10 — INCOME TAX  

(a) Income Tax Expense

Income tax benefit for the three months ended June 30, 2025 was $50,259, and income tax expense for the three months ended June 30, 2024 amounted to $72,445. Significant components of the provision for income taxes are as follows:

The provision (benefit) for income taxes   is based on the following pretax loss:

For the three months ended June 30, 2025, the total pre-tax loss was approximately $2.1 million, which included approximately $1.9 million pre-tax loss in the U.S. and approximately $0.2 million pre-tax loss in Canada. For the three months ended June 30, 2024, the total pre-tax loss was $107,063, which included $99,838 pre-tax loss in U.S. and $7,225 million pre-tax loss in Canada.

The following table reconciles the Company’s effective tax rate:

Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. For the three months ended June 30, 2025 and 2024, the Company accrued nil and $60,076 in income tax related penalty included in current income taxes expenses, respectively.

United States

Income tax benefit for the three months ended June 30, 2025 was $7,398, and income tax expense for the three months ended June 30, 2024 amounted to $73,076.

Significant components of the provision (benefit) for income taxes are as follows:

Canada

Fly Toronto Corp, a subsidiary of the Company, was formed under the laws of Canada and conducts its business primarily in Canada.

Income tax benefit for the three months ended June 30, 2025 and 2024 amounted to $42,861 and $631, respectively. Significant components of the income taxes benefit   are as follows:

(b) Deferred Tax Assets (Liabilities)

Net DTAs as of June 30, 2025 and March 31, 2025 amounted to $153,087 and $94,983 , respectively. Significant components of DTAs (DTLs), net are as follows:

As of June 30, 2025 and March 31, 2025, the Company had approximately $3.6 million and $5.0 million, respectively, in the DTAs, which respectively included approximately $0.7 million and $1.5 million related to net operating loss carryforwards that can be used to offset taxable income in future periods, approximately $3.3 million and $4.8 million related to operating lease liabilities, and approximately $0.4 million and $0.4 million related to inventory reserve.

As of June 30, 2025 and March 31, 2025, the Company had approximately $3.4 million and $5.0 million, respectively, in the DTLs, which included approximately $0.3 million and $0.5 million, respectively related to accumulated depreciation and approximately $3.1 million and $4.5 million related to ROU assets.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. As of June 30, 2025 and March 31, 2025, the Company recorded $153,087 and $94,983 , respectively, in the net DTAs. The tax losses in Canada can be carried forward for twenty years to offset future taxable profit. The tax losses of entities in Canada will begin to expire in 2044, if not utilized. As of June 30, 2025, management considered it more likely than not that the Company will have sufficient taxable income in the future that will allow the Company to realize these net DTAs.

As a result of the Tax Cuts and Jobs Act (TCJA), US NOLs arising after December 31, 2017, may be carried forward indefinitely and can offset only up to 80% of taxable income in any future year. Based upon the Company’s recent taxable loss history, the Company performed an analysis and determined that it was necessary to establish a valuation allowance of $974,000 with respect to its net deferred income tax assets as of June 30, 2025.

Uncertain Tax Positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of June 30, 2025 and March 31, 2025, the Company did not have any significant unrecognized uncertain tax positions.