Datavault AI Inc. Income Taxes Disclosure

The domestic and foreign components of loss before provision for income taxes for the years ended December 31, 2025 and 2024 were as follows:

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The Company had no current or deferred federal and state income tax expense or benefit for the years ended December 31, 2025 and 2024 because the Company generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized

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Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets at December 31, 2025 and 2024 are presented below:

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The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is “more-likely-than-not” that the deferred tax assets will be realized; accordingly, a full valuation allowance was maintained, and no deferred tax assets were shown in the accompanying consolidated balance sheets. The valuation allowance increased by $8.6 million and $6.0 million during the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, the Company had federal net operating loss carryforwards of $125.4 million. The federal net operating loss carryforwards will carryforward indefinitely but is subject to the 80% taxable income limitation.

As of December 31, 2025, the Company had state net operating loss carryforwards of $111.0 million which will begin to expire in 2039.

As of December 31, 2025, the Company had foreign net operating loss carryforwards of $0.4 million. The foreign net operating loss carryforwards will begin to expire in 2039.

Utilization of the Company’s net operating losses and credit carryforwards may be subject to annual limitations in the event of a Section 382 ownership change. Such future limitations could result in the expiration of net operating losses and credit carryforwards before utilization as a result of such an ownership change.

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For the year ended December 31, 2025, the Company adopted ASU 2023-09 prospectively. See Business and Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate for the year ended December 31, 2025, subsequent to the adoption of ASU 2023-09, including the amount and percentage of income before taxes, was as follows (in thousands, except percentages):

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A reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, was as follows:

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Tax positions are evaluated in a two-step process. The Company first determines whether it is “more-likely-than-not” that a tax position will be sustained upon examination. If a tax position meets the “more-likely-than-not” recognition threshold it is then measured to determine the amount of benefit to recognize in the consolidated financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the years ended December 31, 2025 and 2024 is zero.

The Company has not incurred any material tax interest or penalties as of December 31, 2025. The Company does not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions. The Company is subject to taxation in the United States and various state jurisdictions. There are no ongoing examinations by taxing authorities at this time. The Company’s various tax years 2018 through 2025 remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards.

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2025 and 2024, the Company has not accrued any penalties or interest related to uncertain tax positions.