
Cost of Revenue
Cost of revenue mainly consists of cost of purchases of vaping products, that the majority of the purchase are from Shenzhen Yi Jia. Cost of revenue decreased by $17,293,334, or 50.7%, from $34,105,289 for the three months ended December 31, 2024, to $16,811,955 for the three months ended December 31, 2025. The decrease in cost of revenue is in line with decrease in sales. Cost of revenue mainly consists of the cost of purchases of vaping products, the majority of which are from Shenzhen Yi Jia.
Cost of revenue decreased by $23,753,157, or 36.1%, from $65,769,224 for the six months ended December 31, 2024, to $42,016,067 for the six months ended December 31, 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).
| Three Months Ended December 31, 2025 | ||||||||||||||
| Revenue | Cost of revenue | Gross profit | Gross profit % | |||||||||||
| $ | 20,287 | $ | 16,812 | $ | 3,475 | 17.1 | % | |||||||
| Three Months Ended December 31, 2024 | ||||||||||||||
| Revenue | Cost of revenue | Gross profit | Gross profit % | |||||||||||
| $ | 41,828 | $ | 34,105 | $ | 7,723 | 18.5 | % | |||||||
| Six Months Ended December 31, 2025 | ||||||||||||||
| Revenue | Cost of revenue | Gross profit | Gross profit % | |||||||||||
| $ | 50,637 | $ | 42,016 | $ | 8,621 | 17.0 | % | |||||||
| Six Months Ended December 31, 2024 | ||||||||||||||
| Revenue | Cost of revenue | Gross profit | Gross profit % | |||||||||||
| $ | 81,166 | $ | 65,769 | $ | 15,397 | 19.0 | % | |||||||
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Gross profit decreased by $4,247,970, or 55.0%, from $7,722,571 for the three months ended December 31, 2024, to $3,474,601 for the three months ended December 31, 2025, while our gross margin decreased from 18.5% to 17.1%. The decrease in gross margin was primarily due to changes in product mix with less higher margin products being sold during the three months ended December 31, 2025.
Gross profit decreased by $6,775,576, or 44.0%, from $15,396,949 for the six months ended December 31, 2024, to $8,621,373 for the six months ended December 31, 2025, while our gross margin decreased from 19.0% to 17.0%. The decrease in gross margin was primarily due to changes in product mix with less higher margin products being sold during the six months ended December 31, 2025.
Operating Expenses
Operating expenses decreased by $4,733,158 or 31.4%, from $15,082,626 for the three months ended December 31, 2024 to $10,349,468 for the three months ended December 31, 2025. Operating expenses decreased by $9,828,324 or 35.1%, from $28,019,873 for the six months ended December 31, 2024 to $18,191,549 for the six months ended December 31, 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 decreased by $585,336, or 28.4%, from $2,061,664 for the three months ended December 31, 2024 to $1,476,328 for the three months ended December 31, 2025. The decrease in sales and marketing expenses was primarily due to a (i) decrease in brand marketing activities of $0.2 million comparing the three months ended December 31, 2025 and 2024, (ii) decrease in trade show costs of $0.2 million comparing the three months ended December 31, 2025 and 2024 and (iii) decrease in travelling expense of $0.1 million as a result of less travelling activities during the three months ended December 31, 2025.
Sales and marketing expenses decreased by $2,012,739, or 39.8%, from $5,053,911 for the six months ended December 31, 2024 to $3,041,172 for the six months ended December 31, 2025. The decrease in sales and marketing expenses was primarily due to a decrease in (i) stock-based compensation expense of $0.9 million comparing the six months ended December 31, 2025 and 2024, (ii) decrease in travelling expense of $0.5 million as a result of less travelling activities during the six months ended December 31, 2025, (iii) decrease in brand marketing activities of $0.3 million comparing the six months ended December 31, 2025 and 2024, and (iv) decrease in trade show costs of $0.3 million comparing the six months ended December 31, 2025 and 2024.
Credit loss expenses increased slightly by $25,203, or 0.6%, from $4,183,998 for the three months ended December 31, 2024, to $4,209,201 for the three months ended December 31, 2025.
Credit loss expenses decreased by $1,312,626, or 18.0%, from $7,286,079 for the six months ended December 31, 2024, to $5,973,453 for the six months ended December 31, 2025. The decrease is due to more collection of customer payments from repayment plan negotiated and thus less allowance for credit losses were provided as of December 31, 2025.
Our general and administrative expenses consist of employees’ salaries and benefits, rental expense, professional fees, stock-based compensation expenses and other administrative expenses. General and administrative expenses decreased by $4,173,025, or 47.2%, from $8,836,964 for the three months ended December 31, 2024, to $4,663,939 for the three months ended December 31, 2025. The decrease was primarily due to (i) decrease in payroll of $1.6 million comparing the three months ended December 31, 2025 and 2024 as a result of decrease in headcount of North America, (ii) decrease in stock-based compensation expense of $0.7 million for the three months ended December 31, 2025 as a result of drop in headcount in North America, (iii) decrease in legal and professional fees of $0.5 million for the three months ended December 31, 2025 as a result of cost reduction in North America, (iv) decrease of $1.7 million of miscellaneous administrative expenses from North America as a result of drop in headcount and cost reduction for the three months ended December 31, 2025, offset by $0.3 million increase of general administrative expenses from Ispire Malaysia from growth of operations during the three months ended December 31, 2025.
General and administrative expenses decreased by $6,502,959, or 41.5%, from $15,679,883 for the six months ended December 31, 2024, to $9,176,924 for the six months ended December 31, 2025. The decrease was primarily due to (i) decrease in payroll of $2.8 million comparing the six months ended December 31, 2025 and 2024 as a result of decrease in headcount of North America, (ii) decrease in legal and professional fees of $1.0 million for the six months ended December 31, 2025 as a result of cost reduction in North America, (iii) decrease in stock-based compensation expense of $0.8 million for the six months ended December 31, 2025 as a result of drop in headcount in North America, and (ii) decrease of $1.9 million of miscellaneous administrative expenses from North America as a result of drop in headcount and cost reduction for the six months ended December 31, 2025.
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Other income (expense), net
Other income (expense), net includes interest income, interest expense, exchange loss, net and other (expense) income.
Interest income increased by $45,167, from $59,755 for the three months ended December 31, 2024, to $104,922 for the three months ended December 31, 2025. Interest income increased by $140,553, from $59,841 for the six months ended December 31, 2024, to $200,394 for the six months ended December 31, 2025. The increase in interest income is mainly due to charging late fees from customers.
Interest expense increased by $87,118, from $13,073 for the three months ended December 31, 2024, to $100,191 for the three months ended December 31, 2025. Interest expense increased by $187,830, from $24,537 for the six months ended December 31, 2024, to $212,367 for the six months ended December 31, 2025. The increase in interest expense is mainly due to borrowing engaged in February 2025.
Other income, net mainly consists of loss on equity method investment, credits from company credit card and other miscellaneous expenses. Other income, net changed by $63,640, or 319.3%, from net income of $19,934 for the three months ended December 31, 2024 to net income of $83,574 for the three months ended December 31, 2025. Other income, net changed by $25,342, or 66.1%, from net income of $38,333 for the six months ended December 31, 2024 to net income of $12,991 for the six months ended December 31, 2025.
Exchange gain, net changes by $535,410, or 218.4%, from net exchange loss $245,173 for three months ended December 31, 2024, to net exchange gain of $290,237 for three months ended December 31, 2025. Exchange gain, net changes by $427,627, or 335.2%, from net exchange loss $127,588 for six months ended December 31, 2024, to net exchange gain of $300,039 for six months ended December 31, 2025.
As a result of these factors, total other income (expense), net increased by $557,099, from other expense, net of $178,557 for three months ended December 31, 2024, to other income, net of $378,542 for three months ended December 31, 2025. Total other income (expense), net increased by $355,008, from other expense, net of $53,951 for six months ended December 31, 2024, to other income, net of $301,057 for six months ended December 31, 2025.
Income Taxes
Income taxes decreased by $353,445 or 76.8%, from $460,031 for three months ended December 31, 2024, to $106,586 for three months ended December 31, 2025. Income taxes decreased by $324,129 or 35.4%, from $916,784 for six months ended December 31, 2024, to $592,655 for six months ended December 31, 2025. We had a consolidated net loss for both three and six months ended December 31, 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.
Net Loss
As a result of the foregoing, net loss decreased by $1,395,732, from net loss of $7,998,643, or $(0.14) per share, for the three months ended December 31, 2024, to a net loss of $6,602,911, or $(0.12) per share, for the three months ended December 31, 2025. Net loss decreased by $3,731,885, from net loss of $13,593,659, or $(0.24) per share, for the six months ended December 31, 2024, to a net loss of $9,861,774, or $(0.17) per share, for the six months ended December 31, 2025.
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Liquidity and Capital Resources
The following table summarizes our changes in working capital from June 30, 2025 to December 31, 2025 (dollars in thousands).
| December 31, 2025 | June 30, 2025 | Change | % Change | |||||||||||||
| Current Assets | $ | 63,652 | $ | 72,908 | $ | (9,256 | ) | (12.7 | )% | |||||||
| Current Liabilities | 60,190 | 72,540 | (12,350 | ) | (17.0 | )% | ||||||||||
| Working Capital | 3,462 | 368 | 3,094 | 840.8 | % | |||||||||||
The following table sets forth information as to consolidated cash flow information for the six months ended December 31, 2025 and 2024 (dollars in thousands).
| Six Months Ended December 31, | ||||||||||||
| Consolidated cash flow data: | 2025 | 2024 | Increase (Decrease) | |||||||||
| Net cash (used in) provided by operating activities | $ | (5,150 | ) | $ | 428 | $ | (5,578 | ) | ||||
| Net cash used in investing activities | (903 | ) | (1,104 | ) | 201 | |||||||
| Net cash used in financing activities | (683 | ) | - | (683 | ) | |||||||
| Net decrease in cash | $ | (6,736 | ) | $ | (676 | ) | $ | (6,060 | ) | |||
Net cash flow used in operating activities for the six months ended December 31, 2025, of $5.2 million, reflected our net loss of $9.9 million, adjusted primarily as follows: add back of impairment of account receivable of $6.0 million, add back of share-based compensation expense of $1.8 million, add back of inventory impairment expense of $1.5 million, a decrease in accounts receivable of $3.2 million, offset by a decrease in accounts payable and accounts payable – related party of $7.0 million and an increase in prepaid expenses and other current assets of $1.0 million.
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.
Net cash flow used in investing activities for the six months ended December 31, 2025, of $0.9 million reflected primarily investment in joint venture of $0.5 million and capitalized costs of patents of $0.3 million.
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 capitalized costs of patents of $0.8 million.
Net cash flow generated from financing activities for the six months ended December 31, 2025, of $0.7 million reflected primarily repayment of borrowing of $0.6 million.
To date, we have financed our operations primarily through cash flow from operations and working capital accounts payable 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 Quarterly 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.
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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 December 31, 2025 and June 30, 2025, we had contract liabilities of $4,971,135 and $4,861,250, 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 follows:
| As of | As of | |||||||
| December 31, 2025 | June 30, 2025 | |||||||
| Operating lease right-of-use assets | $ | 4,335,355 | $ | 5,030,005 | ||||
| Operating lease liabilities – current | $ | 1,659,698 | $ | 1,838,815 | ||||
| Operating lease liabilities – non-current | 2,642,156 | 3,267,522 | ||||||
| Total | $ | 4,301,854 | $ | 5,106,337 | ||||
The Company had no impairment of operating lease right-of-use assets during the three and six months ended December 31, 2025 and 2024.
As of December 31, 2025, the maturities of our lease liabilities (excluding short-term leases) are as follows:
| As of December 31, 2025 | ||||
| January 1, 2026 to June 30, 2026 | $ | 1,071,457 | ||
| July 1, 2026 to June 30, 2027 | 1,610,545 | |||
| July 1, 2027 to June 30, 2028 | 805,712 | |||
| July 1, 2028 to June 30, 2029 | 725,036 | |||
| July 1, 2029 to June 30, 2030 | 483,357 | |||
| Total future lease payments | 4,696,107 | |||
| Less: imputed interest | (394,253 | ) | ||
| Total lease liabilities | $ | 4,301,854 | ||
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As of December 31, 2025, we have a borrowing balance of $1,378,744 outstanding. The maturities of our borrowing are as follows:
| As of December 31, 2025 | ||||
| January 1, 2026 to December 31, 2026 | 1,146,766 | |||
| January 1, 2026 to December 31, 2027 | 231,978 | |||
| Total borrowing | 1,378,744 | |||
As of December 31, 2025, we recorded an unpaid $5.3 million consideration in accrued liabilities and other payables on the unaudited condensed consolidated balance sheet for a committed investment of $9 million into a joint venture investment named IKE Tech LLC.
Trend Information
Other than as disclosed elsewhere in this Quarterly Report, 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.
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.
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ITEM 3: Quantitative and Qualitative Disclosure About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 4: Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2025, due to (1) the lack of controls needed to enable us to evaluate significant estimates, including (i) the sufficiency of inventory reserve for slow-moving inventories and (ii) the credit loss history and use of it to evaluate the sufficiency of credit loss reserve for accounts receivable under the Topic 326; (2) the lack of sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP, which resulted in restatements of certain unaudited/audited financial statements prior to the fiscal year ended June 30, 2025; and (3) the lack of IT general controls regarding cyber security governance, logical access security and service organization management.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2025, we have continued to develop and implement internal controls over financial reporting particularly in view of the material weakness described above.
Inherent Limitations of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be subject to legal proceedings, investigations and claims incidental to the conduct of our business.
We are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. Our current risk factors are set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the SEC on September 15, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended December 31, 2025, the Company did not conduct any unregistered sales of equity securities.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Pursuant to the share repurchase program approved by the Company’s board of directors on January 20, 2025, for a period of 24 months, the Company may repurchase up to $10 million of the currently outstanding shares of the Company’s common stock. This approval authorized the Company to enter into a repurchase program to purchase shares of the Company’s common stock (i) in the open market, (ii) in privately negotiated transactions, (iii) block purchases, or (iv) otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. During the quarterly period ended December 31, 2025, the Company did not repurchase any shares of its common stock.
| ISSUER PURCHASES OF EQUITY SECURITIES(1) | ||||||||||||||||
| Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| October (October 1, 2025 - October 31, 2025) | - | - | - | $ | 9,894,555 | |||||||||||
| November (November 1, 2025 - November 30, 2025) | - | - | - | $ | 9,894,555 | |||||||||||
| December (December 1, 2025 - December 31, 2025) | - | - | - | $ | 9,894,555 | |||||||||||
| Total | - | - | - | $ | 9,894,555 | |||||||||||
| (1) | On January 20, 2025, the Company’s board of directors authorized the Company’s entry into a program to repurchase up to $10 million of shares of the Company’s Common Stock, as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on January 22, 2025. The board of directors’ authorization to enter into such a repurchase program expires on January 20, 2027. |
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine and Safety Disclosure
Not applicable
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Item 5. Other Information
No director or Section 16
officer
Item 6. Exhibits
The following is a complete list of exhibits filed or furnished, as applicable, as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: February 6, 2026 | ISPIRE TECHNOLOGY INC. | |
| By: | /s/ Michael Wang | |
| Michael Wang | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Jie Yu | |
| Jie Yu | ||
| Chief Financial Officer | ||
| (Principal Financing and Accounting Officer) | ||
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