Note 13 – Income Taxes

Basis of the interim provision

The Company computes its provision for income taxes for interim periods by applying an estimated annual effective tax rate to income before income taxes for the year-to-date period, adjusted for discrete items recognized in the period, in accordance with ASC 740-270, Income Taxes — Interim Reporting. The estimated annual effective tax rate is reassessed each quarter and reflects the Company’s forecast of full-year ordinary income, the statutory rates in the jurisdictions in which it operates, permanent differences, and the expected utilization of tax attributes.

Provision for income taxes and effective tax rate

The provision for income taxes was $1.9 1,903,533 million for each of the three and six months ended June 30, 2026, compared with no provision recorded for the three and six months ended June 30, 2025. The effective tax rate was 4.3% for the three months ended June 30, 2026 and 4.4% for the six months then ended, compared with 0.0% for the corresponding periods of 2025. No provision was recorded in the first quarter of 2026; accordingly, the entire year-to-date provision was recognized in the second quarter.

Estimated annual effective tax rate

The Company’s estimated annual effective tax rate for the year ending December 31, 2026 is 4.4%, compared with the U.S. federal statutory rate of 21%. The principal differences between the two rates are the following:

The Company’s income before income taxes for the periods presented is derived substantially from listing sponsorship services performed by CapForce International during the second quarter of 2026. Because the Company’s results are transaction-driven and the timing of such transactions is not predictable, the estimated annual effective tax rate may change significantly in subsequent interim periods.

Discrete items

No discrete tax expense or benefit was recognized in the three months ended June 30, 2026 or in the three months ended June 30, 2025.

Valuation allowance

The Company maintains a valuation allowance against substantially all of its U.S. deferred tax assets. Activity in the valuation allowance is summarized below:

In assessing the realizability of its deferred tax assets, the Company weighed all available positive and negative evidence, including its recent history of reported income, the transaction-driven nature of that income, the continuing operating losses of its recurring business, and the magnitude of its net operating loss carryforwards relative to demonstrated taxable income. On the basis of that evidence, the Company concluded that it is not more likely than not that its remaining U.S. deferred tax assets will be realized, and no additional release of the valuation allowance was recognized during the period. The Company reassesses this conclusion each reporting period. A change in judgment regarding the realizability of these deferred tax assets could result in a material adjustment to the provision for income taxes in the period in which the change occurs.

Foreign operations

The Company conducts its foreign operations through multiple international subsidiaries, including CapForce International, a Malaysian subsidiary through which it earned income. Income earned by CapForce International is subject to Malaysian income tax and is also included in the Company’s U.S. taxable income as Subpart F income under Section 951 of the Code. The Company claims foreign tax credits under Section 960 of the Code against the U.S. tax liability arising from such inclusion, subject to the limitation imposed by Section 904 of the Code.

The Company intends to indefinitely reinvest the undistributed earnings of CapForce International outside the United States. Accordingly, in accordance with ASC 740-30-25-17, the Company has not recorded a deferred tax liability on the outside basis difference in that subsidiary.

Earnings of CapForce International that have been included in the Company’s U.S. taxable income under Section 951 of the Code constitute previously taxed earnings and profits under Section 959 of the Code and would not be subject to further U.S. federal income tax upon distribution. Malaysia does not impose withholding tax on dividends under its single-tier system. Any residual tax arising on a distribution would therefore consist principally of state income tax and foreign currency gain or loss recognized under Section 986(c) of the Code.

Determination of the amount of unrecognized deferred tax liability related to the undistributed earnings of CapForce International is not practicable.

Unrecognized tax benefits

The Company had no unrecognized tax benefits at June 30, 2026 or at December 31, 2025, and no unrecognized tax benefits were recognized or derecognized during the three or six months ended June 30, 2026.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. No interest or penalties were accrued at June 30, 2026 or at December 31, 2025, and none were recognized during the periods presented.

The Company does not expect the amount of its unrecognized tax benefits to change materially within the next twelve months.

Tax years subject to examination

The Company files income tax returns in the U.S. federal jurisdiction, the State of Maryland, and Malaysia. Tax years 2023 through 2025 remain subject to examination in these jurisdictions.

In addition, tax years prior to 2023 may be subject to examination by the U.S. federal and state taxing authorities to the extent of net operating loss carryforwards generated in those years that are utilized in years that remain open.

The Company is not currently under examination by any taxing authority.