NOTE 13 — INCOME TAX EXPENSE

The provision for income tax expense consisted of the following:

The Company’s subsidiaries mainly operate in Hong Kong and the U.S. that are subject to taxes in the jurisdictions in which they operate, as follows:

United States of America

The Company is formed in the State of Delaware, the Company is subject to the federal income tax rate of 21%.

British Virgin Islands

The Company’s subsidiaries are incorporated in the British Virgin Islands and is not subject to taxation. In addition, upon payments of dividends by these entities to their stockholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

The Company’s subsidiaries operating in Hong Kong are subject to the Hong Kong Profits Tax at the income tax rates ranging from 8.25% to 16.5% on the assessable income arising in Hong Kong during its tax year.

Effective January 1, 2025, Hong Kong enacted the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025 to implement Pillar Two of the Organization for Economic Cooperation and Development (“OECD”) Base Erosion and Profit Shifting (“BEPS”) 2.0. The legislation introduces a global minimum effective tax rate of 15% for multinational enterprise (“MNE”) groups with consolidated annual revenue of at least €750 million in at least two of the four fiscal years immediately preceding the tested fiscal year. The legislation includes the Income Inclusion Rule (“IIR”) and the Hong Kong Minimum Top-up Tax (“HKMTT”).

The Company evaluated the potential impact of the Hong Kong Pillar Two legislation. Although the Company operates through subsidiaries in multiple jurisdictions, mainly in Hong Kong, and therefore constitutes a multinational group, management concluded that the Company is not currently within the scope of the Pillar Two rules because the Company’s consolidated annual revenue does not meet the €750 million threshold required for application of the legislation. Accordingly, no current tax, deferred tax, or top-up tax liability related to Pillar Two has been recognized in the unaudited condensed consolidated financial statements.

For the six months ended June 30, 2026 and 2025, the Company’s principal operations were conducted in Hong Kong. The reconciliation of the Hong Kong income tax rate of 16.5% to the effective income tax rate based on loss before income tax expense are as follows:

Note:

The following table sets forth the significant components of the deferred tax assets and liabilities of the Company as of June 30, 2026 and December 31, 2025:

The movement of valuation allowance is as follows:

As of June 30, 2026, the operations incurred approximately $139.7 million of cumulative net operating losses, which can be carried forward to offset future taxable income. Net operating loss can be carried forward indefinitely but cannot be carried back to prior years. There are no group relief provisions for losses or transfers of assets under Hong Kong tax regime. Each company within a corporate group is taxed as a separate entity. The Company has provided for a full valuation allowance against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes that it is more likely that not all of these assets will be realized in the future. The valuation allowance is reviewed annually.

During the three and six months ended June 30, 2026, the Company paid income tax expense of $0.04 million and $0.14 million, respectively. There was no income tax paid during the three and six months ended June 30, 2025.

Uncertain tax positions

The Company evaluates the 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, 2026 and December 31, 2025, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income tax expenses for the six months ended June 30, 2026 and 2025 and also did not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from June 30, 2026.