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Income taxes | 6 Months Ended
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Dec. 31, 2023
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 PRC. Anivia and its subsidiaries are subject to BVI or Hong Kong income taxes but did not have any operations for the six months ended December 31, 2023 and 2022. DHS, the operating VIE of Anivia, is considered a Controlled Foreign Corporation (CFC) defined under IRC Sec. 957(a) since the Company indirectly owns more than 50% voting control of DHS as a result of the Transfer Agreement. Therefore, DHS is subject to the Global Intangible Low-Taxed Income (or GILTI) Tax. DHS is subject to 5% tax rate in PRC. The Company made an election to apply the GILTI high-tax exclusion for DHS under the Final Regulations (T.D. 9902). As the result of the election, no GILTI tax was recorded as of December 31, 2023 and 2022. In addition, as a result of the acquisition, the Company booked a $6,094,144 of goodwill. Since the acquisition was a stock acquisition, the Goodwill is not deductible for tax purposes. For the three and six months ended December 31, 2023, 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. The income tax provision for the three and six months ended December 31, 2023 and 2022 consisted of the following:
Schedule of provision for income tax |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended December 31, |  |  | Six Months Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,705 |  |  | $ | 280,781 |  |  | $ | – |  |  | $ | 280,781 |
States |  |  | (904 | ) |  |  | (123 | ) |  |  | 11,566 |  |  |  | 9,799 |
Foreign |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Total current income tax provision |  |  | 801 |  |  |  | 280,658 |  |  |  | 11,566 |  |  |  | 290,580 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (555,981 | ) |  |  | (1,090,318 | ) |  |  | (840,629 | ) |  |  | (1,259,785 | )
States |  |  | (133,943 | ) |  |  | (203,562 | ) |  |  | (200,567 | ) |  |  | (306,707 | )
Foreign |  |  | 184 |  |  |  | (34,527 | ) |  |  | 64,809 |  |  |  | (219,633 | )
Total deferred taxes |  |  | (689,740 | ) |  |  | (1,328,407 | ) |  |  | (976,387 | ) |  |  | (1,786,125 | )
Total provision for income taxes |  | $ | (688,939 | ) |  | $ | (1,047,749 | ) |  | $ | (964,821 | ) |  | $ | (1,495,545 | )
The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2018 to 2022 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates:
Schedule of reconciliation of effective income tax rate |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended December 31, |  |  | Six Months Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Statutory tax rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 21.00% |  |  |  | 21.00% |  |  |  | 21.00% |  |  |  | 21.00% |
State |  |  | 5.82% |  |  |  | 5.85% |  |  |  | 5.82% |  |  |  | 5.85% |
Foreign tax rate difference |  |  | 0.35% |  |  |  | (0.33% | ) |  |  | 0.20% |  |  |  | 1.86% |
Impairment loss on goodwill -permanent difference |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (9.32% | )
Net effect of state income tax deduction and other permanent differences |  |  | (0.74% | ) |  |  | (2.38% | ) |  |  | (3.89% | ) |  |  | (2.72% | )
Effective tax rate |  |  | 26.43% |  |  |  | 24.14% |  |  |  | 23.13% |  |  |  | 16.67% |
As of December 31, 2023, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $41,987 and $283,519, respectively. As of June 30, 2023, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $45,718 and $276,683, respectively. The tax effects of temporary differences which give rise to significant portions of the deferred taxes are summarized as follows:
Schedule of deferred taxes |  |  |  |  |  |
|  | December 31, 2023 |  |  | June 30, 2023 |
Deferred tax assets |  |  |  |  |  |  |  |
263A calculation |  | $ | 183,268 |  |  | $ | 239,142 |
Inventory reserve |  |  | 209,655 |  |  |  | 149,907 |
State taxes |  |  | 2,619 |  |  |  | 2,435 |
Accrued expenses |  |  | 253,589 |  |  |  | 273,589 |
ROU assets / liabilities |  |  | 113,992 |  |  |  | 115,125 |
Net Operation loss |  |  | 3,002,627 |  |  |  | 2,173,221 |
Disallowed interest expense |  |  | 214,299 |  |  |  | 163,381 |
Stock-based compensation |  |  | 277,228 |  |  |  | 207,726 |
Valuation allowance |  |  | (66,104 | ) |  |  | – |
Others |  |  | 85,596 |  |  |  | 85,596 |
Total deferred tax assets |  |  | 4,276,769 |  |  |  | 3,410,122 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Depreciation |  |  | (91,944 | ) |  |  | (105,323 | )
Intangible assets acquired |  |  | (1,062,462 | ) |  |  | (1,149,549 | )
Total deferred tax liabilities |  |  | (1,154,406 | ) |  |  | (1,254,872 | )
Net deferred tax assets |  | $ | 3,122,363 |  |  | $ | 2,155,250 |
For the six months ended December 31, 2023, the Company recorded $66,104 of valuation allowance to reduce deferred tax assets for the losses incurred by DHS.

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