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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 15. INCOME TAXES

 

The Company recorded no income tax expense or benefit for the years ended December 31, 2025 and 2024 due primarily to the recognition of a full valuation allowance against its deferred tax assets, resulting from cumulative historical losses and uncertainty regarding the timing of future taxable income.

 

The difference between the actual income tax rate versus the tax computed at the Federal Statutory rate follows:

 

   December 31, 2025   December 31, 2024 
   Amount   %   Amount   % 
U.S. Federal statutory tax rate  $(1,426,464)   21.0%  $(1,905,032)   21.0%
State and local income tax, net of federal income tax effect                    
Michigan   (168,926)   2.5%   (208,514)   2.3%
All other states (combined)   (43,894)   0.6%   (262,274)   2.9%
Effects of changes in tax laws or rates enacted in the current period   (4,040)   0.1%   (98,944)   1.1%
Nontaxable or nondeductible items   5,502    -0.1%   (29,191)   0.3%
Other adjustments                    
Goodwill impairment reclassification   (1,951,752)   28.7%   -    0.0%
Return to provision   0    0.0%   (133,037)   1.5%
Changes in valuation allowances   3,589,574    -52.8%   2,636,992    -29.1%
Effective income tax rate  $-   0%  $-    0%

 

The Company did not have any material uncertain tax positions. The Company’s policy is to recognize interest and penalties accrued related to unrecognized benefits as a component income tax expense (benefit). The Company did not recognize any interest or penalties, nor did it have any interest or penalties accrued as of December 31, 2025 and 2024.

 

 

Deferred income tax assets and (liabilities) consist of the following:

 

  

December 31,

2025

  

December 31,

2024

 
Deferred tax assets (liabilities)          
Net operating loss carryforward  $14,477,942   $12,890,271 
Equity-based compensation   1,868,386    1,592,338 
Goodwill   1,263,351    (599,864)
Intangibles   831,258    990,718 
Fixed assets   (163,644)   (169,130)
Right of use assets   (230,697)   (269,722)
Lease liabilities   240,993    279,565 
Other   23,444    7,282 
Total deferred tax assets   18,311,033    14,721,458 
Valuation allowance   (18,311,033)   (14,721,458)
Net deferred tax assets  $-   $- 

 

The Company has approximately $1.3 million of Federal Net Operating Loss Carry forwards, of which $1.3 million will begin to expire beginning 2031 and $55.9 million will not expire but are limited to use of 80% of current year taxable income.

 

The Company has approximately $47.4 million of state net operation loss carry forward to offset future taxable income in the states in which it currently operates. These carryforwards start expiring in 2029.

 

Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year period. Such limitation of the net operating losses may have occurred, but we have not analyzed it at this time as the deferred tax asset is fully reserved.

 

During the year ended December 31, 2025 and 2024, the valuation allowance increased $3,589,574 and $2,636,992, respectively.

 

The tax periods ending December 31, 2023, 2024, and 2025 are open for examination.