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3. Variable interest entity

9 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable interest entity

Note 3 – Variable interest entity

Effective on March 1, 2020, as amended and restated pursuant to an agreement dated Oct 26, 2020, the Company entered into an exclusive business cooperation agreement with E Marketing Solution Inc. (“E Marketing”), an entity incorporated in California and owned by one of the shareholders of the Company. Pursuant to the terms of the agreement, the Company provides technical support, management services and other services on an exclusive basis in relation to E Marketing’s business during the term of the agreement. The Company agrees to fund E Marketing for operational cash flow needs and bear the risk of E Marketing’s losses from operations and E Marketing agrees that iPower has rights to E Marketing’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of E Marketing or its assets subject to assumption of all of its liabilities. As of March 31, 2021 and June 30, 2020, the Company had paid $60,270 and $20,600, respectively, to fund all of E Marketing’s operations under this agreement.

On September 4, 2020, the Company entered into an exclusive business cooperation agreement with Global Product Marketing Inc. (“GPM”), an entity incorporated in the State of Nevada on September 4, 2020. GPM is owned by Chenlong Tan, the Chairman, CEO, President, and one of the majority shareholders of the Company. Pursuant to the terms of the agreement, the Company will provide technical support, management services and other services on an exclusive basis in relation to GPM’s business during the term of the Agreement. The Company agrees to fund GPM for operational cash flow needs and bear the risk of GPM’s losses from operations and GPM agrees that the Company has rights to GPM’s net profits, if any. Under the terms of the agreement, the Company may at any time, at its option, acquire for nominal consideration 100% of either the equity of GPM or its assets subject to assumption of all of its liabilities. As of March 31, 2021 and June 30, 2020, the Company had paid $30,875 and $0, respectively, for GPM’s operating expenses.

Summary of the key terms of the exclusive business cooperation agreements (the “Agreements”) with E Marketing and GPM (“VIEs"):

· iPower is the exclusive manager of the VIEs;

· the VIEs shall not directly or indirectly accepts same or similar services from other parties;

· the Agreements shall remain effective unless terminated by iPower;

· iPower is granted an irrevocable and exclusive option to purchase all assets and business at nominal price; and

· iPower agrees to fund VIEs’ operational needs and bear the risk of VIEs’ losses from operations and VIEs agree that iPower has rights to VIEs’ net profits, if any.

Pursuant to the terms of the Agreements, the Company does not have direct ownership in either E Marketing and GPM but has been actively involved in their operations as the sole manager to direct the activities and significantly impact E Marketing’s and GPM’s economic performance. Each of E Marketing and GPM has only one shareholder and all operational funding was provided by the Company. The Company bears all the risk of losses and has the right to receive all of the benefits from E Marketing and GPM. As such, based on the determination that the Company is the primary beneficiary of E Marketing and GPM, in accordance with ASC 810-10-25-38A through 25-38J, E Marketing and GPM are considered variable interest entities (“VIEs”) of the Company and the financial statements of E Marketing and GPM have been consolidated from the date of control existed, March 1, 2020 and September 4, 2020, respectively.

The Company did not provide financial or other support to the VIEs for the periods presented where the Company was not otherwise contractually required to provide such support.

As of March 31, 2021 and June 30, 2020, there was no pledge or collateralization of the VIEs’ assets that would be used to settle obligations of the VIEs.

The carrying amount of the VIEs’ assets and liabilities were as follows for the periods indicated:

		March 31, 2021				June 30, 2020
Cash in bank		$	110,872			$	72,686
Receivables from iPower		$	492,384			$	–
Payables to iPower		$	–			$	72,686
Income tax payable		$	174,410			$	–
Other payables		$	599			$	–

The assets and payables were included in the consolidated balance sheets as of March 31, 2021 and June 30, 2020 and the payables to and receivables from iPower were eliminated in consolidation.

The operating results of the VIEs were as follows for the nine months ended March 31, 2021:

		2021
Revenue		$	1,448,464
Net income		$	448,848

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- References

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- Definition

The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-URI http://asc.fasb.org/topic&trid=2197479

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