NOTE 13 – INCOME TAXES

During FY 2026, the Company's effective tax rate was 4.3%. During FY 2025, and FY 2024 the Company's effective tax rate was zero. This was primarily the result of losses reported in the year, no income taxes due, and full valuation allowance against deferred tax assets.

The Company files income tax returns in the U.S. federal and various state taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before FY 2020.

Realization of the Company's deferred tax assets is dependent upon the Company generating sufficient taxable income, in the appropriate tax jurisdictions, in future years, to obtain benefit from the reversal of net deductible temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. A valuation allowance to reduce the carrying amount of deferred income tax assets is established when it is more likely than not that we will not realize some portion or all of the tax benefit of our deferred income tax assets. The Company evaluates, on a quarterly basis, whether it is more likely than not that our deferred income tax assets are realizable based upon recent past financial performance, tax reporting positions, and expectations of future taxable income. The determination of deferred tax assets is subject to estimates and assumptions. The Company periodically evaluates our deferred tax assets to determine if our assumptions and estimates should change.

As of February 28, 2026 and February 28, 2025, the Company had a valuation allowance against its deferred tax assets in the amount of $5.4 million and $4.2 million. The Company accounts for uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. As such, the Company is required to make judgments regarding income tax exposures.

Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to the Company's judgments which can materially affect amounts recognized in the balance sheets and statements of operations. The result of the assessment of the Company's tax positions did not have an impact on the consolidated financial statements for the years ended February 28, 2026 or 2025. The Company does not have any significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months. Amounts are recognized for income tax related interest and penalties as a component of general and administrative expense in the statement of income and are immaterial for the years ended February 28, 2026 and 2025.

As of February 28, 2026, we have $26.4 million and $20.6 million of gross federal and state net operating loss ("NOL") carryforwards, $0.8 million of federal NOL and $1 thousand of state NOL will expire in fiscal years 2027 and 2040, and $25.5 million of federal NOL has an indefinite carryforward period. We do not have any federal or state tax credit carryforwards as of February 28,2026.

The Company’s subsidiary, U-Swirl International Inc. ("U-Swirl"), had a history of net operating losses prior to the company’s acquisition of U-Swirl and thus the Company has a related net operating loss carry forward. In accordance with Section 382 of the Internal Revenue Code, deductibility of U-Swirl’s Federal net operating loss carryovers may be subject to annual limitation in the event of a change in control. The Company performed a preliminary evaluation as to whether a change in control took place, and concluded that there was a change of control with respect to the net operating losses of U-Swirl when the Company acquired its controlling ownership interest. The initial limitations limited the deductibility of U-Swirl’s net operating loss carryovers, but the annual loss limitation is deductible to the Company and U-Swirl upon the filing of joint tax returns in FY 2017 and future years. As of the end of fiscal year, the Company liquidated U-Swirl pursuant to IRC Sec 382. As such, the U-Swirl NOLs carryover to the Company along with any IRC Sec 382 limitations that were previously determined.

The Company estimates the potential future tax deductions of U-Swirl’s Federal net operating losses, limited by section 382, to be approximately $1.8M with a resulting deferred tax asset of approximately $0.4M. U-Swirl’s Federal net operating loss carryovers will expire at various dates beginning in fiscal year 2027.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The legislation included significant changes to the U.S. federal income tax code, effective beginning in the Company’s FY26. The changes included restoration of 100% bonus depreciation, reinstatement of immediate expensing of research and development expenditures, and modifications to the interest expense limitation calculation, among others. The Company was not impacted by these provisions as it plans to opt out of bonus deprecation due to the Company's CY taxable loss position, its R&D expenses were nominal, and it is below the 3-year gross receipts threshold of $31M, and as such was not subject to the business interest expense limitation rules.

Income tax provision allocated to continuing operations and discontinued operations for the years ended February 28 or 29, 2026, 2025, and 2024 was as follows: