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Income Taxes
 6 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note 13 – 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 six months ended December 31, 2025 and 2024 and the year ended June 30, 2025, no GILTI tax was recorded as of December 31, 2025 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 six months ended December 31, 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.

 

The income tax provision for the three and six months ended December 31, 2025 and 2024 consisted of the following: 

                
   Three Months Ended December 31,   Six Months Ended December 31, 
   2025   2024   2025   2024 
Current:                
Federal  $–   $14,042   $–   $14,042 
States   15,010    17,460    24,086    25,869 
Foreign   –    –    –    – 
Total current income tax provision   15,010    31,502    24,086    39,911 
                     
Deferred:                    
Federal   (675,867)   76,153    (834,477)   (444,984)
States   (159,651)   12,856    (193,287)   (110,928)
Foreign   –    –    (280,414)   – 
Total deferred taxes   (835,518)   89,009    (1,308,178)   (555,912)
                     
Total provision for income taxes  $(820,508)  $120,511   $(1,284,092)  $(516,001)

 

The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2020 to 2024 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:

 

          
   December 31, 2025   December 31, 2024 
Statutory tax rate          
Federal   21.00%   21.00%
State (net of federal benefit)   5.63%   5.51%
Foreign tax rate difference   (0.85)%   (2.04%)
Reversal of over accrued income taxes of prior years for VIE   17.62%   – 
Net effect of state income tax deduction and other permanent differences   (0.75%)   (2.35%)
Effective tax rate   42.65%   22.12%

 

As of December 31, 2025, income tax payable to US tax authorities was $3,512. 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:

 

          
   December 31, 2025   June 30, 2025 
Deferred tax assets          
263A calculation  $113,803   $256,568 
Inventory reserve   98,792    83,180 
State taxes   5,058    4,844 
Accrued expenses   21,950    21,750 
ROU assets / liabilities   86,829    95,711 
Net operating loss   3,819,570    3,081,145 
Disallowed interest expense   340,684    311,662 
Stock-based compensation   629,655    336,394 
Valuation allowance   (128,840)   (118,191)
Allowance for credit loss   525,795    512,289 
Total deferred tax assets   5,513,296    4,585,352 
           
Deferred tax liabilities          
Depreciation   (40,528)   (56,648)
Unrealized gain/loss   (1,979)   – 
Intangible assets acquired   (717,764)   (804,242)
Total deferred tax liabilities   (760,271)   (860,890)
           
Net deferred tax assets  $4,753,025   $3,724,462