v3.26.3
INCOME TAXES
 9 Months Ended
Sep. 30, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES

12. INCOME TAXES

 

Income/(Loss) before income taxes

 

The components of income/(loss) before income taxes from continuing operations were as follows:

 

   2026   2025   2026   2025 
  

For the three months ended

September 30,

  

For the nine months ended

September 30,

 
   2026   2025   2026   2025 
   US$   US$   US$   US$ 
Domestic income/(loss) before income taxes   490,808    166,261    (359,852)   (742,814)
Foreign loss before income taxes   (93,043)   (2,390,695)   (1,514,256)   (3,120,898)
Total loss before income taxes   397,765    (2,224,434)   (1,874,108)   (3,863,712)

 

Provision for income taxes

 

The provision for income taxes from continuing operations was comprised of the following:

 

   2026   2025   2026   2025 
  

For the three months ended

September 30,

  

For the nine months ended

September 30,

 
   2026   2025   2026   2025 
   US$   US$   US$   US$ 
Current:                    
Federal   —    —    —    — 
State   —    —    —    — 
Foreign   37    —    37    — 
Total current income taxes   37    —    37    — 
                     
Deferred:                    
Federal   132,522    71,263    28,294    (39,181)
State   41,019    22,057    8,759    (21,595)
Foreign   —    —    —    — 
Total deferred income taxes   173,541    93,320    37,053    (60,776)
                     
Total income tax (benefit)/provision   173,578    93,320    37,090    (60,776)

 

 

CHAINCE DIGITAL HOLDINGS INC.

(FORMERLY KNOWN AS MERCURITY FINTECH HOLDING INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(In U.S. dollars, except for number of shares and per share data)

 

Deferred tax assets and liabilities

 

The significant components of deferred income tax assets and liabilities from continuing operations were as follows:

 

  

As of September 30, 2026

  

As of December 31, 2025

 
   US$   US$ 
Deferred tax assets:          
Net operating losses carry forwards   169,709    206,416 
Provision for doubtful accounts   95    441 
Unrealized loss on short-term investments, net of tax effect   24,192    26,180 
Impairment of intangible assets   238,821    238,821 
Gross deferred tax assets   432,817    471,858 
Less: valuation allowance   (357,038)   (359,026)
Net deferred tax assets   75,779    112,832 
           
Deferred tax liabilities:          
Temporary difference of intangible asset   25,200    25,200 
Gross deferred tax liabilities   25,200    25,200 
Net deferred tax liabilities   25,200    25,200 

 

The Company evaluates the realizability of its deferred tax assets on a jurisdiction-by-jurisdiction basis. In assessing the need for a valuation allowance, management considers all available positive and negative evidence, including historical operating results, cumulative losses in recent years, projections of future taxable income, the reversal of existing taxable temporary differences, and feasible tax planning strategies.

 

Based on this assessment, management determined that it is more likely than not that a significant portion of the Company’s deferred tax assets will not be realized, primarily due to cumulative losses incurred in certain jurisdictions and the absence of sufficient objectively verifiable positive evidence to support future taxable income. Accordingly, the Company recorded a valuation allowance of $357,038 as of September 30, 2026.

 

Deferred tax assets are recognized for deductible temporary differences and net operating loss carryforwards. Certain temporary differences, including unrealized losses on short-term investments, give rise to deferred tax assets; however, due to the Company’s valuation allowance position, no corresponding tax benefit has been recognized in the current period.

 

Effective income tax rate reconciliation

 

The reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate from continuing operations was as follows:

 

   2026   2025   2026   2025 
  

For the three months ended

September 30,

  

For the nine months ended

September 30,

 
   2026   2025   2026   2025 
US federal statutory tax rate   21.0%   21.0%   21.0%   21.0%
Effect of foreign tax rate differential   5.8%   -22.8%   -16.9%   -17.0%
State income taxes, net of federal benefit   10.7%   -1.0%   -0.5%   0.3%
Non-deductible expenses   0.3%   0.0%   -0.2%   0.0%
Utilization of prior-year net operating loss carryforwards   -0.8%   0.3%   0.3%   0.2%
Current year losses with no deferred tax benefit recognized   8.8%   -1.8%   -5.8%   -3.1%
Deferred tax benefit related to prior-year losses   0.0%   0.0%   0.0%   0.2%
Tax effect of temporary differences subject to valuation allowance   -2.1%   0.0%   0.1%   0.0%
Other reconciling items   0.0%   0.0%   0.0%   0.0%
Effective income tax rate   43.7%   -4.3%   -2.0%   1.6%

 

 

CHAINCE DIGITAL HOLDINGS INC.

(FORMERLY KNOWN AS MERCURITY FINTECH HOLDING INC.)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(In U.S. dollars, except for number of shares and per share data)

 

The reconciliation of income tax expense (benefit) computed at the U.S. federal statutory income tax rate to the actual income tax provision (benefit) from continuing operations was as follows:

 

   2026   2025   2026   2025 
  

For the three months ended

September 30,

  

For the nine months ended

September 30,

 
   2026   2025   2026   2025 
US federal statutory tax rate   83,530    (467,131)   (393,563)   (811,379)
Effect of foreign tax rate differential   22,979    506,321    316,752    657,730 
State income taxes, net of federal benefit   42,720    22,057    8,986    (12,100)
Non-deductible expenses   1,025    —    3,188    — 
Utilization of prior-year net operating loss carryforwards   (3,258)   (6,983)   (5,756)   (6,983)
Current year losses with no deferred tax benefit recognized   34,948    39,056    109,616    121,542 
Deferred tax benefit related to prior-year losses   —    —    —    (9,586)
Tax effect of deferred tax assets not recognized due to valuation allowance   (8,221)   —    (1,988)   — 
Other reconciling items   (145)   —    (145)   — 
Income tax provision (benefit)   173,578    93,320    37,090    (60,776)

 

Valuation allowance

 

The Company evaluates the realizability of its deferred tax assets on a jurisdiction-by-jurisdiction basis. In assessing the need for a valuation allowance, management considers both positive and negative evidence, including historical operating results, projections of future taxable income, the reversal of existing taxable temporary differences, and tax planning strategies. Based on this assessment, management determined that it is more likely than not that a significant portion of the deferred tax assets will not be realized, primarily due to cumulative losses incurred in certain jurisdictions and limited sources of future taxable income. Accordingly, the Company recorded a valuation allowance of $357,038 as of September 30, 2026. The valuation allowance relates primarily to net operating loss carryforwards and certain temporary differences, including unrealized losses on investments, for which realization is uncertain.