ISPR Ispire Technology Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 11, 2024 

 

Ispire Technology Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		001-41680		84-5106049
(State or other jurisdiction of incorporation or organization)		(Commission file number)		(IRS Employer Identification No.)

 

19700 Magellan Drive

Los Angeles, CA 90502

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (310) 742-9975

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		ISPR		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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. ☐

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On November 11, 2024, Ispire Technology Inc. (the “Company”) issued a press release regarding its financial results for the fiscal first quarter ended September 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in that filing.

 

Item 7.01. Regulation FD Disclosure.

 

The Company held a conference call and webcast on November 11, 2024, to discuss the company’s financial results for the three months ended September 30, 2024, as reported in the Company’s November 11, 2024, press release. A copy of the press release, which contains additional information regarding how to access the conference call and webcast and how to listen to a recorded playback, is attached as Exhibit 99.1 to this report and is incorporated herein by reference. A transcript of the conference call and webcast is attached as Exhibit 99.2 to this Current Report and is incorporated herein by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in that filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

The following exhibits are being filed or furnished, as applicable, with this Current Report on Form 8-K:

 

Exhibit No.		Description
99.1		Press Release of Ispire Technology Inc. issued on November 11, 2024
99.2		First Quarter 2025 Earnings Call Transcript of Ispire Technology Inc., dated November 11, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	Ispire Technology Inc.
	By:	/s/ Michael Wang
		Name:	Michael Wang
		Title:	Co-Chief Executive Officer
Dated: November 12, 2024

 

 

2

 

 

Exhibit 99.1

 

Ispire Technology Inc. Reports Financial Results for Fiscal First Quarter 2025

 

Gross Profit Increased 13.2% Year-Over-Year to $7.7 Million

 

Gross Margins increased to 19.5%, up from 16.0% in Fiscal Q1 2024

 

Expanded Global Reach through 5-Year Master Distributor Agreement with ANDS for MENA and Global
Duty-Free Markets

 

LOS ANGELES, November 11, 2024 – Ispire Technology Inc. (NASDAQ: ISPR) (“Ispire,” the “Company,” “we,” “us,” or “our”), an innovator in vaping technology and precision dosing, today reported results for the fiscal first quarter 2025, which ended on September 30, 2024, and anticipates filing its annual report on Form 10-Q with the U.S. Securities and Exchange Commission (the “SEC”) on November 12, 2024.

 

Fiscal First Quarter 2025 Financial Results

 

●

Revenue was $39.3 million as compared to $42.9 million in the fiscal first quarter of 2024.

 

●

Gross profit increased 13.2% to $7.7 million compared to $6.8 million in the fiscal first quarter of 2024.

 

●

Gross margin increased to 19.5% as compared to 16.0% in the fiscal first quarter of 2024

 

●

Total operating expenses increased 67.0% to $12.9 million as compared to $7.7 million in the fiscal first quarter of 2024.

 

●

Net loss of ($5.6) million as compared to net loss of ($1.3) million in the fiscal first quarter of 2024.

 

Michael Wang, Co-Chief Executive Officer of Ispire, commented, “Our results from the fiscal first quarter of 2025 reflect our commitment to our growth strategy of becoming the leading innovative vaping technology and precision dosing solutions company worldwide. While our financial results were slightly impacted due to the strategic shifts we have made in our US business to focus on high quality customers and to improve payment terms and gross profit, I am pleased with our team’s overall performance given the challenging macroeconomic environment and look forward to the remainder of fiscal 2025 and the opportunities that lay ahead.”

 

Mr. Wang continued, “Additionally, we have continued to make progress with the point-of-use age-gating technology and have begun the initial phase of commercialization worldwide. Also, our recently launched ‘I-80’ is set to revolutionize the cannabis industry given its production efficiency and cost effectiveness and we continue to see increased adoption of our machine from leading players in the industry. Lastly, we are excited to have recently expanded our global reach through a landmark 5-year master distributor agreement with ANDS for the Middle East and North Affrica region and Global Duty-Free markets. This partnership will enable us to bring our Hidden Hills Club nicotine portfolio to new markets, offering adult consumers innovative, harm-reduced alternatives to combustible cigarettes. We believe that the recent advancements we have made, combined with our solid financial performance, positions Ispire for continued growth and success as we proceed with our mission of providing industry-leading vaping technology worldwide.”

 

 

Jim McCormick, Chief Financial Officer of Ispire, stated, “The results from our fiscal first quarter were in line with our internal projections as we shifted our U.S. strategy while we also had a few delayed shipments which impacted our quarterly results. Despite the obstacles we’ve faced, our first quarter financial performance was still strong, including our gross profit increasing 13.2% year-over-year and our gross margins improving from 16.0% in the fiscal first quarter of 2024 to 19.5% in the fiscal first quarter of 2025. As we head into the remainder of fiscal 2025, we are confident that we are well-positioned to continue delivering value to our shareholders as we advance our mission of becoming a global leading provider of innovative vaping technology and precision dosing solutions.”

 

Financial Results for the Fiscal First Quarter Ended September 30, 2024

 

For the fiscal first quarter ended September 30, 2024, Ispire reported revenue of $39.3 million compared to $42.9 million during the same period last year, a decrease of 8.2%. The decrease in revenue is the combined effect of decreases in product sales in the United States of $8.1 million from $17.8 million for the fiscal first quarter ended September 30, 2023, to $9.7 million for the three months ended September 30, 2024, offset by increases in sales of vaping products in Europe of $2.1 million from $19.9 million for the three months ended September 30, 2023 to approximately $22.0 million for the fiscal first quarter ended September 30, 2024, and increases in sales to other regions of $3.7 million from $0.06 million for the three months ended September 30, 2023 to approximately $3.8 million for the fiscal first quarter ended September 30, 2024, mainly contributed by increase in sales to South Africa of $2.9 million.

 

Gross profit for the fiscal first quarter ended September 30, 2024, was $7.7 million compared to $6.8 million for the fiscal first quarter 2024 ended September 30, 2023. Over this same period, our gross margin grew to 19.5%, from 16.0%. The increase in gross profit and gross margin was primarily due to changes in product mix with an increase in higher margin products being sold during the fiscal first quarter ended September 30, 2024.

 

 

Total operating expenses for the fiscal first quarter ended September 30, 2024 were $12.9 million as compared to $7.7 million for fiscal first quarter ended September 30, 2023. The increase in operating expenses is due to an increase in our marketing activities, marketing campaign and trade shows of $0.7 million, stock-based compensation expense related to selling personnel of $1.0 million for the three months ended September 30, 2024 and headcount and payroll expense for Aspire Science of $0.1 million. The Company also had an increase in stock-based compensation expense of $1.0 million for the three months ended September 30, 2024, as compensation and incentive for management, employees and service providers, and an increase in bad debt expense as an allowance for credit losses of $1.9 million from accounts resulted from management’s assessment on Company’s account receivables balances.

 

For the fiscal first quarter ended September 30, 2024, net loss was ($5.6) million or ($0.10) per share, compared to a net loss of ($1.3) million, or ($0.02) per share for fiscal first quarter ended September 30, 2023.

 

As of September 30, 2024, Ispire had $37.7 million in cash and cash equivalents and working capital of $16.6 million.

 

Conference Call

 

The Company will conduct a conference call at 8:00 am Eastern Time on Monday, November 11, 2024, to discuss the results. Ispire management will host the conference call, followed by a question-and-answer period.

 

Please call the conference call dial-in 5-10 minutes prior to the start time and ask for the “Ispire Technology Call.” An operator will register your name and organization.

 

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Date: Monday, November 11, 2024

 

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Time: 8:00 am ET

 

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Dial-In Numbers: United States 844-826-3033 or International +1 412-317-5185

 

This conference call will be broadcast live on the Internet and can be accessed by all interested parties at https://viavid.webcasts.com/starthere.jsp?ei=1693594&tp_key=0c7f927f41

 

Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.

 

A playback will be available from 11:00 am ET on November 11, 2024 through November 25, 2024. To listen, please dial 1-844-512-2921 or 1-412-317-6671. Use the passcode 10193803 to access the replay.

 

 

About Ispire Technology Inc.

 

Ispire is engaged in the research and development, design, commercialization, sales, marketing, and distribution of branded e-cigarettes and cannabis vaping products. The Company’s operating subsidiaries own or license more than 200 patents received or filed globally. Ispire’s tobacco products are marketed under the Aspire brand name and are sold worldwide (except in the U.S., People’s Republic of China and Russia) primarily through its global distribution network. The Company’s cannabis products are marketed under the Ispire brand name primarily on an original design manufacturer (ODM) basis to other cannabis vapor companies. Ispire sells its cannabis vaping hardware only in the U.S., and it recently commenced its marketing activities in Canada and Europe. For more information, visit www.ispiretechnology.com or follow Ispire on Instagram, LinkedIn, Facebook, Twitter and YouTube. Any information contained on, or that can be accessed through, the Company’s website, any other website or any social media, is not a part of this press release.

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”) as well as Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended, that are intended to be covered by the safe harbor created by those sections. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms, although not all forward-looking statements contain these identifying words. All statements other than statements of historical facts included in this press release regarding the Company’s strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Important factors that could cause the Company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements. Such forward-looking statements include, but are not limited to, risks and uncertainties including those regarding: whether the Company may be successful in re-entering the U.S. ENDS market; the approval or rejection of any PMTA submitted by the Company; whether the Company’s joint venture with Touch Point Worldwide Inc. d/b/a/ Berify and Chemular Inc. (the “Joint Venture”) may be successful in achieving its goals as currently contemplated, with different terms, or at all, the Joint Venture’s ability to innovate in the e-cigarette technology space or develop age gating or age verification technologies for nicotine vaping devices, the Company’s ability to collect its accounts receivable in a timely manner, the Company’s business strategies, the ability of the Company to market to the Ispire ONE™, Ispire ONE™’s success if meeting its goals, the ability of its customers to derive the anticipated benefits of the Ispire ONE™ and the success of its products on the markets, the Ispire ONE™ proving to be safe, and the risk and uncertainties described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Cautionary Note on Forward-Looking Statements” and the additional risk described in Ispire’s Annual Report on Form 10-K for the year ended September 30, 2023 and any subsequent filings which Ispire makes with the SEC. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events except as required by applicable law. You should read this press release with the understanding that our actual future results may be materially different from what we expect.

 

 

ISPIRE TECHNOLOGY INC. 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In $USD, except share and per share data)

 

		September 30, 2024				June 30, 2024
Assets
Current assets:
Cash		$	37,731,954			$	35,071,294
Restricted cash			24,280				-
Accounts receivable, net			62,359,322				59,734,765
Inventories, net			6,992,025				6,365,394
Prepaid expenses and other current assets			1,406,822				1,400,152
Total current assets			108,514,403				102,571,605
Other assets:
Property, plant and equipment, net			2,662,714				2,582,457
Intangible assets, net			2,015,805				1,375,666
Right-of-use assets – operating leases			3,295,952				3,579,140
Other investment			2,000,000				2,000,000
Equity method investment			10,172,075				10,248,048
Other non-current assets			291,699				284,050
Total other assets			20,438,245				20,069,361
Total assets		$	128,952,648			$	122,640,966
Liabilities and stockholders’ equity
Current liabilities
Accounts payable		$	4,341,642			$	3,779,723
Accounts payable – related party			76,001,622				67,046,472
Contract liabilities			2,245,505				2,218,166
Accrued liabilities and other payables			12,139,232				11,738,339
Income tax payable			399,995				-
Operating lease liabilities – current portion			1,240,726				1,207,832
Total current liabilities			96,368,722				85,990,532
Other liabilities:
Operating lease liabilities – net of current portion			1,869,951				2,194,094
Total liabilities			98,238,673				88,184,626
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.0001 per share; 140,000,000 shares authorized; 56,641,041 and 56,470,636 shares issued and outstanding as of September 30, 2024 and June 30, 2024			5,664				5,647
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued at September 30, 2024 and June 30, 2024			-				-
Additional paid-in capital			45,224,962				43,217,391
Accumulated deficit			(14,420,057	)			(8,825,041	)
Accumulated other comprehensive (loss) income			(96,594	)			58,343
Total stockholders’ equity			30,713,975				34,456,340
Total liabilities and stockholders’ equity		$	128,952,648			$	122,640,966

 

 

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In $USD, except share and per share data)

 

		Three Months Ended September 30,
		2024				2023
Revenue		$	39,338,313			$	42,864,647
Cost of revenue			31,663,935				36,019,799
Gross profit			7,674,378				6,844,848
Operating expenses:
Sales and marketing expenses			2,992,247				1,025,219
General and administrative expenses			9,904,539				6,697,874
Total operating expenses			12,896,786				7,723,093
Loss from operations			(5,222,408	)			(878,245	)
Other income (expense):
Interest income			86				72,246
Exchange gain, net			117,585				3,661
Other income (expenses), net			6,935				(43,204	)
Total other income, net			124,606				32,703
Loss before income taxes			(5,097,802	)			(845,542	)
Income taxes - current			(497,214	)			(496,045	)
Net loss		$	(5,595,016	)		$	(1,341,587	)
Other comprehensive (loss) income
Foreign currency translation adjustments			(154,937	)			44,463
Comprehensive loss			(5,749,953	)			(1,297,124	)
Net loss per share
Basic and diluted		$	(0.10	)		$	(0.02	)
Weighted average shares outstanding:
Basic and diluted			56,601,320				54,246,212

 

 

ISPIRE TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In $USD, except share and per share data)

 

		Three Months ended September 30,
		2024				2023
Net loss:		$	(5,595,016	)		$	(1,341,587	)
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation and amortization			204,807				29,161
Credit loss expenses			3,102,081				225,487
Right-of-use assets amortization			283,188				287,481
Stock-based compensation expenses			2,007,588				967,560
Inventory impairment			73,692				-
Loss from equity method investment			75,973				-
Changes in operating assets and liabilities:
Accounts receivable, net			(5,726,638	)			(14,710,476	)
Inventories			(700,323	)			1,863,080
Other current and non-current assets			(14,319	)			1,603,180
Accounts payable			9,517,069				(2,449,276	)
Contract liabilities			(87,402	)			281,529
Accrued liabilities and other payables			360,697				(124,950	)
Income tax payable			399,995				496,138
Lease liabilities			(291,249	)			(249,753	)
Net cash provided by (used in) operating activities		$	3,610,143			$	(13,122,426	)
Cash flows from investing activities:
Purchase of property, plant and equipment			(268,781	)			(533,122	)
Acquisition of intangible assets			(656,422	)			(255,650	)
Net cash used in investing activities		$	(925,203	)		$	(788,772	)
Cash flows from financing activities:
Repayments of advances from a related party			-				(703,323	)
Net cash used in financing activities		$	-			$	(703,323	)
Net increase (decrease) in cash and cash equivalents			2,684,940				(14,614,521	)
Cash and cash equivalents - beginning of period			35,071,294				40,300,573
Cash and cash equivalents - end of period		$	37,756,234			$	25,686,052
Supplemental non-cash investing and financing activities
Leased assets obtained in exchange for operating lease liabilities			-				537,307

 

For more information, kindly contact:

 

IR Contacts:

 

Investor Relations

Sherry Zheng

718-213-7386

ir@ispiretechnology.com

 

KCSA Strategic Communications

Phil Carlson

212-896-1233

ispire@kcsa.com

 

PR Contact:

 

Ellen Mellody

570-209-2947

EMellody@kcsa.com

 

 

7

 

Exhibit 99.2

 

 

 

 

C O R P O R A T E P A R T I C I P A N T S

 

Michael Wang, Co-Chief Executive Officer

 

James McCormick, Chief Financial Officer

 

C O N F E R E N C E C A L L P A R T I C I P A N T S

 

Bo Pei, US Tiger Securities, Inc.

 

P R E S E N T A T I O N

 

Male Speaker

 

Hello everyone and welcome to today's conference call to discuss Ispire's financial results for the fiscal first of 2025 ended September 30, 2024.

 

At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. We will be facilitating a question-and-answer session following prepared remarks from the Company.

 

Joining us today are Mr. Michael Wang, the Company's co-CEO, and Mr. Jim McCormick, the Company's CFO. First, Mr. Wang will brief you on the Company's key highlights, and then Mr. McCormick will review the Company's financial results.

 

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than the statements of historical facts in this announcement are forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in terms of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are relevant. These forward-looking statements involve known and unknown risks and uncertainties, and many factors could cause the Company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the Company's filings with the SEC. The Company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances, or to changes in its expectation, except as may be required by law.

 

I would now like to turn the call over to Mr. Michael Wang. Mr. Wang, please go ahead.

 

Michael Wang  

 

Thank you, Operator, and thank you all for joining us this morning.

 

 

 

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

 

 

 

For the quarter we have generated revenues of $39.3 million. This represents a decrease of $3.5 million or 8.2% from the same period of last year. This was partially impacted by delayed shipments as well as our careful and measured ramp-up in our global nicotine business. However, the number one driver for the decrease in revenue is due to the shift in our U.S. strategy.

 

As we reported previously, our U.S. hardware business is 100% from the cannabis industry. As all of you know, the key challenge facing this industry is cash flow, largely due to the Internal Revenue Code Section 280(e) under the General Act of banking services available to the industry. In the last two quarters, we have focused our U.S. business operations on enhancing our overall customer portfolio of high quality accounts and strong financial stability which we believe will ultimately lead to better bottom line for Ispire. In other words, we have focused more on the quality of customers and the quality of revenue rather than quantity. As a result, we saw a decrease in U.S. revenue from the same period last year. However, we also have started seeing strong fundamentals in our U.S. operations with notable improvements in gross margin, payment terms and accounts receivable management. We believe this approach focusing on gross margin, better payment terms and better accounts receivable will lead to a more sustainable long-term financial performance.

 

While out top line revenue saw a dip this quarter, we expect this dip to be temporary in nature and I am particularly pleased to report that fiscal first quarter 2025 delivered substantial improvements in our key profitability metrics. We achieved a notable 12.1% year-over-year increase in gross profit to $7.7 million and expanded our gross margin to 19.5% from 16% in the same period of the previous year. This is a significant step in the right direction and what is especially encouraging is that we were able to deliver high gross profit and a higher gross margin with lower revenue, which directly reflects the success of our strategic focus on high quality accounts and enhanced operational efficiency, including the improvements we are seeing through the use of our Malaysian facility. We believe these results validate the strategic initiatives we have taken as our innovative vaping technology and precision dosing solutions continue to resonate with consumers.

 

Our international expansion continues to build momentum, which is highlighted by our state-of-the-art Malaysian facility. This best-in-class asset continues to help drive margin expansion as we look to increase our global footprint in the international nicotine market while further driving down operating costs.

 

This quarter we continued to make significant progress through our joint venture with Berify and Chemular on creating a next-generation point-of-use age verification technology for e-cigarettes that will prevent youth access and improve user experience. As we have stated previously, this is a cutting edge vape hardware innovation using blockchain technology as we understand the critical need for safety and security in this industry. I am particularly excited to share that we will have our first discussion with the FDA regarding this transformative age-gating technology this Wednesday, that is November 13^th. We look forward to updating investors on our (inaudible) meeting and continued advancement of this initiative.

 

We are also maintaining our strong regulatory posture as we recently submitted at PMTA application for a disposable end product for four flavors – again, four flavors. We are on track to submit a PMTA application for pod system in 2025 as we are close to finalizing the age-gating technology.

 

This is an important step for the Company as we aim to further capitalize on the approximately US$80 billion in the U.S. nicotine market. As we look ahead, we remain confident in our strategic direction and ability to capture these significant opportunities in front of us as we take the thoughtful approach to scaling our global nicotine business.

 

 

 

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

 

 

 

Additionally, subsequent to quarter end we announced the unveiling of our revolutionary I-80 vape filling machine at the Benzinga Cannabis Conference in Chicago in early October. The industry-changing machine will redefine production efficiency as it is able to fully fill and seal 4,000 0.5-gram vapor devices per hour. In contrast to current methods being used, the I-80 is up to 10 times faster than traditional systems and twice as fast as the current automated systems. The I-80 also eliminates the need for device capping which helps to boost overall workflow efficiency by up to 1000% compared to manual methods, and 100% over current automated systems.

 

Current users in the industry see the I-80 as a must-have device given the significant improvement in productivity and cost savings they are seeing. The I-80 fits in perfectly with our overall objective of being the world-leading provider of best-in-class vape technology and the precision dosing solutions.

 

Also, post quarter end we have expanded our global reach through landmark five-year master distributor agreement with ANDS for the Middle East and the North Africa region, and for the global duty-free markets. This partnership will enable us to bring our Hidden Hills Club nicotine portfolio to new markets, offering adult consumers innovative, harm-reduced alternatives to combustible cigarettes. We are confident that this collaboration will position Ispire for continued growth and success as we advance our mission of providing industry-leading vaping technology worldwide.

 

With that, I will turn the call over to our CFO, Jim McCormick, who will review and comment on our financial results.

 

James McCormick

 

Thank you, Michael.

 

I’d like to take this opportunity to summarize our key financial results for the fiscal first quarter 2025. In my comments I will refer to the fiscal first quarter 2025 as the three-months ended September 30, 2024. All comparisons are to the prior year ended September 30, 2023 unless otherwise stated.

 

As Michael mentioned, we achieved higher gross profit, improved margins, even with lower revenue. Overall, our total revenue for the fiscal first quarter decreased slightly to $39.3 million or by 8.2% compared to the same period last year. This revenue was driven by the following performance across our key regions.

 

European revenues of approximately $22 million in Q1 2025 increased by $2.1 million or 11% over the previous fiscal year. This was primarily as a result of increased sales of Aspire vaping products in the region.

 

In North America, Q1 2025 revenues of approximately $9.7 million represented a decrease of $8.1 million or 46% compared to the same period last year. The decline was driven by a decrease in cannabis-facing hardware sales in the U.S. as Michael mentioned previously.

 

Asia Pacific revenues were approximately $3.9 million, a decrease of $1.2 million compared to the same period last year.

 

For the Rest of World, revenues were $3.8 million, an increase of $3.7 million from the same period last year due to an increased level of sales in South Africa of $2.9 million.

 

During the three months ended September 30, 2024, our gross profit was approximately $7.7 million compared to approximately $6.8 million for the same period last year. Over this same period, our gross margin grew to 19.5% from 16%. The increase in gross profit and gross margin was primarily due to favorable changes in product mix with higher margin products being sold during the fiscal first quarter ended September 30, 2024.

 

 

 

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Total operating expenses for the fiscal first quarter ended September 30, 2024 were approximately $12.9 million compared to approximately $7.7 million for the same period last year. This increase was primarily due to an increase in expenses to support the expanded business footprint in the areas of payroll, contract wages, sales and marketing, professional fees, as well as increased stock-based compensation. As a result of these activities, our net loss was $5.6 million or $0.10 a share compared to a net loss of $1.3 million or $0.02 for the fiscal first quarter ended September 30, 2023.

 

As of the end of the fiscal first quarter 2025, the Company’s cash position was $37.7 million with a working capital balance of $12.1 million. Net cash provided in operating activities was $3.6 million for the three-month period ended September 30, 2024, compared to $13.1 million used for operating activities in the same period last year.

 

Net cash provided by investing activities was $0.9 million compared to $0.8 million used in investing activities for the same period last year.

 

There was no cash used in financing activities in the first fiscal quarter compared to $0.7 million used for financing activities in the first fiscal quarter of 2024.

 

With that, this concludes the review of Ispire’s fiscal first quarter 2025 financial results. I will now turn the call back over to Michael.

 

Michael Wang

 

Thanks, Jim.

 

As we close this quarter, I am pleased that we have continued to make significant progress across our global business lines. While our revenues softened slightly due to the shift in U.S. strategy and the timing of shipments, we were still able to achieve major growth in our gross margin, reflecting the strength of our innovative product portfolio, our strategic focus on higher quality customer relationships, as well as the use of our state-of-the-art Malaysian facility and the efficient global operations.

 

We also reached an important milestone in our joint venture to develop transformative age-gating technology, securing a fast-tracked meeting with the FDA to discuss this critical industry initiative.

 

We remain committed to our operational excellence and profitability as we build on the momentum from the transformative fiscal year 2024. As we move forward into the second quarter of fiscal 2025, we are confident our strategic investments and continued innovation position us well for sustained profitable growth.

 

I would like to thank you all again for your time today and we look forward to sharing our continued progress in the quarters ahead. If you have any questions, please contact us through email at ir@ispiretechnology.com.

 

Operator, this completes our prepared remarks and we are now open to questions. Please go ahead.

 

Operator

 

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time we will pause momentarily to assemble our roster.

 

The first question today comes from Bo Pei with US Tiger Securities. Please go ahead.

 

 

 

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Bo Pei

 

Hi Micheal. Hi management. Thanks for taking my questions.

 

My first question is about the strategy shift in the U.S. market. Should we think about, I guess, the fiscal first quarter, does it look like a bottom in our U.S. revenue, meaning it will start to recover starting in the second quarter, or is it more like a longer period, in fact? Thank you.

 

Michael Wang  

 

Bo, thank you. The U.S. cannabis related revenue, I would say the first quarter, meaning the last quarter reported, should bottom out. Our repositioning of this strategy really started the quarter before, so the recent quarter financials reflected the effect of that position. We strongly believe we have bottomed out as we have completely repositioned our U.S. strategy and shifted towards, let’s just say with our primary focus on the top 20 accounts. Certainly we are entertaining next tier, but the primary focus is the top 20 accounts. This is going to be much assisted by the introduction of the I-80 filling machine.

 

As I previously reported, all customers who have tested our self-sealing product line, that Ispire ONE line, really loved the hardware because of the efficiency, the simplicity involved in filling and packing the device. However, for the last six months we have been working on a higher capacity filling machine. The first generation machine had only one needle, so even though each device could be filled within 10 seconds, still you can only fill one device at a time. So we then moved to a three-needle machine that much improved the production efficiency. Finally, we launched the 80-needle machine, hence the name I-80.

 

So, with 80 needles filling 80 devices on a single tray in 2 minutes, you can just imagine how fast that whole process is, especially without the need for capping the device. So, after we launched it, certainly it sped up our conversations and negotiations with several MSOs and the large accounts that had been waiting for this machine for a while.

 

So, on one hand, prior MSO, our large accounts have accelerated their reordering and additionally with the new accounts signing up we strongly believe in the coming few quarters revenue on the U.S. side will only increase. Bo?

 

Bo Pei

 

Thank you, Michael. That’s helpful, and good to hear that.

 

My second question is, with the shift in the strategy in the U.S., do you still expect total revenue to grow in the 2025 fiscal year? Maybe can you talk about the total revenue and also the U.S. revenue?

 

Michael Wang  

 

Yes. For overall revenue we are still very optimistic about the year. Even though the first quarter saw a dip, we are very, very confident that the full year results will still be very encouraging in terms of a growth rate. Of course we are striving to grow at the same pace as last year and we are confident with this endeavor.

 

Specifically to the U.S., U.S. revenue I think given three quarters to go still in the year, we are of course striving to meet or exceed last fiscal year. But overall, our global revenue should come more from our global nicotine initiatives. Bo?

 

 

 

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Bo Pei

 

Got it. Then, the gross profit margin, I mean on total revenue actually grew a little bit sequentially from fiscal fourth quarter 2024, but gross margin declined quite a bit from 27%, 28% to less than 20%. Can you talk about the drivers there? Is it about the U.S. strategy shift? How should we think about the gross profit margin going forward, or maybe just for this fiscal year?

 

Michael Wang

 

Yes. I will break that down into two parts. On one hand, U.S. revenue and its corresponding gross margin have continued to increase. So from that point of view our strategy, our execution are still on track.

 

Relative to the peak of the gross margin like you mentioned, a couple of quarters back, 19.5% seems to be lower than before. That is mainly because last quarter was the beginning of our ODM (phon) relationship with a European brand and because this is a new customer of ours, as you can imagine there is a great deal of initial learning involved and in picking up any large accounts with ODM relationships there will be some inefficiency early on and then over time as we do more and more of the same work efficiency certainly should increase, both from the labor side as well as from supply chain price negotiation and the leverage point of view.

 

So I would say that is a key contributor to the—relatively speaking, like you pointed out, lower gross margin from the peak quarter a couple of quarters back. But relative to the same quarter last year, we still saw increasing gross margin. That was indeed driven by the cannabis/U.S. revenue with a higher margin. Bo?

 

Bo Pei

 

Got it. My last question is about our accounts receivable. Now with the strategy shift in the U.S., when should we expect to see improvement in the accounts receivable line on the balance sheet? Related to that, also the cash flow statement, when should we see some improvement in the operating cash flow activities?

 

Michael Wang

 

This is the much bigger question that you ask. I think I’ll break that into two parts.

 

I will actually answer your second part of the question first, as far as the cash flow. Cash flow, we are striving to turn cash flow positive by not the current quarter, by the March quarter. That, of course, is a result of not only A/R improvement, but more importantly by then we strongly believe our global nicotine business will start a normal cycle and we’ll get into a more normalized operation. Right now, we are still in the early phase of our global nicotine initiative. As you know, any time you attack a new market, you enter a new channel, there is rather heavy lifting before everything gets into a normal flow. That’s why we strongly believe with our strategy and execution we’ll turn cash flow positive the March quarter.

 

Now, back to the A/R side. As you saw, A/R actually increased only about $4 million this recent quarter versus the quarter before, so with the total revenue of $39.5 million and A/R increasing only by $4 million, it’s an indication that on one hand our U.S. strategy is having effect. On the other hand, it’s also a reflection that the team has worked diligently on a broad base in collecting A/R, reinforcing the payment agreements we have with customers.

 

So, we think that progress on the A/R side will continue this quarter and all the way into the next quarter as well.

 

 

 

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From an A/R point of view, I think the rapid increase has slowed and now we are hoping to get into a healthy cadence. Bo?

 

Bo Pei

 

Thank you, Michael. That’s all my questions.

 

Operator

 

As a reminder, if you would like to ask a question, please press star, then one to be joined into the question queue.

 

This concludes our question-and-answer session. I would like to turn the conference back over to Michael for any closing remarks.

 

Michael Wang  

 

Thank you. Once again, I want to thank you all for your time today. We look forward to the next call. Meanwhile, if you have any questions, please feel free to reach out. Thanks again. Operator?

 

Operator  

 

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

 

 

 

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7

 

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