XML 38 R22.htm IDEA: XBRL DOCUMENT v3.25.2
Income taxes
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income taxes

Note 12 – 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 the People’s Republic of China (“PRC”). Anivia and its subsidiaries were subject to BVI or Hong Kong income taxes but did not have any operations for the year ended June 30, 2025 and 2024. 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 Tax (“GILTI”). DHS is subject to 5% tax rate in PRC until December 31, 2027. Since DHS had tested losses during the year ended June 30, 2025 and 2024 and no GILTI tax was recorded for as of June 30, 2025 and 2024, the Company is not eligible for the GILTI high-tax exclusion. 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.

 

The income tax provision for the years ended June 30, 2025 and 2024 consisted of the following:

        
   June 30, 2025   June 30, 2024 
Current:          
Federal  $–   $– 
State   24,367    40,739 
Foreign   –    – 
Total current income tax provision   24,367    40,739 
Deferred:          
Federal   (1,023,623)   (317,134)
State   (255,233)   (47,305)
Foreign   –    72,335 
Total deferred taxes   (1,278,856)   (292,104)
           
Total provision for income taxes  $(1,254,489)  $(251,365)

 

The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2019 to 2023 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:

        
   June 30, 2025   June 30, 2024 
Statutory tax rate          
Federal   21.00 %   21.00 %
State (net of federal benefit)   5.63 %   5.54%
Foreign tax   (3.73)%   (4.94)%
Prior year adjustment and permanent differences   – %   (2.66)%
Others   (2.77)%   (4.92)%
Effective tax rate   20.13 %   14.02 %

 

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. As of June 30, 2024, prepaid income taxes to US tax authorities and income tax payable to Chinese tax authorities was $31,496 and $276,158, respectively.

 

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

        
   June 30, 
   2025   2024 
Deferred tax assets          
263A calculation  $256,568   $291,354 
Inventory reserve   83,180    171,942 
State taxes   4,844    4,840 
Accrued expenses   21,750    155,860 
ROU assets / liabilities   95,711    110,391 
Net Operation loss   3,081,145    2,190,589 
Disallowed interest expense   311,662    258,352 
Stock-based compensation   336,394    341,591 
Valuation allowance   (118,191)   (64,897)
Others   512,289    40,067 
Total deferred tax assets   4,585,352    3,500,089 
           
Deferred tax liabilities          
Depreciation   (56,648)   (77,287)
Intangible assets acquired   (804,242)   (977,197)
Total deferred tax liabilities   (860,890)   (1,054,484)
           
Net deferred tax assets  $3,724,462   $2,445,605