Note 7. Income Taxes

The Company recorded a consolidated income tax expense of $0.2 million during each of the three and six months ended June 30, 2026. The Company recorded Canadian current tax expense and Canadian local deferred tax benefit for the period ended June 30, 2026. These amounts were more than offset by deferred tax expense from an increase in the Canadian withholding-related deferred tax liability associated with expected future repatriation of net proceeds from Canadian assets. No U.S. federal or state current income tax expense was recorded, and no U.S. deferred tax benefit was recognized because the Company maintains a full valuation allowance against its U.S. deferred tax assets. For U.S. reporting under the interim tax provision methodology, tax effects related to ordinary operations are reflected through using the year-to-date actual effective tax rate approach in accordance with ASC 740-270-30-18, as a reliable estimate of the full-year annual effective tax rate could not be determined due to uncertainty of forecasted results as a result of recent business shifts, including the sale of its reinsurance business and the exit from the digital assets business. The tax effects of discrete items are recognized in the period in which they occur. During the quarter, the Company’s ordinary items and its discrete items, including the sale of its reinsurance business and the exit from the digital assets business, each resulted in taxable losses; accordingly, no U.S. current tax provision was required. In addition, although these losses would otherwise give rise to deferred tax assets, no U.S. deferred tax benefit or expense was recognized because such tax attributes remain fully offset by a valuation allowance.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion 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. The Company considers the scheduled reversal of taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the available objective evidence, including recent updates to the taxing jurisdictions generating income, the Company concluded that a valuation allowance should be recorded against all of the Company’s U.S. tax jurisdiction deferred tax assets as of June 30, 2026 and December 31, 2025. The Canadian deferred tax benefit remains recorded for the period ended June 30, 2026, there is no valuation allowance in Canada and the benefit is a result of the decrease in the deferred tax liability during the quarter.

The Tax Cuts and Jobs Act provides for a territorial tax system, which began in 2018, and includes the global intangible low-taxed income (“GILTI”) provision. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The GILTI provisions also allow for a high-tax exclusion if the effective tax rate of the tested income is greater than 18.9%. The Company has evaluated these regulations in determining the appropriate amount of the inclusion for its income tax provision. For the three months ended June 30, 2026, the Company estimated it would be in a GILTI tested loss position for purposes of its income tax provision.

Changes in tax laws may affect recorded deferred tax assets and liabilities and the Company’s effective tax rate in the future. In July of 2025, the One Big Beautiful Bill Act was enacted and made significant changes to Federal tax laws. The effects of these changes relate to deferred tax assets and net operating losses; all of which are offset by valuation allowance. There were no material income tax consequences of the recently enacted laws on the reporting period of these financial statements.

The Company is subject to possible examinations not yet initiated for Federal purposes for the fiscal years 2022 through 2024. The Company is also subject to possible examinations for state and local purposes. In most cases, these examinations in the state and local jurisdictions remain open based on the particular jurisdiction’s statute of limitations. There were no material changes to unrecognized tax benefits during the first six months of 2026.