NOTE 16. INCOME TAXES

The income tax disclosures below reflect the tax position of FDCTech, Inc. as a standalone U.S. domestic C-corporation (the “U.S. Parent”). The Company’s foreign operating subsidiaries – Alchemy Markets Ltd. (Malta), Alchemy Prime Limited (United Kingdom), AD Advisory Services Pty Ltd. (Australia), Alchemy International Ltd. (Seychelles), and Alchemytech Ltd. (Cyprus) – are separate legal entities subject to income taxation in their respective jurisdictions. The U.S. Parent does not include foreign subsidiary earnings in its U.S. federal or state income tax returns. The deferred tax liabilities recognized on the consolidated balance sheet in respect of the foreign subsidiaries are discussed separately below.

The Company calculates its income tax provision using the asset and liability method prescribed under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss (“NOL”) carryforwards. 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 be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

United States Federal and State Income Taxes – FDCTech, Inc.

The U.S. Parent is subject to the U.S. federal corporate income tax at a flat rate of 21% under the Tax Cuts and Jobs Act of 2017, as well as applicable state income taxes in California. For the fiscal years ended December 31, 2025, and December 31, 2024, the U.S. Parent generated a pre-tax loss from operations on a standalone basis. In each year, the provision for income taxes attributable to the U.S. Parent was $nil, as described below.

Book-to-Tax Reconciliation – FDCTech, Inc. (U.S. Parent Standalone)

The following table reconciles the U.S. Parent’s pre-tax book loss to taxable income (loss) for the fiscal years ended December 31, 2025, and December 31, 2024:

  SCHEDULE OF PROVISIONS FOR INCOME TAXES

 SCHEDULE OF DEFERRED TAX ASSETS

Note 16. Income Taxes (continued)

For the fiscal year ended December 31, 2025, the non-cash stock-based compensation add-back of $49,300 consists of: (i) $35,200 representing the fair value of 32,000,000 shares of restricted common stock issued to employees of the Company’s subsidiaries for services rendered; and (ii) $14,100 representing 10,000 shares of Series B Convertible Preferred Stock issued to Nick G. Kundnani for services, recognized at $1.41 per share. For the fiscal year ended December 31, 2024, the add-back of $846,950 represents 561,844 shares of Series B Convertible Preferred Stock issued to officers, directors, and consultants for services rendered ($792,200), and 500,000 shares of common stock issued for services ($54,750). The allowance for doubtful accounts of $44,058, recognized as a general and administrative expense in fiscal year 2024 in connection with the restatement, is not deductible for U.S. federal income tax purposes until the related receivable is actually written off as uncollectible.

For the fiscal year ended December 31, 2024, the pre-NOL taxable income of $383,187 was fully offset by prior-period NOL carryforwards, resulting in net taxable income of $nil and a current tax provision of $nil. For the fiscal year ended December 31, 2025, the U.S. Parent generated a net taxable loss of $829,312, resulting in no current income tax expense.

Net Operating Loss Carryforwards

At December 31, 2025, the U.S. Parent had generated a current-year taxable loss of $829,312, which is added to the accumulated NOL carryforward. Federal NOL carryforwards generated after December 31, 2017, carry forward indefinitely but are subject to a utilization limitation of 80% of taxable income in any given year. Federal NOL carryforwards generated prior to January 1, 2018, expire 20 years after the year in which they arose and are not subject to the 80% limitation. The accumulated U.S. federal NOL carryforward of FDCTech, Inc. as of December 31, 2025, inclusive of the $829,312 generated in fiscal year 2025, is approximately $1,842,001. The Company has filed its U.S. federal tax return for the fiscal year ended December 31, 2025.

In evaluating the realizability of deferred tax assets, management considered all available positive and negative evidence, including the U.S. Parent’s history of cumulative operating losses, the expected reversal of existing temporary differences, tax planning strategies, and projected future taxable income. Based on the weight of available evidence, and in particular the U.S. Parent’s sustained history of pre-tax losses at the standalone entity level, management has determined that it is more likely than not that the U.S. Parent’s gross deferred tax assets will not be realized. Accordingly, a full valuation allowance has been established against the U.S. Parent’s net deferred tax assets as of December 31, 2025, and 2024.

The change in valuation allowance for fiscal year 2025 reflects the addition of the deferred tax asset arising from the $829,312 current-year taxable loss (generating a deferred tax asset of $174,156 at 21%), partially offset by the release of the $36,038 deferred tax asset associated with the $383,187 of prior-period NOL carryforward utilized during fiscal year 2024 (reflected in the FY2024 comparative column). The allowance for doubtful accounts of $44,058 recognized in fiscal year 2024 results in a temporary difference of $9,252 (at 21%) that is expected to reverse upon charge-off of the related receivable.

Foreign Subsidiary Taxes and Deferred Tax Liabilities

The Company’s foreign operating subsidiaries are subject to income taxes in their respective jurisdictions. Alchemy Markets Ltd. is subject to corporate income tax in Malta under the Income Tax Act at a standard rate of 35%, with a refund mechanism that generally results in an effective tax rate of approximately 5% for trading income distributed to non-Maltese shareholders. Alchemy Prime Limited is subject to UK Corporation Tax at the applicable statutory rate. AD Advisory Services Pty Ltd. is subject to Australian income tax at the applicable corporate rate. Alchemy International Ltd. is subject to income tax in Seychelles under applicable local legislation. Alchemytech Ltd. is subject to income tax in Cyprus.

The Company does not consolidate foreign subsidiary earnings for U.S. tax purposes. Management considers the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested outside the United States, and accordingly, no deferred U.S. federal income tax liability has been recognized with respect to such earnings.

The consolidated balance sheet includes a deferred tax liability of $377,975 as of December 31, 2025 (December 31, 2024: $333,418), relating to temporary differences arising at the Company’s foreign subsidiaries, primarily Alchemy Markets Ltd. in Malta. The deferred tax expense recognized in the consolidated statements of operations arising from changes in this liability was $44,557 for the fiscal year ended December 31, 2025 (fiscal year 2024: deferred tax benefit of $513,163). These amounts are measured using the enacted tax rates applicable in the relevant foreign jurisdictions.

Uncertain Tax Positions

The Company has analyzed its tax positions in all jurisdictions in accordance with ASC 740-10-25 and has identified no uncertain tax positions requiring recognition or disclosure as of December 31, 2025, or December 31, 2024. The Company does not anticipate a material change in the amount of unrecognized tax benefits within the next twelve months. Should uncertain tax positions be identified in the future, any related interest and penalties would be recognized as components of income tax expense.

Open Tax Years

The Company’s U.S. federal and California state income tax returns are subject to examination for tax years beginning in 2021. The U.S. federal income tax returns for fiscal years 2023 and 2022 have been filed and accepted. The California franchise tax returns for fiscal years 2023 and 2022 have also been filed and accepted. At December 31, 2025, the Company has no ongoing tax examinations in any jurisdiction.