Z Squared Inc. Income Taxes Disclosure

NOTE 12 – INCOME TAXES

 

The Company has established deferred tax assets and liabilities for the recognition of future deductions or taxable amounts and operating loss carry forward. Deferred federal and state income tax expense or benefit is recognized as a result of the change in the deferred tax asset or liability during the year using the currently enacted tax laws and rates that apply to the period in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that will more likely than not be realized.

 

During the years ended December 31, 2025 and 2024, a reconciliation of income tax benefit at the statutory rate of 35% and 35%, respectively to income tax benefit at the Company’s effective tax rate is as follows:

Schedule of effective income tax reconciliation
		2025				2024
Income tax benefit at statutory rate		$	2,983,800			$	2,455,499
Change in valuation allowance		$	(2,983,800	)		$	(2,455,499	)

 

The income tax provision differs from the expense that would result from applying federal statutory rates to income taxes as follows:

Schedule of income tax provision
		2025								2024
Excepted federal statutory income tax provision/rate		$	(2,521,826	)			(21.0%	)		$	(2,284,257	)			(21.0%	)
State income taxes, net of federal benefit			(367,582	)			(3.1%	)			(58,863	)			(0.5%	)
Other			(94,392	)			(0.8%	)			(112,379)				(1.0%)
Income tax benefit at statutory rate			(2,983,800	)			(24.9%	)			(2,455,499	)			(22.6%	)
Change in valuation allowance			2,983,800				22.6%				2,455,499				22.6%
		$	–				–%			$	–				–%

  

The Company’s calculation of net operating loss carryforwards:

Schedule of net operating loss carryforwards
		2025				2024
Deferred tax assets
Net operating loss carryforwards		$	28,184,213			$	24,971,010
Section 174 R&D			1,084,044				1,275,054
PPE and intangible assets			974,646				915,327
State taxes			(1,667,634	)			(1,569,922	)
Subtotal			28,575,269				25,591,469
Valuation Allowance			(28,575,269	)			(25,591,469	)
Net deferred tax assets (liabilities)		$	–			$	–

 

At December 31, 2025, the Company had approximately $99,000,000 of unused net operating loss carryforwards. Unused net operating loss carryforwards may provide future benefits although there can be no assurance that these net operating losses will be realized in the future. The tax benefits of these loss carryforwards have been fully offset by valuation allowance. These losses may be used to offset future taxable income and will carryforward indefinitely.