v3.26.3
Income Taxes
 12 Months Ended
Jun. 30, 2026
Income Taxes [Abstract]  
INCOME TAXES

NOTE 15 — INCOME TAXES

 

Corporate Income Taxes

 

Under current U.S. federal tax law, corporations are subject to a federal corporate income tax rate of 21% on taxable income, as established by the Tax Cuts and Jobs Act of 2017 (Public Law 115-97). In addition to federal income tax, corporations may also be subject to state and local income taxes, which generally range from 0% to approximately 12%, depending on the jurisdiction.

 

Under the PRC Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%.

 

Under the current tax laws of Cayman Islands, the Company’s subsidiaries in Cayman Islands are not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

 

As of June 30, 2026 and 2025, the Company did not have an accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the years ended June 30, 2026 and 2025, no amounts were incurred for income tax uncertainties or interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examination by its major taxing authorities for all periods.

 

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures on a prospective basis for the year ended June 30, 2026

 

The Income tax expense applicable to loss before income taxes consists of the following: 

 

    For the Years Ended
June 30,		  
    2026     2025  
Current income tax expense:            
Federal   $ -     $ -  
State     -       -  
Foreign     174,611       233,855  
Total current income tax     174,611       233,855  
Deferred income tax benefit                
Federal     -       -  
State     -       -  
Foreign     (82,900 )     (21,559 )
Total deferred income tax benefit     (82,900 )     (21,559 )
Income tax expense   $ 91,711     $ 212,296  

 

(Loss) income before income tax consists of the following:

 

    For the Years Ended
June 30,		  
    2026     2025  
U.S.     (6,785,652 )     (1,804,645 )
Foreign     (3,261,055 )     118,159  
Loss before income tax   $ (10,046,707 )   $ (1,686,486 )

 

The income tax expense differs from the amount computed by applying the U.S. federal statutory rate of 21.0% to loss before income taxes for the year ended June 30, 2026 as follows: 

 

    For the Year Ended
June 30,		  
    2026  
US Federal Statutory Tax Rate   $ (2,109,808 )     21.0 %
                 
State and Local Income Taxes, Net of Federal Income Tax Effect (1)     -       -  
Change in valuation allowance     1,424,986       (14.2 )%
Foreign tax effects                
PRC                
Statutory tax rate difference between PRC and US     (129,635 )     1.3 %
Non-deductible expense     64,414       (0.6 )%
Change in valuation allowance     913,705       (9.0 )%
Other adjustment     (76,191 )     0.7 %
Other foreign jurisdictions     4,240       - %
Total income tax expense   $ 91,711       (0.9 )%

 

(1) The Company’s U.S. subsidiary is incorporated in Nevada, which does not impose a state corporate income tax. Accordingly, there is no state and local income tax expense related to the U.S. subsidiary.

 

The income tax expense differs from the amount computed by applying the U.S. federal statutory rate of 21% to loss before income taxes for year ended June 30, 2025 as follows:

 

    For the 
Year Ended
June 30,		  
    2025  
Loss before tax   $ (1,686,486 )
Statutory state tax rate     21 %
Income tax recovery at the federal statutory rate     (354,162 )
         
Non-deductible expense     26,565  
Change in valuation allowance     535,167  
Foreign tax rate differential     4,726  
Total income tax expense   $ 212,296  

 

The amount of cash paid for income taxes (net of refunds) for the year ended June 30, 2026 is as follows:

 

    For the
 Year Ended
June 30,		  
    2026  
Federal   $ -  
State        -  
Foreign        
PRC     18,009  
Total income taxes paid, net of refunds   $ 18,009  

 

The Company’s deferred tax assets and liabilities consist of the following: 

 

    June 30
2026		     June 30,
2025		  
Deferred tax assets:            
Allowance for credit loss – account receivable   $ 23,874     $ 8,260  
Allowance for credit loss – loan receivable     473,896       -  
Allowance for credit loss – advances to supplier     736,909       -  
Accrued advertising expense     51,522       -  
Refundable liability net of right of return asset     87,106       -  
Non-capital loss carried forward     1,574,163       535,167  
Total deferred tax assets     2,947,470       543,427  
Less: Valuation allowance     (2,873,858 )     (535,167 )
Total deferred tax assets, net of valuation allowance     73,612       8,260  
Net off against deferred tax liabilities     (73,612 )     (8,260 )
Deferred tax assets, net   $ -     $ -  
                 
Deferred tax liabilities:                
Intangible asset – license   $ (73,612 )   $ (91,360 )
Total deferred tax liabilities     (73,612 )     (91,360 )
Net off against deferred tax assets     73,612       8,260  
Deferred tax liabilities, net   $ -     $ (83,100 )

 

As a result of the disposition of ABL Chicago, the Company derecognized approximately 1.7 million of gross deferred tax assets, primarily related to net operating loss carryforwards and other deductible temporary differences, together with the associated valuation allowance of approximately $1.7 million. The deferred tax assets and related valuation allowance were attributable to the disposed subsidiary and were no longer included in the Company’s consolidated deferred tax balances following the disposition.

 

As of June 30, 2026 and 2025, the accumulated tax losses of subsidiary incorporated in the U.S. of approximately $6.7 million and approximately $1.8 million, are allowed to be carried forward to offset against future taxable profits. The carry forward of non-capital losses in the U.S. generally has no time limit, but the loss could be only offset up to 80% of taxable income in a given year. The carry forward of net operating loss generated by the subsidiaries incorporated in the PRC, subject to the agreement of the PRC tax authorities, of approximately $0.9 million and $0.6 million as of June 30, 2026 and 2025 can be carried forward for 5 years.

 

The deferred tax liability related to the license is expected to reverse through future amortization over the period ending October 22, 2029, and the resulting taxable income is expected to be offset by the Company’s tax loss carryforwards, accordingly, this deferred tax liability has been offset against the Company’s deferred tax assets

 

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, 2026 and 2025, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur interests and penalties tax for the years ended June 30, 2026 and 2025.

 

PRC

 

According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or withholding agent. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined (but an underpayment of tax liability exceeding RMB0.1 million is specifically listed as a special circumstance). In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.

 

U.S.

 

The statute of limitations for the Company’s subsidiary in the U.S. is three years from the date the respective tax returns were filed, subject to certain exceptions and extensions under applicable tax laws.