Big Digital Energy, Inc. Income Taxes Disclosure

NOTE 11 – INCOME TAXES

Loss before income taxes consisted of losses from domestic operations of $23.7 million for the year ended December 31, 2025. Income tax expense included in the statements of operations and comprehensive loss consisted of the following:

Income tax expense differed from the amount computed by applying the Federal statutory income tax rate of 21% to pretax income (loss) for fiscal year 2025 as a result of the following:

Income tax expense differed from the amount computed by applying the Federal statutory income tax rate of 21% to pretax income (loss) for fiscal year 2024 as a result of the following:

The tax effects of temporary differences that gave rise to significant portions of the Company’s deferred tax assets and liabilities related to the following:

Management believes that, based on available evidence, both positive and negative, it is more likely than not that the deferred tax assets will not be utilized. The valuation allowance increased by $4.6 million for the year ended December 31, 2025, primarily as a result of current year tax losses generated, as well as changes in tax versus book basis in fixed assets and stock compensation related activities.

As of December 31, 2025, the Company had approximately $84.2 million of indefinite lived US Federal net operating losses (“NOLs”), and $110.6 million of US state NOLs. The Internal Revenue Code “IRC” limits the amount of NOL carryforwards that a company may use in a given year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. Utilization of NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company has not conducted a Section 382 study as of December 31, 2025.

If recognized, any unrecognized tax benefits would not impact the Company’s effective tax rate due to the valuation allowance against deferred tax assets. As of December 31, 2025, the Company had no unrecognized income tax benefits. The Company’s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. The Company had no interest or penalty accruals associated with uncertain tax benefits in its consolidated balance sheet and consolidated statement of operations for the tax year ended December 31, 2025.

The Company files income tax returns in the U.S. Federal, U.S. State, and foreign jurisdictions. The Company is not currently under examination by income tax authorities in federal or state jurisdictions. All tax returns will remain open for examination by the federal and most state taxing authorities for three years and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.

The Company has made no provision for U.S. income taxes on cumulative undistributed non-U.S. earnings as of December 31, 2025, as the Company is no longer currently operating in any jurisdictions outside the United States.