IPW — FY2026 Financial Report Analysis

Revenue down 68% as iPower empties its warehouse and pivots away from selling garden gear

iPower spent most of the last few years selling hydroponics and home-and-garden products online, mainly through Amazon. In the fiscal year ended June 30, 2026 that business shrank drastically. Revenue fell 68.4% to $19.96 million from $63.22 million. The company blames fewer Amazon orders, supply disruption and "uncertainty over tariffs." At the same time management was taking the old business apart. It sold its Global Product Marketing (GPM) subsidiary in February. It transferred its last $2.0 million of inventory to GPM on the last day of the fiscal year. It ended the year with zero inventory and two full-time employees. The stated focus now is "AI infrastructure acquisition, financing, equipment leasing" and a small crypto holding, paid for with convertible notes. That strategy has produced no revenue yet.

The net loss attributable to iPower more than doubled, from $4.97 million to $11.62 million. A $3.03 million goodwill write-off and a $2.32 million debt-conversion loss account for much of the increase. But the business lost money before those items too: the operating loss excluding the goodwill charge was $11.39 million, compared with $6.33 million the year before.

At a glance

• Revenue of $19.96M, down 68.4%. Amazon fell from 82% of sales to 38%, which works out to roughly $7.6M from about $52M. Another 37% (about $7.4M) came from GPM, the former subsidiary iPower sold in February and now supplies.
• Gross margin of 20.2%, down from 43.3%. Gross margin is the share of revenue left after paying for the goods sold. Supplying GPM at cost plus at most 15% earns much less than selling to shoppers did.
• Unrestricted cash of $0.48M. Another $3.25M of cash and $2.36M of Bitcoin/Ether sit in an account controlled by the noteholder's collateral agent, pledged as security for the convertible notes.

The numbers

Operating margin is the share of revenue left after running the business, before interest and tax. For iPower it is deeply negative: for every $1 of sales the company spent about $1.72 on goods and operating costs, including the goodwill write-off. The per-share figures look strange because the company did three reverse stock splits: 1-for-30 in October 2025, 1-for-8 in May 2026 and 1-for-9 in August 2026. Together that is a 1-for-2,160 consolidation, applied to both years. A reverse split swaps many old shares for fewer new ones without changing what the company is worth.

Where the money went

Costs fell, but not as fast as sales. Selling and fulfillment expense fell 58% to $8.92M as advertising, merchant fees, rent and delivery costs came down with volume. General and administrative expense fell 47% to $6.51M, which the 10-K attributes to cost cuts and to not repeating last year's spending on vendor-network expansion, the SuperSuite software platform and credit-loss and inventory reserves. Total operating expenses excluding goodwill came to $15.43M, which is 77% of revenue, up from 53% in FY2025. Gross profit fell by $23.3M while those costs fell by $18.3M. That gap is why the operating loss grew.

Goodwill written off in full ($3.03M). Goodwill is the amount a company once paid for acquisitions above the value of the assets it bought. The 10-K says it was impaired "primarily due to a sustained decline in the Company's share price and market capitalization." This is a non-cash charge. It is also the accounting admission that the acquired businesses are no longer worth what was paid.

Below the operating line, other expenses rose to $2.06M from $0.37M. The main items:

• a $2.32M loss on extinguishment of debt as the noteholder converted notes into shares;
• an $0.85M unrealized loss on the crypto holdings;
• interest expense nearly doubling to $0.85M.

Three items partly offset these: $0.80M of Employee Retention Credit refunds from the government, a $0.68M gain on the fair value of the notes' conversion feature, and $0.53M of other income, which includes sublease rent on the Rancho Cucamonga warehouse.

The GPM sale added $1.79M. That figure is the discontinued-operations line after tax. Most of it ($1.61M) is a gain on selling GPM, and the buyer, ETTS AI Investment LLC, paid with a $2.3M seven-year promissory note, not cash. The note is already carried on the balance sheet at only $1.69M, and iPower recorded a $0.50M discount on it during the year. Repayment can be credited through the profit margin on goods iPower supplies to GPM, so the cash may never arrive as a lump sum.

The financing: convertible notes and share dilution

Since December 2025, iPower has funded itself through a $30M (since raised to $32M) facility of convertible notes with ATW Digital Asset Opportunities XIV. A convertible note is a loan the lender can swap for shares, here at a price tied to the stock's recent trading. These notes were sold at a 6% original issue discount, which means the company receives less than the face value it owes. The placement agent also takes a 6% cash commission on every closing. Net proceeds from the notes were $10.26M in FY2026, and another $4.7M came in after year-end on $5.0M of new notes.

As of October 2, 2026 the investor had converted $9.36M of notes into 849,697 shares at an average of $11.02 per share. Shares outstanding went from 14,518 at June 30, 2025 to 167,196 at June 30, 2026 (split-adjusted), an 11.5-fold increase. Each conversion gives existing holders a smaller slice of the company. The reverse splits keep the share price above Nasdaq's $1 minimum.

What the headline numbers hide

• Cash flow was propped up by selling off inventory. Operating cash flow was nearly breakeven (-$0.16M) despite an $11.6M net loss. That only happened because inventory fell by $8.16M and receivables were collected down by $1.75M, which freed up $9.9M of working capital, plus large non-cash charges. With inventory now at zero, that source of cash cannot repeat.
• The tax benefit made the loss look smaller. The pre-tax loss from continuing operations was $16.49M. A $3.08M tax benefit cut it to $13.41M. That benefit came from adding to a deferred tax asset, which has grown to $6.15M with no valuation allowance. A deferred tax asset is the value of past losses that can lower future tax bills, so it is only worth something if the company becomes profitable. A valuation allowance is the write-down a company records when it doubts that will happen. Management judges future profit "more likely than not" despite two years of losses and a business with two full-time staff. If that judgment changes, most of the $6.15M would be written off.
• Book equity rests on assets that are hard to turn into cash. Of $16.94M of stockholders' equity, $12.81M (76%) is made up of four items: the deferred tax asset ($6.15M), software under development ($2.64M), intangible assets ($2.33M) and the GPM note receivable ($1.69M).
• Receivables fell far less than sales. Net accounts receivable fell 29% while revenue fell 68%. Year-end receivables of $4.37M equal about 80 days of revenue, compared with about 35 days a year earlier. The credit-loss allowance has reached $2.74M, 38% of gross receivables. About a third of receivables are owed by GPM, which iPower no longer owns.
• Working capital is mostly locked up. Working capital is current assets minus bills due within a year. The company reports $3.4M, but $3.25M of that is restricted cash pledged to the noteholder, so the freely usable amount is close to zero. Management still concludes it has enough liquidity for 12 months, relying on the $4.7M raised after year-end and the $15M of remaining note capacity. That capacity can only be drawn if the investor chooses to buy more notes and closing conditions are met.
• EPS was roughly flat because the share count doubled. The net loss grew 134%, but the loss per share moved only 1.1% because weighted shares rose 131%. Per-share figures hide how much worse things got.

Takeaway: The e-commerce business iPower was known for is close to gone. It has no inventory left, its biggest outside customer is now the subsidiary it sold, and it runs with two full-time employees. What remains is a public shell funded by convertible debt that converts into shares at a discount and is collateralized with cash and crypto, with a stated plan for AI-infrastructure financing that has not yet produced a dollar of revenue. Book value is mostly tax assets and capitalized software. That makes further share dilution the most likely outcome, not a recovery in the old business.

What to watch next

Management gave no revenue or earnings guidance. The next filing is the 10-Q for the quarter ended September 30, 2026, typically due around mid-November. Points to check:

• What revenue is left. With no inventory and the exclusive supply arrangement with GPM released on June 30, it is not clear what iPower will sell in FY2027. Quarterly revenue could drop well below the FY2026 run-rate.
• Whether AI infrastructure turns into a business. iPower AI LLC was formed on July 15, 2026. Watch for an actual equipment purchase, lease or financing contract with stated terms, as opposed to a renamed subsidiary.
• Dilution pace. $15M of optional notes remain, and the 10-K cites about $5.8M of notes outstanding. Each conversion adds shares, and a fourth reverse split would be a signal that the share price is still falling.
• The deferred tax asset. Any valuation allowance on the $6.15M would hit earnings directly and wipe out more than a third of book equity.

Our view: on this filing, iPower is no longer a home-and-garden retailer in any meaningful sense, and its FY2026 numbers say little about what it will earn next year. The figures to track now are cash burn, conversions and whether the AI plan produces contracts, not sales growth.