v3.26.1
Income Taxes
 9 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

Note 14 – Income Taxes

 

In addition to corporate income taxes in the United States, upon completion of the acquisition of Anivia in February 2022, the Company is subject to corporate income taxes in People’s Republic of China (“PRC”). Anivia and its subsidiaries are subject to BVI or Hong Kong income taxes but did not have any operations in those jurisdictions for the year ended June 30, 2022. The Company’s subsidiary in China, Dayourenzai (Shenzhen) Technology Co., Ltd. (“WFOE”), is subject to the Global Intangible Low-Taxed Income (or GILTI) Tax. WFOE is subject to 5% tax rate in PRC until December 31, 2027. Since WFOE had losses during the nine months ended March 31, 2026 and 2025 and the year ended June 30, 2025, no GILTI tax was recorded as of March 31, 2026 and June 30, 2025. The Company is not eligible for the GILTI high-tax exclusion. In addition, as a result of the acquisition, the Company recognized goodwill in the amount of $3,034,110. Since the acquisition was a stock acquisition, the goodwill is not deductible for tax purposes.

 

For the three and nine months ended March 31, 2026 and 2025, as a result of the Company’s inability to establish a reliable estimate for annual effective tax rate, the Company calculated income tax expense using the actual effective tax rate year to date, as opposed to the estimated annual effective tax rate, as provided in Accounting Standards Codification (ASC) 740-270-30-18.

 

For the three and nine months ended March 31, 2026, the Company had income tax benefit of $326,502 and $1,839,874, respectively. For the three and nine months ended March 31, 2025, the Company had income tax expense of $6,364 and income tax benefit of $637,108, respectively.

 

The Company’s effective income tax rate was 21.82% and 18.50% for the nine months ended March 31, 2026 and 2025, respectively. The Company’s effective tax rate differs from the U.S. statutory rate of 21% primarily due the combination of U.S. state income tax deduction, other permanent differences and the impact of foreign jurisdictions.

 

As of March 31, 2026, prepaid income taxes to US tax authorities was $95,328. As of June 30, 2025, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $19,073 and $280,155, respectively.

 

The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows:

      
   March 31, 2026  June 30, 2025
Deferred tax assets          
263A calculation  $73,139   $256,568 
Inventory reserve   97,902    83,180 
State taxes   3,797    4,844 
Accrued expenses   21,753    21,750 
ROU assets / liabilities   79,524    95,711 
Net operating loss   3,076,619    3,081,145 
Disallowed interest expense   369,542    311,662 
Stock-based compensation   644,971    336,394 
Valuation allowance   (129,171)   (118,191)
Allowance for credit loss   521,060    512,289 
Goodwill impairment loss   800,836    – 
Total deferred tax assets   5,559,972    4,585,352 
           
Deferred tax liabilities          
Depreciation   (35,630)   (56,648)
Unrealized gain/loss   142,188    – 
Intangible assets acquired   (675,694)   (804,242)
Total deferred tax liabilities   (569,136)   (860,890)
           
Net deferred tax assets  $4,990,836   $3,724,462