DEF: iPower Inc. Seeks Shareholder Approval for Reverse Stock Split to Maintain Nasdaq Listing Amidst Leadership Changes

Sentiment:

Proxy Statement 28 May 2025 3:00 PM

iPower Inc. is calling for its Annual Meeting of Stockholders on June 23, 2025, to vote on key proposals including the election of directors, executive compensation, and a crucial reverse stock split aimed at regaining compliance with Nasdaq's minimum bid price requirement.

Capital raiseThe company states that increasing the trading price of its common stock through a reverse stock split may assist in capital-raising efforts by making the stock more attractive to a broader range of investors.The document notes that some additional shares underlie warrants, which could be exercised after the reverse stock split, potentially leading to capital inflow.

Worse than expectedThe company received a non-compliance letter from Nasdaq for failing to maintain the minimum $1.00 bid price, indicating underperformance relative to listing standards.The proposed reverse stock split, while a necessary step to avoid delisting, is generally viewed as a negative event by investors as it often signals underlying issues with the company's valuation or operational performance.

Summary

The Annual Meeting of Stockholders for iPower Inc. will be held virtually on June 23, 2025, at 10:00 a.m. (ET).
Key proposals for stockholder vote include the election of four directors, ratification of Guangdong Prouden CPAs GP as the independent accountants for fiscal year ending June 30, 2025, and an advisory vote on executive compensation.
A significant proposal seeks approval for an amendment to the company's Articles of Incorporation to effect a reverse stock split at a ratio between 1-for-2 and 1-for-200, at the board's discretion, primarily to maintain Nasdaq listing compliance.
The company received a Nasdaq non-compliance letter on January 2, 2025, for failing to maintain a minimum closing bid price of $1.00 per share, with a compliance period extending until July 1, 2025.
Kevin Vassily resigned as Chief Financial Officer effective May 31, 2025, with CEO Chenlong Tan assuming the interim CFO role.
Independent directors received $25,000 in annual cash compensation and $30,000 in restricted stock units (RSUs) for fiscal year 2024, with new director Yue Guo receiving $10,000 cash and $10,000 RSUs.
Audit fees paid to UHY LLP were $316,066 for fiscal year ended June 30, 2024, and $405,276 for fiscal year ended June 30, 2023.
The company disclosed several related party transactions, including a $1.3 million settlement with Boustead Securities, LLC, satisfied by the return of 541,667 shares from CEO Chenlong Tan and co-founder Allan Huang on June 18, 2024.
Other related party dealings include sublease income from Box Harmony, LLC (a 40% owned joint venture) of $359,373 in FY2023 and $330,000 in FY2022 (sublease discontinued January 1, 2023), a $2 million loan from White Cherry Limited (repaid by January 31, 2024), sales through MII Strategy Inc. (CEO-owned entity) totaling $95,376 in FY2024, and a $350,000 short-term loan from Allan Huang outstanding as of June 30, 2024.

Sentiment

Score: 3

Explanation: The sentiment is largely negative due to the Nasdaq non-compliance and the necessity of a reverse stock split, which often indicates underlying issues. The CFO's resignation adds to the negative perception. However, the proactive approach to address compliance and the experienced board provide some mitigating positive aspects, preventing a lower score.

Positives

The company is proactively addressing its Nasdaq listing deficiency by seeking shareholder approval for a reverse stock split.
The board of directors includes members with extensive experience in accounting, marketing, and technology, enhancing oversight and strategic capabilities.
Established corporate governance policies, including a Code of Business Conduct and Ethics, Insider Trading Policy, and Incentive-Based Compensation Recovery (Clawback) Policy, are in place.

Negatives

iPower Inc. has failed to meet Nasdaq's minimum bid price requirement of $1.00 per share, indicating potential stock performance issues.
The necessity of a reverse stock split often signals underlying financial or operational challenges and can be viewed negatively by the market.
The resignation of the Chief Financial Officer, Kevin Vassily, and the CEO's assumption of the interim CFO role, could raise concerns about financial leadership stability and continuity.
Two directors, Kevin Liles and Bennet Tchaikovsky, had late Section 16(a) reports for transactions in the company's securities during the year ended June 30, 2024.

Risks

The reverse stock split may not effectively increase the common stock price over the long-term or result in a sustained increase.
The reduction in outstanding shares due to the reverse stock split may decrease the liquidity of the common stock, potentially leading to reduced trading volume and fewer market makers.
Stockholders owning odd lots (less than 100 shares) after the reverse stock split may incur higher transaction costs when selling their shares.
The market may view the reverse stock split negatively, potentially leading to a decrease in the company's overall market capitalization.
Failure to approve the reverse stock split proposal could lead to delisting from The Nasdaq Capital Market if the company cannot otherwise regain compliance with listing requirements.

Future Outlook

The board of directors intends to implement a reverse stock split, if necessary, to regain and maintain compliance with Nasdaq's minimum bid price requirement. The exact ratio and timing of the split will be determined by the board based on market conditions and the company's ability to meet listing standards. The company aims for the reverse split to increase per-share price, potentially attracting a broader range of investors and improving liquidity, though no assurance is given that these objectives will be met or sustained.

Management Comments

Chenlong Tan, CEO and Chairman, believes his combined role is in the best interest of the company and stockholders, providing detailed knowledge, decisive leadership, clear accountability, and enhanced communication of strategy.

Industry Context

The need for a reverse stock split to maintain Nasdaq listing is a common challenge faced by smaller public companies, particularly those whose stock prices have fallen below exchange minimums. This situation often reflects broader market sentiment towards micro-cap or growth-stage companies, or specific operational challenges within the company's sector. The move to consolidate shares is a defensive measure to avoid delisting, which can severely impact a company's access to capital and investor visibility.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Financial Officer	Kevin Vassily	Chenlong Tan (Interim)	May 31, 2025	Kevin Vassily's resignation.
Independent Director	Kevin Liles	Yue Guo	May 8, 2025	Kevin Liles's resignation and Yue Guo's appointment.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Structure	The board consists of four directors, with Chenlong Tan serving as both CEO and Chairman. The board believes this combined role is in the company's best interest.	N/A	A combined CEO/Chairman role can offer decisive leadership but may raise concerns about independent oversight, though the board states independent directors can call executive sessions.
Committee Composition	The Audit, Compensation, and Nominating and Corporate Governance Committees each consist of three independent directors. Bennet Tchaikovsky chairs the Audit Committee and is an audit committee financial expert. Hanxi Li chairs the Compensation Committee. Yue Guo chairs the Nominating and Corporate Governance Committee.	N/A	The composition with independent directors and a financial expert on the Audit Committee strengthens financial oversight and compliance.
Policies and Procedures	The company has adopted a formal Code of Business Conduct and Ethics, an Insider Trading Policy, and an Incentive-Based Compensation Recovery (Clawback) Policy.	N/A	These policies enhance ethical conduct, regulatory compliance, and accountability within the company.
Director Compensation Structure	Independent directors receive annual cash compensation and restricted stock units (RSUs). The Audit Committee chair receives an additional annual retainer. Compensation for new director Yue Guo is lower than other independent directors.	N/A	The compensation structure aims to align directors' interests with stockholders through equity awards, while the additional retainer for the Audit Committee chair recognizes increased responsibilities.

Legal Proceedings

On June 18, 2024, CEO Chenlong Tan and co-founder Allan Huang satisfied a $1.3 million settlement obligation with Boustead Securities, LLC by returning 541,667 shares to the company's treasury, related to the company's initial public offering.
To the company's knowledge, none of its directors, executive officers, promoters, control persons, or nominees have been involved in certain specified legal proceedings (bankruptcy, criminal, regulatory injunctions, securities law violations) during the past ten years.

Related Party Transactions

On June 18, 2024, Chenlong Tan (CEO) and Allan Huang (co-founder, major stockholder) returned 541,667 shares to the company's treasury to reimburse the company for a $1.3 million settlement with Boustead Securities, LLC.
The company subleased 50,000 square feet of warehouse space to Box Harmony, LLC (a 40% owned joint venture) from March 1, 2022, until January 1, 2023, generating $359,373 in sublease fees for FY2023 and $330,000 for FY2022.
The company assumed $92,246 of advance payments from shareholders of Daheshou (Shenzhen) Information Technology Co., Ltd. (DHS) on February 15, 2022, as a result of the Anivia Limited acquisition; the balance was $0 as of June 30, 2024.
On July 8, 2023, the company entered into an on-demand, unsecured and subordinated loan agreement with White Cherry Limited (former owner of a Hong Kong subsidiary), borrowing $2,000,000 on July 16, 2023, and fully repaying it by January 31, 2024, incurring $32,911 in interest for FY2024.
During the period ended June 30, 2024, the company sold $95,376 worth of products through MII Strategy Inc., a company owned by CEO Chenlong Tan, with $56,406 due from MII as of June 30, 2024.
On April 1, 2024, the company borrowed a $350,000 short-term, interest-free loan from an entity owned by Allan Huang, with the full balance outstanding as of June 30, 2024.

Stakeholder Impact

Shareholders: Will vote on critical corporate governance matters, including director elections, executive compensation, and a reverse stock split that will directly impact their shareholdings and potentially the stock's market price and liquidity.
Employees: The equity incentive plan aims to attract and retain employees by aligning their interests with the company's long-term growth.
Customers: No direct impact mentioned, but maintaining Nasdaq listing could enhance company credibility.
Suppliers/Creditors: No direct impact mentioned, but financial stability and Nasdaq listing can influence perceptions of creditworthiness.
Management: Changes in key executive roles (CFO resignation, CEO assuming interim CFO) will impact management structure and responsibilities.

Next Steps

Hold the Annual Meeting of Stockholders on June 23, 2025, to vote on the proposed matters.
If approved, the board of directors will determine the exact ratio and timing for implementing the reverse stock split to maintain Nasdaq compliance.
The company will file a Current Report on Form 8-K with the SEC to announce final voting results after the Annual Meeting.
The company anticipates formally engaging Guangdong Prouden CPAs GP as independent accountants prior to the Annual Meeting and will make a formal announcement via an 8-K filing.

Key Dates

Date	Description
2010	Chenlong Tan co-founded BizRight LLC, predecessor to iPower Inc.
August 2011	Bennet Tchaikovsky served as a director on the board of China Jo-Jo Drugstores, Inc.
January 2013	Bennet Tchaikovsky's directorship at China Jo-Jo Drugstores, Inc. ended.
November 2013	Bennet Tchaikovsky served as a board member and chairman of the audit committee of Ener-Core, Inc.
August 2014	Bennet Tchaikovsky became a full-time professor at Irvine Valley College.
May 2019	Bennet Tchaikovsky's part-time instructor role at Chapman University ended.
August 2019	Bennet Tchaikovsky's board membership and chairman role at Ener-Core, Inc. ended.
January 2020	Chenlong Tan assumed positions of Chairman, President, and Interim Chief Financial Officer.
October 15, 2020	iPower Inc. 2020 Equity Incentive Plan adopted by board and approved by stockholders.
January 2021	Chenlong Tan's position as Interim Chief Financial Officer ended.
January 29, 2021	Employment agreement entered with Kevin Vassily, Chief Financial Officer.
April 27, 2021	Chenlong Tan agreed to reimburse the company for potential judgments/fines related to the IPO, up to $3.5 million.
May 5, 2021	iPower Inc. Amended and Restated 2020 Equity Incentive Plan adopted by board and approved by stockholders.
May 2021	Bennet Tchaikovsky joined the board of directors following the company's initial public offering.
May 11, 2021	Kevin Vassily granted 12,000 restricted stock units.
December 23, 2021	Hanxi Li appointed to the board of directors.
January 2022	Bennet Tchaikovsky began serving as a part-time accounting instructor at California State University, Fullerton.
February 15, 2022	Company assumed $92,246 of advance payments from shareholders of Daheshou (Shenzhen) Information Technology Co., Ltd. (DHS) due to acquisition of Anivia Limited.
March 1, 2022	Company began subleasing 50,000 square feet of warehouse space to Box Harmony, LLC.
May 13, 2022	Company granted stock options of 3,000,000 shares to Chenlong Tan and 330,000 shares to Kevin Vassily.
July 2022	Bennet Tchaikovsky's directorship at Industrial Human Capital, Inc. ended.
January 1, 2023	Company discontinued the sublease to Box Harmony, LLC.
July 8, 2023	Company entered into an on-demand, unsecured and subordinated loan agreement with White Cherry Limited.
July 16, 2023	Company borrowed $2,000,000 from White Cherry Limited.
July 31, 2023	Company repaid $1,000,000 of the loan from White Cherry Limited.
January 2, 2025	Company received a letter from Nasdaq Listing Qualifications Staff regarding non-compliance with the minimum bid price requirement.
January 31, 2024	Company repaid the remaining $1,000,000 of the loan from White Cherry Limited.
April 1, 2024	Company borrowed $350,000 short-term loan from an entity owned by Allan Huang.
June 18, 2024	Chenlong Tan and Allan Huang satisfied the $1.3 million settlement obligation with Boustead Securities, LLC by returning 541,667 shares to the company's treasury.
June 30, 2024	End of fiscal year for which audit fees and executive compensation are reported; outstanding balance of Allan Huang loan was $350,000; total amount due from MII Strategy Inc. was $56,406.
June 2024	Bennet Tchaikovsky's part-time accounting instructor role at California State University, Fullerton ended.
May 8, 2025	Kevin Liles resigned as a director, and Yue Guo was appointed as an independent director.
May 16, 2025	Record Date for stockholders entitled to vote at the Annual Meeting (31,359,899 shares outstanding).
May 21, 2025	Kevin Vassily announced his resignation as CFO.
May 22, 2025	Board of directors approved the amendment to the Charter for the reverse stock split, subject to stockholder approval.
May 28, 2025	Date of the Proxy Statement; Audit Committee approved appointment of Guangdong Prouden CPAs GP.
May 31, 2025	Kevin Vassily's resignation as CFO becomes effective; Chenlong Tan assumes interim CFO position.
June 22, 2025	Deadline for Internet or telephone proxy voting (11:59 p.m. U.S. Pacific Time).
June 23, 2025	Date of the Annual Meeting of Stockholders.
July 1, 2025	End of the initial 180-calendar day compliance period for Nasdaq's Minimum Bid Price Requirement.
January 28, 2026	Deadline for stockholder proposals to be included in proxy materials for the next Annual Meeting.
April 13, 2026	Deadline for stockholder proposals not submitted for inclusion in proxy statement to avoid discretionary voting by management proxies.
April 24, 2026	Deadline for stockholders to provide notice for soliciting proxies in support of director nominees other than the company's nominees (universal proxy rules).

Recommendation

sell

Keywords

iPower Inc., DEF 14A, Proxy Statement, Annual Meeting, Reverse Stock Split, Nasdaq Compliance, Corporate Governance, Executive Compensation, Director Election, Financial Reporting, SEC Filing, Stock Market, Shareholder Vote

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