Arrive AI Inc. Income Taxes Disclosure

NOTE 12 - INCOME TAXES

 

The Company recorded no current or deferred income tax benefit for the years ended December 31, 2025 and 2024, primarily due to losses and a full valuation allowance on deferred tax assets.

 

The income tax benefit consists of the following:

 SCHEDULE OF INCOME TAX BENEFIT

		2025				2024
		Years Ended December 31,
		2025				2024
Current Provision		$	—			$	—
Deferred:
Federal			2,430,664				1,071,110
State			306,523				162,039
Total deferred provision			2,737,187				1,233,149
Change in valuation allowance			(2,737,187	)			(1,233,149	)
INCOME TAX BENEFIT, NET		$	—			$	—

 

As presented above, no benefit (provision) for income taxes has been recognized for the years ended December 31, 2025 and 2024.

 

Enhanced Disclosures (ASU 2023-09 – 2025) 

 

The Company adopted ASU 2023-09 on January 1, 2025, on a prospective basis. Accordingly, the enhanced income tax disclosures required under the ASU are presented only for the year ended December 31, 2025. Prior period amounts have not been recast and are therefore not comparable.

 

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows. In accordance with ASU 2023-09, reconciling items greater than 5% of the statutory tax rate are presented separately. Amounts below this threshold are aggregated within “Other.” The 2025 reconciliation below is not presented on a comparable basis with prior periods due to the adoption of ASU 2023-09.

 SCHEDULE OF RECONCILIATION OF THE STATUTORY TAX RATE

		2025 (in dollars)				2025(%)
Statutory federal income tax rate		$	(2,693,540	)			21.0	%
State taxes, net of federal income tax effect			(428,716	)			3.3	%
Other			11,521				(0.1	)%
Equity-settled debt loss (non-deductible)			373,549				(2.9	)%
Change in valuation allowance			2,737,186				(21.3	)%
INCOME TAX BENEFIT, NET		$	—				0.0	%

 

There were no federal, state, or foreign income taxes paid in the year ended December 31, 2025.

 

Legacy Disclosures (ASC 740 – 2024) 

 

The following is a reconciliation of the statutory federal income tax rate applied to pre-tax net loss compared to the income tax benefit in the statement of operations as of December 31, 2024.

 

		2024 (in dollars)				2024(%)
Statutory federal income tax rate		$	(952,951	)			21.0	%
State taxes, net of federal income tax effect			(179,960	)			3.9	%
Other			—				—	%
Change in valuation allowance			1,132,912				(24.9	)%
INCOME TAX BENEFIT, NET		$	—				0.0	%

 

There were no federal, state, or foreign income taxes paid in the year ended December 31, 2024.

 

The net deferred tax amounts in the accompanying balance sheets include the following components:

 SCHEDULE OF NET DEFERRED TAX AMOUNTS

		2025				2024
		December 31,
		2025				2024
Net operating loss carryforward		$	3,936,612			$	1,814,039
Stock-based compensation			1,264,753				769,563
Property and equipment			349,976				406,695
Intangible assets			302,923				460,517
R&D credits			168,322				75,571
Other			664,959				423,973
Total deferred tax assets			6,687,545				3,950,358
Less: valuation allowance			(6,687,545	)			(3,950,358	)
TOTAL DEFERRED TAX ASSETS, NET		$	-			$	-

 

The tax benefit from state net operating loss carryforwards of $670,036 begin to expire in 2040. The tax benefit from state research and development credits of $186,134 begin to expire in 2031. The federal net operating loss carryforwards never expire.

 

 

ARRIVE AI INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2025 AND 2024

 

The change in the valuation allowance was the following at December 31:

 SCHEDULE OF CHANGE IN THE VALUATION ALLOWANCE

		2025				2024
Beginning balance, January 1		$	3,950,358			$	2,717,209
Change in valuation allowance			2,737,187				1,233,149
VALUATION ALLOWANCE		$	6,687,545			$	3,950,358

 

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating losses and temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to the future realization of the deferred tax assets and has therefore established a valuation allowance.

 

As of December 31, 2025, the Company had operating loss carry forwards of approximately $15,555,122, which are allowed for an indefinite carryforward period but may be subject to limitations. This amount can be used to offset future taxable income of the Company.

 

The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carryforwards and future tax deductions.

 

The Company follows the guidance under ASC 740, Income Taxes, for the recognition and measurement of uncertain tax positions. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. The Company’s application of the uncertain tax position guidance under ASC 740 did not result in any adjustments to the financial statements.

 

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2025, the Company had no unrecognized tax benefits and no charge during 2025, and accordingly, the Company did not recognize any interest or penalties during 2025 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2025.

 

The Company files U.S. income tax returns and Indiana state income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ended on December 31, 2022 and thereafter are subject to examination by the relevant taxing authorities.