v3.25.2
INCOME TAXES
 6 Months Ended
Jun. 30, 2025
INCOME TAXES  
INCOME TAXES

NOTE 12 — INCOME TAXES

The Company and its operating subsidiaries in the United States are subject to federal and various state income taxes. The Company elected to file income taxes as a corporation instead of an LLC for the tax years ended December 31, 2020 through December 31, 2024.

(i)

Loss before Income tax expense (benefit)

​

​

​

​

​

​

​

​

​

    

For the Six Months Ended

​

​

June 30, 

​

​

2025

    

2024

​

​

(Unaudited)

​

(Unaudited)

Loss from continuing operations before income taxes

​

$

(1,248,095)

​

$

(1,509,359)

​

(ii)

The components of the income tax provision were as follows:

​

​

​

​

​

​

​

​

​

​

For the Six Months Ended

​

​

June 30, 

​

    

2025

    

2024

​

​

(Unaudited)

    

(Unaudited)

Current:

​

​

  

 

​

  

Federal

​

$

—

​

$

(128)

State

​

 

5,200

​

 

4,456

Total current income tax provision

​

 

5,200

​

 

4,328

Deferred:

​

 

​

​

 

​

Federal

​

 

—

​

 

(337,235)

State

​

 

—

​

 

(160,082)

Total deferred income tax expenses (benefits)

​

 

—

​

 

(497,317)

Total income tax benefits

​

$

5,200

​

$

(492,989)

​

The consolidated statement of operations reflects income tax expense of approximately $18,342 for the six months ended June 30, 2025, which includes the current quarter provision of $5,200, and approximately $13,142 of tax payments related to prior periods and acquisition-related tax filings upon the filing of 2024 tax returns in April 2025. These additional amounts primarily consist of: (i) $2,155 of tax obligations owed by Cheetah for the 2024 tax year, (ii) $1,101 of pre-acquisition tax obligations of Edward, and (iii) $9,886 of pre-acquisition tax obligations of TWEW. These payments do not impact the Company’s estimated annual effective tax rate for 2025.

​

(iii)

Reconciliations of the statutory income tax rate to the effective income tax rate were as follows:

​

​

​

​

​

​

​

​

​

For the Six Months Ended

 

​

​

June 30, 

​

​

    

2025

    

2024

 

​

​

(Unaudited)

    

(Unaudited)

 

Federal income tax at the statutory rate

​

21.0

%  

21.0

%

State statutory tax rate

​

4.3

%  

11.4

%

Permanent Items

​

(0.4)

%  

—

%

Change in valuation allowance

​

(25.3)

%  

—

%

Non-deductible expenses

​

—

%  

0.3

%

Effective tax rate

​

(0.4)

%  

32.7

%

​

(iv)

Deferred tax assets, net were composed of the following:

​

​

​

​

​

​

​

​

​

    

June 30,

    

December 31, 

​

​

2025

​

2024

​

​

​

(Unaudited)

​

​

​

Deferred tax assets:

 

​

​

​

​

​

Net operating loss carry forwards

​

$

—

​

$

1,001,992

Tax attribute carryovers

​

​

1,214,753

​

​

—

Lease liability

​

​

437,409

​

​

398,757

Others

​

​

530,987

​

​

436,613

Total gross deferred tax assets

​

​

2,183,149

​

​

1,837,362

​

​

​

​

​

​

​

Less valuation allowance

​

​

(1,465,653)

​

​

(1,159,129)

Total deferred tax assets, net of valuation allowance

​

​

717,496

​

​

678,233

​

​

​

​

​

​

​

Deferred tax liabilities:

​

​

​

​

​

​

Intangible assets

​

​

(281,775)

​

​

(249,183)

Fixed assets

​

​

(2,354)

​

​

—

Right of use assets

​

​

(433,367)

​

​

(429,050)

Total deferred tax liabilities

​

​

(717,496)

​

​

(678,233)

​

​

​

​

​

​

​

Total deferred tax assets, net

​

$

—

​

$

—

​

The Company assesses deferred tax assets to determine whether they are realizable. As of June 30, 2025 and December 31, 2024, the Company recorded a full valuation allowance against deferred tax assets, as it has generated a three-year cumulative pretax book loss and is forecasting a loss for 2025. Based on this evidence, realization of deferred tax assets is not considered more-likely-than-not at this time.

The Company records uncertain tax positions in accordance with ASC 740, using a two-step process to determine whether tax positions will be sustained. The Company has concluded that there are no uncertain tax positions requiring recognition as of June 30, 2025 and 2024.

The Company was not previously subject to the interest expenses limitation under §163(j) of the U.S. Internal Revenue Code, due to the small business exemption. Its average annual gross receipts for the three tax years preceding 2022 do not exceed the relevant threshold amount ($27 million for 2022). The Company no longer met the small business exception in 2024, but it meets one of the other exceptions to the §163(j) limitation, “floor plan financing indebtedness” (indebtedness used to finance the acquisition of motor vehicles held for sale or lease or secured by such inventory) and will therefore continue to be exempt from the §163(j) interest expenses limitation in 2025.

The Company monitors tax law changes and has determined that no recent changes materially impact the financial statements.