Ridgepost Capital, Inc. Income Taxes Disclosure

Note 15. Income Taxes

The Company accounts for income taxes under ASC 740. The components of the provision for (benefit from) income taxes for the years ended December 31, 2025, 2024, and 2023 are as follows (in thousands):

(a) The state and local jurisdictions that make up a majority of state and local income tax category are Illinois, New York, Louisiana, North Carolina, and New York City.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

As of December 2025, the Company had an outside basis difference in its investment in Qualitas, a foreign subsidiary, primarily attributable to unremitted earnings and cumulative translation adjustments. The Company considers the earnings of these subsidiaries to be indefinitely reinvested, and accordingly, no deferred tax liability has been recorded for the U.S. federal or state tax consequences of such earnings or related outside-basis differences. Furthermore, the Company is a U.S. corporation and that there are no federal income tax consequences for the undistributed foreign earnings as the Company expects its undistributed earnings to be subject to the 100% dividend-received deduction. As of December 31, 2025, the amount of unrecognized deferred tax liability on the undistributed earnings from our foreign subsidiary that we intend to indefinitely reinvest is not material. The deferred taxes are also not recorded on cumulative translation adjustments where the indefinite reversal exception applies.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount that are more-likely-than-not expected to be realized based on the weighing of positive and negative evidence. Future realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law. The Company regularly reviews the deferred tax assets for recoverability based on the historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. This may change due to many factors, including future market conditions and the ability to successfully execute the business plan and/or tax planning strategies.

The Company had a valuation allowance against net deferred tax asset of $12.8 million as of December 31, 2025. The components of the existing valuation allowance primarily include a valuation allowance recorded in 2020 against its net deferred tax asset of $11.4 million due to the write-off of an intercompany debt which is capital in nature. Management believes that it is not more-likely-than-not that future operations will generate sufficient taxable capital gain income to realize the deferred tax asset. This assessment remains valid for 2025, and no adjustments have been made to this valuation allowance. The remaining $1.4 million valuation allowance is against certain NOLs that are expected to expire without being used. However, should there be a change in the ability to recover deferred tax assets, the income tax provision would either increase or decrease in the period when the assessment is modified.

On July 4, 2025, the One Big Beautiful Bill ("OBBBA") was enacted in the United States. The legislation includes significant provisions, such as permanent extensions and modifications of certain provisions of the Tax Cuts and Jobs Act and modifications to the U.S. international tax system. The OBBBA contains multiple effective dates, with certain provisions taking effect in 2025, 2026, and 2027. The OBBBA's provisions did not have a material impact on our consolidated financial position for the year ended December 31, 2025. We will continue to evaluate the future impacts of these legislative changes as additional supplemental guidance becomes available.

The post-rate effected federal NOLs (net of uncertain tax reserve) amount is $10.4 million. The federal NOL carryforward may expire beginning in 2035, if not utilized. The Company is expected to use the majority of the federal NOLs before expiration based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. The Company had post-rate effected state NOLs (net of valuation allowance on expected expire unused) of approximately $0.6 million as of December 31, 2025. Utilization of the NOLs and tax credits may be subject to substantial annual limitation due to the “change of ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credit carryforwards before utilization.

The Company accounts for uncertainty in tax positions recognized in the consolidated financial statements by recognizing a tax benefit from an uncertain tax position when it is more-likely-than-not that the position will be sustained upon examination based on the technical merits. Recording an uncertain tax position is inherently uncertain and requires making judgments, assumptions, and estimates. The Company believes the judgments, assumptions and estimates made are reasonable and appropriate, no assurance can be given that the final tax outcome of these matters will not be different. To the extent that the final tax outcome of these matters is different than the amount recorded, such difference will affect the provision for income taxes and the effective tax rate in the period in which such determination is made.

The uncertain tax position is primarily related to imputed interest, and research and development credits.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, the Company has $0.1 million of accrued interest and penalties related to uncertain tax positions.

The Company is subject to U.S. federal income tax as well as various state and foreign tax jurisdictions. The Company is not under audit in any other income tax jurisdictions. In general, the Company remains subject to examination by U.S. federal and state tax authorities for all years since 2002, due to net operating loss carryforwards and their utilization in years still open under statute. Additionally, all tax years in Spain since 2021 remain open under applicable statutes.