NextTrip, Inc. Income Taxes Disclosure

NOTE 14 – Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic No. 740, Income Taxes. This standard requires the Company to recognize a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary differences between the financial reporting and tax bases of assets and liabilities and of any available net operating loss or tax credit carryforwards. A valuation allowance is recorded against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

Components of Loss Before Income Taxes

 

Loss before income taxes consisted of the following:

 

Schedule of Components of Loss Before Income Taxes

		FY2026				FY2025
Domestic (United States)		$	(15,900,627	)		$	(10,121,038	)
Foreign			-				-
Loss before income taxes		$	(15,900,627	)		$	(10,121,038	)

 

Components of Income Tax Expense (Benefit)

 

The components of the provision for income taxes were as follows:

 

Schedule of Components of Income Tax Expense (Benefit)

		FY2026				FY2025
Current:
Federal		$	-			$	-
State			-				-
Foreign			-				-
Total current			-				-
Deferred:
Federal			-				-
State			-				-
Foreign			-				-
Total deferred			-				-
Provision for income taxes		$	-			$	-

 

Reconciliation of Statutory to Effective Tax Rate

 

A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate of 21% to the Company’s effective income tax rate is set forth below. The reconciliation is presented in both dollars and as a percentage of loss before income taxes, in accordance with ASC 740-10-50-12 as amended by ASU 2023-09.

 

Schedule of Reconciliation of Statutory to Effective Tax Rate

		FY2026								FY2025
		Amount				%				Amount				%
Federal income tax benefit at statutory rate		$	(3,339,132	)			21.0	%		$	(2,125,418	)			21.0	%
Nondeductible / nontaxable items:
Stock-based compensation			523,970				(3.3	)%			14,254				(0.1	)%
Loss on related-party receivable			66,254				(0.4	)%			210,000				(2.1	)%
Other (M&E, penalties, asset disposal perm.)			29,408				(0.2	)%			229				(0.0	)%
Change in valuation allowance			2,719,500				(17.1	)%			2,289,045				(22.6	)%
Provision for income taxes / Effective tax rate		$	-				-			$	-				-

 

The Company has no foreign operations or income earned in foreign jurisdictions; accordingly, no foreign tax effects or effects of cross-border tax laws are reflected. State and local income taxes were immaterial in each year presented because the Company has incurred losses and full valuation allowances have been recorded against its net deferred tax assets in all jurisdictions in which it operates.

 

 

Deferred Tax Assets and Liabilities

 

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities as of February 28, 2026 and February 28, 2025 are as follows:

 

Schedule of Deferred Tax Assets and Liabilities

		2026				2025
Deferred tax assets:
NOL carryforward		$	13,830,400			$	11,500,300
Related-party accruals			630,000				12,900
Accrued payroll			72,600				47,800
Depreciation			2,900				255,400
Total deferred tax assets			14,535,900			$	11,816,400
Deferred tax liabilities:
None			-				-
Total deferred tax liabilities			-				-
Net deferred tax asset before valuation allowance			14,535,900				11,816,400
Less: Valuation allowance			14,535,900				11,816,400
Net deferred tax asset (liability)		$	-			$	-

 

Valuation Allowance

 

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some 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 those temporary differences become deductible. As a result of the Company’s history of operating losses and the uncertainty surrounding the realization of its net operating loss carryforwards, the Company has established a full valuation allowance against its net deferred tax assets. The valuation allowance increased by approximately $2,719,500 during the year ended February 28, 2026 (year ended February 28, 2025: increase of approximately $2,288,800), reflecting principally the tax effect of additional net operating losses generated during the year together with the net change in deductible temporary differences for which realization is not more likely than not.

 

Net Operating Loss Carryforwards

 

As of February 28, 2026, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $65,859,016. Of this amount, approximately $9,820,078 was generated in tax years beginning before January 1, 2018 and expires in various years through 2038; the remaining $56,038,938 was generated in tax years beginning after December 31, 2017 and may be carried forward indefinitely, subject to the 80% taxable-income limitation under IRC §172. The Company also has state NOL carryforwards in jurisdictions in which it conducts business; the state carryforwards generally follow federal computation rules with state-specific expiration schedules.

 

Utilization of the Company’s NOL carryforwards may be subject to annual limitations under IRC §382 and similar state provisions as a result of historical and future ownership changes, including the change in ownership resulting from the Company’s reverse acquisition. The Company has not completed a formal §382 study; any such limitation, if quantified, would not change the Company’s net deferred tax assets recorded after valuation allowance because a full valuation allowance has been recorded against the related deferred tax assets.

 

Income Taxes Paid (Net of Refunds)

 

Income taxes paid (net of refunds received) for the years ended February 28, 2026 and February 28, 2025 were zero. The Company had no current federal, state or foreign income tax liabilities in either year and made no estimated tax payments. The Company has no foreign operations. Because the total of income taxes paid net of refunds was zero, no further disaggregation by individual jurisdiction is required under ASC 740-10-50-22 as amended by ASU 2023-09.

 

Unrecognized Tax Benefits

 

The Company recognizes the financial-statement effect of a tax position when it is more likely than not, based on the technical merits of the position, that the position will be sustained upon examination. As of February 28, 2026 and February 28, 2025, the Company had no material unrecognized tax benefits and accordingly has not recorded any liability for uncertain tax positions. The Company does not expect any material changes to its unrecognized tax benefits within the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense; no such amounts were recognized during the years ended February 28, 2026 or February 28, 2025.

 

Tax Years Open to Examination

 

The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The Company’s U.S. federal income tax returns for the tax years ended February 28, 2022 through February 28, 2024 remain open and subject to examination by the Internal Revenue Service. State income tax returns generally remain open for periods ranging from three to four years from the date of filing, depending on the jurisdiction. To the extent the Company has net operating loss carryforwards, the tax years in which those losses were generated remain subject to adjustment by the relevant taxing authorities until the statute of limitations expires for the year in which the losses are utilized.