Note 12 - Income Taxes |
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Note 12 - Income Taxes | Note 12 – Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended June 30, 2026 and 2025:
SCHEDULE OF EFFECTIVE TAX RATE
Net deferred tax assets consist of the following components as of June 30, 2026 and 2025:
SCHEDULE OF NET DEFERRED TAX ASSETS
The income tax provision differs from the amount of income tax determined by applying the U.S. Federal income tax rate to pretax income from continuing operations for the years ended June 30, 2026 and 2025 due to the following:
SCHEDULE OF FEDERAL INCOME TAX RATE
Section 382 of the Internal Revenue Code provides an annual limitation on the amount of federal net operating losses and tax credits that may be used in the event of an ownership change. At June 30, 2026, the Company had net operating loss carryforwards totaling approximately $26,965,000. That amount includes approximately $19,000,000 of net operating losses of AppLife Digital incurred prior to the reverse merger. All net operating losses are subject to limitation under Section 382 as a result of the change in control of the Company. A full Section 382 analysis has not been prepared, and the net operating loss carryforwards ultimately available to the Company may be materially less than the amounts stated above.
The Company classifies accrued interest and penalties, if any, for unrecognized tax benefits as part of income tax expense. The Company did not accrue any penalties or interest as of June 30, 2026 and 2025.
The provision (benefit) for income taxes for continuing operations for the years ended June 30, 2026 and 2025 is as follows:
SCHEDULE OF PROVISION (BENEFITS) FOR INCOME TAXES
The Company files corporate income tax returns in the United States (federal) and in California. Since the Company incurred net operating losses in every tax year since inception, the 2022 through 2025 income tax returns are subject to examination and adjustments by the IRS for at least three years following the year in which the tax attributes are utilized. |