Ispire Shifts to Nicotine Amid Cannabis Woes and Liquidity Crisis

Ispire Technology Inc. (NASDAQ: ISPR) reported $127.5 million in revenue for the fiscal year 2025, a 16.1% decline from $151.9 million in the prior year. Despite the revenue decrease, the company highlighted strategic shifts aimed at reducing reliance on the volatile cannabis market and expanding into higher-margin nicotine products. However, the company’s net loss widened significantly, reaching $39.2 million—up from $14.8 million in 2024—resulting in an EPS of -$0.69. This represents a substantial deterioration in profitability, driven by a 38.5% increase in operating expenses and a drop in gross margin to 17.8% from 19.6% in the previous year.

The decline in revenue was primarily attributed to a $30.5 million drop in US cannabis product sales, where the company faced severe credit issues. Credit loss expenses surged 266% to $22 million, and $7.4 million in accounts receivable were reclassified as non-current, signaling liquidity concerns. Additionally, Ispire’s working capital fell 97.8% to $0.4 million, further highlighting its financial strain. Management also disclosed material weaknesses in internal controls over financial reporting, including insufficient oversight of significant estimates and IT general controls.

To address these challenges, Ispire is implementing a multi-pronged strategy. The company is transitioning its manufacturing operations to Malaysia, where it plans to scale production from two to 70 lines. This move aims to reduce dependence on its primary supplier, Shenzhen Yi Jia, and mitigate geopolitical risks. The Co-CEO and Chairman, Tuanfang Liu, owns 95% of Shenzhen Yi Jia, which supplied 91% of Ispire’s purchases in 2025, creating potential conflicts of interest. The recent reclassification of a $25 million payable to Shenzhen Yi Jia as non-current debt underscores the financial complexities of this relationship.

On the product front, Ispire is investing heavily in research and development, particularly for its IKE age-gating technology, which received FDA acceptance as a PMTA component. This development could allow the company to re-enter the US flavored e-cigarette market, provided full PMTA approval is secured. European e-cigarette sales, which grew 13.5% to $74.1 million, now represent 58.1% of total sales, signaling a shift in market focus. The company is also expanding its nicotine product offerings in emerging markets, including South Africa and Nigeria, through partnerships such as the Sprout cannabis vapor device collaboration with Raw Garden.

Despite these strategic moves, Ispire’s stock performance has been under pressure, with a year-to-date decline of 31.81%. The board authorized a $10 million stock repurchase program to enhance shareholder value, indicating confidence in long-term prospects. Meanwhile, the broader nicotine market is projected to grow from $0.6 billion in 2025 to $1.81 billion by 2034 at a CAGR of 13.1%, driven by increasing demand for smokeless and reduced-risk alternatives. This growth could benefit Ispire if it successfully navigates regulatory and operational challenges.

The company’s financial performance highlights the volatility of the vaping and nicotine industry, which is heavily influenced by regulatory changes and market dynamics. As Ispire transitions from cannabis to nicotine, its ability to maintain profitability, secure regulatory approvals, and diversify its supply chain will be critical to its long-term success. Investors are closely monitoring the outcomes of its strategic initiatives, particularly its efforts to stabilize liquidity and strengthen operational efficiency.