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| INCOME TAX | NOTE 24. INCOME TAX The Company is not subject to any income taxes in the United States or the Cayman Islands and had minimal operations in jurisdictions other than the PRC. BHD and Nanjing Recon are subject to PRC’s income taxes as PRC domestic companies. The Company follows Implementing Rules for the Enterprise Income Tax Law (“Implementing Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested and foreign-invested enterprises at 25%. Nanjing Recon was approved as a government-certified high-technology company and is subject to a reduced income tax rate of 15% through November 30, 2019. Nanjing Recon reapplied for a high-technology company certificate, and the new certificate was approved as November 22, 2019 and expired on November 22, 2022. Nanjing Recon reapplied for a high-technology company certificate, and the new certificate was approved as October 12, 2022 and will expire on October 12, 2025. Nanjing Recon reapplied for a high - technology company certificate, and the new certificate was approved as November 18, 2025 and will expire on November 18, 2028. As approved by the domestic tax authority in the PRC, BHD was recognized as a government-certified high-technology company on November 25, 2009 and is subject to a reduced income tax rate of 15% through November 25, 2018. BHD reapplied for a high-technology company certificate, and the new certificate was approved as October 31, 2018 and expired on October 31, 2021. BHD reapplied for a high-technology company certificate, and the new certificate was approved as December 17, 2021 and will expire on December 17, 2024. BHD reapplied for a high-technology company certificate, and the new certificate was approved as December 31, 2024 and will expire on December 31, 2027. Loss before provision for income taxes consisted of:
Deferred tax assets, net is composed of the following:
The Company’s subsidiaries, VIEs and VIEs’ subsidiaries incurred a cumulative net operating loss (“NOL”) which may reduce future corporate taxable income. As of June 30, 2025, the cumulative NOL was approximately ¥131.8 million. During the year ended June 30, 2026, the Company’s subsidiaries, VIEs and VIEs’ subsidiaries incurred an additional NOL carryforwards of approximately ¥9.4 million ($1.1 million). As of June 30, 2026, there are ¥49.8 million ($7.3 million) of the cumulative NOL had expired, resulting in a cumulative NOL carryforwards of approximately ¥91.4 million ($13.5 million) as of June 30, 2026. The NOL will expire over the next five years as follows:
Following is a reconciliation of income tax expense (benefit) at the effective rate to income tax at the calculated statutory rates:
The Company’s income tax expense (benefit) is comprised of the following:
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