Lite Strategy, Inc. Income Taxes Disclosure
Note 14. Income Taxes
Pre-tax loss consists of the following jurisdictions, in thousands:
|
|
For the Fiscal Year Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Domestic |
|
$ |
(15,945 |
) |
|
$ |
17,778 |
|
Foreign |
|
|
— |
|
|
|
— |
|
Pre-tax (loss) income |
|
$ |
(15,945 |
) |
|
$ |
17,778 |
|
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is as follows, in thousands:
|
|
For the Fiscal Year Ended June 30, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
||||
Tax (benefit) expense at U.S. statutory rates |
|
$ |
(3,349 |
) |
|
|
21 |
% |
|
$ |
3,733 |
|
|
|
21 |
% |
State tax (benefit) expense |
|
|
(2,733 |
) |
|
|
17 |
% |
|
|
796 |
|
|
|
5 |
% |
Equity compensation |
|
|
1,671 |
|
|
|
(10 |
)% |
|
|
901 |
|
|
|
5 |
% |
Change in valuation allowance |
|
|
3,782 |
|
|
|
(24 |
)% |
|
|
(6,281 |
) |
|
|
(35 |
)% |
Section 162(m) limitation |
|
|
507 |
|
|
|
(3 |
)% |
|
|
483 |
|
|
|
3 |
% |
Other |
|
|
122 |
|
|
|
(1 |
)% |
|
|
368 |
|
|
|
1 |
% |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
— |
|
|
|
— |
% |
Deferred tax liabilities and assets are comprised of the following, in thousands:
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets (liabilities): |
|
|
|
|
|
|
||
Tax losses carried forward |
|
$ |
53,346 |
|
|
$ |
45,721 |
|
Capitalization of R&D costs |
|
|
9,398 |
|
|
|
11,456 |
|
Fixed and intangible assets |
|
|
7,881 |
|
|
|
8,058 |
|
Share-based payments |
|
|
2,375 |
|
|
|
4,081 |
|
Right-of-use assets |
|
|
— |
|
|
|
(45 |
) |
Other |
|
|
700 |
|
|
|
647 |
|
Total deferred tax assets |
|
|
73,700 |
|
|
|
69,918 |
|
Valuation allowance for deferred tax assets |
|
|
(73,700 |
) |
|
|
(69,918 |
) |
Net deferred tax assets and liabilities |
|
$ |
— |
|
|
$ |
— |
|
We evaluate the recoverability of the deferred tax assets and the amount of the required valuation allowance. Due to the uncertainty surrounding the realization of the tax deductions in future tax returns, we have recorded a valuation allowance against our net deferred tax assets as of June 30, 2025 and 2024. At such time as it is determined that it is more likely than not that the deferred tax assets will be realized, the valuation allowance would be reduced.
We had federal and state net operating loss carryforwards of approximately $246.1 million and $23.8 million as of June 30, 2025. The federal net operating loss will carry forward indefinitely subject to an 80% taxable income limitation. The state net operating loss carryforwards will begin to expire in 2031 unless previously utilized.
Our ability to utilize our net operating loss carryforwards may be substantially limited due to ownership changes that have occurred or that could occur in the future under Section 382 of the Internal Revenue Code (Section 382) and similar state laws. A Section 382 study was completed through December 31, 2021, to analyze whether one or more ownership changes had occurred and determined that two such ownership changes did occur. We have not completed a Section 382 study through June 30, 2025. If an ownership change occurred our ability to utilize our net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes.
None of our prior income tax returns have been selected for examination by a major taxing jurisdiction; however, the statutes of limitations for various filings remain open. The oldest filings subject to potential examination for federal and state purposes are 2021 and 2020, respectively. If we utilize a net operating loss related to a closed tax year, the tax year in which the loss was incurred is subject to adjustment up to the amount of the net operating loss.
We have not reduced any tax benefit on our consolidated financial statements due to uncertain tax positions as of June 30, 2025 and we are not aware of any circumstance that would significantly change this result through the end of fiscal year 2026. To the extent we incur income-tax related penalties or interest, we will recognize them as additional income tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 26, 2025 | Showing above |
| 2024 | Sep 19, 2024 | |
| 2023 | Sep 26, 2023 | |
| 2022 | Sep 8, 2022 | |
| 2021 | Sep 2, 2021 | |
| 2020 | Sep 9, 2020 | |
| 2019 | Aug 28, 2019 | |
| 2018 | Aug 30, 2018 | |
| 2017 | Sep 5, 2017 | |
| 2016 | Sep 6, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.